Episode 242 | Startup Accelerators, Working On vs Working In Your Business and Hiring a Developer as a Non-Technical Founder
In this episode of Startups For The Rest Of Us, Rob and Mike answer questions about accelerators, the difference between working on and in your business, and the benefits of transparency.
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Mike [00:00.5]: In this episode of Startups For The Rest of Us, Rob and I are going to be answering questions about accelerators, the difference between working on and in your business, and the benefits of transparency. This is Startups For The Rest of Us, episode 242.
Mike [00:19]: Welcome to Startups For The Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00.27]: And I’m Rob.
Mike [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob [00.32]: I’m doing pretty good. We have some really nice five star iTunes reviews that have come about, we have [Fresch Norlin?] from Sweden, and he says that “this is my absolutely favorite podcast for entrepreneurs, great tips and advice on how to build and launch SaaS products.” And another one from Gurdiga from Moldova, I think this is our first rating from Moldova, he says, “get ready to take notes, the episodes are well structured and information heavy.” Thank you guys very much for your five star rating. We’d love it if you would pop into iTunes or Stitcher or Downcast or wherever you are, give us a five star review, you don’t have have to comment but it does help us stay motivated to produce the podcast and helps us rank at the top of the search engine so that we can get more new listeners.
Mike [01:15]: Awesome, so I don’t usually go on any security rants about things that are discovered in the wild or happen but this one I think is important just because I know a lot of people who use this service. Recently, LastPass discovered an attack their network and if you’re using LastPass at all, your email address and your password reset data was likely lost. I would go ahead and enable factor authentications, change your password, change your password reset question, things like that. They didn’t lose any data directly pertaining to the passwords themselves but just judging from how they protect that stuff it’s pretty well protected to begin with so that stuff wasn’t lost but I would definitely go in and make some changes about that just in case.
Rob [01:53]: The only other update from me is things are going well with Drip. I feel like marketing has continued to ramp up. We have a lot of content going live right now, we have case studies, we have all types of stuff. The person I had hired for customer success and growth is really hitting her stride. She’s about a month and a half into the position and it is crazy how much has been taken off my plate. It’s given me a lot more time to look at higher level stuff and work on the business instead of so much in the business. I was doing so much time intensive marketing work and I’ve been able to step back from that. It’s allowed me to dig into a lot of metrics, it’s allowed me to look through funnels, it’s allowed me to start thinking about some higher level things that I realized I wasn’t looking at because I was too busy head down doing tasks. So it feels good to free myself up from that and get some clarity on where we’re headed next.
Mike [02:47]: Cool. The only other update I have is I completely bailed on Monday at work this week. I ended up getting up late and it was probably 10:30-11:00 and I was like, “you know what, I’m going to take a free day. I’m not going to do anything today.” I went out to lunch with my wife and after lunch we decided to go to a movie and that took me through the rest of the day until the kids got home. I literally did nothing and it was everything I thought it could be.
Rob [03:10]: Yeah, that’s nice. It’s so nice to have that flexibility and to feel okay about it and not stress about it. I took the new crew out for ice cream at this brand new homemade ice cream place that kick-started here locally. It was only a forty-five minute or hour outing but it was in the middle of the afternoon and it was super hot here and it felt good to just be there and not be thinking about work. We were talking about Dungeons and Dragons and other random stuff and to have that flexibility in your work schedule whether it’s taking an hour in the afternoon or like you said taking an entire day, I think that’s one of the biggest perks of the entire entrepreneurship. If you start your own company and you don’t have that flexibility, in my opinion you’ve made a wrong turn somewhere.
Mike [03:55]: Yeah, what I found nice that was on Tuesday when I decided to get back into the swing of things, I didn’t feel like I was behind and I was able to just sit down and work and I got all the stuff done that I would have gotten done on Monday anyway. So it wasn’t as though I got behind or anything. It was a good feeling to go through that and realize that the world isn’t going to fall down around me if I take a day off here and there. It made me think about if I want to work four day weeks over the summer of something like that.
