Dead Deal Expense Can be Costly to Companies
An article in the WSJ cited several anecdotes where startups had funding offers pulled after a Letter of Intent (LOI) had been negotiated. Typically the majority of the deal-related due diligence expenses are incurred once the LOI has been executed, and frequently the parties involved are responsible for their own expenses in the event that a deal is not reached.
In one such instance, the co-founder and CEO of Plate IQ signed an LOI with an investment group that failed to close.
"[The CEO] said Plate IQ had run up a six-figure legal bill to close the deal. ... [The CEO] told the [investment firm] he never wanted to work with [the investment firm] again."
Source: Rolfe Winkler | “Coronavirus Forces Tech Startup Founders to Grow Up Fast” | 4/18/2020 | Visit