The Management Team - While Building Product

The first stage of a startup, what I call the Building Product stage is management light. The team should be small. We have portfolio companies like del.icio.us and duck duck go where the Building Product stage was accomplished by one person, the founder of course. That is not typical.

What is typical is a team of five or less. The founder/CEO is usually the product manager. There is often a technical co-founder who leads the development team. And there are often several developers (two or three). There can be a designer unless the founder is capable of doing the design. That is about it.

There are quite a few of our portfolio companies that had a two person founding team. Both members of the team built the product. Zach Sims and Ryan Bubinski of Codecademy are a good example. As are Daniel Ha and Jason Yan of Disqus. Both of these teams came out of Y Combinator. But two person teams are not limited to Y Combinator. Dennis and Naveen built Foursquare as a two person team. Greg Yardley and Jesse Rohland built Pinch which is now part of Flurry as a two person team. Billy and Yang built and launched Turntable.fm as a two person team. David Karp and Marco Arment built, launched, and ran Tumblr for well over a year as a two person team. I am sure there are other examples in our portfolio of two person founding teams.

Three person teams are also common. Etsy was built by Chris, Haim, and Rob. That is in many ways the classic founding team. Rob was CEO and product lead including all design. Chris and Haim were the dev team. They built and launched Etsy in about three months if I rememeber correctly.

Hopefully you get the point. Building product is not about having a large team to manage. It is about having a small team with the right people on it. You need product, design, and software engineering skills on the team. And you need to be focused, committed, and driven. Management at this point is all about small team dynamics; everyone on board, working together, and getting stuff done. Strong individual contributors are key in this stage. Management skills are not a requirement. In fact they may even be a hindrance.

Next week we will talk about the Building Usage stage where team building and management skills start becoming necessary.

#MBA Mondays

Comments (Archived):

  1. Stephen Albright

    How do you build the right team?

    1. Peter Van Dijck

      Get 2-3 people together that a) have done stuff (1) together successfully before and b) like each other (2).(1) Technical stuff, preferably.(2) Easily tested by finding out if they really want to do stuff together again.(3) Note that you need to be one of these people, so think of people that you’ve done (technical) stuff with before and want to work with again. Then ask them.

      1. Stephen Albright

        One time in physics class we built a bridge from balsa wood, but it split when weight was applied.

        1. PrasannaKrishnamoorthy

          You’re right, hard times build stronger teams. But the proof is only when you test it.It’s also rare for founders to have gone through tough times together before starting up together, even if they’ve “done stuff together successfully and like each other”.The people who I went through tough times with may not be the right people for the next startup.The people who I was successful with may not last the tough times in the future.But hey, no one said it was going to be easy ūüôā

      2. fredwilson

        i agree with that advice

      3. ShanaC

        First timers?

  2. Peter Van Dijck

    Awesome post. Some thoughts on the non-typical would be welcome too. For example: did any of your portfolio companies build their initial product by outsourcing development? (Like, ever?)I consulted for a startup that outsourced development once – I tried to convince them to bring tech talent in house, but they didn’t want to give up enough equity and it didn’t end particularly well.

    1. fredwilson

      i’m not a fan of outsourcing a startup’s product development. it has worked. fab.com was built that way

      1. kirklove

        Fred, Assuming you know the folks at Fab. Big fan of what they are doing over there. Would you mind facilitating an intro. Would love to pick their brains about a few things.

        1. fredwilson

          what level do you want to connect to?

          1. kirklove

            Jason if he has time or Sheezan. It’s not about level particularly. I love their approach to customers, email, and community and want to learn from them.

      2. ShanaC

        Do you have an idea of how they made it work? No one seems to really know….

      3. whitneymcn

        I’m not a big fan of outsourcing, either (to the point of having made some “build” decisions that really should have been “buys”), but I wonder if Fab was pretty much a best case scenario for outsourcing development?¬†It seems like what they needed in order to answer their key early questions were largely tools that are well established in the wild (time/volume-limited ecommerce, order management/fulfillment,¬†email marketing) — a much better position than, say, having the idea for turntable.fm and trying to explain that *idea* to a third party design/development shop.It’s still not easy, but you’ve got a better shot of spending more of your time with the vendor(s) working on the how-it-fits-together process, rather than what-it-should-be process.Hm. It’s always bugged me that Fab.com identifies me as “whitney7” — I wonder if I’d be whitneymcn there, too, if they’d developed in-house. ūüôā

      4. Brad Lindenberg

        Fab.com is an ecommerce site – cookie cutter requirements – not novel, unique etc like Foursquare, Kickstarter and Etsy.

