So You Want to Start a Start Up…


Published on August 31, 2020

Introduction

Welcome to the “So You Want to Start a Start Up…” blog! I’m Paul Share, and I, along with my colleague Todd Kulkin, have been working with start ups for over 30 years. We’ve started this blog to provide you with the benefit of our experience on some of the legal and business issues that affect every start up.

The Popularity of Start Ups

It is easy to see that start ups have become the most popular mechanism for achieving the American Dream today, from the popularity of investment-based reality TV shows like Shark Tank, to the celebrity status granted to executives of the latest “unicorns” to make a splash in the market. Like the gold rush of the 1840s or the tech bubble of the 1990s, people today flock to start up opportunities with their minds full of ideas and their hearts filled with hope. Unfortunately (but expectedly), nearly 90% of these start up entrepreneurs fail within the first five (5) years after opening their doors, while fewer than half of the surviving remainder (despite receiving ample investment) reach the heights of success, like Mark Zuckerberg or Steve Jobs.

Beating the Odds

According to a 2014 Fortune article, ninety (90%) percent of start up companies fail. We are writing this series of blog posts to provide a broad range of advice, to benefit founders of all levels of experience: from first-timers to serial entrepreneurs.

In 2014, Fortune magazine published a comprehensive survey among founders of failed start ups and found that they all failed due to one or more of these five (5) factors: 1) a lack of consumer interest in the product or service (critical in 42% of failures); 2) funding or cash problems (29%); 3) personnel or staffing problems (23%); 4) competition from rival companies (19%); and 5) problems with the pricing of the product or service (18%).

Each of these factors is important enough to merit at least one blog post of its own. Some, like funding or cash problems, are complex enough to require several posts discussing the practical and legal problems involved in obtaining the funds for a start up.

We will enter this series by providing an overview on the problematic factors mentioned above, with some general strategies for minimizing the difficulties they can pose. We will make a number of posts on various legal issues that start up entrepreneurs face, such as:

  • What type of legal entity should an entrepreneur form to conduct their start up business, and what are the advantages and disadvantages of each type?
  • What are the legal issues with raising money from investors, and what are the “do’s and don’ts” of the investment process?
  • What are the legal and tax issues relating to issuing equity to employees and consultants as compensation for their services?

We will also make posts discussing the many types of investor (“Friends and Family”, “Angel Investors”, “Venture Capitalists”, etc.) and the issues that frequently arise in negotiating with them, as well as the need to write a professional business plan and how to do so, along with a whole host of other issues that start ups have to deal with.

Thank you for reading this first entry in the “So You Want to Start a Start Up…” blog! Continue the conversation by leaving a comment or, if you have specific questions, you can call our office at (866) 954-7687 or send an email to info@warren.law.

In our next blog post, we will start digging into these issues by discussing the first problem area mentioned above: lack of consumer interest in the proposed product or service of a start up. Look forward to it soon!

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