Navigating Emotional Negotiations in Venture Capital with Kamran Ansari

Hey, I'm Kwame Christian, and you are about to step into the world of Negotiate Anything, the number one negotiation podcast in the world, where we teach you how to make difficult conversations easier while getting more of what you want in the process. Each episode is packed with practical tips and strategies from the experts. We delve into negotiation, conflict resolution, and leadership skills that are crucial in both business and in life. Whether you're closing a deal, managing a team, or navigating personal relationships, Negotiate Anything provides you with the tools you need to succeed. Our conversations are real, relatable, and most importantly, rooted in practicality. So if you're ready to transform your conversations and elevate your negotiation skills, join me on Negotiate Anything. Subscribe and listen on Apple Podcasts, Spotify or wherever you love to listen. Let's make every conversation a winning negotiation. Cameron, thanks for joining us today.

Awesome. Thanks for having me.

Hey man, it's our pleasure. So how would you get us started? By telling us a little bit about yourself and what you do.

Great. I'm Cameron Ansari. I've been in the technology business about 20 years, primarily as an investor and a venture capitalist, but I've also had a few operating roles and been on the other side of the fence, most recently at Pinterest where I ran strategy and corp dev and acquired a bunch of companies for us and sort of saw the company from the pre IPO days until our offering a few years back. And on the venture side, I've been primarily focused on early stage companies in the sort of fintech and payments as well as e commerce areas. So I've been fortunate to work with a ton of great founders going back 10, 15 years, both in Silicon Valley and here in New York where I'm currently based. And I've done deals in the US as well as in Europe and other markets. So it's been great and had the fortune to work with companies like Venmo and Braintree and Recurley and Bread Finance and others in the payments area as well as a bunch of e commerce businesses too.

Amazing. Yes. And today we are going to talk about venture investing. And listeners, as you can tell, we have a pro. We have a pro with us today. So we're going to focus on some of the most difficult conversations that come up in your world. And the two areas we're going to focus on are first price. I think that's pretty obvious. That's going to be one of the toughest ones. And then we're going to talk about some of the other details that go into the deal. So just set the stage. When we're talking about price in the venture space, what, what goes into that process?

So I mean, you know, valuation is, as a lot of people say, it's both art and science. I mean, there, there's obviously math, there's science that goes into valuation. You look at a company, you look at the sector and you say, okay, well, you know, you're a payments company. And we have examples of these five or six public payments companies. You know, we have PayPal and Square and Affirm and MasterCard and Visa. And here's where they trade, right? Here's like the multiple, which is typically price to revenue or price to earnings. In the case of most venture companies, there are no earnings, right? These companies have hopefully revenue, but typically not profit just yet. So, you know, series A and B type companies or seed stage companies where I do a lot of deals. So price to sales is really the primary comp or multiple that's used. But it's highly imperfect because you're working off of a set of public companies that are much older, slower growth, and in some ways it can be apples to oranges. But that's one place to start. Because I think it's important in any negotiation to separate facts from feelings. And if you can negotiate with data, or at least frame something with data, it always helps to kind of take some of the emotion out of it. I think that's a key thing that I've learned over the years. So starting with data and you say, look, here's where the public companies are trading. And then of course, venture companies are private. So you look and say, here's where the last five or ten deals that we know about, here's what they priced. And this is the tricky part, because private companies and private deals, that data is not really available anywhere. In some cases, if a private equity firm, a later stage deal, you might see a multiple. But otherwise it's kind of something that's been gleaned over time or, you know, because you're involved with the deal. So those numbers tend to be a little bit more difficult to ascertain. But you try to start with that and say, hey, look, here's what we think is fair. And I always try to take what I think is maybe fair and then add a little booster if I want to do a deal as an investor or as a buyer so that you can kind of make the, you know, the other person feel, feel good about it. But that's where you start. And I think the challenge with venture deals is you are selling as a founder, some portion of your company. And the portion that you're selling, you know that that's called dilution. So you're losing ownership, and all the current owners are losing ownership. And so, you know, part of the challenge with doing a venture deal and trying to negotiate price is in some ways raising, for example, and hopefully I get the math here, right? But raising $2 million at a $20 million pre, that is the same deal, effectively, as raising $10 million at $100 million pre. Why is that? Because from a dilution perspective, it's the same deal for you as a founder, right? You're getting diluted the same amount. You're giving up the same percentage ownership, you're giving up 10%, right? But the truth is that those two deals put you in a very different position as a company coming out of it. Because now if you're the $100 million company, the expectations are a lot higher. The next round being an up round from the prior one is much more difficult. You have to execute to perfection. So I think one of the things that's tough is most founders think the higher number is always better, but really, dilution is what they should be more focused on than just getting the absolute highest dollar amount. Because, again, you know, the higher number comes with its own challenges.

