Term Sheet: No Shop Agreement by Brad Feld

  • Source link: https://feld.com/archives/2005/08/term-sheet-no-shop-agreement.html
  • TL;DR: The “no shop agreement” in a term sheet works as a sort of emotional commitment. You are agreeing not to continue searching out better deals with other VCs and instead committing to closing the deal.
  • How helpful?: 4/5
  • Topic Tags: term sheet, negotiation, terms, no shop agreement
  • Relevant questions addressed: What is a no shop agreement? How should I negotiate it?
  • Summary bullet points
  • Having multiple options will get you the best deal for a round of financing
  • Eventually, you have to commit to an investor
  • No shop agreement essentially makes it so that you have to commit to only negotiating with the lead investor and you can no longer “shop” around looking for better deals
  • “At some level, the no shop agreement reinforces the handshake that says ‘ok - lets get a deal done- no more fooling around looking for a better / different one”
  • The entrepreneur should bound the no shop agreement by a time period (45-60 days)
  • Follow up links