Rob is joined by Anthony Eden from DNSimple as they answer your listener questions.
They cover topics ranging from tax liabilities with contractors, getting feedback on a prototype, and finding a technical cofounder.
If you have questions about starting or scaling a SaaS that you’d like for us to cover, please submit your question for the next episode. We’d love to hear from you!
The topics we cover
[01:26] Tax liabilities and managing international contractors
[10:45] Starting when stair stepping isn’t feasible
[16:38] Getting better at sales as a solo founder
[24:00] Finding a sales/marketing cofounder
[30:28] Getting feedback on a prototype, finding the right developer co-founder, and protecting your startup idea
[40:11] Considering a technical cofounder vs hiring a developer
Links from the show
- Episode 509 | Revisiting the Six Stages of SaaS Growth with DNSimple
- Intellectual Property Agreement
- Episode 498 | Selling During a Pandemic with Steli Efti
- The Startup Chat with Steli & Hiten
- Episode 507 | Making Cold Email Work in B2B SaaS
- Indie Hackers
- Activity Messenger
- Jobs to be Done
- DNSimple | Twitter
- DNSimple | Website
- Anthony Eden | Twitter
If you enjoyed this episode, let us know by clicking the link and sharing what you learned.
In this episode of Startups For The Rest Of Us, Rob and Mike talk about what to look for in a co-founder. They touch on different aspects of evaluating someone for the role including, honesty/integrity, skill-set vs. future skill-set, fixed mindset vs. growth and more.
Items mentioned in this episode:
- AppSumo MicroConf Giveaway
- MicroConf Starter Edition Scholarship Application
- MicroConf Growth Edition
- MicroConf Starter Edition
- Big Snow Tiny Conf
Mike: Rob, why was Pavlov’s hair so soft?
Rob: I don’t know, Mike. Why was Pavlov’s hair so soft?
Mike: He conditioned it.
Rob: Damn. Not fair.
Mike: This is Startups For The Rest Of Us Episode 430.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I got so sick Sunday night. It was a stomach flu. My kids all had the prior week and I thought I had dodged it. I was doing all good and then it was one of the worst nights I can remember. I was up five different times during the night. I was delirious, stumbling around. It was nuts. I got up Monday and the kids are off school for a snow day. I was literally on my phone trying to just respond to email. I would write a sentence and then I would fall asleep.
Mike: Oh geez.
Rob: Yeah, it was crazy. I remember as a kid being sick a lot. I don’t know if that’s true or just my memory. Then as an adult, it’s pretty rare that I get sick now and to be that late out. When I get sick now, though, it knocks me out really good. I got a flu shot, I get one every year, all of our kids had flu shots but this year, it knocks through. I lost a bit of productivity and frankly I was dehydrated for two days after. It was crazy.
Mike: That’s rough. I remember getting sick as a kid, too. I think the difference is that you have less responsibilities as a kid. Your responsibility is just lay in bed, stay off the TV, and stuff like that. But it’s so much harder now because you’ve got all the different responsibilities, we each got businesses to run, and then you’ve got your own kids to deal. Hopefully, both parents don’t get sick at the same time.
As early as this week, my oldest got strep throat and then the past couple days, both my wife and I have been on the verge of getting sick. We’re not quite sure but neither one of us has strep throat yet. So, a little germ farm.
Rob: Yeah, that’s tough, How about you? What’s going on?
Mike: Well, I recently got back from Big Snow Tiny Conf. We can talk about that a little bit. The other thing I wanted to point out to other people is the AppSumo giveaway for MicroConf is still going on. That will end on February 11. You have about one week left from the date that this podcast episode goes live, so apply.
You’ll get a free ticket to each to the conferences, both Growth Edition and to Starter Edition, and the expenses for the trip are going to be paid by AppSumo. We’ll link that up in the show notes. You can go over there and get in on the contest. There’s a bunch of different ways you can get even more entries into it. Definitely check out the website.
You can link up your Twitter account or Facebook account, it’s all the MicroConf Twitter account and things like that. Each of those things will add to the number of entries that you get in there and you can get referrals as well. Check it out and hopefully we’ll see you there.
Rob: On my end, I’ve been working on improving this weakness I have. You know how everyone says I’m so bad with names? I don’t remember names, that’s the cliché thing. I’ve always actually struggled with that in a pretty big way. What’s interesting is that it’s not that my memory is bad. I’ve realized this over and over but it was called out to me again.
It was a couple weeks ago at a startup gathering here in Minneapolis. I talked to someone and I’m like, “Hey, I know we’ve met before,” and we’ve started talking, and I was like, “You know? I don’t remember your name name. I apologize but I remember that your startup is named X and I remembered that it launched on this date. I remember that your churn-up until this point was 2% and then I went to 1.8%.” I just rattled all the stuff and their eyes were huge. I was like, “No, this is my superpower.” I remember not just numbers but it’s the context around the concept, like in this case a startup. It all stuck in my head but I didn’t remember their first name.
It’s such an interesting model on how memory works differently in different people because my wife, Sherry, would have remembered the person’s name, their spouse’s name, and their kids names, and none of that locked-in for me. It’s such about relating to people versus relating to some other thing, concepts, or whenever.
So, I’m working on that because no matter how much, it’s an interesting parlor trick to be able to rattle off all the details of someone’s business. We had a conversation six months prior. It’s an interesting parlor trick but it still is not a good thing. I’ve been looking at […] ways to help me remember people’s names and/or to only go to events where there are name tags. I’m just kidding about the last thing.
Mike: Its funny you’ve mentioned that because I’m exactly the same way. I can remember lots of details and pinpoint exactly where we were standing at a particular event when we were talking about it, but I will just have a hard time with a person’s name. Maybe it’s just a matter of focusing on remembering the person’s name and just avoiding overemphasis of remembering all the details of the conversation. Maybe it’s just they stick in my head because those are pieces that are really interesting to me and I know that I can just look down at their name tag and see their name at any time.
Rob: Yes, probably.
Mike: I should have mentioned this a little bit earlier but the other announcement that I have is that MicroConf scholarship applications are going to start opening this week. We’ll open them up today, haven’t decided on exactly how long they will open but I’ll make sure that we put that on the application itself and we’ll link up the application in the show notes. We have a bunch of sponsors who have graciously offered to help fund these scholarships. The scholarships are all for MicroConf Starter Edition. We have at least 20 of them to give away. Last year, I think we had 14 or so and this year we have to least 20. I’m still working on a couple of different sponsors on that, so that number may go up but that’s what we have currently.
Rob: Love it. For me last update, you can back from Big Snow Tiny Conf East, which we’ll chat about in a second. I am heading to Big Snow Tiny Conf West out in Colorado. I think I’ll be there when is episode airs, actually, so this is my inaugural Big Snow Tiny Conf. Looking forward to hanging out with the people. This was your fourth or fifth, is that right?
Mike: Yes, it’s my fifth.
Rob: That’s cool. Any takeaways or thoughts having gone back that many times?
Mike: If it’s raining severely on the second day, just skip it. Just don’t even go out there. We went out on Thursday and it was just pouring. It was above freezing all the way up the mountain, it was raining, and we said, “You know what? We’re here. We’re just going to go skiing anyway.” By the third round were done and we’re just not going to ski anymore.
We’re probably about halfway down and I kind of pushed off to go down the hill. The front of my ski turned like it was supposed to and the back didn’t. Because I pushed off, my arms were basically kind of behind me because I was pushing myself forward. Of course, I just fall flat on my face and rolled down the hill little bit. I did a faceplant right into the slush. Not fun.
I hurt my shoulder a little bit, […] it about a few days later, jar right into the slush and twisted my neck a little bit. But both of those things is nothing major. A few days later I was still sore but at this point, I’m fine. Do you ski at all or do you snowboard?
