TCN Live - 8 Mistakes Founders Make
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17-Oct-2014 -
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Business
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Transcript of TCN Live - 8 Mistakes Founders Make
• A free, online resource to help entrepreneurs navigate many of the legal and organizational challenges faced by start-ups
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• Site includes self-service tools for generating initial company incorporation and related documents
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8 Mistakes Entrepreneurs Make
Robert E. Bishop
©2009. Goodwin Procter LLP
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8 Mistakes Entrepreneurs Make (cont�d)
1. Failing to Pay Attention to Corporate Formalities
• Formation • Stock Issuance • Founder Agreements • Give corporate and legal matters the same
respect as your source code/lab notebooks/engineering documents
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8 Mistakes Entrepreneurs Make (cont�d)
2. Complicating the Formation Process
• KISS Principle • Choice of entity (corporation vs. LLC) • S corp vs. C corp • Where to incorporate
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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
5
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
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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
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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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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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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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