How do you resolve conflicts during the exit process?

Often, the exit parameters (valuation, timeline, possible structures) are identified or alluded to broadly in the transaction documents executed at the time of the investment. If the fund's vision and expected growth objectives are clear and they're advised by experienced professionals, the inclusion of these terms in the document significantly reduces the probability of a dispute or challenge on exit.

I recall attending a conference where Chris Voss, the author of "Never Split the Difference," had a talk on negotiation techniques. At the end of his talk, he shared something intriguing. He advised against solely seeking persuasion during negotiations because when you persuade someone, their opinion may change in the near future and persuasion tends to be short-lived. Instead, Voss recommended focusing on the approach of "guided discovery" in negotiations. This strategy is not only more stable but also more effective in achieving successful outcomes.

The conflicts are typically the result of existing conflicts that are manifesting themselves because the relevant stakeholders may not have another opportunity to vent. Founders' issues are either (a) issues that can never be resolved or (b) issues that can be resolved over a bottle (or two) of alcohol. There are no hard and fast solutions for most other issues. Therefore, all you can do is always respectful, open, and fair throughout the entire process and use common sense.

A balanced approach would be to identify an advisor who is not only entrenched in the VC space but also understands the pain points of both founders and funds. Most rational people would want to avoid disputes so a joint appointment of such an advisor (one who is acceptable to all stakeholders and who can navigate financial, operational, and legal challenges) as a mediator is likely to result in a mutually beneficial outcome.

Play to achieve a win-win situation. If each side feels that have achieved goals and a win, nothing will stand in the way of closing the deal. You need to understand the motivation of everyone at the table and find common ground. If this is difficult, present your perspective and speak in the language of the benefits that will accrue to the other side. Identify dealbreakers. In other cases, be flexible. If someone doesn't want to let go, ask them to explain why. Knowing the essence of the problem will be easier to solve. If you play to make your opponent lose, you will lose, too. You never know when you will meet at the table again. Therefore, try to be professional and build a good relationship. It will pay off.