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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

#111

Post by zdragnar »

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…

I don't think this is a conflict of interest.

Every feature, design decision, and iota of technical debt are money and time. Either that's raised and spent up front, eating at equity, or it is deferred until a point where revenue pays for it, it is redundant due to a pivot, or becomes so essential that new funding is raised (possibly from a pool that doesn't dilute so much value).

Presenting an accurate and fair cost / benefit analysis of these tradeoffs (at least on the technical side) is the main purpose of a technical lead. Non-technical business people can't get that information on their own. They should have a say in the decision if it materially affects the product's launch, but that's the normal give and take.

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

#112

Post by novaleaf »

how timely. a few days ago I had a meeting with two non-technical founders wanting to make some cloud based finance software.

The double whammy, is that with the powers of ChatGPT on their side, they honestly thought they figured out the big architecture problems and were very unhappy at me pushing back at their design decisions. They wanted me to validate their ideas, not ask what the core user scenarios were (to figure out what tech was needed for an MVP)

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

#113

Post by frenchmajesty »

827a wrote: post #103
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 we…

The point I maybe did not stress enough on is the relationship aspect is two folds:

- Have ability to gain hard-to-obtain relationships in the beginning

- Have ability to grow the pace at which you gain those over time

It the beginning it will give you the money to play the game long enough (ie: customers and angel investors). In the short term it help tremendously in deal-making, fundraising, enterprise sales, hiring superstar employee. In the long term, you can broker insane deals like OpenAI convincing Microsoft to invest $10B and bet their AI future on you or get acquired.

PS: Microsoft is now backtracking out of that situation, but Altman convincing them to get in bed in the first place is very impressive.

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

#114

Post by w10-1 »

The value of a business co-founder lies in their ability to build business relationships and extract value from them.

The value of one founder to another lies in complementary skills and perspectives engaging start-up issues in a productive way, which usually means deep levels of mutual understanding and trust -- which can be antithetical to business relationships and personal comfort. So: hard.

The CEO/COO split reflects the difficulty of scaling this.

Is the solution to talk early? Maybe, or maybe that interferes with trust-building. The key thing I believe (here and elsewhere) is to avoid projecting what you want or fear into what you have. If it's important to success, validate it. For that, it helps to have people willing and able to be honest and truthful, particularly about unknown unknowns -- even if it is otherwise their mandate and mission to project confidence and gain trust.

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

#115

Post by TuringNYC »

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…

>> 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.

I'm constantly approached by "business guy" with deals like this. Here is the truth -- even 50/50 isnt enough because technically, the tech-co-founder is often doing all the upfront work and taking all the upfront risk. The business-co-founder gets a free option to do work (or not) afterwards. All upside and little downside.

IMHO good business co-founders are worth gold and make their worth obvious. They already have POs lined up, they have partnership agreements already in the works, they have VCs willing to invest based on past performance. Perhaps they already tried the business with some overseas teams doing POCs. Perhaps the business co-founder already has exits or a successful business and is willing to pay the tech-co-founder some nominal amount to show skin in the game. Those are all good signs.

If those arent the case, and the "business-co-founder" is sitting back while the other is hard at work coding a prototype -- you dont need a co-founder. Just be the CTO+CEO and hire the "business" work yourself!

In the absolute worst case, i've seen a "business-co-founder" continue to push the definition of MVP more and more and the "tech-co-founder" seeing the sunk-cost of the work they have put in, continues to ever-expand the MVP. Meanwhile the "business-co-founder" gets months or a year of free labour with a free option to participate -- or not.

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

#116

Post by turbotim »

wolpoli wrote: post #19
j45 wrote: post #12

Earlier quoted context omitted.

Business founders have to bring the distribution, technical founders bring the product. Require both.

The technical cofounder becomes less important as the company grows through.

Can you say a bit more here, genuinely curious as to why.

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

#117

Post by TuringNYC »

verelo wrote: post #92
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…

I’m running a business that’s currently doing around 32k a month at ~85% margin after 2 years in operations, no funds raised to far. I have a friend who is an MBA and only held corporate roles up until now. I’ve been running companies my entire life, and had one exit that was 42.5M US. We discussed partnering up, and when i mentioned a buy in or 10% equity split (with no buy in) or some combo of the two, he backed of…

From what i'm reading, you seem like you need employees or outsourcing, not partners. Why would you even bother with this person, their incentives seem all misaligned.

Not sure if they approached you, or vice versa -- but people often approach with deals like this because they are trying to find suckers who they can dupe. And sadly, they find them.

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

#118

Post by frenchmajesty »

crazygringo wrote: post #110

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. Th…

Hey, OP here. I view it like this: if you were to take all technical people on the market for launching a startup and plot them on a distribution to find the "valuable in early stage" subset, you would find that 35% are good enough to get a startup off the ground. They don't need to be extraordinary programmers, just good enough but with a lot of drive.*

However, for non-technical folks that are on the market, the distribution is worse. Only the top 10% ~ 15% actually have sufficient abilities to pull it off. The remaining fall into the archetype I wrote about here.

The caliber for what's in the market is skewed thus the technical person has to be a whole lot more picky than the other way around to avoid ending up with a dead weight.

[*]: This excludes specialized skills like Deep Learning or chemical bio-engineering, etc...

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

#119

Post by Gimpei »

Somebody has to manage the business relationships and go out and sell. Somebody has to be in charge of marketing, payroll, and PR. Somebody has to be the public face of the company, out networking and attending trade shows. If you’re a technical founder and all this sounds like fun to you, then yeah, a non-technical cofounder would not offer much. But there’s something to be said for having more time to put your head down and build.

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

#120

Post by TuringNYC »

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…

>> But an engineer can't help but also factor in "i'm the one that has to build this, so how much extra work am i giving myself?" so they're design will be a compromise of what's good for the user and what can be built easily.

The PM/Strat component is like a fifth or tenth of the tech work, typically. Every product design decision often has a magnitude more of associated implementation work. The only way i'd go with this setup is if the PM/Strat person if one of these things:

- PM/Strat person already has customers lined up

- PM/Strat person has paying partners lined up

- PM/Strat person has had exits with associated aura

- PM/Strat person puts in upfront $ to compensate the tech person

- PM/Strat person takes a way lower equity

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