25 Things a First-Time Founder Should Know

Gil Silberman , Gust Partner , Luca Ventures

25 Jun 2024

This article originally appeared on Gil’s Blog.

25 Things a First-Time Founder Should Know:

• Do it like you mean it. Most folks lack the guts and financial freedom to work for low pay, high likelihood of failure, complete lack of guardrails, and atrocious time-adjusted rate of return. If you can, you’re a rare breed. You can go all-in.
• Seek professional help. It’s extremely hard even with great cofounders, service providers, and supporters. Without, nearly impossible.
• It’s a full-time job. Part-time founders don’t succeed; businesses are not hobbies.
• Failure is guaranteed. Every startup that eventually succeeds will suffer multiple near-death experiences first like running out of money, a massive lawsuit, losing their key customer, a PR disaster, or an employee insurrection.
• Relationships suffer. You may lose a friend, spouse, or your siblings’ goodwill. Your dog will feel neglected. Shared struggle forges new friendships.
• Respect is earned. Bring cofounders, investors, employees, competitors, and customers to your way of seeing things through leadership and persuasion. Having the most votes, money, or résumé points won’t convince anyone.
• Ideas aren’t enough. Wishing a startup into existence won’t make it happen. Your job is to build a full-blown enterprise out of nothing, one that makes something people want to buy, a product or service you can reproduce, distribute, and sell at scale for a profit.
• Great employees are priceless. No matter how motivated a candidate is, how much you pay them, or how great they look on paper, you cannot turn a company man/woman into a great employee if they don’t have a startup spirit.
• Set things up right. Organize your corporate structure and stock grants through a competent lawyer or startup-specific incorporation service. Get everything in writing, sign it, save it. All US states require business registrations. Many cities too.
• Know the labor laws. People have a right to minimum wage and a respectful harassment-free workplace. You cannot use “volunteers”, unpaid interns, or full time on site workers who are not treated as employees. Use the right employment and proprietary information agreements, and hire a solid payroll and benefits provider.
• There’s a right way to raise money. There are regulatory and business rules around fundraising, and lots to learn and practice before you can do it right. Don’t deal with brokers and finders, or anyone who promises help without putting in their own money or legwork. Get legal advice.
• Keep the receipts. Never run a company without a bookkeeping system in place from day zero. Meticulously sort and save records of everything.
• Vesting is a not an option. But options have vesting. Even the founder’s own shares vest over time with a cliff. If you don’t know these terms, learn. Plan for founder and key employee departures upfront, not in the heat of a termination or resignation.
• Study, study, study. Know your market, customers, competition, technology and trends. Read voraciously, network, keep up with the news.
• Invention builds on the past. Everything worth doing has been tried before, and the few new approaches that actually work are already in place. If you think you have no peers, predecessors, or competition, you’re either mistaken or you’re doing something pointless.
• Imitation is flattery. There is no shame in copying others. Whatever you do can be copied. Be the best, not the first or most clever.
• Play your own game. You can’t beat the world’s best on their own terms, so invent a different game and rule set they cannot follow. Serve their customers ten times better, cheaper, and with something more compelling — that’s the margin it takes to defeat an incumbent.
• Failure is a symptom, not the cause. Startups die when they run out of money but that’s not the real reason. The underlying failure is bad decisions, systemic flaws lingering unaddressed, and lack of preparation and proactive planning for when things go wrong.
• Avoid the dangerous and illegal. Some products, service, and practices are regulated at the state and national level. Others are forbidden entirely. Learn every way your product could malfunction or be hacked or misused and hurt people. Think before you try to sell something that’s too good to be true.
• Innovate sparingly. Take only risks that are on-mission, like a great brand, go-to-market plan, design aesthetic, or technological innovation. Don’t compound risks unnecessarily by trying to invent a new corporate structure, management strategy, or sales commission chart.
• No dead wood. Early on everyone drawing salary, holding shares, or even just showing up must be indispensable and at the top of their game. A four-person canoe will not go anywhere if only two are paddling.
• Make everyone replaceable. Later, things flip on their head. Each person at the company, including yourself, can leave tomorrow without sinking the company. This transformation from early stage to growth stage is one of the biggest challenges of running a startup.
  90% of success is not failing. As you become a more mature company (say, 20–500 employees), success and increased valuation are as much about eliminating existential risks one by one as they are about market penetration and profits.
• You can’t go back. Be careful what you ask for. Once you taste the dewy freedom of working for yourself it’s impossible to work for a boss again.
• I can’t teach you this stuff. No amount of education or awareness will teach you how to run a new business. The only way to learn is by doing.

Please remember this list for when you succeed on your own terms, and tell me what I got right and wrong once you do. Or share your struggles and observations along the way, I’d love to hear your story on LinkedIn or wherever you can find me.

For those just starting out I highly recommend David S. Rose’s book, The Startup Checklist, for a step-by-step guide to the things necessary to launch a company, geared to high growth tech startups. David and I designed a popular program, Gust Mission Control, that takes founders through the process including your incorporation, share issuance, and corporate record-keeping

Gust's Mission Control can guide early founders through all sorts of complex startup hurdles and provide access to startup greats like Gil.

Check out Gust MC!