Half Engineer / Half Business Guy

Starting Your Business And Becoming An Entrepreneur

Tag: Early Stage

You Don’t “Just Need Engineers”

As I’ve spoken to new business-side entrepreneurs recently (even those, like me, with advanced engineering degrees), one of the most frequently asked questions has been: “How do I build an engineering team?”

It’s a very tough question! In this post, I’ll describe my team’s experience.

REMEMBER – YOU’RE BUILDING A TEAM

When my co-founder and I decided to pursue Catapulter, we knew it was going to be a complex technology, so we couldn’t just run out and “find some engineers”. We needed to build a team.

For some perspective on what NOT to do:
http://whartoniteseekscodemonkey.tumblr.com/

Here’s how we did it:

  1. Ask Experts Who We Need
  2. Post Jobs & Network
  3. Interview
  4. Get Lucky (Networking & Perseverance Make Luck Happen)

WHO DO WE NEED, ANYWAY?

The first step was figuring out what the Perfect Team would include.

We had a good idea, but we wanted to defer to those who knew from experience. We reached out to as many people as we could find in the entrepreneurial community, to figure out what types of folks would really make the most sense to round out our team.

We met with developers, startup CEOs, VCs, and even a mathematician at Apple, and after a few meetings, we narrowed it down. Besides the fact that we knew we needed a talented CTO (see here why you need a technical co-founder), we specifically needed a mathematician / algorithm guru, and a CTO who could knock out the front-end, but also work with some heavy data processing on the backend.

JOB POSTING & NETWORKING

Now that we knew who we were looking for, we started networking and posting jobs everywhere we could think of.

The easiest way to find a high-quality co-founder is through someone whose opinion you respect.

We basically set up as many discussions as possible with folks in the entrepreneurial community, particularly developers, to find someone who might be interested. First, we asked friends who they knew, then asked those people who they knew. (Whether or not you find someone, you’ll definitely learn something!)

You may have the “perfect person” in mind…but the best folks usually have plenty of projects to work on. There’s likely going to be quite a bit of luck involved – who’s super-pumped about your idea, who happens to have the right experience, and who’s available.

Another way to find folks is by posting to job boards and email lists.

We received a number of quality applications through both entrepreneurial email lists like the Philly Startup Leaders and school job boards like UPenn’s. (We also got a lot of noise, so be prepared to screen!)

With school job boards, there’s a timing consideration based on when each of the various divisions of the school searches for jobs. It turned out that one specific engineering school was recruiting when we posted our Algorithm Developer position, and we received a huge number of applications from that group.

For tips on job postings / intro emails, check out this post from a Penn CS Major.

One important note: If you’re not a developer yourself, there are going to be some people who tell you you’re just a “business person”, you’re useless, and no engineer should ever talk to you. There are certainly folks for whom that’s true…just don’t let it be you!

INTERVIEWS

We found our first team member (our Lead Algorithm Developer) through a school job listing. He wrote one of the few cover letters we received (about his genuine interest in algorithms!), had excellent routing/networking experience, and was a leader going in. We interviewed a number of folks, but he stood out at the interview. He didn’t overpromise, he told us what he could and couldn’t do, but was confident that he could figure out anything.

And he freaking rules.

From the same job board, we found a few students who were interested in the CTO position. We ended up selecting one particularly energetic student before a final round startup accelerator interview…

GETTING LUCKY, PART I

In our interview, the partners of the accelerator gave us the business, and really pushed to figure out how talented our new teammates were. A few days later, our new CTO called and told us, without explanation, that he was out. Shortly after, the incubator called and told us they liked the idea and the team…except for our CTO.

At the time, we were bummed out. We were so close…but now we were a tech startup without a CTO! We didn’t realize how lucky we were to have another opportunity to find the right person.

In any case, we knew we needed to figure it out, FAST!

GETTING LUCKY, PART II

We hit the phones again, now networking with people we knew who already had great jobs. We knew it would be tough, but we also knew we had a fantastic idea, an awesome algorithm developer, and a real opportunity.

Running out of network, I called up one of my college buddies, a super-talented engineering classmate of mine who already had a fantastic job. There was no chance he’d leave, so I decided to ask if he had any friends who might be interested.

However…by an amazing coincidence, it turned out he had recently built a trip planning website in his spare time! AND he was the jack-of-all-trades type of guy who could knock out the front end but work on the heavy processing in the background. AND he happened to be casually looking to join a startup. Booyah.

That’s what networking gets you. You make your own luck. And now we had a CTO.

