The Negotiation Guru

I had a meeting with an angel investor earlier this week. She had started 4 companies in the last 30 years. Now she’s looking at startups to invest in. She talked about her experiences as an entrepreneur and how she had to negotiate with her board of directors, investors and banks.

She pointed out that a lot of deals die because one party is too tired. This is absolutely true. A negotiation can be a long and tiring event. No one likes to negotiate for long hours. There are people who even fear to negotiate.

How do you prevent this? This is specific to entrepreneurs who are looking to negotiate with venture capitalists or other investors.

1) Keep up the momentum

2) Do due diligence on investors

3) Keep valuation of your company in perspective

4) Ignore minor issues

5) Understand the term sheet and its implications

A lot of negotiations ended up negotiating over trivial points. This is the very reason why a lot of deals die.

What’s really important in a negotiation? What’s important to you? What’s important to the other party?

My team arranged to have a meeting at the lobby. In order to enter the building, we had to scan our identity card. I rushed to leave my apartment and left my card at home. I was refused entry by the security card. I explained my situation, and she referred me to the front desk to get approval.

At the front desk was a lady in her late thirties. She was busy sorting out a stack of documents.

“Hi, I’ve forgotten to bring my card. Is there a way I can get into the building? I have an important meeting to attend.”

She shook her head in a really dramatic manner and said “No, I can’t help you.”

I began to think of alternatives. I didn’t bring my phone so I was not able to drop my friends a call.

“How about this, I will leave my laptop with you. Let me into the building and I will get my friend out to sign me in.”

“No, you can’t do that. I will not let you in no matter what. This is the rule of the building.”

“Yes, I understand that it’s the rule of the building. I really have a very important meeting and I’m late …Can you make an exception just for this time round?”

“No.” She was really firm.

So I asked her “If you were me, what would you have done?”

“I will go back home and get my card. This is the rule. No one can change the rule. Sorry, I can’t let you in”

“What if YOU live an hour away?” I pursued.

-Pause-

She knew that I was not going to go away and I was really persistent.

“I didn’t mean to be nasty but I really can’t do that,” she said in an apologetic manner. This was my chance.

I kept quiet and looked at her. She became really uncomfortable with the silence and avoided eye contact with me. Finally, she succumbed.

“Alright, I will make an exception this time just for you. I will sign you in with my own card.”

Bingo!

Can you identify the tools I used?

When you start drilling for information, be careful not to assume. You should never create your own assumptions.

Do not assume what you’ve heard is the truth. But you should not start creating your own assumption too.

Target:  “The car design is really important to me.”

You:     “Oh, you should not be concerned with the design of the car. The engine is really powerful! It has a 3.6 litre V8 engine, producing over 500kW of power and accelerates from 0-100km/h in 5 secs!”

Target (in his head): “Who cares?”

You are making your own assumptions that he should be concerned with the performance. What if your target is really more concern with the car design and not the performance? You will be tuned in to the wrong channel. In negotiation, this principle works the same.

Never assume. Always ask!

“Remember that a person’s name is to that person the sweetest and most important sound in any language” – Dale CarnegieOn my way to work this morning, I was having a heated discussion with my colleague who was sitting at the front seat (I was the driver). We were discussing a project we are working on currently. Another colleague decided that he was not interested in the discussion, put on his ipod and fell asleep.

Suddenly, at the mere mention of his name, he woke up (perhaps he was eavesdropping). But this shows how important a person’s name is to him. You can wake a dead from his sleep just by calling his name. No one cares about other people’s name more than his own. We are only tuned to what we want to hear.

This is the magic contained in a name. During negotiations, we have to be respectful to the party we are negotiating with. Learn to remember the names of the party you are negotiating with. Addressing the other party by his last name can be a way to show respect. Addressing him by his first name can breed familiarity. It all depends on the type of negotiation you are in. During a transactional negotiation such as negotiating with a salesperson, I always make it a point to ask for his name and use his name frequently throughout the entire negotiation. All of a sudden, we became good friends and the success rate of the negotiation increased tremendously.

Andrew Carnegie, one of the greatest negotiators ever walked on this earth, had the policy of remembering and honoring names of his business associates. Why shouldn’t you do the same?

Recently, I was asked to negotiate on behalf of a good friend of mine with a programmer from Myanmar. It was a deal that my friend was hoping to clinch and was afraid that their relationship would be strained if they reach an impasse. We discussed this for many hours online and did lots of research. We wanted to be fully prepared for the negotiation.

The programmer is probably an introvert. He speaks in a low mellow tone. Everything went on smoothly at the beginning. He did not negotiate even a single term of the issues we listed. Before he put down the phone, he said “Alright, this is fantastic. I really like what you have proposed to me. Let me get back to you on this.”

I never heard from him again. He disappeared.

Yesterday, my friend from Vietnam was complaining to me about this birthday party he was invited to.

“I had a lot of things to do and I had to turn down my meeting with my team because of the party!”

“Why didn’t you say no to the person who invited you?”

“In my culture, it’s considered rude to turn down someone’s offer.”

I got a slight hunch that this might be the reason why the programmer from Myanmar did not just turned down my proposal on the phone. He could have done so but he thought it might be rude to do so.

Remember: In different cultures, people negotiate differently. Never assume everything’s homogenous at the negotiating table. Be very sensitive to your target’s culture. Document everything if possible.