As the result of many factors, entrepreneurship in India has been never more vibrant than it is now. It is true that not every start-up will grow intoa“unicorn”,as that depends largely on how “game-changing” the idea truly is and therefore, how easily investors buy into it and how easily the market accepts it and of course,how scalable the offering and market are.

But in the last year or so, there have been several dampeners in the heady world of start-ups.Many have had to let go of employees or shut shop, while others have found it hard to raise capital beyond a round or two at the valuations the founders sought. Again, there are different reasons for these sad endings. However, there are several broad themes that can be abstracted from start-up failures around the world that can act as beacons for wannabe entrepreneurs so that they do not make similar mistakes.

1. Relying only on the spoken word when it comes to agreeing important terms with people, even co-founders.

Very often,start-up ventures are co-founded by good friends or former colleagues getting together.The chemistry might initially be good, but the pressures of business may cause cracks in friendships.It is best if the co-founders have everything documented properly in legally-binding fashion, to prevent “I thought you meant that…” and “I never meant it this way.”from ruining not just the venture but also friendships.These are just examples and may sound trivial in the

2. Not assigning clear roles to each of the co-founders.

Not everyone is good at everything. Some people are great net workers, while others can design products or write code.There may be others in the team who are inherently more meticulous about maintaining records or following up etc. The point simply is that even amongst a group of founder techies, there are some who are better at marketing, while some will be better at managing finances and so on. Make sure that roles are clearly defined and documented. It is a team effort,to be sure, but it is important to ensure that everyone is pulling their weight and doing what they signed up for.

3. Define rules to govern even improbable situations.

Like they say, no body gets married with the intention of seeking a divorce.But hey,divorce lawyers around the world are quite busy,aren’t they? Right at the start, the co-founders should agree on how they will manage situations such as one of them wanting to exit or a new friend wanting to come on board as a co-founder. Who gets the equity stake belonging to the exiting share holder? At what price? When the new investor comes on board, do all existing shareholders dilute their shares proportionately or does the entity issue fresh capital? They are just examples and may sound early stages of the venture.But trust me, such situations have caused grief to many co-founders.

4. To whom does any IP in your venture belong?

Sounds like an innocuous question, right? What if the core idea of your venture is based on IP that has been registered in the name of one of the founders?Or worse,onIP that belongs to some one else? It is best to get professional legal advice to ensure that your venture does not get sued for violating the IP owner’s rights.

A related point is to also check if your venture does indeed have some IP. This is to reduce the risk that IP that has been developed by you and your team (and hence, should rightfully belong to your venture)is infringed by someone else. If something you and your team have developed is indeed IP and can be registered in your name, do so at the earliest. Remember that even today, more than 300 years later, controversy rages about whether calculus was invented by Sir Isaac Newton or Gottfried Liebniz.

In the early days of a start-up, the focus is understandably on fine tuning the offering and cracking sales so that the first set of paying customers are on board.

5. Understand the term sheet for every round of funding.

When entrepreneurs deal with investors, there is inherent asymmetry.9 times out of 10,the former is in a weaker position, given that they are seeking capital.Apart from being more experienced in assessing risks and being able to take a more dispassionate view of a venture than its founders usually can,term sheets are often loaded in favour of the investors, who after all are looking to protect their interests.

Not all entrepreneurs are former PE Investors, I-bankers or Finance wizards.It is a good idea for them to work with mentors andlawyers who understand the business of risk investing to navigate the waters safely and steer clear of potential dangers such as clauses that you did not bother to read (or did not understand).

6. Do not ignore compliance requirements.

In the early days of a startup, the focus is understandably on fine tuning the offering and cracking sales so that the first set of paying customers are on board.Another equally critical focus area is valuation and funding. But amidst all this, do not take your eyes off the compliance ball.The tasks are routine but do take the time to ensure that your venture is fully compliant.