This article is triggered by recent exchanges i had where i realize that there is a gap in perception between founders and the investors who fund them. On one hand, i have the hardworking founder telling me that they dont think they executed badly and in fact executed well given the situation but from my point of view , they did not execute well. So who is right? After some reflection i realize both are right!
Founder point of view :
I have so much shit happening all the time. Traction takes longer to achieve. Staff are hard to hire and quit on me. Sales takes so much longer to happen and when it happens, clients buy less than projected.
And worst of all, market keeps evolving and changing!. So of course i cannot hit my projections. They are just projections. Surely the investors can see i am working crazy hours and obssessing about it all and trying my best!
Investor point of view :
You only execute well if you have achieved the metrics which you pitched and plan annually in terms of revenue, EDITDA, product development plan, marketing plan and HR hire plan. Anything less means execution could have been better.
Sounds harsh? Actually not really. After all the investment as made based on the premise founders will deliver. And don't forget i also need to make sure the investments realize a profit at the end.
Yes, i know startup is difficult. Marketing is hard. Hiring and retaining is hard so is growing revenues. So most investors discount what you pitch somewhat. But it does not mean we agree execution is good when founders fall short.
For me, i will only feel execution has been good if we meet all annual projected metrics and also feel the founder has the right attitude and mindset. Execution is great if we beat of course!
My comment?
Both sides are right. I do both right now and in the past. A little empathy and regular communication will go a long way. So the investor needs to express the worry they have that business not going to deliver on promised returns, founders need to agree they are not executing well and appreciate the other party's stress. And both sides meet. But who should do more in the communication department? I think the founder. Simply because you probably have more to lose and you own more of the company.
No simple solution right?
Thoughts on startup scene in South East Asia. While effort is made to be accurate in terms of numbers, i may sometimes get the data wrong. My purpose is to share what i know and what i have learned over the past 23 years. Feel free to leave comments or to email me. And if you are keen to learn more about Angel Investing pls visit https://www.angelcentral.co/investors/membership
Showing posts with label founders. Show all posts
Showing posts with label founders. Show all posts
Tuesday, May 13, 2014
Sunday, May 4, 2014
Startup Mistakes I made and Lessons Learned
This post is all about failures. I realize that some people prefer and maybe learn from other people's failures better than successes. I tend to prefer the latter as there are many ways to fail but fewer ways to succeed. So intuitively, it makes more sense to emulate and adopt successful behaviours and thoughts/mental models than to learn to avoid failed models and mindsets. But it is always instructive to see things from both sides i guess. Below are failures i have made in the past 14 years.
1) Failure to be transparent about cofounder committment & expectations
Problem : Did not initially spell out intentions and feeling about key topics like how to handle working shareholder departures. So when working shareholder decided to not to work full time, there was much difficulty in resolving feelings.
Result : Much stress and difficult conversations when trying to buy out minority shareholder. It took me some 1-2 months and much distraction to settle this issue. Also had to pay out a good 6 figure sum.
Takeaway - Always spell out various scenerios when contemplating a venture with multiple shareholders. Make sure there is agreement. Don't fall into the temptation of taking the easy way to out and just glossing over difficult items like exit cases, valuation, roles etc. Then encapsulate it all in a written and signed shareholder agreement. If you cannot agree on tough points, it could mean your team has problems.
2) Failure to spearhead new venture & blind faith
Problem : Thought that it made perfect sense to venture out into a recruitment agency work back in the early days. Hired 1 manager & 3 pax and burnt through 40-50K of revenue in 3 months with little to show for it. Believed the manager that they can just start a new wing.
Result : Wasted mgmt focus on sideline and wasted money pursuing it.
Takeaway - New ventures, even adjacent ones take longer than expected. Also in startups, new areas need to be spearheaded by top management. Seldom will an outside middle level hire be able to do it even if they seem to firmly believe it. Most middle (and some top) mgmt are used to having established brand and structure to help them, so they may actually believe they can start up something if only given the chance. Dont believe them and if you must believe them, still watch them like a hawk.
