The Startup Checklist

1. Translate Your Idea into a Compelling Business Model

A business is created in order to execute on an idea. Not having a clear picture of that idea is guaranteed to result in an extraordinary amount of wheel spinning.

Business Model Canvas: Use the Business Model Canvas to visualize and refine your business concept. This tool helps you map out key elements:

• Customer segments
• Value propositions
• Channels
• Customer relationships
• Revenue streams
• Key resources
• Key activities
• Key partnerships
• Cost structure

Scalability: Ensure your business model is scalable by considering:

• Ability to start small
• Decreasing marginal costs over time
• Built-in scalability (not relying on exogenous factors)

2. Craft a Lean Business Plan and Validate with Customers

Planning is about managing change, and in today's world change happens very fast.

Lean Planning Principles:

• Do only what you'll use
• Continuous process, not just a plan
• Assume constant change
• Empower accountability

Minimum Viable Product (MVP): Create a basic version of your product to test with real customers. Use it to:

• Establish baseline metrics
• Test value and growth hypotheses
• Gather customer feedback

Iterate rapidly based on feedback, following the Build-Measure-Learn cycle. Conduct split tests (A/B tests) to compare different versions or marketing approaches.

3. Build Your Dream Team and Allocate Equity Wisely

Equity is forever, so once it's in someone's hands there is no easy way for you to get it back.

Dream Team Components:

• The Entrepreneur: Vision, passion, leadership, risk-taking
• Execution Skills: Technical, sales, marketing, operations
• The Concept: Innovative idea with market potential

Equity Allocation: Use a structured approach like the Founder's Pie Calculator to determine fair equity splits based on:

• Idea contribution
• Business plan preparation
• Domain expertise
• Commitment and risk
• Responsibilities

Implement reverse vesting to protect the company if a founder leaves early.

4. Establish Your Brand and Network Effectively

Because of the extraordinary amplification powers of the Internet, many scalable, high-growth businesses these days are Internet based.

Online Presence:

• Create a professional website
• Establish profiles on key platforms:
  • LinkedIn
  • CrunchBase
  • Glassdoor
  • AngelList
  • Gust

Networking:

• Attend industry Meetups
• Participate in business plan competitions
• Join accelerator programs
• Engage with angel groups
• Leverage peer programs like Entrepreneurs' Organization (EO)

5. Incorporate, Lawyer Up, and Set Up Essential Systems

While no one likes to imagine the fourth scenario, which of the first three you aim for can have a significant impact on everything from the type of business you enter to whether and how you finance it, and even what options you have for an exit.

Incorporation:

• Choose a Delaware C Corporation for most high-growth startups
• Work with an experienced startup attorney for proper setup

Essential Systems:

• Accounting: Use cloud-based tools like Xero
• Banking: Open business accounts and establish credit
• Legal: Set up proper contracts and agreements
• Technology: Choose key platforms for productivity and operations

6. Recruit Boards, Hire Employees, and Incentivize with Stock Options

The combination of integrity, competence, and deal-closing ability sets apart the great startup lawyers from those who are merely good.

Board Recruitment:

• Seek board members who provide: Wealth, Work, Wisdom
• Set regular meeting schedules and clear expectations

Hiring:

• Use the New Hire Draft Board to evaluate candidates
• Balance full-time employees with freelancers as needed

Stock Options:

• Establish a stock option plan to attract and retain talent
• Use 409(a) valuations to determine fair market value

7. Understand Funding, Connect with Investors, and Prepare for Exit

Smart investors are on the lookout for customers that are already spending many hundreds of millions—ideally, billions—of dollars, with a growing field of potential customers.

Funding Stages:

• Bootstrapping: $0-$25,000
• Friends & Family: $25,000-$150,000
• Angel Investors: $150,000-$1.5M
• Venture Capital: $1.5M+

Investor Connection:

• Develop a compelling pitch deck
• Leverage professional networks and angel groups
• Participate in pitch competitions
• Consider online funding platforms

Exit Planning:

• Initial Public Offering (IPO)
• Acquisition
• Management of investor expectations and relationships throughout the process

Remember that the ultimate goal is to create value and achieve a successful exit, whether through an IPO, acquisition, or continued growth as an independent company.

Last updated: August 9, 2024