Rob: I don’t, nope. Here’s the thing. I grew up 90 minutes from Tahoe in California but as kids we are always playing sports pretty intently. I played eight years of soccer and then track for nine years. Played football kind of cross country so we’re always super busy in the winter. Our coaches were like, “Do not go skiing,” because people would tear their knees up, they’d hurt their backs, they did all kinds of stuff, and we didn’t have enough money. We just didn’t have the money for ski gear and the rental and all the stuff. We’re a family of six growing up. I’m the youngest of four kids. People moved out and it just was never a thing even though it was obviously an option geographically. It’s just not something that my family prioritize.
I am going up there. Everyone else go skiing. I’m going to hang out. I’ll probably do a little bit work, I’ll probably do retreat stuff during the day. I have some things I want to get some pretty deep thought, too. I want to do that. I also like drinking hot cocoa and catching up on my reading. I’m looking forward to being up on the mountain hanging out with folks in the afternoons. I guess that’s how it plays out and then having some alone time during the day.
Mike: Yeah. The evening talks are really interesting because you get to hear in-depth details about people’s businesses. Some people come with questions and some people just come with a story. Some people just say, “Hey, this is a problem that I’m working on. Any help with it? What are your thoughts on it?” It’s pretty cool. You get a really good mix of things based on what the people’s businesses are. Some people to B2C, some people do B2B, and it’s just interesting.
Rob: Sounds good. What are we chatting about today?
Mike: Today, we’re going to be talking about what to look for in a co-founder. This came to mind because I’m specifically kind of looking around at my personal network and trying to figure out, is taking a co-founder on for BlueTech a path that I want to go down? If so, what would I be looking for in that type of person? What are the traits or capabilities? What’s their situation? How would that work for me and how will it work for them?
But I thought that it be interesting for the listeners to step back from that a little bit and more of an abstract fashion, think about what sorts of things you should look for in a co-founder and then from there, you can little down the list of potential options and how that would work. Obviously, there’s a little bit of putting the cart before the horse there because you have to decide, “Do I want one?” This is a qualification of, if you do then what would you look for?
Rob: And we recorded an episode about whether you should look for a co-founder, haven’t we?
Mike: I don’t recall. I looked back and I think that we talked about it in general. But I know as we went through and said like, “These are the things that you should actually look,” as opposed to, “Should I get one?”
Rob: There’s going to come a day when we record an episode that’s basically the exact same episode or at least the same topic as what we recorded years ago.
Mike: I know.
Rob: We’ve done that in real life. We’ve gone back and said, “Here are new thoughts on this topic,” but we’re going to do it unintentionally at some point. 430 episodes in, I don’t believe we’ve done that today, but this may be the day.
Mike: Possibly, but we’ll see. I’m sure somebody will remember it.
Rob: Let’s dive in.
Mike: The first one that came up on my list was honesty and integrity. For the person that you’re looking to bring on as a co-founder, what you want to do is be in a position where you know that the other person will always “try” to do the right thing, whatever that happens to be. What that happens to be has to boil down to what your goals in life are and generally how you address different situations or problems. Are they going to have your interest at heart or are they a little bit more selfish? I think you obviously want them to have your interests at heart whenever they’re making different decisions and then balance that against everything else.
You don’t want to sacrifice the entire business, probably, but at the same time there’s going to be certain situations where someone needs to make a decision that may not necessarily be you, and do you trust the other person to make those decisions? What you don’t want is a co-founder that essentially turns into someone you’re micro managing. You really want somebody who is on, equal footing is not quite the right way to put it, but somebody who you can at least respect enough to have a conversation about something, even if you disagree with them on it.
What I found is with contractors, for example, contractors are very loath to bring up stuff that is detrimental to the business or criticize work that you have done. They just don’t tend to give you an objective opinion about things in a way that is any way confrontational because I feel a lot of them are like, “Oh, I don’t want to rock the boat because this is my job at stake.” But at the same time, you need somebody to challenge you in different situations where you could be wrong or they perceive you to be wrong, so that you can talk through those things and say, “Is this the right decision for us and for the business?”
Rob: Yeah. I think this is a big one, being able to have the trust that your co-founder will do two things. One, that they will have your back in a way that, I think you brought up, the kind of the selfish or the self-centered, and I guess honesty and integrity is part of that. But it’s almost like they’re not always going to be thinking about themselves. We all know people who do that and people who don’t come across that way in the first meeting, can later you find out that they just really have an issue. Maybe it’s from childhood or maybe it’s part of the personality, but they really have an issue when talking about money or they have an issue when talking about time. There’s certain triggers that you need to pick up and be aware of because each of us has our own things that sets us off. I feel that’s something that is hard to evaluate in one or two conversations. It really needs to be done over an extended period of time, I think.
Then there is this integrity piece, kind of honesty, ethics, morals that your compasses align. Obviously, there are different ways of viewing the world and you don’t, as you said, want to have to manage this person’s every decision that they make and be like, “Oh, I feel like you kind of screwed that vendor with that decision,” or, “I feel like that was a disingenuous offer you made to that employee,” or, “You certainly didn’t do anything illegal and probably not unethical, but was that really morally the right thing to do?”
Those are hard conversations to have because that’s such a fundamental value that if you don’t share with someone, it’s going to be a constant conflict. Again, not something as super easy to evaluate upfront but it is nice to kind of a must-have, I think, that you do find someone where, in general and 80%-90% of the things, the two of you are going to rely in these hard decisions.
Mike: I think the point that you just brought up about this being something that you may not learn right away and I may take time to get there. I think that’s one of the things that doesn’t bug me but it strikes me as odd when I see people looking around and saying, “Oh, I’m trying to build this business and I want to get a co-founder. Does anyone know where I can find a co-founder?” It almost feels like people are looking for a co-founder in a very, very short period of time. But because of this exact thing that we’re talking about, honesty, integrity, and trust, it takes time to get there.
In some ways you can look at it and say, “Well, are there proxies that I can use for this? Are there people that I know that trust that person?” You trust their experience and then by proxy, trust this new person that you’re looking at as a co-founder. I think that’s a good way to approach it. It’s not perfect but I don’t think that there’s any perfect way to analyze that. It’s not as if you’re cloning yourself and you can’t always know what the other person is thinking.
Rob: Yeah and I think evaluating this in the short term is to know yourself and know how kind of trusting or suspicious you are of new people that you meet. You and I talked about this a little bit but that there’s this test called the Enneagram. It takes about 15 minutes to take. It gives you a number from one to nine. It’s like a Myers-Briggs personality thing. My personality is like creative, introverted, I forget like visionary or something. There’s typically two or three things that are good and two or three things that can be detriments. One of mine is just naturally suspicious of new things and new people.
I know that as a rule, I tend to say I’m a good judge of character. What I actually mean is I really don’t trust people upfront and they tend to have a really good character to get through my defenses early on. I am a very discerning person, which is both good and bad. Sometimes, it’s to my detriment and I write people off too soon. I know that about myself and I will be having internal kind of self-talk or conversations about, are they really coming off the way that I think they are or is that just in my head?
I have known people, my relatives and friends who are on the opposite side. They are too trusting, they get in friendships really quickly, and get pretty deep with people who, it’s pretty obvious that person is not going to be a good friend. That person is going to treat them poorly. Maybe this co-founder relationship is a romantic relationship or maybe it’s a friendship. It is hard for me to watch that because it might end poorly and frequently it does. Those people, I think, are too far on the other side of the spectrum. They are not suspicious enough. I think it’s knowing where you lie and just trying to do your best, frankly, to figure out what you think of someone after few meetings.
