Most of the HBS students take the “Founders’ Dilemmas” class with the hope to find the “magic formula” to answer the question of “what to look for in a cofounder.” Unfortunately, even a class with “Founders” in its title does not seems to have the magic bullet answer: we analyze cases and experiences of past founding teams with the hope of using pattern recognition skills to guide us through future founding events, and that appears to be the best approach available. However, others’ experiences can only go so far – knowing who you are, how you function, and analyzing your previous experiences might be even more important.
I have (fortunately?) had the experience of working on my own startup with a cofounder while at HBS for about a year before the founding team split happened. Having previously worked in VC, I had some exposures to capital structure and founder issues through indirect observations and anecdotes. Being a first-time founder, I tried to rely on the “rules of thumbs” I picked up as a VC, but most of the time I had to rely on my instincts. Coming out of and reflecting on my first founding experience, I started to construct a “cofounder framework” that I hope to help me form better judgments around cofounder selection next time around:
I expect this framework to continuously evolve and develop as I incorporate more personal experiences and observations, but hopefully it will help me increase the chance of success in my next venture by avoiding major “founder issues”.
When I initially started working on my first startup, FirstCrush (a personalized ecommerce wine subscription service), we had a team of two non-technical founders. We got far enough to conduct an MVP test on campus by putting together a WordPress site with PayPal integration so we could test people’s true willingness to pay, but we needed a real beta site that was polished enough to convey the trustworthiness of the service to test with the general population. We also needed a few key features to test our hypotheses around engagement and customers’ willingness to provide ratings of the wines they receive.
After speaking with a few development shops that utilized a blended payment scheme of cash plus equity, we decided to go with Shop A in NYC. Although they seemed young and relatively less experienced compared to a few other options, they were much more affordable, were willing to do an all-equity deal (we did not have much cash so we thought this was the smart way to go – align incentives!), and seemed very enthusiastic about our project. They also pitched themselves as ex-entrepreneurs (which were true) so that they have more “value-add” beyond development resources.
We signed an agreement with the mutual understanding that it will be an all-equity deal, vested in tranches, with the last tranche fully-vested when the V1 site is officially complete. We tried to scope out what the definition of V1 is in a few bullet points and quickly went to work. Fast forward, we did get our V1 delivered and my experience working with the development team was generally positive. I learned a lot both as a first-time founder working with an outsourced team and as a first-time product manager, and here are some of the important learning:
Sometimes using an outsourced development team can help you speed up your project because you can make parallel progress in your product and sales/business development while you recruit full-time engineer talent. However, be mindful about how your outsourced team is incentivized and carefully manage your and their expectations.
The prevailing “lean startup methodology” popularized by Eric Ries over the past few years has greatly impacted how companies and products are built in the early stage. In the early days of a startup’s lifecycle, “proof of concept” and “product market fit” can often be achieved with a minimum viable product (“MVP”) that contains only the critical features required to prove key business hypotheses. However, to fuel the next level of growth, startups usually want to explore partnerships with large, established players in the ecosystem to 1) build out additional distribution/marketing channels (e.g. Square’s partnership with Starbucks, Fab’s partnership with Facebook), or 2) obtain access to critical technology, data, or IP (e.g. Simulmedia’s data partnership deals with TiVo, GetGlue’s partnerships with various media companies).
These two realities often clash against each other, as large companies are generally neither willing nor able to work with smaller startups for the following reasons (and this is why Time Warner Investments, where I used to work as a VC, focused on investing in Series B or later-stage startups because they are more likely to successfully establish partnerships with the operating divisions):
Given the above challenges, how should startups fight this uphill battle and secure the next strategic partnership to accelerate growth? Here are a few ideas:
Ideas or thoughts? Would love to hear your perspective.
Fresh out of the Thanksgiving holiday shopping spree, a few interesting reports came out digging into the Black Friday-Cyber Monday ecommerce shopping performance. According to IBM, mobile engagement continued to soar, making up 24% of the traffic and 16% of the sales. Fab.com, a design-focused ecommerce startup, has been seeing very interesting mobile stats on sales and the dominance of the iOS platform - revenue from its mobile apps reached 25% of total sales just 30 weeks post-app launch (95% of which came from iPhone & iPad), and mobile apps generated over 1/3 of its Black Friday-Cyber Monday sales. This phenomena is not hard to undersand - people are simply spending more time with their phones than with their computers.
