

An Open Letter To Business People - davidbalbert
http://dave.is/businesspeople.html

======
grellas
This is a nice piece overall but, having seen founders negotiate their splits
countless times over nearly three decades, I would add that such negotiations
tend to be more nuanced than equal splits in most cases.

Idea people may not be able to proceed without solid technical people but what
they do or don't have to give them for their services is always governed by
supply and demand. An exceptional technical person who will drive a company
will get an equal split (or more) but someone whose skills can be supplied by
a good number of people will likely get far less. Strong technical expertise
does tend to be _hugely_ important in a typical startup but is only marketable
consistent with what people are willing to pay for it in light of other
alternatives.

So too with idea people. Abstract ideas may not have much value but many of
the best ideas come from those "in the field," i.e., who have worked
extensively in a given area and have special insights about how, e.g.,
customer pain points can be addressed effectively. Such ideas can be
incredibly valuable and they do not necessarily come from technical people.
They can come from managers, from sales people, or from a broad variety of
sources - even from those with a technical background who later moved into
sales or management and who combine their skill set with their experience to
derive special insights. When people like that want to found a company, they
may lack the particular technical expertise to execute on the project but they
will know enough about the industry to know where to find the best candidates
to fill such a role. That may result in a 50/50 deal but it could easily
result in all sorts of splits, even if one of the roles is prominent enough to
be called "technical co-founder."

So, as a technical founder, you should push for as large a split as your
personal qualities can command but you should not use any arbitrary formula
for determining splits. The rule is and always will be to assess the situation
based on the real value each person is contributing and this often leads to a
wide range of founder splits that are far from equal yet are perfectly
suitable for the persons involved.

That said, this again is a fine piece reminding those with technical skills
not to sell themselves short in dealing with business people. There are all
sorts of hustlers out there who are more than willing to take advantage of you
and, if you do not value yourself properly, you will likely fall victim to
them. If people really do have valuable things to contribute, however -
whether on the business or on the technical side - then the process is not
really that adversarial because smart people will know an opportunity when
they see it, whether or not they get equal shares in the venture, and they
will usually work these things out in a way that is amicable.

~~~
davidbalbert
I definitely agree that 50/50 is nowhere near a hard and fast rule. The split
depends on how long the company has been around, how much progress has already
been made, etc.

The larger point I was trying to get across is the discrepancy between the
amount of value many businessy types ascribe to technical skills and the
actual value (at least from my perspective).

If the only progress you've made on your company is the initial idea, I really
do believe that the you'll up your chances of success significantly if the
split is close to 50/50. The odds that you're even going to end up succeeding
with the same idea is pretty low. At that stage, you really want to build a
team of equals, not get employees.

~~~
netcan
I think the problem is extrapolating from simple examples used to illustrate
thing.

eg Rich Dad or similar: You have an idea for a company. You create the company
and deposit $10k in it's account. You bring on a programmer to build the
project paying him in equity. The company could be worth $100m in a few years,
so his 10% is better than a salary.

I'm sure parallel toy ideas exist in people's minds about investors. If
someone puts $1m into a company that's still mostly an idea and a prototype,
it doesn't seem all that far fetched that the investor would expect to
basically own the company. What have the founders contributed? An idea and 6
month work. What has the investor contributed? $1m.

In the absence of actual experience, people develop biases based one imagined
experiences where they are the hero. I don't mean that in a bad way. Everyone
does it. It's hard to see an outside perspective unless you encounter it.

------
smanek
_A startup without a business plan isn't a business. It's just some code._

I disagree. Users make it a business - and users don't care if I have a
business plan. They just care if the product (i.e., code) makes their lives
better.

~~~
nicholasjbs
I mostly agree, though I don't think "business plan" in this context is meant
to read "a 100+ page analysis of the market and other bullshit." Rather, I
took it to mean a sense of how you're going to get the product out to users
and (maybe) how you'll eventually make money. Both of those things are
required if you want your business to become sustainable.

~~~
ssing
In spite of this being repeated so many times still it is so easy to fall into
the trap. At-least it was for me. Working on my latest project we discussed so
much on the feature, design and others but never on how to get users. We kinda
assumed that once the project is done users will be waiting for us.

------
rguzman
I liked the piece a lot and it is roughly right. However, as a technical co-
founder, I think a good measure of a business co-founder is whether he tries
to solve the technical problems himself. e.g. by learning a bit of php and
hacking something together.

Not only does that show that he's resourceful and scrappy, but it also makes
it more likely that he'll be able to talk about the product coherently i.e.
understanding and keeping in mind the constraints that software development
has. It calibrates his intuition, if you will.

~~~
marionogueira
Are you willing to try to solve non technical problems by yourself?

You know, researching the market to assure you're actually building something
people will want to use, finding paying customers or advertisers, dealing with
investors, finding decent PR people, recruiting etc... nothing too fancy.

~~~
rguzman
Yes.

