Start-up strategy and advice: My co-founder wants to raise funds before leaving work, while I work full time. That I have to do?

Updated on : December 7, 2021 by Luis Newton



Start-up strategy and advice: My co-founder wants to raise funds before leaving work, while I work full time. That I have to do?

I was thrilled when Jeroen agreed to become my co-founder and vice president of engineering. Jeroen was perfect for the position with his strong technical skills combined with his ability to recruit and manage a team.

But we had been raising money for 8 months when Jeroen agreed to join us. Worse still, the Great Recession was just beginning.

It was not clear to me if we would be successful with our fundraiser. The last thing I wanted was blood on my hands.

So I said to Jeroen, “I don't want you to quit your job. There is too much risk.

"Wait until we have funds until I quit."

Your co-founder doesn't have to quit

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I was thrilled when Jeroen agreed to become my co-founder and vice president of engineering. Jeroen was perfect for the position with his strong technical skills combined with his ability to recruit and manage a team.

But we had been raising money for 8 months when Jeroen agreed to join us. Worse still, the Great Recession was just beginning.

It was not clear to me if we would be successful with our fundraiser. The last thing I wanted was blood on my hands.

So I said to Jeroen, “I don't want you to quit your job. There is too much risk.

"Wait until we have funds until I quit."

Your co-founder doesn't have to quit his job while you're raising money.

The Great Recession was such a crazy time. You could get meetings, but the climate wasn't exactly conducive to startups.

Now, if there was ever a time when investors were looking for an excuse not to invest, it was the Great Recession. However, I didn't care. If it cost us an investor, so be it.

We were honest with our investors. I told them that Jeroen was still working and that he would be joining the company full time when the funds closed.

Your VP of Engineering or CTO is the critical piece (in addition to you, the CEO) in a technology startup. If Jeroen didn't “show up” well, then we were down.

Fortunately, Jeroen was very good. I could see that Jeroen's combination of technical prowess, professionalism, and excellent communication skills was resonating with potential investors. He attended as many investor meetings as he could. In fact, I don't think she missed a single meeting that I asked her to attend.

But beware of the buyer. Your fundraiser will fall apart if your co-founder doesn't join the company.

Jeroen kept his day job for the following year. When he resigned from Maxim, management pushed the entire court to stay.

They tried everything. They offered him more money. They offered him a promotion. And, of course, since I was also a student of Maxim, they spoke badly to me.

None of that worked. Jeroen quit his job after we signed the term sheet and moved on to the docs. I think we may have waited up to two weeks before closing before he resigned.

I'd be lying if I told you that I'm not worried about Jeroen backing off at the last minute. At the same time, Jeroen was a serious person. Deep down, I knew he wouldn't have stayed if he didn't believe in what we were doing.

That is the key. You are putting the life of your company in the hands of your co-founder if you allow him to continue working his day job while you raise money. Just make sure you know the character of the person you are giving this to.

To learn more, read: What are the 11 Steps You Can Take When a Co-Founder Quits? - Brett J. Fox

1) Any incoming investor wants to see a full commitment to the startup before investing their money, so we highly recommend that both co-founders are full time and demonstrate time commitment (if not equity) before asking an investor invest money

2) As an entrepreneur, I understand the realities of life, especially around cash depletion, and I appreciate that if your co-founder were working in a company to invest in this business, he could really respect the "play" you are doing to invest. . in this business. However, you have to communicate that the day you enter the term sheet, you will stop

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1) Any incoming investor wants to see a full commitment to the startup before investing their money, so we highly recommend that both co-founders are full time and demonstrate time commitment (if not equity) before asking an investor invest money

2) As an entrepreneur, I understand the realities of life, especially around cash depletion, and I appreciate that if your co-founder were working in a company to invest in this business, he could really respect the "play" you are doing to invest. . in this business. However, you have to communicate that the day the term sheet arrives, you will stop working and will be full time.

3) If your co-founder is part-time and you are full-time, make sure your Risk - Reward ratio is equitable. You can't enjoy the stability of fixed income (your co-founder's steady salary from a job) and expect to have Equity Upside (you go into the whole business), so have that conversation with your co-founder today - not the one! have NOW! before these things come and bite you in the future like it has with many co-founders

4) If shortage of funds is a reality, work for 6 more months to save and generate capital for your start-up. Another option is to apply to incubators and accelerators that will help reduce start-up costs and also get you some seed funding.

Good luck!

The investor always looks at the team and their commitment to the project before looking at Idea. If you want to fundraise, both of you must spend full time fundraising. It also helps your startup as one will be concentrating on fundraising and the other founder will be looking at Operations.

