4 ms·

I think you're missing the point. There are established norms that are accepted by the industry during negotiations. Another good example of a firm that is not

I think you're missing the point. There are established norms that are accepted by the industry during negotiations. Another good example of a firm that is notoriously dishonest about term sheets is Global Founders Capital (the rocket internet people). They are known to blow out rival firms offers financially and then after everyone is out, come back and try to renegotiate at more onerous terms.

0zymandias 7y ago
There seem to be two types of people debating with each other in this thread. 1. Some people that have real-world experience with raising money and term sheets. They understand what the norms and expectations are in addition to understanding the legal aspects. 2. Other people that lack the real-world experience and are just speculating without understanding the norms. They are only referring to the legal aspects.
- tgs4 7y ago
  ^ The deal is never actually done until the money is wired and cleared into your account. Everything that happens before that including signed papers and handshakes are just negotiations.
  - okcando 7y ago
    Another way to approach interacting with other humans is to understand that the law only describes minimum expectations and isn't a replacement for ethics or common decency. You can use all the tools of the law to disadvantage others but word will get around that you're a dirty dealer and it'll be their privilege to not do business with you anymore.
    - vorotato 7y ago
      That only works if anyone is doing it.
      - shard972 7y ago
        And it just so happens that large companies like softbank fall into this category.
      - avarun 7y ago
        Yes, and the standard among VCs is to follow social and industry norms. Silicon Valley is an iterated game, and very few players are willing to play in a way that destroys future payoffs.
- shawnz 7y ago
  What makes you think the people with opinion #1 have real world experience and the people with opinion #2 don't? Maybe some people here just have a different understanding of what the norms are.
- duxup 7y ago
  What are the norms?
xwowsersx 7y ago
Exactly. Just because you can walk away from a term sheet doesn't mean doing so doesn't make you a giant jerk. Try doing that regularly and see how long you last in this business.
ThrowAwayFndr 7y ago
As an ex-founder, I've had VCs reneg on term sheets/handshake deals several times before. This is commonplace.
- lmeyerov 7y ago
  Yeah, though part of due dill from founders side should reveal this - you ask past portfolio co's what kind of terms the firm leans to + their preferred process, and if their process is playing stupid partner games with stupid terms, you price that in to your negotiations. And yes, it's annoying + common, esp. the bigger and more diverse you go... . In theory you can add stuff like breakup and late fees: that's unusual in startup fundings, but the weird softbank-isms may make that kind of term more aligned. I now treat VC as a funny form of enterprise sales, and this happens there too. Want a 6/7/8 figure deal? Same thing: has the group bought stuff at that level before, if so, what is the process? And, the more critical the deal, the more imp. you talk to folks who also recently ran the gauntlet.
- CerealFounder 7y ago
  Eh. It's not about the reneging its about the communication and intent. From experience its a very small marketplace (esp with big checks). So there is a very high expectation that people act with longterm consideration of one another and subsequently their reputation. Just disappearing, or changing terms without a material change is dishonest period.
CerealFounder 7y ago
It also stands to be said that there is commonality between these types of "firms." The two firms are essentially dictatorships masquerading as firms. What you get is a bunch of definitionally impotent lieutenants who go make deals and carry them to the 1 yard line and then the boss (Masayoshi or oliver) decide again as if nothing had happened before whether or not to execute. Unless the bosses are the ones leading the deal, know that you there is zero good faith and a lot of risk as far as outcome goes.

0zymandias 7y ago

There seem to be two types of people debating with each other in this thread. 1. Some people that have real-world experience with raising money and term sheets. They understand what the norms and expectations are in addition to understanding the legal aspects. 2. Other people that lack the real-world experience and are just speculating without understanding the norms. They are only referring to the legal aspects.

tgs4 7y ago
^ The deal is never actually done until the money is wired and cleared into your account. Everything that happens before that including signed papers and handshakes are just negotiations.
- okcando 7y ago
  Another way to approach interacting with other humans is to understand that the law only describes minimum expectations and isn't a replacement for ethics or common decency. You can use all the tools of the law to disadvantage others but word will get around that you're a dirty dealer and it'll be their privilege to not do business with you anymore.
  - vorotato 7y ago
    That only works if anyone is doing it.
    - shard972 7y ago
      And it just so happens that large companies like softbank fall into this category.
    - avarun 7y ago
      Yes, and the standard among VCs is to follow social and industry norms. Silicon Valley is an iterated game, and very few players are willing to play in a way that destroys future payoffs.
shawnz 7y ago
What makes you think the people with opinion #1 have real world experience and the people with opinion #2 don't? Maybe some people here just have a different understanding of what the norms are.
duxup 7y ago
What are the norms?

xwowsersx 7y ago

Exactly. Just because you can walk away from a term sheet doesn't mean doing so doesn't make you a giant jerk. Try doing that regularly and see how long you last in this business.

ThrowAwayFndr 7y ago

As an ex-founder, I've had VCs reneg on term sheets/handshake deals several times before. This is commonplace.

lmeyerov 7y ago
Yeah, though part of due dill from founders side should reveal this - you ask past portfolio co's what kind of terms the firm leans to + their preferred process, and if their process is playing stupid partner games with stupid terms, you price that in to your negotiations. And yes, it's annoying + common, esp. the bigger and more diverse you go... . In theory you can add stuff like breakup and late fees: that's unusual in startup fundings, but the weird softbank-isms may make that kind of term more aligned. I now treat VC as a funny form of enterprise sales, and this happens there too. Want a 6/7/8 figure deal? Same thing: has the group bought stuff at that level before, if so, what is the process? And, the more critical the deal, the more imp. you talk to folks who also recently ran the gauntlet.
CerealFounder 7y ago
Eh. It's not about the reneging its about the communication and intent. From experience its a very small marketplace (esp with big checks). So there is a very high expectation that people act with longterm consideration of one another and subsequently their reputation. Just disappearing, or changing terms without a material change is dishonest period.

CerealFounder 7y ago

It also stands to be said that there is commonality between these types of "firms." The two firms are essentially dictatorships masquerading as firms. What you get is a bunch of definitionally impotent lieutenants who go make deals and carry them to the 1 yard line and then the boss (Masayoshi or oliver) decide again as if nothing had happened before whether or not to execute. Unless the bosses are the ones leading the deal, know that you there is zero good faith and a lot of risk as far as outcome goes.