Making rev share & partnerships work between marketers and developerss
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Not a fan of the guys that put a shitton of "Go to line 47" and on line 47 "Go to line 487" comments?
I never said they spoke English as their first language...
I'm not building a 3D video game (the equivalent to your skyscraper). I'm building a web app, which honestly isn't that hard for them if they are given incredible requirements, detailed mockups (Balsamiq FTW), and have a team and a lead to lean on.
I would never hire a one-off programmer for an entire job that is important to me. Programmers can get hit by buses, get pregnant, find other jobs/projects, get addicted to drugs, and turn on you just like anyone else. Outsourcing coding TEAMS, on the other hand, are less likely to get hit by a bus all together.
Originally posted a long reply to wayn3, but decided there's little point.
All I'll say is that a truly amazing developer is worth a hell of a lot to a web based company building a product, and that an amazing developer fits in neither of his two categories that "all developers" fall into, and that the only way you'll get them onboard is by giving them equity. Cas they can make serious bank somewhere else. (e.g. Algorithmic Trading in an investment bank). I'm not talking about your average self taught php developer, or an indian dev you found on ODesk.
If you're moronic to give someone 40% or 30% of your company upfront, you deserve to fail.
That's the whole reason vesting exists. Everyone on the team should be vested. Over at least 4 years. i.e. if you're going to own 40% of the company, you get 10% at the end of year 1, then an additional 0.833333% each month onwards for the next 3 years, until you're at your full 40%. That way, if someone wants to walk away or do something else, you're not fucked. The only person against something like this, is someone who is flaky in nature anyway, and worth avoiding.
In the web world, the worst people I've encountered are "business" people who have seen Facebook skyrocket, have an idea and money for a new product, and are looking for a coding monkey to implement it for them. They hire a developer (or outsource it to an agency), aren't willing to give any kinda equity and then wonder why their product is crap, or have no idea what to do when it breaks 6 months down the road.
Whilst lots of developers are tech motivated, and will build projects for the sake of using cool tech, there are developers out there with sound business heads on them. I'd very much consider myself a developer turned tech entrepreneur, who's acquired other skillsets as he's gone on. I'm now much of an online generalist. I'm no amazing developer, but I know how to spot one, and I know how to work with one. I'm not the best marketer either, but I could definitely identify one and again, work with one. Same goes for many positions involved in tech.
Most people often forget that having a partner is actually a key ingredient to success.
Why Do Startups Fail? An Analysis of 3,200 High-growth Technology Startups | Brilliant Forge
Some key points:
Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.
Business-heavy founding teams are 6.2x more likely to successfully scale with sales-driven startups than with product-centric startups. (i.e. if you're building a product, you need a tech heavy founding team with equity. If you're just building an affiliate site, then you don't need tech, it's all about sales and marketing.)
Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups without network effects than with product-centric startups with network effects. (Founding teams that are tech heavy are more successful in growing businesses which don't suffer from network effects, so if you're building something like bufferapp.com, ifttt, google, etc.. A tech heavy team is much better than a business heavy team. However if you're building the next Facebook (huge networking effects), then the marketing strategy and business side is much more important)
Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
Most successful founders are driven by impact rather than experience or money.
In the end you need to build a team suitable for what you're doing, and people that are vital components of the business should all have equity. Everyone should be vested, even yourself. So that if you want to leave, the other founders can replace you and keep on working. If you're serious about this then it's vital a solicitor draws this up for you. A solicitor experienced in vesting and company formations.
Generally speaking if there's a personX in your team that you think "what the fuck would I do without personX?" then they should have equity.
All I'll say is that a truly amazing developer is worth a hell of a lot to a web based company building a product, and that an amazing developer fits in neither of his two categories that "all developers" fall into, and that the only way you'll get them onboard is by giving them equity. Cas they can make serious bank somewhere else. (e.g. Algorithmic Trading in an investment bank). I'm not talking about your average self taught php developer, or an indian dev you found on ODesk.
If you're moronic to give someone 40% or 30% of your company upfront, you deserve to fail.
That's the whole reason vesting exists. Everyone on the team should be vested. Over at least 4 years. i.e. if you're going to own 40% of the company, you get 10% at the end of year 1, then an additional 0.833333% each month onwards for the next 3 years, until you're at your full 40%. That way, if someone wants to walk away or do something else, you're not fucked. The only person against something like this, is someone who is flaky in nature anyway, and worth avoiding.
In the web world, the worst people I've encountered are "business" people who have seen Facebook skyrocket, have an idea and money for a new product, and are looking for a coding monkey to implement it for them. They hire a developer (or outsource it to an agency), aren't willing to give any kinda equity and then wonder why their product is crap, or have no idea what to do when it breaks 6 months down the road.