Cameron, there is so much to explore here, so much to explore here, because as we can see, there's a lot that goes into this, and there are real numbers. We are selling products. We have costs associated with it. We have revenue, we have margins. All of those things are real data, real numbers. And yet the word emotion still crept in, right? Because we still have to remember that humans are part of this process. And focusing on the data is easier said than done. Because if these deals were just purely math, then this would be really easy. But there still needs to be that negotiation element that caters to the data and the reality of the situation, but also acknowledges the emotions of the parties. And so as you're framing things, focusing on the data, what types of approaches do you use to make sure that we are grounding this as much in reality and data and fairness and not so much in emotionality?

You know, it's hard because as a founder, your company is your baby, right? And everyone wants their baby to be beautiful and valuable and fantastic. And so you have to be very careful as an investor to kind of understand that dynamic that someone has created something out of nothing, has built it, has hired people, has willed something to exist in this world that was not There before. That's a creative, emotional process. And so you can't just be dollars and cents and numbers oriented. I think you have to acknowledge that piece of it. And a lot of that comes from rapport building, from trust, from the testimonials of other founders you've worked with. Ultimately, in the venture business your reputation is everything and that reputation is built from the history of prior deals you've done. Founders talk to each other, they know each other. Often founders refer other founders in as new deals. So the ultimate endorsement, and I'm happy about this and proud of it, is that there are a number of companies, there are three or four that I manage for the firm that I've been with for a long time, that I don't do new deals anymore there. But Greycroft, a firm in New York and la, a multibillion dollar venture fund where I really kind of learned the business. I have four deals I still manage for them. Three of the four are, are repeat founders whose prior company I had backed. So they came back to me for their next thing, which is it feels really good and it gives you a sense that the last time around it wasn't so bad, that they felt like hopefully there was enough trust and value and help there to build the business that they wanted to partner again. So that's the ultimate. But I think it starts with rapport building with trust and you have to get along. I mean, the venture business is not like being a hedge fund or public market investor where, you know, I like IBM stock, I buy it, it just sits in my Schwab account or whatever and you know, I see what it does. You're in the trenches with these people for better part of, you know, seven, eight, 10 years. You know, people used to say, oh, you know, venture timeline is, you know, five, six, seven years. As we've seen companies stay private longer as these things take longer to build. Especially in Fintech, one of the spaces I work in, you know, it could take two, three years to get from your first check that you've raised to the product being live because of all the regulatory, you know, licenses and banking sponsorships you have to set up. So this is a 10, 12 year relationship. It's like a marriage. So, you know, I've had it happen as well where look, I might love a deal, but if I'm like, hey, I don't want to work with this person for the next 10 years, you know, and maybe vice versa, you know, it's not going to work.

Absolutely. And to your point, Cameron here, when it comes to trust and rapport and reputation, those can kind of feel fluffy and nebulous and unimportant sometimes. And so this is a message to some of the young bucks who are coming into this industry too, because I think we can focus so much on the technical nature that we forget that we're dealing with human nature with all of this. And if we were to compare two deals and the negotiation, everything is the same, the same people involved. But in one deal there is a higher degree of trust and a much better public reputation. And then the same person on the other side of the deal, if we were to flip the scenario, let's say they have have less trust and a worse reputation, it will fundamentally change the way that the other side negotiates with you. Because the deal that you end up with, forget the negotiation skills, you're starting off at a completely different place. So for somebody like you, who has handled these types of deals at the highest level is really refreshing to, to have this reminder that the human factors is still really, really important.

