I am a Chicago entrepreneur who builds products for other entrepreneurs. My career came into existence because founder after founder was unable to execute their vision. “Where can I find a technical cofounder?” they asked, because technical cofounders do the initial engineering required to launch a product.
Tech talent is essential to the entrepreneurship community; to keep the gears moving, we must dissect how we got here and where things are heading.
SWEAT EQUITY IS DEAD
The year was 2010 and I could not find a compelling reason to help someone build the technical portion of their business for — what felt like — free. Equity did not appeal to me when I could be paid well for my work. I could enjoy the breakneck pace of entrepreneurship without assuming all the risk myself whilst stuck in someone’s garage.
Yet the great technological companies of yore — Apple, Google, Amazon — all have a story that begins with 2-4 kids holing up in such a garage to build a company together. At least 1 business founder and 1 technical founder came together to engineer something epic, each taking equal risk to invest opportunity-cost (“sweat equity”) in their dream.
Fast forward decades later and the entire product landscape has changed. It is no longer as simple as finding a programmer; a shift in supply and demand has allowed technical people to hold all of the cards. We can claim it’s a numbers game but the issue is far more complicated than programmers per capita. I often say “sweat equity is dead”, because technical people rarely work for just a stake in an endeavor like they would’ve in the days of early Apple; it happens but it’s not the norm. Those who would potentially build a product for equity alone now command lucrative rates, entirely changing how non-technical founders build products.
Accordingly, most business founders must now face up-front costs to build the initial technology portion of their business. Unless resources shift to accommodate this new hard truth, many businesses that should get built may never see the light of day.
UP-FRONT NEEDS AND COSTS
In our current entrepreneurial climate, non-technical founders need a functioning product in order to approach investors. The product is often built by contracting a programmer or hiring a consulting/R&D firm. This practice makes talent an up-front cost on top of the strategic cost typical of the growth-stage. While I do not think this is a bad thing, it certainly changes what it’s like to be a non-technical entrepreneur.
Instead of spending opportunity-cost and pitching to investors, a founder must first save up money (in addition to saving for living expenses), spend that money to build a beta, and THEN pursue raising capital to keep going — assuming they don’t yet have revenue to sustain themselves. I fully support saving up capital far in advance to becoming an entrepreneur, but only recently has it become necessary to "pay to play" so early in the game, and not everyone will be able to cultivate adequate savings accounts to fix this problem entirely.
We need to shift the paradigm. A lack of early-stage/seed funding has long been a complaint from Chicago entrepreneurs, but we need it now more than ever. I’ve seen even a modest 5 figure sum build multiple iterations of a product! Due to valuation concerns — and the correlation of timing/risk — we may need to think outside of the box to tackle this issue. Changing when and how we invest can bridge the gap if not fix the problem entirely. Other changes, such as more investment in high domain-expertise founders, can help mitigate the risks to make earlier investment more feasible.
AN ACTIONABLE SOLUTION
The main issue standing in the way of this solution is stigma: Many investors require a technical, non-contracted person in-house. If you’re paying a freelancer to build a prototype, or you’ve engaged a long-term R&D service like my firm, you will face a bias coming from investors. This stigma is antithetical to progress, and should be mediated by vetting the paid partner in due diligence. Correcting the bias must happen before any other systemic changes can occur.
Any disdain held toward paid technical cofounding should be balanced by how it relieves entrepreneurial pain-points.
- Paid partners agree to legal and financial accountability and are therefore much less likely to flake or delay than an equity cofounder juggling a product with a daytime gig.
- Since paid talent is not taking much if any equity, more is left for both founders and potential investors.
- Lastly, this talent often has tangible experience bringing multiple products to market, which helps a founder navigate the ropes and avoid common pitfalls.
It’s a win-win if everyone is on the same page... and I’ve seen founders in this scenario prove the theory by raising seed rounds, albeit they are the minority (and shouldn't be).
Chicago’s non-technical entrepreneurs bust their butts just as hard as any founder in days gone by. They deserve a real shot at succeeding, but need help overcoming new obstacles. If our entrepreneurial ecosystem is evolving, can we keep up?
I’m open to all kinds of suggestions, as this is certainly a can of worms worthy of constructive debate, so feel free to holler at @marcymarcy on Twitter!
