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Attention Aspiring Founders: 3 striking facts about startups that should spark warnings!

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3 striking facts about startups that should spark warnings!

85% 

startups launched with family money

 

Initial funding often comes from family and, in most countries, family businesses account for 70 – 95% of all companies. The ProLab case shows how things can go wrong working with your spouse, leading to the extreme of divorce and lawsuit. But some couples like Marla & Barry Beck have secrets to make it work. They “hold primary responsibility for different areas, both at work and at home” and they “take walks every night together”. No responsibility overlap and communication are key factors to success.

entrepreneur spouse

Launching a family business?

  • Are family members the right co-founders?
  • What are the implications on working relationships within the founding team and with future employees?
  • Is starting a company with my spouse even more challenging than with other family members?
  • What safeguards will I set up to preserve personal life?
  • Do I really know the working personality of my relatives?

 

71% 

entrepreneurs who got their idea through previous employment

 

You can easily understand why you would get your idea from previous employment. You know the industry, understand the market, have a strong network of colleagues and customers, etc. In short, you feel well positioned to execute on your idea… until you read the employment agreement you signed when joining your employer and discover very restrictive clauses on non-competition, non-solicitation of customers, non-solicitation of employees, or use of company property (e.g. laptop). The case on Sam Martin & Cathy Slater shows why entrepreneurs should carefully manage their relationship with employers and assess legal risks.

IP

Got your idea through previous employment?

  • Do I understand all clauses in my employment agreement that could pose legal issues?
  • Do I only have an idea or have I already developed some form of prototype on which my employer could claim ownership?
  • Am I adequately planning IP protection? i.e. including IP terms in Founders Agreement, applying for patent before contacting VCs, having employees sign agreements …
  • Do I foresee challenges in hiring people tied to conflicting employment agreements?
  • Should I hire a lawyer now to mitigate legal risks that can arise in the future?

 

52% 

Series-D startups that have replaced Founders by professional CEOs

 

It’s common to see Founders being replaced by professional CEOs. The Wily Technology case questions the decision to replace the Founder Lew Cirne by the professional CEO Richard Williams. So far, Lew had been very successful at leading the company but investors assess he is not the right person to take the startup to the next level, mainly based on Lew’s personality and management style. If you are an aspiring founder, you should think about your personal goals early on. Do you want to be king or rich? Few entrepreneurs achieve both – this is a serious dilemma you should evaluate.

choice

Considering founding a startup?

  • Is your primary goal being king – maximize control over company – or being rich – maximize financial gains?
  • If you want to be rich, how to best plan for exit?
  • If you want to be king, what growth trade-offs are you ready to make?
  • If you ambition to be both, but feel your personality doesn’t fit investors’ expectations, how can you live up to the CEO role?
  • Are you really excited about founding or are you actually aspiring to be one of those professional CEOs?

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