Startup Risks for Developers

'S.P.Q.Risk' taken by Matteo RiondatoIn the last month or so, I've had a number of conversations with startups about their recruiting efforts and how much trouble they've had finding good people… whether they're looking for 1, 4, or 10 people.

One aspect of their problem is understandable.  To be blunt, the market sucks.  Investment dollars are moving slowly if at all and the majority of startups will never see funding anyway.  It makes the best developers – aka the people they really need – hesitant about leaving the positon they're in.  

The second aspect of their problem is the compensation package.  I understand startups not having much money – no seriously, I understand – so these startups spend the only thing they have lots of – Equity – without realizing the risk situation they've set up.

When a technology startup is founded, there are one of two scenarios.  Either the founding team has a technical skills to pull it off or they don't.

Plan A)  If they have the technical skills, it's great.  They work together to come up with the idea, the plan, and the technical people build it up while the others are out selling, collecting feedback, and generally pushing the project forward.  Being a "founder" delays/limits some of the resentment when time contributed is out of balance, but not entirely and not for long.

Plan B) If the team doesn't have the technical skills, they're generally of two mindsets:

First, they could be of the "well, it's a simple idea, we just need someone to build it!" mindset.  In general, this group only has a verbal explanation of the idea because "it's so simple".  They don't have a specification or an understanding of the effort involved but they "know it's easy".  If you want to keep any sanity, don't work with these people… because you will never match the imaginary idea they have on the timeline they want for the cost they demand.  Run away.

Second, the non-technical founding team could a bit more clueful and of the "I don't know the details of how to do this, but I know what needs to result".  They've evaluated the idea, written down requirements, features, etc, and generally have a plan in mind.  These guys are generally great to work for.

But either way, there's a fundamental problem in ALL of these scenarios:

The risk is not evenly distributed.

If a developer spends 500 hours (or about 12 weeks fulltime) bringing your site, software, etc online and ready for sale, they've invested a significant amount of money in your sales skills.  Stop and consider that a moment.  As the BizDev team, you've received a significant investment by giving little to nothing in return.

"But we've given up equity!" you say.

True, but most likely that equity has never had an independent valuation and – more importantly – the only reason that equity might be worth something is due to that 500 hours.

Now, a responsible Sales/BizDev team will have customers and partners lined up all along the way collecting feedback, commitments, and ideally (but unlikely) some money but the bulk of the sales process will always happen once the product is ready.

And the worst part…

Even if the product is PERFECT, if you can't sell it, the developer still loses.