Brad Feld

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Letter of Intent

Sep 12, 2005
Category Term Sheet

Coming off the high of a manic Monday in the tech business, Jason and I have decided to follow our Term Sheet series with a new series scintillatingly called “Letter of Intent.”  Deals like eBay / Skype (wow – what a deal – congrats to DFJ, Bessemer, Index, and especially the Skype guys) have to start somewhere, and often the first real “document” that gets negotiated after the foreplay turns serious is the infamous “letter of intent.”

Now – our friend Jack Bauer doesn’t bother with these – he rarely has time to call the lawyers or review documents.  However, most deals – especially those involving private companies – involve a letter of intent.  This sometimes delightful and usually non-binding document (except for things like a no shop agreement) is also known as an LOI, indication of interest (IOI), memorandum of understanding (MOU), and even occassionally a term sheet.

As with the Term Sheet, there are some terms that matter a lot and others that don’t.  There are plenty of mystery words that an experienced deal maker always knows how and where to sprinkle so that he can later say “but “X” implies “Y”, often resulting in much arguing between lawyers.  We’ve had LOIs get done in a couple of hours and had others stretch into periods of several weeks – experience, knowledge, and understanding matter and the LOI negotiation is usually a first taste of the actually negotiating style you will experience from the other party.

We look forward to walking you through this and hopefully concluding before Jack comes back.