Negotiators who understand the importance of collaborating with one another to create value nonetheless often abandon that approach during dispute resolution. Treating disputes as different from other aspects of dealmaking, they tend to view business dispute resolution as a zero-sum game—one in which only a single issue (such as money) is at stake. Consequently, they tend to look at the dispute resolution process as a win-lose battle, to their detriment.

The Big 3 Conflicts are Personal Investments, Board Seats and competing companies in the portfolio. If a partner has invested personally, they should disclose this and recuse themselves from the decision-making process. If a VC holds board positions in competing companies, they should disclose the conflict and potentially resign from one position. If there's Portfolio Company Competition, then potentially implementing information barriers and assigning different partners to manage competing investments would be one work-around.

It is imperative for organizations to establish effective mechanisms for continuously monitoring compliance with conflict of interest policies. Through regular audits and reviews, emerging conflicts can be identified and adherence to established protocols can be ensured. In the event of a conflict being disclosed, it is essential for the conflicted individual to recuse themselves from any related decision-making processes. This proactive step guarantees that decisions are made in the best interests of the organization rather than for personal gain.

Navigating conflicts of interest in deal-making demands transparency and proactive management. I start by openly disclosing any potential conflicts to all parties, ensuring trust and setting a collaborative tone. Bringing in third-party evaluations can also provide an impartial view, reinforcing confidence in the deal’s fairness. Internally, I rely on established policies to handle conflicts consistently and mitigate risks. Ultimately, prioritizing open dialogue and aligning everyone on shared goals turns potential conflicts into opportunities for stronger, more accountable partnerships.

The deal-making and negotiation process is a highly confidential one, typically taking place behind closed doors. When it comes to term sheets, the most common negotiation point is the company's valuation. Founders often assign a high value to their company, given their personal investment and the effort put into building it. However, VCs tend to favor a more conservative valuation, keeping future funding rounds and exit opportunities in mind. This conservative approach allows for substantial growth in valuation over the next funding rounds, aligning with a 3-5 year exit timeline. Through careful qualitative reasoning and financial modeling, both parties work through the valuation gap to find a balanced solution.