by Marcus Turner, President and CTO of Enola Labs
In fall of 2014, after over ten months of struggling with basic “business ethics” issues, I decided to resign from the company that I had poured not only my money but also 3 years of my life into.
From that experience, I have grown as an entrepreneur, but that “growth” came at a tremendous expense, so I thought I would share the 5 lessons I learned throughout that experience that every entrepreneur should know.
1. Be very cautious of ALL the terms within the partnership agreement or company bylaws.
Every company starts (or at least should) with a formal partnership agreement and company bylaws. We were not any different, we had corporate bylaws, which my partner and I both reviewed and signed. The one element that I neglected to correct was the authority of the “majority shareholder”. Our company was essentially going to be 50/50, but since my partner at the time was Indian, we decided that we would apply for HUB status as a business. Thus, in order to even be eligible, we wrote the bylaws on a 51/49% split.
When reviewing the bylaws, I should have corrected them so that the majority partner did not have any more authority in action than any other partner. This was never really an issue during normal business operation as I lead the business development, strategy and operations, but by being the “majority partner”, our bylaws gave my former partner power that he used to litigate me into buying the company that I unquestionably dedicated more time and energy building.
Lesson Learned: Equity is the ultimate power; don’t give it away without the appropriate compensation or plan. Like a prenuptial agreement, when someone brings significantly more to the table than the other, well-planned bylaws can be the difference in the end. Plan everything with the end in mind (both positive and negative) and you have your business off to the right start.
2. Make sure that there is a well-planned contract for everything.
Having the proper contracts in place is discussed in any “business 101” setting. I made sure that we had that: well thought out employment contracts, a binding and clear master services agreement and detailed statements of work.
We simply did not engage in projects where we did not have a documented MSA and SOW in place.
However, we started doing work for my partner’s other company and did not get the MSA’s and SOW’s in place. It was my former partner’s responsibility, but after asking for them a couple dozen times, I just focused on other priorities. Hindsight being 20/20, we should have treated these projects like any other customer.
Lesson Learned: Prior to starting any billable work, ensure that there is a detailed specification with associated terms and conditions. Sometimes this retards the start of the project (due to legal reviews), but getting contracts in place is time (and money) that is well spent.
3. Align on roles and responsibilities and know that one butt can only be in one seat.
Many startups don’t initially have the need or revenue to fill multiple “C level” positions. However, start with alignment on the expectations and responsibilities of the role. Then, once someone fills that position, this alignment can be leveraged to ensure accountability of the person in the position.
Now, I am not saying that in many occurrences, the right decision might be to have a partial, virtual or interim leadership position. What I am saying is that the person in that position should actually have the qualifications for the position and fully be aligned on the expectations of the role. As entrepreneurs, we drive this alignment with our team; why not treat owners with the same expectations?
Within my previous organization some on my leadership team played critical roles on leadership teams of other companies. I never found this as an issue within my entire career as when additional responsibility or tasks were put on my plate, I just worked harder, longer and more effective. However, this is not the case for everyone. Our lack of leadership and direction from the top created systemic cultural and organizational issues and that were directly related to a lack of time investment. Providing the leadership necessary to make a fast growing organization successful is not always easy, so be very careful allowing organizational leaders to concurrently work for multiple companies.
Lesson Learned: Clear alignment on roles and responsibilities not only sets the right expectations, but also is something that should be evaluated and measured.
4. Leverage outside influence right from the start.
Our intention from day one was to have both an executive board and an advisory board. The idea was not just to have additional perspectives on strategic and tactical initiatives, but also give our leadership team some measure of accountability; which is something that we lacked the entire 3 years. Unfortunately, a formal advisory board was something we never fully formed.
Lesson Learned: Whether it’s a formal board, an advisory board or simply a group of trusted mentors; it’s a best practice to get the outside perspective as early within your business as possible. The goal of this group should be to challenge perspectives and ensure a higher level of accountability than one that can be implemented among peers.
5. Ensure value alignment by actions, not just words.
Like most startups, we actually put some time into our value statements. Not just aligning on the words, but also the meaning. We came up with an aligned set of values and beliefs that truly defined the business that I was growing.
One of our core beliefs was:
● 20% of the people should not do 80% of the work. We expect people to contribute at the limits of their potential for each other and our stakeholders.
Unfortunately, we made the mistake of not leveraging these values to make critical business decisions and did not use the corporate values to measure individual performance and contribution.
Lesson Learned: Values are worth tremendously more than just something that you put up on the wall. Values and fundamental beliefs should be leveraged in everyday decisions and actions. Values are an essential element of a company’s ultimate success or failure.
Marcus Turner is the President and CTO of Enola Labs, a mobile app development company in Austin, Texas specializing in custom software solutions for companies ranging from startups to the Fortune 500.
My understanding is Mr. Turner was a graduate of MIT with a degree in math and/or science fiction. Knowing what his graduate studies were helps us understand the fictional $10 million in revenue for 2015. I guess the ABJ does not do fact checking, or Mr. Turner does not really understand math, or both.
How’s that $10M in revenue in 2015 coming?
http://www.bizjournals.com/austin/print-edition/2015/03/06/tech-startup-eyes-10m-in-revenue-for-year-one.html
In Dr. Evil fashion, can someone throw this guy a frickin bone?!
what? targeting 10 M in 2015… hah
http://www.bizjournals.com/austin/print-edition/2015/03/06/tech-startup-eyes-10m-in-revenue-for-year-one.html
Someone was sleeping during their Business Law 101 class at MIT. Cambridge in the Fall can be distracting with all of the pretty foliage, I guess.
