What do you do if a startup company presents a contract with unfavorable terms in contract negotiation?

I want to make clear that my answer is from the perspective of a public procurement officer. As such, it is also important to identify those items which are non-negotiable in the procurement phase. That having been said, prior to submitting a proposal for services, the vendor has the opportunity to question the seemingly non-negotiable items. By doing so it, if pushes the procurement team to consider whether and on what terms items can be "tweaked" to meet a vendor's needs and thereby ensure equity and fairness in the process, especially for complex services that may entail breaking new ground for a public agency.

Effective issue identification in negotiation is crucial because it ensures that the negotiation process is focused, efficient, and productive. Without clearly identifying and understanding the issues at hand, negotiators may find themselves directionless, akin to "a headless chicken," wasting time and resources on irrelevant matters.

With the negotiations, make sure everything is covered, be a devil's advocate. Think of everything that could go wrong, make a list and take it to the table for your own reference. Think of being hard - but present in a pleasant professional way. Listen to what the vendor has to say. Give them scenarios and evaluate their answers.

Es conveniente siempre tener el contexto operativo en el que se desarrolla la empresa, pues cada compañía es un mundo y sus cláusulas se deben adaptar a esa realidad que enfrentan en la cotidianidad. Lo principal es evaluar cuál es el objeto del contrato y con base a esto, analizar si es necesario modificar o variar la redacción de ciertas cláusulas como lo es: vigencia del contrato, forma de pago, renovación, obligaciones, terminación anticipada, protección de datos, confidencialidad, legislación aplicable, resolución alterna de disputas, notificaciones, entre otras.

Uma abordagem interessante para lidar com contratos desfavoráveis é usar benchmarking. Compare os termos do contrato com os padrões da indústria e outros acordos similares em startups. Essa prática pode fornecer uma base sólida para argumentar melhorias nas condições apresentadas. Além disso, buscar a orientação de um mentor ou advogado experiente pode oferecer insights valiosos e estratégias de negociação eficazes.

In front my opinion, for a start-up, any misdirected clause could have an impact on the transformation of your business. Startups by their very name are embryonic nuclei of ideas, which are molded into projects, then converted into products, and only after validation do they reach the market. This shows the level of maturity in a journey. While the business model does not have enough substance to reach a formal first stage, care must be taken by the parties involved to ensure the secrecy and confidentiality of the technology during its testing period, as well as possible investors.

Understanding the nuances of a contract is paramount before entering negotiations. By meticulously examining each clause, one can pinpoint unfavorable terms such as overly restrictive non-compete clauses, inadequate compensation relative to experience, or inequitable vesting schedules for equity options. This thorough analysis empowers negotiators to advocate effectively for terms aligning with their career goals and financial security, ensuring a mutually beneficial agreement.

Effective identification and a clear understanding of high-risk terms is critical because it will help facilitate more a productive discussion with the other party. The other party may not always understand the impacts of their more onerous Ts&Cs, so educating them on those impacts to your business is vital to a reasonable outcome. It also helps the parties understand each other's business expectations and identify tradeoff opportunities within the terms to help reach a viable agreement.

Every contract will have some terms that are favorable and others that are not. I always collaborate with Legal to establish what the red lines are. The rest can then be negotiated. A start-up will have dynamics and priorities/ concerns that are different from a more established company. It is important to understand and respect what is important to them. For example, being paid quickly may be of great value to them and that could be a "give" from the client's point of view.

In negotiation, setting priorities is essential for achieving successful outcomes. The MIT rule—Must haves, Ideally have, and Trade-offs—provides a structured approach to prioritize issues and objectives. This framework helps negotiators focus on the most critical elements while remaining flexible on less important ones. Must haves are the non-negotiable elements of the deal. Identifying your must-haves ensures that you maintain your core interests and objectives during the negotiation. Ideally haves are the terms and conditions that you strongly prefer but are not absolutely essential. These elements add value to the agreement and can improve the overall outcome. Trade-offs are the elements you are willing to compromise

Além de definir prioridades, é crucial desenvolver uma estratégia de negociação clara e bem fundamentada. Prepare argumentos sólidos que justifiquem suas demandas, baseando-se em dados de mercado e exemplos concretos. A habilidade de negociar com base em evidências aumenta suas chances de obter melhores condições. Além disso, mantenha a flexibilidade e esteja preparado para oferecer contrapartidas que possam ser atrativas para a startup, criando um cenário de ganha-ganha.

Defining negotiating priorities is crucial when facing unfavorable terms; 1) identify the non-negotiable points, those that are essential to your organization's strategic and operational objectives. Knowing where you can't give in helps you stay focused on negotiations; 2) evaluate unfavorable terms to understand their potential impact and seek alternatives that meet the interests of both parties. Proposing trade-offs or adjustments can turn a negative point into an opportunity for collaboration. 3) Prioritize building a positive, long-term relationship with the other party. Maintaining an open and transparent dialog can facilitate mutual concessions and lead to creative and mutually beneficial solutions.

