January 1, 2000 was not a party day for the three founders of SpiffyTerm, Inc. Annabella Labella, Krishnuvara Ramakrishna, and Bob Sledge were MBA students at a prestigious West Coast business school that was known for its beautiful redrooftiled buildings and for its hardworking MBAs. Instead of joining the futile celebrations for a turn of the millennium that was really just a counting mistake, they decided to focus on the on-going negotiation that they had had with a number of venture capitalists. The three students had founded the new company on the basis of an idea that had come to them while munching burritos in the school's famous cafeteria. They were convinced that the recent Internet boom had missed the real opportunities offered by this new technology. They wanted to explore the lnternet's true potential by doing something that I would like to tell you about, but I would have to shoot you if I did. All I can say is that their idea involved living creatures on Mars, a really cool Web site, and lots of chocolate chip cookies for the company party. What preoccupied the founders most was a term sheet they had recently received from their contact partnera curious individual by the name of Wolf C. Flowat a well~known Sand Hill venture capital firm called Vulture Ventures (Exhibit 1). As far as the founders of SpiffyTerm, Inc. were concerned, this term sheet was so incomprehensible that it could have been in written in Swahili. So instead of celebrating the new millennium, the founders decided to use this day to understand the term sheet, and, most important, to determine what valuation and other terms they should be bargaining for