Raising from VC? Read the Fine Print Before You Read the Term Sheet

Otonomos Founder & CEO Han Verstraete sits down with Anton Kouprianov to talk about the one piece of advice most founders never get: the best protection from a bad VC deal is not taking the money at all.

Zuck got his supervoting shares. So did the Google guys. If you can get away with founder-favourable terms, great — there's probably a downside to concentrating that much control too. But if you're a first-time founder sitting down with a VC, don't count on getting away with it. Ten votes per share is a Silicon Valley fairy tale reserved for a handful of names, not a template.

The best protection is not taking the money

Run the math before you run the deck. If you bootstrap and grow to a $100M business on your own, you keep close to full control. Take VC money instead, and dilution compounds round after round — even with founder-friendly terms, you can easily end up with 20% of the company. Want your $100M outcome back at that ownership level? You now need to build a $500M business, and that's a materially harder, longer road.

That's not an argument against VC. It's an argument for doing the calculation before the seduction of a term sheet, not after.

Don't hire the lawyer the VC recommends

Second piece of advice, and it's blunt: don't negotiate your term sheet with a Silicon Valley lawyer whose real client base is VC funds. They get their volume business from the investor side of the table, not from you — a founder who'll do exactly one deal with exactly one term sheet in the next five years. Work with someone who does litigation, who isn't beholden to the VC community, and who can look at a term sheet and ask, plainly, "what's going on here?"

Because here's the uncomfortable truth about founder shares: they can be clawed back. An "allegation" about a misclassified expense is sometimes all it takes to trigger a for-cause removal clause. That's not paranoia — it's the nature of a term sheet written by people who do a hundred of these deals a year, against someone doing their first.

Know who's on the other side of the table

There's a real information asymmetry between a VC and a first-time founder, and it's not evenly distributed by accident. There's a small group of genuinely excellent, ethical VCs — and a much larger graveyard of struggling funds hungry to wedge into a deal on worse terms. Knowing which one you're sitting across from matters as much as the term sheet itself.

None of this is a knock on venture capital as a category. It's a reminder that VC has an agenda, same as any other counterparty — and being clear-eyed about that agenda is the whole game.