Startup Administrivia: Part 1 – getting started

Note: This multi-part post is for first time founders.  Anyone who has done it before will already know all this.

If you are a first time founder, what should you obsess about? Hopefully, you are all over the market opportunity.  You are doing customer development to understand buyer and user personas, building knowledge about the problems they face, and evolving hypotheses for how to solve these problems.  You are working on building a great product.  You are focusing on the build-measure-learn loop and iterating and pivoting fast to incorporate market learnings. You are working on putting together an A team to get the job done. And you are managing your time so you are able to focus on these value generating activities.

Instead, I find that a lot of first time founders spend a disproportionate amount of time sweating the details on administrivia.  Hiring professional service providers.  Company formation.  Making sense of Cap Tables.  Setting up a bank account and doing the accounting.  Keeping track of business contacts.  Company positioning and messaging.  Company naming.  Corporate identity.  Web site. Social media.  Filing patents.  You get the picture.

This stuff is not rocket science. It has to be done, but it doesn’t add value.  Figuring out the core premise of your startup – that  needs to be the main thing. Everything else is a distraction.

To help young founders spend the least possible time on this stuff, I am putting together a few posts that helps summarize some of the key tasks as well as pointing out some possible resources to execute those tasks.  Hopefully this will also arm you with the vocabulary to learn more.

  • Hiring professional service providers

    • What is this? Professional service providers can help you with the mechanics of starting and running a company.

    • Why do it? A small cash outlay can save you a lot of time and the trouble of learning things outside your area of expertise (such as how to file corporate taxes) that adds no value to your startup or your professional trajectory.

    • Who do I need? A corporate attorney, a contract accountant, a creative web / graphics service provider, an IP attorney.

  • Company formation, a.k.a. “incorporation”

    • What is this? The process by which the startup becomes a separate entity from the people who own or operate the business.

    • Why do it? To protect your personal assets in case your company gets sued / owes money, or some such.

    • What kinds of entities are relevant? Choice of C-Corp, S-Corp, or LLC.  This is a critical choice as it has significant tax implications.  Forbes has a great article on C-Corp versus S-Corp, and the Small Business Administration has an article on LLC that you should read. Work with a corporate attorney who can help you pick what works for you.

    • How do I file for incorporation? You can file your own incorporation papers with the SEC of your state. The easiest thing to do is to hire a corporate attorney to do it for you.

    • Who can help me with this? A corporate attorney.  e.g. Morse, Barnes Brown and Pendleton or Foley Hoag are example law firms that specifically service startups.

  • Cap Table construction:

    • What is this? A cap (capitalization) table lists who owns what stock in the company.

    • Why do it? To define ownership of the company. You need it immediately if you are incorporating with more than 1 founder, and you definitely need it when you raise your first round, or when you need to define an option pool for new employees.

    • Where can I find examples of cap tables to learn more? S3 ventures provides a fantastic excel template for free – you can download it here. Google any words that you don’t know in there and relax, you don’t need to understand all of that all at once.  Venturehacks has a blog post with a video link depicting the process, as well as an excel template you can buy for $9.

    • Who can help me with this?  Your corporate attorney.

  • Setting up a business bank account and business credit card

    • What is this? Opening a bank account and obtaining a business credit card for your startup, that is separate from your personal bank account and credit card.

    • Why do it? Keeps things clean and separate and saves you many hours of busywork writing expense reports from yourself to yourself. Keeps the credit histories separate.

    • Who can help me with this? You don’t need help on this one – just pick a local bank with a no-minimum-balance checking account product. Amazon business card is a great product for the corporate credit card.

  • Doing the accounting, and the software to do it with

    • What is this? Keep track of money in and money out for your business, separate from your personal finances.

    • Why do it? Some day you will get audited and you will be glad your books are squeaky clean from the start.

    • What do I need to do? Hire a contract accountant who can set you up with Quickbooks. You can do the Quickbooks management yourself until it gets unwieldy, then you can contract it out or hire a staff accountant. I have seen people use Quickbooks through Series B – I would suggest going with a professional ERP (enterprise resource planning system) before you get that far, especially if you are selling product and need to manage inventory.

    • Who can help me with this? A contract accountant.

  • Keeping track of business contacts via a CRM (Customer Resource Management) system

    • What is this? A CRM system helps you keep every detail of every conversation with every prospective customer / vendor / contact in one place via a database.

    • Why do it? Conversations can be long range and have a long half life – important to keep track of people, companies and tracks so nothing falls the cracks. Spreadsheets or documents or email trails are not scalable beyond a few conversations.

    • Who can help me get this done? You will have to set it up yourself.  Then everyone who interacts with outside contacts should get in the habit of logging their notes and conversations in the system.  There are free tools like the Zoho CRM, with limited functionality, or you can always spring for salesforce.com when you are big enough.

That’s enough for starters.  I’ll cover basic marketing presence in the next post.

Complete list of posts in this series:

  • Startup Administrivia: Part 1 – getting started
  • Startup Administrivia: Part 2 – basic marketing presence

 

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