Mar 14, 2013, 2:48pm PDT Updated: Mar 15, 2013, 11:16am PDT

Paul Graham says a handshake is never enough

Paul Graham, co-founder of Y Combinator, proposes a new four-step process to confirm handshake funding deals between investors and startups.

Sponsored Links
	Sony Laptops for Business High Performance and Mobile, with 3rd gen Intel® Core™ i7 processor. store.sony.com/VAIO
	Microsoft Office 365 Office Capabilities Across Devices. Your Complete Office in the Cloud. Microsoft.com/Office365
Get Listed Here

Cromwell Schubarth: Senior Technology Reporter- Silicon Valley Business Journal; Email | Twitter | Google

Y Combinator co-founder Paul Graham has a new four-step dance that he wants to introduce to replace the Silicon Valley Shake. He thinks it is the solution for reducing disputes over startup fundings and can be summed up in four words: Get it in email.

Graham said the fabled Mountain View startup accelerator is putting a four-step process in place immediately that it hopes will become the standard in handshake deals between startups and funders.
"This is not a closed community of pros who deal with one another day after day," Graham wrote in a blog on Thursday. "Many participants in the funding market are noobs, and some are dishonest."
Y Combinator gets reports in every cycle of supposed handshake deals on funding that fall through. "Without video of the conversation it's hard for us to be sure whether there really was a deal and the investor welched, or there wasn't and the founders are just victims of their own wishful thinking," Graham wrote.
So here is the new process for doing a handshake deal at Y Combinator:
1. The investor says, "I'm in for (fill in the offer)."
2. The startup says "Ok, you're in for (fill in the offer)."
3. The startup sends the investor an email or text message saying "This is to confirm you're in for ."
4. The investor replies with an email that says yes.
"Unless and until this process is completed, there is no handshake deal," Graham wrote.
We'll see if everybody is doing the new Y Combinator four-step at its next Demo Day on March 26, a day when Graham says many of his charges get offered as much money as they need.
"Why do we need handshake deals? Why not just wait till the actual transaction? Because things can happen fast in the startup world," Graham wrote.
Click here to subscribe to TechFlash Silicon Valley, the daily email newsletter about startups, venture and angel investors.

Cromwell Schubarth is the Senior Technology Reporter at the Business Journal. His phone number is 408.299.1823.

Industries:

Technology

Your News Made Easy

Sign up for the DailyUpdate

The latest local business news delivered to you each day.

We recommend

Smart people like curly fries, and 5 other things your Facebook 'likes' reveal about you BizJournals
Menard gains ground on $56 million project BizJournals
Y Combinator shrinks its startup program BizJournals
Need a job? Your Facebook friends might be the key BizJournals
Series B may be the real startup funding crunch BizJournals

From around the web

5 Best Beach Towns To Buy Property In Investopedia
Look Out for Black Ice this Holiday Season! Griswold Home Care
9 Worst Recession Ghost Towns in America The Fiscal Times
How Carwash Workers Managed to get Health Care Aficio
Best 4-door, AWD cars for the snow and cold Bankrate

What's this?

Comments

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.