Page no: G102
Table of contents
- 1 High-Level Advice
- 2 Program Schedule
- 3 Session Types
- 4 Weekly Deliverables
- 5 Participating in Working Groups
- 6 Keeping Up-to-date
- 7 Attending Office Hours
- 8 Contacting Mentors
- 9 Working on Vacation
- 10 Reporting Issues
- 11 Pitching Your Idea
- 12 Joining the Equity Collective (aka “Bonus Pool”)
- 13 Completing the Program
- 14 Dropping Out
- 15 Good luck!
Welcome to the Founder Institute. You are now on your way to building your dream company.
Remember: the Founder Institute is hard, because building an enduring company is harder. Everything in this program is designed to push your business and founder skills forward, and help get you to traction and funding.
This guide is designed to help you understand the program and be successful.
Table of Contents: High Level Advice | Schedule | Session Types | Weekly Assignments | Working Groups | Keeping Up-to-date | Office Hours | Contacting Mentors | Vacation | Pitching | Incorporation | Bonus Pool | Graduating | Dropping Out
1. Check your Email
Like most businesses, the Founder Institute primarily uses email for communication. We expect you to check your email often and respond promptly because this is expected for any Founder of a technology company.
In order to ensure that you receive important and timely emails from us, please put our emails on your Email Whitelist.
2. Keep Up with Deadlines
Like any early-stage entrepreneur, you will almost never have the time to do everything in detail, so you will need to master the art of time management. It is crucial that you meet all deadlines in the program, producing high-quality work with tight time constraints.
When building a company, missing a deadline can mean that the business dies. As a result, founders who do not meet deadlines for deliverables may be asked to leave the program and join a future semester.
3. We Measure Results, Not Effort
We don’t care how your work gets done, just that it gets done. If your assignment was done for you by a team member, an outsourced college grad, or your mother, we don’t care so long as it gets done and is high quality.
Note: co-founders are welcome to submit identical assignments where appropriate. Both co-founders must still load the assignment into their own individual profiles.
4. Time Management Tips
Past founders have shared the following tips to help keep up:
- Read each session’s assignment in full before that session starts, so you can ask Mentors or Leaders appropriate questions at the session.
- Do your work in a Google doc or similar platform, and then copy it into the Founder Institute system, so you don’t accidentally lose any work.
- Be conscious of the suggested time to complete each piece of work. If you are taking much longer than the suggested time then you are probably doing it wrong. Ask yourself how you can be more effective, if you are being too much of a perfectionist, and who you can ask for help
- If you find you are taking much less time than recommended, ask yourself if you are doing the work properly.
- Make a checkpoint in your schedule part way through each week, e.g., on Sunday morning, and upload all work done to date so you can see what is missing.
- If you are given an ‘Epic Sprint’, make sure you focus first on that assignment and only afterwards on your regular weekly deliverables: being late on or performing poorly on an Epic Sprint can result in your being asked to leave the program and join a future semester.
- After finishing one week’s assignment if you are able to start working ahead on the next week’s deliverables that will give you a useful cushion in case unexpected demands on your time come up. Always try to get ahead of your future deliverables.
5. Do the Work for Your Own Sake
All of the work assigned has been carefully created to cover things you will need to build your business at some point.
If you do a poor job or skimp on any part of an assignment, you will pay the penalty later, when you find you need that missing piece (e.g., when an investor asks you for it). Whether your Local Leaders notice everything in your deliverables or not, do the work for your own, and your business’s, sake.
6. Local Leaders Can’t Read Your Mind
If your work is not complete, make sure you upload everything you have done, so we can see your progress. If you load nothing, then we can only assume you have done nothing, and that you are not taking the program seriously.
If you include a link to a Google sheet or similar, make sure the link works and sharing permissions are set to ‘anyone with the link’. If the link doesn’t work, we can only assume you didn’t do the work.
7. Expect the Unexpected
When building a company, things rarely go as planned. As a result, the Institute may introduce additional sprints which require immediate attention at any point in the semester. These tasks are designed not only to correct poor feedback you have received from Mentors or Leaders but also to simulate the problems that may arise in the course of running a startup. These assignments should be completed on time and in a professional manner.
