What Can You Do if a VC Pulls Their Term Sheet?
I was asked to answer this exact question on Quora and I did so some time ago. The beauty of evergreen content is that it resurfaces all the time and it is as relevant today as it was years ago when I answered it. One of my favorite ways to resurface content is when I see people on Twitter put out a Tweet linking to an old post. Tech Tidbits did this with this Quora answer and also linked to a Pinterest board with my quote, which I love.
Sorry for using fuck two posts in a row. This isn’t Dave McClure secretly taking over Mark’s blog. I’m just writing verbatim what I wrote in a Quora response years ago.
So, what can you do?
Legal actions = zero.
A term sheet is not a legally binding document.
Retribution actions = lots.
But why bother. There are bad people in life, yes. But the negative cycles you’ll spend on trying to bad-mouth somebody aren’t worth the effort. At worst you potentially have others question your intentions and most people don’t like people who bad mouth others (they often – perhaps wrongly – assume that while the VC was probably ill-intentioned there was also probably something wrong with you or your business. You know that’s not true but trust me others will have doubts.
Get even by getting funding, building a great company and always know that the best “fuck-you” in life is success.
Of course you should eventually warn other entrepreneurs you know 1-1 in private. I recommend waiting for a cooling off period. As they say, “Revenge is a dish best served cold” because if it’s recent it comes across as more petty.
Something is rotten in tech startup land. Don’t call me a hater for saying so. It’s not that I’m anti innovation or a disbeliever in disruption or calling it a full-scale bubble or saying every darling startup is going to fail. None of those.
Somebody posted too many party fliers. The uninvited crowds have all turned up. The people here don’t respect your parents’ furniture, are throwing beer cans in your back yard and there’s a dude passed out face down in your sister’s bedroom. About an hour ago he thought he was invincible. That he defied the laws of gravity. He turned up for the fun but went too hard, too early.
There’s no one sane I know any more who doesn’t privately say that things have gotten out of hand. Few like to say so publicly.
And I blame unicorns.
Not the successful companies themselves but the entire bullshit culture of swash-buckling startups who define themselves by hitting some magical $1 billion valuation number and the financiers who back them irrespective of metrics that justify it. Unicorn has become part of our lexicon in a sickening way and will no doubt become part of the history we tell about how things got so out of control again.
One of the least understood parts of the venture capital industry and venture capital firms is how investment decisions actually get made. The truth is that each firm is different and there isn’t one standard but over the years I’ve talked with enough of my peers to get sense of how many firms work.
Often if it’s a bigger firm (say 4 partners or more) and it’s a super small investment for their fund size (let’s say $250-500k when they normally invest $5-7 million) they will just require 1 or 2 partners to decide. For anything that would be considered a normal investment for the partnership most firms try to make sure every partner has seen the deal and has a chance to weigh in. That’s why the investment process begins with a partner meeting and if they really believe in your business then they “champion you” by inviting you to a full partner meeting.
What happens next feels like a black box to outsiders. They only know if they get a yes, no or “I need to do more work” after that process. Some firms have formal voting structures but in my experience most don’t.
When most people think of John Shahidi two words come to mind. Bieber & Mayweather. Yes, that Bieber (67 million Twitter followers, 73 million on FB) & that Mayweather (6.4 million Twitter followers, 12 million on FB). The reason being – John Shahidi counts both as investors and friends.
You’re probably thinking, “slick talking, super confident, tall, extroverted, arrogant, LA kinda dude.” You’d be dead wrong. As I’ve gotten to know John Shahidi he has broken every stereotype that one may have of somebody who spends the day driving around in an SUV with Justin and landing famous investors. And I’ve learned a lot of things in the process.
Shahidi’s inspiration for building Shots was that he was picked on growing up. He knew first hand what it was like for people to bully or make you feel self conscious due to your weight or looks or physical abilities. So when he built shots it was with the goal of protecting younger people from this sort of intimidation.
My partner Greg Bettinelli is an avid sports fan who throughout his career has developed an expert understanding in online ticketing (at eBay has was a champion of the StubHub acquisition) and online marketing.
Greg knows consumer businesses and customers, which has added tremendously to our team where I admittedly have more of a background in enterprise software, data and online video. If you’re interested in sports tech (or want to argue with a 49ers fan) you should definitely follow Greg.
I mention this because Greg led our investment in a company that I have personally become addicted to called Draft. If you want to read more about our investment you can follow its launch today on ProductHunt, which has become my favorite place now to launch new applications and companies. The Draft team will answer questions there and so will Greg and I if you have anything for us. They just announced their Android app (you can