And look, and people talk. I mean, your reputation follows you. It's not like whenever you're doing a deal, the first thing the founder is going to do is they're going to call or reach out to prior deals you've done and say, you know, what was like to work with this person. It's also, you know, the case that firms are not monoliths. Typically as a, as a founder or CEO, even though you're working with like Firm xyz, you know, you're working with a huge firm like Andreessen Horowitz, let's say you're still partnering with one person typically, right? That's the person that is going to sit on your board, has endorsed the deal, is going to pound the table for you, is going to be your point of contact when something goes wrong. And things always go wrong. You're not texting five people, you're texting your one kind of partner. And so that relationship again is paramount, that the investor and the CEO have a really close level of trust and transparency. So I think that's key.

Hello, my friends. Before we get back to today's episode, I want to ask you a question. Have you ever wondered how to elevate your team's negotiation game and how you can help the folks on your team have better, difficult conversations? At the American Negotiation Institute, we offer transformative keynotes and workshops tailored to empower professionals with top tier negotiation and conflict resolution skills. Whether it's a keynote for your next event or hands on training for your team, we've got you covered. Don't just negotiate. Master the art with the American Negotiation Institute. Click the link in the description to find out more. Elevate, negotiate, and succeed. Absolutely. And I want to go back to something that you said in passing that I think is really important. When we're thinking about the psychology of a founder, there are some patterns of thought and some biases that come into play. And I think it's important if the person listening to this is a founder, to understand how susceptible you can be. And then somebody on the other side potentially, how they could potentially leverage that against the founder. And you talked about how the founders often focus or fixate on big numbers. And it seems like there is a status or prestige play that goes into the decision making process there too. If I get more money, I. I am less focused on the quality of the deal because I can tell my friends that I'm really cool and I raised a lot.

Unicorn. I mean, everyone, you know, there's a while everyone just want to be a unicorn. Like, no matter what, it doesn't matter if the numbers make no sense. I want that billion dollar evaluation.

Exactly. So, so walk us through that. What does that, where does that psychology come from? And then how does it impact the actual negotiations we're having?

Yeah, I mean, I think a lot of it is. Some of it's kind of the FOMO fear of missing out, where you're comparing yourself to other companies and founders or other competitive businesses in your space and you're saying, well, they raised the price X, or I have a buddy who got a term sheet from this firm $100 million, so therefore I want to be worth that. Some of it comes from, for better or worse, some of the accelerators and programs like Y Combinator have a playbook that they. Which is useful for founders who are, who are young and learning. But it's not one size fits all, right. You know, in a Y Combinator class, you may have an Airbnb and then you're gonna have 80 other companies that are not of that same stature. So it's not appropriate necessarily to have them all kind of go through the same set of motions in terms of, you know, that we've seen companies come out of those programs where it's like, oh, you know that the YC people told me that I need to raise it safe at a 15 million cap. Or I'm like, well, where'd that number come from? Why that number? It doesn't makes sense for every company. And again, you have to think really carefully because this is not a one and done. You have to think about the next round and the next round, because for better or worse, I've never been involved in a company that raises only one round of capital. There's always a chance as an investor to put in more capital and write another check. And as a founder, you're going to be raising additional capital. So it's not just like I want to maximize for the highest price I can right now. You have to think about what does that leave me 18 months from now for the next investor that's looking at my business and saying, oh, you raised at that price. And you also have what I think I would call valuation nostalgia, where if you raise at a high price, then your next round you're like, well, I was worth X before and I must be worth more than that now. Even if a lot of that was driven in the US what drives these prices? I mean, it's market environment. And so when we're in 2020, 2021, zero interest rate environment, you see a surge in things like E commerce. Those companies could raise at almost any price. But just because you were worth that three years ago doesn't mean you're still worth that today, unfortunately. So I think some of that realism needs to come in. And I think where I've seen deals get done more recently is where founders and investors have been able to come to an agreement on, okay, you know, we're going to pick a more reasonable price than maybe where you were at before. You may have to take a haircut, but you're going to build for the future. And again, it's all about like, this is not a, you know, one year, two year game. This is a 10, 15, 20 year game. And perfect example of that, by the way, is Klarna, where Klarna had raised at a massive valuation, you know, $45 billion or something. And the founders and investors there came together and proactively cut that down to like nine in a subsequent round. So that's a heavy hit, right to your ego, to the psychology of all your employees. Oh, you know, I was worth this and now I'm worth this. But the reason they did it was to be able to raise additional funds to continue to grow aggressively. And now they're going to be able to list publicly, get liquidity, which is very, very rare, probably at 15, $20 million valuation, and grow from there. And eventually they'll probably get back into that the 40, $50 billion range over the coming years. But very few founders are willing to take that hit, are willing to proactively agree to what's called a down round. You know, down round is like, you know, box office poison. You can't possibly do a down round.

