How to Negotiate Your Way into a Startup
How to Negotiate Your Way into a Startup
Victoria Pynchon is the founder and chief negotiator at “She Negotiates,” a consulting company that’s helped hundreds of women use the spoke model negotiation strategy to make more money. In today’s conversation, we talked about negotiating your way into a startup. What are the biggest mistakes that people make? How do you build leverage into the negotiation? What should your plan look like? Listen to hear Victoria’s thoughts!
Mark: Welcome to the Negotiations Ninja podcast where we develop and deliver the most engaging negotiation content and training in the world. We host negotiation experts, business people, and entrepreneurs and discuss what works, what doesn't work, and how we can improve our negotiation skills. Hello, Negotiations Ninja listeners. You've got Mark here. Welcome to the show. We have an amazing interview today with the incredible Victoria Pynchon. She is the Founder and Chief Negotiator, I would say, of a company called SHE NEGOTIATES which is a consulting company that has helped hundreds of women use bespoke negotiation strategies to make more money. And in today's conversation, we talk all about the negotiation that comes with getting into startups. If you've been in sort of the corporate world for a while and you're thinking of joining as a senior executive into those startups, sometimes, there are options that are negotiated as part of it. Sometimes, there are share structures and RSUs and all that kind of fun stuff. And in today's discussion, we talk all about that. Highly recommend that you check out Victoria's stuff online. It is amazing. And I recommend that you reach out to her if you're looking for unique advice around negotiation consulting, especially when it comes to negotiating your worth. She knows what she's talking about. Thank you so much. Enjoy. Hello, Victoria. How are you?
Victoria: Hey, Mark.
Mark: I'm super excited to have you on the show. Thank you so much for being here.
Victoria: Thank you. crosstalk.
Mark: Before we get into our conversation today, maybe you could tell the listeners a bit about who you are and what you do.
Victoria: Sure. At heart, I'm a lawyer. So I practiced law for 25 years, and what I did was litigate commercial cases mostly between one corporate entity and another which I considered to be morally neutral, just shifting huge sums of money between entities that can afford it. So after about 25 years, you grow weary. Just gets tedious after a while in mediation which was meant to have me help lawyers settle cases, and I did that for about 10 years. I put up a website on negotiation, a blog, really. You actually had to know HTML which I knew just well enough to blog, and women started contacting me. They were much more interested in learning how to negotiate than the lawyers I was trying to reach because lawyers want to win, and they know they're going to settle, but negotiation's a hard sell. And I've been doing this now. I decided to direct my efforts toward women because I knew that women were not negotiating their compensation. I knew that was part of the reason for the wage gap, and I thought it was a quick line resolving some of the wage gap problems. So that's what I've been doing for a little more than a decade.
Mark: You're doing an incredible job. And I mean, I've looked at some of the stuff that you're doing on SHE NEGOTIATES and the resources that you have there, and they truly are amazing. Lately, it sounds like you've been involved in a lot of negotiations around equity negotiations of people moving from the corporate world into the startup world. How did that all come about?
Victoria: Tech. I think there are really two reasons for that. I think the first reason is that most people going into startups or even into corporate entities that are being traded on the New York Stock Exchange or the NASDAQ, they know that they don't understand equity. They don't know the difference between a restricted stock unit and a stock option. They have no idea how to value the stock that's being offered to them, the equity that's being offered to them in a myriad of forms which, frankly, I learned from consulting more than from reading. And so I think that's the reason why there is such a jump. Also, I'll tell you that during the pandemic, I just think millions, billions of dollars were flowing into startups. I think that the money people were a little freaked out about what the pandemic meant for the stock market because I had many clients who were being blindly recruited from Facebook and Google and Microsoft by startups. So there was a flood of money. So I think that's why I'd say now probably 30% to 40% of my clients are negotiating equity.
Mark: Wow. So given that you've got so many of your clients negotiating equity, what do you see as some of the biggest mistakes that these people are making when they're moving from sort of the corporate giant world into the startup world?
Victoria: Well, they're not doing their due diligence. Almost everyone who goes into a startup, no matter what stage the startup is at, most of those people are taking cuts in compensation in exchange for equity. They're also taking cuts in compensation because at Facebook, they're never going to be COO. They're never going to be CFO. They're certainly never going to be CEO. And so there's an opportunity there for people to move up that they wouldn't otherwise have, and I recognize the importance of that opportunity and that there's a good rational reason to give up early compensation to be given the opportunity to do what they've always wanted to do which is to really run the thing, grow the thing. It's an exciting opportunity, but they don't see the decrease in their salary as an investment in the company. So I try to remind them that what they're actually doing is the same as digging into their bank account or taking out a second mortgage on their house and putting$ 100,000 to$200, 000 a year into this company. And if they're going to do that, usually over a five- year period, that's the kind of typical payout period, one- year cliff. So one year where they get no equity and then the first traunch of equity comes in year two. So I'll divide that total number by five years and say," What you're receiving back is stock that's approximately$ 50, 000 a year. Over five years, that's going to be$ 250, 000 total, and you're taking a$250, 000 cut in compensation in year one." And that is not an unusual cut in cash compensation for anybody who's moving into the C- suite or very close to the C- suite.
