advisoray guide for startups (ebook)
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Dear founder,
Thank you for picking up a copy of Advisoray Guide for
Launching a Startup.
Advisoray is a group of professionals who want to
help startups succeed, so that their innovations can be
brought to market and enrich peoples lives.
This guide is a distillation of many conversations amongthe professionals within our network. The end result is
35 pieces of honestsometimes contrarianadvice
that you can use as you take your new products or
services to the marketplace.
Every startups situation is dierent, so we dont expect
all these pieces of advice to apply to everybody equally,
but we hope you will find a few of them insightful and
relevant.
We also hope you take advantage of Advisoray.com as a
companion website to this pocket guide. You can search
for terms or jargons mentioned in this guide and find
advisors that may be willing to work with you directly for
free or for a fee, as well as give you valuable feedback
that is tailored to your unique situation.
The members and sta of Advisoray are here
to help. We hope to hear from you, and goodluck on your new venture!
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Find a metaphor, not just an
analogy
HONE / YOUR IDEA
One of the biggest mistakes startups make, is to
compare your product or service with another popular
startup or website:
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8FXBOUUPCFUIFF#BZGPSSFTUBVSBOUSFTFSWBUJPOT
0VSBQQJTBDSPTTCFUXFFO"JS#OCBOE'BSN7JMMF
Often the thing that you compare yourself to is obscure
in the sense that many have heard of it, but they may
not understand the full capabilities of the site unless they
have interacted with it and formed an intuition of what
that comparison site does. This vastly diminishes the
uniqueness of what you do, as others have to under-
stand what your comparison company does and why
they are unique before they understand what you do.
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Brainstorm and test out your
idea with someone who has
done it before
HONE / YOUR IDEA
One of the funnest activity you can do as a startup
founder is brainstorming: Lets talk about new product
ideas! Cool design concepts! Disruptive marketing hacks!
Maybe even throw in a famous spokesperson for our
company!
The truth is that brainstorming is really less about
coming up with new ideas, but more about sifting out
the gems from the pool of ideas. Then, you will need to
synthesize a cohesive set of goodand doable ideas
that can form the foundation for a viable new business.
This is harder than it looks. What you need to do is to
find an experienced entrepreneur and pretend he or she
is your co-founder. Brainstorm, or even argue with this
person for an hour or two. An experienced entrepreneur
usually have a good feel of which ideas are good and
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Answer the question:
Why you?
HONE / YOUR IDEA
Once you have honed in on an idea that you believe
is the right one, you must be prepared to explain to
yourself and others why you are the right person to run
this venture.
Look at this as an application essay for yourself as the
CEO of this company. It could be because of your prior
experience, educational background, lifelong passion,
circumstances, skill sets, or a combination of all of these.
The key is to convince someone who must be sold on
the idea that there is no other person in the world better
than you for the job.
Outcome 1: Your narrative is natural, it makes sense,
and it becomes your personal story behind founding the
company. Investors and customers are convinced that
you are the only one for this role.
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Get as many reactions as you
can to everything you have
made
HONE / YOUR IDEA
How a person reacts is more important than what they
say after you stop speaking. Read their face and their
body language. In a marketing study, you would have a
one-way mirror, but when you are having dinner with
prospective customers, have a team member attenddinner with you. Have one person pitch while the other
observes how the prospective client or investor reacts
to the product. There will be some things that worked
better than you thought they would have, and others
that will work less well.
The goal is to get as many reactions as possible as these
reactions will give you perspective on how your idea
would translate when a random person on the internet
or a mobile device interacts with your product.
People are really good at picking up cues and adjusting
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Invest in a beautiful set of
screenshots that show what
your site or app does
DESIGN / YOUR PROTOTYPE
Invest time in this and make it great. You will use them
over and over again as marketing materials, and in
meetings with partners, customers, investors and even
with the press.
This should not be a flowchart, a set of wireframes, or
even a concept animation. These screenshots should
look like it is taken from the real site, so the viewer will
know exactly what your site does. The screenshots need
to contain most of the features of your site even before
it is built. They should be explorable and understand-
able by anyone without a narrative. Annotations and
descriptions are helpful but the screenshots in linear
order should describe the business to someone that has
neither seen nor heard of your business before.
