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No Shop Provision

Fund: Sequel Venture Partners

Posted by gpetras on 2011-09-04

PUBLIC:

Before you work with these guys be sure if it's a co-funded deal they've had prior co-funding relationships with the second funding source.
They were eager to issue a term sheet after our first series of meetings. The term sheet had a "no shop" provision. Later management learned that Sequel did not have a relationship with co-funding sources to bring in the $3 million for the second half of the funding. Bottom line is they did not raise the $6 million specified in the term sheet.
The lack of performance personally cost me an additional $1.5 million. We were shocked they couldn't perform considering our revenue for the year prior to our term sheet was $100,000 (prelaunch) and $1 million (recurring subscriptions first year) and that Gartner selected hours as product is one of the top new offerings in the CRM, sales and customer service market. To obtain a copy e-mail greg@gregpetras.com.
Their inability to fund and deliver on their initial enthusiasm appeared to be the byproduct of not having existing funding relationships with tier one firms. We have blue ribbon clients, growing revenue, strong pipeline and solid management. Since Sequel Venture Partners failed to raise money potential new investors had concerns.
I understand "note shop" provisions are common but with Sequel, I’d be sure they had all the money under their control or at least a strong commitment from a fund before I agreed to such a provision.

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