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The Handshake Deal Protocol

ycombinator.com

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Re: The Handshake Deal Protocol

#41

Post by rthomas6 »

kirse wrote: post #32

Why not do something creative like have the investor sign a dollar bill (of any denomination) and give it to the founders? Every founder comes prepared with some cash in their wallet, and then when you confirm a deal the founders ask the investors to sign the dollar bill with a Sharpie/pen. On it would be some sort of short-hand for the deal valuation... Cash is more ubiquitous than phones - even impromptu, it's high…

>Cash is more ubiquitous than phones

Are you sure? Right now I have a phone but I don't have any cash.

Re: The Handshake Deal Protocol

#42

Post by Jabbles »

eli wrote: post #35
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 would want a potential investor to spend a little more time on due diligence than that. Also, does the lawyer work for free? Don't you want to do some of your own research on the investor? This just sounds utterly bonkers.

I don't think many people turned down Yuri Milner's offer.

They may feel differently about a bigger, later stage offer, but they may have to trade that off with how quickly they want to start spending money. Would the speed and organisation of a VC impress you?

Re: The Handshake Deal Protocol

#43

Post by pc86 »

IgorPartola wrote: post #13

So I've wondered this for a while. Contracts are of course important, but if the only way you can trust the other party is through a contract and don't feel secure without one, can you really be sure that you won't get screwed over because of a hole in the contract? Seems to be that in reality a contract is only as good as the word of the person behind it, and if you wouldn't simply take them on their word, you might…

That's why you have your attorney look at the contract thoroughly. It's not about distrusting anyone, it's about making sure you're as protected as you can be.

Truthfully, a contract is only as good as your attorney is.

Re: The Handshake Deal Protocol

#44

Post by pc86 »

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.

Can someone define cap for me in this context?

Re: The Handshake Deal Protocol

#45

Post by crapshoot101 »

_jss wrote: post #28

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?

Honestly? Given what you've described, they aren't interested and it isn't happening.

Re: The Handshake Deal Protocol

#46

Post by samstave »

kirse wrote: post #32

Why not do something creative like have the investor sign a dollar bill (of any denomination) and give it to the founders? Every founder comes prepared with some cash in their wallet, and then when you confirm a deal the founders ask the investors to sign the dollar bill with a Sharpie/pen. On it would be some sort of short-hand for the deal valuation... Cash is more ubiquitous than phones - even impromptu, it's high…

This is a fantastic idea, and there is no reason that this couldnt be an option to the Handshake Protocol.

Also, these bills will be sold off and collected when massive failures happen in later years.

Re: The Handshake Deal Protocol

#47

Post by ritchiea »

[deleted] wrote: post #8

[deleted]

This is not uncommon. Google's NYC headquarters is in Chelsea and many of their employees live nearby. Just a few blocks away are the New York City Housing Authority's Chelsea Houses which provide low income housing for over 1000 residents. Google and the Chelsea Houses are just blocks away, far less than 30 minutes, and yet are totally different worlds.

Re: The Handshake Deal Protocol

#48

Post by Dylan16807 »

rlpb wrote: post #10

A handshake is generally not taken to be a legally binding contract in itself. An email might be. So it might be worth making it clear in the emails that you don't intend them to be legally binding.

A handshake sure sounds like a gesture used to signify that a deal has been negotiated to the satisfaction of both parties. Why would it not be a contract?

Re: The Handshake Deal Protocol

#49

Post by argonaut »

legutierr wrote: post #40
jcampbell1 wrote: post #18

Earlier quoted context omitted.

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

But might that not be a problem? Some deals must get hung up on the documentation, no? Or perhaps more reasonably, a disagreement over the materiality of something discovered in due-diligence? This can't be a promise to invest X at Y valuation no matter what, which it might be if it were treated as a legal contract.

I think the point you're missing is that an oral contract is legally binding. So even handshake deals are legally binding. The only thing preventing a startup from suing a VC that reneges is 1) the startup/founder's reputation and 2) the difficulty of proving your case. The legal system only prefers written contracts because it's easier to prove in court.
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