Everyone realises that ratings and deals like those on *The Lion's Den* do not reflect the reality of the German start-up scene. Nevertheless, many start-ups focus on the real world when negotiating their first Participation agreement too strongly on the Valuation.
There are numerous other aspects that are at least as important. What should you pay attention to? We give you 5+1 valuable tips!
The 5 most important points for a successful negotiation
1. BE PREPARED
Your counterpart is a professional. You should therefore go into the negotiation well prepared. Know your strengths and weaknesses and be clear about the actual, realistic value of your start-up. A well thought-out, long-term strategy will help you to negotiate confidently and gain a good standing with your negotiating partners.
2. FOCUS ON MORE
A high rating is tempting, but not everything. Other contractual conditions such as Liquidation preferences or dilution protection can be crucial for you as a founder in the long term. Make sure you don't make any unnecessary concessions here.
3 KEEP IT LOW
An excessively high initial valuation can backfire later. It may look good at first, but increases the pressure in the next financing round. A continuous increase in the valuation creates a convincing investment story.
4. GET HELP
An experienced lawyer is essential. Make sure to hire someone with specific experience in startup financing. Ask for references and, if possible, negotiate fixed prices for legal advice.
5. RUN IF YOU CAN
When the VC negotiates unfairly, pull the ripcord. Without trust, no one in your Cap table sit. You will find better investors in the next round at the latest.
In general, don't promise more than you can deliver!
Avoid making exaggerated promises. If it turns out later that you do not have all the rights to the code, for example, or that your data concept is not GDPR-This can worsen or even jeopardise the deal. Honesty and, above all, a realistic assessment definitely pay off here!
Do you have any further questions about the participation agreement or other contractual topics? Then contact us now without obligation here.
Disclaimer: innoWerft does not provide legal advice, is not qualified to do so and is not liable. We cannotir but pass on our experience.