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by claudiusd 4308 days ago
I'm not surprised to see this coming from KPCB. They have a reputation for using underhanded tactics and this is just the latest example.

I unfortunately learned about their reputation too late... they pressured my company into signing a Series A term sheet only to pull it 3 months later (at the end of the no-shop) after THEY messed up a partnership negotiation. Needless to say we were out of cash at that point, but luckily we had some great seed investors who re-upped and a month later we signed a term sheet with another VC. What a nightmare though.
1 comments
dchuk 4308 days ago
Can you explain how they went about just pulling the term sheet even after you guys signed it? Sort of in a nebulous situation with our own investors right now and would appreciate chatting with someone with a similar experience.

You could also email me at me@dchuk.com if you'd prefer.

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claudiusd 4308 days ago
In general, the only "binding" part of the term sheet is the "no-shop clause", which doesn't let you solicit additional offers from investors, usually for 3 months. It otherwise represents a handshake on terms so that the VCs have time to perform diligence and produce the paperwork (which is substantial) while the founders find strategic investors to fill up the round.

Either party can still back out of the deal at any time, and this typically only happens when something bad emerges during the diligence process. It's important that startups can trust this fact because agreeing not to solicit investment for 3 months while (presumably) running low on cash is a pretty big risk. KPCB broke this trust in our case.

Feel free to email me at the address in my profile if you'd like to chat more.

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spitfire 4308 days ago
Thank you for being out in the open about this.

The VC's have a lot of money to run their PR machine, but no one ever hears the negatives about them. It's important to a functioning market that the information is out there.

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davidu 4308 days ago
Nothing about a term sheet is realistically very binding. That goes both ways. If you break the terms, there's generally little recourse for the other side.
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