Escape Velocity You need to decide when you're in and when you're out of any contract. Here's how to do it.
By Marc Diener •
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If your deal has any kind of timeline, having an"escape" clause can be a lifesaver. It can be a drop-deaddate after which all bets are off. Or, you can erect a"milestone." For instance, it can be something like this:"If gross revenues do not equal at least X dollars within 18months, we stop funding."
With a "step" deal, you hedge your bets by investingtime and/or money in stages. Here's an example: A venturecapital firm will fund in phases, from seed capital at the outsetto bridge financing before the IPO. At each prenegotiated juncture,the firm reserves the right to pull the plug.
As one of the most common devices in dealmaking, the"option" gives you the right to buy something for a setprice at some later date. For instance, if I were to give you$10,000 today, you would give me the option to buy your house anytime within the next six months for $200,000. Like a milestone, theoption leaves you an out. You don't have to exercise it. Italso protects you from escalating bids by locking in a price. Notto mention, if it's exclusive, it lets you control somethingfor less than it would cost to buy it.
