Crowdfunding platforms, such as Kickstarter and Indiegogo, have become mainstream in the past few years. There are many reasons why early stage entrepreneurs have turned to crowdfunding. Some of these reasons include not wanting to take out more debt, validating product market fit or simply to create a brand following. Crowdfunding serves many benefits such as crowdsourcing, opportunities to pre-sell, and starting a campaign is usually free. As great as these things might sound, having a successful crowdfunding campaign is harder than it seems. For every successful Kickstarter campaign, two fail, and about 9 out of 10 Indiegogo campaigns fail to reach their goals. Here are a few reasons why experts believe that so many crowdfunding campaigns fail.
- Companies Fail to Establish Credibility
There are so many projects and initiatives on crowdfunding platforms, you must find ways to stand out in the clutter. Many crowdfunding initiatives have a reputation for unmet promises. Highly publicized credibility issues run deeper than product or supply-chain issues. The PME funded company, Revols, had managed to avoid such issues with their highly successful Kickstarter campaign, which garnered 2.5 million dollars in just a month. Their Kickstarter video showcased their credible partners, endorsements from industry experts, and specific accreditations to their name. They also hired a PR firm in order to make sure the right image was being spread prior to launch. Two weeks prior to starting their campaign Revols visited established media outlets with product demos in various North American cities. Like Revols, you have to be on top of your PR game.
- The Video is Too Long
A video that is too long is not likely to be shared on social media platforms. Keep your video length between 1 to 3 minutes long, so that people who would like to share your video with their network will be likely to. Sharing aside, people are also busy and have short attention spans. They want something, short and informative to watch.
- The Video Doesn’t Tell a Story
Videos have the capability to tell stories better than any other medium. Your video should have a story line that elicits emotional feelings from the viewer. If your video doesn’t seem sincere, you will have a difficult time getting investments or even people following-up on your brand down the line.
- Companies Aren’t Clear About How They Will Use the Funds
If you know exactly what you’re going to be using your money for, so should your backers. Investors want to know how their money will help you. Putting out vague statements such as “help our business grow” or “we need your help to expand” does nothing to show that you have a strategic plan moving forward. To our previous point, not being specific also doesn’t do anything to boost your credibility.
- No Testing
By testing we are referring to two things. The testing of the product and the testing of your Kickstarter page prior to launch. Before investing people want to know that your product has been tested and that it has garnered positive reviews from users and industry experts. Investors and backers want to be sure that their money is going into a quality good that has been vouched for. Testing your Kickstarter page means sending it to friends, family, mentors and trusted individuals in order to get feedback on its presentation and content. Building social capital prior and during your launch will have immense payoff.
- Your Goals are Unrealistic
Don’t aim to get millions of dollars right off the bat. Even Revols had the objective of raising only $100,000 before they reached their $2.5 million mark. You should plan and set a timeline for the investments you hope to receive. Being conservative with your estimates is always better. Your goals should be SMART, in other words, specific, measurable, attainable, relevant and time-bound.
These are some of the main reasons why crowdfunding campaigns fail. If you do the right planning in order to avoid these mistakes your crowdfunding campaign will already be more likely to rise above the clutter. Even if you don’t achieve your campaign goal, you should still be leaving the platform with more than you entered. You should have more supporters, a longer e-mail list, and most importantly, a better idea of what it is that your consumers want.
Au cours des dernières années, les plateformes de financement participatif, comme Kickstarter et Indiegogo, sont devenues dominantes. Il y a plusieurs raisons pour lesquelles les jeunes entrepreneurs peuvent se tourner vers les campagnes de financement participatif, incluant, en autres, le désir de ne pas s’endetter, valider l’adéquation produit / marché, ou tout simplement créer une visibilité de sa marque. Ces campagnes de financement offrent de nombreux avantages tels que l’externalisation ouverte et des possibilités de prévente, sans compter qu’il n’y a généralement aucuns frais pour démarrer une campagne. Cette approche peut sembler très excitante, mais c’est plus difficile que ça en a l’air. Pour chaque campagne Kickstarter réussie, deux échouent, et environ 9 campagnes Indiegogo sur 10 ne parviennent pas à atteindre leurs objectifs. Voici quelques raisons pour lesquelles les experts croient que tant de campagnes de financement participatif échouent.
