What if this startup is a real success?
A few wealth building concepts to consider now as a founder
A few wealth building concepts to consider if you actually have the next big idea
At Backstage Capital we partner with our Headliners that we invest in. We live this out by providing exclusive opportunities for each of the founders to become more successful. Last week we collaborated with Goldman Sachs’ Private Wealth Group to offer a lunch and learn session concerning the financial estate planning issues that most first-time entrepreneurs never think about until it’s too late. The Goldman Sachs team shared tips with respects to growth capital raising, conducting an exit, and estate planning.
I won’t share the in-depth notes on the session because that is exclusively for our headliners (Exhibit AAA on why you should become a Backstage Capital Headliner 😉) but I will share a few general ideas that I think all startup entrepreneurs should consider. This subject is rarely thought of and I wish I would have researched these subjects some when I was a founder.
So what if your startup becomes a huge success? — if so you should think about the following:
When raising growth capital…
What is our purpose of raising capital?:A fundraising round should be viewed as a means and not a milestone. It is essential that every founder considers how the capital will help the business reach its next goals.
Who is the right investor?: It is important to conduct your own due diligence on prospective investors; each strategic/traditional investor has their own advantages and disadvantages.
When considering an exit…
What’s the right exit strategy?: The only true exit for a founding team is typically an acquisition. In acquisitions the founding team usually only has to stay on at the parent company for a transitional period. However, taking your company public should be seen as another type of fundraising and not an exit. The public markets usually do not react well when founders leave or sell their stake in a company.
What’s the right time to exit?: Founders typically ask how can they best time the market for an exit. The answer, in short, is that you can’t. No matter if the public markets are booming or acquisitions are happening at a high level in your industry, the fact of the matter is that due diligence or macroeconomic events could derail the economics of deals. Founders can only control their company’s operations and that’s something that should be focused on more than timing the unpredictable public & private markets.
When thinking about your estate planning…
What are my state’s estate laws?: Each state has it’s own respective laws that rank what next of kin will receive assets of your estate if you do not have a will. It is important to review these laws so if you do not like the order you can change how your assets are distributed in your will.
What’s the right trust for me?: These are questions that you should ask your tax attorney and will depend on your preferences. A few popular types of trusts for entrepreneurs are Grantor Retained Annuity Trust (GRAT) and APTs or Asset Protection Trusts. You should consult a tax attorney to determine which trust is legal in your state and meets your short-term and long-term needs.
Earnest Sweat is an Entrepreneurial Engineer for Camelback Ventures and an Investor in Residence for Backstage Capital. If you have any questions or requests please connect with Earnest through LinkedIn or Twitter.
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