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Term sheet isn’t a deal. Same way an “accepted offer” on a house isn’t a purchase contract until you have an actual contract. Clearly SoftBanks is having its c

Term sheet isn’t a deal. Same way an “accepted offer” on a house isn’t a purchase contract until you have an actual contract. Clearly SoftBanks is having its challenges but this just sounds like normal deals falling apart during pre-closing due diligence. You don’t have a deal till you have a deal.

CalChris 7y ago
If a term sheet isn't a deal, and I kinda agree that it isn't, then what is an exclusive, six-month term sheet? Why would someone sign a six-month exclusive non-deal? BTW, a term sheet is usually very specific about it being for discussion purposes only.
- bsder 7y ago
  Some level of exclusivity isn't necessarily bad. The purchasing company doesn't want you using their deal to shop around. VC's are sheep, and having Softbank interested would generate lots of FOMA (Fear of Missing Out) amongst the herd. However, 6 months instead of 30-45 days without a useful fee for non-execution sounds like the company wasn't in a good place to begin with.
- matthewowen 7y ago
  To take a lesson from Thucydides, "the strong do what they can, and the weak suffer what they must".
- jalonso510 7y ago
  When term sheets say they are non-binding, they will usually say "except the sections about confidentiality and exclusivity". So those will be the only parts that actually are enforceable promises. But the exclusivity period is typically 30-45 days. There would have needed to be some particular reason for six months, given how far off-market it is.
  - CalChris 7y ago
    Thanks. No shop. It is, in fact, spelled out in the NVCA model term sheet. Still, why SoftBank would ask for 6 months is a conundrum.
yorwba 7y ago
AFAIK, in contract law, an "accepted offer" is an actual contract, even if there's no paper record of it (though it may be a bit hard to prove acceptance without one). However, when someone puts their house up for sale, they're usually not offering it to anyone yet, rather they're inviting others to offer to buy it. I think a term sheet is also just an invitation, not a binding offer.
- whiddershins 7y ago
  I believe in nys you can’t have a verbal real estate transaction
- Nursie 7y ago
  Likely depends on the country - in England, on a house sale, either party can back out after an offer is accepted, free of consequences, until contracts are exchanged.
  - richardwhiuk 7y ago
    That's very specific to house sales I think.
    - SamReidHughes 7y ago
      There are some other specific exceptions, like exclusive copyright licensing in the USA.
  - hirako2000 7y ago
    And there are unwritten rules in the solicitors community, do that a few times and you are blacked out.
    - dmurray 7y ago
      Does this work? For house buying, solicitors are often taking on first-time clients, and they don't have a lot of leverage against the client if the client decides to renege on the deal.
CerealFounder 7y ago
I think you're missing the point. There are established norms that are accepted by the industry during negotiations. Another good example of a firm that is notoriously dishonest about term sheets is Global Founders Capital (the rocket internet people). They are known to blow out rival firms offers financially and then after everyone is out, come back and try to renegotiate at more onerous terms.
- 0zymandias 7y ago
  There seem to be two types of people debating with each other in this thread. 1. Some people that have real-world experience with raising money and term sheets. They understand what the norms and expectations are in addition to understanding the legal aspects. 2. Other people that lack the real-world experience and are just speculating without understanding the norms. They are only referring to the legal aspects.
  - tgs4 7y ago
    ^ The deal is never actually done until the money is wired and cleared into your account. Everything that happens before that including signed papers and handshakes are just negotiations.
    - okcando 7y ago
      Another way to approach interacting with other humans is to understand that the law only describes minimum expectations and isn't a replacement for ethics or common decency. You can use all the tools of the law to disadvantage others but word will get around that you're a dirty dealer and it'll be their privilege to not do business with you anymore.
      - vorotato 7y ago
        That only works if anyone is doing it.
        7y ago
AstroJetson 7y ago
"Term sheet isn’t a deal. Same way an “accepted offer” on a house isn’t a purchase contract until you have an actual contract." It's not a deal until the check clears. I've seen real estate and business deals fail at the very, very last moment. Sometimes people do amazing things at the last second.
onetimemanytime 7y ago
depends on their reputation and mode of operation before. If they always stuck to term sheets and now they are walking away it's news. Legal or not is irrelevant here. A lot of times CEOs shake hands and lawyers work the details...reneging even if it's legal (depending on how /where) it's damaging to your reputation.
op00to 7y ago
Real Estate agents that play cute games between offer and contract like tweaking terms often find their offers at the bottom of the piles, some times lost entirely!
alexnewman 7y ago
I'm sorry, when you shake hands that's it. Here in SV we believe in trust.
- OnlineGladiator 7y ago
  > Here in SV we believe in trust. You trust venture capitalists to care about people more than money? I'm genuinely asking, as I cannot fathom that worldview.
  - readams 7y ago
    They care a lot about their reputation. Reneging on promises and dealing in bad faith is a quick way to get a bad one.
- alexnewman 7y ago
  Why in G-ds name was I downvoted for this. Seriously, if you shake hands and don't give the check, your name is mud. http://thefunded.com/ http://thefunded.com/
  - alexnewman 7y ago
    Wow softbank is crashing http://thefunded.com/funds/show/SOFTBANK+Capital?view=search http://thefunded.com/funds/show/SOFTBANK+Capital?view=search
rossdavidh 7y ago
1) something being legal, is not the same as being a reputational risk. If you get a reputation of quitting your job with no notice, well generally that's totally legal, but it will eventually get harder to get a job, all else being equal. However... 2) I think everyone knows that Softbank just had a very hard time, so I think this is both understandable (if things calm down for them then a year from now no one will hold this against t hem), and also the least of their worries (if I were looking for VC's right now, Softbank would not be at the top of my list regardless of whether I had heard this or not).

