Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist is the definitive guide to venture financings. This book is for anyone who wants the insider's guide to raising money, negotiating deals, and to know what really makes venture capitalists tick. Don't believe us? Check out these recommendations:

The adventure of starting and growing a company can exhilarating or excruciating.or both. Feld and Mendelson have done a masterful job of shedding light on what can either become one of the most helpful or dreadful experiences for entrepreneurs.accepting venture capital into their firm. This book takes the lid off the black box and helps entrepreneurs understand the economics and control provisions of working with a venture partner. - Lesa Mitchell, Vice President, Advancing Innovation, Kauffman Foundation In my entrepreneurship class at Stanford, the number one topic is venture financing -- how it works and how (or even whether) to get it. There are no two better people to coach an entrepreneur through the venture process than Brad Feld and Jason Mendelson, and next to in-person guidance this book is the next best thing. I am planning to make this required reading for my class at Stanford. - Heidi Roizen, Fenwick and West Entrepreneurship Educator, Stanford University Technology Ventures Program Venture Deals is a must read for any entrepreneur contemplating or currently leading a venture-backed company. Brad and Jason are highly respected investors who shoot straight from the hip and tell it like it is, bringing a level of transparency to a process that is rarely well understood. Its like having a venture capitalist as a best friend who is looking out for your best interest and happy to answer all of your questions. - Emily Mendell, Vice President of Communications, National Venture Capital Association I've been reading and loving Brad Feld's blog for years. He's one of my favorite venture capitalists on the planet. I'm delighted Brad and Jason have written the definitive book for entrepreneurs seeking to learn about raising and going through the venture capital process. - Bijan Sabet, Spark Capital Feld and Mendelson pack a graduate level course into this energetic and accessible book. The authors. frank style and incisive insight make this a .must read. for high-growth company entrepreneurs, early stage investors, and graduate students. Start here if you want to understand venture capital deal structure and strategies. I enthusiastically recommend. - Brad Bernthal, CU Boulder, Associate Clinical Professor of Law - Technology Policy, Entrepreneurial Law My biggest nightmare is taking advantage of an entrepreneur without even realizing it. It happens because VCs are experts in financings and most entrepreneurs are not. Brad and Jason are out to fix that problem with Venture Deals. This book is long overdue and badly needed. - Fred Wilson, Union Square Ventures I would highly recommend .Venture Deals. to any entrepreneur, venture capitalist, student, or casual reader who wants to get the .true scoop. on how venture deals come together and what the venture capital landscape truly looks like. The authors are not only veterans of the industry, but are willing to share their unvarnished views of what venture is all about. The reader will not find the insights shared here anywhere else. And, perhaps best of all, the authors write in an easily readable, casual style that makes the book quite fun to read. - Craig Dauchy, Cooley LLP A must-read book for entrepreneurs. Brad and Jason demystify the overly complex world of term sheets and M&A, cutting through the legalese and focusing on what really matters. That.s a good thing not just for entrepreneurs, but also for venture capitalists, angels and lawyers. Having an educated entrepreneur on the other side of the table means you spend your time negotiating the important issues and ultimately get to the right deal faster. - Greg Gottesman, Managing Director, Madrona Venture Group

As you may recall, Brad and I have been blogging about 409A since the initial proposed regulations were released. You can find our series here.

The final regulations were released.  The work of artistry is 397 pages.  Since most of you will not find the need to read all 397 pages, you might be asking “so what’s the deal with the final regs?”

Basically, the final regs reaffirmed everything that we’ve been saying about 409A.  Nothing major has changed, although the tax experts are still sifting through the regulations and we’ll update you as info is delivered to us. 

One thing that the final regs did articulate (better, not great) was regarding start up companies potentially using their own internal finance people to conduct their 409A valuations.  As you might recall, our guidance was that all private companies should use an outside valuation firm, as the internal valuation method was too tough to comply with and potentially would lead to liability for the company and its financial officer.

Specifically, the regs say that an internal finance person can conduct a presumably valid 409A valuation if the person has “significant experience.”   This generally means at least five years of relevant experience in business valuation or appraisal, financial
accounting, investment banking, private equity, secured lending or other comparable experience in the line of business or industry in which the service recipient operates.

I don’t know if we have any financial folks at our start ups who fall under these guidelines.  It’s a pretty tough standard to meet.  Our original thoughts stand that the safest way is to employ outside valuation experts.

We’ll keep our eyes on all the different interpretations of the final regs and post from time to time on the latest and greatest thoughts.

Brad sent me a link to an article the other day regarding the IRS urging companies to pay the taxes owed by workers that received backdated options. This has been a subject that hasn’t gotten nearly the limelight that the actual backdating scandals have gotten.

If you remember from our 409A series, stock options that are priced below fair market value subject the recipients of these options to a 20% excise tax on top of normal income tax on the spread.

The IRS came out the other day and “suggested” that companies who have issued backdated / under priced options should pay these liabilities on behalf of their employees. I won’t even try to estimate how much this aggregate liability amounts to. I’m sure the amount adds up to a “$B” number.

What’s interesting is that the government will make some money and if companies comply with this, the IRS will only have to go after one tax payer, the corporation, not the individuals.

As critical as we’ve been of 409A, I don’t have a ton of sympathy with companies who blatantly backdated their options. Brad’s bet (and I concur) is that this “suggestion” gets codified into the code when the final 409A regulations are published

A belated holiday gift was given to all California option grantees from the California Franchise Tax Board. If you remember from our previous series on 409A, if you screw up, the option holder gets hit with a 20% federal excise tax. Not to be outdone, it appears that California is also tacking on a 20% state excise tax as well.

A friend of ours at a large Silicon Valley law firm indicated that the instructions to the CA tax forms include this new 20% tax, and despite contrary reports last fall from the CA Tax Board, it appears they now intend to get in on the game. Please note that the online forms are different than the hard copies sent out to taxpayers.

Ahwnold? Ms. Pelosi? Please stop the madness.