Co-CEO’s: The Bubonic Plague of the Board Room

..or Why I Believe co-CEO’s Are A Bad Idea.

Not so long ago I was invited to take a CEO position at an 18 month old start-up. There was a small team of seven, only three full time. The business guy in the team was one of the part timers and had also invested some money, but chosen to retain his existing position at a large corporate with a full time job and salary.

The two initial meetings, with one of the Founders who was the real day to day engine behind the business, went well. She was eager to bring in a CEO, part time or full time, to help put in a solid strategy – including raising money – and to hire new team members and ensure milestones were being hit, financials kept up to date, people managed etc; all the usual jobs of any CEO.

But when it came to negotiating terms the other part-time co-Founder I mentioned sprung on me a two character prefix to my title which meant I walked away from the deal. He wanted to add “co” to my CEO title. I was pretty surprised as he’d said previously he was happy bringing in an external person to be CEO and run the business.

There are a raft of reasons why I believe having co-CEO’s in your start-up is a thoroughly dreadful idea. Even if you’re both co-Founders of the business.  Reason number one is because it doesn’t work.

At least with a pantomime horse the front is in charge (unless the back disagrees of course). Enough said.

At least with a pantomime horse the front is in charge (unless the back disagrees of course). Enough said.

Quite simply co-CEO arrangements in my experience don’t work, or don’t work as well a different structure. This conclusion is both from being in situations myself where CEO responsibilities were split between two people (even if the actual official title wasn’t) and also from seeing some others trying to run their company’s this way. Having Co-CEO’s creates its own set of problems, outside of the challenges inherent in being a CEO.

Here are some of the problems (and please feel free to add your own in the comments!):

  • Someone has to have the final decision, because people do not always agree.
  • Legally, someone must be responsible to report to the board of directors
  • Someone must “own” the over-arching business strategy and the milestones on it.
  • Logistically, if you have co-CEOs, in reality for both people to be equally well informed they must both attend every meeting which might impact any significant business decision a CEO might make OR one co-CEO must relay and discuss all this with the other co-CEO, to convince them it’s a good idea and bring them up to speed
  • If you have co-CEOs the team do not know who their boss really is
  • If you have co-CEOs there is always the risk of the team or the board or investors playing the CEO’s off against each other
  • If you can’t sort out with your team and co-founder who is going to be CEO and what that means, how on earth are you going to sort out other problems
  • If one personal isn’t responsible, it’s not really fair to measure them entirely for not performing the role
  • There’s a danger you can both re-enforce your own errors of judgement, making those miscalculations or oversights further entrenched
  • Measuring performance becomes harder. If CEO responsibilities are split, or the CEO isn’t driving forward the things they should be, someone needs to call it out. Another co-founder, a Board Director, shareholder, the team. That’s harder with co-CEO’s and there is one less person who could be devil’s advocate.
  • If makes it harder for both people to perform well. If two people are sharing the co-CEO spot (even as a shadow CEO rather than named title) then it’s all too easy for things to end up dropped on the floor, between the two people – who most like are both very well meaning souls who want success for the company as much as anyone.
  • And my personal favourite, if you have co-CEOs it simply looks stupid. Investors and the outside world will probably think “why not just get one competent person to be CEO, rather than two who individually are not?”

Indecision, confusion, mixed messages and an increase in communication workload are the last things you want in a start-up or any business, and I feel co-CEOship encourages just that.

In summary, avoid being a co-CEO or working in a start-up which has them. And don’t take my word for it just look how well it worked for Blackberry.

The march of Windows Metro inspired design

A while back I wrote a blog post saying I thought the forthcoming release of Windows Phone and it’s metro interface (plus subsequent Windows 8 release) would probably trigger a change in fashion with regards digital design. This was partially demonstrated by the MySpace new design also.

Seems this prediction may have been salient, as I’ve started seeing a variety of designs popup both on software and websites which clearly owe a nod and sometimes more, to the Metro interface.

