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Article 8 – Common Ground May 10, 2010

Posted by Lawrence Lenihan in Uncategorized.

Sorry for the disappearance – I had to wrap up my NYU Ready, FIRE! Aim class and I have been buried in presentations and businesses.  Great students – I think you will hear about a number of them in the future as they build and grow the fantastic business ideas they developed during the class.

The common ground in Article 8 is the same common ground that we have touched on before: communicate before you make a commitment to be partners as entrepreneur and VC and communicate regularly and often during your partnership.  No surprises.

You can’t hold back: if you as the entrepreneur feel that you never want to sell, don’t take the money.  In my mind, it is unethical and unscrupulous to do so.  And, by the way, you can’t expect your VC to go along with you if you change your mind mid-stream.  That was never the deal.  On the other hand, VC’s can’t tell the CEO that they are fine building to being a big public company that will stand forever on its own if what the VC really wants to do is to have a quick flip. This notion also applies if suddenly the VC is in fundraising mode and needs a nice exit to demonstrate returns.  If that was not the deal going in, it is wrong to expect the entrepreneur to suddenly go along with the VC’s new plans if that was not part of the original agreement.

But remember, these “moral” agreements hold only so long as each party is holding up to all other agreements.  If the company is not performing, don’t expect your VC to have a bottomless cup of patience to offer – he/she won’t.  And, if this is the case, you can’t expect your VC to want to wait forever for an ultimate exit if a nearer term option becomes available.



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