Six Quick Tips for Stage-One Entrepreneurs
Before you choose legal representation and launch your startup, lay the groundwork and keep an eye out for a few expensive and common mistakes. These simple tips may seem rooted in common sense, but in the early stages, excitement and optimism can blind entrepreneurs to a few hazards that can lead to resets or financial sinkholes. Keep your eyes open, don’t expect too much too soon, and don’t assume that the path you’re on has never been traveled before.
1. Overestimate costs and underestimate returns.
Keep your face toward the sun, but when it comes to budgeting for legal expenses and estimating the time required to accomplish tasks, stay conservative. To be safe, assume every step will cost twice as much and take twice as long as your calculations suggest.
2. Don’t treat legal concerns lightly.
If you’re looking for legal shortcuts or financial loopholes that can take you to the finish line faster, stop doing that. Don’t play fast and loose with the law, and recognize that even minor oversights or innocent mistakes can put you back to square one at best, and land you with prohibitive fines and fees at worst. Stay square with the law from day one, and trust that relevant regulations -- labor regulation, securities regulations, and corporate and tax rules -- are designed for businesses just like yours.
3. Protect your trademark and respect the registration process.
Even the biggest companies have to spend significant time and money rebranding, if and when they realize that a preferred branding strategy just isn’t protectible at the trademark office. Start speaking with counsel as early as possible about issues associated with your company name and other products you want to protect through the trademark registration process. Once you start to build brand equity, it can be painful (emotionally, legally and financially) to part with a brand that is just too exposed from a trademark perspective. Put together a strategy as early as you can with respect to brand protection.
4. Outsource whenever possible.
Keep the core model of your business, your mission, and your major decisions well under your own control, but free your hands and your time by delegating everything else to others. This can include payroll administration, marketing, bookkeeping and accounting, outreach, or product development. You’ll need to decide which elements of your business require your own attention and let the other aspects go.
5. Choose your funding option with the long term in mind.
How much control will you cede to your investors with each of your potential funding options? If you choose to rely on friends and family, angel investors, crowdsourcing, or VCs, what degree of leverage will you maintain over the direction of your business? Keep in mind that your long term goals will influence your decision. How long do you intend to lead the company or retain ownership? Do you want to stay small or go public one day? Do you want to be at the helm forever, or are you looking to sell one day?
6. Don’t confuse technology with efficiency.
We live in an time where the algorithms and technology you use to create your products and services, and the data generated through your interaction with your customers, is equally as important (perhaps even more important) than the actual products and services that you sell. You need to be very careful with how you protect this critical information; you could very well lose your competitive edge if this information is leaked to the public or if an employee or consultant walks away with it. Take the time to put in place adequate data protection policies, including non-disclosure agreements and IP assignment agreements, so that information generated for your company stays only with the company.