What designs have you seen which look like bastard children of the Metro UI ?



Note the menu design on the Port du Soleil website navigation and the new AVG anti-virus navigation.

What happens when you complain to TFL about London Bus drivers? short, the answer is a belated but appreciated personal reply, but tangibly, precious little.

Many London bus drivers, employed by private companies operating in conjunction with TFL, are at best aloof and at worst down right rude.

Many London bus drivers, employed by private companies operating in conjunction with TFL, are at best aloof and at worst down right rude.

Credit to this article on public transport customer service, for the photo>

My main complaints were:

  • That I had a specific bad experience with a bus driver
  • That this is not unique
  • That many people I know (including other bus drivers I have spoken to) AGREE that rude, uncommunicative, unfriendly bus drivers are endemic in the industry

My complaint, and subsequent reply, are published below in full, for those who care.

My email sent on the 3rd December 2012:

Sent: 03.12.12 12:10:19
Subject: Formal Complaint

Dear Sir / Madam

Bus REF: DLA20S,
Registration: W404VGJ,
Route: 243 from Waterloo, @ 10:47 am on Monday 3rd December 2012

Can someone explain to me why TFL find it acceptable that on repeated occasions your bus drivers are permitted, seemingly encouraged, to treat passengers with such contempt?

The bus reference and time above refers to just one occasion where, after I ran to the bus stop and bus door, the driver closes the doors as I arrive, sees me, looks at me, and despite it being obvious I wish to board chooses instead to drive off.

There was no traffic which caused his need to depart so speedily as Waterloo bus station is not on the highway.

The hall mark of a successful business in this day and age is good customer service. While a minority of bus drivers still seem to embody this (and what I would hope remains a British tradition of politeness and good will) a vast majority do not.

I have too often experienced an arrogance from drivers, or at best ambivalence. Aside from driving off, many:

- Don’t respond when said “good morning” to or “good afternoon”
– Some accents are so thick that if they do reply they either mutter or sometimes one can’t understand their response
– Some don’t speak or respond when asked questions, at all!

I’m paying for a service and they are being paid by the custom I provide. Moreover, they are representing my (and presumably their) country and London, to everyone single passenger that boards a London bus.

I’m fed up with feeling like an unwelcome guest aboard my own bus service.

In summary then I would like a proper response (and action taken) around two points:

1) Regarding my specific experience:-

A) why the driver felt it appropriate to drive off

B) what has been done to ensure he pays more care and attention in future

2) In general why so many TFL bus drivers:-

A) seem to feel empowered not to put the passenger first

B) are rude, unresponsive and uncommunicative (if you don’t want to speak to the general public all day, don’t be a bus driver)

C) ..and what is going to change in TFL’s training and employment policies to ensure the points A/B change to substantially improve the customer service and friendliness of London bus drivers, to have an impact on tens of thousands of peoples lives every day who use London buses.

Perhaps TFL’s senior leadership can view it as a revolutionary new approach to their people, to go along with their revolutionary (and very good) new London busses.

Yours sincerely,

Andrew Scott

NB: To ensure a considered response from you, this letter will be published on line, on my personal blog, to my 3,600 twitter followers, publicly on Facebook, and sent to the Evening Standard newspaper.

The reply I received, 23 days later:

Our Ref:         1011585328/ABB

Date:              27.12.2012

 Dear Mr Scott

 Thank you for your message. I was very sorry to hear that a bus driver on route 243 (registration W404VGJ) did not allow you to board his bus when departing from Waterloo on the morning of 3 December 2012.

 Arriva London, who operate route 243 on behalf of Transport for London (TfL) have asked me to pass on their apologies to you. The driver could have allowed you to board and the incident is being followed up with the aim of minimising the possibility of similar errors on his part in the future.

