About a century ago, a person’s handshake was just as good (or even better than) a written contract. People stood by their handshakes and a person’s reputation was made or lost on his ability to keep a promise. Back then, people took time to clarify expectations, thoroughly flesh out the deal and move toward it. Enter, the industrial world: deals are done in seconds, not weeks. Five minute conversations during hectic breaks at conferences become "deals" and often leave pros and newbies alike confused about exactly what just happened. People shake hands, promise and then hedge, making things dicey at best for both the investor and the company. The handshake deal is needed more than ever, but the rules have changed. Since there are newbies, snakes and opportunists lurking among the reputable handshakes, it's important to understand how to do a handshake deal in the 21st century if you don’t want to screw up a (literal) million dollar deal. There are protocols to be followed to ensure that obligations, promises and expectations are met, and that conditions, commitments and investments are real.
At the end of the day, a handshake deal really isn’t a deal until there is some form of documentation. An email confirming the basics, and a response agreeing to those details is critical. But even though an agreement can’t (and shouldn’t) stand on a handshake alone, there is significant value in the handshake deal and the protocol of making such deals.
The handshake deal sets the stage for a speedy transaction. It includes the big basic building blocks necessary for a complete agreement. And it gives both sides a sense of direction on where to go. Never forget this, though: regardless of the handshake, the deal isn’t done until the contract is signed and the check has been deposited and cleared. The handshake is the starting point, but it is not a guarantee.
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