How do you prepare for a deal term negotiation with investors?

1 Know your numbers

Before you enter any negotiation, you need to have a clear and realistic idea of your company's financial situation, growth potential, and valuation. You should be able to justify your numbers with data, metrics, and projections, and explain how you plan to use the funds you are raising. You should also research the market, the competition, and the typical deal terms for your industry and stage. This will help you set a reasonable range for your ask and avoid unrealistic or unfair offers.

2 Understand your investors

Not all investors are the same. They have different goals, preferences, and styles of communication. You need to do your homework and learn as much as you can about your potential investors, such as their track record, portfolio, reputation, and criteria. You should also try to establish rapport and trust with them, by being honest, respectful, and responsive. You want to show them that you are a credible and capable founder, and that you share their vision and values.

3 Prioritize your terms

Deal terms are not just about the amount of money and the valuation. They also include other aspects, such as equity, dilution, board seats, voting rights, liquidation preferences, anti-dilution clauses, and milestones. Some of these terms can have a significant impact on your control, ownership, and future outcomes. You need to prioritize your terms and decide what are the most important and non-negotiable ones for you, and what are the ones you are willing to compromise on or trade off. You should also be prepared to explain why your terms are fair and reasonable, and how they align with the interests of both parties.

4 Practice your pitch

Negotiating deal terms is not just a matter of numbers and logic. It is also a matter of persuasion and emotion. You need to practice your pitch and refine your message, tone, and delivery. You should be able to articulate your value proposition, your competitive advantage, and your vision for the future. You should also be able to handle objections, questions, and feedback, and address any concerns or risks that may arise. You should practice your pitch with different audiences, such as mentors, peers, or advisors, and solicit their feedback and suggestions.

5 Be flexible and creative

Negotiating deal terms is not a zero-sum game. It is a collaborative and dynamic process that requires flexibility and creativity. You need to be open to different options and scenarios, and be willing to explore alternatives and solutions that can benefit both sides. You should also be ready to adapt and adjust your strategy and tactics, depending on the situation and the response of your investors. You should avoid being too rigid, stubborn, or emotional, and instead focus on finding common ground and mutual value.

6 Seek professional advice

Negotiating deal terms can be complex and technical, and may involve legal, financial, and tax implications. You need to seek professional advice from experts, such as lawyers, accountants, or consultants, who can help you review, understand, and negotiate the terms. You should also consult with other founders, investors, or mentors, who can offer you insights, tips, and support. You should not sign anything without fully understanding the terms and the consequences, and without getting a second opinion.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?