8. No Threes Allowed
Founder Institute Mentors and Leaders will provide you with very tough feedback throughout the program on your ideas, revenue model, growth plan, and more. This is by design because early-stage entrepreneurs need as much honest feedback as possible in order to avoid costly mistakes. In order to encourage honest feedback, the Founder Institute employs a “no threes allowed” rule.
It is imperative that you are receptive to feedback, don’t argue, and address the concerns that you receive each week by the following week. Sometimes addressing a concern means you should change something in your business; sometimes it just means you should change how you present or explain it. Even if you do not agree with feedback, that does not mean you should waste mentors’ time by arguing or explaining further. This will be especially important prior to the Mentor Idea Review and Mentor Progress Review sessions in which Mentors and Leaders will determine whether or not a business idea and model is viable.
Founders that are not receptive to feedback will find it very difficult to succeed in the program, and in the real world.
9. Expect Mentors and Leaders to Contradict Each Other
There is no secret formula to building a great business, so when receiving feedback from Mentors and Directors,you should expect to frequently hear contradictory feedback. People are different and should be expected to disagree with each other. If one person says something, it is one data point. If you hear the same thing multiple times, there may be a clue there. Ultimately, it is up to you to listen carefully to the feedback, try things out, and see what is true for your business.
Note: the best way to overcome negative feedback is by demonstrating real results. If someone says ‘I don’t think anyone will buy that’ the best way to argue them out of that opinion is to say ‘we already have 50 customers’.
10. Focus on Your Business, Not Politics
During the semester, there will be moments when Founders drop out or are asked to leave because they have not kept up with the pace of the program. In our experience, some dropped Founders try to contact their peers or disrupt the program, try to pressure their way back in, or are otherwise disruptive to the cohort.
Remember – you are here to build your dream company, and working hard is not optional. If a peer or former peer attempts to engage you in lobbying or politics, please notify your Local Leaders and the Founder Institute so we can take care of it. Stay focused on your business, and let us handle the distractions.
11. Be Honest, Not ‘Nice’
All of you hold warrants in the companies of the other Founders in your cohort. The best way you can help make your fellow Founders succeed is by being honest with them. Some countries and people have a culture of ‘niceness’ where you tell people what they want to hear, not what you really think. If a business is going to fail, the truly nicest thing to do is to tell the Founder directly (if politely) while they can still change what they are doing.
Similarly, if someone is being disruptive to your group, or has a weak business, the best thing to do is to use the flags in the system to tell the directors so that they can address things immediately. If you don’t open your mouth, it hurts everyone, including you and the Founder involved.
12. Walk Through the Doors we Open
The Founder Institute will open doors, but you will need to walk through them. For example, we will introduce you to Mentors and provide you with an opportunity to build a relationship with them, but it is up to you to take advantage.
Only you can make your business a success. We are simply here to help.
13. Enjoy the Process
If building an enduring company was easy, everyone would do it. There will be many times when you are ready to quit, but to be a successful entrepreneur you simply need to power through it.
Try to enjoy the process, and check out some of the links below with tips on graduating:
- Bootcamp for your Brain: What I got from the Founder Institute
- How my Experience in FI Changed My Life
Your semester schedule is available at the top of your Founder Dashboard.
There are two main types of sessions that are explained below.
Approximately 75% of scheduled sessions will follow a Mentored format. In Mentored Sessions, between two and four seasoned CEOs or founders of fast growth technology companies deliver 20 to 30-minute presentations on a company building topic. The Mentors answer questions from Founders in a panel format, and the Mentors listen to, rate and review the business pitch of Founders in a ‘Hotseat’ format. Below is an example timeline of how the session typically flows.