Rob [04:25]: Yeah. So we’re answering some listener questions today.
Mike [04:28]: Yeah, and the first one we have is from Sam Mullen and he says, “Hey, I’d love to hear you and Rob talk about accelerators. I know my opinion but I’m not typical.” So what are your thoughts on accelerators?
Rob [04:37]: Well, it’s a pretty broad question because there must be hundreds of accelerators now. If you haven’t heard the term “accelerator” in essence the first one was Y Combinator and it started around 2005 by Paul Graham, and the idea was that before that if you wanted to raise funding you either had to go to Venture Capitalist or Angel Investors and there weren’t a lot of Angel Investors around at that time. There were these things call Incubators, there were just a handful of them but it was similar to a Venture Capitalist that owned an office building and would provide in house services and provide funding and house your company, but it didn’t spread. I think there was too much money and logistics involved in getting those started.
Paul Graham took a middle ground to that and he started something that was later dubbed an accelerator. That is where they would bring in a cohort of small, young startups. I think they started with college aged kids purely and it’s since expanded out of that but the first one was a cohort of seven or eight companies and it later expanded beyond that. Now I think they’re at 60-80 companies at a time through a YC batch. They basically provide the same amount of funding to all of them, somewhere around $120,000, and they take X percent from all of them. It’s about 7% I think. Those numbers depend on how many founders there are and some other stuff but that’s how it works.
Since then a bunch of places like Techstars, 500 Startups and hundreds of others have sprung up around the world. They’re typically in major metro areas, a lot of them are niche down, so there might be one that is an accelerator purely for medical software or purely for content software or content startups. That’s the landscape as I see it and overall it really depends on your goals. The first question is do you want to go the funding route at all? And I think if your answer to that is “no” or you don’t want to grow to be a hundred million dollar company, then you probably don’t want to think about an accelerator unless you can find an accelerator for boot strappers, which I’ve never heard of. Although Mike, you and I have certainly batted that idea around about trying to organize something like that.
If you decide, “yes, I do want a hundred million dollar company. I want to go for an evaluation of raised funding” in my opinion it’s like business schools. If you’re going to do it you’re going to want a big name. There is a huge value of the network and cache of going to Harvard or Princeton or Yale or going through or going through a YC or Techstars or 500 Startups. I think if you wind up at a random accelerator somewhere, I don’t know that I can vouch for the credibility that you’re going to get, the evaluations, I think it gets complicated at that point. You really need to do your research and know who is involved, know why they’re putting up the funding, because accelerators from what I see take quite a bit of share of your company for the amount of money they put in so they can be not as good as going out and trying to raise Angel Funding directly. How about you? What do you think, Mike?
Mike [07:36]: I think I share a lot of the same thoughts as you. At the end of the day it really boils down to whether or not that’s a route you want to go. Do you want to try and create a high growth startup that has a much smaller chance of success and you really have to drive things forward as quickly as possible rather than feeling things out and being a little bit more careful with your money because when they give you the money the expectation is that you’re going to spend it and spend your way through mistakes and you’re going to spend a lot more money on various mistakes in an effort to learn quickly. That’s really the trade off that you’re making is time versus money. They give you the money so you can save the time and learn those mistakes faster but it’s going to cost you a heck of a lot more to make those mistakes.
Let’s say you’re testing out Facebook ads, your not going to be spending one hundred or two hundred dollars, you’re going to be spending thousands of dollars on a daily basis in order to figure out whether or not that’s a viable strategy and you’re going to really take it to the wall. So those are my thoughts on it but at the same time I feel the same way as you about the name behind the accelerator. For example I heard on Justin Jackson’s Build and Launch podcast a couple of weeks ago, he had a quote on there from somebody that basically said YC is the ultimate validation of your idea because just getting accepted into a Y Combinator gives you a lot more attention than it would if you were at a tech hub or accelerator in Milwaukee or something like that people are going to pay a lot more attention to you. What that means is higher evaluations, more attention, more opportunities to network with people, more introductions to people who have more money and basically a higher chance at successfully landing whatever your next round of funding is. But at the end of the day if that’s not the direction you want to go then an accelerator is probably not for you.