GETTING LUCKY, PART III

With the new team, we spent the summer at Betaspring building our alpha product and beginning to test with users. At this point, our database was rapidly expanding, and we wanted an experienced engineering leader to focus on managing the growth of our technology, and our growing data acquisition and storage needs.

Over the summer, we had continued to network and post on job boards, but hadn’t found anyone. We had been interviewing a number of candidates through the normal channels, but none really fit the team

Then one day, while cleaning out my email, I found one that had slipped past…

Well after we had selected a CTO and began at our accelerator, a really talented candidate who fit the bill had sent us an email. He had experience as VP of Tech/Product at other heavy-data startups, where he had guided nascent technologies through rapid growth.

It only took a couple of phone calls and a video chat with the writer of this email, but it was clear he was the man for the job.

PIECE OF CAKE, REALLY…

And like that, we had three killer engineers making up Catapulter’s core team.

The perfect team needed a jack-of-all-trades CTO, an algorithm developer, and an experienced data-processing guru and technology leader, and somehow we got them all.

The main take-away for me: you have to network, and you have to try everything. It took a ton of legwork, but as a result, we built the absolute perfect team.

It was totally worth it.

You Need A Technical Co-Founder

NO, YOU CAN’T JUST OUTSOURCE

If you’re starting a tech company, you need a technical co-founder.

Without one, you won’t be able to build your company. In addition, you won’t be able to raise money, because investors know how important it is to have a technical founder on the team.

There are a long list of reasons, but here I’ll make like an entrepreneur and show you the problem, then give you the solution.

Let me start by addressing the most common issues, usually preceded by:

“Sure I can start a tech company without a tech co-founder, I’ll outsource!”

PROBLEM: OUTSOURCING = MISALIGNED INCENTIVES

While outsourcing a website is possible, the incentives of whoever you’re sending work to is often the opposite of what you want.

Even for the most expensive contractors, their incentives are:

  • Do the least work possible while getting paid
  • Take longer than you want, if it means they can get paid more

Even a great provider has these incentives – they’ll just act on them differently. The best folks do work quickly to earn repeat business, and don’t charge for hours above their estimate. However, until you’ve had experience with someone, it’s hard to know how they’ll treat a job.

At Catapulter, while some of our contractors worked hard to earn repeat business, others did a quick, messy job and then demanded further hourly payments for edits. To be fair, that’s the lowest of the low, but it absolutely happens, particularly when you’re paying bottom of the barrel prices (common for early, low-cash startups).

(See my post on not getting screwed by outsourcing)

SOLUTION: TECHNICAL CO-FOUNDER

Above, I said that some of our contractors did a bad job. If we didn’t have technical co-founders, we wouldn’t even know it!

Fortunately for us, these were quick jobs, and we could afford to lose the $100 we paid. What if we had gone the outsourced route with a 3-month, several thousand dollar job, with no one to look over our contractors’ shoulders? It would have been a tough spot.

The reality is: you need a technical co-founder you trust. Someone who is not trying to make money from you, and wants your company to succeed.

Your Technical Co-Founder Will:

  • Screen and manage
  • Integrate
  • Do it the right way
  • …and, surprise – code!

Screen and Manage

If you’re non-technical, it’s very difficult to manage technical contractors because you don’t know what they’re doing, or how they need to interact with other contractors. Your technical co-founder will understand how the pieces fit together, and make sure that different components can actually integrate.

Also, you shouldn’t expect every contractor or even employee to be able to problem solve or think pro-actively. You’ll need to give guidance and feedback constantly, and if you’re not technical, you won’t be able to do this correctly by yourself.

Integrate

If you outsource components, they’ll have to be integrated. Integration takes an immense amount of time, and it’s not something that can be tacked-on to the end of a job. You’ll want someone internal to guide this process (if not do it completely), to make sure it’s done right.

Do It Right

As I mentioned earlier, a contractor is interested in completing the job, and maybe getting repeat business, not making your site as elegant and easy to maintain as possible. Your technical co-founder will want to drive this process, to make sure your site is being built in a scalable, updatable, low maintenance way.

Code!

Building a website is not easy. There are many moving parts, and there’s always something that needs to be fixed, changed or updated. You want someone on your team who you can count on for emergency fixes, to fill in the gaps between contractors, or add that one last little feature before the next release.

AND MOST IMPORTANTLY, THEY’LL STICK IT OUT WITH YOU

If you fully outsource your website, the folks building the website are doing it for a paycheck. If you stop paying the bills, they’ll stop building the site.

