Choosing your technology stack is one of many decisions you’ll have to make when creating a company from scratch. Along with this, you’ll need to figure out who you should found a company with, who you should take money from, what the company culture should be, management processes, and who to hire when. Joe will be covering basic technology stack choices (cloud v. hosted, frameworks, etc.) as well as other critical decisions one faces when starting a startup.
2. • Early employee at three startups ranging
from bootstrapped to venture funded.
• Angel investor in three startups.
• Advisor to seven venture funded startups.
• Cofounder of two venture funded startups.
7. “Don’t start a company unless
it’s an obsession and something
you love. If you have an exit
strategy, it’s not an obsession.”
Mark Cuban
8. “Focus on the problem. If
you’re only excited about the
solution, you’ll lose interest
when your solution doesn’t fix
the problem. ”
Adil Wali, CTO of ModCloth
12. founder(s) (n): The person or people who
agree to quit their jobs after initially conceiving
and brainstorming an idea.
13. How many founders?
• Investors want to see more than one
founder for redundancy reasons.
• More than three founders leads to dilution
and control issues.
14. What to look for?
• Find people who have a similar work
ethic as you.
• Find people with complimentary skill
sets.
• Find people with a similar approach to
product development as you.
• Find people with similar values.
15. BE WARY OF GIVING
THE TITLE
“COFOUNDER” TO
EARLY EMPLOYEES
21. SimpleGeo
✓ Matt Galligan is an established designer
with expert knowledge of CSS, HTML,
and branding.
✓ Joe Stump is an expert in building
scalable web infrastructure, recruiting
engineers, and programming processes.
๏ Both are extremely opinionated product
people.
23. • All founders should be on a four year
vesting schedule. One year cliff, 25%
vested up front, monthly vesting after
cliff.
• Set aside 15% for an employee option
pool. Your investors will make you
anyways.
• File your 83(b) election.
24. • First non-founding engineer should
expect 1-3%
• Early engineering hires can expect
0.5% to 1.5%
• Director level around 1%, VP level
around 2-3%, CEOs between 6-9%
28. • Many law firms in the Bay Area will
form the company on consignment.
• Investors in the Bay Area are used to
dealing with a handful of lawyers.
Speeds up process and saves
money on closing.
36. Venture
Bootstrap
Backed
Control ✓
Fast to market ✓
No distractions ✓
No dilution ✓
37. pre-money valuation (n): 1. What
investors think your company is currently worth
sans investment. 2. Bullshit.
38. post-money valuation (n): 1. Company’s
pre-money valuation plus the dollar value
invested. 2. Bullshit. 3. Money in the bank.
39. dilution (n): 1. The action of making a liquid
more dilute. 2. The act of stock being
transferred from the people creating the
company to the investors with the money, thus
reducing the percentage of the company the
people creating the company own.
40. liquidation preferences (n): 1. The dollar
amount that a holder of preferred stock will
receive prior to holders of common stock. 2.
The act of investors covering their asses.
41. preferred stock (n): 1. Stock that entitles
the holder to a fixed dividend, whose payment
takes priority over that of common-stock
dividends. 2. The act of giving up all control over
your company.
42. convertible note (n): 1. A loan whose
value may be converted into common or
preferred stock. 2. Easiest, most founder friendly
form of capital on the market.
43. discount (n): 1. An investment discount
convertible note holders receive in subsequent
rounds. 2. If the Series A share price is $10.00/
share, and the convertible note holder has a
20% discount, they may buy at $8.00/share.
44. price cap (n): 1. A share price ceiling that
note holders enjoy in subsequent rounds of
financing. 2. If the convertible note’s price cap is
$5M, and a round is raised at $10M, the note
holder gets twice as much value.
45. priced round (n): 1. Financing the company
by selling a certain percentage for a mutually
agreed upon price at a mutually agreed upon
value of the company. 2. The most expensive,
investor friendly form of capital on the market.
3. Moment when your notes convert into
preferred stock according to their terms.
47. A few gotchas
• Be wary of aggressive pro rate rights that
allow investors to “buy up” in subsequent
rounds.
• Be wary of board composition early on.
• Be wary of any one investor owning a
majority of preferred stock.
48. Company Structure
• Preferred stockholders have all voting rights
to change company charter.
• Common stockholders have no voting rights.
• Founders are at-will employees of the board.
• All transactions (fundraising & exits) must be
approved by board and majority of preferred
stockholders.
53. 1. Invest $2m at a $4m pre-money valuation
for 33% of the company.
2. Sell company for $12m in less than 12
months.
3. PROFIT! $2m in profits from the sale.
4. On a $400m fund you’ve netted a 0.5%
return for your fund’s LPs.
54. 1. Look for investors who have founded and
ran a startup before.
2. Look for investors with some of their own
money in play.
3. Look for investors who understand the
problem and are excited about your
solution.
61. Physical
Cloud
Hardware
Cost efficient ✓
On-demand ✓
Less to ✓
maintain
Automated ✓
62. Key Questions
• Does your application have abnormal
performance characteristics or density
requirements?
• How much time, money, effort, and
management will go into building & maintaining
multiple colocation facilities?
• What is the opportunity cost to your product
if you are fully staffing a network operations
center?
74. Approaching Product
1. Focus on a single use case that addresses
the problem.
2. Start with a minimal core set of features.
3. Release and listen to your users.
4. Question your initial assumptions based on
feedback.
5. Rinse and repeat.