- Des entreprises ne parviennent pas à établir une crédibilité
Il existe tellement de projets et d’initiatives sur les plateformes de campagnes de financement participatif que vous devez trouver des façons de vous démarquer de la masse. Plusieurs de ces campagnes ont acquis une réputation de promesses non tenues. Des problèmes de crédibilité hautement médiatisés vont bien au-delà des questions sur les produits ou sur la chaîne d’approvisionnement. La société Revols, financée par PME, a réussi à éviter ces problèmes grâce à une campagne Kickstarter très réussie qui a recueilli 2,5 millions de dollars en un mois. Leur vidéo Kickstarter présentait leurs partenaires crédibles, le soutien d’experts de l’industrie, et une adhésion spécifique à leur nom. Ils ont également embauché une agence de relations publiques afin de s’assurer de propager l’image désirée avant le lancement. Deux semaines avant de lancer leur campagne, Revols a visité des organes d’informations reconnus de différentes villes nord-américaines avec des démonstrations de leur produit. Tout comme Revols, quand il est question de relations publiques, vous devez bien maîtriser votre jeu.
La vidéo est trop longue
Une vidéo qui est trop longue n’est pas susceptible d’être partagée sur les plateformes de médias sociaux. Limitez la longueur de votre vidéo à 1 à 3 minutes — ainsi, il y a plus de chance que les gens la partagent dans leurs réseaux. Mais, même si on laisse le partage de côté, il faut admettre que les gens sont très occupés et qu’ils ont une capacité d’attention limitée — ils veulent regarder quelque chose qui est court et informatif.
- La vidéo ne raconte pas une histoire
Mieux que tout autre moyen, les vidéos offrent la possibilité de raconter des histoires. Votre vidéo doit avoir une trame qui suscite des émotions chez le spectateur. Si votre vidéo manque de sincérité, non seulement aurez-vous du mal à obtenir des investissements, mais les gens auront peu tendance à retenir votre marque.
- La façon dont les fonds seront utilisés n’est pas claire
Si vous connaissez exactement la façon dont vous utiliserez l’argent, vos bailleurs de fonds devraient la connaître aussi. Les investisseurs veulent connaître comment leur argent vous aidera. Des déclarations vagues comme «contribuez à la croissance de notre entreprise» ou «nous avons besoin de votre aide pour grandir» ne démontrent aucun plan stratégique pour l’avenir. Comme nous l’avons mentionné ci-dessus, le manque de précision ne fait que renforcer votre manque de crédibilité.
- Aucun test
Par test, nous faisons référence à deux choses. Tester le produit et tester votre page Kickstarter avant le lancement. Avant d’investir, les gens veulent savoir que votre produit a été testé et qu’il a reçu des critiques positives des utilisateurs et des experts de l’industrie. Les investisseurs et les bailleurs de fonds veulent être certains que leur argent est investi dans un produit attesté de qualité. Tester votre page Kickstarter signifie l’envoyer à des amis, la famille, des mentors et des personnes de confiance afin d’obtenir des commentaires sur la présentation et le contenu. Développer le capital social avant et pendant votre lancement offre des avantages considérables.
- Vos objectifs sont irréalistes
En partant, ne vous fixez pas comme objectif d’obtenir des millions de dollars. Même Revols avait pour seule ambition de récolter 100 000 dollars avant d’atteindre la barre de 2,5 millions. Vous devez planifier et fixer un calendrier pour les investissements que vous espérez recevoir. Il est toujours préférable d’être prudent dans vos estimations. Vos objectifs doivent être SMART, en d’autres termes, spécifiques, mesurables, atteignables, réalistes et temporels.
