Five weeks. Six entrepreneurs. One billionaire investor. Oh, and the small matter of £100,000 up for grabs. For a young businessman like me, The Angel was a hell of an opportunity.
To pit my business wits against contemporaries and scoop John Caudwell’s investment, all on national television, was a thrill albeit a nerve-racking one. What I didn?t know then was that greater drama lay ahead, away from the bright lights of the TV studio. The negotiation process between me and John was a learning curve of alpine steepness.
First, my business plan. That document represents my hopes and dreams not to mention, months of hard graft. But the emotional investment shouldn?t get in the way of the brute business facts.
Yes, investors are often as much attracted to an entrepreneur’s personality as the commercial proposition. Indeed, John knew nothing of my company, Market Mavens, when he decided to invest; but that didn’t grant me license to let my heart rule my head. There’s no room for pie-in-the-sky forecasts they?ll all be exposed and your credibility undermined. It was especially true of my experience, given that it wasn?t just John shining the spotlight on my business plan, but his team of financial wizards.
So, banish all ambiguities and guesswork (known as ?liabilities?, come negotiation-time). Be ready to account for every projection and margin. Above all, know your business objectives top to bottom and back to front. You might not be the smartest person in the room, but you can be the best prepared.
For me, the process was the ultimate opportunity to rethink and refine my vision for Market Mavens. The result was a more streamlined, far stronger business plan than the one before it.
If the business plan was a learning curve, the term sheet negotiations that followed were a long, long road.
There are many ways to structure an investment beyond the conventional cash-for-equity swap. Convertible loans, for example, are particularly popular among investors today. But whichever road you and your potential business partner go down, before committing, always ask yourself this: are we “all in it together”” John’s enthusiasm not just for Market Mavens, but for my entrepreneurialism, went a long way to allaying my doubts.
Meanwhile, the age-old stumbling block of valuation kept us busy. You guessed it: there was disparity between John’s valuation of where the business currently stands and my vision for the future of the company and its growth potential.
Don?t get me wrong; despite the bumps in the road, it’s been an invaluable experience nay, endurance to negotiate with John and his team. The process taught me much more about business than I ever learned in a TV studio. Indeed, during the lengthy negotiations that followed filming, I’ve learned more than I did in twelve months studying for my MBA.
So the question follows: why don’t business schools prioritise the investor-investee relationship and term sheet negotiation more than they do?
At Imperial College London, where I studied, there was an assumption among students that investment is a good thing; that while your slice of the pie might be smaller, with the overall size of the pie being bigger, everyone benefits. If only it were that simple.
Yes, investment can power your business to new heights; but only the right investment. If an investor’s offer compels you to relinquish control of key decisions from recruitment and salaries to when and for how much to sell, then we entrepreneurs owe it to ourselves and our businesses to negotiate hard and shop around.
The learning of theory and terminology in a lecture theatre helps, but it only goes so far. MBA students would, I think, benefit greatly from a lengthy and detailed term sheet-style negotiation being a staple of the business school curriculum.
Thankfully, I got all the reassurances I needed from John but only after three months of tough negotiations. At one point, I even walked away from the deal. As you?d expect from a billionaire, John drove a hard bargain; but I fought hard and held my own. And now I’ve got the £100,000 investment to show for it.
Yakub Zolynski is founder and owner of Market Mavens, a recruitment agency for business school graduates.