How do you successfully negotiate with entrepreneurs?

1 Know your value proposition

Before you enter any negotiation, you need to have a clear idea of what value you can offer to the entrepreneurs, beyond the money. What expertise, network, reputation, and resources can you provide to help them grow their business? How can you differentiate yourself from other investors and align with their vision and mission? Communicating your value proposition effectively can help you establish trust, credibility, and rapport with the entrepreneurs, and also justify your terms and conditions.

2 Understand their motivation

Another key step is to understand what motivates the entrepreneurs, both personally and professionally. What are their goals, needs, challenges, and concerns? What are their expectations, preferences, and assumptions? What are their non-negotiables, trade-offs, and deal-breakers? By asking open-ended questions, listening actively, and empathizing with their perspective, you can gain insights into their interests and priorities, and also uncover any hidden issues or conflicts that might affect the negotiation.

3 Be flexible and creative

Negotiating with entrepreneurs is not a zero-sum game, where one party wins and the other loses. Rather, it is an opportunity to create value for both sides, by finding solutions that satisfy their mutual interests and address their concerns. To do this, you need to be flexible and creative, and avoid getting stuck on fixed positions or rigid terms. Instead, explore various options, scenarios, and alternatives, and use objective criteria and benchmarks to support your proposals. For example, you can negotiate on valuation, equity, dilution, board seats, milestones, vesting, and exit clauses, among other aspects.