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).
The Handshake Deal Protocol
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Re: The Handshake Deal Protocol
#12This 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 is at least $1m more valuable than when they started raising money.
Re: The Handshake Deal Protocol
#13So 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 reconsider doing business with them altogether.
This protocol highlights that you don't need 50 pages of documentation to agree on something and I like it because of that.
Re: The Handshake Deal Protocol
#14Brb while I go make an Unofficial YC Handshake Deal Protocol app.
I was just thinking about using the "bump" feature a lot of smartphones have for step 3. The bump would have a message pop up on their screen, to which they would reply yes or no and completing step 4.
Re: The Handshake Deal Protocol
#15[deleted]
Re: The Handshake Deal Protocol
#16Oh I like this a lot. That adds a lot of clarity around what can be a very tumultuous time for a young company. I've personally been burned by the "We would like to come in but we don't want to lead." line. I treat such statements as polite "no thank you"s now.
Re: The Handshake Deal Protocol
#17Brb while I go make an Unofficial YC Handshake Deal Protocol app.
I was just thinking about using the "bump" feature a lot of smartphones have for step 3. The bump would have a message pop up on their screen, to which they would reply yes or no and completing step 4.
I would say,
1. something with a trigger like Bump,
2. which then pops up an Etherpad-style collaboratively-edited text field,
3. with MMO trade-dialog style 3-phase mutual-assent commit,
4. that leads to a copy being saved on both your phones, to a public-but-anonymous URL both parties can cite, and also forwarded to any other parties which either of you please--for example, your lawyers.
Re: The Handshake Deal Protocol
#18You 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.
Re: The Handshake Deal Protocol
#19Earlier quoted context omitted.
I was just thinking about using the "bump" feature a lot of smartphones have for step 3. The bump would have a message pop up on their screen, to which they would reply yes or no and completing step 4.
I would say, 1. something with a trigger like Bump, 2. which then pops up an Etherpad-style collaboratively-edited text field, 3. with MMO trade-dialog style 3-phase mutual-assent commit, 4. that leads to a copy being saved on both your phones, to a public-but-anonymous URL both parties can cite, and also forwarded to any other parties which either of you please--for example, your lawyers.
We live in social days. Add a FB/Twitter sharing "Just got an investissement from X"/"Just invested in Y"
Re: The Handshake Deal Protocol
#20Earlier quoted context omitted.
I wouldn't expect most "handshake deals" with a friend/spouse to require that level of formality - unless money is changing hands.
Agreed with the "most" sentiment. But it is worthwhile for anything where a misunderstanding is possible and the consequences of a misunderstanding would be meaningful (to you).
When I was first dating the woman who became my wife, we decided to take a vacation together and split the expenses. We worked up a budget and did a pretty good job of sticking to it, until our car had a minor issue and we had some extra expenses (an extra meal at a restaurant, etc.) When we did the numbers at the end of the trip, it turned out that I overpaid by a bit, and she wrote me a check for that amount. When I cashed it a week later, she got very upset with me, because she forgot about it and already slated the money for something else. My response was "well, you gave me a check and I simply cashed it. I would have gladly paid for the extra stuff, if I knew that's what you wanted". Her issue was that something unexpected happened with her money.
Long story short, a quick text with "About to cash the vacation check you wrote" would have saved us a fight. OTOH, coming up on 10 years together, so I think it worked out OK.