3 Questions: Entrepreneurial Negotiation

MIT builds students’ technical skills while also creating an environment that encourages taking risks and innovating. Entrepreneurship, across a diverse set of fields, is a natural result of this ecosystem. MIT alumni entrepreneurs have created millions of jobs and generate annual revenues of nearly $2 trillion, a figure larger than the gross domestic product of the world’s 10th-largest economy. Yet, a great majority of successful entrepreneurial efforts are built upon earlier failed experiences. MIT’s Professor Lawrence Susskind and Samuel Dinnar wanted to know, could entrepreneurial ventures be examined and codified to create a guide to increase new innovators’ chances of success?

Susskind, Ford Professor of Urban and Environmental Planning and co-founder of the Program on Negotiation at Harvard Law School, and Dinnar, a strategic negotiation advisor and a mediator, scrutinized the literature and conducted interviews with successful entrepreneurs to demonstrate common negotiation errors entrepreneurs make, and provide tips on how to navigate these mistakes, to produce their new book, Entrepreneurial Negotiation: Understanding and Managing the Relationships that Determine Your Entrepreneurial Success.

What is the most important factor to support entrepreneurial success?

Dinnar: We knew that the great majority of start-up businesses fail. A great idea, a cool product, an innovative technology or a polished “pitch” are just not enough to ensure success. By conducting interviews with successful entrepreneurs, who had previously experienced failures, combined with our experience in the field of negotiation, we discovered that the single biggest threat to entrepreneurial success is an inability to effectively manage the relationship dynamics that arise at key interactions in the evolution of a start-up.

Susskind: We identified and categorized the eight worst mistakes that entrepreneurs make over the life of a start-up from seed to exit. To mention one of those codified mistakes, let’s start with the fact that many entrepreneurs enter most interactions with a competitive mindset. They feel the need to win, and win now. Whether they negotiate with this mindset or not, we have found that many entrepreneurs become focused on besting their counterpart or their peer group, even if that leaves them with a poor outcome.

Dinnar: Another common mistake is that entrepreneurs rely too heavily on their intuition. Entrepreneurial efforts involve many moving parts and multiple factors must be considered simultaneously. This complexity can create surprises. Just like improvisational theater actors, entrepreneurs have to be ready to go off script and respond in the moment. Many rely on their instincts in these situations, but what worked before may not work a second time. When negotiations don’t go as expected, many entrepreneurs blame whatever difficulties they are having on the other side. To make matters worse, these same problems can keep occurring because many entrepreneurs do not learn from their mistakes.

Entrepreneurial Negotiations takes advantage of the large numbers of biotech and tech entrepreneurs in the Cambridge area, could you describe the research?

Dinnar: The local entrepreneurial ecosystem has plenty of experienced entrepreneurs, angel investors, venture capitalists and other professionals who promote startups and help them thrive. We interviewed a select group of these individuals who have a reputation for being self-reflective and who were willing to share their experiences. We combed through the published literature looking for evidence that helps to explain their long-term success. We found that most of the entrepreneurs who succeed have made mistakes and learned from them. Many entrepreneurs fail at key interactions because they have not prepared to handle the negotiation challenges that almost always arise. They don’t pay sufficient attention to the non-monetary interests of the people with whom they have to interact.

Susskind: Entrepreneurs transform ideas into new products or services for which there is a need and a market. They must convince others to share their vision, and, even in the face of skepticism, assemble supporters to move their ideas forward. These require a different set of soft skills that do not necessarily come naturally to many gifted technologists. Our research and experience show that these skills can be learned if treated as a critical entrepreneurship skill. We demonstrate in the book that entrepreneurs who pay close attention to the various relationships around them, while simultaneously keeping a clear map or plan in mind, achieve the best results.

A particularly timely issue that we could not ignore was the gender and minority gap that exists in this field, which is very much male-dominated—as is the venture capital side (those who make the investment decisions). In our book, we address the issue of gender bias along with cultural challenges in entrepreneurship and entrepreneurial negotiation. We summarize a lot of the troubling research that shows how men and women entrepreneurs are asked different questions by potential investors, and are treated differently. Then, we give practical advice about how women and minority entrepreneurs can be ready for meetings and navigate issues of bias.

How will this book contribute to MIT’s entrepreneurial ecosystem? And what is unique about this book?

Dinnar: Our book is the required text for both the undergraduate and graduate versions of a six-week, blended course, Entrepreneurial Negotiation that Professor Susskind offers each spring and fall at MIT (11.159/11.259). The course is the first course available simultaneously on MITx and to students at MIT, with all participants – regardless of their institutional affiliation - interacting with each other. MIT students take the course on-line for part of each week (along with their peers from around the world who have signed up under MITx – Entrepreneurial Negotiation: The MIT Way). The MIT students also meet in-person each week with Professor Susskind to talk about their reactions to the face-to-face negotiations they did that week.

Susskind: It turns out, many of the students who participate in the class are involved in personal entrepreneurial projects of their own, often through campus accelerators like the School of Architecture and Planning’s (SAP) DesignX. The course and book give them a safe space to develop and practice these critical skills, while collaborating with their peers to refine their entrepreneurial ideas. In addition, both the book and the course feature video interviews with Boston-area entrepreneurs and venture capitalists talking about the mistakes they have made on their way to success. These individuals are an important element in the local entrepreneurial ecosystem and students are able to make personal contact with the professionals featured in the class videos.