If you’re a new startup, you’re probably not loaded with cash. You want to find someone who’s going to stick it out with you when the going gets tough, and continue to move forward if you hit a rough patch.

How To Make A Pitch Deck More Awesome

In a previous post, I detailed how to create the content for a killer pitch deck. In this post, I describe some of the more technical aspects of refining your deck, and how to make it sharper and harder-hitting.

USE THE “NO THINKING RULE”

Your audience should think about your deck as little as possible…they should only be thinking about your ideas.

Of course, you want them thinking about how much money they can make, or which portfolio company you could partner with. However, any time they’re thinking due to technical aspects of your presentation, it’s time they’re not listening to you, and making decisions internally that could hurt your credibility.

The “No Thinking Rule” Has 4 Parts:

  1. Tell a story
  2. Show, don’t say
  3. Keywords only
  4. Remove sticking points

Tell a story

Every slide should work together, and no one should ever have to think “why is this slide up?” You should be able to remove the slide content, say the title/main point of each slide in order, and be left with a cohesive, complete story.

After you’ve written each slide, make sure that the main point you thought about while creating your story is the obvious take-away, and hits quickly. If not, go back and refine.

Show, don’t say

Any time you can show something with a picture instead of words, do it. Examples include:

  1. Separate groups on a page visually – Who wants to read a 12-bullet laundry list?
  2. Use logos/icons to replace names/words – You’ll get your point across faster
  3. Use graphs to replace numbers – Numbers (especially relationships between numbers) are often easier to understand visually

Keywords only

You shouldn’t be writing prose, just include the important words. Instead of “Google’s specialty is spinning products out of large scale data aggregation and processing projects”, put a Google logo next to the words “Large Scale Data Aggregation”, and voice-over the rest.

Remove sticking points

Don’t distract your audience! You know when your computer freezes, and you get a “Not Responding” or a Beachball Of Death? It can happen to audience members too if you give them sticking points like these:

  1. “You’re wrong!” – If you write “Google sucks at search”, people will stop listening and start thinking of all the reasons you’re stupid
  2. “I have to do math?” – Only put numbers that directly relate to your point, or really simple, clear math. Don’t force your audience to make a mental leap
  3. “What is that?” – One confusing bullet point on a slide, such as an unfamiliar industry acronym, can distract an audience member for the entire slide
  4. “Did he mean…?” If a word you choose has a second meaning, particularly a dirty meaning, don’t use it. Even the grown-ups in the room will get distracted, even if just for a few seconds

Conclusion

Following the “No Thinking Rule”, you’re going to have a much more effective pitch deck. Your communication will be clearer, so your audience will waste less time getting distracted and have more time to focus on your story.

(This was a description of a deck’s more technical aspects – for the content of a killer pitch deck, see my post here.)

Should You Raise Money And Where Should You Raise It

When many people go into fundraising for the first time, they don’t really understand the lay of the land. As a result, they waste time approaching the wrong people. Fundraising can already be a long and arduous process, so it’s important to focus.

A pretty simple rule of thumb for raising money: a VC won’t be interested unless you’ve got a $1B+ idea, and an Angel won’t typically be interested unless you have a $100M+ idea.

BREAKDOWN OF THE WORLD OF VENTURE INVESTMENT

Venture Capitalists (VC)

  • A professional investment firm which raises large funds from which to invest in big ideas
  • Won’t be interested in less than a $1B+ opportunity

Micro VCs

  • A relatively new addition to the investment landscape
  • Raising smaller funds, and investing smaller amounts than traditional VCs
  • Opportunity required: somewhere between VCs and Angels ($100M-$1B+)

“Super Angels”

Sophisticated Angels

  • Individual investors who like to invest in venture
  • Have entrepreneurial or investment experience
  • Typically interested only in $100M+ opportunities
  • Many are part of larger Angel Groups who screen deals as one

Other Angels

  • Individuals who are interested in venture investment, but may not have entrepreneurial or investment experience
  • This does not make them “worse” than sophisticated angels – they will just think about investment opportunities differently

Incubators / Startup Accelerators

  • Provide mentorship, office space shared with other startups, legal advice, and in many cases “rent & ramen noodles money” (~$10k-$30k)
  • Usually a ~3-month “startup school”
  • Incubators gather “classes” of ~10 startups
  • Sometimes connected to investment firms, sometimes independent

