strategic consultant to:  

~ serial CEOs & CTOs in software, Internet, technology & digital media
~ experienced consultants in all fields to maximize their practices

A quick thought on some behaviors I have seen from energetic entrepreneurs, particularly in technology, and often those starting their first ventures: they are too excited.

Now, high energy is a great asset in a CEO. And excitement about emerging technology is a plus. Combine high energy and excitement with an over-hyped emerging market space, and one with an undefined or unresolved business model, and the thrill can lead to mistakes.

I’ve lived through this excitement several times. It is a high not to be denied.

The behavior that results from this excitement is a rush to the deal. The market pressures, (especially the first time they are experienced) combined with the energy of the times (and often the energy of youth), creates in a new CEO an eagerness to consummate deals and make new alliances fast. “We must keep pace with the industry” the CEO will say.

Of course, a fast alliance leaves the partners strangers to one another, even if they know each other through the community, common reputation, or industry events. None of this is “knowing.”

Slowing down a bit will help and not lose your edge in the marketplace. Trial periods that precede an actual formal deal will let you know more about your fit with a strategic ally, and if either of you can deliver on your promises to one another. It is a wise courtship period where you have a chance to experiment with your compatibility.

This advice came to me early in my career: “You don’t know anyone until you negotiate with them.” Turns out to be true.

Negotiations are the setting in which your partner’s real nature begins to reveal itself. Your own nature is revealed as well. The pressure of the negotiation and the hard questions that need to be addressed often reveal a side of your colleague that you never saw before… both positive and negative. Perhaps he is calm under pressure and sincerely seeks a win-win balance. Or she gets tense and shrieks when a control issue arises. Or she reveals a long-term vision that does not align with yours at all, when you assumed she wanted the same things you want.

A good negotiation is a peaceful conversation about what each of you wants from the alliance, and should include what each of you wants farther down the road for your own company – wealth creation, an exit, dominant market share, an ongoing family business without an exit, and so on. These long-term visions make a difference in understanding the value of the alliance to each party, and how to satisfy each partner during the alliance.

A good negotiation also reveals the true goals of each party, and can lead to deciding against the alliance. This is a positive outcome as well, as it saves the pain and cost of un-doing the deal or ownership in a commonly-held company later.

So, a bit of patience goes a long way. Many of us like all the details wrapped up in advance of moving forward with an ally or partner. Attorneys especially will advise this. Anything less seems sloppy and fraught with later danger.

I advise my clients to give all deals some time to reveal what is required. In one case, a couple of years ago, I advised that a start-up should be abandoned in favor of much more lucrative opportunities that were available to the CEO. I suggested that she be completely transparent about the market realities that pointed to this, and then let the team get used to letting go of the company, since the team members were minority owners. “Let the team feel the weight of the company over time, under the new market pressures. No need to shock them with any sudden decision. They will come to the same understanding if you are patient.” It turned out to be so.

Another time, I created a series of deal memos with 120 day trial periods. The outline of the ultimate deal was drafted in the deal memo, and signed, but actual ownership and ultimate compensation was deferred until we could all see if this configuration would work in the market, and among the team members. Everyone began on an even playing field, but not with equal ownership or compensation, and with each of their contributions recognized. The rest of the deal was decided upon the performance of each party in the first four months.

So, give some thought to the slow road, in the midst of the pressures of time to market and bad economic conditions. Test yourself and your potential partners, do a little courtship. Then, when you know your team, solidify your alliances.