We’ve covered the basics and building a start-up’s core team. An important are that many entrepreneurs overlook is advisors. More often than not, to do so is to court disaster avec bras ouverts.
Entrepreneurs have different approaches to domain expertise. For example, when we have an electrical issue in the house, I call an electrician. I could take the time to learn basic residential wiring and local building codes, but I’d rather rely on someone competent who’s been doing this for years. If someone has special expertise I need, I believe in engaging them to help me instead of trying to figure it out myself.
For starters, you need a lawyer. Even if you are one, or have one in the family, find a good one who deals with start-ups for the same reason you want an experienced orthopedist (not your cousin in med school doing the clinical rotation in tropical diseases) when you injure your knee: to save potentially unlimited aggravation later. If you have a technology company, your product is, in essence, a program, or in legalese, intellectual property. US law has a whole infrastructure for protecting innovations like that and if you don’t invest in protecting it, others will help themselves to it. A patent or trademark will protect your idea, but you may have to litigate it if someone else steals it. That gets very expensive very quickly, and you don’t want to waste time and money with a Social Security disability or tax lawyer who’s learning as they go while you try to figure out which overseas holding company to sue for stealing which elements of your idea.
Lawyers also help you incorporate your company the right way, regarding structure, domicile and what works best for investors (if you already have them). Yes, I’ve heard of legalzoom.com and, yes, I’m still recommending using an attorney.
Another occasionally-unheralded benefit of a competent and experienced attorney is that they often have networks of people who can help you out, usually as a favor to them, and often for a lunch or a cup of coffee. Do that a lot.
Another vital service is accounting. You (and your company) will have to file a tax return, and that is best done by a professional. Early on, you will probably have losses, not profits, and those can affect your (and, potentially, your investors’) tax liability. Again, that’s best handled by a professional, and a decent one at that (I have it on good authority that federal penitentiaries – with their bevies of white-collar criminals gamboling on manicured lawns and landscaping that shames Sch?nbrunn – are best enjoyed from the outside). Pinching pennies is not recommended here, either.
If, as John Donne taught us, no man is an island, then surely no start-up is, either. As talented as a group of founders may be, there is much to be gained from engaging seasoned professionals with domain expertise and experience to fill strategic holes in your core team. For example, you may need help getting in front of decision-makers in a specific industry. A senior executive who has worked in that space (as a principal or advisor) may be able to make some vital introductions.
Beyond just opening doors with a phone call, a group of advisors, or an advisory board, that have been carefully selected to complement the executive team, as well as one another, make a start-up appear grown-up. They can add gravitas to an organization by agreeing to lend their names to it and guiding it to success. Again, opinions differ, but in recognition of value received, it is entirely appropriate to award some equity to advisors with whom you seek a long-term and strategic relationship. How much will ultimately be a matter of negotiation, but the notion of acknowledging the value that people with more experience than you can offer is an important one.
For example, you may be good at engaging users directly through direct mailings, but less so through social media. An advisor who specializes in social media can be enormously helpful there. In the case of LiveDial, for example, such an advisor may have experience in structuring social media posts and updates to optimize views and clicks. This can make a difference in several orders of magnitude when it comes to usage and its importance cannot be overstated.
In the case of my app, we work with people who have deep experience in social media engagement. So when we want to know who the all-time best NFL wide receiver or running back was, we position it one way. When we want to know about what moms think about mothers being arrested for letting older kids play unsupervised, we promote that another way. I’m not bragging about it, but if you (hypothetically) wanted to know what people thought about the state of connubial bliss in the Jay Z-Beyonc? household, then it might be promoted a third, substantially different way.
For those wondering, it’s Jerry Rice and Barry Sanders (both by significant margins, in a symbolic but meaningful restoration of my ebbing faith in humanity); that lady in South Carolina who let her kid play in a park by herself while she was at work should have been arrested (James Q. Wilson, thou should’st live at this hour!); and the consensus is that the parents of Blue Ivy may or may not have hit the rocks, but they are playing things close to the vest. Fortunately, there’s not much else happening, news-wise, on the global stage. The world continues to watch with bated breath.
Next time we can explore raising capital. Meanwhile, please send in any questions and I’ll be happy to address them as well as I can.
Yali Elkin spent 15 years perfecting his spreadsheetmanship in corporate finance before starting LiveDial (www.livedial.com), a software development company polling and surveying users via smartphone applications on many issues. He has a BA in History from University of Pennsylvania and an MBA from NYU. He lives in Teaneck with his family.
By Yali Elkin