If you are seeking VC assistance to get off the ground, absolutely get yourself a copy of "The Entrepreneur's Guid to Business Law" by Bagley and Dauchy. It won't replace a good layer, but it will get you conversant enough to know what most of the issues are.
Also get a good lawyer. Interview several and ask for a reference or two. There are a lot of law firms that seem really good, but are in reality over burdened by the amount of activity going on right now in software and the Internet. There are some firms that will take you on deferred payment if you have a solid business plan. Some will even offer to offset fees in exchange for stock later down the road. Shop around. A good lawyer is essential, especially when you are dealing with VC.
Some tips from the front line:
1) Definitely pick a CEO and differentiate duties. In a start up, many of the founders will be doing many things, but make sure that one person has the eventual say. The previous poster is absolutely correct in stating that the CEO's main dities will be in raising money and forging relationships. If someone on your current management team can't do this, find someone who can.
As a startup, many times you see founders acting as "partners", each giving their input to every decision. Reaching a general consensus is a good thing to get everyone involved, but don't operate democratically, nothing will get done.
2) The previous post summed it up: Divide the equity equally amongst the founders. This also means that you should look closely at each founder. Some one who leaves after the first month because they were marginal in the first place can return to cause problems. Wayward founders can become a legal nightmare if you are successful. Equal equity is important to give a sense of fairness to all the founders. If you deviate from this, make sure that there is a real good reason for doing so.
3) Get your elevator pitch down. This means basically that you can powerfully explain what you company does to someone sharing an elevator with you. If it takes you five minutes to explain what the company does, then you need to do some rethinking! Keep it simple and powerful. Ideally it should be explained in a single sentence like, "We aim to be the Amazon.com of snack foods."
4) Think angel. For your first round of money, unless you have a VERY good business plan or an amazing management team (or both!) most VC will not touch you. There is a lot of hype about how much VC money is floating around, but the reality is that they are very selective in who they invest. Angels are your best bet for the initial seed round until you have something to show.
5) Initial valuation. Be careful. With a good idea, a good BP, and a capable management team, you should be able to get as much as a $5 million dollar valuation. But don't shoot too high. If you get too high a valuation, the next round investors will laugh at you. And if they come in at a lower valuation, you will definitely piss off the initial investors (not to mention invoking any legal nasties like ratcheting clauses that will probably be a part of your agreement). Moral: get a realistic valuation. Seek out angels first, unless you really think you have the Right Stuff(tm). In that case, go for it. There are a lot of good VC and they are indispensible for both cash and industry contacts and management assistance.
6) Don't get discouraged by competition! If you have a good idea, chances are that there are 20 other startups moving at the same time with a similar idea. Plan to execute quickly and make sure you do it better. Darwin works overtime in this economy, so be ready for it. But don't get discouraged by competition. Its inevitable and makes you work harder to make a valuable product or service.
7) Lastly, don't be afraid to admit you don't know something. The last thing that investors want to find out is that you lied to them about something. Be honest and frank and you might find that someone can get you your answer or provide a resource to assist. No plan is perfect. No team is perfect. And they know it.
Good luck to you all! Its a hard, long and frustrating road to start your own company, but the rewards are worth it. Even if you "fail" you take away very important lessons and experience to use next time.
This year will be the first full moon to occur on the winter solstice, Dec 22, in 133 years. Since a full moon on the winter solstice occurs in conjunction with a lunar perigee (point in the moon's orbit that is closed to Earth), the moon will appear about 14% larger than it does at apogee (the point in it's elliptical orbit that is farthest from the Earth). The Earth is also several million miles closer to the sun than in the summer. Sunlight striking the moon is about 7% stronger. This makes it brighter. Also, this will be the closest perigee of the moon of the year (since the moon's orbit is constantly deforming). If the weather is clear and there isn't a snow cover where you live, it is believed that even car headlights will be superfluous.
On December 21st, 1866 the Lakota Sioux took advantage of this combination of occurrences and staged a devastating retaliatory ambush on soldiers in the Wyoming Territory. In layman's terms it will be a super bright full moon, much more than usual AND it hasn't happened this way for 133 years!
