8 Mistakes Founders Make February 26, 2013 12:00-12:45pm You have the next billion dollar idea. Now you have to transform your idea into a company. Our friend Bob Bishop of Goodwin Procter can warn you about the Top Eight Mistakes founders make and how to avoid them before they happen. Experts: Bob Bishop - Goodwin Proctor

1. Founders Workbench
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A free, online resource to help entrepreneurs navigate many of
the legal and organizational challenges faced by start-ups
•
Resources include the Capital Calculator, Deal Dictionary,
Document Driver, and Founders Workbench blog
•
Site includes self-service tools for generating initial company
incorporation and related documents
Legal Standard of
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Web Marketing Association
1st Place
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CIO 100 Award Winner
for Information Technology
Department

2. www.foundersworkbench.com

3. 8 Mistakes Entrepreneurs
Make
Robert E. Bishop
©2009. Goodwin Procter LLP

4. 8 Mistakes Entrepreneurs Make (cont d)
1. Failing to Pay Attention to Corporate
Formalities
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•
•
Formation
Stock Issuance
Founder Agreements
Give corporate and legal matters the same
respect as your source code/lab notebooks/
engineering documents
2

5. 8 Mistakes Entrepreneurs Make (cont d)
2. Complicating the Formation Process
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KISS Principle
Choice of entity (corporation vs. LLC)
S corp vs. C corp
Where to incorporate
3

6. 8 Mistakes Entrepreneurs Make (cont d)
3. Refusing to Subject Founders Stock
to Vesting
• Founders departure triggers repurchase of
some shares by company
• 83(b) elections are critical
• Transfer restrictions – ROFR and IPO lock-up
4

7. 8 Mistakes Entrepreneurs Make (cont d)
4. Dwelling on Valuation
• Focus on winning before worrying about your
share of the win
• A company never went out of business
because of dilution
5

8. 8 Mistakes Entrepreneurs Make (cont'd)
5. Failing to Raise Enough Money (for
fear of dilution or otherwise)
• Everything costs twice as much as you think it
will
• Everything takes twice as long as you think it
will
• Management needs to run the business
rather than be preoccupied with fundraising
efforts
6

9. 8 Mistakes Entrepreneurs Make (cont'd)
6. Spending Money Too Quickly
• Hire conservatively and purposefully
(programmer vs. CFO)
• Consider equity compensation (with vesting)
7

10. 8 Mistakes Entrepreneurs Make (cont'd)
7. Failing to Pick Advisors Who Add
Value to your Business
• Investors
• Directors
• Service Providers and Advisors
8

11. 8 Mistakes Entrepreneurs Make
8. Failing to Adequately Protect Your
Intellectual Property Assets
• Rights of former employers
• Rights of consultants and other third party developers
• Lack of adequate trade secret protection (NDAs)
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