Let me start by saying I fully appreciate the “would you rather own an entire grape or part of a watermelon” argument for pursuing angel and VC funding. That said, my hope has been that we’d be able to bootstrap and wouldn’t need to raise external dollars. (I started writing this post a few weeks ago and for a variety of reasons things may be-a-changin).
Our team is mostly MBA’s, that means we’re in the glorious position of having guaranteed income (in the form of student loans). As individuals that’s fine but as a company we’re poor. We’re not interested in raising significant money at this point, see my post “How are you funded?”, but we could use a little more cash in the ‘ol bank account.
I’ve spent a lot of time trying to recruit people who are willing and able to work without cash compensation but it’s been tricky. Since returning to school after the holiday break I’ve been asked a number of times, “hey, how is the startup going?” My response has become, “The BizDev and Strategy is going great but development is seriously lagging.” We’re building the first feature of our prototype web application in India and they are working for free (great) but it’s been sporadic (boo). I can’t blame them, they have bills to pay and they engaged us because they’re a new small firm looking to build its brand and get a US reference customer but that doesn’t cover payroll.
I used to talk about our company as a sales and service organization built to be scalable on a web platform but, lets face it, we’re a tech company and we need a tech lead and developers – if you know people… Anyway, I’m not naïve, I know that good devs with experience are hard to come by but despite the tough environment finding an entrepreneur incentivized by equity hasn’t proven as attractive as I’d hoped.
So, if you were and enterprising MBA student looking for find a talented and passionate Rails guy or gal to join the world-changing company as a technical cofounder but couldn’t offer immediate cash compensation what would you do? The business is reaching the point where fundraising is plausible but definitely not a given, particularly in light of our full-time MBA status, and the valuation still would be quite low. Are tech folks more interested in the cash today than equity tomorrow? If so, perhaps raising cash would just act to shift most of the allotted the equity from the “founder” to the investor while finally accelerating development in the direction of a revenue-producing product? Startups are fun.