How can you avoid giving up control of your startup during a VC negotiation?

The higher your valuation, the less dilution you will suffer for the amount of money you raise. However, if your valuation is too high, investors may put in antidilution clauses that will create difficulties in future rounds if your company does not grow as expected. As a founder, a good strategy is to have a valuation in line with your progress, expected growth, and the market. The easiest way to set a valuation range with VCs is by comparable companies. Similar companies in your market at a similar stage will have recent (ideally within 12 months) raises and valuations. Your valuation is likely to be within the range of these comparables.

When negotiating over an evaluation, if there is too much discrepancy, as a founder you could steer towards a SAFE clause, to start with a convertible debt. That could postpone a proper equity evaluation and splits after the assumptions would be tested by the team and the market.

Some VCs are known for replacing founder CEOs. Some are known for supporting founders. Consider the value you bring as CEO and your long-term leadership goals. Do you want to be CEO forever, or would you be happier in a CXO position that is not the CEO? Understanding your motivations will help in your choice of VC.

Besides the valuation, there are many terms that affect your influence as founder. The voting rights of the different classes of stock are important. There are important details such as how those voting rights (vs pure economic rights) might change if employees are no longer with the company. The composition of the board is an important detail that will influence founder vs investor control. Finally the degree of revesting asked of the founder is important.

Voting rights most simply follow economic interest. So, try to minimize dilution. Voting rights can be extended both for founders (supervoting shares) and for investors (preferred voting rights, blocking rights, etc.). Consider what you as a founder bring to the company and that state of the market (founder friendly or investor friendly) in negotiating the voting rights clauses with investors.

Another aspect of negotiating voting rights could be that of following functions. Mostly important voting rights, if the product is ready, are usually over the spending, and that has 2 main voices: ads and HR. You could negotiate an agreeable threshold to avoid board meetings, and according to what your team competence is you could retain some veto or leave some veto rights to the investor, for specific functional decisions. Being a delicate side of the terms sheet, it should be taken softly and it should be a process to which both you and the investor contribute without friction, as it will determine both your company culture and life.

Investors want to make money from the increase in the value of the company's shares, not by putting their foot into the founders' shoes and running the company for them. If you have investors at the table with a different approach, run away. Surround yourself with people who want to help you build a global company through their capital, market experience, and contacts.

A significant part of keeping your vision alive is that you are also economically motivated to continue working with the company. If the negotiations get especially tense, you as a founder might want to bring up this point. The VC knows you need to be motivated -- creating a successful company is enormously hard -- so she is likely to acknowledge this point when you bring it up.

Two of the best ways to avoid giving up control of your startup during a VC negotiation: 1) Not needing VC! It's like getting a loan from a bank - the people who have great credit scores and perhaps could do without loans are the ones most likely to get loans! 2) Having multiple interested parties! The more other VCs are interested in you - essentially, a highly competitive or oversubscribed round - the more likely you are to receive better terms.