How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO

Deal Terms

My father said: You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.

—J. Paul Getty

When an angel or VC wants to make an investment, they issue a term sheet. This is a short document—one to four pages or so—that sets forth the amount to be invested and the valuation. There is also an array of protections that are heavily legalistic and technical. Often these are the most critical part of the document, yet investors tend to focus instead on the valuation. It can be a huge mistake.

Mark Zuckerberg ...