In continuation of the first post we will now hit on Don’ts. In reading this keep in mind that this advice does not apply to all and there are notable exceptions in which this advice was not followed and it worked out well. For the majority though these are good rules to live by.
- Be paranoid
- Quit your job
- Start a company with family or a best friend
- Don’t split equity equally
Don’t be paranoid
For some reason, people still think ideas are super sensitive and require NDA’s before they will talk in any detail about the solution. Just stop. Frankly, if your idea is that easy to steal then somebody else has probably already had it too. Translation — there is not going to be much investable IP in the company. To paraphrase a famous saying, remember that ideas are a dime a dozen. What matters is the execution. The only person you hurt by not explaining the problem you solve but HOW you solve that problem is you. Your goal at this stage is to get as many data points as possible. Not telling them how you solve the problem is a missed opportunity for great feedback.
That being said, there is a difference in revealing enough detail to receive advice/reactions and going too far and giving up real IP. A good rule of thumb is to have two presentation decks. One should be geared towards sales/funding pitches that you should be comfortable sharing with anyone, and the other should focus on deep due diligence in product/processes that does require an NDA.
Don’t quit your job
I remain surprised by how many people believe that founding a company requires leaping off the cliff & leaving their current job. This is absolutely not true. Most of the initial phases of pulling together a team, building out the idea, validating the market, and possibly even prototyping the product (depending on your resources) can all be done in your spare time. Essentially, before you walk in to pitch to any customer or investor — you can have most of the data points and fully fleshed out deck while you still have a full-time job. Generally, there are two points at which you will have to make a decision on whether or not to quit your job:
- Initial funding is raised: Once investors commit — you must also commit.
- You are generating revenue and the customer pipeline and the business can only grow with your time being committed.
One piece of advice I always give when people are considering the jump is that you can always go back to a big company. If you can afford the risk, take it.
Don’t start a company with family or a best friend
A startup is a roller coaster of craziness. I’ve seen way more destruction in long term relationships (and implosion of the company) than success. When you are just getting off the ground, it’s natural to reach out and recruit the people closest to you. Be extremely careful in considering this move. I recommend you start networking and find the right person for the job vs family/friends who can be easier to convince.
Don’t split equity equally
First and foremost, discuss equity early! Many people are afraid to approach this with co-founders because they don’t want to take the risk of ruining the momentum. After all, you have worked so hard just to convince your co-founders to join and help on this mission. It’s hard to bring up something so sensitive. Do it & do it early! I have seen companies with 4 founders all with equal share because it was “fair”. This leads to chaos and politics when the company moves later down the road and disagreements pop up. The difference in percentage can only be a couple points but there should be an established decision maker early on. How you make these decisions is all specific to your context and situation. Clearly lay this out among your founders early so that you don’t end up with friction when you should be focused on growing the business.
For part 3 we will conclude with “Do’s” and end with a more positive note!