They want to build the next great communication app. I've been communicating with people on the internet since 1998, and I'm aware of the influx of communication apps hitting the market.
I was offered a third of the company in return, and they're asking for 4 to 5 hours a week of my time (to start out). I know that that's not what it's going to turn out to be, considering development challenges. Plus, I have a full-time position as a software developer.
I'm in the process of launching some of my own projects, and I'd have to put those to the side in order to dedicate my free energy and time to their project. They've pitched the idea. I fear it's not innovative enough and that it's just another chat app. How do I know it's worth the commitment? They want a solid decision (quickly).
- Who is our target market? Who are we building the chat app for?
- How do we get traction in this market?
- Who are our competitors? What is our differentiator / unfair advantage over them?
- What are the monetization plans?
- What is the end goal? Being acquired by a big company, IPO, lifestyle business etc
- What are the responsibilities for each of the three founders? How would each of them add value to the business?
- How would we know if we are on the right path? e.g. x% per month increase in number of users/messages/revenue etc
At the end of this, you will either be sold on the idea or you will not. I'd advise you to join only if the two guys are able to convince you of the idea.
I had a meeting with them yesterday to discuss in more detail. I asked them questions like "What's supposed to separate you from all of the other chat apps out there?" I understood their idea, but I don't see it as very unique. I asked them about how they'd monetize, and they told me -- a lot of it depends on star power (big people using the app in order to entice potential users). I wouldn't consider myself business savvy by any means, but that plan doesn't seem like something solid.
They told me they can make one or two calls to get funding, but that they just need an app. In my minor experience, the funding part of the operation isn't even half the battle. So, even if it is true that they can get funding just like that, it doesn't mean that this idea is strong enough to make a sustainable, considerable profit (then again, what is?).
One of the founders brings connections, but I'm focused on the idea and how it's solving a problem. I asked if there's a problem being solved, and their answer wasn't very strong.
1. Do you trust them in the "If I died they would make sure that my family was taken care of" way?
2. Are the executing right now even without technical talent?
3. Do they have a track record in the industry they are about to try to enter?
That's it.
Now the red flags:
Do you really want to work with *two* idea guys?
Do you really want to work with two people who think
4 or 5 hours a week is going to get a solid app built?
Do you really want to work with two people who believe
that high pressure is a good way to establish a long term
business partnership?
Good luck.
One of the big yellow flags to me was that they would be idea guys. They told me that they're willing to learn how to code, but considering they don't have super technical backgrounds (one is an electrical engineer, so he'd have the best chance at learning), they probably wouldn't be of aid in the interim.
2. IMO, when it comes to going into business:
Yellow = Red
4. What does the buy-sell agreement look like?
5. What has the electrical engineer been doing that has prohibited them from developing a technical background?
It's not that ideas don't matter, but from my own personal experience, ALL startups over-estimate the uniqueness of the idea and under-estimate the effort and capital required to go to market.
So ask yourself these questions:
#1: Can I work with these 2 idea guys for the next 2-3 years? Are they the kind of co-workers I'd enjoy working with? What do they bring to the table that I don't?
#2: what do I know about their perseverance, fortitude and willingness to work? This is hard to prove or establish objectively, so answer this question honestly.
#3: Do you trust and respect the co-founders? Do they understand marketing and finance? Do you guys "jam well" with each other?
#4: How are they painting the picture of the future? Is it all yachts, expensive cars and visions of cashing out? Pay attention to that language carefully and then see if you believe in it.
#5: Are your co-founders former entrepreneurs? If not, I'd suggest you wait it out. You want partners who have experienced the pains of managing tight cash-flows, living without paychecks for 6 months or more.
But they're talking 5 years of commitment. Tech experience isn't something they have, but I know that at least one has entrepreneurial experience (just hasn't exited or anything). Again, he hustles.
Definitely talk about yachts and painting the picture of there being far less in our lives than there "will" be after building this app.
Do you mean they haven't worked in communications or technology industry? That's a big red flag. Your team will have a STEEP learning curve.
