The Venturepreneur

These days, with the proliferation of founder sites (CoFoundersLab, FounderDating, AngelList), there are plenty of ways to identify qualified technologists for your venture. Add to that the host of industry trade sites (VentureFizz, TechCrunch, GreenhornConnect) and all the startup networking events in most major cities, and finding candidates shouldn’t be the problem.

The problem is getting them to join you.

Here are some facts to stipulate for the record:

1. There are more non-technical entrepreneurs out there than technical ones.
2. Technical entrepreneurs have lots of opportunities.

When we hear stories about successful ventures from breathless startup propaganda blogs and magazines, the story is always that the technical co-founder worked for nothing but got rich. But the truth is that most startups don’t succeed and most founders don’t get rich. So the implied reality behind most offers technical co-founders receive is this: “Work for me on my idea, for free, for an uncertain length of time, and if everything goes right and we’re extremely lucky you might get paid.”

Add to this the fact that most qualified technologists have multiple opportunities for employment that pay real (and often good) money, not to mention their own long list of fantastic ideas, and you might forgive them for being choosy. TechCrunch put it this way: of 100 entrepreneurs at a recent Wharton startup event, 94 were nontechnical and looking for a cofounder. Of the six who were technical, all of them were working on their own ideas and only one of them was looking for help.

Even if you get a technologist so excited they agree to work for free, if your venture’s momentum should slow and a better offer comes along she’ll most likely take it – which means abandoning or deprioritizing her previous commitment (to you). I see this happen all the time – it’s not at all uncommon for a venture to go through multiple lead technologists, with major and sometimes fatal consequences.

So how do you make this work?

Pay them.

Here’s why:

1. Real money now (and the promise of more later) makes your idea competitive with the other opportunities your co-founder is considering. It makes you stand out from the “work for free” offers they’re already receiving. And it also means you’re serious and have some skin in the game – all good things.
2. Business relationships are just that: business. They make commitments real, they make everyone behave more professionally, and they hold everyone’s feet to the fire. Chemistry and good relationships are key, but in the end performance matters. And if things don’t work out, business relationships make separation clean.
3. Financial pressure is a good thing. Real money only lasts for so long, which means you need to set a finite timeline and a tight schedule. This has the valuable additional effect of focusing everyone on business milestones: generating cashflow, raising investment, et cetera. It also forces you to ask the constant, correct question: is whatever we’re doing the best way we can spend our limited resources? The answer to that should always be yes. Agreeing to work indefinitely for free doesn’t carry nearly the sense of urgency than that created by a finite cashflow reserve.
4. You’ll get better people. I know more than one investor who believe that the only people who work for free on a speculative venture are people without better options. While this is not always true, it is probably fair that you’re more likely to recruit quality with money than without.

Here are three things you shouldn’t do:

1. Don’t offer equity. For anyone with an ounce of sense, equity is not enough of a motivator until it’s worth something, and until your idea has traction it’s worthless anyway. Good technologists know this. Instead, ask your cofounder to discount their market rate and defer a portion of compensation until there are funds to pay for it. This shares the risk and aligns incentives: everyone should be aware that this isn’t “just a job,” and that the company’s success means their success. You can always offer to convert deferred compensation into options or equity when the company is real. And if for some reason your relationship has to change, you have one less person on the cap table.
2. Don’t hire a development shop without a qualified co-founder. This sets you up for a whole host of problems (I call it technical ransom and describe it here). And even if everything goes right, your first investor will ask you where your technical cofounder is, which means you’ve just kicked the can down the road.
3. Don’t say “I can’t afford it.” At the concept stage, for technology-oriented businesses, could there be a more important or higher-leverage expense than getting your first technology assets in place or recruiting someone to manage them? If you don’t have enough money raised or set aside to invest in startup expenses, you probably shouldn’t be starting anyway. And if you’ve set aside funds to live on while you get things off the ground, deploy a few months’ of that towards your technical co-founder. Better to get where you’re going in three months than six anyway.

Bottom line, as long as there are nine non-technical entrepreneurs to every technical entrepreneur, it’s a buyer’s market.