Agreed. And so let's actually make this real for the listeners. So let's say there is a company that you're looking, looking at, and it's one of those situations where they had a high valuation at the beginning and now the market has shifted, but their egos have not shifted in a similar way. But you really see a lot of power and potential in this organization. But they seem stuck or fixated on the previous valuation. So as you approach that negotiation, how do you do it in a way that is optimized toward lowering the price to something that is fair for both parties and reasonable without running the risk of potentially losing a good opportunity?

Yeah, I mean, I think one thing that is always useful to do is kind of put yourself on the same side and align your interests. And one way to do that is when you reduce a company's valuation in a subsequent round. One kind of hidden benefit of that is that you're also most likely going to reset the stock option prices so that the options are now going to be priced at a lower price, which means that all the employees and founders have more upside in terms of when they can buy stock. The way stock options work is there's always this sort of market that prices these things. There's something called A409. A409A is a accounting economic process where an outside firm comes in, values the companies. These are not VC investors or hedge fund analysts. These are just accounting firms typically. And that price determines your stock options. And the stock option for an employee is, you know, I have, let's say, 30 cents a share. I have to buy my shares at 30 cents. I have a right to buy them at 30 cents. And hopefully at the time I do that, the market price for those shares is A$5,$10. So I have all that upside. When a company raises around at a very high price, then your options are now all of a sudden priced much higher too. So your room for profit is a lot lower and you have to put out more cash to buy those shares. So there is a hidden benefit to actually having that, that more reasonable valuation. So I think touching on some of that, I think is what helps kind of get things done. And then, look, companies come to the table when they're running out of cash. So I think that's the ultimate kind of equalizer. So you Know, you can kind of, as a founder, be stuck on a prior price or valuation and want to kind of attain that again. But when you're starting to run out of cash, you sort of have to come to the table and figure out what you're going to do.

Yeah, that makes sense. Leverage can humble a lot of people, you know, and in those situations, they're coming to you because they have a need. People don't give up parts of their companies lightly. So I think that's really important to keep in mind. And I love the fact that we are aligning ourselves in terms of interests. Because you're not going, hey, me versus you. Because then it turns into an ego measuring contest and it becomes very unproductive. But you're saying, hey, listen, I'm on your team, we want to work with you. Here's what we're seeing. And this is how this helps both of us. And what ends up happening is you circumvent a lot of potential resistance by taking this more diplomatic win win approach.

Yeah, I think as a venture investor, the approach is always, you know, you're partnering with companies, right? You're partnering with founders. You want to work side by side. You know, I'm not their boss, they're not my boss. We're not, you know, working as owners. You know, we're taking a slice of ownership, but it's really a partnership model there. You know, I think once you get to the later stages, like, you know, private equity funds and leverage buyouts, some of those folks do come in as owners, right. They're going to own the majority of the business or the whole business. They want to put in a new management team. They want to, you know, change all these things and kind of operate that way. But that is not how early stage venture really works. Early stage venture is much more about partnership and coaching and mentoring and helping and making introductions and trying to get a business to the next round and to the next round and to further growth and more revenue and hopefully, you know, eventually one day ringing the bell at the stock exchange.

I love it. And this actually, Cameron, gives us a perfect opportunity to transition into some of the other factors that go into the deal. Because we just talked about the fact that this is not a me versus you type of scenario. This is us working together, we're partnering. And that's where those human factors really come into play. Because, yes, price is probably going to be the biggest, most important thing that we need to consider when we're making these deals, but those other factors are going to be vitally important after we align on price. So can you talk about some of the other factors that appear in these deals and how you handle them?

