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Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

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Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#101

Post by run4yourlives »

tptacek wrote: post #79
run4yourlives wrote: post #25

Ouch. I suppose the moral of this story is to make sure you draw a line between employee and partner right up front, and be very firm about the roles. Obviously, ee's get a paycheck and little else, and partners equity and a little paycheck. Sounds like you put yourself in the position where an ee could hold you for ransom. You were paying her a good salary, and she had no risk. Lesson learned huh? So what do you do…

Not to be argumentative, but just to talk straight: you can "draw lines" between employer and employee all you want, but if both parties are rational, it's the market that enforces the line, not you. In other words, if you bring very little to the table, and your "employee" brings a lot to the table, you're setting yourself up to fail by being "clear" about an untenable arrangement.

I think this example shows that the market has nothing to do with anything - it's people's perception that matters. It this particular case the dev won. I'll give you that most of the time it works the other way around.

Clearly, the poster underestimated her position and overestimated the dev's ability and that's what got her in trouble. With more knowledge, she could easily see that a django dev isn't worth 80K + 35%! In fact, I'm sure she'd get some bites (provided a solid idea) for the 35% alone from some very experienced people.

If the market did enforce the line, we wouldn't be having this discussion. :-)

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#102

Post by pchristensen »

Holy crap - you're paying her $83K, plus gave her equity, in TULSA?!?!? That's not exactly a high cost area. If you have $190K and you've paid close to $100K to her (14 months) just to get a proof of concept, I'd say you're in trouble. If she's drawing a handsome salary, won't put any of her own money in, and won't take a pay cut, she can't be that confident in the value of the equity. Sounds like you got milked.

I wish you luck but I think you've got some serious structural problems, both in your company and your relationship with this Django girl.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#103

Post by 9oliYQjP »

drinko wrote: post #94
9oliYQjP wrote: post #84

Now is the time to be honest with yourself. You need to find out why she left. People usually complain about money/equity issues when they think the situation is so crappy that only money/equity can keep them in the situation. Was there a lot of scope creep? Let me pose this hypothetical situation. You contract with this developer to create your web app before you have fully spec'd it out. But that's okay because you…

She left because we ran out of money. Scope creep was limited. The company owns the IP - we did sign paperwork on that. In case it isn't clear, at the time I did agree to giving her the 35% in equity. I currently own 45%. She has agreed to documenting and transitioning the app.

Damn. I feel for you then. If she's gone, she's gone. Fat chance she'll even document/transition the app. She's probably gambling on the fact you have no money to pay another developer so she figures she won't have to do it.

As others have said... learn to program. Consider it a character building exercise. I don't see too many other ways out of this situation.

That said, I don't think she was being malicious here. Most of these stories don't involve malicious folks. But when working with contractors you have to factor significant cost overruns as a reality. The work will be costlier and take longer than you expect.

EDIT: I also forgot to add. This is a litmus test. If she thought that her work would yield dividends, she might just bite the bullet and work for free until everything is finished. But she's not. She doesn't have confidence in the viability of your product/service. You might want to probe her and ask why. If you aren't going to get much out of her, you may as well at least try to get some feedback.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#104

Post by Xichekolas »

I hate to say it, but the fact that she wanted market rates AND equity should have been a tip off that she didn't care about the idea. If I care about an idea, I'll work on it for free (and maybe a bit of equity). If all I care about is getting paid, I'll focus much more on the salary, and that seems like what she did here.

If she was planning to ride it out long term, she would've definitely demanded more equity up front, and she would have offered to take a lower salary. It's not financially stupid to take as low a salary as possible in a startup. Lower salaries = more runway = more chance of eventual success = equity stake is worth something = rich.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#105

Post by alex_c »

It is hard to say without knowing more about your web app, but my first instinct was that 6 months of full time development seems like a really long time for a prototype, especially for a start-up. As one data point, clutterme.com took me about one week to prototype, and about 4 months to a public beta (and I did not consider myself an experienced developer at the time).

Unfortunately, it is more difficult for a developer to step into a project this late and be up to speed right away. For example, if your original developer had 1 month of work left to completion, it might take a new developer 2 months to learn the system and complete the remaining work. (this depends greatly on the complexity of the system and on the quality and clarity of the code you have at this point).

My advice would be to find a good developer you trust (not always easy, I know) and get them to look at what you have so far. Get them to look at your specs and requirements and design docs. Get them to look at your source code so far. Talk about what is left to do. This will take a few days, maybe a week. Pay them for their time. The goal is to get a professional opinion on the state of the current codebase (at this point I imagine there is little trust left in the original developer, so I would also treat any claims of progress they made as suspect), an estimate of how much work is left, and their opinion on how best to proceed (outsource, hire another developer, try it yourself).

