Things I wish someone would have told me before I founded my first startup

For years I was designing my future baby in my mind. After a long and exhausting road of mastering a certain hobby, I knew I could pave a much smoother and less bumpier road for future enthusiasts. My idea would change the world. I won’t share what exact hobby I’m talking about, because I don’t won’t to hurt my company’s brand. But my story is real, and I wish I could go back in time with the knowledge I have today.

You see, I’m a software developer. A good software developer. Some might even say a great one. And while I don’t want to brag and start off by presenting an image of a condescending person, I believe that part of the problem that I’ll illustrate here, stem from the huge self-confidence I have in my mental skills. Because sometimes, when you get used to years of seeing 2 steps ahead of everyone, your advantage might make you numb, and when your guards are off, you are more prone to error.

Team Players

If your idea is worth anything, you will need a team to build it. It doesn’t matter if you are the best engineer, businessman, salesman, marketing wiz, product manager and customer success person in the entire world. You do not have enough time to wear all those hats, and every minute spent on one role is a minute not spent on a different role.

Okay, telling you to choose a great team is an obvious advice, and I‘m not wasting my time to tell you things you already know. The more crucial thing is understanding you could NEVER know on point zero that the team you chose is great. You can barely guess how YOU will function under the most basic start-up pressure, much-less, when the company is on its beam-ends. When the company’s bank account is empty because you didn’t raise yet or what you did raise is already gone. When you get “no” number 30 in the end of another tiring fund pitch. When you get awful reviews from users on your alpha versions. When you work alone from your home and need to raise all your will power and mental strength to stay focused without a boss forcing you to come to the office from 9:00 to 18:00. When your bed and television are 5 meters away, persuading you to come to them and relax a bit. You can work on it later right ? Your project isn’t going anywhere. So if you can’t know how you are going to function, even though you know yourself since the day your were born, I can assure you, you have no idea about how your team members will manage.

The Pieces of the Puzzle

Here is a list of truths which you should know:

• Even if you’re sure or almost sure about something, it doesn’t mean your team members will feel the same.
• The fact that you are a “man of your word” doesn’t mean your team members hold the same values.
• When someone tells you he possesses a certain skill set, even if it might sound 100% genuine, and you are a really good judge of character, you will never know the truth until you will see him in action. He might be lying, he might be self unaware (most people are), he might being raised by new-age mantras telling him “You can do anything! You’re great in everything! Don’t listen to anyone who tells you differently!”. It doesn’t matter. You can never rely on words.
• You will try to avoid taking business disagreements to court as much as you can. It costs money. It costs energy. It litters the company’s reputation in future due diligence. It ends relationships in a really bad way.
• Having an under-functioning co-founder in your startup, which holds the same amount of equity like other functioning members, will poison the other members’ motivation and kill any fund raising opportunities from savvy investors.
• “Where I sit is where I stand” — people can find any logical or illogical excuse to explain why they acted right, why they deserve to be paid so much or why they deserve to hold a certain amount of equity in the company. They won’t necessarily be lying. It’s easy to be dishonest with yourself or to see reality in a very specific way, as long as that way benefits you.

Putting all those pieces together will bring you to this conclusion — When things will go south, you can’t count on solving the issues with your co-founder by reasoning. The legal court is also not your saviour. You need an internal solution.

There are 2 easy and well-known mechanisms that you need to take from this blog post. Mechanisms that if I used before founding my company, it would be in a completely different place today. Here they are:

1. Do not form a company board consisting only of 2 members — You and a friend have the greatest idea and you want to build it together as two co-founders? You’re in for a mess. The board of a company is its most powerful organ. There is no way you could fire a non-performing co-founder when it’s only the two of you amending the board seats. Its even a good rule of thumb to always have an odd number of board members, so you won’t end up with “deadlocks”, i.e. ties in votes, but creating a board of 2 people can have devastating consequences.

2. Reverse Vesting — If you do not know what it means, read about it! This is a MUST. If you found a company and divide all its shares between the co-founders on day one, with no buy-back or other fallback mechanism, you just made one of the biggest mistakes in your life. If you want to get rid of a co-founder that got all his shares upfront, your company is basically dead. No investor with a bit sense in his mind will fund a company in its early years that has so much equity held by a person that doesn’t work there anymore.

If you never heard about these two mechanisms, trust me, I just saved a few years of your life. When I founded my company, I was in love with my idea. It was exactly what the world was missing. It was revolutionary. I was acting like a woman who really seeks a romantic relationship in her life, who really wants to get married and have children. Her desire for love blinds her from the bad qualities her partner has.

I looked online for several templates of founders agreements. I consulted a friend that I trusted and who founded a startup of his own, and that’s it. I thought I had everything planned right. “Why would I need to consult a lawyer? It’s expensive and I have Google. I can learn anything with Google. I’m auto-didactic. I absorbed so much knowledge over the years by myself using the internet. Why would this be any different?”. It’s different because I’m emotionally involved. And when you are emotionally involved you aren’t aware that you are emotionally involved. This is not a romantic relationship, this is business, but still, it’s your dream, it’s your baby, and you MUST be emotionally involved.

Aftermath

In the end, we’re just human beings. If I was you right now, reading this on my phone or computer, I would probably think to myself — “Naaaa, no way I would act like that. No one can trick me. I’m too smart to fall for these obvious traps”. Maybe you are. I hope you are. But maybe, just maybe, you shouldn’t trust yourself as much as I did. Learn from my mistakes.

Good Luck!