Startup Killers -- and Killer Startups
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Transcript of Startup Killers -- and Killer Startups
About Your Hosts
2
Kevin SmithFounder and CEO
Glenn McCraeChief Operating Officer
SEEDCHANGE and
The VAULT
Killer #1: Founders
Bloomberg Businessweek
'People Problems' Sink Most
StartupsBy Karen E. Klein on April 02, 2012
SEEDCHANGE®
Killer #2: IP
SEEDCHANGE®
Intellectual Property Ownership
• Do you have IP?
• Who owns it?
• How do you know?
• How do you keep it?
Daily Conversations in SV
SEEDCHANGE®
Scenario #1: “I couldn’t afford the lab equipment for this
product before but now I have some funding and I’m
ready to leave BigCorp. to start my own company. “
Scenario #2: “My co-founder is a brilliant coder and he
developed all the code for this product.”
Scenario #3: “We are constantly meeting with strategic
partners and potential hires. Should they sign
something?”
Prove You Own Your IP
SEEDCHANGE®
Intellectual Property Issues
•Corporate Invention Assignment & ConfAgmt.
•Founders Agreement
•Startup Invention Assignment & Confi Agmt.
•Non-Disclosure Agreement
Killer #3: Accounting/Compliance
• Open business banking
account
• Separate personal and
business expenses
• Keep records of receipts
and invoices
• Be mindful of tax obligations
• Collect payments
• Select payroll provider
• Stay on top of stock records
Killer #4: Structure
SEEDCHANGE®
Company Creation:
• S-Corp, LLC, C-Corp or LLP?
• Arizona, California, Delaware or Nevada?
• 1mm, 5mm, 10mm or 20mm shares?
• 1, 2, 3 or 6 directors on the board?
• Does a(n) [Arizona/Delaware/Nevada]
corporation have to register in California?
• Board meets 1/wk., 1/mo., 1/Q or 1/yr.?
Incorporate in Delaware
SEEDCHANGE®
Company Creation:
• C-Corp
• Delaware
• 10mm or 20mm shares
• 3 directors on board
• Register in California
• Conduct Board quarterly meetings
Killer #5: Stock
SEEDCHANGE®
Issuing Securities:
• Vesting
• IRS filing
• Friends and family
• Debt or equity – what’s the difference?
• “Do we have to file anything?”
Restricted Stock Agreement &
Convertible Notes
SEEDCHANGE®
Issuing Securities:
• Vesting: 4/1
• 83(b): 30 days!
• Friends and family: Accredited only
• Debt or equity: Debt, then equity
• File with the state, file with the SEC
It’s Not Rocket Science, But…
SEEDCHANGE®
“Starting companies is like launching a rocket:
If you’re off 1/10 degree at launch,
you’ll miss your target completely.”
Founders Agreement
Invention assignment, confidentiality and non-disclosure
agreements
Segregate accounts/understand compliance obligations
C-Corp in Delaware
Restricted stock agreements + vesting
+ state/federal filings
Convertible notes with accredited investors
Thanks and Contact Us
SEEDCHANGE®
Glenn McCrae
415-234-3437
@EarlyGrowthFS
Kevin Smith
1.650.703.3749 (c)
@seedchange