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Tech startup life: team challenges, new responsibilities

Being an entrepreneur is both rewarding and difficult, with one of the primary challenges being that no one will ever have the same drive and passion for your vision as you do, with the next challenge being financing to get any startup off of the ground.

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Top tribulation: commitment levels

The intention of my column is to share the inner workings of start-up life for me and my company, as well as, to share the personal trials and tribulations that come along with it. As with all things, there is success and there is failure. For me, success can create a sense of accomplishment and failure is a character builder. As we have all heard, it’s what you do with failure that can define who you are. Lets hope I dont need to build any more character.

Things have been challenging lately. This doesn’t mean bad, just challenging. One of the things that has been creating a challenge has been dealing with the issue of those who over promise and under deliver. I find this one of the most difficult things to deal with as a startup. You set expectations and when they are not met, it creates a certain level of frustration. Perhaps it’s just me and maybe my expectations are to high but they are set by what others represent in their ability to deliver. When this doesn’t happen, it can have a trickle down effect that can be very meaningful as a startup.

I mentioned in my last post the challenge of no one having quite the commitment towards your startup as you do. No one wants to work as hard as you do and frankly, outside of those who are on your team (if you have one), most people just don’t get or appreciate the focused approach and sense of dedication it takes to launch a startup company and make it successful.

Setting frustration aside, it’s getting exciting

That being said, and setting those frustrations aside, I am at the stage where things become very exciting. I am funded by a few friends and my own bank account. I am very pleased with how far we have come with our limited resources. I have managed to launch a successful beta web app and have received good feedback. We continue to develop, debug and improve on our efforts. It’s very difficult to bring out a beta app because you never feel like it’s ready. I have a new appreciation for those that have launched an application. In my case, I am the only one who is responsible for the ultimate design and functionality. All QA falls on my shoulders which makes finding unknown issues a challenge. We went live with a few bugs but there was a great sense of accomplishment when we finally got to that point.

Now, on to the next milestone. As you might expect, we need more money. This comes as no surprise as raising capital is an integral part of the process to grow a company, however, this can be another source of anxiety. I believe that I am creating a product that the market needs and wants. There are one or two other companies that are going down a similar path as mine. They have received good recognition lately, but in no way does this guarantee success for all.

When raising money there are many questions. Should I continue to bootstrap until we have revenue? Should I sell equity? Should I consider a Convertible Debt Offering? How much money will I need? How long will that last?

Adding on new responsibilities

A new level of responsibility comes with  having investors. At this stage in a startup, it is frequently said that investors may like the idea but they are really investing in you. When said like that, it adds even more pressure to deliver success. For those of you following along, I have elected a $700,000 Convertible Debt Offering as opposed to selling equity as a Series Seed round. Our memorandum has just gone out and I am on the road. I’ll let you know how it goes.

Amidst the challenges of a startup, there also comes a time when things can just fall into place. For the last year, I have been building a company and an application on the idea that I want to be a brokerage and offer agents, clients and consumers a more transparent user experience. This is very possible given the rules and regulations of the local MLSs and the NAR, but it’s a challenge to scale. Going market by market, Redfin, Sawbuck, Zip and others have demonstrated this can be done.

Enter the Spark Platform announced by FBS. It could be a game changer. This is an API solution aggregating the data and licensing of participating MLSs and is exactly what we have been architecting our brokerage solution to work with for the last year. The real estate industry has a lot of old software out there. A lot of brokerages have issues with their legacy systems that are not designed to work with modern day APIs. They may not be able to leverage the Spark Platform. On the other hand, this is exactly what I was anticipating and solves the issue of scalability for my company.

Having a startup is a challenge in just about every way you can imagine. Perhaps the most important element is the ability to manage your personal life as well. I have a wife and a daughter that mean the world to me. I suppose in a way, we have all made a commitment to my startup. It is very difficult at times when you start wondering if what you are doing is the right thing. The emotional aspect is a roller coaster ride not for the faint of heart. My family probably gets the short end of the stick at times, but they support me when I need it. What keeps me going is when I wake up, read a great blog post by an industry leading consulting firm about how a new group of applications is redefining the way agents work with their clients, know that I fit right in that space, and can’t wait to get to the office to get to work… and I love it!

As the leader of NuHabitat LLC, Jeff brings a unique qualification to the table with 10 years experience of buying and selling homes as a high-end luxury homebuilder while working with clients, agents and brokerages. Motivated by a unique set of circumstances, his goal is to provide a more efficient and economical approach to prospective home buyers and sellers in the modern day world of residential real estate.

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Business Entrepreneur

Small businesses angry at depletion of COVID-19 relief funds without warning

(ENTREPRENEUR) Small businesses are in shock when they find out COVID-19 relief funds are no longer available, with an email update from the SBA.

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Small businesses are no longer offered EDIL loans from the SBA.

In May, the Small Business Administration (SBA) sent out an update to borrowers of the Economic Injury Disaster Loan (EIDL) for COVID-19 relief. The EIDL program is now out of funds, according to an email sent to borrowers.

The loan program formally closed back in December 2021, but there was a period when small businesses who had already received funding could request additional money. That period is now officially over, and the $345 billion that was allotted for COVID-19 relief is gone.