Sure. I mean, I think that the best examples of this for me have come from my time at Pinterest where I was acquiring companies for us and running M and A. And in those cases I can remember a couple of examples very vividly. One is we were buying a company that had maybe 20, 30 employees. And I knew the founder very well. We worked together before. I wish we'd gone to graduate school together. So he and I were friends. But he also had offers from. It was us. But I think also Uber and Dropbox and Salesforce and all these other companies wanted this team. This team was exceptional. And we were only a few hundred person company at the time. We weren't like Microsoft with 100,000 people and you can just tuck in 30 people and throw them in a corner and figure it out later. We insisted on having roles for every person. And we'd gone through the leadership team and the CEO and the CTO and these people and we found roles for everyone. And we were down to like the last executive assistant that he had and one other person who was like an office manager. And you know, he was just insistent like calling me day and night, being like, we have to find a role for her. You know, we can't leave her behind. And I'm trying on my end to work with the HR team and the talent team at Pinterest and figure out, well, do we have a seat for this person? And you know, and they're telling me, well, no, like we don't need anybody who, with her background and we don't have that role here. And so, you know, that. And this is, you know, we're down, like the price has been set, the timing's been set, like we're ready to do the press release and he's really like hammering me about these last people. But that just shows like obviously he cares about the outcome for everybody and that's tough. We have to go through that. There's another case where this is really awkward. We were buying a two person company and the Pinterest execs, we had decided that we actually only really wanted one of the two. So I had to tell him, you know, we value both of your experiences, but we only have a role for this person and not the other. But we are, you know, happy to compensate the other person and give them, you know, additional equity and cash to make them hopefully feel a little better about it, but it's just, yeah, we were, we were not in a position and it was very uncomfortable for me to have to have that conversation. But you have to just explain to them the rationale, like, here's why we value this person's experience. And I think one was a designer, one was a technical person and design was very important to Pinterest and we really wanted the designer, so we worked around it. But obviously those are difficult conversations to have, but you're always focused on trying to get to a place of kind of mutual understanding and agreement.

What I love about this, Cameron, is that it shows that there's no way for us to approach this that is pain free. So in a conversation like that, a lot of times people dilly dally and hold back from having the conversation because they're saying to themselves, okay, I need to figure out how to say this. If I say it this way, they'll feel bad for this reason. If I say that way, they'll say they'll feel bad for this reason. And really that's just a sneaky manifestation of fear that holds you back from having the conversation that needs to happen. You have to just jump in. You have to acknowledge and validate what the person is feeling. You have to recognize that it will be painful. And then you share the data that led to the decision. It's not a personal decision. It is a data driven decision that happens to be exceptionally hard. And we want to work with you to figure out how we can work through this decision that we have to make. And you know, I really appreciate the simplicity of it because we're not masking the difficulty of it, but we're just saying, hey, listen, you have to jump in and have these conversations. And probably sometimes, for example, in that conversation, the other factors, the more human centered elements of it, might actually be harder than the money conversations too.

And I think, I mean, one of the other things that I think is useful is, and I tend to be pretty direct and I appreciate people that are direct. You know, not everyone operates that way. So I think when you are direct, you tend to attract other people that you work with. And probably the founders and CEOs I work with tend to be more direct. And the ones I feel like I have the hardest time with are the ones that I think are not giving it to me straight. Right. Are always like sugar coating something. You know, once you're an investor in a company, you want to get the good, bad and the ugly. Like, you know, we're not here to just to do a marketing exercise and have you as a founder constantly telling me, like, what's going well? You know, we want to know what's not going well, we need to work on, because there's always something. And I think that transparency is important. And I tried to do the same thing at Pinterest when we were negotiating deals, because, for example, there was a, you know, we had a threshold amount, like a dollar amount, where below that amount, it was a fast track process. Like I could, you know, we had approval. We just like, get a deal done quickly. Like Ben and Evan, the founders had given us their blessing, but if we went above that price, then we have to go back to the board and do. And so I would just tell people, look, if you want the higher price, I can go and try to fight for it and see what I can do. But you realize that now you're putting me in this, like, other category. So you want to get something done quickly below this. I can get it done fast. Right. You know, we can sign today. And it was, you know, it wasn't like, you know, the used car salesman is like, you know, by midnight tonight, if we sign, you know, I can give you the 30% off. But it was the truth. Like, I was like, here's. There's a, you know, we have this policy. So. And a lot of times, you know, I think there's one case or two where the founder was like, you know what? I want to fight for the higher price. But there was a handful of cases where the person was just like, you know what? I'm good with the fast track. Certainty is important. You know, let's just do it.