The continued rise of smartphone led to an appreciation for a “mobile first web second" strategy - in order to deliver the "right" mobile experience, you have to start building your product with the mobile UX/UI in mind (vs. building a website and then repurpose the web experience to mobile). As a result, countless startups focused all their resources and energy to build a killer iOS app (why iOS first? because it continues to dominate Android on engagement and monetization) only to realize there are some serious flaws in this approach.
Some of the issues around building a “mobile first/mobile only” product can be attributed to the unique properties of a mobile device (e.g. smaller screen translates into a constant battle between usability and monetization, small/ineffective ad units, etc.), but a few of the key problems can be traced back to how Apple runs its App Store.
So what can you (and Apple do) beyond reconsidering the above policies?
Apple’s iOS ecosystem is currently enjoying the mindshare of developers, and developers need a thriving ecosystem that can help them build a business. It’s a fine balance to strike between maintaining the integrity of the user experience and optimizing on monetization, but Apple should start spending more time to help developers make a plausible business case by investing in “mobile first on iOS.”
(p.s. I know some people will suggest “Why not just build a good mobile web app using HTML5?” Unfortunately, as Mark Zukerberg (and many others) realized, “‘good enough’ wasn’t good enough" and its benefits of delivering consistent cross-platform experience and development weren’t enough to outweight the downsides - much slower and less stable. Plus, consumers just LOVE apps and their app icons.)
There have been countless posts and discussions around the topic of “If I don’t know how to code/am not technical, how do I launch my website/startup?”, and I know many of my classmates/non-technical friends (myself included) have encountered this challenge. I wasn’t going to pile on top of great posts that were already written (such as here, here, here, and here), but an in-depth discussion in class the other day prompted me to share a summary of insights and actionable suggestions that I thought would be valuable to others.
Last Tuesday, instead of the usual case discussion, we had an interesting group of guest panelists (Brandon Liu, Anna Palmer, Jim Psota, and Hugo Van Vuuren) in our Online Economy class to discuss the very topic of “Hiring Tech Talent” (translation: How do I find a tech cofounder/coder???), and the discussion kicked off with a glance of the infamous tumblog MBA Seeks Code Monkey. Because of the right mix of technical and non-technical panelists and their understanding of their audience (HBS students), I thought the discussions were even more relevant and actionable to business/non-technical people in general.
The biggest takeaway, surprisingly, is that finding a (tech) cofounder is VERY similar to dating (a panelist plugged OkCupid’s blog as a resource with nuggets of wisdom that are as applicable to dating as to startups/cofounder relationships).
Below is a summary of tidbits from the discussion that resonated most with me:
How to attract/find tech talent:
How to identify top tech talent:
Sources for top tech talent that you can realistically attract:
What technical people value in a potential non-technical cofounder:
Tech product management/how to manage working relationships with your tech team:
How to get technically fluent:
There’s no “one silver bullet” and it takes time to find the right technical cofounder/team, but you can start building relationships and technical fluency now.
(from Jason Goldberg, Fab.com)
My co-founder, Bradford, and I decided from the beginning that we’d never make a single decision about what goes on the website based on how much money we’ll make on a particular product. Instead, we ask, Will it make customers smile? Excite them? Make them tell their friends about it? The biggest realization I’ve had is that if you really want to build a successful business, it’s not about how much money you’re making. It’s emotional. For us, it’s how do we make our customers smile? Every single decision we make comes down to that.
a collection of random coffee meetings scattered across NYC this summer. (Taken with Instagram)
Wine pros @morganwharris @davisanderson3 opening 1993 bottle @ericbatscha found in storage. W/ @leitihsu @ericahsu (Taken with Instagram)
Cake with @winemeapp & other @DreamItVentures logos #DreamItNYC12 demo day (Taken with Instagram at Time Life)