        1. fredwilson

          that’s an interesting way to put it

          1. Brad Lindenberg

            I founded, built and sold an eCommerce business. Ecommerce is 10% technology, 90% retailing.It’s about product, price and promotion.You can set up a private sales site on Magento Gohttp://www.magentocommerce….I don’t view Fab as a tech startup. I view them as a curator of well designed product with a strong buying team and an excellent content team that can make products look great online via photography and so forth. They just happen to sell their wares online via a daily email.A software company / web app is a completely different beast.

  3. PrasannaKrishnamoorthy

    We’re in the two person stage right now, shooting for bootstrapped/profitable/proud. Both of us getting things done, dev & biz. First prototype sold to two customers, then built :), beta deployed, advances recd, final release next month.We’re 500km apart, customer is 5 time zones away, everything is remote, and managing that is tough at times…And with all the focus on the product/features/cust feedback, getting the biz side chugging is tough :/Interesting times ūüôā

    1. fredwilson

      wow

  4. Brad

    We are a three person team, product is almost done. We have bootstrapped, and are excited to launch. It has been quite the process, but we have been able to do it without investment money so far.We have been able to outsource a lot of the development. Although cheaper, this has taken more time.

    1. fredwilson

      how did you decide what to build yourselves and what to outsource?

      1. Brad

        Mainly it was based on an access to resources. My partner has 4 developers, but what we are building is quite a complicated process that we wanted to make very easy for brands and retailers.Think about the thousands of fashion retailers, there are in the US let alone the world. The amount of time they search for various new products and brands (I am sure you could compare us to Etsy for the retail world).Then the amount of time it takes to get pricing (tiered wholesale pricing) and the frustration of the brands to get their product in front of these retailers. It is a very complicated and frustrating process for both.We want to make this process super simple, so we had to outsource some of the more complicated processes to simplify it for both the retailers and the brands. What we have now is so easy, and I think it was the right decision because it would have take three or four times the resources to get to where we are now had we not been able to take advantage of more engineers for less money.

        1. Mark Essel

          I think once you’ve zeroed in on the question(s) you want to answer, valuing your time and bringing in outside expertise makes sense. Not every founder is technical, and building a highly valued product is far more than just executing a development plan.

          1. Brad

            Unfortunately I am not technical from a coding perspective. However, I do understand the frustration that we are trying to eliminate.I think you said it well, we looked at the problem first and created a technology that answers the largest issues. We are now able to build a “commerce network” based on the issues in the marketplace, rather than having a technology that is trying to find a home for that technology.

          2. Dave W Baldwin

            Good luck Brad.¬† Being in the same boat (putting together multiple teams) makes me appreciate what you’re¬†doing.¬† And you’re right, fit the pieces together to drop into market rather than looking for one.

    2. William Mougayar

      The trick with outsourced development is that you have to think about transition issues and knowledge transfer. You’ll need to bring it in-house at some point, and re-learn everything that was done.¬†Where the outsourced approach makes sense sometimes is to build a prototype for proof of concept, but I would keep the scope of the outsourced development down to a very minimum.Finally, you might run into difficulties getting funded if you’re still on outsourced development. An investor will want to know about your in-house capabilities.¬†

      1. Brad

        William what you say has so much value and you are spot on.Our main goal with the outsourcing has been to develop the product that we can then bring the majority of the development back to the US. We have four engineers and designers here as well that can take the product on as well as lead the charge for the transition. The advantage that we have had is that they are following the development.We would love to have equity investment, but our goal is to create revenues first to prove the product, then start talking to investors. We have discussed the ideas with some investors but we never felt right about their approach. So we will want the right investment team, not just an investment. I have a personal problem with taking others money and not have a clear path to creating value and a return schedule.

    3. abhic

      It maybe debatable whether it did take more time or not.¬†Let’s say you didn’t have the right fit with a techie on Day 1, but you were readyish with the business spec for your MVP & started with an outsourced indie/dev_shop on Day 1. In that case, you are already ahead and working on what really matters. Now, depending on your skillset and how deep can you go with the outsourced product, the time_to_market trajectories diverge or converge.¬†IMHO, if you got something out with whatever you had and in this case it was with a 3rd party contractor, more power to ¬†you.

      1. Brad

        Excellent point.Of course it took some time to assemble the right team overseas as well.One advantage that I had is that I have been outsourcing manufacturing and understand the difficulties of relying on a foreign entity.I certainly can not complain about what it cost us to get this far.

        1. William Mougayar

          Just curious- do you users using the product now? Do not underestimate the “management” aspects of the app, whether it’s bug fixes or enhancement requests. An outsourced team is generally not as responsive as yours. I’m not sure about the parallels between outsourced manufacturing & software. A software product requires continuous improvements & is never finished. A hardware product can take asynchronous development cycles.

