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    Tuesday, January 5, 2021

    Startups The 50% rule - about the role of the CEO in startups

    Startups The 50% rule - about the role of the CEO in startups


    The 50% rule - about the role of the CEO in startups

    Posted: 04 Jan 2021 02:52 AM PST

    Talking to first time CEOs and executives in high growth companies, the thing that overwhelms them the most is the nagging feeling that they have to actively operate the business or everything falls apart. This often leads to exhaustion, mental first and then physical, which in turn hurts their ability to do their actual job.

    Like most other things, I had to learn this the hard way and was forced to hire lieutenants during my first stint as a senior manager. Steve Jobs was once quoted that about 50% of his time is unstructured (can't find the quote now). I think that's roughly true. Spending time away from tactical responsibilities allows you to:

    1. Think strategically. One CEO told me how the first time he took a vacation after 4 years in the trenches led to deeper thinking and an acquisition by a public company. Worrying about tactical issues drains that capacity for strategic thought.
    2. Fix major issues. As a senior exec you're going to get involved to steady the ship, right a wrong, save a major relationship. This is especially common in enterprise startups where you're often fodder for the client's senior execs to chew on to protect your team. This is both stressful and humbling and cannot be done if you're exhausted.
    3. Convince. Once you reach a certain size it's not about just fight or flight anymore. You have a large team of opinionated people and you need to inspire, convince, and direct them instead of practicing battlefield command and control.

    The amount of time I spend thinking, talking, and writing about the business rather than creating anything will surprise anyone and stands in complete contrast to the "creator" myth that startupland loves so much. As a growth CEO it's my job to become an ideas merchant, not a builder. Staying at the right level of abstraction and leaving a lot of unstructured time is critical.

    submitted by /u/what_we_know
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    New Amazon Feature is basically the startup I was building

    Posted: 04 Jan 2021 11:59 AM PST

    Solo founder, bootstrapped. Been working on a startup for the last several months since the pandemic started.

    Amazon recently released a new feature that does what I've been building. Also more competitors emerging over the last few months.

    At this point, I'm trying to figure out whether it's worth it to continue down this road. I had an MVP but couldn't gain much traction with it.

    Is it better to close the company and try to come up with something new or try to compete?

    submitted by /u/mhuzsound
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    When to hire your first dev

    Posted: 04 Jan 2021 09:45 AM PST

    TL;DR

    The trade-offs of internal vs. external resources can be complex, and the financial aspects can be very nuanced. External software development resources are generally excellent for validating an MVP with low commitment but are outpaced by internal dev employees for investing in your long term product.

    My background

    In my 10 years of experience in the software sector, I've worked as an engineer, manager, and executive. I've worked for small startups (<10 person), mid-sized companies (100s of employees), and large corporations (fortune 100). I've worked with all kinds of local teams, remote teams, domestic and foreign contractors, consultants, and vendors. I joined my current company as the engineering leader and first technical employee. Prior to my arrival, the company had built and maintained their software product entirely through external resources, including various contractors, software development firms, and vendors. I have since built a small internal team with a light but strategic reliance on external resources.

    I'm glad to have spent the time over my career to learn the trade-offs of internal vs. external resources, but I hope to help you avoid the pitfalls of first-hand experience, especially if you're a non-tech business owner who can't go through the technical experiences I did.

    Financial considerations of internal vs. external development resources

    In my experience, I have found that employees are a big, long-term, high return investment. Externally-contracted resources are a smaller, short-term, low-to-medium return investment. External resources are generally 2x-4x as expensive per hour as full-time employees of comparable skill, but carry much lower commitment. They allow you to pause your development for a period of time, which can afford breathing room at critical times and allow you to reduce your spend dramatically. If you were to pause payroll for your employees, they would leave, and you probably wouldn't get them back. It should be noted however that many external development firms (i.e., not one-man dev contractors) require you to purchase regular support agreements with hourly minimums or face exorbitant fees for out-of-contract support. That's not as big of a financial hit as retaining developer employees, but it does mean that a pause will not lead to a total reduction in spend.

