The Term Sheet | Wattys 2016 Winner

Chapter 41

"He'll see you in just a few minutes. He is just wrapping up an international call."

David sat on a modern plastic seat. Wanting to be prepared at a moment's notice, he resisted the urge to check his email, but ten minutes later he realized that a few minutes could actually be a while. He pulled out his laptop, linked up with his phone's hotspot signal and began his normal routine of checking things. First his email: spam, Google Alert, newsletter, a message from Andrew asking where he had to meet to sign paperwork. Then he checked the stats: 313,002 signups, servers were under very little load, everything seemed okay. Then news sites: TechMeme, Re/code, TechCrunch. Khelli looked up from her desk.

"Okay, he's ready for you." She gestured toward the large door.

"Thank you."

David walked in, trying to muster as much confidence as he could.

"David," said Doug with a broad smile, standing at his desk and gesturing for David to sit on the semicircular white couch in front of his desk. "Good to see you. Please, have a seat."

David felt intimidated and unsettled. The office was so modern, clean and geometric. It was sterile. He felt like he had stepped into another universe.

"What was so important that I had to drive all the way up here?"

"We can get to business soon. First, how are you? How was the drive?"

"Fine." There was an awkward pause.

"I see," said Doug as he sat down with a grand gesture. "Well, I guess I'll come out and say it: David, I think I made a mistake last time we talked. I should not have given in to the pressures of my company at the time—I am the chairman, after all. I should be able to do what I think is right. I hope you aren't offended by how I treated you last time, but I'd like another chance to buy your company."

I knew it! thought David.

"Sorry, Doug, but the company isn't for sale any more. We're about to close a round of funding from a VC."

Doug looked puzzled. Then let out a condescending laugh.

"Everything's for sale, David. It's only a matter of price."

David's pulse quickened.

Doug continued. "When I was a young kid, my father died quite unexpectedly. He left my mother and I with little more than credit card debt and some land with a tiny house he had inherited in Germany from his dad. There wasn't much left in the checking account, and my mom hadn't been part of the workforce in years. It was up to me to figure out how to get my mom and myself out of that pickle. Can you tell me what you would have done in my shoes?"

"Sell the land?"

"Certainly, that was my first thought too. I reached out to a realtor in Germany who seemed more than eager to help. In just a couple days, we had our first offer in hand. Apparently, my dad had fielded many offers for the land in the past. They wanted to bulldoze the small house and build some new restaurants or something. Anyhow, he had rejected them for years. Now that he was dead, it was finally their chance to get their hands on this land. The timing worked out well, because my mom and I could barely eat and had already missed a payment on the mortgage. Do you know what I did next?"

"Sell it?" asked David.

"Of course not, David. No. You still have a lot to learn, son. I turned down the first seven offers. It took two months of scraping by and odd jobs to make the rent. But in the end, I got four times more money than the initial offer. You see, timing is everything in business and if you don't have time, people will take advantage of you and pull you apart like a crab eating a corpse on a beach. Do you understand what I am trying to tell you here?"

"I think so," said David.

"Good, so let's skip the fancy term sheets and legal expenses and get down to it."

Doug opened his desk and pulled out a white sheet of paper and a pen. He scribbled something on the paper and folded it in half. He slid the paper to the other side of the desk and David picked it up.

"Before you open it, I need you to understand something. There is no wiggle room for negotiation here. I may have made a mistake last time, but this time I am dead serious. Take it or leave it, this is my best offer."

David's hands and feet were drenched in sweat. He couldn't bring himself to open the heavy paper. He tried to do some quick math in his head. If Doug was trying to tell him that this offer would be four times as much as the previous one, then five hundred thousand dollars times four was two million dollars. Split between him and Andrew and they would both be millionaires. Not what he was hoping to hear, but certainly something he would have to think seriously about. He could always just take the money, put in a few years at System, and then invest it in his next startup. Plus, two million was the same value the venture capitalists had come to. If he took the million in investment at the two million-dollar valuation, he would still own a third of the company.

"Well, are you going to open it?"

David nodded. Slowly, he opened the piece of paper. He tilted his head to the side, squinted and pursed his lips.

"Is this some kind of joke?" asked David.

"As I already explained, this is not a joke. This is the final offer you will get from me. It's the best I can do given the circumstances."

"I can't take two hundred and fifty thousand dollars. That's half of what you originally offered. Is this supposed to be my reward for holding out? For having put together an offer from top-tier venture capitalists?"

"David, you have clearly misunderstood the point of the story. I was trying to explain that time changes things. Sometimes for better, sometimes for worse, like it did when my dad died and left me to take care of my family. For you, unfortunately, time has changed things for the worse. I sympathize with your situation. I'm sorry you took it the wrong way."

"What do you mean that time has changed things for the worse? Things are better for Cryptobit than they have ever been."

"How much cash do you have left in the bank?"

"None. But that will change in two days when the venture deal closes and wires us a million dollars."

"There you go counting chickens again, David."

"What do you mean?"

"What do you think Rocketship Ventures will say when they see this?"

Doug slid over another piece of paper he took out of his desk. This one was full of printed words—it was a legal document. David read the headline: Cease and Desist.

"This is baseless. It's all lies. They'll figure that out right away."

"You know, that might be true. And if you only had enough money to pay your contractors and server fees and keep bankruptcy at bay, it might just work out in your favor. But that's the problem: when you run out of time, you run out of options. Given your current situation, I think you should give my offer another look. I know you can't move forward on this without your partner's approval, so I'll give you until tomorrow at sunset before this document falls into the lap of your precious VCs. I suggest you be persuasive."