|5 Min||Director Welcome|
|30 Min||Working Group Reports (Optional)||Each Working Group President should stand up for a couple minutes and quickly outline the key positive highlights and the key negative setbacks that they face in their two Working Group meetings.|
|30 Min||Hotseat Set 1||Between 5 and 10 Founders get up in front of the room and present their business to the Mentors. Mentors then rate the presentation from 1 to 5 (no threes allowed), holding up a rating card and inputting their specific score for tracking. Mentors collectively give up to 10 minutes of verbal feedback per pitch. Rating results are showed publicly at http://fi.co/leaderboard. Before the Mentor Idea Review, the Founder is given 1 minute to pitch on the Hotseat. After the Idea Review, the Founder has either 3 or 5 minutes, depending on the preference of the Director, and it is requested that the Founder use slides.|
|20 Min||Mentor 1|
|20 Min||Mentor 2|
|20 Min||Mentor 3|
|30 Min||Mentor Q&A||Three Mentors sit together in the front of the room and answer questions from the Founders.|
|30 Min||Hotseat Set 2
||Between 5 and 10 more Hotseats (see above).|
|…||Working Group Meeting
||Any remaining time should be used for the Working Groups to meet, and Mentors should be encouraged to roam the room and get a quick update from each Working Group.|
|3.5 Hours (session)||TOTAL|
|2+ Hours||Post-Session Networking
||Once the session has concluded, Founders are encouraged to join the Mentors at a nearby bar or restaurant for informal networking and socializing. In many cases, this is where the best networking and information exchange takes place.|
There are two critical “review sessions” in each semester:
- Mentor Idea Review: This session, which takes place at the 1/3 point of the program, is 100% devoted to pitching your idea to a panel of Mentors for feedback on the viability of your startup idea. This is the first major “checkpoint” for the progress of Founders in the program.
- Mentor Progress Review: This session is identical to the “Mentor Idea Review”, except that it takes place at the 2/3 point of the program, and focuses Mentor feedback on your program progress, financial model, product development, and scalability.
In these sessions, all Founders present to a panel of Mentors to receive a multivariate rating on their business, as well as detailed verbal feedback. 6, 9 or 12 participating Mentors are broken into groups of 3, and the Founders are divided equally by the number of Mentor groups. So, if there are 30 Founders and 6 Mentors, two Mentor groups will be formed with 15 Founders pitching. Co-founders pitch together once.
It is expected that as many as 50% of the semester will fail the Mentor Idea Review either by a poor score during the session or a weak Special Assignment. Founders that do not score above a 2 out of 5 average Mentor rating are dropped out, while Founders that score between a 2 and a 3 are given difficult “Special Assignments”. Founders that score above a 3 continue in the program without any special work. Once the poorest scoring businesses are eliminated, then Working Groups are switched, and eventually grouped by sector/ industry/ stage.
|5 Min||Director Welcome||The Director explains that this is the critical juncture in the program where the strong Founders are invited to continue and the weak Founders are invited to re-enroll in a future semester.|
|10 Min||Pitch Group Formation||The Director breaks the Mentors into groups of 3 and the Founders into groups of 5 to 15 individuals.|
|20 Min||Pitch Batch 1||The first set of companies present to the Mentors. For the Idea Review, each company is given 1 to 3 minutes, depending, and a pitch deck is optional. For the Progress Review, each company is given 3 to 6 minutes, depending, and a deck is mandatory. Mentors have up to 10 minutes of total feedback.|
|20 Min||Pitch Batch 2||The second set of companies present to the Mentors.|
|2+ Hours||Post-Session Networking
||Once the session has concluded, Founders are encouraged to join the Mentors at a nearby bar or restaurant for informal networking and socializing. In many cases, this is where the best networking and information exchange takes place.|
For sample videos and a further explanation of sessions, visit FI.co/sessions.
After each session, Founders have until the following session to complete a comprehensive list of the step-by-step company building tasks and deliverables, which are designed to take approximately 20 hours total. Each week’s assignment is based on the topic of that week’s session, and was developed using Silicon Valley best practices and with input from top global entrepreneurs. This work is mandatory.
We strongly encourage that you review all of the weekly assignments ahead of time. In addition, if you are able to complete the current week’s assignments and have extra time, you should always start on the next week’s assignments.
Epic Sprints (aka “Special Assignments”)
If a Founder falls behind in the program, or receives notably poor feedback from their peers, mentors, or Local Directors, they may be given an “Epic Sprint”. These assignments are extremely difficult and have a high failure rate, forcing Founders to “catch up” and complete a large amount of business-critical progress within a short timeframe.
Epic Sprints are tailored to each company and are designed to address the poor feedback a Founder has received, in order to help them correct the issues in their business. For example, below is an example sprint that was given to a Founder who received very poor feedback related to their product definition and customer development progress:
Epic Sprint: “First, study the best practices to complete market research and surveys for your target market, and summarize your conclusions in a one page document. Second, produce a professional fifteen question survey that will help you to understand the needs and issues of your target market. Third, secure 1,000 responses to the survey from your target market via online advertising, social media, and more. Finally, produce a 10+ page PDF report that analyzes the results and outlines conclusions that will influence your product development.”
