Managing risk, from idea to exit: key takeaways

Jonathan Ellis
3 min readSep 15, 2020

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On September 1, 2020, as part of the midwest.tech/connect 2020 programming series we explored risk management with panelists Cailie Mau (SaaS Practice Leader, TriNet), Jessica Schultz (Venture Capital & Private Equity Practice Leader, TriNet), Tom Firestine (Managing Principal, Calculated Risk Advisors), and Horace Flournoy (Co-Founder, SwayBrand), moderated by Jonathan Ellis (Managing Director at Sandalphon Capital).

We’ve listed some high-level takeaways from the session here below — be sure to consultant your legal and tax advisors for full information on these and other important topics:

Employment law is often the most crucial area of risk management for early-stage companies to address. There can be steep penalties around a variety of employment issues including misclassification of employees as 1099 workers, payroll tax compliance, ACA reporting, benefits compliance, interviewing procedures, or other wage and hour disagreements. With the shift to remote hiring, thought needs to be given to numerous state-by-state and federal regulations including workers’ compensation and avoidance of penalties for failing to implement company policies (e.g. sexual harassment or provision of a 401(k) plan to employees) or carry certain insurance policies upon reaching specific employee headcount inflection points.

Expect a variety of stakeholders to demand and/or prioritize different types of insurance as you navigate your startup journey. Board members may insist upon directors & officers (D&O) insurance or key-person life insurance for the CEO; customers may insist upon significant levels of liability insurance as a part of the contract negotiation process. Commercial contracts often require multiple types of insurance including general liability, auto insurance, workers compensation, errors & omissions (E&O) insurance, and cyber insurance. Consult a knowledgeable insurance broker to help you understand which types of insurance the company may need, how much, and how soon.

Internal document assets become increasingly important as a company grows. Employee handbooks, onboarding procedures, and solid corporate governance are essential as the company takes on money from investors, expands to a broader set of customers, and gets closer to a sale or exit. Entering into contracts is inevitable at any size or stage of a company’s lifecycle; be sure to retain experienced legal for any agreements entered into by the company.

Understand costs that your risk management program will incur before you seek financing from outside investors. Upon reflecting on your desired level of protection against risk, you may decide that it would be appropriate to hire your first HR staff sooner than you otherwise may have considered, to hire an HR/compliance consultant, or to outsource some of risk/legal/HR to competent external providers, such as professional employer organizations (PEOs).

Understand where your remote workers will actually be working, and be sure to abide by all local jurisdictional law. Whether your company has hired employees or contractors in other states or in other countries, be aware of the policies, processes, and offerings that are legally required by the governing bodies of the jurisdictions in which those individuals live or work.

Recognize that as your company gains traction, funding, and customers and becomes increasingly successful, the likelihood of becoming involved in lawsuits is likely to increase. Always be sure to be purchasing insurance of the types and the amounts that make sense for a company of a certain size and age within your specific industry. Realize that some issues which may be covered by certain types of insurance (e.g. a data breach) may be extremely damaging to your company’s reputation and prospects regardless of financial liability protection provided by insurance; it is important to dedicate ongoing resources to preventing large, negative events from occurring in the first place.

More information

You can check out the full webinar recording here.

More resources from TriNet:

TriNet: If you are interested in learning more about TriNet and how they can help you with your company’s HR needs, please contact one of their representatives through their calendar here.

To learn more about Calculated Risk Advisors, a boutique risk consulting firm and professional liability insurance brokerage, you can contact Tom Firestine via tfirestine@crbrokers.com

Thank you to our MTC2020 sponsors: TriNet, Signature Bank, Neal Gerber Eisenberg, Calculated Risk Advisors, Objective Paradigm, and Carta.

Summary by Andrew Hawley, MBA Associate at Sandalphon Capital.

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Jonathan Ellis
Jonathan Ellis

Written by Jonathan Ellis

Sandalphon Capital, a Pre-Seed to Series A stage Midwest/Midcontinent-focused early stage VC firm