Entrepreneur Office Hours - Issue #97
TikTok... is... amazing*
A few weeks ago, here in EOH, I mentioned I was going to begin experimenting with TikTok as a creator platform for publishing content that teaches about entrepreneurship. Nearly half a million views later, I’m pleased to report that TikTok is awesome.*
So what’s with the asterisk?
Well, turns out TikTok is, indeed, awesome for creating content and reaching people. However, nobody on there seems particularly interested in learning about entrepreneurship. They are, however, interested in seeing me make a fool of myself along with students. So, if you’re interested in some behind-the-scenes, classroom shenanigans, don’t forget to follow me on TikTok. Maybe if I get enough of you from EOH onto there, I can start creating entrepreneurship content, too.
In the meantime, EOH is still filled with lessons about entrepreneurship, including a conversation with the billionaire founder of Shutterstock and some advice on how to negotiate a term sheet.
Entrepreneurs have lots of jobs, but one job might be more important any other. Just be prepared: It’s something most entrepreneurs hate dealing with…
Shutterstock may not be the first company that comes to mind when most people think of successful, billion dollar tech companies, but it actually pioneered the concept of online, subscription-based, creator marketplaces. You can hear the story of how Jon Oringer built it on the new episode of Web Masters.
Listen now on:
…or search “Web Masters” wherever you listen to your favorite podcasts.
FROM THE ARCHIVES…
This Two-Letter Word Will Destroy Your Company
Anytime you find yourself saying this two-letter word, warning sirens should be going off in your head warning you that you’re overlooking something important.
Office Hours Q&A
After months of fundraising, we finally got a term sheet from an investor. We’re very excited about it, and we think it validates all the time and effort we’ve been putting into our idea. But the terms aren’t what we think they should be.
What I’m wondering is: How much room do we have to negotiate with investors who give us a term sheet?
We definitely want to raise capital, and we’re worried about scaring away the investor, but we also are worried about creating problems for ourselves in the future if we decide we need to raise additional rounds of capital.
Thanks you for your help,
In my experience, term sheets are a starting point, not an ending point. In fact, even if you get terms you like, you should still try to negotiate them in order to get better terms.
Because that’s what any good investor would want you to do! At least, that’s what I’d want any company I invest in to do.
Entrepreneurs should always be trying to get the best deal possible for their companies because that’s their jobs. Seriously… a founder’s job is to do what’s best for your company. Any good investor should know this, and, as a result, shouldn’t fault you for trying to negotiate. Heck, if the investor does have a problem with you trying to get the best deal possible for your company, then you should probably run away from that investor as quickly as possible.
All this is to say if you’re not happy with the terms, you’re within your rights to make a counter offer. Assuming the investor is genuinely interested in investing – and the investor would have to be in order to offer terms – you’re not going to scare away an investor by proposing different terms so long as you’re realistic and reasonable with what you propose. Of course, if you really want the investment, don’t get too extreme with your counter offer, because that could scare away an investor. Other than that, go to town! Negotiate away!
When you do negotiate, don’t sell yourself short. If the investor balks at a counter offer you believe is fair, then you should probably turn down the deal. You shouldn’t take less than you believe your worth.
The real trick with term negotiations is what happens after you make your counter offer. This is when you’ll be able to tell how interested the investor is. If the investor takes your counter, then you’ve got the leverage. But, if the investor continues pushing back, it means you might be asking for a bitt too much (in the investor’s opinion), you’re likely to lose the deal if you don’t give up some of your demands. At that point you have to decide what you really want, what you genuinely believe you’re worth, and what you’re really willing to give up.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!