Two ways to irreparably f***k up your startup
There are just two ways to irreparably f***k up your startup I’m aware of:
1) give or sell the equity to the wrong people
2) building weak (or worse, broken/toxic) culture
Here’s how I see it:
When it comes to your equity — it’s a one-way street. Once it’s gone, it’s gone. Some people might whisper about maneuvers to fix a nasty cap table. But, let’s face it, those are all ugly tricks that don’t really work out the way you want them to in the end.
DOs:
- Avoid the snakes’ den when choosing investors. Those relationships are long and consequential. Investor decisions are ones you’ll live with for years. They’ll reverberate across your startup for better or worse and affect you and your team for a considerable period.
- Hire slowly and thoughtfully. When it comes to your team, it’s your responsibility to curate a crew of individuals dedicated to your vision and your customers and to one another in a positive and productive way. Investing early in an outstanding VP of people who has not just *seen* the movie but ideally *filmed* it once or twice before is a good idea before, not after, you scale-up.
- Spend 2x-3x more of your own time to set up the norms, traditions, and day-to-day behaviors that you want for your company. You get to design the company you want to work for, and that’s amazing. Make culture a priority.
Now, for the DON’T:
- Don’t jeopardize your cap table or your boardroom. Non-standard, bizarre deal terms can be lethal. It might sound like a no-brainer, but seriously, read the standard deal docs for whatever round you’re raising. Download them. Read them. Make sure you understand them. YC’s SAFE, NVCA Series A docs, and Cooley’s Series Seed Equity docs are excellent resources. They are simple enough that you can understand everything without too much effort I promise. Get great counsel from one of the premium Tall Building Attorneys.
- Avoid chasing vanity valuations and Techcrunch headlines to the exclusion of everything else. e.g. a 3x liq pref or strange voting rights or other punitive structure on your deal…those are mistakes that will cost you and everyone you hire very meaningfully. A simple and clean cap table is a wonderful thing
The opportunity to create your “dream job” atmosphere remarkable. Very few get the privilege in their career to build their dream job. But it’s equal parts privilege and responsibility.
Mistakes happen in startups left and right. Ask me or any founder, and we’ll all tell you we make many mistakes all the time. We try to keep them to a minimum. But it’s a part of the program in startups
But for the handful of mistakes from which there is no turning back..those need to be within field of view 24/7 since there’s no “do-over” on them. The good news is it seems like a short list. And cap table and culture are definitely on it
If you found this post useful, you might also enjoy this one: Manage Due Diligence on Your Terms the Right Way
I’m on Twitter @austinogilvie and LinkedIn /in/austinogilvie
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