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Even in a strong market, raising venture capital financing is a pretty tough task. So, buoy up your resources by exploring our Venture Capital guide. Discover venture capital myths, why who you know matters, and how to make the most of the resources and human capital you have on hand.
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A startup incubator, accelerator and soon to be coworking space located in downtown Long Beach, CA.Mission:
To provide a physical coworking location in Long Beach, CA coupled with startup acceleration and incubation under the direction of 30+ year serial entrepreneurand publisher Stephen G. Barr of SGB Media Group & Boardroom Advisory Services.
Our mission is to assist emerging technology start ups from conception through IPO, merger or sale by serving, guiding, advising and governing their advisory & director's boards on a fee or equity consulting basis with a focus on current best practices, ethics and prudent leadership principles.
DescriptionStartup Hive™ is a startup incubator and accelerator to be located in Long Beach, CA consisting of a group of private investors and mentors assembled and managed by Stephen G. Barr and Boardroom Advisory Services . Please see the "Apply" page to submit your startup for consideration to the Hive!
We are currently in formation stage and seeking investors, board members, collaborators, a permanant location in Downtown Long Beach, CA and of course startups!
Startup Weekend is a global network of passionate leaders and entrepreneurs on a mission to inspire, educate, and empower individuals, teams and communities. Come share ideas, form teams, and launch startups.
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What Is Start-UP TV Show About? Start-Up is television program focused on highlighting small businesses across the country, interviewing owners and founders, delving into the how and why of small business, and inspiring others to take the leap and start their own businesses. Get Your Own Business Started!
Thinking of creating a startup? One of the first things you will need to do is select who is coming on this journey with you. You make the decision while everyone is enjoying the thought of fame and fortune, then have to stick with it over years of hard graft, late nights and dwindling bank accounts. It’s not that different from marriage really, and should be taken as seriously. In many ways it is the most critical decision you make because let’s face it, even if you get your product wrong a great team can find a way through.
The big questions are, how many founders and of what skill sets? 1. The number
If there was a magic number of founders that magic number would be 2. There is considerable power in the bond between two people working towards the same goal, but from different angles. Two people have to settle differences quickly. Much like a marriage, you bring a third person in and all sorts of bad things can happen. With three or more founders you can get politics, lobbying and ganging up.
Think about all the great companies, Microsoft (Bill Gates and Paul Allen), Apple (Steve Wozniak and Steve Jobs), Oracle (Larry Ellison and Lane), Google, HP etc.
There is nothing to say you can’t give shares to a bunch of different people, as long as there are two people running the show.
2. Skills
If there was one right answer that answer would be Development and Sales. One person builds the product and the other sells it. We all know that two introverted technical guys will create an amazing product and fail to sell it. There is always a component of selling or marketing which needs to be done and you need that skill set on board from the start. Why the start? Because people with sales and marketing skills will help you design a product which will be easy to sell. For example a person with online marketing skills will know how to design a product to fit the unique challenges they will eventually encounter.
Once you have that core blend of skills it is worth balancing them with the amount of work that needs to be done. If you have a massive amount of development work to be done, it helps if both of you can code (for example).
3. Date First
Most successful marriages start with a successful period of dating. If you last a couple of years you have proved you can work through problems together as a successful team. The same could be said of founders, before Bill and Paul founded Microsoft they were school mates and later close friends. The two Steves who founded Apple were best buddies. They knew they could work together, because they already did.
So look to people you already know and trust. You will be in a better position to judge what they bring to the table, and wither you will be compatible over the long term.
4. Passion
While larger companies run on money, most startups actually run on passion. Passion replaces a regular pay check, an office and a large team. Therefore passion is something you need to forecast and manage as closely as a functioning company watches its cash flow.
You need to pick passionate people with the right skills. Both skills and passion are important. Without skills you won’t create anything worthwhile, without passion you will give up before you succeed.
This ties nicely back into the point about friends making good co-founders. Friends enjoy each others company, they often get passionate about the same things. You may end up enjoying the work just because you are spending time with your friends. The reality is there may not be anything more to enjoy in the first few years of a startup, so grab hold of this. Good founders will keep each other passionate and motivated through the hard times.
In summary
When it comes to co-founders don’t settle for anything less than the right fit. Hopefully this will be a long term relationship, any lingering doubts you have now will destroy the relationship later. Look at people you already know and enjoy spending time with. Make sure as a team you have both sales and development (or service, product sourcing etc) skills.
When you combine that with enthusiasm you have a winning team.
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Here at StartupDigest we read a ton of books. Here are some of our favorite books for entrepreneurs, hackers, and people in the startup community.Founders at Work
(From the reviews) If you have ever considered a start-up you should definitely read this book. It’s like picking the brains of some very experienced entrepreneurs. Anybody that has already tried their hand at start-ups will recognize the value of this book. Most will probably feel like I did, and wish that they had had this book before they started their first company. It could have saved me many painful lessons (both financially and personally). Reading these interviews is like having 32 mentors.
