The Business of Software

Hello,

A little background. Next Friday is my last "cubicle" day. I needed to end the madness. I am going out on my own. I believe I have a temporary contract lined up in the next couple of weeks where I can work part time for a few months while I get my business started. I am super excited (and nervous).

So, I have some software ideas. 40-50 maybe. From really tiny components, to full-fledged, I would need a server farm type of app. Some are surely non-starters, some might have legs. Some could beget future ideas and products. That is what brainstorming is all about. I even have the beginnings of a business plan -- it needs a lot of work.

Now, I consider myself knowledgeable in many areas (an advanced jack of all trades, if you will). However, while I can hold my own for sure, I don't consider myself the best programmer in the world. And I surely would prefer to work with somebody in starting a business and doing development. While others have proven otherwise and will disagree, I believe having the right partners and team can only be a benefit in any business.

I want a partner or two. I want some people that have ideas like I do, where we can choose the best one or two to go after and sell.

I am all about sweat for equity here. I couldn't afford to pay anybody, nor would I expect to be paid.

So how do I go about finding a partner or two? I have a couple of colleagues that I have pinged, but it hasn't really gotten off the ground.

I sort of wish there was this virtual place where aspiring software/micro-isv entrepreneur's could get together and try to form a business. I have not found that place. Maybe this is that place. Or maybe such a virtual place is an idea all of its own.

What are your thoughts? If you really had the itch to start a micro-isv/software company, had some ideas to bring to the table, wanted to work sweat for equity, but wanted to partner up with some folks who also may want to start a micro-isv/software company, who you could bounce ideas off of and also listen to their ideas --- how would you go about it?

Anyway, this is my thought for a Saturday morning.

Joel

P.S. I do have a meeting next week with an old acquaintance of mine where we are going to discuss partnering up, but, like anything, nothing is for sure.

I have the same problem. I don't know how you really find others to work with unless you already have friends you can count on. Partners who became successful were long time friends.

One thing I've seen though is that unless you really know the person and you can trust him, you do not want to go into business with them as partners. It is really like marriage. You have to be that serious when considering partners.

Another alternative is to get something going and then look for employees to get things done. Yeah you have to pay them, but you are not as much "in bed" with them as you are with a partner.

Third alternative is to once again get something going and if you can get a decent fan base, and if some of them are technically inclined, perhaps they'll either volunteer to work for you (by creating add-ons etc) or may even want to join your cause. This is really the best kind because you need people who love what they do to really help you succeed.

I also came across the following website, but never actually used it. It may help.

http://www.partnerup.com/

my 2c,

If you start by looking for partners then you are not starting right.

Even though my last comment sounds negative, I don't think that partners are a bad thing.

From what I have read from here and there, the product usually brings people together, not the other way around. It's better to find somebody with same interests as yours. Otherwise, it's not really different from a real employer/employee relationship right?

Hi,

You wrote:

"I sort of wish there was this virtual place where aspiring software/micro-isv entrepreneur's could get together and try to form a business. I have not found that place. Maybe this is that place. Or maybe such a virtual place is an idea all of its own"

One word: FairSoftware. Yes, I'm biased, you are talking about our baby (you just didn't know it).

You have an open letter that barely describes a plan to do anything and that's your "baby"

Do you really need a "partner," or are you just looking for someone to make your product for you for free? The bottom of the barrel is filled with hucksters and "idea people" and "manager" people looking for that too. Make my product for me and I'll give you some of the profits if it makes any.

And ask why would someone develop a product and give you half when they could spend the same time on their own and keep it all for themselves? Your ideas unfortunately are worth very little.

Philip,

Like I said, the original poster wouldn't know he was referring to our baby. That's ok, all I was saying is that he has a need and we happen to intend to solve it.

Regarding the site, you are correct, there's nothing there publicly yet, but this will change. We'll be updating the site with much more specific info next week, hopefully.

Hi all,

Good and fair replies by all. Let me address one of them in particular.

Ron,

I am in absolutely *no way* looking for someone to develop a product for me for free. Heck, the reason I am quitting my job is to start something on my own; so, as a software engineer, why in the *world* would I want to give all of the fun to someone else. That would be one of the dumbest moves a person in my position can make.

One of the points I was trying to make, and obviously not well, I guess, is that working alone on an idea many times can be a hindrance because all of you have is yourself the critic. It's like writing a paper -- the more times you review it, the more you get used to it and are not able to find the flaws. But if you have someone else, the better chances there are to find flaws and mistakes, and thus comes out a better paper.

