Co-Founders & Captables with Danny Robinson

Choosing the right co-founder is definitely one of the most important decisions you will have when starting your company.  It is very much like a marriage of sorts. You want to find someone, who shares the same values as you, yet has different strengths to balance things out and keep things interesting.  Of course, you can start a company on your own but entrepreneurship can be quite lonely and very challenging at times and it is nice to have someone to share the load, ride out the lows and celebrate all of the small successes.

I have been lucky enough to have co-founded two companies with Danny Robinson and I would absolutely do it again. We both have different strengths, want the same things and respect each other immensely. Danny is also really good at having the uncomfortable conversations, which many of us want to avoid and has always taken the lead on raising money.  He is a great mentor, friend and the best person I could think of to deliver a C0-Founder & Captable talk at Bootup last Wednesday.  Danny kicked things off with a very timely joke:

“There’s a little Sheen in All of Us.”
Entrepreneurs are typically very passionate individuals, who have opted out of the safer, climb-the-corporate-ladder career path and put it all on the line (read: sold house, minimal salary- if any, eating ramen) in the hopes of creating something bigger, even changing the world and WINNING.

Splitting up the Pie
Once you find your co-founder soul mate(s), you may be tempted to just dig in and move fast so you can experience the ultimate high of WINNING sooner!  As a result, you may not take the time to have the important C0-founder discussions like shareholder splits, vesting schedules and employment agreements but before you start to turn that idea into a valuable product, it’s best to have a co-founder heart-to-heart.

Danny stressed not to delay the equity conversation because it will only get harder down the road. You may also be tempted to just split the company 50/50 and call it a day. DON’T!  If you do, you could put the company in serious jeopardy at a future date.  Danny always take a few things into account when splitting up the company pie:

  • Commitment
  • Skill
  • Connections
  • Experience
  • Responsibilities
  • Idea

Danny places the highest value on a founder’s commitment to the company. For instance, if you quit your day job and are hustling nearly every waking hour on your startup, while your co-founder has a lot of connections but has a family and can’t commit full time until the company either raises or starts making money, then you score higher on the commitment front. On the opposite end of the spectrum, Danny places the least emphasis on the Idea itself. The idea will change, so just because you may come up with the idea, it does not mean you should get more equity then another founder.

After you look at all of the above factors, you may end up with a 50/50 split in the end but Danny rarely sees that as the case. So, have the difficult conversation first because it will force you to really think not only about the shareholder “PIE” but also about your roles and responsibilities within the organization and each cofounder’s ultimate vision for the company. For example, do each of you see the company as a long term play or would you prefer to build and sell the company in a few years?  In the end, don’t get hung up on the % too much. Just get going…

Vesting
Founder Vesting is usually different than employee vesting in the company. To start, Danny recommends keeping it simple and using a single class of voting common shares for founders with a standard vesting schedule of equal monthly installments over the course of 3 years. (e.g. 1/36 per month)  Not all founders will stay on for the long haul, so if you are going to stick with the company – then your shares should vest.

Other types of vesting to consider:

  • Cliff Vesting – when an employee/founder becomes fully invested at specified time rather than vested in increasing amounts over an extended period of time.
  • Single trigger – upon change of control, 100% of your unvested shares would vest.
  • Double trigger – accelerate 100% of your unvested shares if terminated after a change of control

Captable – “Your budget for dilution.”
This is a core document when you are starting a company.  On Day 1, when the company consists only of Founders, your captable may look something like this:

As you hire new employees and raise money, your Captable will expand to include ESOP and financing information. Here’s an example of a Captable for a 2M Series A Financing Round:

The Captable is a reminder that you do not have an unlimited amount of shares to give away and will help you budget and plan for “What if” scenarios. What if I raise 2M dollars in Series A financing or What if we sell for $10M dollars? You can see in the above example that the founders went from owning 100% to 80% with the ESOP to 43% after raising a Series A round.