3) Failure to focus on sales & that Sales manager
Problem : A parallel of point (2) is believing that hiring an experienced sales director/manager will help you settle sales while you focus on product. This is 99% pure bullshit. Founders must spearhear their own sales almost all of the time initially. I never fell prey to this but a portfolio company of mine has. They raised money, spent it on hiring sales team and sales mgmt then hands off!
Result : Total waste of money as the founder discovered that a hired sales mgmt will never be as dedicated to chasing down each lead, helping to get feedback and care as much as a founder. End result was 1 year wasted and damage so bad it may kill the company. Pain to me is also a possibly wasted 6 figure investment.
Takeaway - Always spearhead your own sales effort via a founder in the first few years. Not only will sell better but will also iterate product better since closer to client. You also squeeze the most out of your other sales hires since you are leading them. Did i mention investors also like sales driven founders?
4) Failure to plan for worst case.
Problem : When things are doing well, that is the best time to raise more money than you need. Another company i invested in had an opportunity to raise money that is equivalent to 2 years cash burn. Business was doing well and so there was also an option to not raise too but it required no mistakes and continued flawness execution. The founder chose not to raise.
Result : As usual, bad things happened and metrics did not grow as expected. Cash crunch started looming. Had to scramble to reverse the metrics. Work in progress.
Takeaway - Always do a worst case scenario and if in that scenerio, you dont need funding, then dont do it. Be paranoid!
Hope the above helps! Feel free to comment and add on.
1) Failure to be transparent about cofounder committment & expectations
Problem : Did not initially spell out intentions and feeling about key topics like how to handle working shareholder departures. So when working shareholder decided to not to work full time, there was much difficulty in resolving feelings.
Result : Much stress and difficult conversations when trying to buy out minority shareholder. It took me some 1-2 months and much distraction to settle this issue. Also had to pay out a good 6 figure sum.
Takeaway - Always spell out various scenerios when contemplating a venture with multiple shareholders. Make sure there is agreement. Don't fall into the temptation of taking the easy way to out and just glossing over difficult items like exit cases, valuation, roles etc. Then encapsulate it all in a written and signed shareholder agreement. If you cannot agree on tough points, it could mean your team has problems.
2) Failure to spearhead new venture & blind faith
Problem : Thought that it made perfect sense to venture out into a recruitment agency work back in the early days. Hired 1 manager & 3 pax and burnt through 40-50K of revenue in 3 months with little to show for it. Believed the manager that they can just start a new wing.
Result : Wasted mgmt focus on sideline and wasted money pursuing it.
Takeaway - New ventures, even adjacent ones take longer than expected. Also in startups, new areas need to be spearheaded by top management. Seldom will an outside middle level hire be able to do it even if they seem to firmly believe it. Most middle (and some top) mgmt are used to having established brand and structure to help them, so they may actually believe they can start up something if only given the chance. Dont believe them and if you must believe them, still watch them like a hawk.
3) Failure to focus on sales & that Sales manager
Problem : A parallel of point (2) is believing that hiring an experienced sales director/manager will help you settle sales while you focus on product. This is 99% pure bullshit. Founders must spearhear their own sales almost all of the time initially. I never fell prey to this but a portfolio company of mine has. They raised money, spent it on hiring sales team and sales mgmt then hands off!
Result : Total waste of money as the founder discovered that a hired sales mgmt will never be as dedicated to chasing down each lead, helping to get feedback and care as much as a founder. End result was 1 year wasted and damage so bad it may kill the company. Pain to me is also a possibly wasted 6 figure investment.
Takeaway - Always spearhead your own sales effort via a founder in the first few years. Not only will sell better but will also iterate product better since closer to client. You also squeeze the most out of your other sales hires since you are leading them. Did i mention investors also like sales driven founders?
4) Failure to plan for worst case.