In contract negotiation with a startup, prioritize terms by assessing their significance to you. Not all terms carry equal weight; identify deal-breakers versus areas for compromise. Know your worth and boundaries. While realism is key due to startup resource constraints, focus on terms vital for your career and personal objectives. This approach ensures balanced negotiation, aligning the contract with your goals and fostering mutual benefit.

Preparation is a cornerstone of successful negotiation, and a detailed preparation sheet is essential for ensuring that you are ready to address every aspect of the negotiation process. This sheet should include each clause under discussion, its corresponding advantages and disadvantages, possible concessions you can offer, and strategies to frame these clauses as common interests.

Para uma negociação eficaz, proponha termos alternativos embasados em dados concretos, como pesquisas de mercado. Isso demonstra preparação e justifica suas demandas. Mantenha-se flexível e aberto a contraofertas, reconhecendo que a negociação é um processo colaborativo.

When faced with unfavorable terms in contract negotiation, proposing alternatives is key. Present specific, justified changes aligned with your priorities. Stay open to counteroffers, fostering a collaborative negotiation. Flexibility ensures mutual benefit, as negotiations are a dynamic, two-way process aimed at achieving optimal terms for both parties.

Proposing alternative terms in contracts for startups balances interests and promotes innovation. Using market data, demonstrate the viability of flexible clauses that meet the dynamism of startups. For example, by suggesting a performance-based payment model and projections that show the financial benefits for both parties. Propose periodic contract reviews to adapt to growth and market changes, ensuring that the contract remains relevant. Scalability clauses that allow for adjustments to obligations as the startup develops. Alternative terms, grounded in data, offer security and encourage collaboration, and interest in a balanced and sustainable way.

Proposing alternative terms in contracts for startups balances interests and promotes innovation. Using market data, demonstrate the viability of flexible clauses that meet the dynamism of startups. For example, by suggesting a performance-based payment model and projections that show the financial benefits for both parties. Propose periodic contract reviews to adapt to growth and market changes, ensuring that the contract remains relevant. Scalability clauses that allow for adjustments to obligations as the startup develops. Alternative terms, grounded in data, offer security and encourage collaboration, and interest in a balanced and sustainable way.

In negotiations, it's imperative to emphasize your strengths and the value you offer to the startup. Showcase your skills, experiences, and any distinctive qualities that set you apart as a valuable addition. If you possess multiple job offers or significant experience in a sought-after sector, leverage this to negotiate favorable terms. Startups rely on talented individuals for growth and might be open to adjusting contract terms to secure top talent. Remember, demonstrating your worth can lead to mutually beneficial outcomes in negotiations.

Para maximizar suas chances, destaque suas habilidades e experiências únicas que agregam valor à startup. Use múltiplas ofertas de emprego ou expertise em áreas de alta demanda como alavancas nas negociações. Isso demonstra seu valor e pode incentivar a startup a ajustar os termos do contrato em seu favor.

You could also use the opportunity to negotiate through giving advice to the startup. If the contract terms of a startup are unfavorable, it might be a showstopper for potential business partners. Highlight to the startup that you consider the terms to be unbalanced, why you consider them to be unfavorable and what your concerns are, and then ask for an explanation of why the terms are as they are. Instead of defending the indefensible, a startup might accept negotiating the terms to find a mutually acceptable solution. And this might even be in the startup’s best interest.

Procure orientação de mentores, advogados ou colegas experientes para obter insights valiosos sobre os termos do contrato. Eles podem ajudar a entender implicações de longo prazo, elaborar contrapropostas e fornecer táticas de negociação, garantindo que você não subestime sua contribuição.

The presence of a lawyer specializing in intellectual property and innovation, along with business mentors, is essential for the success of a startup. These professionals offer critical guidance at every stage of the journey, from idea conception to exit. An IP lawyer ensures the protection of intellectual assets, avoiding litigation and guaranteeing market exclusivity. Business mentors, such as those from the Brazilian Association of Business Mentors (ABMEN in Brazil), provide strategic insights, experience, and valuable networks, helping to overcome challenges and scale the company effectively. Together, they form a solid foundation for innovation and sustainable growth.

Communication is prime most importance thing to keep it going and setting timelines & deadlines do the trick. Never assume one sided as this will create more complications in execution stages.

Uma comunicação clara e eficaz é crucial em negociações. Seja direto e assertivo ao expressar suas preocupações e justificativas, mantendo sempre um tom respeitoso. Ouça atentamente a perspectiva da startup e busque um entendimento mútuo. Manter um comportamento profissional estabelece uma base sólida para a futura relação de trabalho.

Contracts are tough nuts to crack specially when other party involved is very adamant of accepting terms laid out by your organization. I prefer this as a part my negotiations and while negotiating the commercials I send them a draft of contract to read before they walk into negotiations. This saves time and parallelly contract gets finalized too..

In general, it’s much more effective to start with a contract on your own paper in order to gain the advantage. You should have several boilerplate contract templates that contain your desired terms for the main commercial terms of the contract.