    Internal vs. external for an MVP

    If your software product is small or nonexistent (e.g., still developing your prototype/MVP or still finding market fit) or you are not yet confident in it, external contractors or firms are a much better fit than employees. They are very good at small, short-term projects (<6 months), have a canned development process, and can get your product to a customer-facing state. After that, you have no obligation to continue development with them. That's a great way to do the minimum work required to validate an idea to see if it's worth long-term investment.
    Think of external resources as putting development on rails that limit the risk/reward to an acceptable medium range. There's an additional hidden benefit to using external resources at this stage, too: the higher per-hour cost for external dev hours will help you resist the urge to overextend your scope, helping you keep your MVP as minimal as possible. However, if you are still using substantial amounts of purely external resources for over a year, you should reexamine your position. Are they spending time fixing costly bugs in what they built earlier in the year? That's concerning. Are they building more and more features? That's better, but not sustainable in the long run either.

    Internal vs. external after market traction

    Once you have traction and you are ready to make the deep investments in your product necessary to scale, you should strongly consider hiring internal employees. The lower cost per hour is helpful, but there is a much more valuable benefit: your business is their business and your customers are their customers. They are deeply incentivized to build into the success, longevity, and sustainability of your product. External resources, on the other hand, aren't as directly aligned with your goals. Your fires are not their fires. They have their own business to run, and it likely looks very different from yours. Their job is to fulfill what their customers ask for as explicitly as possible, and if that results in your product going sideways, they only stand to lose you as a customer. Your employees, however, know that a product going sideways means they are going to be out of employment and scrambling to find a new job. That mindset is much more closely aligned to your own and results in better products.

    Final thoughts
    This is probably enough for one post, but let me know if you found it valuable and if you have any questions or comments about what you're going through with your external vs. internal decisions. Also let me know if you'd like to hear more about related topics, like how to vet external resources, how to make your first technical hire, and when to rewrite your prototype!

    submitted by /u/bridgebeam
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    startup incorporation

    Posted: 04 Jan 2021 04:53 PM PST

    Could anyone recommend the best strategy for incorporating a new startup (SaaS). I'm a developer building a web based product. I might want to seek funding eventually if the idea takes off, but generally it is important to me to get this right from the start with potential long term expansion.

    Are there any recommendations for online filing services, potentially to file as a Delaware corp?

    Areas of concern:

    • not filing the corporation with too many shares which I've read could cause tax issues in some states
    • I don't have an office yet (working remotely) and would prefer not to disclose my home address on any public documents, in which case what is the alternative?
    • Post filing documents required
    • Operating agreements (currently it is myself, I might partner with a friend in the near future)

    Appreciate your help!

    submitted by /u/guru223
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    How do I choose a good business angel? What questions should I ask her/him?

    Posted: 04 Jan 2021 02:18 PM PST

    We're in a good position: after one year we have a lot of growth and could be break even if we stopped investing in new development. Were in a growing industry (climate tech/impact investment). Bootstrapped so far from the income of my other business.

    I'm the solo founder. Not my first business, though the first one where I see a lot of potential. And this is why I'm considering adding a business angel.

    I don't have any experience growing a company to the "next stage" and eventually exiting. I find it hard to know what to focus on long term.

    1) How did you choose your business angel? 2) How did you find her or him? 3) What would you differently? 4) What questions should I ask? What should I look for?

    submitted by /u/dror88
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    Looking for advice on my current situation

    Posted: 04 Jan 2021 11:05 AM PST

    Hi everyone,

    Unfortunately things are not going well for me right now at my current company. To put things short, I've been working at this startup for 1.5 years and am very unhappy. My CEO makes empty promises, is behind on multiple paychecks, told me I would get my options contract and benefits within 90 days of me joining the company (which never happened), and much much more. The direction of the company is looking bleak and I feel like I'm wasting my time here.

