Negotiating – Winning Angels

Winning Angels: the seven fundamentals of early-stage investing

Winning Angels: the seven fundamentals of early-stage investing


The section of Negotiating in Winning Angels focuses on the four elements that are commonly negotiated in investment proposals; the price, the structure (terms), how much capital is invested, and what role the investor will play if any (Amis, D., & Stevenson, H. H, pg. 225). To be forthcoming, not all angel investors negotiate proposals, some investors chose to accept the original proposal or pass method. 

The price is negotiated by setting the valuation of the company. This element affects the price conversion of shares and how much they will be worth during the exit point. If the valuation is set incorrectly on the first round of investment it can throw following rounds out of balance and the investor could not make as much of a return.

The structure, or terms, of the proposal, causes the most headaches for investors that negotiate. As covered in the last section of the book reflection, there are many ways to structure a proposal. Many investors try to avoid this element when negotiating the first round of investment because they feel there is more to gain by negotiating the following rounds.

The amount of capital to be invested is as simple as it sounds. The entrepreneur might want more capital than for the business than what is being offered to the investor. Many investors have set amounts that they will invest, but they need to be compensated for the amount invested.

The role, that the investor chooses to play in the business, is a negotiating element for investors that want to have an active part in the business progression. Many silent investors chose not to get involved in roles because it is time-consuming and they don’t want to be an active participant.

As mentioned above not all investors negotiate. Some investors know that the negotiating process can cause a rift between investor and entrepreneur that will sour all future investments and interactions. These investors look at the original proposal and if the proposal is not to their likings, they will politely inform the entrepreneur that the venture has promise, but this investment round will have to pass. There is a type of investor that uses a little bit of negotiating and non-negotiating practices. These investors that are in the middle use a middleman. These investors use attorneys, accountants, or even a different investor to take lead and handle the negotiating.

What does all this mean to the entrepreneur?

This has been the first section that spelled out in the book how this information should be used from an entrepreneur viewpoint. Alternatives and bargaining range (Amis, D., & Stevenson, H. H, pg. 241) mentions that the investor and the entrepreneur should be shopping around and maintain their leverage. The investor wants to invest in hopes of making returns, and the entrepreneur needs the capital to take the business to the next phase of growth; however, neither should feel like this is their only option unless they have shopped and around and know that it is their only choice. Just as investors know that if they beat up the entrepreneur during the negotiations there will be tension, the entrepreneur needs to know that there are other investors out there who will not try to take advantage of them if the proposal is structured correctly.

Source –

Amis, D., & Stevenson, H. H. (2001). Winning angels: the seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

One thought on “Negotiating – Winning Angels

  1. Understanding one’s value in the marketplace is extremely important in the negotiating process. If your valuation is appropriate, it undoubtedly simplifies the negotiation process. Having multiple options for obtaining an investment, in the case of entrepreneurs, or making an investment, in the case of angels, allows for greater leverage as well. Additionally, if an entrepreneur’s valuation and business model are strong, they must not bend to the demands of the first investor who enters into negotiations.


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