Mark: Well, and that's a substantial hit that a lot of people are facing. Now, logically, when I think about this as an outsider looking in, and I don't have any perspective on it, but I would ask the person," Why on God's green earth would you ever make that sort of a decision?"
Victoria: Well, the answers are many. The first answer I've already covered which is this is their opportunity to be in the C- suite. It's also, and I know this from my own history of employment, there's a point at which you are so relieved to be leaving behind the employer you're working for now and the problems that you know exist, that most of the people, by the time they call me, they have left, right? They have at least one foot out the door, and it is disappointing to them when they hear me say," You're going to invest a million dollars in this company over five years. Are you going to get a million dollars back?" And that's just no benefit. Are you going to get 2 million or 5 million or$ 25 million back? I've had people say," Well, this huge corporate entity has invested a hundred million dollars," and I remind them of WeWork and SoftBank. So the negotiation consultation is pretty much like being a lawyer. I am the bad news.
Mark: You're the rain on the parade.
Victoria: I am the cautionary tale, and I'm also the cheerleader because I get why people want to do this. I just want them to do it with their eyes open because they're making such a huge decision. And frankly, anybody who's making$ 400,000 a year, maybe they should be taking a big risk because nobody really needs to make$ 400, 000 a year. So I get it. And for people who are entrepreneurial and they're risk friendly and they see a super opportunity, I cheer that, and I'm the due diligence queen. So those are the huge issues. And then there's how much is it really worth? How can you calculate it? Is there going to be a market for it? What is the runway to acquisition or going public? I am beginning to see advertisements on my social media channels that show workers in business suits dancing in the hallways because they found a market for their stock options before there's a market for them. So there are companies that are popping up in the area to buy these stock options at a discount. I have to admit that I do love capitalism. I'm a leftist capitalist, but I love to see the garden of money grow.
Mark: Well, and the fact that people come up with ideas around this, recognizing that maybe some of these RSUs aren't necessarily worth what people think they're worth, and so they create a secondary market to buy that at a discount. And it's just what an amazing opportunity that these people have created, not only for those people that maybe want to offload some of those things, but also to create additional wealth. Amazing, fantastic. One of the things that you mentioned there which is I think perfect around what you said around due diligence and sort of bringing them into the sort of a zone of reality and what a lot of people don't think about is decision quality and negotiation go hand in glove, right? You can't have a good negotiation without having good decision quality and good due diligence. And so I'd like for us to maybe dive into that because a lot of people think that negotiation is like this," shoot from the hip, I've got a good feeling about," this sort of mentality, right? Good negotiation is very disciplined. It's very strategic. It's got a lot of decision analysis behind it. What kind of decision quality do you take them through or decision analysis do you take people through? Let's just say you meet someone before they've made a decision to move. How would you walk them through that process?
Victoria: Well, I begin with trust-building, frankly. I begin with small talk and open- ended questions. So I begin with taking the opportunity, particularly during the interviewing process, to ask the kinds of questions that are going to reveal the interests of your negotiation partner, so that you can frame what you're going to do for the company as something that the company actually needs. And I think, frankly, that that is the biggest failure in the interviewing process is that the people who are being interviewed are not leading the interview. And I suggest that they lead the interview which does a couple of things. I think that builds goodwill because after interviewing paralegals and secretaries and junior associates and partners for 25 years, I can tell you that most people hate interviewing. It's not a fun process.
Mark: Yeah, no. I mean, you feel like you're getting questioned by the Gestapo a lot of the time, right crosstalk.
Victoria: And you feel like the Gestapo, and it's work. That's all it is. It's work to interview somebody, and I would be happy to have my interviewee lead the conversation. So I encourage them to do that and to ask open- ended questions about what are the opportunities that the business wants to seize in the next year or two? What are the biggest challenges that they are facing in the next year or two, or even immediately, and how does this position the company to seize those opportunities and to meet those challenges, so that when you finally get to the point where you're negotiating and the part of negotiation that is persuasion, that you're able to talk about what they need as opposed to how good you are. They know you're good. They've read your resume. You don't need to keep saying what's on your resume. But if somebody had walked into my office, say, three months before a six- month federal court trial and asked me what I really needed and then told me how they were going to help me do that, I would have fallen to the floor and kissed their feet, right? I mean, that's what I want. When people say," I'm proactive. I'm self- starting," I'm... it's like, yes, you're a professional, or you're a business person. If you don't have those qualities, then I wouldn't have even picked up your resume. So what I really want to hear is what are you going to do for me? What are you going to relieve me of? What are you going to add that I can't do because by the time I'm interviewing senior associates and junior partners, I know what I can't do well. There are numerous things I can't do well. I considered myself a very good lawyer, and there are a lot of things that I cannot do well, and I need a team of people who are going to step up and say," I see that you're not doing X. I'm going to do that." So the negotiation begins as soon as you start asking questions of your negotiation partner about what they need.
