How do economic trends impact the venture capital sector? Why is a strong governance framework essential for startups and investors? And what are the common pitfalls in negotiating deal term sheets? In this interview, Daan Wilms van Kersbergen, VC Investor at The Yield Lab Europe’s Dutch office, shares his insights on the art of successful deal-making and the growing role of ESG in the fast-changing world of venture capital.
Daan Wilms van Kersbergen is a guest speaker at the popular 2-day Entrepreneurial Finance: Venture Capital Financing program led by Prof. Cyril Demaria at the Amsterdam Institute of Finance.
“The ideal situation is where there is no trade-off between sustainability and profitability. Financial success will always matter because, in a financially unhealthy company, the positive impact is inherently limited.”
Daan Wilms van Kersbergen, Venture Capital Investor, The Yield Lab Europe
We posed five pressing questions to Daan Wilms van Kersbergen, covering topics from deal term negotiations to the growing influence of ESG in venture capital. Explore his vision and insights as he navigates the complex world of early-stage investments, providing practical advice for both investors and startups.
Daan, how do current economic trends affect the venture capital sector and how investors engage with startups?
“Macroeconomic trends shape the investment climate, and this applies to venture capital as well. During low-interest periods (until late 2021), capital flowed into higher-risk categories since returns in other asset classes were under pressure. For VC, this meant more funds were raised, more capital became available for startups, and relatively more was invested. It was easier for startups to raise money, rounds were larger, and valuations were higher. Since 2022, this trend has reversed, with longer fundraising periods and pressured valuations. This shift is also reflected in non-financial deal terms agreed upon between investors and startups, such as stronger liquidation preferences, offering investors more protection.”
As part of the Entrepreneurial Finance: Venture Capital Financing program, Daan leads the Deal Term Negotiation Game. He co-founded a business simulation game company and developed the venture capital Deal Term Negotiation Game, which is used to teach participants the dynamics of deal term negotiations from the perspectives of both investors and entrepreneurs.
“While the legal aspects of term sheets can be technical and dry, the game brings them to life in a dynamic, engaging way.”
What makes your Deal Term Negotiation Game an essential part of the Entrepreneurial Finance: Venture Capital Financing program?
“The game offers an interactive and playful way to dive into VC deal terms, allowing participants to experience negotiations firsthand as an investor with startups. While the legal aspects of term sheets can be technical and dry, the game brings them to life in a dynamic, engaging way. The negotiation process in the game consists of multiple rounds where participants receive direct feedback. These personalized feedback loops make the experience highly educational and contribute to the unique learning experience of the game. Additionally, the game has a competitive element. All participants start from the same point in the negotiation, and naturally, everyone wants to perform well compared to the rest of the group.
Why is creating a governance framework crucial for both investors and entrepreneurs?
“First, investing in a startup is a long-term commitment. Unlike public markets, you can’t simply sell your shares. So, both parties must make well-considered decisions. Second, entrepreneurs and investors don’t hold equal positions; it’s not a 50-50 partnership. Investors offer capital for minority stakes, while entrepreneurs commit time and often retain larger shares, especially early on. The entrepreneur runs the company, while the investor typically provides advice and support.
Both parties want the venture to succeed, and as such they are aligned in their interests. Given their different positions, it’s essential to establish adequate governance, information flow and decision-making processes.
Moreover, investors, especially funds, often manage shareholder capital, making proper management a necessity. A solid governance framework is, therefore, a requirement for most investors.”
“… I strongly recommend every entrepreneur be well-prepared for term sheet negotiations. Especially if you’re new to this, legal advice can be invaluable.”
What are the most common pitfalls investors and entrepreneurs face during Deal Term Sheet Negotiations?
“Young or inexperienced entrepreneurs often underestimate the investment process. If you’re not prepared for investor expectations or questions, the process can take longer than anticipated. I frequently meet entrepreneurs who don’t fully understand their term sheet’s terms, so we first explain the clauses before negotiating. Young startups often have limited funds and view legal advice as too expensive or unnecessary, but I strongly recommend every entrepreneur be well-prepared for term sheet negotiations. Especially if you’re new to this, legal advice can be invaluable.
Investors usually have more experience with term sheets, but they also face pitfalls. As with any negotiation, it’s crucial to prioritize important issues and identify areas with more flexibility. Sometimes key issues are set aside with the assumption they’ll be resolved later, but that’s not always the case.
For both parties, it’s essential to manage the process efficiently and communicate clearly and transparently about positions, expectations, and timelines. This avoids potential frustration, since term sheet negotiations lay the foundation for a longer relationship. Therefore, it’s wise to prevent frustration early on.”
How do you see ESG’s growing role in venture capital, and what are the benefits for investors and startups?
“In my opinion, ESG, especially sustainability, is becoming increasingly important, though it shouldn’t be overestimated; many investors remain primarily profit-driven. Of course, the ideal situation is where there is no trade-off between sustainability and profitability. Financial success will always matter because, in a financially unhealthy company, the positive impact is inherently limited. VC can drive sustainability (and broader ESG) since it’s often technological innovations that drive improvements and progress.
At The Yield Lab Europe, we invest in such innovations in the Food & Agri space. We’re an impact fund, meaning that every startup we invest in must contribute to the sustainability of the food system. This often involves reducing CO2 emissions, fossil inputs, toxic pesticides, and improving biodiversity, among other things. We track various impact KPIs per startup, and we hold ourselves accountable for meeting them. It’s a strict criterion, not just a nice story. For us, the ‘E’ (Environmental) in ESG is particularly relevant.”
Daan Wilms van Kersbergen is a guest speaker at the challenging 2-day Entrepreneurial Finance: Venture Capital Financing program, taught by Prof. Cyril Demaria at the Amsterdam Institute of Finance. Discover how to invest in new ventures and raise funds for startups. Learn more about this Entrepreneurial Finance program and reserve your spot here.
Brochure
Reserve
Enroll