Whilst lots of developers are tech motivated, and will build projects for the sake of using cool tech, there are developers out there with sound business heads on them. I'd very much consider myself a developer turned tech entrepreneur, who's acquired other skillsets as he's gone on. I'm now much of an online generalist. I'm no amazing developer, but I know how to spot one, and I know how to work with one. I'm not the best marketer either, but I could definitely identify one and again, work with one. Same goes for many positions involved in tech.
Most people often forget that having a partner is actually a key ingredient to success.
Why Do Startups Fail? An Analysis of 3,200 High-growth Technology Startups | Brilliant Forge
Some key points:
Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.
Business-heavy founding teams are 6.2x more likely to successfully scale with sales-driven startups than with product-centric startups. (i.e. if you're building a product, you need a tech heavy founding team with equity. If you're just building an affiliate site, then you don't need tech, it's all about sales and marketing.)
Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups without network effects than with product-centric startups with network effects. (Founding teams that are tech heavy are more successful in growing businesses which don't suffer from network effects, so if you're building something like bufferapp.com, ifttt, google, etc.. A tech heavy team is much better than a business heavy team. However if you're building the next Facebook (huge networking effects), then the marketing strategy and business side is much more important)
Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
Most successful founders are driven by impact rather than experience or money.
In the end you need to build a team suitable for what you're doing, and people that are vital components of the business should all have equity. Everyone should be vested, even yourself. So that if you want to leave, the other founders can replace you and keep on working. If you're serious about this then it's vital a solicitor draws this up for you. A solicitor experienced in vesting and company formations.
Generally speaking if there's a personX in your team that you think "what the fuck would I do without personX?" then they should have equity.
Blah blah blah, if your developer is not a terribly subservient shell of a person, don't pay him a salary, blah blah blah slavery sand nigger blah blah threats of sending your job to India.
All of these are terrible rules of thumb, naturally, but I thought this last one deserved special attention.
How about the converse?
Developers, if a marketer wants to work with you, and he doesn't smoke blunts, he's probably not a very good marketer. Real marketers smoke blunts, beware imposters.
I don't think anyone wants a developer who is a subservient shell.
We'd just like developers who spend less time being ideologues and more time writing code, since code is what the product is made of, and the product is how we make a living.
Code quality only matters when code is delivered. Guys who talk code quality but can't deliver in a timely manner can bill $10,000/hr and talk about all the latest happenings in the software world until they are blue in the face, and they will still be useless to the most simple of projects.
There are lots of developers out there who are entrepreneurial. Find one with his own code or product in production. He will understand what so many freelancers do not.
Anyway, it really doesn't matter. There are 100 programmers for every marketer. It's not like we don't have options which is why we can be choosy.
We'd just like developers who spend less time being ideologues and more time writing code, since code is what the product is made of, and the product is how we make a living.
Code quality only matters when code is delivered. Guys who talk code quality but can't deliver in a timely manner can bill $10,000/hr and talk about all the latest happenings in the software world until they are blue in the face, and they will still be useless to the most simple of projects.
There are lots of developers out there who are entrepreneurial. Find one with his own code or product in production. He will understand what so many freelancers do not.
Anyway, it really doesn't matter. There are 100 programmers for every marketer. It's not like we don't have options which is why we can be choosy.
When in startup stage, there's more work to do than many of you posting on this thread would realize. There's a lot of good reasons to not have your big guns on the front lines.
Try starting up something serious without a legit CTO and promptly prepare laughed out of funding talks. Now if you're talking small potatoes (like install a pligg hack and set up my hosting and domain because I'm a tech retard) then WTF would you partner wth someone??? Pay the man.
More than a few moving parts in your startup, and you're going to wished you had people that gave a shit surrounding you ... just make sure they're motivated motherfuckers. Someone that is currently hungry and prepared to get involved is worth compensating.
lwbco said:
Actually, the best salesmen I've ever been around in my life have blown through 8balls regularly. You'll get full days out of them for sure.
I'm loving this thread, so I gotta toss my 2c into the ring.
There are so many variables that impact a startup's equity structure. It's impossible to come up with a one-size fit's all formula.
It really boils down to two things: the business "idea" and what the founders bring to the table.
An idea for a simple iphone app probably doesn't require as much development as a complex SaaS. It doesn't make sense to do a 50/50 split for the iphone app, but it could very well be the best structure for the SaaS.
Founders should be evaluated based on experience and talent. A greenhorn nontechnical founder shouldn't expect 50% if he's teaming up with a talented technical cofounder with a few startups under his/her belt.
