Category: Startups (page 1 of 2)

Is it possible to startup if I already work as an employee?

Often, the startup ideas come from employees that see a gap in the market they are working with. E.g., an employee at a corporation who finds an opportunity to create a mobile app in the tourism area and gets on board a couple of team members to work together on the idea, on a part-time basis.

 

According to my observations, there are limited possibilities for a part-time team to have a successful launch of their project. What happens usually is that the part-time group starts with a lot of enthusiasm and devotes weekends and late after-work nights to the project. As time goes on, the team discovers the problem of the different rhythms within the team. One co-founder has to devote the weekends to the family, another one might be too pressured with work for a particular month and so on. This creates the problem of one team member delaying the rest of the team. And instead of hitting the first plan of creating a minimum viable product in 4-5 months, this seems to go far in the future.

 

Another common pattern is that a part-time member of the initial team starts to lose interest in the project as he sees that it’s much more difficult and time-consuming than what he thought in the beginning. If this person continues to be in the team but with devoting less and less time on the project, then the team psychology starts to change: “All three of us have 33% in this idea and the two of us are devoting so much time, sacrificing weekends with our friends and family, while the third doesn’t seem to be that committed”. This often leads to difficult discussions inside the team which could lead to having a team member leaving the team. Obviously, this has the cost of having to onboard a new part-time member and lose even more time.

I am not saying that part-time teams cannot succeed. But you should be three times more careful when joining such an effort. Here are some things you can do to mitigate some risks when you start with a part-time team:

 

1. Get the approval of families: This is especially important when having team members who have families and kids. Each co-founder has to explain to his significant other that joining such an effort, might require that he devotes many weekends and late nights to the idea and not to the family. And that there might be no revenue coming out of this at the end. Family support has to be granted with a clear view of the risks and the opportunities since day one.

 

2. If it’s something simple, pay it and don’t build it: If you want to build e.g. a mobile app for finding the best parties in the town in real time, you may think that you have to recruit a developer and a web designer in the part-time team to build it. Well, do your research. If you can buy the first prototype to test your idea with 2-3k USD through Upwork.com or a freelance developer, why should you bring additional part-time members in the beginning? Just bite the bullet, spend some money and get this off the ground as soon as possible. If you see traction, you can later recruit more members in the team.

 

Of course, if you want to do a sophisticated machine learning algorithm or a new social network or a very demanding software as a service, this is not possible, yet many times the startup ideas are not based on the excellence in technology but in the market connections or another unfair advantage that the team might have.

 

3. Create Rules of Disengagement in the team: Part-time teams usually don’t discuss what are the rules of leaving the startup, in the beginning. They feel that this will ruin the enthusiasm and the positive spirit of the team. It would be advisable to get in such an agreement with other team members as soon as possible. As an example, agree that you are all going to spend the next 12 weekends to create the first version of your mobile app and recruit 100 beta users. And that at the end of these 12 weekends you will meet to discuss if someone wants to leave, or if the team wants someone to leave due to low commitment. In that case, you could agree that the person that has to leave will let all his equity go, without requesting compensation for the hours worked. Or that he could keep a 2% in the company without doing anything in the future, instead of the 33% that possessed on day 1.

 

4. Create Sprints. Rest. Create Some More Sprints: It’s not easy for 3 persons who work 9 hours per day as employees to be on high performance all the time. Agree to the rhythm of the startup. As an example, agree that you will spend this week doing a sprint to gather 200 questionnaires for your market research. Let 3-4 days pass without doing anything. Create a second 4-day sprint of setting up the landing page, connecting analytics, creating online ads, your first blog posts and the press media kit. You get the idea. Create a healthy tension in the system with tight commitment and deadlines and execute on that as your whole life depends on it.

 

5. Manage the Emotional Flow: Cash flow is important, yet emotional flow might be even more important in the beginning. Try to find some ways to have fun as a part-time team. Celebrate a small victory, such as getting 100 beta testers with a night out with the team and everyone’s families. Get together as a team and work on some ideas that can help you keep the spirit high when the tough times come.

 

6. Have complimentary skills in the part-time team: If you are a business expert great in representing your startup and getting it off the ground but you don’t have industry connections, don’t recruit a friend of yours in the team just because you like him and he likes the idea. Get an industry expert, who could bring the connections that you don’t have.

What is a fair share of equity that each startup member should get?

A common question between co-founders when they start a new venture, is how to split their shares in the startup.

Let’s suppose that you have an idea for a startup and you decide to co-fund your startup with another two persons. So, you are three co-founders. Should you split equally the equity in your startup and get 33.3% each?

Actually, you should not do it. Although this is the way most startups choose to start, especially if the other two are friends of yours, you should take under consideration several factors to determine what is the fair way to split the equity in your startup.

Here are some questions to take under consideration, when deciding about the split of equity among co-founders:

  • Who had the original idea?
  • Who is the CEO?
  • Who pitches to investors?
  • Who writes code?
  • Who is working part-time, with the promise to turn into full time when the startup takes off?
  • Who runs the online digital marketing campaigns and does content marketing with blog posting?
  • Who is paying at the moment for the business expenses?
  • Who has the most connections in your targeted industry?
  • Who could become the CTO of the company if you hire many developers in the future?
  • Who is the co-founder that if he leaves, you will have much fewer possibilities to raise funds?
  • Are you going to give a small percentage to advisors? (Typically advisors get 1% in the company)
  • What is the market value of each co-founder at the moment? Meaning, what would be his/her salary if he was employed by a company?
  • How many startups has each founder founded in the past? What was the biggest achievement that they had in the previous startups?
  • Has any co-founder participated in an accelerator in the past?
  • How many hours has each co-founder contributed to the project up to now? And what would be the cost per hour for his/her expertise?

 

Answering all these questions will provide to the co-founders team with a better understanding of what should be a fair split of equity. There is no formula that works perfectly to define the equity split. You will have to make up yours. Having said that, there are several online tools that could be used to help you understand the gravity and the “special weight” of each of these factors.

Here are some of them:

http://foundersolutions.com/founder_equity_solution

http://slicingpie.com/the-new-pie-slicer/

http://foundrs.com/

https://smartasset.com/infographic/startup

30 Startup Buzzwords You Should Know

30buzzwords

There is a specific language that is used in the startup world. Yes, it contains many buzzwords and there are also humorous infographics on them, while many people -who are many years in the space- make fun of new teams over(ab)using them (read posts at quora). However, you should still invest some time in learning and understanding them, in order to communicate more effectively. Here are the basic terms and their explanation: Read more

I have a startup idea! Should I tell it to others?

Idea Startup

Yesterday we had a Startup Pitch presentation at Founders Institute in Athens (click) and one of the questions that came up was: “I have an idea for a startup. I am afraid that if I tell it to others, someone may steal it. Should I tell my idea and how can I protect it?”.

The short answer is “Yes – you should definitely share your idea as much as possible”. Let me explain the reasons: Read more

How to Name Your Startup,Mobile App & Software Product

How to name your startup
Finding how to name your startup is one of the first problems you will need to solve. While some argue that you should leave the struggling to find a name for a later stage and focus at first to just build your product, it is still a nice investment of time to spend some days figuring out the name of your product or startup. This will help you to design and brand your website/mobile app etc and make a better impression to potential investors. Read more