Voilà donc quelques-unes des principales raisons pour lesquelles les campagnes de financement participatif échouent. Une planification appropriée qui évite ces erreurs vous offrira déjà plus de chances de vous démarquer de la masse. Même si vous ne réalisez pas votre objectif, vous devriez tout de même être en mesure de quitter la plateforme plus fort que vous ne l’étiez à votre arrivée. Vous devriez avoir plus de sympathisants, une liste de courriels plus longue, et surtout, une meilleure idée de ce que vos clients veulent.
Finding the right investor for your business, let alone any investor, is a difficult task. You have to know where to look, who to network with, and the kind of resources your business needs. The last thing you want is an investor who can only provide financial support. You will likely speak to over a dozen of investors before finding the right one for you. It will be a tiring process, but meticulousness is necessary if compatibility is what you’re looking for. Here are 4 tips on how to find investors for your business when the time is right.
- Get an introduction from a mutual acquaintance
Asking members of your professional and social networks if they know any investors should be your first step. Entrepreneurs will have an easier time to get a meeting with an investor when introduced by a mutual acquaintance that the investor trusts. It is important you network constantly and consistently. Networking, whether in a social or professional setting brings about many advantages. The more good relationships you build, the better your chances of being introduced to an investor that is willing to give you his time. Remember that when networking you are not just gaining exposure, you are building connections with the networks of others as well. If someone they know has a need that matches your business, or vice versa, and you’ve made a good impression, chances are you will get a referral.
- Research where they’re going to be
If you have particular investors in mind, research where they are going to be. Many investors spend time at speaker series and conferences open to the public. In order to get the attention of your prospects make sure to attend these events, and have your elevator pitch ready. You might just have a small window of opportunity to speak to them, so make sure you provide them with just enough information to spark their interest, and provide them with your business card. Make sure to get permission to contact your prospect in order to continue the discussion further.
- Understand your KPIs and market
Your KPIs and market will help you determine exactly what kind of investment your business needs. This is what will lead you to the finding the right investor for your business. Understanding your KPIs will showcase precisely where your business is lagging and where it is prospering. You will therefore be able to identify your selling points to your investor. Additionally, understanding your market will indicate the kind of experience you need your investor to have. Which companies have they invested in? What industries are they most interested in? how does their investment track record look? What do they provide the companies they invest in?
- Research credible online communities
LinkedIn is a great online platform to find investors. It is, however, not the only one. There are many social networks that connect you directly with investors from other countries. These investors are usually interested in contributing to the global business environment. Such platforms include Crunchbase, AngelList, Xing, Plaxo, Startup Nation, and Meetup. While it will take much more work and precautions to assess compatibility with an investor you met this way, it should not prevent you from expanding your search to online resources.
Finding investors for your business will be a difficult task. Especially at the beginning stages of business development when your business hasn’t gained much traction yet. Just keep in mind that your relationship with your investor is worth more than a business transaction. Therefore, make sure you know exactly where you are looking and what you are looking for.
Your business’s MVP is more than just your minimum viable product. Sport teams aren’t the only ones with a most valuable player. As an entrepreneur in the product development stage, your minimum viable product is without a doubt your most valuable player. A team’s most valuable player teaches, remains focused, sets reasonable goals, is a representation of security, and gets the job done. All of these are also embodiment of a quality minimum viable product. Saying that your minimum product is also your most valuable may sound like a contradiction. Here are a few reasons why they are not mutually exclusive and what your MVP should accomplish.
- Fix the basic problem you are trying to solve:
This is your testing stage. It is the first step you must take in order to validate consumer need. What do your customers want? How will your product satisfy consumer needs before you decide to invest a significant amount of capital into your product development? Here is where you must balance your product efficiency and usability. At this stage you must aim to identify the core problem your product is going to solve. Products can have a varied set of interesting features, however, if you are unable to prioritize and rank your features based on importance you should probably take a few steps back and re-evaluate your strategy. Your MVP is supposed to be the most basic version of your final product. This will allow you to make the necessary modifications, if need be, based on the responses you will get. An MVP is about learning from your potential customers, not about impressing them. The goal here is to learn about your product and your customers’ expectations in order to prevent spending on unnecessary costs in following stages.
