Founders play a critical role in the launch of any company. What first-time entrepreneurs often don’t realize is they are effectively getting married to the other owners in the company. Let’s take a look at how to use founders’ agreements for online businesses to prevent the marriage from going bad or at least providing a seamless method for the removal of a bad player if it becomes necessary.
I can’t emphasize enough that deciding upon the founders of a business is one of the critical factors in determining success. End up with a rotten egg or two in your ownership group and an otherwise excellent business plan may devolve into a disaster because of poor performance and infighting. Take identifying, investigating, and bringing on founders extremely serious.
So, what are a few steps you can take to find a quality founder? Here are a few recommendations.
Are you launching a business with the goal of being miserable? Probably not. Well, it one of the other potential founders annoys you, that feeling is likely to only grow in the future. Take your time to feel out potential founders and partners. A dinner with a good bit of wine can be very enlightening.
Do the potential founders bring needed skills to the table? If you are considering launching an online e-commerce site and you are a programmer, does it make sense to bring on another programmer as a founder? Perhaps, but it certainly makes sense to bring on a founder who is an expert at online marketing. While this isn’t a hard and fast rule, do your best to fill needs.
3. Exit Strategy
Make sure everyone has agreed to a specific exit strategy. Is the goal to build the business up as fast as possible to attract a buyer or is it to build a business that will stand the test of time with the founders’ ownership interests being passed to heirs who will continue to run the company? The failure to agree to an exit strategy up front will cause discord.
4. Due Diligence
“He seems cool.”
“She worked at Facebook.”
“He went to Harvard Business School.”
Ah, the claims I’ve heard over the years that simply were not true. Don’t believe anything that someone tells you during the founder identification process. Check each statement for objective proof. People are bold face liars a good bit of the time. Sad, but true. If you don’t believe me, read these horror stories.
When you’ve settled on a few potentially serious candidates, have a background check conducted. Ask the candidates for permission to, oh, run a credit report and so on. If the person balks, then mark them off the list.
5. Get Social
Visit the social media channels of your candidates. Look at what they are posting. Does anything bother you?
Selecting founders for a business is one of the genuinely critical steps. Once you’ve identified a few good choices, move ahead with the founders’ agreement.
Richard Chapo, Esq.