Get this bookInfluence: The Psychology of Persuasion
(From the reviews) Cialdini believes that influence is a science. This idea attracted me. As a rhetorician, I have always thought of persuasion as more of an art. Cialdini, however, makes a first-rate case for the science point of view. But maybe most importantly, he makes his case in a well-written, intelligent, and entertaining manner. Not only is this an important book to read, it is a fun book to read too.
Get this bookThe Monk and the Riddle : The Education of a Silicon Valley Entrepreneur
(From the reviews) So, here’s my attempt at summarizing the book. It’s a story about a business plan being pitched by a budding entrepeneur that Komisar is reviewing for a VC friend. The (factitious…I presume) story includes Komisar’s personal perspectives about how one’s career interacts with one’s life and passions, how his own career, life, and passions have evolved together, and how VC’s look at business plans / ideas. If you need more from your job than a wage, you will likely find some pearls of wisdom in this story.
Get this bookHackers and Painters: Big Ideas from the Computer Age
(From the reviews) In this volume Graham covers a range of topics, though all are, understandably, centered on computers. Why nerds are unpopular at school, and what this demonstrates about our eduction system; why program in Lisp; the importance of “startups”, programming languages and web development are all touched on. At the same time he covers topics less techno-centric such as heretical thinking and speech. wealth creation and unequal income distribution.
Get this bookThe Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything
(From the reviews) This book can be likened to a quick reference guide for starting a business and useful strategies: has just what is needed without heavy-duty or dry language. It is, however, larger than most quick guides, but a fast and easy read into the world of startups and dealing with VCs. If a VC isn’t involved, the book provides valuable tools and ideas to help with any business. However, technology start ups seeking VCs will benefit most.
Get this bookHard Drive: Bill Gates and the Making of the Microsoft Empire
(From the reviews) This is a relatively short book and an easy read. Frankly it is a must read for anyone running their own business and or in the Tech field. Gates is the statistical anomaly who sits at the very pinnacle. He is perched even above Warren Buffet the financial guru who is at least 20 years older than Gates. But Gates was astute enough to buy DOS for $50,000. and then had the business smarts and drive to market and sell the product. He was a hands on manager working long hours and a technical leader.
Get this bookHow I Raised Myself from Failure to Success in Selling
(From the reviews) As a person who resisted learning about sales for years and years and even more years, I have to admit that this book is enlightening. When I finally realized, much to my surprise, that selling is about effective communication, my whole perspective changed.
Get this bookThe Art of Profitability
(From the reviews) This book is focused on explaining 23 different models of profitability that different firms have followed. The author uses the realtionship between a wise mentor and an eager mentee to take the reader through the process of understanding the different models. The book is aimed at describing and giving the reader some insight into each model; it is not an in depth analysis of profitability.
Get this bookBuzzmarketing: Get People to Talk About Your Stuff
(From the reviews) The author, Mark Hughes, was a vice president of marketing at online retailer Half.com. Using a small advertising budget he drove his company’s number of users from zero to 8 million in three years. His secret: he transformed the company into a magnet to media attention.
Get this bookTweet @StartupDigest to recommend your favorite books for the startup community.
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Posted on 09. Mar, 2012 by BMB in Uncategorized
March 8, 2012
For immediate release
NEW SITE HELPS MATCH SMALL BUSINESSES WITH EXPERIENCED ADVISORS
Boardmybiz.com LLC Offers Unique Model for Helping Entrepreneurs Find Advisory Board Talent
Boardmybiz.com, a community for online matching for business owners with potential advisory board members, has launched its Web site. The site serves as a platform matching entrepreneurs looking to create a board of advisors with individuals seeking to serve as an advisor. The site also allows those looking to connect with businesses to offer professional services.
Kathy Murray, CEO of Boardmybiz.com, says, “Small business owners need an advisory board but it’s not always easy for them to put one together – it takes time and attention. Boardmybiz.com offers a one-stop venue to break down these barriers, giving them access to advisors beyond their limited circle of friends and family.”
The company’s aim is to grow its online community to create a viable tool for business owners, advisors and professionals. Within the first few weeks, there are already 200 business owners and advisors actively using the service.
The partners running Boardmybiz.com are themselves entrepreneurs with a unique perspective on how businesses succeed. Their goal: to help other entrepreneurs benefit from having access to the right advisory board members to move their businesses forward.
Boardmybiz.com Founder Bill Bubenicek says, “By finding the best advisors and building their boards, small businesses owners can increase the value of their companies while also unlocking growth potential throughout each phase of their development. Advisory boards have proved critical to my other business ventures where they have been instrumental in their ability to effectively grow and brand themselves.”
