Alignment for Founders

I love start-up companies and entrepreneurs! I love their creativity, their passion, their drive and  their dedication to the vision. I also love the absence of processes and protocols, bureaucracy and empire building, decision paralysis and pointless meetings. In fact, I love it all so much that I decided to become one after over twenty years in corporate America.

My Experience with Startups and Entrepreneurs

I am lucky because I experienced both worlds personally and professionally. In 1996, I joined a small but well-funded startup called Sprint Spectrum LP. I was one of the few early employees who did not come from Sprint or one of the other partner companies. Our mission was to build and launch the first nation-wide digital wireless telephone network. It was fun. It was invigorating. It was challenging.

I also helped start several nonprofit organizations, sat on their boards of directors, and provided legal advice to they and other startups. These experiences from the outside looking in combined with my own employee experience fueled my desire to help founders set themselves up for greater success and fewer landmines.

What can go wrong? Look no further than Facebook

The list of things that go wrong and derail young companies is long and varied. Anyone who watched “The Social Network” or heard the story of Facebook knows what can happen in the absence of authentic alignment.  Here are some less famous examples:

• The Tech startup in need of clarity and organization.

  • Two founders created and developed their shared vision into a test application after which they received some funding, hired 5 employees and built out the initial platform. A number of investors took note and expressed interest in funding a large scale implementation of the technology. However, after discovering that the company’s organizing documents were inconsistent, conflicting and did not clearly address ownership of the underlying IP, several withdrew. The remaining investors were not as sophisticated, did not fully understand the vision and demanded a high percentage stake in the company. Left with few choices and no money, the founders accepted the riskier offer and within a year, the investors sold the underlying IP and dissolved the company.
    • Our Founders’ Agreement Tool identifies the key elements to include  in corporation documents and how to preserve them in order to attract high quality investors.

• The Manufacturing startup in need of defined roles and shared vision.

  • Two founders who met in art school formed a textile company that used methods and practices from their native India to create beautiful cloth and other products that they began selling to small local and regional companies. A reputable, high-end clothing company expressed interest in purchasing wholesale volumes of a particular line of product but the founders could not agree on whether or not to pursue the opportunity. Despite having done a decent job of initially organizing the company and hiring good people, the founders were ill-prepared to manage the business and scale for demand. They eventually sued each other for control and arrived at a mediated settlement after spending hundreds of thousands of dollars in legal fees. Neither is involved in the business today.
    • The Founder’s Agreement questionnaire includes issues regarding growth, ownership and decision-making that can help avoid stalemates when success comes calling.

• The Entrepreneurial consultants in need of boundaries and definition.

  • Two friends were independent consultants and provided complementary services to a similar client segment. One approached the other about licensing his offering and combining it with hers to reach a broader audience with more robust services. They created a basic terms sheet setting forth the price for the license and a communications strategy for sharing basic information about the clients and experiences. Six months later, the licensee claimed that the licensor was competing against her for the same clients and using his knowledge of her offering to expand his own. The licensor made similar claims that the the licensee had repurposed and combined her materials with his in breached of the license. Although they settled the dispute without litigation, the stress, distraction, loss of friendship, loss in business, and damage to their professional reputations continues to impact them three years after the fact. 
    • Our agreements can be adapted for different scenarios that include closely held and “friendly” associations. Let’s not sacrifice business for friendships.

Getting married is fun. Staying married takes work!

In each of these scenarios, the founders and friends aligned around the basic concept and premise for forming their organization and then they stopped. Aligning around that kind of passion is the easy part much like aligning around a proposal to get married. The tough part comes in the execution.

Regardless of whether you are building new widgets or developing the next mega social media site, you owe it to yourself and your partners to align as clearly and deeply as you can as soon as you can. The process of creating a founders’ agreement will guide you through ways to handle the initial bumps and expected bruises that will inevitably arise. It’s akin to pre-marital counseling. The questions asked are not always the things you want to talk about but talking about them will strengthen the vision, increase the likelihood that it will survive the surprises, and clarify the roles, responsibilities and rights of each founder. 

We are here to help.

What’s Next Biz will walk you through whatever questions you or your organization faces to arrive at a proposed solution. But, we won’t leave it there, we will see it through to whatever success looks like.