Ben Hatten

What VC’s and Criminal Prosecutors have in common - Negotiating with Leverage

This morning I was at the county courthouse as a wintess for the prosecution in a burglary case.  The case was pretty boring - but what happened in court room in the 2 hours before the judge showed up was fascinating.  This court was a simple criminal courthouse - and the state prosecutor was there to try about 15 cases or prelim hearings.  All of the defendants who were being tried by the state were there bright and early with me too - 2 hours before the judge shows up.

This prosecutor was not I expected, he was about 28 yrs old, incredibly engaging,  and was super polished.  He was friendly, saying hi to just everybody in the room.  He started calling up the defendants one by one with their lawyer.  These defendants looked so stressed out walking up there and all were walking away like
they had won the lottery and had such a sense of relief.  This prosecutor was giving them their last chance to plead guilty and get a deal before their case  went before the judge.  Every defendant who walked up and took the deal.

Watching this, I couldn’t help but chuckle.  All this felt way to familiar. As a start up founder, we do the same things. We’re pitching VC’s with our companies, our lives,  on the line.  If you’re like most start ups founders, you know you need the investment to stay alive and keep the lights on - and guess what- so do the VC’s. Just like the prosecutor, any deal the VC proposes (if you’re lucky enough to get one), you’re probably going to take it. Everyone always tell you to get some traction and hit some milestones before you take in your first institutional or seed money, and there’s a reason for that.  Otherwise you’re lacking leverage, and that deal is going to favor the investor.  Most of us are not in the position of foursquare and have 4 VC’s fighting over the chance to be our lead investor.

The take away for the founder - hope is not lost, you’re not fighting a battle that you at least can’t make a little more fair.  You need to get prepared, and learn how to negotiate.  VC’s see more deals in a month than you’ll probably see in your career; they’re going to be better at it, just like the prosecutor was crushing the defendants.  Negotiating is more a science than an art, get educated on it. If you don’t know what your BATNA is- learn fast.  As for the leverage - that’s a tough one to gain the upper hand in, most of us don’t have foursquare traffic or a major past success. But unlike the defendants in the courtroom - we can negotiate with more than one person.