Chapter 6 - Negotiating the Deal
IN THIS LESSON
Contact the Investor Before Freaking Out
One day, you may look at the edits to a contract that the lawyer for the investor made and then you want to freak out. An investor’s lawyer may add provisions that seriously concern you. You may feel like they are blindsiding you with a prickly provision or trying to take advantage of you or injecting measures that seem excessive to you. When this happens, it’s easy to misinterpret certain legalese and imagine an infinity of negative scenarios that impact your end of the deal. However, you must clear any doubt before you freak out.
Before you lose your mind and cancel the deal completely, it is better for you to reach out directly to the investor and see if they care so much about the provision that bothers you – or not. Although the lawyer has added a certain provision, the investor may not care and may not agree with his own lawyer. Sometimes the investors are totally unaware of certain provisions that were placed on their behalf by their lawyers. This is why you must be clear and raise any concerns with your investor. If a given provision in the contract irritates you, it is possible you can have it removed. Remember that negotiation is expected at this stage, and a significant portion of the negotiation stems from what is written in the proposed contract.
Lawyers tend to think that it’s good for their clients to add certain endgame protections, such as in the case of bankruptcy. The lawyers get caught up in their legalese, trying to prepare for every imaginable possibility. However, the reality is that, in those cases, there is very little and usually nothing left for investors, so those protections aren’t needed.
Simply talk to the investor about the issues. As partners, you are more than likely able to work out a compromise. This is why you need to be committed to negotiating the terms with the investor, not with the lawyer.