MBAX 6860 – BOOTSTRAP TACTICS FOR ENTREPRENEURS SPRING 2007
WEEK 3 – Feb. 2: Bootstrap Founders
Topics:
1. Lessons from bootstrap founders – what to do and what not to do at the early stages of a start-up (speaker Dan King)
2. PLANNING! Bootstrappers will be responsible for most if not all tasks early in the start-up. But it is very important to do some
planning and set-up some infrastructure in the early stages to be prepared to grow.
a. Team selection
b. Organization
c. Job descriptions
d. Compensation
e. Stock
f. Stock options
g. Non-competes
h. NDAs
i. Working with friends and family
Speaker: Dan King
Discussion
Slides: Week 3
Readings:
Stock and Stock Options. Providing stock or stock
options is an important way for startup companies to compensate and motivate
founders,
early partners, employees. An advantage of granting stock options
(technically warrants) over giving stocks directly is that
taxes are not due on options until they are
exercised, if properly set up. You are well-advised to consult with an
experienced attorney
when drafting a stock option plan. Read the
following for more information, all from the NCEO website at http://www.nceo.org/:
1. Employee Stock Options and Related Equity Incentives
2. Employee Stock Options Fact Sheet
3. Noncompete Agreements, Nolo Press, www.nolo.com, 2003
4. Nondisclosure Agreements, Nolo Press, www.nolo.com, 2003
5. Five Common Myths About
Stock Options
6. Avoiding Lawsuits In Your Stock Option Plan
Tasks to be completed for
next week:
(All tasks from Week 2 #3 due on February 9th as well)
1.
____
Company Organization. Create an organization chart for your new
company showing the roles and relationships of
the founders. For each of the founders,
write a short job description that includes the responsibilities of the job,
the time commitment
expected, and the compensation to be
received. Even if you create a document that identifies just yourself, create
positions you think
you will hire as you move forward. This will act as a great planning
tool. (Attach all.)
2.
____
Confidentiality Agreement. Create a confidentiality agreement for
one of your founding team and/or future team members.
(The others would presumably follow the
same format.) Use the document creation software in Quicken Business
Lawyer
(Section 9E of "Legal Forms for Small Business") ($24.95) or
create from sample or sample 2 or Google search -- attach.
3.
____
Non-Compete Agreement. Create a non-compete agreement for one of
your founding team and/or future team member.
(The others would presumably follow the same format.) Use the document
creation software in Quicken Business Lawyer (Section 9F of
"Legal Forms for Small Business") -- attach. Sample($24.95) or create from Google
search
(http://www.kinseylaw.com/freestuff/EMPLOYMENT/EmpNCom.html
OR http://www.ilrg.com/forms/nocompet.html
) -- attach.
Assume that your company is a corporation (S or C). Prepare the
following documents (modify as appropriate) setting up the sale of
stock to current shareholders, and the granting of stock options to employees,
partners, and associates. The sample documents below
were created from a fictional company as a resource for Leeds.
4. ____ Stocks. These documents set up and consummate the sale of stock to founders and early shareholders (attach both).
· Board Resolutions authorizing sale of stock
· Stock Subscription Agreement for purchaser of stock
5.
____
Stock Options. These documents set up and consummate the
grant of stock options to employees, partners, and associates.
Note that these documents set up non-statutory options (NSOs) versus statutory
options. Know the difference before executing these documents! (Attach
all.)
· Company Equity Incentive Plan that sets up NSO stock option plan *
· Board Resolutions adopting Equity Incentive Plan
· Stockholders' Consent of Equity Incentive Plan*
·
Employees Agreement for issuance of
non-statutory options (NSOs) *
*adapted from The National Center for Employee Ownership, The Stock Options Book,
4th edition, June 2001.