 I am also sorry to hear of your many experiences when bus drivers in London have not exhibited the expected level of customer service. Transport for London (TfL) certainly does not encourage the sort the sort of behaviour you described and we engage with the private bus operating companies, who employ the bus drivers and manage the day-to-day running of the routes, to ensure that standards are as high as possible.

 All bus drivers in London are formally assessed by a Driving Standards Agency (DSA) Approved Assessor and must pass an additional test for Passenger Carrying Vehicle’s (PCV) as assessed by the DSA (which includes a focus on customer service). In addition, we work very closely with all our bus operators to improve the quality of our services, highlighting the need for attention to proper standards of service and driver conduct. We also strongly emphasise staff training and liaise with all bus companies to ensure we continue to achieve improvements across London. Whenever we receive complaints about poor standards, we follow them up with the bus company concerned. Assuming the complaint is upheld and it is not of a nature that could lead to dismal or suspension, the driver will undertake a variety of follow-up actions aimed at improving their standard of service.

 We would hope that the majority of bus drivers are not rude, unresponsive or uncommunicative and that they do try to the put their passengers first. The evidence we collect from our various monitoring exercises suggest that most of London’s 21,500 bus drivers carry out their jobs in the manner expected of them and customers find many to be helpful and professional in general. It is regrettable that isolated drivers cause this perception to be called into disrepute. Therefore we greatly appreciate you highlighting this incident to us, as it allows the bus operator to take action aimed at continuing to improve the level of service provided to our customers.

Once again, please accept our apologies for the delay and upset caused by the driver’s behaviour on 3 December. Thank you for bringing this matter to our attention. Please don’t hesitate to contact me again should you require any further information or assistance.

Yours sincerely

 David Gwynn

Transport for London – Customer Experience

Context is the next big thing. Got an app for that?

I had breakfast a few weeks back with Robert Scoble. Not for the first time, the conversation turned to the subject of context.

It’s an often abused word and a subject close to both our hearts.

In a past life I founded Rummble (created in 2006 to “fix” recommendations for places – we were rather early to market!) and it’s a topic which Robert has written about many times before and is now I understand writing a book about.

I’ve certainly heard the word context more and more the last two or three years. It’s banded around at conferences as if until now no-one has been thinking about it. When announcing Rummble five years ago at Mike Butcher’s first ever London tech event, I was told by Jason Calacanis that the vision was “sh*t and irrelevant”. In one sense he was right. Rummble was far too early to market and ultimately failed as a consumer service.

Layers-of-Context-Awareness-Full-12-11-11Slide from @ClarkDodworths talk about context – click here to read more

Five years on, still few if any services are yet truly contextual (as Robert discusses in his blog) but today I’m excited that contextual search and relevance is more relevant, even fashionable. It’s edging its way out of computer science departments up the start-up agenda.


Context is not to be confused with personalisation. Personalisation filters a set of information to prioritise the things most appropriate to you and your taste.

Contextualisation changes information of surfaced to you depending on the circumstances in which an event occurs, it is dependent on the setting, e.g. environmental factors such as location, time, weather, or a human behaviour such as walking, driving, flying, sleeping, eating.

There is plenty of personalisation out there and some of it really quite good. Your TIVO-clone recommends TV shows. Google personalises your search results. Facebook filters your feed of news from your friends. But most incumbent services don’t join the data dots in the way that they should to produce contextual understanding of what you’re actually doing as a human being.

So I agree with Robert, that there is huge opportunity in this space. He describes the problem of there being too much noise. And there is so much noise because services throw data us when we don’t have use for the data. When information isn’t relevant right now, it’s as bad as junk mail in your post box, only continuous.

The next big thing

One of the next David turned Goliath tech start-ups of this decade will certainly be some clever service or app which deals with that “noise” by understanding your own context.

It may be a highly contextual son-of-Siri for your Google Goggles, or may be a wristband a la Nike Fuel which instead of telling me whether I’m exercising enough, understands my entire day: where I should be, what I should be doing, by which mode of transport and in which order.

