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Few first-time startup founders have ever been privy to the somewhat arcane structure known as a board of directors, which complicates the founder’s need to make smart decisions about who sits on the board and how to manage it. Gust Launch handles the paperwork and processes of board management, but to use them correctly, it’s important to understand what a board of directors is and why a startup needs one.
The valuation of a company and its price per share are closely related. When a company starts out, its stock is essentially worth nothing, which is why its price per share is $0.00001.
Startups are more than just a product or service built to scale: they’re legal entities which come with legal processes and regulatory responsibilities that can sometimes seem arcane and difficult to catalogue—especially to first-time founders. Every stage of a company’s growth seems to multiply the compliance and risk management challenges facing the startup.
When it’s time to bring on the first non-founder to a startup’s team, it’s an exciting moment for the company. The startup’s product development or business needs have grown beyond the capabilities of the founders, and the project is validated well enough that it makes sense to invest in additional talent. However, founders should proceed with caution in how they are choosing to bring on that new worker.
Imagine that you have just founded a company—you’re going to act as CEO and work on product and business decisions, and your technical cofounder is going to handle most of the building and design. You’re both fully committed and you’ve both quit your day jobs. You plan to hire some contractors and employees later but they will not be co-founders, so you decide to split your equity around 60% for your co-founder and 40%...