What I Learned Negotiating With Steve Jobs


An interesting article I stumbled upon that provides a bit of an insight into negotiations.  Enjoy Heidi Roizen’s piece in her dealings with Steve, below; (source: http://heidiroizen.tumblr.com/post/80368150370/what-i-learned-negotiating-with-steve-jobs)

Fresh out of Stanford Business School, I started a software company, T/Maker, with my brother Peter. He was the software architect and I was, well, everything else. Our little company was among the first to ship software for the Macintosh, and we developed a positive reputation among the members of the nascent developer community, which led us to expanding our business by publishing software for other independent developers. Two of our developers, Randy Adams and William Parkhurst, went to work for Steve Jobs at his new company, NeXT, and that’s how I ended up head to head with Steve Jobs. 

Turns out, Steve had a problem and Randy and William thought I could be the solution. Steve had done an “acquihire” of the developers who had written the Mac word processor MacAuthor. In order to make the deal economics work, Steve had promised to publish MacAuthor and pay royalties to the developers. But now, with the world’s attention on his new startup, how would it look to have NeXT’s first product be a word processor for the Mac?  Randy and William suggested to Steve that if I were to be the publisher, the problem would be solved.  Steve liked the idea, and invited me in to talk about it.

My first meeting with Steve lasted well over an hour. He grilled me about packaging, channels, distribution, product positioning and the like. I must have passed the test, as he invited me back to negotiate a publishing deal. I spent the next three weeks preparing detailed timelines, package mockups and drafting a very specific contract based on our experience with the other developers we had already published.

On the appointed day, after waiting in the lobby for 45 minutes (this, I would come to learn, was par for the course for meetings with Steve), I was called up to Steve’s cubicle. I remember to this day how completely nervous I felt. But I had my contract in hand and I knew my numbers cold.

Shortly into my pitch, Steve took the contract from me and scanned down to the key term, the royalty rate. I had pitched 15%, our standard. Steve pointed at it and said,

“15%? That is ridiculous. I want 50%.”

I was stunned. There was no way I could run my business giving him 50% of my product revenues. I started to defend myself, stammering about the economics of my side of the business. He tore up the contract and handed me the pieces. “Come back at 50%, or don’t come back,” he said.

I slogged down to my car feeling like I had just blown the biggest deal of my life.  Lucky for me, someone had followed me out.

Dan’l Lewin, one of the NeXT co-founders, had a cubicle within earshot of Steve (actually, at that time, every employee was within earshot of Steve.) Dan’l had been working with me in background over the last few weeks and we’d developed a good relationship. If this deal did not get done, it was going to end up being his job to find someone else, so he really wanted me to get the business. Dan’l put his arm around my shoulder, and said one sentence, which I will never forget.

“Make it look like fifty percent,” he said.  

“But I can’t afford to pay fifty percent!” I complained.

“I get that you can’t afford to pay fifty percent of gross,” said Dan’l, “but Steve wants to see 50% on that contract. So figure out a way to make a contract that you can live with that also says 50% at the bottom.”

That’s when the light bulb came on.

For Steve, this contract wasn’t that important to the future of NeXT. While we would go on to pay Next about $5 million in royalties over the life of the contract, and were their first source of revenue, we were not central to his mission (Steve later teased me that he made more money collecting interest on his bank account than he made from me.). However, he had promised the developers 50%, he had said the number within earshot of everyone, and he wanted to be able to tell everyone he got what he wanted.

I had to make the business make sense financially. I just needed to make my 15% look like his 50%.

To do so, I reduced the nut to split by first deducting the cost of packaging, of technical support, the salaries for some developers on my side of the business to implement fixes, and when I still couldn’t get the math to pencil out, I added a $6 per unit ‘handling fee’ thanks to some inspiration from an infomercial on the Home Shopping Network.   My new “Hollywood net” number read 50%, but fully-loaded it was pretty close to the 15% of gross I needed to make the deal work.  Magic!

Steve was happy with his 50% contract and the deal got inked.   T/Maker became the publisher of the renamed WriteNow word processor, which went on to decent success, garnering 25% of the Mac word processing market during its multi-year run and making many millions of dollars for both NeXT and T/Maker.  And, I went on to work with Steve for many years – but that is a different story! 

Here is what I learned:

Know your numbers:  I knew my numbers, what I could make money on, and what I could not.  I understood which dials I could turn to make the deal work for me and for the other side.

Don’t let the bright lights blind you:  I did not do a bad deal just because I was dealing with a high-profile person, no matter how tempting the glory was at the time.   In my current life as a VC I can’t tell you how many times the entrepreneur wants to do a deal simply because it would be a great press release. Don’t do it!

Have allies inside the other organization:  During my preparation process I had gotten to know Dan’l Lewin quite well, and he likewise got to know me as a proactive, thoughtful, ethical person that he wanted to do business with.  Without him working the background this deal never would have gotten done.  For every deal, it is important to cultivate other relationships inside the firm who can help you with perspective and work behind the scenes to move you into the yes position.

Understand the needs of the other person:  In business school, I learned that negotiation is “the process of finding the maximal intersection of mutual need.” At first I did not understand Steve’s needs, but when I reflected on it after being banished from his cubicle, I came to realize that this deal was not important to NeXT in terms of dollars or future, but important for Steve to get the 50% he promised his developers.  Once I got that, it was relatively easy to come up with a contract that met his needs but also met mine.  People are not often as clear as Steve was — it sometimes takes extra work and lots of iterative communications to find out what the other person truly wants, but the process creates better, more sustainable deals.

