Dear SaaStr: If a VC Backs Out of a Signed Term Sheet, Should the Entrepreneur Spread the Word?

Q: Dear SaaStr: If a VC Backs Out of a Signed Term Sheet, Should the Entrepreneur Spread the Word?

No.

First, there’s a good chance it’s at least 1% your fault.  Rarely in an auto accident is one party truly 100% at fault.  Are you sure you didn’t hide something, even inadvertently?  That you were totally upfront about that issue with your co-founder?  Etc. etc.  We talked about 10+ reasons deals fall apart the other day.  You’re likely at least 1% to blame.  Perhaps not.  But likely.

So if it’s even 1% your fault — you’ll look bad “spreading the word.”  And it won’t get you anywhere.

Two, no one will care.  Not really.  I know, but the thing is, someone else will still take their money.  Also, no one really thinks VCs are saints, folks.  It’s a tough business, with sharp elbows, and half promises.  Everyone knows this.  If you refuse to work with VCs that have never done something remotely questionable — your VC network will end up being close to zero partners.

Three, let it go.  As founders, we have to let a lot of stuff go.  It’s hard.  Man, it’s hard.  But let it all go.  Move on and focus on your business.  Not this one episode.

Having said that, you’ll get your chance here.  The answer isn’t to spread the word.  The answer is that when a founder comes to you later, and says, should I take money from the Backed Out VC or from This Other VC — you can say the latter.

(note: an updated SaaStr Classic answer)

Published on June 30, 2022

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