Danny covered a lot of ground in just two hours and left me thinking we could even go deeper into how to structure shareholder agreements, set up captables and other legal documents. Stay tuned for more info on that.

Thank You Danny!
Many Thanks To Danny for educating us and sharing his tips on the Captable & CoFounder topic and to Martin Ertl from Contractual.ly for offering some legal insight and helping answer questions.  If you missed Danny’s talk, you can check out his slides below.

Q & A

1) What is the ideal # of co-founders?
Danny doesn’t think there is an ideal number while Venture Hacks recommends 2-3 co-founders. Each co-founder is just a shareholder. It can get complicated the more co-founders you have but it really depends on you, your company and the value each person brings.

2) Are titles important?
Danny thinks titles are a necessary evil.  It helps people outside the company know what you do and also forces you to take ownership over certain things. Though in a startup, you may be doing everything from the dishes to pumping out code.  He does not like to see Co-CEO titles or Vice Chair. In most cases, he thinks this is a result of not wanting to have the tough discussion but in some cases, like @summify he has seen the Co-CEO role work out nicely.

3) What if my co-founder invests more $ then I do in the business?
Danny thinks you need to keep money out of the shareholder discussion and treat the money as investment in the company, which could be treated as convertible debt.

4) We started a company 6 months ago, built out a product and there is a key employee who has been with us for a while.  Should we make her a co-founder?
Danny said “No but do make sure she realizes how important she is to the company.”  Perhaps, this would mean more stock options, responsibility and recognition but she does not need to have the title of co-founder.

If you have more questions or would like to see us cover another Startup topic, please leave a comment below.

Bootup – We are Just Getting Started.

As many of you have heard, Bootup Labs Managing Director and Co-Founder, Danny Robinson recently accepted the role of CEO of BCIC.   There has always been a bit of confusion with the Accelerator and the Non-profit b/c we share the Bootup name and understandably so.  But, BES has always been an independent organization. We have our own team, an independent Board, have to make our own money and raise our own funds. When Danny moved on to BCIC, the only thing that changed was he stepped down from our Board and Boris Wertz of WMedia Ventures stepped up as our Chairman.

In the past two years since we started Bootup Entrepreneurial Society, we have organized more than 40 of our own events and supported many other associations, organizations and international companies in their efforts as well.  These events include mentor talks and workshops, Democamps, Mentor speed dating, Co-Founder speed dating, Launch Party Vancouver, Facebook Developer Garage and more.  We have seen companies like UnbounceMobifyHootsuiteAyogoGistYowza and Weddingful attend and launch their companies at various BES events and continue to thrive.  We are their biggest fans and we want to see all of these companies and more hit it out of the park.

We have come this far with a team of 2 full time employees and the support of some amazing volunteers including Mack FlavelleParveen KalerLyal AveryBoris Mann, Angela Baldonero, Jodi Day, Tina Hoang, Ross Howard Jones, Alexa BoothJordan Behan, and Derek Shanahan, a rock star Board of Directors,  our sponsors and countless others, who have stepped up to help at many of our events.

What’s Next – Bootup Garage, an open space for Founders to Bootup
Bootup (BES) has always had an open door policy. We love having people drop by, plug in and work away while they are visiting from Toronto, SF, Boulder and even France.  Working in an environment like this is exciting and inspiring.  And as an entrepreneur, who’s first startup’s HQ was in my garage, I really appreciate and thrive on being surrounded by others, who are taking the same risks or have been there and can help me navigate through the sometimes unpredictable and challenging waters of entrepreneurship.

With this in mind, BES is launching the Bootup Garage Pilot Program.  The Bootup Garage is something we believe every healthy startup ecosystem needs and we want to create a space where Internet founders and developers know they can come, connect and hack away on their idea in a very supportive, collaborative and inspiring environment.  It is not meant to be a co-working space, where you rent a desk on a monthly basis.  The space will support new ventures from their earliest single-founder ideation stage through small-team prototype development, until the startup has achieved proof of demand and is ready to accept funding or establish their own workspace.