Mike: The next trait that I kind of came up with was more or less a current skill set versus ability to learn new skills. You’ve talk about this in the past that comes from like a fixed mindset versus a growth mindset. I look at it in terms of what does somebody bring to the table now versus what could they learn in the future to bring to the table later.
I think that there’s the short-term aspect and then the long-term aspect. The short-term aspect, you’re really looking for somebody who can complement your current skill set. In the long-term, you’re looking for somebody you know what it is that they want to do and it’s not necessarily or directly overlapping with the things that you want to do long-term, because you probably don’t want to have two people who both want to do sales, for example. Long-term, you probably don’t want both to be doing sales. You probably need somebody to be doing technical stuff and the person to be doing more of the business, marketing, and the sales side of things. But if you both want to be doing development long-term, that may not necessarily be a great fit because then, who’s going to be doing the sales and marketing stuff long-term?
Rob: Yeah. This is a mistake I made in the early days. I think a lot of people make this mistake when hiring and finding a co-founder is similar. It’s not the same but it’s similar to evaluating a potential hire. The thing is not to look at their skill set because things are going to change. In startup, they just change so fast.
If I were to look back at myself 10 years ago, I didn’t know 80% of what I know now. You could have looked at me and said, “Wow, this person knows how to write, and he knows SEO, and he knows how to write code. That’s an interesting skill set. What is his potential someday?” You know what? I don’t do much SEO anymore and I don’t write any code anymore. I write a lot less that I used to, actually. Everything that made me who I was 10 years ago, really has have to adapt. I’ve had to learn to build relationships better. Even just speak in public which was something that terrified me early on, and to speak on the microphone which is something that terrified me early on, all the things that you just have to get over.
I have watched other people do the same thing. You look at Derrick Reimer, my co-founder with Drip, you look at Ben Orenstein and you see how they’ve adjusted and adapted over time. And you know when you look at people who are really sharp and who are getting […] done, something you’ll notice about them is they don’t stand still for long. They don’t have the same skill set for very long. They are constantly adapting to new things.
If I’m hiring a team member, if I’m looking for a co-founder, if I’m evaluating a startup founder as I’ve been doing for the past several years but more intensely over the past 11 days since TinySeed applications have been open, a lot of this is not what do you know. It’s what can you learn, how quickly, and it’s trying to be able to evaluate how they can do that. So my question to you is, how can you evaluate that?
Mike: I think if you look at the history of what people have done, whether it’s launching small apps or working for different businesses, I feel like if you’re looking at somebody’s experience and they’ve done consulting at a bunch of different companies, that right there says that they have the ability to adapt, change, work in different environments, and presumably be productive. Otherwise you’re probably not going to get a lot of consulting gigs that way.
I have mixed feelings on somebody who’s doing consulting work for the same business for like five years or ten years or something like that. I would question how much adaptation there is there because you’re not adapting to different business environments and changing conditions. Going from one company or customer to another, it’s a very, very different experience between those two and there’s a lot of different things you have to manage. Whereas, if you stay in the same company or within that, the sandbox there, it’s not going to change a lot or dramatically.
I think in those cases, it’s a little less clear cut as to how to measure that. But I would definitely say, if somebody’s hopped around a little bit, then you can give them the benefit of a doubt in terms of their ability to learn new skills. The thing you have to be a little careful of though is, is it like entrepreneurial ADD where they just can’t focus on something and that’s why they switch so often? I think that many people suffer, I myself included, suffer from the shiny object syndrome where you hop from one project with other because something interest you and you’re not necessarily finishing things. That’s something that kind of comes into this. That’s something you have to balance that against.
Rob: I agree. That’s what you have to dig into. You touched on it exactly is was the person running away from something? Like, “Oh, this got too hard,” or, “Oh, that boss was dumb,” or, “They didn’t value me there,” or, “Oh, I got bored of that.” Or is it ambition? Ambition is not the right word because it’s this weird thing. I’m not that ambitious but I love creating new things. But I also finish what I started. I think that’s something to look at when your evaluating.
I agree that hopping from one thing to the next can actually be a good and a bad trait and it’s determining what their reasoning, logic, and motivations for doing that are, then I agree. If someone’s been working the same job or the same contract for years on end, it can be hard to gauge. You almost have to like, “I don’t know what else I would look at to figure out.” It just makes it harder to evaluate if someone hasn’t been tackling new challenges. I think that that’s kind of the thing that I’d be looking for.
I think the four axis that I look for when I think about someone as a startup founder, like skill set, I think of technology skill set, like are they developer or do they speak developer? Marketing, can I actually get stuff done, drive traffic, optimize a funnel, convert people, trial to paid? SaaS experience which is pretty unique. Most people don’t have it but do they know all the metrics and the numbers that churn the LTVs? Do they think in terms of SaaS numbers? This is one thing you can certainly learn but if someone already has that experience, whether they worked in-depth for one or whether they start at one. The fourth is kind of hiring, managing, and delegating of people.
There are certainly more more axis but those are honestly the four that, when I’m evaluating a startup founder, do I think they’re going to succeed? I look along those axis and they don’t need all four of them. Again, if they can learn stuff, you can start with one of them and branch off into the other three. But if you have two co-founders, I really don’t want two co-founders who both have a ton of tech experience and both want to write code. You want one of them who’s willing to know the marketing or to learn the marketing. Or one who’s willing to do the hiring and managing because assuming that you are going to scale up at least a little bit, you need to learn all these skill sets.
Mike: And that kind of leads directly into the next one which is difficult to measure resources. There’s certain types of resources like time and money which I think are directly measurable. But when you come into things like your personal network or your experience and your skill set, I feel like those are a little bit more difficult to measure in terms of what it brings to the table and what it means for the future. I think every situation is different. Those things are going to mean different things for different businesses.
Let’s say somebody brings a lot of domain knowledge and expertise to a particular problem that you’re working on and you want to involve them. The stuff that they know and that they have experience is going to be valuable. Is it stuff that you could learn on your own? Yes. The other side of that is perhaps and perhaps not. You have to take those things into account some way because they do make that relationship a little bit more valuable.
It also depends a lot on how long it’s going to take you to acquire that knowledge, like have they already tried to do a startup in that space and they either succeeded or failed? Those things can make a huge difference in terms of whether or not want to add that your team.
Rob: And then there are the measurable resources that each co-founder might bring. How much time does a person have? Obviously, a lot of us start by our products by working on them part time. What I’ve found in my experience is that people have a lot less time on the side than they think they do. A lot of times I have hired contractors—this probably happened six or seven times to me—where I’ve gone through a full interview process, done video interviews with 6-7 people, narrow, narrow, narrow, get somebody it’s like, “You’re sharp. Cool. You have a day job as a marketer and you want to run Facebook ads for me on the side. Love it. How many hours a week? Okay, you’ve got 15 hours, 20 hours. That’s great.” Then we’ll start and they’ll work four or five in a week. I’m going to, “Hey, what happened?” “Yeah, I just have a lot less time that I thought I did.”
This is something that I think you really need to dig into. If someone tells you they have 20 hours a week to work, I honestly think you should try to get a schedule and say, “Carve that time out because if you have kids, you probably put them to bed at seven or eight or whatever. So you’re working three hours a night during the week and then some on the weekend. If you don’t have kids, what does that look like?” Again, everybody seems to overestimate the amount of time that they have. I think it’s kind of human nature.
The other thing to think about in terms of a measurable resource is money. Does having some money help you get to escape velocity quicker? How much money does each person have to contribute? If you have an even amount, then cool. You can be 50/50 partners. If one person has more, that probably should buy them more equity, I think, unless time is out of whack. There is a bunch of things to think about but certainly someone bringing money to the table can be a bonus. I would say with caution, money is a very short-term thing.