CTO Rod Smyth says, “BoardmyBiz.com combines the key elements of social networks to create a vibrant community of small business professionals that really sets us apart from other listing services. We look forward to building critical mass and adding features to underscore the strength of this community of entrepreneurs.”
About Boardmybiz.com
Boardmybiz.com launched by Bill Bubenicek, Kathy Murray and Rod Smyth in February 2012 and based in New York, aims to be the go-to social network for matching business owners with those seeking trusted advisors to work on strategy, execution and growth. The site registers and refers small business owners with potential advisory board members and professional service providers, and features user-created business pages, the ability to rate advisors and professionals, discussion groups, and the ability to refer others to the site.
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Please contact Kathy Murray at kmurray@boardmybiz.com and 646-662-3725 with inquiries.
Related posts:
- Real-Life Advisory Boards @ Work
- Taking Small Business to the Next Level
- The number one business advisor network is back!
- Business Coach in Business Group Leads to Great Discussion
- Diary of a “Mad” Entrepreneur – Entry # 3
Tags: advisor, board, business, Entrepreneur, growth, networking, pressrelease, smallbiz, startup, talent
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Update: Also see our 40-minute interview on this topic.
Picking a co-founder is your most important decision. It’s more important than your product, market, and investors.
The ideal founding team is two individuals, with a history of working together, of similar age and financial standing, with mutual respect. One is good at building products and the other is good at selling them.
The power of two
Two is the right number — avoid the three-body problem. Think Jobs and Wozniak, Allen and Gates, Ellison and Lane, Hewlett and Packard, Larry and Sergei, Yang and Filo, Omidyar and Skoll.
One founder companies can work, against the odds (hello, Mark Zuckerberg). So can three founder companies (hello, @biz, @ev, and @jack). In three founder companies, the politics can be tough — gang-up votes, jockeying for board seats, etc. — but it’s manageable. Four is an extremely unstable configuration and five is right out. When 4-5 founder companies work, it’s because two founders dominate.
Two founders works because unanimity is possible, there are no founder politics, interests can easily align, and founder stakes are high post-financing.
Someone you have history with
You wouldn’t marry someone you’d just met. Date first. Guess which pair of famous co-founders is in this photo:
Go through something difficult, like a Prisoner’s Dilemma or a Zero-Sum Game. If being ethical was lucrative, everyone would do it!
One builds, one sells
The best builders can prototype and perhaps even build the entire product, end-to-end. The best sellers can sell to customers, partners, investors, and employees.
The seller doesn’t have to be a “salesman” or “business guy”. He can be technical, but he must be able to wield the tools of influence. Bill Gates and Steve Jobs aren’t salesmen, but they are sellers.
Aligned motives required
If one founder wants to build a cool product, another one wants to make money, and yet another wants to be famous, it won’t work.
Pay close attention — true motivations are revealed, not declared.
Criteria: Intelligence, energy, and integrity
It’s not the kid you grew up next to. It’s not the person you like the most. It’s not the hacker most willing to work for free.
It’s someone of incredibly high intelligence, energy, and integrity. You’ll need all three yourself, and a shared history, to evaluate your co-founder.
Don’t settle
If it doesn’t feel right, keep looking. If you’re compromising, keep looking. A company’s DNA is set by the founders, and its culture is an extension of the founders’ personalities.
Pick “nice” guys
Avoid overly rational short-term thinkers. There are bounds to rationality. Partner with someone who is irrationally ethical, or a rational believer that nice guys finish first. Be especially careful with the “sales” guy here.
What you don’t know
Business founders who don’t code use bad proxies for picking technical co-founders (“10 years with Java!”). Technical founders who don’t sell also use bad proxies (“Harvard MBA!”). Learn enough of the other side to have an informed opinion. If you’re not seriously impressed, move on.
FAQs
What if the right guy already has his own startup? Convince him to work on yours part-time — he’ll drop his idea once yours gets traction.
Breakups are hard
If you’re going to fall out with your co-founder, do it early, recover the equity into the option pool to keep the company going, and recruit someone else great to fill the missing slot. Build in founder vesting (a.k.a. the “Pre-Nup”) to keep the breakup from getting messy. Building a great company without a partner is like raising kids without a…
Nearly everything I’ve written on this topic applies to dating and marriage. Coincidence?
Go forth and multiply.
Update: Also see our 40-minute interview on this topic.
This post is by Naval Ravikant. If you like it, check out his blog and Twitter.
