If you’re founding a company with other people. All founders should vest in their stock over time. Typically, you should use a one-year cliff and 4 year vesting period. The one year cliff solves the problem where one founder drops out because of changing life conditions or lost interest. If you don’t vest into your own company, you often end up with a big chunk of equity you can’t sell or redistribute to other parties who are going to add value to the company. Secondly, they tend to split up the company equally, instead of based on people’s abilities to contribute and relative scarcity of the skill sets they provide. Fairness is setting percentage ownership based on the amount of lift each Founder provides to the company’s valuation, not splitting it equally per capita. If you’re too afraid to discuss how much value different activities, backgrounds, and networks, add to the company – you should reconsider your co-founder relationship; the conversations are only going to get harder from here.
The Equity Mistake They Make With Outsiders:
You’re not going to know everything about your business, your market, or your team. That’s OK, but you should seek out Mentors, not Advisors. Mentors give of their time and their talent freely, knowing that they will learn from their mentees. Advisors require an equity stake in the company. I’ve seen some insane term sheets offered to early-stage founders with advisory fees between 5-10% of common stock. That’s predatory, unless that’s contingent upon a huge investment, international brand recognition through celebrity influencers, or some other exception to the rule – I would run for the hills if I saw something like that. A reasonable advisory fee for an advisor/firm who is working unpaid for you in an early stage startup is somewhere between 0-1%. Founder’s Institute Founder / Advisor Standard Template lays out a great table to align close to market value.
The Ownership Mistake They Make With Insiders:
We all hear about how hard it is to be an early-stage founder. But what about the first few hires on the founding-team? They tend to get significantly less equity than founders and even later stage C-level hires, but they’re taking the risk with you because they believe in the company. You should treat your first employees like Angel Investors. They accept the biggest risks early on, so it’s only fair to provide them a multiplier on their ownership stake. They help to set and reinforce the culture of your organization and deal with all the chaos you create while thrashing around trying to find product/market fit and funding. Your first employees end up being friends and family, so treat them well.
What other distribution mistakes do you see repeatedly?
With four weeks left in 2019 it’s time to start your new years goal setting. Unless you have a bias-for-action, which you should — if you’re a founder.
Four weeks is enough time to define and test some hypothesis around the business that you’ve been noodling since January 2019. Let’s get together and turn thoughts into deeds. I’m putting together a workshop series to drive your “idea stage” startup to “early stage” before January 1st, 2020.
As a group, we’ll help you determine the Who, What, and Why of your product and provide an operational plan and the tactics you need to validate your hypothesis before the end of the year. Register to attend each week individually.
The content will build over the course of the month, you will be assigned homework in advance and the in-person time will be a group review to ask and answer questions. The goal is to create a cohort of new founders who can peer mentor each other. I will bring different experts in to cover the content from the homeworks. Want to know more? Sign-up below.
In Episode 3 of “Cleared Hot”, Andy Stumpf talks about his time as a Basic Underwater Demolition School (BUD/S) instructor. According to Wikipedia, “BUD/S is a 24-week training challenge that develops the SEAL candidates’ mental and physical stamina…” and according to Andy, one of the instructors’ jobs is to eliminate candidates from the program. Specifically, those who do not have the mental toughness required to be an operator.
“Nothing lasts forever, this sucks now, but it’s going to end.”
Andy interviewed many candidates who quit. He wanted to know what lead to their decision, so he could develop techniques to exploit the weakness in others. Their most frequent response was that they were overwhelmed by the duration of BUD/S. They were experiencing discomfort and multiplied it by the time remaining in the course. Psyching themselves out.
One Foot in Front of the Other.
Successful people focus on breaking down seemingly insurmountable tasks into smaller objectives. Achieving each smaller objectives creates a momentum that allows them to blast through the larger obstacles.
Although I’m not a SEAL and never will be. I’ve personally experienced this in Marathon Training, Weight Lifting, and Entrepreneurship. The first mile, squat, and pitch — those moments felt overwhelming because I knew how tiny my current output was compared to the end goal. But each day I put in the work. I focused on following the plan and completing today’s objectives, not worrying about the end state. When the time came to complete the mission I had been training for, my body and my mind were ready.
Show up, do the work, rest, repeat.
Questions of the Day
What’s the largest goal you’ve succeeded at? How did you break it down into smaller pieces that you could accomplish? What in your life today is stressing you? What’s the next incremental step towards fixing it?
I’ve spent the last six months weaning off of Facebook’s suite of apps. Their lack of ethics finally outweighed the value of their ubiquity. Because of this, I began the process of deletion (Facebook, Instagram, Messenger). Almost immediately, I felt a notable change in my overall level of happiness and contentment.
Trending topics and outrage focused feeds may have been overloading my psyche. My brain is only able to effectively deal with the level of stress generated by the happenings of a small community (See: Dunbar’s Number). I was genuinely surprised by how much better I’ve felt once I removed awareness of the continuous-crisis news-cycle from my life.
The major downside that originally kept me from leaving was FOMO. I didn’t want to miss out on dank memes and interesting dialogue. To counter this perceived loss, I’ve decided to start generating more original content and I’m working to develop deeper relationships with key individuals in my life.
Plan of Action
Backup my data from Facebook, Twitter, LinkedIn
Deactivate, delete, or refactor accounts
Find a new messaging alternative
Develop more active relationships with my network
Backup and Deactivate
There are plenty of posts on how to backup Facebook and Twitter data and deactivate your accounts. So I’m not going to cover Step 1 and 2.
I decided to switch my primary messaging client over to Signal since it supports end-to-end encryption, is easy-to-use, and is cross-platform. It also supported encrypted phone calls. The only thing that I’ll miss is the video conferencing – which I plan to handle through Google Hangouts or Skype.
Activate My Network
I now block time using recurring appointments to make phone calls to key friends/family and to blog. I will be distributing my blog via mailing-list and I plan to put hooks into each post to start 1-to-1 conversations. By disintermediating my relationships, I hope that I can build a stronger network that involves more personal and meaningful interactions.
The Question of the Day
How do you feel about your social media usage? On average do you think it makes you happier and more content or does it leave you with feelings of insecurity and anxiety? What’s keeping you from disconnecting from the major platforms?
I’m beta testing PostHaste from ClearView Social – learn more about it through the video below:
What if you could assemble high performing blog posts in just a few moments? What if this content you create would also tap into a larger conversation automatically, piggy-backing off of interest in current issues in the news? What if you could do all of this in just a couple of minutes? Now you can, with Posthaste.
At some point, everything’s gonna go south on you and you’re going to say, this is it. This is how I end. Now you can either accept that, or you can get to work. That’s all it is. You just begin. You do the math. You solve one problem and you solve the next one, and then the next. And If you solve enough problems, you get to come home. -Mark Watney
In “The Martian” by Andy Weir, Mark Watney is stranded on Mars with his survival completely dependent upon his ingenuity, grit, and super-human ability to never lose hope. It’s been my experience that startups run on hope long before they have actual capital to deploy, they also crater when founder’s lose hope even though they still might have money in the bank.
Having a cultural touchstone that reinforces your team’s morale during your startup’s biggest challenges is an effective way to maintain hope.