In the early days of a startup you can think, “Oh my gosh. This person is bringing $20,000 to the table but they don’t have much time so they should get this huge chunk of it.” That makes sense for about six months. It makes sense until you get to the point where you launch and suddenly you start growing and $20,000 just isn’t that much money anymore. There’s the balance here because money in the early days is more risky. It is a big deal for someone to bring $20,000, $30,000, $40,000 into a startup that may never work. I would say consider all of these other factors. I would probably put above the value of just pure dollars invested.
Mike: Yeah. I think time and money tied together to some extent as well because if somebody has money set aside and the business isn’t quite making enough to pay the founders of reasonable income, can somebody extend the runway to some extent by living off of less? You may be able to command a salary $150,000 a year but do you have to? If the business can’t support that, then obviously you can’t pay yourselves that. How is that going to work? Is somebody essentially taking a massive pay cut in order to be able to contribute time? Do they have other sources of income?
That’s kind of really what I was getting at in terms of the measurable resources. Not so much can they dump a bunch of money on it but are they able to be somewhat self-sustaining and still contribute to the business while it’s getting further along? Nights and weekend project is a very different story. I think you brought up a lot of great examples and points about the fact that people have probably a lot less time available to them than they think they do. Some of that comes into motivation and as you commented earlier, whether they’re running towards something or away from something.
Rob: I think another big thing to think about is, talking about long-term goals a big deal because startup had a lot of connotations. Startup may mean you just want to start a really nice lifestyle business. It’s going to get you collectively $200,000-$300,000 that you guys split and that’s a good goal to have as long as you both agree on it. But if one person wants to raise venture funding or they want to go seven or eight figures and stay bootstrap, these are all different paths and it’s going to impact a lot of things along the way.
This is something that I would at least have a conversation. You may not need 100% everything ironed-out upfront, but to say, “What really is your goal here? Is your goal to work as little as possible and for both of us to make six figures? Okay, let me think if that’s what I want to do.” If you don’t, there’s going to be this constant tension as you’re growing your product.
Mike: And sometimes, these things don’t always work out and you may think upfront that your goals overlap. Those goals may change over time. I read an article from the guys over at Buffer where there’s three co-founders and initially, everybody was kind of on the same page. They all wanted to do the same things. Over the past couple years—I forget the exact timeline of that—they ended up kind of going in different ways. Two of the co-founders left the company and there’s one still there that’s running everything.
It was interesting to see that they laid out the different types of conversations they had and how it took a long time for them to get there. There are ways out of the situation if long-term you find out that your goals have diverged. But I think it’s important to keep in mind that if you have that conversation early and they don’t overlap right then, it’s possible they could kind of come in alignment but it’s probably not a good place to be starting from.
I think one of the last important things that you should be looking in a co-founder is, do they work well with others? Specifically, by others I mean you. But in general, are they easy to work with? Are they, not necessarily focused and driven, but can you hold a conversation with them and not get angry with them about how they’re doing things? Or vice-versa. Are they going to critique your work all the time and if so, is that something you can deal with?
There’s only so many ways that you can figure this stuff out. I think probably the best way to do it is just work together for a little while. I think you’ll very quickly see whether or not you’re going to be able to work with them long-term or not. There’s soon going to be some things that jump out of you very quickly and then some things that you’re going to learn six months, two years down the road that you didn’t necessarily pick up on right away.
It’s not necessarily good or bad but I think that hammering out what those things are that really irk you or the things that you do that irk them, if you know those upfront you can at least have the conversations and talk about it, and figure out whether it’s something that you can both live with or not. If you don’t do that then you could head for trouble.
I haven’t found any other good ways of doing that other than actually working with somebody. You can ask friends or colleagues or people who have worked both with you and that other person but sometimes those recommendations are: (1) hard to come by, and (2) people don’t really want to throw other people under the bus. It’s difficult to get that information from a third party.
Rob: That’s right and when I’ve done these reference checks, I tend to say, “Tell me about the hardest part about them. Tell me their biggest weakness. Tell me where did their plans […] are like.” I try to dig into this stuff. I try to just prove my theory that they are someone that I should work with. Or even not even just prove it but just to know. I can work with blind spots as long as I know what they are, like this person tends to give a very direct feedback, so be prepared for blunt feedback. It’s like, “Okay, that’s not a deal-breaker for me,” but when this person says something that shocks or offends me, it just be like, “Cool. That how they roll.” That’s also a big plus for a number of other other reasons.
I think a good story of this is like Jordan Gal with Ben Fisher and the founding of CartHook. They say they dated as founders and they really tried it out for quite a while. A couple months, I believe. They went and co-worked in one location and then another because they lived across country from each other. But they really got to know each other. I’ll even say with Einar Vollset and I, co-founders of TinySeed. I asked some folks who knew him better than I did. I know him through MicroConf but he and I never worked together. I asked a few folks, “Hey, you know him better than I do. Tell me about him.”
Then we started just working on a deck and that’s all it was. He said, “I don’t know. What you think? Should we do a deck?” “Cool.” Then I get to see not very much skin in the game. He and I are both saying, “Well, we’re not sure we’re going to do this.” I knew we’re going to do it but it was both of us kind of sizing each other up and saying, “Is this person going to be fun and complement my skills and are they going to work well with others?”
That was the big thing to just sit and hammer something out, to agree on certain things, disagree on other things, be convinced by the other person because you’re like, “Wow, this guy’s smart.” That’s the thing that I think you want to get to. So, even doing one or two smaller projects together before you do a full commit, I think can really be helpful.
Mike: In the beginning of this episode, you and I have chatted briefly about whether or not we’ve actually covered this particular topic before. I went back and looked in episode 408, evaluating whether or not you should take on a co-founder. That’s where we talked about that. This is more about what to look for in a co-founder.
Rob: And that was only 22 episodes ago and we had already forgotten? That is like six months.
Mike: We we were pretty sure. We knew we’ve talked something about it. We just didn’t remember the specifics.
Rob: I total did. It was vaguely. I knew we’ve talked about co-founders a number times. I just don’t know what the specific episodes have been.
Mike: That’s okay. We’ll let it go this time.
Rob: All right. If you feel like you’d like to add something to this list of what to look for in a co-founder, including how to evaluate that, you can either post at Startups For The Rest Of Us episode 430. You can post a comment there, or you can email us at firstname.lastname@example.org, or call into our voicemail number and 888-801-9690. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike answer the questions, should you take on a co-founder? The guys discuss the difference between hiring and being a partner, how to begin a partnership, and how to do if you’re a good fit.
Items mentioned in this episode:
Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about whether you should take on a co-founder or not. This is Startups For The Rest Of Us episode 408.
Welcome to Startups For The Rest Of Us. The podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: MicroConf Europe tickets are not available to the public. Head to microconfeurope.com and click on the ‘Gimme a ticket now’ link or we’ll link directly to our event right page in the show notes. I’m pretty stoked. It’s Croatia, man. It’s just a couple of months away.
Mike: Yeah, I know. The date is coming up quickly. It’s definitely something to look forward to though. The place where they are having it is right on the ocean. It should be a gorgeous view, if nothing else. I don’t know if I’ve mentioned this before, but parts of Game of Thrones were filmed there and over at Old Town in Dubrovnik.
I saw this article that showed a mashup of what the place actually looks like versus what the Game of Thrones scenes that’s associated with it was. Some of it is just breathtaking. It’s just fantastic architecture, the scenery, and everything else that goes with it. It will be pretty cool.
