Last week saw the final step in closing a deal that would have made me a decent amount of money in the short run and, potentially, a great deal of money in the long run. I could have ignored my principles and my gut thereby finalizing the details of the deal. Or, I could have stood on principal, followed my gut and likely caused the deal to crash and burn. I stood my ground. It crashed and burned. I feel really good. If making money is the measure of success, I failed. But if the measure is what was ethical, legal and honest then I scored big. This deserves an explanation.
I had been in negotiations with the creator of an app. He was trying to raise seed money; first round investors. Even if you’ve got a great product or service, which this guy seems to have, that first round of fundraising is always a challenge. After all, you’re doing it with no profits or sales to back up your claim of value. And of course, the developer always thinks the value of his product is worth gazillions and the investors always think it’s not. There was a target amount to be raised by a date certain and I was trying to reach that target by that date. One week prior to the deadline I had succeeded in securing an investor willing to put up 50% of the target. Further, I had contacted an additional investor who had an interest and, if terms were agreeable, was willing to put up twice the target amount in addition to the 50% I had already secured.
Terms. The magic word.
You see, from the first presentation that I attended as a potential fundraiser, the terms for potential investors were vague and changeable. In fact, whenever the developer was asked the terms, he repeatedly said, “everything’s negotiable.” Trouble was, what he said and what he did were inconsistent. When it came to terms he was inflexible and demanding. In fact, he was dictatorial in his delivery. Further, he refused to put anything in writing.
I am a lawyer. Terms in writing, even offers to contract that are yet subject to negotiation, need to be in writing. This is not a quirk of mine. This is standard legal and business practice. Further, this developer was refusing to put in writing even the terms that pertained to me as a broker.
I grew up watching my father, a successful entrepreneur, make many a deal on a handshake or someone’s word. I am “of that school” even though I am also a trained attorney. So, in this particular instance, sharing some common cultural background with the developer and wanting to believe the best of him, I was proceeding as if on a handshake.
But things started to not feel good in that “gut” I spoke of earlier. I call it intuition but it’s the same thing. It’s an internal instinct and “caution” light that goes on which says, “Pay attention. Something is out of alignment and doesn’t feel good.” It was the developer’s continuing refusal to commit to writing along with his increasing disrespect towards me and my investor’s rights the more certain he was that the investor was on board and the closer we got to closing the deal.
Three days before the target deadline, the developer sent me an email with terms. They were not the terms repeatedly discussed and those which were there were woefully inadequate and poorly defined. The email closed with a “take it or leave it” directive and a demand that I not respond with any counter-offer or other terms. I was to reply simply “Yes” or “No.”
Well, there’s the kiss of death to a lawyer. Under the best of circumstances I am unlikely to not have something to add! And these were definitely not the best of circumstances. So I replied with a detailed explanation of terms as my investor believed them to be based upon representations made to him (and me). Further, I set forth in detail why those terms were in everyone’s financial interest.
I received no direct reply. However, three days later, on the target date deadline, I received a call from a third party involved in the fundraising who informed me that the developer’s “team” had advised him to accept the terms as I had forwarded them. However, I was also told he was in another city that day trying to raise other money.
Well, we were at a deadline set up by the developer, not me. He had not replied to my email of three days prior. My investor was calling me to ask why there was no contract to sign as this was the target date. So, I sent an email and text to the developer at 5PM stating that if I did not have confirmation in writing by 6PM of an agreement to terms and proof of the remaining 50% of funds raised as per the budget that my investor’s offer would have to be renegotiated once the 6PM deadline passed. At 6:35PM I received a scathing email from the developer who suggested that his lawyer contact a third party in the fundraising and attempt to negotiate the close of the deal. The last sentence of the email was , “But I am completely okay with us not doing business.”
We did not do business.
I could have let the refusal to commit to writing go; I could have ignored the ever changing terms; I could have disregarded the firm deadline; I could have overlooked the increasing disrespect; I could have seen grey everywhere instead of seeing black and white. After all, a lot of money was potentially in my future. A lot! As in similar to owning early shares of Apple or Uber.
But I think letting all that go is one of the primary ways this country got itself into the economic mess it’s in. Without principles we are lost. Without principles, it’s impossible to know when to leave the room…or the deal. Without principles money isn’t our means of transaction, it’s our god.
The terms should have been set forth, committed to writing and respectfully negotiated back and forth until the point of mutual agreement. The deadline, set by the developer, should have been able to be counted on and honored by all sides. The manner in which communication was exchanged should have been respectful and not demeaning.
I feel sorry for people who do not know the core principles that form the basis for their existence. These are my principles. So when they were not met, it was easy to know when to leave the room and the deal. I do not have the money that was a part of that opportunity but I have my self-respect and I have not added to the decline of values and principles that so many in our nation bemoan the loss of. I am not part of the problem I am part of the solution. It’s a different kind of profit that I made on the deal…but profit none-the-less.