Transcript excerpt of Doug Leone (Sequoia partner) advising founders on negotiating with VCs. He says founders should aim to maximize price but should avoid short-term optimization (e.g., keeping ownership by lowering price) that ignores board dynamics and long-term partnership; the best deals are win-win and founders must consider the other side to demonstrate business maturity.
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What's the best position or leverage that you you've seen founders get in entrepreneurs to negotiate with VCs? Where's the best place I can be coming into a negotiation?
So I think founders unfortunately make a mistake. First of all, I think the founders should, should have a right to maximize price. Let me not be a baby in the woods and say keep price lower so we can own more. That is all bullshit. The founder needs to take care of maximizing price. But within that they, they need to understand the following. And that is we are business people too. We are an 8 or 9 on 10 boards. And if their attempt at maximizing price, they get one of us on a board and we own 3%. Logic would only follow that it's probably not good. People have to understand that the very best deals are win win deals. And win win deal is taking care of yourself. Because when you're in a negotiation, yourself comes first, but also taking care of the other side. And when I find founders optimizing their own ownership or something like that at the cost of everything else, it shows me they just have no long term perspective and they don't understand how business is carried out.