FTA: "At the end of September, we agreed on terms and I flew up to San Francisco to do a closing dinner at a little café next to Brainwash. We had some good food and wine and I thought things were solid. We shook hands and planned to formally close the investment the next day."
I'm gonna go out on a limb and assume that the investor already possessed emails saying "Let's do this" with numbers in it. Is that different than a signed term sheet? You bet -- it's not legally binding! But it also meets all the requirements of the gentleman's agreement -- aka YC Handshake protocol:
1. The investor says “I’m in for [offer].”
2. The startup says “Ok, you’re in for [offer].”
3. The startup sends the investor an email or text message saying “This is to confirm you’re in for [offer].”
I believe contract law doesn't require signed physical paper to have an agreement be legally binding (it just makes it easier to litigate disagreements on either side).
I'm starting to get out of range of my recollection of law at this point.
On the tangent of the protocol as the protocol, I also note that it is meant to be exclusive. That is, you don't construct it by piecing together the individual events -- it's written as a once off 2-phase transaction with no other intervening steps to prevent shenanigans and mistakes.
Sorry, but this protocol should be improved: "in" is ambiguous.
All the startup has done is repeat verbatim what the investor said. In this situation the startup has signaled receipt of the investor's offer and has not signaled intent to ratify or otherwise accept.
Yes, an eager investor might interpret that as acceptance.
>1. The investor says “I’m in for [offer].”
>2. The startup says “Ok, you’re in for [offer].”
You'll notice that the startup has only repeated back what the investor said, correcting for the inverted subject-verb and adding a customary signal opening. The startup has confirmed receipt of the investor's signal.
>3. The startup sends the investor an email or text message saying “This is to confirm you’re in for [offer].”
The startup confirms receipt on a secondary channel.
I'm gonna go out on a limb and assume that the investor already possessed emails saying "Let's do this" with numbers in it. Is that different than a signed term sheet? You bet -- it's not legally binding! But it also meets all the requirements of the gentleman's agreement -- aka YC Handshake protocol:
1. The investor says “I’m in for [offer].”
2. The startup says “Ok, you’re in for [offer].”
3. The startup sends the investor an email or text message saying “This is to confirm you’re in for [offer].”
4. The investor replies yes.