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Business co-founders in tech startups are less valuable than they think

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Re: Business co-founders in tech startups are less valuable than they think

#101

Post by JumpCrisscross »

slt2021 wrote: post #64
dgs_sgd wrote: post #45

Earlier quoted context omitted.

> Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably. When he asked why I thought 50/50 was fair, this pretty much sums up what I said. I'd be happy to take an 80/20 split with an industry insider or celebrity, someone who's guaranteed to attract buzz and attention. But he wasn't that guy.

should just ask him: what do you think stops me from taking your idea and implementing it myself? I will hire another MBA type of guy for 20% equity to do the work you wanted to do and keep the 80% to myself. flip the negotiating table

He’s already showed his cards. Partnerships are based on trust, not (explicit) threats. If you’re both approaching the dais locked and loaded, call off the wedding.

Re: Business co-founders in tech startups are less valuable than they think

#102

Post by arresin »

pier25 wrote: post #56
dgs_sgd wrote: post #8

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes). My advice is to have this conversation wi…

> wanted an 80/20 equity split in his favor. If they're so confident in their value they should just find some money and pay for the development of the product to a freelancer or employee.

They may be a little surprised how much that costs. And then the running of it and the bug fixing and the feature expansion. It may be a little… “surprising”. My advice is to get idea guy to price it out haha.

Re: Business co-founders in tech startups are less valuable than they think

#103

Post by 827a »

neilv wrote: post #48

One thing I've wondered about for awhile: How do you find a business co-founder you can trust? For one example, the article says that some of the best value that a business co-founder can contribute is disproportionately building the relationships. But those relationships can be more connected to the business cofounder themself, than to the company. It's a bit different for the technical co-founder, since your percep…

> some of the best value that a business co-founder can contribute is disproportionately building the relationships.

The other subtle thing I take issue with on this is: What relationships, exactly? Most of the time I've seen this surface as a few early customers you might not have otherwise gotten, which is great and necessary, but IME that well runs dry pretty quick, and those customers oftentimes don't stick as well as ones that were found on merit. A better relationship with vendors? Again, weird, merit should trump that personal relationship.

If you're building a business that relies on a small number of very high value contracts, I think I could see a world where having a foot in the door on those high value customers is worthy of elevating the body that foot is attached to toward Founder. That isn't, generally, how most software companies sell software though.

Re: Business co-founders in tech startups are less valuable than they think

#104

Post by d357r0y3r »

dgs_sgd wrote: post #8

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes). My advice is to have this conversation wi…

You've gotten good at telling the machine what to do. He's gotten good at telling people what to do.

The latter turns out to be a much more effective way to build power and influence.

Re: Business co-founders in tech startups are less valuable than they think

#105

Post by cruffle_duffle »

parpfish wrote: post #86
_bin_ wrote: post #35

Earlier quoted context omitted.

Very typical. I've run into cases where an "idea guy" basically says "you do all the product and tech half, I'll do marketing and strategy." Which is dumb, because sometimes I'm legitimately better at the strategy half too. Generally these people want ridiculous equity splits of that nature. It's worth anyone technical's time to build skills in strategy, marketing, finance, etc. The technical co-founder always gets s…

> Which is dumb, because sometimes I'm legitimately better at the strategy half too A semi-related thought I've had recently: I've run into a number of non-technical product people that say that they're primary skill is that they have a great "product sensibility" that engineers lack so they need to step in and provide guidance. It's true that many engineer-designed products are terrible, but I'd argue that most engi…

Conflict of interest is exactly how I term it as well. Tech people with good product sense have to work very hard to override their engineering instincts or they’ll handicap the product.

I’m guilty of it all the time. What helps is remembering that absolutely nobody gives a shit about the code or the architecture. Nobody. It really doesn’t matter. They just want an awesome product.

(Which isn’t to say none of that matters, because it does. We are engineers and know the consequences of shitty technical decisions… it’s just that you have to pull yourself out of that mode when thinking of what needs to be built)

Re: Business co-founders in tech startups are less valuable than they think

#106

Post by avmich »

d357r0y3r wrote: post #104
dgs_sgd wrote: post #8

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes). My advice is to have this conversation wi…

You've gotten good at telling the machine what to do. He's gotten good at telling people what to do. The latter turns out to be a much more effective way to build power and influence.

The point is he's not, as he can't prove.

Re: Business co-founders in tech startups are less valuable than they think

#107

Post by rchowe »

_bin_ wrote: post #38
dingdingdang wrote: post #4

Having started businesses with the explicit lack of biz-co-founders I beck to differ. That is of course unless your da Vinci-like super modal capabilities allows you to feel unlimited joy when doing business plans, taxes & marketing alongside your (hopefully) core competency of product development.

I do actually know a few people who are like me and really enjoy both doing the biz plan/strategy half, and the marketing work, and product/tech. It's not as common but I enjoy working with them a whole lot more. We almost always create better results when the tech people are also biz people who understand how what we build needs to fit into the market. It's also super helpful to have some personnel fungibility when…

I discovered I liked business planning, strategy, and marketing pretty early in my technical career.

I also discovered that one of the thing business people bring to a company are connections, especially if they have already worked in a vertical, and few people want to talk to a bright kid about their problems.

Re: Business co-founders in tech startups are less valuable than they think

#109

Post by frenchmajesty »

goatherders wrote: post #71

This post is hilarious and details exactly why so many startups die in infancy. Yes yes, engineers are brilliant and without them nothing ever gets built. And even still, sometimes things get built and never turn into a real business precisely because of this hubris. And 99.9% of the time, the ones that DO grow over time would have grown much much faster if "the business guy" had been there all along.

This is true! I argue here that the right business co-founder who drives long term financial success to the company is super rare and super valuable. The problem is the average one you'll run into at a networking event cannot deliver on that.

They are much more "I give the ideas and I want to keep 90% equity and you shut up and listen to me because I'm the CEO" guys.

Re: Business co-founders in tech startups are less valuable than they think

#110

Post by crazygringo »

I don't agree at all. Not even with the premise that "there are significantly more business guys looking for tech guys than the reverse".

There are a lot of business and tech guys and most of all of them are pretty clueless when you randomly meet them in "gatherings".

But a valuable business co-founder brings extensive domain expertise, a network of people, sales skills, management skills, and fund-raising talent.

There's little point in arguing who is "more" valuable -- the business side or the tech side. They're both critical to have.

For some reason, this post equates the "business side" to the person with the "idea". But that's a strawman. Having an idea doesn't make you a "business" co-founder. Being a business cofounder means having a experience and talent on the business side of things. And a good business co-founder generally doesn't have a lot of trouble finding good tech people, because that's one of those business skills that they're good at...

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