Rob: That’s super cool. I had heard that. I didn’t realize that they did it in Dubrovnik. Assuming we’re pronouncing that correctly, although we may not be. I’m excited both to get there for MicroConf Europe because I always enjoy the conference, seeing old friends, and hearing the speakers, but also excited to take a couple of weeks and see Croatia because we’ve never been. I’m going to be bringing the family, or I should say we’re––Sherry and I are going to be bringing the family.
Sherry and I are both speaking at MicroConf this year and we’ll probably take a couple of weeks before MicroConf Europe and head all the way down the coast. There’s some cool itineraries if you buy a guide book where they have a two-week driving itinerary. There’s also some online. You fly in to the capital and then you drive down different cities. The thing is, when we first talked about it, we’re like, “Yeah, we can probably take out the kids for two weeks because there’s school and all that kind of stuff,” but Sherry’s like, “I’m not sure there’s going to be enough to do in Croatia. Maybe we should head over to Greece,” and then as soon as we started researching it it was like, “No, there’s a lot to do and a lot to see.”
Reminds me a little bit of California. It’s not identical, obviously, but there’s, at least in that order of magnitude, that much rich kind of cultural things, natural beauty, beaches, mountains, all that stuff. So, pretty stoked to do it there this year.
Mike: Very cool. On my end, I have a Bluetick revenue milestone today. Just recently, Rachelle recently crossed the $30,000 in total revenue for it.
Rob: Good for you, man.
Mike: I’m pretty happy about that, but obviously I definitely have ways to go in terms of MRR but things are trending upwards in the correct direction. I’m pretty stoked about that and it’s just a matter of getting the things done.
Rob: Yeah, it always is. That long slow SaaS ramp of death is always just that. Long and slow. Hopefully, it’s not actually death, though.
Mike: Yes, hopefully not.
Rob: I was actually listening to CurrentGeek, which is a Tom Merritt podcast. He was talking about eBay and that he hadn’t sold something on eBay in 15 years and that he was moving and he’s getting rid of some old stuff. He started talking through the process of selling and how different it was. I realized that I just always done a lot of buy and selling online. Even before eBay and Amazon, I was in the Usenet groups in the 90s.
Mike: Oh, you’re old.
Mike: You’re old.
Rob: No, I am one of those guys and I used to buy and sell all kinds of stuff like comic books. I used to do guitar pedals, play electric guitar a lot back then. It was mostly for profit. I was trying to cover at least my living expenses, not my rent or my tuition, but just other miscellaneous expenses.
Anyways, with that said, eBay was such a bear to sell on in the late 90s and early 2000s. It was like you had to take your photographs, then you had to get them scanned, then you make them digital. It’s such a mess. But with the eBay app now, you just take the pictures right in the app and then if you’re selling anything that’s moderately standardized, like if you’re selling a model of printer or a model of a laptop, or a set of headphones, they have all that data now. I don’t know why it took them so long to do it, but it’s not exactly the same, but it’s more similar to selling on Amazon.
I switched over to Amazon for almost all of my selling. I don’t do that much these days, but I will play some games and then we’ll get tired of them or will have some books that are worth something, and I’ll post them up because it takes 30 seconds to post. Then you can print the shipping labels both right directly from eBay and Amazon now.
I have my kids tape them on and they take typically some of their stuff that we’re selling, to be honest. I don’t have much physical stuff left like physical books and stuff, but my kids will take a portion of the profit and portion of the things. I’m trying to show them how to do it and motivate them as well. It’s just one of the comments that I typically have veered towards Amazon because it’s such an easy process to post.
eBay does still take longer but there are items sometimes that Amazon won’t let you resell. Like the manufacturer had said, there are certain types of games that don’t have replayability, there’s the escape room games, and Amazon just won’t let you sell them, so I’ve sold those on eBay. Then there’s some other like mighty wallets and stuff that I have that are in good shape that I was trying to sell. Really just public service announcement that if you’re going to sell something and Amazon won’t let you do it, head over to eBay. It’s not as catastrophic as it once was.
Mike: That’s some definitely good advice. I’ve tried to avoid eBay to some extent just because I don’t tend to just sell a bunch of my stuff. I guess, I just collect it, to be honest or just throw it away. I remember checking my eBay account. It was a couple of years ago and most of my radiance and stuff have completely gone away because I hadn’t used my account in so long. I’m just like, “Oh, all right.”
Rob: I don’t know if they do. They show lifetime ratings but them they’re like that. If you haven’t got ratings in eight, six months or a year, then they degrade, which I think is a good policy. Basically, people will buy an account with some ratings to swindle people, so they really have to be concerned about that.
Mike: Oh, I haven’t thought about that. Darn those people.
Rob: What else is going on with you?
Mike: The only other thing I have is that I spent far longer than I wanted to trying to rebuild my deployment process for Bluetick. I talked to about how I was in the process of deploying a public API, put that out there, and unfortunately as part of that, it creates another URL that I need to have software deployed to. Things just got more complicated and I’ve got multiple machines involved.
It’s no longer as easy as it’s just like, “Oh, just click this button here and then copy a folder from this machine to this machine and then run an executable or whatever.” Now that it’s much more complicated because I have four different websites that basically need to be deployed as part of the build process, I ended up re-engineering this whole thing.
It took me probably a week-and-a-half to two weeks to just rebuild that using different software, but it’s all working now. It’s really nice I can just click the button and then it just goes out and deploys everything on multiple machines and it deploys new copies of it. It’s no longer deploying over itself which is just fantastic because now if anything goes wrong, I can revert, whereas before, I didn’t really have that capability. I had to do a bunch of manual stuff in order to make sure that in certain cases, I have the ability to revert.
Obviously, there’s some changes that you’ll make that are like, “Oh, I’m changing some HTML here, an API call there, and it’s not a big deal,” but then there’s other ones where you know that it’s much more of a risky change and you want to have backups of stuff before you go deploy it because the build process can take a while for you to revert in any way.
Rob: That’s brutal to spend that much time on something like this at this juncture but I get it that these are the things that, at some point, you have to deal with and you can’t just keep kicking them down the line. You can, but then you get this crazy legacy stuff that really can hold you back down the line.
Mike: I kicked this down the line for a year at this point. I went back and looked at when I started trying to do what I just finished and it was a year ago. I was like, “Oh, I need to upgrade the software, put the latest version on, and all of these other stuff. I remember seeing the dates and it was about a year ago. It was complicated enough that I’m like, “Nope, I’m not going to do this now,” and I pushed it off for long enough that it’s like, “I have to do it now.”
Rob: It stinks to lose that much time when you’re trying to move fast on a startup and this is why, at a certain point, it’s either having money whether from revenue or from a small amount of funding like we talked a couple of episodes ago, to just hire someone who can come and help with that, or to hire someone who can come in and help with that, or to hire someone to build features while you’re doing that. It allows so much more parallelism, you can move a lot faster.
Mike: That’s a nice lead in to today’s topic which is should you take a co-founder? Obviously, if you have a co-founder, you don’t necessarily need funding. You can certainly go down that road as well if you’d like, but I think the problem most people are trying to solve by bringing on a co-founder is avoiding going down that road altogether or by adding somebody in in a way that feels much more cost-effective and helps to have somebody else who’s got some skin in the game and they’re going to help the business with a completely different skill set than you have and help drive the whole thing forward.
Rob: Yup, for sure and this is a topic I know we’ve discussed a little bit in the past, but I don’t think we’ve dedicated a whole episode to it and it’s something that a lot of people are faced with. It’s like, “Should you do this or should you go it alone?” I think it will be a big conversation today.
Mike: The opening question is should you actually go down the road and having a partnership or should you hire somebody? I think for most self-funded businesses, the big issue with hiring somebody is you simply don’t have the money. You either don’t have the revenue or you would have to cut significantly into your own amount of money that you basically put into your own pocket in order to hire somebody, and you may just not have enough coming in to be able to do that. Also, if your very early on, or you’re just working from the point of having an idea, there’s nothing there.
