Startups

What should you do before you leave your corporate job to launch a startup?

ivan ner HR Manager at VR

October 2nd, 2016

I have a friend that recently asked me this question. There are obviously some potential legal ramifications as this individual is looking to launch a company that may indirectly compete with the corporation that he used to work for. Thank you for your help here.

Jesse Watson Software Development Manager at TUNE

October 2nd, 2016

My advise to your "friend" ;-) is that one should never quit a secure job until their new business is generating enough money for them to live off of, or until funding arrives (as in, check is in the bank account). Check what you have signed with your employer, and if you have a non-compete agreement, get a good sense for what your company considers competition before choosing a market and idea. There are no laws against starting a business on the side so long as you aren't using their time or resources, or competing for their customers. After having started two businesses and nearly run out of cash in both cases, my opinion is that having a business that is strong enough to actually compete with an established corporation (even a small one) is not the first thing you should worry about. (Only about 1 in 10 new businesses succeed, so the odds are against you.) But I would strongly advise against killing off a stable income source before starting a business... Nothing will kill a new business like wondering whether or not you can pay next month's mortgage, and new businesses need time to incubate, pivot, and adapt to find their first customers. Unless you're rich, your greatest asset is TIME and the freedom to tinker and run market experiments with what kind of business you want to start. Some will tell you that you "have to light a fire under yourself", or else you will be a "want-trepreneur" forever. You should live under a bridge and eat nothing but ramen until your startup takes off. Maybe that works for them, but I'm interested in starting a business to support my lifestyle, not demolish it. If you're motivated to start a business, tap into why that is, and let that drive starting the business. Make it a top priority (right after your primary job), and it will happen. -Jesse

Michael Barnathan

October 2nd, 2016

"that may indirectly compete with the corporation that he used to work for"

Obviously, check the employment agreement to see if there's a non-compete clause, and make sure that your friend documents the return of any of the company's confidential information.

Beyond that, make sure there's enough capital to provide the startup with a decent runway! If there isn't, keep working until there is. Don't want to be making business decisions out of panic.

Rod Abbamonte Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute

October 2nd, 2016

Make a good financial reserve providing at least two years without any revenue.

Martin Omansky Independent Venture Capital & Private Equity Professional

October 2nd, 2016

Ask this question to a corporation lawyer. Sent from my iPhone

Ema Chuku Product Developer. Founder @ Ridit

October 2nd, 2016

Your question and scenario are 2 different things. On what you should before launching a company: (1) It must be a passion (2) Have finances. (3) Understand 80% chances you are likely to fail.

That's said, on the scenario, let him/her consult a lawyer. If your friend is going to have these worries, he/she is better off not starting.

And unless, it's a big idea or stealing the employer's clients (e.g law firm), the employer is unlikely to care about chasing after him/her.