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Properly Compensating Entrepreneurial AddVisors

Free Advice, Worth Half The Price – Properly Compensating Entrepreneurial AddVisors

“Advice is judged by results, not by intentions.” Marcus Tullius Cicero, Roman Lawyer and Statesman, 106 BC – 43 BC With slight modification, Cicero’s astute quote aptly applies to the entrepreneurial world: “Startup advice should be judged by results, not by intentions.” One way to accomplish this goal is to compensate your addVisors with equity and clearly specify the tasks that they must perform in order to earn their remuneration. If their advice proves sage and the company’s value increases, then they will be duly rewarded. If the company fails, their advice is free, as it should be. The key covenants to consider when crafting your addVisory agreements include: Equity Only – ensures the addVisor’s and Company’s interests are aligned Specificity – clearly state the tasks to be performed and the minimum time requirement Restricted Stock – ideal form of equity, with no detrimental impact on your adVenture Cashless Loan – allows the addVisor to have beneficial ownership of stock, with no cash outlay Vesting – reduces your risk of parting with equity and not receiving requisite value Out Clause – motivates both parties to keep each other happy and allows either party to quickly terminate an ill-fated relationship Short Term – reflects the relatively brief duration of most addVisor relationships Each of these issues is discussed in greater depth in the following section.
Karch Kiraly (pronounced “cartch kur-ai”) is an anomaly. He is the only person to win Olympic gold medals in both indoor and beach volleyball. Just...

What Do Bill Gates And Karch Kiraly Have In Common? They Can Go Both Ways

Karch Kiraly (pronounced “cartch kur-ai”) is an anomaly. He is the only person to win Olympic gold medals in both indoor and beach volleyball. Just as Karch is a rarity, so are entrepreneurs who are equally facile at startups and Big Dumb Companies (BDCs). Many of these gifted few are household names, partly because the represent such a rare breed: Bill Gates, Michael Dell, Steve Jobs and Jerry Yang. All of these Founders managed their startups from launch to BDC success. With the exception of Gates, each of these Founders took a victory lap hiatus before returning to their BDC as CEO. Given the relatively small number of people who are proficient contributors at both startups and BDCs, it is worthwhile to explore the different skills required to succeed in each venue. To add a unique perspective to this exploration and hopefully gain new insights, we will examine these different skill sets through the prism of volleyball.
Not all flops are failures. Take Dick Fosbury’s for instance. He began experimenting with alternative, unconventional methods of high jumping as a high school sophomore....

Innoventors – How Entrepreneurs Change The Rules Of The Game

Not all flops are failures. Take Dick Fosbury’s for instance. He began experimenting with alternative, unconventional methods of high jumping as a high school sophomore. Rejecting the straddling approach, which had been the standard for the prior forty years, Dick tweaked the old-fashioned scissor kick, eventually morphing it into a new and unique approach, which was eventually dubbed the “Fosbury Flop.” The track and field community initially scorned Fosbury’s approach, labeling it “unsafe” and “too unorthodox” for the average jumper to master. However, nothing sells an innovative idea like winning. After Fosbury set an Olympic record at the 1968 Mexico City games, jumping 7 feet 4.25 inches, track coaches all over the world took notice.
“With a name like Smucker’s, it has to be good.” Really? I would think that with a name like Smucker’s it has to be a...

Lousy Products Might Break Your Bones – But A Name Will Seldom Hurt You

“With a name like Smucker’s, it has to be good.” Really? I would think that with a name like Smucker’s it has to be a vile disease or possibly a large, poisonous, South American leech. If “Smucker’s” can be slapped on food and annually generate billions of sales, chances are that your company name, no matter how mediocre, will not preclude you from achieving significant success. Thus, join the ranks of Yahoo, Google, Amazon, eBay, Cisco and Microsoft and focus your limited time and resources on perfecting your customer value proposition, not on devising an ideal company name. When selecting your company and product names, consider the following: Uniquely Familiar Buzzless Intuitive URL Brief Avoid Hyphens No Numbers Sans Acronyms Not Abbreviated .com Suffix Phonetically Spellable Readily Pronounceable Extensible Single Connotation Each of these naming considerations is discussed at length in the remainder of this entry.
In the 1960s cop show “The Mod Squad,” Linc played a vital role as the tough, street-savvy member of the hip, made-for-TV crime-fighting team. When...

Corporate Venturing – How Entrepreneurs Can Get the Love Without a Bear Hug

In the 1960s cop show “The Mod Squad,” Linc played a vital role as the tough, street-savvy member of the hip, made-for-TV crime-fighting team. When you shake down a drug-addled informant, Lincs are a great asset. However, when you are negotiating with a Big Dumb Corporate Investor (BDCI), links between the strategic aspect of your partnership and the investment terms can be fatal to your adVenture. Each aspect of your BDCI relationship, financial and operational, should stand separately on its own merits. If there is not adequate strategic value in the relationship, do not accept BDCI funding.
The following is a true story. The names have been withheld to protect the entrepreneurs’ competitive advantage. Once there was a startup that grew to...

