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Developers Guide to Startups How not to work for free
© 2016 Code Fellows @CodeFellowswww.CodeFellows.org
Agenda
About Dave About You Startup 101 Customer Development Compensation
Contracting What happens when (Good or Bad) things happen?Resources Q&A
© 2016 Code Fellows www.CodeFellows.org
About Dave
CEO Code Fellows 5X Founder Entrepreneur in Residence – Mitsui Ventures Board Member
About You Have a startup idea?Consider joining a startup?
© 2016 Code Fellows www.CodeFellows.org
Thinking Like an Investor
”When we invest in a company, we consider six things – Team, Team, Team, Market, Progress and Idea” David Cohen, Techstars founder video @6:30
Single Biggest Reason Startup Fail – Bill Gross Idea Lab Founder Video
Idea, Team, Business Model, Funding, Timing
© 2016 Code Fellows www.CodeFellows.org
Type of Company
○Product – ship something ○Service – people are involved ○Passion/Idea/Platform? Worst option because it’s not tangible ○Life Style Business
> Generates income for team/owners> Not investable
○Scalable > Venture style business
© 2016 Code Fellows www.CodeFellows.org
Stage of Company
○Funding > Pre-Funding > Friends & Family > Institutional Funding > Bootstrapped
○Prototype Shipped? ○Revenue? ○Small – negotiate with Founder ○Medium – Hiring Manager ○Large – Tech Recruiter
© 2016 Code Fellows www.CodeFellows.org
Scorecard
Low to High○Team 1 2 3 4 ○Market 1 2 3 4 ○Traction 1 2 3 4 ○Idea 1 2 3 4 ○Business Model 1 2 3 4 ○Timing 1 2 3 4
○What can you ask for? > Early you can ask for more (but may not get it) > Later, less you can ask for less
© 2016 Code Fellows www.CodeFellows.org
Add Idea Survey
Customer Development
© 2016 Code Fellows @CodeFellowswww.CodeFellows.org
Customer Development
○The process of interviewing prospects to determine what they actually want
> What will you ship?> What will they pay for it? > Product roadmap
○You need to get out and do this as well – don’t let the future of the company rest in one person
○Who is the customer > B2B > B2C > Have you talked to them
○Vitamin or Pain Pill © 2016 Code Fellows www.CodeFellows.org
Product Market Fit
○Customer Acquisition Cost (CAC) ○Live Time Value (LTV)○Ratio of LTV to CAC of 4:1
MVP V1 V2 V30123456789
Growing Customers
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Roles
○Early stage = generalist role > Interview customers > Project plan/manage > Ship > Test
○Titles > CTO, Senior Dev, None??
○As company matures roles will naturally narrow ○Who is in today and how do you fit with them? ○Will you have a “seat at the table” and do you want it?
© 2016 Code Fellows www.CodeFellows.org
Stage and Compensation
○Co Founder – large stock component – up to 49% if you’re not the person with the idea
> Why 50/50 is bad ○Early Companies – compensate with Stock, below market cash
> Could be up to 10-15% ○Mid companies provide a mix of stock and cash – usually below
market rates> Calculated as # of shares vs. percentage of company
○Later stage – some stock, market rates, benefits to compete○Awkward conversations need to happen early
© 2016 Code Fellows www.CodeFellows.org
Stock Compensation
○Founders Shares – at time of incorporation, usually $0.0001/share as a grant
○Strike Price ○Incentive Stock Options - Employees ○Non-Qualified Stock Options – Contactors○Common vs. Preferred shares ○Vesting schedules
> Cliff vests > Reverse vesting scheduled
○83B Elections
© 2016 Code Fellows www.CodeFellows.org
Cash Compensation
○Contractor> Standard Contractor Agreement > IP Assignment > Paid when?
○Employee > Paid when > Starting below market – when do you move to market
○What happens at funding? Everyone has expectations, we may not talk about them
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Sidebar – Contracting
○Freelance, self employed and Contracting all of the same mechanics
○Project based vs. Hours based > Fixed Bid > Time and Materials
○Sub-contracting and Agent (Layers) ○Independent Contractor Agreement
> Scope of work or Addendum > Example
○Who sells your services? > Be cautious of the feast/famine cycle > End of contract term© 2016 Code Fellows www.CodeFellows.org
When Things Go (choose your adventure)
© 2016 Code Fellows @CodeFellowswww.CodeFellows.org
Startups Outcomes
○Fail Fast > Running out of money (or your savings) > Not have customers or revenue > Six months or six year to determine outcome? Go fast
○Zombie Startups> Worst option – refer to LTV to CAC ratio
○Merger/Sales > Earn out – usually one year. Negotiate new comp with buyer
○IPO > Sadly rare
© 2016 Code Fellows www.CodeFellows.org
Resources
○ Crunchbase> Funded companies, amount, investors. > ”Pattern Match” for companies that are similar
○ Business Models – ideas are unique, seldom are business models > 9 B2B> 10 B2C
○ Blogs > Tom Tunguz, Redpoint http://tomtunguz.com/ SaaS and MRR > Brad Feld, Foundry Group http://www.feld.com/ > Fred Wilson, Union Square http://avc.com/ > Version One – Marketplace VC Blog, http://versionone.vc/
○ Pitch Resources > Startup Weekend > Best Startup Pitch decks > Guy Kawasaki “10 Slides”
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Q&A Subtitle goes here
© 2016 Code Fellows @CodeFellowswww.CodeFellows.org
Thanks! @DaveParkerSEA
© 2016 Code Fellows @CodeFellowswww.CodeFellows.org
