IDEA STAGE STARTUP FAQS
Have a burning startup question or not sure where to start your startup journey? Read our startup FAQs where we address common questions and topics common with the emerging founders in our community.
Should I tell people about my startup idea?
Absolutely! As a matter of fact, we highly recommend it.
So many potential entrepreneurs with amazing ideas are afraid to share them. They somehow think that their idea may be stolen, they make others sign Non-Disclosure-Agreements before sharing their idea. This is silly, and really a tell-tell sign that you are just entering into startupland. Telling people of your idea is the only way to 1) validate that the idea is viable 2) spread awareness of your startup 3) get the resources you need to help you grow.
Expert Tip: Do not give away your “secret sauce” when sharing your startup idea. Talk about the human benefits of your startup idea, not the details in how it works behind the scenes.
Can I start-up as a single person startup?
Yes, but only in the initial stage.
When you are evaluating your startup idea, and aren’t sure of how to explain it, it may be hard to onboard a co-founder. However, it ultimately takes a team for a startup to succeed and the first person you would recruit is a co-founder. The ideal co-founder is one who has had a successful startup before. Also ensure that you have similar goals, excellent communication and commitment towards your startup. Be clear on what you are looking for, and what you are offering in your co-founder search. Our Accelerator program can help you find your perfect co-founder, but if you aren’t ready to join the club yet, there are other local networking groups, meetups, and online networks you can browse in your search for a co-founder.
Expert Tip: When you have a clear vision, and mission and are driven you WILL attract people to join you. Remember your leadership skills is what will attract co-founders. People follow people first, the idea second.
Is having a startup mentor important?
A startup mentor is essential to get honest and constructive feedback about your startup. Their experience provides excellent solutions to challenges you face. They are the unsung heroes in a startup, and generally give their help free of cost and become the cornerstone in making the important decisions around your startup. Finding the right mentor can be challenging, it is a two-way relationship so take your time and explore. ViveDC takes great pride in our mentor community.
Expert Tip: Your mentors(s) are your support and guides, but ultimately you must make the decisions in your startup. You must learn to take action, quickly swiftly, and learn from your mistakes and always push forward.
So how do I onboard my first co-founder?
Be clear on what you are offering, and what you are expecting.
Create a document of an ideal co-founder role(s) based on your strengths and weaknesses; write an ideal “job description” for the ideal partner as well as an orientation plan. Use them in your interviewing and selection process. Do remember to get feedback on your process from your mentors. Be clear on how you will distribute equity. One of the most common ways to determine equity to your startup team including your co-founders is sweat equity. Equity is allocated based on the highest-valued contribution and the largest undertaking of risk. Open discussion upfront with is the best starting point. Ensuring that there is a formal agreement and not just a casual conversation will ensure success of your startup. Listing multiple factors like idea generation, capital contribution, ability to raise capital, business planning, product development, domain expertise, operational management, total responsibilities and legal responsibilities and who is contributing towards these functions will drive the equity distribution. Remember equity can be allocated upfront, or put on a vesting schedule, or can be dynamic – meaning it can fluctuate based on performance. Do your research and consult a legal expert, and your startup mentors, or advisors are at this point.
Expert Tip: Your co-founder is your partner in the crazy ride of entrepreneurship. Select carefully, but once you have formally on-boarded them, know that there are a 4 stages in team-formation. 1) Forming 2) Storming 3) Norming 4) Performing. A lot of teams don’t make it past the Storming – which is where you learn about each other’s strengths and weaknesses. Try to get past that and into the Norming, and eventually you will be unstoppable if the match is right!
When should I incorporate?
Before processing your first customer.
Once you are ready to launch your startup, it is critical to decide on the structure of your business. Here are some tips to help you form the legal structure: Benefits of incorporating – Protect your personal assets, tax flexibility, enhanced credibility and branding. When choosing your legal entity type as a profit generating startup, you generally want to choose from a Limited Liability Company or Corporation (LLC), S corporation (S-Corp), or C corporation (C-Corp), or finally a Benefit Corporation (B-Corp).
C-Corp – Attractive to investors, Lots of corporate book-keeping, and potential incorporationcosts, and you get taxed as a company, and as a shareholder.
S-Corp – Just as much book-keeping and incorporation costs as a C-Corp, but the companydoesn’t get taxed, the shareholders do, and you can convert to C-Corp later.
B-Corp – Good for mission/cause based companies. You can choose C-Corp, or S-Corp as tax entity.
LLC – Easy management, downside is that the ownership is by percentage, not shares.
Please keep in mind this is a very simplified explanation, and the pros and cons are case-by-case, and may differ region to region. Consult a business lawyer and experts before making your final choice.
Expert Tip: LLC is easier to manage initially, as a Corporation needs directors, and shareholders. But remember as an S-Corp you can convert to a C-Corp and pursue investment opportunities down the road, but as a LLC, you cannot change to an C-Corp without re-incorporating your company. That being said, pursuing investment and what kind of entity your investors are interested in is a case-by-case, so consult mentors, advisors, legal counsel, and an accountant.
Should I assemble an advisory board?
Yes. But again be clear on what their roles are, and what you are offering, as well as your expectations.
Advisors are experts in a particular topic and are usually compensated with equity. A great advisory board can bring credibility to your startup and your advisors can open doors and help your startup access funding, partners, or customers. When selecting an advisor, be clear on what you are offering, and look at their past performance and experience. An advisory board can help you make informed decisions concerning your startup, they should have ample expertise in the industry your startup operates in. A good advisory board is an invaluable asset to a startup CEO.
Expert Tip: It may be tempting to add a bunch of friends to your advisory board, but remember that in an advisory board, nothing beats experience and connections, and honest criticism. Be sure your board has an uneven number of advisors 3-5 is recommended. Hold regular meetings, and encourage facilitated and truthful discussions, and put up items for vote.
How do I validate my idea is worth doing?
Validation comes from customer demand, and talking to them.
As startups we are in the business of solving a problem better than anyone else. You would probably start with a web search on alternative solutions that your customers may use, do a quick analysis of competitors, and then talk to enough people that have the problem your startup aims to solve validate or invalidate your solution hypotheses. Do lots of customer interviews and focus on the problem and understand the customer. Do not sell your solution during customer interviews. Then talk to people in your industry, and see if your startup idea has enough demand and potential to usurp existing alternatives that your target market uses.
Expert Tip: Again it is very tempting to talk about your startup idea, or product, but to validate your idea, interestingly enough you do not talk about your startup idea, but rather focus on customer problems, and how they go about solving them, and then you would analyze post the interview if your solution is the right fit