Yeah. And we have to recognize, like you said, certainty is important, but it also is a key issue. It is, it does offer a material benefit. Right. Both tangible and intangible. I get my money faster, and then I also can sleep well at night. And these conversations can be really stressful.

Speed and certainty are really important.

Absolutely. And before we wrap up, there's one more question I want to ask because I really appreciate the point that you made about being direct and being too transparent and then also recognizing that not all humans are like that. And so when you recognize that somebody might be sugarcoating because they're either in sales mode or they're trying to, like, soften the blow for you, how do you cut through that and get them to be more direct and share the information you need?

It's, I think, when you know someone, because that's so innate. Right. That, that that's a behavior that that someone's had for a long time, I think, I think two approaches. One is. And again, this happens most frequently, I find, with founders, especially younger founders, who if something's not going well, they're embarrassed or they want to kind of like move around it until they can figure it out and come back to you later with good news. This is always the case where it's like, good news travels fast and bad news travel slowly. But I think you have to just remind them, hey, listen, you know, we're on the same side of the table here. We're in this together. I have capital invested, you have time and capital invested. And so it's to everyone's benefit to understand exactly what's going well and not going well. It's that reminder. I think the other thing is, you know, and the zoom Covid world made this more difficult. But there's nothing, no substitute for, like, face to face conversation. You know, taking a walk with somebody and actually having a conversation face to face. You tend to get more transparency that way. And you can also, you can read, you can read expressions, body language a lot better. And I think that tells you a lot as well.

I love it. Yeah, man, you're spot on. It's not easy. It's really tough. There's usually a reason why somebody is holding back the information. The legitimacy of said reason differs greatly between, between people. And it makes me think back to some of these. The episodes where we've had police interrogators come on the show and sometimes even like parents and teachers because they have to get information from, like, teenagers. That's tough. Teenagers and criminals, those are the ones.

That are tough information. Yeah. And look, it's. I think that the, the, the way, the way to go about it is really to think about, you know, what's the best way to kind of build trust and transparency. But I do think that as a vc, a lot of times I say that you're like a detective. Being a venture investor is a little bit like being an investigative journalist or detective because you're constantly trying to turn over leaves and understand things that are not publicly available information. Right. These are private companies, small companies. You're meeting someone for the first time, so you're always doing, like, reference checks and background calling people and trying to get, you know, details through. You know, you're at a drinks event, you're. You're asking other investors, hey, what was this person like? Or what price are they asking for? So, you know, you're like Scotland Yard. You're constantly, like, looking for little bits of information and data that can help you in your business.

Man, this is so good. So good. Cameron, I really appreciate you coming on the podcast today. Before you go, let the listeners know again the about what it is that you do and how they can get in touch with you.

Absolutely. Look, I'm a venture investor focused primarily in early stage. I do a lot of deals in fintech and E commerce. I have a small vehicle that I run called Capital Ventures and I also work with a larger firm called Headline out of Europe and the US which invests both in early stage as well as growth deals across various stages of tech. So you can find me on LinkedIn on X or Twitter and I'm Cameron at Headline or Cameron at Capital Ventures with a kid. Happy to answer any questions.

Awesome. Cameron, thank you so much for joining us. Really appreciate it. Wait, wait, wait wait, wait. Now, before you sign off, I have something to tell you that I've never told you before. Just kidding. I've told you before, but you should listen to it again. I want you to know about Negotiate Anything Premium. Imagine all of the things that you love about our traditional feed, plus so much more. I know you like our traditional feed because you're at the end of the episode. And with Negotiate Anything Premium, you'll get more bonus content you've been asking for, more of the expert insights that you can't get anywhere else, and more exclusive behind the scenes access into every conversation. Are you ready to get more of what you want out of your life, career and every conversation? With Negotiate Anything Premium, you'll have access to more high level, custom designed content and insights, giving you the tools you need to negotiate higher salaries, better deals and better relationships in your life and career. Once I had a listener share that Negotiate Anything helped her to negotiate a $53,000 raise. Could this be you? What would that mean for your life? I've seen firsthand the impact this model has had on my life and the lives of my corporate clients and I am confident that it can do the same for you. Are you ready to negotiate more of the best things in life? Click the link in the show notes to learn more. I'll catch you later.