Mark: And it builds... what a lot of people don't realize, and I love how you started this off, what a lot of people don't realize is that when you ask these questions and you're giving these answers like," What do you need," and then the answer is given is you're not only finding out what they need so that you can help them meet their needs, but you're also building leverage in the negotiation. And people don't understand that, so maybe let's talk about that for a second because I want people to understand that it's not just about understanding the needs of the organization so that you can show them how you can meet them. But it's about building an arsenal of needs so that you can build leverage in the negotiation. How do you feel about that?
Victoria: I think it's everything. What I do with clients is I prepare a written strategic plan. If I'm not writing, my thought process is disorganized, right? I don't know about everybody else, but I need to put it down on paper. So I write a strategic plan and that strategic plan starts with market value, primarily because most people don't come to me before the interview, right? They're going to have to do this, ascertain inaudible interests during the negotiation process. But I do start with what's your market value, what's the objective data on which you base that market value, what's your bottom line, and what's your wildest dream so that we... I usually bracket wildest dream, bottom line and then let's talk about pre- planned concessions so that you're not caught flat- footed when they say no. And I think my favorite phrase, and I don't know where I picked this up, but I say it all the time now is that the negotiation doesn't begin until someone says no.
Mark: I like that.
Victoria: Because otherwise, you're going to have buyer's remorse and seller's remorse, right? You say," I want 150," and they say," Yes." You got to watch the new Steven Soderbergh movie. I can't remember the name of it. It just dropped yesterday on HBO Max. And it's a caper movie, but the main characters are always looking for the higher level where the extra money is. And it's just brilliant. It's not easy to follow. It's brilliant.
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Mark: And to your point that you made earlier, these people are leaving maybe 400,$500,000- a- year jobs going into these startups situations. They're making these massive concessions without necessarily getting something in return? And that part of the process seems so integral to the entire thing.
Victoria: Which is why one of the steps, of course, in just the money part of the negotiation is can you break it down into as many component parts as possible so that you can trade across issues for something you want more, something of high value to you and low cost to the other party? And I also counsel my clients to save their rationales. Most people talk too much. They don't recognize the value of silence. That should probably be at the top of any discussion, right? I remember walking into a, this is maybe 30 years ago, I remember walking into an apartment I wanted to rent, and the landlord said it's 1, 750 a month. And I thought," Wow, that's really a good price for this place." And I was just kind of quiet because I was contemplating, and she said," And if you pay on time, it's 1, 700." And I thought," Oh yeah."
Mark: Oh yeah, silence.
Victoria: crosstalk the power of silence. Don't talk too much. Don't over- explain. One reason, one great reason, one great trade per concession, and then ask for reciprocity. Dealing primarily with women, I'd say 80% of my clients are women. 20% are men. They call, I think they think SHE NEGOTIATES means me as opposed to them, but although some men write me and say," Do you do men?" And I say," Yeah." I don't say," Yes, I've been doing men for 40 years." I like men. But because most of my clients are women, they want to soft negotiation style.
Victoria: And that's pretty easy for me because I entered the legal profession in the late 70s, and there weren't a lot of women, and there certainly weren't a lot of women trial attorneys. So I learned to use my gender strategically, and I certainly found that underestimating your opponent is the greatest benefit that you could possibly have.
Mark: When people underestimate you, you mean.
Victoria: When people underestimate me, that's a serious mistake.
Mark: Right because it provides you with so much opportunity to now leverage that situation.
Victoria: I'm a pretty soft negotiator. I know that when it comes down to crunch time, you need to be direct and certain about your boundaries. The very first time I ever consulted with a woman was with my best friend, which is, by the way, for anybody listening, if you want to practice, just do it with your best friend. So she was a manager, a senior manager at a big healthcare organization, and she was making, I don't know, 100 or a little less than 100. We did some research. I had her rewrite her job description because she'd been there so long, I knew that what she had been doing was nothing like what she was doing then. And I think I suggested 150 as her wildest dream number, and she was having a hard time even saying anything above 120. So anyway, it was a process, and we went through it and finally, they said she had a face- to- face meeting, and they said," The most we can pay is 120." And I think she put 135 on the table. And she said," I heard myself say,'That's unacceptable.'" It was like," I couldn't believe I was saying,'That's unacceptable,'" and she got 135. A lot of this consulting business is cheerleading. My clients say," How can I build confidence?" And I respond by saying," You're not entitled to be confident unless you have a plan."
