Dancing With the One Who Brung Ya

Saul Lieberman, a lawyer in NY/Israel asked a great question in response to the intent post.

"Once you send your "intent email" and you and the entrepreneur are on the same page, what are your expectations regarding the entrepreneur continuing to negotiate with other investors?"

Excellent question. I expect him/her to keep talking to everybody.

Here is my view on the whole VC dance process. 

Until you have a signed term sheet where you've agreed, in writing, to some period of either no-shop or exclusivity, entrepreneurs should pursue every opportunity and continue to talk to anybody returning calls.  Given the whims of the day, human nature, what's hot/not in the minds of your potential financing source, keep talking until somebody delivers a term sheet with conditions you can accept.  Once you sign it and you've agreed to work just with the VC (or other financing source) stick to your word and follow through.

Now having said that, the amount of time you should 'lock up' with a VC is obviously a critical issue.  In my opinion, you should talk to everybody, give out the information people need to get to a term sheet (less customer calls), and get people as far down the path as possible before any lock up.  If you take this approach, you don't have 90 days of exclusivity nonsense, it is much much less.

Keep your options open until you get on final approach.

Thanks, Saul.