What are some tips if you are contemplating joining or working for a SaaS startup. Although it might be cliche you really should get into business with people that you respect and enjoy spending time with. Call SaaS Lawyer Andrew S. Bosin for a free consultation at 201-446-9643.
So you want to join a SaaS startup. You want to be an entrepreneur who is part of a growing company creating something that hopefully companies will use in their everyday business operations.
SaaS Attorney Andrew S. Bosin counsels individuals on the importance of helping startup founders understand just how important it is to pick and choose the right startup co-founders.
Because you are going to be interacting on a daily basis with your startup co-founders it is really important to get along and hopefully like each other. With that said, there are always going to be founders in any company that not everyone gets along with but they serve a purpose and add value just like the other founders.
Equally important is to find individuals you actually like and want to get into business with. Some might disagree and say that this is not important. But, it actually is and you will spend more time with your startup partners than with your family and friends at least in the early stages and you want to make sure you get along with these people. If you get a sense that there will be fighting in the group you should be very cautious about joining the company.
Because it is difficult to launch and scale a SaaS business it is really important that early on you evaluate the different team members to see the strengths and weaknesses of each individual and what they can bring to the table. The more talent that your startup has usually means less money you’re going to need to spend outside of the company to get those services delivered.
What qualities should you look for in a SaaS startup partner? One of the most important things to learn is whether anyone you are considering getting into a startup with has any track record of success at a startup or has successfully exited from a startup.
This is important for several reasons. For starters, someone with successful startup experiences knows how to build and scale a business. They have made mistakes in their prior startups so hopefully they have learned from those mistakes and can be successful again.
Also, investors love to put money into startups founded by entrepreneurs who have successfully exited from other startups. As you will see if you join a startup you will always be looking for funding.
For example, if your startup does not have a developer as a founder to work on your company software code you need to understand that you’re going to have to spend a tremendous amount of money to bring in an outside developer to do the work or you’re going to have to give up a lot of stock to motivate someone to quit their job and to develop the software as a founder of your company.
Leaving a full-time job and joining a startup is very risky so you can expect that the developer will probably want no less than 10% ownership in the company.
One of the things that you need to assess early on when you meet with your future partners to decide whether or not you’re going to join your startup is whether or not they have the skill set, talent and personality to be successful. If you walk into a room and it’s just a bunch of egos and not a lot of talent and all they talk about is how successful they’re going to be without actually having built anything or successfully exited from other startups you probably should walk away from this company and not join it.
What you should be looking for are individuals who are self-motivated, smart and disciplined and who understand that it is going to take a lot of hard work and sacrifice to build a successful company.
Things that you should be looking for are whether or not they’ve already started to create drawings or wire frames of the application or product they hope to create. You should also be looking for whether or not they have started to develop a business plan, sales deck or financials so you can see how they are projecting earnings, costs and expenses over a two year period.
A huge red flag for any young entrepreneur should be if the discussions with your future partners are focused on how much money they’re going to make, what salaries they are going to put in the deck when they meet with investors and how luxurious the company’s office space is going to be.
Instead, you want to get into business with individuals who are going to run and operate a lean startup and account for every cost and expense and create smart financials so that when the company meets with investors they can see that you are a mature group of individuals who are focused.
With that said, you are going to need quality SaaS legal advice and you should not save money by going with an attorney just because they are the cheapest option.
Another area that is really important to figure out early on is what are the other co-founders strategies for building, launching and selling the product and have they thought about an exit strategy.
These are all questions that smart investors will ask a startup before they give them one dime of their money. Although it is healthy for co-founders to disagree on certain things, it is detrimental to the company if you’re sitting in a room with an investor and you cannot agree with your partners about fundamental things such as marketing and sales strategies.
How about stock and equity? It’s very important before you quit your day job or disrupt your life by joining a startup that you find out how your future partners feel about dividing up the company’s equity.
If you’re bringing a serious skill set to the table let’s say the ability to raise money and without someone like you pounding the pavement seeking capital your startup might not survive. Clearly, your skill set should be rewarded with a significant amount of stock. If any of your future partners try to tell you that you don’t deserve as much stock as you think then you should think twice about going down the road with these individuals.
You should also find out about the other partner’s vision for costs and expenses and simply put, spending money. Do your partners want lavish offices that no one besides them cares about that the company probably does not have the money to spend? Or, would you rather join a company where the founders are frugal with costs and expenses and know how to budget their monies?
Another area that you should bring up with your future partners is what experience do they have in the vertical that you will be trying to sell your product into. If your future partners have no experience working in the vertical or industry that your product will be geared toward this means that your company as a whole will likely have no connections in the very industry that contains the companies you will be selling to.
You’re better off getting involved in a startup in your industry with individuals who have also worked in the same industry as you all know what product needs to be built and you likely will all have the connections to make sales.
This blog post is for informational purposes and not offered as legal advice.
SaaS Attorney Andrew S Bosin is also a SaaS entrepreneur who represents startups, founders and entrepreneurs all across the US.
Please reach out to Andrew for a free initial consultation at 201-446-9643.
Email: andrewbosin@gmail.com