ENT 640 – Negotiating

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

11 thoughts on “ENT 640 – Negotiating

  1. I think this entire book should be renamed to “Good relationships”. Your post really made me think genuinely about how often in the book we hear how important relationships are and if you aren’t continuously building strong connections you can find yourself behind the 8 ball very quickly.

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  2. Colin,
    Thank you for reading and commenting on my blog post. I would agree with you about the importance of having a great relationship between the entrepreneur and the investor. Networking could quickly get more deals going. It is amazing how much content is contained in this book. Thank you again.
    Tina Jones

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  3. Tina,
    Fantastic post from our reading! Negotiating is another piece of the puzzle for entrepreneurs. You’re right, negotiation can be completed easily when both parties have respect for one another. Of course, as with our reading it depends on the situation as to if negotiation is necessary. I can definitely understand why an angel investor would attempt negotiation to see how the entrepreneur would react as it would provide more insight into the company the angel investor is pursuing. Learning how people react in certain situations can also be a make or break when it comes to investing.

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    1. Audrey,
      I thought that it was interesting that the book brought out the fact that having the entrepreneur in negotiation is a great way to get to know them. As an angel investor, you could possibly have a close relationship with the entrepreneur.
      Tina

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  4. Excellent post on negotiating! I agree that negotiation involves mutual respect among the parties involved, and that negotiations should benefit both parties. It was interesting to learn that some investors do not negotiate and either accept deals as-is or pass on them completely. In my opinion, whether an investor chooses to negotiate or not is a good indicator of how much the investor will participate in building the company and how much support they will offer to entrepreneurs.

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  5. What a great point about the participation of the investor in the company if they are not willing to be involved in the negotiation. The importance of respect between the parties is mentioned throughout the book. I would want to work with someone that I liked and respected.
    Tina

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  6. Nice post, Tina!

    I love your line “negotiation boils down to mutual respect”. Great point! In my opinion, mutual respect is the basis for any healthy relationship whether it be business or personal. When it comes to entrepreneurs and investors, mutual respect surely must exist as neither party can be successful without the other. Each has something the other needs.

    I found this section of the book to be further confirmation that the quality of the people involved is more important than anything else. As you said, “honesty and integrity” are paramount. And you’re right that the tone of the relationship will be set for years to come which needs to be positive even if the parties decide not to come together on this particular deal. Paths will often cross again in the future and establishing a positive, trusting relationship can only benefit all involved.

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  7. Hey Tina! I hope that you are doing well. I think you did a great job of breaking down the roles of each party in the negotiation process. I also like that you highlighted that mutual respect should be the basis on which we negotiate deals. I think we are so used to hearing about “sharks” in business and people who are self interested and have made lots of money. We don’t really hear as much about successful entrepreneurs who are equitable and just and investors who are also the same way. I really enjoyed that this book continuously highlighted the importance of relationship building and trust as the basis for which all of the fundamentals are completed upon.

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    1. Thank you so much for reading my blog post. I think that mutual respect is important for everything we do. I teach high school and mutual respect is key to the success of the student and the teacher.
      Tina

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