The Importance of Co-Founders

Although some folks are renaissance guys or gals who can do everything, the statistical rates of success for sole founders of tech companies are not attractive. TechStars has been helping fledgling tech companies for over three years now, and we’ve found that the magic number of founders seems to be 2.6 or so. Yeah, it sucks to be the .6 guy .

Finding co-founders however is tough. Really tough. These relationships are more like marriages than work relationships. I’ve certainly spent more hours with at least one of my repeat-offender co-founders than I have with my wife!

Recently, a program called Founder Dating emerged in CA. A group of smart folks here in Boston decided we needed something like that in our local ecosystem, and are making it happen. The first event is behing held next week Wednesday 12/16 at 1800 ET at MS N.E.R.D. You can learn more and sign up here.

So if you have a great startup you’re working on and you need a technical co-founder, or a marketing co-founder or a bizdev co-founder, sign up! If you’re co-founder material and are looking for a new startup to sink your teeth into, we want to hear from you!

http://founderdating4techstars.eventbrite.com/

Hugh MacLeod FTW!

The Constancy of Start-Up Stress

Earlier this month, I had the privilege of speaking on a panel at the Foley Emerging Technology Conference entitled “Prospering in a Volatile Market: an Investor Perspective” along with way smarter investors than myself, including Paul Maeder, Nina Saberi, and Michael Skok. If you’d like to listen to the session, it’s archived on that first page/link.

As we were putting the panel discussion together our intrepid moderator Gabor Garai broached the topic of whether economic downturns create particularly more stressful times for entrepreneurs. The question made me stop and think for quite a while.

The topic came up again earlier this week when I was addressing the Northeastern University ACM chapter as we talked about, among other things, “what to expect” when starting a start-up.

Here’s the thing: start-ups are inherently risky, and risk creates stress. There’s no way around those two facts.

Sometimes risk creates fun stress – like when you’re about to bungee jump off a bridge. Mostly though, risk creates garden variety “stress stress”. Are you going to be able to make payroll next week? Is some competitor about to crush your nuts? Are you going to make the quarter’s numbers? Is the product going to work? Is your top engineering team looking to leave? And so on and so forth.

Some things are absolutely “more stressful” in a downturn, such as raising money, and closing sales. QED. However, while I won’t argue it’s a zero-sum game, there is a yin-and-yang as it concerns the stressors created by the economic environment.

Successful technology start-ups usually exist longer than the peak or valley period of most economic cycles. If you were crazy enough to start a newco in the early 90s, you had a tough time raising money and getting going. Once you hit the late 90s, the economic world was nearly inverted. Now you were frustrated you couldn’t hire great people or find decent offices or keep track of the dozens of copy-cat businesses VCs were funding daily! Your stress level didn’t materially change between those two time periods – the types of stress just changed.

The nice thing about economic cycles is that you get to pick when you start your company – you can effectively “pick your poison” .

Start-ups are stressful. No way around it. If you don’t like stress, go find a nice 9-5 at the RMV or something.

Entrepreneurs: Don’t Pay To Pitch

Jason Calacanis put up a hilarious and serious-as-a-heart-attack post on Friday railing against investors who charge startups for the privilege of pitching them.

Jason is mobilizing his net.troops. He wants the practice to stop, and …

… if this is not done immediately, my group of startup CEOs and angel investors will begin targeting specific groups for elimination. We will launch competing, fee-free events directly opposite your events. We will encourage angels investors, service providers and startups to boycott your events. You may even find our street teams outside your events handing out flyers. This isn’t a joke and this is a threat: stop charging startup companies to present or we will do everything we can to put you out of business with a competing, free option.

Check out the list of investors on Jason’s post who charge for pitching. Folks are adding to it, but hopefully it’ll stay short.

I’d love to hear from groups that charge fees to present. What are the arguments? Presumably you guys have logical reasons for this (though perhaps misguided)?

I’ve worked with hundreds of startup CEOs over the years, and I always advise them that the minute a potential investor asks for money in order to hear you out, you should slot them to the very bottom of your list (at best).

I had a conversation with Charlie O’Donnell last week over breakfast about this. He also had an interesting thought about mobilizing the community to boycott investors who require pay-to-play. Smells like a meme developing…

“Startups are what make me happy”

TechStars Boston was fortunate to be able to coax the inimitable Megan Leigh Sweeney to Cambridge from Colorado to film what has become Episode 13 of The Founders – the series of exceptional, short videos that covered the TechStars Boulder (until now!) program.

The result is “The Founders: Bean Town”. Enjoy!

Is “Revolutionary Angels” either?

