Negotiation and Bargaining taught by Prof. V. S. Veeravalli at Great Lakes Institute of management Chennai. Generic Game Plan for Updown Equity splits

1. Negotiations on Updown Equity splits
By Disha Ghoshal
FT201032
Issues:
There are four Issues to consider:
1. Founders Equity Split
2. Phuc’s Salary
3. Seed Equity Split
4. Founders Equity to Warren
 Each of these issues will be affecting my revenue by a lot.
 There is a ZOPA which Georg needs to have in order to work out a compromise solution
 Georg has decided that he will rate each of these issues In the NAB based on a points
based system
 If the NAB scores less than -115 points, George has decided to reject that offer
 Georg has gone up to -37.5 points in the actual negotiation
Generic Game Plan:
1. I do acknowledge that you have worked hard in the recent weeks
2. Excited to start working So much that I have shifted my family to Boston
3. Would not have to travel abroad for visiting the Family
4. The Vacation was already planned before we received the funding to start developing the
prototype
5. Vacation was absolutely necessary to spend quality time ‘With my family
6. Will work harder to make up for the Vacation period
7. Currently is being given 28% of the equity. Ask for 30%
Frame:
Initial Founder’s Equity Split
Michael 36% Michael had slightly more equity because he started first
Georg 32% Georg would have to do more work initially
Phuc 32% Phuc is the CTO and is responsible for the delivering the site and starting its
operations
100%
Michaels’ proposed Equity Split
Michael 42%
Michael had worked harder than the other two co-founders in the recent weeks

2. Georg 31%
Georg had family commitments, Michael feels that he didn’t work enough.
Phu 26%
Phuc needs a clear business objective and his salary issue sorted out before he could actually
start working
Warren 1%
Warren had worked in the initial days and helped in the development of financial plan
Total: 100%
GENERIC STRATEGY:
Compromising is the Strategy that would be adopted by Georg
But
Accommodating Strategy was adopted in the actual Negotiation
1. Michael knows that Georg will be on a Vacation,
Someone like George who waited two years for his partner finish their Studies so that he can
pursue MBA Would prioritize his family more
2. Georg Is getting his whole family shifted to Boston to concentrate more on the business
3. Michael's work during the week, week will be acknowledged, But it is necessary for him to
understand that the ratings, has given himself are a bit overvalued
4. Ask for of founders’ equity saying that both you and your family have made drastic changes
because you are well committed to the creation of this platform
7 Key elements:
Parties:
Michaels, Georg, Phuc, Warren, Georg’s family
Barriers: Michael is overplaying his hand in the issue of Founders equity
BATNA:
Micheal: The Next best thing for Michael to do would be to look for Energetic competent
individuals who would be able to start working from Day 1
Georg: The Next Best thing for Georg would be look into the proposal of Phuc's new venture
and get that started along with him.
Phuc: Has a lot of ideas. BATNA would be to go and work on his Event based Social
Networking Site and get Georg on board
Power:

3. Michaels: Is the originator of the idea and deserves maximum equity, But has overplayed his
hand in the latest offering
Phuc: Can back out any time. Has other Options and Ask compensation to leave his current
projects and focus fully on Updown
Ethics:
Georg: Understand that he has contributed little in the past few weeks and is ready to accept
Michaels point that Michael should be rewarded more founder's equity than what was agreed
earlier. But feels the number provided by Michael is a bit higher
VALUE:
Michaels:
 Identified the Business Opportunity
 Recruitment of Individuals
 Setting Initial Site
 Developing Initial Financial Plan
Georg:
 Defining Business Strategy
 Defining Business Strategy
 Releasing Beta and Maintenance
Phuc:
 Initiating Development
 Marketing and Sales
 Sourcing of Investment
 Product Management
 Incorporation
 Recruiting Salesforce
 Management of Investors