startup mistakes: what to avoid, and how to succeed
DESCRIPTION
Everyone who's been down the startup road has made a mistake or two -- and we don't just mean the sandals-with-socks kind of mistake... Nope, we're talking real mistakes, some of which can even be fatal. The good news? Many of these same mistakes are also avoidable. Key topics include: - Financial forecasting - IP protection strategy - Setting appropriate funding objectives - Issues with resource allocation - Understanding and monitoring your cash burn - Getting your best valuation - Building the essential infrastructure your business needs to scale - and more...!TRANSCRIPT
Startup Mistakes:What to avoid, and how to succeed
Starting up the right way – by avoiding the most common legal, financial, banking, & HR mistakes
Gadiel Morantes Ryan Johnson Emily Levin Ashley Bennett
About Early Growth Financial Services
• Outsourced financial services firm providing small to mid-sized companies with an integrated financial solution
• Three platforms of services and support: transactional accounting, CFO, compliance
• Services include: AP/AR, financial forecasts, cash management, financial statements, monthly close, 409a valuations, taxes
• 200+ successfully funded clients nationwide• #5 Silicon Valley Business Journal Fastest Growing Private
Company Award 20132
About SBL Counsel
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• Boutique transactional practice that caters to small and middle market in three practice groups: Silicon Beach Legal, Business Law & Strategy & Lifestyle Brands & Services
• Services range from advising emerging businesses to facilitating complex business transactions
• Our Silicon Beach Legal group offers assistance with respect to structure, capitalization and operation
• “Big firm" understanding with “small firm” personal dedication and responsiveness
• Managing attorney has 10 years of deal transaction experience
Presentation OverviewUnderstanding the most common startup mistakes can help improve your chances of startup success
• Mistakes happen, but…• Common startup predicaments• Lack of preparation• Fundraising blunders• Financial issues• Lack of infrastructure• Hiring mistakes• Final thoughts• Q&A
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Resource Allocation, Financing, and Personal AttentionCommon startup predicaments
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Problem SolutionAllocation of Resources: You need resources to provide for development and marketing; you also need resources to protect your IP and position yourself for investment.
Carefully gradate each stage of legal protection that you need at each stage of your development so you can budget your resources accordingly.
Financing: You need to raise capital to fund your efforts, and the proper documentation to show your sophistication
Find trusted legal and financial advisors who can identify your current needs and provide the right time-tested tools to navigate the fundraising process.
Personal Attention: You appreciate the contract templates that some firms provide you, but you need a reliable contact that is willing to answer your many questions about how they are to be implemented.
Establish your need for personal attention and take the firm for a test drive to make sure it is the right fit by sitting down face to face, to see how well you are able to communicate.
Lack of PreparationWith proper planning, you can easily avoid the most common mistakes startups encounter during the early stages
• Business planning• Legal formation and
founders’ equity grants• Forecasting and expenses• Selecting business partners• Intellectual property (IP)
protection strategy
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Fundraising BlundersVC, angels, bank debt, crowdfunding…when you’re ready to raise funds, clarity is key
• Valuation• Funding structure• Funding objectives• Negotiating terms• Investor management
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Financial IssuesBusiness is money – so careful financial management and accurate financials are essential
• Cash management• Checks and balances• Cash burn
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Lack of InfrastructureTo build a thriving startup, start with a solid foundation comprised of practical and flexible systems and processes
• Legal infrastructure• Accounting and finance
infrastructure• Banking infrastructure• HR infrastructure
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Hiring MistakesBuilding the right team and keeping them motivated is crucial for success – not to mention it’s probably your largest expense
• Hiring slowly – identify, interview, accept
• Firing quickly – manage, evaluate, terminate
• Compensation
Equity Ranges for Non-Founders
COO 2% - 5%
CXX 1% - 3%
VP of Engineering 2% - 4%
Other VPs 1% - 3%
Directors 0.75% - 1.50%
Key Engineering Roles 0.25% - 1.50%
Final Thoughts
“It may seem counterintuitive to think that something as disruptive, innovative, and chaotic as a startup can be
managed or, to be accurate, must be managed. Most people think of process and management as boring
and dull, whereas startups are dynamic and exciting. But what is actually exciting is to see startups succeed
and change the world.”
-Eric Ries, The Lean Startup