And there-in lies the problem with applying context and relevance to your service.  Doing this sort of clever technology requires far more engineering hours than building an Instagram app, which has a single context of whenever the user takes a photo.

I wonder then what that does to the odds of a start-up in this space succeeding?

The holy grail

It’s already almost impossible to get funding in the European ecosystem for consumer-facing services which don’t have an immediate revenue stream so how will start-ups inventing the next big “context-aware” service survive?

Even in Silicon Valley the appetite for investing in consumer services is on a down curve, because it’s so hard to be heard amongst the thousands of apps and websites being launched. And not just in America but in all of the recently spawned start-up ecosystems around the world. Most of the clusters on this list simply didn’t exist five years ago, not in any significant way anyway.

If future start-ups will need more engineering complexity to have a minimum viable product, what does this mean for boot-strapping start-ups and their potential investors?

Hopefully it means that investors will be forced to be more adventurous in their choice of investments, buying-in more heavily to the big visions of entrepreneurs and understanding that this technology will not only take time to build and perfect but that the market is going to take time to mature.

Well, that’s unlikely to happen.

Currently things are going the other way. Enterprise services are once again becoming more fashionable targets of VC money, and in Europe they never went out of fashion!

Dinosaurs to the rescue

Perhaps it means some of the disadvantage that has befallen the corporates of the world, due to the ease and ultra-low cost of create compelling services on the web, now will be reversed.

Cloud services, third party APIs, better programming languages and universally compatible browsers (well nearly) have all made setting up a starting up a start-up uber easy, even if winning in the marketplace still isn’t.

But at least start-ups now have a chance to compete. I can’t imagine Huddle, who is now a serious challenger to Microsoft Sharepoint, would have survived long had they needed to write desktop software, advertise at exhibitions, send junk mail and advertise in trade journals and then ship CDROM’s out the door.

This evolution has increased innovation and democratised the production of computer software (i.e. apps and websites) leaving big companies struggling to respond quickly enough. Corporate hierarchies with all their controls, checks and balances are not good at lean or gutsy, dynamic risk taking on new products (though that is changing)

But as services become more complex and the software behind them has to become more sophisticated (and contextual certainly requires sophistication) does this mean some of the advantages of the grass roots tech-entrepreneur are being eroded ?

Back to school

Students who have a lower cost of living and can invest two years of their study in creating the very technology they will later commercialise may have an unfair advantage in the world of Web 3.0 (let’s accept for a minute that context is what Web 3.0 will be renowned for). There is good precedence for this; Google (built as Backrub at Stanford) and Siri (built at SRI the non-profit lab) are just two of many.

Even if the window of opportunity for great financial success from simple apps will only be open a short while longer, I am sure there will be other opportunities created by the launch of new killer ‘personalised’ services. The provision of API’s as part of many modern services enable developers to build upon one service to create another and that seems something that is unlikely to go away.

In fact, as the Internet in general continues on a path toward everything being more “open” I wonder whether the days of walled gardens for almost any type of service, are numbered.

The Internet of Things, a very hot sector, is by its very nature the poster-boy for openness and interconnectivity. The data itself is the new gold rush (and not just social data). Over the next five years we’ll be stumbling over more and more of it, as everything from your thermostat to your toaster starts to engage in digital conversation with you and everything else around you.

Where next?

In summary then, I think the execution of innovation with mobile apps, which is the future of everything, will indeed become harder. It will take more engineering time to get to an MVP.

But these things do go in cycles. Setting up a newspaper 350 years ago required a rudimentary press, a lot of patience and of course some creativity of what you wanted to say. By the mid-1990’s the cost of launching a newspaper was millions of dollars, a large workforce and a lot of sector expertise. Then along came the Internet which made publishing a newspaper as cheap as the cost of a telephone call with a modem and learning a few funny tags called <h1> <bold> and <center>.

