Disappearing Term Sheets and Down Rounds: Inside Venture Capital’s New Normal
Investors who ghost. Withdrawn offers. And more debt deals. After last year’s frenzied funding market, startup founders are encountering tougher terms at the deal-making table.
On a Monday in February, founder Annafi Wahed downed two glasses of wine, called her best friend and had a good cry. A venture capitalist had just emailed to say he was walking back a verbal agreement he made late last year to lead a seed round in The Flip Side, her media startup, with a $500,000 investment.
The investor was abandoning the investment around the same time large investors like Tiger Global Management had begun renegotiating deal terms for more-mature companies in response to cratering public technology stocks. Rubbing salt in her wounds, the investor told Wahed he was more interested in funding a “crypto news” site instead.
Once she got over the disappointment, Wahed made a plan to try her hand at fundraising again later this year, when the startup—which is developing an app that encourages healthy political debate—will have more mature products to show investors. “I won’t be able to rest until the money hits the account,” she said.