According to “Winning Angels,” there are “four elements” up for consideration when negotiating a deal—structure, price, the amount of capital that will be invested, and what role, if any, you will play in the development of the company. (Amis & Stevenson, 2001) These angels are also aware that not every deal presents a chance to negotiate and they may choose to walk away if that is the case. Angels who do not negotiate may choose not to negotiate for “three fundamental reasons:
- They don’t want to invest the time.
- They are concerned about the efficacy of a relationship based on trust that starts with a fight for money and/or control.
- Within certain limits, they don’t think the terms or price are that significant.” (Amis & Stevenson, 2001)
Not every entrepreneur is a gem to work with and not every deal is worth negotiating. Essentially, there is a learning curve for angel investors, and knowing when to invest in or pass on an idea becomes easier with time and experience.
Amis, D., & Stevenson, H. H. (2001). Winning angels: The seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.
One reply on “Angel Investors: To Negotiate or Not to Negotiate”
I agree that there is a learning curve to negotiating. This section of the book really encouraged me to start looking at more situations from a negotiating stand point to hone my skills.
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