The program was organised by Peter Zaboji of the European Entrepreneurship Foundation and brings accomplished entrepreneurs and venture capitalists to the classroom. Zoli is a serial entrepreneur from Silicon Valley and EEF Entrepreneur-in-Residence.

Incentives for founders

What it is that makes a startup run? What are the methods used by accomplished company founders to build successful teams? According to Zoli, one of the key starting points is startup financing. He explained the concept of vesting, in which founders earn their shares overtime, in proportion to the amount of time they dedicated to the business (read more). If there are two co-founders, they should always involve a third person, who is independent and trustworthy and is ready to show them the critical mirror. Founders are often reluctant to spend money on lawyers, but as Zoli put it ironically, one who is not willing to pay a couple of thousands of dollars for setting up a stable legal framework for his or her business should not consider becoming an entrepreneur at all.

Incentives for employees

Early joiners usually benefit from the option plan: the strike price is the price of the stock at the time they joined the company – so they can acquire shares later at a very low price. Many companies apply the “cliff” concept (read more), which means that the new joiners have to wait for at least 12 months till they can execute the option, i.e. buying stocks at the strike price. However, liquidity is often an issue in the case of closed corporations, as their shares cannot be sold as easily as that of public companies. The main reason is the lack of transparent company information. So what is in it for shareholders? They have to work together to grow the business and make its shares liquid!

One has to explain the vesting system and the stock option plan to employees honestly. These methods are not well known in Budapest or in Central Europe. Incentivising is a key for success, as some employees would want to work more if they receive additional stock options in exchange for their extra efforts. Zoli suggested to treat employees in a way that they feel ownership – including the secretary or the maintenance personnel. How else would you expect them to care? You are in the same canoe with everybody else.

A players choose A players, B players hire C players. When you make a hiring decision, do not focus on acquaintances. Instead, you should find people who are better than yourself. If you hire people who have a much smaller comfort zone than yours, they will drag you down. And when it comes to evaluating performance, no one should have a safe job. All employees, everybody – including the founders – can be asked to leave.

Incentives for investors

Investors should be incentivised, too. They add value to the company when they invest, therefore there is no vesting. You have to make sure to choose the right people – ones you can work with “in the pressure cooker”. Good investors can facilitate the introduction of the company break the vicious circle of the “chicken and egg problem”: if they stand behind you, potential clients will be more likely to trust you so you can show up more successful projects and references to future clients. And they can also facilitate additional fundraising – money is never enough. However, you need to keep investors on their toes: they must feel they are honoured, privileged to work with you. As your fame spreads, it will be easier to raise additional funds from various sources as more investors will flock to you.

And the Crown Jewel

The crown jewel of business are the customers. Without them, no company will ever succeed. Their trust has to be earned on every single day. If someone is willing to pay for your product, that is a real privilege.