1. Starting your Startup
Joe Stump, CTO & Cofounder of SimpleGeo

2. • Early employee at three startups ranging
from bootstrapped to venture funded.
• Angel investor in three startups.
• Advisor to seven venture funded startups.
• Cofounder of two venture funded startups.

3. Itʼs lonely at the top.

4. Implementing vision
takes time
Inception Your brain
Funding v1.0

5. Startups are Trench Warfare

6. FOUNDING A
STARTUP IS REALLY
FUCKING HARD. NO
JOKE.

7. “Don’t start a company unless
it’s an obsession and something
you love. If you have an exit
strategy, it’s not an obsession.”
Mark Cuban

8. “Focus on the problem. If
you’re only excited about the
solution, you’ll lose interest
when your solution doesn’t fix
the problem. ”
Adil Wali, CTO of ModCloth

9. FIND A MENTOR
WHO HAS FOUNDED
A STARTUP BEFORE.

10. Forming the Company

11. Choose your partner wisely

12. founder(s) (n): The person or people who
agree to quit their jobs after initially conceiving
and brainstorming an idea.

13. How many founders?
• Investors want to see more than one
founder for redundancy reasons.
• More than three founders leads to dilution
and control issues.

14. What to look for?
• Find people who have a similar work
ethic as you.
• Find people with complimentary skill
sets.
• Find people with a similar approach to
product development as you.
• Find people with similar values.

15. BE WARY OF GIVING
THE TITLE
“COFOUNDER” TO
EARLY EMPLOYEES

16. You

17. Them

18. FIND PEOPLE
ECONOMICALLY
ALIGNED WITH YOU.

19. Good
A little friction is good.

20. Bad
A lot of friction is bad.

21. SimpleGeo
✓ Matt Galligan is an established designer
with expert knowledge of CSS, HTML,
and branding.
✓ Joe Stump is an expert in building
scalable web infrastructure, recruiting
engineers, and programming processes.
๏ Both are extremely opinionated product
people.

22. Slicing up the Pie

23. • All founders should be on a four year
vesting schedule. One year cliff, 25%
vested up front, monthly vesting after
cliff.
• Set aside 15% for an employee option
pool. Your investors will make you
anyways.
• File your 83(b) election.

24. • First non-founding engineer should
expect 1-3%
• Early engineering hires can expect
0.5% to 1.5%
• Director level around 1%, VP level
around 2-3%, CEOs between 6-9%

25. PLEASE FILE YOUR
83(b) ELECTION
(PRETTY PLEASE).

26. 48% of $1M is greater
than 15% of $1M.

27. Hire a Lawyer

28. • Many law firms in the Bay Area will
form the company on consignment.
• Investors in the Bay Area are used to
dealing with a handful of lawyers.
Speeds up process and saves
money on closing.

29. Delaware C Corp

30. USING CHEAP
LAWYERS IS AN
EXTREMELY DUMB
IDEA.

31. Funding the Company

32. “Money is a renewable
resource. Time is not”
Adil Wali, CTO of ModCloth

34. Bootstrap the Company

35. Venture funded company

36. Venture
Bootstrap
Backed
Control ✓
Fast to market ✓
No distractions ✓
No dilution ✓

37. pre-money valuation (n): 1. What
investors think your company is currently worth
sans investment. 2. Bullshit.

38. post-money valuation (n): 1. Company’s
pre-money valuation plus the dollar value
invested. 2. Bullshit. 3. Money in the bank.

39. dilution (n): 1. The action of making a liquid
more dilute. 2. The act of stock being
transferred from the people creating the
company to the investors with the money, thus
reducing the percentage of the company the
people creating the company own.

40. liquidation preferences (n): 1. The dollar
amount that a holder of preferred stock will
receive prior to holders of common stock. 2.
The act of investors covering their asses.

41. preferred stock (n): 1. Stock that entitles
the holder to a fixed dividend, whose payment
takes priority over that of common-stock
dividends. 2. The act of giving up all control over
your company.