Dont fret if its not perfect, after all, you dont have a
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Find the epicenter of your
product and devote all your
eort towards it
DESIGN / YOUR PROTOTYPE
When we interact with most products or apps, we tend
to only interact with a very small portion of the product,
but with an extremely high frequency. These most used
and useful features can be regarded as the epicenter of
the product.
Devote a larger amount of time, energy and money to
this epicenter and then work on the supporting features
to make your product minimally viable. Do not waste
too much time on features such as login, account page
or dashboards. Use it instead on the epicenter and make
that part of the product exceptional.
The way to ensure that the epicenter is correct is to
try as many productive variations on this epicenter as
possible. It is worth making five variations of a composi-
tion, narrative, or structure with slightly dierent foci and
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Conceptualize for the future,
but prioritize for the present
DESIGN / YOUR PROTOTYPE
Once you have honed in on your idea and developed
some concepts of what you want to build, create a
minimum viable product (MVP). This is a small product
that users can use to see if your hypothesis is working.
Prepare a list of all the things you want to get done in
inverse priority order. This process gives you the chance
to think through what is most important and most ap-
pealing. It enables you to reflect on the broad capabili-
ties of this service and perhaps build and present these
these capabilities in wireframes or prose form.
Talk to prospective customers to get as much feedback
on your intuitions as possible before translating them
into actionable steps for another person to build. Your
development goal is to make an MVP. Thus, having
a reasonably complete set of concepts or cohesive
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Build a version of your
product by writing the fewest
line of code possible
DESIGN / YOUR PROTOTYPE
If you can build the first version of the product without
writing any lines of code by simply pointing and click-
ing, then...Congratulations! you have won the Grand
Prizeyou have built the minimum viable product (MVP)
in no time! Any written line of code will deduct from thegrand score of writing no lines at all because more code
introduces more testing, more costs and more time
expended. Worst of all, the more code you write for the
first version, the harder it is to move away from this code
since you have invested so much in it.
It is likely that the first version of your product or your
supposedly minimum viable product (MVP) turns out to
be not viable. Despite your best eorts, you might have
picked the wrong epicenter or built the wrong product
or chosen the wrong brand. So the less you invest in itthe better.
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Design version 1 on a hunch,
and version 2 on the basis of
hard data
DESIGN / YOUR PROTOTYPE
Most people want to research and gather facts and
figures to support the decision they are making in
designing the first version. How big is the market? How
likely are people to use a product like this? What are the
preferred ways of communicating with customers in atarget group? While these data points are sometimes
useful, they could also lead you to a conclusion that
moves you away from the epicenter of your product.
Before your first product exists, the data points you can
collect are from other peoples products. They are hy-
pothetical oerings and vague generalizations. Without
a real product that is collecting granular data about its
actual usage, these indirect data points may cause more
harm than good.
Instead, you should follow your intuition or hunch based
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Dont look for an ideal co-
founder, look for someone
that can help you right now
STRUCTURE / YOUR COMPANY
Think about finding a co-founder as finding a husband
or a wife. Nobody goes around the city asking someone
to marry them on the spot. You start by taking someone
out on a date, and see what happens from there.
Similarly, when it comes to looking for a co-founder,
date them first. Start working with dierent people
that can satisfy your immediate needs. It will be clear
who the right people are and a co-founder (or two) will
eventually emerge. It could be someone you are paying,
bouncing ideas o of, or someone that is just willing to
help you out. Before you agree on any paperwork, un-
derstand and communicate about your goals and ideas,
ensure your working styles are compatible because, as
already stated, making someone a co-founder of your
startup is like marrying someone.
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Lock down the company
structure before things get
interesting
STRUCTURE / YOUR COMPANY
Before you get in the trenches and get your startup o
the ground, you need to test people. Ensure that the
companys interests and the interests of all the individu-
als align. Once the idea you have talked about stabilizes,
your goal is to use the process of locking down shares,vesting agreements and collaboration agreements to
test the strength and collaboration of the people around
you. This is early enough in the process that you can risk
everything to be scrapped.
Separate the idea stage from the execution stage of the
company. Before this point, it could be gentlemens
handshakes or pinky promises, but the formation of the
company will define what the next 3 or 4 years will look
like. You will need to do this only once.
