Showing posts with label StartUp. Show all posts
Showing posts with label StartUp. Show all posts
Sunday, February 20, 2011
Books:Book about Oracle Founder Larry Ellison
This book absolutely must read! If you are DBA or start up founder - this book opens really shocking insight how business was and is made in Silicon Valley.
Have you knew that Larry Ellison was not employee #1 of Oracle?
Have you knew that Oracle put on IPO papers that it has mainframe solution while it was not even functional?
Have you knew how exectly Oracle crush the competitors and grew sales?
Read the book!
Monday, January 3, 2011
Beware:Legal Help and Legal Fees
One of the items that technical founders underestimate and frankly do not understand, is importance of using legal help and also importance of controlling legal fees.
Not having proper agreements and legal setup at the beginning of the company existence will cause many problems going forward.
One of the simple cases: When company is founded, it is very important to set up equity vesting schedule - if you just say that 100% of equity is yours, or split it among the founders, any coming investors will request recapitalization and will re-establish proper vesting from scratch, so after years of work you may end up vesting from zero.
It is best to find legal help through trusted recommendations. Also, you need to make sure that your lawyer has specific experience and references related to work with start up companies - especially your corporate lawyer.
Lawyers like doctors - you need corporate lawyer to deal with company matters, you need IP layers to work with your patents and at some point you many need a litigators well.
Also, as a founder, make sure to retain services of your personal corporate lawyer.
Understand this very clearly - company corporate lawyer is NOT your personal corporate lawyer.
When you starting the company it may seem that way, but you need to recognize clearly - your interests are NOT the company interests. They are aligned in 99% of the cases, but the last 1% is what really matters. Matters especially when investors are being involved.
Silicon Valley is full of stories when founders are totally diluted and left with nothing while companies are sold for 100's of millions of dollars, or when companies are liquidated by investors because they thought that profitable company is progressing too slow for their portfolio.
One sensitive matter here is IP. Founders are brainwashed, that IP should be automatically assigned to the company. The question is WHY? Of course, your business partner would want this, or investors may want this too. But this is clear conflict of interests. Why to do this immediately and to create a huge personal risk exposure?
There are many better options. For example: You may lease IP to your company (for annual fee with interest) and sign agreement that you'll assign it after initial investment of over 1M or even after exit of over 5M, etc (some reasonable condition). This way, if company have to shut down, your IP is not part of the assets and can not be taken from you. Also, since company would own you some money, you'll be establish yourself as one of the creditors. This will also prevent unscrupulous investors from "sending you to cleaners"
Remember, as a technical founder your ideas and your IP is what you have and contribute from an asset perspective and you need to keep it as long as possible and to make sure to be paid for it fairly, not to surrender it just because your partner or corp lawyer says so,
Another thing - always think not just about best possible outcome, but about worst possible outcome as well and make sure to be ready for it. What would happen if your partner leaves tomorrow (for any reason) - can he just walk away with all the equity? - What would happen with the company then? (this is why you need vesting, proper vesting cliff and a right of company to purchase his shares for a very small price, etc). Overall, you need trusted qualified legal advice.
Now in regards to controlling fees - you need to control your talking, control your agenda and control / inspect your legal bills. If you planning to engage into casual conversation with your lawyer - literally - check if this is billable or now. Lawyers derive lots of their income from phone conversation - so be extremely clear, short and precise!
If you plan to engage lawyer into some kind of clearly defined activity - like asking to prepare a document, etc - always ask how long would it take, as well if he can assign this task to associate with the much lower rate.
If your lawyer is dealing with something that can be very taxing for company finance if billed by an hour, request this to be bullied as a project with the cap and in general, try to assign cap (top limit) to the project.
At the end I would like to recommend amazing book that I found after long search - would I read this book earlier, I would have saved thousand of dollars -
Taming the Lawyers: What to Expect in a Lawsuit and How to Make Sure Your Attorney Gets Results (Taking Control)
Not having proper agreements and legal setup at the beginning of the company existence will cause many problems going forward.
