Tag Archives: startup

How to Build a Killer Team

Nothing is more exciting for founders than that first moment when they take their destiny into their own hands. After putting in the hard work and research using the Lean Startup Model, and determining that the product or service you have developed is really desired by customers, it’s finally time to bring your vision to life.

Now it’s time to identify who you need to join you to grow and protect your business. There are well defined as well as unexpected challenges ahead that are beyond the scope of just one person, and it’s up to you to identify the kinds of people you need behind you – those with the right experience and expertise – to face those challenges. You also need to know when you will need them.

Facebook’s CEO Mark Zuckerburg recognizes the power of a good team. “The most important thing for you as an entrepreneur trying to build something is … to build a really good team. And that is what I spend all my time on.”

What Skills Do You Outsource?

At the very beginning, you probably did a little bit of everything in order to put your plan into action. However, a few more people with specific expertise will be needed to help you go beyond the nuts and bolts of creating the business. These are the types of people you will need to make sure your business has the right financial and legal footing to hit the ground running:

An experienced startup accountant
An experienced corporate lawyer
A banker – Finding a banker that is willing to dig in and understand you and your business will be a valuable resource for the future. By winning this person over, you won’t be viewed as another commodity and source of a fee. Instead, you’ll have a valuable partner that will more likely be a source of financial support to help grow your business.
A reliable outsourced bookkeeper
Product Development – This is an area that can be outsourced as well. However, be sure you control the vision and the strategy. If you have the skills and experience in house, keep it there.

All Hands on Deck

Next, as the founder, you need to assess your own competencies. Be brutally honest about acknowledging your strengths and weaknesses, and the type of person you will need to fill the gaps in terms of both skill and time.You should have a very strong vision and clear goals for the company after defining and redefining them with the startup model, so you can proceed to identify the skillset you will need to make your business a success.

Identify what you need, from product or service development, sales, marketing, project management, to operations, and who be responsible for these things. Sometimes that person will be you, the founder, and other times, you will have to evaluate who to bring onto your team.

Finding someone with the right experience and expertise isn’t the only only criteria you need when vetting a potential teammate. A candidate could be the best in the business, but if you can’t stand him or her, it’s probably best not to lay down an offer. Here are some things to consider when looking at future teammates for your business:

Vision – It’s important to look for candidates that are passionate about the vision you have for the company. Founders must communicate the big-picture goals they have, and provide a potential teammate with an opportunity to make a difference.
Diverse Knowledge – Find candidates with knowledge and skills different from your own, so that your team is well rounded and prepared to deal with any challenges that arise.
Continuous Improvement – Look for evidence of learning ability. Someone who has learned from the past and will adapt their knowledge to future challenges at your company is a prime candidate for your Lean Startup Model mindset.

If you have found people with the right experience, expertise, and characteristics, you will have a found the right players to join your killer team to bring your business to life.

Written by: Judson Sutherland, Founder & CEO

Sutherland, PLLC – FoundersFirm.com

Why the Lean Startup is a Force of the Future

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Launching a startup has always been risky business. According to Fortune.com, 9 out of 10 startups fail, leading many to search for a more reliable alternative to the traditional rubric of building a business. In the past, this has meant writing a business plan, presenting it to investors, building a team, introducing a product or service to the market, and then selling ‘til the cows come home.

The key issue with this traditional model is that it fails to take into account that customers may not even want the product or service that founders are offering. Many businesses spend months perfecting their new products before asking customers what they need and want, only to discover that their target market has no interest – and then after all of the hard work necessary to launch, they eventually close shop.

The Lean Startup Model is a relatively new way of founding a company that shakes up the old process and lets founders dip their toes in the water before diving in. The innovative element of this model is its focus on acquiring customer insights in order to create a product or service that customers really want. While the traditional route requires startups to develop a thorough business plan based on educated guesses – then following through with the proposed model – the lean model allows founders to experiment, acquire customer feedback as they go, and evolve the business as they see fit. The result: less risk, and more successful businesses.

