Keys to Negotiating with Investors
Mike Segal, New York Private Equity Forums
Ellen Sandles, Tri-State Private Investors Network
Most entrepreneurs and small business owners are at a disadvantage in funding negotiations with investors. Those seeking funding tend to have technical or marketing skills, while those providing funding can draw on the collective financial expertise of their networks.
Negotiations can be difficult, since entrepreneurs often are not familiar with the process, either in terms of issues to debate or options available at each juncture. As a result, when the deal is finalized start-up managers may believe that they have given away too much.
The lecture will provide perspectives and review options on the main negotiating points entrepreneurs will encounter during discussions with investors. The meeting is designed to facilitate more effective communication between startups and angels, so that they can focus on achieving shared goals and position their firms for future rounds of funding.
Negotiating points will include:
- type and terms of the security
- equity division
- anti-dilution provisions
- employment contracts
- vesting schedule
- liquidation preference
- investor's control of management
- performance measures
- pre-money valuation of the firm
Mike Segal is a Founder of New York Private Equity Forums, the pre-eminent private equity and venture capital event organization in the northeast. He is also a member of the screening committee for the Tri-State Private Investors Network, one of the area's leading Angel groups. Further, he is General Partner of the private investment firm Joshua Capital Partners, and founder of the boutique investment banking firm M.J. Segal Associates. MJSA was formed to address problems faced by emerging/growth companies who are unable to raise capital through the large Wall Street firms. The company focuses on developing relationships with institutional investors to find sources of equity and debt for its clients.
Ellen Sandles is President of the Tri-State Private Investors Network, an angel investor group that serves early stage entrepreneurs who are too small or not sufficiently developed for venture capital financing. The network functions primarily as a source of introductions, and not an investment bank that raises capital. In addition to linking entrepreneurs with qualified investors, Ellen also provides guidance on business plans and key business issues such as marketing strategy, competitive environment, and valuation of the venture. She has lectured frequently on angel financing at venues such as the Harvard Club, the NYU Entrepreneurship Conference, and the IBC Conference on Roll-ups and Mergers.