Give and Take

Give and Take — summary

The strangest term sheet in Silicon Valley

Two dads stood on the sideline of a kids' soccer game in Silicon Valley. One was a serial entrepreneur named Danny Shader, who had already sold two companies for hundreds of millions of dollars. The other was a venture capitalist named David Hornik, a 5'4" computer-music major turned criminologist turned lawyer who collects first editions of *Alice in Wonderland*. They got to talking about Shader's new idea: a way for the 25% of Americans without bank accounts to pay for things online by walking into a 7-Eleven with a barcode.

Hornik loved it. Within a week he handed Shader a term sheet. And here's the part that stops you cold. Every venture capitalist on earth attaches a deadline to a term sheet. The deadline is the whole game. It pressures the founder, prevents shopping, creates urgency. Hornik did the opposite. "Take as much time as you need," he said. He even sent Shader a list of 40 founders he had backed before, encouraging him to call every one and ask whether Hornik was a person worth working with.

Shader took the time, called the references, shopped the deal. And then he signed with someone else. By every conventional rule of negotiation, Hornik had blown it. Except the story doesn't end there. Shader felt strange after he signed. He felt like he was leaving something behind. Before the round closed, he called Hornik and asked if he could invest anyway, even though it would mean Shader's own ownership stake had to shrink. Hornik said yes. The company, PayNearMe, grew thirty percent a month. Hornik now sits on twenty-eight similar deals, with an 89% close rate where the industry average is closer to 50.