“Don’t give up control. And don’t borrow less than you need. That’s the number one problem is that people have the tendency to say “oh all I need is $50, 000 and I can take off with this”. And usually the $50,000 doesn’t even get you to the first step, it just gets you started on some things.” Dennis King ( CPA/Partner 38 years experience)
Negotiating can be a stressful time for you and your angel. It is when everything gets down to the nitty gritty. It tests the relationship under stress, so if you guys can get through negotiating you can get through anything!
Some key points to remember when negotiating are:
- Don’t give up control – no amount of money is worth giving up control over your business.
- Don’t sell yourself short. You have a great idea, make sure your numbers and data show that.
- Produce significant capital
- Stay Calm. Your investor uses negotiating as a test to see how you will handle pressure.
- Make sure you ask for enough money to follow your entire business idea through, from start to finish. A lot of businesses have what it takes to become successful but run out of money before success can happen.
- Be fair, everyone wants to feel like they are winning. Remember this is going to be a close business relationship, so be mindful of how it starts.
- Don’t take forever- no one wants to spend days negotiating terms, so go into the meeting with some self set decisions on what you can and can not except.
- Be flexible, it is important to show your investor that you are willing to work with him/her.
- Treat your investor like a customer- meaning don’t be afraid to show them your customer service skills.
- Have strong exit strategies
Remember that angel investors will likely focus on weeding out greedy entrepreneurs, likes structure, expects their entrepreneur to have legal representation, and they like to negotiate aggressively.
Keeping these basic principles in mind when negotiating with your angel, will help you to achieve the best results your business could ask for.
Amis, D., & Stevenson, H. (2001). Winning Angels: The 7 Fundamentals of Early Stage Investing. London: FT Press
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