This article in today’s Xconomy outlines a new “pay-to-play seed fund competition” (my words) created by a new firm called Revolutionary Angels (“RA”). From what I can tell their program works like this:

• ~100 companies apply (apparently per quarter)
• those companies pay $5K each to apply
• thus RA “raises” ~$500K per quarter
• the 1st place winner gets a $250K seed investment from RA at a $2.25M pre
• the 2nd place winner gets a $50K seed investment from RA at a $450K pre
• so $300K gets invested, and the other ~$200K goes to RA operations/overhead

I don’t know the folks involved in RA (which perhaps reflects well on them ) so I can’t speak to their intentions. My  knee-jerk reaction though was negative, as I have an allergy to anything that consumes precious start-up capital that does not generate product progress, customers, or revenues.

RA argues that the $5K is not simply a lottery ticket because their folks will add value to each applying start-up during the application evaluation phase, including a detailed written commentary on their business plan(s). They also have a list of sponsors and partners who can add value to the start-ups. Whether that value is worth $5K in precious cash we’ll need to wait and see.

It’d be interesting to see if there could be a way to marry start-ups with sponsors so the often-impoverished founders aren’t shelling out cash they usually don’t have.

It’d be interesting to see if they could get their operating costs lower, which could lower the application fee. We run each TechStars program with less OpEx than that, and that includes office space during the program for 30+ people.

It would be exceptionally interesting to figure out if they could distribute the equity participation in the two winners to all the people who pay into the fund. Although this is a legal quagmire, if your $5K got you a tiny piece of the two investees, it might pay the investment back; as-is, AR gets 10% of the two winners with no outlay of their own cash.

I’ll be watching the program closely. I hope it can be a positive one for the ecosystem.

TechStars in a Nutshell

Definitely check out this thoughtful blog post from William Sulinski, CEO of AccelGolf, which graduated from TechStars Boston just a few weeks ago.

AccelGolf is a TechStars Boston 2009 company. We were also a pain in the ass during the acceptance process … we were confident that nothing could be as good as TechStars sounded.

We couldn’t have been more wrong.

It was incredibly satisfying to see AccelGolf kick ass and grow as a company this summer. I was quite sad to see them head back to Maine, but I trust they’re in good hands up North and down East. Thanks for the kind words, Will!

TEE: Non-Disclosure While Interviewing

This post is part of a series of posts called The Educated Employee (TEE), the goal of which is to get employees up to speed on the terms and conditions they usually (but maybe should not) agree to as part of taking a new job. As always, I will caveat the following with the statement that I am not a lawyer; my ruminations should not be taken as legal advice; and you should seek out proper legal counsel before you sign potentially-life-altering contracts.

Non-Disclosure While Interviewing

Lots of people glibly sign non-disclosure agreements (NDAs) while interviewing. This is, generally speaking, not an sharp move. Statistically speaking, you are not likely to get in trouble for signing a non-disclosure agreement – but you do want to be careful and thoughtful about them.

When it comes to hiring interviews, companies are all over the map about if and when a prospective employee needs to sign an NDA. Some firms require you sign an NDA to get into the building (cough cough). Many will require an NDA when you’re deep into the interview cycle and they need to open their kimono to test some of your knowledge/skills/etc. Some firms won’t ask you to sign an NDA until your first day of work.

Sometimes there’s a solid reason for a prospective employer to require you to sign an NDA. Sometimes there isn’t, and they just request it as a default in case any of their employees involved in the interview process screw up and blather on about top-secret-project-xyz. Sometimes they just ask for the hell of it ‘cuz most folks giddily sign them and there’s really no downside for the employer to have you sign one.

What’s the downside to signing an NDA during an interview process? Basically, it’s the same reason that venture capitalists don’t sign NDAs and why there’s such an uproar in MA about banning non-competes. If you’re an expert in the voice processing space, for example, you have a constrained number of potential employers you could be talking to. Many or most of them are competing with one another. If you sign an NDA with ACME Voice Processors, Inc. at your first interview, and then you want to take a job with VoizeProzezzing LLC a month later, the latter will consider your NDA with the former a potential liability. ACME could inflict various flavors of legal grief on Voize if they hired you. As I mentioned at the start, the statistical probability of this is  low, but it isn’t zero. Lawyers like zero .

You should only sign an NDA if it’s warranted. Net-net, it’s warranted only when the prospective employer needs to share proprietary corporate information with you in order to evaluate your applicability for the job. Do keep in mind that it might be reasonably warranted if you simply want to “see the office space”, as there could be who-knows-what all over white boards and on desks and visible on computer screens.

