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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

#51

Post by msuster »

cperciva wrote: post #29
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.

Right, despite the example being a bit off I can see what you were trying to say. It seems to me that this situation started when the company had a signed term sheet but still went around to VCs trying to interest them in investing. Is this normal? (I'm a bootstrapper, so I have no experience with these games.)

term sheets have "no shop" clauses which prohibit you from talking with other investors. But they're pretty unenforceable so it happens anyways.

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

#52

Post by msuster »

mdda wrote: post #11
[deleted] wrote: post #7

Earlier quoted context omitted.

[deleted]

What wasn't stated was whether the Termsheet had any kind of no-shop clause.

My term sheet wasn't signed so I would have understood if the entrepreneur chose the other partner.

In the case of the new vc / old vc example that wasn't me ... yes, there was a 'no shop' clause. but ...

1. those are mostly unenforceable (is a vc going to sue an entrepreneur over no shop? not likely) 2. if the team really wants to get around it they can just run out the clock. most no shops are 45-60 days.

In the end, a term sheet is really just an expression of honor and reputation.

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

#53

Post by msuster »

edanm wrote: post #41
msuster wrote: post #23

Earlier quoted context omitted.

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 con…

that is EXACTLY what happened in the situation I described. We hadn't yet signed the term sheet. So I told the CEO that I would understand if he went with the other firm. But that I personally couldn't be involved with the deal for reasons I described. Until a CEO has signed the term sheet (or gives you an email saying they will) I assume they are still negotiating with others.

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

#54

Post by cperciva »

msuster wrote: post #51
cperciva wrote: post #29

Earlier quoted context omitted.

Right, despite the example being a bit off I can see what you were trying to say. It seems to me that this situation started when the company had a signed term sheet but still went around to VCs trying to interest them in investing. Is this normal? (I'm a bootstrapper, so I have no experience with these games.)

term sheets have "no shop" clauses which prohibit you from talking with other investors. But they're pretty unenforceable so it happens anyways.

Ok, thanks. I wondered if the etiquette was different in situations where the first VC was trying to put together a consortium.

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

#55

Post by pg »

wisty wrote: post #46
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.

They will honor a handshake deal with a company we fund.

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

#56

Post by gringomorcego »

Truthfully, I fucking hate this sort of shit. VC's and entrepreneurs are at opposite sides of the table. You can pretend it's a friendship, but it's not. Now, I don't extend this to angels. They are making a personal investment, or at least that's how I perceive it.

VC's represent a corporation with a corporate interest. I do not extend ethics to corporate entities. I will feel bad if something bad happens to a person, but not to a corporation. I will never allow myself pretend that corporations deserve anything close to a personal bond. And fucking shame on you for trying to make people think of that.

You are business partners. At the end of the day, it is money. You want to put a guilt trip on me? GTFO.

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

#57

Post by staunch »

pg wrote: post #55
wisty wrote: post #46

Earlier quoted context omitted.

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.

They will honor a handshake deal with a company we fund.

The YC Mafia.

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

#58

Post by pg »

amirmc wrote: post #42
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 thr…

I tell founders to actually use the term "handshake deal." Then there is no uncertainty.

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

#59

Post by Nick_C »

tomjen3 wrote: post #43
pnathan wrote: post #33

Earlier quoted context omitted.

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.

> 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.

This is such a silly statement I don't know where to begin. They knew there was going to be another war, did they? How did it make the concept of was less terrifying? WW1 was the "Great War" because it was the first time war was terrifying for everyone (except the stupid British generals, but don't get me started).

On this statement, one would disagree with the nuclear non-profileration treaty and think that WMDs are ok because war would be more terrifying.

My grandfather was gassed and it was horrific.

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

#60

Post by edanm »

msuster wrote: post #53
edanm wrote: post #41

Earlier quoted context omitted.

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 con…

that is EXACTLY what happened in the situation I described. We hadn't yet signed the term sheet. So I told the CEO that I would understand if he went with the other firm. But that I personally couldn't be involved with the deal for reasons I described. Until a CEO has signed the term sheet (or gives you an email saying they will) I assume they are still negotiating with others.

I'm mostly interested in whether you would hold it against the CEO for asking your opinion on the matter. It sounds like you might be implying that the CEO shouldn't even be considering the decision, whereas I would assume a CEO working with you would want to feel like he can be open with you about his/her dilemmas.

Of course I might be really misreading here.

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