Precision manufacturing has for years been the privilege of large companies. Yet 3D printers are set to hit the $500 mark by the end of 2013. That brings complex physical manufacturing back to the home, where it all started before the industrial revolution nearly 300 years ago.

It seems as one thing becomes harder, opportunity elsewhere becomes easier.

Personally, I’m still dreaming of creating a mobile recommendation app which gives an instant intelligent answer to the simple question “Where should I go next?”

To get to a version 1.0, which answers that question exceptionally well (in other words, an MVP that does to existing recommendations services what Google did to Alta-Vista search results)  I would guess is probably at least two man-years of development. Understanding context takes time. But somebody somewhere is working on it, along with other fantastic solutions for the barrage of big data we are surrounded by today and will be drowning in tomorrow.

Expect the next Google or Siris to appear very soon, on a mobile device near you.

We’re All Drug Addicts. And The Drugs War Is Madness.

Note: See the base of this blog post for links to other external sites with interesting content on this topic.

I could easily spend the entire day writing a post about this headline statement.

In fact, I could probably consume the next year of my life researching and justifying a case for a radical rethink of the way we deal with drugs – both legal and illegal – in our society. But that will have to wait for another life time.

What I do know is that current policy is not working. The war on drugs is being lost every day. For me it’s a matter of simple logic. You can blame capitalism, market forces and the human condition.

If enough people want something badly enough, there is always going to be a healthy market which someone somewhere is going to try and serve in the name of making money.

Put simply, I’d rather that money was collected by the Exchequer (the tax man, in simple parlance) and put to good use, if you’re content to call government spending a good use, than lining the pockets of the few; a group of rich criminals who control and expand their international organised crime empires on the back of mass consumption of illegal substances. Even if you’re not happy with the term good use for government spending, the government does considerably better things with the money than organised crime – well, at least most of the time. Illegal wars excepted.

You’re a drug taker. Oh yes you are. Every day.

Medicines, tea, coffee.. In fact, that most people don’t view coffee – or more accurately caffeine – as a drug, is an anathema to me. Such a powerful psychoactive drug, which is highly addictive and readily available to anyone. Pretty toxic to dogs by the way, so best not perk up your pet Labrador with a quick Nespresso.

The power of this substance was ably demonstrated to me today, after an abstention of a couple of days from this Ethiopian elixir. I woke up at 4AM with a cracking headache. Seven hours and some ibuprofen later I’m no better (and I’m not a big taker of painkillers).

One cafe latte and within 15 minutes, I’m right as rain.

Caffeine at it’s best.

We’re all drug addicts. Alongside the 90% of Americans who consume crystalline xanthine alkaloid doses every day.

The American alcohol prohibition of the 1930’s didn’t work (and in the process, set the stage for three decades of organised crime, as the profits from the illegal alcohol production set the American Mafia up for the next fifty years). It’s ridiculous then to think that prohibition of Marijuana or in fact other substances is going to be successful.

Drugs should be make legal, probably with a couple of exception. Why? Because they can be controlled, quality controlled, access controlled and because Marlboro & co will kick the arse of every drug cartel in the world within months.

A not insignificant 7.6 billion pounds of the UK government tax revenues comes from Tobacco sales. Imagine what you could do with those from  additional drug sales?

Education. Proper care for those addicted to any drug – prescribed medications included.

The sometimes dangerous differentiation between legally rubber-stamped drugs (that many of us consume every day – some good, some bad) and those which are illegal for historical or habitual reasons must surely stop in our lifetime.

Two of the biggest practical problems with the illegal street trade is the up-selling onto harder drugs by street dealers and that those substances which are already dangerous are made more dangerous by impurities. For a drug user, it is a lottery.

How often do you go the off license to buy a bottle of wine or beer and be up-sold by a shop keeper to a crate of 50% proof Polish vodka? ..almost never. And at least even if you did, you could be pretty sure the Vodka wouldn’t blind you.

