I'm a very seasoned web and app developer. I'm also pretty good on the business and tech side of things. A few months ago, I took a call from an idea person. His idea was great and he wanted to make me a 40% partner. Everything seemed good.
I started development and things were on track. After a month, I asked him about contracts, the business license, bank accounts… he had nothing ready. I voiced my concerns which prompted him to start working. Another two weeks go by… nothing.
I told him that I'd need to be a 50/50 partner if I had to start doing business work as well as development. He went crazy after that. After a week of threats and angry emails the doomed partnership failed.
Looking back, I think he was just trying to get free code work done and he was going to ditch me after an initial demo was complete. Are there any simple questions I could ask to avoid this in the future?
I think you don't want to be someone's first startup, especially if you're doing all the work.
Initial Questions for Mr. Idea
First you want to establish what their claims are. Then test the claims.
1. What are the Tasks that you think we'll need to do to develop this product and make money?
(Presumably Mr. Idea is only expecting you to be the technologist (the product developer).
If Mr. Idea knows what they're doing their answer should include:
2. Which of these must be done first?
3. Which of the tasks of the business are you planning to take on?
4. How many products have you done #3 for?
If Mr Idea says "I know the market. That''s my value."
I'm betting Mr. Idea will claim to know the market . That can be extremely valuable. But it's vague. It's like someone saying " I'm a good developer". Think about how you'd qualify that statement.
Remember: it's not as simple them saying "you build something my great idea. Then people will just give us money for it." There's Wayyyyy more to it than that. Hopefully you know all the tasks involved in bringing a product to market and profiting.
So we need to drill down a bit and qualify what that means.I would think that includes :
An idea-only (wo)man would bring all of the above to the table and be very very valuable without actually implementing any of the idea. (Knowing where the wallets are, how much it's worth to them, and how to reach them is GOLD.)
Questions to validate I KNOW THE MARKET
PS - to me it's a red flag if they get annoyed that you're trying to validate the idea (if you approach it as positive but seeking to understand more). True entrepreneurs are actually risk-averse. They WANT to know what the risks are so they can mitigate or avoid them. (Obviously, they want you to be positive but health skepticism is...well...healthy)
Time and capital(knowledge and monetary) are probably the two most important resources for bootstrap startups. That said, there are a few items I'd like to highlight:
1. As mentioned earlier, cofounding takes time and is like dating. You need to establish trust, and usually that only comes with time. Even if you had a set of questions, how do you know that the answers are truthful?
2. Do not agree on a fixed % up front especially if you don't know each other. If anything, you should work on a dynamic equity arrangement if possible. E.g., if it is only time that you are both putting in and he puts in 10 hrs and you put in 40 hrs, that that is 80% for you at that point in time.
3. My company is even based on this premise, we have hundreds of ideas and don't mind disclosing and sharing these ideas for someone else to execute. In fact all most of the work is in the creation, building and implementation. Most ideas lack market validation / use cases. An idea is worth 1-2%, at most 5% depending on how far its been tested. So for him to ask 60% is quite a lot.
4. As long as there is no patent, proprietary IP agreement that was signed, the idea now might as well be yours, he has no recourse to claim "an idea".
From what you say, it seems like it was something he wanted to call his own, but had no idea how to execute.
Happy to further chat if you want.
Sorry to hear that.... I've been in the other side, with a company ready and all but no coding. So I dove deeper into it and got it working. Why don't you do the same but the other way around? If you don't like business, find someone who does, and if the idea is great, and you have no contract, why loose your beloved work time for someone who really didn't brought the extra juice?
The only piece of advice I suggest you is this: have a partnership agreement contract. There's no need to actually have a business if you're going for idea, concept and seed money (and the prototype can be raw as well, if that works for VC's, but already working businesses are more easily funded - by all sorts of investors - then ideas and concepts).
If you're looking for a serious business partner, then control your part - have the code controlled by you and you alone, say your website, your loopholes to enter it, or if all goes wrong, grab your work and create your own company! You didn't had any contracts signed... so... what a heck? Even IP is hard to prove and legal battles are a bloody mud path for all in the swamp.
Real work comes with real contracts, unless the guy is your 20 years best friend - and even then, the hammer can drop in your head.
One thing I've noticed is that if you present yourself as a company, the chaff will avoid you. Scammers do not like informed people.
All success to your endeavours!
PS: If you do the tech & business side... 50-50 is a bit kind for the other guy who does... nothing... right?
I think the first thing is to square away on a lot of those important items upfront. Not sure whether one of the issues was your equity grant existing or not, but before you get going, making sure both sides understand the founding equity grants is key, and what the decision making structure is.
If that was finalized, I agree with the previous poster that this ends up being an example of this 'idea' guy not being able to execute his role in the partnership. If you don't know the person in advance, reference checks and things of that sort (in addition to test project, etc.) might be the best path to validate the individual, their competency and, most importantly, their character.
Interpersonal skills, emotional intelligence, and that good ole gut instinct is probably your greatest asset in situations like this. I don't think there are any hard rules or questions you can ask to avoid these types of situations. You just have to feel people out and proceed with cautious optimism. That's my two cents.
Take my advice if they are not serious run
You can not always judge the trustworthiness of a person by asking a few questions initially,
Though, you may keep your eyes open forfor-
1. subtle signs of immaturity and/or secrecy, you need to trust your guts on that.
2. Too good attitude
3. Prior experience with business
4. Prior experience with team (the people who tend to blame on others for their past failures turn out to be the most selfish ones)
5. Skipping the details- a red alert
6. Taking all the credit for themselves before others.
However, you can learn about a person "only" when you start working with him/her !
Hope it helps.
What skills do entrepreneurs need today to face volatility in the market?
First of all it's good to know how each of us skills set complement with each other. Getting the job done in time require a lot of foresight and fast execution.