In many ways, it makes sense to go the partnership route versus hiring somebody because if you’re going to try and hire, let’s say, a developer or something like that, you’re probably going to blow at least $30,000 or $60,000 trying to get something to the point where you can just show it to customers and get it out the door.
Whether you validated that in idea in advance—obviously you should’ve—especially if you’re going to dump that kind of money into it because you want to be absolutely sure that this large quantity of money that your dumping in there for that work to be done is going to eventually pay off.
Rob: Jason Calacanis on This Week in Startups has a saying. He says, “Hire your co-founders,” or at least that’s what he does. He has the luxury that he has the funding to do that. He can basically keep the line sure of equity because long-term he thinks that’s going to be worth a lot of money. He can hire someone at a totally reasonable salary because he can either do it out of pocket or he can raise a round of funding and pay them probably market rate or something close to that and maybe they get 5% of the company.
They have skin in the game and they all get the upside, too, but he doesn’t have to give up 50% of the company or whatever it is as maybe if you were starting from scratch that you would have to deal with.
The hiring is a luxury that you will have if you have either raise some kind of funding on your own or have the power to do that because of whatever, because of your background or your network, or you have the money that you were able to sell fund from other ventures. But if you don’t, then yeah, it becomes not possible. If you don’t even have enough money to quit your own job, how are you going to have enough money to pay someone else’s salary?
Mike: The other thing to take into consideration is the skill sets, like do you have the skill set that ranges both the marketing sales side of things or can you only do development? If you’re a non-technical founder, then you need somebody to step in and perform those duties as a developer from the eyes of the business owner.
I’ve talked to a few different people or non-technical founders and they were like, “Oh, okay I want to bring somebody in to help out with the development side,” but I find it a lot of contractors are very hesitant to take the reins and say, “Okay, I’ll be the architect for this,” or the people just don’t have the money to hire somebody who’s a skilled-enough person to be able to have that high-level view who’s done it before. It’s more of the chicken and the egg problem, I think, but even with the skill set, you have to figure out what is going to be complementary to you and what is the best type of person to bring in.
Rob: What’s interesting to me, you’re talking about having a technical co-founder. I don’t believe it have backed a single company in terms of my personal angel investments that did not have a technical co-founder. I have passed on several that did not and that was my biggest concern is how are you going to get the tech right? This is a software company.
Obviously, the marketing’s important, but the software has to work and someone has to own that. If you don’t have someone who is either has some skin in the game, whether it’s co-founder or whether if someone say, “Hey, I’m employee number one and I’m able to pay my full-time salary and I give them 5%,” I’d be like, “Okay, I can live with that.” But just saying, “Hey, I’m going to go hire an agency. I’m going to hire a contractor or something.” That wouldn’t work for me. That’s a personal bias or a personal belief of mine. It is obviously possible to do, build a software company without a technical co-founder. I’m sure we probably know people who’ve done it, but very, very difficult especially SaaS, which is, as we know, even more complicated than the traditional downloadable software model.
That’s not too much of a tangent but it is something that I think folks should think about. This is part of why that stair step approach works for even non-technical founders. You start super simple and you start with the one-time download like an info product or it could be a WordPress plugin because I can see you paying a contractor to build a plugin to solve a problem, making a few grand a month from that, then you build, build, build to the point where you either have the network, or the relationships, or you have the funding to then where you can self-fund and actually bring someone on who really is more of a technical co-founder.
Mike: The next question I think the answer is how do you know if you are a good fit for each other? I feel this is a hard question to answer just because it depends a lot on what your relationship already is with the person. If you’ve known them for 15 or 20 years, it’s a lot easier to make the determination is to whether or not you would want to work with them.
But if you just met them at some local meetup or something like that, or you met someone at a conference, or you followed them online, and you’re just starting a new relationship with them and you haven’t known them personally for very long, then it becomes a lot more difficult to make, I’ll say, an objective consideration about it.
I think that there’s a couple of things I would keep in mind and try out when I’m doing this. First one is, before you make a full-blown agreement, have a trial period of some kind on a project. It could either be that project or it could be something else. You might hire them to build something for you. That’s more of a contracting basis. I wouldn’t say that I would hide it from them that you’re interested in potentially pursuing something later, but probably wouldn’t bring that up as like the first thing as, “Hey, I want to think about having you brought on as a partner and I want to hire you for this project in order to figure out whether or not we’re going to be a good fit.” Because then, if it doesn’t work out, then you already set those expectations that, “Hey, this might turn into something.”
Rob: Yeah and on this topic there’s an episode of the Zen founder that is probably 100-150 episodes ago where Sherry interviewed Jordan Gal and Ben Fisher, who were the co-founders of CartHook and just about the “dating process” that Jordan and Ben went through. They had spent months trying to figure out how, “Are we a fit to each other? Are we going to work well together?”
I believe Jordan flew out and worked for a week or two from Ben’s co-working space. Ben went out to New York and did that with Jordan and they just went back and forth and it was definitely a long trial process, but they were really feeling each other out and figuring out, “Can we work well together? Are we a good fit? Because if we’re not, let’s not do this. Let’s not waste either person’s time and let’s not have the agony,” because the agony of a co-founder breakup is pretty bad. It’s pretty rough.
I think that pre-arranging a trial period—you had mentioned not mentioning it—to someone that you think of bring them on, I think that is definitely one way to do it. For some reason, I don’t remember the context of the story, but Jordan and Ben had already––there was more context to it to where they’re both equally willing to walk away. It wasn’t like one guy bringing the other guy on. It was really they were trying to find a fit. I think you can do it both ways.
Mike: I think that whether you bring it up upfront or later on is dependent a lot on how well you know them to begin with and whether or not you even broach the topic. If it’s someone you know online or you seen them and you are considering potentially asking them, then I probably wouldn’t bing that up first thing. But if you already have some relationship with them and you see them on occasion, or you’ve talked to them before and they know you personally already and you have the sense it might be something you want to pursue, then yeah, I would probably bring it up upfront at that point.
There are some red flags, I think, I would look for. One is if you’re trying to communicate with them and they are not very willing to communicate back with you especially if you hire them for a project, that’s obviously a red flag. If there’s any social power disparity between you in terms of what you guys would be bringing to the business relationship, not like Twitter followers, more along the lines of, “Oh this person has all the contacts in this particular industry and he’s going to try bring them in as customers and the other one basically has none.” It can be an issue. I’m not saying that that’s a disqualifier or anything, but it’s something to examine with a magnifying glass, say, “Is this going to be a problem?”
I think the obvious question is, “Could you see yourself hanging out with this person as a friend?” Because if there’s a business partner with you, you’re going to have to talk probably quite a bit and it’s going to be a relationship that you’re going to have to maintain for years.
If you can’t see yourself working with this person or hanging out with them, maybe you just don’t like the way that they treat other people or they’re racist or something like that, there’s certain things that you’re going to have to say, “No, this is a deal breaker and we’re just not be able to do it.”
Rob: Another thing to think about, obviously, is this is a little bit like hiring someone that you want to have references, you want to do references checks. So, talk to friends or colleagues that run in the same circles who can potentially know this person. Hiring someone who’s completely unknown is certainly a possibility that could work out, but it is less likely if you don’t have any overlapping circles and no one you know knows this person. Don’t know if you’re just starting out or have been going longer, you have to get contacts to it, but certainly if you know anyone who knows this person, it will be a lot better off if you can talk to them about it, how this person works and all that kind of stuff.
