I was recently in a meeting where we were reviewing a term sheet for one of our existing investments together with the company’s founders, existing investors including us, and the new round’s lead investor. At the conclusion of the meeting, we agreed to make several changes to the terms. However, the new round’s lead investor was going to get the approvals of their partners and the other investors participating in the round before formally applying the changes.
A week later, we collectively received the revised term sheet from the new round’s lead over email. Some of the changes agreed to during the meeting were reflected in the revised term sheet but some weren’t. I then got a call from the new round’s lead to explain why some of the changes hadn’t been made.
In the absence of the call, I would have been disappointed to see that the terms we agreed to during our meeting hadn’t been reflected in the term sheet. However, as a result of the call and the personal explanations for why some terms hadn’t been changed, I felt much better. The reason is that the personal explanation shows that the new investor acknowledges our requests and our earlier agreements. Rather than act as if we hadn’t preliminarily agreed on these terms during our meeting, they took the time to personally explain their reasoning for why some of the updates we had agreed upon during the meeting weren’t reflected in the revised term sheet.
This doesn’t mean that we agree with the explanations offered. We’re still negotiating these terms.
However, the personal call is a signal of the new investor’s positive intent to get the deal done. Disagreeing with a reason and a personally delivered explanation is much better than simply disagreeing. It’s a necessary condition for a successful partnership and I therefore appreciated the approach.
Also published on Medium.