Problem : When things are doing well, that is the best time to raise more money than you need. Another company i invested in had an opportunity to raise money that is equivalent to 2 years cash burn. Business was doing well and so there was also an option to not raise too but it required no mistakes and continued flawness execution. The founder chose not to raise.
Result : As usual, bad things happened and metrics did not grow as expected. Cash crunch started looming. Had to scramble to reverse the metrics. Work in progress.
Takeaway - Always do a worst case scenario and if in that scenerio, you dont need funding, then dont do it. Be paranoid!
Hope the above helps! Feel free to comment and add on.
Thursday, January 23, 2014
When to raise outside capital & what kind of dilution is ok.
Have been talking to quite a few entrepreneurs lately and i realize that many have very mixed views (rightly so) about raising capital from (semi)/ professional investors. Some also never seem to have thought about dilution and seem to have an almost ambivalent attitude about ownership.
So i thought i will pen down my thoughts on these issues both as an entrepreneur who tried to raise money before and as an investor in startups. DISCLAIMER : REGIONAL CONTEXT ONLY.
There is actually only 1 good reason why a tech startup raises money.
Company needs the cash to grow in SG or to expand into overseas markets which current organic cash flow projections cannot meet. Growing can be by organic or acquisition route. Usually your 5 or 3 or 2 year P&L projection shows great revenue growth but you need to spend money to get there and you are negative cashflow for a good period. Then you need funding to tide all that negative cashflow and then some. The extra is buffer.
So if you find that you are in the lucky situation where you are already profitable and cashflow positive. And you actually do not have a burning vision that you cannot execute due to lack of money, then perhaps you should not be fund raising. Even though usually, this is when VCs and investors and brokers will bug you the most to raise. They will tell you stuff like money in the bank is king, having a buffer is always good, you never know, how much network and strategic help they can give etc etc.
They are not wrong. But you need to weigh that against the distraction of fund raising, the distraction of dealing with investors, the value of network and also whether you actually need the money. I have known of at least 2 big internet companies who raised 800K and 1+M each and they actually almost did not touch the money at all until exit!
To be fair, I am not including the strategic help which a good investor can offer and that is valuable. This cannot be underestimated and i think if you find an investor who really helps and cares, then the story is different. For these cases, i have seen people do convertible notes so that valuation is higher later or just raise less money. You still get the help and network but dilute less.
How about dilution? How much is too much or too little for our tech space today?
It really depends on each entrepreneurs goal. But by and large, most entrepreneurs are highly competitive people who benchmark a lot. I think they also want to win and there are many measures of winning. It can be to control the biggest company by revenue or profit or user traffic etc. It can also be a combination of those factors.
1) My first non-contentious observation in SG is that it will be best to bootstrap and skip the angel round. Lets say we have a 2-3 founder team. They run through 100K to build their prototype and a further 50K to market the prototype and raise money. At this stage they still own 100% of the company.
So they raise the Seed round to hire a few pax, market more, build out software more. Lets say they raise 500K at 1.5M premoney. So now, the founders own 75% of the company. With this 500K, they build out SG and after another 1 year want to expand overseas and drive to SG profitability. Now in SG, it is usually a 1.5 to 2.5M raise. So lets say 2M raised at premoney 8M, now founders are down to 60%.
Wait, there is now employee option pool which varies from 5-10% usually paid jointly or out of founder pool. So lets say founders down to 55%.
This is where we depart from USA since our ASEAN market is a lot smaller. With this 2M raised, the tech company needs to grow into exit event. An exit event can be an IPO or a trade sale. There are some fewer cases of raising Series B to expand even further but most of the SG stories exit already - Hungrygowhere, Tencube, Brandtology, Groupon, Dealguru, sgcarmart, Travelmob, Asian food channel all exited after raising 1-2+M. The only ones i know who raise Series B or equivalent is Propguru and Reebonz. Maybe readers can add.
So back to the optimal stake. At 55% left for founders and average sale value of lets say 20M, that is 11M only for say 3 founders. Or about 3.66M each. Now imagine if this company raised a initial bootstrap round that took out 15%, they are left with 2.7M each for about 6 years work if divided evenly.
