This section covers the internal procedures and systems used to keep a startup running smoothly on a day-to-day basis and in its relations with vendors and among team members. It also covers incidental matters such as legal and accounting issues.
This sections covers the tools and methods your team can use to mobilize, communicate, innovate and ultimately operate to achieve your objectives. Management theories differ quite a bit here, so you'll find resources that encourage strong collaboration among team members, and resources that urge founders to provide employees with autonomy and independence.
The power of focusing should be at the top of that list. When you focus, you can rid yourslef of extraneous expenses (Jobs laid off over 3,000 people in his turnaround of Apple), you can get your best people focused on the important projects, and you can bring clarity to your marketing and what you want the consumer/customer to think of you for. Many entrepreneurs and CEOs misjudge how many things they and their team can do well. It is always less than you think. Focus is critical when you are three people, when you are twenty-five people, five hundred people, and ten thousand people. You can always get farther faster by saying no to too many projects and too many priorities. Pick your shots carefully and hit them.
We use very little email at AngelList. Most of our communication happens on Yammer, HipChat, Tracker and face-to-face. This probably gets us a 90% reduction in email. If you’re running your company via email, you’re missing out on newer, more effective communications technologies.
Every organization deals with accounting and finance matters. This section breaks down the basic concepts and provides resources that reflect on these areas from a startup perspective.
Earnings Before Interest Taxes Depreciation and Amortization. The way I like to think about EBITDA is the pre-tax cash earning power of the business. It is not much different than the notion of Operating Income which is revenue minus cost of goods sold and operating expenses. But it takes out the two big non-cash items in an income statement, depreciation and amortization.
When you think about the various ways you can make money, two ways predominate. You can provide services to others and get paid for those services. That is ordinary income. And you can invest in something; shares of stock, a building, a domain, and then sell it later for more. That is a capital gain. The distinction is important, at least in the US, because these two kinds of income are taxed differently.
From how to choose and work with a lawyer, to how to mitigate your liability, the Legal & Liability section has resources to help you navigate the legal matters your company will face. Of course, nothing here should be considered legal advice, and it's always a good idea to consult with a lawyer.
Some docs are too long and boilerplate to read, so this is how I read financing docs: 1- Read and understand everything in the term sheet. 2- Get a good lawyer because you probably don’t have one. 3- You probably can’t tell the difference between good legal advice and bad legal advice.
Forming a company is the best way to "putting a buffer between you and the business." But you can't just pretend to be a business, you have to be a business. "Being a business" means separating your personal and business records, separating your personal and business bank accounts, treating the business as a real entity, having board meetings, taking board minutes, doing major activities via board resolutions, following "due process." If you don't behave as a real business, you could find yourself in a situation where someone, most commonly someone who is suing your business, can come after you (and your business partners) personally. And then you are going to say "but what about the liability limitation the business provides?" It may not be there for you.
When you build a company and have customers using your products, it is important to have systems and processes in place to mitigate downtime and other vulnerabilities. It will also likely be apart of your strategy to make your operations as lean and efficient as possible through outsourcing and similar cost-cutting measures.
The advent of modern electronic communications has allowed companies to efficiently source and manage labor all around the globe. This is one of the megatrends, if not the megatrend, of the current economic period we are living in. But just because you can use labor halfway around the world doesn’t mean you should. This post is about the pros and cons of offshoring from my perspective.
Outsourcing is when a company hires another company to perform certain functions. Wikipedia defines it as "contracting to third parties." The term has become synonomous with the transfer of labor/work overseas, but outsourcing is not geographically defined. You can outsource work to the company across the hall. The two primary reasons one company will outsource work to another company are cost and skill set. The third party outsourcing company can provide the required work at either lower cost or higher quality or possibly both. Sometimes time is also a factor. It is often the case than an outsourcing company can get the job done faster.
This section covers best-practices on how to initiate and maintain relationships with your vendors. It also covers certain pitfalls to be aware of when partnering with third-parties service providers.
The really important difference between Skype and Joost was that Joost’s product had a critical input that depended on a stubborn, backward-thinking industry – video content owners. Whereas Skype could brazenly threaten the industry it sought to disrupt, Joost had to get their blessing. Eventually the content companies licensed some content to Joost, but not nearly enough to make it competitive with cable TV or other new platforms like Hulu and iTunes.
Pitches usually fail because they answer the wrong questions. The right questions depend on the stage of your business—for example, some businesses are just getting started with an idea, while others are printing money. Focus your pitch on the key questions for your stage and if you keep getting non-key questions, something is wrong with your pitch. This post includes a hierarchy that you can use to classify your business and the key questions for each stage in the hierarchy.