The first reason I like this book is Roger’s solution driven approach to negotiations. Most deals are complicated and there are many elements that can be traded off against each other if the negotiators are skilled enough to listen and find out what is important to the other side. As Roger notes repeatedly throughout the book there may be concessions you can make which cost you little or nothing but are meaningful for the other side. In-experienced negotiators, however, are more prone to getting focused on a single issue (often price) which leads to conflict and occasionally deadlock and lost deals.
In the context of venture capital deals the valuation of the company is always important, but there are a number of other elements which are material and where there is often more room for each side to make easy concessions. The most common of these are liquidation preference, anti-dilution rights, size of the option pool, good leaver/bad leaver, and provisions determining the balance of control between investor and the company post transaction.
When a VC invests in a company/entrepreneur it is often likened to a marriage and it is very important that the relationship doesn’t get off to a bad start with acrimonious negotiations over deal terms. It is thus more important than in most negotiations that both sides work hard to find the white spaces that form the basis of a happy agreement rather than approach discussions as a zero sum game.
As an aside, one of the small things that Roger advocates is always leaving the other side happy, and he offers a number of tips for doing so.
The second reason I like Roger’s book is that it is full of actionable recommendations for getting the best deal available whilst maximising the chances of the negotiations reaching a harmonious conclusion. They are too numerous to list here in full but in they group into:
- Ways to maintain flexibility in your position and avoid deadlock – e.g. NEVER go too quickly to your best offer as problems will follow if the other side then tries to negotiate you down further. A common mistake is to take the approach of cutting straight to a ‘fair’ position which leaves little room for manoeuvre if the other side has a different idea of what ‘fair’ is. Better to start with a more extreme position and then get to know how your opposite number thinks.
- Tools to help you better understand the other side (and yourself) – these range from questions to ask (e.g. always ask for more), to descriptions of different national negotiating styles and analysis of the different types of power negotiators can hold (e.g. power to reward).
Finally, the book is extremely well written. It is an easy read, key concepts are referred back to multiple times as the book progresses, making them easy to remember, and it is often humorous.
Discussions between experienced negotiators are a bit like a game of chess. The two sides enjoy pitting their wits against each other and understanding and countering the tricks and tools that the other side employs and if there is space for an agreement then the two sides will find it. It isn’t easy for most people to become experienced negotiators though, they don’t get that many chances to practice and when they do the situation is often loaded with too much significance for it to be a good learning experience. This book can help anyone to get up the learning curve more quickly and reduce the chances of a deal that could have been great getting ruined by poorly conducted negotiations.
I have had two negotiations in the last six months that were a real pleasure, one over a compensation package and one over deal terms. Each time both sides pushed hard and discussions were occasionally tense and we ended up with a fair deal that everyone was happy with, and I also finished the discussions with more respect for the other side than when I had started (good negotiating skills are an asset to every business). I hope that more of my negotiations in the future will be like those.