Back in the mid-1980's, Heidi Roizen, today an operating partner at VC firm DFJ, was the co-founder of software company T/Maker. Her firm’s products had attracted the attention of early Mac developers, including a couple of stars at NeXT, the company Steve Jobs started after his departure from Apple.
Through this connection she ended up negotiating a software publishing deal with none other than Jobs himself, she explained in a recent and fascinating blog post offering a glimpse into the negotiating tactics that would later make Jobs a legend.
The initial meeting didn’t go well.
"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," Roizen recalls. "Shortly into my pitch, Steve took the contract from me and scanned down to the key term, the royalty rate. I had pitched 15 percent, our standard. Steve pointed at it and said, '15 percent? That is ridiculous. I want 50 percent.'"
Roizen was stunned and could see no way to make the economics work on her end if she gave up half her revenues. Jobs was unmoved, telling her: "Come back at 50 percent, or don’t come back."
While this sounds like another story of Jobs much feared (and respected) single-mindedness, the tale doesn’t end with Jobs simply sticking to his guns and Roizen conceding defeat. She did finally offer a contract with the magic 50 percent number but only after heavily massaging the figures by "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.'"
Presto, the deal was done.
So what general lessons did she take away from this experience? The complete post offers a number of takeaways, including these:
Never Be Star Struck
"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," Roizen writes. Don’t let the allure of a big name blind you to fundamental business realities. You may want to work with a superstar but the deal needs to work for both parties.
Get an Inside Man (or Woman)
Roizen’s developer contacts inside NeXT were instrumental to her closing the deal, explaining Jobs’ constraints to her and urging her not to walk away from the possibility of working together. "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," she learned.
It’s standard business school advice, but Roizen’s experience with Jobs drove home for her the importance of truly making an effort to understand the other side’s perspective. "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," she explains.