I also recommend you seriously think about these two points:
Equity and Salary should be mutually exclusive -
Scenario A: A talented developer teams up with a newbie nontechnical founder. The equity split is 70/30 in the developers favor. The startup takes off very well, the business grows but there isn't much development work. Unless the developer gets heavily involved in the business side, he shouldn't expect to make as much money each year as the nontechnical founder. If he thinks so, he's a douchebag. Salary gets paid before Profits. If you don't work, don't expect a salary.
Scenario B: A talented entrepreneur teams up with a inexperienced developer. The equity split is 80/20 in the entrepreneur's favor. The product launches and starts to grow rapidly. The growth is viral and the business side is pretty automated.The developer is swamped 24/7 trying to scale the product. The entrepreneur shouldn't expect to make as much as the developer for a long time. If he thinks otherwise, he's a douchebag.
It's very common for Salaries to exceed Profit Distribution and it should be that way. If my partner is busting his balls making the company successful, why should I sit on my hands and get 70/80% of the disposable income because I have 70/80% equity? Fuck that noise. I'm as greedy as it comes, but you foster success by rewarding hard work.
Look for a Technical Cofounder/Non Technical Cofounder, not a marketer/developer -
There's a big difference between a cofounder and a developer/marketer.
A developer programs.
A technical cofounder cares about the entire business (and understands this interesting concept called building a product that sells), but his strengths are on the technical side.
A marketer sells a product.
A nontechnical cofounder cares about the entire business (and understands that an idea is worth nothing, it's the development of the idea that matters). It just so happens that his strengths aren't technical.
A marketer and a developer can make a few bucks. A technical cofounder and a nontechnical cofounder can make millions.
There are so many variables that impact a startup's equity structure. It's impossible to come up with a one-size fit's all formula.
It really boils down to two things: the business "idea" and what the founders bring to the table.
An idea for a simple iphone app probably doesn't require as much development as a complex SaaS. It doesn't make sense to do a 50/50 split for the iphone app, but it could very well be the best structure for the SaaS.
Founders should be evaluated based on experience and talent. A greenhorn nontechnical founder shouldn't expect 50% if he's teaming up with a talented technical cofounder with a few startups under his/her belt.
I also recommend you seriously think about these two points:
Equity and Salary should be mutually exclusive -
Scenario A: A talented developer teams up with a newbie nontechnical founder. The equity split is 70/30 in the developers favor. The startup takes off very well, the business grows but there isn't much development work. Unless the developer gets heavily involved in the business side, he shouldn't expect to make as much money each year as the nontechnical founder. If he thinks so, he's a douchebag. Salary gets paid before Profits. If you don't work, don't expect a salary.
Scenario B: A talented entrepreneur teams up with a inexperienced developer. The equity split is 80/20 in the entrepreneur's favor. The product launches and starts to grow rapidly. The growth is viral and the business side is pretty automated.The developer is swamped 24/7 trying to scale the product. The entrepreneur shouldn't expect to make as much as the developer for a long time. If he thinks otherwise, he's a douchebag.
It's very common for Salaries to exceed Profit Distribution and it should be that way. If my partner is busting his balls making the company successful, why should I sit on my hands and get 70/80% of the disposable income because I have 70/80% equity? Fuck that noise. I'm as greedy as it comes, but you foster success by rewarding hard work.
Look for a Technical Cofounder/Non Technical Cofounder, not a marketer/developer -
There's a big difference between a cofounder and a developer/marketer.
A developer programs.
A technical cofounder cares about the entire business (and understands this interesting concept called building a product that sells), but his strengths are on the technical side.
A marketer sells a product.
A nontechnical cofounder cares about the entire business (and understands that an idea is worth nothing, it's the development of the idea that matters). It just so happens that his strengths aren't technical.
A marketer and a developer can make a few bucks. A technical cofounder and a nontechnical cofounder can make millions.
My 2 cent: it comes down to PASSION. You want to work with passionate people!
I've been a front-end programmer for 5 years before turning into a marketer. I still do some minor programming, but I realized I have more passion for marketing, so eventually I'll become a much better marketer than programmer.
When I was working 9 to 5 jobs, I've worked with some fucking A-M-A-Z-I-N-G programmers. The kind of guys that are passionate about writing super-optimized code, well commented, W3C compliant & compatible with every single browser you can think of. These guys spend hours optimizing their code to chop off a couple milliseconds off of their script loading time. They live and breathe code. They produce awesomeness only. If you ever have the chance to start a project with one of these guys, definitely offer a 50% stake at least, because you don't want to lose them!
On the other hand you've got programmers that only want their shit to "run". Not concerned about loading time, clean code, cross-browser compatibility or user experience. Avoid these guys like the plague.
