The paper would discuss and analyze a negotiation scenario that took place between me (an Entrepreneur) and a group of Venture Capitalists. The entrepreneur has a sound idea for initiating a new business but does not have enough capital to let it start, so he approached a group of venture capitalists to present them with the plan, build their interest, and obtain sufficient amount of investment funds for the business.
There are a couple of issues between them over which they are negotiating – the settlement of amount of investment, its interest rate, and payment method and time.
And second issue is the conditions that are set by the venture capitalists about the type and operations of the business for the entrepreneur over which he must act on in order to have funds available. These issues took a lot of time for negotiation; nevertheless it was successful because both parties agreed on win-win conditions.
Of course it was not expected by the entrepreneur that such conditions would be set by the venture capitalists that might compel him to walk away without accomplishing his objective.
Moreover, venture capitalists also wanted to see ‘what’s in it there for them’ that would benefit them in terms of monetary value, brand image, increased sales, and popularity. The negotiation’s success is analyzed in the light of ‘6 Habits of Merely Effective Negotiators’ that would understand the reasons it got successful for both the parties.
Both of the parties did not make the mistake of neglecting each other’s problems and needs, which enabled them to put themselves in other party’s shoes and think from their perspective too.
The entrepreneur did understand that venture capitalists do require higher return over investment, want business to operate in new emerging markets rather than developed ones, grab more market share, customers, and profits. Whereas, venture capitalists did understand that the entrepreneur has a sound business idea and is desperate to implement it that would also benefit the community.
Venture capitalists agreed to pay much more than the amount the entrepreneur was asking for investment, because they did not want him to bear low value and higher costs. Moreover, the entrepreneur also considered the social contract, social norms of conducting business, and did not let the relationship with the investors turn towards a negative direction The position of the entrepreneur was to obtain around $150,000 while making no changes in the type, operations, and locality of the business (that were his interests).
But depending on the scenario and conditions put by the venture capitalists, he had to sacrifice his interests but they were being compensated in other ways. As far as common grounds are concerned, both parties realized that there cannot be such a common ground that benefits both the parties at its best; nevertheless, the sacrifice of interests was not that much since both the parties are interdependent and hence would seek a win-win situation.
Walking away from the situation for both the parties was quite difficult, since entrepreneur was very willing to start the business somehow and the venture capitalists did see a great potential and profitable results in the business idea. And finally, both the parties kept themselves from a mistake called ‘Partisan perceptions’ where one party depicts itself as full of good qualities and defame the other party (Sebenius, 2001). This encouraged friendly atmosphere that eventually led to the finalization of deal on agreed terms between both the parties.
Therefore, when negotiating with any other party in the future, I would consider its problem or situation, would always bargain for my own stake and as well as consider his benefit, understanding the level of bargain that can be done, would not let the position affect the interests, and would prefer BATNA if a sound negotiation could not be done.
Sebenius. J. K. (2001). Six Habits of Merely Effective Negotiators. Harvard Business Review. April 2001.
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