Participating in Working Groups
Throughout the program, each Founder is placed into rotating Working Groups with their peers, in order to build camaraderie and allow Founders to help eachother on their weekly assignments. Working Groups meet at the beginning and end of each training session, and are expected to meet at least twice per week in between sessions.
At three times in the semester, normally in the beginning of the program and then after the Mentor Idea Review and Mentor Progress Review sessions, the Working Groups are re-assigned.
Working Group Presidents
Each Working Group selects a President through a process of their choosing. The process could be democratic, nomination-based, volunteer-based, or even random. The President is ultimately responsible for the success of a Working Group and has a variety of duties, designed to reflect being the CEO of a startup:
- Organizing Meetings: Each Working Group should meet at least two times per week, one meeting is required to be in person. The President organizes these regular meeting and keeps attendance, tracking the progress of Founders in the Group.
- Report Absences: The President should report all absences from Sessions before sweeping it under the carpet and from Working Group Meetings on the Ratings Page.
- Posting Notes: After each session, the President needs to post notes from the Group efforts to complete the Assignment on the Working Group Page, under “Notes.”
- Selecting Pitchers: In the event that there is an Investor Session for your semester, the President selects between two and four of the most advanced Founders to pitch at this session on the Ratings Page.
- Identify Drop Outs: The President posts notes on the performance and attributes of Founders in the Working Group using a special note area with a chat bubble in the Ratings Page. At the end of the Working Group, the President informs the Director of the Working Group performance and recommends removing any inactive or poor performing Founders from the Institute.
NOTE: The President is held accountable for the performance of his or her Working Group. If two or more Founders drop out that were not flagged by the President, then the President may be asked to leave the program as well.
Working Group Meetings
The Working Group should meet two times per week, ideally once in person and once virtually. Each Working Group can choose tools to help coordinate, such as Skype, Google Groups, and Google Docs. Here are a few suggestions on the types of team meetings you can hold:
- In-person Progress Meeting: At the beginning of each session, each Member describes or preferably shows one significant product or service development milestone accomplished in the previous week and sets a major milestone for the coming week. These development milestones are different than weekly Assignments that relate to building the business.
- In-person Assignment Meeting: At the end of each session, the President leads a quick discussion on the assignment for the coming week based on the information on the session detail page and the discussions in the session itself. The Group discusses ways to successfully complete the assignment.
- Virtual Progress Meeting: For at least one hour between sessions, the Group convenes in person or in a call to brainstorm solutions to specific challenges with creating an offering. Group Members may present issues for discussion, such as finding a co-founder, building a product plan, resolving bugs, clarifying an idea, finding vendors, etc.
- Virtual Assignment Meeting: For at least one hour between sessions, the Group convenes to discuss completing the session Assignment. Each Member presents their positive and negative experiences with the Assignment, as well as any helpful resources that were used to complete the assignment. The President takes notes and posts the notes to the session detail page.
Working Group Meeting Format
The two weekly Working Group meetings between sessions should be run very efficiently by the President and the Group members. The goal is to complete the meeting in less than 2 hours. The Institute recommends that the President use a timer to keep meeting order, and a proposed meeting agenda is below:
- 10 Min President Introduction: President sets the agenda for the meeting, sets the speaking order for the Founder discussions, and collects topics for the discussion.
- 15 Min per Founder: Founder presents information for 5 minutes, and then the Working Group discusses the Founder situation for 10 minutes.
- 30 Min Discussion: This is a structured discussion of any issues or topics collected at the beginning of the meeting.
The Institute requires that all participating Founders keep their information up-to-date and stay up-to-date on their peer activities.
- Rate the Mentors: After every session, you need to rate the Mentors. This helps the Institute measure the quality of the experience and adjust if there are problems. You can see all Mentor ratings in one location below.
