Mark: Alright, Michelle, here's a number for you: 90%. That's the startup failure rate. We hear about the unicorns, but nine out of ten ventures die. And the reason is rarely the tech or the idea. It's the people, and the deals they make... or break. Michelle: Whoa. I knew it was high, but 90% is brutal. And I always assumed it was because they ran out of money or a competitor beat them to market. You’re saying it’s more about… bad handshakes? Mark: Exactly. It's about the conversations happening in boardrooms, over coffee, on late-night phone calls. Which is why we’re diving into a book that tackles this head-on. It’s called Entrepreneurial Negotiation: Understanding and Managing the Relationships that Determine Your Entrepreneurial Success by Samuel Dinnar and Lawrence Susskind. Michelle: That title is a mouthful, but it sounds surgically precise. Who are these authors? Mark: They're a fascinating duo. Dinnar is a former entrepreneur and an actual jet pilot, so he brings this high-stakes, real-world experience. And Susskind is a legendary negotiation professor from MIT and Harvard. You get this perfect blend of street smarts and deep academic rigor. Michelle: A pilot and a professor. Okay, I'm intrigued. One is used to navigating turbulence at 30,000 feet, the other in a tense boardroom. I can see the overlap. So where do they start? Mark: They start with a story that is basically a startup horror film in three acts. It’s about two co-founders, Fallon and Fernando, and it shows just how quickly a dream can turn into a nightmare.

Michelle: A horror film? I love it. Let's get into the gory details. What happens to Fallon and Fernando? Mark: Well, it starts out as a success story, which is what makes the downfall so tragic. Fallon is the brilliant inventor, Fernando is the business-savvy guy. In the first act, "The Good," they do everything right. They negotiate their co-founder agreement beautifully, discussing equity, roles, and even how they’ll handle disagreements. They build a solid foundation. Michelle: Okay, so they're competent. They're not clueless. That makes the inevitable turn even more interesting. Where does the first crack appear? Mark: The first crack appears in Act Two: "The Bad." They need funding to grow. They approach an angel investor, and this is where the classic entrepreneurial mistakes begin. The angel investor lowballs their valuation. Michelle: Right, the classic investor power play. So what do they do? Mark: They compromise. They meet in the middle on the valuation, which feels like a win, but it’s not. To get the deal done, Fallon, the inventor, accepts some really unfavorable terms, including giving the angel investor veto power over future financing rounds. Michelle: Hold on. Veto power? That sounds like handing someone the keys to your car and then letting them decide if you're ever allowed to get gas again. Why would they agree to that? Mark: Because of what the book calls one of the most common entrepreneurial traps: being overly optimistic and too quick to compromise. They were so focused on the prize—getting the cash in the bank—that they ignored the long-term cost. They thought, "We'll be so successful, this veto power will never matter." They saw the money, not the chains attached to it. Michelle: I can see that. You're so in love with your vision, you assume every step forward is a good one, even if you're stepping into a trap. So they get the money, but they've given up a huge amount of control. What happens next? Mark: Things get worse. Act Three: "The Terrible." A big-name Venture Capitalist, a VC, gets interested. They offer a multimillion-dollar investment. This should be the moment they pop the champagne, right? Michelle: I'm sensing this is the moment the monster jumps out from behind the door. Mark: Precisely. The VC's term sheet is brutal. It requires them to relocate the company, and it includes something called "founder reverse vesting," which basically means if they leave or are fired, they could lose a huge chunk of their own equity. Michelle: That's just… predatory. It feels like the VC is betting on them to fail so they can take over. Mark: It’s an aggressive tactic, and it splits the founders. Fallon wants to fight it, but Fernando is terrified of running out of money. The tension that was simmering between them just explodes. Their communication, which was so good at the start, completely breaks down. Michelle: And the angel investor with the veto power? What are they doing while all this is happening? Mark: The angel suggests they just fire people to save money! The whole thing becomes a toxic mess. To make it worse, their star developer, hearing about the instability, demands a huge raise. Fallon feels betrayed and fires him on the spot. Fernando is furious. They start yelling at each other in meetings. Productivity grinds to a halt. Michelle: Oh, this is painful. It's a total meltdown. It's not one thing, it's everything at once. Mark: It's a death spiral. They make one last, desperate call to the VC, who, seeing the chaos, says, "No thanks." The startup runs out of cash. The company that started with so much promise is dead. And the co-founders, who were once partners, are now bitter enemies. Michelle: Wow. That is a horror story. And it’s so chilling because it feels so plausible. You can see each individual decision making a tiny bit of sense in the moment, out of desperation or optimism, but together they create a catastrophe. Mark: Exactly. The authors use this story to illustrate what they call the "Entrepreneurial Galaxy"—this complex web of relationships with investors, employees, partners, and customers. Fallon and Fernando failed because they couldn't negotiate their way through that galaxy. They crashed on every single planet.