  5. LIAD

    probably the most romantic stage of company building.moving like the wind, completely focused on product, adrenaline on overdrive, watching your vision become reality.bliss.

    1. fredwilson

      yup

    2. JimHirshfield

      Queue the theme to Chariots of Fire. ūüėČ

      1. Mark Essel

        Hahaha, ideal choice to help paint Liad’s words.

      2. Aaron Klein

        I had to go back and read it again with that soundtrack and it was indeed an even better comment. ūüėČ

      3. Donna Brewington White

        Not the theme from Rocky?

        1. JimHirshfield

          That works too, if your co-founder is named Adrienne.

          1. Donna Brewington White

            Yo.

    3. ShanaC

      Romance is less fun than practical, alas.

  6. Kha

    This is a very interessting subject Fred, thanks. I live for example in Europe and the culture of quitting a job and starting a startup hier is not welcomed. In America or England or Holland it is different . And as an immigrant in Europe it is even more difficult.I have been trying to start a startup since 5 years, i was not allowed to do that because i had only a visa to study and then after that only to work hier.How can a person convaince other people to work with him, when people don’t believe in you as a person, and where people don’t believe in web startups, and everybody says that what the americans are doing withh all these new startups does not make sense.My conception is any entrepreneur has to start a startup first, with others or by himself. And then if¬† he (they) sees some attraction, he (they) can bring more people.I know that VCs prefer strong teams, but maybe sometimes even with strong teams they don’t succeed, and i know too that with just one person it is very hard and maybe he will not make it.Everything is possible ūüôā

    1. fredwilson

      if you can build something by yourself, nobody can stop you from doing a startup

    2. jason wright

      Aus Deutschland?

  7. Guest

    Would love to read your thoughts on building a management team after the romantic product building stage is over Рwhen we have real revenues with the goal to grow. 

    1. fredwilson

      that is next week and the week after

  8. Boybot

    Perhaps this is true for B2C, but the complexion of a B2B team can and probably should look much different than this. The most important thing for B2B is to have CEO with experience and relationships in whatever industry the product is being built for. This is essential to getting trial and then raising money.It is preferable that the CEO have a strong sense of product, although he/she does not need to code or design.Early prototypes can absolutely be outsourced and VCs are wrong to insist otherwise. Whatever is the cheapest and best way to quickly get something in front of clients is fine. You can have a development team right from the start but that often means significantly diluting yourself. Also you may end up locking yourself in to cofounders who may end up being irrelevant when the product changes.In B2B it is also important to have someone on the team who can be an account manager for the initial clients as well as manage all of the day to day stuff. Big corporations expect a level of service and if you can’t provide this, even in Beta, you will have trouble no matter how good the product is. Do not make your developers be account managers, this will make them very unhappy.Eventually you will absolutely want and need a big in house dev team, but that can come after you have your initial product and market dialed in.

    1. fredwilson

      i agree with everything you say here other than the outsourcing part. but that is apparently a matter of debate

      1. Matt Straz

        In fairness, it‚Äôs harder to get outsourcing right than insourcing and there are at least two things you have to nail:1. The Dev Shop: Ideally this is someone you’ve worked well with before. They should not be too big or too small. In a perfect world they are close enough to visit in person on a regular basis. They are lead by someone seasoned that you get along with and can serve as your virtual CTO (assuming you are not highly technical). This person should be willing to help you in a number of ways, including interviewing your first few internal dev hires.2. You: You need to have a very clear idea on the prototype you want to build. The dev team is there to design and build, not help you with your idea. You also need to be a good manager. It is just as easy to drive an external team crazy with constant changes to the scope as an internal one.If you can manage to do these two things, however, you can stay light and move very fast in the beginning.

        1. kenberger

          I think you have the right idea, Matt. The fit really depends on what the definition of “outsourcing” is. Shops like Pivotal Labs, Hashrocket, and my group have an Agile model where the founder or tech lead works directly and interactively with an external dev team (in my group’s case, the team happens to be offshore).¬†With this model, you never for a second just hand off such a core competency, you instead augment and multiply your dev efforts and preserve capital efficiency (I’m quoting @bijan on that last part).You also quickly wind up with a basic product (MVP) you can build upon next, better than a ‘prototype’ which tends to get discarded.

          1. JerryH

            The thinking here is that there is a “final product” that is good or bad I find is a trap in thinking – typically good money is thrown after bad to try and improve on bad tech ….. which is bad because it came from bad early choices. The ego is locked into a “My idea is good so the tech must be, it’s the coders who don’t know what they are doing” state and you end up with sunken cost being chased by more money.A tech system is constantly evolving as it adapts to the requirements and it’s environment, facilitated in doing so by the skill of the individuals working with it and the clarity of communicationi surrounding it. Out sourcing is building your house on sand.

