Know what you want – It’s shocking how frequently parties enter into negotiations without a clear understanding of what they each want. If you don’t know what you want, it’s impossible to know what you can give up and what you need to hold onto.
Understand the terms – This is basic, but generally ignored. If you’re signing a document, you need to read it and understand it. If you’re going to use terms in negotiations, make sure you know how to use them. This applies to financing terms (“pre”, “pro-rata”, “control”), employment terms (“vesting”, “cliff”, “at will”), and essentially anything else you say to the other party.
Do not leave anything to ambiguity – Turns out this is one of the hardest things to do, especially in “friendly” negotiations with investors you know or friends you might be hiring. Don’t assume that something you think is implied is agreed upon. Every point that you negotiate should be made explicitly. Which leads to…
Document everything – If you agree to something, confirm it in writing. This can be as simple as an email saying “Thanks for meeting Aaron. As agreed, we’re excited to have you investing 100k in our round at $5mm valuation.” If the other side confirms, great. Do this immediately because if there’s disagreement on what was actually agreed in person, this is how you’ll find out. Importantly, silence doesn’t count as consent.
Just because the other party is your friend… – Doesn’t mean they’re going to give you everything you want, or that you should give them everything they want. This is where mixing business and friendship get tricky, so keep in mind that deals are about business. Negotiating with friends is also where ambiguity is most likely to arise, so be extra cautious.
You don’t get points for being a jackass – There’s a popular misconception that mean people are better negotiators. That’s not true. People who are formidable are good negotiators. They’re tenacious about the important points, and gracious about the things that don’t matter. The key here is to remember that a negotiation tends to be the start of a relationship. You don’t want to start that relationship on a bad foot. In most cases, you’re also operating in a surprisingly small world. You’re going to see the same people again and again, so being on good terms with them is going to be productive.
Your word is your bond – Probably the most important rule there is. If you agree to something, don’t break that agreement. Don’t even let yourself fall into a place where you might break an agreement. If you agreed to something, whether with a handshake or in writing, the negotiating on that point is done. Reneging is the fastest way to destroy your reputation and any trust that you’ve built up. If you find yourself unclear if you agreed to something, refer to point 3. This is not the place to get cute or try to re-interpret after the fact. You can be forgiven being confused (up to a point) but not for breaking an agreement you knowingly made.
via How to create good outcomes when negotiating – Aaron’s Blog.