Launching a startup requires taking part in many negotiations. Some discussions are small, like those undertaken when choosing business cards. Others, like dealing with investors, are a far bigger deal.
Negotiation training games are a great way to learn the art of dealing with investors. Here is some of the best advice you’ll learn.
Don’t show up unprepared
Preparation helps show why your concept is worth investing in, and also that you’re ready to grow. It’s not enough to have a great idea when pitching investors. As they say, ideas are a dime a dozen.
So, do your homework so you can express the value of your business clearly and concisely. Learn about market conditions, history, and other factors that might influence the deal. Make sure you are also clear on what you want out of the arrangement, and what you would accept as an alternative.
Understand what you need
What does your startup need to move on to the next stage? A startup’s needs can vary depending on where that startup is in its growth cycle. Also, investors come in different forms and with different strengths.
Do you need money, access to large networks, industry expertise, or something else? The better you’re able to articulate your needs, the higher your chance of choosing the right investors.
Learn how to pace your negotiation
The pacing of negotiations is an important element when dealing with investors. Rush, and you could lose the opportunity to establish trust. However, momentum could get lost and the deal might fizzle out if the discussion moves too slow.
A negotiation training game can teach you how to strike a balance between “too slow” and “too fast” to pace investor meetings effectively.
Be prepared to answer questions
Serious investors ask a ton of questions. Those questions help the investors understand if your company fits in with their investment portfolio and is ready for funding. How you respond to questions is sometimes as important as the answer itself.
For instance, your answer can show how you deal with situations that may involve uncertainty, especially as uncertainty is common with startups. Knowing that you can handle uncertainty could help investors feel more confident about your abilities, which is a plus when it comes to negotiations.
Don’t be afraid to say no
Part of being an effective founder is looking out for your startup’s best interests. Sometimes, that may mean you have to turn down investors. All deals and all investors are not created equal, so don’t be afraid to say no if the offer is not the right fit. Remember, when an investor joins your team, their brand and portfolio may become associated with yours.
The devil is in the detail
When meetings between startups and investors get serious, lawyers show up. Lawyers translate any agreements into term sheets with legal terms. Misinterpreting the term sheet can have big consequences for your business.
So, have a lawyer review the contract before you sign off. Also, consider taking specialized negotiation training including true-to-life gamification to familiarize yourself with the term sheet language.
Give investors an exit strategy
An investor may believe in your business or vision. However, that’s rarely enough to secure investment. Ultimately, investors need to know whether they’ll get a return on their investment.
The best sales training courses teach that an exit strategy is what investors use to determine if and how a profitable return is possible. So, come ready to show investors what’s in it for them during negotiations.