Negotiation Techniques For Funds And Founders

Understandably most of us in cap raising mode focus on the activity needed to find new investors or partners to facilitate growth. But once you’ve found your ideal investor and engaged them to the point of negotiations, how do you take them on the right journey to close them out so that both sides get what they need and want from the deal?

At DXBP we’ve spent decades on the buy and sell side of the industry, tried most of the fashionable negotiation techniques, failed a lot, succeeded a lot and out of this maelstrom we’ve developed a tried and tested method for converting interest into tickets. Take a look at the step-by-step guide below and tell us what you think we’ve missed and what you liked the most…  

Cull Your Pipeline

Before even contemplating a negotiation with a prospect, make sure to create head and diary space by relegating those names you have on your prospect list that all the evidence tells you will never come through. There’s a respectable school of thought that suggests it only takes one yes and therefore the implication is keep talking to everyone all the time. We get the thrust of this but we suggest that most funds and founders have a natural sweet spot investor that should be where 80% of their resource is spent leaving 20% on the wild cards (and not the other way around).                   

Don’t Discount The Gatekeeper

You may be meeting the #4 on their team, their gatekeeper, for a key negotiation. Make them your very best friend, don’t treat them only as a conduit to the top C Suite decision maker. Done right, this gatekeeper can be your very best sales person representing your brand and products to the right people at the right time.  

Negotiation Prep Sheet

Contrary to popular belief, whilst some homework on investors you’re about to meet is helpful, you can pick up every single important detail for a negotiation in the meeting itself. Create a prep card with the must know items, commit it to memory and have a physical version with you and then work those questions into your discussion.  

Uncover What You Don’t Know And Build Rapport

Linked to the point above, rather than spend hours on public domain research, focus on getting your fact find from the meeting itself. Have your prepped questions ready and land them all interwoven in your narrative. Lots of ‘why’ and ‘what’ questions tend to work best.   

Get Ahead Of Negative Perceptions

Maybe your contact sees you as sales not engineering, perhaps there’s perceived prejudice because of where you come from or your asset class is new and unproven – get ahead of it, work this into your story in the meeting, dispel rumours and be on the front foot.    

Don’t Close Too Quickly

Avoid the temptation to agree to terms too fast in the pursuit of getting numbers on the board. Ask two more questions than feels comfortable and glean that extra information that could get you an even better deal.

Use These:

  • ‘I don’t think we’re ready for you yet’ – this will normally lead to a helpful exchange on when/how you can land on someone’s radar and remove the pressure on the current conversation to create a ticket before it’s realistic.  
  • ‘No’ – if the terms offered are beyond your commercial boundary, always be prepared to say so.
  • ‘Tactical empathy’ – showing that you understand the other person’s point of view and demonstrating that they are understood.
  • ‘Dynamic silences’ – take a moment to really think about what you just heard and avoid filling the gap with chat.
  • ‘Mirroring’ – draw out more information by inviting more depth e.g. INVESTOR “when we invested with Fidelity in 2021, what a great experience it was” YOU “you invested with Fidelity in 2021?”
  • ‘Timescales and deadlines’

Distinguish Between Value And Price

Establish and re-establish whether your investor wants better terms or more value in the deal. Do they want an extra seat on the board more than a cheaper entry, maybe they want access to your research not just your fund or maybe they just want cheaper fees or a better return profile.

Close With Implementation

Layout how you will engage after the sales process is done. Who will takeover the relationship, the DD, the long term follow ups – what is their background and credentials? Clarify that from your point of view. Inking the ticket is just the start of the relationship and activity.