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This sounds way too much to me like a VC trying to teach startup founders a brand of ethics that mostly benefits VCs.
To be clear, this article isn't telling CEOs not to negotiate or seek competitive deals. It is about not backstabbing business partners.
The CEOs weren't brought to the dance, they could pick whichever VC they wanted to. It's just that he would have left the deal if they hadn't picked his VC.
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He also throws in a story at the end about another company who signed a term sheet, then reneged on it and considers that as a black mark on their reputation. Maybe it is, maybe it isn't but its a separate story.
This is an experienced VC writing total bullshit. He should know better. In love and war, everything is fair.
Certainly I would avoid a known backstabber in business to the point of not doing business with them, even if they had the better financial terms.
Earlier quoted context omitted.
I don't know Mark Suster, and maybe I'm completely misreading this, but the whole story seems rather self-serving to me. His "ethical dilemma" was whether to agree to a deal changing in such a way that he would be paying 50% more... and when he said that no, he wasn't going to pay 50% more, we're supposed to accept this as a great triumph for ethics? I'm a great believer in behaving ethically, but this is not the sor…
Fair comment. I could see why it might come across that way. The impression I meant to leave was that I risked losing out on the deal all together because the CEO could have simply done the deal with the other investor. I would rather that have happened than to screw over the VC who convinced me to look at the deal in the first place.
I wonder how much of that is "doing the right thing" vs. protecting one's reputation so you can continue to do deals. (And you clearly referred to protecting reputation ..)
If you are just interested in "doing the right thing" then the issue of protecting one's reputation wouldn't even come up in the discussion, right? (And nothing wrong with sounding "pollyannish"?)
I wouldn't have done what your friend did at the dance. Not because I'd be worried about reputation but because it would make me feel bad to do it. I wouldn't want it to happen to me (empathy). I can tell you have empathy just by the way you wrote the post. I'm wondering if you feel a need to cloak it in "reputation" and are you sure that's as big a motive as you make it out to be? As if it won't be manly or something.
Remember that VCs are motivated by returning a big return to their LPs first. It's nice to say that they'll stick with you but that could change in an instant. Plenty of stories out there where people have gotten screwed over by unscrupulous VCs. PS. obviously, there are exceptions to the norm but I'm a big believer in understanding people's primary motivations.
This is an analog situation. Things like this are a matter of degree not absolute. Just like speeding, insurance claims and taxes. Some people can definitely be trusted less than others to care at all about the other party. Those are the people that you need to identify.
This sounds way too much to me like a VC trying to teach startup founders a brand of ethics that mostly benefits VCs.
Nope. I was an entrepreneur for 10 years first. I always employed this mentality. Reputation matters.
Always accuse the seller of having bad ethics, and turn it into a moral dilemma for them so you can take advantage.
Always threaten their reputation.
Always avoid using sexist analogies.
If there was a handshake deal, the company should certainly have stuck with the original VC. Not because of any complicated rules about who introed whom to whom, but simply because you have to honor handshake deals.
If there was not a handshake deal, it's less clear. The company seems to have been fairly eager to raise money. Which implies they'd have taken a sufficiently good deal if one was offered. Which implies it had been in the investors' power to get a handshake deal if they wanted one, and if they didn't have one, they essentially blew it by negotiating too hard. If so then I don't think the company would be obliged to stick with the original investor. But I'm just speculating; it's impossible to say for sure without knowing more.
Business negotiations (in which VCs benefit from founders not shopping around, negotiating for better deals, or building interest) are not at all comparable to a social situation involving actual humans. The goal is to get readers thinking morally instead of in the cold business terms that the VC is.
I would say that playing these social games IS what constitutes business and while it's important to bond to allow for future business sometimes, actually, the right thing is rather to not to play along if your gut says no, even if it was good for business.