Note that I am not saying an entrepreneur shouldn’t get a competitive process going and try to get the best deal with the highest quality investors. You just need to do it in the right way. Discuss things verbally and only accept a term sheet when you have agreed on all significant terms. At that point, assuming the term sheet agrees with what you said, you should sign it and return it within a day or two. (Don’t say you need to wait for you lawyer to review it – if you want to be an startup CEO you need to learn how to review and evaluate term sheets. Have your lawyer teach you about term sheets before you receive them.).
cdixon.org / Don’t shop your term sheet
this is how i like to do it too. and in the vast majority of cases I haven’t sent out a term sheet without an agreement in principle. but there have been exceptions like everything else in the world.
having said that, i do believe it makes sense for the founder/entrepreneur to have a lawyer review the term sheet. I think that actually is the responsible thing to do.
Source: cdixon.org
