I’m an aspiring entrepreneur with a relatively diverse background. I took my first web-based business concept from startup to market and, within 8 months, turned a $2,000 investment into $60,000 in sales, and was two days from receipt of funds on our first round of financing before our investor backed out (uncertainty with his other investments, the continued crunch in 2004). I’m also an IT guy by trade, starting out on the support side in 2004, and recently (Nov 2008) delving in to programming (.NET/CSS) for my company. I’ve also spent a few months in the world of affiliate marketing (PPC), but didn’t like the methods of my ‘mentor’ (here’s how you market to kids to get e-mail addresses! – aka SPAM) so have backed out of that to re-evaluate my position and direction.

This background has provided me with an understanding of a lot of the different functional areas of a website; the coding of the back & front ends, the marketing, the business side… Yet I wouldn’t qualify myself as a true expert in any of these areas.

I came to this site because I am an idea guy with what I perceive to be is a pretty good idea, and rather than spend far too much time attempting to develop the demo on my own, I was looking for a developer entrepreneur to combine efforts. After reading this post, I’ve come to the conclusion that I have a lot of work to do, and I’m hoping to get some feedback from some very knowledgeable folks such as yourself.

I’ve built an 80 pg business plan before, so I’m not a stranger to putting in hard work for an idea. With that said, what kind of plan would you, as a dev-epreneur, be interested in? I’m almost certain you wouldn’t want a full grandiose business plan, right? Perhaps something more of an extended-summary that fleshes out the concept & has the foundation for the eventual marketing & finance plan?

My question doesn’t come from a standpoint of not wanting to put in the time. I find I tend towards perfectionism when it comes to things like this, when in reality nailing down the core competencies of the business should be enough to display the characteristics you’re looking for: dedication, intelligence, hard-work, teamwork, as well as a plan for directly providing the marketing or the money (which, in my case, would be the marketing).

If the idea of a demo is to secure the first round of financing, I want to learn what the most effective method is for getting to demo. Any advice or thoughts you’d care to share would be most appreciated.

Take Care,

Scott

Give me a shout, maybe we can hook up. Always wanting to start another project. I got plenty of idea’s but right now they are one at a time for me.

http://www.spoiledtechie.com

Here are the issues we’ve seen with “student designed” software ventures:

1) Students generally don’t have the programming background to write code
efficiently. They take longer and are more “Distractable” from the main
mission – especially if they’re not being paid, have trouble with school workload, or are looking for a more lucrative long term job.
2) Ideas are a dime a dozen. To get funded you need to prove to a bunch of
people you’ve never met that you have the whole package. The whole package
includes marketing, sales, distribution, support, infrastructure,
scalability, stability, security, etc. Not that you have to have those
already, just that you have the right team in place to actually deliver
those, and a plan to deliver them. Betting on students out of college is
usually the toughest one for a venture firm to go for.
3) You want teams that will be with you over the long haul, from demo mode
to full production and understand the development process along that entire
lifecycle, as well as the funding process and what the funding sources
expect. Students don’t have the experience (in our experience anyway) to
properly understand that full lifecycle till they’ve lived through it once
or twice.
4) You may have to give away more of your precious commodity – initial
shares in the company – to attract students to come work for you for free or
very little. By the time you are through with Venture funding you will
probably own between 40 and 60% of your company. If you give some of that
away now you will own less (and make far less) come exit time. The venture
company will still want their share they don’t care how much is left for
you or your private investors and programmers.
5) Shares in a company ONLY PAY OFF WHEN YOU SELL THE COMPANY. That might
be 5-7 years from now. Are your students willing to wait that long on the
CHANCE they might get a pay off (a pretty remote chance when you look at the
number of startups, the number that get funded and the number that actually
succeed once funded.

So what are the upsides?

