Over 20 years ago, Heidi Roizen became the subject of a Harvard Business School case that is still one of the most popular cases taught at business schools around the world today. This episode is a culmination of Heidi’s best answers and actionable advice from two decades of being asked about the best ways to build one’s network — or, as Heidi likes to put it, how to build a relationship-driven life, as opposed to one that’s transaction-driven.

In Season 3 Episode 8 of The Startup Solution, Heidi covered "How to Think About Venture Capital" and explained the VC business model. She now wants to dive into the topic of dilution - that is, how to think about the trade-off between what you give up and what you get when it comes to your startup’s equity.

To determine if you should pursue VC dollars to fund your company, you first need to understand how the venture capital model works. Heidi covers the type of businesses and growth potential required for a VC to make an investment, along with the high risk involved in venture capital, and an explanation of the power law

A person with a big online presence is calling out Athena for the seed investment she received from a big corporation that appears to be in opposition with Athena’s company’s mission. Heidi points out why founders need to know as much as they can about potential investors before they take their money to avoid being blindsided by an association that may lead to reputational fallout.

Rudy, a founder in fund-raising mode, received a verbal term sheet. A what? Heidi informs Rudy that there is no such thing as a verbal term sheet and flags all the other issues with the investor’s offer. In this episode, Heidi resets Rudy’s expectations of what is involved in the fund-raising process, including the time it will take to properly diligence investors.

Simone is a founder in a challenging situation. The only financing she can raise comes with a catch – she needs to do a recap. Heidi reviews how Simone landed in this position, what a recap entails, and the best path forward for the company and investors.

What do you do when you want to exercise your startup’s stock options but need to borrow money to do so? Do you take an interest-free loan from your company? Heidi counsels her former student Aisha on why that may sound like a great offer, but the devil is in the details. It’s likely that a loan could lead to painful financial consequences later.

Many founders, like Alyssa, worry that a 409a valuation is considered a true market-based assessment of a company’s overall worth or potential. It is not. Heidi points out factors that influence a 409a valuation along with what is not reflected, namely, leadership, team quality, and disruptive potential.

An independent director can play a crucial role in mitigating conflicts of interest among board members while also providing valuable input. Heidi explains what an independent director does and why it’s important for a founder to include one on their board.

Chester, an early-stage entrepreneur, wants to put terms in place so he can never be fired by his board. Like many founders, he saw what went down with Sam Altman at OpenAI and wants to know what he can do to avoid a similar situation from ever happening to him. Heidi explains why boards are set up the way they are and reassures him that a board and accountability are good for an entrepreneur and their company.