Rob [09:24]: Yeah, I think the one other thing that I would add is that in general I like the cohort approach meaning you’re involved with a number of other companies going through the same thing at the same time. I think the camaraderie and momentum it builds is positive especially if it’s your first time going through this because just raising funding and going out and being on your own is hard and it’s hard to know exactly what to do and it’s hard to stay motivated and I think that’s where a cohort or batch approach like the accelerators tend to take would be a good thing.
Mike [09:57]: So Sam, thanks for the question. Our next one comes from Anders Peterson and he says, “Hi, Rob and Mike, I talked to a fellow Microconfer the other day and he said he started every day working for ninety minutes on his business instead of in his business and it got me to thinking how much time I spend working in and on my business. It’s easy enough to see if others are working on or in their businesses but how do I get that clarity for myself? I’m always wondering if I’m working on or in the business. Can you help clarify this for me?”
Rob [10:21]: I have a couple of thoughts on this. I think the way I would define this has changed over time. I think early on in my business, even doing some minimal things like hiring a VA and getting support off my desk, I would have considered that working on the business because I’m not actually answer the support requests myself any longer. As things have gone on and my team is a little larger now, we’re a total of five full-time, I think there are two ways that I can work on my business and I think Anders, you’re probably in a similar situation with this.
The first one is, is there a recurring task that I never have to do again because of what I just did? To me that is working on my business. If I spent that ninety minutes that that fellow MicroConfer was talking about either described a process, documented a process to hand off to someone or wrote some code to automated or I somehow eliminated that from my plate and someone else was accomplishing that, to me that’s working on the business rather than actually doing that step manually again. Hiring a bookkeeper, to me was working on my business because it eliminated a number of hours each month that I was spending doing things.
The other thought that comes to mind is that I like to do quite a bit of high level planning and thinking ahead and trying to map out what’s next. What do the next sixty days look like? What do the next ninety days look like both in terms of features, where we’re headed and in terms of marketing approaches. Are we going to roll out webinars soon? Are we going to run a contest? That type of stuff takes some brain power that isn’t necessarily tactical. It’s not like going to plug in this ad copy and run a headline and put an image in here but it’s making high level decisions in the direction and vision of the business. So when I’m thinking about that I typically have my black notebook and I don’t even have the computer open and I’m mapping things out, sketching and thinking about them. A lot of them I may not implement. I may hand them off to someone to implement but if I can document them well in this notebook, in my opinion that’s working more on the business because it’s higher level thinking. I think that’s debatable.
I think some folks might say, “well, if you’re still having to plan that stuff out or make those decisions you’re still working in your business.” But I really enjoy that part, the high level visioning and then going one step down and mapping out a whole flow of the entire webinar marketing approach or whatever and then handing it off. So those are the two types of tasks that come to mind for me when I think of working on rather than in my business.
Mike [12:56]: Yeah, for me something like that becomes a very meta question especially what you just said about some people who classify building out those plans as working in the business rather than on it. But at some point somebody is going to have to map out what those plans are going to look like and how everything fits together. And it seems to me like when you are doing things like that you are doing the architecture for how your business is going to execute things. To me that’s working on your business, rather than in it. The deciding factor for me is really are you creating a process for doing something or are you executing the process that is doing something for the business? And to me that’s the differentiator between are you working on versus in the business?
Rob [13:39]: I like that. I like that definition.
Mike [13:41]: The other thing I think is that there are certain cases where you’re going to be required to work in the business because there is probably not anybody else who can do it. For example, doing a podcast tour to talk about what your software does or your approach to a particular problem, that is in many cases working in your business because the process of going through and doing those interviews, you could theoretically outsource it but you’re the founder so you’re the one who is expected to be talking about that stuff. It’s not to say that it would be impossible to find someone else to do it but in the boot strap world of the startups that we deal with it’s more expected that you’re going to be doing that. You can see how that’s working in your business but at the same time you almost have to do certain things like that. So there are going to be times where you have to work in the business not just on it. You can lay down all the plans in the world that you want but if nobody is executing them it doesn’t matter. Your business isn’t going to move forward. Our next question is from Ina Coveney and here is the audio for that question.
