The big one I mentioned is worthy of sharing with the world, the biggest mistake during my time working on FFM that I'll never make again:
A startup should ALWAYS have the "brains" behind their core business IN HOUSE! In the case of a software company like us, this means software developers. During the process of creating a product or service, these technical people will be making mistakes, learning about the business processes, and in general building what you might call "institutional knowledge" specific to the company and industry.
A startup's core competency cannot be "we are the best in our niche at being business people," it needs to be something like "we are the best at *creating* a product/service that caters to our niche," which requires in-house technical skill. FFM was started by a bunch of people that at the time had never built a web application, thinking that we could outsource the actual technical work and use the resulting product, but this meant that we could not evaluate the outside firm's work, be confident in the status of the project, or in the event of an overall failure have learned from mistakes made during the project.A software company should have a software developer, a biotech company a bioengineer, a cleantech company a chemE and/or EE, etc., and those individuals need to be sold on the idea and be equity partners.
This may seem obvious to experienced entrepreneurs, or those on the west coast where "software developer turned entrepreneur" is the startup archetype. But to a group of business students starting what ultimately became a software company in Cleveland, it was not so obvious. Furthermore, while we had advisors, mentors, etc., this wasn't something that was stressed by anyone else.
So I'll stress it now. YOU NEED A TECHNICAL CO-FOUNDER! With equity, who loves the company.
A startup should ALWAYS have the "brains" behind their core business IN HOUSE! In the case of a software company like us, this means software developers. During the process of creating a product or service, these technical people will be making mistakes, learning about the business processes, and in general building what you might call "institutional knowledge" specific to the company and industry.
A startup's core competency cannot be "we are the best in our niche at being business people," it needs to be something like "we are the best at *creating* a product/service that caters to our niche," which requires in-house technical skill. FFM was started by a bunch of people that at the time had never built a web application, thinking that we could outsource the actual technical work and use the resulting product, but this meant that we could not evaluate the outside firm's work, be confident in the status of the project, or in the event of an overall failure have learned from mistakes made during the project.A software company should have a software developer, a biotech company a bioengineer, a cleantech company a chemE and/or EE, etc., and those individuals need to be sold on the idea and be equity partners.
This may seem obvious to experienced entrepreneurs, or those on the west coast where "software developer turned entrepreneur" is the startup archetype. But to a group of business students starting what ultimately became a software company in Cleveland, it was not so obvious. Furthermore, while we had advisors, mentors, etc., this wasn't something that was stressed by anyone else.
So I'll stress it now. YOU NEED A TECHNICAL CO-FOUNDER! With equity, who loves the company.
Huhmmm, was just having the same thoughts myself! Not a good week in the software development world here.
Good point overall. I'm still confident that technical expertise can be hired...it just proves to be harder than one can imagine.
Oy, sorry to hear that! Let me know if you ever get that code from LD and want someone to look over or work with it... I'm starting to get back in the programming groove and wouldn't mind another project :) Python preferred but learning some Ruby would be fun.
On your second point, I agree. For a startup, though, it's betting the farm on somebody who lacks long-term interest in the project's success or direct accountability to the company. I think the best case scenario is having a heavily equity-compensated technical person on staff and in the same room, second best that same person working remotely, then a salary-only employee, and finally an outsourced solution.
I think, for at least web-based startups, technical expertise can be hired. The problem is that the founder either never wants to pay more than a couple hundred bucks, or wants the developer to basically build the entire business in exchange for a very minority share of equity.
If you have something you think you can sell online I can build a site for you to do that; but asking me to build and market the site on spec for 10-30% of "future earnings" is ridiculous. 30% of 0 is 0.
The problem is, the idea that the web is easy and if you build it they will come. That's what I see anyway, I'll get off my soapbox now :)
Haha, great points Brendan, thanks for getting on the soapbox.
I was definitely talking about bringing that technical person on as a long-term partner/CTO, giving a big chunk of equity, and probably paying some small amount of cash as well. I think the whole idea of developing the initial product on a contractual basis isn't a very good one unless the initial founder just wants a prototype and has cash to drop on one, with the expectation of building out a dev team if the prototype is well received.
Some friends have been presented with those arrangements in the past: "build my website and I'll give you 50% of the profits, but I'll be running the business." Insanity...
In the case of Fresh Fork, we paid cash but to an outside firm. Giving away even a small amount of equity to a single individual and putting them on a salary would have been much more effective, even if it was something like 10% equity and $30k salary