- Rate Your Peers: It is important that you rate the Course Performance and Idea Quality of each Founder in your Working Group, and keep these ratings up-to-date over time. If a Founder is experiencing problems, you should add a concern under Status, marketing them “Bad Idea,” “Falling Behind,” “Bad Pitch,” “Negativity,” or “Concerned.” This information helps the Institute to identify Founders that require assistance and to remove Founders that are not taking the program seriously.
- Post Assignments: Before each session, you should upload your work on the last session assignment. Keeping your work up-to-date helps the Institute keep track of your progress, and posting all assignments is required to Graduate.
- Update Your Profile: Everyone should now post their tentative company name and first three sentence description under Edit Profile. This information is frequently reviewed by the Institute to ensure that each company being developed within the program is of the highest caliber.
NOTE: You may need to refresh your web browser to see the recent changes on a page.
Attending Office Hours
Office Hours provide Founders with the opportunity to meet with the Director for 20 to 30 minutes at a time to discuss issues they are facing with their semester progress or business progress. These brief meetings require structure to be productive, and, so everyone with scheduled Office Hours must bring (1) a printed agenda of the topics that they would like to cover and (2) an overview of their business idea.
If you plan to contact a Mentor, please keep your email short and ask only one question or for one favor.
The format should be: one sentence to introduce yourself, followed by one sentence on the company vision, one sentence to frame your need, and one sentence to make the request. These are very busy and smart CEOs. Writing multiple pages of copy will not get a response. Here is a sample:
TITLE: Thanks for Mentoring Dear XXX, I enjoyed your talk at the Founder Institute on "Earning Revenue." My background is in banking, and I currently work for Morgan Stanley. The company that I am launching, SmartBank, helps to match customers with different banking needs. Given your background in lead generation, do you know what is the range of rates paid by banks for qualified leads? Any data or insights are welcomed. You can email me, or maybe we can meet for coffee. I can pop by your office any time on Monday or Thursday. Thank you. - Name, Phone, Email
Working on Vacation
Most programs have weeks with no sessions to break up the semester or to observe local holidays. Founders are expected to make progress on their business during these “vacation weeks,” and they are expected to continue having two meetings with their Working Group. As a leader of a successful startup, you will work year round, even during vacations.
From time to time, issues may arise within your working groups and cohort. The proper protocol is to work with your group to resolve any issues. If you cannot resolve them, you can then escalate the issue to the Local Leader. If there is a major issue in the program and you would like to confidentially send a message to Founder Institute HQ, please email our Enrollment team ([email protected]) with “Confdential” in the email subject line. We can then help resolve any issues you are facing.
Pitching Your Idea
Once you have finalized your idea in the program, then you should look to pitch the idea during the Hotseat and Working Group sessions in a way that answers the following questions:
- 1: What does your company do and what need does it serve?
“Anastasia makes fashionable staplers for the global office workers to add character to the work environment.”
- 2: What is the market size for your offering?
“Over 20 MM staplers are sold worldwide each year in the $20 billion office products marketplace.”
- 3: What do you have that makes you unique as compared to your competition?
“Anastasia has developed manufacturing relationships that allow the company to produce low quantities of fashionable staplers and generate 30% gross margins, and the company has secured eight of the top ten fashion designers to release a stapler line.”
- 4: Where are you in your growth plans?
“The company has already sold 10,000 fashionable staplers through an online storefront and closed a distribution deal with Staplers-R-Us.”
- 5: What are you looking to raise and what will the money be used for?
“Anastasia is looking to raise $1 MM on a $3.5 MM pre-money valuation to have ten of the top fifteen national retailers carry the fashionable staplers.”
Here are five key tips on pitching at the Founder Institute:
- Avoid Useless Words: Entrepreneurs commonly use superlatives when describing their own business, such as “XYZ has the best staplers in the entire world.” This detracts from the credibility of the statements. Most descriptions include useless adjectives and phrases that bulk up simple statements, such as “XYZ has developed over an elongated period and under the supervision of world-class engineers the process to both quickly and efficiently mass-produce staplers at various quantities.”
- Keep It Short: You should be able to explain your company in 5 to 10 sentences that takes a couple of minutes to present. If you want to succeed, make sure that your written pitch impresses your Working Group first, then videotape yourself giving the pitch. Watch the video and write down everything that you want to improve in a list. Repeat this process until you are happy with the results. At the end of your pitch, say: “does anyone have questions that I can help you with?” The shorter your pitch, the more questions that will you have, and more questions are good.
