Come for the Ride…

There are an ungodly amount of resources out there that says when doing a startup, you should raise money from either friends, family or fools. For the 10 years I’ve been trying to execute that statement, I was only able to do it twice. Unfortunately the amounts I raised were too low to help reduce any risks and ultimately the startup didn’t really go anywhere.

No, this post does not have the silver bullet to the FFF problem. However, if you do have FFF’s that like your idea but are on the fence, we did find two services that may help you push em over the edge.

The first service we found is Virgin Money. Virgin Money draws up legal contracts that adds a business/legal element to loans between friends and family. For about $200, your fools can get some assurance that they will get money back based on the terms of the loan. Yes, with this service, you can’t just make up random empty promises - on the bright side, you also can’t make up ridiculous rates of return in certain states that forbids it.

The second service we just saw is another startup promoting social savings. Smarty Pig promotes savings and allows your friends and family to help you reach your goal. I would elaborate further but they already have an awesome video intro on their home page that explains the service; (something we should probably do for our web site.)

While we are unable to help you find new rich friends, hopefully the two services above will crack your existing rich and risky friends who like your current business idea. On the flip side, if you know anyone who has more money than sense and like cars, feel free to refer them our way! We could use the help!

We’re still scouring the web and networking events looking for awesome entrepreneurs to join our startup. As we’re checking out various areas on the web and seeing what other people are writing and asking about, there seems to be a common theme among the newbies which is: how much equity or options should I give away to attract raw talent?

Well, I’m sure the answer differs for everyone, every industry and especially for people who think their ideas MAKE the business and everything else is secondary. However, my experience has taught me that it’s much better to share. Think about it… would you rather have a 40% stake in a King Monster sized Twix or would you rather have a complete piece of a fun size Twix? If you opted for 100% of the smaller piece, you are definitely not seeing the BIGGER picture.

So what is a fair split in equity? 33% across the board would be fair on paper for a three person company, but that seems a bit too simple and well… not fair in practice. I’m not sure if there is a magic formula for this question but I can tell you what we’re doing.

My original plan and the one we’re using for now is 40% (me) ideas / 30% developer / 30% marketing. This split is of course, pre-funding and pre-slicing the pie for other roles in the company. My thinking is, the business would not exist without the idea, at the same time, without programming and without marketing, the business would also not exist. So because I’m in need of all three key positions to sustain the project, I’m happy to give away large pieces of the pie (or Twix) for those that would work towards the shared vision.

However, ownership percentage aside, the above split is also how I envision the work to be split. Many, MANY startups focus on 98% programming and nothing else. I’ve been there, it doesn’t work. You can’t sit in a bubble and code all day and expect your product to meet some demand and suddenly gain interest if you never get any feedback or market it. We all should know by now: If you build it, they won’t come unless they have a reason to. Therefore, just as I believe my CTO should get 30% of the company for months of hard work, my VP of business development/marketing should also do about 30% of the overall work and get 30% of the equity.

In the end, hopefully all the hours will add up and something nice, possibly a monster Twix will await us on the flip side.

Speaking of marketing and networking… while Randall has been busy hammering away at the technical stuff, I’ve been out in the field talking to people and avoiding sitting in front of a computer. Though I must admit, after just a couple of weeks of these events, I’m a bit networked out…

Wednesday night was an AiMA meeting where I met some marketers and learned about Business Lead Gen. (Great stuff!)

Tonight was the Atlanta Deck Party which was also a pretty cool networking event. Surprisingly, the crowd was a lot older than I thought since I expected half to be GaTech students.

I did make Randall come out for this one cause I figured it’s probably more his crowd than mine. Also, I see a common theme between all my programmer friends which is: they don’t network enough. In any case, it’s great to see such a huge turnout for the Atlanta area… Maybe I don’t have to move to Silicon Valley for awhile after all!