1) Student run ventures tend to have cutting edge new ideas and aren’t as
hampered by old-fashioned ways of doing things.
2) It’s usually MUCH easier to acquire grant funding in a college setting.
Grant funding is FREE MONEY they ask for nothing in return other than that
you agree to SELL THE SOFTWARE TO THEM OR PROVIDE THE SERVICE later FOR A
CHARGE! It’s better money than FFF funding, it’s better than having a team
try to work for free, it’s better than venture capital (Which carries a
hefty surcharge) or bank money. It’s the best money there is, and if you’re
at a good college, your best way of funding your startup demo team.
3) College areas are usually filled with other entrepreneurs and relatively
inexpensive resources to help you succeed, and the towns they’re in have a
reason to keep you there.
4) Generally you don’t have the proper infrastructure in terms of vendor
relations, hardware, development software and specific training to put
together a decent effort. You’ll spend much of your time doing things like
building dev systems and backup routines that the established companies
already have filled out.
5) Do you have a business id, tax plan and accounting, employee HR, hiring
practices, a team with depth in case one programmer leaves, business
insurance, etc. etc.? IF not – you need them. Do you have time to put all
that together yourself AND lead the company?

So how do you control the downside while taking care of the upside?

1) Work with a company that specializes in software development in the area
of software you are creating. Choose them based on what they’ve done
before, and how much entrepreneurial software development experience they
have. Get ball park – not fixed price – estimates from them for developing
a realistic demo that puts the major features of your idea to the test. Be
sure your company understands the difference between inventive
entrepreneurial development and software for production with fixed
specifications development. Be sure YOU understand the difference.
2) Find and recruit marketing if your forte is not in that field. You need
someone who understands deeply how to monetize the idea, and makes sure to
keep your focus on that – not just cool features.
3) Try to get an experienced entrepreneur on your board. One that’s brought
a company to fruition preferably. Look at 1 and 2 for those things if you
can’t find someone separate, but best would be an independent in a similar
but not competitive field.
4) Go to your college and work with them to find grant money to fund your
startup. You can get grants now for up to 250K in initial funding. Expect
to spend at least that much putting together a provable demo of your
software. Go for multiple grants in different applications of your idea.
5) Be sure you’ve hammered out all the legaleze in terms of who owns what
and when they own it with your developer. Understand they may hold a
portion of your software in escrow until payment is made and that they have
cash flow issues (IE they have to pay their programmers, so you’ll need to
pay them promptly).
6) Be honest and straightforward with them about your financial situation so
you can both plan a scope that will fit within the finances presented. This
is key. You must have a trusting relationship with your developer team so
that they all understand how this will all pan out.

Do you mean I should try and get a few marketing speacialist on my team in order to make developers believe that the product could go somehwere?

Also, what are the main issues with outsourcing parts of your development? Who owns IP rights etc….

The promise of a “rosy future” only will go so far. This is especially true if you have development without marketing. I’ve seen so many cool tools just get built and then lie there….

After the first round of funding you may well throw away much of what you did in phase I of the tool – based either on the fact that it won’t scale, or that testing showed it wasn’t needed or practical, or that it didn’t fit with the final marketing model. You have to go back to a more traditional design/build model where each phase is carefully laid out, a full testing regimen is put in place, controlled alpha and beta releases, full documentation and scalability testing and planning are carried out. This may even be an entirely different team that develops this phase – and the original developer may feel less comfortable with it.

OS-Cubed is looking deeply into the idea of creating an entrepreneurial development service company, catering specifically to this market. If you have ideas for what that company should offer – I’d love to hear them – be blogging soon on the ideas and will post the blog link later.

Hey, Noah, may we will need you too …

The “dedicated to the idea” part is without a doubt the most important line in this post. If the originator of this fabulous idea later decides they’re no longer interested after the developer has committed time, it sucks. Massively.

As a Developer, if I’m going to commit time to anyones project, I want to know they have made a significant investment, in either time invested marketing and building business relationships, or in cash. Otherwise, it is too easy to be left flapping in the breeze.

Boxlight – very interesting idea.

Its relatively easy to figure out if someone has money, but how do you measure marketing experience? I don’t just look for people with sales background, because selling over the phone or one-on-one is way different than marketing online. You need to understand SEO, Copywriting, Affiliate Marketing, PPC, and much more. What I usually look for is someone who’s managed to actually marketed and sold something online… enough that they were able to quit their job and live comfortably on their online income — its not as rare as you’d think.

Also I think its important to find someone who is a peer. If you’ve spend years honing your development skills, always striving to improve and produce excellent work — as I have — you want to find someone who’s does the same. You never want to feel like the “superstar” of the group.

Look for your local entrepreneur group. It’s crazy how many leads will get thrown at you once they hear you’re a developer looking for a startup. We are the minority.