Negotiating: Drawing A Hard Line or Building A Negotiating Cushion?

I believe that negotiating is more of an art than a science. There are certainly strategies and skills that one can develop that make for better outcomes.

But the art comes into play in figuring out what the person or people on the other side are optimizing for and adopting a strategy that reflects that.

I have found that a single style and strategy rarely works well for every situation.

Let’s take the important question of whether you should make a “take it or leave it” offer and then draw a hard line on that offer or whether you should make an offer that has a fair bit of negotiating cushion in it.

Some people like to negotiate and expect to negotiate. If you make a hard line offer and refuse to negotiate with them, they will be frustrated with you and may seek out other offers. Or if they do end up transacting with you, they will feel burned by the negotiating process and you will be starting off the relationship on the wrong foot

If you make an offer that has a lot of room for negotiating, they may actually enjoy the experience and come away feeling like they got a good deal from you.

I like to shake hands at the end of a negotiation with both parties pleased with where they ended up. That is particularly important when you are entering a long term relationship like a venture capital investment.

It is also critical to know what your “must haves” are going into a negotiation and what you can give on.

Another form of negotiating art is how you reveal your must haves and where you are flexible. I have found that it is not helpful to a negotiation to lay all of that out at the start. There is a lot of value in a discovery process. It is a bit like dating. Each side reveals a bit about themselves to the other and that is also very helpful at the start of what might be a long relationship.

All that said, there are times when drawing a hard line is appropriate. If the other side has all of the leverage then it is often best to make your best offer and say take it or leave it. If, for example, the other side has used a process to drive price discovery and possibly discovery around other key terms and has multiple offers, you are not going to win the deal with the low ball offer with negotiating room. You have to give it your best shot and then walk if you can’t win on that basis.

Like most art, it takes some time to learn all of this. You can take a class or a workshop on negotiating tactics and learn the fundamentals. I would strongly recommend that for young folks just getting started in business.

But when it comes to learning how to size up the other party, well that takes time. You have to mess up some negotiations, lose some deals, and possibly win some on terms you later regret.

It is that last bit, living with the terms you negotiate, where the greatest learnings come. I have found that a very powerful argument in a difficult negotiation is when you say “I did that once, I deeply regret it, and I’m never doing it again.”

Feature Friday: Plan A Trip

I don’t really use Waze that much. My trips are typically a combo of walking, biking, subways, and driving and Google Maps does a great job of offering all of those options. Waze is made for driving. So I am more of a Google Maps user than a Waze user.

But Waze has one feature that I am increasingly addicted to: the “plan a trip” later feature.

I am going to Brooklyn this morning for a Board Meeting and then I need to be in my office later. So I pulled out my phone, launched Waze, and figured out when I need to leave by (if I am going by car). 

It looks like this:

Given that Google (which owns Waze) has this data, I would love to see Google add this feature to Maps and apply it to subway trips as well.

I would also like Google to add this data to scheduling a meeting in Google Calendar.

Imagine if this feature was available in Resy and Open Table, when you are deciding when to book a table. Imagine if this feature was available any time that you are selecting a time for something and need to travel to it.

We are living in a time when our phones and the services we use know so much about us and the world around us. That is problematic and getting more so. But it is also true that can offer magical experiences that makes our lives so much better. This plan a trip feature and other places it can be applied is an example of the latter.

Down Time

Yesterday I upgraded to a higher tier of hosting service from my hosting provider (Bluehost). AVC is now running on a “virtual private server” vs a “shared server” in the past.

That upgrade was processed in the middle of the night last night and after it completed, AVC went down.

Anyone who tried to access AVC in the last six hours was served this error message:

Account Suspended

Which is mildly embarrassing, as it appeared as though I have not been paying my bills 🙂

The issue has been corrected and AVC is working properly again. We may have also fixed the nasty “error establishing a database connection” issue that has plagued AVC for years and has been particularly bad in the last few days. That was one of several reasons I did the upgrade.

The particular reason AVC was not reachable for the last six hours is that my new server has a new IP address and I needed to change that in my Cloudflare account. 

It is little things like that which cause many of the problems that happen in tech. I changed the IP addresses at Cloudflare and AVC was back up and running immediately.

Oh well.

Sorry about the downtime. And here’s to hoping that AVC is more reliable for all of you now. 

Pixel Slate

My Chromebook journey has led me to the Pixel Slate.

As I wrote here a few months ago, I have wanted to move to a Chromebook for a while and I finally decided to do it.

I started with the Pixelbook, and I have been using it for about three months as my only machine at work. I wrote a bit about what I like about it and what I don’t like about it.

The lack of a biometric login (face or finger recognition) is a real limitation for me with the PixelBook because you have to use your Google login to unlock the device and I’ve got a very strong password on my Google account.

So when the Pixel Slate came out and offered fingerprint login, I bought one. I got it this week and have set it up and started to use it at work.

It’s a really interesting device. I bought it as a Pixelbook replacement as it has a keyboard that turns it into a laptop (sort of). It works a lot like the Microsoft Surface in that regard, although I have never used a Surface so I can’t really compare them.

