8 Mistakes Founders Make
February 26, 2013
12:00-12:45pm
You have the next billion dollar idea. Now you have to transform your idea into a company.
Our friend Bob Bishop of Goodwin Procter can warn you about the Top Eight Mistakes founders make and how to avoid them before they happen.
Experts:
Bob Bishop - Goodwin Proctor
1. Founders Workbench
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A free, online resource to help entrepreneurs navigate many of
the legal and organizational challenges faced by start-ups
•
Resources include the Capital Calculator, Deal Dictionary,
Document Driver, and Founders Workbench blog
•
Site includes self-service tools for generating initial company
incorporation and related documents
Legal Standard of
Excellence Award Winner
Web Marketing Association
1st Place
“Your Honor” Awards Web
Site Winner
CIO 100 Award Winner
for Information Technology
Department
4. 8 Mistakes Entrepreneurs Make (cont d)
1. Failing to Pay Attention to Corporate
Formalities
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Formation
Stock Issuance
Founder Agreements
Give corporate and legal matters the same
respect as your source code/lab notebooks/
engineering documents
2
5. 8 Mistakes Entrepreneurs Make (cont d)
2. Complicating the Formation Process
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KISS Principle
Choice of entity (corporation vs. LLC)
S corp vs. C corp
Where to incorporate
3
6. 8 Mistakes Entrepreneurs Make (cont d)
3. Refusing to Subject Founders Stock
to Vesting
• Founders departure triggers repurchase of
some shares by company
• 83(b) elections are critical
• Transfer restrictions – ROFR and IPO lock-up
4
7. 8 Mistakes Entrepreneurs Make (cont d)
4. Dwelling on Valuation
• Focus on winning before worrying about your
share of the win
• A company never went out of business
because of dilution
5
8. 8 Mistakes Entrepreneurs Make (cont'd)
5. Failing to Raise Enough Money (for
fear of dilution or otherwise)
• Everything costs twice as much as you think it
will
• Everything takes twice as long as you think it
will
• Management needs to run the business
rather than be preoccupied with fundraising
efforts
6
9. 8 Mistakes Entrepreneurs Make (cont'd)
6. Spending Money Too Quickly
• Hire conservatively and purposefully
(programmer vs. CFO)
• Consider equity compensation (with vesting)
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10. 8 Mistakes Entrepreneurs Make (cont'd)
7. Failing to Pick Advisors Who Add
Value to your Business
• Investors
• Directors
• Service Providers and Advisors
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11. 8 Mistakes Entrepreneurs Make
8. Failing to Adequately Protect Your
Intellectual Property Assets
• Rights of former employers
• Rights of consultants and other third party developers
• Lack of adequate trade secret protection (NDAs)
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