| Foreword | p. 11 |
| Acknowledgements | p. 16 |
| Company Valuation | p. 17 |
| Confidentiality | p. 19 |
| Fair Market Value and the Use of Comparables | p. 21 |
| Case Study: Comparables Analysis in Determining Valuation | p. 27 |
| Effects of the Financing Environment and Intangibles | p. 31 |
| Risk and Exit Strategy for Investors | p. 33 |
| Future Capital Needs | p. 34 |
| Case Study: Relationship of Dilution, Valuation, and Investor Return | p. 35 |
| Venture Investors Need to Shoot for High Returns | p. 44 |
| Common and Preferred Stock and Effects on Valuation | p. 49 |
| The Relationship Between Common and Preferred Stock | p. 51 |
| Straight Common or Convertible Preferred Structures | p. 52 |
| Case Study: The Common and Non-convertible Preferred Structure | p. 55 |
| Impact on Management | p. 58 |
| Alignment of the Interests of Stakeholders | p. 60 |
| Impact of Common and Non-convertible Preferred on Term Sheet Structure | p. 63 |
| Dilution | p. 65 |
| A Sensitive Issue for Founders | p. 66 |
| The Mechanics of Dilution | p. 68 |
| Full-ratchet Provisions | p. 71 |
| Weighted-average Dilution | p. 72 |
| Narrow-based vs. Broad-based Weighted-average Anti-dilution | p. 74 |
| Stock Options and Their Effect on Capital Structure | p. 77 |
| Balancing Financing Needs with Competitive Best Practices | p. 78 |
| Dilution and the Protection Investors May Require | p. 81 |
| Director and Advisory Board Member Compensation--The Hidden Costs of Added Value | p. 85 |
| Flat Rounds and Down-Rounds: Term Sheets as Road Maps | p. 91 |
| Multiple Classes of Preferred Stock and Implications in a Flat- or Down-Round Financing | p. 92 |
| Resetting the Clock | p. 94 |
| Case Study: Company, Inc.--Sample Term Sheet | p. 100 |
| Alternatives to Equity Financing: Types of Debt and Bridge Financing | p. 109 |
| Strategic Sources of Capital: Alternatives to Traditional Debt | p. 111 |
| Debt and the Capital Structure: The Pros and Cons of Using Leverage | p. 112 |
| Sources of Leverage | p. 115 |
| Term Sheet for Convertible Promissory Notes | p. 121 |
| Case Study: Company, Inc.--Summary of Terms for Convertible Promissory Notes | p. 122 |
| Due Diligence: How Investors Size-up a Company | p. 127 |
| How to Prepare | p. 130 |
| Peeling the Onion: Understanding the Business | p. 132 |
| Assessment of Business Mechanics | p. 134 |
| Organizational Structure | p. 134 |
| Markets and Market Positioning | p. 136 |
| Products, Suppliers, and External Relationships | p. 140 |
| Strategic Plan | p. 141 |
| Product Research and Development and Services | p. 142 |
| Sales and Marketing | p. 144 |
| Sales Associate Profiles and Incentives | p. 146 |
| Partnering Program and Distribution Channel Definition | p. 147 |
| Direct and Indirect Selling Strategies | p. 148 |
| Pricing and Discounting Practices | p. 149 |
| Marketing Materials and Programs | p. 150 |
| Financial Structure | p. 151 |
| Cash Flow Statements | p. 152 |
| Income Statements | p. 153 |
| Balance Sheets | p. 154 |
| Pro-forma Financials | p. 155 |
| Organizational Structure, Management, and Other Issues | p. 156 |
| Physical Plant, Production, and Outsourcing | p. 156 |
| Other Significant Issues | p. 156 |
| The Lawyer's View: Ins and Outs of Successful Financings | p. 159 |
| What to look out for in a Term Sheet: Discussion with Private Equity Lawyer James M. Crane | p. 161 |
| Logistical Coordination of Venture Firms, Legal Teams, and Company Management: Guidance from Sarah Reed, General Counsel, Charles River Ventures | p. 182 |
| Cookbook for a Successful First Financing Transaction | p. 184 |
| Cookbook for a Successful Follow-on Financing Transaction | p. 187 |
| Raising Capital | p. 197 |
| Discussion with Andrew McKee, Entrepreneur and Private Equity Investor | p. 199 |
| Placement Agents--Terms of Engagement: Discussion with Ginny Davis Wilmerding | p. 213 |
| Appendix | p. 223 |
| Sample Term Sheet | p. 224 |
| Administration and Compensation of Boards and Advisory Boards | p. 239 |
| Documents Likely to be Requested During Due Diligence | p. 244 |
| Time Value of Money Tables | p. 247 |
| Index | p. 249 |
| About the Author | p. 255 |
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