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When it comes to accepting VC money, don’t get pressured into the wrong deal.

Raising money for your company can be an exciting, challenging, and stressful time. There are always plenty of other businesses and ideas out there competing for scarce funds. When you find a venture capital fund willing to potentially invest in your company, you will probably feel like you’ve struck gold. However, receiving a proposed term sheet from a VC should be seen as the beginning of a process, not the end of one. If possible, it’s always best to have interest from more than one VC, to ensure that you receive the best deal possible and don’t get pressured into a bad deal. The terms of an investment in your company from an outsider do matter, and can make a big difference down the road.

Some VCs may try to pressure you into accepting their terms before you are able to shop around for a better deal. What should you do? Fellow blogger Mark Suster wrote a piece a few years ago on this topic, and I think it’s still relevant today. If you’re in the process of raising money from venture capitalists, I recommend that you read it. To sum up his post: don’t cave into pressure tactics.

Article Referenced: Beware of Gym Salesman VC

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© 2011 Alexander J. Davie — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

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Alexander J. Davie

Alexander Davie is a corporate and securities attorney based in Nashville, Tennessee. Businesses of many varieties rely on his counsel and judgment throughout all stages of their growth. In particular, fund managers and investment management professionals seek the expertise Alex gained when he served as general counsel to a private investment fund. Alex also has significant experience and enjoys working with companies and entrepreneurial ventures, especially within the technology industry. As a believer in technology's ability to enrich people's lives and allowing people to connect with each other in new ways, he is passionate about helping tech startups achieve success. He is active in Nashville's startup community as a mentor at the Nashville Entrepreneur Center and participates in numerous other events geared towards making Nashville a nationally ranked location for starting a business.

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