Technical co-founder · Minimum Viable Product

The chicken and the egg dilemma w/ regards to tech cofounder and funding?

Kurosh Hashemi Strategic and Product Marketing

April 8th, 2015

I'm finding that potential technical cofounders can only work with funded startups (or want money to help build the MVP).  However, investors don't invest until a company has an MVP that has demonstrated traction.  

I'm left wondering if I should be teaching myself how to code (already in process) or dedicating my time to finding that person that will also be willing to start without pay (several months lost on this already).

Does anyone have any suggestions on how non-technical cofounders get beyond this challenge?

Neha P

April 8th, 2015

I can tell you what is working for me. It's not perfect, but it is working. I faced the same problem - no funds to pay someone and obviously no one will invest in "just an idea". Two things need to go on simultaneously - finding team members and building the product so that you're not wasting time. I started with validating the market, some competitive analysis, a business model canvas. I then proceeded to write the specs of the product, draw wireframes using balsamiq. I bought a domain and bootstrap template. I hired someone on elance for a few hundred bucks to make a few simple things work. In the meantime, I found someone on meetup.com who is a student software developer. It has been a few months and he is developing the site with me. He is not really my tech cofounder but an integral part of my team. I really like working with him. Developers would probably be more interested in working with you after seeing a prototype. I keep reading articles about the perfect cofounder relationship, how we must absolutely find someone etc but what if you can't find someone immediately? Are you willing to wait endlessly? I'm not convinced about that approach. 

David Bergman CTO, Co-Founder of Stackray, Inc.

April 8th, 2015

The idea of learning how to code, to quickly gather those sought after VC bucks. Well, what can I say. I am not the smartest egg in the basket (...), but I couldn't build a system of any significant level of complexity before I had plowed in some 6,000 hours into it. At least not from scratch.

So, I would only recommend the 'heck, I am tired of those spoiled developers and have the idea defined down to the last screw inside my formidable head, so just give me one of those Learn Programming in 24 Hours book, how hard can it be!?' path if either:

1. You are extremely smart. Well, ok, you just have to be significantly smarter than me and my [spoiled geek] peers. So let's change that to 'quite smart' then.

2. The product, or at least what you call MVP (but it sounds more like a demo, or prototype), is very simple technically, such as a pure web site with perhaps a few database tables. RoR + Postgres running on Heroku. But nothing else. No integration with anything else, no automatic sending out of anything, no intelligence.... And no esoteric demands, like actually keeping the system running or backing up data or keeping data safe. That stuff.

3. You have *someone* to lean on for at least the 'mundane' tasks as getting an empty app up and running, which you can then fill with your love. Getting the infrastructure in place, both on your laptop and for production deployment. A DevOps guy. He/she would preferably give you advice when your head is bloody by all the wall-banging at night.

4. You have massive time at your disposal. Both personally and for the market window. I would in somewhat complex product case assume a few years to get to a "build stuff from scratch and make it run" level.

And, I am deliberately ignoring mobile clients and that good stuff.

Regarding MVP, I have noticed how people are starting to overuse it. And often prefix it with "just", as in "just an MVP," in order to push down the crazy demands of the greedy technologist, whose only purpose in the end is merely encoding my great entrepreneurial thoughts. An MVP is a product. Solid, stable. Product. Used by clients.

Joe Monastiero CEO, Founder nFlate

April 9th, 2015

I realize this subject is beat up pretty good already, but I'll throw in my 2 cents anyway.

I found a CTO co-founder with my paper napkin idea. We went out to raise money without any code but with excellent resumes. Epic fail. After 4 months, CTO and I split amicably.

I then went to a Startup Weekend, pitched my fairly mature concept to the group (of about 200), got 4 people interested, 1 was an outstanding young webtech, another called a young Ph.D. data scientist candidate he knew to come and meet me and another (cloud expert) told me he wanted to join our team after the weekend was over. So I ended up with 3 outstanding young engineers working with me part-time (each had full-time jobs) and they've been with me for over a year now. We're releasing our MVP this month, after pivoting 6 months ago.