I am one of the fairest people you will find. So with respect to your profit statement, my whole intention is that any partner that comes in at the beginning would get equal (or near equal) stake in all work. That is the definition of sweat for equity. And if the idea was theirs, they may even get more than me. But, and I didn't say this, as founder, I would be putting up my own capital for hardware, software, hosting, etc (assuming we were going down an individual product route and not something that would need to be hosted in a data center). So, I am taking a bunch of risk in that respect.

And, as outback said, trust is key here.

What do you need a partner for? To put up money? That's the only valid reason. If you just need another programmer, hire or contract somebody and keep all the profits and ownership yourself. Or if you need someone to assess your business plans and product potential, pay a consultant a few thousand, and again keep all the profits yourself.

If you don't need somebody to put up money, then you don't need a "partner."

> I sort of wish there was this virtual place where aspiring software/micro-isv entrepreneur's could get together and try to form a business

Put together the right post and you might find this forum could provide some interesting leads.

Bill,

I am not looking for money at all.

Have you read this thread and anything I wrote? I don't need anyone to put up any money. I said specifically "...I would be putting up my own capital for hardware, software, hosting, etc (assuming we were going down an individual product route and not something that would need to be hosted in a data center)"

I am also not necessarily looking for just "another programmer" either.

Is it really that hard to fathom a philosophy that someone believes that working with a small group of people would achieve better results that going it alone??

I have no doubt that I could do something by myself, and I will go that route if need be; but if I believe that something could be built "faster, better, cheaper" with a team, doesn't it make sense to at least pursue it?

All I was really trying to ask with this thread was if there was a central place that prospective software entrepreneur's can go to see if there is a mesh/trust with respect to starting a business / developing a product. It doesn't seem that out of the ordinary.

And, maybe part of the answer to that question is this Business of Software conference that is happening in October - I forgot about that.

Joel, "working with a small group of people" is not the same as forming a legal partnership. You asked above about a partnership, not "working with" people. Setting up a legal structure where you all share responsibility, investment, risk and reward has huge pitfalls for the marginal benefit.

Instead, you can achieve the same -- "working with a small group of people" -- without setting up an actual partnership. Hire them. Get them to work on commission. Pay them stock options. But do not set up a legal partnership, you don't need it and you don't want it. I've been there!

Very interesting discussion.

Re: "What do you need a partner for? To put up money? That's the only valid reason.", let me suggest at least a few things the right partner could do:
- improve your app by providing feedback
- improve your code by helping to refactor it for performance.
- build the web site, if they're good at that and you're not.
- build your online community.

and on and on. I'm a one person company, but my partner in life helps out. And I can see there's a range of ways people can work together from formal legal partnership on down.

"let me suggest at least a few things the right partner could do:"

Yes, or an employee or contractor can do all that too, and you keep and own everything. 

The problem when you take on a "partner" who contributes no capital but who gets ownership in the company, is they're putting up no risk. If they ever have doubts or disagreements about the company (which everyone does at some point), it is simply not in their interest to continue contributing because they have nothing put up and  nothing to lose. In fact it is in their best interest to quit, be "too busy this month", take on other jobs or just work elsewhere, since they still own "half" of at least everything they worked on so far and possibly half the venture's future income. Structure the parternship agreement how you want, but they can always get around it in the worst case by still coming into the office and just bitching all day until you tell them to leave. That is their best interest if they don't think the venture will succeed. Do you really want that?

But if they have a financial stake in the outcome, it will be in their best interest to make it succeed so they can recoup their investment. Or a very close friend or relative has the friendship at stake. But people met off the internet with no investment and nothing to lose ... forget it. Always assume people will act in their best interest, not yours!

I hate these meta discussions.

Here's what you need to do

1. Find a group of people with a particular pain

2. Find a method to reach that group of people

3. Create a solution to their pain, presumably in software

4. Get them to give you money in return for your solution to their pain

That's it.

I agree things like how you manage yourself, a good working environment, etc. are important, but they are all means to an end, rather than the ends in themselves.

If you're just getting started, concentrate on the ends.

> I hate these meta discussions.

I mean meta's on how to run an ISV discussions, rather than meta's on what this board's moderation is like, or meta or anything else.

> One of the points I was trying to make, and obviously not well, I guess, is that working alone on an idea many times can be a hindrance because all of you have is yourself the critic. It's like writing a paper -- the more times you review it, the more you get used to it and are not able to find the flaws.

The customers (or prospects who didn't become customers but could and should have) are the only critics that count.

