Rodley’s Law of Negotiation

My post about technical co-founders handing over contacts from their network for business development generated a fair amount of offline pushback, most of it being some variation of “well you obviously didn’t have a trusting relationship with your CEOs”. All of which put me in mind of Godwin’s Law.

Godwin’s law states that as an online discussion continues, the probability of someone introducing a Nazi analogy approaches 1. This is usually extended to mean that the first person to introduce a Nazi analogy has lost the argument and the Nazi analogy is an acknowledgement of that loss.

I’m here today to not-so-humbly introduce Rodley’s Law of Negotiation which states:

As a negotiation continues, the probability that one side will use the word “trust” approaches 1 and the first person to use the word “trust” has lost the argument if not the negotiation.

Hypothetical example 1 – you’re a technical co-founder negotiating an agreement to join a venture that’s already incorporated:

YOU: I need a clause that exempts vested stock from penny-per-share buyback on voluntary departure.

CEO: Why would you need that?

YOU: Because it could happen.

CEO: We’re friends. We’d talk about it and come to some reasonable arrangement.

YOU: I want it in writing.

CEO: Why would you need it in writing – don’t you trust me?

ingodwetrustAhhh .. the T word. Now, you’re close to a deal (be honest, you’re probably already working with them gratis) and you want to join this outfit but your prospective partner just played the trust card. Rodley’s Law says that you’re screwed here and that it’s pretty much guaranteed that your prospective CEO will buyback all your stock for a penny a share if you leave for any reason.

The example clawback-clause negotiating point here is not hypothetical at all. Read this to see how Skype did exactly this and turned a bunch of people who should be startup-fucking-rich to older-but-wiser-poor.

But there’s an important thing to realize about our example. If you’re dumb enough to “trust” this guy, and you do get into a voluntary departure situation, it’s his job to screw you in that situation. A CEO’s responsibility is to the corporation, not to YOU. And the bigger the stakes, the more obligated he is to screw you.

Now I’m not saying to never trust anyone. What I’m saying is that you’re worrying about the wrong guy. As a techie negotiating a co-founder agreement the person you really can’t trust is yourself. You don’t negotiate stuff for a living, legalese is harder to understand than bad Objective-C, and you really, really, really just want this agreement to be done so you can go back to writing the damned code. You know this and it’s scary. You need help. What do rich people do when they need help? They hire it.

The real problem is not that suits are untrustworthy. It’s that guys like me are too lazy to find a decent lawyer and too cheap to pay him. Which leads us to Rodley’s Second Law of Negotiation:

If you’re struggling with a founders agreement, shut up about the shady suits, find a fucking lawyer and pay him his fucking money or go be a W2 slave like everyone else.

Once you engage that help, it turns the issue from an emotional issue of who to trust and how much, to a technical execution issue of finding the right lawyer and paying him his fucking money. And if there’s one thing us code monkeys are good at, it’s execution.

Networking for Dummies

When you’re in the swirling cauldron of a seed stage startup you pull out all the stops.  No hour of the day goes unworked, no dirty coding trick goes uncoded, no rock remains unturned.  Just Do It is a reflex, not a tactic.  JFDI is dangerous and fun and “living on the edge” and that’s why we do it.  There is one area of startup life though where I wish that I had Just Not Done It and that’s handing over connections to non-technical co-founders to help the business.

I have had some version of the following happen at nearly every startup I’ve worked at, with at least two striking examples that still sting years later.


Me: Hey Mr. CEO, I talked to my buddy, Mr. X and his good friend, Mr. Y is a VP of BizDev at <major player in our industry>.  I told him what we’re doing (without including the fact that we’re out of money and missing payroll), he told Mr. Y about us and he’s really interested.  Here’s his number, he’s expecting your call.

Mr. CEO: Great. Thanks.

Two weeks later.

Me: Hey – did you talk to Mr. Y?

Mr. CEO: Who?

Congratulations!  You just burned a whole branch of your network.  And I say you did it, not your CEO because, guess what, your network is your responsibility not his.

Sometimes it’s even worse when they do make the call.  I’ve actually had a connection ping me back after meeting my CEO and say, literally “Hey, good luck to you guys, but oh my god you’re going to need it.”  My guy might’ve worn the wrong color tie, or he might have peed on the rug like an overexcited shih tzu.  I never found out because I wasn’t there.

This is the downside to what is usually A Good Thing for a CEO – the lack of a conscience. I use that term conscience in both the usual Webster’s sense of not taking other’s feelings into account, and in the sports-metaphor sense of a basketball point guard who can throw up a string of airballs and still keep shooting as if he were God’s gift to the sport.  Think about Jack Dorsey and Square.  When Square launched he gave three consecutive interviews where he told different stories about what the Square business model was.  Each time, he stepped up and told a new story as if the previous interview had never happened.  That’s “no conscience”.  For you old-timers out there, think Andrew Toney.

How does this lack of conscience affect your relationship to Mr. CEO? Well, it means that your feelings, your life outside the shared venture and more pointedly your life after the shared venture mean nothing to him.  On balance, that is A Good Thing.  At worst, it’s Not A Big Deal.  You’re in this for the money.  But on a strictly personal level your connections are not as valuable to him as they are to you. To him, it’s found-money. If he burns that connection it’s no loss to him.

Knowing what I do today, here’s what I’d do differently in those situations:

  • Make the contact myself, alone, in person (i.e. face-to-face or by phone).  Your network is valuable to you, and this person is a valuable part of that network.  Treat him that way.
  • Own the relationship.  Don’t make the intro and then forget about it.  Follow up with both sides and if somebody’s feeling burned, fix it.

The chance to “do business together” even if it’s just a chance for him to help you is an opportunity for you to strengthen your connection to this guy and thus, strengthen your network.  And, in the not-inconceivable event of your CEO treating this connection like dirt, the blowback will be against him, not you.  The worst case you want coming out of this is your connection thinking “Jeez, Jack’s a nice guy, I hope he wakes up and joins a company that doesn’t have a fool for a CEO”.

Personally, I wouldn’t do it at all – hand over bizdev contacts to a non-technical co-founder.   Think about it.  If my connections are the difference between life and death for our venture, we’re fucked.  At the very least, we have the wrong CEO.  And that’s A Bad Thing.