There are the 3 Key Components to creating a Lean Startup:

Business Model Canvas – Founders implementing the lean startup model acknowledge that they don’t know what’s going to happen. The best they have is a hypothesis of how they can create value for their customers, so they turn that educated guess into a framework business model.
Customer Development Approach – The next step for founders is to test their business model canvas with a customer development approach, which involves asking potential customers and partners what they want and then listening to them. They get immediate feedback on everything from the business model, product features and pricing, distribution channels, etc., before going back to the drawing board and making adjustments. Then, they repeat the process and gradually perfect a model that they are confident will work.
Agile Development – By receiving frequent customer feedback, founders are able to incrementally develop the product they offer. Instead of typical long product development processes that presuppose customers’ needs, agile development eliminates wasted time and resources by continuously altering a product as the needs of the prospective users become more clear.

The Lean Startup Model: a Force of the Future

The lean model has taken the startup world by storm, and the success of those who have implemented it forecasts that it may have a lasting impact on a large scale. According to Steve Blank, associate professor at Stanford University and experienced founder,

“Using lean methods across a portfolio of startups will result in fewer failures than using traditional methods. A lower start-up failure rate could have profound economic consequences. Today the forces of disruption, globalization, and regulation are buffeting the economies of every country. The creation of an innovation economy that’s driven by the rapid expansion of start-ups has never been more imperative.”

The lean approach is altering the entrepreneurial landscape. Founders are now able to launch products knowing that customers actually want them, and can do it much more quickly and less expensively than they have been able to in the past. Additionally, because of the information they have acquired, the venture becomes much less risky and primed for success.

This is also made possible by the access that entrepreneurs now have to various types of financing for their businesses. This includes super angel funds and accelerators like Y Combinator and TechStars for early-stage investments, as well as crowdfunding portals for a more democratic method of capital raising for startups.

Lean-ing In

In a business world where products and processes call for continual innovation to succeed, the lean startup model isn’t just for founders getting their feet off the ground. Large companies can implement this model into their existing organizational structure as a means to evolve with the demands of the market. The lean startup model encourages change and innovation in businesses of every shape and size, while changing the way we think about business.

Written by: Judson Sutherland, Founder & CEO

Sutherland, PLLC – FoundersFirm.com

Why Courting an Investor is Like Dating: Here’s What Investors Look at Before Putting a Ring On It

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Courting investors is a lot like dating. There are the coffee dates, the small talk, maybe even a little batting of eyelashes and making sure all of your good traits are front and center. But after the initial introductory stage, what makes an investor commit to the relationship?

Most venture investors want to invest early in a company that has huge growth potential. They are looking for a substantial reward to offset the risk of investing in an illiquid privately held company that has little to no revenue. Like a marriage, before putting a ring on it, investors need to know and trust where they’re placing their investment. They spend a significant amount of time analyzing the people, the product, and the performance of a company.

The People

Most experienced investors care significantly about the founders they are investing in, and want to know what kind of people they are. Throughout the courtship phase, they are trying to drill down on 3 strong indicators of future success:

What is the character of the founders running the business? Do they have integrity? Are they trustworthy?
When problems arise and things get tough, how do the founders react? What does their past history reveal? This is important so that investors can feel confident that they won’t be on the short end of the stick when the inevitable challenges arise.
What is the dynamic among the founders, and between the founders and the company leadership? Is the team cohesive? Do they value one another? How well does the team work together? Does the team respect the company leadership, and are they willing to follow them?

Answers to these questions are crucial to building an investor’s confidence in taking the leap.

The Product

Experienced investors constantly track and measure their own enthusiasm towards the founders and their product. They gauge whether their enthusiasm increases with each interaction. If not, they are unlikely to invest. Founders need to show investors they have a solid product or service that is unique in some way from what is already out there, and they must demonstrate that people want it.