One of the simple cases: When company is founded, it is very important to set up equity vesting schedule - if you just say that 100% of equity is yours, or split it among the founders, any coming investors will request recapitalization and will re-establish proper vesting from scratch, so after years of work you may end up vesting from zero.
It is best to find legal help through trusted recommendations. Also, you need to make sure that your lawyer has specific experience and references related to work with start up companies - especially your corporate lawyer.
Lawyers like doctors - you need corporate lawyer to deal with company matters, you need IP layers to work with your patents and at some point you many need a litigators well.
Also, as a founder, make sure to retain services of your personal corporate lawyer.
Understand this very clearly - company corporate lawyer is NOT your personal corporate lawyer.
When you starting the company it may seem that way, but you need to recognize clearly - your interests are NOT the company interests. They are aligned in 99% of the cases, but the last 1% is what really matters. Matters especially when investors are being involved.
Silicon Valley is full of stories when founders are totally diluted and left with nothing while companies are sold for 100's of millions of dollars, or when companies are liquidated by investors because they thought that profitable company is progressing too slow for their portfolio.
One sensitive matter here is IP. Founders are brainwashed, that IP should be automatically assigned to the company. The question is WHY? Of course, your business partner would want this, or investors may want this too. But this is clear conflict of interests. Why to do this immediately and to create a huge personal risk exposure?
There are many better options. For example: You may lease IP to your company (for annual fee with interest) and sign agreement that you'll assign it after initial investment of over 1M or even after exit of over 5M, etc (some reasonable condition). This way, if company have to shut down, your IP is not part of the assets and can not be taken from you. Also, since company would own you some money, you'll be establish yourself as one of the creditors. This will also prevent unscrupulous investors from "sending you to cleaners"
Remember, as a technical founder your ideas and your IP is what you have and contribute from an asset perspective and you need to keep it as long as possible and to make sure to be paid for it fairly, not to surrender it just because your partner or corp lawyer says so,
Another thing - always think not just about best possible outcome, but about worst possible outcome as well and make sure to be ready for it. What would happen if your partner leaves tomorrow (for any reason) - can he just walk away with all the equity? - What would happen with the company then? (this is why you need vesting, proper vesting cliff and a right of company to purchase his shares for a very small price, etc). Overall, you need trusted qualified legal advice.
Now in regards to controlling fees - you need to control your talking, control your agenda and control / inspect your legal bills. If you planning to engage into casual conversation with your lawyer - literally - check if this is billable or now. Lawyers derive lots of their income from phone conversation - so be extremely clear, short and precise!
If you plan to engage lawyer into some kind of clearly defined activity - like asking to prepare a document, etc - always ask how long would it take, as well if he can assign this task to associate with the much lower rate.
If your lawyer is dealing with something that can be very taxing for company finance if billed by an hour, request this to be bullied as a project with the cap and in general, try to assign cap (top limit) to the project.
At the end I would like to recommend amazing book that I found after long search - would I read this book earlier, I would have saved thousand of dollars -
Taming the Lawyers: What to Expect in a Lawsuit and How to Make Sure Your Attorney Gets Results (Taking Control)
Friday, December 10, 2010
Beware: Recruiters: How-To notes
In a start-up you must have best recruiters possible. Unfortunately, quite often, this is not a case. Many recruiters just pick candidates from job search engines, like yahoo jobs, dice or monster and trying to present them to you as if they identified them.
More than that - if you hire person who was found on a search engine, but by any chance (which is quite high) such recruiter also have send you same candidates resume, he can claim that you owe him the fee.
Considering that many of such recruiters keep litigation lawyers on contingency, you can face a lawsuit very fast if you reject to pay such a fee.
