Deals falling through

Founders will often ask me what to do if they ever find themselves in this situation. Well, here’s the hard truth: Not much.

Until the Term Sheet is signed, there’s always a chance that the deal can fall through. It’s an unfortunate risk within any industry where trust and relationships carry so much weight. Sometimes, people break that trust.

When something like this happens, there are typically a few different responses by those around you:

1. The impulse for some will be tribal. Founders will come to your defense. Investors will either justify the behavior or back out of the conversation entirely.

2. There will be calls for blood by many in the startup community. Some will demand that you name the investor so that others know not to work with him/her.

However, as I’ve said in the past, the startup business is built on relationships. Unless this person/fund completely tanks your business with their negligent actions, it’s probably not constructive to burn that bridge on the way out. In this industry, there’s always a strong possibility you’ll cross paths with them again.

Your reputation as a founder will be defined by how you handle situations like this one: Do you get angry? Do you yell at the investors who blew up your deal? Do you name those investors to the world in hopes that they never get new business again?
Or, do you take the high road, communicate clearly with the remaining investors, and work to save the round?

Here’s the advice I would give to the founder from this Tweet:
1. Don’t feel ashamed about a deal falling through — These things happen. That investor’s decision likely had little to nothing to do with you or your company.
2. Don’t expect an apology from the investor — You’re only setting yourself up for disappointment.
3. Figure out how to move past it — The sooner you find a way to move on, the sooner you can move forward.

I’ll leave you with one final thought: I’ve met plenty of founders who regretted losing their temper and acting impulsively against someone who wronged them.

But, I’ve never met a founder who regretted taking the high road.