Mike: Of who has done business with them before, how do they treat their clients and other people that they interact with at business level because if they are in the habit of screwing over their customers, then is that the type of person you want to be in business with?
Mike: The next question is, how to begin a partnership? There’s lots of different ways to go about that like you put together a vesting schedule, think that most startups tend to do that if they’re granting options, for example, but I do think that even in a partnership, a vesting schedule of some kind is probably a good idea.
In the early days, you can track hours. Just say, “Okay, well I put in 20 hours this week. How many did you put in?” I wouldn’t necessarily use that as a weapon, for example, in a relationship but use it as a barometer of how much effort are people putting into the business. What you don’t want to do is you don’t want to end up in a situation where you’re putting in 95% of the effort and the other person is putting in 5% or 100% and 0%. At that point, the whole thing is just going to fall apart at some point down the road. You can’t have a long-term business relationship if that’s going on.
Another tip is having regularly scheduled meetings to just discuss what’s going on, put together an outline of what those things are going to entail, and then make sure you have a set of common goals and expectations for one another. Know what your expectations of that other person are and make sure you communicate them because if you don’t tell them what you expect of them, then they’re going to be hard pressed to just come up with it on their own.
Rob: I think the thing is you’re trying to find common goals. It’s a ‘do you have’ common goals. That could be a big thing from the start is like, “Hey, I want to start a SaaS company and one person wants to go raise funding and go through YC and the other person just wants to build a lifestyle business and work as long as possible and pay the bills. That is overly simplistic way of looking at it, but these are the hard conversations that will save you so much pain and anguish down the line.
I think this is probably a good point to talk about. We’re talking about how to vet a co-founder right now but the title of the episode is Should You Take On A Co-Founder and I think I went off a tangent about if I were non-technical, I would look for a technical co-founder and that’s a very common thing. But what if you are a single technical founder? The question I’m posing here is, do you that that you should go look for a co-cofounder? And what are the pros and cons about it?
I know that when folks apply to Y Combinator, that they tend to fund a lot few single founders because from their perspective, the code is like the journey is hard and you tend to need someone else to lean on.” I don’t know if that’s programmed pattern-matching. I don’t know if this program had, I believe, two or three other co-founders when he launched and grew his startup. What are your thoughts on that question, specifically? If you’re going to build a SaaS and you are a technical person, what are the ideas? Obviously, if I say should you, you could say no because you’re a single founder. But what is the thought process there? What should someone think about as they’re thinking that thing through?
Mike: I think the interesting point to bring up here is actually the Startups For The Rest Of Us podcast actually came from a blog post that I’ve written a long time ago about when Y Combinator was first and announcing that they going to be funding a bunch of companies and they were going to be offering $6000 to move for three months to some certain location. I’m like, “That’s just not enough especially for somebody like me and what about the rest of us? Startups for the rest of us?” That’s where the original idea came from and plus, obviously, I had the domain singlefounder.com. It hit really well, but I do think it’s a really interesting question because one, there’s no right or wrong answer. It’s really what is right for you? What is it that you are comfortable doing?
I have met people who are perfectly comfortable taking all the responsibilities for a business on their own shoulders, and I’ve also met entrepreneurs who are not. They want a co-founder to share the responsibility and they’re okay sharing everything because they don’t want everything on their shoulders. It really depends on the type of person that you are. I also believe that depending on the type of business that you’re trying to build, you may or may not need help. That’s a big question as well. How complicated is the thing that your building. Are you going to be able to do both the marketing side of things and are you also going to be able to do all the technical side of things?
If you’re building something that’s extremely complicated like the level of Drip or something like that, there’s a ton of stuff that goes in there. I think it would be extremely difficult to build that as a one-man band. There’s just so much technical stuff going on and so many things that need to go into it and a short amount of time, that you are not going to have the bandwidth to build the stuff and also do the marketing for it.
I think that’s probably one of the contributing factors to why you and Derrick worked out together so well because you have technical architecture level stuff and you can help with the design, but then you went off and did the marketing stuff while he did a lot of the implementation. You served as a barrier so he can get work done. I’m speculating to some extent here but you can confirm or deny that.
Rob: Yeah, Drip started off as a smaller idea. It was going to be a lifestyle business. Derrick was a contractor at that time, then became W2 at some point. When we made the decision to become more ambitious about it, I was bouncing ideas off Derrick. At this point, I was still the full owner of the company. It was truly my decision whether or not to go into this market. But he was like a confidante and he and I just had a lot of co-founder-like discussions, is what I realized. Between the two of us, he and I made better decisions than I would make alone. That’s what wound up happening. It was just a natural thing.
Honestly from the very start, I did not think there could be a co-founder. It was not a plan for me. He was literally a contractor working half of his time on HitTail and I said, “Hey I want to build another product. What do you want the other 20 hours of your week? Do you want to get paid for that?” And he was like, “Sure.” It was fun to build a product from scratch and his UX chops are good. It was just a funny little thing and we unintentionally traveled down this road that you’ve outlined here of how to vet but we didn’t have any of the presuppositions of, “Oh man, are we going to make the decision someday to be a co-founder …”
Eventually, Derrick started a couple of apps before that, before Drip that hadn’t panned out and he knew that he wanted to kind of own something. He didn’t just want to work for somebody forever and knew that about him. It came to the point where it’s like, “Look, I’m going to do my own thing,” and it was like, “Well, let’s talk about what I can do at Drip for you to not do that, to make it worth your while to stick around in that.” That’s where it went. It’s very natural and by that time, I trusted him, he trusted me, we both knew how we work.
It was a Cinderella story so to speak of just making it work. But you’re right. I don’t want to say it wouldn’t have been what it was without both of us. It just would have been different. You know what I mean? Drip, especially in the early days just built a lot on my network and my very early vision for the product that quickly became our vision, and it was built a lot on my public speaking and my audience and all that stuff, and that’s what got early traction. Even my network later on got us affiliates and got us people recommending it and people willing to try it and all that stuff.
I think Drip could have worked without Derrick but it wouldn’t have be able to grow as fast. It would have been way more stressful for me. Derrick took so much of the load of the technical side as well as just building good software. I wasn’t dealing with a revolving door of contractors, I wasn’t dealing with that headaches which would have severely hampered the growth of the business, I believe. I think either of us having not been involved, it still could have been successful but it could potentially have been calamity as well.
I think it comes back to that question, should you take on a co-founder? As you said, Drip is very complicated. It’s very large in terms of the app. I can’t imagine doing that alone. I can’t imagine doing that as a single founder. If we’re doing a simpler app, I had HitTail before that. I didn’t take on a business partner with it, nor I didn’t build it, but it wasn’t that many lines of code. I did grow it essentially from $1000 a month to $30,000 a month over a course of a couple of years really on my own. Then I had a couple of contractors helping me out. For that one, I didn’t need a co-founder. That was definitely a nice little lifestyle business.
Mike: But I think there’s an order of magnitude and complexity difference between those two different products and that’s my whole point is that, if there is an order of magnitude difference between what you currently have going on and what you intend for that product to be or what it is going to become, then having that co-founder is probably really a good way to go, regardless which of the two is writing the code or if only one of them has technical experience, that’s fine. But there needs to be help because you are not going to be able to switch back and forth between both of them very well.
I’m saying this as somebody who’s in the middle of that right now. It’s really, really hard to switch back and forth between them because Bluetick is complicated under the covers. It’s way more complicated than I thought it would be and that’s just the nature of it.
Rob: Yup. That’s the struggle. Do you regret or do you wish you had a co-founder? Have you thought about looking for one?