- Identify your Early Adopters
Your early adopters are your trend setters. Identifying the wants and needs of your early adopters during this testing stage is key. First of all, this will help you define your marketing strategy and sales process in the upcoming stages. Because early adopters are very knowledgeable on the industry you intend on entering, they are known to be credible sources of information to members of their network. By identifying who your early adopters are and how you will be able to satisfy their needs, you are bettering your chances at word-of-mouth advertising. Secondly, from the perspective of feedback, they are your most honest critic. They know of most products out there and are not interested in the popularity of your brand or impressing those in their surroundings by purchasing your brand. Early adopters want quality. Early adopters live for new and cutting-edge products. Learning about their expectations will allow to create a quality product and a compatible marketing plan.
- Figure the amount people are willing to pay for your product
Finding out the price customers are willing to pay for your product during the MVP stage will give you further indication on the positioning of your product in the market versus other competitors. This will also give you a better idea for your pricing strategy moving forward. If you are met with feedback that indicates a higher willingness to pay for your MVP, you can explore the possibilities of a more expensive pricing strategy for example. Of course, such a decision also depends on how much it costs to make your MVP.
- Inform yourself on the positioning of your product
Simply put, positioning symbolizes the place your product holds in the mind of the consumer. If you intend to enter a market where you will be competing against numerous other similar products, it is crucial you occupy a unique and easily identifiable place in the consumer’s mind. Because your MVP is such a basic version of your final product, there is much flexibility with the route you can choose for branding. The goal here is to start developing your brand persona and identity based on the feedback you get from your testers. Of course, this in addition to marketing research will lay the foundation for your marketing strategy moving forward. For instance, based on the feedback you will be getting on your MVP, you will be able to identify your main product differentiators, your strengths, weaknesses, and base some of your market research on these components.
- Map out your following stages toward market
Learning from your MVP, means setting up metrics and different forms of measurement prior to testing. Your MVP findings will be your foundation in mapping out the following stages of your business activity. What you need to do is find tangible ways to record and monitor your feedback and research findings. There are some Pre-MVP considerations you should establish prior to testing. You can create a grading scale for answering each of the questions listed below. For instance, a low response would mean 0 points, medium; 5 points, and high level; 10 points. Lower points for questions would require further investigation justifying the unfavorable responses.
- Whether the problem you are trying to solve is really important to users
- Whether users are actively trying to solve this issue now with other services or self-made solutions
- Are they active during the interview
- Do they agree to come and discuss the solution with you when it’s ready
- Do they agree to refer other people to you
- Are they ready to pay for the solution right away
There are also many available online programs and application that will not only help you with the planning process of creating an MVP, but also provide you with useful KPI tools.
Your MVP is your most valuable player. Think about it. A general manager of a sport`s team first secures his star player, his MVP. The team’s MVP is the reliable player that can be counted on to lead the team, deliver the needed results, and perform. At this point the general manager starts to form the team around his MVP. Hence, your added product features. Without your MVP your product loses almost all of its value to its customers. Would you have bought tickets to a Chicago Bulls game if you knew Michael Jordan wasn`t playing? Probably not. At this stage, the goal is to learn. Sometimes this can mean going back to the drawing board. But, what this always means is that you are saving yourself time and money moving forward.
If you’re a small business owner that has contemplated starting a blog, stop contemplating and start writing. No more excuses! “I’m not a good writer” “I don’t have any original ideas” or “I don’t have time” are not good enough reasons, especially when the benefits of having a blog far outweigh the weaknesses. In fact, considering the fact that by 2020 customers will manage 85% of their relationships without talking to a human, and that blogs have been rated as the 5th most trusted source for accurate information online, the only thing blogging is really costing you is time.
If you are part of the minority that hasn’t jumped on to the blogging bandwagon yet, here are 4 reasons why we believe you shouldn’t wait much longer:
1. It’s Inexpensive
Firstly, blogs can be very inexpensive to create and maintain. They can be embedded into your already-existing website or be launched independently. It is a low cost marketing channel that is available to you as an entrepreneur. There are also numerous cheap and reliable WordPress hosting companies available for you to choose from.
