154 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
to agree on how to share or divide a limited resource, (2) to create some-
thing new that neither party could attain on their own, and (3) to resolve a
problem or dispute between the parties.
Negotiation should be contrasted with mediation, where a neutral third
party evaluates each side’s arguments and attempts to reach a “suitable” or
“fair” agreement between the parties. Negotiation should also be contrasted
with arbitration, which resembles a legal proceeding. In arbitration, both
sides make an argument as to the merits of their case and the arbitrator
alone imposes the outcome.
Closely related to negotiation is bargaining. Bargaining is a type of
negotiation in which the buyer and seller of a good or service dispute the
price or value that will be paid and the exact nature of the transaction, and
eventually come to an agreement.
8.1.1 Negotiation Wheel
When dealing with potential investors, as a founder you have more
power than you think. Remember that like beauty, power is in the eyes
of the beholder. Investors depend on you to come up with the innova-
tions that will turn a prot for them. Without you, all they have is money.
And they must invest that money or lose value as a result of yearly
Figure8.1 depicts the negotiation wheel from a founder’s perspective.
The wheel assumes that this is your rst “ofcial” negotiation with an
established investment consortium such as an Angel group. Notice that
your individual objectives are at the center of the negotiating wheel. These
objectives were the main reason why you undertook the risk of starting a
8.1.2 Negotiation Strategies
“You got to know when to hold ’em and when to fold
’em.” —Kenny Rogers
Negotiation theorists generally recognize two types of strategies: distribu-
tive and integrative (Figure8.2).
3, 4, 5
Three basic kinds of negotiators have been identied by researchers
involved in The Harvard Negotiation Project.
These three types of negotia-
tors are soft bargainers, hard bargainers, and principled bargainers.