          2. FAKE GRIMLOCK

            REAL PRODUCT OF STARTUP IS TEAM, NOT CODE. SOMEONE ELSE WRITE CODE, HAVE NO TEAM, HAVE NO STARTUP.

          3. kenberger

            That is not quite *my* thinking.¬†The outcome largely depends on what methods you use re working with someone outside (besides the obvious task of choosing someone highly competent).¬†Yes- most “outsourcing” experiences suck, so it’s needle in haystack, but does exist. And it should never replace your efforts.

          4. jason wright

            Would you be able to quantify a very generalized ball park cost to such an outsourcing approach? The cost say of getting a ‘typical’ app project to MVP stage. ¬†

          5. kenberger

            Love to but probably should do it offline lest I violate the implied TOS of this awesome blog.¬†I’m easy to contact via the disqus link.

          6. kenberger

            I highly recommend that excellent AVC post and discussion, it was seminal.¬†my group’s approach isn’t really outsourcing although it certainly is offshore; we need a new name for the interactive model…¬†

        2. FAKE GRIMLOCK

          HIRE SOMEONE TO BUILD ONLY BUILD THING YOU WANT.CO-FOUNDER THAT BUILD TELL YOU WHICH PARTS OF THAT THING WRONG.

      2. FAKE GRIMLOCK

        OUTSOURCE DEV FOR STARTUP IS GREAT WAY TO DEVELOP FAILURE.

        1. Girl Develop It!

          (post from incorrect account)

        2. Girl Develop It!

        3. Sara Chipps

          Agreed, if you’ve never managed a software project before, using an offshore team is setting yourself up for failure.¬†However, if you’ve already managed many software projects (note: not worked at a company that built software projects, or sat in on some meetings, I mean working as a project manager for a web application) offshoring can be a good way to get things done cheaply. Finding a good offshore team is a must, however, and difficult.¬†Apologies for the duplicate post, sometimes this internet thing is hard.¬†

          1. bfeld

            I am very anti-outsourcing / anti-offshoring for a startup team. It never ends well. When you are a raw startup team (less than 5 people) get 100% of the team on full time / completely engaged / obsessed with the product.

          2. Sara Chipps

            I generally agree. I have never seen it work amazingly well, and generally things need to be rewritten fairly quickly. I’m just¬†hesitant¬†to completely condemn outsourcing. It sounds like domestic developer bad grapes.¬†

          3. bfeld

            We’ve had great success with outsourcing, just not in the very early startup phase.

          4. Vinay Pai

            Agreed, I think outsourcing can work when you have a very well defined product and spec, and know exactly what you want to build. ¬†If you think you have that early on in your startup, you probably aren’t listening to your customers and learning/evolving.

          5. FAKE GRIMLOCK

            IF WANT BUILD PRODUCT, OUTSOURCING MAYBE OK.IF WANT BUILD TEAM, NOT.NO CAN MAKE RIGHT TECH DECISIONS UNLESS BUILD TECH ON OWN. MUST DO BY TEAM.

          6. leigh

            Yes yes yes “if want build team not”

        4. bfeld

          Succinctly said.

        5. leigh

          Too difficult with iterative products but works well when you have larger budgets and slower timelines (our CTO builds dedicated teams from eastern europe and has found them highly effective vs. outsourcing to companies)

        6. fredwilson

          saw this comment on twitter and favorited it

          1. FAKE GRIMLOCK

            ME SAW REPLY ON DISQUS AND LIKE IT.

    2. JerryH

      I wholly disagree with the outsourcing comment, it’s akin to trying to build a decent restaurant and thinking you don’t need chefs for good food and outsourcing to some junk food outlet.A common mistake of marketing and hype over substance.

    3. bfeld

      I strongly disagree with the outsourced part. If your plan is to throw away your prototype completely and all you are trying to get to is a funding event, then maybe. But I don’t think this is necessary, or efficient. Instead, spend the time and mony getting a technical co-founder on board, be obsessed with the product at the beginning, and make sure the founding team is extremely close to the customer.We are investors in many B2B companies. I can’t think of a single successful one that didn’t have at least one technical co-founder, wasn’t a product leaning team, and outsourced its early development.

      1. David Semeria

        Well said Brad – you can’t outsource your soul.

        1. fredwilson

          tweet that one david. it’s awesome.

  9. Dennis Buizert

    My startup is a big odd. We have a 3 person team, but only 1 coder. So in order to make up that weird gap ill be taking on coding courses to help and build the initial idea with the tech guy.I am an odd person overall. I know security but not technical. I know basic code but all mrssed up and the long around.

  10. kirklove

    These posts are going to be good. The comments even better. Excited. Bring it 2012!