Michelle: Okay, that was bleak. I feel like I just watched a documentary about a plane crash. Please tell me there's some hope. Is there a way out of that death spiral? Mark: That's the brilliant part of the book. The authors don't just leave us in the wreckage. They give us an "Alternative Good Ending." They literally rewind the tape and show us how Fallon and Fernando could have navigated the exact same challenges and come out on top. Michelle: A do-over! I love a good 'sliding doors' moment. So, what’s the first thing they do differently in this version? Mark: It starts with the very first investors. Instead of just taking the money from Fernando's uncle and the angel, they proactively align expectations. They get everything in writing and have frank conversations about control before the cash is wired. They prevent the problem, rather than trying to clean up a mess later. Michelle: That sounds like the book's core framework you mentioned, the "Prevent, Detect, Respond" idea. They're in prevention mode. Mark: Exactly. And when the aggressive VC term sheet arrives, the one that killed them in the first story, they handle it completely differently. Instead of panicking and fighting with each other, they work as a team. Michelle: But what can they do? The VC has all the power, right? They have the money. Mark: This is the key insight. They realize they have more power than they think. Instead of just accepting or rejecting the bad offer, they use it as leverage. They go to other VCs and say, "We have a term sheet from a major firm. Are you interested in competing?" Michelle: Ooh, a power move! Creating a bidding war. I like it. That takes guts, especially when your bank account is dwindling. Mark: It does, but it works. They get multiple offers, which allows them to negotiate much more favorable terms. They don't have to relocate. They get rid of the founder reverse vesting. They maintain control over their own company because they created alternatives for themselves. They didn't just hope for a better deal; they actively created the conditions for one. Michelle: So they didn't just get better at arguing; they got better at strategy. What about the internal team dynamics? The star developer who held them hostage in the first story? Mark: In the good ending, they manage that proactively too. As the company grows, they recognize they're out of their depth on the operational side. So they don't just keep winging it. They negotiate to bring in an experienced Chief Operations Officer, a COO. This person helps them scale professionally, manage the team, and handle personnel issues before they explode. Michelle: That’s so smart. It’s about admitting what you don't know and negotiating to bring that expertise onto your team. It’s not a sign of weakness; it’s a strategic strength. Mark: And the communication is night and day. When disagreements pop up—and they still do—Fallon and Fernando have a process for handling them. They talk constantly. They trust each other. When cash gets low at one point, their investors, seeing a well-managed and united team, agree to a bridge loan to get them through. Michelle: Of course they do! In the first story, the investors ran for the hills because the house was on fire. In this one, they're happy to provide a fire extinguisher because they trust the firefighters. Mark: You've nailed it. The story ends with the company being acquired by a larger firm under fantastic terms. It's a win for everyone. Fallon and Fernando celebrate their success, not as enemies, but as partners who navigated the storm together.

Michelle: That's such a powerful contrast. The exact same people, the same idea, the same market—but two completely different universes based on how they handled their negotiations. So, when you strip it all away, what's the one thing that separates the horror story from the success story? Mark: It's realizing that negotiation isn't a single event, like signing a term sheet. It's the continuous, day-in-day-out process of managing relationships. The book's big idea, which is probably why it won a prestigious Axiom Business Book Award, is that your startup's success isn't determined by your product's code, but by the 'code' of your relationships. Michelle: The code of your relationships. I like that. Are they built on trust, transparency, and creating mutual value, or are they built on quick compromises, hidden resentments, and a win-at-all-costs mentality? Mark: Precisely. The bad ending is what happens when you treat negotiation as a series of transactions you need to win. The good ending is what happens when you treat negotiation as the art of building robust, resilient partnerships that can withstand pressure. Michelle: It reframes negotiation from a battle to an act of co-creation. You're not just dividing a pie; you're baking a bigger, better pie together. Mark: That’s a perfect analogy. And the authors are clear: this is a learnable skill. Dinnar's experience as a pilot is relevant here. Pilots don't just hope they avoid turbulence. They train relentlessly using simulators. They have checklists. They have a plan. Entrepreneurs need to do the same for their negotiations. Michelle: So what's one practical thing our listeners could do tomorrow, whether they're in a startup or just want to get better at this in their own career? Mark: The most practical first step is to just map your own 'Entrepreneurial Galaxy,' even if you're not an entrepreneur. Who are the key players in your professional life? Your boss, your key colleagues, your clients. What do they really want? What are their interests and pressures? Just thinking about that for ten minutes can change how you approach your next important conversation. Michelle: That’s great advice. It’s about moving from a self-centered view to a systems-level view. I'm also really curious what our listeners think. If you're in a startup or have been, what's the toughest negotiation you've ever faced? Was it with a co-founder, an investor, a key hire? Let us know. We'd love to hear the real-world stories. Mark: Absolutely. The lessons from this book feel universal. It’s a powerful reminder that the most important deals we make are the ones that build, or break, our relationships. Michelle: A fantastic and slightly terrifying lesson. Thanks, Mark. Mark: This is Aibrary, signing off.