Comments on: Term Sheet: No Shop Agreement

By: Marcus

Marcus — Wed, 21 Oct 2009 20:35:38 +0000

Great post you got here. I’d like to read a bit more concerning that theme.

By: Real VC

Real VC — Thu, 12 Feb 2009 08:00:11 +0000

VCs do not appreciate when entrepreneurs go shopping with our terms sheets – we especially do not like it when they reveal our term sheet to other VCs without our permission. It's akin to taking someone's contract and showing it to someone else to see if you can wangle a better deal. It's a newbie move and VCs do talk amongst themselves. A company did that to us once because they weren't satisfied with the valuation we gave them (which IMHO was comparatively high). Our other VC friends they went to came back to tell us about this company – and said we were too generous with our valuation. The company couldn't find better terms from other VCs in the end so they came back to us – and ended up having their valuation slashed further.

By: Gundeep Hora

Gundeep Hora — Sun, 05 Aug 2007 22:10:31 +0000

Actually, I can see where VCs are coming, even though I’m an entrepreneur. It’s the VC’s business to keep looking at other deals for the rest of their fund. If every entrepreneur started requesting that VCs only focused on a single deal at the time, VCs would have a very difficult time putting their huge fund to work in the appropriate time.

As the article suggests, you could have the VCs agree to the no-shop for X amount of time. Hey, if your deal is so good that a VC is willing to get serious and you are getting other offers, those offers will more or less still be there even after 30, 45 or 60 days.

Look at it this way. If you go to VC A and sign a no shop for 30 days, and then receive inquiries from VC B and VC C, you can 1. go to VC A and inform them about you getting interest from others, which will make them hurry up and close the deal and 2. if VC A skips on the deal, you can always let VC B and VC C know that you have a no shop clause in your contract, but if the deal doesn’t go through, you’ll be happy to talk to them.

It’s a standard term with VCs, so they are all understand that as an entrepreneur you are stuck. I personally don’t see a problem with this clause at all.

By: tom

tom — Tue, 19 Jun 2007 06:32:16 +0000

if you have samples of letters of intent for M&A and VC pls send them to me

By: Joe White

Joe White — Thu, 11 Aug 2005 04:22:57 +0000

Totally agree with Nivi. No-shops are BS for the entrepreneur/start-up and I have ALWAYS found that the VC caves on this. Take it for what it’s worth (the no-shop)….nothing. VCs are duplicitous and why in the world would you agree to not listen to terms from as many suitors as possible? Once a VC funded your company, would they ever tolerate something like a no-shop in the normal course of business (closing a deal with a prospect/client, choosing a service provider, etc., etc.)? You want a no-shop Mr. VC, give me a term sheet that I like and I will close with you ASAP.

By: Nivi

Nivi — Tue, 09 Aug 2005 11:37:53 +0000

It is important to note that “no shops” are asymmetric when it comes to commitment.

The VC will continue to shop by looking at other possible deals. Meanwhile, the entrepreneur is committing to a single VC.

Would it be fair if the entrepreneur asked the VC to stop looking at other deals until the deal the closed?

“No shops” may be “market” and putting a time limit on the no shop obviously helps but I think it is important to note this asymmetry.