2. Drives traffic to your website
In addition, Adding a blog to your website can drastically increase the amount of highly targeted traffic your website receives. Research has shown that companies who blog receive 97% more links to their website. Producing compelling and insightful news for your blog, while also strategically using keywords, making sure your blog is SEO friendly, and being timely with your publications will help you with building a loyal following.
3. Position your brand as a thought leader
On top of that, it has been proven Successful bloggers are brand builders. Blogging offers businesses a chance to discuss important issues relevant to their respective industries. Furthermore, it allows businesses to showcase to their consumers that they do more than just sell products or offer a service. The goal here is to utilize blog space in order to attract readers when they aren’t necessarily looking to purchase anything. Chances are that these readers will return in the future when they are, in fact, looking to buy.
These days consumers aren’t just investing in products, they invest in everything a business symbolizes. Blogging is the best way to show to your consumer that you represent the lifestyle they want to support.
4. Build relationships with your customers
Finally, blogs have a personal touch to them. This informality allows you to create a friendly and trusting bond with your audience. Adding a comments section, or an option for customers to reply to your posts can help with sparking interesting dialogue. Conveniently, the positive PR will enrich your brand image as a business that cares about its customers. If you continuously create content that is insightful to your target market, it will help establish you as a primary source of information them.
Blogging has helped numerous entrepreneurs carry their businesses from rags to riches. Great examples include Dooce, and Shoemoney. If these reasons aren’t enough to convince you that blogging is a must, ask yourself one simple question: What do I have to loose from starting one? That’s right. Nothing but time well spent. Give it a try.
Hillary Clinton once said that she is neither an extrovert nor an introvert. In her words she is an “extro-introvert.” Whatever that may mean, one thing is for sure: It seems as though identifying as one or the other comes with the fear of being judged. If you embrace being an extrovert you may be perceived as loud and obnoxious. On the other hand, if you declare that you are an introvert it is likely that you will be judged as a person who is shy and would rather be left alone. Unfortunately, such misconceptions can also be found in the business world and, most times, introverts get the short end of the stick.
In a world where entrepreneurs are constantly networking, speaking in front of large crowds, and looking to grow their businesses, it can seem as though entrepreneurship is made for extroverted people. In a poll conducted by USA Today, results showed that 65% of executives believed that introversion was a barrier to leadership. However, on that same token, some of the world’s most successful entrepreneurs are self-proclaimed introverts. Bill Gates, Mark Zuckerberg, and Warren Buffet are just a few names that come to mind. Often times the reasons why people may dub introverts as less competent is exactly the reason for their success.
Myth #1: Extroverts are better at public speaking
Malcolm Gladwell has a talent for making people reflect on their actions. He too, can captivate thousands on stage while remaining completely calm and collected at the dinner table. To him public speaking, also pitching, is not an act of extroversion; it is a storytelling technique. Furthermore, some of the things that introverts fear about public speaking and pitching are the exact same things feared by extroverts. The hostility of the crowd, remembering lines and general anxiety levels can be found with all people.
Myth #2: Extroverts are better at networking
It is common knowledge that introverts enjoy reflecting on their thoughts internally. However, you don’t have to be as outgoing and vocal as an extrovert in order to network successfully. This myth also assumes that all people present at networking events are extroverted, which is likely not the case. Adapting to different behaviours, and building relationships is what networking is all about. Introverts tend to dislike small talk and enjoy deeper one-on-one conversations. This can be a definite plus when present in a room full of people who are passionate about their start-ups and projects.
Myth #3: Extroverts are better business leaders
It’s not that extroverts are better business leaders, it’s that extroverts and introverts have different ways of running businesses. There is not one right or wrong way. Being analytical, and allowing others to do some of the talking while you listen, can allow for richer strategies to be put in place. Having great listening skills, empathy, and alone time, are characteristics that can positively contribute to leadership.
Whether you identify as an introvert, extrovert or “extro-introvert” your success as an entrepreneur is not dependent on this. Let us also not forget that great entrepreneurs remain true to themselves. They do not try to be someone they are not. More importantly, good entrepreneurs know their strengths in addition to their weaknesses. If you are smart enough as an entrepreneur, you can partner with someone who compliments the traits you lack. Unfortunately, there are many myths floating around making introverts feel like they must compete with extroverts when what matters most is adapting to different settings. Fortunately for us introverts, these myths are mistaken.
