

Adventures w/ VC Outside the Valley (Or How to Get Screwed) - randfish
http://timbull.com/adventures-with-venture-capital-outside-the-v

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dshah
Wow, quite a riveting story.

Frankly, I don't know that the guys did anything particularly wrong along the
way. It was a series of small things, and at each one, I'm sure they were
telling themselves "well, it's not a major deal, we've come too far..." etc.
I've been in similar situations before.

The things I keep in mind when fund-raising:

1\. The deal is not done until the money is in _your_ bank account.

2\. There's no such thing as a "formality". If there's a step in the process,
there's a step in the process. It's almost always possible for something to go
wrong at any step.

3\. Signed term-sheets are tricky. Once signed, there's usually a "no-shop"
clause (so you have to halt conversations with other investors). Along side
that, the termsheet is non-binding. So essentially, the investor can back-out
if they want.

4\. Not sure how it's done in China, but here, if the first version of a
contract does not match the terms in the termsheet, I'd push back hard and
fast. That's not the deal that was agreed to.

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tbull007
Thanks Darmesh. Its pretty much the approach we took, I guess the only thing
is that we should have walked away at your point 4. We discussed it, what
stopped us in the end was that even though the deal had now changed, it was
still a deal we would have happily done.

In retrospect it was a bigger deal than we made of it and we really should
have walked away. Rather than focussing on the terms we should have focused on
the signals this was sending - something fishy was going on and internally
these guys weren't communicating.