Every day, people risk their general health by taking illegal substances, bought from dubious sources, and in the process support child labour, horrendous criminal activities both at home and particularly abroad, creating in the process potential future or immediate burdens on our health services, without even having contributed to their funding via the very recreation which subsequently causes the damage.

In summary, de-criminalisation is no answer. This actually makes the situation even worse. It encourages consumption and increases demand which further funds organised crime – as even if not a criminal action to consume, production will remain so.

Politicians need to grasp this nettle and lead. Part of a politicians job is to educate the masses and in the process lead the country to the right solution. That will, for sure, take time. And sadly, perhaps a very long time as some parts of the electorate have not always been renowned for their forward thinking. That might suggest it translates then to potential political suicide for any one who dares suggest the status- quo with drugs is not the way forward. May be. May be not.

Juan Manuel Santos should know what he’s talking about, he’s the President of Columbia. He says may be an interesting decade for management of the drug problem.

UPDATE: Here are the full results of the Q1 2013 UK Survey on the amendment of drug policy for the UK Drug Foundation.

UPDATE: Report in May 2013 suggest the war on drugs is leading to a Hepatitis C pandemic

UPDATE: The Global Commission on Drug Policy, supported by Kofi Anan and three ex US Presidents amongst others, alongside Latin American leaders both past and present, damning the existing global policy on drugs.

UPDATE: BBC November 2013 More illegal drugs kill people due to fake content or bad supply

UPDATE: Mark Curry writes of The Truth About Our Favourite Addictive Drug  (i.e. caffeine)

UPDATE: More evidence that media reporting of drugs behaviour (and deaths) is distorted and misguided.

UPDATE: Are some Doctors to blame for the Heroin crisis?

Creating A Tech Start-up: Forty Point Checklist

This is my favourite quote by Winston Churchill:

“Success is the ability to go from one failure to another with no loss of enthusiasm.”

Unless you’re the absolute except to the rule (like the one-in-one-hundred-thousand such as Zuck) as an entrepreneur you can expect to fail repeatedly. And especially with technical innovation you have to fail day to day, to perfect your product or service.

The last thing you need, then, while surrounding yourself with the inevitable problems you will encounter while attempting something new and different, is for a known issue to be the one that becomes a major problem in your business.

With this in mind, while comment and opinion certainly has its place in this column, the key to any entrepreneurial venture is execution. So today I would like to offer a blueprint process to getting your start-up off the ground. This guide is inspired by a blog post by Basil Peters – indeed some of it is lifted verbatim, and I’m indebted to Basil for his original list.

Procrastination is just a worthy an adversary as poor planning, so let’s get started:

1. Build your start-up team.

2. If it’s still just you, repeat step one.

  • Statistically, start-ups with co-founders rather than single founders are over twice as likely to receive investment;
  • Some will work evening and weekends until you can raise capital, but do ensure they are definitely ready to leave their jobs if you do;

3. Agree that you want to start a company together. The next several dozen steps will test this.

4. Agree on an idea.

  • The idea is much less important than the team as the idea will likely change and evolve;

5. Agree on the time and money each of the founders will contribute.

6. Agree on areas of responsibility.

  • Choose a co-founder who complements your skills, not one which duplicates them;
  • Who will be on the board?

7. Agree on intellectual property ownership. This is essential.

  • The IP must reside in the company;
  • Create NDAs and employment contracts which you should ALL sign (even founders);
  • Create these even if you’re not paying yourselves anything;

8. Agree on how you will handle personal guarantees, credit cards and other personal liabilities.

  • Steer clear of personal credit card debt if you can;
  • If you rack up directors’ loans against your start-up as long term liabilities, bear in mind you may be pressured by future investors to convert these to equity;

9. Agree on founder compensation and equity allocation.

  • Allocate options to yourself and co-founder vesting (reverse vesting) over four years;
  • Include favourable terms for you the co-founders (eg six months’ redundancy pay, three months’ notice) and a three or six month probation period for staff – they may not work out;