A bit less snarky: a good measure of a technical co-founder is him trying to
solve the business problems himself. For the same reasons I cited above.

~~~
marionogueira
That's the right attitude. Unfortunately, that's not the norm at all.

Mostly, technical folks tend to behave as spoiled brats when dealing with non
technical people as cofounders (which amazes me given that one of the best
performing tech companies today is run by a non technical guy - Steve Jobs).

Update: no need for the technical guy to actually work on non technical
issues... given the current scenario, respecting the non technical guy within
his domain would suffice. It's not like non technical people try to tell
programmers how to do their job.

~~~
sachinag
Steve Jobs soldered with everyone else at Atari. Just because he didn't
engineer at Apple doesn't mean he's non-technical.

~~~
marionogueira
Just soldering doesn't make anyone "technical". Woz's designs were the
technical assets that made Apple a successful startup.

Furthermore, that experience certainly didn't mean a thing for his second
tenure at Apple since 1997, during which the company became bigger than ever.
I also doubt he had anything to do with the technical aspects of the operation
during this time.

~~~
staunch
You can be technical without being an engineer. Steve Jobs has been working
closely with some of the best engineers in the world full-time for 30 years.

He probably knows more about display, memory, graphics, processor, and battery
technology than 99% of programmers. Not to mention his knowledge of a dozen
other technologies.

------
ndl
I have a few things to add to this.

Know something I don't. Plenty of people seem to operate under a false
dichotomy between code and business, where "not programming" gets treated as a
business skill. I consider myself a hybrid hacker/businessman, but stronger on
the hacker side for now. If I am to take a "business person" as a partner, I'm
looking for that person to do things I couldn't learn easily from a day of
reading. This could mean lots of things: truly understanding markets and
pricing, being a professional member of a specialized target market, legal and
accounting training, unlimited patience for customer support, etc.

I see some "business" people making the same mistakes they're supposed to
prevent. The stereotype is of a programmer who builds and builds without
testing the market, but how many non-programmers try to recruit techs to hack
together a totally untested but "revolutionary" idea?

Another thing I've gotten wiser to is the use of vague terms, like
"leadership" and "networking." To me this comes off as "I wanna be the boss
and hang out." If you really are good at these things, try to give some
specifics.

Finally, if I wanted to have a boss and live in a hole, I'd get a job at X big
corporation. This is the point I expect the most disagreement on. I don't want
a business founder who will "take over" all of the networking. By deciding to
be a founder, I've already bet that I can manage myself better than someone
else can manage me.

------
terra_t
Why do we always hear about non-technical cofounders looking for technical co-
founders, rather than the other way around?

Is this like some singles bar where 80% of the people are male?

I for one would like to find a hustler who really knows how to hustle.

~~~
malbiniak
At it's core, yes. You (and me) are in the wrong place. It's like going to the
Apple store and hoping to hear great things about WP7.

I don't want to be snarky, but I'm having a hard time resisting. Two technical
co-founders have shuttered a business and moving on to work "hard on a new
product which we're super excited about." It's great that you're super excited
about it, but wouldn't it even be more exciting if you had a business minded
co-founder who could demonstrate the market opportunity, or lack thereof, and
make sure the time, energy, and sweat equity you're dumping into this will
have some payback?

I do appreciate the use of "'technical cofounder' and not 'developer.'" I
think a lot of technical co-founders that also write code have been annoyed to
hell by the non-technical business people who don't understand the effort
required to realize their big awesome idea.

~~~
davidbalbert
I see how this might look a bit ironic ;). The reason we're shutting down
HireHive and launching something new is precisely because of what we've
learned in the past 8 months working in the hiring space. The only way to find
out if there's market opportunity is to come up with a hypothesis and test it.
So we've done that once, learned a bunch of stuff about hiring, and are
pivoting to what we think is a bigger problem (still in hiring).

I doubt there's a business minded co-founder who could have told us the
direction we should be going in without learning what we did about hiring
first.

~~~
malbiniak
_I doubt there's a business minded co-founder who could have told us the
direction we should be going in without learning what we did about hiring
first._

You're absolutely right, and I agree with this statement. I'm left with the
feeling that you don't think this could have been learnt without first writing
code, testing the application, and learning the expensive way.

It's tough, awkward, and often frustrating, but you can connect with potential
users ("prospects" or "strangers") and flesh your idea out without writing a
line of code. People are willing to talk, but you have to approach them -- and
go outside of your comfort zone to find them.

------
joshklein
The author makes the assumption in this relationship that the technical co-
founder is a talented hacker who has read all of Paul Graham's essays, maybe a
Steve Blank book or two, and is well connected in the startup tech scene, all
while the business co-founder is just some marketing shmuck. The
characterization is unfair; there are plenty of marketing shmucks, but they
should be compared against socially inept code monkeys, not this superstar
technical co-founder (say, the kind that read Hacker News).

A great "business person" doesn't just flip open a roledex and start dialing
for dollars once the technical co-founder has laid a magical golden software
egg.

And hopefully, a technical and non-technical co-founder can find a way to work
together where they don't perceive their partner as a parasitic dead-weight.

------
alain94040
Pretty good explanation. A couple of tweaks: 50/50 is a bad split, because it
will lead to paralysis, argument, flying chairs, and eventually bankruptcy.

Second, the advice here is to not pitch the idea when you first meet potential
technical co-founders. I disagree: I think sharing the same passion is key, so
you definitely should tell me that you plan to revolutionize the music
industry (a bad example, I know...). Small talk won't get me, the developer,
interested.