  11. William Mougayar

    I presume that a key assumption is that these small teams are using agile software development.¬†The other factor is building the product for scalability. I’d like to hear other opinions on architecture considerations for making the product scale into the millions of users vs. the initial thousands.¬†

    1. Mark Essel

      No doubt the early product has to go through an overhaul step with a design for scale vs. a design for search (is this a valued product and why).

    2. JimHirshfield

      Not so sure 1 guy and an idea set out to scale or comply with strict dev structures. It’s MVP with whatever it takes, no?

      1. William Mougayar

        The trick is in scaling the MVP for many users. It’s a different thing to make it work for hundreds, thousands, millions…

  12. Tom Labus

    Solo and small teams should have access to some management and operations people who understand the nuts and bolts of growth and where the pitfalls are located.  It beats figuring it out after you have fallen into a hole.

  13. JimHirshfield

    Trust is SO important at this stage. Which is why starting up with friends works best, usually. Caveat is make sure friendship can withstand the pressure.

    1. abhic

      My experience has taught me that this isn’t a great way to start off.¬†The friends part I mean; Trust is supremely important.Working with people with established rapport (read – friends) is beneficial, as far as communicating the vague details of the idea internally. But as you move forward, you need to be able to learn and grow, in every sense of the word.’Old’ relationships (of family & friends) tend not to be overtly flexible in such ‘professional’ situations. My $0.02 is find a connection with a fellow dreamer, a former or current co-worker, somebody you met online who is/was doing/wanting_to_do.¬†There are tons of examples for both, obviously.

      1. JimHirshfield

        You’re right, friends was probably the wrong word. Trust was my main point. and¬† JamesHRH did a good job of articulating.

        1. abhic

          +1 on JamesHRH

    2. JamesHRH

      Make friends of your co-founders, not founders out of your friends.

      1. Shawn Cohen

        Interesting you say that, I wondered which would be the better idea here…

        1. JamesHRH

          Matching experience to the situation trumps being friends. You need to work together effectively. That does not require the romantic ’90 hour weeks & late night pizza sessions’ that makes friends seems like a good choice.

      2. fredwilson

        such great advice

        1. Donna Brewington White

          Were any of the teams you mentioned above friends going in?

          1. fredwilson

            i don’t think any of them were “friends” in the conventional sense except for possibly Daniel and Jason.

          2. JimHirshfield

            You didn’t mention Zemanta, but I’m pretty sure Bostjan & Andraz were friends prior to starting up.

          3. fredwilson

            i should have mentioned bostjan and andraz. i’m not clear if they built the initial app all by themselves though.

      3. JimHirshfield

        Good point.

      4. NicolasVDB

        Rockefeller said “always make friends in business, never do business with friends”

        1. fredwilson

          smart man

        2. JamesHRH

          Seriously Nic, how about a reference from someone with some accomplishments? ;-)Are there a lot of good Rock quotes?

          1. NicolasVDB

            I’m not an expert in Rockefeller quotes; I researched it, and I found this less Fred-Wilsonian one:”Do you know the only thing that gives me pleasure? it’s to see my dividends coming in” ¬†ūüėČ

          2. fredwilson

            that doesn’t give me any pleasure

          3. Shawn Cohen

            What gives you the most pleasure in business? I’m guessing openness and disruption…

    3. K_Berger

      Co-founding is like a marriage (just sometimes with more than two people).¬† Like many successful marriages, having superficial things in common is not the key.¬† Things like trust and dependability are.I think it works really well when the co-founders are very different.¬† Not just skills (tech vs. biz) but especially perspective.¬† Helps you see things from different angles which is especially important in the early stages when you don’t have the customers/users to get those answers from.¬† It also helps avoid group think.¬† There is plenty of lively discussion (arguing) in our office but it gets us to a better place in the end.I also think there is a great benefit to having both a male and female perspective.¬† Generally speaking, men and women think and act differently and having both at the core of a team is powerful.

      1. JimHirshfield

        Good points.

  14. Aaron Klein

    I really like the 3 person team. It has to make sense for your needs, but that keeps your burn rate low while giving you 33% more insight into the right steps to take while making the vision take shape.For Riskalyze, I’ve been the product guy, one cofounder was a physics grad who engineered the math behind our algorithms, and the other cofounder is an amazing designer and web engineer.We couldn’t have done it with less and I wouldn’t have wanted more during this last ten months.

    1. fredwilson

      that sounds like an ideal team

  15. Anne Libby

    Can you elaborate on how management skills might be a hindrance?

    1. fredwilson

      managers managefounders create

      1. Donna Brewington White

        wowBut would you make a distinction between managers and leaders?  