The impact of EIDL

Many owners and entrepreneurs are outraged and frustrated with the lack of transparency from the SBA. There was no warning that the funds were almost depleted and many businesses were relying on that loan money to keep their businesses afloat as the economy rebounds. However, SBA Administrator Isabella Casillas Guzman praised the program,

“The SBA has delivered historic economic relief to millions of America’s small businesses through the COVID Economic Injury Disaster Loan program…”

According to an SBA press release, over $390 billion in aid was distributed to nearly 4 million businesses.

Small businesses still need help

In May, Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization (WHO), told health ministers that COVID-19 and its effects are not over. Here in the United States, life seems to be getting back to normal, if you discount the horrific inflation and gas prices, which are further impacting the recovery of small businesses.

Congress has been wrangling with legislation (H.R. 3807) that would offer more funding for those that were hit hard due to covid. Getting the House and Senate to agree on this legislation is expected to be difficult. So, no guarantees that more help is coming.

The SBA recommends that businesses who need more resources contact their local SBA office. Virtual appointments can be made for those who wish to avoid contact.

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Business Entrepreneur

Regularly update your succession plan – it isn’t for setting and forgetting!

(ENTREPRENEUR) You may think that once you have a succession plan in place, you’re set for life, however, it’s recommended to continually update them!

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business succession plan

We’ve written before about how the everlasting success of the business will need to outlive you, and this is best conjured up in a succession plan. This is especially true for small business owners and entrepreneurs that have built an empire for themselves but aren’t sure what the future will hold beyond their passing. This is the exact reason that succession plans shouldn’t be set and forgotten, but instead consistently updated.

What are some of the obvious reasons that you may need to update your succession plan?

  1. Health Issues
  2. Marriage or Remarriage
  3. Changes in health in executors or guardians
  4. Changes in the law
  5. Changes in Residence

Now, for the not-so-obvious reason: It should be updated when any personal circumstances changes, which most likely happen often. This is why a will is like your home, an investment that needs to be properly maintained, and if it is, it will last a very long time.

Examples include changes in economic or parental status, as well as designations or fiduciaries. Elders could be aging, siblings may be having their own life changes, as well as if any dependents are born with or develop special needs.

“Every state has different laws regarding the administration of a will,” he said.?“For instance, states vary regarding the required residence of an executor, inheritance tax laws, and whether a child can be disinherited by omission.”

The recommended procedure is to review wills and powers of attorney at least every five years.

Lastly, when should a will update to a trust?

  1. When you have some significant assets (more than $500,000) in your own name.
  2. If you have special needs beneficiaries.
  3. If you have properties in multiple jurisdictions (multiple states or even counties).
  4. If you have beneficiaries you want to control distributions to (e.g., distribute at ages 25/30/35).
  5. If you have kids from a previous relationship you want taken care of.
  6. If you may want asset protection (special trust needed).
  7. If you are a big dog (over $22M if married), to save taxes.

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Business Entrepreneur

Should your severance agreements include confidentiality clauses?

(ENTREPRENEUR) Confidentiality clauses and NDAs have long been tied to severance agreements – but is that notion becoming outdated?

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severance agreement

Severance agreements and their ilk have long included confidentiality clauses, often comprising an exhaustive list of actions former employees may not take should they desire to keep the benefits listed in the agreement. Carey & Associates P.C.’s Mark Carey breaks down the knowledge you’ll need to successfully incorporate a severance agreement – including a stern warning about the future of confidentiality clauses.

There is a long list of things you’ll need when curating a severance agreement, but we’ll start with Carey’s honey-do-nots.

Carey’s primary recommendation is avoiding a non-compete clause where, previously, there wasn’t one.

“As employment lawyers, we see this tactic used every day, but you do not,” he says.

This is because most employment lawyers will advise that a non-compete agreement is largely unenforceable, which sets a poor precedent for an otherwise airtight document.

Carey even recommends against reviewing prior non-compete clauses for the same reason.

He also eschews what he calls the “21 days to sign – or else” philosophy, and he advises that employers should loop themselves into the non-disparagement clause so that employees cannot be blacklisted – something he refers to as “a very real phenomenon.”

What a severance agreement should include is a non-admission provision, a payment provision, a release of all claims to cover any feasible scenarios regarding employee disclosure, a challenge to agreement, a “no other amounts are due” section to release the employer from future responsibility, and a mandate to return any company property. This is a truckload of information, so you’ll want an employment lawyer to help you through the process.

But what Carey warns against is the future of confidentiality agreements, or NDAs. While these provisions have long accounted for employee silence in the face of abusive or corrupt employers, Carey posits that, one day, “confidentiality provisions in employee severance agreements will be banned as a matter of statute and public policy.”

This assertion comes in the wake of the #MeToo movement and the uncovering of the manner in which powerful people were using NDAs to buy silence from the people who suffered under their direction. Carey points out that it’s a non-partisan issue; corruption isn’t aligned with one specific political party, and the option to come forward with allegations of misconduct is a courtesy that should be afforded to all.

Whether or not confidentiality agreements are ethical is a moot point, and Carey does recommend continuing to use them when necessary – but, sooner or later, one can safely assume that the landscape of severance agreements will change, arguably for the better.

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