By eavave • January 18, 2010

Start Me Up: A Company Primer

When our dream for Empire Avenue started to morph into reality and we began our journey to where we are today we quickly came to the realization that we needed more than just a product to be successful. In addition to developing our product we had to establish a company that would own the product and would be the vehicle whereby Empire Avenue would go forward to achieve our dream. For those that have not taken this journey before, and some of us here at Empire Avenue had not, incorporation of the company may seem like “job complete”, but that is not quite the case. As part of our commitment for transparency and openness, we would like to share with you some of the things that need to be covered off in addition to developing your product when setting out on your journey. These are simply some lessons I have learned from my 30+ years in business, and I’m still learning every day!

The first thing to decide is where your principal place of business will be located.  For example, different provinces or states, as the case may be, may have different tax rates and programs (in addition to Federal programs) and these are  factors to be considered.   Also many provinces or states may have programs in place to encourage certain types of enterprises to conduct all or part of their business, even when that province or state is not the principal place of business. In Canada, the province of Quebec is a good example when it comes to the video game industry.

Having decided where to station your business activities you need to determine the share structure for your company. This includes deciding on the various classes of shares and what percentage and class of shares will be used to attract and keep key employees as you go forward. This structure needs to be flexible to take into account the potential ownership requirements of a 3rd party investor down the road.

In addition to addressing your share structure you need to appoint not only a Board of Directors to guide the company but also the initial management team of the President, Chief Financial Officer, Secretary etc. While you may think that this is no problem, it is not as easy as simply appointing the buddies that helped you come up with the original business concept. With a well qualified and experienced team to guide the founder(s) there will be an increased chance that execution of the business plan will be successful. With such a team in place you will be well positioned to present an experienced and diversified group to a potential investor complete with a comprehensive and informative business plan of which you will be proud.

You will most likely want to access financing for your enterprise, unless you are independently wealthy or really lucky on the poker tables. The quality and experience of your Board of Directors and the management team will be important considerations for any investor, be it an angel, a venture capital or a private equity investor. Raising investment money is not like going to the Dragons Den. You need a management team that provides an investor with confidence in the company’s ability to deliver on a well presented business plan. If you have never done this before, this is not easy stuff to accomplish, but  don’t let it deter you! Just remember that you only have one chance to make a good first impression and we all know how important first impressions are. As an example, the breadth of experience, diversity and qualifications of the Empire Avenue team are some of the ingredients that we believe we needed in order to for us to succeed.

Finally, you should not be satisfied with just any investor. You should do your homework to determine the appropriate investor(s) you want to approach. Ideally, you want an investor who understands and supports what you are doing and wants to be your partner. As your partner, any investor will want a piece of your company and this is where it gets tricky. What are you prepared to give up to fulfill your dream? Just remember “pride cometh before the fall” so do not let pride or greed get in the way of making a deal that is a win /win for both parties. 100% of nothing is exactly nothing so a smaller percentage of something is always better. In negotiating with an investor you should attempt to have a plan B enabling you to walk away and pursue an alternative course. If you do not have a plan B don’t let your pride get in the way.

This blog is not meant to be a definitive treatise on starting up but just a few tips that I believe can be useful and that we have implemented as part of our incubation here at Empire Avenue. We hope this is helpful to you and will help them achieve your dream. We’re following ours and hope you can join us on our journey!

Disclaimer: Our owners, writers, and/or guest post authors may or may not have a vested interest in any of the above projects and businesses. None of the content on this blog is investment advice nor is it a replacement for advice from a certified financial planner.