My advice to people is that there’s virtually never a reason to sign an NDA at a first interview. You’ll be talking to someone from HR or to some senior person in the firm, and their goal will be to figure things out like “can she put a sentence together?” or “does he smell horribly?” or “is this resume total bullshit or not?”. None of that requires an NDA. Furthermore, you don’t really need to know anything beyond what their web site says about them during that first interview beyond things like “are these people morons?” or “do they all smell horribly?” or “is their web site complete bullshit and this is all vapor?”. If you strike up a positive relationship with the first interviewer, and are piqued by what the company is doing and how it seems to operate – and assuming the feeling is mutual – then there may be a reasonable discussion to be had at a second or third in-depth interview regarding an NDA.

So do you have to sign an NDA if the prospective employer asks? Of course not. It’s still a free country! But it’s admittedly not always that black and white. As I mentioned in the TEE: Everything Is Negotiable post, you need to know when/if you have leverage. If you have no money and your mortgage payment is due in 27 days, well, maybe you don’t have arbitrary flexibility. Also, if the company is particularly prickly about it (and some are), your refusal could send a negative signal. You should evaluate these sorts of risks beforehand.

Like most things in life, the best solution is usually open, crisp communication. If they ask you to sign an NDA in order to walk in the front door for the first interview, suggest “perhaps we could skip that by chatting at the coffee shop next door – my treat.” If they ask you to sign an NDA during an early interview and you’re not comfortable, suggest “I’d rather not yet discuss any information about your company that isn’t already publicly available. If we both decide we  want to take this interview process further, I’d be happy to discuss an NDA.”

In closing, I’d love to hear about folks’ experience with NDAs during the interview process – please post ‘em in the comments!

Please submit any questions or comments or arguments in the Comments to this post. My goal is for this series of posts to become a useful community resource, so please participate!

TEE: Everything Is Negotiable

This post is part of a series of posts called The Educated Employee (TEE), the goal of which is to get employees up to speed on the terms and conditions they usually (but maybe should not) agree to as part of taking a new job. As always, I will caveat the following with the statement that I am not a lawyer; my ruminations should not be taken as legal advice; and you should seek out proper legal counsel before you sign potentially-career-altering contracts.

Everything Is Negotiable

Please say that out loud. Again. Keep going…

Any and every term on an employment agreement is theoretically negotiable. If a company tells you it isn’t they are almost certainly yanking your chain. Don’t believe the hype.

Lots of employees (and statistically speaking, this set includes you) make the unfortunate mistake of not seeing the terms of their employment until after they’ve started. At that point, terms are not negotiable ‘cuz you’ve fucked up. Negotiate terms while you’re negotiating your offer. The legal terms of your employment are just as much a part of your offer as the salary and stock options.

The first push-back you’re going to get as an educated prospective employee (a TEE) is “we don’t change those forms” or “that’s just the way we do it” or “those terms aren’t negotiable”. It’s bunk. They most certainly can change these terms.

Companies negotiate a TON of contractual things. All the time. All companies have a threshold cost number, above which the terms of that cost get negotiated. For multi-national conglomerates, that number is obviously higher than for a young startup, but you get the point. A company with ten employees renting 2,500 square feet of office space at $20/sf/yr is looking at a 3 year commitment of $50K per year. Leases (for example) get negotiated ad nauseum. If the company is offering you a senior engineering job for $100K per year, is it not unreasonable to expect negotiations? Of course it’s reasonable. What signal should it send to you if they are not even willing to have such a conversation?

All that said, be sure to understand how valuable you are to the company. Not all employees are critical to a company. If you’ve gotten an offer to sweep the floors (no offense to floor-sweepers!) it’s likely the employer can quickly find five other folks who’ll take the job with no discussion of any terms. If you’re one of the top RoR guys in Boston, you can negotiate until the cows come home. Like any negotiation, you need to know how much leverage you have.

Even if you are not critical to the employer, there’s no reason you can’t put forward some desired changes to the terms, if they’re warranted. At a minimum, if your requests are reasonable, they will at least think you’re a smart potential employee and you’ve done your homework.

Is the goal here for every employee to make a stink with every potential employer about negotiating every term in an employment contract? Absolutely not. The hope is that an educated employee base will quickly cause employers to tone down those employment terms that are problematic so that their default template of terms is hyper-reasonable for all employees.

Next up: Confidentiality agreements during the interview process.

Please submit any questions or comments or arguments in the Comments to this post. My goal is for this series of posts to become a useful community resource, so please participate!

.sig of the Day

How about instead of spreading the wealth around we spread the work ethic around?

Amen, brother.