Lessons I Learned from Co-Founding a Tech Startup

Once upon a time, when I was a wee lass (25 years old, to be precise), and not yet a product manager but a code warrior-ess (or whatever it is that you call female warriors), I did that clichéd, hackneyed Silicon Valley stunt: co-founding a tech startup with three other dudes.

We were all so young. The old guy of the bunch -- and I did genuinely think of him as impossibly old -- was a whopping 31 years old.

And BOY, what a learning experience THAT was! (Even though, by most standards, it was a moderately successful venture, being acquired by a big company within 4 years.)

Since that "interesting" experience, I have kept a list of Lessons Learned from Co-Founding a Tech Startup. And today I share it with you...

On Choosing the Right Co-Founders

  • If your co-founder says something like "I'm one of maybe five people in the world who know how to do <technical feat>, RUN AWAY. Fast. Who knows, maybe he's right and truly is one of the smartest people on the planet, but the odds are WAY against it and his lack of humility will make him unbearable to work with.

  • Don't go into business with someone with questionable business ethics. Listen to your gut as to whether that person is full of it.

  • Unless you've known your co-founders for a VERY long time, do a background check on them. They might be lying about their past professional accomplishments and qualifications. They might be a semi-functional alcoholic or drug addict. Their former co-workers might despise them because they have personality disorders. CHECK UP on them. Co-founding a company is like getting married.

  • Most founding teams are like the Beatles (or Destiny's Child, for you younger folk) and eventually break up. They might break up because they failed. Or because they succeeded. Or because of a Yoko-like situation. In fact, I've heard someone say:

    "It's not a real startup until a co-founder departs and the survivors rewrite the company's history to omit him or her."

On Co-founders Suing Each Other

  • Not sure who originally said this, but it is so, so true:

    "When it comes to money, people are funny."

  • If you are too cowardly to have difficult conversations with your co-founders, you have no business starting a company.

  • Anyone can sue you as an individual, for anything, even if your business is a corporation. But that doesn't mean they'll win. Almost every entrepreneur who has been in business for more than a few years has been sued at least once, and a good portion of those were sued as individuals.

  • Getting sued as an individual sucks. Especially when you have no money for legal representation because you've foregone a decent wage for years.

  • Don't sue your attorney for malpractice if he is a named partner at THE premier law firm in the Valley. (For the record, I did not do this, but one of my co-founders did. He personally sued John Goodrich, of the law firm Wilson Sonsini Goodrich & Rosati. Oh yeah, the same guy sued ME and all my other co-founders too.)

On Corporation Paperwork & Procedures

  • Until you've actually issued stock, you might not be a "real corporation" even if the rest of your corporate paperwork is in order. You might actually be a partnership; it's not clear, and could be debated either way in court. So, before you do anything else, have enough courage to have the difficult conversations with your co-founders, split up the stock, and issue shares.

  • You can have a lot of board meetings and never really accomplish anything.

On Getting Market Traction

  • Don't pitch investors with a lame business case like "if we win just 5% of the market, we'll ....". 5% is an unsustainable market position unless you are specifically targeting that niche (in other words, you want 90%+ of that sub-segment). In the end, you're either #1, #2, a marginal player, or gone. Go big or go home.

  • That hockey stick growth curve almost never happens. And even if it does, the bend is two years after you thought it would be.

  • If your product is superior to the competition in almost every major way, you should probably charge more than them, not less.

On Perspective

  • No matter how dreamy the startup, it is not worth sacrificing your health.

  • EVERY startup thinks they are only three to four years from going public or being acquired by RANDOM-BIG-COMPANY. 99% are not.

On Hiring & Managing Employees

  • Managing a bunch of summer interns sounds like a money saving move. But not really.

  • Make sure your summer intern doesn't accidentally overwrite your code tree.

  • If you're a 25-year-old code warrior-ess, you have no idea what a CFO does. Maybe you should get some recruiting help from people who DO know.

On Getting Investors

  • VCs don't usually sign NDAs. In fact, you can count on them to forward your business plan to their portfolio companies in your space. And then you'll see your slides show up in your competitor's deck at a pitch competition.

  • Non-traditional VCs might make you wait until their lucky numbers or astrological chart (or whatever superstitions they believe) says it's OK to invest...all while you take more and more cash advances on your credit card to make payroll. (Our A-round was funded by some very superstitious investors from Taiwan).

  • Some VCs won't believe that a 25-year old white woman (who -- gasp! -- wears skirts and makeup) is capable of being a technically solid engineer. We soon figured out that pitches to potential investors went better if I was dressed like a slob in sweatpants.

Miscellaneous

  • Order the rug pad for your booth at trade shows.

  • It costs roughly 10 times as much for a startup to provide health insurance for a person in their 50s with a family than it does for a single 20-something. (Just one more thing contributing to the rampant age discrimination in Silicon Valley.)


A reader posted this article to Hacker News, and now there is an interesting discussion about it taking place over there. Check it out

Sue Raisty

Product management geek, born-again engineer, adoptive mother of boys, coach & mentor, mountain trail runner, tinkerer, no-bull communicator, wannabe writer, room mother & compulsive researcher.

Silicon Valley, California http://blog.sueraisty.com