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Airbnb, My $1B Lesson

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Re: Airbnb, My $1B Lesson

#111

Post by PopeOfNope »

ghshephard wrote: post #35
beambot wrote: post #21

If it's bad form for a VC to break a handshake deal, it's equally-bad for a startup too... no? Doesn't that reflect poorly upon the founders? It's so important that YC went through the effort to codify the process: http://www.ycombinator.com/handshake/

I don't know about Handshake Deals, but everybody says it's bad form to back out once term sheets have been signed- but in the single round of VC funding that I had internal insight into, our VC backed out at the 59th minute after term sheets had been exchanged and agreed to, paperwork signed. On the basis of that, we even went out and brought on our first external board member. Now, this particular VC has only raise…

> VC backed out at the 59th minute after term sheets had been exchanged and agreed to, paperwork signed.

I'm curious how this works, legally. If they make the offer and you sign the papers, doesn't that legally obligate them to follow through on their offer?

Re: Airbnb, My $1B Lesson

#112

Post by plonh »

PopeOfNope wrote: post #110
someear wrote: post #105

Earlier quoted context omitted.

but at the end of the day, the haggling ended, and terms were agreed upon (it seems). Handshakes done. I think the comments have gone off on a tangent focusing on whether you getting cut out of the deal was ethical (whereas the blog post was just a flat out interesting story to read about). But at least the way your post reads, you definitely got screwed out of the deal. Sure, nothing is done until things are signed,…

> Handshakes done. Nothing's done until the papers are signed. This goes for all things in life, too, from investing to renting apartments. If you don't have a signed piece of paper, you have no deal.

One of the main selling points of YC is that they promise not to legal obnoxious things. Saying "nothing's done until the papers are signed" is completely missing the point.

Re: Airbnb, My $1B Lesson

#113

Post by plonh »

PopeOfNope wrote: post #111
ghshephard wrote: post #35

Earlier quoted context omitted.

I don't know about Handshake Deals, but everybody says it's bad form to back out once term sheets have been signed- but in the single round of VC funding that I had internal insight into, our VC backed out at the 59th minute after term sheets had been exchanged and agreed to, paperwork signed. On the basis of that, we even went out and brought on our first external board member. Now, this particular VC has only raise…

> VC backed out at the 59th minute after term sheets had been exchanged and agreed to, paperwork signed. I'm curious how this works, legally. If they make the offer and you sign the papers, doesn't that legally obligate them to follow through on their offer?

A contract isn't complete until someone actually spend money (or something of value) in reliance. The standard remedy for breach of contract is to unwind the victim's situation to the position they were in before the contract was signed.

So at the moment you sign the paper, but don't hand over money or burn other bridges or whatever, it is trivial to tear up the paper.

Re: Airbnb, My $1B Lesson

#114

Post by plonh »

andrewstuart wrote: post #72
harryjo wrote: post #57

Earlier quoted context omitted.

Lying is generally considered lack of integrity. Integrity: "I like your offer a lot" (but then something actually changed, and I don't sign). Lack of Integrity: "I'm in." (but then I don't sign.)

With all due respect, you'd get crushed by business people who mean business.

Nice goalpost move.

Re: Airbnb, My $1B Lesson

#115

Post by paigecraig0231 »

jackgavigan wrote: post #95
paigecraig0231 wrote: post #87

Earlier quoted context omitted.

It's not weird at all. Brian talked to a ton of people over many months. He was raising many months before I met him. And then I came in. I then spent too long negotiating but then we finally worked out a deal end of Sep and then my lawyers and their lawyers negotiated the agreement Sep 26th and then we did our dinner. But then YC smartly moved in after this closing dinner and booted me out. Funny enough Justin Kan a…

> ..YC smartly moved in after this closing dinner and booted me out. Do you think YC told AirBnB "We won't accept you on our programme if you take investment from Paige", or do you reckon it was AirBnB's decision to join the YC programme instead of taking your investment?

Pure speculation here: But objectively I think my money was perceived as "dumb money" and YC had a great rep even back then. When you compare the offers the YC money is clearly the best deal and smarter move.

