A Silicon Valley company owned proprietary technology that would allow a multinational Japanese company to catch up to the leader, another Japanese company, in the consumer electronics business. Every discussion and meeting went smoothly and mutual agreement on the basis of cooperation and contribution from each side was reached reasonably promptly. The only sticking point came up when the American company wanted the Japanese company to invest in the American company. This issue took some time to resolve. Eventually, the Japanese company injected the cash demanded and needed by the American company but as fee for a license agreement. In effect, the Japanese company said to the American entrepreneurs: "Here is the money, but you keep the stock." In a casual setting outside the meeting room, the Japanese executive explained to me that a license agreement can be committed at the division level while equity investments required board level approval. While the American company looks at the equity investment as a potential upside kicker in a strategic alliance, the Japanese company looks at equity investment as a potential source of embarrassment when and if the invested company goes down the drain.
Lesson for privately held companies looking to partner with Japanese companies: Do not assume that stock in your company is useful as negotiating chips.