Trouver le bon cofondateur pour votre entreprise sera une des décisions les plus importantes que vous aurez à prendre en tant qu’entrepreneur. Faites-nous confiance, cette décision déterminera le sort de votre entreprise. Nous avons été témoins des meilleurs et des pires scénarios. Voici quelques conseils à considérer avant de prendre cette décision importante.
- Apprendre à se connaître avant le mariage
En affaires, comme dans toute relation, vous devez apprendre à connaître votre partenaire et sa façon de travailler avant de vous passer la corde au cou. Rencontrer quelqu’un à un événement de réseautage n’est pas suffisant pour décider de signer une convention entre actionnaires quelques semaines plus tard. Une fois qu’un tel contrat est signé, il n’est pas facile de le révoquer. C’est un processus qui peut devenir fort désagréable et qui peut ruiner une entreprise; tout comme épouser quelqu’un sans bien connaître la personne ou ses intentions. Le divorce sera un processus long, déplaisant et pénible que vous auriez pu éviter. Les désaccords les plus communs entre les cofondateurs concernent la vision et l’orientation future de l’entreprise. De toute évidence, l’objectif est de développer l’entreprise, mais les façons de faire croître une entreprise sont limitées, et il y a tellement de directions dans lesquelles on peut orienter une entreprise, et qui peuvent toutes conduire à des résultats très différents. Avant de vous engager dans un partenariat, assurez-vous que vous et votre partenaire potentiel êtes sur la même longueur d’onde, surtout en ce qui concerne la vision et les valeurs en lesquelles vous croyez.
- Choisissez quelqu’un qui vous complète
Établir un partenariat avec quelqu’un qui a exactement le même profil que vous n’est pas une bonne idée. Vous devez trouver une personne dont les compétences complètent les vôtres, afin de permettre à votre entreprise de croître et de prospérer. Lorsque vous considérez à quoi peuvent ressembler des compétences complémentaires, pensez surtout à l’avenir de l’entreprise. Les fonctions seront établies en fonction de ces compétences complémentaires. De cette façon, vous pouvez vous créer une émulation et bâtir une entreprise plus solide et de qualité. Alors que l’idée de vous discuter des mêmes choses peut être séduisante, vous voulez être avec quelqu’un qui possède des compétences différentes.
- Si vous êtes programmeur, il devrait être agent de commercialisation.
- Si vous êtes concepteur, il devrait être développeur.
- Si vous êtes introverti, il devrait être extraverti.
- Comprendre la convention d’actionnaire
Nous ne pourrons jamais assez souligner l’importance de ce point. Les conventions d’actionnaires garantissent qu’on a bien réfléchi aux responsabilités des actionnaires en fonction de ce qui est permis et de ce qui ne l’est pas, et sur la façon dont les décisions seront prises. Son objectif est de réduire les risques de conflit entre les actionnaires dès le départ. Cependant, des problèmes peuvent survenir lorsque vous ne comprenez pas entièrement le contrat avant de le signer. Il faut donc réfléchir très sérieusement à la propriété des actions. Qui possède combien d’actions (et quelle contribution en espèces? Propriété intellectuelle, etc.)? Et, comment ces actions sont-elles détenues?
Questions à vous poser avant de signer :
- Suis-je satisfait de ma participation au capital? (Si je suis le principal fondateur, est-ce que je traite les autres équitablement?)
- Puis-je quitter cette entreprise si je le veux? (Puis-je vendre des actions?)
- Puis-je acheter plus d’actions si je le veux?
- Est-ce que je m’engage à faire quelque chose que je ne pourrai pas respecter?
- Est-ce que je pourrai exercer suffisamment d’influence pour protéger mon investissement?
- Quels sont mon risque financier total et ma responsabilité juridique (présente et future) dans cet engagement?