        1. fredwilson

          yes i would. founders can be creators and leaders but only sometimes managersmanagers can be managers and leaders but only sometimes creatorsleaders are often both creators and managers

          1. NicolasVDB

            Fred, with all due respect, I think you shot from the hip on that one.¬†The logic of your statements seems tenuous (from A: founders can be leaders, from C leaders are often managers, yet from A founders are only sometimes managers).¬†I suspect you’re victim of Daniel¬†kahneman’s representativeness cognitive bias (see¬†http://en.wikipedia.org/wik… )¬†Also I think that a good manager would know that the early stage of a start up is all about creating the product and would not get on the way.Maybe I don’t understand your definition of “Manager”, I very much look forward to your next posts on the topic to clarify

  16. Elia Freedman

    Aren’t you missing the punch line, Fred? Why such a small team is important and what is the goal in this stage of development? Let me take a stab and hopefully others will weigh in.The point of this early product development is to develop a product that tests market viability. It doesn’t need to scale yet but it needs to be stable enough and feature-rich enough to make it possible for groups of users to start playing with it to verify that it is a product that they want. So the team required is the minimum number of developers who can build that MVP (minimum viable product) and who can test that that product is indeed viable to the customers. It is also important to consider that in many cases there is no money or very little money in the company at this stage, so having a small team conserves cash and extends the run-way for course corrections.

    1. fredwilson

      yes, exactly.maybe i should stop trying to finish my posts and let the community finish them for me

      1. Dale Allyn

        No matter when you stop writing, Fred, the community (this community) will extend it. That’s the sign of a great community.¬†Business is a continuum so “extensible posts” are a feature, not a bug. ūüėČ

      2. Elia Freedman

        Actually, that would be a blast. You write the headline (and maybe the first line); we’ll write the post!

  17. andyswan

    I wouldn’t say you “NEED product, design and engineering on your team.” ¬†For now…you don’t need shit except a product that people will pay for (either with their time or their money). ¬†So do whatever it takes to get there first.The two companies we’ve started began with no technical founder. ¬†We knew what we wanted to bring to the customer and we figured out how to get that done….via outsourcing, key hires, founders hacking awful code…whatever it took. ¬†And it worked. ¬†You can argue about whether or not we would have been able to do more with a technical founder all you want….but at that point we didn’t KNOW and TRUST anyone enough to do that (we do now). ¬† So the point is moot because if we NEEDED a technical founder we would have NOT HAD a business.Fred’s points here are all good…I don’t really think what I’m saying is in conflict with the overall point…now that we’re in a position to have an amazing technical co-founder, we will.But I want to make sure everyone on here knows that you don’t NEED to give any of your points (only 100 will exist…ever) to someone just because they can code or design. ¬†Build your team on trust, admiration and common passion first…..skill sets later.

    1. abhic

      “…founders hacking awful code…whatever it took.” – respect!¬†I believe more ‘non-technical founders’ should just take that shot. I don’t even want to get into how much easier it is today vs. 5-6 years ago to hack up a super raw proof-of-concept; more than enough posts on that out there. But the hype that you NEED a techie co-founder isn’t necessarily true.Caveat – I am referring to a very thin splice of (mostly consumer) web startup world. Starting a bio-research firm without PhDs may not be a smart idea.¬†

      1. fredwilson

        yes, great point. i have met many “non technical founders” who built some of the initial product.

        1. bfeld

          And that’s an important point. The founders don’t have to be “coders” – they have to be “product leaning.” I’ve learned that the magic formula for a startup team is that a majority of the founders be focused on product. Almost by definition this means that one of them is coding.

          1. kenberger

            totally agree with this, Brad. my group follows “teach a man to fish” rather than “give him a fish”. it’s not really outsourcing, since we work interactively to extend the young startup team’s dev efforts. works pretty well in most cases.

    2. Aaron Klein

      And if I could reword what you wrote here, it would be “there is no one size fits all formula to building a successful company.”Certainly there are things you can do to put yourself on the path to failure…and many of those things are done in pursuit of a formula (“the book says I need to hire a VP Sales now”).

      1. andyswan

        Right on.Techies dont NEED me either

    3. jason wright

      “But I want to make sure everyone on here knows that you don’t NEED to give any of your points (only 100 will exist…ever) to someone just because they can code or design.”Pay peanuts, get monkeys. That assuming one has even peanuts.

      1. Aaron Klein

        I don’t think it’s about paying peanuts vs. not.I think it’s about not giving up those points just because the rulebook says “you gotta have a X.”I have paid pretty well to get the world-class team I needed to accomplish the goal. (I paid okay in cash, and the “well” part came in equity…a clear indicator of their commitment.)

      2. andyswan

        Pay cocaine, get rock stars.Pay noodles, get ninjas.That assuming one has a point.

