Aggressive Negotiations Can Kill Partnerships

Today I participated in a mock negotiation session that was designed to mirror a negotiation between venture capital investors and founders. Most participants hadn’t negotiated an investment deal before, so I was curious to hear their takeaways.

One of the founders shared something that stuck with me. Their negotiation started off with aggression from the investors, which set a bad tone. And the investors were aggressive with terms throughout the negotiations. Toward the end, the investors realized they were running out of time to get a deal done and offered a better deal. The founder was so frustrated by the experience that she didn’t even realize they had offered better terms and walked out without a deal. She was stuck on the aggressiveness of the entire process and couldn’t bring herself to do a deal with these investors.

Venture investors and founders, when they come to an agreement, are planning to work together for many years. But at deal term negotiations, they have opposing interests. Today’s session was a reminder that starting off with aggressive negotiating tactics isn’t a way to begin a long-term partnership and can blow up the partnership before it even forms. The best deals are ones that everyone is comfortable with, neither side got everything they wanted, and they’re looking forward to working with each other.