Therefore, Trivedi says, entrepreneurs have to know the key terms up front. Equally important is a clearly defined term sheet. A term sheet, he said, is a mutually agreed outline of commercial deal and terms. It forms the legal basis of agreements later. The term sheet, he added, contains details on how a venture has been valued, minority protection rights, exit routes for the VC, exclusivity clauses and drop dead fees.

These details, Trivedi said, are penned to protect the interests of the fund. Like the exclusivity clause and drop dead fees for instance. Signing the term sheet prevents an entrepreneur from leveraging it to get a fresh dose of funds from another VC. In much the same way, if an entreprenuer decides to walk out of the deal after the term sheet has been signed, the VC has to be paid for the effort put into valuing the company.

VCs also like to protect their stake in a company from being diluted, Trivedi added. Therefore, they incorporate an anti-dilution clause into the agreement, he said.

When it comes to the exit route, Trivedi said, that invariably the public issue route is sought out. Here again, the timing is crucial and VCs are unwilling to hold on indefinitely. Of late, he said, a new trend is making itself felt in the industry. He called it the `drag along' phenomenon. In this, if a VC finds a good buyer for its stake in a venture, even as they sell out, they ask the promoter to offload their holding.

While it initially met with a fair amount of resistance, Trivedi said that entrepreneurs are increasingly willing to explore this option. It allows them the flexibility to book profits earlier and enter into a fresh line of business. The problem in all this, however, Trivedi said is that most companies tend to look at VC funds as aggressive and seeking control. That, he was at pains to clarify, is an unfair perception because what VCs look at is not to control but to build partnerships and infuse discipline.