Leaped like a tiger, landed as a bedside rug – the risks of overselling your round

There is a German saying that goes something like this:

“Als Tiger gesprungen und als Bettvorleger gelandet.”

A rough English translation is “leaped like a tiger, landed as a bedside rug” – it basically means someone came roaring in to say a negotiation / argument / situation but essentially was overselling and or bluffing from the start in an over the top way – eventually the bluff is called and all credibility is lost. The outcome for the former tiger, now turned bedside rug, is never a good one.

Every now and then I’ll see this failed stunt in startup fundraising and it ends in tears a lot of the time. Actually I am seeing it more and more so I thought I’d write about it. It’s important because it can ruin your entire raise and risk your company – without any need.

The movie goes like this. “Hey you need to know we have XX term sheets at XX valuation and funds X, Y and Z are really keen. You have until XX to decide.” Sometimes the founders will say that, sometimes the existing investors will put in a call to us.

Per se that is OK – let’s be adults about it. If you have a lot of options, time pressure etc we’re happy to know that. We are going to have to get comfortable in our own time and do the job our LPs are paying us for – but we’ll try to be as fast as we can and tell you if we can’t meet your timeline. That’s business, that’s OK. We also know we all need to hustle a little here and there and that psychology matters in getting deals done. That is part of the game. OK.

The thing that doesn’t work so well though is when deadline X passes by a long time. And it becomes evident that X, Y and Z funds actually never tabled a term sheet at all. And then you come back with a new deal where the valuation is X instead of XX and there is no time pressure.

It is not hard to see how the intended psychology of the situation could now backfire massively.

Of course we should look beyond this. Of course if we still like the company and the team we’ll invest. No hard feelings. But it’s not unlikely that we’ll have lost trust in your judgement and are wondering what kind of person you are to work with. It’s pretty likely we aren’t going to feel so warm and fuzzy about the prospect of investing.

So by all means – be a hustler, play the game, bluff a little – but make sure it doesn’t come at a horrible cost.


  • http://www.balderton.com/ Robert Moffat

    Great post. I also see this happening more and more