- Answer Briefly: Answer every question with one or two sentences and with as few words as possible. Uncomfortable silence is a tool that you can use to elicit another question. If you do not have or know an answer, say: “I don’t recall the answer to that off the top of my head, can I look it up in my files and get back to you through email.” Questions are an excellent sign of interest and engagement. When an investor gets into ‘question mode,’ they usually have a series of 5 to 10 questions that they need answered quickly to evaluate the opportunity. You are doing well in a pitch when the investors are talking.
- Ask for Feedback: Make sure to leave a couple minutes to collect feedback. Ask the investors, ‘do you have any recommendations for the business?’ Have a pen and paper out, and write down everything that the investors say. It’s a common courtesy to take notes, and it’s expected. After an investor says something, say ‘thank you.’ Do not get defensive. Nothing sours a relationship faster than getting into a debate.
- Be the Expert: You should read every recent blog post and know about every key development in the primary industry and all related industries to your idea. There is more than a 50% chance that an investor will have seen and researched a very similar idea within the last 45 days. It is also very likely that this investor will ask you about mundane developments or other companies in the field as a test of your knowledge and to show off their own expertise. When confronted, you say, ‘Yes, I was aware of that. Thank you.’ This will lead to more questions.
Incorporating Your Company
Forming a company before the end of the semester and issuing the Bonus Pool Warrant or Option is required to graduate. Founders must agree to immediately start the incorporation process and to issue the warrant or option following the legal session to remain in the program.
Founders are encouraged to incorporate their business with the local legal partner, but Founders may also choose to use their own counsel under their own terms. If a Founder selects their own legal partner, then they are asked to choose a high-profile law firm with startup experience that can help them in a variety of situations.
Incorporating a company is a significant step. There are costs to set-up a company, such as legal and filing fees, and companies require regular maintenance, including annual taxes. Some Founders already have companies, and everyone that is serious about being a Founder will have to set-up a company. If you are currently employed, you should read a post describing things to consider “before you quit” by Yokum Taku. Yokum has also written a relevant post on when to incorporate. If you do not understand the basics of corporate governance, the issuance of stock, incentive stock options, warrants, or other basics of a company, please purchase and read “How to Incorporate: A Handbook for Entrepreneurs and Professionals” or “Incorporating Your Business for Dummies.”
Here are answers to some common questions:
- Does the Founder need to use the legal partner?
No. The Institute strongly recommends that the Founders use the legal partner, but we do not mandate it. However, we do mandate that each company uses a high-profile and professional law firm versus an online service, discount solution provider or sole practictioner.
- What if the company is already incorporated?
If the company is incorporated with an acceptable legal structure, then the company only needs to issue the warrant or option with the help of a professional law firm. Otherwise, the legal partner needs to work with the company to transition an incorrect structure to the proper structure as part of the engagement. The Founder Institute does not accept partnership and LLC formats.
- Does the Founder Institute accept partnerships or LLC-type companies?
No. The Founder Institute only accepted stockholder organizations, such as a Delaware C or Subchapter S corporation on the United States. There are many reasons for this, including the desire to avoid passthrough taxation and the need for a common warrant or option structure.
- What if the Founder can’t incorporate due to work, unemployment or visa conflicts?
The legal partner should review existing employment contracts and basic visa situations to determine if a Founder is able to incorporate a business without significant ethical breaches. If a Founder can not incorporate, then they must drop out of the program.
- Does the Founder need to be prepared to quit their day job?
The Founder may need to quit their day job to incorporate a business, depending on the agreements that the Founder has with their employer. In such situations, the Founder must chose to quit and incorporate or drop out of the program.
- Does the legal partner take additional Warrants or Options in the company?
The legal partner should not request additional Warrants or Options in the companies as part of the initial fee deferral agreement. The initial fee deferral should include enough deferred fees to do a basic set-up of the business. After a company has used all of the deferred fees, the legal partner may request Warrants or Options as part of a larger fee deferral arrangement.
- How does the out of pocket fees work?
Each Founder is expected to pay all out of pocket government filing fees to set-up a corporation. Normally, the legal partner estimates these fees and bills the Founder to initiate the relationship as part of the client engagement process. In the United States, these fees are approximately $1,000 to set-up a Delaware C corporation.
