Being a founder isn’t just about raising a company; it’s about building a legacy.
Founders embarking on the high-growth, venture-backed startup journey face a unique set of challenges, and navigating them means paying special attention to structural, relational, and strategic details from day one.
Drawing on their extensive experience advising startups and investors, Fenwick’s Kristine Di Bacco and Jay Pomerantz recently hashed out strategy with an eye toward legacy on The Legacy Code with Teresa podcast. Here are the key takeaways:
One of the earliest and most consequential decisions founders must make is how to split equity among co-founders. While a 50/50 split is common, especially when there are two founders, it comes with risks. Equal ownership means no one controls the board outright, and both parties must agree on all major decisions. This “forced compromise” can work in healthy partnerships but becomes problematic if there’s a falling out.
Founders need to go in “eyes wide open” about these dynamics and set up mechanisms to manage disagreements. Beyond the split itself, vesting schedules are critical. Without vesting, a departing co-founder could walk away with a large chunk of equity, leaving the remaining founder to shoulder the work without additional ownership incentive. Proper documentation, tax filings, and legal terms form the bedrock of fairness and protection here.
Don’t default to “equal shares” without thinking through control implications. Establish clear vesting from day one to protect the company and each co-founder.
Raising venture capital is often compared to dating; it’s a mutual selection process. Founders shouldn’t be so focused on securing funds that they neglect evaluating the investor in return. Is this someone you want on your board for the next decade? Do they have a history of supporting founders through tough times?
Smart founders sometimes take lower valuations to partner with investors who offer strategic value and cultural fit. This can mean introductions to partners or customers, recruitment support, credibility in the market, or hands-on help in crisis. Conversely, mismatched investors can lead to boardroom dysfunction and even CEO replacement.
Treat fundraising as two-way diligence. Speak to other founders who’ve worked with the investor, especially about how they behave when things aren’t going well.
In the early stage, two priorities dominate: equity and intellectual property. While resource limitations mean not all legal matters can be addressed immediately, IP is foundational to defensibility.
The right IP strategy depends on your industry. Consumer brands may prioritize trademarks early; SaaS companies may delay patents but should still think about code ownership and confidentiality; biotech firms must file patents from day one. Without securing IP early, founders risk erosion of value or disputes over ownership later.
Determine your sector’s critical IP assets and secure them early. This may mean investing in patents, trademarks, or contracts that preserve ownership of your core innovation.
A common early mistake is cutting corners on legal support; self-incorporating or hiring someone who doesn’t specialize in venture-backed startups to save money. Expert counsel pays off many times over by preventing costly mistakes in structuring, documenting, and protecting the company.
Founders who treat lawyers as strategic partners, rather than one-off “tools,” benefit from insights on governance, compliance, and dispute prevention. Involving lawyers early in board meetings helps them understand the evolving context and advise proactively. Some firms attend these meetings for free to facilitate a deep understanding of their clients.
Engage specialist startup lawyers from the outset, and bring them into strategic discussions, not just transactional work.
In many cases, the founder-CEO who thrives in the early stage may not be the right person to lead the company in later phases. Investors may push for leadership changes as the company scales. This can be emotionally difficult, but founders who are self-aware about their strengths and weaknesses and work to grow their executive skillset can reduce this risk.
Even if departure becomes necessary, negotiated transitions, such as moving into a product or advisory role, can preserve relationships and company stability.
Invest in your own leadership growth to meet the demands of each stage, and be open to evolving your role for the company’s best interest.
A healthy board relationship depends on consistent, transparent communication in good times and bad. Surprising the board with major issues during a formal meeting erodes trust. Previewing problems with individual members beforehand allows for a more constructive discussion and collaborative problem-solving.
A lack of early disclosure often leads to unnecessary conflict and loss of investor confidence.
Share bad news early and privately with board members before meetings, positioning issues as solvable challenges rather than late-stage crises.
Founders often push their physical and mental limits, which can degrade judgment and increase the temptation to take shortcuts, sometimes with disastrous consequences. High-pressure situations lead founders to misrepresent revenue or performance; actions that can destroy companies.
Resilience comes from maintaining health, perspective, and some degree of personal financial security. Good investors increasingly encourage founders to “take some money off the table” mid-journey to relieve personal financial stress; this is done through a secondary sale transaction. Executive coaching and well-being support are also becoming more common.
Treat health and stability as business assets. Seek investor alignment on maintaining your well-being so you can sustain high performance under pressure.
The founding journey is never driven by one person alone; it’s a team sport. Surround yourself with the strongest possible roster of employees, advisors, directors, and investors who share your long-term vision. Each should add strategic value and be invested in your success.
The best leaders instill loyalty, attracting talent and support even in rough patches. Paired with sound structural decisions, thoughtful investor relationships, and early protection of your core assets, this is the formula for building something that lasts.
Listen to the full podcast episode at The Legacy Code with Teresa.