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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

#241

Post by ghc »

nostrademons wrote: post #240
ghc wrote: post #233

Ok, but technical co-founders in tech startups are also less valuable than they think (as this blog post shows). In reality there are four critical skillsets (outside fundraising) for a new tech venture: Operations, Sales, Product, and Engineering. I've seen plenty of startups with a heavy focus on product and engineering flail about because they suck at operations, product, or sales. The harsh truth is your CEO bett…

What stage of the startup’s lifecycle? When it’s just a couple founders in an apartment, there are really just two key skillsets you need or want: sales, and then engineering for a tech-heavy startup or operations for a tech-lite startup. Product is a distraction at that point: the product will emerge as you talk to and acquire more customers. It’s very helpful if the sales cofounder has a keen product sense so they…

I'm generally speaking of the stage right after a startup closes an institutional seed round. Across 75+ such investments over the past 10+ years, I've seen gaps in each of those areas be catastrophic. It definitely doesn't require "a few dozen employees" to mess up.

Especially on the operations side, I think engineers underestimate the amount of stuff there is to do. Have a distributed team? Welcome to state taxation hell. Have some pilots? You're going to have to deal with a lot of NDAs, cooperation agreements, onerous contracting requirements, building trust by connecting advisors (but not using them too much), etc. Mess up your banking and miss payroll? Your best employees will leave. Fail at reference checks during hiring and hire someone who results in a sexual harassment allegation? Your investors will have your head.

I think you're also misunderstanding what I mean by the product skillset. There are plenty of founders out there who can write amazing backend code, but couldn't deliver a usable product to their customers if their life depended on it. Sometimes that's ok, but most of the time being able to deliver a useful product can work even if your backend engineering is lacking -- not so the other way around. Ideally your technical co-founder can do both, but sometimes, especially when all the founders are engineers, a product-oriented CEO and an engineering-oriented CTO can work really well.

While sales is important, it really should be all the founders learning it, and good investors will go through great pains to help, either by sending founders to "sales school", recommending specialized advisors, or even pitching in themselves, using their connections to get you in the door at "big logos". In my experience, having a founder whose primary skill is sales can either be a positive or negative, depending on what else they bring to the table. If they bring nothing else, it's usually a negative.

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

#243

Post by nostrademons »

ghc wrote: post #241
nostrademons wrote: post #240

Earlier quoted context omitted.

What stage of the startup’s lifecycle? When it’s just a couple founders in an apartment, there are really just two key skillsets you need or want: sales, and then engineering for a tech-heavy startup or operations for a tech-lite startup. Product is a distraction at that point: the product will emerge as you talk to and acquire more customers. It’s very helpful if the sales cofounder has a keen product sense so they…

I'm generally speaking of the stage right after a startup closes an institutional seed round. Across 75+ such investments over the past 10+ years, I've seen gaps in each of those areas be catastrophic. It definitely doesn't require "a few dozen employees" to mess up. Especially on the operations side, I think engineers underestimate the amount of stuff there is to do. Have a distributed team? Welcome to state taxatio…

At the stage of an institutional seed round, I'd generally agree with you. At that point you're big enough that screwing up your customer experience will hurt you.

It's the early-founder stage, where you're still proving out an idea and verifying that people will use it and likely will have to pivot several times, that I think sales + engineering (or ops if technology is not your core competency) is key. The advantage of having a really good engineer over a product person is that a really good engineer can "hit the high notes" and deliver a product that most ordinary people assume is impossible.

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

#244

Post by verelo »

hn_throwaway_99 wrote: post #235
TuringNYC wrote: post #117

Earlier quoted context omitted.

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.

Totally agree. To be honest, I think a 10% offer here would kind of lead to the worst of all worlds: too high for the person to be considered an employee, but too low for the person to really be considered a partner. I've seen a case where a company was started by a very small, relatively inexperienced team, and then had 2 much more experienced "business people" join later. These 2 business people were actually given…

Yeah frankly my expectation on the most realistic outcome was some middle ground: where they buy in and i juice it with a bonus of equity based on outcomes.

Regardless, I’m just trying to work on making progress day over day. It’s fun, and a real business, so good problems to have.

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

#245

Post by verelo »

TuringNYC wrote: post #117
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…

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.

Yeah, i mean, I’ve done this a few times before and had one decent outcome…i feel I’ve seen enough to feel totally at peace with this outcome.

I think getting incentives right is the hardest part of business, once you find any initial traction. It’s less sexy but i agree, finding good employees and contractors is the next step from here.

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

#246

Post by blackqueeriroh »

ianbutler wrote: post #145
JumpCrisscross wrote: post #100

Earlier quoted context omitted.

> the perception that technical co-founders typically get gypped hard is very warranted I’d love to see the data. Most start-ups fail. For any given category of founder, there are therefore more stories of disasters than successes.

I mean YC literally has a video on how not to get screwed as a technical founder https://www.youtube.com/watch?v=fcfVjd_oV1I

Yes, but that’s also because it’s YC

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

#247

Post by blackqueeriroh »

nand_gate wrote: post #203
osrec wrote: post #126

Earlier quoted context omitted.

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…

You can consistently sell trash, you just need a captured market.

And captured markets no longer exist

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

#248

Post by crazygringo »

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…

> However, for non-technical folks that are on the market, the distribution is worse.

And that's where I took issue with your post -- that you are lumping all these people as "business co-founders".

That's false. To call yourself a business co-founder, you need to have the same kind of business and management chops as a technical co-founder has technical chops.

Your post seems to be complaining about co-founders who are just idea people who don't have any business skills at all. It's misleading to call them "business co-founders". You should call them "idea co-founders" or something.

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

#249

Post by vr46 »

Jeepers, I worked on two startups where I met a “business” person (first was a finance-type, second was a doctor, and we (I) proceeded to do all the work in gathering requirements, building prototypes, etc etc. In both instances, neither of the “ideas” people had any experience of being in any kind of project, and both wanted to discuss equity way too often. And in the event, neither of them as CEO did a blind bit of work. Classic management-by-walking-around. When I suggested to the second one that we might want to find an actual CEO he went nuts and started raving around how he had done all the work of setting up the company and coming up the idea - reader, there was nothing on paper, he hadn’t written anything down, he just wanted to explain it and have everything magically happen.

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

#250

Post by guywithahat »

echelon wrote: post #27
guywithahat wrote: post #17

I realize this is all subjective, but the hardest problem in every startup is solving a real customer problem. I’ve never been part of a startup where the engineering was the hardest part, and I’ve been part of very high-tech companies. An accountant maybe doesn’t add much, but a business major who deeply understands a customers need can be more valuable than any engineer.

> An accountant maybe doesn’t add much, but a business major who deeply understands a customers need can be more valuable than any engineer. 1000%. I'm a solo tech founder and raised $3M. There isn't a day where I wished I didn't have a business or growth person with me on this journey. The tech pieces are easy.

In my last startup, I built a parental filter which worked over VPN, could decrypt internet traffic (itself not a trivial feat), and then used small LLM's to remove portions of web pages that violated filters, without blocking the page itself. Highly technical, and I was always pushing for lower latency or better fault tolerance.

Unfortunately nobody cared, including the original customers I was talking to, and so I spent my days stapling flyers to polls and talking to parents trying to learn what their actual problems were. Every small startup I've been a part of looked like this. Companies live and die over whether they can find market fit, not whether the product could be built.

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