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They're trying to make this a story about SoftBank being bad, but this just sounds like normal business. I have been "shafted" by VCs before, in similar ways, b

They're trying to make this a story about SoftBank being bad, but this just sounds like normal business. I have been "shafted" by VCs before, in similar ways, but none of them were SoftBank specifically. This is just an attempt to make a story (and drive clicks) out of the punching bag du jour.

JumpCrisscross 7y ago
> this just sounds like normal business All except Creator. Getting a company to enter into "an exclusive, six-month term sheet" is unusual and shitty.
- brenden2 7y ago
  Indeed, 6 month does seem onerous. Definitely a tough lesson learned there.
- utopian3 7y ago
  What are the negatives that the six-month term sheet implies that I'm missing (I'm not familiar with them)?
  - brenden2 7y ago
    The negative is that you can't go out and do fundraising with any other parties until that 6 months is up. Depending on how much runway you have, that might be terminal for some startups. I think 30 days is more typical, but YMMV. If the company is in dire need of funding then the VCs can usually get away with more.
    - OnlineGladiator 7y ago
      > The company pushed back, and SoftBank agreed to wire between $10 million and $15 million as a show of good faith. It sounds like they probably came out ahead anyway, if runway was even slightly a concern for them.
      - Bartweiss 7y ago
        A six month lockup with no guarantee on the other side sounds crazy, but with a cash transfer to compensate and provide runway it looks a lot more reasonable. (Of course, it depends a lot on the missing detail of what SoftBank took for that money in the absence of a deal. Was it a loan? A smaller investment at the same terms/valuation planned for the big one?)
        OnlineGladiator 7y ago
        I'm not saying Softbank is a great fund (I've thought they made shitty investments long before the recent media frenzy in the past year), I just meant Creator isn't exactly a startup starlet that is drowning in funding opportunities. They're ~10 years old, have raised ~25 MM, and I heard their last round was already a downround (pretty bad considering how little they've raised and how long they've been around). Looking from the outside, Creator was likely desperate for cash and happy to agree to anything - which they did. And unless they ended up with no cash at all after this brouhaha, they are probably still better off than they were initially. And who knows - maybe Softbank will still give a stupid amount of cash to another terrible robotics startup. They've certainly done dumber things before.
        Bartweiss 7y ago
        Yeah, all very true. Out of all those stories, I'm most surprised SoftBank walked away on Seismic. Maybe they're scared that all the recent unicorns are going to lose value, but it's a pretty safe/standard company that wasn't depending on Softbank to live, and opening the Japanese market was a Softbank-specific perk. Funding an already-unicorn at a high valuation isn't likely to get you the usual VC 10x, I guess. But it sounds like a way to help stabilize Softbank's rep with a modest win, not a risky bet to bail out of.
- duxup 7y ago
  It might be shitty but it's not like they didn't know it was 6 months. I'm not trying to absolve Softbank here but if 6 months is bad, Creator knew it... they signed it.
- heyflyguy 7y ago
  It does suck that it happened, and I've been on a similar receiving end of that - but at the end of the day the founders had to sign and the board approved that "deal".
- jagged-chisel 7y ago
  Having read this, I'd think (as the startup) I'd insist on a clause that the contract isn't binding until at least $X or %Y have been received from the VC (defining "received" as "the money deposited and cleared.") And if we find another investor before you send the money, the contract is dead and we renegotiate a new one.
  - jethro_tell 7y ago
    If you have the leverage for that, it could work. But you probably also wouldn't sign a 6mo exclusivity deal if you had that kind of leverage . . . so?
- CalChris 7y ago
  What did Creator get for this six months of exclusivity?
austenallred 7y ago
While it’s legal, it is not “normal” for VC funds to be backing out of a half dozen deals at the same time. To continually do so without finding a carcass in the details would be reputation suicide for any legitimate VC.
- toast0 7y ago
  The timeline for the backing out is around the WeWork IPO debacle. This makes a lot of sense --- in reaction to that, maybe they have new standards for investing, maybe they don't even know what the new standards are yet, maybe they don't even know when the new standards will be available, (almost) all the deals in progress are going to be screwed. This kind of stuff is more common with corporate acquirers than established VC, I would expect, but it's kind of part of the game. If you have leverage as the start up, you demand short timeframes and meaningful deposits to keep the investors on task; if you don't have leverage, you get a bad deal (6-month exclusivity is crazy).
  - austenallred 7y ago
    Nah, where there’s smoke there’s fire. They’re fucked because their LPs are losing their minds, and as a result everything changed for them and they’re bailing on deals.
    - Kye 7y ago
      What's an LP in this context?
      - MartianSquirrel 7y ago
        LP is short for Limited Partner
      - ganstyles 7y ago
        Limited Partner, the people who out up money in VC funds for the General Partner to invest/manage. iirc though LPs cant have an actual say in investment/strategy or else they risk losing the "Limited" status.
BitwiseFool 7y ago
What do you mean by "Shafted"? I'm interested to know what they did.
- brenden2 7y ago
  The original title (before it was changed) included the word "shafted".
apozem 7y ago
> They're trying to make this a story about SoftBank being bad Don't overthink it and assume motivations with zero proof - they're reporting facts about how SoftBank is dragging their heels on some deals. At the very least, it's informative and helpful to anyone who may deal with them in the near future.
- rdiddly 7y ago
  If I WERE going to assume motivations, I would put it more like "They have SoftBank and the Vision Fund on a death watch ever since WeWork."
mindentropy 7y ago
When you have words like "shafted" in a news about investments etc then what do you expect the story to be but unprofessional.

