Death spiral

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I’m a big believer that anyone can build a technology company if they've got the desire to learn about the process of building technology in addition to seeing to all of the other business needs. There are many examples here in Raleigh-Durham—as well as in any other city—of successful technology startups that were founded by untechnical founders. Unfortunately, there is also a much longer trail of tears, littered with the remains of good or even great ideas that ran out of runway. 

What many of the failures have in common is something I call the Untechnical Founder Death Spiral. It starts with a killer app idea, which quickly leads to the inevitable question: “Do you know anyone who can help me build my app?” 

If you ask this question in the wrong circles, you’ll get an answer that goes something like this: “I have a friend who knows a girl/guy who builds websites for a living. I bet they’d be willing to help you out, and maybe even build the first version for free." 

And so the Death Spiral begins. 

Stage 1 - Find a Friend Who’ll Work for Free 

Let’s clarify what exactly I mean by free. Free means, well, free. You’re not offering a piece of your company, and you’re not offering any immediate compensation. Many times people will work for deferred compensation, but in my experience, the difference in motivation between someone working for free and working for deferred compensation is almost nil. 

What will happen is that somewhere not long into the project the person who agreed to work for free realizes that ( a ) he or she doesn’t really have time to work on something else because of a day job and (b) you’re not paying, so if the choice is to work for free or go out and drink beer with friends, your person is going to drink beer. 

You find yourself in a really odd position because you can’t really ask this person to knuckle down, and yet you’ve invested time and effort to get him or her up to speed. Your idea sits. And sits. 

You finally get so frustrated that you make the decision to actually spend money. You borrow from friends and family or draw down your personal savings, and you show up at a freelancing / contractor site with your project. 

Welcome to Stage 2. 

Stage 2 - Outer Mongolia 

You read in Tim Ferriss’s book that you can outsource almost everything, and you’ve read stories about lots of people who’ve used UpWork (or Elance before it was absorbed). It can’t be that hard, right? After all, you’ve got your wireframes done and you know exactly what you want! Let’s do this! 

You post your project on UpWork and the offers start coming in. Based on what you think you need, you hire someone from Outer Mongolia and get rolling. Your dream is within your grasp! 

However, you’ve never run a technology project before or managed a developer. You don’t know how much information you need to provide to get things done correctly (Hint: It’s way more than you think). You don’t know how to set deadlines or hold the developers accountable. You don’t have any way to measure the quality of the work you’re getting. 

The dream starts to fade. You spend the next few weeks struggling to communicate with the developer, trying to match up time zones, getting the app to work and other issues. 

You’ve spent $10,000, another couple of months, and you still don’t have a product that you can show to prospects. 

You make the hard decision to start over, and this time you’re going to use a local contract software shop. 

It’s going to cost $100,000 to build the first version, but at least you’ll be working with a local company. Its reference list is amazing! You raise money from friends and family and take the plunge. Welcome to Stage 3. 

Stage 3 - The Local Contractor 

Your first meeting with the local contractor leaves you both assured and slightly confused. These people appear to really know what they’re doing, but there were lots of terms you’ve never heard before: sprints, user stories, customer profiles, source control, deployments, unit testing. It felt like you were in a foreign country. What of all of this do you really need to understand? What can you “just let them handle?" 

A few months in, your project hits an unexpected roadblock. Neither you nor the contract shop thought of a critical problem that just came to light. It’s another $25,000-$50,000 to fix the problem before your MVP can be done. 

You’re out of cash. You don’t have a product. You’ve spent a lot of your own money and time, and probably a good bit of other people’s money and time. 

You’re dead. Time to go get a “real job” again. 

Avoiding the Death Spiral 

If this sounds at all familiar to you, or you’ve heard of others going down this path, the good news is you don’t have to pay the tuition to learn the hard way. Yes, there are some things that you can only learn by doing them, but there are guiding principles that as an untechnical founder you can follow to avoid many mistakes. 

  • Don’t build anything until you have done your research. Have you put together a Business Model Canvas? Have you interviewed 40-50 prospects about your idea? Have you tested different acquisition channels with landing pages? 
  • Find a way to build your product without having to write code. There are so many stories of massive companies that started with no code: Groupon, Zappos, Dropbox. Check out sites like HustleCon or Google, “build a tech company without writing code.” The off-the-shelf tools that are available to build your first version are amazing. A couple of my personal favorite stories are: Building Kollecto and Coffee Meets Bagel. You can also check out Dropsource, a local company that lets you build your app without writing a line of code. 
  • If and when you’ve done everything you can to prove your business model and product, and you are ready to build your product, do your homework on how technology products get built. You should spend time reading everything you can about agile development, how source control works and other key topics. Be exceptionally curious. 
  • Have a trusted advisor already identified to help you navigate the tough decisions as you move forward. 
If you follow these three principles, you can avoid the Death Spiral. Then, when you’re ready to hire developers, you’ll know what to look for. You’ll also know exactly what needs to be built because you’ll have already proven much of the required functionality. You can confidently hire developers either remotely or locally, or you can even start looking for a technical co-founder if you want to go that route.