Source: Up Till One
“People are to startups what location is to real estate”
— Paul Graham, Y Combinator founder
Any successful technology company requires a mixture of different skills:
- Software development
- Design and user experience
- Sales and business development
- Finance and administration
- Customer support (last, but not least)
Even within each of these areas there are conflicting demands.
A good software development team needs a combination of people who are heads-up (thinking about people and how they use the software) and heads-down (thinking about the machine and how to make everything run as fast and efficiently as possible).
Smart strategy requires a very rare mix of faith-based and fact-based thinking.
All of this means that it’s extremely unlikely that you can do everything. Instead, you need to surround yourself with people who can cover the areas where you’re not strong—and ideally generalists who can cover more than one area, like somebody who can code and answer the phone when it rings.
Here is a good rule of thumb: if you can’t convince at least one other person to work with you on your venture, it’s likely that your idea is not great. As Nat Torkington pointed out to me recently, a business with a solo founder is like OS9: they can sell to customers, or do support, or build product, or fix bugs, or hire, or manage, or fundraise … but only one at a time, and with horrendous context-switching costs.
In a technology company it’s also extremely important that at least one of you is a technical person. If this seems unfair to the majority of people who can’t code, consider this: what is the most successful technology company you can think of that didn’t have a co-founder or early employee who was a developer?
“Never in modern history has it been so easy to create something from scratch, with little or no capital and a marketing model that is limited only by your imagination.”
Most of the people who contact me with a business idea are not technical people, and so have no idea what is really involved in building software. And yet most developers seem to prefer to be employees, not realising that the skills they have mean they are effectively sitting on a goldmine. Why is that?
My guess is that many are intimidated by people, be it potential or existing customers. Although I said to be really useful you need somebody who can code and answer the phone when it rings, even better is somebody who is prepared to pick up the phone when it doesn’t ring (more about that later).
Another important ingredient is choosing the right investors. Perhaps you have enough money of your own that you don’t need investors, or perhaps you can get by with funding provided by people who share your surname. But probably not.
The good news for founders is that these days it seems everybody with some spare cash wants to call themselves an angel investor and fund the next big winner.
The recent surge in popularity for early-stage investing has seen the unionisation of investors into networks and clubs. Unfortunately this sort of structure often seems to select the worst ventures, because in a club everybody tends to rely on everybody else to do the work to identify and validate good opportunities, meaning that actually nobody does.
Investors are the tender to a new venture, not the engine.
You should have a preference for investors who take a founder-centric approach. My advice is to choose based on the contribution they can make. In the long run that is likely to be much more meaningful than the amount of money they can provide in the short term. The best way to judge this potential is to look at the trail they have left from previous ventures. It’s worth trying to understand why potential investors care about your success, or even what success is from their perspective.
Whether you are looking for a co-founder to share your vision or an investor to provide the fuel and push you along, choose carefully. You will soon discover the true character of these people, when the going inevitably gets tough.