- How does the fee deferral work?
The legal partner normally offers the company a fee deferral to cover the basic corporation set-up and some miscellaneous corporate work. Legal fees are deferred for 18 to 24 months using the standard fee deferral structure of the legal partner. The legal partner does not ask for any options or warrants or other equity in exchange for the deferral. In the United States, legal partners normally defer $5,000 in fees.
- When does the company pay the fee deferral?
The company should pay the fee deferral back as soon as possible, normally after the first financing. If the company generates revenues, the Founder may want to set aside a certain amount of revenue per month to pay back the legal partner.
- What is Class F stock?
Class F stock is a series of agreements in the United States to set-up a Delaware C corporation with Founder-friendly terms, such as protective provisions and greater degrees of control. Companies formed in the United States are encouraged, though not required, to use the Class F documents:
Joining the Equity Collective (aka “Bonus Pool”)
Each Founder in the program is asked to contribute 4% of their company in the form of Warrants or Options to join an Equity Collective. This creates a supportive group of peers and Mentors that cheer for your success, and it provides every Alum an opportunity to profit from the success of their peers.
Each semester has a Bonus Pool containing the Warrants or Options from all Alumni companies. The Pool is divided as follows:
- 1% to Founders, divided equally among graduating companies.
- 1% to Mentors, divided based on the number of sessions that a Mentor leads and the average rating of the Mentor by the Founders.
- 1% to the Local Operator(s), in exchange for organizing the semester and supporting the graduates.
- 1% to the Founder Institute, as a management fee to oversee the Bonus Pool for 15 years.
A simplified example of the Bonus Pool economics is as follows. If an Alum sells their company for $100 MM without taking external investment, the Bonus Pool would receive approximately $4,000,000. If there were 15 Alumni in the cohort, and if there were only one Founder per company, each Founder would receive a check for approximately $66,667.
For more information, see http://fi.co/liquidity_pool.
Completing the Program
In order to complete the program, there are four criteria, which are specified in the Founder Agreement:
- First, a Founder must attend all sessions.
- Second, a Founder must complete all of the Weekly Assignments in coordination with the Working Group.
- Third, a Founder must receive sufficient scores from the Founder Institute Mentors and Directors.
- Fourth, a Founder must incorporate a suitable company.
- Finally, the incorporated business must issue a warrant or option, and the Founder will join the Bonus Pool.
The Institute supports the efforts of every entrepreneur. The goal is for 100% of the participants to succeed, but it is inevitable that some in the program are unable to graduate. Founders that leave the program will no longer be able to attend or watch sessions, and we will notify the Mentors and key vendors that they have left the program as part of the protocol.
Completing the Founder Institute is challenging. For the alumni, there are multiple rewards. Here are ten, ordered from tangible to intangible:
- Equity Collective: Each Alum joins a fifteen year Equity Collective that distributes cash generated from peer success. The shared upside reduces the risk of launching a company and creates camaraderie between Mentors and Founders, who all share in the pool.
- Access to the #FIWorldwide Network: Each Alum joins an elite global network of 5,000+ startups and 20,000+ CEO Mentors from 200+ cities and 6 continents. You can reach out to members of the network using our private tools to get feedback, advice, best practices, and support. In addition, we facilitate communication through a mailing list, Facebook Groups, and online discussion tools.
- Founder Lab Advisory Programs: The Founder Institute has three advisory programs for Alumni under the Founder Lab umbrella: Funding Lab, Venture Lab and Product-Market Fit Lab. Funding Lab (https://fi.co/fundinglab) is will help you close your first or second round of finacing from professional investors. Venture Lab will help you close your first Venture Capital round. Product-Market Fit Lab will help you launch your first product to paying customers. You can learn more about each of these programs here: https://fi.co/scale.
- Invitations to Silicon Valley Events: The Founder Institute hosts regullar invite-only events to gather the network. At this 3-day event, startup founders and leaders from across the globe meet for a series of networking events, workshops with top speakers, formal dinners, and fun! Speakers at past FI events include Elon Musk (SpaceX, Tesla), David Sacks (PayPal, Yammer), Aaron Levie (Box.com), Scott Painter (TrueCar), Scott Heiferman (Meetup.com), and countless others.
