Step 3: Add them to the list
Once you have found that an investor is interested in your market, add them to your list of leads. I like to add a few additional details for each lead-a link to their profile, their interest in the market, and their current company/position.
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contribution if you can. If there are no funds for a salary at the initial stages, recognize this in terms of equity and ensure that they are given leeway to take the business toward revenue as soon as possible.
(3) Appoint a CEO and create a board of directors.
One of the full time founders should serve as the CEO of the company. This person should be trusted with the economic future of the company, and should be tasked with the goals and metrics needed to achieve revenue and cash flow break even. Provide incentive shares in the form of stock options to keep such an individual motivated to do the best they can to ensure the business will succeed. Also, create a board of directors consisting of the CEO, the founders, and preferably at least one other external person.
(4) Create stock restrictions or rights to repurchase.
These terms will help ensure that if one co-founder leaves the company or otherwise does not hold their weight, there is a recourse to purchase back their stock should the board of directors agree.
(5) Recognize that investors putting in real money are likely to
have the greatest control.
If one founder puts in a capital investment into the business, they will likely be a creditor to the business. It is not always necessary (and it is not often preferred) that a solely financial investor is provided with equity shares in a new company. What you want are founders that will bring something more – whether their personal skills, efforts, connections, or goodwill to help drive a new business toward success. This being said, those founders bringing in cash into business are likely to demand more voting and liquidation rights in case of default, and therefore are likely to be able to exert the greatest control. Therefore, pick your investors wisely.