So bottomline is: when a passionate marketer meets a passionate developer: fasten your seatbelt cause this partnership is going into hyperspace! (Steve Jobs and Steve Wozniak... anyone?)
I've been a front-end programmer for 5 years before turning into a marketer. I still do some minor programming, but I realized I have more passion for marketing, so eventually I'll become a much better marketer than programmer.
When I was working 9 to 5 jobs, I've worked with some fucking A-M-A-Z-I-N-G programmers. The kind of guys that are passionate about writing super-optimized code, well commented, W3C compliant & compatible with every single browser you can think of. These guys spend hours optimizing their code to chop off a couple milliseconds off of their script loading time. They live and breathe code. They produce awesomeness only. If you ever have the chance to start a project with one of these guys, definitely offer a 50% stake at least, because you don't want to lose them!
On the other hand you've got programmers that only want their shit to "run". Not concerned about loading time, clean code, cross-browser compatibility or user experience. Avoid these guys like the plague.
So bottomline is: when a passionate marketer meets a passionate developer: fasten your seatbelt cause this partnership is going into hyperspace! (Steve Jobs and Steve Wozniak... anyone?)
Some great points above, but I'd add:
Most people are way too eager to give equity away when they are starting up. The number of people I've seen trying to recruit a team by basically giving away their business is insane.
I know why they do this. At the start, shares are free, and cash isn't. But it's a terrible idea because:
1. Every equity dilution means a loss of control
2. If you're banking on an exit, the less you own, the larger you'll need to grow the company to hit your numbers (and the more can go wrong)
3. If you genuinely need investment later on, you'll have far less to bargain with for it
4. 99.9% of the workforce will be terrible co-founders no matter how much equity you give them. And unless you are experienced in this field, you probably won't realise they're terrible until 12 months in when it's too late.
My personal view is that you should NEVER give equity to a job title. That's what salaries are for. The only reason you should give away equity for is that there is absolutely no possible way you can make a success of your venture without that particular individual. If it's feasible they could be replaced with a salaried employee, make/borrow the goddamn money and hire an employee.
Most people are way too eager to give equity away when they are starting up. The number of people I've seen trying to recruit a team by basically giving away their business is insane.
I know why they do this. At the start, shares are free, and cash isn't. But it's a terrible idea because:
1. Every equity dilution means a loss of control
2. If you're banking on an exit, the less you own, the larger you'll need to grow the company to hit your numbers (and the more can go wrong)
3. If you genuinely need investment later on, you'll have far less to bargain with for it
4. 99.9% of the workforce will be terrible co-founders no matter how much equity you give them. And unless you are experienced in this field, you probably won't realise they're terrible until 12 months in when it's too late.
My personal view is that you should NEVER give equity to a job title. That's what salaries are for. The only reason you should give away equity for is that there is absolutely no possible way you can make a success of your venture without that particular individual. If it's feasible they could be replaced with a salaried employee, make/borrow the goddamn money and hire an employee.
I 100% agree with your entire post but this part. It all depends on how you setup your operating agreement.
I could give away 99.99% of my company, retain 100% control of my company, and pay myself 100% of my company's disposable income.
No one would buy my equity of course, unless they were stupid enough to not read the company operating agreement.
As someone who used to smoke blunts, and stopped quite a long time ago, I can assure you that this just a stoner's fantasy of how the world should work.
In fact, I'd say there is an inverse correlation between amount of Cannabis consumed and quality of commercial output. Which is why China is shaping up to be the next economic superpower, and not, say, Jamaica.
As I hit enter on that, I knew some smartass was gonna come back with non-voting shares
Over here (UK) at least, there are laws in place protecting minority shareholders, so they can sue for more control if you do stuff like that, no matter what your set-up is.
As I hit enter on that, I knew some smartass was gonna come back with non-voting shares
Over here (UK) at least, there are laws in place protecting minority shareholders, so they can sue for more control if you do stuff like that, no matter what your set-up is.
Haha, I am a smartass.
I get boners for Operating Agreements, I guess i'm a legal nerd.
I don't even think the shares need to be non-voting to pull that off.
If:
- I am the sole member on the Board
- The operating agreement requires a 100% consensus for members to add/remove board members
- The power to distribute profits and dictate wages is given to the Board.
Then shares, even voting shares, are basically worthless.
-------------------------------
If any of you readers are trying to setup equity and business structure, then hit me up... I'd love to help you out. NOTE: I am not a Lawyer. Just a badass.
biz dev + programmer = brogrammer
In tech, some bemoan the rise of 'brogrammer' culture - CNN.com
good luck bros
In tech, some bemoan the rise of 'brogrammer' culture - CNN.com
good luck bros