Slashdot Mirror
If you miss the show, you can still get it on DVD and VHS sometime around November 15th from here.
Also get a good lawyer. Interview several and ask for a reference or two. There are a lot of law firms that seem really good, but are in reality over burdened by the amount of activity going on right now in software and the Internet. There are some firms that will take you on deferred payment if you have a solid business plan. Some will even offer to offset fees in exchange for stock later down the road. Shop around. A good lawyer is essential, especially when you are dealing with VC.
Some tips from the front line:
1) Definitely pick a CEO and differentiate duties. In a start up, many of the founders will be doing many things, but make sure that one person has the eventual say. The previous poster is absolutely correct in stating that the CEO's main dities will be in raising money and forging relationships. If someone on your current management team can't do this, find someone who can.
As a startup, many times you see founders acting as "partners", each giving their input to every decision. Reaching a general consensus is a good thing to get everyone involved, but don't operate democratically, nothing will get done.
2) The previous post summed it up: Divide the equity equally amongst the founders. This also means that you should look closely at each founder. Some one who leaves after the first month because they were marginal in the first place can return to cause problems. Wayward founders can become a legal nightmare if you are successful. Equal equity is important to give a sense of fairness to all the founders. If you deviate from this, make sure that there is a real good reason for doing so.
3) Get your elevator pitch down. This means basically that you can powerfully explain what you company does to someone sharing an elevator with you. If it takes you five minutes to explain what the company does, then you need to do some rethinking! Keep it simple and powerful. Ideally it should be explained in a single sentence like, "We aim to be the Amazon.com of snack foods."
4) Think angel. For your first round of money, unless you have a VERY good business plan or an amazing management team (or both!) most VC will not touch you. There is a lot of hype about how much VC money is floating around, but the reality is that they are very selective in who they invest. Angels are your best bet for the initial seed round until you have something to show.
5) Initial valuation. Be careful. With a good idea, a good BP, and a capable management team, you should be able to get as much as a $5 million dollar valuation. But don't shoot too high. If you get too high a valuation, the next round investors will laugh at you. And if they come in at a lower valuation, you will definitely piss off the initial investors (not to mention invoking any legal nasties like ratcheting clauses that will probably be a part of your agreement). Moral: get a realistic valuation. Seek out angels first, unless you really think you have the Right Stuff(tm). In that case, go for it. There are a lot of good VC and they are indispensible for both cash and industry contacts and management assistance.
6) Don't get discouraged by competition! If you have a good idea, chances are that there are 20 other startups moving at the same time with a similar idea. Plan to execute quickly and make sure you do it better. Darwin works overtime in this economy, so be ready for it. But don't get discouraged by competition. Its inevitable and makes you work harder to make a valuable product or service.
7) Lastly, don't be afraid to admit you don't know something. The last thing that investors want to find out is that you lied to them about something. Be honest and frank and you might find that someone can get you your answer or provide a resource to assist. No plan is perfect. No team is perfect. And they know it.
Good luck to you all! Its a hard, long and frustrating road to start your own company, but the rewards are worth it. Even if you "fail" you take away very important lessons and experience to use next time.
For all you amateur astronomers out there:
This year will be the first full moon to occur on the winter solstice, Dec 22, in 133 years. Since a full moon on the winter solstice occurs in conjunction with a lunar perigee (point in the moon's orbit that is closed to Earth), the moon will appear about 14% larger than it does at apogee (the point in it's elliptical orbit that is farthest from the Earth). The Earth is also several million miles closer to the sun than in the summer. Sunlight striking the moon is about 7% stronger. This makes it brighter. Also, this will be the closest perigee of the moon of the year (since the moon's orbit is constantly deforming). If the weather is clear and there isn't a snow cover where you live, it is believed that even car headlights will be superfluous.
On December 21st, 1866 the Lakota Sioux took advantage of this combination of occurrences and staged a devastating retaliatory ambush on soldiers in the Wyoming Territory. In layman's terms it will be a super bright full moon, much more than usual AND it hasn't happened this way for 133 years!