ENT640 Negotiating Blog Week 6.
Negotiating Blog Week 6 I did door-to-door sales a few years ago. I was a vacuum saleswoman. I had the opportunity to practice negotiating when it came to convincing someone to allow me to show them the Kirby in their home, then convince them that they have a need for this product, and negotiate a price they are willing to pay to own the Kirby today. Negotiating took place throughout this whole process for me! Some angels negotiate and some do not. Here are three reasons why some angels do NOT negotiate: 1. They don’t want to invest the time 2. They are concerned about a relationship based on trust that starts with fight for money and/or control 3. Within certain limits, they do not think the terms or price are that significant Angels do not negotiate because they want to save time or have a representative do it for them. Many winning investors do not negotiate personally because they prefer to leave those problems to another (235). The benefit is that it lets ill feelings that may develop fall on their investor’s or representative’s shoulders, and not yours (227). Angels that do not negotiate think about structure, price, amount of capital that will be invested, and the role. People who DO negotiate have the opportunity to learn about the other person. For example, angels will be able to fully see how the entrepreneur handles high stressful situations during the negotiation process. Negotiating will always reveal how the other person truly thinks. “Let them have it your way.” Give the entrepreneur their own terms and it is less likely for them to regret it later. Approaches to negotiating are: 1. Negotiating directly and actively until the desired outcome is achieved 2. Quickly offer final terms in a one-shot offer 3. Get someone else to negotiate (228). If you’re going to negotiate: (1) Realize there are situations where you can’t negotiate (2) Use these principles in early-stage negotiation: a. Start from a position of perceived or real strength b. Represent significant capital c. Get to it d. Establish precedents e. Sell value-added f. Don’t gouge 4 key areas of negotiating are: 1. The price 2. The structure of the deal 3. How much money they will invest 4. What role they will play, if any (230). Angels with big wings or clout, have significant advantages at the negotiating table. These include: 1. A history of successful angel investments 2. A history of successful business 3. Name recognition 4. A known style of doing business that’s favorable 5. Lots of capital 6. Are not afraid to pull the trigger 7. Excellent contacts (231). When making an investment the winning investor wants: • Respect • The ability to share in the winnings • Information • Return of capital as soon as possible • A feeling of having contributed/made a difference • The ability to get out if circumstances change (e.g. death) • Fun (234). Aggressive negotiating doesn’t foster trust. “…Productive relationship is only possible when the relationship starts off on a foundation of trust.” (235). “Greed is one of the biggest problems.” – Anonymous winning investor (236). Get it done and get on with business. Don’t take too long to make a deal. (237). “Let another investor or one of your advisors negotiate with the entrepreneur.” (238). There are 3 things that entrepreneurs must keep separate when negotiating: 1. Interests- What you care about. “Why are you in this negotiation?” Naïve entrepreneurs think mainly on how much money they’re going to get. Don’t do this! You must make interests the main focus or center of negotiating strategy. 2. Issues- Items for explicit agreement. These include amount to be invested, equity granted, and terms of payback. 3. Positions- Sees the process as a “dance.” (240-41). Negotiation doesn’t need to be unpleasant. “The whole idea of negotiation is that both sides be better off after making the deal.” (242).
Amis, David, and H. H. Stevenson. Winning Angels: The Seven Fundamentals of Early-stage Investing. London: Pearson Education, 2001.