Hot Seat: The Startup CEO Guidebook

We send the candidate a real job offer. It’s pegged to the 50th percentile (higher than half of salaries at companies our size for that position) and has a generous stock grant. Then we give a little speech. It goes like this: We think you’re a fantastic developer/marketer/glassblower, and we’re really excited to make you an offer. We do it a littl

This number will get you started. And if you remember the discussion from the previous chapter, you can now multiply this amount by 3–5x to get a ballpark of what kind of valuation you’ll probably see when you get a term sheet.

Note that while founders usually invest as a part of the company’s creation without further reward (and this is part of their contribution for their founder shares), family and friends should have some form of structured agreement. An uncapped convertible note with a 20%–30% discount is a good, fair instrument for this that won’t bother most invest

We also take the opportunity to say something like, “Once you interview with us, you’ve got our full attention. And if you get the job, we’re going to hold it open for you and stop interviewing other candidates until you decide. So we’d really appreciate it if you can arrange to be able to make a decision within a week of getting our offer.”

Another approach is a simple uncapped note with no discount but with a most favored nation (MFN) clause. This is very generous toward you (and not very good for them), but the MFN clause specifies that as you negotiate deals that are better for the investors, they get to opt in to those as well. It basically commits them to investing at whatever te

I suggest a simple rule: no more than five interviews and two weeks once the candidate sets foot in the building.

But if you’re raising a first round of investment from a variety of investors, it could go either way. Conventional wisdom says to push for debt. Some companies will use this as a concession — switching from debt to a priced round as a negotiating tactic. Others will dig on the debt structure and make other concessions instead.

Decisions within 10 business days.

Startups don’t outthink their competitors; they outexecute them. The best startups have founders who stay in sync, but work independently. And there’s a single magic ingredient that makes this work: trust.