Thanks to Atlas Venture for supporting Venture Hacks this month. This post is by Fred Destin, one of Atlas’ general partners. If you like it, check out Fred’s blog and tweets @fdestin. And if you want an intro to Atlas, send me an email. I’ll put you in touch if there’s a fit. Thanks. – Nivi
If you believe the blogosphere chatter, the entrepreneur-VC relationship seems strained like at no time in the past. The discussion seems to veer towards the “good versus evil” myth of creepy financiers intent on screwing polymath entrepreneurs out of their hard-earned wealth. Good-versus-evil is not a very constructive way of framing complex debates (remember “the war on terror” and the “axis of evil”?). Most sour VC-entrepreneurs relationships are simply partnerships gone bad, and divorce is never a pretty experience.
I see a lot of misguided commentary out there focused on the wrong issues, such as “how can you ask for liquidation preferences and call yourself entrepreneur friendly?” I am happy to answer that one if you are interested.
What I wanted to do here instead is focus on a few of the clauses that entrepreneurs should absolutely avoid; the wrong tradeoffs which later expose them to really “losing” their company. There are rational explanations for all of these, but as we know hell is paved with good intentions. Here are some of the pathways to hell:
Now we own you: Full ratchet anti-dilution
Anti-dilution says “your company has no tangible value and as result I accept 20% ownership today but if we don’t create value I want some protection on potential share price reduction”. This protection is embodied in a clause called anti-dilution protection which results in additional “bonus” shares being issued where there is a down-round, i.e. a subsequent financing at a lower price per share. You can attack this clause conceptually but if VCs did not have any form of anti-dilution they would set the initial price lower. In other words, you as entrepreneur are getting less diluted today but with some ownership risk if company value goes down (at least that’s the theory, would be interesting to see how prices adjust without anti-dilution).
Anti-dilution is usually mild. Broad-based weighted average anti-dilution says that a number of anti-dilution shares are issued (or the conversion price of the preference shares is adjusted) based on a formula nicely explained by Brad Feld back in 2005.
Here is how you can get really screwed: there is one version of anti-dilution whereby the number of shares issued to the investor is FULLY readjusted if subsequent financings are downrounds. Say you raise $1M at $10 per share and hence issue 100,000 shares to your VC, in exchange for 10% of your company. The next round is at $5 per share; the original VC now gets an additional 100,000 shares issued; in the original cap table, he now owns 20% of your business, before the new money comes in.
This gets nasty when serious money has been raised. Imagine the following happens: the pre-money valuation on your next round is less than the cash you raised previously. Say your company is in difficulty and raises $10M at $10M pre-money, having raised $10M previously. Because the anti-dilution calculation is iterative, guess what, the share price mathematically converges to… zero. Legally it will be set at the par value, say €0.0001.
Your ownership just evaporated.
If your VC understands how the world works, you will sit around the table and hammer out some deal. But your negotiating position is weak. If on top of that a new CEO has been hired, the rational optimisation is to keep as much equity free for the new sheriff in town and not for the original entrepreneur. You are now relying on people’s ethics, sense of fairness, or belief that long-term you don’t build venture firms by screwing entrepreneurs. In, say, 75% of cases, good luck — few people really believe in win-win in these situations.
Note that there is usually a shared responsibility in full-ratchet: the entrepreneur is obsessed with maximising the headline number and accepts anti-dilution as a tradeoff (“OK, I will agree to this silly price but you better not screw up”). Often a Pyrrhic victory.
“Thank You and Good Luck”: Reverse vesting without good leaver clause
First, let me state that reverse vesting matters to me. I would not do a deal without some form of reverse vesting. Here’s why: I invest in three founders, two of which work hard and one of which decides to leave to open a restaurant. I (and his co-founders) are screwed. The guy or girl who left gets a free ride on the back of everyone else. He needs to be replaced, for which additional stock options are required. This is why reverse vesting exists.
The usual reverse vesting that you will find in our term-sheet is: quarterly reverse vesting of founder stock over 4 years. This is watered down or adapted based on individual circumstances.
I have seen cases where reverse vesting is not qualified: you leave the company, you lose your stock. That is a very toxic clause, and you should never accept it. You are now fire-able at will and there is even an economic incentive to do so. Unfair and abusive.
So don’t find reverse vesting per se, but fight on the details. Can a percentage of your stock be considered yours? Probably. Make sure there is a good leaver / bad leaver clause. You get fired for cause, you lose some. You decide to leave, you lose some. The company decides it does not want you around anymore, you keep it. The need to be watchful of the details; sometimes you will be asked to sell your stock at “fair market value” when you leave, or at last round price etc. Negotiate hard.
Continued in Part 2 with limited exercise period options, multiple liquidation preferences, cumulative dividends, and the trap of complexity…
If you like this post, check out Fred’s blog and his tweets @fdestin. If you want an intro to Atlas, send me an email. I’ll put you in touch if there’s a fit. Finally, contact me if you’re interested in supporting Venture Hacks. Thanks. – Nivi
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