I've added another part-time Web-tech (about 4 months ago) that the cloud architect brought in and a BD person about 3 weeks ago. All are working for equity, but of course, not full-time, co-founder, CTO-experience equity. The downside is that the 6 months of dev to get to MVP (really 14 months, if you count pre-pivot efforts) could have been about 90 days. But the upside is a great team, ready to join full-time once we are funded.

I am the product architect (I do not write any code, aside from a little HTML/CSS/JS touchup), but I am responsible 100% for directing coding activities, so I believe in order to accomplish this strategy, you have to have a solid technical foundation and the ability to lead an engineering team's activities.

As a final point, I did a series of trial closes in attempting to procure funding pre-MVP with no success. Our target market is huge, our product category is very topical, I've been involved in 2 previous successful exits (1 IPO and 1M&A) and the story/message has been ubiquitously well received, by both trusted personal friends and advisors as well as investors. I'm a very firm believer that in 95%+ of the cases, you need an MVP and some compelling traction to attract outside funding today.

Anonymous

April 8th, 2015

I'm doing the same, Kurosh, and if the right person NEEDS some minimal cash flow to get involved, my plan is to raise a micro round from a few angels at a lower valuation to get to MVP.  While I'm not eager for that sort of raise, if you find an awesome person who just happens to have cash requirements (if legitimate, vs just wanting to keep up a lifestyle), I'd rather do that than lose them. 

Bill Kelley

April 8th, 2015

Ray's solution is a good one: it can be done as a 'bridge round' in which the stock ownership converts at a favorable (founder) rate into options. Usually vesting at 125% will be attractive to an angel. It can also be done as a 'bridge note' in which the investor has the choice of taking 125% in cash or options. 

At this stage, of course, it is such a high level of risk that most entrepreneurs look to friends and family.

Of all the positions to fill at the start, I find the CTO candidates to have full dance cards, so it is not unreasonable to expect they will want compensation. The best candidate will buy into the vision and opt for a mix of equity and cash...

Lane Campbell Lifelong Entrepreneur

April 8th, 2015

I have a great idea, its for a flying car. Everyone in the developed world will buy one if we can price it at $400 USD. Would you invest?

In a nutshell that's what your idea is to an investor or a developer. An idea. It's on you to make it more than that.

I can't tell you what works for everyone but I can tell you what has worked for me. There were a bunch of missteps along the way and I spent a bunch of my own money on an offshore team before finally doing it right and recruiting in North America. I have built and sold three service companies in the last six years but I am shifting to building a company around a platform. I have a background in consulting for technologies like IP Transit, Telecom, Enterprise Storage and Virtualization. I don't talk the same kind of tech as software developers but I know they are highly rational people who value their time. To attract the right kind of co-founder I needed I built a company around my idea. I used Vesting Schedules to ensure everyone is actively participating in the growth of the business. Here is what worked:

First, I found non technical co-founders who shared my vision. I started with someone who at the time was a partner of mine in another business, they are an amazing salesperson. Together we sold the idea to four companies in the states and one company in the UK. I expanded from that co-founder to bring on a CMO (Chief Marketing Officer) who gets growth hacking, a CFO (Chief Financial Officer) who has built and sold his own financial company, and finally a CPO (Chief Product Officer) who has over 15 years of experience in the industry and loves our idea.

Second, I brought on advisors to our advisory board that are highly regarded experts in our industry. People who are well regarded, who are published and most importantly know a ton of others in our industry who can help us grow explosively when we are ready for market.

Third, I brought highly regarded development experts to our board of advisors, folks who are on the core team of popular open source technologies we will be using or are contributors.

Fourth, we applied for all the startup programs we could that don't take equity. Most give you some type of credits for their service/product, access to their engineering teams and allow you to state your associations with the company. We got into every single one of the programs we tried to get into.

Fifth, I leveraged my network to get introduced to investors. One agreed to invest in our company after we launch the platform.

