September 11, 2005

Make “no shop” and other clauses in the VC deal mutual

From Tom Evslin:

My advice to entrepreneurs on this clause is to say politely and firmly “what is sauce for the goose is sauce for the gander.” The no shop should prohibit the VC from entering into financing discussions with competitors broadly defined of the company during the exact same period when the company can’t talk to other investors. If your VC won’t agree to this, don’t hesitate to ask what discussions they are engaged in

In general it is good negotiating advice to make sure that every clause which can be mutual is mutual. Often this technique helps in reaching agreement. For example, with a truly mutual no shop neither party will want it to be very long and both have a strong incentive to complete negotiation quickly.