In the words of Mark Achler, a mentor at Techstars, “to paraphrase Field of Dreams, most entrepreneurs believe that if we build it they will come. But a great product without customers is a great product – not a business.” Founders must clearly demonstrate that customer demand exists at each new meeting. The combination of the building excitement, backed up by facts, will entice investors to invest because they want to be part of a winning team.

The Performance

Experienced investors also want to be confident that founders can raise all of the capital that the company needs to hit their targets; otherwise early investors will be left holding an empty bag. They want to see a clear track record with a history of successful performance by both the founders and the leadership team. This helps drive the capital raise. More importantly, it indicates a greater chance of future success.

It also helps if the founders have had a prior successful exit. However, a flawless record isn’t necessarily a prerequisite. In fact, having faced very challenging situations is probably better, as it gives the founders an opportunity to show how those situations were managed and how they rose again afterward. When talking to investors about their past experience, founders should be transparent. They should talk about their mistakes, and how they have learned from them. Investors are interested in how a founder’s experience has made them better equipped for their current venture.

After analyzing the people, the product and the performance of a company, investors will decide whether or not to move forward. Founders who give thoughtful attention to addressing what investors need to know will increase their chances of getting that ring.

Written by: Judson Sutherland, Founder & CEO

Sutherland, PLLC – FoundersFirm.com

3 Things Every Founder Needs to Mitigate Risk and Ensure Success

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“Success doesn’t necessarily come from breakthrough innovation but from flawless execution,” says Naveen Jain, founder of InfoSpace and Intelius. Most entrepreneurs understand this and spend months or even years thoughtfully organizing a business plan before putting it into action. Despite thorough research and long nights spent planning, the reality is that much remains unknown – early stage entrepreneurs are constantly haunted by the question: “Will this really work?”

However, the dark tunnel ahead can become illuminated and less intimidating with these 3 critical tools: money, great people, and insight from other capable people. Here’s how these elements play a key role guiding an entrepreneur toward success:

The Ability to Raise Capital

Capital is an essential part of any business. In order to get up and running, entrepreneurs need to raise capital to cover startup costs, beyond what they can fund themselves, before they put their “open for business” sign out. To raise this amount, entrepreneurs must sell their vision to investors and convince them of the value of the opportunity by delivering a presentation that is both compelling and attractive. This is where the charisma and conviction that successful entrepreneurs possess is critical. (See No. 5 in 5 Characteristics Every Entrepreneur Needs To Crush It)

Beyond the initial funding needed to get running, businesses need to be able to raise money to fund development and operations. Capital is needed to fuel a business’ growth, but it is also important to have dry powder as cash reserves. The dry powder will help weather the ups and downs of unforeseen obligations that are – inevitably – ahead.

The Ability to Build a Great Team

“A great idea is the catalyst to get things in motion, but at the end of the day, it’s the team you hire who will ultimately determine the success, or failure of the company,” says Aaron Goodin, CEO and Founder of Tack. And rightly so: entrepreneurs need to build a great team of people and then lead them well. Those who can strategically position the right people into the right seats on their bus will lay the best foundation to get them to their destination. (See 3 Tips on Winning Talent for Your Startup)

The Ability to Value Counsel from Those with Special Expertise

Knowledge is critical. Entrepreneurs need to know what they know, and do it. They need to know what they don’t know, and delegate it. Never stop seeking counsel. Entrepreneurs that choose to learn from experts are better equipped to help their business navigate the road ahead.

Entrepreneurs need to find mentors and advisors in different specializations to help them effectively manage all aspects of their growing company. What types of individuals are needed in these ranks? Founders should include an experienced entrepreneur who has already been through an exit – meaning that this isn’t their first rodeo; an experienced CPA; an experienced lawyer that has a background in advising entrepreneurs; and investors who have a sincere interest in helping the founder.

