3 (big) mistakes to avoid as a first time startup founder
You and your best friend, James, from college, came up with a brilliant idea for a startup. You decid e to quit your jobs and turn the idea into reality, together, as equal partners. You sign a shareholder agreement and agree to give each of you 50% equity stake in the company. Things go well and within a short few months you release the first version of your product and start on-boarding early customers. But just as business picks up James tells you that his wife got a huge promotion at work which requires her to relocate to a different country. James, of course, is going with her and will not be able to continue working with you. 7 months after starting the company, with a very long way before a potential exit, he is walking away with 50% of the company.
I’ve seen this fictional scenario play out in real life many times in different versions. More often than not, departing a co-founder doesn’t end in an amicable way, in fact, quite the contrary. Equity is a precious commodity which allows a startup to raise capital, attract talent, and if done right, keep people around for the long haul. The main mistake in the example above was to award the ownership of equity right away.
