Technical co-founder · Business Strategy

How to keep leverage as a non technical founder?

Anonymous

March 30th, 2016

I struggled for a year working fulltime as a founder and hired designers and engineers using my savings in an attempt to develop an MVP. We couldnt finish an MVP and I couldn't find a technical cofounder, hence we never were able to raise the money either.
 When I ran out of money, I had to unfortunately take up a full time job and unfortunately all of the team left as they only wanted to work on cash based jobs.
 I still believe in the idea and I had validated the product market fit by doing competitive analysis as well as getting feedback from potential customers through interviews and showing the screenshots from the design documents. My startup falls into a "me-too" business category with no monopoly and can be profitable in a year (as has many recent similar startups done). It is not disruptive and not fit for VC money either (won't scale to a billion valuation).
It has been over six months now and I have found some developers who want to take it forward as tech cofounders. Unfortunately, due to financial constraints, I am not in a position to quit my job before next 12 months.
If I give the new cofounders already existing code, they have a headstart in product development, enough that they can finish the MVP in 3 months. A lot of hard core data scientific algorithms are already built, they will only need to finish the web dev/ mobile app part..
If I hand over to them all the code for the algorithms, the research from users as well as the design documents that I spent a lot of money to built, what incentive do they have to keep me around ?
For next 12 months I wont be able to add a lot of tangible value and because I can't join the company fulltime, we wont be able to raise money either. I will be in a very vulnerable position with no leverage.
They will be tempted to steal the IP and start their own company and I wont be able to do anything about it since they are from another country where law enforcement is impossible and contracts have no meaning.
What is my strategy to ensure that I get a fair reward for all the hard work I put in and all the money I spent on my startup ?
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Tarun Wadhawan Programme Manager

March 30th, 2016

My 2 cents. Never rely on outsourcing partners when you are not a subject matter expert. No offense to foreigners but there are plenty out there from India , South America / Ecuador - double the efforts and Can prove unreliable. You mentioned that you already have spent a good amount of time and money recruiting local team So what was produced out of that effort? If you have a working piece of software I would approach a local tech company through a local Incubator / accelerator ( state run ) and offer them a partnership. Make sure to have a mutual confidentiality agreement signed between u guys Before u talk about your ideas. Let me know how goes the battle.

Michael Barnathan

March 30th, 2016

There are a few things I want to highlight:

"If I give the new cofounders already existing code, they have a headstart in product development, enough that they can finish the MVP in 3 months. A lot of hard core data scientific algorithms are already built, they will only need to finish the web dev/ mobile app part."

Don't assume that - they now have to come up to speed on an existing codebase. It may be written in a language / framework they're not familiar with, or it may, bluntly, be crap and they will want to rewrite most of it (most developers I know will want to rewrite most of it even if it isn't crap, so make sure the reasoning is clear and compelling).

"For next 12 months I wont be able to add a lot of tangible value". If they're the coders, you need to be the one who (pre-)sells it. It's your vision, and you will have to stick around to promote it among your team as well as to external stakeholders. Your value is in validating your concept, finding product-market fit, and bringing in partnerships. You can do it, but will need to carve out some time on evenings and weekends in addition to that full-time job to make it happen (hey, startups are hard).

"They will be tempted to steal the IP and start their own company and I wont be able to do anything about it since they are from another country where law enforcement is impossible and contracts have no meaning."

If they're co-founders and you're uncertain whether they're trustworthy, don't bring them onboard. It sounds like they're employees working for equity, and in that case, their continued participation in your business is contingent on their faith in your ability to do things they can't and make that equity valuable for them. I doubt they'll want to steal your work in any case; most likely they'll simply drop the project (potentially at the worst possible moment) if they're not happy.

As the primary founder of the business, you are *always* selling the business to your team. Everything you ask of them, they'll do because they believe in your vision and in your collective ability to make it happen.

So in short, I don't think there's any way you can simply "do nothing" and still have a viable business. You're going to need to be in the thick of it with them for the business to succeed, selling, creating opportunities, and inspiring, and that's how you'll justify your equity.

John Currie ITERATE Ventures - Accelerating Science & Technology Ventures www.iterateventures.com

April 8th, 2016

If you are the Non-technical Co-founder, doesn't that make you the business leader?  And doesn't everyone know in the startup world that "business issues" - namely marketing and sales - are more important, equal at miimum - than the tech?  Are you not bringing this value to the table?  Don't they value what the 'business side" does? 

If the tech side doesn't VALUE business skills - run.  Most startups recognize they need some.  I would also assume that the primary business skill you bring is CUSTOMERS (or the path to them, at a minimum). As long as you hold the keys to getting customers, you should have tons of leverage. If you're not bringing this skill, you have to ask, what non-technical skills are you bringing to the table?

Terrance Boult El Pomar Prof of Innovation and Security at U. Colorado at Colorado Springs

April 8th, 2016

This is a common question I get from students. Almost but not quite as common as how to get the tech team to do follow the CEOs directions and timelines.

