Silicon Valley runs on handshake deals. A handshake deal is a verbal commitment to a transaction. The actual transaction comes later, when documents are signed and money changes hands.

Why do we need handshake deals? Why not just wait till the actual transaction? Because things can happen fast in the startup world.

So both investors and founders need a way to reserve space in a transaction. Founders need it because creating documents and getting them signed would slow down their fundraising, and investors need it because if they had to wait for documents to get created and signed before they could commit, they’d miss out on the hotter deals.

Handshake deals are not unique to Silicon Valley of course. They tend to arise wherever trust is sufficiently high and speed is...

Silicon Valley runs on handshake deals. A handshake deal is a verbal commitment to a transaction. The actual transaction comes later, when documents are signed and money changes hands.

Why do we need handshake deals? Why not just wait till the actual transaction? Because things can happen fast in the startup world.

So both investors and founders need a way to reserve space in a transaction. Founders need it because creating documents and getting them signed would slow down their fundraising, and investors need it because if they had to wait for documents to get created and signed before they could commit, they’d miss out on the hotter deals.

Handshake deals are not unique to Silicon Valley of course. They tend to arise wherever trust is sufficiently high and speed is sufficiently important...