Silicon Valley Entrepreneurs - East Message Board › DOs & DON'Ts of STARTUPs

DOs & DON'Ts of STARTUPs

Peter
Wiz4.biz
Group Organizer
San Jose, CA



Talk at Startup Meetup – 05/05/11

Our Speaker for Thurs 05 May was Thomas Hong, CEO Consultant & Serial Entrepreneur.

He talked about the DO's & DONTs of “Starting a Company” (ie, writing your Business Plan, building your Team & finding your Funding).

Use an Executive Summary to provide an overview of the company – including your Mission & future Vision. DO: share it with many savvy friends & others, to get feedback on what they think of the idea. DON’T: ask for a NDA. It’s not the idea, but how you implement the vision and bring it to market that’s most important.

Create a Business Plan to define the opportunity and how you will take advantage of it. A Biz Plan serves as a guide of how you run the business and is reviewed & revised periodically, to ensure you’re on track. DO: Pay particular attention to the Financial Plan to ensure you have sufficient Cash Flow to survive, until you thrive! Don’t go into too much detail, because Investors will be reluctant to read a very long detail plan.

Pick a Team where the co-founders see your Vision and share your passion. DO: 1) get 2-3 people to develop your concept. 2) get Sales/Marketing expertise definitely prior to launch – in the planning stage (if possible) - to create the Marketing Plan. But as CEO, get out there and talk to Customers to see what they like & don’t about it – first hand. [Are you cheaper, better, faster?] DON’T: 1) have “equal” Partners. The CEO must be in charge. 2) a Financial CFO may not be needed until the company is big enough. Do it yourself early on, In fact, do it all yourself in the beginning – Market Research1, Product Demos, etc, so you learn all about every aspect of your business. You’ll know how it all works together and it will help you to pick & manage your staff. NOTE: 1) Look for as narrow a niche as possible, so you can dominate it.

Equity Vesting: DO’s 1) establish an Equity Plan early to have a "Road Map" for equity distribution as the company grows. 2) assign equity to employees based on past and/or expected contribution. 3) allocate small portion at "initial vesting”. 4) allocate another portion for linear monthly vesting over a long period of time (ie, 48 months), 5) allocate about 20% to 30% equity for future key employees, and Board Directors. 6) allocate some equity to be awarded to employees for outstanding accomplishments (ie, significant revenue performance or product development ). DONT: assign “equal equity” among Co-Founders, people are unequal in knowledge, experience, talent, and contributions.


Stages of Funding

1. Bootstrapping – self-funding often with the help of Family, Friends & Fools - $10Ks to develop & prove your product/ service and get a few paying Customers

2. Angels - $100Ks after product works & is proven to some paying customers

3. VCs - $Ms after you have a proven product with a growing/paying customer base. You can now project high revenue growth, and with significant fund infusion, you could add employees and support a more aggressive marketing effort.

Create a Pitch to present your business model to Investors. Keep it short [10-15 slides]. Focus on PSR [Problem, Solution, Results]. Also include your Vision, Market, Revenue generation, Management Team. Why do you need Funding? How will you use it? What is ROI?

NOTE: The best time to ask for $$ is with a proven Business Model that’s growing nicely [when you don’t really need it]

Contact Thomas Hong for more information or if you’re interested in using him as an Adviser. Thomas@BoardofCEOs.com (408) 455-0170


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