But the thing that really kind of turned me upside down on the Slate is when I started installing Android apps on it. Once I had the native Gmail, Calendar, and other Android apps on it, the Slate started to feel like a massive phone to me.

So now I am really trying to understand this device and how best to use it.

I am intrigued by the hybrid nature of it, part laptop, part tablet, part phone.

I may very well start taking it with me when I travel, instead of my MacBook Air. 

In any case, I am now in full discovery mode with this device. And very excited to see all that it can do for me.

The one thing that took me some time to figure out is the biometric login. If you login to the device with your work Google login, the fingerprint login may not be available to you (that’s what happened to me).

With the help of my colleague Nick, I figured out that I could install the device with my personal Google login, then add my work Google account to it, and then I was able to use the fingerprint login.

I don’t really understand why Google deprecates the fingerprint login for work accounts as they allow that on the Pixel phone. 

But in any case, I got all of this working and I am now going to see how far this Pixel Slate can go with me. I am pretty optimistic that I am really going to like it.

When Markets Overcorrect

When capital markets change direction, to the upside or to the downside, they often go too far before finding the right balance. When they overshoot to the downside, you can find some real values.

Back in the financial crisis of 2008, I was blogging about that as it related to the big tech stocks (Apple, Amazon, Google). The market hated everything and you could buy the big three tech franchises at crazy low prices as it related to their fundamentals (revenues, profits, cash flow, etc). And so I did and a lot of other people did too. And when the market came back in 2009 and beyond, those who bought at those bargain prices were rewarded.

So, it may be time to start thinking this way in crypto land. The reason I say “may” instead of “is” has to do with the fact that really bad bear markets take a while to find their footing and start moving up again. I worry that it will take crypto a while before it can make a move upward again. I wrote about that in this post a few weeks ago.

But nevertheless, I think it is time to at least start looking for fundamental value in crypto land. Ethereum is trading below $10bn. There are some traditional businesses in the crypto sector that are valued at almost that level. And if you believe in the fat protocols thesis, as I do, that gets my attention.

But there are more rigorous ways to think about fundamental value in crypto and one of the best known fundamental value thinkers in crypto is Chris Burniske, a partner in Placeholder, a crypto venture firm that USV is an investor in and I am an investor in too.

Chris posted a bunch of charts and analysis yesterday comparing Bitcoin and Ethereum to a bunch of measures of the fundamental value of their networks.

This chart from that post is the most telling in my view:

The green line is the use of gas to pay for smart contract execution on the Ethereum network. The blue line is the market cap of Ethereum. The growing gap between the green and blue lines represents, to me, the sign of market overshooting itself.

There remain some important fundamental questions about Ethereum so it is not like Apple, Google, and Amazon back in 2008. There is still existential risk in Ethereum. It could fail as a protocol and go to zero. So there are many reasons not to go all in on Ethereum right now.

But if you view Ethereum as a call option on the possibility that it will retain its role as the leading decentralized smart contract execution platform, then I think it is starting to look pretty compelling. And analysis like the work that Chris is doing is really helpful in determining things like that.

Leadership and Self Care

I saw this tweetstorm by Jack Dorsey on Saturday evening and thought “Good, Jack is taking care of himself.”

I guess I was the only one who reacted that way given the amount of abuse and vitriol that has been thrown at him on and off Twitter for that tweetstorm.

I understand the frustration that users feel about the things that don’t work right on Twitter, particularly the abuse and hate and the other unpleasant stuff that the Twitter platform attracts, including our horrible President and his nonsense.

I also understand that the country Jack visited and made a number of positive comments about, including suggesting that others visit there, is a place where the government and military has done all sorts of bad things, including genocide.

Certainly the comments that Jack’s tweetstorm was “tone deaf” are accurate.

But I would like to take the other side of the argument here and make a few important points.

Say what you want about Jack Dorsey, he came up with the ideas for two hugely impactful products that I use every day and many others do too. Those products are Twitter and Square.

Not only did he come up with the ideas for those products, he has breathed life into them with his work and his passion and they are two of the best products brought to market by the tech sector in the last decade.

Jack is not a conventional CEO. He does “run” two companies. But he has very strong teams who operate both companies underneath his leadership.

And since he came back to Twitter full time in the summer of 2015, Twitter has slowly but surely addressed much of what was ailing it. The stock has doubled in the last 18 months and user growth has stabilized. And, most importantly, the company is addressing many of the most troubling aspects of the service, certainly not as quickly as its critics would like, but the service is undeniably dealing with the abuse issues more seriously than it has in the past.

Square is a company that Jack has run since day one. And as Jack tweeted out the other day, the Square cash app is doing great.

And here is Square’s stock price since going public:

Even with the recent pullback, Square is up 5x since its IPO in late 2015.

So, it’s not like Jack hasn’t been doing his job. He is leading not one, but two companies, and from the outside, I would argue that he is doing a pretty solid job at that.

I am not on the inside at either Twitter or Square, so I don’t really know how things are going at these companies, but from where I sit, I would say he’s doing well.

So, with all of that backdrop, I want to make a point about the toll leadership takes on someone and the need for self care, particularly in high stress jobs like running public companies.

