Part I — Should I Raise Money?

First things first

Part I of Advice for Non-Technical Founders

One question I’m asked about all of the time is “When should companies without a technical founder go about raising money?”. This is a fundamental question and there are many reasons why I chose this question to be Part I, but the primary reason is that non-technical founders need to follow a different fundraising playbook. I hope to address some of that here.

The short answer is that a non-technical founder should raise money once they’ve secured a technology lead. Not before. I’m sure some will disagree with me here, but a solid technical expert on your team is a prerequisite for fundraising.

This might sound harsh, but you are building a technology company without a technologist, why would anyone give you money?

Technology leads can take many forms. They could be senior positions like a CTO or a CSO (Chief Science Officer) or a CMO (Chief Medical Officer), but they can also be just really good software developers. What they have in common is an in-depth understanding of the level of effort your idea will take to bring to fruition.

This is critical for 2 reasons:

1. One of the biggest mistakes early startups make is promising too many products. A strong technical lead will help you differentiate what is simply a feature from what should have been a full-blown product. I call this the entrepreneurial iceberg. On the surface, ideas can get strung together with ease, but often simplicity on the surface conceals deep complexity lurking below. A strong software engineer, architect, or CTO, will help you refine your idea.
2. The product roadmap for this refined idea, and ultimately your funding needs, should be directly correlated to the level of effort. How will you know this if you don’t have a technical lead? It’s rather presumptuous to ask for investment without a roadmap and accurate estimates for timelines and resources.

To be sure, understanding the technological or scientific scope is only part of the equation. The industry, customer base and value prop are of equal importance, but let’s assume you, as the non-technical founder have those parts covered. Understanding the scope to build or research your idea is absolutely a prerequisite to raising money. What’s more, finding a technology lead reveals far more than your ability to estimate the scope of your idea, it shows you can attract talent.

Attracting talent is the number one sign of a good leader.

You probably know by now that early investors usually are betting on the team, not necessarily your idea. Your ability to attract a team is critical and if you are a non-technical founder your ability to attract engineering, scientific or research talent should be one of the main priorities in your early stages.

Securing a technical lead prior to raising money offers two benefits:

1. A technical lead will help you vet the feasibility of your idea
2. A technical lead will show that you can attract the right talent

The great thing about these benefits is that they benefit you and your investors equally.

A solid understanding of the scope of your idea will allow you to come to the negotiating table armed with data and options. You will feel more confident and your investors will better understand what their investment will go towards.

More importantly, attracting a solid team is your first leadership test and ultimately will mean the most to early investors. Sadly, I see a lot of early startups failing this test and it usually takes the form of the following scenario: In order for me to take my startup to the next level, I need to find an expensive technical lead so I’m going to raise money so I can find that expensive hire.

Leadership comes before money.

I heard a great story at a recent ATDC event. An entrepreneur told a story about how his first problem was not how to find an engineer, but how to pay the engineer that had shown up and was already working for him. If you have a great idea that you are passionate about it , people will show up. Leadership comes before money.

Everything from developing your value prop, to gauging a customers willingness to pay, to product market fit, is dependent on a solid understanding of what it will take to build your vision.

I’ve just seen too many great ideas and early businesses run into brick walls because a founder, or investor, or advisor said: “We’ll figure how to build it later, that’s the easy part!”. It is never the easy part.

Comparatively speaking, raising money is easy, hiring high quality technical leaders is not. I’m interested in opinions here, but I would wager it is easier to raise a $1m in funding than it is to hire a top notch engineer. I’d further argue that both $1m and a top notch engineer are of equal value. Most recent “acqui-hires” validate this equivalence.

So how do you find a high quality engineer, developer, or architect? We are going to cover that in Part II: Technical Leads

Cheers,
Mike

@msengbusch1