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Negotiating Your Next Venture Capital Investment

Negotiating Your Next Venture Capital Investment

You’ve finally found that entrepreneur you want to invest in; they have exactly what it takes to make the venture succeed and you want to take part of it so both of you prosper. The problem now is, how do you get the deal terms you want? Here are three key tips from the experts that are worth a quick review:

1. Forget buyer’s remorse, you need to worry about winner’s remorse
It’s easy to make the winning bid when there are others at the table – offer the highest price! As the pros will be the first to admit, though, the deals they are most proud of are often the ones they walked away from. Do your homework, arrive at a price range that makes sense given the risk and returns, and stay within that range. It’s no different than buying stocks – find a good company, but buy it when the market has it on sale.

2.Don’t try to get your piece of the pie bigger, try to get a bigger pie
Move past the simplistic model of low-balling, trying to eek out those last nickels and dimes from your “opponent”. Look at the deal from the entrepreneur’s perspective and try to maximize opportunity for both you and them. It will be better financially for both of you, as you will be that much more willing to help each other, in addition to uncovering new opportunities in the process.

Quantify the complete value of your offer
Usually your offer is not just a number you write on a cheque. Instead, it typically includes all of your knowledge, experience, contacts and advice. The entrepreneur quantifies the opportunity in a business plan to demonstrate how much potential return there is for a certain level of risk. You should do the same – quantify how much additional revenue and profits can result in accepting your offer, so you partner with someone of your stature. This makes sure that your offer gets the attention it deserves.