Draft VC Term Sheets: They're Just Not That Into You

I received an urgent call from a client last night, asking me to review a term sheet he had received. At the top of the document were the words "DRAFT -FOR DISCUSSION PURPOSES ONLY". I suggested he give his investor a draft "yes".

I don't understand why some VCs believe that providing a draft term sheet is a useful, relationship-building tactic. There are only two ways a draft term sheet can reasonably be interpreted:

1. The investee's valuation expectations are too high and need to be right-sized. (I have never heard a VC say, "Your business is even better than we first thought! We need to increase the pre-money valuation before we close!" )

2. Some of the VC's partners don't support the deal, but he still wants to hedge his bets that things might work out after all.

Think about how these messages would be received in the dating world (investing is, after all, the pursuit of financial romance). Has having "the talk" with a date to set expectations about the future of your relationship ever worked out for you? (Did you ever feel the need to have "the talk" when everything was progressing fine?) Did your girlfriends ever appreciate it when you explained that you needed more time before you could fully commit?

Some women may overlook this kind of behaviour by rationalizing that it is simply your fear of commitment, poor darling, that makes you do such things. But I don't think you'll get a relationship mulligan from entrepreneurs. They're mostly men.