Core Values That Sustain Your Startup’s Culture

The following is a true story. The names have been withheld to protect the entrepreneurs’ competitive advantage. Once there was a startup that grew to the point that the newly hired employees began making decisions that troubled some of the long-time employees. Distressed, the tenured employees approached the CEO and expressed their concern that the company’s culture was being damaged by the newer employees. The CEO was initially at a loss. The new employees were well-educated, hard-working and dedicated to the adVenture’s success. However, the CEO agreed that some of their actions were inconsistent with the company’s values, desires and purpose. The CEO was confused, as conveying the Company’s cultural tenets had never been an issue that he had to proactively address. In the past, everyone just knew the company’s Corporate Creed. Understanding how the CEO solved this dilemma may benefit your startup.
Stop complaining about how difficult it is to encourage well-mannered, highly educated, civilized professionals to work together. How would you like to transform twelve convicted...

Dirty Team-Building

Stop complaining about how difficult it is to encourage well-mannered, highly educated, civilized professionals to work together. How would you like to transform twelve convicted felons, with an affinity for violence and no desire to work together, into a cohesive, effective team? That is exactly what Major Reisman is forced to do in E.M. Nathanson’s World War II novel, The Dirty Dozen.  The steps Major Reisman takes to create this unlikely team are enlightening to entrepreneurial leaders who seek to unite far more willing team members.
Sometimes an entrepreneur should reinvent the wheel, as Revolution Motors has done with its Dagne electric vehicle, which utilizes a joystick to steer and brake...

Reinvent The Wheel – A Nonstandard Look at Standards

Sometimes an entrepreneur should reinvent the wheel, as Revolution Motors has done with its Dagne electric vehicle, which utilizes a joystick to steer and brake the vehicle. The key to the success of wheel reinvention is knowing when and where to implement such dramatic shifts from past precedent. The car brake pedal originated with stagecoaches, which required the use of the driver’s leg muscle to stop the stage, due to the horses’ “horsepower” and the coach’s weight. Use of the driver’s foot also freed their hands to hold the reigns. The foot brake made sense on stagecoaches, but it is less than optimal on computer-controlled, modern vehicles*. Like the brake, early cars’ steering mechanisms were drawn from legacy modes of transportation.  Cars were initially steered via a tiller device, similar to that used to control a boat’s rudder. Ironically, such tillers were rudimentary approximations of a modern joystick. Steering wheels were co-opted from sailing ships. One of the first uses of an automobile steering wheel was in Alfred Vacheron’s 1893 race car. After winning several high-profile races, Vacheron’s design became widely adopted. In 1898, C.S. Rolls introduced a commercial vehicle which incorporated wheeled steering and by the end of the following decade, tiller steering was a thing of the past. Use of a steering wheel was logical, especially before the advent of power steering, as a large wheel required fewer revolutions to mechanically translate movement to the car’s front axle, whereas a tiller had a limited range of motion. However, the introduction of power-assisted steering eliminated the steering wheels inherent advantage. Studies by DaimlerChrysler have shown that the reaction time between the hand and the foot varies significantly. The hand is approximately twice as responsive, due to the relatively small and nimble wrist muscles which react more quickly than the larger, less agile leg muscles. This difference in reaction rates is minute, but significant. A half-second of enhanced response decreases rear-end collision deaths by 90%, whereas the application of the brake a full second earlier reduces such deaths by 95%. The major cause of front-end collision deaths is the combination of the driver’s compromised response rate and the subsequent impact of the steering wheel. Even with airbags and collapsible steering columns, the International Road Traffic and Accident Database notes that a significant percentage of the 50,000 drivers killed each year on US highways are crushed by the steering wheel. In fact, emergency responders are instructed to inspect the steering wheel at crash sites as a means of estimating the extent of the driver’s internal injuries. If it is safer to eliminate the steering wheel and allow drivers to control the brakes with their hands, why do all mass-produced cars still utilize technologies which arose from stagecoaches and sailing ships?
Philo Farnsworth created a technology which underlies one of the 20th Century’s most ubiquitous products, yet he died a man of modest means and he...

Inventors vs. Innovators

Philo Farnsworth created a technology which underlies one of the 20th Century’s most ubiquitous products, yet he died a man of modest means and he is relatively unknown today. Philo was an inventor, not an innovator. He was primarily motivated by the educational potential of his invention, not the wealth it might generate. He freely shared is ideas and technology with others in the hopes that such openness would advance the science that he loved. No one, except for Philo, was surprised when the innovators with whom he had shared his invention capitalized upon it and created dozens of multi-billion-dollar, self-sustaining enterprises.
During the spring of 1999, John Lusk and Kyle Harrison turned their backs on the traditional path taken by most Wharton MBAs. Instead of accepting...

Driving The Mouse

During the spring of 1999, John Lusk and Kyle Harrison turned their backs on the traditional path taken by most Wharton MBAs. Instead of accepting high-paying positions with an investment bank, consulting firm or Dumb Dot Com, John and Kyle decided to launch a startup based upon a simple, pedestrian product.
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