Creative Structures w/ Becki DeGraw | Wilson Sonsini Startup Legal Basics
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this dynamic episode of Startup Basics, Jason Calacanis and attorney Becky DeGrasse from Wilson Sonsini dive deep into the wild world of hot startups that have multiple term sheets and investors fighting to get in. They explore the "off-menu" deal terms emerging in today's competitive funding environment (03:40), including founder proxies where investors must give voting control back to founders (03:55), and companies raising over a billion dollars without any preferred directors on their boards (07:47). The conversation reveals how the power law drives investors to accept unprecedented terms just to secure a seat on breakout rocket ships, while also examining the resurgence of crypto deals and the ongoing tension between speed and proper due diligence in today's FOMO-driven market.
Speakers
Jason Calacanis (Host)
Angel investor and host of This Week in Startups, creator of the Startup Basics podcast series. Former Silicon Alley Reporter founder who has invested in Uber, Robinhood, and other unicorns with decades of experience in startup ecosystems.
Becky DeGrasse
Partner at Wilson Sonsini Goodrich & Rosati, one of Silicon Valley's premier law firms. With 18 years of legal experience representing both startups and investors, she specializes in venture financing and has guided companies through everything from seed rounds to IPOs.
Key Takeaways
Embrace the Proxy Power Play
High-performing companies are demanding founder proxies from investors in secondary transactions—if you invest, the founder gets voting control over your shares. (04:00) This shift reverses traditional power dynamics and requires investors to bet entirely on founder competence. For ambitious professionals: when you're winning, don't just negotiate harder terms—restructure the game itself.
Skip Traditional Governance When You're Hot
Billion-dollar companies are operating with zero preferred directors on their boards, defying conventional startup wisdom. (07:47) While boards provide invaluable mentorship and connections for most companies, exceptional performers can demand governance-free structures. The lesson: when you have overwhelming leverage, traditional "best practices" become optional constraints.
Lock in Your Next Round Today
Series seed companies are requiring investors to commit to predetermined follow-on investments in future rounds with pre-agreed valuations. (11:38) This creates guaranteed funding runways and eliminates future financing risk. Master-level move: don't just raise money—engineer your future capital structure while you have maximum negotiating power.
Speed Trumps Diligence in Winner-Take-All Markets
Hot companies are shortening investor diligence to days instead of weeks, threatening to "next" investors who slow things down. (19:01) The fastest path to closing wins over thorough analysis when demand massively exceeds supply. For high-achievers: when you're the prize, control the process timeline ruthlessly.
Prepare for Success While You're Still Building
Half of early-stage companies have major structural flaws discovered during diligence—missing IP assignments, undocumented equity, no vesting schedules. (20:25) Getting these fundamentals right early positions you to move fast when opportunities emerge. The insight: excellence isn't just about your product—it's about having bulletproof operational foundations ready for prime time.
Statistics & Facts
- Companies can raise over a billion dollars with zero preferred directors on the board. (07:47)
- Secondary sales and proxy arrangements are now appearing as early as Series B rounds instead of waiting until crossover or pre-IPO stages. (07:09)
- 50% of seed-stage companies have significant issues requiring cleanup during due diligence, including missing IP assignments, undocumented equity structures, and lack of founder vesting schedules. (20:22)
