Looks like this new gig is a go! I’ve been working full-time on it for a month now and am enjoying myself. My co-founder and I are setting up a new company and are still several weeks away from having it official. But I’ll provide an overview of the range of activities I find myself doing as CEO of this new company.
As has always been the case with this blog, much of what I write is “old-hat” to experienced entrepreneurs. But they were never my intended audience. The original purpose of this blog was to provide insight for others working at established companies what it is like to leave and search for a new position at a startup. Now that I have done that I am going to extend its purpose by writing about what it is like founding and working at an early-stage startup.
With my new company, the first two orders of business have been to establish the company (from a legal perspective) and to develop a business plan. Below is what I’ve been up to on these fronts over the past month:
Setting up the Company
- Finding an attorney: I tapped the network I had established over the past nine months and received about a half-dozen recommendations/introductions for Boston-area attorneys. I met with them all to better understand each’s experience level, capabilities, and how comfortable I would feel working with each. In general, they all had deep experience with startups and were highly capable. In the end, my selected came down to intangible factors related to my comfort level with the selected attorney. Now that we have one he is moving ahead with registering our company and establishing a variety of agreements involving the three co-founders involving equity terms, confidentiality, invention assignment, etc. (One note of interest – all the attorneys I spoke with operated on a deferred-payment basis for pre-funded startups. What this means is that the startup is billed for services but is not asked to make any payments (except for the third-party expenses) until it receives funding. This is in recognition that early-stage startups don’t have any money and is the attorneys’ way of populating their “client funnels” with startups that will eventually yield some number of paying clients.)
- Picking our company name: This was easier said than done! The professor with whom I am partnering had already selected a name some time in the past. However, once we started using it in practice we realized it was awkward and didn’t work very well. We embarked on a 2-3 week brainstorming session seeking to develop a new name. It wasn’t easy to find one we liked let alone one all three of us agreed on! In the end, we did agree on one that I will disclose once our company is legally established.
- IT stuff: Now that we had our name we needed to set up email accounts, a web site, and a file sharing system. Fortunately, I had been through much of this when setting up this blog and it turned to be pretty easy to do using this blog’s hosting company.
- Equity split: A key item that can impact a startups’ success is the equity split among the founders. If not done in a thoughtful manner that treats all founders fairly it can lead to troubles down the road. I highly recommend The Founder’s Dilemmas by Noam Wasserman. This book deals with the many decisions founders face including partner choice, investor selection, and equity splits. In our case, we needed to deal with the fact that the professor had been working on this technology for about four years and is the inventor while I was coming in fresh out of the blue. On the other hand, I will have a higher level of responsibility and will have to be the primary person getting funding and leading our execution. Fortunately, the professor recognized the value of what I was bringing to the table and over the course of 2-3 weeks we arrived at an arrangement that we are both happy with.
- Seed money: We are fortunate that both the professor and I have a moderate amount of disposable funds we are willing to contribute to the company to cover early expenses (travel, legal 3rd-party items, etc.). Between the two of us, this amounts to several tens of thousands of dollars and will be structured as loans to the company to be repaid some time in the future.
Developing the Business Plan
- Understanding the technology: I’ve spent a fair amount of time reading about the professor’s research, visiting him at his lab, and getting up to speed on what he has done. This will be an ongoing process. It is crucial that I have a deep understanding of the technology in terms of its potential benefits, constraints, maturity level, economics, possible extensions, key risks, etc.
- Understanding the market: We are fortunate that our technology has broad applicability to a wide range of uses. The flip side is that I need to explore them all to figure out where we should focus first. This job has been made a bit easier in that when the professor published his research last spring it received broad media coverage and triggered many inquiries. This provides a great starting point for me as I now have a collection of interested parties from a range of applications that will talk to me. I’ve started having phone calls and meetings with these parties and have learned enough to make some preliminary decisions regarding attractive and unattractive markets. Having said that, there is MUCH more work to be done.
- Selecting our business model: In a nutshell, this deals with how we will operate and our business will make money. Will we manufacture and sell something or will we license technology to other parties? Will we sell directly to end users or through and intermediary? Will we outsource certain activities or do them ourselves? Defining a business model means answering these questions and many others. It is obviously intertwined with the above points related to technology and market and forms the basis of the business plan. Based on my understanding so far I do have an early view of what our model should be but it needs to be validated and refined by further discussion with potential customers, partners, and our team.
That’s it for now. I hope I’ve conveyed a sense as to what has been occurring in the very early days of our startup. I’m eager to write about what our technology actually is and hope to be able to do that in about a month.