Why don't you sign up for takeoffnow (.) Co and talk to a related investor so you know what the investor expects from startups and how to move forward and what are you going to do?

All the best

Well, your co-founder wanted to be safe because he is quitting his job and arguing whether he believes in your business or not. If it does, you better go fundraising and be prepared for anything ... You can't blame your friend. Put all your effort and make your product / service successful.
All the best

You are in a situation where you have thrown all your cards on the table, but your co-founder wants to really play very safe.

If he's not committed to your startup like you are, you shouldn't have spent your precious time on this !!
So now there are two options: -

  1. Either tell him to leave now or
  2. You can also work part-time until then so that the effort is put in evenly.

I have never had a part-time co-founder. Either they are equally and completely there or they are not at all.

Be smart and careful when writing legal documents.

All the best :)

It's okay for your co-founder to continue at work, but insist that he share his salary with you.

I know there are many answers, this is my personal opinion.

You survive by having a deep understanding of what you consider "your" pile and a very superficial understanding of the rest.

In my case, I consider myself a Microsoft developer, so I know C #, SQL, etc. at my best. Aside from these languages, I am familiar with the commonly used frameworks, tools, and libraries, from Entity Framework to WPF.

Then I try to keep up to date with the best technologies in other worlds, so I have a basic understanding of Java, Python, C ++. I can't write decent software with these languages, but I know how C # stacks again

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I know there are many answers, this is my personal opinion.

You survive by having a deep understanding of what you consider "your" pile and a very superficial understanding of the rest.

In my case, I consider myself a Microsoft developer, so I know C #, SQL, etc. at my best. Aside from these languages, I am familiar with the commonly used frameworks, tools, and libraries, from Entity Framework to WPF.

Then I try to keep up to date with the best technologies in other worlds, so I have a basic understanding of Java, Python, C ++. I can't write decent software with these languages, but I know how C # compares to them, what their strengths and weaknesses are.

Finally, I get my feet wet from time to time in those languages ​​that I start to hear a lot about, like Swift or Rust. I know what they are used for, I have read about them on their websites and Wikipedia; I know they exist, what is their purpose.

Whenever necessary (in a technical business meeting, when interviewing a candidate), I am always ready with my idea over the entire spectrum of languages, more or less. Also, if I have to face a problem where my tools are not enough or not well adapted, I know where to look: only then do I deepen my knowledge about something new.

There are two main reasons why I am not rushing to learn new languages ​​or frameworks: First, time taught us that many of these brilliant modern languages ​​come and go: they are sold as the absolute solution on a keynote and are forgotten for full of one. year later. The fact is that it takes a long time (and not just time) for a language to gain traction, there is no need: let the enthusiasts do the "dirty" work and see if that technology reaches a point of maturity (3 major versions? maybe? ). Second, I think that to be successful you need a deep and solid knowledge of a few languages: this gives you time to focus on other factors that may seem secondary but are much more important, such as architecture, readability and organization, testability, just to name something. .

This is my first week working full time at my start, after having quit my day job. The quick backstory is that I am married, I own a home, and this startup started as a side project on May 24th. I decided that now was the right time by evaluating several areas that would impact my future success:

  • personal budget
  • start-up feasibility
  • setting the personal ability of the starting idea
  • start time
  • time advantage

Each category was evaluated based on my best and worst case scenario.

Personal budget
This was kind of a yes / no game for me. When I decided to consider quitting, I wanted to know how long I could

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This is my first week working full time at my start, after having quit my day job. The quick backstory is that I am married, I own a home, and this startup started as a side project on May 24th. I decided that now was the right time by evaluating several areas that would impact my future success:

  • personal budget
  • start-up feasibility
  • setting the personal ability of the starting idea
  • start time
  • time advantage

Each category was evaluated based on my best and worst case scenario.

Personal budget
This was kind of a yes / no game for me. When I decided to quit, I wanted to know how long I could have zero income before our savings ran out. I also wanted to know what it would take to make my expenses less than my wife's take-home pay. My goal was to find a viable situation that we could both live with.

Startup Feasibility
If you're already generating income, then this should be a bit easier. Because I was considering quitting before the business generated income, it was important to consider if there was any way to make this work. I did my best to conduct interviews with potential clients, run surveys, and find and engage people on Twitter. More importantly, I was looking for validation that people had the problems we raised from the beginning. Honestly, this category is the subject of many books, blogs, conferences, etc. Rather than dig into everything, here are some of the areas I considered when evaluating feasibility (in no particular order):

  • Total Addressable Market, LTV> CAC
  • "Hair on fire" problem for users
  • How will I get to my market?
  • How will I defend the business?
  • Required technical skills
  • How will I finance the first stage?