10. Agree on the exit strategy now.

  • This does not necessarily mean running your company toward a quick sale – you should focus on creating a valuable, scalable business – and your aspirations may change, but being aligned monetarily and on life goals provides a foundation to build toward the same end game. Basil says “I know that’s not intuitive, but [not doing this] is one of the most common flaws”;

11. Agree on the capital structure at year three.

  • Create your own cap table now: a spreadsheet of how the capital structure/share register might look after two or three investment rounds. It also allows you to see what the investment will do to everyone’s equity;
  • Agree on the amount of equity for future employees and directors (create a share option pool – usually around 10 per cent but in the US it is often higher. I would recommend a minimum of 15 per cent);
  • Allocate your employees or founding team options over four years;
  • You can get away with a Options letter – include strike price, number of shares (not percentage), vesting schedule (when they have rights to each chunk of the shares);
  • If you are doing equity, not a convertible debt round, consider creating a class of non-voting shares and giving those to your angel round (if they will accept). This means that your voting rights will be different to the total ownership. Useful if, for example, your Series A is not at the stratospheric valuation you hoped and you want to avoid getting close to owning less than 51 per cent between you and your co-founder;

12. Think hard about whether the first dozen steps are fair and equitable. Try to imagine whether they will still seem fair and equitable in a year, or three years.

  • If everyone in the founding team is not absolutely in agreement, stop and try to work it out;
  • Write a letter of agreement outlining all these points. It will not be legally binding, but gets down in writing what has been agreed and makes people really think about what they are agreeing to;

13. Make sure your documents define the legal & corporate jurisdiction (choose which State if you are in the US).

14. Confirm the previous eight steps by signing:

  • Employment agreements;
  • IP assignment agreements;
  • Share options letters;
  • Non-disclosure agreements;

15. Agree on the company articles (the constitution of the business).

  • Change the standard articles so a 51 per cent vote is required to sell the company;
  • Provide for electronic communications for statutory shareholder requirements (one company I started had over 20 angel investors – chasing signed paperwork by post is a nightmare);

16. Check alignment among the founders for points 1-16.

  • If alignment is not perfect, it may now be time for the first offsite strategic planning retreat with an excellent facilitator (perhaps your mentor – see below);

17. Find a least one very experienced advisor, mentor and/or coach who can review and confirm the previous five steps and can help to be a sounding board.

  • If you are going to offer them equity, what remuneration, if any, they will have;
  • Choose someone who you both respect enough – and is strong enough – to challenge you both;
  • Sector expertise is useful as you don’t want to spend all your time explaining everything, but someone under the influence of the cool-aid can sometimes reinforce a bad decision, so get this balance right;

18. Incorporate the company.

19. Have the first board meeting to “hire” the officers and give them the authority to conduct business.

  • Have the first shareholders meeting and the first Annual General Meeting to elect the board;
  • If you do not do these things now by the book, expect a nightmare when it comes to due diligence on future funding. Admin is the last thing you want to do when you are starting a business – you want to build product! But this is not only good discipline, it is your legal responsibility as a company director;

20. Celebrate! You have have your own company!

21. Create a legal share register and issue share certificates.

  • Pay for your shares (in the UK you need to place money in the company bank for the nominal value of the shares. US Delaware companies don’t have nominal share values so check your jurisdiction on this process);
  • You must record the history of issuing shares in the company share register;

22. Have a board meeting to approve the capital structure and share register – another essential legal procedure.

23. Create an electronic minute book and an electronic Due Diligence folder.

  • Place copies of all the paperwork, agreements, NDAs etc in the DD folder (you’ll thank yourself later);
  • Have a folder for board meeting minutes AND record minutes for board meetings. These can initially summarise the main points, you don’t need to quote every word. This attention to process will give comfort to investors at DD time and help demonstrate you have some grip of how to run a business;