Ina Coveney [14:37]: Hello guys, I just discovered your podcast and I love it. My name is Ina Coveney that is I-N-A C-O-V-EN-E-Y. My website is Ina, I-N-A, nutshell web dot com and I’m an entrepreneur and I have a couple of ideas and my question is do I roll out those ideas into a holding company or should I be personally signing as a partner on these other ventures that I’m signing up for? So again, I’m partnering up with a couple people for a couple different businesses. Should I be asking as a holding company? Should my company be with a partner or should I personally be? What are the pros and cons? Thank you, guys. I love the show. Keep it up. Bye.
Mike [15:24]: I think the usual disclaimer should apply here. We’re not lawyers. You should definitely check with a lawyer on a lot of this stuff but I think if I were in this situation I would probably not personally sign up in any other business partnerships especially if you already have an LLC that is designed to act as a legal buffer between you and somebody else. There are situations that I’m aware of for LLC’s. For example, I live in Massachusetts and in talking to my attorney about it he basically said that a one person LLC has less protections afforded to it than a two person LLC and it’s actually different if it is completely within your family as well. So for example, if I had a LLC and my wife owned 50% of it, legally speaking it’s treated as one person because it’s the two of us combined into a family unit or something along those lines. That’s the way he explained it to me. This can vary between states as well so again this goes back to why you really need to check with an attorney but I think the underlying question is should you use a business to sign onto different partnerships with different people and I think the answer to that would probably be yes. That’s the purpose of those things is to essentially act as your agent in many respects, to assume some of the legal liability and financial responsibilities and that’s what a business is for. Use the business for what it’s intended for.
Rob [16:46]: Yeah, I think I would echo your sentiments. If you have a LLC, one of the reasons is to shield you from liability so that I would use to start other businesses. The pros of doing that is that you don’t have to expose yourself to personal liability if you sign up for those businesses in your own name or set up five different LLC’s. One for each partnership. That becomes a nightmare during tax time, it’s very expensive to maintain, legal fees are high, unless those things are cranking out money it’s not worth doing. The negatives of doing it this way, having an umbrella holding company that houses four or five partnerships, is that if those partnerships are not corps or LLC’s which I think is what we’re talking about, then one of them if it was sued could potentially leak into the others. They’re not protected, there are no walls between them. There is only a wall between your personal stuff and all of your businesses and partnerships. For most smaller operators where you have a lot of small sub one hundred thousand dollar businesses collected, my guess is that there is not enough liability to worry about it but of course this is something you have to ask yourself. It’s a risk tolerance thing and certainly a conversation you might want to have with your lawyer.
Mike [17:56]: Our next question is from Michael Steep and he says, “Hi Mike and Rob, Mike from Australia here. Let me start off by saying thanks for the podcast. I really enjoy listening to it. I was listening to episode 224 and I liked the nontechnical discussion. While your podcast is targeted at boot strapping developers, I think you might be surprised by how many non-technical people listen to your podcast. I’m one of them and I’ve been listening for years. This is in two parts; the fist question I have is do you know of any resources for non-technical self-funded founders?
Rob [18:21]: Yeah, this is a good question. I think the best resource I’ve heard about is Programming for Marketers at programmingformarketers.com, this is from Justin Mares who co-wrote the “Traction” book with Gabriel Weinberg and I’d love to see a programming for non-technical founders but no one has put it together yet. But I think this is a start to give you an idea of what it’s like to code, how to tap into some API’s and just give you enough of an idea to start thinking about hiring someone who would obviously have to build your product or even partnering up with someone.
I like Mike’s comment about how many non-technical people listen to the podcast. We actually changed the introduction a few years ago. We used to say this is for developers who are trying to launch products and it now says developers, designers and entrepreneurs because we did shift the focus to not only cater to developers and technical folks but non-technical as well so we’re definitely well aware that there are a lot of non-technical audiences listening to the show.
