I was talking to an entrepreneur client yesterday (this client is a rock-star and a visionary in his space), and I just talked to another client who is working hard to do his first start-up (in a different space from yesterday’s client).

The rock-star has name brand VC (that he does not actually know) making cold calls to him trying to get into his next venture. For the other guy, it’s an uphill battle. No surprises here. 

Here is the issue. In each case, I have met with the client and discussed what is “market” for terms in series A investments. Now, I actually know what market is in Boston/New England because our firm does the research on New England deals every quarter. We actually have a database with the terms, the valuations, the investors etc. And, to make the point again, we update every quarter. To my knowledge, no one else does that for New England. (Note that I stress New England because Fenwick does something similar on the West Coast.)  BTW, we also publish some of the data in EEC Perspectives.

I can assure you that I have been in plenty of conversations in which a VC, lawyer, banker or other person has baldly asserted that XXX is a current market term, and I know that that only a small minority of deals had XXX last quarter (last year, whenever). I had a VC assert in a negotiation that his fund only did deals with dividends. But I knew, based on our research that this particular fund did about half their deals with dividends and half without. We can tell you the actual range and distribution of dividend rates on deals that had dividends in the last quarter… and so on.

But who cares?

The rock-star can (and will) get any deal he wants. He just wants to know what are the best terms (i.e. no participation etc.). He doesn’t care, nor should he, whether they are prevalent market terms or not. He is going to ask for and get the best terms.

The other client is not going to have a lot of (any?) choices. He is going to take what he can get.

In either case the facts (i.e. what is going on in the market) don’t matter. 

Now, you could point out that there must be people in the middle, for whom such knowledge could be useful for negotiation. Unfortunately, one of the characteristics of the market we are in is that it is really tough to raise money if you are not a rock-star.