Securing customer contracts for joint development or non-recurring engineering?
I was advised by several mentors to secure joint development agreements or R&D contracts for non-recurring engineering (NRE) to demonstrate customer traction. Unfortunately, I found that negotiating these contracts could take months with corporate entities with very little transparency about the decision-making process.
How have you closed the deal with corporate counterparties? Or is it a sign that you don't have the right customer if the negotiations are taking forever?
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Sign InUnfortunately, a good deal usually takes time. Some companies have faster decision making structures than others, so if you've got a lot of partners to choose from, prioritizing the faster or fewer decision makers might be worthwhile. Privately owned companies will often move faster than public ones, and understanding the organizational structure of the company can be helpful to know who writes the checks and signs the deals. Understanding how a deal gets done should be part of the early conversation (not the first one, but early).
It's really important to be talking to the right person. If you're negotiating with a lower level party, and haven't even met their senior manager, you're both likely to have to redo any negotiating you do, and it's a higher likelihood you'll get a no. In our successful negotiations, we had VP or C-suite folks on early calls, so even if we then did most of the grunt work with someone more junior we knew there was at least thematic buy-in from the real decision makers.
If they have in-house counsel, things will move a lot faster, and it's important to start with the right first documents. I'd consider a rough term sheet first, where general business terms are agreed, and then once those are settled moving into longer form legal documents. No point getting snagged on typos in a termination clause section when the real deal terms aren't finalized yet. Ask if they want to use their documents, or yours and consider your legal costs in that (if applicable).
Like running an investment process, I think it is ok to set a clear cadence and deadline for signing the deal, with milestones and stage-gates in your process. If there is a lot of foot dragging that could be a sign that you don't have the right customer, or they are just trying to get information from you instead of really getting a deal done. A motivated party will move with reasonable speed.
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