2) The 2nd observation i have is a lot more contentious. I have seen many teams where the 2-3 founders share the stake equally. While this feels right at the startup phase, it actually does not make sense. A company will require a CEO and driver. That person performs a role that is more stressful and more impactful than other founder roles. And in startup, pay cannot be used to compensate. So i would argue and indeed prefer configurations where the key leader has a much higher stake and plays a stronger role. So in the case of the 3 founders, maybe 50%, 30%, 20% or even 60/20/20. Of course, the founders should put in capital commensurate to their shareholding and i am all for equal or near equal pay among the 3 to show the solidarity.
On the flip side, i would not advocate any key founder having less than 10% equity from the start. Too little to feel any pain and to be aligned well. And after all the dilution, the person will be left with 5%. Too little for talent for our region. They will end up looking around and asking for near market rate salaries to compensate.
As an investor, one thing good about CEO owning the bulk is that we know even if the shit hits the fan, there is one clear person with the most to lose. And that is good alignment.
So i thought i will pen down my thoughts on these issues both as an entrepreneur who tried to raise money before and as an investor in startups. DISCLAIMER : REGIONAL CONTEXT ONLY.
There is actually only 1 good reason why a tech startup raises money.
Company needs the cash to grow in SG or to expand into overseas markets which current organic cash flow projections cannot meet. Growing can be by organic or acquisition route. Usually your 5 or 3 or 2 year P&L projection shows great revenue growth but you need to spend money to get there and you are negative cashflow for a good period. Then you need funding to tide all that negative cashflow and then some. The extra is buffer.
So if you find that you are in the lucky situation where you are already profitable and cashflow positive. And you actually do not have a burning vision that you cannot execute due to lack of money, then perhaps you should not be fund raising. Even though usually, this is when VCs and investors and brokers will bug you the most to raise. They will tell you stuff like money in the bank is king, having a buffer is always good, you never know, how much network and strategic help they can give etc etc.
They are not wrong. But you need to weigh that against the distraction of fund raising, the distraction of dealing with investors, the value of network and also whether you actually need the money. I have known of at least 2 big internet companies who raised 800K and 1+M each and they actually almost did not touch the money at all until exit!
To be fair, I am not including the strategic help which a good investor can offer and that is valuable. This cannot be underestimated and i think if you find an investor who really helps and cares, then the story is different. For these cases, i have seen people do convertible notes so that valuation is higher later or just raise less money. You still get the help and network but dilute less.
How about dilution? How much is too much or too little for our tech space today?
It really depends on each entrepreneurs goal. But by and large, most entrepreneurs are highly competitive people who benchmark a lot. I think they also want to win and there are many measures of winning. It can be to control the biggest company by revenue or profit or user traffic etc. It can also be a combination of those factors.
1) My first non-contentious observation in SG is that it will be best to bootstrap and skip the angel round. Lets say we have a 2-3 founder team. They run through 100K to build their prototype and a further 50K to market the prototype and raise money. At this stage they still own 100% of the company.
So they raise the Seed round to hire a few pax, market more, build out software more. Lets say they raise 500K at 1.5M premoney. So now, the founders own 75% of the company. With this 500K, they build out SG and after another 1 year want to expand overseas and drive to SG profitability. Now in SG, it is usually a 1.5 to 2.5M raise. So lets say 2M raised at premoney 8M, now founders are down to 60%.
Wait, there is now employee option pool which varies from 5-10% usually paid jointly or out of founder pool. So lets say founders down to 55%.
This is where we depart from USA since our ASEAN market is a lot smaller. With this 2M raised, the tech company needs to grow into exit event. An exit event can be an IPO or a trade sale. There are some fewer cases of raising Series B to expand even further but most of the SG stories exit already - Hungrygowhere, Tencube, Brandtology, Groupon, Dealguru, sgcarmart, Travelmob, Asian food channel all exited after raising 1-2+M. The only ones i know who raise Series B or equivalent is Propguru and Reebonz. Maybe readers can add.