Mentors
We have lined up dozens of mentors already, who love Vancouver and want to support Canadian entrepreneurs.  Mentors will be on site, hosting office hours on a weekly basis (if not more) at Bootup Garage and you can set up meetings based on their schedule.  Everyone from Jason Bailey of Super Rewards, Boris Wertz of W Media Ventures, Boris Mann of IQMetrix, Angela Baldonero of Return Path, tech artist Kris Krug, David Ascher of Mozilla Messaging and Stewart Butterfield of Glitch and Flickr are on board and we are just getting started!  The list and mentor calendar will be posted soon.  Thanks to everyone for your support.

Funding
Bootup is a non-profit, supported by many wonderful partners and sponsors including BCIC, who has been a big supporter of us before Danny ever interviewed for the CEO job.  While BCIC has funded us again this year, which includes this pilot project, we are also talking to many other private and government organizations to help us in our mission to support and inspire entrepreneurship in BC and Canada.  If you are interested, please contact us or come to our Open House: 

Open House
On December 1, from 12:30-2:30pm – we invite you to an Open House at Bootup – 163 West Hastings St., Suite 200. Come find out more about the Pilot program, ask questions, meet other entrepreneurs and mentors and check out the space.

If you are interested in the new space, sponsorship or being a mentor, you can send me an email – maura [at] bootup [dot] ca or jeff [at] bootup [dot] ca or sonia [at] bootup [dot] ca, come to the Open House on Dec. 1st or connect with all of us at Launch Party Vancouver 10, http://lpv10.eventbrite.com

“The Brand of Me” with Shira Lazar

On March 18, our good friend Shira Lazar, flew up to Vancouver to present at Social Networking in Transmedia Hollywood: A Strategic Master Class presented by DigiBC and DFAIT.

Shira was joined by other social media specialists from LA, Darcy Jouan, Peter Huh & Gregory Markel, who spent the day discussing transmedia storytelling and how to engage audiences across multiple platforms including mobile and social networking sites.  For example, Darcy discussed the TV Series, Ghost Whisperer and how they created a series of webisodes to create a themed experience for viewers both on and offline.  The webisodes named The Dark Side were spawned by fans of the TV series. The purpose of the webisodes was to allow the audience to experience something beyond what they experienced from week-to-week on TV. In return, both audiences tuned in on and offline as the series runs parallel.

Shira’s presentation focused on her personal brand and how she bridges the online and on air worlds together using multi-media platforms.  Here are Shira’s “Five Steps to Becoming a Media Empress”:

  1. Be you! People can see through a fake brand of image, and it’ll drain you to maintain something that you’re really not. Once you embrace your authentic voice, you’ll find your audience and your audience will find you.
  2. Balance PR/buzz with actual work, i.e. new content and projects. As much as it’s great for everyone to see you at that party or getting interviewed by a cool outlet, it can only go so far. If you’re not continuing to challenge yourself and your audience with some real projects outside of publicity than you’ll lose engagement. Your brand isn’t just about you, but the conversation you create and what you contribute.
  3. Maintain a consistent presence on and offline. As powerful as all these online tools can be to make an impact and be heard, meeting your network and community in person is the incing on the cake.
  4. Think multi-platform. Whenever you have an idea, think of how you can integrate other mediums to get the message out there.
  5. Call yourself a media empress. Michael Jackson actually pegged himself the King of Pop, and he delivered that above and beyond. Don’t wait around for someone to discover and brand you. You have the power to create what and who you are now — and as we all know, perception is reality.

Shira and I sat down during lunch to discuss her presentation.  At the end, she gives a shot out to some of her favourite Vancouver peeps!

Lunch with Shira from Sonia Ryan on Vimeo.

Many thanks to DigiBC for letting me attend this event on behalf of BES.