Finance Geek

For several years the public has been told that “green energy” –an expansive term that embraces renewable energy, pollution reduction, and conservation– will create jobs in America, lots of jobs. And that the federal government must subsidize green energy to create these jobs.
Now it turns out that story is nothing but a fairy tale.
At a hearing Wednesday before a House Oversight and Government Reform subcommittee, the Inspector General of the Energy Department and an Assistant Inspector General of the Labor Department testified that funds authorized by Congress to create green…

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Hardly a day goes by without some pundit bemoaning the loss of the U.S. manufacturing base, and with it, jobs. Usually the blame is placed on China.
It’s nice, frequently heated rhetoric. But it’s also utter nonsense.
To bemoan the loss of manufacturing jobs is to bemoan economic progress. Not asked enough of those with rose-colored visions of a not so glamorous manufacturing past is what advanced economic society anywhere in the world has gotten that way by way of clinging to days gone by. In the U.S. we can point to Michigan as a state stuck in the past, and the result is massive…

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Best selling author and Harvard professor Niall Ferguson recently had at it on CNN with Columbia professor and director of the Earth Institute Dr. Jeffrey Sachs over the Occupy Wall Street movemen Sachs - as he recently told the Daily Ticker - thinks Wall Street has acted like robber barons and deserves harsher regulations and [...]

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Follow The Daily Ticker on Facebook here! Europe is a mess; many European nations are in recession or face sluggish growth prospects. Across the Atlantic, the U.S. is plagued by high unemployment, modest growth and a trillion dollar deficit. After 500 years of predominance, the West is facing some huge challenges. At least that’s the [...]

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Follow The Daily Ticker on Facebook here! With the heads of France, Germany and the IMF summoning Greek Premier George Papandreou for an “emergency” meeting in Cannes, the Fed meeting became something of an afterthought on Wall Street Wednesday. Still, what the U.S. central bank says and does has huge implications for the global markets [...]

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Follow The Daily Ticker on Facebook here! For the past several years, an argument has raged about about the US should deal with its lousy economy and debt-and-deficit problem. On the one hand are the “austerians,” who think the US should immediately cut government spending to balance its budget, “taking our medicine” in one painful [...]

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Thirty-seventh in a series of weekly posts by myself and Nicholas Lovell of Gamesbrief which answer the fifty questions you should ask before raising venture capital.  We expect the series to run for a year after which we will collate the posts into a book.  You can find the rationale behind the series here, and the list of questions here.  We welcome your comments on any and every aspect of what we are doing.

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I just brainstormed common pitfalls that entrepreneurs fall into during negotiations with my partner Richard Marsh.  The top five are listed below, in rough order of importance/frequency of occurrence.

1. Focusing on the wrong points/ignoring any of the most important terms

   In previous posts I listed out the key terms in a termsheet (see here and here).  A common mistake is to focus on other areas, either at the termsheet stage of negotiations or when the definitive documents are being agreed.  There are a great many points that need to be discussed and many of them are complicated to understand and it can be easy to get excited about the wrong points.  Wasting energy and goodwill on clauses of minor significance will weaken your position on other points and is a classic negotiating error.

2. Trying to win every point

   Trying to win every point makes sense in situations where there is no need for an ongoing relationship between the parties – for example when you come to exit your company.  A VC deal marks the start of a relationship and is emphatically not one of those situations.  So rather than to win every point the aim of negotiations should be to reach a deal that both sides feel is fair and reasonable.  Fighting for every point will simply delay completion and get the relationship off on the wrong footing.  It might also raise questions about your judgement.

3. Having an inaccurate view of market norms

   Most good VCs will be seeking to quickly agree a deal that is fair and reasonable (see 2) and their view of ‘fair and reasonable’ will be dictated by market norms which have evolved over time as the average outcome of previous negotiations.  When there is a difference of opinion over what is ‘market’ then each side starts to think the other is being unfair, and things can turn acrimonious pretty quickly.  This point really came home to me when I was negotiating a deal in 2006 and the company’s lawyer was arguing that liquidation preferences are unusual, we got stuck on this point for a long time before we managed to convince the CEO that we were being reasonable and his lawyer, a paid advisor, was in the wrong.  (Note the importance of having advisors who are familiar with startup financings.)

   It is possible to seek non-market terms, but in that case acknowledge that you are asking for something out of the ordinary.

4. Allowing the negotiations to get deadlocked without understanding the underlying differences

   Some negotiations fail because the two sides simply can’t agree on a deal, most commonly because of valuation. So long as that happens before two much time and money has been wasted then it is an inevitable occasional cost of doing business.  However, some negotiations get deadlocked when a solution could have been found if both sides had worked harder to understand the underlying differences.  Often this happens when discussions get overly focused on a single issue, egos come into play, and the wider perspective of the deal is lost.  Much better to keep egos in check, keep asking why something is important (ask yourself as well), and then keep a few issues in play and be willing to trade.

5. Taking your eye off the business

   The process of raising money often takes 6-9 months and if momentum falters at any point during that period then the chances of completing a deal recede.  The fundraising period is therefore doubly challenging because on top of the convincing someone to invest you need to keep the business moving forward with half your time suddenly taken away from operational matters.

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Nobody has ever wished that Twitter’s 140-character limit were even stricter, but then, nobody before had ever tried Tweeting from an old-school rotary-dial phone. Enter Tweephone, a phone that will let you do just that.

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Tweephone was made to celebrate the first birthday of the UP Digital Bureau in Russia. It embeds an Arduino and a …

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Follow The Daily Ticker on Facebook here! As Occupy Wall Street enters its sixth week, spiritual leader Dr. Deepak Chopra, also the author of the new book, War of the Worldviews: Science vs Spirituality, says it’s time to harness the “rage and anger” of the protesters into a new movement that pushes towards a new [...]

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Google Reader unveiled big changes this week, and the internet recoiled. Some folks (I’m one of them) loathe the new design: the excessive use of white space at the top of the screen, the heavy black-and-gray palette, the black-underlined links that have replaced the stand-out blue. But far more irritating to many users is the …

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Google Reader unveiled big changes this week, and the internet recoiled. Some folks (I’m one of them) loathe the new design: the excessive use of white space at the top of the screen, the heavy black-and-gray palette, the black-underlined links that have replaced the stand-out blue. But far more irritating to many users is the …

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Banks: Using the Guy Fawkes mask emblem of Occupy Wall Street and the “Anonymous” hacker group, leftists are planning a big Nov. 5 to-do to pull their money from big banks and put it into small banks. It’s economic idiocy.
Led by the likes of MoveOn.org, Arianna Huffington and a supposed Los Angeles art gallery owner named Kristen Christian, the leftist game of “blame the banks” for the acts of Democratic politicians is coming together Friday - Guy Fawkes Day in England - in an extravaganza of events alternately titled “Bank Transfer Day,” “Move Your…

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