Six, I recruited for a CTO to join the team to help us build the product. It took three months, I interviewed over 200 people. We had five candidates who agreed to help us build it. The developer we went with to be our CTO has plenty of experience and we are confident in his ability to lead us to ship the product.

In summary, my unproven method (we haven't launched yet so it's not a proven model) is that you don't try to raise money or build the product till you build the company. If you attract great people to the idea then others will want to join you and in the end you can build a great business.

/my2cents

Michael Barnathan

April 8th, 2015

Pay them, offer a lot of equity, and/or convince them it's a rocket ship and you're Captain Kirk. The equation doesn't make sense otherwise - industry pays too well right now, and on the opposite extreme, they can always start a company of their own and get 100%. In the middle, you're competing with every other entrepreneur who has an awesome idea that will disrupt everything, but no product, and an experienced tech will see enough of them to become jaded quickly. What's compelling about working with your company specifically? It's what every nontechnical entrepreneur in the tech industry has to have a message for. You could also code it yourself or find contractors (again, $ out of pocket) to build the prototype. Bootstrapping labor and capital is one of the risks you have to take as a tech entrepreneur. Well, there is one other thing you can do, perhaps the smartest thing you can do: pre-sell. Generate traction and you'll get *everyone's* interest, investors included (see rocket ship). Plus it'll help you validate the market.

David Schwartz Multi-Platform (Desktop+Mobile) Rapid Prototyping + Dev, Tool Dev

April 8th, 2015

As someone else pointed out, take a look at this thread I started. I'd love to get more perspectives!

http://members.founderdating.com/discuss/2689/Software-community-lab

If you're a marketing expert and you think you'll be able to learn enough programming skills to build your product, consider the flip-side: a hard-core programmer who decides to learn enough marketing to launch his business, so he doesn't need to hire a "real marketer". How successful do you think he'll be? 

I hate to say it but ... you're both in the same boat.

Anonymous

April 9th, 2015

When you ask someone to be a co-founder, you're not getting a free employee. You're getting a business partner. So ask yourself, what if the shoe were on the other foot? What if a technical person were asking you to be their co-founder, to work for free and build their idea? Would you do it? Do you even have any skills that a technical co-founder would be interested in having as a co-founder?

"I'm the CEO type, I'll wine and dine investors". Do you know investors? No? Then you're just bragging, "I have a charming personality", and if it's what you are trying to bring to the table, you're implying that I don't. Great job.

"I have awesome ideas". No you don't. I want to know, where does this idea that ideas are so valuable keep getting perpetrated? Was it some popular cartoon we all watched as children? Was it a movie? Was it a class in school? A history book or something? Because anybody can come up with an idea. Few people have a strong work ethic plus intelligence.

"I have an MBA, I can manage people." What people? Oh, you mean me? Sorry, wrong answer. I don't need you managing me. I'm perfectly capable of managing my own work. I need something else out of you. And get something straight, we're not trying to get hired anywhere, your credentials mean nothing.

If, on the other hand, you were to say:

"I know people in the XYZ industry press, I can get hits from our target demo on our site." Oh hey! Now where getting somewhere.

"I have worked in XYZ industry for 20 years and I noticed that your thing that you're already working on would be great for my vast contact list of people still in that industry." You have potential customers with pain points? Okay!

"... and I know that they're only interested in <insert specific monetization plan>. Any other type of monetization will be completely ignored." Hey man, this is gold. Literally. Money. That's what this shit is all about.

"... and I've done this before." Cuz I can show you that I know how to code, can you show me that you know how to market and sell?


If you can't do that, you're wasting everyone's time. Go back to the megagigantocorp world.

Eric Wold

April 9th, 2015

@ Joe,
Fantastic story. Would you privately tell me how much equity that ended up costing you to get this far?  I'm doing serious research to try and prove if I can deliver a better result for founders via a "full stack accelerator":  https://docsend.com/view/br9aa92

If I can get the model to the point where even an experienced founder would consider it a good deal, then I will be able to sleep at night.  :)