    I came on as a business analyst but instantly transitioned in a product manager role since there's only 4 people at the company. I've been applying to jobs for the past 2 months but it seems impossible to find a PM role that requires less than 3 years of experience.

    Should I keep applying for PM roles or just apply to Business Analyst roles instead? I love what I'm doing as a PM but like I said, I only have 1.5 years of experience and generally PM roles require lots of seniority. I just want to get out of this horrible company as soon as I can.

    Can someone please give me some advice on what to do? I'm tired of not getting paid on time and not being able to contribute to my 401k or getting literally anything I was promised when I signed on. It's taking a huge toll on my mental health and I'm really unhappy right now :(

    submitted by /u/FireLordKuzon
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    ESOP/PSOP exercise price definition, who's behind it and why I think my company lies to me?

    Posted: 04 Jan 2021 12:00 PM PST

    Greetings everyone,

    A happy new year and hope you have a great mood!

    I really need a second opinion here, the text is long but structured and you will help me by answering anything that comes into your mind, as I'm pinned right now and armless to continue the negotiation.

    Straight to the business:

    I work as a CTO in an early-stage startup in Germany since March 2020.

    During the interview phase, founders said they will be issuing a stock options program to me after my probation period of 6 months, though they didn't have the stock options program in place yet and they will define it later.

    The company was getting prepared to file for Series A funding and I explicitly said I want to get the exercise price that is before funding if I make it to the company before they get funded, which I did, the company got funded only around November 2020.

    From the first moments in this company, I've brought a big, tangible and positive impact on the technological and engineering aspects of the company, even during heaviest COVID times as you can imagine, that is very much confirmed by my colleagues and direct reports. Later you will see why it's important I mentioned it.

    The PSOP contract got dragged for 4 months, while other employees were receiving the contracts, reasons were different, but I was fine with that as long as the company would take care of me.

    During the period of my employment here the company have received small internal funding round from the founders themselves and as they claim, the rounding was "on-going" since 2019 until the Series A funding. I don't understand how it's possible, but let's assume it's true and the stock price was already going up even before I joined.

    When we sat to discuss the PSOP proposal, the founder started the conversation with "why this package is like that is because you are not really doing a CTO job here, we are too small for that, maybe in the future it will be CTO like responsibilities (here comes sarcasm) but for now you just run production with 1mil monthly visitors, 15 engineers, and do absolutely all possible engineering, HR and managerial jobs, but you are head of engineering kind of, so we made this package accordingly"

    I don't think I'm delusional here, but this seemed like manipulation to undervalue my worth so I agree to a lower package, but I said you know what, I love the company and the team, I'll take it, let's move on.

    Finally, in 2021, I have received my PSOP proposal which has an exercise price that is set after the company have received the Series A (let's say it's 100EUR per stock), which makes the shares more expensive than they were when I joined the company.

    I've asked to review my exercise price because I clearly joined way earlier than we got the funding started or finalized.

    I'm being told that I cannot receive an exercise price that is equal to the one when I joined the company because:

    • It will dilute the investors and they won't agree to that (not sure?)
    • Our PSOP talks started after the company have signed first term sheets with the investors (true)
    • I didn't lose anything as the price of stocks was HIGHER before the funding (of more than 5mil EUR) - what?

    So clearly my exercise price is defined after we started our PSOP talks and not when I joined the company, even though I was asking for a different outcome and investors are used as a shield to check-mate me.

    Maybe I'm making noise for a sum that is not that big? I've asked what is the lowest stock price you gave to other employees? Because we have people who worked here since day 1. Apparently, all these people got 1EUR stock price, to my question "Why?" I've been told, "Because they are with us from the beginning".

    I never asked for 1EUR stock price, just to calculate the price for me since I joined the company, just like you did for the rest of the company, but apparently, I'm different...

    I don't feel this is a fair deal in general, I don't question the number of shares that they offered, even though it seems pretty low for a CTO position at that stage and salary rate on the market in Germany, but damn this is a bad move, it undermines their reputation more than I care about the actual stocks.

