You said “It is considered bad form to share the contents of a termsheet with other investors” and “You do not want to be seen ‘shopping around’ your unsigned termsheet”.
The benefits to a founder of shopping around seem clear, so could you quantify the downside risks? Do the risks matter for a “hot deal”?
PS: Thank you so much for your awesome article: it is especially gratifying to see something that isn’t from the valley (I am in NZ).
The downside in the extreme is that the original investor pulls the termsheet and you end up empty handed. I know of cases of this happening, but it's rare.
More commonly, you develop a bad reputation in the VC community, which is very close-knit. Next time you come to raise money, this can hurt.
Comments
You said “It is considered bad form to share the contents of a termsheet with other investors” and “You do not want to be seen ‘shopping around’ your unsigned termsheet”.
The benefits to a founder of shopping around seem clear, so could you quantify the downside risks? Do the risks matter for a “hot deal”?
PS: Thank you so much for your awesome article: it is especially gratifying to see something that isn’t from the valley (I am in NZ).
The downside in the extreme is that the original investor pulls the termsheet and you end up empty handed. I know of cases of this happening, but it's rare.
More commonly, you develop a bad reputation in the VC community, which is very close-knit. Next time you come to raise money, this can hurt.