This is a rigorous process assisted by each persons
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Choose a corporate structure
to optimize your short-term
tax implications
STRUCTURE / YOUR COMPANY
To form a company, either a lawyer or an accountant
can help you talk through the benefits of each type of
corporate structure, e.g. S Corp, C Corp or LLC. One of
the most important things is the tax implications in the
first two years of your startup. Decide how you want tobe taxed, and this will determine the type of company
you will be building. Tax implications are often more im-
portant than where you decide to incorporate (although
most startups do end up incorporating in Delaware).
Deduct company expenses from your income. Any tax
money you save becomes capital you can use to invest
in your company. A tax professional can give you a
better idea for your specific needs. Make your expenses
clear. Separate home oce expenses from personal
expenses.
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Dont feel guilty when it
comes to using your unique
advantages
STRUCTURE / YOUR COMPANY
While most startups lack cash to pay vendors and
accelerate growth, some founders, especially those that
are working professionals, may have quite a bit of cash
flexibility. While you might want to preserve capital,
when you have cash, spending it wisely really doesaccelerate your progress and elevate the quality of your
product if you get the right people to work for you.
If you are currently a student, you can get a lot of free
help from classmates and you should plan to engage as
many people as possible in your circle while in school.
Though most people are not as driven as you, they want
to feel like they are part of something exciting that could
become big one day.
These are examples of obvious advantages you may
have. The key is to look deeply and honestly on every
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Business plans should be
bottom-up, not top-down
STRUCTURE / YOUR COMPANY
People with professional experience of making business
plans for larger businesses often make the mistake of
talking about the size of the market. This is a top down
approach and it is a waste of ink and paper. A startup is
certainly not in a position to take any percentage of anymarket since your biggest struggle is to exist at all.
Your business plan should be based on what you
believe you can realistically achieve with actions your
team will perform to get to quantifiable success. If you
are thoughtful about the tactics you can chain them
together to achieve your short-term and medium-term
goals. Then it may be inspiring to talk about the larger
macro climate and discuss how you could be a big
player in a big market somewhere down the line.
However, even if you have your eyes on changing the
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Dont put anything in your
terms of service you wouldnt
talk about in public
STRUCTURE / YOUR COMPANY
Think of your terms of service as a deal you are oering
your customers that they can accept or reject. The norm
on websites is that you either automatically agree with
the terms or need to check o the box before using the
site. This seems like you could add any terms you wish atany time to benefit yourself. Dont do this.
Make this deal you are oering fair, mutually beneficial
and most importantly, comfortable to you. You should
never translate something you are not comfortable
asking in person onto a legal document.
Experienced lawyers will always find ways to maximize
protection for you without compromising the deal you
are making with the users. Before you speak with one,
write out the gist of the deal in terms you can under-
stand. Discuss feedback from your first customers in
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Build half of a polished
product, not a half-assed
product
BUILD / YOUR PRODUCT
In an industry that is enamored with shipping features,
every startup is working with an in-house or outsourced
engineering team shipping stu at lightning speed.
Therefore, it could be a rare advantage to build a highly-
polished product that actually works and works well.
It cant be emphasized enough the importance of identi-
fying an epicenter of your designyou can concentrate
your eort on polishing and refining that to ensure that
the end product is as perfectly-crafted as possible.
Engineering and writing real code is too costly of a
process for randomly trying things out. When you start
building your product from your epicenter outwards,
you have a better chance of achieving polish. Wording
matters. Spacing matters. Handling exceptional flows
matters. When you bring out a product that is polished,
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Make your product too good
to be true
BUILD / YOUR PRODUCT
The dierence between too good and good is the
surplus from which you can extract value. To extract
value, it needs to be at least better-than-good. The
better you make your product, the more surplus you can
extract from your customer.
Once you have figured out how to make your product
too good to be true, you have found your business
model. This means that the business model is simply a
part of your service or product that has excess value of
which you could charge for that value. People are willing
to pay for it. In a freemium model, everyone could get
some free storage, but if you want unlimited storage
then you would have to pay. Therefore, your business
model must incorporate excess value people are willing
to pay for.
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Use a mobile screen as a
thinking frame about what
your user would want to do
BUILD / YOUR PRODUCT
You may not be building a product with a mobile use
case, but using a smaller screen such as a smartphone
or a tablet as a thinking frame, will keep your product
focused on its epicenter. This is likely how someone
will interact with your product. The person will desireimmediate pay-o and will only devote limited time to
your product (a minute or two tops). If you are success-
ful in making your epicenter come alive given the mobile
limitations, you know that you have found the right
focus.
