Brett, I've seen participation and preference multiples in term sheets from Tier 1 investors. It all depends on the deal, the stage, and the environment. It's definitely not a bad sign for an entrepreneur, it's just all dependent on what kind of market you're in and what the demand for the deal is from other investors. Having said this, participation was classicly an "east coast" deal term so you'd probably still expect to see it more from new york/boston investors than from west coast investors. I think that's still accurate.

There seems to be agreement that better investors are much less likely to ask terms like fully participating preferred or a 5x preference multiple which are more onerous for founders. At what point then do you worry less about the terms you are getting and more about the investors you are getting such terms from?

Along the same lines, if you're having to scrape the bottom of the barrel for VCs, should you take that as a powerful sign that YOU are doing something wrong? Are there examples of good teams with good ideas that just had to take crappy terms from crap investors and lived through it to succeed?

Definitely heard about this before, but it was good to see examples. Also one thing that was glazed over at startup school (and at the other ones I listened to) is that it is an exclusive or sort of thing because these terms are specifically for a "subpar exit". Preference and participation OR conversion to common stock. Now it seems obvious, but before I was kind of thinking, "participate percentage-wise? don't they get to do that already because they have stock?"