Guess what! Sweat equity is dead in Chicago. Okay, there are a few exceptions in the developer communities. But other than that, dead.
Therefore, I write this with bold transparency: I am a former programmer turned founder, who leads a team of programmers. Each member of my team is "technical co-founder" material. Yet, here they are, working on a team with me. Not co-founding for equity with you, the non-technical founder.
So, why is that? Seriously. There's a real answer, and it's not a smug thing I want to rub in your face. The truth of the matter is that, in an industry where talented programmers can ask for hourly rates/salaries that make business founders weep, there is no reason for them to give that money up in order to co-found a company unless they genuinely crave such a role in their lives. If you were in their shoes and asked to take cash or a risk, you can surely understand why they pick the former, sometimes working for those engaged in the latter.
What is the upside of this hard truth, though? Instead of giving up copious equity to a technical co-founder, you get to keep all of that control while you seek alternate options for building your product. You can use it as leverage! Additional investment! Employee incentives! Flexibility!
Where does that put you, then? Who builds your product if you lack a "sweat equity" technical co-founder? For those of you who want to focus on strategy and management instead of learning to code, this means you need to find someone who works for cash and not equity. While "dev shops" have existed a good long while, mostly interfacing with ad agencies and mid to large corporations, some of the smaller ones have evolved into a consulting focus on "product development". This means they want to help you craft a company, not just build software. While my firm Polymathic counts as one, I am really glad to see other options popping up, many lead by awesome engineer-turned-business types.
It takes a unique skill set to help a founder build a business instead of just blindly following orders.
That's right, if you are a client of mine and you ask my team to build a feature and we don't think it's the right next step, we are going to push back. We will say: you pay us to make sure we discourage you from costly mistakes... just as much as we encourage, and fortify, your success.
This is, after all, teamwork. Only by combining forces can you build the best product possible. Using team-for-hire consulting is NOT outsourcing when done properly. Let's call it 'insourcing'.
Now, another thing I am hearing people come up against with this new way of building early-stage product is: how can you do incubators, accelerators, or heaven-forbid raise funding? Well, work with a local team that you communicate with on a daily basis and there's no reason you can't do a local incubator or accelerator program with them. The managers of those programs need to get past their fears, however, as do angels and VCs. It troubles me that everyone sees such a relationship as prohibitive versus 'traditional' startup means.
The right team for you CAN be full-time. They ARE on your side and accountable. Your baby IS also their baby. They are PROUD to work on this product with you.
So, if incubator/accelerator programs or investors hold "not having a full-time technical co-founder" against you, I say tell let's tell 'em it's 2013 and they need to think outside of the box. Really, tell them to call me, I will gladly rant on-demand on your behalf. I am more than happy to help those with funds better understand how firms like mine can be a valuable vetting source, on top of helping fill the talent gap in an accountable manner.
Not convinced? There are even benefits to using a team-for-hire that you cannot get with a 'traditional' technical co-founder. Our clients are all on an as-you-need-it plan to avoid the high costs of salarying the types of epic talent in which I keep company. Not only does this mean I can give awesome startup founders access to senior-level talent they normally could not afford at full-throttle long-term, but the folks on my team get a full schedule working with passionate people instead of accepting high-paying jobs that are low in satisfaction and singular in clientele. This means EVERYONE is excited and driven to work on a product. And best of all, if you need to scale up your resources — you just do it. There's no formal hiring process; you just plan accordingly with your consulting firm and scale up as needed. This is a huge asset if your product requires it and of course, the plan is to build something so awesome that it must grow at lightening speeds.
Of course, a team-for-hire is not sustainable (or recommended) forever … but it doesn't have to be. I'm talking early-stage, here. Put up cash now to get only what you need, and build a product that generates investment and revenue to pay for in-house members later on. Those same developers who want cash instead of risk then become viable options for you as you enter growth-stage. We've come full circle.
Oh wait, you have to have cash already to build a product if you're in this scenario? Yes, but don't fret. I do agree it's a conundrum that the typical model calls for sweat equity technical help and therefore a product before you can ask anyone for money, but I have 2 thoughts on this:
1) You have to spend money to make money, and we typically see early-stage products in the 15-60k range (averaging at 20-40k) for multiple iterations of a product from scratch. This is a short-term loss if you build a product with a clear, immediate plan for revenue. I tell you, nothing makes me happier than working on a product with a founder where the product's income pays for its own maintenance and iteration. That's the dream right there!
2) Let's fight the status quo. I want to challenge this city — a delightfully industrious city with old & new money that far extends the so-far identified investment scene — to (again) think outside of the box as far as fundraising goes. You are often told, "investors don't pay attention to anyone without at least a prototype or basic traction", which makes this money-to-achieve-said-traction a bit of a chicken/egg problem. Then why don't we reinvent investment? Why can't funding happen earlier?
This rant is by no means thorough but you get the picture. Just because you cannot find the talented tech person of your dreams who will work for sweat equity doesn't mean you can't build the most amazing product that ever was. Get creative. Be open to testing the waters in a new way. Recognize how this is shifting risk/reward in ways you can work to your advantage. Ask lots of questions and use this evolution of product development as a way to find a stellar team that perfectly fits your needs, attitude and culture. There are options out there and all of 'em are ready to talk through an idea with you.
Speaking of which, in an effort to help bridge the gap between technical co-founding of yore and the hard truths of 2013, we are putting $500 toward any new product that comes to us in the month of May (so long as this article is mentioned somewhere in the intake conversation). Our intake process is free and brainstorm-y and awesome.
And… If enough people want to know more about how a team-for-hire situation can and SHOULD work (how to avoid pitfalls, what type of arrangement to look for) I'd be more than happy to detail that in the future. Happy building!
"...sweat equity is dead! long live sweat equity!..."
