Start Up Stories

Improving the Odds

Posted in Uncategorized by Devon on January 12, 2009

dice1It’s the last week of July and we met with our first angel investor this week, her advice was, “Do as much as possible to demonstrate the process (reduce risk) before raising capital.”… Good advice!  We were also working on a market release of a product that supported a business model that would change; ouch!  And the laywers, of course, were reluctant to write a formal opinion on our legal status, which was and remains a little mysterious 5 months later. 

I see that I was introducing our CTO to our patent attorney – a sensible move.  We were also starting into the discussion of compensation for founders – that would be a lengthy but ultimately successful discussion (more on that later).   I see that I was still trying to contact a West Coast VC that I didn’t know – that wouldn’t make sense, in the end.  And I was about to schedule our first board meeting.

Lesson Learned/Questions to Ask    

1. Define what reducing risk means in the eyes of investors, then take systematic steps to reduce that risk.

  • Have you asked potential investors what would reduce the risk profile of your business, in their view?

2. Get ahead of the founder compensation discussion, getting it wrong or late can be a huge distraction later on and possibly be the unwinding of the firm.

  • Are you viewing the founder compensation discussion as a top priority?

3. Start assembling a board of smart and trusted advisors early, the CEO needs someone to report to about every 4-6 weeks early in the company’s life; the exercise forces the founders to expose their thinking to external criticism. 

  • Are you regularly reporting to anyone outside the firm?

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