    While I feel really undervalued and not motivated anymore, but after so much effort and soul being put into the company even in just 10 months, I still wanted to convince myself to accept it as is but I just can't step on my own throat, couldn't convince myself. So I wanted to ask a few questions.

    The questions are:

    1. Is it true the investors will be diluted if founders altered the exercise price for me? The PSOP program and the size of it are already allocated for employees, the stocks are phantom and virtual, they have no meaning until the exit event
    2. Would you agree that it's fair to issue the number of shares based on the perception of a founder of my current actions/responsibilities (e.g Head of Engineering, means less than a CTO would get), rather than the title I've been hired for and which I will be potentially holding for the next 5-7 years and will do my best to drive this company to success as a CTO?
    3. Is it fair that they've issued the exercise price for other employees because of their starting date and for me because of the start of stock option plan negotiation?
    4. After reading this, assuming it's all legit and I didn't try to paint my founders as evil and myself as an angel, what are your feelings about them? Because I'm on the verge to change the company and not because of the stock options, but simply because of the treatment I get

    I know this group doesn't like long texts and I'm sorry for that, but I thought without enough context it would rather be confusing.

    Thanks, everyone! Appreciate any kind of comments.

    submitted by /u/advanced-circuit
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    Should I be asking for compensation until I'm fully vested?

    Posted: 04 Jan 2021 01:50 PM PST

    I'm contemplating entering a partnership with a client I've been contracting for - I think it's a very promising concept and the CEO has proven himself capable in the industry.

    This is a brand new company (pre launch) and I'd prefer to just make the deal rather than do any vesting, but if that's the offer I get, I may take it. Should I be charging my consulting rate until I'm fully vested, and prorate the amount accordingly until then? Would it be foolish to work without compensation while I'm still vesting?

    submitted by /u/sentForNerf
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    Who here was able to use their startup work experience for an international career?

    Posted: 04 Jan 2021 12:13 PM PST

    Hi, I just started working at a high growth startup that will be going through series B soon. I'm the first operations employee other than the COO so I expect that I'll gain a lot of great experience.

    I wanted to read experiences of startup employees (preferably in non-tech roles, as I know that developers could get hired anywhere) who were able to successfully leverage their startup experience in their home country to get hired at startups abroad. I read that after ~3-5 years in a role, you should be specialized and valuable enough for companies to want to sponsor your visa - can anyone speak to this? I suspect it may take longer for someone in a non-technical role but that may just be my imposter syndrome talking.

    I speak English, another relatively uncommon language, and I should be fully proficient in Spanish in a year or two. I live in the US and am not too picky about markets (Europe, Latin America, Asia, Australia all fine). Is it safe to assume many international offices will have English as their office language?

    Thank you for any insight!

    submitted by /u/aerospacekittens
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    Best software for creating mockups / simulating an MVP?

    Posted: 04 Jan 2021 07:46 AM PST

    I know some of this software exists but I'm not familiar with it at all.

    I need to create a mockup for a pitch deck. I cannot make an actual MVP (I'm an attorney, not a coder), and honestly I don't need to - the concept is fairly simple and can easily be shown using mockups.

    The potential market is one of the biggest untapped markets in the world, and the idea has been validated.

    I just need a mockup !

    TIA

    submitted by /u/EvilLost
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    Forming an LLC to outsource

    Posted: 04 Jan 2021 11:18 AM PST

    I have a business idea that involves clients that reside in US taken care of by employees of a firm that reside in a different country (A). The business will be completely online. The LLC I start in US will hire the firm in Country A to operate in States and earn in $. Majority of the clients will be non-resident aliens on a visa and some might be resident aliens. What legal barriers in the US do I need to watch out for? What are the legalities of hiring a firm abroad? My apologies for the vagueness of it all; I am super new to all this.

    submitted by /u/LittleKidzLover
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    Financial Data Sets for AI & ML testing - "Cold Start"

    Posted: 04 Jan 2021 11:03 AM PST

    Hi all,

    I have started a small financial services business and would like to grow to offer more forward thinking data services such as AI, BI and ML. The issue I face is that I am a "cold start." I have no data with which to learn trends from. I am interested to find out if anyone knows of any public repositories or data sets that can be purchased with which I can get a reasonably affordable start on these exploits. Thank you in advance.

    submitted by /u/Indaflow
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    Selling Home-made food in europe.

