Negotiating – and you CAN say…

Previous: Prepare to negotiate

Don’t be afraid to say NO.

Negotiations are complex and usually comprised of multiple terms. If you’re faced with a condition you can’t – or won’t – agree to, say no. Recently I negotiated a deal with a corporation with sales of over $300 million dollars annually. They sent me their “standard” contract which I reviewed and found a series of stipulations we found problematic. So I said no. And they agreed to strike the terms.

Which leads us to the next point…

Understand what the other side wants.

I was successful in the above situation because I had a good idea of what terms were important to the other party and which weren’t (one indication: bringing up clauses in a contract to which the other party replies “Oh, I didn’t know that was in there.”)

We’re back to negotiating that term sheet for your startup with a venture capital firm. You’ve established by now that the terms that are important for you are valuation and vesting period, and you’ve already decided what minimum valuation you are willing to accept, and the maximum vesting period you’re willing to endure. On the other hand the VC is probably more interested in liquidation preferences and pro-rata rights. You may not have a clue what these things are, but before you sit at the table you need to understand why they are important, and if you can, find out what the VC was willing to settle for in the past.

If you have previous experience with the “other side” or have access to prior outcomes or people who have negotiated with them before, learn what items they focus on why they are important. Negotiate harder on the terms that are of interest to the other side than the terms you are interested in, and leave aside all the non-essentials (for example arguing about Governing Law or payment of fees (except for the cap)) – it can make a CEO seem amateurish and cause the VC to have second thoughts about the CEO’s ability to forge deals in the context of their business.

Put yourself in your opposite’s place while planning.

I specifically used the term ‘opposite’ and not ‘opponent’ because not all negotiation is antagonistic. Ideally you should see the persons across the table as partners as the two groups work to build something together.

Try to run a simulation within your company where you negotiate with someone taking the place of your opposite. This will help you understand how you look to them, how strongly and convincingly you elucidate your positions, and what to expect from their side of the table.

Next: Everything’s perfect, right?