        1. Dave Pinsen

          The sweet spot I’ve been lucky to find recently is tech help that’s not cheap on an hourly basis, but is cost effective on a project basis, because the developers are fast, conscientious, and productive.They’re out there, particularly if you’re willing to look outside of major tech hubs like NYC/SV.

        2. jason wright

          There’s always more than one way to skin a…monkey.It doesn’t hold that success by one method means the same method is always the right and only method. Being wedded to a single approach is not smart. The next project will be different, and the circumstances different too.¬†Disqus is a bit hit and miss. I didn’t receive a notification of your reply. Just stumbled across it. Perhaps they’ve added a filter?

          1. andyswan

            That is the entirety of my point

          2. jason wright

            I got this one – strange.I think it’s better to give a few of the 100 points to a technical contributor at the beginning. The key is to set the terms of the arrangement with regard to the anticipated future evolution of the project.¬†

    4. Josh Haas

      Question about the 100 points thing (this has been bothering me for a while). ¬†There’s a “value explosion” when a startup first creates a product with traction. ¬†Then there are subsequent value explosions as the startup grows, expands into new markets, launches new products, etc. ¬†The traditional equity structure puts a premium on the people who were part of the first value explosion at the expense of people who are part of subsequent explosions. ¬†That seems bad for innovation as the company grows b/c each new employee is less and less of an owner.¬†Is there a way / has anyone experimented with creating a new 100 points around each subsequent explosion so that each round of innovation gives people a chance for big rewards? ¬†Would require some accounting mechanism to divide success among different product lines, and some legal mechanism for structuring it, I guess.

  18. panterosa,

    18 months ago, right out the gate, I built a great team of 4- one tech/biologist, one artist, one production manager and me, concept and design. But the tech and production people dropped out for outside reasons within the last year, leaving me to do everything, and struggle through what they did, and how to replace them. It blew my mind and made things very slow for the last 6 months. The upside is now I know better what I need for team 3…… the first non-lift off of this idea was 6 years ago with a botanist/artist in a different, smaller version.I am tempted to outsource some things while I still don’t have a tech partner, but I haven’t found the match yet. Interestingly, this seems not to be as pressing as building the science components, and a few of the right people and institutions just jumped on board for that recently. I hope actually to mine some tech talent from that community.¬†Throughout the Freak Show of the first year I am glad to have had an excellent coach and AVC to educate me and keep me sane. Reading all the different stories and trajectories is helpful for me pondering next steps.

  19. gregorylent

    government could learn from this post

  20. reece

    as we scale (9 people!), i sometimes miss those early days of a small team just building like hell with very little managementthat being said, i’m loving the challenge of keeping that sort of dynamic, while adding some light mgmt tactics to make it all work

    1. fredwilson

      i bet dan doesn’t miss it as much as you do

      1. reece

        on the contrary, he’s happy to have an engineering team of 6 (himself included) but he is also doing more management as a consequence

        1. fredwilson

          yup. that’s going to be a big part of next week’s post. the tech co-founder becomes more of a manager than a builder.

          1. reece

            cool. it’s tough to swallow for him (he’s a great engineer), but he needs to make himself scalableand same goes for all of us really

  21. abhic

    Fred, you just saved me an hour to write out an email describing my management choices (re equity) to somebody. Thank you for highlighting this crucial juncture of a startup.The key takeaway for me is “Management at this point is all about….getting stuff done.”The founding team is a mish-mash of whatever works and laser-sharp-focus on learning & ultimately doing just enough to deliver the MVP. Stupid business card monikers disrupt an ego-less flow of feedback & distracts from the only goal – make the user fall in love with the product.

    1. fredwilson

      yup. andy swan’s comment at the top of this thread makes that point well.

    2. K_Berger

      Management is ALWAYS about getting stuff done.¬† The difference is whether it is doing it yourself or doing through others.¬†Not to jump into the coming weeks’ posts, but as a company grows, management becomes more about taking care of all the things that happen around getting work done so that your team can continue to make great things happen.¬† (Easy to say, much harder to do.)

      1. abhic

        Agreed 100%

  22. Alan Mendelevich

    Looks like you are listing products built by co-founders. I think that small teams of co-founders are fundamentally different from small teams of employees. As long as everyone is a co-founder they are probably more or less equal and employees are not equal to the founders by definition. So the need for some management arises.

    1. abhic

      Very true! There are a ton of cultural & logistical differences in the way a team comprising of only founders vs a team with employees.

  23. JamesHRH

    Post should be titled Pre-Managment Team!

    1. fredwilson

      yes. it should.

