Protecting Yourself As A Startup FounderRyan Howard | Founder & Former CEO of Practice Fusion

The Price of Being an Entrepreneur

Sequoia's founder says 45% of founding CEOs of their

investments are fired within 18 months.

Founders of Twitter, PayPal, Cisco, and Tesla, were all

exited.

When Incorporating Your Company…1. Allocate 3-4 common seats to

maintain control of your board.2. Have clear vesting for founders

and rules for termination.3. Issue FF class shares to yourself

for early partial liquidity.

Employment Agreement Musts• Always be thinking about

potential and possible downsides.

• If this ends today…o How much money do I

have in my bank account? o Can I liquidate my equity?

• The state of California is at-will, even for founders.

Employment Agreement Musts• Get a great employment attorney

unassociated with the company.• Make a cure provision: Timetable

for making things right• Think about severance.

o Cash: 6-12 months if you have closed Series A

o Accelerated vesting o Extended exercising

Today is brought toyou by the letter

U for Unemployed

Employment Agreement Musts• Get a great employment attorney

unassociated with the company• Make a cure provision: Timetable

for making things right• Think about severance.

o Cash: 6-12 months if you have closed Series A

o Accelerated vesting o Extended exercising

Today is brought toyou by the letter

U for Unemployed

Your TeamsThree teams you want to be constantly focused on:1. Your management team2. Your board team3. Your personal support team

1. Your Management Team

Exceptional management team members will be force multipliers.• Free up your time to be more

strategic

• Have a network to recruit from in order to rapidly build a team

• Deliver much better results for their function than you can

The Wrong Leader

• Set functions back by a year (sales)

• Put the company behind company plan

• Be the reason you get fired• Ruin culture by causing

dysfunction, fighting, and people to quit

Enough wrong leaders will cause the company to fail.

The wrong leader can greatly harm your organization. He or she can:

Interviewing Tips

• Group interviews result in more data and overall consensus.

• Candidates should explain how every part of a problem was solved.

• Test everyone! o Have them do “A day in the

life.”• Check references that the

candidate didn't give you.• Must be a culture fit - Tolerating

assholes will ruin your culture.

Your ability to assess a potential employee during an interview is critical.

2. Your Board TeamThe biggest single mistake founders make is assembling their board.

• Allocate 3-4 common board seats.

• Spend more time on vetting these candidates versus all others.

• Avoid bloated boards so you can run your company.

• Do not add board members unless you absolutely have to.

Board Member InvestorsInterview Them• Ask them when

was the last time they fired a CEO and why

• Explain your expectations of them

• Explain how your run the board meetings

Check References• Call CEOs in their

portfolio companies • Check their

reputation on ‘The Funded’

Watch for Dysfunctional Behavior• Fast-talking• Anxious / Jittery• Germophobes

Many times, the majority of your board members will be investors.

Board Member Pitfalls

• Operators > MBAs• Partners > Associates• Never rush filling a board

seat.• Common seats: Find

someone you trust implicitly (advisor first)

• Board observers can have undue influence in meetings.

3. Your Personal Support Team• Great Coaches, Advisors, and Success

Modelso People who have been in your shoes

• Therapists o Someone to vent to that is always on

your sideo Hire a professional, not your spouse

• Personal Assistanto To keep your life together, while you

work

• Build strategies to your routine to relaxo Meditation, message, social time

3. Your Personal Support Team• Great Coaches, Advisors, and Success

Modelso People who have been in your shoes

• Therapists o Someone to vent to that is always on

your sideo Hire a professional, not your spouse

• Personal Assistanto To keep your life together, while you

work

• Build strategies to your routine to relaxo Meditation, message, social time

Don’t Give Up Your Life For Your Company

Wealth Love

Health

Don’t Give Up Your Life For Your Company

Wealth

Love

Health

Thank YouRyan Howard

Ryan@ibeat.com

For more Dysfunctional Startup tips, visit www.dysfunctionalstartup.com