24. Create a 12 month budget and five year financial projections.

  • Many people just ask for three, but some ask for five. The worst thing in the world is having to add two years to projections you have already spent way too long on. Just do five from the start;
  • All the projections are complete rubbish. They will all be wrong. Give it your best shot anyway. It will help you understand short term capital requirements – and hopefully give your investors the big carrot of oodles of cash at the end of the rainbow;
  • Assume you will spend more than you will. Easy things to forget (for a UK start-up) include: directors indemnity insurance, employee AND employers’ National Insurance, VAT on sales and the accountant’s and legal bills;

25. Check that your projected capital structure still makes sense now that you have thought more about the numbers – update if necessary – at this stage you still can.

26. Check again that you still have team alignment on all the previous 25 points.

27. If you have not already, write a business plan.

  • A PowerPoint (or Keynote!) deck is fine. The list of slide headings on Sequoia’s web site is as good as any;
  • This is as much to clarify to you and your team plans and direction, as it is for investors;
  • No more than three points on each slide, it is a sales tool, not an exhaustive biography of your product or market analysis;

28. Appoint an accountant.

  • Early stage bootstrapping is all about saving money, but a rubbish accountant now will cost you money later;
  • Appoint an accountancy firm which is large enough to know what they are doing but small enough to care. If you’re in Shoreditch, London, is a great example of experience combined with boutique size;

29. Open a bank account.

  • Agree on signing authorities for financial management;
  • If co-founders, allow single signatory but only up to a sensible cap (eg £5,000 or $10,000) with dual signatures required above that;
  • Make sure you have good online banking which ideally interfaces with your accountant’s software;

30. Check again the team is in alignment with last 29 items. Sometimes small disagreements can be a sign of a deeper disagreement.

  • Schedule an offsite strategic planning retreat to perfect alignment if necessary. (Choose an excellent, experienced facilitator to maximise chances of success – perhaps you mentor if he or she is capable);

31. Celebrate achieving the last 30 items!

  • It may not seem important, but it is for psychological reasons and bonding;

32. Get a simple subscription agreement for the founders’ investment.

  • Pay for your start-up equity by transferring the par value cash into the bank;

33. Learn about all of the taxes your company will have to pay.

  • Do not rely on your accountant to make the decisions; they cannot understand your business well enough to do this entirely themselves. You must understand taxes well enough to ensure you are paying all of the taxes the company owes and that you are not creating personal liability for your directors;
  • As directors, pay for anything you can get away with as expenses – all your travel (provided it doesn’t say on the ticket it’s to Disneyland). It is the most efficient way to get money out of the business. Don’t be fraudulent, just be tax efficient;
  • Use an electronic expenses tool (Xpenser, or Expensify) to collate your own and team accounts – all expenses are tax deductible;

34. Make sure none of your employees think they can be contractors outside of working on your start-up.

35. Understand the R&D tax credits program.

  • This allows you to claim back a large percentage of PAYE tax (this is an excellent R&D tax rebate available in the UK, others are available in Canada and other countries);

36. Get insurance (the insurance you really need, not what the broker wants to sell you).

37. Get an alarm system or check security before you move the computers into your office (unless you all have laptops). Two of the offices I had (including a shared one) were burgled.

38. Start planning you investment round and reaching out to investors. Make sure you adhere to EIS for angel investors – Google it – or in the US any legalities for private securities investing.

39. Agree on a fair valuation.

  • Get your external advisor to check and correct the capital structure and share register if necessary. (It’s still easy to fix this but that window is closing fast);
  • Don’t state your valuation in your first conversation with angel investors;
  • Consider convertible debt (offering a discount on the valuation at the next round);

40. Celebrate completing all of the absolutely necessary steps in building a successful start-up!

And then, as soon as the hangover clears, start working on the product, marketing, sales, recruiting, strategic relationships and exit strategy. Good luck…!

Note: This post was previously written by me for publication as an article in The Kernel magazine, an excellent deep-dive blog on the start-up scene. Think The Economist for technology.