Startup Killers -- and Killer Startups

KILLER STARTUPS

and

STARTUP KILLERS

#StartupKillers

About Your Hosts

2

Kevin SmithFounder and CEO

Glenn McCraeChief Operating Officer

SEEDCHANGE and

The VAULT

Startup Mortality Rates

3SEEDCHANGE®

What Kills Startups?

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Killer #1: Founders

Bloomberg Businessweek

'People Problems' Sink Most

StartupsBy Karen E. Klein on April 02, 2012

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Founders Agreement

• Who?

• What?

• How?

• How much?

• Why?

• What if?

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Killer #2: IP

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Intellectual Property Ownership

• Do you have IP?

• Who owns it?

• How do you know?

• How do you keep it?

Daily Conversations in SV

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Scenario #1: “I couldn’t afford the lab equipment for this

product before but now I have some funding and I’m

ready to leave BigCorp. to start my own company. “

Scenario #2: “My co-founder is a brilliant coder and he

developed all the code for this product.”

Scenario #3: “We are constantly meeting with strategic

partners and potential hires. Should they sign

something?”

Prove You Own Your IP

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Intellectual Property Issues

•Corporate Invention Assignment & ConfAgmt.

•Founders Agreement

•Startup Invention Assignment & Confi Agmt.

•Non-Disclosure Agreement

Killer #3: Accounting/Compliance

• Open business banking

account

• Separate personal and

business expenses

• Keep records of receipts

and invoices

• Be mindful of tax obligations

• Collect payments

• Select payroll provider

• Stay on top of stock records

Killer #4: Structure

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Company Creation:

• S-Corp, LLC, C-Corp or LLP?

• Arizona, California, Delaware or Nevada?

• 1mm, 5mm, 10mm or 20mm shares?

• 1, 2, 3 or 6 directors on the board?

• Does a(n) [Arizona/Delaware/Nevada]

corporation have to register in California?

• Board meets 1/wk., 1/mo., 1/Q or 1/yr.?

Incorporate in Delaware

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Company Creation:

• C-Corp

• Delaware

• 10mm or 20mm shares

• 3 directors on board

• Register in California

• Conduct Board quarterly meetings

Killer #5: Stock

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Issuing Securities:

• Vesting

• IRS filing

• Friends and family

• Debt or equity – what’s the difference?

• “Do we have to file anything?”

Restricted Stock Agreement &

Convertible Notes

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Issuing Securities:

• Vesting: 4/1

• 83(b): 30 days!

• Friends and family: Accredited only

• Debt or equity: Debt, then equity

• File with the state, file with the SEC

It’s Not Rocket Science, But…

SEEDCHANGE®

“Starting companies is like launching a rocket:

If you’re off 1/10 degree at launch,

you’ll miss your target completely.”

Founders Agreement

Invention assignment, confidentiality and non-disclosure

agreements

Segregate accounts/understand compliance obligations

C-Corp in Delaware

Restricted stock agreements + vesting

+ state/federal filings

Convertible notes with accredited investors

Thanks and Contact Us

SEEDCHANGE®

Glenn McCrae

415-234-3437

[email protected]

@EarlyGrowthFS

Kevin Smith

1.650.703.3749 (c)

[email protected]

@seedchange