Importance of Negotiating
This week’s reading in the Winning Angels – the 7 fundamentals of early stage investing by David Amis and Howard Stevenson was really interesting. Negotiating the deal is another important fundamental. As with the other fundamentals, negotiating needs to build the relationship between the entrepreneur and the investor. The terms that are established should benefit both parties.
Negotiation boils down to mutual respect. The objectives of the winning angels that choose to negotiate include the price of course, the terms, their investment, and the role they will play in the organization (Amis & Stevenson, 2001, p. 230). The objectives of the entrepreneur are building relationships, getting their investment with favorable terms, and maintaining control of the company.
A successful winning angel can choose to negotiate or not to negotiate. The angels that do negotiate have different motives. I thought that it was interesting that some angels negotiate to not only be active in their role in the investment, but to get an idea of how the entrepreneur reacts to situations. The angels that do not negotiate may not want to deal with the emotions involved so they avoid negotiations.
If the entrepreneur and the investor have honesty and integrity, I think that the relationship will be successful. It is important to have a good relationship because this will set the tone for years to come. The investor needs the entrepreneur and the entrepreneur needs the investor.
Amis, David, and Howard H. Stevenson. Winning Angels: the Seven Fundamentals of Early-Stage Investing. Financial Times Prentice Hall, 2001