Acknowledgments ix 1 The Entrepreneurial Dream 1 PART I BOOTSTRAPPING:VENTURE CREATION OUT OF THIN AIR 2 Should I or Should I Not Venture intoEntrepreneurship? 13 Timing 14 Career Planning 17 Money, Uncertainty, and What Really Matters 22 When Is Enough, Enough? 25 Don't Lose Sight of the Big Picture: It's Your Life! 27 3 Startup Assets 29 Ideas 30 Early Customers 32 Patents and Offensive IP Strategies 34 Defensive IP Strategies 41 Copyrights, Trade Secrets, and Know-How 44 What to Pack in Your Bag 49 Cofounders 51 Attitudes 52 Skills and Roles 54 Immigrant Founders 60 Together We Will Prevail 67 5 Early Funding 69 Revenue, the Best Source of Funding There Is 70 Incubators and Accelerators 74 Angels 76 Free Money, Courtesy of Your Government 78 Banks and Loans 84 Crowdfunding 87 Creative Money 90 6 Administration 91 Legal Representation 91 Corporate Form 94 Corporate Compliance 103 Bookkeeping and Taxes 107 Payroll and Mandatory Benefits 108 Insurance 110 Office Space 112 Housekeeping 117 7 Compensation 119 Equity: A Startup's Most Important Currency,but What Is the Exchange Rate? 119 Vesting, Cliff Vesting, and Accelerated Vesting 126 Cash and Benefits 130 Deferred Compensation 135 Compensation Packages 138 Let There Be Justice, if You Can Afford It 147 PART II EQUITY FUNDING:A DOUBLE-EDGED SWORD 8 Venture Deals 151 Understanding Private Equity andVenture Capital 152 Which Firms to Seek Out 153 Term Sheets 157 Liquidation Preferences: The BiggestNuisance of Them All 166 Due Diligence and Closing 171 Taking a Bite from the Apple 177 9 Raising a Down-Round 179 Going Back to the Well 180 B, C, D, E, F . . . Rounds 185 Strategic Investors 189 When Things Get Really Desperate 195 10 Right-Sizing 197 Firing for Nonperformance 198 Reduction in Force 199 Showing Executives the Door 205 It's Not Your Fault 209 PART III EXIT:SELLING YOUR BABY 11 Startup Dynamics in Crisis 213 Tired Founders 213 Impatient Investors 216 When to Sell? 220 Never, Ever Give Up! 227 12 Exit Strategies 229 Hiring an Investment Banker 229 Poor (Unprofitable), but Pretty! 232 Financial Valuation 238 Protecting the Team 245 All's Well That Ends Well 251 13 Corporate Life 253 Acquisition Philosophies 253 Living Up to One's Own Promises 257 Before You Start All Over Again 261 Notes 263 Index 265
BERND SCHONER worked in the Physics and Media Group and the Things-That-Think research consortium at the MIT Media Lab, where he received his PhD. He cofounded and sold the high-tech startup ThingMagic to Trimble Navigation, a multibillion-dollar public technology company, where he now serves as vice president of business development. He lives with his wife and son in New York City and Cambridge, Massachusetts.