FOUNDATION OF A SUCCESFUL STARTUP – PART 1

So you’ve founded a startup with you and your buddies working around the table until 2am every night. But before you go on tour, let’s talk about keeping the band together.

First, look across the table. Before you commit to bringing anyone on board, make sure you are aligned or at least recognize each person’s motivations, objectives, working styles, and values. This is going to be the foundation of your company. For example, it’s likely an ex-banker, anti-social prodigy developer, and a retired civil engineer may not have their interests aligned — but they could also create amazing things. We all go into the arena for different reasons. Some people might want better work life balance, while others enjoy solving problems and autonomy, and some frankly just want glory and money. Step one is to either find an alignment and appreciate everyone’s differences — don’t push off or you’ll be hit the rocks sooner or later.

The Elephant in the Room. The first turning point is when we stop being dreamers and friends and everyone gets a percentage. If you have made it this far, it’s time to have an honest discussion. For the equity-hoarders who want to delay contracts and just build the tension in the office, please realize that success is binary. The worst thing you can do is poison the well early. Try to get equity agreements out of the way as early as possible and don’t avoid the topic or pretend you are too busy or it’s too difficult  (you can find a template online). If it’s done early, you can always set renegotiation for the following year. Study vesting schedules and think about adding in a cliff before vesting if you want to derisk.

What you want to avoid throughout the whole process is polarizing the office. Whenever there is a master and slave dynamic or people feel like they are under-appreciated. This is often due to the lack of a controlled, open space for your team to communicate and discuss. The flip side of this dynamic is when a bootstrapping founder becomes jealous of their first hires who view work as mercantile exchange and won’t take less even though he isn’t taking a salary. The culture and aims for growth are up to you.

The trick to navigating through the landmine is to get ahead of it – get everyone to agree on a structure together. If you are really risk adverse, propose a structure you are comfortable with, explain your thought process, and get buy-in from your team.

Process before Progress: During this period, your team will always be extremely busy because there are no shortage of things to do. However, as you are putting out fires, take a step back to set processes in place and look at the organization as a whole.

I realize that a lot of people who are drawn to startups hate reporting and any kind of rules that might slow them down. However, if you set processes in place, it will make your team more flexible and accountable, and ultimately make your business more scalable. For example, if everyone uses Google Drive as a source of truth, you have visibility in each department, and when Billy storms off one day you will still have his work. Or, if you have solid invoicing and expenses processes, anyone can help with accounting and you won’t be waste time scrambling to balance your books in hindsight. More importantly than the retention of data and increased visibility across your team, you will also build discipline and habit into your team by codifying and implementing these processes. This will be crucial to being able to quickly pull together information for investors.