Negotiation and investors go hand and hand. Many people think of the show Shark Tank when it comes to the topic of negotiation. The founder or entrepreneur will create and deliver a pitch of their business to an investor or group of investors. From there, if the investors like the pitch, they can invest in that company to assets with grown and benefit when the company does well, usually being an equity stake in the company.
From the entrepreneur’s standpoint, the negotiation is extremely important. Because, as we previously mentioned, not all money is good money. And the same goes for investors. However, even finding a good investor for your company is not enough. The right deal will have to be formulated through negotiation. Many individuals go into a defensive mode when negotiation, and this nature, often times, there is a lot of value left on the table.
I like to approach negotiations from a standpoint of creating value. If the focus is creating value, more sophisticated and throughout solutions will arise. The mode changes from defensive to collaboration. And nothing is better than being with an investor whose money is working for you; as well as, personally working for you on solutions outside of the norm.
Although, this collaborative effort is the goal, it is not always the case when it comes to angel investors. Since many these individuals are risk advise, they may not choice to negotiate at all. In fact, their silence is negotiation enough. They will simply wait until your business grows and other investors and VC get involved and offer a better deal in the future. Although, this looks like it only benefits the investor, it actually benefits the entrepreneur more. This is the case because they are receiving more funds and benefits at a better rate. Additionally, it illustrates to the investor that you are a real, functioning, long-term business they should invest in.
Amis, D., & Stevenson, H. H. (2001). Winning angels: the seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.