The Tech Entrepreneur's Survival Guide: How to Bootstrap Your Startup, Lead Through Tough Times, and Cash In for Success: How to Bootstrap Your Startup, Lead Through Tough Times, and Cash In for Success

by Bernd Schoner

Overview

Most technology startups never make it to the fundingstage, and only a small percentage of those that are venture-backed generate a positive return for their investors. An even smaller number of startupfounders enjoy a truly prosperous exit.

Bernd Schoner cofounded his tech startup during the dot-com bust, navigated it through market crises and internal turmoil, brought it through the global financial meltdown intact, and eventually sold it to a multibillion-dollar, multinational public technology company.

In The Tech Entrepreneur's Survival Guide, Berndshares what he learned and what he wished he knew at the time. He explains the major phases in a technologycompany's life cycle, helping entrepreneurs avoid common pitfalls and survive crises when they strike. He guides readers from the initial bootstrapping process through venture-capital financing and provides valuable advice on how to sell a technology company profitably--even in a challenging economic environment. Every chapter presents solutions to realworld issues that could otherwise have fatal consequences for a tech venture.

Aspiring tech entrepreneurs will learn to:

• Set up shop: build the team, assemble necessary startup assets (including technology and intellectual property), get legal and financial affairs in order
• Secure capital: ask for money, nail the term sheet, ask for more money
• Get out: know when to sell, who to sell to, and how to make it a happy exit for all stakeholders, includingthe employees

Written with deep insight, refreshing candor, and a dash of humor, this comprehensive guide to the often harsh realities of startup life is indispensable for entrepreneurs at any stage.

PRAISE FOR THE TECH ENTREPRENEUR'S SURVIVAL GUIDE:

"A genuine narrative from the field, with battle scars and self-reflection. Reading this book will help you avoid many pitfalls." -- Nicholas Negroponte, professor at the Massachusetts Institute of Technology Media Lab

"There's a lot of great insights and practical advice for the entrepreneur in this book, stuff you normally won't read or hear unless you buy some hard-bitten company founder a few drinks. If you are launching a technology startup, reading this book is the thing you should do first." -- Mark Roberti, founder and editor in chief of RFID Journal

"I wish I had read Bernd's book when we founded The Echo Nest. Bernd touches on all the major issues in the initial formation stages of a tech company and many of the problems that come up when the company matures. If you are thinking of founding your own tech startup, read this book first." -- Tristan Jehan, cofounder of The Echo Nest

"A visceral, behind-the-scenes guide to technology entrepreneurship. Bernd tells it like it is and presents a universe of solutions to tricky startup situations that can significantly improve the odds of success. Indispensable." -- Larry Begley, cofounder and managing director at .406 Ventures

"The best-laid business plans never survive contact with reality. Bernd has provided a comprehensive guide to anticipating the unexpected in the life of a startup." -- Neil Gershenfeld, professor and director of the Massachusetts Institute of Technology Center for Bits and Atoms

Product Details

ISBN-13:	9780071823975
Publisher:	McGraw Hill LLC
Publication date:	05/30/2014
Pages:	288
Product dimensions:	6.20(w) x 9.10(h) x 1.30(d)

About the Author

BERND SCHONER worked in the Physics and Media Group and the Things-That-Think research consortium at the MIT Media Lab, where he received his PhD. He cofounded and sold the high-tech startup ThingMagic to Trimble Navigation, a multibillion-dollar public technology company, where he now serves as vice president of businessdevelopment. He lives with his wife and son in New York City and Cambridge, Massachusetts.

Table of Contents

Acknowledgment ix

1 The Entrepreneurial Dream 1

Part 1 Bootstrapping: Venture creation out of thin air

2 Should I or Should I Not Venture into Entrepreneurship? 13

Timing 14

Career Planning 17

Money, Uncertainty, and What Really Matters 22

When Is Enough, Enough? 25

Don't Lose Sight of the Big Picture: It's Your Life! 27

3 Startup Assets 29

Ideas 30

Early Customers 32

Patents and Offensive IP Strategies 34

Defensive IP Strategies 41

Copyrights, Trade Secrets, and Know-How 44

What to Pack in You Bag 49

4 Cofounder 51

Attitudes 52

Skills and Roles 54

Immigrant Founders 60

Together We Will Prevail 67

5 Early Funding 69

Revenue, the Best Source of Funding There Is 70

Incubators and Accelerators 74

Angles 76

Free Money, Courtesy of Your Government 78

Banks and Loans 84

Crowdfunding 87

Creative Money 90

6 Administration 91

Legal Representation 91

Corporate Form 94

Corporate Compliance 103

Bookkeeping and Taxes 107

Payroll and Mandatory Benefits 108

Insurance 110

Office Space 112

Housekeeping 117

7 Compensation 119

Equity: A Startup's Most Important Currency, but What Is the Exchange Rate? 119

Vesting, Cliff Vesting, and Accelerated Vesting 126

Cash and Benefits 130

Deferred Compensation 135

Compensation Packages 138

Let There Be Justice, if You Can Afford It 147

Part 2 Equity funding: A double-Edged sword

8 Venture Deals 151

Understanding Private Equity and Venture Capital 152

which Firms to Seek Out 153

Term Sheets 157

Liquidation Preferences: The Biggest Nuisance of Them All 166

Due Diligence and Closing 171

Taking a Bite from the Apple 177

9 Raising a Down-Round 179

Going Back to the Well 180

B, C, D, E, F … Rounds 185

Strategic Investors 189

When Things Get Really Desperate 195

10 Right-Sizing 197

Firing for Nonperformance 198

Reduction in Force 199

Showing Executives the Door 205

It's Not Your Fault 209

Part 3 Exit: Selling you Baby

11 Startup Dynamics in Crisis 213

Tired Founders 213

Impatient Investors 216

When to Sell? 220

Never, Ever Give Up! 227

12 Exit Strategies 229

Hiring an Investment Banker 229

Poor (Unprofitable), but Pretty! 232

Financial Valuation 238

Protecting the Team 245

All's Well That Ends Well 251

13 Corporate Life 253

Acquisition Philosophies 253

Living Up to One's Own Promises 257

Before You Start All Over Again 261

Notes 263

Index 265