    Posted: 04 Jan 2021 08:22 AM PST

    I have no experience in the food business and any tips and advice would be greatly appreciated.

    So basically my family makes homemade jared anchovies. We are from a fishermans town in the south of europe so the anchovies are caught locally and my family prepare and jar the anchovies into a final product.

    We usually eat them for ourselves and give to friends and family. The feedback is amazing, everyone loves the taste and often ask for more.

    I think we could produce enough for a much wider market and monetize this product.

    Has anyone any advice when it comes to this business? We have the final product and know it tastes great, but just need someone to point me in the right direction when it comes to monetising it. Eg. is shipping to other EU countries difficult? Considering its food and in glass jars. plus all the legal things involved. Don't know where to start or if it is worth starting at all.

    Absolutely any advice appreciated.

    submitted by /u/Blackson78
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    Is it too bad to hire the C-Level executives of your startup instead of becoming them?

    Posted: 04 Jan 2021 07:55 AM PST

    Hi everyone!

    I've been over the last few years working on creating and maintaining products, some of them have a reasonable revenue with a streamlined process of keeping everything up and running. Maintenance and support just takes a few hours a week, we have not even hired no one to help us so far. Hiring and even becoming a C-Level executive was not a problem, as all of them do not need a full time CEO/CFO/CTO.

    But one product that I'm building will require team building, and possibly full time C-Level executives on the long run, but one thing that I personally struggle is that being a CEO or CTO of a business is not something that I would like to do that much.

    I feel I'm much more productive on the early stages of a company, building and validating a business is something that I love doing and even done for free on some Open Source and free products that I release out there.

    People always say that delegating tasks is a key part of building a great company, but they seem to not talk too much about delegating the C-Suite. Would it be too bad if I delegated a full time C-Level job to someone else, acted just as an advisor and used my time more productively in building other products?

    submitted by /u/nihas
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    Need advice for my startup and partner

    Posted: 04 Jan 2021 06:56 AM PST

    Hi everyone and a happy new year! I've been a lurker for some time here.

    A little bit about myself, I live in Malaysia and I have been working as a Full stack developer for about 6 years already and I also have been learning about managing highly scalable applications in AWS quite recently. Additionally, I have personally enrolled myself into a Business Management course part time in a local college to allow me to transition into a manager or business owner in the near future.

    So there's this project idea which I've started to work on with a friend of mine and I'm currently having issues of setting the salary, position, and share distribution for him when we run the company in the future.

    The reason why I recruited my friend is because I needed an extra hand in doing some manual work, plus he also has the desire of getting out of the 9-5 work loop with a low pay and he is the type that can get along with people easily. Furthermore, I've known him for some time since childhood, so its easy to trust him with some important things. These are the upsides I can see from his end.

    However, he is a non-technical guy and he only worked in F&B industry as an operations manager before. Currently his mind is focused into saving up for a motorbike that would help him to switch to Grab Food (food delivery) in a few months from now as it allows him to earn x2-x3 his current salary and he is not independent. Therefore, he needs to be pushed regularly into doing things and I would need to guide him when it comes to learning things.

    An example would be the marketing part. I agree that both of us have no marketing experience but I personally think that it can be done properly with proper planning. There was one instance where I tested my friend and asked him into doing a research and planning task. I had explained to him how to research and what variables we need to look at and how they can broken down further. In addition to that, I had given him some examples and gave him a week of deadline to just come up with a few ways on which we could possibly use to market our platform. He agreed to do it, but in the end, he did not do any work by the end of the week and I had to remind him to meet up on that day to discuss the marketing strategy which I later completed it a couple of hours as well. He did however join the conversation and gave his input, which is still fine but deep down I wasn't happy that he still didn't put any effort especially when I spent time explaining to him and after he said that he will do it.

