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The Handshake Deal Protocol

ycombinator.com

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Re: The Handshake Deal Protocol

#141

Post by FlukeATX »

joshAg wrote: post #108
FlukeATX wrote: post #99

Earlier quoted context omitted.

Though this does follow the qualities of a contract, it's important to note that oral agreements only get you so far in many jurisdictions and particularly have an upper limit on the value, around the order of $500. So while its great this is an explicit and clear conversation, I don't think you can say that it is assuring unenforceable agreements aren't made.

that's what steps 3 and 4 are for, aren't they? Wouldn't that make it a written contract instead of just an oral one?

As someone who hasn't been past first year of law school, I can't say whether an SMS creates a valid written contract.

Re: The Handshake Deal Protocol

#142

Post by tobyjsullivan »

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…

If a dollar bill is signed, only one party has a record (which can easily be spent and conveniently lost forever). If an email is sent, both parties have a record.

Re: The Handshake Deal Protocol

#144

Post by lominming »

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…

Reminds me of Ron Conway's Google receipt investment story. Signing on a dollar bill is interesting. Small shops/cafes frame the first dollar bill they earned. Similarly, founders can frame the first 'dollar' investment.

Re: The Handshake Deal Protocol

#145

Post by redblacktree »

jgross206 wrote: post #131

Seems like a good idea. One issue-- What if the investor doesn't immediately respond to the e-mail? Wouldn't that be sort of like the "partial yes" free option from the article, where they could wait until terms are (or are not) more favorable but still have a seemingly valid claim on an initial agreement? Perhaps there should be a time limit, or the start-up can have the option of sending a second e-mail withdrawing…

I think in that case, the expectation is that you (as a founder) have no obligation to "keep a place in line" for them. If they never responded, you can consider it a "no."

Re: The Handshake Deal Protocol

#146

Post by bgmasters »

One thing to note is that the CA statute of frauds renders certain kinds of oral contracts invalid, unless there is some memorandum of the oral contract is in writing. One such contract, as outlined in CA Civil Code Section 1624(a)(7) is:

> A contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, made by a person engaged in the business of lending or arranging for the lending of money or extending credit.

This wouldn't seem to apply to equity financings, but I suspect it applies to debt financings. If that's right, an actual "handshake deal" is not legally enforceable absent the kind of e-mail memorialization that PG is talking about. Of course, a "handshake deal" starts to look a lot like a simple written contract if a handshake alone cannot a deal make.

Re: The Handshake Deal Protocol

#147

Post by mfringel »

rthomas6 wrote: post #41
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.

I have a feeling that it's regional. I live in Boston, and there are still significant amounts of restaurants that don't take credit cards.

Re: The Handshake Deal Protocol

#148

Post by OnyeaboAduba »

quizotic wrote: post #34

The databaser in me wonders about the applicability of a two-phase commit protocol. Suppose PG/YC (s/PG/{FW or BF or ...}) acted in the role of a transaction coordinator. Instead of sending confirmation messages directly to each other, the parties would send their confirmations to the coordinator. Like an escrow agent, the coordinator would wait until all parties had confirmed and then send agreement notifications to…

great idea would add alot of extra work on the plates of yc mentors tho

Re: The Handshake Deal Protocol

#149

Post by a3_nm »

wuest wrote: post #80
rthomas6 wrote: post #41

Earlier quoted context omitted.

>Cash is more ubiquitous than phones Are you sure? Right now I have a phone but I don't have any cash.

The last time I had cash on my person, it was because I was traveling, and wanted some on hand. I haven't carried cash, as a rule, in almost a decade.

I'm not in the valley, but I have the opposite policy: I systematically use cash unless it is not possible to do so. (It's better for privacy.)

Re: The Handshake Deal Protocol

#150

Post by tomp »

swampthing wrote: post #137
tc wrote: post #65

This protocol causes a valid and enforceable contract to be formed. In fact, the constraints imposed by the protocol are almost exactly what you might learn about contracts in the first year of law school. A contract is composed of a 1) reasonably specific offer, 2) acceptance of that offer, and 3) some consideration between the parties. By forbidding vague offers, PG is assuring that obviously questionable or unenfo…

Taken literally - yea. But you can fix it pretty easily just by adding the standard "this is nonbinding" language that all term sheets have. That's a little inelegant though. Probably what would be best is just to have a page defining the protocol (and clarifying that it is nonbinding) and have people link to it in their handshake email.

What's the point in making a non-binding agreement? Isn't it easier to just not make one?
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