The idea of
commissioning is tailored to personal capacity Even if I find the commissioning feasible, it is important to verify that it is something you can understand and execute. Do I have domain experience? Do I really need it? Do I have a network that can help me fill in my gaps? Do I know people with the other talents that it will take to build this? I measured this based on my action / planning ratio over the course of the first week of work on this, which was only nights and weekends. I was able to spend very little time planning and more time doing, which was a good sign. Okay, that's not always the case, but I need to be biased towards action. Do something that brings me closer to the goal every day. If I end up in big hurdles, I am withholding everything.

Starting time
There are a lot of good ideas out there, but if it's not the right time, maybe you shouldn't quit your job. For me, this means identifying dependencies outside of my control that dictate the success or failure of this business. For example, if my business really requires my users to have access to 1Gbps internet connections, then it might take a while before I start making money. I may never make money and I have no control over it. That doesn't mean it's a bad idea, but it may not be something you need to quit your job for.

Time advantage
This was one of the most critical pieces for me. It seems obvious that spending more time getting started would allow you to progress more in fewer calendar days. However, it was more important for me to assess whether my ability to work during the day (the hours I worked at my old job) would have a significant impact on the business. In other words, it wasn't just about how many hours you could put into business, but where those hours fell in the day. Could you have enough meetings with potential clients after hours? In cases where I couldn't, do I have enough vacation time that I can use for daytime meetings as needed?
My target users are real estate agents, and I learned very quickly that they live very busy lives and don't like having after-hours meetings as much as you might think. So aligning my life to make better use of each day on the calendar was a strategic time advantage.

Here is a story that can be helpful in your endeavors.

When I was 26, I was working as an account executive at a growing technology company. The company produced $ 25MM in annual revenue at the time of my departure, up from $ 15MM just 2 years earlier. He had worked there for the past two years, earning more than 15% of the income output. I made $ 275K / year for 2.5 years ($ 700K before taxes, $ 490K after taxes). The relationship ended abruptly and I had to decide what to do next in a fairly short period of time.

I had roughly $ 220K in dollars / after-tax assets, exactly 24 months of personal runway

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Here is a story that can be helpful in your endeavors.

When I was 26, I was working as an account executive at a growing technology company. The company produced $ 25MM in annual revenue at the time of my departure, up from $ 15MM just 2 years earlier. He had worked there for the past two years, earning more than 15% of the income output. I made $ 275K / year for 2.5 years ($ 700K before taxes, $ 490K after taxes). The relationship ended abruptly and I had to decide what to do next in a fairly short period of time.

I had roughly $ 220k in after-tax dollars / assets, exactly 24 months of personal runway before I went broke. Over time, I liquidated everything to maximize the personal track.

I contemplated navigating the world and living off practically nothing for 3 years and then going back and sorting things out with $ 150K in the bank. That would have been fun. This will continue to happen in the future. He contemplated living in a low-energy country in Central America and basically buying a property and living off the land. This would have been fun too. This will happen in the future. However, he was still not ready for both from a personal skill set point of view.

Fortunately, I was 26 years old and had been keeping an eye on my monthly expenses. I quickly lowered my spending budget from $ 8.5K / month to $ 5-6K / month.

Previously, I was able to buy / go anywhere I wanted for $ 8-10K / month for the last 3 years and I noticed that at $ 5-6K / month of living expenses, I was able to buy what I needed (organic food, keeping the same house of beach that just busy, same sports car), just couldn't travel / ski / race cars freely.

The funny thing is that the suffering increased enormously during the first 6 months, I learned a lot about myself. In hindsight, I am much simpler today and happiness levels rise the lower my budget / the more minimal my budget and lifestyle become.

Now he had 44 months of personal runway. However, this track calculation is done without investment in a new company.

Tried starting a mobile app company. We spent 8 months, we raised a total of $ 25K, we returned the $ 25K the day we decided to stop moving forward. Finding partners was difficult, finding engineers was difficult, finding investors was difficult. The worst part about all of this is that I was used to making $ 20K + / month and now my personal profit and loss were in the red every month.

He burned $ 50K of personal funds trying to start this company in addition to 8 months. 60% of my afternoons consisted of staying silent thinking about all the ways everything was going to crash. This was part of the problem (hard to imagine after having a successful mini-sales career).

