It’s fun coming up with ideas. You know what’s not as fun? Everything else. Validation, recruiting, product development, customer acquisition, iteration, scalability, etc. let alone the countless sub stages that can make or break the startup. Every one of these stages is equally as important but there is one that I get asked about the most: recruiting. I realized that, especially, first time entrepreneurs, place the highest degree of importance on finding their complement to help in product development. Assuming there is enough proof that the proposed solution addresses a need, product development phase 1 or as many call it, minimum viable product, comes next. Who can you work with? Who should you work with? And how can you align interests with whom you work? Are questions I discuss and answer in this post. In sum, it is when interests are aligned that best results are achieved.
Let us start with founders’ profiles. No one knows it all especially at the beginning of a career but we do sometimes find founders with a non-technical background and good technical skills or founders with technical backgrounds and good business acumen. Commonly, we classify founders as technical or non-technical.
Business Development and Marketing
I often object classifying founders as technical and non-technical. This classification essentially implies founders with a business and marketing background are compared to the main group of those with programming skills. In my opinion, programmers have a valid argument: you can do all the research, interviews, and brainstorming in the world but eventually people are going to pay for a product; one that will be built by a programmer. It is very important that business founders prove their value. Idea is not a criterion. Using non-scalable resources to validate the solution, attract early buyers, securing funding, connections, and previous startup experience represent value. This can certainly attract quality programmers and designers but how scalable is it? Hiring, evaluating, compensating, being part of the technical discussion about the different frameworks, languages, methodologies and approaches require some technical knowledge. Your chances of building a successful startup increase when everyone in the founding team speaks the same language. Fluency is a plus but not mandatory.
A technical background doesn’t only enable core product development but most importantly, in my opinion, fast iteration and pivoting. How much of a technical founder’s time should go to programming? Rob Cromwell CTO and co-founder at Inkling tells his story.
“When starting out, I neglected most of these (recruiting, defining and reinforcing culture, establishing standards, tools, and engineering processes, developing an IP strategy, and being a business thought person) responsibilities and was focused entirely on coding. Through a combination of difficult conversations with my co-founder and CEO Matt, hiring mistakes, and a few very painful arguments over standards, I began to realize the breadth of the role I had taken on. While I initially gravitated toward the areas of responsibility that were closest to my technical comfort zone, I now realize technical leaders need to be excellent at all five in addition to being a technical leader and managing the team.”
Programming alone is therefore one side of the equation. Great programmers can build great solutions but unless, at least initially, there is an urgent customer need and defined sales funnel, a platform alone doesn’t do any good. Founders with a technical background should not only acquire and enhance their business operations and management skills but also allocate sufficient time for other, equally as important, activities.
The Best-case Scenario – Finding Your Most Valuable Complement
I think we all agree about the impossibility of growing a tech or non-tech based business without leveraging the power of the group. Venture initiation and validation, in the other hand, can certainly be led and accomplished by one person using existing and non-scalable resources. If you are one of the few to have previously worked with someone who shares your interest, passion and complements a skill you have, you’d be better off co-founding the compnay with him/her than starting alone. I have spoken with many entrepreneurs who spent over a year looking for a co-founder. About this I say, you’re just not one of the fortunate ones to have known someone who complements you personally and professionally. Over the years, I learned that co-founders can rarely be recruited. Most successful co-founder relationships were friendships before turning into partnerships.
Under the best-case scenario,
The business development and marketing co-founder’s main responsibility is to define and evaluate the best path to long-term value. This is accomplished through constant customer interaction to understand needs, fundamental drivers of the business, and business model. Sales, fundraising, and partnerships also fall under the responsibilities of this person in the team.
The technical co-founder brings together the various technologies required to build the product or service. Hiring, evaluating and project management mainly fall under the responsibilities of the technical leader.
A designer is equally as important. An artist who translates ideas, positioning, branding and competitive advantage into a unique product experience and interface.
