For those of us who are Philadelphia 76ers fans, we are all too familiar with the phrase, “Trust the Process” and how Sam Hinkie, the team’s former General Manager, spent years structuring the franchise for future success while experiencing losing seasons. With the 76ers still losing games on a consistent basis, it is debatable as to whether Hinkie’s plan has truly led to any success, but with first overall draft pick Ben Simmons soon rejoining the lineup and Joel “The Process” Embiid playing like a potential NBA All-Star; this lawyer (and 76ers season ticket member!) thinks it’s safe to say that the 76ers will soon be in a position to start winning games.
But what does this have to do with startups? As the startup community in Philadelphia continues to grow, we are seeing more people take the route of becoming an entrepreneur. These individuals should learn from Hinkie’s “Trust the Process” strategy and focus on establishing a strong foundation to support future success, while making some monetary sacrifices in their early stages.
For anyone who has started a company or is thinking of setting a New Year’s resolution to start a business in 2017, it’s important to consider these tasks to establish a strong foundation:
The Startup “Process”
- Establish a Board of Advisors – Many startups are successful because they are guided by the mistakes made by others before them. Alternatively, even more fail because of common mistakes that could have been avoided. Establishing a board of advisors who have experience in your industry can be a key element to startup success.
- Structure Your Entity Based on Your Goals – There are many different forms of legal entities such as corporations, limited liability companies and partnerships and the decision of which to choose is determined on a case-by-case basis dependent upon who the founders are, what the company does and what its plans are. Talk to your legal advisor to determine which structure is most appropriate for your business – doing so can save from future headaches and can even keep more revenue or acquisition proceeds in your pocket, rather than being sent to a creditor or to Uncle Sam.
- Protect Your Intellectual Property – One of the most valuable assets for businesses ranging from one-man operations to Fortune 50 companies is intellectual property. If you are currently employed by someone else while getting your startup off the ground or if you have other people working for you, you need to ensure you retain the rights to the product you are developing. Trademarks, copyrights, patents, and trade secrets all protect your IP, but they need to be established and recorded properly in order to have legal effect. Again, discuss this with your legal advisor (and avoid issues experienced by the likes of Snapchat).
- Document Loans and Investments Made by Founders, Friends, and Family Members – Most successful startups raise their first capital from friends and family investors. Well-meaning, but often inexperienced, entrepreneurs treat their friends and family investors unfairly or without complying with applicable law and that can cause considerable damage to their startup and future funding opportunities (and family relations). All financings, regardless of size, are governed by securities regulations, and entrepreneurs must know what the legal requirements are before accepting that first dollar of investment, even if it’s from a family member.
Hinkie’s strategy also applies to our startup community as a whole. Philadelphia is often referred to as the future “Silicon Valley for health technologies” but those involved in our tech community know that we are more than that. In 2016, stakeholders and leaders in the Greater Philadelphia area made great strides in setting up the entrepreneurial community for future success:
- Mayor Kenney wrote an op-ed explaining how he plans to further champion Philadelphia’s tech industry (evidenced by his dedication to attend the SXSW Conference in March 2017);
- Philly Startup Leaders held the city’s first Diversity Dinner promoting an increase in diversity within the tech industry;
- Ben Franklin Technology Partners of Southeastern Pennsylvania, Independence Health Group and Safeguard Scientifics announced a $6 million fund to foster healthcare IT innovation;
- Microsoft opened a Reactor location in University City;
- Boston-Based Cambridge Innovation Center chose uCity Square for its newest expansion location;
- RJMetrics was acquired by Magento Commerce;
- Pepper Snapple Group acquired Bai Brands for $1.7 Billion; and
- Numerous conferences, Meetups, and startup events were held to support the growth of the entrepreneurial community.
Taking a page out of Hinkie’s playbook, members of our community have been laying the foundation for what could, and should be a wildly successful entrepreneurial ecosystem here in Philadelphia.
We just need to “Trust the Process.”