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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

#121

Post by John23832 »

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…

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

A valuable technical cofounder brings the skills to literally create what you're trying to sell. Otherwise, have fun selling dust. Or networking to sell nothing.

The "0 to 1" here isn't "no management to management" it's "not having a product built to having a product built".

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

#122

Post by TuringNYC »

FlyingSnake wrote: post #81
dust42 wrote: post #60

Having seen plenty of businesses throughout my life, both successful ones and less successful ones I'd say the most important traits are: - the ability to execute - having drive, focus and flexibility to adapt - being able to manage a team and keep it focused, motivated and on track this is valid for both the technical founder and the business founder alike. In a perfect team the business founder has a very good unde…

> ability to execute How do we define what execution looks like? As a general rule we must be wary of “business cofounders” who sell pontification as execution.

>How do we define what execution looks like?

- Previous exits

- Previous successful business

- Bringing 1-3 potential buyers to the table who can define what is needed and what they would pay, ideally clear "if X then i pay Y"

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

#123

Post by bix6 »

frenchmajesty wrote: post #118
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 di…

Solo founders do worse and teams with a technical founder do better particularly in enterprise. So it seems your best chance is one of each.

https://10years.firstround.com/

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

#124

Post by n_ary »

The article reads… interesting. A business depends on its demand, competition, scale, operation costs and numerous other factors. If the product is a tech, a technical founder can have immense impact on future success but marketing, customer acquisition, sales, networking, fund raising and other huge headaches are often burdens carried by non-technical counter part.

Of course, the person building something from a vague idea to life wields magical power, but the other aspects of business are more so important.

As an engineer myself, I can see 500 ways I can improve things at my employer’s business, but while I have a technical vision, the non-technical founders of the business has broader picture and what I may wish to spend time optimizing might just be a pocket change issue not worth solving.

We technical folks undermine the mountain of difficulties of marketing and sales as well as interacting with people to convince them to part with their money. Of course, I have seen a fair share of over confident wanna-be founder who would just be next trillionaire if someone would build the 10000th Airbnb clone but for pets so they could sell it and give 5% equity to the builder because their idea was the main thing, but in broad sense of things, tech is just a means to an end for a successful business and simply building is not the 100% of execution step.

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

#125

Post by TuringNYC »

lurk2 wrote: post #87
greatpostman wrote: post #18

Living in NYC, I have been around a TON of venture backed startups with the classic non technical CEO, technical CTO. Some HUGE percentage of startups see the CTO fired once the tech stack and revenue are stabilized. The incentive from the CEOs perspective to remove a contender as well as claw back the equity is huge. Early stage the CTO is the most critical, but after real traction they can be replaced far easier th…

> Early stage the CTO is the most critical, but after real traction they can be replaced far easier than most want to admit. If the technical founder can be replaced so easily, how does it follow that the non-technical founder is less valuable?

>> If the technical founder can be replaced so easily, how does it follow that the non-technical founder is less valuable?

Because at that point, you can raise VC cash and hire for the job instead. The idea has been vetted. You can theoretically even rebuild the entire codebase from scratch just looking at the existing app. The CTO should maintain equal voting rights for as long as possible

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

#126

Post by osrec »

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…

Good you walked away. In my experience, the heavy lifting in a tech start up is, by definition, the tech. The "idea guys" rarely understand that it's the execution that makes an idea valuable.

Sales are important, but are a bit of a crapshoot. You can't consistently sell trash, no matter how good a salesperson you are. The guy was happy to roll the dice, while using your mental energy. Great deal for him, but not so good for you. You risk the burnout, stress and pressure, while he feeds you requirements and deadlines, and essentially becomes your manager.

In my younger days I got a lot of similar proposals, but thankfully could see right through them from day one. Bootstrapping as a solo founder was the harder, but ultimately more rewarding route for me.

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

#127

Post by TuringNYC »

Ancalagon wrote: post #99
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 had this exact scenario happen on the ycombinator cofounder matching of all places. Except the other cofounder (non-technical) wanted it 95/5. Yeah, I stopped all contact that same day. That project never got launched.

>> I had this exact scenario happen on the ycombinator cofounder matching of all places. Except the other cofounder (non-technical) wanted it 95/5.

I've gone to some of these just out of curiosity and it seems like people on the hunt for suckers. Having been thru this myself and seen the drama play out with friends from back in the dot-com days to now --

CO-FOUNDING IS LIKE MARRIAGE You cannot just match to someone. There has to be a low-stakes dating period, an engagement period, and then "marriage". You have to be able to walk away early on w/o extensive entanglement. The best co-founder is someone you've known for a long time in various semi-tense scenarios, where you can evaluate their ethics under pressure. This ideally means having worked together or done many projects together.

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

#129

Post by anitil »

s1artibartfast wrote: post #98
verelo wrote: post #92

Earlier quoted context omitted.

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…

>To me this is just unintelligent? You would know better than us, but I dont think of 10% as a partnership. Maybe they just thought they were going to get a killer deal.

10% sounds like an employee with a decent lottery ticket to me. Maybe that's unfair.

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

#130

Post by moralestapia »

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…

>have this conversation [...] as early as possible

Yes, it could be one of the things you bring up on the very first talk you get around this, and it's much easier to do it early than anytime later.

"Hey, this thing you're telling me about, do you want my opinion or are you telling me because you want me to be a part of it?"

(if: want to be part of it) "Nice, have you thought about how much each one of us will get? I always prefer to do equal splits."

If equal splits or very close to that I might do it. If not, the deal would have to be exceptionally good from the start, e.g. "we'll give you 10% of a post Series A company that is already valued at XX million".

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