Name: High tech startup
ISBN: 9780914405719

High tech startup

The phenomenal success of the initial public offerings (IPOs) of many new internet companies obscures the fact that fewer than six out of 1 million business plans submitted to venture capital firms will ever reach the IPO stage. Many fail, according to start-up expert John Nesheim, because the entrepreneurs did not have access to the invaluable lessons that come from studying the real-world venture experiences of successful companies. Now they do. This revised and updated edition of Nesheim's underground Silicon Valley bestseller incorporates twenty-three case studies of successful start-ups, including tables of wealth showing how much money founders and investors realized from each venture. Acclaimed by entrepreneurs the world over, this practical handbook is filled with hard-to-find information and guidance covering every key phase of a start-up, from idea to IPO: how to create a winning business plan, how to value the firm, how venture capitalists work, how they make their money, where to find alternative sources of funding, how to select a good lawyer, and how to protect intellectual property. Nesheim aims to improve the odds of success for first-time high-tech entrepreneurs, and offers an insider's perspective from firsthand experience on one of the toughest challenges they face -- convincing venture capitalists or investment banks to provide financing.

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pthreadsJan 2019

Other commentators have touched upon topics like building, selling, networking etc.. So I won't repeat those.

My advice is to first and foremost firewall your personal assets. It will save you a ton of regret and headache later if things go wrong.

- If you are in the US then start by forming an LLC (or Delaware C corp if you have the funds) with a separate bank account.

- If you are in the services business then get business insurance (quite affordable actually).

- Buy domain names. Also set up a time line for when you may want to register a trademark if that applies in your case.

- Create all necessary document templates ahead of time, for e.g. NDA, contracts, IP assignment etc. depending on what is applicable in your case.

Some additional advice :

- Never make verbal promises or handshake deals especially when you are scouting for a co-founder, contractors, or employees. It doesn't matter how well you know them.

- Avoid, to the extent you can, offering equity for services or deferred compensation. In the early stages it is quite possible that you will be using contractors. If you do then make sure the written agreement terms are solid and unambiguous.

- Read books like Deal Terms, Term Sheets and Valuations, Venture Deals, High Tech Startup, Founder's Dilemma, Fools Gold etc.. and become very familiar with the concepts and terms. I can't stress this enough -- be well informed! - Thoroughly understand cap tables and how they change over time/events.

- Read Getting To Yes (Harvard publication, if I remember correctly). Will help you with your negotiation skills.

- Consider startup incubators if that helps in your particular case. But be careful and understand the terms carefully. Some incubators will take a non-trivial amount of stock in exchange for very little.

About co-founders :

If you are passionate and/or good at selling your idea it is quite likely you will attract co-founders. Do not rush. Take your time to get to know them within the context of your startup regardless of how well you have known them personally.

- If you can try to work out a try-out phase with potential co-founders. But be very careful and make sure both parties sign proper agreements and are very clear about what they are getting from each other.

- Personally I am not a fan of part-time co-founders. If someone wants to join they are either all in or out.

- Please read Founder's Dilemma (Noam Wasserman).

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mindcrimeDec 2013

That's a lot of questions, and most of the answers are "it depends", or there's more than one right answer.

I'd suggest you consider reading The Art of the Start[1] by Guy Kawasaki, The Four Steps To The Epiphany[2] by Steve Blank, and High Tech Startup[3] by John Nesheim. Between those, they cover a big chunk of the basic stuff you need to know.

The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup[4] also has a good reputation, but I haven't had time to read it yet, so I can't give a personal endorsement. But it sounds like it might be worthwhile.

FWIW, though, I can tell you what we did at Fogbeam[5]: The company is organized as a legal entity, but we are an LLC right now, not a Corporation. I would not necessarily recommend doing that to anybody else though... while it is possible to build a big company as an LLC, practically speaking, if the intent is to build a scalable startup, the kind that's going to seek VC money and that you ultimately hope to IPO, you need to be a corporation. VC's essentially will never invest in an LLC (there are technical reasons why) and LLC's have serious limits if you need more than a hundred or so "shareholders" (I forget the exact number, but it's a pretty small number). The reason we are an LLC is a historical coincidence, rooted in weird shit that happened back when I was planning to start a consulting company, before deciding to do a product. Fortunately the prevailing wisdom is that it's fairly straightforward to convert from an LLC to a C Corporation. When they day comes that we need to do it, we'll switch.