Obviously, having a mobile strategy helps with the
narrative of why this company is relevant and valuable.
The mere thought of a person holding the mobile device
in his or her hand, at a particular time of a day, with a
particular need to fulfill, helps ensure that you keep yourproduct focused on the epicenter.
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Write your user interface,
dont just draw it
BUILD / YOUR PRODUCT
A common misconception of user interface design
is that it is best done by a graphics designer. This is
probably because a well put together user interface
looks like a picture and not a novel. The truth is, most of
us interpret the user interface and learn how to use thesystem by reacting to the words on the screen rather
than looking at the color and texture under the words.
We all somewhat know how to write. Try to explain how
you can engage an end user exclusively with words.
Imagine that your beautifully constructed website has
gone down, due to some hosting problems, but you
have the ability to fulfill all the features on your website
over e-mail or instant messenger. You can write a dia-
logue between two people on both sides of the conver-
sation and figure out the words they would use. Thesewords should be used in your user interface designs.
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Capture data about what
your users do as soon as your
site launches
BUILD / YOUR PRODUCT
Why? Because you will never get another chance to
capture this data once it has happened. Poof!
You dont need to have sophisticated tools to analyze or
mine the data and provide beautiful data visualization;
those can come later. What you need is to instrument
your product to collect data in fairly granular units and
store the data somewhere. It would give you a history
of how users interact with your site that will form the
foundation of the objective criteria of which future
features are designed and prioritized.
While standard web packages like Google Analytics are a
good start, more application-specific analytic tools like
Mixpanel provide a much more precise capture of what
your users are trying to do. Some other analytics pack-
ages allow you to automatically send e-mails if your user
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Its not just about the code.
Seek to understand the big
picture of technology.
BUILD / YOUR PRODUCT
Talk through your technology options with a Chief
Technology Ocer-level person. Most startups would be
happy to have access to a programmer on the founding
team or a vendor that can build the first version of the
site. This person is likely to use the tools he or she knowsto minimize risk. Once in awhile, you may get lucky,
and the persons skill sets matches the technical needs
of your product perfectly. But most of the time there
are better ways to build the product, especially beyond
the first version. There are technologies that are more
appropriate, easier to evolve and ultimately scale better if
your product is successful.
While you dont need to implement many of these
technology considerations right away, as getting your
first version out is still the most important task, it is prob-ably worthwhile to look one or two years ahead and talk
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Failure is overrated. You
can iterate by succeeding in
succession.
BUILD / YOUR PRODUCT
People sometimes conflate the need to iterate with the
need to fail. You should try not to fail because failure
means wasting time and chance. There are ways to
reduce your chance of failure by avoiding traps and by
reaching out to people who have done it before.
One of the most valuable resources available to a startup
are professionals. Most professionals who are on solid
career paths in various functions and industries all wish
in some ways they were in for some exciting startup
venture. They just may not be ready to jump in head first
the way you have. However, they may be very excited to
play an advisors role and share their professional know-
how and experience with a newcomer in exchange for
a fun experience of dipping his or her toes in the startup
world.
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Craft a brand name that
summarizes the promise of
your product in one word
SPREAD / YOUR MESSAGE
Perhaps the greatest mistake a startup can make is to
fall in love with a cute word and then struggle to find a
product to fulfill the promise of that word. To avoid this
trap, startups should first determine a resonating product
concept and then discern a brand name using variousnaming and branding techniques.
The most successful brand names become commonly-
used verbs for a products main function. In the 1980s,
oce workers began to xerox copies. In our own day,
to google has become the worlds favorite way to
search the Internet.
A brand name should be a natural nickname for people
to remember via a mnemonic device. A brand name is
for recall and not for introduction. It should come from
your product. It should not define your product.
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Claim your name everywhere
before others can hold you
ransom
SPREAD / YOUR MESSAGE
Building a brand in these first decades of the Internet
can be a bit like oil prospecting in the American West in
the mid-1800s. Its a race to get there first.