Such a team with complementary skills, shared vision and passion enables the development of a strong company foundation since day one. Steve Blank suggests two tests to know whether someone belongs on a founding team: do we have a company without them? And, can we find someone else just like them? If both answers are no, you’ve identified a co-founder. Your co-founder(s) should be your most valuable complement. One(s) that add tangible value to the venture. What if you’re answer to the questions is no but still can’t find the right fit? You’re second best scenario is to solely initiate and validate your solution while building personal relationships with potential co-founders through startup weekends, meetups, incubators and others. Most startups fail, Blank notes, because co-founders hadn’t “dated first.” Use the period from initiation to validation to build relationships with people you want to share a period of your life with.
Initiating and Validating a Solution Without a Co-founder
One of the advantages of initiating a venture with a co-founder with shared vision and passion is accountability. With a co-founder, you would be able to focus on what you are good at while trusting your partner to do the same. You operate under the same level of resources and conditions; something we don’t find with other startup development options. In this section, I discuss the different options business development and marketing, programmers and designers have as a complement to their skills. I argue that due to the risk and uncertainty involved in startups in general, the best options are the ones where founders’ interests are aligned with service providers’.
Founders with a technical background essentially have two main responsibilities at the beginning: customer development and coding. Whereas founders with a business development and marketing background focus entirely on customer development and can start providing the service using non-scalable resources. The same is true for designers. In all cases, solo founders have a limited capacity and independent hustle is not scalable.
Without a co-founder or as you are seeking one, here are your options.
Hiring Full-time Employees: One of the benefits of hiring a full-time employee is commitment. The right members can go above and beyond to help the company complete major milestones. On the other hand, it is very challenging and time consuming to find the right fit because of the lengthy process required to identify and sell the best candidates. It is also a costly option which adds an extra layer of risk to your early stage startup. Early employee(s), however, can become co-founder(s) and save founders a lot of co-founder hunting time.
Alignment of interest: Aligning employees’ interests with yours (startup) starts at the recruiting stage. Before putting an employee incentive plan in place, members should be interested in company’s mission and vision. Their own personal goals should be aligned with yours whereby money is not their only reason to join. I then like to hear about them. I hear their own objectives and dreams. No matter how committed and interested hires seem, chances are they have goals different or slightly different from yours. I listen then tailor an incentive plan that enables them to work towards achieving their goals in parallel to achieving company goals. The best fit is when an employee’s goal is to lead a large division in a growing company. Alignment of interest is stronger if employees have real ownership in the company. With the right fit, it is a good approach to building a lasting co-founding relationship.
Independent Contractors: Contractors get compensated for their time and unfortunately not for their results. As a founder, you have an extra layer of responsibility by making sure the tasks are crystal clear. The more in depth the discussions and question/answer sessions you have with contractors at the beginning, the more wasted time you can eliminate later. The value of contractors comes in their flexibility and affordability plus you don’t have to worry about legal implications such as workers’ compensation, tax liabilities, insurance and others. Contractors are your best option if you operate under a limited budget and have sufficient knowledge and time for project management and frequent meetings.
Alignment of interest: The best contractors, I learned, worry about the nature of their assignments as much as they do about the money, sometimes more. They like to work on exciting ventures; ones that challenge their capabilities. It is therefore important to think about the project-contractor fit. Next, consider fixed contracts to align compensation with results. Furthermore, invest in a contractor with more experience for evaluation before contract termination.
Web Development Companies: This is essentially a hub of contractors and part/full time employees. Web development companies not only assign tasks to relevant members but also take care of project management and quality control. It is in most cases the most expensive option. Web development companies, in my opinion, provide a valuable service to companies with a proven business model but represent high risk to those seeking for one. This is due to its high cost, especially if you work with a reputable company, and, sometimes, bureaucratic. A large percentage of web development companies’ revenue comes from changes in scope. In a startup environment, changes happen sometimes twice a day and for this reason, in my opinion, web development companies should be an option at later stages in the venture but not in the beginning.
Alignment of interest: With web development companies, you do not have to worry about contractors’ project interests and, with good companies, project evaluation. Align interests by using fixed contracts with well-defined milestones.
