As a non-technical founder of a startup, you may think you’re at a disadvantage. You’re acutely aware that, in the disparaging words of YC’s Paul Graham, you’re “just some business person.”
But don’t overlook the value of what you possess: insight into a market opportunity that is closed to outsiders as well as direct access to the initial buyers.
For tech-enabled founders such as yourself, mobilising an effective product and engineering team in the early stages of your startup journey is a crucial enabler. And solving this challenge requires more than just a capital partner, it requires a digital partner too.
Part 1: The Founder’s Dilemma
Picture the scene: you’re a highly skilled professional; let’s say a doctor or a lawyer. You’ve been working in your sector for at least a decade and your career prospects are bright.
But something at the back of your mind is bothering you.
You’ve had an idea for a new software product that, if it existed, would make you and your colleagues faster, more efficient and more informed; better versions of your professional selves.
The more you think about it, the greater your desire to see it happen.
But, you’re not technical. You have little commercial experience and enjoy a good standard of living which will be hard to forego.
A few years ago, you wouldn’t have seriously entertained the notion. After all, you’ve never considered yourself an entrepreneur. But now everyone seems to be starting a ‘tech’ company despite knowing next to nothing about developing software.
Maybe you could be a ‘startup founder’ after all?
Having made up your mind, your instinct is to move quickly. Your immediate priority is to to build the first version of your product idea and test it in the market. To do this, you’ll need money. Partly for yourself, but mainly to acquire the additional expertise you need.
You’re not sure how much it will cost but doubt your limited savings will be sufficient. You assess your options and conclude there are three routes forward:
- Learn to code and build the initial version of the software yourself.
- Hire a ‘technical co-founder’, give them the role of CTO and rely on them to build a team.
- Find a ‘dev shop’ or agency and pay them to build your product.
You quickly discount the idea of learning to code as too inefficient and time consuming. As Daniel DeLaCruz from Dualboot Partners observed,
“Non-technical leaders should not learn to code. However, they should become acutely familiar with the process of building software.”
Hiring a CTO to build an engineering team now seems like the most appealing option. Part rock-star, part comfort-blanket, the notion of having someone on your team who ‘knows about tech’ is compelling.
But, thanks to the explosion of startup activity (not to mention aggressive recruitment by companies like Google, Amazon and Facebook) engineering expertise isn’t always easy to come by.
As a non-technical founder, it’s unlikely your niche idea will appeal to an industry veteran. You also worry about how to evaluate possible candidates and how much this unicorn-shaped figure may cost. It’s likely they’ll expect a high salary and a lot of equity in return for their involvement.
You’ve heard stories about non-technical founders being bamboozled by their CTOs who promised much but delivered little. After a few months, the CTOs often left for more exciting jobs at DeepMind (or somewhere similar) taking half the firm’s equity and leaving a half-finished product behind.
You consider Option #3.
Cash for services providers — or ‘dev shops’ — remove the problem of hiring and retention but bring different concerns. You’ve met founders who distrust their technical suppliers. The most common complaint seems to be a lack of responsiveness and commitment.
However, the root cause of this mistrust seems to arise from an absence of aligned incentives and shared outcomes. It’s in a dev shop’s interest to maximise the time they spend working on your product. But it’s in your interest to extract maximum efficiency from them.
The lack of strategic guidance also concerns you. When your team are charging purely for time, long-term plans usually fall by the wayside in favour of short-term fixes.
And how do you know you can trust what you’re being told? As a non-technical founder, you’re at risk from the Dunning-Kruger effect. Buoyed by enthusiastic false confidence, you (literally) don’t know what you don’t know so can’t spot your mistakes or errors of judgement.
What you really need is a genuine venture partner. One who can provide both technical expertise and capital…
Part 2: Founder/Market Fit
Venture investing has been compared to building a stool with three legs. The legs are: people, markets, and innovative products.
However, in the B2B world, it’s easy to overlook the value of founder-market fit. In contrast to the self-doubt they instinctively feel, professional founders are in a privileged position despite their lack of technical knowledge.
Firstly, a professional founder has secrets: unique insights into market opportunities that are hidden to outsiders.
Being problem-lead protects them from the principal reason for startup failure; known at Y Combinator as SISP, a Solution in Search of a Problem. The problem they seek to solve is not theoretical, it’s something they’ve encountered and wrestled with personally, often for many years.
Second, their network means they can immediately (and credibly) connect with the initial users of their product. This again is an ‘unfair advantage’; professional credentials bring an authenticity not easily replicated by outsiders.
Finally, one should never underestimate the extent of the cultural divide between engineering-lead startups and corporations, mainly to the discredit of the former. Corporate Heads of Innovation are frequently exasperated by the behaviour of the startups with whom they engage and advocate for internally.
Common complaints include a disdain for information security concerns, dogmatic adherence to Amazon Web Services and an expectation that users should adapt their working practices to accommodate new software, rather than the other way round.
I’m not sure which guidebook recommends treating prospects with arrogance and discourtesy, but it’s been well distributed in some spheres.
A founder who understands how to conduct themselves inside a large organisation, who shows deference to rank and an empathy for the cultural challenge faced by Innovation Leads has a far greater advantage than they realise.
Part 3: Capital and Code
Despite their privileged perspective, non-technical founders still face execution-risk related to software development in the earliest stages of their startup. Unique market insights can be easily derailed by an inability to deliver a solution.
When you’re ‘pre-product, pre-revenue’ the challenges you face are formidable. But when you’ve proved there’s a market for your idea (ie. when you’re ‘post-product, post-revenue’) your prospects are transformed. At that point, you’ll attract as much capital and talent as you need.
Those looking for the most efficient way to reach that point should consider Venture Services; a small but growing category within the juggernaut that is the venture capital industry.
Venture Services means the exchange of software services for equity in a startup, as opposed to one purely of cash.
As Derrin Hill, of Venture Services firm RevRoad, observes,
“Systems solve problems more than people do.”
Venture Services firms acknowledge the execution and hiring risks faced by non-technical founders and address them by providing software engineering and product management resources to founders. They are ‘operator angels’ at scale.
Although it’s fashionable for venture capitalists to extol a gameplan of ‘finding the smartest possible founders and backing them to the hilt’, non-technical founders need both capital and code in the early stages to succeed.
There are tech businesses and there are tech-enabled businesses and it’s important to differentiate the two.
The first wave of startups were lead by computer science dropouts and fresh-faced software engineers who built (then dominated) new markets in consumer technology.
But, in the new wave of enterprise technology, most founders will be experienced professionals. Domain, rather than technical, experts. They’ll possess unique market insight but lack the technical expertise necessary to realise their business vision.
For these founders, Venture Services could be the best way forward.