Shopped Deal

Has the deal been shopped around to many investors, each of whom rejected it?

An eighth screening mechanism used by many venture capitalists is to determine whether deals have been "shopped," that is, whether they have been presented to and been passed over by other investors. Venture capitalists generally avoids shopped deals. Properly employed, this strategy makes a lot of sense. Shopped deals, by difinition, have been reviewed and rejected several times by other venture capitalists. If a particular venture capitalist trusts the business and investment judgment of another investor who rejected the deal, there s no reason that the former should not rely on the latter's negative due diligence. However, rejecting a deal solely because it was shopped, without finding out who rejected the deal and why it was rejected, could result in the venture capitalist missing a great opportunity. Twenty venture capitalists turned down Hotmail before Draper Fisher Jurvetson ivested; Hotmail was later sold to microsoft ofr over $400 million.