It's hard to give more specific advice without diving into the details of your project, and you will be proceeding blindly otherwise. It sounds like you can't afford to make any more mistakes.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#106

Post by nostrademons »

mixmax wrote: post #59
pg wrote: post #36

I realize this won't sound encouraging, but it seems to me that you were doomed from the start. Whoever writes the code in a web startup has to be a full cofounder-- which means a friend, not just a stranger you recruited for this project. You've inadvertantly shown why this custom exists. Trying to outsource the development would just be repeating the same mistake. Your best bets would be either to learn to hack, or…

I can counter that with a real world example. I've done a startup that succeeded and got a pretty neat product out (which btw. included FPGA programming, hardware, mobile technology, and web technology - not exactly easy stuff..) and we had contractors do everything. No hackers aboard. And it worked. So it can be done.

I get the feeling that there's an exception to almost every startup rule.

In my personal experience, I've never seen outsourcing work well, or really work at all. The first startup I worked at spent $300k to setup an office in China, paying their developers about $10-15k/year. It would've been a great deal, except that the China office produced nothing and sucked up the complete time of both the CTO and chief scientist so they couldn't get anything done stateside. They would've been far better off writing the code themselves.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#108

Post by Xichekolas »

tptacek wrote: post #93
run4yourlives wrote: post #73

Earlier quoted context omitted.

It is a marketplace. A marketplace where I know that good people exist that will not draw a standard salary and demand equity at the same time. (at least not in the levels we're using here) And I don't care what you're doing, if it takes 12 months to get a prototype in django, you aren't worth 80K.

You're totally right about that. Sounds like there's a consensus that this project needed milestones.

I think there is also consensus that this dev wasn't very good. Not sure I have seen a site so complicated that you couldn't at least roughly approximate it in 12 months with django.

Whole deal sounds to me like she didn't give a crap about long term future of the company, she just wanted to ride the funding into the ground through her paycheck. I'd bet she demanded more equity in a moment of faith, but by that point they were doomed.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#109

Post by tptacek »

run4yourlives wrote: post #101
tptacek wrote: post #79

Earlier quoted context omitted.

Not to be argumentative, but just to talk straight: you can "draw lines" between employer and employee all you want, but if both parties are rational, it's the market that enforces the line, not you. In other words, if you bring very little to the table, and your "employee" brings a lot to the table, you're setting yourself up to fail by being "clear" about an untenable arrangement.

I think this example shows that the market has nothing to do with anything - it's people's perception that matters. It this particular case the dev won. I'll give you that most of the time it works the other way around. Clearly, the poster underestimated her position and overestimated the dev's ability and that's what got her in trouble. With more knowledge, she could easily see that a django dev isn't worth 80K + 35…

I think we're agreed in principal and opposed semantically --- if drinko's position was better, a dev quitting wouldn't matter to her.

Strong disagree that a Django dev isn't worth 80k+35%. Sure, I wouldn't pay anything close to that, but I have a mature thriving company. But on day 1, without the capital to contract the project out, that could be a totally fair deal.

Am I totally wrong about how much Django devs make relative to PHP or Rails devs? Because my experience is they make more than 80k if they're good and have any business aptitude. They certainly get billed out higher than that.

Re: Ask YC: Startup crisis. Out of money and tech co-founder has bailed.

#110

Post by nostrademons »

aonic wrote: post #35
redorb wrote: post #11

Earlier quoted context omitted.

because she agreed to 6% and $6,900/mo (a lot more than the founder) ... I think loyalty means something, be loyal to what you agree to; or quit... but don't hold the whole company hostage being selfish. I still stick with the "better off without her" mantra here.

If you are a paying your developer a market value salary, you are basically paying to have your idea developed. Unless you were paying the developer very little, or nothing, that is when equity should be used as payment 35% is a LOT with $6900/m

You're much better off paying that 35% equity along with a full salary than giving her 6% (or worse, 1%). Think about it this way: she is building your product. She can either put in high effort or low effort. If you give her 35%, there's a good chance she'll put in high effort, you'll both succeed, and your 65% is actually worth something. If you give her 6%, there's a good chance she'll put in low effort, you'll fail, and she'll soak you for your $6900/m sunk cost. If you give her 1%, it's almost certain she'll blow you off and you get the privilege of paying her $6900/month for nothing.

As happened here, apparently.

There's a whole chapter on this problem in most introductory game theory textbooks. The basic problem is that you cannot directly control how hard someone works, you can only give them incentives to work hard and then measure the output. Much as you'd like to say "She's a professional, you're paying her, she ought to do a good job," the real world doesn't work that way. She'll do a good job if it's worth her while to do a good job.

The economy is not fair. You can try to pretend it is and watch all your ventures get driven into the ground, or assume that you're going to get a raw deal sometimes and only take those raw deals when it leads to a sweeter deal later on.

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