I was recently involved into "damage control" situation, when reckless executive behaviors enabled recruiter to sue the company and actually get some money in a process - as for businesses very ofter it is easier to pay than to engage into lengthy lawsuit.
As a person in charge of hiring, it is very important to make sure that agreement clarifies what search of candidates you expect from recruiter.
Another important point - always make sure to have a written agreement in place. Never agree to have couple candidates to be presented to you "just to show how good I am". This is an invitation to a legal troubles.
As a person in charge you already know what percentage / fee you are willing to pay and what other conditions for candidate search you need to have in place. Ask recruiter to send you an agreement, modify it with change tracking, send it back, execute it. After that let him present candidates.
Fees in general:
25% today is a standard proposed fee. I have negotiated 20% with the majority of the search firms. Some companies tried to set 30-35%, but in todays economy this is not reasonable and should not be considered
Other conditions:
Usually recruiter propose 30 days free replacement if candidate left of let go. In complex technical and business positions, this is nearly not enough to understand if person fully fits the position or not.
Always request free candidate replacement within 90-120-180 days - whatever longer you can negotiate. I manage to negotiate 120-180 days with many recruiters.
More than that - if you hire person who was found on a search engine, but by any chance (which is quite high) such recruiter also have send you same candidates resume, he can claim that you owe him the fee.
Considering that many of such recruiters keep litigation lawyers on contingency, you can face a lawsuit very fast if you reject to pay such a fee.
I was recently involved into "damage control" situation, when reckless executive behaviors enabled recruiter to sue the company and actually get some money in a process - as for businesses very ofter it is easier to pay than to engage into lengthy lawsuit.
As a person in charge of hiring, it is very important to make sure that agreement clarifies what search of candidates you expect from recruiter.
Another important point - always make sure to have a written agreement in place. Never agree to have couple candidates to be presented to you "just to show how good I am". This is an invitation to a legal troubles.
As a person in charge you already know what percentage / fee you are willing to pay and what other conditions for candidate search you need to have in place. Ask recruiter to send you an agreement, modify it with change tracking, send it back, execute it. After that let him present candidates.
Fees in general:
25% today is a standard proposed fee. I have negotiated 20% with the majority of the search firms. Some companies tried to set 30-35%, but in todays economy this is not reasonable and should not be considered
Other conditions:
Usually recruiter propose 30 days free replacement if candidate left of let go. In complex technical and business positions, this is nearly not enough to understand if person fully fits the position or not.
Always request free candidate replacement within 90-120-180 days - whatever longer you can negotiate. I manage to negotiate 120-180 days with many recruiters.
Sunday, November 21, 2010
Starting a Startup (part 1)
Being an engineer all my life transition to startup founder is not an easy thing, especially at the initial phase, when you have a good idea and working on a prototype of the product that will become an initial startup technology. I did it on my "moonlight" time - while being crazy loaded at work and having a beautiful growing family.
This is a real challenge and family support is critical - in fact all this work is done on out-of-work time, which is taken from your family - this is a great sacrifice on their behalf.
Initially there is one challenge - to create prototype of technology or web-site, but very quickly this is changing toward many operational and organizational activities.
I can list few and every one of them deserves separate entry in it's due time:
1) Incorporate your company - need to know what is good for taxation,your situation, etc. Many start with LLC and convert it later to S-Corp or C-Corp - I can recommend some good books on this that helped me.
2) Think about IP - need to file patent pending application almost immediately - very important to know what to file - sending bunch of prints is useless and will not protect your invention - again books are your friends here - I'll share my experience separately
3) Get legal help - lawyers like doctors, you need them and they are separate per your need - there are Corporate lawyers, IP lawyers, litigators (hopefully you would not need them right away, but best is to know one as in a life of your company you'll be surely sued)
IMPORTANT - this is a major money burner!!! - you should be very careful with the legals people time and use it appropriately. I'll share my cost-containment tactics later - this is very important how to deal with the lawyers. Lawyers are great (honest), but they love to talk and this will cost you.