So back to the optimal stake. At 55% left for founders and average sale value of lets say 20M, that is 11M only for say 3 founders. Or about 3.66M each. Now imagine if this company raised a initial bootstrap round that took out 15%, they are left with 2.7M each for about 6 years work if divided evenly.
2) The 2nd observation i have is a lot more contentious. I have seen many teams where the 2-3 founders share the stake equally. While this feels right at the startup phase, it actually does not make sense. A company will require a CEO and driver. That person performs a role that is more stressful and more impactful than other founder roles. And in startup, pay cannot be used to compensate. So i would argue and indeed prefer configurations where the key leader has a much higher stake and plays a stronger role. So in the case of the 3 founders, maybe 50%, 30%, 20% or even 60/20/20. Of course, the founders should put in capital commensurate to their shareholding and i am all for equal or near equal pay among the 3 to show the solidarity.
On the flip side, i would not advocate any key founder having less than 10% equity from the start. Too little to feel any pain and to be aligned well. And after all the dilution, the person will be left with 5%. Too little for talent for our region. They will end up looking around and asking for near market rate salaries to compensate.
As an investor, one thing good about CEO owning the bulk is that we know even if the shit hits the fan, there is one clear person with the most to lose. And that is good alignment.
Friday, September 13, 2013
Ethics while running a business
My topic today is about Ethics and the various experiences I have witnessed that illustrates these points. I believe as entrepreneurs, we will encounter many circumstances which test us and it is up to us how we react. How we react will determine what kind of a person we are. I am a firm believer in living a good and moral life and in the innate goodness of man. When I die, all I achieve is worth nothing as I cannot bring it along. So i would want to die knowing i did right at best as I can.
For me, it also helps tremendously that my cofounder and life partner is even more clear on ethics than I am. So with us reinforcing each other, it helps a lot.
1) Overpayment. You will be surprised that some clients procurement will make mistakes and overpay us for an invoice. Figure can range from hundreds to $10K! Our policy is to always notify the client nicely and pay back.
2) Honoring our mistakes. You or your staff will sometimes make mistakes too and basically misquote to the client. My policy is to always come clean and admit it is a misquote. And we will try our best to either honor that misquote or at least give a sweetener to show that we know we made a boo boo.
I have been on the other receiving end of this before. I had an association who owed us money. And the Executive Director had the cheek to call us down and say that his manager (who had left) signed the contract and used the services without his knowledge. I told him that even if this was true, he still owed us the money (about $4000) since i had a manager's signature in black and white. This guy actually threatened me (back then 27-28 year old) and told me that he will not pay. In fact, if we do not back off, he will complain about us to his university contacts who were my partners.
I felt so bad at that time because i could not believe i was being threatened because his organization made a mistake. (and that is assuming he was not lying). Managed to resolve this by basically giving him face and accepting half payment and the other half in contra. And i think he agreed simply because i played on his ego. In front of his staff, i counterproposed and told him we are already giving in and he should not bully a startup. But i left the room with 2 thoughts.
First, i wrote off that man and never thought well of him subsequently. Anyone who does not honor their word and who tries to bully because they can does not deserve any respect from anyone.
Second, I resolved to never do that to another person. We will honor our word even if it costs us.
3) Conspiring to cheat. Early in my business, i had a potential acquirer who was running a decent sized executive search firm. Founder claimed to be a Goldman Sachs MD. At that time naive me thought that an MD was a big shot. Now i know it is just a middle ranking position in IB. Pays about US$600K a year all in. Its the partners that earn the real money. Anyway, this guy pretended to be all interested in investing in us and naive us believed him as he had a fancy car and office.
After a bit of discussion, this guy called us and said they will invest. My partner and i were so happy we bought an $800 spa espirit spa package as a reward. Next thing we knew, they wanted our jobportal functional specs and made copies of it. After that, we never heard from them and they later when chased, said change of mind. Couple of months later, they launched a job portal. Of course it died a few years later. It was run by his mistress.
