on startup

So, you're the idea guy - huh?

So, you have a great idea for a startup. A once-in-a-lifetime idea. There’s only one problem: you don’t know how to code. So, you are trying to get a developer to work for you. What should you do to get them to build the product for you?

I’ve seen some variants in the past, and as a developer myself I know what works and what does not.

Bad: Equity only

To make a developer interested in the opportunity you need to give a way a significant portion of the business in order to get any interest. Somewhere between 20% and 50% depening on your own time and money investment for a brand new startup having one single developer should be a good rule of thumb.

But, when you bring in a developer for equity they are tied to your business for a long time. If you want to bring on more developers later you may have a problem with equity distribution, and if your startup does not make money in a long time you will have an angry developer going somewhere else.

Great: reasonable salary

Sometimes you don’t want to give away parts of your company. That is okay. Then you have to compensate the developer in other ways – meaning a salary.

Yes, money talks. Developers have bills to pay, too. If you can afford it I would always recommend you to take this route.

Good: equity + salary

A little bit of equity can motivate a pay cut. That helps a lot when starting out and trying to bootstrap your business. Just make it reasonable.

Some people say that the upside of equity is that you can get a little more motivation to build a good product. But in my experience a developer does the same job if he/she is compensated fairly with a regular salary. Most developers take pride in their work.

Great: Fixed price for fixed scope

This is not very agile, but defining a MVP (minimum viable product) and pay a developer a fixed price to build this may be a very good way of building your product.

This lets you test the waters and see what you getting. We do this kind of arrangement in my Rails/Angular-company all the time. The customer has a small scope and we give him or her a fixed price to make it into a real product. If we work fast we get more value per hour. If we are slow or make a bad work in estimation we get less. The customer always gets what he asks for and for a set price.

Remember: your idea is not worth anything unless it is executed.

Other good things to do

  • Define the scope. Developers want to know what they’re up for, and if you have a well-defined scope it will make the decision much easier.

  • Define what everyone will do. Write a simple partner agreement where all roles in the company are defined. If your responsibility is selling and handling Adwords - write that down. It does not need to be complicated, it is a good way of getting everyone to understand what the others are doing.

Bad things to do

  • Saying “this will be good for your portfolio” or “Think of all the exposure you will get” and offer no payment.

  • Having no scope or plan.

  • Forgetting to tell the developer what your role is.

  • Overvaluing the idea. An idea alone is worth very little. I get new product ideas every day, and if ideas were valuable I would be super rich a long time ago.