Deal Guys

When I started my first company, I was NOT a deal guy. I actually understood nothing about sales. I think my conceptual vision of a sales person was this:

As it turns out, there are a lot of these people out there, but they are not the best deal guys. These guys create win-lose deals or deals with extremely high risk and asymmetric information (bad deals). The BEST deals though are very boring. The best deals are where both understand what they’re getting / giving, find mutual ground, and everyone wins. If someone loses, at least you can say that you both understood why and how.

I’ve been slowly learning this and turning it into an abstraction, but basically everything from your VC term sheet to your customer contracts to your relationships with cofounders and early employees are deals, just of varying sizes and magnitudes.

Man, if I would have understood that at the start of doing companies I would have saved myself a lot of heartache. When you’re doing sales and something is too easy, there’s a reason it’s too easy. If a VC gets on the phone with you, has only done 2 lifetime deals, and on the first call commits capital this seems great on the face of it, but it’s most likely a terrible deal (not because you don’t understand but because they don’t).

The components of a good deal are really simple:

• Everyone understands the terms

• Everyone understands the risks

• Everyone wins (which should be implicit if everyone understands the terms and risks)

This means the best sales people ALSO tell you what’s wrong with the deal. And in 20/20 hindsight, I’ve made a lot of shitty deals as a result (both selling and being sold).

Most things in life are deals, you’re just trading different kinds of value. Even your closest emotional relationships are deals that are constantly give / gets. They don’t show up in legal contracts, but it’s an exchange of value between two people. Seems transactional, but it’s reality, and unbalanced deals always collapse.

Relationships

Relationships are just special kinds of deals, ones that don’t end when the money is wired but are multi-turn games. There’s a key to balancing these that often means complex trade-offs and making sure each party always is aware of what they’re getting into.

The highest value deals are relationship deals that happen over years, and they’re where reputation is built long term. They’re also where the most downside is because it’s where we put things on the line. The hardest part about maintaining them is that when things don’t go right in certain deals (games in the multi game) you need to talk about it, make sure that you both had understood the risks, and choose to keep going even given the downsides. The value is built on that upfront communication.

When a relationship goes a while and things are going well, there’s temptation to trust too much. To always believe the other person has your best interest in mind. One of the big problems with relationships long term (business or otherwise) is that both parties get lazy. They think the other will always have their best interest at heart, and so they end up creating deals that neither of them understand or would have taken (the classic “the other person’s got this“ excuse). It’s important to recognize this and always be on top of it, for all relationships in your life or at least set boundaries that protect you from the downside.