Corporate & Securities Law

It Is Not Your Baby Anymore

By Ryan Roberts

Many entrepreneurs treat their startup like their baby. And rightfully so. The entrepreneur has likely shed blood, sweat, tears, and some cash on the startup, therefore the entrepreneur wants to keep the startup in its grasp and control at all times.

But once you issue equity in exchange for services or investment, your startup isn’t your own anymore. You now have joint-custody.

Sure, you can (and should) still care for and nurture your startup as if it were only yours. But face it, you are slowly selling off your baby when you issue equity.

Most entrepreneurs get that, but there are still some that view any other equity holders (key employees, consultants, investors) as “The Others” and remain in a constant state of fear that all the other equity holders are going to steal their startup from them.

Being vigilant about keeping control of your startup is fine. You should always be prudent about any equity issuance. But being paranoid about it is only going to paralyze you from either (a) teaming up with people that can assist in the development of your startup, or (b) bringing in the necessary capital to take your startup to the next level.

In order to make your startup work, you are going to have to work with many different types of people, including employees, contractors, consultants, and maybe even investors. Be vigilant about issuing equity to these people, not paranoid.

Full post as published by The Startup Lawyer on March 08, 2010 (boomark / email).