Founder Partnerships, Equity Stuff, and Accountability

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Jorge Soto, Head of Inside Sales - MoPub at Twitter and Founder at Sales4StartUps
Jorge Soto, Head of Inside Sales – MoPub at Twitter and Founder at Sales4StartUps

I have been involved in a ton of startup ventures for more 10 years. Most failed and so far I have had a very, very small handful of wins. Luckily the wins make it all worth it and the losses prepare you to win.

There are few things that suck more than a co-founder who makes excuses and doesn’t pull their weight. Not only does it destroy execution but it crushes morale and leads to resentment amongst partners.

The following advice comes from my experience over these 10 years, especially what I learned the past 4 or so years through participating in Angelpad, watching MoPub grow from 3 people to a 90 person company with a $100 million run rate and a 2013 exit to Twitter, and building Sales4StartUps from scratch to becoming one of the leaders in startup sales education.

 

Be Real, Direct, and Set Expectations from Day #1

I know this has always been a struggle for me. Not because I wanted to be fake or superficial, but because I am always so concerned with hurting people’s feelings or coming across like a jerk.

What I have realized is that by not being direct and communicating your expectations, you are not only not being real, but setting the stage for poor communication and resentment for unfulfilled expectations.

You MUST be 100% direct about the expectations that you have for your fellow co-founders, as well as your early hires. These expectations must be around everything from effort, attitude, communication-style, character, to execution, tactical topics, and vision. Start this practice from day one; make no exceptions.

To be clear, I am NOT suggesting that you be disrespectful or communicate inappropriately. There is a difference between being transparent, open, and direct versus treating people poorly or being condescending and aggressive.

I don’t tolerate disrespect myself; so always treat people with the utmost respect, no matter what their role is. This starts with the janitors in your office or workspace to your co-founders and investors.

 

No Excuse Zone

Another painful experience to deal with is hearing excuses. They drive me absolutely insane, and will drive you mad, if you allow them to prevail.

On my teams I preach a no excuse zone, focused on getting shit done, and being responsible for lack of execution. I absolutely understand that we are only human and will drop balls once in a while, but what I don’t tolerate of myself or anyone else I work with are excuses; and neither should you.

At the end of the day, things either get done or they don’t. No one really cares why things didn’t get done, they just know it wasn’t done.

If you allow excuses to be accepted and a lack of accountability to exist, a lack of trust will result and the team will break down.

At Sales4StartUps everyone knows not to even try to give an excuse for balls being dropped. We might not be happy about it, but there are no excuses and we work towards a solution immediately and move forward.

One of the many things I admired about my good friend and MoPub CEO Jim Payne, was his lack of tolerance of anything that didn’t articulate excellence. And this was for everyone, including himself. As demanding as Jim was for excellence from others, he was 10x more demanding of himself. There were no excuses with Jim; you could only provide solutions and accountability.

Set up a no excuse culture from day one, hold people accountable and the quality of your organization will skyrocket.

 

This is Business, Not Play Time 

This is something that I see a lot with the startup space. Founders get together, perhaps raise a little money, and think that they have all the time in the world to have fun. Now don’t get me wrong, at MoPub we played a lot and had more fun than you can imagine, but we worked even harder and were always laser focused from day one.

During the early days, you must understand the power of momentum and leverage the energy that these days yield.

Because I love sports analogies — it’s important to treat these days as the big game, and you are losing by many scores. You are truly the underdog and will be crushed at any moment.

Yes have fun and enjoy the ride, but you must be laser focused and operate with the highest sense of urgency. Make no exceptions.

 

Hold Each Other Accountable

This is actually much easier than we all like to accept. It’s a matter of defining what yourself and others are willing to commit to, and holding them accountable to that commitment.

Your word is your rock. If you can not be trusted to have integrity around that word, then how can you or anyone for that matter be relied upon?

 

Equity Splits and Vesting Schedules

This is something that is sorta over-thought during the early days, mostly because your ownership equity has zero value until you actually build a meaningful business. However, you must set the numbers in place and move on.

A popular and investor friendly format is the 1-year cliff, 4-year vest. But simply put, all stakeholders have a 4-year timeline to vest 100% of their shares, and need to be with the company at least 1 year to vest the first 25%.

This protects all parties involved including the founders, investors, employees, etc. You don’t want someone walking away with a huge chunk of the business after low or no contributions.

Here are way better explanations:

http://startuplawyer.com/incorporation/what-is-four-years-with-a-one-year-cliff

http://www.quora.com/Startup-Compensation/What-does-4-years-vesting-with-1-year-cliff-mean

 

Even if you will reincorporate and edit the agreement, get one in place as soon as possible, and make sure all parties are aware and in agreement with the terms and conditions before proceeding with any activities.

 

Keep Cap Table Clean and Lean!

Be very thoughtful about how many investors you receive money from. I have seen entrepreneurs raise money from more investors than I can count on two hands.

It’s just a best practice to keep your investment limited to high quality, value-adding investors. Even if you have to take less money.