You Can’t Do a Good Deal with a Bad PersonBack to home
A founder told me about a deal he’s considering doing. It’s a deal for equity investment in a company. This start-up has runway and is executing, but it’s open to extending runway for more cushion, so this deal is appealing to the founder. I listened to everything and asked about the person presenting the deal.
The founder told me the person is known for using aggressive tactics to tilt things in his favor. His reputation among people he’s worked with isn’t great. Knowing this, the founder told me, he negotiated a deal that limited this person’s ability to exert control over the business or to influence it. As he put it, he’d negotiated a good deal.
There’s no such thing as a good deal with a bad person—even if the terms on paper are fair or in your favor. A bad person doesn’t comply with what’s written on paper. They play by their own rules (if they follow any rules). They will do unscrupulous things to get the outcomes they want. You can enforce what’s written on paper, but that usually requires involving courts, which is expensive, time consuming, and inherently risky (and bad people in business know that and take advantage of it).
I’ve learned from my experience as a founder and investor that working with bad people never ends well. So before I start negotiating terms, I focus on figuring out what type of person I’m dealing with. If they’re a bad actor, there’s no need to negotiate terms. Because I think it’s impossible to do a good deal with a bad person, I don’t do deals with bad people.