It's exceedingly rare - if not impossible - to see a startup team move into a new industry without industry experience AND capital.
My suggestion to you would be to let this opportunity pass.
What would they spend their time doing while you coded?
The only caveat to this is if they've already exited and are successful entrepreneurs. My guess is they're not, and just looking for someone to do the development for free.
It'll really come down to me doing a lot of development between now and October, including managing another developer if they stay true to their word and get another developer to help out.
And no, they haven't already exited or anything of that nature. Not yet. Ambitious friends of mine, though.
It also sounds like you have goals of your own. There is a true opportunity cost here. This will be your side project for longer than you probably expect. You don't really get any others if you're trying to get a business off the ground. I'm not sure how old you are, but divide the remainder of your working life into 5 year chunks. That's how many tries you get, roughly speaking, if you're going the startup route.
They texted me, asking for a decision. I texted back, letting them know that I'll pass but that I'll meet with them once a week for a little while to help them refine their MVP so they can communicate it to a developer. I figured it was a friendly offering of my expertise. I told them to feel free to utilize me in that regard if they'd like.
Instead of identifying the friendliness, one replied telling me that I'm either fully in or I'm out, implying that my offer was too half-assed for them. I was clear in saying that I passed on their offer to be one of their founders, so I didn't really understand what he wasn't clear on -- I plainly offered to help them refine their MVP strictly so they can execute as seamlessly as they could once in contact with another developer. I told them that when I received his response.
The other still hasn't said anything. And the one who initially responded hasn't replied to my last message. I'm assuming they're mad, although, that's not a very friendly way to reply, even after being rejected.
Now, I'm really glad I decided not to take on the role.
After reading your whole comment, I have to agree you were incredibly lucky. I don't want to jump to any conclusions but from my experience, people whose attitudes become so fierce so quickly in this type of situation are often the same type of people that may be perfectly fine with screwing you over in the case your partnership ever finds success. Idea people are dime a dozen in this era, and many are desperate to find competent developers on the cheap to execute their idea. Some of them have a misconceived notion that their idea is pure gold and you are merely a replaceable resource (which of course, we all are to some extent, but the builder has a huge role in building a startup; arguably a larger role than any other person).
So again, congratulations on learning a good lesson at no cost. My favorite part about your comment is the fact they completely burned any chance they had of getting your advice/expertise for free (hopefully), so you can focus on the things/people that really matter.
1) You are not convinced the idea is disruptive/feasible enough
2) They want YOU to do all the work, yet only give you 1/3rd equity. What do they have to bring to the table? Probably nothing.
3) You don't need them. Ask yourself: would I build this if I would get 100% equity? Since you also have plans of your own, the answer would most probably be no.
Great points.
They want your expertise. That alone, should be worth the 1/3 equity they are offering you. There should also be some type of ongoing compensation for your time spent. You mentioned that they have access to funding. Isn't any of this funding earmarked for developing the new product?
If they are willing to compensate you for your actual time spent, this would have some indication as to how serious they really are.
My initial gut reaction, after reading your question and statement, was your potential partners might be looking for somewhat of a free ride, without having to actually put any real skin in the game. Your "skin the game" is your knowledge.
And bottom line, you don’t sound overly impressed with their proposed product concept. That in itself, would make me leery of involvement (on a pro bono basis) even with the offered equity.
I'm not very impressed by the idea. It's an okay idea, but nothing super inventive.
By then, you'll have a much better understanding of what value (if any) they bring. How you work and get along together. Focus on refining the mockup, brainstorming ideas, etc. This shouldn't take too much of your time.
As everyone else pointed out already, 1 dev for 2 idea people is a bad ratio. I think the equity is reasonable (you can't expect them to offer you more than 50% as a first offer...). I strongly question whether those two people are worth working with at all. But only time can tell.
Just don't promise anything long-term just yet. Commit to one month part-time. No need for a fancy deal yet. Don't write the app yet.