Assess your market size with OMSAT, for Free


The Ornicept Market Size Assessment Tool, or OMSAT for short, is a simply excel spreadsheet, but has the power to provide insight for entrepreneurs and investors to access statistics from the U.S bureau of Labor Statistics, to 

This tool was graciously released under the Creative Commons (CC) license, to help startups have access to information only larger corporations can afford to pay to research, in getting the market size, which will allow for a more scientific interpolation of number of users that may be interested in certain goods or services, allowing for better assumptions. The spreadsheet is capable of using formulas to work out expected value per user per year, and over life-time. 

With the information you can generate, you can present to investors a stronger case for market need, and portray a more accurate assessment of the market-space, answering an important question that a lot of investors might have. 

Once you have built a case for your expected value per user per year, the workbook will calculate a bottom-up market size valuation.

— Russell Conard

 The tool uses employment data from 2012 as well as projections for 2022. You can download the tool by clicking here.

4 tips for Lean Recruiting using LinkedIn


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As an entrepreneur, you don’t have the financial stocks to have your own HR, nor the affordability to pay recruiters a hefty fee, but you want to snatch up the rockstars of development. In line with various other concepts like Lean Analytics, I believe small and ambitious companies need to have a Lean Recruiting strategy, that will bring them the best talent, at minimal cost. LinkedIn in my opinion, along with Angel.co provide two of the best sources for the CEO to snatch up quality talent, and here are 4 tips for Lean Recruiting using LinkedIn to get you started:

1. Strong LinkedIn Company Profile

You need to make your LinkedIn profile reflective of the ambition and stature you want people to see your business as. With LinkedIn becoming the de-facto direct interface between potential candidates and employers, you need to dress the part.

45 million profile views take place on LinkedIn every day—it is the #1 activity on the network.** Your profile is often candidates’ first interaction with your company so it should be inspiring. The more you can show about who you are and what your company does, the easier it is for candidates to engage with you and determine whether or not your company might be a great fit for them.

Your dazzling profile should include the following:

  • Killer opening: Your headline and summary needs to have the ‘Don Draper’ weight in it, something that’s catchy, modern and capture the potential candidate’s imagination right off the bat.
  • Be Interactive: You should invest the same time in your LinkedIn company profile as your website, have rich media, profiles of various staff, present some videos and showcase visually what your company is about. Link it up to your company YouTube channel.
  • Be Relevant: Update the LinkedIn profile, don’t do it once and drop it. Monitor who comes to visit, participate and engage in various industry groups, comment and chat back. This should be a vital arm of your social media engagement channel, that includes an active Twitter account that networks around.

Some interesting company profile you can utilise as inspiration is Zappos. On LinkedIn you may come across Influencing figures like Guy Kawasaki, your company can be a corporate ‘influencer’, by being more engaging.

2. Post interesting things

You should look at posting interesting status updates, and engaging and interactive questions, expert tips and opinions. Look to some of the inspirational updates below as a guide on how to build your viral network influence:

Followers are twice as likely to amplify a post via likes, shares, and comments if it contains video. No videos? Try SlideShare, PDFs, images, and links.

3. Track profile performances

LinkedIn provides great analytical tools for measuring your social presence footprint, helping you build your company and employer brand. Some of the important analytics you can employ to track your engagement campaigns include:

  • Who’s viewed your profile (are you getting more views, are you being endorsed or showing up in search engines more);
  • How effective are your status updates (are you getting your status updates shared or liked more);
  • Network reach (is your network growing?)
  • Follower demographics (where are you getting your followers from? Are you attracting the right type of people?)

4. Sourcing well


Source: Recruiting for Small BusinessSource: Recruiting for Small Business
Source: Recruiting for Small Business

To fuel your business’s growth, you need to engage the best talent, not only those actively looking. The reason is that the vast majority of professionals are passive candidates, they’re not actively job seeking but would consider the life-changing role you have for them.

Passive candidates typically don’t visit job boards or career sites or have current resumes—they are too busy exceling at their current company. Here’s where your size can be a huge advantage. Passive candidates want to make a big impact, and they want challenging work. Compared to slower-moving corporate giants, you can offer them greater responsibility, flexibility, and/or access to leadership.

To be a smart recruiter you need to source smartly. This requires prioritising your outreach, allowing you to better understand supply and demand. Through LinkedIn’s search tool, you can run a live search and determine the size and quality of the talent pool for a specific skill-set. In fact, with the tool you should learn to be more boolean-proficient, to get a more precise and calibrated search result for the specific type of person you are looking for.


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Blog source: [http://business.linkedin.com/talent-solutions]

Review of Managing Startups: Best Blog Posts

You are looking into creating a startup, and seeking some advise from others? This book provides a collection of blog posts from others, with Tom Eisenmann compiling an annual collection of the best blog posts covering startup management, which in this edition counts up to 72 posts. The posts are more so about successful entrepreneurs who share their thought processes and experiences, to help you get a good head’s on start in the areas of:

  • Management Tasks;
  • Organisational issues; and
  • Funding

The book is sectioned off into the appropriate topics, with certain areas more interesting to some than others, but I find the entire book to be a good FYI read, something to get you thinking in different ways, even if not every blog post is actionable. Certainly getting financial backing from angel investors is something every entrepreneur would want to be interested in, and I’d say that section is quite informative and digestible.

I personally thing even fi you aren’t a venture capitalist, the ability to construct processes for planning an idea from conception, to managing interests, this book is still for you. The work of Professor Eisenmann of Harvard University in collating these blog posts has been great, and the size of the blog posts means you can read one or two every morning on your ride to work, which is what I have been doing, taking down notes and annotations for future use.

Concise: [rating=5]

Level: [rating=4.5]

PriorKnowledge: Not a technical book, and no prior assumed knowledge. Easy to read for anyone, from marketers to tech guys.

My rating :[rating=4.0]

 

AuthorThomas Eisenmann

TitleManaging Startups: Best Blog Posts

Publisher: O’Reilly Media

Year: May 2013