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Venture Deals, 4th Edition
book

Venture Deals, 4th Edition

by Brad Feld, Jason Mendelson
August 2019
Beginner content levelBeginner
368 pages
9h 33m
English
Wiley
Audiobook available
Content preview from Venture Deals, 4th Edition

CHAPTER 16Letters of Intent: The Other Term Sheet

There is another type of term sheet that is important in an entrepreneur’s life called the letter of intent (LOI). Hopefully, one day you’ll receive one from a potential acquirer that will lead to fame, riches, and happiness. Or at least you’ll get a new business card on heavier card stock.

Typically, the first formal step for a company that wants to acquire yours is to issue a letter of intent. This sometimes delightful and usually nonbinding document (except for things like a no-shop agreement) is also known as an indication of interest (IOI), memorandum of understanding (MOU), and even occasionally a term sheet.

As with our friend the term sheet, there are some LOI terms that matter a lot and others that don’t. Once again there are plenty of mysterious words that experienced deal makers always know how and where to sprinkle so that they can later say, “But X implies Y,” often resulting in much arguing between lawyers. We’ve had LOIs get done in a couple of hours and had others take several months to get signed. As with any negotiation, experience, knowledge, and understanding matter. The LOI negotiation is usually a first taste of the actual negotiating style you will experience from the other party.

This negotiation will be the beginning of the end of your independence as a company. Unlike a venture financing where everyone can win by expanding the pie over time, you are now negotiating for a fixed pie. Subsequently, the ...

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Publisher Resources

ISBN: 9781119594826Purchase book