December 24, 2012
For many new entrepreneurs, negotiating with investors is the hardest part of officially securing funding. At the start of negotiations, it can seem like both of you are completely at odds about the future of your business and the role the investor will play in its development. Disagreement is a normal part of that stage. How you deal with it is more important. Learning a few useful tips can make you feel more confident about the art of negotiation and help you get the results you are looking for.
1. Don’t walk in unprepared.
You should go into negotiations with an open mind but not completely devoid of ideas and expectations. A big part of negotiating is trying to get what you want. If you don’t know what that is, it’ll be hard to have a productive discussion. Have a list of goals before you meet with venture capitalists to streamline the dialogue.
2. If possible, get a team together before you meet for negotiations with investors.
As a new entrepreneur, facing professional venture capitalists can be intimidating. Not to mention that you might not be able to spot a bad deal if you are inexperienced. Having your partners with you or a lawyer can make you feel more self-assured and help you avoid making costly mistakes.
3. Don’t be too confident.
You should feel great that you were able to make it to the negotiation stage. That means you have a good business plan and a winning personality. However, you should keep in mind that investors like entrepreneurs who will involve them in the decision-making process, so it’s important not to be too confident or stubborn.
4. Don’t make big decisions on the spot.
Sometimes investors will push for an answer because they want to close the deal. If your decision will have a big impact on ownership or the future of your business, it’s something that you should think about and discuss with your partners before coming up with a final answer.
5. Watch your body language.
Closed-off body language like crossing your arms or slightly turning away can make you look unapproachable and hostile. Instead, keep your body language open and relaxed. It will make you look more easygoing and open-minded.
6. Be clear about what you like and don’t like.
Using vague phrases or words because you are afraid of saying no will only make the dialogue more confusing. Be professional and upfront about your plans, needs and opinions.
7. Keep your emotions in check.
Calmly listening to an unfavorable offer is hard, but it’s what you have to do to move the negotiations forward. A big part of the negotiating process is saying no or coming up with counter-offers. Showing emotions and anger is unprofessional, and it won’t get you what you want.
8. Try to Avoid Deadlocks.
Deadlocks are common during intense negotiations. They can bring the discussion to an abrupt end, and put plans for your start-up on hold for a long period of time. It’s in everyone’s best interested to keep the discussion moving.