$ 220K - $ 50K = $ 170K Living
expenses of $ 50K over an 8-month period
Total cash remaining $ 120K

20 months of personal track remaining at $ 6K / month of expenses, 12 months of personal track at $ 10K / month

I decided that I didn't have enough money to navigate the world now or move to a low-energy country in Central America. I had to go all out because I was "committed to marijuana."

Every waking hour for the past 6 months was used to read start-up / self-help / investment books and network with as many people as I aspired to be. Still, I had many nights when I thought the world was falling apart.

I started the second company, this time a consumer packaged well in the beverage space that was fashionable and that I was passionate about. This time, I was going to further support my all-in by leveraging and PG'ing the leveraged funding.

The credit was impeccable, he had no debt. Smart or not smart, he was going for it. I thought that worst case scenario, I would be living off the grid somewhere and trying to eat good food.

Credit cards, here they come. Of course, I had some credit cards with limits of $ 10-20K from the last 3 years, with zero balance / debt.

I decided that I was going to see how many 18-month 0% credit cards I could get and start the business with them to take advantage of my cash. The plan was to keep as much cash as I racked up debt. I kept a detailed personal balance of what I was comparing to cash / assets.

This was a good plan, but when it actually works, you're going to be "committed to marijuana" again and go over your head. If you're close to something and you're committed, statistically you have to keep doing it for it to be successful. If you quit, you lose. I almost went over my head. Almost keyword. If he had, he might have been fine in this particular situation, but he wasn't.

I was approved for 6 credit cards, all balances $ 10-15K, 0% interest for 18 months. Great, you now had access to $ 70,000 in capital at no cost for 18 months. Dangerous.

I went for it. This business plan was much more robust than the mobile app and the cash flowed immediately (into the plan).

The first start-up, I could not get investments. Partly because it was the first time I'd learned how to sell investments to qualified investors. Other factors included:

- acting like he was all-in but not all-in (he was a hungry young entrepreneur with $ 100-200K cash in the bank), which perhaps people might vibrately perceive
- not having paying clients (only signed clients they don't pay)
- no finished product
- no fundraising experience
- no paying
clients
- no paying clients - no paying clients

Don't go ahead with a business if you don't have paying customers after 8 months. Seriously. Unless it's a tech company with significant backing, it's likely to be a long way.

The second startup took 6 months to show any kind of real income ($ 10K + / month). At this rate, he was more confident about selling investments. We were able to see the growth before our eyes on a weekly / monthly basis.

I used Paypal to process the payroll and I used the cards, I paid as much as I could on the card for the first 6 months.

We invested between $ 20,000 and $ 30,000 in cash, but we were bleeding. Increased income, increased expenses, R&D that kills us ... bleeding badly. $ 15-20K per month in the red. I couldn't handle this on my own, we were going to sink.

My personal cash was down to $ 54K, 9 months burning down to $ 6K for monthly expenses. ($ 120K - $ 30K investment - $ 36K living expenses)

We had a windfall and raised some capital. It was more like breaking my ass for 70-80 hours a week for 6 months and finding the right investors, but we can also call it a windfall. The first money that entered was $ 160 thousand. Wow. This felt good. We could keep working the business and breathe. I received a guaranteed payment of $ 1.5K for 3 months (the only money I saw for 2 years).

It would take 6 more months for the business to show legs. Six months later, we had revenues of $ 30K / month and we were growing 15% month-over-month.

At that point, we had raised $ 400K and the company had ~ $ 50-100K at any point on the balance sheet.

There was a losing streak where we had less than $ 10K in cash and I had to invest another $ 10-15K. After that patch, the silver lining started to shine through.

I wanted to give up when we had less than $ 10,000 in cash. This was also the point where he had $ 30K in personal cash. I wrote a check for $ 10K and bit the bullet. Doing so showed my investors that I was hungrier than ever. So my investors matched my $ 10K with a big discount on stocks and we now had $ 25K in cash when the payroll came in. I personally had $ 20K and didn't see a paycheck ahead.

Today, we are far from "succeeding", but now we are at a RRR of $ 600K and we are breaking even. Investors are now approaching us and our growth is evident. We have a lot of work ahead of us, but it is more stable than ever. We're likely to raise another $ 100K in the next 60 days, but if we don't, the company is self-sufficient, which I think is important up front.

Self-sufficiency for a company is enormous. You can then choose your investors. You don't have to carry cash that you see. You can think deeply before acting. If you are sinking, you must carry cash to stay afloat.

