10 Things Every Startup Founder (And Employee) Should Know

David Weekly

Photo: David E. Weekly, Twitter

In anticipation of the Facebook IPO this week and the thousands of young millionaires it will spawn, the runway success of the social network is a good reminder that sometimes you can get rich by starting a startup or by working at one.Not quite. David E. Weekly thinks equity is a lottery ticket. Weekly, who helped found Hacker Dojo and PBworks, wrote a guide for startup guys.

Weekly scribbled all this wisdom down because he wished someone had told him all this stuff when he was 25, when he got his start in the Internet business. Weekly also is an angel investor, so he knows both sides.

This document is the third edition, and he even got help from three attorneys. Weekly wrote the first one when he was on a plane and it got over 20,000 views in just a few days. 

Congrats! You have an idea. BUT....Don't join an incubator so you can find a technical co-founder. If you can't find someone to code, learn. All it takes is some logic. Try Codecademy or Udacity.

So now you need money to fund your idea. Try angel investors first. They are usually entrepreneurs who have sold their businesses and can mentor new startup guys. If they want to give you money, you get a check right away. Unless they have to ask their spouse.

If you need more money and decide to pursue venture capital, make sure you're meeting the right person. You need to know if you're talking to a partner or an associate. A partner can decide about the investment. An associate is an analyst.

You can raise money by convertible notes (debt) or through sale of equity (stock). Usually convertible notes are smaller than $50k-$500k, while priced rounds are $500K and larger. But now some convertible notes in the $2m range are becoming more common, which may be a sign that we are in an early stage funding bubble.

VCs can smell fear. So don't go around asking for money when you're desperate. It's better to ask when you don't really need it.

You can't call a last minute board meeting. There's this technical rule: before a board meeting is legal, they need to know about the meeting at least 24-48 hours in advance. A majority of board members need to be present (or at least phone or Skype in). So plan ahead!

So you have your team and your product. And now you have money to hire. When you hire your first employee, you might have to grant them equity, which will dilute your stock. But it's OK if that employee will make your company 10% more valuable.

So what if you're one of those early employees rather than a founder? Weekly advises you to ask for a cash bonus, ask for permission to early exercise, and ask for NSOs. Weekly suggests exercising your options at once if you can.

Now check out what is it like to pitch your startup on Sand Hill Road...

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