This experience taught me to be a lot more careful about people. Luckily my line depends on execution and day to day effort. Not some incredible piece of IP. It also taught me that i will never want to do that to another person.
Nowadays i take extra care to always declare conflict of interests and to always make sure i am transparent in my dealings. Many times i have had people come to me for investments who are in my job portal or related space. I always take care to tell them not to reveal anything that is proprietary and to remind them that i run a job portal which may be a competitor to them.
4) Dishonest to investors/cofounders. I think trust between cofounders is most important. Even if intentions are the best, there are already sure to be areas of conflict over roles, compensation, alignment of interests etc. But it gets worse if cofounders consciously do something that affects the basic trust. For me, if someone is willing to work with me and embark on a major risk like a new business, then he or she deserves my trust and faith unless proven otherwise. And i will feel very betrayed if my cofounder does anything to betray that trust. In fact, i think if it happens, i will probably start to work out how to disengage the offending co-founder already.
For investors, i have heard and witnessed startups who are really selfish. They signed on an investor for a venture which requires them to work full time on it and by extension that means to put in their full 110% effort like any startup. However, with a bit of setback or perhaps out of greed, they start to create a business plan for another new venture and basically try to raise funds for that. I don't know if it is naivety or stupidity but which VC will fund a founder that is unable to focus and who is perfectly willing to screw their original set of investors? And word does get around in our industry. SG is really small.
5) Sweat the small stuff. It is easy to cheat your own company. All you need to do is to claim entertainment expenses that aren't strictly entertainment, or pay your personal mobile, petrol bills via the company. My stand is that this is fine if you own 100% of it since technically that is your own money. But if you have external investors or other cofounders who are not aware of this, then it is their money you are stealing. It is better for cofounder dynamics to be transparent and just work it in?
From investor angle, most investors will not sweat the small stuff and will not begrudge you some extra claims that are actually for personal use. We rely on your personal integrity and how you view things. Strictly speaking, the shareholder agreement will say that your annual compensation cannot exceed $XXK without their agreement and so you can declare such items to be part of your legal compensation. So do that.
6) Sales people who lie. Wow! I have seen so many examples of this. Basically it is quite common to hire sales staff who seem to view ethics as something that one can be creative about. You can create the best commission systems to tie reward to actual performance but there will be sales staff who will spend time and effort to game the system. And this includes outright conspiring with the client if they have a good enough relationship.
My philosophy in office is to accept no unethical behavior. If we can prove that you tried to cheat us, we will terminate on the spot without recourse and i will be happy to tell all subsequent background checking employers the reason for termination. I dont care how much money you bring in for the company. I strongly suggest readers do the same, life is too short to have to hang around cheaters.
I am sure you will encounter many more experiences that will test you. So try to do the right thing!
For me, it also helps tremendously that my cofounder and life partner is even more clear on ethics than I am. So with us reinforcing each other, it helps a lot.
1) Overpayment. You will be surprised that some clients procurement will make mistakes and overpay us for an invoice. Figure can range from hundreds to $10K! Our policy is to always notify the client nicely and pay back.
2) Honoring our mistakes. You or your staff will sometimes make mistakes too and basically misquote to the client. My policy is to always come clean and admit it is a misquote. And we will try our best to either honor that misquote or at least give a sweetener to show that we know we made a boo boo.
I have been on the other receiving end of this before. I had an association who owed us money. And the Executive Director had the cheek to call us down and say that his manager (who had left) signed the contract and used the services without his knowledge. I told him that even if this was true, he still owed us the money (about $4000) since i had a manager's signature in black and white. This guy actually threatened me (back then 27-28 year old) and told me that he will not pay. In fact, if we do not back off, he will complain about us to his university contacts who were my partners.
