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When companies enter into negotiations with venture capital firms, there are several issues which need to be defined and agreed upon. This article describes the key issues.

Valuation. Valuation is the most prominent negotiating issues. Valuation is the price of the company in which the venture capitalist invests. Valuation determines what percent of the company the investor is buying for their capital.

Timing of the Investment. Many investors will commit a large amount of capital, but will contribute that capital to the companies in installments. Often, these installments are only made when pre-designated milestones are met.

Vesting of Founders’ Stock. Like capital, investors often prefer that stock is given to company founders and key employees in installments. This is known as vesting.

Modifying the Management Team. Some investors insist that additional or substitute management employees be hired subsequent to their investment. This gives investors additional security that the company will execute on its business model. An important issue to negotiate with regards to modifying the management team is the amount of stock or options that will be issued to new management team members, as this will dilute the holdings of the founders.

Employment Agreements with Key Founders. Venture capitalists typically do not want companies to have employment agreements that limit the circumstances under which employees can be fired and/or set compensation and benefits levels that are too high. Other key employment agreement issues to be negotiated with venture capitalists include restrictions on post-employment activities and employee severance payments on termination.

Company Proprietary Rights. If the company has an important product with intellectual property (IP), investors will want to ensure that the company, and not a company employee, owns the IP. In addition, investors will want to ensure that new inventions be assigned to the company. To this end, investors may negotiate that all employees must sign Confidentiality and Inventions Assignment Agreements.

Exit Strategy. Investors are very focused on how they will “cash out” of their investment. In this regard, they will negotiate regarding registration rights (both demand and piggyback); rights to participate in any sale of stock by the founders (co-sale rights); and possibly a right to force the company to redeem their stock under certain conditions.

Lock-Up Rights. Venture capitalists may require a lock-up period at the term sheet stage. The “lock-up period” is typically a 30-60 day period where the investors have the exclusive right, but not the obligation, to make the investment. Investors typically conduct due diligence during this time without fear that other investors will pre-empt their opportunity to invest in the company.

Each of these issues is critical when raising venture capital, since the outcome can significantly impact the success of the venture and the wealth potential of the company founders and management team. Because venture capitalists are very knowledgeable regarding these issues, and have great skill in negotiating on them, companies who are raising venture capital should seek advisors who also have this experience and expertise.

I was very eager for new business when I first started out to the point of accepting every Dick and Jane that came my way into my client portfolio. I figured the only way I would be successful was to keep busy so I poured myself into turning every new prospect into a new retaining client. No sooner had I done this than realized I was totally in over my head. A couple clients were great but 75% of them were emotionally draining me and costing me more in psychiatric bills of my own to deal with them than the price they were paying me. Just kidding but you get my drift!

Properly screening your clients first before investing your time and talent into them will pay off for your business (and emotional well-being) in the end. If your gut says no to a prospective client for reasons which may be unknown to you at the time, go with your gut! Trust that inner voice.

Client screening questions you should consider:

1. Is this the type of project you enjoy doing? If they want 25 hours of database entry and you detest that type of work, do you really want to put yourself through that?

2. Does this person seem easy to get along with? How did they act on the phone? Were they pleasant or depressive? Did they interrupt you or did they listen to you? Did they appear dictative or were they curious and ask you lots of questions? Look for these types of things and others during your intial meeting since this will help you decide what type of client they may be.

3. Are the services they require worth the hourly rate you are giving them? ie) If you offer administrative retainer rates at $30 per hour but they want some website maintenance services thrown in at this rate, do you really want to go there knowing that most charge double that for the same services?

4. Do you really have enough time this month for this new client? Check your schedule twice to make sure there is room since there is nothing worse than overbooking your month. Don’t forget that hockey tournament your son has at the end of the month which means planning your personal things into your schedule as well since they will affect your business schedule.

By being clear to yourself on what type of clients you want you will attract that type of client. Plus you will do your best work if you are happy with what you are doing and who you are working for. People of like minds tend to stick together and before you know it, your current clients will refer other prospects to you of like-mind giving you a full client base of people and services you love working for!

Negotiation is a big part of the business world. Every day, businessmen and women negotiate to close big deals. However, negotiation is also used to solve disputes between one or more parties. Negotiation is used to allow all parties involved feel that they have come out winning. The power to be a skilled negotiator is not something you are born with, it takes years of practice to hone this skill, and when perfected, you will have a certain power.

To become a skilled negotiator, there are several guidelines that one must follow in order to be successful. These guidelines have been proven to work with thousands of people around the world.

When you are the negotiator of one or more angry parties, avoid using the word negotiate. It makes that parties feel like they are settling and you will ultimately fail. Using positive statements such as Lets work things out or you may be interested in this…

Try not to use anything remotely close to negative terms, parties will grasp on to it and feel that they are being cheated. When you make a proposal that denotes positive words, more often than not, people will listen.

Before you start your negotiations, you need to sit down and look at both parties. Try to find a commonality between the two as a starting point. You need to set goals as to where you want the negotiations to go and set your priorities. You want to try and limit the amount of anger that will be brought to the table.

It is also important to try and figure out different scenarios that could lead to complications in your negotiations.

Any obstacles you can overturn before the negotiations begin will only assist you in completing your task sooner. You are negotiating to reach an equitable solution for both parties. It is crucial that you are prepared for anything when you go into negotiations.

