Bengaluru, India–In January, the founders of a business-to-business e-commerce startup were looking to raise $20m, in exchange for a 15 percent stake. While they were talking to three to four investors to finalize the deal, a new investor swooped in with a better offer: $50m for a 17 percent stake, valuing the nearly three-year-old business at a hefty $200m. Two days later, the investor gave the thrilled founders a term sheet, which is a non-binding offer.
But in March, citing reasons like “low margins” in their business, the investor pulled the deal, leaving the founders with no one else to raise money from and putting a sudden end to their aggressive expansion plans. That venture capital fund gave “random reasons” before pulling the deal, said an investor familiar with how the deal fell through, requesting anonymity as the conversations were private.
