Build a Stronger Startup Foundation
When exactly is a startup born?
Aristotelian logic — the one with nothing but true and false— demands an exact moment in time when a “not startup” becomes a startup. Using the incorporation date is a tempting copout, but it feels wrong: in the minds of most founders their startup is born long before this formality. The simple truth is that founding a startup is an organic, often meandering process of people drawn together by the gravity of ideas and purpose towards a critical mass of passion that leads to an act of creation.
In working with dozens of startups over the years as a founder, angel & VC investor, advisor and director I’ve noticed that the whirlwind of activity surrounding the fuzzy process of startup creation leaves a number of important matters unresolved until lawyers get involved, by which point the very foundation of the startup — the team’s ability to remain strong and effective in the face of an uncertain future — may have been compromised. The prevailing pattern of startups raising several rounds of convertible notes using light paper tends to make things worse, because it allows for further delay in addressing important issues.
Don’t get me wrong: I’m not arguing for more complex legal documents earlier in a startup’s life. I’m arguing for considering a number of key issues related to the formation and long-term evolution of the founding team earlier than lawyers typically are involved. Following a conversation on this topic with a founding CEO, I usually send a few links to “classic”, i.e., old but relevant, posts.
Today I listened to a pitch where, a year into the startup journey, the company pivoted from a B2C model to a B2B model and was doing quite well. However, the CEO was the only person on the founding team with any B2B background: an excellent B2C founding team had become an OK B2B founding team. When to fire your co-founders provides 10 rules for building agile founding teams that can better deal with significant pivots.
I wrote Startup Founder Agreements to answer a reader question: “Simeon, can you tell us how you structure ownership and control so you can fire your co-founders if necessary?” It introduces tools that many founders are unfamiliar with, such as pre-formation agreements, that can bring predictability and clarity to complex situations.
Around that time I got a lot of private feedback from founders who were unhappy with the performance of their co-founders. Ten rules for better founding teams provides some tips for avoiding common edge cases. The best vesting schedule considers the pros and cons of standard and alternative vesting schedules. Founder Agreements — Vesting, Vesting and more Vesting introduces the perspective of an experienced startup lawyer.
Like all “rules” about startups, those of my posts are meant to be broken in the right situations. First and foremost, they are thinking aids for building a stronger startup foundation, rooted in a stronger & stabler founding team, so that you may never have to think about firing your co-founders.