Re: Airbnb, My $1B Lesson

#116

Post by j_s »

philwelch wrote: post #60
harryjo wrote: post #56

Earlier quoted context omitted.

AirBnB has never been one to follow the rules, from the earliest days of Craigslist spamming and flouting lease agreements and hotel regulations. You don't do handshake deals with people whose fundamental business model is "cutting corners wherever you can sneak away with it"

One thing we can all learn from AirBnB: if any group of people you hire for any reason, even on a contract basis, do one bad thing on the Internet one time, haters on the Internet will never let you live it down. Hire carefully.

Yes, because no one ever passes the buck entirely. I believe this accountability is a good thing; see for example this discussion:

This is how Visa works https://news.ycombinator.com/item?id=4396414 (900+ points 3 years ago)

Re: Airbnb, My $1B Lesson

#117

Post by forgetsusername »

pitchups wrote: post #89

It is interesting and a bit ironic that AirBnb accepted funding from YC - who did not believe in their idea [1], and rejected the only investor that not only believed in their crazy idea, but actively sought them out and tried to woo them. Did they go with YC because of its brand, name recognition, or because it offered them better terms? Of course, it is all counterfactual, but could Airbnb have been as successful h…

>"but could Airbnb have been as successful had they not joined YC?"

These guys had a good idea, some luck, and were able to execute. I doubt that the "brand" of their money or broad aphorisms from VCs had much to do with any of it.

For all intents and purposes, money is money. There's an element of "tech celebrity" in the Valley, and big-name VCs are part of that. In reality, successful businesses around the country are built, every day, by hard-working entrepreneurs who bootstrap it (because their business is making money) or get funding my more traditional means. I don't think VCs have any "secret sauce" for success.

Re: Airbnb, My $1B Lesson

#118

Post by giarc »

paigecraig0231 wrote: post #73
late2part wrote: post #44

Hey Paige - If I negotiate a potential financing with Arena, and it doesn't work out, will you take all of my emails and publish them as well?

If your emails had anything hurtful, embarrassing, proprietary or damaging to yourself or your company I wouldn't publish them. In this case these emails and documents make ME look like a novice investor and speak highly of the Airbnb founders. I have no problem exposing my own failures and mistakes but I'd never expose yours unless you were cool with it. This event was a very important lesson for me and made me a be…

Did you ask Brian et al for permission to post emails? Is that something that is required or just a courtesy (regardless if they are harmful etc)

Re: Airbnb, My $1B Lesson

#119

Post by dkrich »

PopeOfNope wrote: post #110
someear wrote: post #105

Earlier quoted context omitted.

but at the end of the day, the haggling ended, and terms were agreed upon (it seems). Handshakes done. I think the comments have gone off on a tangent focusing on whether you getting cut out of the deal was ethical (whereas the blog post was just a flat out interesting story to read about). But at least the way your post reads, you definitely got screwed out of the deal. Sure, nothing is done until things are signed,…

> Handshakes done. Nothing's done until the papers are signed. This goes for all things in life, too, from investing to renting apartments. If you don't have a signed piece of paper, you have no deal.

This isn't factually accurate. You can have an implied contract from exchanged emails, verbal communication- pretty much anything that shows intent.

Re: Airbnb, My $1B Lesson

#120

Post by PopeOfNope »

plonh wrote: post #112
PopeOfNope wrote: post #110

Earlier quoted context omitted.

> Handshakes done. Nothing's done until the papers are signed. This goes for all things in life, too, from investing to renting apartments. If you don't have a signed piece of paper, you have no deal.

One of the main selling points of YC is that they promise not to legal obnoxious things. Saying "nothing's done until the papers are signed" is completely missing the point.

is this comment a non-sequitur or am I missing something? The deal we're talking about was between the author of the piece and Airbnb. YC may have made the offer to fund the whole round, but they're not the ones who made the decision to pull out between shaking hands and signing the paper.

In any case, I apparently place too high a premium on paperwork. In another comment thread on this story, someone pointed out that the remedy for breach of contract is to unwind the wrong party's situation to the position they were in before the contract was signed. In this case, until the check has been deposited and spent, it's trivial to tear up the paperwork.

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