You survived your pitch, connected with the audience and sparked their investment interest. The negotiation stage is fast approaching and you must be prepared for it when it does. In my own experience in supporting startups to secure funding, there is a lot you can do to prepare for these negotiations.
Time the term sheets – Hopefully you are in the process of courting multiple VCs for funding. If you are then try and align the timing of the delivery of their term sheets. Term sheets have short expiries before you have to respond, so you them to arrive around the same time. This allows you to use the various offers as a negotiating tool and leverage against each other.
Have a plan B – If you are working on multiple offers then you already have a plan B, however, if you don’t then you need to come up with one. The strongest negotiation position you can have is when you can walk away from the negotiation altogether.
Focus on what matters – There are 3 things that matter when negotiating and you need to keep them in mind throughout the process. 1) Aim for a win-win situation without delay. 2) Understand all the terms of the deal over the full duration of the deal. 3) Focus on building business relationships and not harming them.
Soft negotiate – Negotiations always start earlier than you think. Take the time leading up to receiving the term sheets to find out about the priorities of your investors. Finding out what is important to them ahead of time will give you the ability to control and direct the negotiations later.
Never walk into a negotiation blind. Preparing and setting yourself up in advance is a must. These four tips along with the others I will share will have you well prepared to negotiate your next VC fundraising.