If you can convince another software developer, the one you're calling partner, that your product looks get, it will make you feel good and give you confidence - and this reassurance is what it sounds to me, that you are realling looking for. 

But in reality the reassurance, in the end counts for nothing, and may even give you a false sense of security.  The partner's feedback is only truly valuable if he has more insight into your customers and prospects than you do.

And by the way, I agree, with those who said partner is the wrong word if you are bearing 100% of the risk.
If anything, it may even give you a false sense of security

Wow! I never thought this thread would have generated this type of discussion. I guess I should have just asked "Is there an online site where entrepreneurs get together to talk turkey?" ;-)

It's good to have these points and counterpoints. Whether you know it or not, it helps.

Bill, I do see your point about legal partnership vs. employee. I guess I come at it from a different direction, naively maybe, that if you come into a company on the outset (i.e. help form it), then you should have equity stake. Besides, I don't even know how to set up stock options nor do I have any money to pay commission -- at least not enough money to pay for the type of talent I would be looking for.

You did say "The problem when you take on a "partner" who contributes no capital but who gets ownership in the company, is they're putting up no risk." Well, I wouldn't bring anyone on board who isn't committed 100% to the effort. This wouldn't be part time. This is full time, 100% sweat for equity. Their risk would be that they don't have a steady paycheck. My risk is a little higher because I put up some initial capital, but that cost wouldn't be all that high, I don't think.

"Always assume people will act in their best interest, not yours!" Yes, yes, this does hit home with me. I am, by nature, cynical. But, I do want to start a successful micro-isv if possible, so sometimes chances have to be taken.

Sunil, your 4 points are right on, but I don't believe "that's it". It's great to find a market and target it, but  you have to set up the right situation for yourself to target it successfully. Some people's right situation is to target it alone. Others is to band together. Others is to work for a corporation. So I think that needs to be considered a very important factor.

>>"Well, I wouldn't bring anyone on board who isn't committed 100% to the effort."

And that might last how long, a couple months? Then he changes his mind and gets a corporate job leaving you dry while still owning half the company. Or even a small percentage, but you still have to do all the rest of the work and send him his share of the profits forever while he just sits back and cashes the checks.

Believe me, they all start to scatter when commitment time comes. I've been there... don't waste your time. People just won't quit their jobs and work full time for "sweat equity" unless it's a close friend or associate you've worked with before, or they have $100K in the business they don't want to lose.

At best I think an internet forum for partners seeking partners will only attract the clueless and desperate, and the dreamers and schemers who are not the types you want to be in business with anyway.

>>"Is there an online site where entrepreneurs get together to talk turkey?"

This is probably as good as any, especially for software-centered businesses. I'm on my third full-time venture with 5 employees and over $1 million in sales so far this year; somebody just the other day said they had over $1 million net; Joel Sposky himself must be doing pretty well to afford all those employees and prime NYC office space; and I know there are a number of others from here who are also full-time so must be over $100K at least in sales. Plus lots of others with very small mISV's who just do it on the side but have still experienced common startup headaches.

Besides anonymous internet forums though, also check your local Better Business Bureau or City Hall for small business services. My city has an excellent business mentorship program using retired small and medium business owners who volunteer as coaches for startups. It might just be one hour sessions or monthly seminars, but it can be very enlightening.

Bill,

Thanks for the advice and tips.

I suppose, if a legal partnership was entered into, you can have "legal-eze" that said if you leave the company before a certain period of time, or before we go bankrupt ;-), you lose all equity share. I am not a lawyer, so I am not sure how you could word it, but there would have to be a way to protect the principals who really do care about the company, right? Maybe not though.

Anyway, like I said in my original post, I do have a conversation set up with an old colleague of mine who I do trust -- maybe this whole dilemma becomes moot for me anyway -- or maybe I just do go out on my own and do it myself so the only one who can make it or break it would be me. That seems like the advice you would give :-)

We'll see.

> > I hate these meta discussions.

> I mean meta's on how to run an ISV discussions

Isn't that one of the main reasons why this forum exists?

Victor N : "If you start by looking for partners then you are not starting right... the product usually brings people together, not the other way around."

This is a good point by Victor.

----
Victor N : "If you start by looking for partners then you are not starting right... the product usually brings people together, not the other way around."

This is a good point by Victor.
----

I think this is true in some situations but cannot be used as a generalization. I mean I would say that Bill Gates / Paul Allen were partners that developed a company. Same for Sergey Brin and Larry Page with respect to Google. The difference here is that I (along with others, I presume) don't have that partner yet. Am I wrong?

Bottom line, I think you can get to the same place (success) in two different directions.