When you enter into negotiations, state what your goals are right from the start. Do not make small talk, both parties are there to solve their dispute. When you do not start negotiating, it may appear that you are a weak negotiator. Having a clear and concise plan will ensure confidence.

It is important that you make all parties feel comfortable. If one person feels that you are not offering something to his advantage, he will start to feel resentful toward you. If you want the cooperation of everyone involved, you need to inform each person of the benefits of settling the negotiations. A good negotiator will listen to the viewpoint of each person and work from there.

Always be positive. Make sure that all parties work together and offer positive reinforcement by reciting past success stories. If parties in negotiations know that this strategy has worked in the past they may be more receptive to the idea.

Perhaps the most fundamental rule of negotiations is that you treat everyone with respect. Giving a gift to each party member as show of good faith will inevitably gain their respect. Have small plates of snacks available. People tend to get cranky when they are hungry. By treating others with respect you are being viewed the same.

When you’re the one who must deal with conflict you know what to do?

If you’re an executive, manager or human you resource professional, managing conflict is probably part of your job. So is recognizing when hidden conflict is the source of a problem.

The very word conflict has a negative impact on most people: you associate the word with war, destruction, hostility and pain. When you think of conflict as negative, even dangerous, you probably tend to avoid it whenever possible rather than learn how to deal with it effectively.

Conflict within an organization is not necessarily negative. In fact, it is a valuable potential source of energy for achieving organizational goals. Effective conflict intervention can help transform a conflict situation into an opportunity for change, growth and development of creative solutions to an organization’s most difficult problems.

Conflict may be open or hidden. It is relatively easy to focus on visible conflict. Suppressed conflict may be more difficult to identify and may masquerade as a variety of symptoms such as low energy, high stress, diminishing productivity, high turnover, poor quality of decision making, defensive behavior, nit-picking and so on.

Whether the conflict is visible or hidden, if you are the one who must manage it you need to be aware of its source and its contribution to the identified problem, as well as having resources for helping your group deal effectively with the problem itself.

You need to be able to:
? identify the actual problem;
? elicit the client’s goals in regard to the problem;
? establish initial areas of agreement among the antagonists;
? observe objectively and identify the continual processes of the group or organization;
? be aware of potential pitfalls and the ability to avoid them;
? help everyone generate options in which all participants will win.

You need to be able to bring hidden conflict to the surface.

Suppressed conflict within an organization can be a far greater problem than open conflict. When divergent ideas are not expressed, energy and information are lost to the group.

Any group or organization problem may be masking suppressed or unacknowledged conflict. Bringing that conflict into the open provides an opportunity for successful resolution.

If underlying conflict issues are ignored, they do not go away. Instead, they surface as a series of different problems: “If it’s not one damn thing, it’s another.” As each problem arises, it is often regarded as something that can be solved by training.

When training is provided, however, the impact is minimal; in fact, the training often seems to have vanished shortly after its completion. When training fails, one should suspect suppressed or unidentified conflict within the organization.

Negotiating is the art of bargaining and coming up with an agreement between two or more individuals, groups, or organizations. It’s importance in various areas such as business and commerce can never be overly emphasized. Negotiating is an essential skill needed to get what you want while fostering good relationships with the other negotiating party.

Not everybody can negotiate properly. In fact, this is what probably separates successful businesspersons from the not-so successful ones. In today’s competitive world of business, the success of an individual or a group will lie heavily on negotiating skills.

Characteristics of a good negotiator:

He is a good communicator. Negotiating involves the act of communicating your needs and wants. Aside from the need to have open communication between parties involved, a good negotiator must be able to maximize the time spent with the other business partners by being able to communicate his ideas well. Misunderstanding among businesspersons and/or business groups may sometimes arise because of the inability to converse properly.

He is a good listener. The act of communicating ideas in a negotiation does not end with having to inform. Remember that communication is a two-way process and the recipient of the information communicated must be able to understand and interpret the data properly. In order to do so, he must have good listening skills to get the job done.

He is competent and knowledgeable. He follows the simple rule of “You cannot give what you do not have.” You cannot negotiate on something that you don’t know about. As a businessperson, he must have intensive knowledge and experience about the company, products and services, and projects that are being negotiated with other businesses. Moreover, he must also have a good idea of what the other party wants from the transaction and be able to balance his needs with their needs.

He is able to analyze situations. The art of negotiating is all about analyzing the offers made in a given transaction. In fact, before making an offer, it is a given that he has processed the results that he wants to incur from the business deal. Furthermore, the acceptance or disregard of a counter offer from the opposite side will need analytic skills from his end.

He can make bright decisions quickly. Time is money, and money is what constitutes a business. Thus, arriving at business deals at the least possible time with calculated risks is a vital factor in negotiating in trade.

The steps in negotiating:

1. Planning - involves data gathering and research. This is where the negotiator?s knowledge on the deal will stem from.

2. Initiation - is the process of beginning a business deal. This step is concerned with the act of starting the communication between the parties involved.

3. Bartering - the act of making offers and counter offers. This involves analyzing the conditions of the deal.

4. Finalization - the art of closing a deal. Since there are transactions that will have to be settled at the actual place where the negotiating process is taking place, this is where the negotiator?s ability to make quick calculated decisions will be used.

If you want to become a good negotiator, it is important for you to realize the steps in negotiating to assess yourself on which aspect you may need to improve. Also, recognizing these phases in the art of negotiating will allow you to strengthen your negotiating skills by being able to direct the flow of the deal. You’ll find yourself calling the shots and not being misguided in any transaction.