Mark: And your plan point is critical here, and it ties into something that you said earlier which I found very interesting. People think about the big numbers, right, where they say," Hey, this is the total compensation that we're negotiating," but they're not breaking it down into their component parts to make more tradable items that they can start with. And I think that for the people listening, if you picked up on one key thing here, it's yes, have a plan, but also start thinking about the goal is not to get X amount of dollars. It's what are the components within that X amount of dollars that become tradable so that you're not conceding on the total amount, and you have more tradable items so that you can leverage more of those things throughout the conversation.
Victoria: Right. I advise my clients that they should marry compensation negotiation with career path, partially because career path is what you're going to do, what you see for your own future. But it's also asking for the benefits that you need in order to grow. So I was a terrible career person. I was in inaudible of people who thought," I'll just keep my head down and keep producing good work, and they'll reward me." So where I'm beginning, for instance, as a lawyer in a law firm today, I'd ask for client contact. I want to go to client meetings. I want to be in court.
Mark: Love that. Now, because of your consulting work and the amount of people that you're seeing who are moving careers, changing careers, my guess is especially now, considering all of the things that are going on, there are going to be a lot of people who listen to this and are going to go," Holy crap, I need to call Victoria." So if people want to reach out to you and find you online and say," Hey, I'm moving. I'm potentially going to a startup, or I'm going to another organization. How should I approach this salary/ position negotiation thing? What should I be considering? What's the strategy that I should take?" How do people reach out to you?
Victoria: This is probably the primary way that people figure out that it would be good to hire me. I started by giving out free 15- minute consultations. I was disappointed because when you give people things free, they don't call. I was-
Mark: The intrinsic value is gone crosstalk.
Victoria: ...so I was waiting for a call, and they didn't come. And my husband said," You should charge." And so I started charging, I think, 25. And then I said," 100 is the new 20." And then I went to 100, and now, I have a$ 200 hour. And during that hour, I do probably what I do best as a lawyer which is to very quickly gather the facts, the water the clients are swimming in. Who are the influencers? What are their strengths? What are their weaknesses? What do they really want to do? What do they know about the company that they're going to? And then I give them actionable advice in that hour. For a lot of people, that's enough which is why I moved it from 100 to 200 about a month ago. Also, the return on investment is ridiculous. I'm talking to people who are making$ 500,000 a year, and I'm charging them$ 200 for my intellectual property. But a lot of them, at that point, they realize when they're talking to me that they need help and that they need a plan. I hate billing by the hour. I spent 25 years dividing my time into tenths and two- tenths. And I'm also a bad timekeeper. So I would have to kind of reinvent my week at the end of the week. I hate keeping track of my time. And so I tend to offer a package. My husband is always telling me I should charge more. And I do what I tell women not to do which is to say," But I'm so happy." I tell women," You can be happy and rich at the same time," but I'm so happy doing this work, and I am semi- retired, and I don't really need more money.
Mark: I heard someone say that to me the other day. They were like," Look, I don't need the money. I'll take it. I'll take the money, but I don't need it."
Victoria: I need to be compensated for the work I do, right? I mean, I need to be compensated at what I think is a fair value. And the return on investment element is something that I don't have a grip on, frankly. But when somebody I'm consulting gets$ 100,000 more than was originally on the table, I would really like 10 of that.
Mark: Absolutely. Absolutely. Fantastic. Listen, you've been so good at sharing your insights today and sharing intel and given your wisdom freely, and I really appreciate that, and I'm sure our listeners really appreciate that as well. My guess is, considering all the career moves that are happening, you're going to get at least one or two phone calls out of this. So thank you so much for being on and thank you for sharing your wisdom.
Victoria: You're welcome. And I'm aging, so I'm not going to do this much longer. It's a limited time. I'm a limited time offer.
Mark: Absolutely. Well, we'll have to do a round two at some point, but thank you so much for being on, Victoria. I appreciate it.
Victoria: Thank you, Mark. It was fun. It was fun.
Mark: Hey, friends, thanks so much for listening to this episode. If you enjoyed it, please share it with friends and colleagues so that they can benefit from it as well. If you find Negotiations Ninja podcast worthy, please go on to iTunes and give us a cool rating with a nice review. We certainly appreciate every single one that we get because it helps us to understand who is listening, how they're listening, and what it is they like. If there's something that you would like me to discuss around negotiation, influence, or persuasion, give me a shout. You know how to reach me on social media, or you can get me on my website which is www. negotiations. ninja.