No contracts!

i gave a friend $50K a few month ago

no contracts

it is quite a bit of money and i am supposed to get it back next week

will i get any of it? some of it? all of it? with nice rewards?

i guess i will find out in a few weeks

but the point is, when are we willing to do deals without contracts?

in the Jewish diamond industry i understand it is common. it is a closed tight community with a high degree of trust. you break that trust once, and you are out of business.

in my business, lawyers make money, slow processes, and often, it turns out, do not do an outstanding job.

yet, i can not imagine a VC deal with no contracts

can you?

we can not get even to a ‘standard’ Term Sheet and every funding round takes about 45 days, usually arguing about the same things over again.

how inefficient!

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5 Responses to “No contracts!”

  1. Gabriel Gunderson Says:

    Let’s test it! $750K should be a good test 🙂 Please send the check to…

  2. ophirk Says:

    Vague memories from one of the MBA classes rmind me that certain economists developed ways to measure the value of (mis)Trust.
    Consider for example the extra costs of all the guards in front of Supermarkets , which only started in 2000.
    Another example is the electric gates around people’s private parking.
    We never used to have those in the old days …

    BTW, if my memory serves me well, you actually do have a contract with your friend. There is no need for a written, long document to create a binding contract . It is enough that you both meant for it and accept it.
    ( Two seconds of highly unprofessional legal advice – worth about 10$ in going rates ).

    • adisababa Says:

      the economics of trust are of great interest for me. if you have any links, let me know

  3. Assaf Says:

    There are a lot of attempts of doing money from blogging.
    if you manage to get $50K from a post (reminder to the loaner), it is probably the ever best prfitable blog post 🙂

  4. Tiran Dagan Says:

    Well then – you will be shocked to learn there is an enormous industry that works well without a single contract: The broadcast and entertainment industry, specifically for TV advertising. Once a year during the upfronts advertisers make their anual committments for advertising in a period of mutual courtship. Agencies will committ as much as $1b (billion) in advertising spend without a single contract page. More surprising is the fact that historically there have never been difficulties in this relationship and 99% of the time the committments hold (sometimes a “serious” document is drawn in the form of a napkin note). Coming from financial services this was shocking to me as well but its a fact.

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