5 ESSENTIAL TIPS EVERY ENTREPRENEUR SHOULD KNOW

Thanks to Evan Davis and Rachel Barnes of Royer Cooper Cohen Braunfeld LLC as authors of this article.

You just came up with the million-dollar idea, and now you want to go out there and sell it. Congratulations, you are an entrepreneur! This is that exciting moment when the limitless opportunities make you feel invincible. However, you still want to be careful; while the world of entrepreneurship is filled with success stories, it’s easy to lose momentum and see the dream fade away when you don’t have the right plan.

We want to see you succeed; that is why we have prepared these 5 Essential Tips Every Entrepreneur Should Know so that you may start on the right foot and make your entrepreneurship goals come true.  We’ve focused on the things that you should keep in mind not just at the outset, but throughout your journey as a founder in the world of gaming.

Choose the Right Goal, Market, and Entity

Having a great idea is only the first step to start a successful business, and there is a slate of other considerations you need to make if you want to put your company on the right path. The earlier you take the time to think about your goals and how you will achieve them, the closer you are to a flourishing business. 

For example, you need to think carefully about your product—or service—and tailor it to your costumers. What are their needs? How can you best satisfy those needs? You will need to put that same amount of thought when thinking about the market you’re in and how you can thrive in it. What’s the best market for your product? Is that market strong enough to support your product? How can you differentiate yourself from potential competitors?

Once you have decided the what, how, and where of your product, you will also need to think about the why behind your company. Do you want to quickly raise stock value and sell, or take your time and grow your company in a corporate giant? 

Your holistic vision of the business’s purpose will ultimately determine what entity—corporation or limited liability company (LLC)—will best fit your needs. A corporation will be more attractive to potential investors at the cost of less flexibility and double taxation, while an LLC will allow you to be flexible and pay less taxes but might complicate the venture capital investment process.

Once you’ve decided how you’re going to proceed, an experienced attorney can help you to get your corporate docs in a row.  Spending some extra effort upfront to do more than simply filings articles of incorporation – for example, taking care of your operating agreement, bylaws, etc. – can sometimes ward off bigger problems from occurring down the road.

Start With a Strong Team and Take Care of Your People

You can’t do everything on your own—no one can! That’s why it’s critical to build a strong team that can support you through the difficult early stages of your company’s life and beyond. You should take time to carefully think about the people that surround you and assess how their skillset can best be used to build your company.

If your team needs more help, don’t be afraid to seek help from professionals. When it comes to entrepreneurship, knowledge is power, and consulting the right people will make building your business easier. Consider hiring additional people whose expertise complements that of your preexisting team instead of trying to figure it out on your own.

Remember, a company’s greatest asset are its people. It’s fundamental that, once you have built your team, everyone is taken good care of; plan for your company to follow practices that will satisfy your people and avoid unintended issues and conflicts, and always consider how your decisions will impact your team.

Control Your Cap Table

In the excitement of starting your new company, you might be tempted to distribute equity freely among your team. While it might not seem like a big deal at the time, you need to remember that equity isn’t free. You want to make sure that it is distributed in a way that reflects the contribution of each team member; avoid equal splits among founders—unless truly necessary—and make sure to have no “dead weights.”

Equity is also an amazing strategical tool that can be used to reward contributions and incentivize growth. While not everyone should receive equity—remember, keep it proportional—you should plan for an equity pool to reward early hires. Of course, don’t forget that excessive early-stage distributions might restrict future ones and plan accordingly.

The value of your equity might be diluted as additional shares are issued. While not all dilution is necessarily “bad,” issuing equity unnecessarily will hurt long-term ownership stakes. You should always work with an attorney that specializes in dilution management to plan all future equity issuances. 

Finally, keep in mind whether your company may need to pursue gaming licensure down the road, and how that may require disclosures from some of your key investors.

Protect Your IP

The core of your company will be its intellectual property (IP)—its trade secrets, trademarks, copyrights, and patents. It’s imperative that you take the right precautions to protect it. You should work with expert IP attorneys to safeguard your processes, components, branding and strategies—the things that make your company unique—from competitors and others with malicious intent.

You must also carefully consider who will be in control of the IP your company relies on. As the lifeblood of your company, its ownership will inevitably influence the power structure within the company. In other words, who owns the IP—you, its creator, or the company itself—will impact the control of the whole business, as well as all future growth opportunities. Make sure to consult your attorneys to develop an ownership plan that will best suit your company’s goals.

Secure the Right Funding

No business can run without enough money. Before you begin operation, the company must secure enough funding. However, not all investments are born equal; it’s crucial that you carefully research all funding options and consult with a specialist to choose one that fits your business—selecting the right investor and the right terms will save you a lot of time and money.

When choosing which investors will be best suited for your company, you should also consider factors beyond the amount of money invested. By the nature of their involvement, investors will be eager to influence the company to ensure a profit; you need to select investors that you firmly believe will not harm you or the company—trust is critical!  Particularly with respect to the gaming industry, there are a number of strategic investors – both angels and VCs – that have both great insights and great connections.  Think about how they may be able to help you in ways beyond the dollars that they invest.

Conclusion

Entrepreneurship offers great opportunities to those who are prepared to sit down and prepare a carefully thought-out plan. When preparing for your next step in your business venture, keep in mind these tips to remind yourself that the more questions you ask, the more answers you will have. Also remember that failure is sometimes inevitable; with an infinite number of things that can go wrong, you will need to be ready for the challenges you may face—entrepreneurship needs flexibility!

Evan Davis and Rachel Barnes are attorneys at Royer Cooper Cohen Braunfeld LLC.  Evan leads the firm’s Gaming and Sports practice and has over ten years working within the gaming industry.  Rachel routinely counsels clients on various corporate law matters, including mergers and acquisitions, venture capital investments, corporate governance, joint ventures, and strategic alliances.