Friends & Family

  • People who want to help out

PROS AND CONS OF RAISING MONEY FROM EACH GROUP

This isn’t a comprehensive list, but it’s a few of the key points that should affect your decision:

Venture Capitalists

  • Can use industry knowledge and connections to help guide your business
  • Assuming you do well, will often help syndicate next round
  • If they don’t invest in next round, it’s a signal to other investors that you’re tainted
  • Require a larger exit than smaller investors to reach their fund’s expected returns, so may wait longer to sell than founders would like (e.g. wait 7 years for a $1B exit rather than 3 years for a $200M exit)

Sophisticated / Super Angels

  • Have similar connections and knowledge to Venture Capitalists
  • Often won’t invest unless there is a “lead investor” who they know has done full due diligence (usually VC or angel group)
  • Do not usually have funds to invest in a round after Seed Round, therefore no signaling problem if they don’t invest in your next round

Other Angels

  • Like sophisticated angels, usually require a lead
  • Typically won’t match startup network or experience of sophisticated angels
  • If not used to the entrepreneurial process, entrepreneur must be careful about setting clear goals, milestones and expectations

Incubator

  • A bit of money to get you started – before raising a seed round
  • Amped up, constant mentorship from partners and industry experts
  • Give guidance on designing your strategy, perfecting your pitch, raising money, and make introductions to investors and mentors
  • Don’t usually invest in seed round, therefore no negative signaling issues if they don’t invest in you
  • See my post about the (many) benefits of incubators here

BOOTSTRAPPING

Bootstrapping means funding the business yourself (or with your co-founders), and not taking any outside investment.

The most obvious benefit of bootstrapping is that you don’t give up any of your company, and hence don’t lose any control or equity. On the downside, you may not have enough money to run your company.

SO SHOULD I RAISE MONEY OR NOT…?

This is an almost religious war, and there many arguments either way made by many smart people.

For the sake of argument, let’s assume that you could somehow fund your business to at least survive at some level without external investment.

To me, it comes down to this:

  • If you take external investment, you will have less power and a smaller percentage of upside. However, it can add rocket boosters to your company. You may have been able to slowly grow your business without investment, but taking it could allow you to hire a larger staff, pay for marketing, and grow your business faster than you otherwise could.
  • If you bootstrap, you may not build your business as fast, but you will retain full control, and a larger percentage of upside.
  • So really, it’s a personal choice, there’s no right answer. It’s a balance between how much money and control you want, and how much of this can be achieved without external investment.

I’ve heard plenty of stories in each direction: folks with billion-dollar businesses who saw no upside after selling all their equity to investors, and bootstrappers who’ve made hundreds of millions on businesses no VC would touch.

The bottom line is that “success” does not rely on raising outside capital, and in fact can at times hinder it. You must decide what success means to you, and understand what your business needs to get there.

(If you’ve decided to raise money – I’ve written a post here about the technical side of doing so)

I’ve Got An Idea For A Startup, Now What?

Many non-technical folks have a big idea, then immediately set off to find engineers and attempt to raise VC funding.

Slow down!

Before that, you should make sure the idea is really worth your time. It’s easy to fall in love with an idea, and you should really try to decide whether your business can accomplish your goals (save the world, pay $100k/year, build an exotic car collection, etc.) before you move forward.

In addition, it’s going to be really hard to raise money without figuring out quite a bit of detail first. Just ask a VC how many Next Big Ideas they see from excited co-founders without backup or any idea how they’re going to execute (hint: the answer is “too many”).

Once you’ve got an idea, your process should go something like this:

Of course, these materials and decisions don’t need to be sharp and finalized before you set off on your entrepreneurial adventure.

However, they’ll help you channel your energies into answering the key questions of your startup, decide whether you should really begin to build this business, and be armed with the information you need to excite your future teammates and investors.

A few pieces of advice that I’ve picked up along the way:

  • It’s going to be way harder and take way longer than you think
  • Now that I’ve adjusted your expectations, take that amount of time and effort and triple it
  • Problems that seem like certain doom for your startup will occur constantly

And if those seem ominous and negative, they shouldn’t. Starting a startup is really hard, and you should know what you’re getting into from the beginning, so you can prepare yourself and not freak out. Freaking out doesn’t help anything.

That said, what is likely driving you to entrepreneurship is passion for your idea, and that is one of the most important assets you have. Be sure to communicate that passion to everyone with whom you discuss your business.

One final tip: This is your business, so don’t act on a single person’s advice (mine included). Get as much advice as you can, synthesize the results, and make your own decisions.

Good luck!