While the future always contains an element of the unknown, entrepreneurs can mitigate many of the risks involved in starting a business by taking smart steps that will guide them towards success. By developing the ability to raise capital, building and leading a great team, and recognizing the value of capable advisors to give counsel in areas of their particular expertise, an entrepreneur can move forward with clarity and confidence.

Written by: Judson Sutherland, Founder & CEO

Sutherland, PLLC – FoundersFirm.com

5 Characteristics Every Entrepreneur Needs To Crush it

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The light bulb went off. You have an idea that you sincerely believe will launch you to success; the only thing left to do is to take the leap and start your own business. But do you have what it takes to succeed?

Starting a business is a courageous feat. It’s attractive to be your own boss and call all of the shots, but it is also comes with challenges like having the tough conversations and the weight of success or failure on your shoulders. Entrepreneurs must possess a few unique characteristics in order to achieve success. If you are thinking of beginning your own entrepreneurial journey, ask yourself if you have these 5 crucial characteristics that will help you propel your new business to the next level:

1. A bizarre sense of optimism. Entrepreneurs are pathologically visionary and believe that their ideas will work, no matter what. They believe that everything will ultimately play out for the best, and they will reach their targets with smashingly successful results.

Optimism not only drives entrepreneurs forward, it also helps them recover quickly from disappointments or failure. According to Barbara Fredrickson, author of Positivity and professor of psychology at UNC-Chapel Hill, “When people are able to self-generate emotion or perspective, that enables them to bounce back. It’s not just that you bounce back and then you feel good – feeling good drives the process.” It also helps to have a short-term memory, making it easier to leave the mistakes in the dust and focus on the bright road ahead.

2. Grit and perseverance. Entrepreneurs have a superhuman strength of character that allows them to handle every situation that comes their way. That passion, perseverance and stamina is grit, and it sets them starkly apart from the general population. Entrepreneurs with this trait are fueled with motivation and a strong work ethic that leads them to pursue their goals until they become a reality.

Muhammad Ali once famously responded to a reporter, “I don’t count my situps, I only start counting when it starts hurting, when I feel pain, ‘cause that’s when it really hurts.” Winners push through the pain to achieve their dreams. That stick-to-it-iveness and willingness to face both the ups and the downs is what gets entrepreneurs ahead.

3. Comfort taking calculated risks. For entrepreneurs, uncertainty and ambiguity are necessary to discover possibility. Smart entrepreneurs assess which risks are worth taking with hopes of a high reward – they enjoy the thrill of exploring the unknown.

Even a big risk-taker and well-known founder like Richard Branson believes in devising a worst-case scenario when evaluating if risks are worth taking. While planning the launch of Virgin Atlantic, Branson convinced the board of Virgin Records to start an airline by demonstrating that the company would lose only six months of profit if the plan failed. Entrepreneurs succeed when they can minimize risks while being open to crucial decisions and opportunities.

4. Life-long learners and innovators. Entrepreneurs are always conceptualizing ways to make things better. By refining their skills and continuing to ask critical questions, they are able to create efficiency and make the biggest impact wherever they go. Founders focused on growing stable companies seek knowledge constantly: they read, brainstorm, and share their experiences with other entrepreneurs. That thirst to learn keeps them fresh and on the edge, ready to generate new ideas.

5. Charisma and conviction. JFK had it. Successful entrepreneurs like Steve Jobs had it too. Entrepreneurs possess a rock star quality that can be used to inspire devotion from others in a way that is compelling and attractive. They radiate authentic enthusiasm, and can convince both customers and business partners to share in their closely held convictions and help their cause.

According to Nolan Bushnell, founder of Atari and Chuck E. Cheese’s: “The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”

So do you have what it takes to be an entrepreneur? If the answer is yes after identifying with these crucial traits, take Nolan’s advice and start doing something about it today!

