The negotiation table
Before you go into a negotiation, write down everything you can give and everything they can give. There is usually a lot more on both sides than you'd expect. Then use these small bits to get the one thing you want: money confirmed by a date.
The idea
💬 commentA sheet with two columns. Left: everything you can give or negotiate with. Right: everything the other side can give. Most of it is small stuff but that's good! The small stuff is what you trade with, so the big terms stay where they are.
- Price is one line on the sheet. The other twenty are timing, access, information, rights, introductions, scope.
- Nothing gets given away for free. Every bit is tied to a behaviour or counter-trade you want. In a fundraise, that might be to get a commitment by a specific date.
- Ticket sales use early-bird discounts (often with several stages, e.g. first bird, early bird, normal bird, late bird) to incentivise people to commit. That's because, unfortunately the task expands to the time you give it, and VCs are notorious for requiring time pressure to move their cushy butts :')
- The same sheet works in corporate sales: shipping cost, minimum order, volume discount, payment terms.
- Write the two columns before the first call.
- Every bit you give is tied to a counter-give. Approach it like trading cards.
- Ideally, your terms stay. The bits around the terms can move.
The two columns for a fundraise
💬 commentOnce a round is priced, and especially once a lead is in, price is off the table. That is a good thing. Everything below is non-price, so none of it reopens terms with the investors who already signed.
What the startup can give
- Access to the founder. A quarterly call for the first year, or a working session with their portfolio companies.
- Reporting rights. Standard financials and cap table updates. Cheap to give and usually asked for anyway.
- A board observer seat. Non-voting, time-limited, for the largest ticket only.
- Pro-rata in the next round. Limited to the next priced round and to tickets above a threshold.
- Introductions. Industry partners, pilot customers, co-investors, etc.
- Visibility. Named in the closing announcement and the press around it. Or kept out of it, if they prefer.
- Ticket flexibility. Half at signing, half on a milestone. Room to top up later. A smaller minimum for a strategic investor.
- A fast process. DD package ready, a call with the lead or existing shareholders.
- A site visit. The lab, the production line or the partner plant, with the founder.
- Most of all: ASK. What do they care about? What are the bits and bobs they would appreciate? Once you know, you know the value of your cards.
What investors can give
- The money, on time. A signed commitment by the date, funds within an agreed number of days.
- Speed. A fixed decision date. No committee rounds that aren't needed for a round that is already priced.
- Fewer conditions. No DD on terms, no side letter beyond the standard one.
- Introductions. Other family offices and funds who fit the round. Customers, industry partners, public funding contacts.
- A public commitment. A quote for the announcement, a LinkedIn post.
- Ticket size. Rounding up, a second ticket, or bringing a co-investor.
- Expertise. Many VCs have inhouse or external support. Negotiation for a look at a grant application, a contact at a certification body.
- Patience. Agreeing not to renegotiate if the timeline moves again.
- Most of all: find out what they could give! Maybe they can introduce you to other investors, but they wont until you ask. Maybe they have in-house expertise they can add on top to sweeten the deal but you don't know, until you ask. ASK!
What stays off the table
💬 comment- Voting board seats. The lead has one. More seats for small tickets means a board nobody wants.
- Vetoes or blocking rights for a single investor.
- Anything open-ended. "Information rights" without a scope, "pro-rata" in all future rounds, an observer seat without an end date.
- Check the shareholder agreement for most-favoured-nation clauses before anything goes into a side letter. If earlier investors have one, every extra you give goes to them too.
The same table in sales
💬 commentWorth having a look at for your first commercial contracts and offtake agreements. The bits are different, the rule is the same: tie each one to the behaviour you want.
| The bit | Tied to |
|---|---|
| Shipping cost | Order confirmed before quarter end |
| Minimum order quantity | A second project in the pipeline |
| Volume discount | A framework agreement instead of single orders |
| Payment terms (30 vs. 60 days) | A deposit at signing |
| Delivery date | Specifications frozen by a date |
| Reference case, site visit, press | Permission to name them as a customer |
| Regional exclusivity, time-limited | A committed volume per year |