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Always Go Home with the Lady Who Brought you to the Dance

bothsidesofthetable.com

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Re: Always Go Home with the Lady Who Brought you to the Dance

#41

Post by edanm »

msuster wrote: post #23
Drbble wrote: post #21

To be clear, this article isn't telling CEOs not to negotiate or seek competitive deals. It is about not backstabbing business partners.

Thank you. I wish more people saw it that way. I always believe in negotiating / seeking competitive deals. But once you agree a deal with people you honor it.

How would you react in this situation:

1. You negotiate and have a handshake deal with a company for a round of funding.

2. The company gets an offer for a higher valuation from someone who wants in on the round.

3. The CEO asks you whether to take them or not, but basically leaves it up to you?

In other words, assuming the CEO didn't "backstab" you but rather sought your advice, would you be upset that he's even considering a different deal? Would you tell him he should take it, assuming the deal is still worthwhile for you? How would you react?

Re: Always Go Home with the Lady Who Brought you to the Dance

#42

Post by amirmc »

pg wrote: post #38

This account is vague about the most critical point: was there a handshake deal? The phrase "the company agreed on a price" suggests there might have been. But not necessarily; they might have been talking about what the price would be if they did a deal. 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, bu…

> "... was there a handshake deal?"

Well put but it raises a (possibly naive) question. At what point can one assume that a 'handshake deal' has taken place, and is that point really the same for both parties? e.g Is it literally a handshake and the words "We're going ahead with this!" Or could it be more vague where one party thinks there's a deal but the other's not so sure.

You've said that deals exist to fall through and that "The key to closing deals is never to stop pursuing alternatives ... don't believe it till you get the check." [1] From my point of view, I'd want to spend as little time as possible in 'handshake-limbo' and get something signed. The deal might still fall through but the intent to close is more explicit.

Aside: Mark says "... so I thought they should take the deal", which implied to me that not taking the deal was still a valid option. i.e. no handshake.

[1] http://paulgraham.com/startupfunding.html)

Re: Always Go Home with the Lady Who Brought you to the Dance

#43

Post by tomjen3 »

pnathan wrote: post #33
proofpeer_com wrote: post #5

This is an experienced VC writing total bullshit. He should know better. In love and war, everything is fair.

I am not sure that everything is fair in love and war. The ideas of "cheating on someone", and "banning clorine gas" might be taken as the counterexample. 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.

Banning clorine gas was a silly thing to do -- it didn't exactly stop the next war and only made the concept of war less terrifying.

As for your cheating example, cheating is generally frowned upon but it is not even close to illegal and people do it all the time.

Re: Always Go Home with the Lady Who Brought you to the Dance

#44

Post by sriramk »

pg wrote: post #38

This account is vague about the most critical point: was there a handshake deal? The phrase "the company agreed on a price" suggests there might have been. But not necessarily; they might have been talking about what the price would be if they did a deal. 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, bu…

The Zuckerberg Washington Post(Graham) and Accel situation is one counter example - Zuckerberg walked away from a handshake deal and I suspect it didn't exactly hurt his reputation.

Re: Always Go Home with the Lady Who Brought you to the Dance

#46

Post by wisty »

pg wrote: post #38

This account is vague about the most critical point: was there a handshake deal? The phrase "the company agreed on a price" suggests there might have been. But not necessarily; they might have been talking about what the price would be if they did a deal. 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, bu…

No way. A VC will not honor a handshake deal. They probably won't renege simply because they can get a better deal elsewhere (that's not how they operate - if a deal is good they take it, as they have the luxury of being able to participate in lots of deals), but if your market segment starts looking less favorable then they'll probably dump you.

Re: Always Go Home with the Lady Who Brought you to the Dance

#47

Post by DiabloD3 »

sriramk wrote: post #44
pg wrote: post #38

This account is vague about the most critical point: was there a handshake deal? The phrase "the company agreed on a price" suggests there might have been. But not necessarily; they might have been talking about what the price would be if they did a deal. 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, bu…

The Zuckerberg Washington Post(Graham) and Accel situation is one counter example - Zuckerberg walked away from a handshake deal and I suspect it didn't exactly hurt his reputation.

I dunno, everyone considers him sleazy, underhanded, and not trustworthy. If I had a startup and he came to me and wanted to invest unlimited money into my venture, I would tell him to get the hell out. If the opposite was true, and he had a venture that needed investors, I'd pass and go invest in a company ran by people who actually give a damn.

Re: Always Go Home with the Lady Who Brought you to the Dance

#48

Post by nhangen »

larrys wrote: post #34
msuster wrote: post #20

Earlier quoted context omitted.

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 agree with what you did and it's what I would have done no question. But I have to say that loyalty and that type of behavior has definitely hurt me business wise over the years. 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 iss…

I suppose it depends on what you value more - maxing your business potential or maintaining your integrity.

Re: Always Go Home with the Lady Who Brought you to the Dance

#49

Post by jpdoctor »

msuster wrote: post #25
newman314 wrote: post #6

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.

I definitely have never argued that all VCs are good or even that good VCs always act appropriately. That's for sure. I think the key is knowing the parties with whom you're dealing and knowing their past behavior. I advocate reference checking portfolio companies that failed: see http://www.bothsidesofthetable.com/2010/02/08/how-do-you-ref...

> and knowing their [VCs'] past behavior

So given the complicated web of legal documents from the exits of folks that have been screwed over, how would you find the worst cases?

Re: Always Go Home with the Lady Who Brought you to the Dance

#50

Post by newman314 »

larrys wrote: post #35
newman314 wrote: post #6

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.

"there are exceptions to the norm" 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.

Put differently, one hears many more stories about founders getting screwed by VCs as opposed to the inverse.
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