Mike: Oh yeah. It was probably a year-and-a-half ago I actually approached somebody about coming on as a co-founder. It’s not something I haven’t thought of but at the time, I was like, “Okay, yeah, I know and trust this person and I’ll asked him.” He thought about it and we discussed it a little bit, and he decided to go on a different direction, which is totally cool. We’re still great friends and everything and he’s off doing something else and that’s great. But at the same time, I also have it at the back of my mind like, “Hey, it would be nice to have a co-founder or it would be nice to have funding to be able to either attract a co-founder or help in areas where I just can’t dedicate nearly as much time as I would like to then.”
I could either go in either direction and I honestly weighed them both pretty heavily over the past 6-8 months. I know that down the road I probably can’t do both side of the business. The question is what do I do? Do I go for funding and try to hire people that just do marketing and report to me or do I go the co-founder route? I think that it’s a hard comparison to make because on one hand, you’re saying, “Okay, well, if I get funding, maybe I give away some percentage of the company,” and I don’t really want to do that. But at the same time if you bring in on a co-founder, what are the logistics of that look like?
I’ve already spent months, actually years at this point helping build the product and get it to where it is. I’ve done a lot about, I’ll say, the hard, heavy lifting to get the products to be functional and do what it needs to do, but how does a new business partner work into that? How do you value the business, how do you value all the work and effort that I put in, the money that I paid to the contractors that help me in different ways, the infrastructure that I put in place, how do you put a price on that? How do you work out, what the terms of that would be?
Rob: You’re right. That’s hard to do but that shouldn’t be a reason that you don’t do it. You need to figure that out if you really need a co-founder. There’ll be some awkward or hard conversations and you’ll both have ideas of, “You know I have an idea that you should get this much equity,” and then the other person have different and you figure out, “Hey, are we willing to meet in the middle or are we willing to compromise? Or is this just not a fit?”
You’re right. There’s a lot of complexity to that stuff, but it doesn’t mean that it’s not worth doing. As developers, you and I see all the problems with everything, frankly, like Sherry can say, “Hey, we’re going to Croatia in two months,” and I’m thinking, “Oh my gosh, the logistics of that is going to be a nightmare. Everything is going to go wrong.” It’s like we’re used to looking at code and trying to figure out how it’s going to break. In life I try to figure out how are things going to break so I can think, be ahead of them, or whatever and I think that’s what you’re doing here. If it’s the right decision, you just have to figure it out.
But if it’s not the right decision, if you can raise funding and essentially hire someone to handle that, or if you can grow revenue fast enough that you can hire someone, and I’m not saying you in particular but just in general, I mean these are other options instead of having a co-founder, but it sound like you’re right. There’s going to be complexity but I still think that it’s something if you think it’s right for the business, that you should consider.
The good news is raising funding at a later stage or bringing someone at a later stage means that it shouldn’t be a 50/50 proposition or your evaluation should be higher because you do have more traction. If you’ve proven in the business that you have all of these and you have traction, then it becomes a different conversation.
Mike: Yeah, that’s true. Like I said, the situation for me personally is like I’ve got three different, I guess, pass so to speak, and it’s not to say that any of them is necessarily exclusive of the others but there’s the finding the co-founder, there’s also the funding, and then there’s the potential that is like grow the business revenue higher than it is currently to the point where I can hire somebody to bring on which I’m almost positive that like that would be somebody to help out on the marketing side of things, and then figure out things from there.
If I did that, it doesn’t necessarily mean that bringing on a co-founder is out of the realm of possibility because if I hire somebody to do marketing, I may decide that, “Hey, this person is working out in this capacity but I would not want to have them as a co-founder.” And the question is like, “Well, who would I bring on as a co-founder?” I don’t have an answer for that, to be perfectly honest. I don’t want to say a hard situation, it’s just I don’t have easy answers.
Rob: It’s startups, man. There are never easy answers. That’s the thing. I do think that though our discussion today about whether to look for a co-founder, I feel that should be helpful to people. This is one of those issues where there’s a lot of ‘it depends.’ It depends on who you are, your goals, your goals personally and for the business, and like we said, the complexity of the business and all that kind of stuff.
Mike: Yeah, and I think at the end of the day, I really feel it comes down to the complexity, and as you said, you probably would not fund a company that doesn’t have a technical co-founder if they’re trying to be a software business. I would agree with you but at the same time, I also say the decision to take on a co-founder, I feel, is heavily influenced by how complex the software is that you’re going to be building or that you’re working on.
The more complicated it is, I feel the more you are likely to probably need a co-founder because you need somebody who has a large stake in the business, who owns that and knows that they’re responsible for it, and is going to do whatever the right decision is, regardless of the cost, but also keeping in mind all of the other business things that are going on.
If you hire somebody to do the technical stuff, they are probably not going to be aware of this marketing effort that’s going on. That thing is going over on sales. They maybe even involved in some of the support stuff because they’re going to have to fix those issues. But their concern is not marketing. Their concern is not sales side of things. Their concern is building the tech stack and because of the lack of, I’ll say, visibility that they would have or their perceived lack of importance of that stuff to their job, I just don’t think that they’re going to do as well if they’re not an equity/co-founder type of person.
Rob: Yeah, I would agree. Is someone a co-founder? Co-founder is just a title. You can give someone a co-founder title retroactively. If someone has 5% of the company, are they a co-founder? I don’t know. Some people might have that title. Other folks might say, “I don’t know. They’re the CTO, they’re technical employee number one or whatever. Software developer number one.” We are throwing around this term and haven’t really defined it. But I don’t know. We don’t necessarily need to dive into that.
I think the thing to think about is, you know the reason that I haven’t funded any companies without a technical co-founder, you talk about the complexities versus non-complexity of an app. I think these days, I want to fund companies that are going to be seven figure or eight figure businesses. They’re going to be in the millions or above $10 million in annual revenue. I think today to build a SaaS that does that, you are going to have complexity.
I don’t know of a space where you can go back to the Basecamp days and build a project management system that isn’t that complicated. Let’s say Basecamp’s not complicated today, but realistically, when they built it, it was just a lot of CRUD, Create, Read, Update, Delete. That’s what Rails is really good at and that’s what Rails is really good at and that’s why DHH built Rails right out of––pulled it out of Basecamp. Those days are mostly over. I don’t want to say entirely over but the complexity of getting something to seven or eight figures these days, I believe, almost without exception, will require software that’s more complicated than we want it to be. How about that?
It’s like Drip was more work and more complicated than I wanted it to be and same with Derrick. Bluetick is more complicated than you thought it would be and want to be. That’s just what becomes because people want features, you look at the features and like, “Oh my gosh, it’s going to be hard to build,” but that is going to be my differentiator or that is going to get this client to sign up.
Mike: I think a close second behind that is the type of person that you are and whether or not you do well under pressure and how comfortable you are making decisions without additional input. I do agree with you in almost every case like two heads are better than one. It almost doesn’t matter what the situation is, but at the same time, somebody is going to have to ultimately make the decision and it’s more comfortable to have somebody to make a decision when you have somebody else there who’s on even footing with you, and they agree with the decision. Versus, “I think this is the right decision but I’m not sure, but I don’t have anyone to talk to about it or anyone who can say ‘Yes, we should go on in this direction,’ so I’m going to make it. But I’m going to be more stressed out because of that.”
Just by virtue of having somebody else to be able to act as that sounding board who is involved in the business, yes, mastermind group can help and other founders of other companies that you know they can certainly help out and give advice, but ultimately, if you’re the only person in the business making those decisions, everything falls on your shoulders enough a lot more stressful. Just having that co-founder to share the stress and the responsibility of those decisions, good or bad, is going to be helpful.
Rob: I feel that was a pretty good discussion. I hope you as a listener enjoyed our conversation. If you have question for us, call our voicemail number at 888-801-9690 or email us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us 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.