- Répartition des capitaux
Certains ont l’idée fausse que les capitaux doivent toujours être divisés en parts égales (50/50). Alors qu’une répartition égale du capital peut très bien fonctionner pour certaines entreprises, ce n’est pas la seule solution à considérer. Vous évitez peut-être une conversation gênante et difficile en répartissant les parts de façon égale maintenant, mais pensez aux répercussions que cela peut avoir sur l’avenir de votre entreprise. Vous devriez également considérer l’acquisition des droits. Cela pourra empêcher d’émettre des actions à des partenaires ou à des employés indignes.
Rappelez-vous que vous passerez probablement plus de temps avec votre cofondateur qu’avec votre propre famille. Le choix de cette personne déterminera l’avenir de votre entreprise. Une bonne alchimie et une bonne entente entre vous et votre partenaire sont essentielles. Vous voulez quelqu’un qui assume ses responsabilités et qui démontre la même passion et le même dynamisme que vous. Vous êtes sur le point de vous embarquer dans un voyage ambitieux et mémorable, assurez-vous d’avoir le bon compagnon de voyage!
Finding the right co-founder for your business will be one of the biggest decisions you will have to make as an entrepreneur. Trust us when we say that this decision will determine the fate of your business. We’ve seen some best and worst-case scenarios. Here are a few tips you will have to consider before making this big decision.
- Date Them Before You Marry Them
As with any relationship, in business you must get to know your co-founder and the way they work before you tie the knot. It’s not enough to meet someone at a networking event and a couple of weeks later sign a shareholders agreement. Once that’s done, it’s not easily undone. The process can get nasty and can ruin a business, just like marrying someone without having known them or their intentions, the divorce will be a long, ugly, and tedious process you could have avoided. The most common disagreements that co-founders have is with regards to the future vision and direction for the business. Obviously, the goal is to grow the business but there are only so many ways a business can grow, and so many directions a business can take that can all lead to very different outcomes. Before you commit to a partnership, make sure you and your potential partner are on the same page as far as the vision of the company and the values you hold.
- Choose someone that compliments you
Partnering with someone who has the same exact profile as you, is not a good idea. You must find someone with complementary skills that will allow your business to grow and flourish. Look to the future of the business when you consider complementary skills. Based on those complimentary skills, job positions are drafted. That way you can challenge each other and build a stronger and quality company. While it might be appealing to geek out together about the same things, you want someone who has a different skillset.
- You’re a programmer, she should be a marketer.
- If you’re a designer, he should be a developer.
- If you’re an introvert, she should be an extrovert.
- Understand your Shareholder’s Agreement
We cannot emphasize the importance of this enough. Shareholders agreements ensure that the responsibilities of the shareholders are well thought-out, what is to be permitted and what is not to be permitted, and how decisions are to be made. It should also include what do to when you cannot reach a commune decision, who gets the last word? It is meant to decrease potential for conflict between shareholders from the get-go. Problems arise, however, when you do not understand it fully before signing. Some very careful thought must be given to the share ownership. Who owns how many shares (and for what contribution cash? time? intellectual property, etc.)? And, how are these shares held?
Question to ask yourself before signing on the dotted line are:
Am I happy with my ownership stake? (If I’m the key founder, am I treating others fairly?)
2. Can I get out of this deal if I need to? (Can I sell the shares?)
3. Can I buy more shares if I’d like to?
4. Am I committing to something I cannot live up to?
5. Will I be able to exert sufficient influence to protect my investment?
6. What is my total financial exposure and legal liability (present and future) on this deal?
- Splitting Equity
Some have the misconception that equity must always be split 50/50. While an equal equity split can work great for some businesses, it is not the only alternative on the table. You may be avoiding an awkward and tough conversation by opting to split equally now, but think about the repercussions this may have to your business’s future. You should also consider vesting. This can prevent you from issuing stocks to unworthy partners or employees.
Remember that you will likely be spending more time with your co-founder than with your own family. Choosing this person will determine the future of your business. Having good chemistry and getting along with your co-founder is a must. You want someone that will carry their weight and that has the same passion and drive as you. You are about to embark on a challenging and memorable journey, make sure it’s with the right person!