You can say what you want about the article, but I can’t really tell why there is such a negative connotation with the word Indian. Is Indian not what someone from India is called? It seems apropos in the context of describing the company split in terms of the desired HUB status. Obviously the guy is bitter about the previous relationship, but calling the guy prejudice against Indians just because he used the word Indian seems a bit harsh.
The word “minority” would have sufficed rather than calling out his ethnicity. In addition, HUB = Minority, so there is no need to mention his race. If he has an issue with his ex-partner being an Indian then he should just say it and not be passive aggressive about it (he said it by not saying it.) Bottom line, it appears he did not have the same business acumen, savvy, and sophistication as his partner did so he probably felt played and is insecure about it. As my granddaddy use to say, “getting old and being an entrepreneur are not for the faint of hearts.”
Literally nothing about what I read above eludes to the idea that the author dislikes Indians. Maybe that he dislikes AN Indian- his ex partner, but as far as I can tell it has nothing to do with his skin color. The guy just had a bad experience with his partner and he’s telling the story. He made mention of his ethnicity to better explain the sentence. Lighten up.
The comments for this article are more interesting than article.
Okay, let’s just say the author of this article seems like a slow learner with regards to learning from past experiences. Based on a LinkedIn search he appears to be in his mid forties and he has some pedigree schooling and some great experience at Fortune 500 companies and startups. Why would someone with that much education and professional experience just be figuring out the pitfalls of a startup company especially since he was an owner of another company for eleven years? Something seems fishy and it sounds like an ex-spouse not happy with the agreed upon divorce settlement.
Lesson Learned: Read all partnership agreement documents and all divorce settlement documents carefully before you sign them and get a qualified lawyer in business law and contracts at the beginning and end of a business relationship.
Good points!! Sounds like someone had partnership remorse and why did it take three years to figure all of this out? Better luck next time and maybe an Indian lawyer would be helpful in negotiations too.
Marcus Turner sounds like Donald Trump with his prejudicial comments. I wonder what he thinks of women and Mexicans?! Can we add another angry white guy to those Republican debates?
Can’t we all just get along?!
What’s with the nuclear labels here with Enola Labs and Atomic Axis? Sounds like there are some toxic fumes between these partners and companies. It sounds like a major meltdown to me. Maybe the next company will be called Chernobyl Disaster.
It appears to me that there may be some sour grapes on Mr. Turner’s behalf due to his bad planning, his inexperience, his immaturity, and his overall ineptness. It doesn’t take an entrepreneurial wiz kid to know that you get EVERYTHING in writing at the beginning of any business dealings, whether it is with a family member, friend, colleague, partner, spouse, or an Indian etc. Crying about it after the fact just shows how poorly someone executed and is downright embarrassing. My five year old daughter does a better job of defining her rules of engagement in her sandbox or with her Xbox when her friends come over to play than Mr. Turner did with his former Indian partner.
I find it interesting that Mr. Turner blames his former Indian partner about his uneven equity share due to their mutually agreed upon filing for a HUB status. We
all know you cannot have your cake and eat it too. It sounds like Mr. Turner knew full well going into the HUB filing that he was forfeiting his 1% of equity to his former Indian partner so they could qualify for government business that would not otherwise be available to them. Mr. Turner cannot be an Indian giver after the deal he struck does not strike his fancy anymore.
Speaking of Indians, Mr. Turner mentioned in his article, and I quote, “but since my partner at the time was Indian”. Does that imply that his former Indian partner is no longer Indian or was that a prejudicial slap in his Indian face? It sounds a bit racist to me and should not be allowed in any article today. I expected better editing from Daniel Goh and Young Upstarts and I expected some fact checking before going to print. How would it have sounded if Mr. Turner had said ”but since my partner at the time was Black”? Al Sharpton and the NAACP would converge on the Ebola Labs office in a heartbeat. Social media would have a field day with it. The Drudge Report would have had a link to it.
Based on Mr. Turner’s one-sided whining I am guessing he was out-negotiated at the beginning his partnership and out-lawyered at the end of his partnership. Well Mr. Turner that is called BUSINESS 101 NEGOTIATIONS. Big boys play by rules established at the beginning of the game and do not try to change the rules just because the throw to first base beat the runner. If you are going to play in the majors do not bring a minor league playbook to the ballpark because you will be outplayed every time.
By the way, it is a well-known fact that Indians drive a much harder bargain so
it sounds like you ex Indian partner brought the correct playbook to the park
at the beginning of the game and he filled out the scorecard correctly during
the game, so the “W” goes to him. Batter Up!!
Hip Hip Hooray! Maybe they were playing cricket and Mr. Turner did not know those rules either.
I like the cricket idea!! It sounds like a rookie move to me and he was sent to the minors even though he says he resigned. What partner resigns from his own company, didn’t he still have 49% of the company? He resigned, and then according to LinkedIn he starts a similar company, the whole thing sounds fishy to me. I would love to hear the other 51% of this story.
A simple Google search reveals that his ex partner is Ben Dyer so you can ask him directly.
This an example of where getting an advanced degree in business or law comes in handy. My guess is these guys are engineers or computer science majors and may have had some good ideas but they do not know how to run businesses or do contracts. I know this happens more than we read about. It sounds like a good case study for the Harvard B School.
The Indian comment was obnoxious especially coming from a CTO and President of a company and in an industry with lots of Indian developers and programmers. Sounds like he may need to read “How to Make Indian Friends and Influence Indian People.” I hope he isn’t in a business community with lots of Indians because his role as an Indian business developer just got more difficult.
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