Written by: Judson Sutherland, Founder & CEO

Sutherland, PLLC – FoundersFirm.com

FoundersGuide: What is Private Placement?

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When a company sells shares of its stock (or limited liability company membership interests or partnership interests) to third party investors, an offer and sale of securities has occurred. The general rule both under US federal law and state securities laws is that all securities must be registered unless the offer and sale qualifies for an exemption from the US federal and state securities laws registration requirements. Registration is a costly process that requires extensive interaction with the SEC and generally is a task undertaken by companies with larger capitalizations. Legal fees alone can range into the hundreds of thousands of dollars. An example of such a company would be any company whose securities are freely tradable on a public stock exchange, such as NASDAQ or NYSE.

A securities offering exempt from registration with the SEC is sometimes referred to as a private placement or an unregistered offering. Generally speaking, private placements are not subject to some of the laws and regulations that are designed to protect investors, such as the comprehensive disclosure requirements that apply to registered offerings. Private and public companies engage in private placements to raise funds from investors. Hedge funds and other private investment funds also engage in private placements. The transaction costs (i.e., legal fees) for a private placement almost always will be substantially lower than with a publicly registered offering.

As an individual investor, you may be offered an opportunity to invest in an unregistered offering. You may be told that you are being given an exclusive opportunity. The opportunity may come from a broker, acquaintance, friend or relative. You may have seen an advertisement regarding the opportunity. Keep in mind that private placements can be very risky and any investment may be difficult, if not virtually impossible to sell. On the buy side, while you are buying a bona fide interest in the company, you may not know all of the implications associated with the investment, and that is why it is so crucial to engage an attorney to represent your interests.

If you are a company that is interested in selling its securities to raise capital, it is very important to understand what your specific obligations are to your investors so that you can avoid the risk of liability for securities fraud. Selling securities in a private placement can be a great tool to raise capital for your company, but it is a substantial undertaking and should not be attempted without the advice of an experienced securities attorney.

Written by: Roland Wiederaenders

FoundersFirm.com

FoundersGuide: Advertise Your Securities in the Newspaper

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If you ever raised money for your business through the sale of securities, you probably are at least somewhat familiar with United States federal and state laws governing the sale of private securities. Specifically, these laws provide for exemptions from the general rule that all securities must be registered (i.e., publicly-traded) before they are sold to investors.

Historically, Rule 506 under Regulation D (of the United States federal Securities Act of 1933, as amended) has been the most commonly used exemption from the U.S. federal securities registration requirements. Nearly all states have an exemption that corresponds to this federal-level exemption.

Recent changes to Rule 506 have added a new exemption, Rule 506(c), that is very similar to the old exemption with a key distinction: an offering of securities under Rule 506(c) may employ advertising and general solicitation.

Previously, no advertising or general solicitation was allowed in connection with sales of private securities. Consequently, it was not permissible to buy advertising space in a newspaper or magazine to notify the world that you were attempting to raise money through the sale of interests in your business. Importantly, this prohibition against print advertisement meant that companies also were not allowed to use the internet and their websites to sell their private securities.

While Rule 506(c) allows for general solicitation and advertising, it imposes an additional requirement from the old Rule 506 exemption that ALL investors participating in the offering must be “accredited investors”. Whether an investor is accredited differs for individual investors and investors that are business entities. Individual investors may qualify as accredited investors either by having a net worth of at least $1 million (excluding the value of their principal residence) or an annual income of at least $200,000 (or $300,000 together with their spouse) and a reasonable expectation of earning at least those amounts in subsequent years. Business entities generally qualify by satisfying a $5 million minimum net worth requirement.