Part two of Mike’s question involves how a non-technical self-funded founder could work with a developer on a lower risk basis. He basically says that he’s a business owner and he’s heard that working with developers on a purely equity basis is not going to work and I think we’ve seen that happen a lot where developers get approached all the time by people who have this great business idea if the developer wants to just spend a few hundred hours of their spare time to build it then the person will go out and try to market it. We know that that’s basically a lose situation for the developer.
So Mike says, “I have an idea for a piece of software for my industry and I’m in a position where I have wire frames but taking the next step in hiring a developer is difficult. I have quotes that range from four thousand to twenty four thousand dollars. So my concern is I have no way of moving forward because I’m just not confident in my ability to hire or manage a developer. I think the solution is to engage a CTO. I think there is some space in your community for people to work as a CTO with people like me. The CTO would work as an adviser instead of a coder to make sure the non-technical person has an idea of what’s needed. This could work on a peer consulting basis or some form of discounted consulting or equity basis. This way the CTO does not end up wasting months of development time before they find out it’s going nowhere. So I’d be interested in hearing your thoughts.” This is a good question. We’ve heard this before, not asked in the term of a CTO but folks have asked, can I find a cheaper developer and then hire a high end developer to manage them or vet them or view their code and that kind of stuff. The CTO idea is an interesting one so I’m interested to hear your thoughts first.
Mike [20:54]: I think that there are similar problems with this in terms of hiring a developer versus hiring an advanced developer. How do you know that the person is going to be a good CTO and how do you know that they’re going to be able to manage people? I think you can do some of that based on experience, based on things they’ve done before or success with previous projects, but past history does not necessarily indicate that you’re going to be successful moving forward, especially when it’s going to be a new hire for both you and the CTO because it may not work out between the two of them and it may not work if just the developer being hired is difficult to work with.
There are a lot of variables in there and it seems to me like all you’re doing is moving the problem from one place to another. So I’m not sure how I really feel about this idea. In theory it sounds like it could work and on paper there’s nothing that’s really a red flag other than the fact that how do you get to the point of trust with the CTO such that you’re conveying to them exactly what it is that you need and they understand it and are able to convey that down to the next person. Because you’re introducing this other level of abstraction that theoretically and hopefully as a CTO they’re going to understand all the subtle nuances and be able to translate that to somebody else and understand that, “oh, you’re not technical. You’re saying this word that you don’t necessarily understand the specifics of exactly what that means but I can translate that to a developer who is probably not going to be able to interface very well with you and then talk through it with them. I have mixed feelings on it is really what the bottom line is.
Rob [22:27]: I like the idea of couching it as a CTO. I know that Jason Roberts from the Techzing podcast has done some of this work specifically where he comes in at a high consulting rate and does an hour a week or two hours a month or something like that and helps someone keep their guidance as they’re working with contract developers. I think it can work, I think you’re correct, it’ll be a challenge to find someone who will do this. When I was coding and consulting I probably would not wanted to take on small even high dollar per hour projects like this but there are folks out there that I think you’ll be able to find. I think if you looked on airpair.com, that is a YC company and they have a lot of experts on there. I think if you looked at consultants in your niche in terms of the programming language, if you’re going to build a web app, try to find someone who has written a book or is a prolific blogger and consultant and they have a name and their rate is going to be pretty high but my guess is they’re going to be a decent bet to get started because A. they know how to communicate if they’re a decent writer and two, they’re probably an expert in that language so they are going to have high standards for it. They’re not going to be cheap, like I’ve said, but if this is the way you want to go I certainly wouldn’t be skimping on that CTO role and I think this could be an interesting middle ground. I think it’s not a silver bullet and instantly work, I think there are still going to be a lot of challenges but I do like the idea of trying to do that rather than going at it alone if you’re non-technical and riding in blind and hiring some outsource firm where you don’t know what the quality of the code is going to look like.
