Congrats on getting your first customers. Most founders never get that far.
I’d make an effort to get to 20 paid customers first and interview all of them, especially the ones that churn. You don’t want to dump a bunch of ad spend into a leaky ship, so make sure you fix or build any features you beta testers give you feedback on first. Then push some ads.
DM, looks like we might have people for 2-3 teams
Good question…
At a high level, I’d say success is running through a proper customer validation process itself. It’s the thing most founders struggle with the most in the early stages. This kind of process is about getting comfortable talking to customers and incorporating their feedback into what you build before you build it.
As far as tangible deliverables, I figure a 3-4 person team should probably be able to at least produce the following:
If we’re firing on all cylinders, we might even be able to push a v1, and depending on where the idea lands, success might be a 100 person waiting list or 1 paying customer. TBD.
As far as format. I’d propose the following, timezones permitting:
I think these kinds of projects work best with 3-5 person teams, depending on people’s backgrounds. My ideal is usually 1-2 devs, 1 designer, 1-2 GTM, but I’m also down to have multiple teams self organize in friendly competition so we can push each other. I can maybe bring in an investor friend to judge and give feedback.
Whatever the outcome of the event, I’d suggest letting the idea rest for a week. If it’s still keeping you up at night, keep working on it. Otherwise let it go and we can always do the event again with a different idea.
I’d be down to explore ideas & build something…
My background is primarily in biz dev. I’ve worked at early stage, growth & pre-IPO companies, and spent a year working nights and weekends on my last startup. More recently I’ve been a scout and operator in residence for a few VC firms.
My proposal would be that we add maybe one other collaborator to the mix and then try to spin something up in a weekend, hackathon-style. With focus, that’s enough time to make meaningful progress on validating and invalidating ideas and potentially push a prototype or landing page at least. It also allows us to figure out how to work together under a little pressure, which usually helps strengthen relationships faster.
If you’re interested, shoot me a DM.
It really depends on who the customer is and in most cases that’s local government. The problem is local govt is probably the hardest customer to sell into as sales cycles can often be up to a year plus. You’ll also be competing against the municipal workers who are already hired to do that work, which makes it an even tougher sell.
It’s absolutely worth the request. Can’t guarantee the outcome. But if things are up and to the right, investors don’t have a lot of reason to apply pressure about these things. They’re just along for the ride.
Whatever financial models and hiring plans they reviewed in due diligence before investing likely already forecasted internal promotions into that plan. In fact, if the founders didn’t for some reason, that would be a good opportunity for an investor to demonstrate value but dropping a lecture on the importance of team culture and employee retention, even if its only lip service to them in practice.
The bigger issue you’re likely to run into is that your HR team is likely young and small… two, maybe three people now? They likely have to double or triple the organization’s headcount with this round of funding. Their first goal will be to formalize new employee onboarding, then secondly make high priority hires, and thirdly standardize promotion schedules.
Either way its probably a good time to make the inquiry, but it could be another 6-12 months before they get their ducks in a row and you get your pay bump.
This is all good advice to strongly bear in mind.
I think the absolute failure rate of startups is probably 95%, but the failure rate of venture-backed startups is about 75%, pretty much in the middle of your high and my low, according to a 2022 Harvard Business School study (“The Venture Capital Secret: 3 Out of 4 Start-Ups Fail.”)
Would only add that there are a fair number of service providers these days that will help employees exercise their options if the company is up and to the right. Might have to hand over a thirdish of your shares but you won’t have to come out of pocket for them.
If you’re non-technical and what to work recruit and engineer, start by working with a designer and get some mockups. This will give you 1000% more credibility when you to start engaging engineers. Setting up a landing page and putting together a good set of mockups can probably be done in 2-4 weeks.
Once you have both assets in hand, run the CTO search process similarly to how you’d run customer discovery. Create a target persona based on your technical co-founder’s industry background, domain expertise, years of experience, etc. Make a list of target Linkedin or Twitter profiles and ask them for feedback on the feasibility of the product you’re looking to build. Remember that this is not recruiting. This is pre-recruiting.