    Since I have the idea and the technical skills, I'm the one who would create the mobile app, website, CRM etc. This includes the requirements and even the mockups. However, his actions makes me feel like I can't rely on him to lead teams in the future. And this is an issue that I'm currently facing.

    I would have to push him to do things, and when I'm not around monitoring things, I foresee that he will slack off because he spends his free time during the day before work by playing games on his phone. For now, I think it makes sense because I have not given him any work yet, but seeing how he treated the normal marketing task I gave previously, I'm not sure anymore if he can take on other tasks like even replying to customer emails or some other tasks like finding out the best place to print our marketing banners and placing orders etc. I'm starting to see him as someone who just tags along and does whatever he likes to do.

    He keeps saying that he will do what he can to help out and make this project work, but his actions say the opposite. Initially I told him that we would have the same salary and I would put him as COO since he was an operations manager before, but I dont know anymore.

    Looking at the bright side, I have a friend whom I can trust to help out with some minor work and I just have to keep pushing him to do these things, which is better than kicking him out and doing everything by myself.

    So, getting back to the original concerns: 1. Is there a method that you guys use to determine the salary difference between cofounders? I originally told my friend that we would have the same salary and earn the same cut from the revenue, but this sounds ridiculous to me now.

    1. I'm planning on keeping a 70% share while my friend gets 20% and 10% would go to staffs (might change in the future). Would this be considered reasonable? I have told my friend about this share breakdown before and I emphasized that this was because I will need it to control the direction of the company and he was just silent about it, no complaints however.

    2. Currently I am thinking of making him a call centre manager as I think that should be the easiest task for him to do but I doubt that he will enjoy that position and would prefer to join me in traveling around as a Marketing Head to market our platform. If he does the latter, I'm afraid most of the marketing plans will be done by me and I would have to constantly push him to do things unless I give him a rule to come up with his own marketing plan suggestions in order for him to join me. Even him being a call centre manager, I have doubts that he is able to recruit people easily in the beginning. Any advice on this? I might as well do his job instead if it takes too long to get things done.

    3. Saving up for marketing funds is an issue as well, due to the low pay for Engineers in Malaysia (I kid you not, I'm entering my late 20s and I'm still living with my parents without any car or house, and we are sharing the rent for a small place). I'm already saving half of my salary each month but its still not enough to achieve our intitial marketing budget of rm50k (about 12k USD) within a year, even if its combined with my friends savings. Skimping on marketing budget is one thing I would not like to do, would starting a kickstarter fund work for this?

    Thank you all for reading this long post, I'm aware that I should solve these issues on my own and I've been thinking of ways on how to fix these concerns, but for some reason I just had to make this post because I've seen some great topics discussed here with some awesome guys giving out fantastic answers. I wonder if I could get some of that help by sharing my current situation as well. Thank you again.

    submitted by /u/joshyjosh111
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    Feeling a bit overwhelmed

    Posted: 03 Jan 2021 10:57 PM PST

    My startup has been lucky enough to get a team of 5 student developers working full time for us for the next 6 months. The plan is to release our MVP by this summer. Now, the students getting handed to us like this happened quite fast, and me being the CTO in this company, I'm feeling a bit overwhelmed. I want to make sure they feel well taken care of.

    Do you have any good advice?

    submitted by /u/mrfireflow
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    Do angel investors usually have online profiles or presence?

    Posted: 03 Jan 2021 10:59 PM PST

    I once heard of a wealthy foreign individual claiming to be an angel investor. When looking up her name using relevant keywords, I couldn't find any information about her. Even a known address doesn't show any trace of this individual.

    Is it common for an angel investor to have an online profile? Something tells me that she might not be who she claims to be.

    submitted by /u/RCube123
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