~~~
Mistone
whats your suggested equity split?

~~~
jasonshen
I think it really depends on how far along the idea/business guy has taken the
project. If he has talked to tons of angels/VC's, or lots of potential
customers, especially if those customers have indicated or even signed things
saying they are ready to pay money to use the product, the split might favor
the idea/business guy more than if he has just been "noodling" over something
and has some "sketches" of what it might be.

~~~
haploid
This. The later you come into a given project, the less equity you would be
justifiably entitled to.

As to the original question, if you are starting from zero and you want a
means of avoiding critical shareholder deadlocks, you can split 45/45/10 with
the smaller portion going to a party both founders agree will be impartial.
This person can be the initial angel, or perhaps a minor founder who accepts a
smaller chunk in order to maintain his dayjob.

You can also maintain 50/50 splits of ownership but still break executive
deadlocks via a third vote by mandating a third seat on the board. This won't
help fundamental shareholder deadlocking, but disagreements rarely go to the
shareholder vote level.

------
Apreche
Wrote basically the same thing a month ago.

[http://comments.apreche.net/166/no-you-need-a-technical-
co-f...](http://comments.apreche.net/166/no-you-need-a-technical-co-founder/)

The one thing that I don't understand is how people are willing to be paid in
equity. Do you people not have to pay rent? Are you living in your parents
basements with someone feeding you?

In the words of many a Taxi driver "NO! You pay me cash now!"

Lottery tickets don't keep the lights on.

~~~
rguzman
_The one thing that I don't understand is how people are willing to be paid in
equity. Do you people not have to pay rent? Are you living in your parents
basements with someone feeding you?_

Hint: savings.

------
mattmaroon
The problem is you don't need a technical cofounder, you need a good technical
founder. Just because someone is at a meetup or on Github doesn't mean they're
a good technical cofounder.

Finding a technical cofounder isn't too difficult. If you can't sell your idea
to one developer you probably can't sell it to customers. Finding a good
technical cofounder is very hard.

~~~
nicholasjbs
It's even harder than that: You need a good technical co-founder that you have
good chemistry with.

~~~
shay
Finding this _is_ hard, especially because we non-techies are likely on a
learning curve when we're having substantive discussions with you about the
evolution of our product.

But I think that as long as we're informed on technology (opportunities and
hurdles) and have truly crystallized some initial business plan, I think we're
better poised to experience that essential chemistry.

------
locomoto
This piece gave me a couple of red flags even before I started into the
article - primarily the adversarial premise in the title and implied put down
of "business people". Remember the time when your VP or manager walks into the
room and begin with "you people need to ..."?

As a tech founder, I realize how many aspects of technologies and competencies
I need to get right to move the startup to somewhere near a profitable
business. There are very few super techs who "know it all". There are legal
techies, business techies, hardware techies, etc and probably will look down
with similar disdain that a "coding techie" who just don't get it. That
attitude is not going to be conducive to building relationship all around.

I would suggest looking at any proposition that comes your way as what a good
angel or VC would - ask the right questions, be helpful, do your due
diligence, say no politely and walk away if it does not interest you. We
techies must educate ourselves how to evaluate a startup proposition and be
helpful where possible to build our network because the network may yield
answers in our "next" startup.

------
chadp
Maybe the title should read, business focused entrepreneurs with no money. If
I am a entrepreneur and I have money, I will not be looking for a "technical
co-founder". I will hire technical teams to build and iterate the product to
my liking and specification, with their expert input of course (which I can
choose to accept or not).

------
netcan
I listened to a Mixergy podcast earlier this week where the founder (a
"business founder") started by doing some customer development, getting a
prototype developed (paying to get it done, raising a round and then going to
find co founders. Andrew (interviewer) assumed this meant a higher equity
portion, but Rafael said it was close to an even split. The logic seemed to be
that he could get better co founders this way.

To anyone who sees themselves in David's (the poster) position: How would you
feel about coming on board at this stage? How would you feel about coming on
board at this stage minus the investors?

------
T_S_
Before embarking on new venture, everybody should watch the "Treasure of the
Sierra Madre", a great movie, directed by John Huston, starring Humphrey
Bogart. There you will see that the real problems begin once you have a whiff
of success.

Oh forget it. Go see the "The Social Network" if you want to see that. Give a
huge majority of shares to your technical cofounder and try to stay on his
good side.

------
marionogueira
btw, a good technical cofounder isn't "just" a good programmer (or even a
great one)... actually, he doesn't even have to be the best programmer on the
team

------
QuantumGood
Guy says he doesn't value the "vision guy" that much...has he looked at the
photo he's using? It's not even sized properly. Simple, simple fix:
<http://i.imgur.com/o73DX.png>

