VC calling: “Pay my lawyers!”

This is a true story about us raising our seed round for Talon.One. The following happens:

We are in talks with couple of investors, some drop out because they don’t like what we are doing, some what other terms etc. etc… Finally we have two investor lined up:

Investor A and B.

Investor A was first in the discussions and send a term-sheet which we never signed. Talon.One offered to provide all prepared legal documents based on the not signed term-sheet. Investor A declined and involved expensive corporate law firm… $$$… and a lot of changes from the initial agreement in the term-sheet ( still not signed).

Investor B.

Due to the ongoing deviations from the term-sheet, we start talking to Investor B who matches and improves terms significantly by providing much founder friendly terms. While talking to Investor B, we tell Investor A that we have better terms on the deal and because of the advanced discussions we have with him ( Investor A) we want to give him the opportunity to match these terms.

Investor A thinks it’s a bluff. Doesn’t move on terms.

We then decide to go with Investor B. Write a nice email to Investor A explaining our decision and get answer basically saying: “ Go f*** yourself”.

……….

6 months later: I get a phone call from Investor A: They want us to cover their legal cost on the deal.

Should we pay or not?