Bringing on external mentors and advisors is one of the best things you can do for your early-stage venture. Not only do they provide valuable advice and connections, but having strong advisors also signals to investors that other talented people believe in you and what you are doing. Typically, ventures have a formal Board of Directors, who get legitimate control over the operations and major decisions of the venture. Many Ventures have a less-formal Board of Advisors, who they turn to for industry-specific and other more day-to-day advice. Finally, there are mentors, which is a very informal designation that more describes their relationship to the founder than it does to the venture. When you bring on Board Members, you’ll need to follow the rules you outline in your Bylaws. With Advisors, you get to decide the process, but it’s good to have a standardize system for onboarding new advisors.
If you are confident that you want to carry this venture forward, it’s a good idea to incorporate as soon as you can. Incorporating separates your personal assets from your business assets, and gives you limited liability. For nonprofits, you have to incorporate (and register with the IRS) if you want to take tax-deductible donations. However, incorporation does cost money (anywhere from $200-$1200 depending on the state and type of venture you incorporate), and if you opt for a C-Corporation, you’ll have to start paying taxes (even if you are pre-revenue). You will definitely need to be incorporated before you take any external funding or enter into contracts with other businesses or individuals. When incorporating, the big decisions include: what type of entity to incorporate as, what state to incorporate in, and the details within your Operating Agreement or Bylaws.
First off, let’s get on the same page - you only need to worry about splitting Equity if you have a Corporation (LLCs don’t have equity, they have different classes of members). If you have a corporation, when it comes time to raise funding, you’ll need to have the equity split between cofounders sorted out. There’s no magical formula for doing this, but there are a few approaches: the 50/50 or 49/51 split is fine when partners bring equal skills and dedication to the venture. If one partner dedicates a lot more time or brings more advanced skills to the venture, then they may get a larger majority stake. There are a few online calculators that you can use to get potential breakdowns, but what matters most is that the cofounders agree on the splits and that you get this down in writing with a Founder’s Agreement so that there are no disputes down the line, when the equity actually translates into real money.
When building a startup, small business, or nonprofit, it’s important that you get plugged in to your local innovation community. You’ll meet other entrepreneurs, mentors, and even investors more quickly. If you’re just getting started, try attending some local innovation events, or joining a meetup group. Add your public profile and venture info on your profile so that other users on EcoMap Baltimore can support you! Finally, look for Incubator programs - these will help get you plugged into the ecosystem quickly.
Ideas are a dime-a-dozen: the difference between a napkin idea and a billion dollar company is all about execution. If you are not talking to others about your idea because you are afraid they’ll steal it, you’re only holding yourself back from meeting potential partners and getting valuable feedback. If you are really worried about Intellectual Property, consider checking out some Pro-bono legal office hours to chat with a lawyer about your concerns. But otherwise, talk to the world about your idea - that’s the quickest way to move it forward.
Validation and Traction are both two very important, interrelated concepts for idea-stage venture, and many people use them interchangeably despite their differences. Validation is proof that people want or need your idea: it can come from observing problems, talking to potential customers/users, or getting testimonials. But even though people say they want something doesn’t mean they will pay to have it - that’s where traction comes in. Traction is proof that people want and are willing to pay for your idea - typically in the form of users on a platform, revenue, other investors lined up, or letters of intent from key stakeholders. Think of Traction as “objective Validation”.
Most ideas lack what we call Validation, or proof that there are people who want - and can financially support - the idea. So many idea-stage resources, like incubators or mentorship programs, focus on helping you get validation. The best way to get validation is by talking to users and building a Minimum-Viable-Product (MVP) that showcases the most basic essence of what your venture does. So look for resources that help you either meet customers, build an MVP, or connect you to experts in your industry.
The number 1 reason that companies fail is because they build something that nobody wants. The best way to ensure you avoid this fate is to get out of the room and talk to people about your idea. This process of customer discovery helps you understand the exact needs of the people you are trying to serve, and will help you uncover whether or not they would pay to have those problems solved. Try to talk to at least 30 people about your idea, and iterate your model based on their feedback.
Idea-stage ventures are what they sound like: typically, they are just an idea. You probably haven’t legally incorporated your venture, and you don’t have any users or customers quite yet. The team is probably just you, or maybe a few cofounders, and you’re mostly looking for help getting your idea off the ground and into reality.
Funding idea-stage ventures is one of the trickiest parts of entrepreneurship. Typically, any institutional investor is going to want to see more than just an idea sketched out on a napkin (unless you are a serial entrepreneur who has successfully started lucrative ventures before). Investors will want to see progress, meaning you have taken concrete steps to turn your idea into reality, and traction, proof that other people are as excited about your venture as you are.
The most common source of idea-stage capital is personal savings, although this may not be viable for everyone. Then there is the Friends and Family Round, which is exactly what it sounds like - you get your friends, family, and acquaintances to contribute money if possible. This still isn't going to be accessible to most founders, so the best outside places to look for idea-stage capital are going to be Microgrant/Microloan programs, pitch competitions, and very early-stage incubator and accelerator programs.