Responsibilities of the business partner vs the tech partner
Posted on Wed 21 June 2017 in Startups
This story about a developer interacting with an entrepreneur has been making the rounds. I have seen this play out multiple times myself.
As a developer, I have a basic rule: it is the responsibility of the "business" guy (or gal) to raise the money. If they can't do it, then they are incompetent, and the developer should avoid them.
Generally speaking, the business side needs to be able to identify and validate the market opportunity, define the product, handle sales and marketing and raise the money. The tech side needs to translate the product definition into a technical solution and build it.
If you have programming skills, you have plenty of options, and should not partner with people who can't do their part. You can probably handle the business side of things as well, though there is a difference in skill and temperament. Find someone who is as good or better at the business side than you are at programming.
I run a software development company that helps companies build products and I have seen the same thing happen at a larger scale multiple times.
An entrepreneur once came to me with a business idea and was looking for a partner. I would fund the initial development and get 50% of the shares, and they would handle sales, marketing and operations. They generally understood the industry and had contacts. I was in, as I liked the opportunity.
Then they started talking with VCs and got delusions of grandeur. The deal changed. I would fund the development, then once we launched the product, I would get 50% of the "profits" (not the gross). After I was paid back, I would get a 5% share in the business long term. This was a problem for me, as I have all the risk up front. If they failed to do their part, I would be screwed. So I proposed a different split: I get 95% of the shares for building the product, and they get 5% for marketing it :-). For some reason, they didn't think that was fair, because it was "their idea."
In the end, they never raised money and didn't do anything. Fundamentally, the inability for the business side to raise money is a big red flag, as it means that they will have difficulty actually selling the product, as it requires similar skills.
Another mistake that I have made is thinking that because someone understands an industry well enough to identify the product opportunity, that means that they can handle product management and project management. It's easy for me to provide developers to build something, but someone needs to sweat the details on exactly what we are building, or the project will stall.