Don't Shop Your Term Sheet | Hacker News Reader

Don't Shop Your Term Sheet

cdixon.org

11 pointskareemm10 comments

Note to self: Ignore Chris Dixon.

A small number of VC’s have a real value add. I would not shop Sequoia's term sheet, but a second tier VC has little to leverage other than cash.

correct.

puhleeze. If your startup is hot, shop the fuck out of it. VC's are lemmings; once they decide with their collective hive mind that you're the hizzy, it's basically impossible to piss them off enough to kill the deal.

OTOH, if you're not hot, they will use any lame excuse to walk, and you won't have anything to 'shop' in the first place, other than warm fuzzy talk at the end of an expensive lunch.

If you read through the whole article and the comments, the author adds more nuance to this advice than the title suggests.

It boils down to "shopping your terms verbally is fine, just don't flash your actual physical term sheet around town."

Hm, I distinctly recall reading:

Also, don’t shop a verbal offer.

There's a difference between verbally shopping a written offer and verbally shopping a verbal offer.

That would have a lot more credibility where it not coming from an investor. A VC writing an article that says "just sign the term sheet immediately without having your attorney review it" is actually preposterous.

His overall sentiment is not necessarily without merit (that you should shop around terms/valuation verbally rather than emailing out copies of the term sheet to every VC on Sand Hill Road) but wow did he go about expressing it poorly.

I don't know anything about VCs and funding, that being said how are you supposed to get competitive bidding going if you can't shop term sheets, or verbal offers as this article suggests?

What are you supposed to say, "I have a very good feeling VC X might offer me 4, so you are going to have to offer 5." You can't haggle unless you have concrete alternatives to push the price up.

As i am reading into this whole "raising money" topic recently, this is what i came across in Venture Hacks.

My understanding is, shop around, but, don't say it as "shop around". Use other languages or excuses.

http://venturehacks.com/articles/shop-around

This is the summary:

Summary: A deal is only as good as its best alternative. Keep improving your alternatives until you have a signed term sheet. And keep developing your current offers or they will die. Finally, don’t say "shopping around", it puts investors off their stroke.

yeah, many people selling, for example, bandwidth also try to keep prices secret; as far as I can tell it's nothing more than an effort to make the market less efficient.

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