- Post-Program Resources: Graduates gain access to an assortment of advanced, step-by-step guides on things like generating traction, negotiating a term sheet, getting media, and more. In addition, we leverage our global scale to crowdsource useful resources like a shared media list of 15,000+ journalists for Graduates.
- Media Outreach: The Institute provides Guides and hosts calls to help Graduates secure media, and media outlets regularly come to the Institute asking to profile certain types of companies.
- Investment Support: Not all Graduates seek external funding. But for those that do, we often have local relationships to fast-track investment, refer Graduates to various seed-accelerators around the world, and run regular conference calls to provide fundraising advice and feedback.
- Service-Provider Discounts: By leveraging our scale, the Founder Institute has secured over $2M in discounts from some of the world’s leading service providers. We typically have deals with local law firms to defer costs, and global deals include some of the world’s top business services, like Microsoft, Salesforce, PayPal, AWS, and many more.
- Safe Haven: The scale of the Founder Institute encourages fair treatment of Graduates by investors and discourages service providers from taking advantage of Graduates with poor service and bad rates. The Institute proactively confronts investors and service providers that take advantage of Graduates.
- Credibility: The training and apprenticeship program offered by the Institute have helped Graduates secure investment, close partnership deals, find co-founders and win industry awards.
- Prestige: The growing success of Graduates combined with the difficulty in completing the program and the credibility of the Mentors make graduation a prestigious accomplishment.
There are other intangible benefits. The Institute helps Graduates get exposure of new offerings across all enrolled Founders, sometimes as customers and other times as beta users. Graduates regularly meet at large events and share information on different programs, business challenges and opportunities. Graduates even share workspace.
Founders must attend the sessions, maintain minimum scores from mentors and peers, keep pace with the assignments, and engage with Working Group meetings, or they will need to drop out of the program.
There is no shame to dropping out of the Founder Institute. Many people that have dropped from the program have re-enrolled in the next semester and been very successful. You can read the experience of an FI drop-out here.
Only Founders that drop out before the Customer Development session of the program are eligible for a refund. If you drop out after this time, you will be invited to re-enroll in the next available semester in your city and apply your Course Fee to that semester. All refunds are processed within 30 days after the third program (Customer Development) session. If Founders drop out after the Customer Development session they are invited to attend the next program free of charge.
Between 40% and 80% of enrolled Founders drop out in any semester. There are two ways to drop out.
- First, a Founder that is falling behind can notify the Director that they wish to leave the program, and the Director will then remove the Founder from the system and notify the Working Group. Founders can also click the Drop Out link on their homepage. Founders that drop out with less than 45 days remaining in the semester are bound by all of the terms in the Founder Agreement, including the need to issue a Warrant or Option.
- Second, a Founder may be flagged by his or her peers or the President as falling behind, and then the Institute will conduct a review of the Founder’s assignments and attendance. If the Institute feels that the Founder does not have a suitable business or a strong commitment, the Institute will ask that the Founder leave the program. In select cases, a Founder that has fallen behind may be asked to get three peers to “vouch” for them, in which case all three peers will be asked to leave the program if the Founder in question drops out at a future date for any reason.
The system automatically detects and warns Founders if they are in danger of being removed from the program or dropping out. The system scores a Founder for being delinquent on key items. The Founder is then given an overall delinquency score, and the score is then converted to a verbal warning. If you see “Dropout” in the warning message, then you need to quickly correct your delinquent items within 48 hours. The scoring system is outlined below.
Miss 1 then +1
Miss 2 then +2
Miss > 3 then +3
Miss a Working Group then +1
Miss a Session then +2
PRESIDENT AND FOUNDER WARNINGS:
For Each Warning then +1
POOR PEER RATINGS:
For < 2.0 then +2
For 2.0 to < 2.7 then +1
MISSING COMPANY DESCRIPTION:
No Name or Description then +2 (after Idea deadline)
Missing Agreements then +5 (after Incorporation deadline)
Director “Warning” Flag then +2
Director “Drop Out” Flag then +5
score = 2: “Falling Behind”
score = 3: “Falling Seriously Behind”
score = 4: “Potential Dropout”
score > 4: “Likely Dropout”
If at anytime you have questions about the program, please feel free to email your Local Directors, or reply to any email you receive from us.