Radio Silence

My partner Albert has a great short post up on Radio Silence.

I have found that an important ingredient is to set realistic
expectations about how long it will take you to respond to a new draft
or a set of questions.  Don’t say “we will get back to you tomorrow” if
you already know that your lawyer is traveling and it will take you
three days to get back…. Often the net result of that
are several days of “radio silence.”  During this time the other side
will start to ponder and more likely than not draw all the worst
possible conclusions (“they are stalling”, “they are shopping the
deal”, “they want to recut the deal”).

I’ve often said that a venture investment is like a marriage and the negotiation is like the engagement. So this is important stuff to get right.

#VC & Technology

Comments (Archived):

  1. andyswan

    Not really sure I agree….Seems like to me, radio silence is a great negotiation tool specifically because of the psychological reactions it creates….and the “easy out” of blaming it all on lawyers if it doesn’t work 🙂

    1. fredwilson

      Is that a technique you would use on the future mrs. Andy swan?

      1. andyswan

        I’m already married and no, I didn’t use it on her of course.I disagree with your premise, because in a negotiation….I can always walk away from the deal. There was no way I was letting her go. I was already sold 🙂

      2. just.a.guy

        Your repeated comparison of a business deal to a marriage means one or both of two things:1) you fall in love with your deals, or2) you equate marriage to a business transactionNeither is that flattering. Having raised several rounds of capital myself, and having been on the other side of the table as well, I like to keep in the front of my mind that “until the deal is done and we are on the same side of the table, we aren’t.”This does not mean that I break a lot of glass and have a take no prisoners win-lose attitude. At the same time, it also doesn’t mean that I wistfully whistle in the wind while a VC pants-es me either.

        1. fredwilson

          Of course it’s not a perfect analogy, but it works for me because I don’t want to make an investment in a company unless both sides recognize that we could be partners for a long time and are willing to work together to make the relationship a happy onefred

          1. andyswan

            I think that’s the right approach. So, I agree with “investment = marriage”, but count me out on “negotiation = engagement”. For some reason I just don’t see you telling Gotham Gal that you are very excited to marry her, but first you’d like to see her get “a little more traction” or send her out to meet with a few other guys so that you can determine if they would also like to marry her if you do. :)Most VC’s don’t even realize that what they do during a negotiation is a “negotiation technique”….it’s just the way things are done. I’m sure we’re all playing certain cards automatically without ever realizing just how powerful (and/or annoying!) they are!

          2. jer979

            According to Stephanie Coontz in “Marriage, A History” Fred’s concept of marriage as a business transaction (not saying he is advocating that) is actually much closer to the historical reality of what marriage was supposed to be.The analogy works for me (and yes, you can tell my wife), b/c in the courtship period you are basically saying “here are the rules we will agree to live by, our values, our mutual goals, etc.” And, during marriage, when the wooing is a bit over (I’m still a romantic!), you have to work at it differently, but you are committed to mutual success.Stay strong, Fred! ;-)BTW, the book is pretty good (a bit of a college anthropology read), but reviewed here (with some add’l editorial by me):

  2. stone

    I’ve raised four rounds of funding in my career and never like the process. I tell all VC’s early on that I do not like silly negotiating tactics and find them distasteful especially because we’re supposed to be real partners and should save our “tactics” for the future. Now that I have a major win under my belt my conversations are radically different. It’s my brain and your money — we both need each other and both are critically important. I then lay out the terms that I think are fair for all sides. I then give VC’s a chance to react. If they react favorably (as most have) then we can continue a dialogue. If they react unfavorably then I move on.

  3. hdunn2

    I agree, I think the earlier and clearer the lines of communication are in any relationship, the better the results (whether in private life or business).

  4. DanInCambridge

    Seems like this falls under ‘honesty is the best policy’.but since there is now a distinction, I’m wondering when in the VC business honesty isn’t the best policy…