JumpCrisscross 7y ago

> this just sounds like normal business All except Creator. Getting a company to enter into "an exclusive, six-month term sheet" is unusual and shitty.

brenden2 7y ago
Indeed, 6 month does seem onerous. Definitely a tough lesson learned there.
utopian3 7y ago
What are the negatives that the six-month term sheet implies that I'm missing (I'm not familiar with them)?
- brenden2 7y ago
  The negative is that you can't go out and do fundraising with any other parties until that 6 months is up. Depending on how much runway you have, that might be terminal for some startups. I think 30 days is more typical, but YMMV. If the company is in dire need of funding then the VCs can usually get away with more.
  - OnlineGladiator 7y ago
    > The company pushed back, and SoftBank agreed to wire between $10 million and $15 million as a show of good faith. It sounds like they probably came out ahead anyway, if runway was even slightly a concern for them.
    - Bartweiss 7y ago
      A six month lockup with no guarantee on the other side sounds crazy, but with a cash transfer to compensate and provide runway it looks a lot more reasonable. (Of course, it depends a lot on the missing detail of what SoftBank took for that money in the absence of a deal. Was it a loan? A smaller investment at the same terms/valuation planned for the big one?)
      - OnlineGladiator 7y ago
        I'm not saying Softbank is a great fund (I've thought they made shitty investments long before the recent media frenzy in the past year), I just meant Creator isn't exactly a startup starlet that is drowning in funding opportunities. They're ~10 years old, have raised ~25 MM, and I heard their last round was already a downround (pretty bad considering how little they've raised and how long they've been around). Looking from the outside, Creator was likely desperate for cash and happy to agree to anything - which they did. And unless they ended up with no cash at all after this brouhaha, they are probably still better off than they were initially. And who knows - maybe Softbank will still give a stupid amount of cash to another terrible robotics startup. They've certainly done dumber things before.
        Bartweiss 7y ago
        Yeah, all very true. Out of all those stories, I'm most surprised SoftBank walked away on Seismic. Maybe they're scared that all the recent unicorns are going to lose value, but it's a pretty safe/standard company that wasn't depending on Softbank to live, and opening the Japanese market was a Softbank-specific perk. Funding an already-unicorn at a high valuation isn't likely to get you the usual VC 10x, I guess. But it sounds like a way to help stabilize Softbank's rep with a modest win, not a risky bet to bail out of.
duxup 7y ago
It might be shitty but it's not like they didn't know it was 6 months. I'm not trying to absolve Softbank here but if 6 months is bad, Creator knew it... they signed it.
heyflyguy 7y ago
It does suck that it happened, and I've been on a similar receiving end of that - but at the end of the day the founders had to sign and the board approved that "deal".
jagged-chisel 7y ago
Having read this, I'd think (as the startup) I'd insist on a clause that the contract isn't binding until at least $X or %Y have been received from the VC (defining "received" as "the money deposited and cleared.") And if we find another investor before you send the money, the contract is dead and we renegotiate a new one.
- jethro_tell 7y ago
  If you have the leverage for that, it could work. But you probably also wouldn't sign a 6mo exclusivity deal if you had that kind of leverage . . . so?
CalChris 7y ago
What did Creator get for this six months of exclusivity?

austenallred 7y ago

While it’s legal, it is not “normal” for VC funds to be backing out of a half dozen deals at the same time. To continually do so without finding a carcass in the details would be reputation suicide for any legitimate VC.

toast0 7y ago
The timeline for the backing out is around the WeWork IPO debacle. This makes a lot of sense --- in reaction to that, maybe they have new standards for investing, maybe they don't even know what the new standards are yet, maybe they don't even know when the new standards will be available, (almost) all the deals in progress are going to be screwed. This kind of stuff is more common with corporate acquirers than established VC, I would expect, but it's kind of part of the game. If you have leverage as the start up, you demand short timeframes and meaningful deposits to keep the investors on task; if you don't have leverage, you get a bad deal (6-month exclusivity is crazy).
- austenallred 7y ago
  Nah, where there’s smoke there’s fire. They’re fucked because their LPs are losing their minds, and as a result everything changed for them and they’re bailing on deals.
  - Kye 7y ago
    What's an LP in this context?
    - MartianSquirrel 7y ago
      LP is short for Limited Partner
    - ganstyles 7y ago
      Limited Partner, the people who out up money in VC funds for the General Partner to invest/manage. iirc though LPs cant have an actual say in investment/strategy or else they risk losing the "Limited" status.

BitwiseFool 7y ago

What do you mean by "Shafted"? I'm interested to know what they did.

brenden2 7y ago
The original title (before it was changed) included the word "shafted".

apozem 7y ago

> They're trying to make this a story about SoftBank being bad Don't overthink it and assume motivations with zero proof - they're reporting facts about how SoftBank is dragging their heels on some deals. At the very least, it's informative and helpful to anyone who may deal with them in the near future.

rdiddly 7y ago
If I WERE going to assume motivations, I would put it more like "They have SoftBank and the Vision Fund on a death watch ever since WeWork."

mindentropy 7y ago

When you have words like "shafted" in a news about investments etc then what do you expect the story to be but unprofessional.