At one point, we almost agreed to sell 30% of the company at a valuation of $ 700,000. Today, we have enough cash to earn $ 120K / mo income and raise a $ 2.5-3.5MM valuation. The 30% deal actually fell through; again, the rear view is 20-20. We wanted the deal because we were cash poor, but looking back we are very glad the deal didn't go through.

My personal cash went down as low as $ 17K. It basically started with $ 220,000 up to $ 17,000 over a 2-year period. $ 200K + down payment in 24 months. Oh!

I had a family member pass and did not receive any death assets. However, I received a life insurance benefit of $ 100,000. I would have been stressed over the remaining $ 10K in personal cash today, but am not stressed out with the insurance policy breakdown. I'm back at 30 months of personal track. It's interesting how time works when you need it.

All of this effort required more resources and effort than I ever imagined. This is also after working in or around 5+ startups since I was 17 years old and participating in each one until break-even or success.

The two startups that I personally endeavored on my own weren't high-budget, glitz, and glitz startups. This was starting up and making it happen, guerilla style. This was a difficult reality to swallow due to my previous earning capacity at such a young age.

Even with these low budget startups, the total investment was $ 200K +, including no payment for 2 years.

how old are you? Can you work on your startup from a remote area? Go to a low energy country like Costa Rica, Nicaragua, Thailand, etc. and work remotely for $ 500 / month. San Francisco and Southern California are not conducive to zero income for 2 years. Living expenses are high.

I'd say you need 24 months of personal gateway + $ 50K to quit your job and look for investment / full-time work in a startup.

If you can do this in a low-energy country, this could add up to $ 65K. High power input like AC and you're looking for $ 200K.

How quickly can you get customers and income? Nobody wants to invest in a company that can't show traction. Can you earn customers and income while working remotely to show traction? If so, this will help. Not only will this help, but it will also increase your valuation. You won't have to give up the farm for a $ 50,000 investment (you will if you have zero customers and zero income).

I'm not sure the end goal is to raise money or become a self-sustaining growth company. I've heard that companies that are forced to become self-sustaining end up outperforming the biggest rounds and profitability because they actually learned how to run and lead the business rather than cover it with cash raised.

You can do it. Think well and work hard. Don't go into debt. Go bankrupt but don't get into debt. Debt is like handcuffs. Those bad boys are hard to get rid of.

Best of luck.

Cheers to health

Disclaimer 1: I am the one who posted this question. At Akli's suggestion, now posting this answer.
Disclaimer 2: This answer is based solely on my experience working at four different startups, as an employee.

Most start-ups start out with the belief that running a business requires a brilliant idea, unrelenting enthusiasm, resourcefulness, and a commitment to yourself.
But this is not all that is required to run an organization.
When you are the carver of the destiny of a group of people, you have to take responsibility and accountability for their life and their career.
A company works with p

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Disclaimer 1: I am the one who posted this question. At Akli's suggestion, now posting this answer.
Disclaimer 2: This answer is based solely on my experience working at four different startups, as an employee.

Most start-ups start out with the belief that running a business requires a brilliant idea, unrelenting enthusiasm, resourcefulness, and a commitment to yourself.
But this is not all that is required to run an organization.
When you are the carver of the destiny of a group of people, you have to take responsibility and accountability for their life and their career.
A business works with people, not using people to achieve its own goals.

Some of the things that really bother me are: The
people who run these startups lack maturity. They have not learned enough to deal with people. To work as a leader it is necessary to know their aspirations, what drives them and how to make them contribute to a collective effort.

For people management, they generally follow the philosophy of some successful ideal that gets complicated with each failure.
Idea, zeal, and hard work alone are not enough to become a success, especially when it comes to a group activity.

His only focus is on the "Idea". People are resources and they use them to achieve their goals. And the worst part is that they don't even know how to harness an employee's potential. In ruthless activities, empathy and human considerations are forgotten.

Even when they are lost in the chase, they avoid accepting that they are lost. Thus confusing the entire batch that supports them.

They feel insecure about being sidelined by good people who are sometimes lucky enough to hire. Also, they are not comfortable around people who might need coaching to be the best person possible at work.

They have little patience as they want to reap the fruits of success in a very short time, possibly while they are still young. At the cost of many damaged careers while they experimented to find out what they wanted from whom.

Many of them become psychopathic narcissists because it is mainly necessary to move on when the whole world is against them (as they feel). Also not to lose a single moment in the wrong resource, route, decision or collaboration.


Dreaming big is good, but also dreaming well.


Last Disclaimer: This is a very critical post because I was concerned about the careers and lives ruined by such manipulative and nubile startups. I hope to spread this message to aspiring entrepreneurs.

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