In this series of articles, Nicolaj Lund shares tips and tricks that can help negotiations move in the direction you want.
What is negotiation?
- Fundraising negotiation refers to the process where the business seeking
capital and potential investors discuss and agree on the terms and conditions
for the investment
- The scope of the negotiation includes all aspects of the investment, such as
the amount of funding, the valuation of the company, the percentage of equity
to be exchanged, and other key terms and conditions
What is the importance for fundraising?
- It is crucial for a founder to excel in negotiating with investors to secure
favorable terms that align with the company’s long-term goals and values
- Effective negotiation ensures the founder can maintain sufficient control over
the business while meeting investor expectations, fostering a balanced
partnership
- It also enables the founder to protect the company’s interests and establish
clear guidelines for future growth and decision-making, laying a solid
foundation for sustainable success and minimizing conflicts
Setting the scene – How to prepare for negotiating with investors
NEGOTIATION
Know your numbers | Have a thorough understanding of your historical financials and forward projections
Decide on non-negotiables and concessions | Identify your non-negotiable terms and be clear about them from the start. Decide in advance what you are willing to concede and what you expect in return
Research investor backgrounds | Understand the investor’s investment history, preferences, and
expectations of the investors
Have valuation benchmarks ready | Ideally you should have some benchmark valuations of similar companies to support your arguments – investigate, if possible, what the investor has been willing to pay
on other investments and on which terms they have entered into the investments
Relationship matters | Establish a positive relationship with the other party before the negotiation. People are more likely to negotiate in good faith with someone they like and trust
Download the full PDF, Negotiation, on StridePartners.com.