Mike [24:03]: Thanks for your question, Michael. Our next one comes from Karen Flavel, and Karen says, “Hey guys, thanks for the show. I really appreciate the actionable advice. I’m considering the benefits of opening up and making public the data about site traffic, bug tracking and user issues and even revenue and wondering if you’ve seen this done well. Most importantly I’m wondering how this might be done internally to build staff commitment and trust.
Rob [24:22]: I’m torn on this one. I think it’s up to you if you open up all of that stuff internally. I’d imagine site traffic, bug tracking and user issues are probably already exposed internally because that doesn’t seem like anything that should be hidden from your team internally, revenue that’s up to you. I think if you communicate revenue and expenses people can see how they’re impacting the bottom line. I don’t see any major issues with that. Other folks may have different experiences but I’ve always had a dashboard of the revenues coming in for SaaS apps and the entire team can view revenue for the entire month, go up and down and see how far ahead of the previous month we are and all that. They see all the trial counts and conversion rates and I think that’s helpful so it’s not just some black box that you’re working on and not seeing how you’re impacting it.
Now, making all of that available to the public, I’ve never loved that approach. I know that there is this big movement toward transparency and we see companies like Baremetrics and Buffer putting all of their numbers online, I don’t believe that the world is headed in that direction. I think that there are people who like to do it. I think some people like to do it genuinely to help other people to give them a context, I think others like to do it to brag and show off how much they’re making and you can tell by how people mention it or how they humble brag it when they do it. At a certain point I think there’s a little bit of a transparency backlash. We’ve seen some conversations about that in blog posts like, “enough with the transparency” enough of saying look how much I’m making, public. So those are my overall thoughts. I think if you’re considering making your bug tracking and user issues, site traffic and revenue–that’s a lot of stuff to expose so if you have competition that’s a really nice way for them to get a good idea of what you’re up to. If you don’t have a lot of competition or that’s not really an issue because you’re a mobile able or some other non-competitive field like that, maybe it’s less of a concern. How about you, what do you think, Mike?
Mike [26:12]: I think that opening up the numbers internally is probably a good idea because it gives the people inside your business a little bit of context about what’s going on. How is the business doing? Where are the places where they can help? Are there struggles in terms of the number of bugs and issues that people are running into? Knowing what the company is making is helpful for keeping expenses down especially if you know that the business is struggling in any way shape or form. People are very loathe to spend company money or even waste time doing things that are not directly helping the business move things forward and in the right direction. I used to work at Wegman’s food markets and at the time they had 25,000 employees or something like that and they were pretty public about what their revenue numbers looked like and what they were spending money on and there was a very concentrated effort across the company to help keep costs down. They would not spend money on things that were wasteful and people just generally didn’t waste time and it showed in terms of the customer experiences as well. All the way through to the people who were in the stores. Those people made a concerted effort to make sure that their customers got a good experience and that they were not wasting things.
So I think there are definite benefits and advantages there, outside of the company the only people that you’re helping are your competitors and the people who are aspiring to be entrepreneurs and want to learn form the things that you’re doing in such a way that it’s going to help them do something similar or in a similar market. They may be competitors, they may not but at the end of the day I don’t see what that really buys you especially if you’re going the funded route. If you’re going the funded route they are not going to be happy about you sharing those numbers. But if you’re boot strapped, I don’t know of any clear advantages of sharing all of that information publicly.
Rob [28:00]: I think there is a case to be made. The first few people who did show their metrics like when Baremetrics and Buffer did it, it got them some press, it got them a short term bump of “hey, look what we’re doing” and I’m sure it drove some trials. I’m not convinced that that is the right approach for most businesses, especially if you’re in a highly competitive market where there is blood in the water and people are coming after you. That’s going to wrap us up for today. If you have a question for us and you’d like to hear us answer it on the air you can call our voicemail number at 888-801-9690 or you can email us at firstname.lastname@example.org. Our theme music is an exert from “We’re Outta Control” by MoOt, it’s used under creative commons. Subscribe to is in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.