Common Mistakes made by by startups

A start-up is a risky proposition at the best of times, but thanks to Keith Spencer of Fasken Martineau, fledgling businesses attending the 25th Angel Forum at the SFU downtown Vancouver campus have a series of guideposts to follow in order to not stumble before they can soar.

One of the most common mistakes is to incorporate too late, as well as overcomplicating the share structure. A venture capitalist will simplify your structure anyway, so don’t complicate his job at the outset. A lack of sufficient bylaws or articles is another no-go, again causing headaches down the road.

Employment agreements shouldn’t be left (especially with founders) until just before the first financing. Similarly, make sure at the outset that intellectual property consideration happens early in the company’s life.

Never disclose inventions without a non-disclosure agreement. That’s simply common sense. So is failing to comply with securities laws when issuing shares, but many founders don’t know any better and could end up in hot war.

Founders shouldn’t wait for VC financing to bring independent directors to the board, and shouldn’t base VC financing on the company’s valuation.

Finally, it’s a bad idea to hire professionals who aren’t experienced in dealing with early-stage companies, VCs or angel investors.