This happens all too often. A firm would rush to a term sheet knowing that they haven't done all the work required and knowing that there is a chance they will

This happens all too often. A firm would rush to a term sheet knowing that they haven't done all the work required and knowing that there is a chance they will pull out of the deal, only so that they can kill off the interest from the competition. I think it is very likely that they hadn't done any real DD (on you, or the market) until after you signed, and during that DD found that the business/market was not as hot as they thought it would be. I have been through a similar process twice. The first VC gave us a term sheet 3 days after the first meeting, only for them to drag through the DD. and all VC's say that they have an interest in the market you are in. The only way to substantiate it is to see if they have made investments in similar industries. ie. has this firm previously invested in an enterprise SaaS company related to marketing or aimed at marketing departments? If this firm or partner had only invested in server software, or consumer, etc. then it should have been warning. You should also look at how many deals that partner has done and what their decision making process is. There is no mention of this in the post, but it could be that he took the deal to his partners and they decided to turn it down. There is no mention of the other partners at the firm nor how they make decisions. The solution is to go through DD with 4-5 firms at the same time before signing anything or before finalizing terms. Tell them straight up that you want to do DD with all these firms between date x and date y, and that by date z you want final committals, from where you can go over terms with those who are still interested. Things were done in the wrong order in this case, and you said you didn't want to shop the deal -- the VC took advantage of that.