CalChris 7y ago

If a term sheet isn't a deal, and I kinda agree that it isn't, then what is an exclusive, six-month term sheet? Why would someone sign a six-month exclusive non-deal? BTW, a term sheet is usually very specific about it being for discussion purposes only.

bsder 7y ago
Some level of exclusivity isn't necessarily bad. The purchasing company doesn't want you using their deal to shop around. VC's are sheep, and having Softbank interested would generate lots of FOMA (Fear of Missing Out) amongst the herd. However, 6 months instead of 30-45 days without a useful fee for non-execution sounds like the company wasn't in a good place to begin with.
matthewowen 7y ago
To take a lesson from Thucydides, "the strong do what they can, and the weak suffer what they must".
jalonso510 7y ago
When term sheets say they are non-binding, they will usually say "except the sections about confidentiality and exclusivity". So those will be the only parts that actually are enforceable promises. But the exclusivity period is typically 30-45 days. There would have needed to be some particular reason for six months, given how far off-market it is.
- CalChris 7y ago
  Thanks. No shop. It is, in fact, spelled out in the NVCA model term sheet. Still, why SoftBank would ask for 6 months is a conundrum.

yorwba 7y ago

AFAIK, in contract law, an "accepted offer" is an actual contract, even if there's no paper record of it (though it may be a bit hard to prove acceptance without one). However, when someone puts their house up for sale, they're usually not offering it to anyone yet, rather they're inviting others to offer to buy it. I think a term sheet is also just an invitation, not a binding offer.

whiddershins 7y ago
I believe in nys you can’t have a verbal real estate transaction
Nursie 7y ago
Likely depends on the country - in England, on a house sale, either party can back out after an offer is accepted, free of consequences, until contracts are exchanged.
- richardwhiuk 7y ago
  That's very specific to house sales I think.
  - SamReidHughes 7y ago
    There are some other specific exceptions, like exclusive copyright licensing in the USA.
- hirako2000 7y ago
  And there are unwritten rules in the solicitors community, do that a few times and you are blacked out.
  - dmurray 7y ago
    Does this work? For house buying, solicitors are often taking on first-time clients, and they don't have a lot of leverage against the client if the client decides to renege on the deal.

CerealFounder 7y ago

I think you're missing the point. There are established norms that are accepted by the industry during negotiations. Another good example of a firm that is notoriously dishonest about term sheets is Global Founders Capital (the rocket internet people). They are known to blow out rival firms offers financially and then after everyone is out, come back and try to renegotiate at more onerous terms.

0zymandias 7y ago
There seem to be two types of people debating with each other in this thread. 1. Some people that have real-world experience with raising money and term sheets. They understand what the norms and expectations are in addition to understanding the legal aspects. 2. Other people that lack the real-world experience and are just speculating without understanding the norms. They are only referring to the legal aspects.
- tgs4 7y ago
  ^ The deal is never actually done until the money is wired and cleared into your account. Everything that happens before that including signed papers and handshakes are just negotiations.
  - okcando 7y ago
    Another way to approach interacting with other humans is to understand that the law only describes minimum expectations and isn't a replacement for ethics or common decency. You can use all the tools of the law to disadvantage others but word will get around that you're a dirty dealer and it'll be their privilege to not do business with you anymore.
    - vorotato 7y ago
      That only works if anyone is doing it.
      - 7y ago

AstroJetson 7y ago

"Term sheet isn’t a deal. Same way an “accepted offer” on a house isn’t a purchase contract until you have an actual contract." It's not a deal until the check clears. I've seen real estate and business deals fail at the very, very last moment. Sometimes people do amazing things at the last second.

onetimemanytime 7y ago

depends on their reputation and mode of operation before. If they always stuck to term sheets and now they are walking away it's news. Legal or not is irrelevant here. A lot of times CEOs shake hands and lawyers work the details...reneging even if it's legal (depending on how /where) it's damaging to your reputation.

op00to 7y ago

Real Estate agents that play cute games between offer and contract like tweaking terms often find their offers at the bottom of the piles, some times lost entirely!

alexnewman 7y ago

I'm sorry, when you shake hands that's it. Here in SV we believe in trust.

OnlineGladiator 7y ago
> Here in SV we believe in trust. You trust venture capitalists to care about people more than money? I'm genuinely asking, as I cannot fathom that worldview.
- readams 7y ago
  They care a lot about their reputation. Reneging on promises and dealing in bad faith is a quick way to get a bad one.
alexnewman 7y ago
Why in G-ds name was I downvoted for this. Seriously, if you shake hands and don't give the check, your name is mud. http://thefunded.com/ http://thefunded.com/
- alexnewman 7y ago
  Wow softbank is crashing http://thefunded.com/funds/show/SOFTBANK+Capital?view=search http://thefunded.com/funds/show/SOFTBANK+Capital?view=search

rossdavidh 7y ago

1) something being legal, is not the same as being a reputational risk. If you get a reputation of quitting your job with no notice, well generally that's totally legal, but it will eventually get harder to get a job, all else being equal. However... 2) I think everyone knows that Softbank just had a very hard time, so I think this is both understandable (if things calm down for them then a year from now no one will hold this against t hem), and also the least of their worries (if I were looking for VC's right now, Softbank would not be at the top of my list regardless of whether I had heard this or not).