I felt so bad at that time because i could not believe i was being threatened because his organization made a mistake. (and that is assuming he was not lying). Managed to resolve this by basically giving him face and accepting half payment and the other half in contra. And i think he agreed simply because i played on his ego. In front of his staff, i counterproposed and told him we are already giving in and he should not bully a startup. But i left the room with 2 thoughts.
First, i wrote off that man and never thought well of him subsequently. Anyone who does not honor their word and who tries to bully because they can does not deserve any respect from anyone.
Second, I resolved to never do that to another person. We will honor our word even if it costs us.
3) Conspiring to cheat. Early in my business, i had a potential acquirer who was running a decent sized executive search firm. Founder claimed to be a Goldman Sachs MD. At that time naive me thought that an MD was a big shot. Now i know it is just a middle ranking position in IB. Pays about US$600K a year all in. Its the partners that earn the real money. Anyway, this guy pretended to be all interested in investing in us and naive us believed him as he had a fancy car and office.
After a bit of discussion, this guy called us and said they will invest. My partner and i were so happy we bought an $800 spa espirit spa package as a reward. Next thing we knew, they wanted our jobportal functional specs and made copies of it. After that, we never heard from them and they later when chased, said change of mind. Couple of months later, they launched a job portal. Of course it died a few years later. It was run by his mistress.
This experience taught me to be a lot more careful about people. Luckily my line depends on execution and day to day effort. Not some incredible piece of IP. It also taught me that i will never want to do that to another person.
Nowadays i take extra care to always declare conflict of interests and to always make sure i am transparent in my dealings. Many times i have had people come to me for investments who are in my job portal or related space. I always take care to tell them not to reveal anything that is proprietary and to remind them that i run a job portal which may be a competitor to them.
4) Dishonest to investors/cofounders. I think trust between cofounders is most important. Even if intentions are the best, there are already sure to be areas of conflict over roles, compensation, alignment of interests etc. But it gets worse if cofounders consciously do something that affects the basic trust. For me, if someone is willing to work with me and embark on a major risk like a new business, then he or she deserves my trust and faith unless proven otherwise. And i will feel very betrayed if my cofounder does anything to betray that trust. In fact, i think if it happens, i will probably start to work out how to disengage the offending co-founder already.
For investors, i have heard and witnessed startups who are really selfish. They signed on an investor for a venture which requires them to work full time on it and by extension that means to put in their full 110% effort like any startup. However, with a bit of setback or perhaps out of greed, they start to create a business plan for another new venture and basically try to raise funds for that. I don't know if it is naivety or stupidity but which VC will fund a founder that is unable to focus and who is perfectly willing to screw their original set of investors? And word does get around in our industry. SG is really small.
5) Sweat the small stuff. It is easy to cheat your own company. All you need to do is to claim entertainment expenses that aren't strictly entertainment, or pay your personal mobile, petrol bills via the company. My stand is that this is fine if you own 100% of it since technically that is your own money. But if you have external investors or other cofounders who are not aware of this, then it is their money you are stealing. It is better for cofounder dynamics to be transparent and just work it in?
From investor angle, most investors will not sweat the small stuff and will not begrudge you some extra claims that are actually for personal use. We rely on your personal integrity and how you view things. Strictly speaking, the shareholder agreement will say that your annual compensation cannot exceed $XXK without their agreement and so you can declare such items to be part of your legal compensation. So do that.
6) Sales people who lie. Wow! I have seen so many examples of this. Basically it is quite common to hire sales staff who seem to view ethics as something that one can be creative about. You can create the best commission systems to tie reward to actual performance but there will be sales staff who will spend time and effort to game the system. And this includes outright conspiring with the client if they have a good enough relationship.
My philosophy in office is to accept no unethical behavior. If we can prove that you tried to cheat us, we will terminate on the spot without recourse and i will be happy to tell all subsequent background checking employers the reason for termination. I dont care how much money you bring in for the company. I strongly suggest readers do the same, life is too short to have to hang around cheaters.
I am sure you will encounter many more experiences that will test you. So try to do the right thing!
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