Starting a company comes with no shortage of poetic adjectives. Great founders are innovative, brave, inspiring, and visionary. Their ideas are groundbreaking and world-changing. But it’s critical to the health of your future company to understand how to set up your business.
Here are 5 lessons on forming your startup from Secrets of Sand Hill Road:
What Form Should Your Company Take? Spoiler: C Corp
“A C corp is just a simpler mechanism through which to provide broad equity ownership to a startup’s employees. And a C corp does not have any limits on the number of shareholders that can be part of the organization; thus, as a startup hopefully grows, later employees can also benefit from potential equity ownership.”
Carving Up the Ownership Pie
“Most companies have more than one founder. And when you start a company, it’s you d your cofounder against the world. As with most things in life, a little planning between founders can go a long way toward ensuring that a breakup doesn’t crater your dreams of world domination.”
Founder Stock Vesting
“The basic purpose of founder equity is to create long-term incentives. The rationale for vesting is to tie the founder to some defined term of employment before she can exit the firm and take 100 per cent of her equity with her.”
“A blanket transfer restriction means that shareholders cannot sell without some form of company consent – often the board’s consent is required to do so. Transfer restrictions are designed to be permanent, but, as with most governance provisions in private companies, they can be removed by the company with a majority board vote and shareholder vote.”
“Intellectual property is the lifeblood of most startup companies, so we need to protect it carefully…we need to make sure there is no entanglement of the intellectual property with the previous employer and that the startup owns all the inventions.”
Filled with Kupor’s firsthand experiences, insider advice, and practical takeaways, Secrets of Sand Hill Road is the guide you need to turn your startup into the next unicorn.