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1/ When negotiating terms, founders have more leverage than they think. Why is that and how do you get to a successful outcome?
2/ It is a RARE event that an investors find a team he wants to back, takes it through partnership and decides to issue a term-sheet.
Getting a partnership to commit means they have DECIDED to back you. That happens for most 5-8 times a year after reviewing tons of of projects.
Getting a partnership to commit means they have DECIDED to back you. That happens for most 5-8 times a year after reviewing tons of of projects.
3/ This means they don't want to lose you. It is important that you do not open up on whether you have various offers (or not) and keep some information asymmetry here. Protect your cards so you maintain tension. The investor WANTS you.
4/ There is really no such thing as "market" and it is fair game to calmly and rationally discuss each important clause.
Each situation is unique and different founders care about different things (dilution, control). Investors KNOW that.
Explain your own sensitivities.
Each situation is unique and different founders care about different things (dilution, control). Investors KNOW that.
Explain your own sensitivities.
5/ Get a great lawyer. There is nothing worse than bad lawyers intent on winning legal arguments who do not understand the objectives of their clients. You need a lawyer who is a good commercial partner.
HOWEVER...
HOWEVER...
6/ DO NOT outsource the negotiation of the key items to the lawyers. Get your prospective investor on the phone and discuss the "why" behind each important request and discover how you can accommodate their objectives and explain how they need to accommodate yours.
7/ Overall - don't overlook this important of the process, rationally discuss the purpose of each clause, and push back on things you don't find legit.
This is a two way discussion in which you have more leverage than you think, I assure you.
This is a two way discussion in which you have more leverage than you think, I assure you.
