When I started my first tech company in 1999 I had pretty good tech chops and had led teams but had very little exposure to many other things that matter in a startup including sales, marketing & business development. Like most first-timers, I learned the hard way.
Negotiating was a subset of every activity in a startup – it really was a way of life.
- Getting an office in a tight real estate market.
- Getting a sublet at the right terms when the market crashed.
- Convincing people to join your start. And take less than their big companies paid them and with less security.
- Getting a recruiter to agree to work with you. And not charge you outrageous up-front fees.
- Persuading a journalist to write about you rather than the 1,000 other companies bugging them. Offering them exclusively information as inducement.
- Convincing tech ops to carry a pager on weekends. Finding the right compensation for doing so without pissing off other devs who also worked many weekends. And not breaking the bank.
- Dealing with pesky VCs. And those long contracts they want you to sign with terms that seemed more like Latin than English. And for which I was sure were designed to screw me.
As unpleasant as people find the thought of it – life is a negotiation. And no life is more of a constant negotiation than that of an entrepreneur.
And most of us start with zero training.
One of the big mistakes I used to make (and still sometimes do, frankly) was to negotiate piecemeal. I think it actually comes naturally to the uninitiated and it’s suboptimal.
Luckily I had my colleague and still dear friend Stuart Lander to sort me out. He was a recovering lawyer and has now become a startup operator extraordinaire. His lawyerly training has helped him become an excellent negotiator. Negotiating is part of the training as a corporate lawyer and why you should never negotiate against lawyers unless you yourself have one present.
When Stuart and I first started working together he had just joined the company as a junior business development professional. It was his first job after giving up the well-paid lawyerly career for a low-paying roller coaster ride of a startup. You can imagine how his proud Jewish parents felt about his giving up a job as a lawyer. I wonder if they’ve ever forgiven me?
We were meeting with a potential business partner and Stuart had drafted an agreement between the two companies. The other side had a series of things that they wanted changed. The owner of that company was in the meeting along with his business development lead. On our side it was Stuart and me.
Like a machismo first-time CEO I thought I should handle the negotiation myself. Their CEO was equally bravado and dumb. He openend with his first issue. I listened to why he didn’t agree to that particular term and what he preferred in stead.
Like the problem solver I had been trained as in my software development days, I parsed his issue. I saw where he was coming from and from our side why our ask was what it was. I talked too much. I looked for middle ground. He talked too much. He haggled with me. We both felt good. And smart. We agreed a compromise. Then on to the next issue.
Our list was long. 15 or 20 points.
We worked through the first 4 or 5. Stuart is not a patient man. And never mind that I was the CEO, his frustration with me was visible. He found a good excuse for a break and pulled me aside.
“Mark, you need to stop negotiating point-by-point.
Our goal here isn’t to have a negotiation line-by-line. We want to know what all of their issues are first. You’re compromising on each point and that makes no sense.
Let’s get all of their issues on the table. Let’s then convene privately and rank the issues we care about and which we don’t.
Let’s be very flexible on the issues that are at the bottom of our rank and they might really care about. Let’s dig in our heels on the issues we care most about. We can trade compromises on issues that aren’t as important to us in exchange for not budging at all on our most important points.
If you negotiate piecemeal you end up compromising on everything. That’s not very smart.”
And it wasn’t. It came both from impatience (who wants to go through an entire list and hear issues without debating them?), inexperience and ego.
Corporate lawyers know better. They’re used to negotiating long agreements. Their modus operandi is, “send us all your comments by marking up our entire document.” That is a form of “let’s negotiate in an entirety rather than piecemeal.” They’re even happier if they don’t have to do it face-to-face.
To me it always seems so harsh. You get back a document that has 5,000 redlines on it. It feels like receiving one big middle finger and I still find it unsettling. To a lawyer it’s just efficiency. They know they’re going to concede on many of those points. But the hassle is … you don’t know up front which ones their client really cares about it and which are BS items designed to wear you down in the negotiation.
The problem with negotiating piecemeal as Stuart taught me is that you trade on every item. You don’t prioritize the issues which you really care about. If you don’t want to give a millimeter on one item you have a hard time doing that point-by-point. Done as a “package deal” you can say, “I gave in on these 5 issues that you asked for. On this issue I can’t give.” That’s much harder to pull off piecemeal.
Piecemeal you might be reasonable in your negotiation on each of those first 5 issues as each came up. You found middle ground on each of them. When the 6th point comes us – the one you really care about – you’ve lost your leverage. You might have been better off not finding middle ground on the first 5 points but rather having given completely on all of them in exchange for not budging an inch on point 6.
I know this will sound like the blinding glimpse of the obvious to the reader.
Trust me when I say that most untrained business people approach these negotiations piecemeal. I think it’s human nature. And to this day I still struggle not to do so myself.
Stuart Lander was promoted within months of this first meeting we had together to run business development for the entire company. Within a year he ran a territory. Within two years he became the COO. And within four he ran global operations across 5 countries including the United States. He’s very talented.
He took the title of “President” which for a Brit was very funny to him. It seemed very overstated like all things American. But perhaps by then his parents forgave me both for taking him away from a “real” profession like being a lawyer. But probably not. You know the old joke:
For the first time in history a Jewish person is elected as president of the United States.
At his inauguration his mother is sitting in the front row, beaming. The person next to her says, “You must be very proud of your son – becoming the first American Jewish president!”
She replies, “Ah, yes, he’s OK. But you should see my other son. HE is a doctor!”
Stuart is the main guy who persuaded me to start blogging some of the lessons we learned together. He has many of his own. He taught me as much as I taught him. If we could persuade him to tell you all some of his lessons I think you’d learn some interesting insight. But maybe he’s keeping them all to himself? Or maybe he’ll channel them through Suster.