As far as equity distribution, we have been operating on a handshake agreement between the founders. Technically speaking, I own 100% of the company "on paper" since I'm the only Member listed in the LLC operating papers. But that is, again, only a historical legacy. I created the company and worked alone for the first year before inviting the first co-founder onboard. It would be easy enough to amend the papers to update the equity split, but we've basically taken the approach that "well do that when we convert to a C corp, or there's a specific need to" (like, if we get an acquisition offer). So, yeah, we are operating on trust at the moment. A lot of people will recommend against doing that sort of thing for various reasons (see: The Social Network for example), and I have known friends who got screwed by co-founder disputes because things weren't put into writing up-front. If I had to advise somebody, I'd probably advise you to decide on the equity splits, intellectual property assignments, etc. up-front, and formalize everything from the beginning just to be on the safe side. The downside to that is, it costs a little bit of money and time. shrug

As for YC... nothing against them, but I'd never make a decision based on "what YC wants". But I look at all accelerators / incubators / etc. as "something that might be nice to do, but we'll succeed with or without them." Being that we are an East Coast startup with constraints that would limit out ability to move to CA in order to do YC, we've never even applied and probably never will. If doing YC is super important to you, then maybe you should treat this a bit differently. It's up to you.

Design document? Meh... I mean, yeah, but no. Not exactly. You need to know something about what you're building, but as a rule, you probably won't know exactly what you really need to build to achieve "product / market fit"[6] right away. So no sense spending months on an elaborate BDUF design doc. Sketch out the high level design, and IF you wind up subcontracting any work, then you'll have to formalize a spec for the contractor. But don't spend months and months designing something nobody wants. "Get out of the building" as they say, talk to customers, and iterate the design as you learn what people want/need.

[1]: http://www.amazon.com/Art-Start-Time-Tested-Battle-Hardened-...

[2]: http://www.amazon.com/Four-Steps-Epiphany-Steve-Blank/dp/098...

[3]: http://www.amazon.com/High-Tech-Start-Revised-Updated/dp/068...

[4]: http://www.amazon.com/The-Founders-Dilemmas-Anticipating-Ent...

[5]: http://www.fogbeam.com

[6]: http://www.stanford.edu/class/ee204/ProductMarketFit.html

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robdimarcoApr 2010

High Tech Startup is a fantastic book that takes you from the kitchen table to IPO.

http://www.amazon.com/High-Tech-Start-Revised-Updated/dp/068...

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fusionmanSep 2008

For startups,

-Art of the Start by Guy Kawasaki -Blue Ocean Strategy -High Tech Startup by John Nesheim -The Power of Unfair Advantage by John Nesheim -Crossing the Chasm

These are all helpful for startups.

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fdschoenemanMay 2008

So long as you're writing the business plan with the purpose of helping you think through your new venture, rather than with the purpose of being able to drop it off John Doerr's lap and have him be, like, "Sweet plan, dude, here's three million dollars to go make it happen," it's a good idea. But be careful about writing the perfect business plan without working on your product simultaneously; business plans go through many revisions and iterations, just as do most software development projects.

Having said that, I'm one of those guys who really did find the process of writing a business plan to be personally helpful, whether or not a potential investor likes the result. So here's my .02. I'd start with John Nesheim's books, both "High Tech Startup" and "Unfair Advantage." I'd also check out his blog and his reading list. Somewhere in there he has a template that many successful tech companies have found useful for their own business plans. He also has a sample business plan, written by students, that you can take a look at.

Again, a rough 10 or 15 page business plan can't hurt at this stage, but you should be focused on making your product awesome, so that people will want it. Get that handled, and then worry about writing a really tight executive summary and you'll be good to go.

Good luck.

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Alex3917Apr 2008

You might like the book High Tech Startup by Nessheim. It's basically a collection of statistics about startups.

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