All Money Is Not Created Equal

Finance your company's growth without losing your stake in it

Too often, thanks to multiple rounds of equity investment, company founders wind up with only a small fraction of the businesses they start. But this situation isn't inevitable. The intelligent use of a variety of financing options—including debt financing—can help to maintain, or even grow, a founder's stake.

In All Money Is Not Created Equal: The Entrepreneur's Guide to Finding the Right Funding for Your Business, renowned Silicon Valley veteran David Spreng delivers an expert guide for entrepreneurs and founders seeking to maintain as much ownership stake as possible in the companies they create as they move through the various stages of the financing process. The book draws on the author's decades of experience as a venture capitalist, venture debt lender, and CEO of a publicly traded company in Silicon Valley, as well as interviews with entrepreneurs, board members, investors, and bankers.

Readers will also find:

• A well-rounded and insightful perspective on the financing process informed by industry veterans
• An informal and accessible exploration of a complex topic that remains critical to the success of entrepreneurs and founders
• Discussions of alternatives to equity financing, including debt financing, in the growth phase of startups

An essential handbook for startup founders, entrepreneurs, and managers, All Money Is Not Created Equal also deserves a place in the hands of company board members, venture capitalists, investors, and investment bankers interested in the company financing process.

Foreword ix

Acknowledgments xi

Introduction xiii

Part One: Setting the Stage 1

Chapter 1: A Tale of Two Companies 3

Chapter 2: All About Growth: My Journey from Venture Capital to Venture Debt 17

Part Two: Startups: Understanding the Arena 29

Chapter 3: The Stages of a Startup 31

Chapter 4: Geography Matters – to a Point 45

Chapter 5: The Startup Ecosystem 53

Part Three: Getting the Money 65

Chapter 6: Your First Outside Investors 67

Chapter 7: What Kind of Money Is Right for Your Business? 75

Chapter 8: The Ins and Outs of Venture Capital 85

Chapter 9: Debt Is Not a Four-Letter Word 91

Chapter 10: What a Deal with Debt Looks Like 97

Chapter 11: Making the Most of Debt 109

Chapter 12: Options for Exits 119

Part Four: Making the Best Use of Your Money 129

Chapter 13: Bullshitters, Liars, and Jerks 131

Chapter 14: Bullshitters, Liars, and Jerks, Part 2: What You Need to Be on Guard For 137

Chapter 15: Your Team: Getting the Right People in the Right Jobs 143

Chapter 16: Founder versus CEO 151

Chapter 17: Getting the Most from Your Board 157

Chapter 18: The Moral Contract 165

Part Five: Going Forward 171

Chapter 19: Runway’s Story of Going Public 173

Chapter 20: Conclusion 183

Appendix 189

Index 211

DAVID SPRENG is a veteran investor based in Silicon Valley with 30 years’ experience as a venture capitalist and growth debt lender. As a VC, he was involved in the formation and development of approximately 50 tech companies resulting in 18 initial public offerings and 14 trade-sales. He is the founder and CEO of Runway Growth Capital.

Far too often, founders pour their heart and soul into a company only to find themselves starved of any substantial equity ownership. The multiple rounds of funding often required to get an organization to a place where it is viable in the marketplace can dilute the ownership of even the most careful entrepreneur.

In All Money Is Not Created Equal: How Entrepreneurs Can Crack the Code to Getting the Right Funding for Their Startup, renowned investor and Silicon Valley venture capitalist David Spreng delivers an accessible and authoritative discussion of the myriad financing options available to founders and how to best utilize them to ensure both company growth and the maintenance of a significant ownership stake.

In the book, Spreng interviews key stakeholders in the startup ecosystem, from entrepreneurs to venture capitalists, board members, and investors, who discuss the full range of corporate eventualities, like mergers, acquisitions, IPO, failure, and success. He also draws heavily on his decades of personal experience in the industry, during which he was involved with dozens of growth companies.

You’ll find tried-and-tested strategies for obtaining financing at every stage of company growth that don’t drain your equity. In particular, you’ll discover the value of using debt financing during later-stage funding rounds to avoid unnecessary dilution and maintain the value of your ownership stake.

Perfect for prospective and currently active entrepreneurs with growing companies, All Money Is Not Created Equal is also an essential resource for angel and venture capital investors, as well as lawyers, accountants, and tax specialists who provide financial and legal services to entrepreneurs.

Praise for ALL MONEY IS NOT CREATED EQUAL

“A great idea, a fantastic team, and the right capital structure are the necessary ingredients for success in any business, small or large. David’s insights on the right mix of equity and debt are an essential input before building your business.”
—Warren Jenson, CFO, Nielsen

“David Spreng has been a friend of mine since our Minneapolis days, and I can easily say he’s one of the smartest and best guys in the investment business. Importantly, David is both a highly accomplished investor, but also a successful founder and entrepreneur. Now, he’s sharing insights from his all-star career in this highly readable, highly informative treatise. All Money Is Not Created Equal says it all and is a must-read!”
—Michael Moe, Founder and CEO, GSV Asset Management and author of Finding the Next Starbucks

“High-growth entrepreneurs assume that raising external financing means selling multiple rounds of stock to angels and venture capitalists, a process that often leads to the founders ending up with little ownership and control of the firm they started. In recent years, however, the volume and sophistication of debt products available to entrepreneurs has exploded. This book visits this exciting territory and argues that entrepreneurs can—and should—think every bit as strategically about their mixture of debt and equity financing as large firms have done for many decades.”
—Josh Lerner, Jacob Schiff Professor, Harvard Business School and author of Patient Capital