Founder Fridays No. 91
Founder Fridays No. 91
How to Win as a First-Time Founder -- Misfits -- Intelligent Failure
There was a big win for crypto this week!
The US House of Representatives passed the first major legislation on Wednesday that aims to provide regulatory clarity for the cryptocurrency industry. The Financial Innovation and Technology for the 21st Century Act (FIT21) was approved by a vote of 279-136, with support from 71 Democrats, despite the Biden administration's opposition. The bill offers a path for sufficiently decentralized cryptocurrencies to be traded and used by Americans, while clarifying which tokens fall under the jurisdiction of the U.S. Securities and Exchange Commission (SEC). The cryptocurrency industry has long complained about the lack of a clear regulatory framework, with companies struggling to operate in compliance with U.S. regulations.
How to Win as a First-Time Founder
Drew Houston, the founder of Dropbox, shares valuable insights about how to succeed as a first-time founder. One crucial aspect is choosing the right problem to solve. Houston himself was inspired by his experience struggling with file storage. He advises entrepreneurs to pursue ideas that are irresistibly compelling, have massive potential reach and provide ample learning opportunities. Surrounding yourself with brilliant, motivated individuals and embracing failures as learning experiences are essential for rapid growth. The scale of the opportunity should be evident, even if it seems ambitious, such as Dropbox's aim to attract a billion users. First Round Review (11 minutes)
Misfits
Venture capitalists seek three essential qualities in innovative teams: 1) Founders with contagious charisma and strong character who energize others. 2) Diverse "misfits" who bring valuable, fresh perspectives despite lacking traditional industry experience. 3) Cohesive, complementary teams rather than relying on lone individuals. While corporations often overlook these principles, prioritizing them is crucial for driving disruptive innovation. Building teams with these key attributes can help any organization unlock the venture mindset needed to create the future. Big Think (7 minutes)
Intelligent Failure
In our culture, there is a deep-rooted belief that success means never failing, but failure is actually an inevitable part of growth and achievement. There are three types of failure: basic failure, which occurs due to carelessness or distraction; complex failure, which stems from multiple causes and can be unavoidable; and intelligent failure, which teaches us something new or improves us in some way. To ensure that your next potential failure is intelligent, think of your task as an experiment. Start small, have multiple ideas, establish a feedback mechanism, know when to walk away and avoid the perfectionist trap. Embracing intelligent failure is the key to great advances and even joy, as it allows for discovery and accomplishment. Freethink (7 minutes)
Founder FAQ: How Does Equity Compensation Work at a Startup?
Startups use equity compensation to create an ownership culture, attract and retain top talent, and incentivize hard work and direct contributions to the company’s growth. This type of compensation can take the form of stock options, restricted stock or other equity-based incentives. Equity compensation in startups can take various forms, including: 1) Restricted Stock (sometimes called Restricted Stock Award, or RSAs) — A grant of common stock in the company. The recipient owns the stock at the date of the grant, subject to the vesting schedule. 2) Stock Options — Stock options give employees the right to purchase company stock at a certain price (the exercise price) within a specified time period. 3) Restricted Stock Units (RSUs) — They represent a promise to deliver company stock at a future date once certain conditions are met. Unlike stock options, RSUs do not give employees the right to purchase company stock at a certain price. Instead, they receive the company stock once they have vested. 4) Stock Appreciation Rights (SARs) — SARs give employees the right to receive the increase in the company’s stock price over a specified period. 5) Phantom Stock — Phantom stock is not equity at all. Rather it’s a mechanism to reward employees with the financial benefits of stock ownership without giving them actual shares of company stock. These shares don’t provide ownership rights, but they do entitle employees to economic benefits since their value rises and falls in accordance with the company’s stock. The restricted stock and stock options are by far the most common type of equity in an early stage startup. RSUs are sometimes issued in a late-stage startup. SARs and phantom stock are very rare but can be helpful in very specific circumstances. Westaway (8 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term by term and give you negotiation tips so that you can speak to investors with confidence.
Convertible Note: Guide / Video
Built By Founders for Founders
I co-founded my first startup with friends in 2007. As a founder, I struggled to find an affordable law firm that was designed for early-stage startups. So, I created one myself. Westaway is a law firm built by founders, for founders. If you're ready to ditch the outdated billable hour model and try a new approach to legal services that saves you time and money, let's talk. I'd love to jump on a 15-minute call to show you how we can make legal smooth, fast and cost-effective for your startup. Schedule a call with me now.
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