Approximately 1 out of 5-10 engineers you reach out to are likely to agree to a meeting. By the end of the first meeting, your goal is learn everything you need to know about what it will take to build a project like yours,
You want to feel pretty clear about what the engineering lift entails, because it will only make your pitch stronger with the every consecutive engineer you chat with. If the engineer is intrigued with your idea, they’ll either ask or follow up with more business questions… How will you find funding, when do you plan to raise, etc?
Always ask at the end if there’s anyone they know they think might find this project interesting. Also mention that you’ll be recruiting 3-4 college CS majors as interns to help with the hardcoding. If an engineer is interested in the project, this will alleviate a lot of stress on their part knowing that they wont have to hard code the project themselves. If you post a JD somewhere like wellfound, you’ll get 30-40 application in the first couple of days. When you find an interested CTO candidate, ask them if they’d be open to running a techincal interview with the intern candidates, so that they are essentially selecting their own team.
When it comes down to comp and ownership. Be honest with them. There’s no money yet. Still, a game engineer will be open to the idea of working with each other nights and weekends for 3 months just to feel each other out. You just have to be clear about what success looks like on the engineering side, fundraising side and customer acquisition side. The division of labor should be him or her running everything technical, you running everything customer and fundraising-related, and the two of you meeting half way on product ideas and questions. Oh yea, its worth it to get a contract designer or design intern to work with you throughout the process as well. Fiverr or Upwork might be a good place to start.
The priority is getting the co-founders, though it might be helpful to take a few investor meetings just to gauge the market appetite.
If it were me, I’d be prepared to give two co-founders, 20-25% of the business each. Why? 1) They’ll presumably be working for free or pennies on the dollar, and 2) more importantly, you’re picking people you believe will go the distance with you. That could be another 7-10 years of their life they’re putting towards your vision. You want them sufficiently incentivized to do their best work. If you do pursue funding, at least one of your investors is going to care about this to avoid future conflict down the road.
Also, if you do pursue funding, don’t claim product market fit yet. It will invite a lot of scrutiny. Instead say “we have some early customer validation,” and then breakdown what that looks like:
After that, you have to make a case that there’s a clear path to $1M in annual revenue and a visible path to $100M. Good luck!
If the company recently raised $3M, it’s considered a seed stage company and is likely valued at $15M by its investors. Your 2% equity stake would actually be worth $300K on paper right now.
If things go well and the company hits $1M-$2M in annual revenue in the next 12-24 months, the founder(s) will raise another of funding, probably in the $10M range, which will be considered a Series A financing that values the company somewhere in the $50M range. Your 2% ownership stake will get diluted to 1.6%, but with the increased valuation, your paper position increases to $800K.
If the company continues to do well, say triple its revenue over 12-18 months, the founders will raise a Series B round of funding, probably somewhere in the ball park of $30M, which would likely value the company around $187.5M. You’d get diluted down to 1.3ish%, but your paper position would hover in the $2.5M range.
If the company sold at that price, this would be a great outcome for an early employee. An incredible outcome, however, would be IPOing or exiting for $1B+, where you would likely make 8 figures.
The catch however, is that only about 100 companies or so out of a couple of thousand funded every year go the distance, and something like 60-80% flat out fail… That is, your paper shares ultimately are worth zero. So you have to decide whether you really believe in the team and the opportunity enough to risk having to look for another job in 12 months because things aren’t working. At a minimum you’ll get paid to learn what it takes to get a tech startup off the ground.
Sounds like the classic “if you build it, they will come” trap. I’d say 9 times out of 10, it’s worth it to do customer development and define the problem you’re solving before you start building anything. That 1 time out of 10, you’re building a solution to your own problem and it just so happens that a lot of people have the same problem.
Why not just start with the landing page and nail the value prop (MVP). Build a beta and get feedback. Then build and launch a V1.