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The Handshake Deal Protocol

ycombinator.com

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Re: The Handshake Deal Protocol

#22

Post by jessaustin »

jcampbell1 wrote: post #18
Uhhrrr wrote: post #11

You should probably clarify that this is not intended a legal contract and violations will be dealt with socially (if that is indeed what you intend).

What? How is this not a legal contract? All the elements are there.

They've left out the most important part: paying lawyers thousands of dollars!

Re: The Handshake Deal Protocol

#24

Post by monsterix »

Splendid. Was expecting something of this sort after Harj Taggar's post "We'll be circling back" [1]. Hope the protocol does good of what it intends to: i.e not letting VCs hide behind a VC way of saying no.

However from a situation standpoint, this kind of indicates beginning of incoming processes in VC funding. Bureaucracy. Like it happens in big boy industry. Seems a bit detrimental but probably dishonest and noob VCs asked for it.

[1] http://paulgraham.com/circling.html

Re: The Handshake Deal Protocol

#25

Post by jcampbell1 »

pg wrote: post #12
jcampbell1 wrote: post #5

This seems completely sound. Is it implicitly understood that all investors get the same terms? I assume that if there is an agreement to invest $100k at $5M cap, then the startup can't go take another $100k at a $4M cap, without giving that same deal to the first investor.

There are cases where that would make sense, e.g. if the second investor was some famous domain expert. That said, it doesn't happen often. The more common case is where the cap rises for later investors. Later investors gripe about that when it happens, but it's justifiable. The earlier investors took more risk. Plus the company actually is more valuable on account of their investment; a company that has raised $1m…

In my scenario, where the second investor isn't a domain expert, but says something like "I will say yes to $xxx at a a lower cap", then does the startup have a moral obligation to give the same deal to the first investor? I think so, but could be convinced otherwise. Maybe this never happens.

Re: The Handshake Deal Protocol

#27

Post by Jabbles »

Surely there's a huge opportunity for the market of VCs to favour those that move quickly: Bring an accountant to the startup demo day to look over the books of ones you find impressive, a lawyer on call to prepare a (i.e. tweak a standard) contract and a free coupon for a same-day courier service for the founders to return it once they've consulted their lawyer and signed. Then an instant money transfer.

Obviously, this puts an awful lot of power in the hands of the investor that actually attends the demo day. Those VCs (and their backers) willing to do so will face the usual risk/reward tradeoff.

Re: The Handshake Deal Protocol

#28

Post by _jss »

I could really use some advice on this, actually. It's very serendipitous to see this posted.

What if you have a handshake deal and the other person abruptly disappears? I'm incurring all costs of operation, they've gone back and not completed anything they've said they would and now don't even reply to emails?

Re: The Handshake Deal Protocol

#29

Post by timjahn »

Jabbles wrote: post #27

Surely there's a huge opportunity for the market of VCs to favour those that move quickly: Bring an accountant to the startup demo day to look over the books of ones you find impressive, a lawyer on call to prepare a (i.e. tweak a standard) contract and a free coupon for a same-day courier service for the founders to return it once they've consulted their lawyer and signed. Then an instant money transfer. Obviously,…

I think this would only work if the VCs had been regularly paying attention to the company long before Demo Day, and had done their research. I don't think they'd want to invest immediately after seeing the company for the first time.
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