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NJ Startups – Meetup #2New Brunswick, NJ27 February 2014
Entrepreneurial Negotiations and Deals:A Really, Really, Really Short Primer
Rhett L. Weiss, J.D.Executive Director, Entrepreneurship & Innovation InstituteSenior Lecturer of Management, Johnson Grad. School of Mgt.Visiting Senior Lecturer, Cornell TechCornell University
1. Help you – as an entrepreneur -- negotiate well, including with “big players”
-- Think and act like a strong, conscientious negotiator without being big
2. Learn some negotiation similarities/differences between startups and big players
3. Warning: very high and quick orbit; short presentation (there is much more)
• Content
1. Introduction; My Background; Some Questions
2. Typical Entrepreneur’s View of Negotiation
3. Negotiation Defined; 3 Dynamic Parts; Sources of Negotiation Power
4. Deal Types
5. Process
6. Suggested Strategy Framework; Two Examples
7. Tactics Overview
8. Best Practices
9. Take Aways; Q&A
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Introduction: RLW at a Glance
• At Cornell– EII Executive Director; BR Suite, fellows program, events, other programming– Johnson Faculty: entrepreneurship, venture capital, & negotiations– Cornell Tech in NYC: Tech Enterprises (entrepreneurship); Innovation; Pitch Lab
• At Google– Strategic acquisition & dev. projects; negotiated deals with heads of state, CEOs– Conducted negotiation training worldwide
• Pre- and Post-Google– Serial and parallel entrepreneur, innovator, “dealaholic”– Founded, co-founded: bulk mailing (Jr HS through HS); DEALS® software (patent
holder) & DEALTEK consulting, data center, commercial bank, RE dev., aquaculture– XM Satellite Radio, Orbital Sciences, Motorola, AOL, Oracle JV, & other deals– Boards of Directors; C-level positions; bank COO; boards of advisors; mentor– Consultant; former Big 4 director and national mgt. team; now, global consulting– “Recovering attorney”; corporate, business, finance, and real estate transactions– Presenter, author
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Hey Entrepreneur, does this look familiar?
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Q: How do you negotiate with big players?A: The same way you eat an elephant!
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One bite at a time.
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“Negotiation”
• Multilateral
• Interactive
• Usually iterative
• Sometimes repetitive
• Process
• To accomplish goals
• At least 2 parties
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David vs. Goliath
Time
PowerInformation
Negotiation’s 3 Dynamic Parts: Time, Power, & Info
Time Available time to each parties;
time constraints Timing strategy and tactics
Information - 4 Types: Known to all sides:
Internet/public -- industry, market, or company info
Known only to your side (YS) & can be disclosed to other side (OS); vice versa
Known only to YS but cannot be disclosed to OS; vice versa
Needed but not yet possessed by one or more sides
Power - 7 Types: Title Reward/Punishment Consistency Charisma Expertise Situation Information
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Where does negotiating power comes from?
Perception,Anticipation
Knowing Process,Facts, & Strategy
Confidence,Ability to Act
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Negotiating Power
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Common Startup Deal Types• Contracts – from Ordinary Course of Business to Infrastructure to Strategic
• Goods (supplies, materials), Services/Outsourcing (project-specific and functional), Utilities
• Company-Level Buy/Sell (M&A); Asset vs. Stock Deal
Entrepreneur’s framing can shape larger party’s strategy and behavior for the negotiation’s duration.
Two Entrepreneurial Strategy Examples --Example 1: Frame Disadvantages as Opportunities
Framed as
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Strategy Example 2: Pit Big Players Against Each Other
SoBe
$100mm
$100mm
$100mm
$70mm
$100mm
$100mm
$40mm
• Rivals can work against each other to their detriment and Entrepreneur’s benefit.• Entrepreneur with strong “Plan B” pressures rivals to make concessions.
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Common Tactics: Tools, Moves, Tricks of the Trade
• Viability, Likely Success• May seem counterintuitive
• Often are used incorrectly, like “splitting the difference”
• Generally work when used correctly; never work all the time
• Each has a counter-tactic
• Recognize OS's tactics• Let OS know: decreases OS’s game playing, increases your power
• Recognize the Difference Among Smart Plays, Bluffs, and Lies• Tactics reveal each side’s negotiation ethics, good or bad
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Closing the Deal
Making the Deal
Set the Stage
Reluctant
buyer/seller
The list
Feel, felt, found
Flinching
Uproar (we want it all)
First offer
Best offer
Flinch; Grimace
Play dumb, act smart
Trade-off
Good cop, bad cop
Higher authority
Squeeze
Funny money
Splitting the
difference
Printed word
Set aside
Decoy
Red herring
Nibble
Fait accompli
Set aside
Turn down, walk away
Withdrawn offer
Hot potato
Throw away concession; So what?
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Best Practices: 5 Traits of an Effective Negotiator
1. Understands and conducts negotiations as a process• A multilateral, interactive, and often iterative process to accomplish the goals
of two or more parties 2. Does the homework on a regular basis
• Masters the issues & their interrelationships• Masters information and adapts to changes in it
3. Maintains sensitivity and tolerance for interpersonal differences• Personality types• Nationalities, Cultures• Communication styles, methods, and content; notice the changes
4. Emphasizes areas of agreement, not disagreement• Explains and substantiates own points
5. Instills strong belief in OS that YS will uphold the deal• Shows integrity, reliability, and credibility
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Best Practices: 5 Do’s
1. Know your stuff – be on top of all sides’ facts, interests, and issues
2. Be a great communicator ( = listener, not just talker)• Keep your side informed of all key negotiation communications• Communicate regularly but carefully with OS
3. Consider own enthusiasm’s affect on concessions, agreements
4. Be alert to pressure• All sides are under pressure to deal, settle, compromise• Generally, the side under the most real or perceived pressure "loses”
5. “Keep your eye on the ball”: focus on movement, measure progress• Concessions and interim agreements• Statements, sometimes silence• Action, sometimes inaction
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• Best Practices: 5 Don’ts
1. Don't assume money or price is the all-important deal point• After all, it probably isn’t
2. Don't unnecessarily narrow your negotiating range or flexibility• When possible, don’t be the first side to make an offer or name a price
3. Don't narrow the negotiation down to only one issue• Negotiations are so much easier with at least two issues in play
4. Don't disclose your side's time constraints, deadlines, or pressures • . . . unless there is a compelling reason to do so
5. Don't become emotionally involved or egotistical• Don’t get personal• It’s typically counterproductive, and it’s a lonely place