Questions

What are the factors to consider when launching two to three startup projects/products under one corporation?

How do you structure that, so that investors can have the option to invest in only one or two particular products, and not just in the corporation as a whole?

5answers

It's best to keep everything in a single company to start with. Before going further with my answer, I'm compelled to tell you that launching multiple products *rarely* works and unless you have very significant prior success, most investors will take interpret diversification as a very negative signal.

So just wanted to provide you that warning. You should do nothing in the early stage to your corporate structure to optimize to sell or spinoff what the Company develops. The reason for this is that it incurs legal expense prematurely and often limits your choices instead of facilitating the desired optionality.

Investors almost always want "the whole hog" and also want to back a whole team focused on making a single product or service as big as it can get.

Let an investor or buyer drive a spin out discussion, not the other way around.

Happy to talk in more detail in a call.


Answered 8 years ago

If you are the sole leader in the startup, and cash is tight, this is going to be tough.

If you have capable leaders to delegate to, and have a sizeable warchest, this is possible to carry off.

The only way I can see multiple launches working is to have each treated like its own company. Each has its own leader, staff, budget and success/failure criteria in a specific period of time. You act as the cheerleader, focuser and resource-getter for each 'general'.

Trying to do it all yourself will lead to exhaustion.


Answered 8 years ago

On one hand you're trying to put all your eggs in one basket and then you don't want to share the basket. I believe it doesn't makes sense as long as the products aren't complimentary. You need to understand the equity trade-off that would happen in case of just product based investment or corporation based investment. Once clear with numbers and exit plans, it would hardly make any difference. If I may ask, if 2-3 products is what you're launching and 2-3 products is for what you're seeking investment as well then, how does it matters if an investor invests in all three or one corporation which comprises of all three?


Answered 8 years ago

You're going to be mad at me. Do one thing and do it well. FIRST. branch out after the initial launch and offerings but it's hard to have everything dialed in to multiple projects at the same time unless you have a seperate team devoted to each of those projects which means more overhead, less profit and a lot of juggling.

You CAN launch multiple products under one corporation. In fact I'm helping a tech firm do just that right now. but our main focus is on a single product with ancillary offerings to begin with. (we don't shut down the opportunity for monetization, but we don't advertise that we are everything to everybody either).

Once the first phase is performing at a rate that the firm is happy with, the focus will be able to shift to another product launch and offering while the first is still performing.

I hope this helps. Feel free to speak with me more in depth!


Answered 7 years ago

I personally wouldn't advise it - simply from a liability point of view, it seems to me you are defeating the whole point of forming an entity. Furthermore, depending on the products - you may be able to offset taxes using multiple entities...if you're clever.


Answered 7 years ago

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