The Arguments Good Leaders Intentionally Lose, How to Deal with Exploding Term Sheets - Tactician: #0088

"Ever notice how leaders will sometimes intentionally lose an argument? 'Okay, we can try communicating solely through interpretive dance.' They're not defeated; they're just curious how you'll explain quarterly profits through the medium of dance."

29/03/24

The Arguments Good Leaders Intentionally Lose

Why Read:

• Learn effective leadership techniques for balancing consensus with authority, fostering team engagement, and upholding core values.

Author:

• Admired Leadership, a development program focused on leadership behaviors

Link: 

• “When to Accept Differences in Views and When to Stand Your Ground”

Key Concepts and Tactics:

• The Value of Conceding in Arguments:

  • Point: Leaders should occasionally lose arguments and allow the team to influence decisions to foster engagement and ownership.

  • "Good leaders make it a point to occasionally lose arguments, to be outvoted by the team, and to concede to the wisdom of others whenever they can. They know that getting their way on everything is a surefire way to create a passive team of disengaged followers."

• Empowering Team Expertise:

  • Point: Acknowledge and defer to the subject-matter expertise within the team to build trust and respect.

  • "Leaders who 'get it' defer to the subject-matter expertise of those team members who are true experts on the issues at hand."

• Choosing Battles Wisely:

  • Point: Distinguish between decisions where consensus is beneficial and those where the leader's vision must prevail.

  • "Good leaders also look for opportunities that allow team members to have their way when it comes to solutions and tactics to address small problems. They live with differences in opinion that aren’t worth fighting over."

• Upholding Core Values and Vision:

  • Point: Firmly uphold the organization's core values, vision, and mission, ensuring they are not compromised by consensus.

  • "But good leaders stand their ground when it comes to the vision, mission, and values of the organization or team. Deferring to others when it involves the core values and guiding principles of the team doesn’t create buy-in and goodwill."

• Leadership and Decision-Making:

  • Point: Recognize the unique responsibility of leadership in making decisions that shape the organization's direction and principles.

  • "There are some decisions that only the leader can make. Leaders who mistakenly allow the team to have an undue influence over the vision and values of the organization relinquish their role as the leader."

• Balancing Influence and Authority:

  • Point: Understand the balance between welcoming input and maintaining authority over essential organizational elements.

  • "Sometimes, winning the argument is how to lose the team. But the vision, mission, and values of the team are never up for grabs."

How to Deal with Exploding Term Sheets

• Why Read:

  • Master navigating exploding term sheets, strategically use them in negotiations, and make informed decisions without compromising your company's future:

• Author:

  • Rob Moffat, Partner at Balderton Capital

• Link: 

  • “Founders, here's how to deal with exploding term sheets”

• Key Concepts and Tactics:

  • Understanding the Nature of Exploding Term Sheets:

    • Point: Recognize that exploding term sheets are a tactic, not an ultimatum.

    • "It is obvious why VCs issue these “exploding” term sheets. They are worried that given more time you will either find another VC you would prefer to work with, or a higher offer."

  • Leveraging the Term Sheet in Negotiations:

    • Point: Use the term sheet as a tool to expedite responses from other potential investors.

    • "Once you have a good term sheet from a good investor you can let other potential investors know. Not who the firm is or the valuation, but you can tell them that you have a good offer and they need to hurry up and reach a conclusion."

  • Considering the Timeframe for Decision-Making:

    • Point: Take the necessary time to make an informed decision, recognizing the long-term impact of your choice.

    • "Obviously, no one loves fundraising and you want to get back to running the business. But taking an extra week or two to make the right decision on your long-term funding partner is a decent use of your time."

  • Understanding the Non-Binding Nature of Term Sheets:

    • Point: Recognize that term sheets are not legally binding and do not guarantee investment.

    • "Term sheets are a moral and reputational commitment but they are not legally binding. So, even if you do sign up before the deadline, you are not rewarded with 100% certainty of outcome."

  • Evaluating and Negotiating Term Sheet Details:

    • Point: Ensure thorough review and understanding of the term sheet's terms beyond just the valuation.

    • "Term sheets are not standard and there are a number of terms beyond price. You want your lawyer and existing investors to have time to review the terms."

  • Handling Negotiations with Integrity and Strategy:

    • Point: Negotiate transparently without pitting VCs against each other in an unprofessional manner.

    • "It is bad form to go around other VCs saying exactly who you have an offer from and at what price. VCs don’t want to participate in an open auction. It is enough to say you have a good offer from a good VC and so need their best offer quickly."

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