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What Do You Need To Do Before You Get An Investor’s Term Sheet?
“I believe this term sheet explodes like a pumpkin at 5PM. Here’s my number. Call me before then if you’re interested in accepting my terms,” “Raul”, our potential new investor, said to me.
I had just spent the last thirty minutes trying to negotiate with Raul. Raul reacted the same way to every suggestion I had. He said, “There is no negotiation on this term sheet.” He had me, and he knew it.
And Raul had tired of me trying to get him to change the deal terms. It was Saturday afternoon at 4:35 PM. We received the “Donald Ventures” term sheet from Raul Friday at 2:15 PM. So from start to finish, we were expected to make a decision in 27 hours.
Our first investor, Gill, gave us four days to agree to his term sheet. The reality is, whether it’s the 27 hours Donald Ventures gave us or the four days Gill gave us, you don’t have much time to make a decision.
There’s a reason investors give you short expiration dates on term sheets.
It should be obvious, but, when an investor gives you a term sheet, they want you to sign the term sheet. And, the one thing investors don’t want you to do is shop the term sheet to another investor. The result can be the investor losing the deal or paying a higher…
