TUG OF WAR OR TEAMWORK?: AN INSIGHT TO MULTI-PARTY NEGOTIATION STRATEGY

 

Negotiating a Strategic Business Partnership (The negotiation score sheet and contract) 

Note: values were adjusted on the paper copy*

Scenario: You are part of a three-way negotiation involving a tech startup, an investor, and a corporate partner. Your goal is to reach an agreement that maximizes your individual interests while ensuring the deal is acceptable to all parties. The negotiation covers eight key issues:

1. Equity stake
2. Investment amount
3. Board representation
4. Intellectual property rights
5. Revenue-sharing model
6. Product launch timeline
7. Geographic expansion strategy
8. Exit strategy

Each party has a different valuation for each issue, presented in the form of ‘points’ on the attached position sheets. Your objective is to maximize your points while reaching an agreement within the given time.

If no agreement is reached, this will be indicated in the final contract.

 

Tech Startup's Position Sheet

Issue	Option	Points
Equity Stake	5%	200
	10%	150
	15%	100
	20%	50
Investment Amount	$1M	50
	$2M	100
	$3M	150
	$4M	200
Board Representation	1 seat	50
	2 seats	100
	3 seats	150
	4 seats	200
Intellectual Property Rights	Retain full rights	200
	Shared rights	100
	Full transfer	0
Revenue-Sharing	5%	200
	10%	150
	15%	100
	20%	50
Product Launch	6 months	50
	12 months	100
	18 months	150
	24 months	200
Expansion Strategy	Domestic only	50
	North America	100
	Europe & Asia	150
	Global	200
Exit Strategy	IPO	200
	Acquisition	150
	Buyout	100
	No exit plan	50

 

Investor's Position Sheet

Issue	Option	Points
Equity Stake	5%	50
	10%	100
	15%	150
	20%	200
Investment Amount	$1M	200
	$2M	150
	$3M	100
	$4M	50
Board Representation	1 seat	200
	2 seats	150
	3 seats	100
	4 seats	50
Intellectual Property Rights	Retain full rights	0
	Shared rights	100
	Full transfer	200
Revenue-Sharing	5%	50
	10%	100
	15%	150
	20%	200
Product Launch	6 months	200
	12 months	150
	18 months	100
	24 months	50
Expansion Strategy	Domestic only	50
	North America	100
	Europe & Asia	150
	Global	200
Exit Strategy	IPO	50
	Acquisition	100
	Buyout	150
	No exit plan	200

 

Corporate Partner's Position Sheet

Issue	Option	Points
Equity Stake	5%	100
	10%	150
	15%	200
	20%	50
Investment Amount	$1M	50
	$2M	100
	$3M	150
	$4M	200
Board Representation	1 seat	50
	2 seats	100
	3 seats	150
	4 seats	200
Intellectual Property Rights	Retain full rights	200
	Shared rights	100
	Full transfer	0
Revenue-Sharing	5%	200
	10%	150
	15%	100
	20%	50
Product Launch	6 months	50
	12 months	100
	18 months	150
	24 months	200
Expansion Strategy	Domestic only	200
	North America	150
	Europe & Asia	100
	Global	50
Exit Strategy	IPO	100
	Acquisition	200
	Buyout	150
	No exit plan	50

Negotiation briefs 

Investor’s Brief: 

You are a successful investor with multiple opportunities on the table. This startup is just one option, and you are only interested if the deal is highly favorable to you. You know startups need funding more than investors need deals, so you will push for maximum equity, a strong revenue share, and board control.

You have no interest in charity—this is about return on investment. Intellectual property rights are key; owning them could mean future profits beyond just this startup. You prefer a fast product launch to start generating returns immediately. If the terms don’t serve your financial interests, walking away is always an option. 

Tech Startup’s Brief: 

You’ve built something innovative, and this deal could take your company to the next level. You need investment and a strategic partner, but you must also protect your company’s future.

Corporate Partner’s Brief: 

Your company sees this startup as a long-term asset, not just a quick investment. You are here to secure a stable and profitable partnership that benefits your business for years to come. Control is key—board representation and influence over major decisions will ensure this deal works in your favor.

Unlike the investor, you don’t need immediate returns. A steady, well-planned product launch and a controlled expansion strategy are more important than rushing into global markets. An eventual acquisition would be ideal, allowing your company to fully integrate the startup’s technology and expertise over time.

 

Transcript 

Audio File https://drive.google.com/file/d/1vhS-EysbIhEuhCOaNtsmLxId34w_g9gO/view

Negotiation breakdown

1. First Offer and Anchoring (0:30 - 1:00)

• Quote: "Who would like to make an offer? 15%."
• Analysis: This is an example of making the first offer, which acts as an anchor in negotiations. Research suggests that first offers significantly influence final agreements, as counteroffers typically shift toward the initial number​.

 

2. Counteroffers and Concessions (1:10 - 2:00)

• Quote: "I'll be honest. 15 is probably too high for me... I can do middleware and I can go 10. But I'm not going five."
• Analysis: The response demonstrates a counteroffer strategy. Effective counteroffers are close to the reservation price of the opposing party​. Additionally, the use of concessions here aligns with the shrinking pairs principle, where each successive concession is smaller than the previous one​.

 

3. Zone of Possible Agreement (ZOPA) (3:00 - 4:00)

• Quote: "3 million for 10%? I would say that probably two million. 2 million, 10%. Three for 15?"
• Analysis: The discussion here is about the ZOPA (Zone of Possible Agreement), which is the range where both parties' reservation prices overlap​. The negotiators are trying to identify this range by adjusting investment and equity percentages.

 

4. Integrative Negotiation (5:00 - 6:30)

• Quote: "Board representation. I guess, is the next one... We'd like to be quite involved."
• Analysis: Instead of solely focusing on financial terms, they introduce board representation, moving beyond a distributive negotiation (where parties argue over a fixed sum) to an integrative negotiation, where multiple issues are considered together​.

 

5. BATNA Consideration (7:00 - 8:00)

• Quote: "I'm definitely not happy to give that. 3 million for 10%? I would say that probably two million."
• Analysis: The speaker is demonstrating knowledge of their BATNA (Best Alternative to a Negotiated Agreement) by refusing offers that do not meet their minimum acceptable terms​. A strong BATNA provides leverage in negotiations.

 

6. Package Deals and Logrolling (9:00 - 10:00)

• Quote: "If we go for four seats on board representation, then we can agree on revenue share."
• Analysis: This is an example of logrolling, where negotiators make trade-offs by prioritizing different issues​. By offering board representation in exchange for revenue share, they increase the likelihood of a mutually beneficial agreement.

 

7. Exit Strategies and Long-Term Planning (11:00 - 12:00)

• Quote: "Should we go public or look at acquisition?"
• Analysis: Discussing an exit strategy is a long-term negotiation approach. This aligns with the principle of expanding the pie, ensuring that both parties consider future gains rather than just immediate benefits

Contract agreement (negotiation exercise)

Tech startup representative: Jack

Investor Representative: Rob

Corporate Partner Representative: Ashley

 

Agreed terms:

Equity stake: Option C

Investment amount: Option C

Board representation: Option D

Intellectual property rights: Option C

Revenue sharing: Option C

Product launch timeline: Option D

Expansion strategy: Option D

Exit strategy: Option C

 

Points earned

Tech startup: 1150

Investor: 1100

Corporate partner: 1250