#1 If you don't trust someone don't work with them. Ever. Legal remedies are a last resort and only work if you can afford to use them and if they have enough money to pay when/if you win.

#2 if you cannot add value, then don't start a business. But as multiple people already said, you are probably selling your self short and can still add lots of value.. just maybe not lots of time. Remember Time != Value. And in your case you may already have so much value just to get it to the current point.. just keeping the development on track for the product is adding value.

#3 working for equity does not imply they are a team-member If you want a team to work, you have to understand what motivations them. People working for pay (even equity) are often not committed to the cause or the vision. At the beginning you want/need people that really share the vision.

#4 don't undervalue the tech contribution. I constantly find business people that undervalue the tech team.. offering 5% or 10%. They might initially agree to it but then quickly loose motivation. A good tech team will be adding value well beyond just implementing things, e.g. understanding how to make the product work well and satisfy customers. I try to get founders to consider what it would take if you paid the tech team cash... and took the cash from an investor how much equity would they demand for the cash. And that is how I would say to set the value of a equity-funded team. In that context remember that new money often does not place near as much value on past things that did not work.  And early money, sees great risk, so demands greater upside.   Ideas are cheap; execution (both the business side and tech side), are were value is really created and for many products it takes both done well.



Given you say this is a me-too business I would recommend you take a bit more time find an actual tech-co-founder who will work more closely with you but who also sees the vision and with whom you can work closely. Maybe you should do a startup-event or visit a university and find a student that wants to be your tech co-founder.

Paul Brunson

April 9th, 2016

Hey Anonymous,

I just wanted to echo some of these comments above and hopefully encourage you a bit. I am in a fairly similar situation - I'm 'non-technical' myself, CEO of my startup and had a team that was actively working in our part time to develop the MVP product and then it all fell apart. Mostly I think because it's hard to do all of this in your spare time and stay motivated. As someone up above said, "It's hard starting a business". So, hear I am on a Saturday on FounderDating, looking for a CTO and (quite honestly) getting a lot of inspiration from your struggle and the comments and advice from everyone!

Don't. Give. Up.

If you really believe in your idea - and I assume you do, or you wouldn't be here trying to keep it alive - then make it happen. Keep contacting folks here and in real life that can be your CTO and don't sell yourself short. The CEO sets the entire tone for a company and that tone, that vision, is most important in the early stages of a company.

Good luck and let us all know how this plays out.


Paul

Richard Alcott Marketing and Communications

April 8th, 2016

You appear to be operating from weakness.  First if you don't trust them walk.  Go find people you are comfortable with.  There are options finding software resources willing to work for a piece of the company, and a defined opportunity for reward with growth.   Second, if you do work with others, create an agreement that clearly rewards their success -not sweat equity- so they work with you, and that clearly penalizes if they decide to compete against you post exposure to your work & business.  Last, if you have the right team, respectively be the expert that drives business success and let them be the expert in their area.  

Andrew Corn CEO at E5A Integrated Marketing

April 8th, 2016

Seek balance not leverage. Being business savvy, having a contact list, being able to communicate, market, bus/dev are all as important as coding. In the old world of companies, controlling revenue ultimately is as powerful as any other position within a firm. I believe showing interesting and learning enough about topics important to your business, and not your forte is important. Some of the best partnerships are based on having few overlapping skill sets. Primarily focus on what makes you a co-founder, keep your promises and balance should be achieved.

Brian Tsang Aspiring Marathon Runner, Payment Risk Analytics Products

April 8th, 2016

The value of understanding the business problem, prioritizing requirements, and launching the go to market is more golden than building the actual code. You can always find engineers however identifying a solvable business problem that can go to market trumps all.

Hiring a team is not easy and you should never partner with people whom you do not trust nor want to grow with. This is not a throw over the fence thing. It is a commitment, much like marriage.

Suggest to rethink the partnership strategy.

Raul Martin

May 7th, 2016

I dont think how to reward is a theme at all.
The real issue is the lack of trust between the original owner and the potential members. He is afraid that once he shares any or all the code, they will dissapear and create their own version of the product.

As others have said, I would walk from that team. Your choices are basically: 
1-Try to find a team that's local, or at least on a country with strong IP laws.
2-Wait for those 12 months to save up money, or maybe a bit less, and hire someone to finish your platform.
3-Partner up with a local software company/startup studio. Offer them an equity deal so that they get equity after they complete certain thresholds. If they develop the business enough, you could eventually transition to a full time position.

Kinda curious of why you think its not a VC business. If you think it could pay for salaries for 3-4 people, it might be something scalable or at least you could the software for other regions. If it was the case, then you could at least get an angel involved.

Michael Barnathan

May 9th, 2016

If they're out of another country, a contract could be pretty dicey. And even in the US, it would be unenforceable unless "consideration" is included for both parties - usually that would be either cash or equity at some non-insignificant valuation for you, code/IP for them.