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There is a reason why lawyers go through year of school and tests to get to the jobs that they get paid so much to do - law is a complicated beast that takes a special breed to understand all the ins and outs of it. When entrepreneurs and venture capitalists meet at the bartering table to talk over the terms of their agreement, there is often too much or too little negotiation that goes on, so here's some advice I came across that can help startup founders find the "sweet spot" for negotiations. Sponsor Matt Bartus , a Silicon Valley-based lawyer who mainly aids startups and VCs, wrote last week on his blog A View from the Valley warning entrepreneurs new to the negotiating table to not damage their relationship with their investors by over-negotiating . According to Bartus, a surplus of startup and legal advice from blogs has clogged the minds of new entrepreneurs who think they need to nit pick over every detail of a term sheet. "They sometimes feel the need to optimize every individual provision in the term sheet according to the guidelines found online," writes Bartus. "For example, a founder recently expressed his shock to me that a VC wanted an 8% non-cumulative dividend preference on the preferred stock given the historical lows of current interest rates. He didn't realize that dividends in fast growing companies are almost never paid, thus making this provision essentially irrelevant and just a relic of past practice." Bartus says that while over-negotiating and creating needless tension is a common misstep, it is just as bad to not push back enough and to accept the terms of the agreement without any discussion. When you roll over and take what they give you, you show them that you don't stand up for yourself, damaging both your credibility and the possibility of future investments. To avoid this, he provides a few suggestions for topics that are worth debating with VCs that won't necessarily damage your relationship. Of the dozens of issues that could arise between VCs and entrepreneurs, Bartus provides a list of six important issues that could be discussed during negotiations, of which three he suggests actually focusing on. These include valuation and dilution, liquidation preference, board of directors and voting provisions, founder vesting, antidilution protection, and finally, exclusivity. By knowing these important issues, you can boost your credibility with the VCs and you ensure that you can get the best results from the term sheets for you, the founder. This is exactly why hiring a lawyer with startup experience is key to doing things right. Yes, the job of the lawyer is to explain to terms to the entrepreneur so they know what they are signing up for, but mostly, that lawyer is there to take the burden of legal worries off their back. As with any position within your startup, lawyers should be chosen on merit, not based on their reputation to the founders. He recalls an issue he had when representing a VC who was dealing with a lawyer who was the father of the founder with no startup experience and who slowed the whole process down, damaging the relationship between the two parties. Just remember the real important part of a VC/entrepreneur relationship: building and growing a great product. Hire a great lawyer with startup experience and let them do the grunt legal work so as to not divert your energy and focus from your ideas and your business. For more legal resources geared at startups, check out our list compiled earlier this year . Discuss
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Avoid Legal Tussles When Negotiating With VCs
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Today, Twitter took the wraps off a new feature of the site. When logging in, it prompts the user to set defaults on being discovered with their email address or mobile phone number. It's called "Be Found on Twitter". Our contact at Twitter told us that, like many new features, this will show up for some users today and others soon. Up to this point, Twitter allows people to create a persona for themselves that may not be directly correlated to the real world. You can't do that on Facebook (assuming that you're following the terms and conditions). This change in settings - even if it is optional - represents a shift in how the service is working behind the scenes to connect people that already know each other. Personal data is moving in between the social networks and becoming a key part of cloud services. Sponsor Do You Want Followers? Default Settings Make it a Reality So far, Twitter hasn't offered a way to make this kind of connection easy. We believe the reason this service is being offered now is simple: Twitter wants to take your email inbox and turn it into relationships. Below is the screen that popped up for Web client users of Twitter that are being offered this enhancement. (Note: Those are my personal email and mobile phone digits, but I chose to opt-out of the service. In case you want to contact me , email is still an option.) Thinking a bit into the future, perhaps Twitter will offer to take my email folders and auto-magically create lists of users from the email accounts and phone numbers in them. This all gets interesting in the context that Twitter lists are viewable to the outside world - and inbox settings are not. There still seems like more work to do to make this all make sense, but for now, it seems to be somewhere between Buzz and Facebook's approach to connecting users to their intimate relationships. The Reverse of Buzz, or, Do Memes have Cellphones We can see the motivation for Twitter to launch this feature. One of the challenges the service has is also its greatest feature: no rules. Anyone, anything can have an account today: devices, dogs, spacecraft, germs, conferences. All of 'em are out there somewhere and are one button away from being in your feed. Something to think about in this mixed model of accounts, is that although the settings on Twitter are now moving towards discovering email and phone numbers for our contacts, we don't expect the Cassini Saturn spacecraft to have a mobile phone number. Although Twitter is amazing for finding information about the world in real time, one of the things that Twitter has lacked is stickiness with intimate contacts. Trying to get folks use Twitter to connect to their real friends, people they work with, and family members is a part of the battle for the real-time Web. Facebook has unique features and momentum in this area (e.g. requiring your real name), and Google Buzz made a big move in connecting the inbox for millions of Gmail users to its social service. API Makes it Harder to Create Harmonized Settings for Users This is a great example of where Twitter, being so decentralized, has to rely on partners to roll out these types of features. Traditional Web users see these features offered by the company, but others - Seesmic, Tweetdeck, Tweetie - may not ever offer this feature in their client. One thing to watch will be how Twitter evolves the terms of service and default settings as it ramps up its efforts to compete further for mind share in the real-time web. Taking this all into consideration, do you want to be found on Twitter? Discuss
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Be Found on Twitter: Connecting Our Dots in the Social Graph
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We don't know about you, but we're sort of a fan of being a fan of things on Facebook. It can be useful a way to keep up with what's going on at the White House , for example. Or you can let the world know that you enjoy " Not Being On Fire ", in case they were wondering. Or, you can express your support for political change. Or can you? We noticed over the weekend that
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Facebook Shutters Political Fan Page, Users Cry Foul
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