Musicians and film production companies need to start acting more like tech startups. Bootstrap, find an audience (traction), raise funding to pay for production costs (friends, family, fools, or kickstarter.com), distribute in iTunes or elsewhere, make money from digital downloads.
You could create a tech startup to sell user generated digital content and give back 100% of revenues to the artists. Got a great idea for a film? Find investors, gather the talent, shoot it, and sell it online. Forget about Hollywood.
Hacking new ways to distribute user generated digital content is only one part of the solution. iTunes and Youtube already exist for garage bands and film school students to bypass the entertainment industry to sell their work. And most of it is terrible.
Technology companies could take an active role in financing the production of quality digital content. Invest $20k into 10-12 artists to seed an album or film leaving enough upside for the company to get back a return.
I'd ask myself a blunt question: why do I need this guy? Why am I so attracted to this compelling idea? If you're a smart engineer, you can be the idea generator and the coder. That way you can retain full ownership, and then recruit the business guy. I'd reasses your approach to this potential partnership. Ideas and code are property of the business. Your compensation comes with equity and % ownership. I'd state clearly what each of you plans to contribute to the future of this venture, and how the two of you will work together to make this succeed. Ex. I will focus on engineering; he will be the biz guy who focuses on fundraising, handling investors, doing sales, crafting product vision, etc.
Tom excellent point. There is a huge market for innovation in the enterprise space. At the financial services company I work for, the average employee uses about 25 applications and has a different username and password for each. And most of these apps are terrible. There is enormous pain in the corporate world and it's an understatement to just build a better mousetrap. Just build something that doesn't suck as bad as their current software; and sell to the business people and upper-middle management decision-makers.
Of course they do. Sure, co-founders can fight over product design, what type of pizza to order for lunch, or which programming language to use, etc. But where I've seen most startups collapse and fail is over contentious issues such as splitting ownership and compensation. The inability to come to an agreement on this is when relationships turn sour and co-founders split. It's rare to hear about someone leaving a startup because s/he disagreed with the startup's product vision. Don't treat this issue lightly and get a lawyer if necessary to write up a 1 page agreement between the both of you. Things can get ugly.
I'd go further. Patents are nice to haves for VCs and investors and look pretty on glossy business plans (look at our shiny algorithms and wireframes!). Don't bet the success of your company on your patent portfolio. The fact is, no startups out there succeed in the long run because of their proprietary technology (think facebook, myspace, youtube, yahoo, google, flickr). Even if something is "rocket science" and very hard to build, it might keep your competition at bay for a while. But once, you're successful, they'll always find a way to do it. So, what can you do? Figure out your sustainable competitive advantage. What is the rocket science that will insulate your startup from big competitors? I think that is the angle worth exploring here.
There is never an "easy" way to do this. But in the early stages of your venture, there should be very few battle making decisions. Lead by persuasion and team-building. You're only 2 people and don't need a general calling the shots just yet. In the later stages, your role as CEO should emerge from your ability to lead and pursuade. Go 30/30 with vesting, add an options pool of 20% for later employees and 20% for early stage investors. If you are both starting from scratch and equally committed to the venture, the even split is fair and reasonable. But that is a conversation you should have with your co-founder and not us. Be honest about the shortcomings to your potential marriage. Good luck.
lucifer - I'd turn the tables on this deal. What is the value proposition of the non-technical co-founder? What is he bringing to the table? Money, ideas, customers, investors, partnerships, IP, co-founders? He generated the idea: yipee. Biz guys and idea generators are over-rated. There is no marketplace for ideas, and business plans are worth less than the price of the paper they're printed on. He cannot execute, and needs someone to do his bidding. There is no business at this point - just a compelling, unique idea and chicken scratches on napkins. All this talk about signing NDAs, pricing shares, and seeking VC $ is a waste of time. Focus on (1) building a team, (2) coding a basic v.1.0, and (3) finding users. If you can get past the prototype stage, then some more serious conversations can begin.
Hi ivan. Drop me a note if you're interested in mobile startups. We use a hybrid of back-end "cloud" services for the back-end: GAE (Python), Amazon SQS for message routing, and another server for push messaging (PHP). If you're curious, write to us: ryan [at] sayhiapp.com
Cambridge, MA mobile startup here. Our dev team is located abroad, graphic designer in Silicon Valley, and we could use the additional dev help (front-end/server-side) in Boston to work on the next iteration of our app. New platforms, new servers, new features, and plenty of challenges to keep us busy. Userbase is about 10K at this point, and we're working on a business model. We've been a top 30 free social networking app on iTunes a few times since launch. Funding from friends, family, and fools (the founder). Looking to contact with co-founders in the Cambridge area.
Thanks, Joe. Again, the behavior of this age group is very concerning to me. I'm 26 and don't remember these problems with AIM when that was in its heyday. Or maybe I'm just clueless. Even with services like Loopt, I've heard complaints that these projects attract this type of lewd behavior.
Thanks paul. I think the most immediate answer is: improve the product and keep pumping out features. In the short-term our costs are really under control. I apologize if my initial thread sounded like I was shouting "fire" in a crowded theater. With the recession and downturn in the economic climate, startup logic (understandably) has shifted from the web 2.0/YCombinator preaching of: build, find users, get acquired or profit. The difficulty is that competitors in our space operate on this “free” model and are backed by substantial angel or VC money. In fact, the only widely visible startups that seem to still be operating under this logic were founded and funded pre-recession. What is going on here?
I’m somewhat confused by all the conflicting recommendations I get on early-stage startups. Again, cash is king and we have some ideas for monetization (which, of course requires more $).
In today's economic climate, can startups afford, literally, to avoid realizing a business model after you've scaled? I realize that YC has increased the number of seed investments, but has the angel community also increased the pace at which they invest in these fledgling ideas at the >$100k investment stage? I'm in Boston, so my perception is a little bit warped. Can someone offer their thoughts?
Of course, thanks jhancock. In the end, the total initial capital (pocket money, friends/family round, and credit) was comparable to the amount invested using the YC seed formula of $5000 + $5000n.
Correct: we are a chat message application. You can find friends and exchange messages with online/offline users based on location-based proximity. Offline messaging is available in the next iteration, v.1.2.
Thanks, tptacek. Actually from a founder's perspective, my BATNA is maintaining the day job and surviving on Ramen noodles. Which in the short-term is a distraction but can keep the project going while controlling the increase in the userbase and minimizing costs. Bootstrapping could continue ad infinitum until a deal is struck.
Thanks Micah. The free version was dropped very quickly...although it was exciting to be in the top 25 free downloads for those few days. It was an experiment to get some sort of quick market validation (for ourselves and potential investors) and it worked in the short-term. The price at cost put the breaks on downloads fairly quickly and we are back keeping things manageble.
Also, we ran into the surprise of discovering our potential userbase: the 12-18 crowd stormed in like bulls in a china shop posting sexually explicit pictures, profanity, etc. which created a whole new slew of headaches. It's a valuable/lucrative audience, but you need a fair amount of policework to prevent things from getting out of control...
You could create a tech startup to sell user generated digital content and give back 100% of revenues to the artists. Got a great idea for a film? Find investors, gather the talent, shoot it, and sell it online. Forget about Hollywood.
Hacking new ways to distribute user generated digital content is only one part of the solution. iTunes and Youtube already exist for garage bands and film school students to bypass the entertainment industry to sell their work. And most of it is terrible.
Technology companies could take an active role in financing the production of quality digital content. Invest $20k into 10-12 artists to seed an album or film leaving enough upside for the company to get back a return.