42. convertible note (n): 1. A loan whose
value may be converted into common or
preferred stock. 2. Easiest, most founder friendly
form of capital on the market.

43. discount (n): 1. An investment discount
convertible note holders receive in subsequent
rounds. 2. If the Series A share price is $10.00/
share, and the convertible note holder has a
20% discount, they may buy at $8.00/share.

44. price cap (n): 1. A share price ceiling that
note holders enjoy in subsequent rounds of
financing. 2. If the convertible note’s price cap is
$5M, and a round is raised at $10M, the note
holder gets twice as much value.

45. priced round (n): 1. Financing the company
by selling a certain percentage for a mutually
agreed upon price at a mutually agreed upon
value of the company. 2. The most expensive,
investor friendly form of capital on the market.
3. Moment when your notes convert into
preferred stock according to their terms.

46. “Raise money when you can;
not when you want to.”

47. A few gotchas
• Be wary of aggressive pro rate rights that
allow investors to “buy up” in subsequent
rounds.
• Be wary of board composition early on.
• Be wary of any one investor owning a
majority of preferred stock.

48. Company Structure
• Preferred stockholders have all voting rights
to change company charter.
• Common stockholders have no voting rights.
• Founders are at-will employees of the board.
• All transactions (fundraising & exits) must be
approved by board and majority of preferred
stockholders.

49. YOU CAN BE FIRED
FROM YOUR OWN
COMPANY.

50. “A 2x return in less than 18
months is uninteresting to us.”

51. LOLWTFBBQ?!

52. Moving the Needle

53. 1. Invest $2m at a $4m pre-money valuation
for 33% of the company.
2. Sell company for $12m in less than 12
months.
3. PROFIT! $2m in profits from the sale.
4. On a $400m fund you’ve netted a 0.5%
return for your fund’s LPs.

54. 1. Look for investors who have founded and
ran a startup before.
2. Look for investors with some of their own
money in play.
3. Look for investors who understand the
problem and are excited about your
solution.

55. INVESTORS ARE
NOT YOUR FRIENDS.

56. Spending the Money

57. MONEY / EMPLOYEES = $12,000 – $15,000

58. 74%
18%
3%
5%
Rent Infrastructure
People Other

59. Cloud

60. Physical Hardware

61. Physical
Cloud
Hardware
Cost efficient ✓
On-demand ✓
Less to ✓
maintain
Automated ✓

62. Key Questions
• Does your application have abnormal
performance characteristics or density
requirements?
• How much time, money, effort, and
management will go into building & maintaining
multiple colocation facilities?
• What is the opportunity cost to your product
if you are fully staffing a network operations
center?

63. “Want to increase
innovation? Lower the cost
of failure.”
Joi Ito

64. CLOUD VS.
PHYSICAL
HARDWARE IS A
BUSINESS DECISION.

65. Rails Django Code Igniter
Prototyping ✓ ✓ ✓
ORM ✓ ✓ ✓
MVC ✓ ✓ ✓
Community ✓ ✓ ✓
Scalable ✓ ✓ ✓

66. LANGUAGES DO NOT
SCALE.
ARCHITECTURES DO.

67. RDBMS NoSQL
Well known ✓
Ecosystem ✓
Linear scaling ✓
Multi-master ✓
Scalable ✓ ✓

68. “As far as technology, go
with what you know.”
Mark Cuban

69. THE TECHNOLOGY
STACK YOU CHOOSE
IS AN
IMPLEMENTATION
DETAIL.

70. Creating the Product

71. “The best products in
the world start out as
features.”
Kevin Systrom, CEO of Instagram

72. “If you’re not embarrassed
when you ship your first
version you waited too
long..”
Matt Mullenweg, CEO & Founder of WordPress

73. BE MILITANT IN
YOUR MINIMALLY
VIABLE PRODUCT
(MVP).

74. Approaching Product
1. Focus on a single use case that addresses
the problem.
2. Start with a minimal core set of features.
3. Release and listen to your users.
4. Question your initial assumptions based on
feedback.
5. Rinse and repeat.

75. Product / Market Fit
Enjoy the Ride

76. @joestump