Under the old Rule 506 exemption (and continued under the Rule 506(b) exemption in effect now), an issuer may rely on self-certification that an investor was accredited. This typically was obtained by asking the investor to complete and sign a questionnaire. The SEC specifies now that under Rule 506(c), the reasonable steps the issuer must take to verify that its investors are accredited include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, and credit reports. For individual investors, tax returns, pay stubs and W-2s readily document that the investor satisfies the accredited investor minimum income requirement. If an investor is not willing to provide this type of information (and many are understandably reluctant to, particularly because self-certification has been the standard for so long), the issuer should rely on self-certification and not use advertising or general solicitation in connection with the offering.

Advertising and general solicitation can be powerful tools for your fundraising efforts. Please let us know if you are considering using advertising in connection with your securities offering.

Written by: Roland Wiederaenders

FoundersFirm.com

FoundersGuide: Make the Most of Your Time

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Communication is key to most successful interactions. It is especially important when your attorney is charging hourly rates, or more importantly, trying to distill all necessary information from you in order to best represent you and your interests. Face to face meetings are a rewarding and essential part of the attorney client relationship. In person interaction develops the bond that breeds the trust necessary for open and clear communication to take place and move a founder or business owner toward their goals.

As attorneys, we are counselors, but we are constrained by time when meeting with our clients. First and foremost, we respect our client’s time, but even if we spent an entire afternoon with a client, effective communication requires both time and thought. Unclear communication can cloud the attorney client relationship and impede our efforts. The best thing we can do, and our clients can do, to prepare for any meeting is to think about the meeting and what we want from it.

So how do we prepare? How should you prepare? Beforehand, dedicate time to thinking about the upcoming meeting. Clarity around the following questions helps us, your attorneys, zero in on what we need in order to better understand your needs.

What do you care about most? Write down what you really value.
What is your goal? Do not try to create a laundry list, but try and clearly describe the goal that you need help on from the person you are meeting.
What are your biggest threats around that goal? Again, no laundry list needed, just try and narrow it down to the key threats and try to identify what is keeping you from accomplishing your goal.

Answering these 3 simple questions will not only help you prepare the development of your better communication in any meeting, but also helps us, as your advisors, focus on where and how to guide our strategy. Taking quiet time and space to prepare for meetings is important because communication is the foundation of relationships. It not only gives you clarity, but helps us better understand your needs, and better cue in on what questions to ask, and information to seek. Through these efforts we aim to understand your needs, and best serve you.

Written by: Santiago Diaz

http://www.foundersfirm.com

3 Tips on Winning Top Talent for Your Startup

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Contrary to what many budding entrepreneurs think, a business start up can compete and win top talent in the market without much cash. Here are three tips for attracting and retaining the best talent.

#TIP 1: LOOK FOR RESTLESS EMPLOYEES LOOKING FOR NEW ADVENTURES

In your search for top talent, pay attention to high potential workers who are looking for a new adventure. Many large corporations tend to stifle talent and many top performers feel restricted in such environments. With a good pitch, you can offer a restless employee a new lease of life by offering them a position in your business start up that will give them the freedom to fulfill their career aspirations. For instance a talented middle level manager will seriously consider a VP post in your startup if you find that this is one of their career aspirations.

#TIP 2: GIVE UP SOME EQUITY FOR TOP TALENT

Facebook and Google both used equity to retain top talent when they were still startups. They offered stock options to some of their initial employees. Even the most talented employees have the desire to own something more than their generous paychecks. Many big corporations do not have this option. Dedicate a percentage of your equity to retain your top talent if you realize that this is what will secure for you the best talent in the market.

#TIP 3: LOOK FOR PEOPLE WITH AN ENTREPRENEURIAL MINDSET

The third way you can attract and retain top talent for your starts up is by focusing on people who have an entrepreneurial mindset. In other words, find fellow entrepreneurs who are yet to launch, maybe because they are held up in an eight to five job, and give them an opportunity to test their wings. A business start up not only needs employees who will stay with it until it matures, but it also needs a set of entrepreneurs who will take the risks needed for it to grow.

Written by: Judson Sutherland, Founder & CEO

Sutherland, PLLC – FoundersFirm.com