Leadership is a burden. You are the one everyone looks to for inspiration and direction. The things that land on your desk are the things that nobody else wanted to or could deal with. Leadership is lonely, stressful, and takes a toll on people.

Just take a look at the faces of every President on the day they took the job and the day they left the job. You will see the burden and toll of leadership right there.

And so, it is very important for leaders to take care of themselves. That can take many forms, but here are some things that I recommend to the leaders I work with (in no particular order):

  • Vacations
  • Sabbaticals
  • Eating Healthy
  • Drinking Less
  • Exercise
  • Meditation
  • Coaching
  • Working On Your Marriage
  • Spending Quality Time With Your Family

And yet, for some reason, we criticize our leaders for doing these things. Like taking a vacation, or doing a workout, or going on a meditation retreat is some abandonment of their duties.

I think it is exactly the opposite. It is their duty to take care of themselves. Because if they don’t take care of themselves, they can’t take care of their companies and all the stakeholders who rely on them.

I am glad Jack went on a meditation retreat. I am glad he is taking care of himself. I understand why that tweetstorm was tone deaf, but let’s not get carried away here. Leaders are humans too. Let’s be decent humans to them.

Disclosure: My wife and I own shares in Twitter and I was on Twitter’s board a decade ago.

Thinking Ahead To 2019

In the last week, we have learned that Uber, Lyft, and Slack plan 2019 IPOs. I am sure that a few more highly valued private companies are also planning to go public in 2019.

It is something that I have been expecting and predicting for a few years now. Eventually these companies that have raised a ton of capital in the private markets will choose to go public and generate liquidity for the shareholders who plowed all of that capital into them.

And yet storm clouds are on the horizon for the capital markets in 2019. Rates have risen significantly in the last eighteen months, pulling capital out of the equity markets and into the fixed income markets. There are some leading indicators that suggest a business slowdown is on the horizon, which would be the first one in the US in a decade. And, of course, the situation in DC is getting dicey and that will weigh on markets as well.

Good companies can go public in bad markets so I am not saying that the long delayed IPO plans of juggernauts like Uber will be squashed by a bear market in 2019. 

But what I am saying is that 2019 is shaping up to be a very interesting year for the capital markets that power the startup economy.

There is a big difference between the private markets and the public markets. They do not move in lockstep. For years now, the late stage private markets have been trading at valuations that are well in excess of their public market comps. That is true for a number of reasons. First, private market investors have longer time horizons and are looking for a three to five year return, not an immediate one. Second, private market investors get a liquidation preference which in theory protects them from losses. Finally, deals in the private markets clear in an auction like environment where the highest bidder wins the deal. All of these factors mean that a hot company can raise capital in the private markets at valuations well in excess of where they can raise capital (and trade) in the public markets.

But the public and private markets are connected to each other. If the Nasdaq falls significantly, and it is down roughly 15% from its highs in the late summer/early fall, then it will eventually weigh on the private markets.

And, if Uber, Lyft, and Slack do go public in 2019, where they price and where they trade will impact startup valuations, both late stage, and ultimately early stage too.

These markets, public, late stage private, and early stage private, feed off each other and the participants in one look to the others for supply of deals and liquidity. So while they may appear to be disconnected, and often are, they do ultimately sync up.

And so I’m wondering if 2019 is the year they start to sync up again, after quite some time being out of sync. And if that comes to pass, what it means for our portfolio companies and their financing and liquidity options.

Fortunately for most of our portfolio companies, and most companies in the startup sector, we have had a number of years of very flush capital markets and many companies have strong balance sheets and a lot of staying power. The same is true of most venture capital firms as the past few years have been a great time to raise capital.

So if things slow down in 2019 and I am not predicting they will, but I think they might, the startup sector is in good shape to weather it. But at some level, the startup capital markets are a game of musical chairs and you don’t want to be the one who can’t find the chair when the music stops. 

Video Of The Week: The Shifting Funding Landscape

Our friend and USV Limited Partner Beezer Clarkson hosted a panel at the recent Slush Conference in Helsinki talking about the shifting landscape for startup funding. My partner Rebecca participated on the panel along with several others.

It’s a roughly 30min conversation and covers the big topics in startup finance.

Funding Friday: Signal Problems

One of the most vexing issues facing NYC right now is our transportation mess and at the heart of it is the subway system.

My favorite chronicler of the subway mess is Aaron Gordon and his Signal Problems blog/newsletter.

If you want an example of the quality and clarity of Aaron’s analysis and writing, I would point you all to his post on Amazon HQ2 and the transportation issues it presents.

So what does all of this have to do with Funding Friday? Well, I am glad you asked. 

Aaron is offering regular readers the opportunity to subscribe for $50/year and help support his efforts to shine a bright light on the MTA and all of its issues. 

I think we need more journalism like the kind that Aaron is providing and so I signed up for the $50 today. 

If you are a NYC resident and ride the subways regularly and want to stay on top of what’s going on, I strongly suggest subscribing to Signal Problems and while you are at it, you might consider helping to fund this effort with an annual (or monthly subscription). You can do that here.