After you determine your product and select your brand
name, it is imperative that you claim that name in every
corner of the World Wide Web. This includes registering
your domain name with the common domain suxes
(.com, .org, .net, .tv, etc.) as well as securing the brand
name (as close as possible) on all of the social media
sites. If your chosen brand names are already taken, pick
a variant of the name you can get everywhere and stick
to it. This will reduce confusion for customers searching
for you in the social media space.
It is helpful to create a unified email account to manage
all these resources. Never share access to an email ac-
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Measure your market
through early advertising
SPREAD / YOUR MESSAGE
Can you only advertise when you have something to
sell? Absolutely not.
In the first weeks and months in the life of your startup,
it may be advisable to advertise a product that is com-
ing soon to gauge the level of interest in some of its
features or toolsas well as to test various advertis-
ing messages. You will find your audience may react
favorably to some features and messages and poorly to
others. Getting this feedback at an early stage can help
you build your product and hone your message in align-
ment with the needs of your target market. Dont build a
product that people dont want.
Google AdWords can be an inexpensive means to test
and validate your product, brand name and message.
These ads could lead a user to a landing page where you
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Tell a compelling story about
your company and people
will repeat it
SPREAD / YOUR MESSAGE
Hollywood producers and New York publishing execu-
tives will tell you the same thing: the key to selling a
story is creating sympathetic characters in the midst of a
compelling story. The audience needs someone to root
for. Perhaps the same could hold true for even the mostutilitarian startup.
Your product is your star. And it needs a compelling
reason to exist. How is your product going to change
the world? How will it make life easier for the masses?
Once you are a success, you can hire advertising agen-
cies and public relations professionals to help craft your
message. But, before Don Draper joins your team, spend
some time thinking about the story you will tell about
your product (and maybe even yourself and your team).
The default state of the public toward your product
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Create a video that can
stand alone as a piece of
entertainment
SPREAD / YOUR MESSAGE
The best way to demonstrate the functions of your
product is to show it in action in a video. But, the days
of boring industrial films are over. You cannot create a
video that simply demonstrates what your product does.
You need to create a dynamic video that both illustratesyour product and is at least somewhat entertaining in its
own right.
Most product demonstrations can be realized as a series
of screenshots, possibly stitched together into a single
page narrative (see how Apple explains the features of a
new product on its website).
When making a video, choose one unique aspect of your
product that would wow people. This is not the time for
an exhaustive description. Staying focused in this way
could reduce your time spent and costs while increasing
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Reflect your best thinking on
your front page
SPREAD / YOUR MESSAGE
The front page of your website needs to reflect the best
of what you have to oer. If your product is clean and
smart, your front page should reflect that. If your prod-
uct is quirky, your front page should be just as unique.
You need to build a front page that presents to the worldwhat your product and service is about and allows you
to build a list of prospective users even at an early stage
of development.
Is your front page a personal invitation to a fewor a
flyer for all? Thats something to keep in mind through
the various stages of design. Dont fall into the trap of
speaking to no one in particular. Consider how specific
you need to be in dierent steps of your launch. Make it
a conversation.
As you unveil your product and your message evolves,
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Love those who love you
back
SPREAD / YOUR MESSAGE
In business, as in life, sometimes our early presumptions
turn out to be wrong.
Sometimes the customers or users whom you presumed
to be your target market fail to swoon over the result of
your hard work. At the same time, its occasionally the
unexpected user who sends you love notes.
To quote the songwriter: Love the one youre with.
It is the people who fall in love with your product first
that you need to love back and give them everything
they want and need to move your product from an idea
to a thriving business. To identify who is loving you back,
look for signals of unexpected success or messages
saying you have solved a real problem. Strive to be a
breath of fresh air.
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It is better to get the best
person for 2 hours than a
mediocre person for 20 hours
GROW / YOUR TEAM
There is a saying among software engineering managers
that the best programmers are 10 times more productive
than an average one. Building software is a high leverage
activity, for example, a little bit of improvement for the
speed of the website, may yield a lot more purchasesbecause the site responds quickly and you can breeze
through the shopping process.
A lot of the jobs surrounding a startup are also high
leverage ones. Creating a blog post that becomes viral
because it is just entertaining enough to spread virally,
the return of that 500 words may be a 100 times what a
run-of-the-mill blog post would be.
