Three Negotiation Tips When Fundraising
Fundraising is one of the most critical and impactful parts of running a startup. How well you negotiate can make a huge difference. This blog post will find the three most important tips to help you deal better in your fundraising process.
Tip number 1 - Determine the three HOWS:
In the negotiation process, you should decide about the three HOWS:
1. how much money will you receive?
2. how much of the equity will you give?
3. How much time should you wait till you get the money?
The most important tip we can give you is to know your startup's Value.
Tip Number 2: Know Your startup's Value
The most important tip we can give you is to know your startup's Value. The better you understand the Value, the better deal you will make. Most founders do not try to understand the value of their startup before negotiation. Many available tools can give an accurate within a minute. One of the best tools is Equitest - an online valuation platform that includes business valuation software, pitch deck creator, and cap tables management software - tools that every startup needs.
Knowing your Value will help you determine the objectives - the three HOWS - how much money would you like to raise, and what part of the equity will you give in return?
For example, if you conclude that the worth is 1,000,000 USD, you can decide that you will give 10% of the equity for 100,000 USD.
You will also need to decide the lower and upper boundaries - such as no more than 15% for 125,000 USD.
Another important aspect is the time - how much time should you wait until you get the money? 30 days? 60 days?
If you want you can evaluate your startup for free, in 30 minutes, using Equitest's valuation calculator.
To start with valuation - click here.
Tip Number 3: If You Are Not Experience - Hire
Now that you have determined your three HOWS, it is time to start negotiating. Before starting, remember that negotiation is a learned skill, like any other skill, such as public speaking, sales, and pitch deck creation. The more you practice, the better you become. That means you can learn and improve on it too. If you are not experienced with negotiating, you can hire people to help you. These advisors may include lawyers, investment bankers, and fundraising advisors.
