START-UP SERIES – 1 A Tech Co-Founder..Boon or Bane for Start-ups ?

‘START-UPS’ is the buzz word in the world economy today. With the innumerable benefits and subsidies being declared, Start-ups have become an attractive proposition for the new age entrepreneur. This has given rise to a whole new segment of advisors offering targeted start-up advisory services. Integration of technology with traditional businesses has been one of the proven methods of scaling up. Harnessing technology has downsized human intervention, increased precision, reduced costs and guaranteed higher profits. More and more Founder/s are opting to build tech based disruptive business models.

In such a glitzy and dynamic world of tech fuelled start-ups, there are innumerable decisions to be made on a daily basis by the Founder/s. Just having an idea and the passion to build a market disruptive product / service around it, is not enough. Sharpening the idea, finding a like-minded core team, finding the right start up advisory, finding the right investor, ensuring the balance between boot strapping and putting in place the basics, ensuring deployment of seed capital in the correct manner, right positioning to the chosen target market etc. etc. etc. the list is endless. Breaking the moulds of convention and walking a difficult path in unknown territories is thrilling. Yet it needs fearlessness, iron will, grit and determination to keep going, braving unforeseen circumstances.

One of the most important decisions for any start-up Founder is choosing a Co-Founder, whether Tech / Non-Tech. Having a Tech Co-Founder on board can be quite confusing, considering that most Founder/s would want someone who will look good to Investors. Amongst most obvious choices of friends or family or someone choosing to be an angel investor for your venture and who has a fair knowledge of technology, there are many more parameters which need careful consideration before taking the plunge of having a Tech Co-Founder on board. Taking on board someone to appease the investors versus someone who will actually add value, someone who will prove to be a good bet in the long run, someone who will be able to look beyond just the tech-based responsibilities, etc. could be a broad criterion.

In my opinion, Founder/s need to master the skill of understanding that there is a typical difference between a person who can in the real sense of term be a Co-Founder, who pretty much walks shoulder to shoulder with the Founder and a person whose purview is limited to the preliminary scope of work for which the person is onboarded for. The scope of a “Tech Co-Founder”, is not just to be responsible for the Tech function of the start-up but also for a lot more than that. This is the point that a lot of Founders miss out and take a tech expert on board only because they think he / she will look like an attractive proposition to the Investors. Having knowledge of technology is necessary but having strategic manner of thinking, understanding the business of the company in and out and having fair analytics on probable competition is more important.

The next factor that needs consideration is whether the proposed Tech Co-Founder has proven experience in a field similar to the Founders’ idea, has devised technology to resolve recurrent issues of any similar business, has a bank of ideas ready to smoothen out probable creases in the business, has had previous exposure to the ever-evolving technology and has the pliant attitude to adapt to the needs of the dynamic world of technology.

A Tech Co-Founder is someone who conceptualizes, collaborates amongst the team members of the business, collates data, designs, tests and performs various other functions to ensure the technology built fits the purpose precisely. He / She is someone who necessarily does not build technology by himself / herself but facilitates the tech building and shares his / her experience and knowledge to build a robust system. All the above responsibilities require the person to be extremely congenial or a people’s person or in common language, to be a TEAM PLAYER. Gathering and putting to right use, the inputs from the entire team requires someone who is a team player, rather than someone who is only fairly good at execution of a tech idea.

Sharing the same passion as the Founder/s, sharing the absolute same vision for the start-up, the readiness and ability to step up from being a tech expert and fit into the same shoes as the Founder/s is also a factor to consider. The Tech Co-Founder has to be someone who embodies the qualities of the Founder/s and fits into the Founders’ scheme of things perfectly.

Remunerating your proposed Tech Co-Founder is the next important point to consider. How much is too much and how little is too little, is complicated. Yet giving out equity of your start-up to a proposed Tech Co-Founder by over valuing the involvement of someone who would probably give you the same value add as just a tech expert, is a huge mistake that I have seen Founders making. Equity is the most expensive cheque you can ever cut ! So use it frugally ! Do not give upfront equity to a tech expert, with the thought of attracting investors. The ideal way to go is to get the tech expert on board as a consultant and evaluate your working relationship with the person.

The core team of a start-up is not just about working relationships but having the same wave length on a personal level too. Start-ups go through loads of ups and downs / trials and tribulations / good, bad, ugly phases and this is when Founder/s need people who are rock solid mentally, to be around them. It is a lonely journey to the top for the Founder/s and the core TEAM will help the Founder/s get where they aim to be. Onboarding a tech expert as a consultant, will give the Founder/s a chance to consider whether the person embodies all the criteria listed above and will aid decision making on whether the person is the right fit as a Tech Co-Founder.

So, in short, DO NOT GET A TECH CO-FOUNDER on board with immediate effect and give out equity upfront. Alternatives could include issuing ESOPS / Phantom stocks to your tech expert when you onboard him / her as a consultant / key or senior employee or simply outsourcing the tech function. Outsourcing may or may not work positively in the eyes of an investor, since once the development of the app ends, the outsourced tech firm may not have any accountability towards the app. One way to make this work is to have a very robust contract with the tech firm which primarily encompasses and establishes the ownership of the IP of the technology built and have a small but effective and strong internal tech team (could be 2-3 in number or even 1 mid-level employee) to monitor the deliverables.

There is no one-size fits all rule for any start-up. Do not make the mistake of committing something which will drag you down later. Importantly, don’t worry about investors and don’t let your decisions be clouded in the hope of attractive figures !! When you are head strong and convinced as a Founder about your idea and your decisions, the investor will see the passion in you for your product / service idea!

Article written by Janhvi Pradhan Deshmukh (Startup Specialist)