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How to keep leverage as a non technical founder?

I struggled for a year working fulltime as a founder and hired designers and engineers using my savings in an attempt to develop an MVP. We couldnt finish an MVP and I couldn't find a technical cofounder, hence we never were able to raise the money either.
When I ran out of money, I had to unfortunately take up a full time job and unfortunately all of the team left as they only wanted to work on cash based jobs.
I still believe in the idea and I had validated the product market fit by doing competitive analysis as well as getting feedback from potential customers through interviews and showing the screenshots from the design documents. My startup falls into a "me-too" business category with no monopoly and can be profitable in a year (as has many recent similar startups done). It is not disruptive and not fit for VC money either (won't scale to a billion valuation).
It has been over six months now and I have found some developers who want to take it forward as tech cofounders. Unfortunately, due to financial constraints, I am not in a position to quit my job before next 12 months.
If I give the new cofounders already existing code, they have a headstart in product development, enough that they can finish the MVP in 3 months. A lot of hard core data scientific algorithms are already built, they will only need to finish the web dev/ mobile app part..
If I hand over to them all the code for the algorithms, the research from users as well as the design documents that I spent a lot of money to built, what incentive do they have to keep me around ?
For next 12 months I wont be able to add a lot of tangible value and because I can't join the company fulltime, we wont be able to raise money either. I will be in a very vulnerable position with no leverage.
They will be tempted to steal the IP and start their own company and I wont be able to do anything about it since they are from another country where law enforcement is impossible and contracts have no meaning.
What is my strategy to ensure that I get a fair reward for all the hard work I put in and all the money I spent on my startup ?

23 Replies

Joe Albano, PhD
0
0
Joe Albano, PhD Advisor
Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.
I can think of at least three elements I can think of that come into play here:
  1. Clarity - before you work with anyone be sure all parties are clear about expectations including relative value of each person's contribution and how rewards (cash, equity, etc.) will be divided.

  2. Operating Agreement - documentation of the clarity established in step 1 and other factors including ownership and protection of IP (you might want to consult an attorney about things like patents, NDAs, and trade secret protections).

  3. Trust - if you can't establish a good relationship with the people you work with, none of the other stuff will matter.
Tarun Wadhawan
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Tarun Wadhawan Entrepreneur
Programme Manager
My 2 cents. Never rely on outsourcing partners when you are not a subject matter expert. No offense to foreigners but there are plenty out there from India , South America / Ecuador - double the efforts and Can prove unreliable. You mentioned that you already have spent a good amount of time and money recruiting local team So what was produced out of that effort? If you have a working piece of software I would approach a local tech company through a local Incubator / accelerator ( state run ) and offer them a partnership. Make sure to have a mutual confidentiality agreement signed between u guys Before u talk about your ideas. Let me know how goes the battle.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
There are a few things I want to highlight:

"If I give the new cofounders already existing code, they have a headstart in product development, enough that they can finish the MVP in 3 months. A lot of hard core data scientific algorithms are already built, they will only need to finish the web dev/ mobile app part."

Don't assume that - they now have to come up to speed on an existing codebase. It may be written in a language / framework they're not familiar with, or it may, bluntly, be crap and they will want to rewrite most of it (most developers I know will want to rewrite most of it even if it isn't crap, so make sure the reasoning is clear and compelling).

"For next 12 months I wont be able to add a lot of tangible value". If they're the coders, you need to be the one who (pre-)sells it. It's your vision, and you will have to stick around to promote it among your team as well as to external stakeholders. Your value is in validating your concept, finding product-market fit, and bringing in partnerships. You can do it, but will need to carve out some time on evenings and weekends in addition to that full-time job to make it happen (hey, startups are hard).

"They will be tempted to steal the IP and start their own company and I wont be able to do anything about it since they are from another country where law enforcement is impossible and contracts have no meaning."

If they're co-founders and you're uncertain whether they're trustworthy, don't bring them onboard. It sounds like they're employees working for equity, and in that case, their continued participation in your business is contingent on their faith in your ability to do things they can't and make that equity valuable for them. I doubt they'll want to steal your work in any case; most likely they'll simply drop the project (potentially at the worst possible moment) if they're not happy.

As the primary founder of the business, you are *always* selling the business to your team. Everything you ask of them, they'll do because they believe in your vision and in your collective ability to make it happen.

So in short, I don't think there's any way you can simply "do nothing" and still have a viable business. You're going to need to be in the thick of it with them for the business to succeed, selling, creating opportunities, and inspiring, and that's how you'll justify your equity.
Irwin Stein
2
6
Irwin Stein Advisor
Very experienced (40 years) corporate,securities and real estate attorney.
My 2 cents. If you believe in your project and yourself, take a second mortgage on your house. If you do it, you will be able to hire local employees to finish the work who you can tie up with enforceable contracts. You don't have to quit your job. They work for you. You will own 100% of the finished product. Takes guts to start a business.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
(Note: I'm not the original poster, just commenting on it)

I'm a more risk-averse person (though I like to say that I simply like to calculate my risks), and that prospect scares me. Better to save for another year and try again full-time (on/off employment) rather than quitting the job right now and accumulating debt in the meantime, particularly with the uncertainties about the market and team that I'm hearing from the original post. Failure in the second mortgage strategy could put you on the street very easily, and the likelihood of failure in a pre-funded startup is quite high.

"Live to fight another day", as they say.
Irwin Stein
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0
Irwin Stein Advisor
Very experienced (40 years) corporate,securities and real estate attorney.
Nothing wrong with your strategy. I would not suggest that you get out of your comfort zone. What you are trying to do, nail down and control workers in another country is also very risky. There is very little about owning a business that is not. If it can wait a year then do so and hire domestic code writers.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
Sorry, didn't intend to give the impression that I'm the original poster. I'm not! Just replying with some commentary that I personally wouldn't be comfortable with the risk. Maybe the OP would.
Dermot Corrigan
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0
Dermot Corrigan Entrepreneur
Chief Commercial Officer at Gorkana (sold to Cision)
where are you based?
Rima Awasthi
0
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Rima Awasthi Entrepreneur
Founder and CEO at QuickZipp Inc.
Hello, I read your message and can relate to what your position. I have similar experiences, however, I am still working on the idea and looking for a technical co-founder. If you don't mind, can you please share your personal email or any contact info, I would like to connect with you. Thank you and good luck, Rima
John Currie
2
0
John Currie Advisor
ITERATE Ventures - Accelerating Science & Technology Ventures www.iterateventures.com
If you are the Non-technical Co-founder, doesn't that make you the business leader? And doesn't everyone know in the startup world that "business issues" - namely marketing and sales - are more important, equal at miimum - than the tech? Are you not bringing this value to the table? Don't they value what the 'business side" does?

If the tech side doesn't VALUE business skills - run. Most startups recognize they need some. I would also assume that the primary business skill you bring is CUSTOMERS (or the path to them, at a minimum). As long as you hold the keys to getting customers, you should have tons of leverage. If you're not bringing this skill, you have to ask, what non-technical skills are you bringing to the table?
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