Conceptual clarity: The ecosystem gamblers
The entrepreneurs are always ready to start the game. Of course, after they saw the success of other ventures. That was the time to take the idea to the next level. But, who really participates in a venture?
Let’s clarify, as the first step, the basic concepts of the ecosystem gamblers. It is important that the entrepreneur has a clear idea of who they are, what they do, and how to collaborate with each other to be able to conduct the investment rounds in an efficient, economic and clear way.
- The entrepreneur: even though that the other gamblers do not value his/her courage and creativity, without the entrepreneurs the terms: term sheet, ecosystem or startups would not exist. We have to take note that it might happen that the term “entrepreneur” can be used in the industry as a synonym of the term “founder”.
- The venture capitalist: usually we can identify it with the English name: Venture Capitalist or VC. These often come in several ways, sizes and experience level, but, in contrast with a simple investor, they are organizationally constituted and their main mission is to look for new early investment opportunities. Usually they intervene in the entrepreneurship operation but from a position in the Board of Directors of the company in which they are investing. It is important to consider that each one is very well structured with an inner hierarchy and you have to understand it at a 100%. Within the VC, exist different positions, and here we define the most common ones, so you can have a clear idea of who you are talking to:
2.1 Managing Director “MD” or General Partner “GP”: in some firm they can take decisions. In other firms, they have to consult every investment with the Board of Directors, so that means that it is just a title that they hold but is the highest position in the VC. Even though you have to show respect to everybody in the firm, you have to try that the negociation of your entrepreneurship is made with one of them and try to have a close relation with him or her.
2.2 Principals or Directors: usually they have a responsibility level and negotiation power, but their main task is to support the “MD” to close the transactions that are attractive to the VC.
2.3 Associates: typically they do not negotiate the transactions, they work for a “MD” or Principal and they complete the internal documentation process, diligence, financial and risk analysis, etc.
2.4 Analysts: usually they are recently college graduate that have to support the work of the associates.
We will talk with more details about the types of VC in the next Legal Trend, we will also discuss the concepts of the nomenclatures and series for the investment rounds.
If you have any doubt regarding the concepts or if you want to explore more about it, we recommend you the book “Venture Deals: be smarter than your lawyer and venture capitalist” written by Brad Feld and Jason Mendelson.
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