Question & Answer
How Do Founders Negotiate Better Deal Terms?
Raising capital is only half the battle. The real challenge? Structuring a deal that fuels growth without sacrificing control, equity, or long-term upside. Too many founders walk into negotiations focused solely on valuation, missing the critical terms that determine who truly benefits as the company scales.
Investors structure deals to maximize their returns and minimize risk. Founders need to do the same. A well-negotiated deal doesn’t just secure funding – it preserves optionality, protects ownership, and aligns incentives for future success.
Control the Narrative – Set the Terms First
The biggest mistake founders make? Letting investors dictate the terms. The party that sets the initial structure controls the negotiation. Walk into a discussion with a well-prepared term sheet that outlines key terms before investors present their own.
Key areas to define upfront:
- Equity vs. Debt – Are you willing to consider convertible notes or venture debt to avoid dilution?
- Board Control – How many board seats are you offering, and who controls decision-making?
- Liquidation Preferences – Will investors get a guaranteed return before common shareholders see any upside?
- Anti-Dilution Protection – Are you agreeing to full ratchet terms, or negotiating a more balanced approach?
Investors respect founders who come in prepared. Instead of reacting to investor terms, founders should shape the conversation from the start.
Leverage Multiple Investors to Create Competition
Nothing weakens a founder’s negotiating power more than a lack of options. If investors know they’re the only ones at the table, they will dictate terms. The moment multiple investors are engaged, the dynamics shift.
Key strategies to build leverage:
- Engage multiple investors in discussions before finalizing any deal.
- Time meetings strategically to create urgency and competitive tension.
- Use term sheets from one investor to negotiate better terms with another.
Investors know that competition drives better deals. Founders who create demand for their company secure better valuations, stronger protections, and more favorable governance terms.
Negotiate More Than Just Valuation
Valuation is important, but it’s only one piece of the deal. A high valuation with restrictive terms can be worse than a lower valuation with founder-friendly conditions.
Areas where founders should focus:
- Liquidation Preferences – Avoid terms where investors get paid multiple times before founders see an exit.
- Board Composition – Maintain enough control to prevent investors from forcing unwanted decisions.
- Vesting Schedules – Ensure founder equity is structured fairly, preventing unnecessary dilution.
- Protective Provisions – Negotiate veto rights to maintain influence over critical decisions.
Investors may push for aggressive terms. Founders who focus on more than just valuation ensure that long-term incentives remain in their favor.
Understand the Investor’s Perspective
Investors aren’t just looking for upside – they’re managing risk. Founders who understand investor concerns can proactively structure deals that provide confidence without unnecessary concessions.
Common investor concerns:
- They want a path to liquidity – founders should outline clear exit strategies.
- They want downside protection – structured equity or liquidation preferences may be negotiable.
- They want governance influence – founders should offer reasonable oversight without giving up full control.
By addressing investor concerns proactively, founders can negotiate from a position of strength while keeping critical protections in place.
Founders who negotiate well don’t just get better deals – they set their companies up for long-term success. Strong negotiation isn’t about resisting every investor request. It’s about structuring a deal where both sides win without sacrificing control, excessive dilution, or future flexibility.
In Deal Structuring, I break down negotiation tactics that separate great deals from costly mistakes. The best founders don’t just secure funding – they secure terms that keep them in control as their company scales.
Deal Structuring
Buy the book today and dive into practical techniques that empower you to get started immediately, navigating transactions efficiently and maximizing your success in minimizing cash requirements.
In this book, you will:
- Be introduced to the fundamentals of deal structuring
- Learn 19 proven deal models for structuring deals
- Discover 39 key elements of deal nuances
- Access 32 actionable clauses for your term sheets
- Explore 9 specific deal structures
- Receive 257 pages of invaluable insights
- Gain the distilled expertise of 20 years