March 26, 2013
If you're a product guy like me, you probably aren't great at negotiation. You can be a user experience savant, a whizbang coder capable of overnight feats of greatness, or a genius marketing strategist - but one skill that entrepreneurs don't get to practice often is the art of negotiation. Selling your company to an investor - or acquirer.
Negotiation is a separate skill from pitching. You can be very good at pitching but pitiful at negotiation. Pitching is 90% enthusiasm and preparation. Negotiation relies on much more tacit knowledge about the market, about what leverage you have, about etiquette and protocol - things that you can't just fake-until-you-make. Negotiation is a skill that must be learned.
In the video below you will watch a brilliant negotiator handle a high pressure situation masterfully. Normally, Shark Tank and its kin offer about as much actionable info as big macs do vitamin C - but this was something different. The pitch itself was well-crafted, but that's expected when pitching to investors. It's after the pitch where Jonathan Miller (an ex-VC) is in his element and shows us how to get what you want during a negotiation.
If I ran a startup school, I would make this 12-minute video clip compulsory viewing for all entrepreneurs.
There's a few tactics here that I will unashamedly steal for future use.
Horse & Jockey
Jonathan reinforces a few times that they are buying into him and the vision. The investors were valuing the company based on current earnings, which is never favourable to an early stage company. Jonathan uses the great line I'm selling you the horse & the jockey - reminding the investors that they aren't just buying into a company but also himself as an entrepreneur.
Jonathan remains calm and composed, even in the face of a small defeat. After learning that one Shark is declining to participate in the round, he counters immediately with "I would like to answer your objections, even if you are out" - it's polite, respectful and gives him a platform to respond to any doubt that the other Sharks might now have. He gets to state his case without sounding desperate, which would erode his leverage.
I can't negotiate with myself
Perhaps my favourite tactic from the whole clip. When the Sharks pushed Jonathan to come up with a different offer (since they didn't like the first one) he threw the ball right back in their court. He's right. Let the investor counter-offer. Don't counter-offer your own offer.
Is that an offer?
After a Shark talks numbers but wasn't forthcoming about whether he's serious or not, Jonathan cuts right to the chase. He knows that the quicker he can get a concrete offer on the table, the quicker he can start a bidding war between the Sharks.
My negotiating range
Polite negotiation speak for "your numbers are nowhere near what I want".
Jonathan's savvy seems to be paying off.
His company Element Bars shipped 1 million bars in 2012.