Essentially, instead of trying to fill roles that need to
be done and evenly allocate money to the dierent
roles, you should look for exceptional people and
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Build the smallest possible
team you can get away with
GROW / YOUR TEAM
The greatest enemy to productivity is communication
overhead. The success of your startup depends on what
you produce and not who produced it. The most valu-
able players in a startup are what we call unicorns. They
are the rare group that are simultaneously two things.They can do two roles or morea marketer who can
build their own web page, a designer who can write very
well, or a salesperson with a law degree. You want to
condense the skill sets to the fewest number of people
to cover all the needs of your organization.
To reduce the communication overhead, you should
carefully design and delegate responsibilities, so projects
dont have a lot of dependencies on getting everyone on
the same page. Agree on a philosophy for your company
that is consistently applied against projects to judgetheir success or failures. The best projects happen when
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Partner with people who
need access to technology
GROW / YOUR TEAM
Sometimes startups want to build partnerships with
other startups because they feel like the recognizable
names of similarly hip ventures will improve their stand-
ings within their hierarchy or respectability. The truth is
the respectability does not translate to customers andacquiring customers is the real measure of success in
turning your startup into a real business.
Instead of pursuing partnerships within the echo
chamber of technology or even social media, try to
oer your startup to old world organizations that may
not have the same access to technology and the new
markets. Oer to be their partner to provide a conduit
between their existing base of customers and the new
tools and opportunities that your business has to oer.
Winning these more traditional partnerships will allowyou to show traction and give you a compelling story
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Establish a fair employee
stock compensation
structure by being formulaic
GROW / YOUR TEAM
The founders collaboration agreement should have
been decided upon at an early stage of structuring the
company. It is important to include in the founders
shares a vesting agreement so that people have the
incentive and expectation to contribute and carry theload of the new venture for at least a few years.
Beyond the pool of founder shares, you should establish
a very formulaic strategy of allocating stock to employ-
ees who join the company after the founders. There are
various literature online that describes the model to fairly
distribute equity but the basic idea is the sameemploy-
ees that join around the same time get an equal slice
of the stock that is allocated for that year. Every year
that goes by, you get exponentially smaller slices. This
encourages people to get involved early and rewardsthem disproportionately with a potential upside. The
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Game the real estate market
to get the workspaces you
need
GROW / YOUR TEAM
In the age of web products and apps, it doesnt matter
where you build your product. Many successful startups
started in garages and out of peoples homes. Convert-
ing a founders residence into a temporary workspace
is often the most cost-eective working option at theearly stage of development. It is important that every-
one is comfortable while working but be sure to keep
boundaries between personal and shared space. If this
arrangement isnt possible, co-working space is a more
expensive alternative.
As your space needs grow beyond what a private
residence can accommodate, subletting oce space
from companies that has excess space is preferable
over getting startup incubator space that is much more
dense and sometimes noisy. On the other hand, the co-working or incubator space does have perks of shared
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Look for trust and honesty in
your Board of Advisors
GROW / YOUR TEAM
Do not give equity to people only because they are a
big name. A seat on your Board of Advisors should really
be a reward mechanism for non-employees that have
contributed generously throughout the formation pro-
cess of your company and your product. They may be afriend that has been doing work for free, a partner that
has been giving you advice, or someone that has made
key introductions. In each case they have interacted with
you and your business and have a deep understanding
of it.
Unlike your Board of Directors, these advisors dont
provide oversight as your superiors. Instead, they provide
suggestions as a peer. They should be the people you
respect and trust for their brutally honest feedback.
There are many ways to find people who can help or
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If you find the advice gathered in this guide useful, thenwe think you and your startup will benefit from the
collective knowledge of our growing network of advi-
sors and professionals, covering the areas of business
strategy, technology, design, law, accounting, marketing,
real estate, to name a few.
To find the right advisors for your needs, you can:
Search Advisoray.com for advisors using keywords
listed on the bottom of each page in this guide, or by
areas of expertise or services oered.
Browse the interactive version of this guide atadvisoray.com/startup and look for advisors that
have listed their profiles there.
Let us play matchmaker for you by sending an e-mail
to ask@advisoray.com describing your situation and
what problems you need solved.
We hope you have enjoyed this pocket-sized guide.
Follow us on Twitter (@advisoray) to keep up-to-date
as we roll out new content and expand our services to
serve you and help your startup succeed.
TAKE THE NEXT STEP
2012, Advisoray Club. All rights reserved.
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