> Isn't that one of the main reasons why this forum exists?d

It's not for me to say why the forum exists.

What is was trying to draw a distinction between these two types of discussions:

How/What do I do something to achieve business goal X?

vs

How/what can I do something, so that I can then do something else, to achieve business goal X?

I always find the former type of discussions considerably more interesting than the latter.  It's often the difference between focusing on getting things done, and then looking for the means and tools to do them,  and mainly focusing on means and tools.

"The difference here is that I don't have that partner yet. Am I wrong?"

Well, you gave some examples of guys that knew each other and worked together on something they were both interested in together. Do you have any examples of companies that were founded by partners who met the way you propose, without a product already under development?

Entering into a partnership agreement is in my opinion, the largest risk you can take in your company. Far more than any other factor. So you better have a really great reason to be adding this specific person to Project X. But, you don't have a specific person OR a project X, so, as Victor says, it seems quite bizarre to be looking for a partner. What will this partner do for you? You talk about bouncing ideas around or something. He won't do coding, you said you'll do that yourself. Is he a salesman? Well, he'll be sitting around with little to do while you work for 3 years developing the product to version 1. Why not wait until then to become partners? When you have a product to sell.

"Should I get a partner" and "should I do it alone" are, for me, two completely different questions.

Bob Walsh was right - you cannot really do it alone. You need feedback; constructive criticism and another voice that helps you see the wood for the trees.

But don't confuse this with "getting a business partner". I did that, and it was a big, huge, enormous mistake.

Here's how I am doing it:
- grunt work, accounting, research, website dev, marketing content, parts  of marketing : outsourced.
- business guidance & advice : free small business resources and consultants where appropriate for key info.
- strategic guidance & advice : a mentor and my wife.
- bounce ideas : industry friends and colleagues from the old days, family, non-industry friends.

One thing I've learned is that there is help out there from all different quarters, when and where you need it. All you have to do is have the guts to ask - most people are more than willing to help.

Cyclops,

xcellent response, thanks.

Actually great responses by most everyone. I never thought this question would have generated such insightful comments.
I really appreciate all of the responses.

I do want to do more than just "bounce ideas" with someone. I really am looking for a reliable teammate. But, with the comments here, I may try a different approach to the whole concept.

I just may bounce some ideas off the people who subscribe to this forum ;-)

Joel,

I have to say they are right on.  I started a business with some people I met.  I had written a version 1.0 of a product, and was looking to sell it.  I brought on a business guy and a lawyer.  What a waste of time/effort/money.  I would suggest in the strongest possible terms that you don't go into business with someone that you don't know *extremely* well.  I had a very bad experience with those partners, and after having done exactly what you are talking about, I would tell you to avoid it at all costs.  When they say forming a business with someone is like marrying them, they aren't kidding.  There are all kinds of things you can do to reward early employees, from profit sharing through options.  There is no need to bring them on as a partner in the beginning.  If someone really does stay motivated and committed to your company for years on end, you can always amend the articles of organization and make them a partner later.  You have a lot of options right now, don't choose the one that will be the worst for you in the long run if they turn out to be a total flake.

Let me finish with a quick story that influenced me when I was younger, and ignored to my peril.  When I was in high school, one of the richest men in my state came and spoke about success.  At the end to the talk I went up to him and talked to him about some of my business ideas.  After we had talked for a while he told me he was going to give me the best advice he'd ever received from his mentor.  He said that advice was that the worst kind of ship is a partnership.  You should always form a company with someone firmly at the helm.  He said that advice had served him better than any other advice he'd ever received throughout his career.  From my experience, I agree. 

Forming a partnership can possibly have some upside to it, but the downside is far bigger than most people can imagine.  Always hope for the best, but plan for the worst.  That's especially true when it comes to contracts or agreements in any shape or form.

Best of luck with your business.
Doug

Joel, I would really be interested in becoming a partner with you for 50% of the company. I would be an incredible resource and it will be far more likely that your company will succeed. I promise to work on this project full time (50+ hours / week.). I am extremely trustworthy and the hardest working and insightful person you will meet.

You can count on me!

I may be mistaking, but my gut tells me that poster entrepreneur was being facetious and sarcastic. :-)

Fine, fine, fine, I get your point. I agree it is good not to just pick any random partner. There has to be an interview process; and yes, partnering with someone you trust and know is probably better.

But, yes, maybe partnering up is not always the best route to go.

Oh, and Doug, thank you very much for the insightful response. That was a good one.

++1 for Doug - I'd like to hear from him more often!