Startup Development Studios: They include members with complementary skills and startup development experience. From strategy to product management, design, development and marketing; it’s a one stop shop for all needed resources. Good startup development studios are very costly. From idea to a minimum viable product, expect to invest $30,000-$50,000, sometimes more. From a minimum viable product to finding product-market fit, expect to invest over $100,000. Good startup development studios usually consist of members or at least leaders with proven startup record and can help entrepreneurs clarify the road map to successful venture initiation, validation and growth. Besides its high cost, another disadvantage is in its non-scalability. By the time you reach product-market fit, you want to focus entirely on the company and having an in-house team is important to increase efficiency and efficacy. If you have the investment, startup development studios can be very valuable.
Alignment of interest: Terms differ from one studio to the other but in general, they are comparable to web development companies. Your best options are studios that not only understand but also account for the uncertainty that characterizes every early stage startup. They can do this by minimizing initial investment and tying further greater investment with results. A million-dollar platform is worth nothing without a proven solution. Results in startup development are about validation, revenue, user growth, and platform among others. However, if you think about it, good studios have talents who must be well compensated to remain in the company and produce. It is thus challenging for studios to equalize between entrepreneurs’ high initial risk and attracting and keeping the best members.
Because I worked with every one of the four options above at different periods in my career, I can evaluate the drivers behind entrepreneurs’ choice. As a first-time entrepreneur, few years back, I was personally attracted the most to studios. I had countless questions that only an expert could answer. I also needed complementary skills and found that good studios could satisfy all my needs. I had put some investment aside for the venture from freelancing work I had done a year early until realizing the required investment to only test a solution. Few years later, I launched AspireIT. Through this young growing studio, I addressed all the needs I had earlier in my career plus the struggles and cons I faced and discovered after interacting and learning about a few startup development studios. Mainly: accounting for startup risk, aligning interests and avoiding the middle men-no bureaucracy.
I do so by evaluating the opportunity and entrepreneur- I make sure the entrepreneur is realistic, passionate and good to work with. I also look at the solution and do my own research to evaluate the opportunity. This is my due diligence phase.
With selected entrepreneurs, I leverage and commit my experience, knowledge and highly skilled team to
- Use non-scalable resources for initial validation.
- Based on initial customer interaction, surveys and initial non-scalable version, build the most viable solution.
- Based on customer interaction and user behavior from the first version, iterate or expand product features.
- Finding product-market fit should be around this time. If solution does not prove viable or need does not seem worth addressing, we pivot. With product-market fit we scale. For scalability, I either assign a fully committed team just for the startup or help entrepreneurs recruit theirs. With the latter, I get involved in defining key skills, recruiting, and onboarding. I remain an outside adviser, sometimes investor or board member.
Nothing completely new with the above process. Over the past 6 months, I have adopted and still testing a different model. I do believe that advanced product development (beyond the minimum viable product) is better serviced under fixed terms and deadlines but certainly not the case during the initial stages of the venture when uncertainty is at its highest. For this, I have eliminated contracts. Instead, from initiation to validation, I define clear startup (product and non-product related) milestones and tie investment with outcome. For instance, using non-scalable resources for validation can take 1-2 months depending on the idea. By the end of the set period, founders and I should have taken all the necessary steps (listed and defined) to validate or learn that we need to iterate on the idea. With validation, we define and plan for the second milestone then together leverage resources to meet the goals or learn that we need to iterate, etc. Investment is progressive depending on the stage and nature of the product. SaaS products for instance require more technical resources.
Using this model, entrepreneurs get a chance to evaluate and justify their investment and idea at every step of the way while my team and I go above and beyond to exceed expectations for continuation. This is only possible because of a team that wants to be known for the startups they helped build.
Startup founder backgrounds are typically classified as technical and non-technical. Though either backgrounds can initiate a startup venture and validate a solution, solo founders have a limited capacity and independent hustle is not scalable.
Founders’ most valuable complements (MVC) are those who add tangible value to the venture. MVCs are accountable and share founders’ passion and vision.
Founders without co-founders can hire full-time employees, independent contractors, web development companies, and startup development studios. The best option depends on founders’ needs and resources.
Alignment of interest is important especially during early startup stages when uncertainty is at its highest. Founders can ensure alignment of interest by recruiting employees with shared interests, investing in their personal goals, using fixed contracts with independent contractors and web development companies, and by working with startup studios under progressive rather than fixed compensation.
Can you think of a fifth option? do you have a comment on the post or a story you want to share? We’d love to hear from you.