5 ms·

Disclaimer; I have no experience with investors what so ever. To avoid the "we're in, we're out" scenario would it be possible to ask investors to sign a commi

by pan69 13y ago

Disclaimer; I have no experience with investors what so ever. To avoid the "we're in, we're out" scenario would it be possible to ask investors to sign a commitment agreement when they agree they're in? E.g. an investor says they're in for $100k. You then ask them to sign a commitment agreement that states when they change their mind they owe you 10% of the proposed investment, or something like that. Would this weed out the wanna be investors and guys who are tip toeing around so they can stop wasting your time?

Bahamut 13y ago
Would you want to turn down a potential $100k so quickly?
- pan69 13y ago
  It's not about turning down a potential 100k. It's about the commitment of the investor, i.e. to avoid the tip toeing. A potential 100k investment is not a 100k investment.
  - joshu 13y ago
    "we might be in. who else is in?" is not committment, it's lemmings.
pbreit 13y ago
That would probably just lead to "Nos" instead of "contingent Yeses" (which really are pretty good if you think about it). It's not like these investors are backing out.
- nostrademons 13y ago
  A "no" is significantly better than a "contingent yes", because it lets you move in and focus your time and energy on getting a real yes.
  - pbreit 13y ago
    But a "contingent yes" is a "yes". Totally disagree that a "no" is better.
    - nostrademons 13y ago
      It's often not, though. That's what this whole thread is about. Usually when investors waffle it's because they aren't going to commit anyway; they may think that they should and at one level want to, but their fear gets the best of them.
      - pbreit 13y ago
        Maybe we're not talking about the same thing. A "contingent yes" is completely different from a "maybe". The rug guys were the "contingent yes", Google Ventures was the "maybe". Suggesting "A "no" is significantly better than a "contingent yes"" is bizarre.
brc 13y ago
You seem to think investors are some sort of ATM waiting for the right pin rather than humans with their own set of decisions, problems and multiple priorities. Think of it like dating. You'll get a lot fewer dates if you ask someone to commit to a series of four dates as a condition of accepting the first. It's how it is done. That's it.
- pan69 13y ago
  > You seem to think investors are some sort of ATM No. I don't seem to think that, at all. Let me explain it again, just for you. A common problem for startups seems to be dealing with investors who say they're in and a week later they're out and then later they're in again and then out, etc. As a start up you'd like "commitment" from an investor because if an investor claims they're in and then they're out, it would be immensely frustrating right? It means you can't commit to hiring that great developer or rent that office space you so desperately need or pay yourself some salary for a change. You might have met with an investor a few times and at some point they "say" they are very interested and they'd like to invest $100k in your idea. If you then explain to them that you'd like them to sign a commitment agreement to see how serious they actually are. If they sign it they can still change their minds, it will just cost them x% of the proposed investment. If they are not willing to sign it might just show that they're not actually interested after all, they just like to keep you around just in case something else falls through. It's just business right?
  - mark-r 13y ago
    You're forgetting who has the power in this relationship. It's the people with the money. Remember the Golden Rule? "He who has the money makes the rules".
  - avree 13y ago
    "Ah, you want a commitment? Great. I'll tell all the other VCs too. Oh, and by the way—we're all out now. Bye!"
- dirktheman 13y ago
  Yes and no. In dating, it's usually not a great idea to tell the person you want to date that you have dates planned with other people as well.
patio11 13y ago
YC's answer to this is "If you verbally commit to an investment with a YC company they will memorialize it instantly with an SMS or email, which they will ask you to confirm substantially instantly. If you renege on a deal committed to by this protocol, you will be entered into a list of Unserious People. You very much don't want to be Unserious People to all future deals associated with YC companies." That's for actual commitments. Investors historically have a very diverse vocabulary of ways to phrase "No" (for example, any sentence which begins with "I will invest if" means "No, but I like option value, particularly when it is free.") and entrepreneurs historically have a reality distortion field where they hear "No" and think "I didn't hear Never so that's practically a Yes!"
- rralian 13y ago
  So in this case (and others, I suppose) YC acts as a union.

by pan69 13y ago

Bahamut 13y ago

Would you want to turn down a potential $100k so quickly?

pan69 13y ago
It's not about turning down a potential 100k. It's about the commitment of the investor, i.e. to avoid the tip toeing. A potential 100k investment is not a 100k investment.
- joshu 13y ago
  "we might be in. who else is in?" is not committment, it's lemmings.

pbreit 13y ago

That would probably just lead to "Nos" instead of "contingent Yeses" (which really are pretty good if you think about it). It's not like these investors are backing out.

nostrademons 13y ago
A "no" is significantly better than a "contingent yes", because it lets you move in and focus your time and energy on getting a real yes.
- pbreit 13y ago
  But a "contingent yes" is a "yes". Totally disagree that a "no" is better.
  - nostrademons 13y ago
    It's often not, though. That's what this whole thread is about. Usually when investors waffle it's because they aren't going to commit anyway; they may think that they should and at one level want to, but their fear gets the best of them.
    - pbreit 13y ago
      Maybe we're not talking about the same thing. A "contingent yes" is completely different from a "maybe". The rug guys were the "contingent yes", Google Ventures was the "maybe". Suggesting "A "no" is significantly better than a "contingent yes"" is bizarre.

brc 13y ago

You seem to think investors are some sort of ATM waiting for the right pin rather than humans with their own set of decisions, problems and multiple priorities. Think of it like dating. You'll get a lot fewer dates if you ask someone to commit to a series of four dates as a condition of accepting the first. It's how it is done. That's it.

pan69 13y ago
> You seem to think investors are some sort of ATM No. I don't seem to think that, at all. Let me explain it again, just for you. A common problem for startups seems to be dealing with investors who say they're in and a week later they're out and then later they're in again and then out, etc. As a start up you'd like "commitment" from an investor because if an investor claims they're in and then they're out, it would be immensely frustrating right? It means you can't commit to hiring that great developer or rent that office space you so desperately need or pay yourself some salary for a change. You might have met with an investor a few times and at some point they "say" they are very interested and they'd like to invest $100k in your idea. If you then explain to them that you'd like them to sign a commitment agreement to see how serious they actually are. If they sign it they can still change their minds, it will just cost them x% of the proposed investment. If they are not willing to sign it might just show that they're not actually interested after all, they just like to keep you around just in case something else falls through. It's just business right?
- mark-r 13y ago
  You're forgetting who has the power in this relationship. It's the people with the money. Remember the Golden Rule? "He who has the money makes the rules".
- avree 13y ago
  "Ah, you want a commitment? Great. I'll tell all the other VCs too. Oh, and by the way—we're all out now. Bye!"
dirktheman 13y ago
Yes and no. In dating, it's usually not a great idea to tell the person you want to date that you have dates planned with other people as well.

patio11 13y ago

YC's answer to this is "If you verbally commit to an investment with a YC company they will memorialize it instantly with an SMS or email, which they will ask you to confirm substantially instantly. If you renege on a deal committed to by this protocol, you will be entered into a list of Unserious People. You very much don't want to be Unserious People to all future deals associated with YC companies." That's for actual commitments. Investors historically have a very diverse vocabulary of ways to phrase "No" (for example, any sentence which begins with "I will invest if" means "No, but I like option value, particularly when it is free.") and entrepreneurs historically have a reality distortion field where they hear "No" and think "I didn't hear Never so that's practically a Yes!"

rralian 13y ago
So in this case (and others, I suppose) YC acts as a union.