4) Create your website - this includes not just a web-site coding, but also getting SEO running, forms coded
5) Start marketing - blogging, links, live marketing, etc
6) Set-up company communication channels - phone-line/PBX, web conference, phone-conference, physical company address, mail communication
7) Start networking, go to entrepreneur meetings (like SVASE and free classes)
8) Decide on your partner (if you'd want to have one) - VERY CAREFULLY - this can make or break your company
9) Test Water / Start thinking who can be potential future beta customers
......
As you can see, many things can be done on a shoe-string, without VC or angels money.
The main idea is to do as much as you can yourself to raise company valuation as much as possible before you'd start searching for outside investment. Don't be afraid to do new things - this is only helping you to learn more about how to run your own business and how to interact with people.
Also, as soon as you'd involve more people they will consume your time, which you do not have at this phase. Even interaction with Web designer will take more time that it will take it for you to make a web-site fix.
Will continue in a next post...
This is a real challenge and family support is critical - in fact all this work is done on out-of-work time, which is taken from your family - this is a great sacrifice on their behalf.
Initially there is one challenge - to create prototype of technology or web-site, but very quickly this is changing toward many operational and organizational activities.
I can list few and every one of them deserves separate entry in it's due time:
1) Incorporate your company - need to know what is good for taxation,your situation, etc. Many start with LLC and convert it later to S-Corp or C-Corp - I can recommend some good books on this that helped me.
2) Think about IP - need to file patent pending application almost immediately - very important to know what to file - sending bunch of prints is useless and will not protect your invention - again books are your friends here - I'll share my experience separately
3) Get legal help - lawyers like doctors, you need them and they are separate per your need - there are Corporate lawyers, IP lawyers, litigators (hopefully you would not need them right away, but best is to know one as in a life of your company you'll be surely sued)
IMPORTANT - this is a major money burner!!! - you should be very careful with the legals people time and use it appropriately. I'll share my cost-containment tactics later - this is very important how to deal with the lawyers. Lawyers are great (honest), but they love to talk and this will cost you.
4) Create your website - this includes not just a web-site coding, but also getting SEO running, forms coded
5) Start marketing - blogging, links, live marketing, etc
6) Set-up company communication channels - phone-line/PBX, web conference, phone-conference, physical company address, mail communication
7) Start networking, go to entrepreneur meetings (like SVASE and free classes)
8) Decide on your partner (if you'd want to have one) - VERY CAREFULLY - this can make or break your company
9) Test Water / Start thinking who can be potential future beta customers
......
As you can see, many things can be done on a shoe-string, without VC or angels money.
The main idea is to do as much as you can yourself to raise company valuation as much as possible before you'd start searching for outside investment. Don't be afraid to do new things - this is only helping you to learn more about how to run your own business and how to interact with people.
Also, as soon as you'd involve more people they will consume your time, which you do not have at this phase. Even interaction with Web designer will take more time that it will take it for you to make a web-site fix.
Will continue in a next post...
Starting to Blog
I thought about blogging for quite a while - why would I blog? Who would be my readers? What good will it do? What can I write about?
I decided to blog, as I think I can share quite a wealth of information - I worked for a great companies, like eBay, founded by own bootstrap startup (Enteros), earned millions in revenue, lived in interesting countries - USSR, Israel, USA, so I guess there is something I can share both from technology and life perspective.
I do believe in sharing - I believe that by sharing I can empower people to get some useful information that in a microscopic doses will help us all, and will help my country that I love - USA
I decided to blog, as I think I can share quite a wealth of information - I worked for a great companies, like eBay, founded by own bootstrap startup (Enteros), earned millions in revenue, lived in interesting countries - USSR, Israel, USA, so I guess there is something I can share both from technology and life perspective.
I do believe in sharing - I believe that by sharing I can empower people to get some useful information that in a microscopic doses will help us all, and will help my country that I love - USA
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