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.
Finally, know that the VC & entrepreneurial worlds are very, very small. We trade in information all day. I have spoken with many VCs in the past about which VCs pull out of deals. The market has a way of self-regulating bad behavior. So if you’re a VC – you better have a pretty damn good reason for pulling out of deal after offering a term sheet. There are times where it is warranted. But they are few and far between. Your word is your bond and pulling out screws founders with other potential investors.
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