Entrepreneur Office Hours - Issue #45
Co-founder dating and the reason your fundraising pitch isn't working
Jumping straight to the end, I need to let you know that I love, love, love, love, love the question in this issue’s Q&A. Usually I run into business-focused founders struggling to find great tech co-founders. Not this time. I got a question from a tech-founder trying to find business co-founders. It’s like living in the Twilight Zone!
Also in this issue, I explain why your pitch deck isn’t working. Or, to put things more bluntly, why your pitch deck sucks. And I promise it really does suck. But don’t worry because there’s still plenty of time to salvage it and learn to give a great pitch.
While I’m on the subject of great pitches, on Web Masters, I got to speak with the man who pitched Mark Cuban the company that would ultimately make Mark a billionaire. How’s that for a successful pitch? I wrote an article about the conversation, too, which you can check out after you listen to the podcast.
And when you’re done with all that, don’t forget to subscribe and share. You just have to click a few buttons. In fact, here’s a simple button you click right now:
That was easy, right? Thanks for reading!
Here’s a hint: you’re probably not helping potential investors solve their biggest problem, and that’s no good.
The 'Idea Guy' Behind Mark Cuban's Billion Dollar Success
You surely know who Mark Cuban is. And you probably know he became a billionaire by selling his company, Broadcast.com. But did you know he didn't start the company? It was originally created by the guest on this episode of Web Masters, Chris Jaeb.
Listen to Chris’s story now:
…or search “Web Masters” wherever you listen to your favorite podcasts.
My conversation with Chris Jaeb was so insightful that I wrote a follow-up post focusing on one of the most interesting thoughts he shared about entrepreneurship that, unfortunately, couldn’t make it into the episode. Read it here.
Pitch competitions aren’t the same as pitching investors. That’s why great fundraisers often loose pitch competitions. Do you know the best way to pitch your startup to a crowd?
Office Hours Q&A
Investors invest in teams more than specific products, right? How do you build "the" team if you're a tech guy who can build products but is not skilled at building a company? Where can you meet business people and how do you "date" them before marrying them?
The biggest challenge to being a tech person trying to find a business person is that lots of the business-type people in the entrepreneurial ecosystem are looking for a tech person to help them build the thing they’ve already envisioned. If you encounter any of those people, the chances of convincing them to drop whatever they’re currently imagining and start building a business around your product are slim-to-none. In fact, don’t bother.
Instead, if I’m in your position, I’d figure out where those people are pitching their business ideas and figure out how to pitch alongside them. After all, they’re all struggling to find tech talent, which means they’re likely surrounded by other business-type people.
Most large communities (towns, cities, universities, even big corporations) have some sort of entrepreneurial ecosystem in place where startup-y folks like to gather. Those communities also usually host informal pitch events and “matchmaking” events. For example, at the Fuqua School of Business (Duke’s business school), every school year begins with a startup meet-and-greet where people with business ideas share them. The problem with those events is usually that they’re filled with business people and lacking tech people.
But that’s not a problem for you because you’re one of those rare tech people. So find a local pitch event where you can present what you’re working on as well as the technology you’ve developed. You don’t have to be the greatest presenter in the world. In fact, you’ll probably do even better if you acknowledge you’re not so great at presenting (if, indeed, you aren’t). Instead, be clear that you’ve already got a technology and you’re explicitly looking for people to help commercialize it.
If the technology is compelling enough, I guarantee some of the people in the audience will want to help you. Probably more than you can handle.
As for how to “date” them before marrying them… traditionally, when people are given equity in a company, they don’t get the equity all at once. Instead, it accrues over time. This is called a vesting schedule.
For example, if you join me as a co-founder with (for the sake of easy math) 48% ownership, you won’t get all 48% immediately. Instead, each month for the next four years you’ll accrue 1% ownership in the company. If you leave after 24 months, you’ll only hold 24%.
In addition, normal vesting schedules have what’s called a “cliff.” The “cliff” means the person doesn’t actually get anything until clearing the cliff. In a traditional four year vesting schedule, that cliff is usually 12 months. If the person leaves the company for any reason prior to that 12 months, none of the equity vests. This is the “dating” period.
What this means, from your perspective, is that you can find someone you like as a potential co-founder and strike an equity agreement with appropriate vesting terms before the person starts working. Just make sure you retain majority ownership (which, theoretically, you should be entitled to since you’ve already started the venture) and that the agreement has a reasonable cliff. If things don’t work, let the person know before the cliff expires, and you should be fine.
Two other things to note about the above advice:
First, make sure whatever agreement gets established between you and the person includes the person assigning all work to the company. This way the company has ownership of everything created even if the person leaves (on good or bad terms).
Second, I here’s the part where I remind you that I’m not a lawyer and I’ve dramatically oversimplified a lot of legal concepts. Please don’t follow anything I’ve written here. Instead, consider it guidance. Before doing anything, go talk to a lawyer and do whatever that person says.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!