  24. Dave W Baldwin

    Another great post and glad you’re going to stick on this theme.The debate re out or not outsource tells me there is going to be growth in outsourcing.¬† Probably good idea to fashion outsource teams headed by those that can understand ideas/designs.

  25. markslater

    as i mentioned beforewe are 4 people with 6 developers. the one addition that i think is great to squeeze in if you can is a customer discovery / development resource. if you are in pilot Рthis can be invaluable. Solely based upon evangelist feedback , we now know the two major feature challenges for the next 60 days. 

    1. LE

      Hey Mark let me know when you are in the Philly area. You need a new photo for your avatar you look way to unhappy in the one that you use. I would be glad to shoot a better one for you.

      1. markslater

        haha – ok i am going to change it. i am rarely in the city of BL.

  26. SD

    While I understand the use of “pattern recognition” as a way to simplify and organize the high-volume inflow of ideas, I think that there are multiple paths to success.A technical founder may be able to build and iterate quickly, whereas a strategist with strong product/project management skills may be able to pick the market approach/positioning much more effectively, and get a better v1 product out the door.Larger point is that an investor (whether its internal or external) needs to have a gut level sense of how patient he/she needs to be given the team thats in place….and the entrepreneur needs to be a skilled communicator, helping set realistic yet ambitious expectations for the investor.

  27. Baba

    Wish Mr.Wilson, USV team, and the readers of this blog a healthy meaningful new year..Have a question for Mr.Wilson, these 2 and 3 person teams, do they tend to divvy up the workload and equity equally or is there a tiered approach to how the work and equity is distributed.One of the things that I find interesting is most of the readers of this blog and also most of the VC’s in the Internet space tend to be¬†focused¬†primarily in software ventures.¬†Wonder if these metrics apply for startups in other areas which are creating hard goods and software services?

    1. fredwilson

      i can’t speak well to non-software projectsand there is no easy answer to your first question. i think it largely depends on the team. but if its not close to equal, it leads to issues on the team

  28. LE

    Does anyone know if any service has gained traction in pairing up founders? I know they are out there but from what I can tell nobody has cornered this market.Googling “find a co founder” brings up various links but nothing stands out (and I’ve read about this before and don’t remember a conclusive answer to the question.)For all that people knock online dating for me personally it worked and had tremendous value. Being able to zero in on exactly the type of person you want to date/marry removing reasonable geography. No reason this can’t be done with finding business partners. ¬†Seems that there are many similarities to dating (pre-internet) to finding co-founders (now). There must be people ready to get paired together (by skills, personality, geography) but this isn’t happening on any scale. It’s all people you know in business or go to school with or friend of a friend (like dating used to be). Seems there should be a better way.Added: I know about the meetups and find a co founder type events but that’s not the answer.

    1. fredwilson

      startup weekend seems like it does this best

      1. LE

        http://startupweekend.org/ is fine (anyone interested watch this video)¬†http://philly.startupweeken… but it’s focused on “building a web or mobile application which could form the basis of a credible business over the course of a weekend”.¬†Since the most investing is on a team and not on an idea what is needed is a service that concentrates on putting people together irrespective of whether they had a particular idea in mind at the time. ¬†Maybe they do and maybe they don’t.Not to mention that having to physically attend an event is going to lessen the amount of people that can pair up. (Now some would say that this is a good barrier that it takes initiative and if you’re not willing to attend then person isn’t worth matching with but I don’t agree.)And the events are not held that frequently. And only in major cities.Ideas are easy to come by. Teams of compatible people with the skills needed are not.¬†Similar to what¬†http://angel.co does with investors and startups.So matching possible visions with skill sets. Some people with vision (and maybe an idea) and many people with different skills.Or maybe just skill sets keeping eyes open for a potential idea.¬†A service that does not concentrate on physical presence in order to match opens up many more degrees of matching (and you can get feel from video chat making many more opportunities for matches possible.)

        1. fredwilson

          yeah, seems like nothing does this well enough yet

      2. bfeld

        I recently joined the board of Startup Weekend and agree. It’s an awesome “54 hour simulation” and a great way for founders to meet each other in a real environment where you are doing something significant together.

    2. whitneymcn

      I think that find-a-co-founder events are more like marriage brokers than dating, and that may be part of the problem.¬†Most of us wouldn’t get married after knowing someone for just a couple of weeks or months, so an arrangement that’s intended to match up co-founders together after a similar amount of time is likely to have a relatively high “divorce rate.”From what I’ve seen of NYC, the general tech/startup scene is closer to dating: people get to know one another in a relatively low-pressure, low-commitment situation, and get to know each other — the good and the bad — over time. You meet someone as part of a group. Then maybe spend a few evenings together, followed by a couple of weekends working on something, and then one day the two (or three, or whatever) of ¬†you realize that you want to spend the next few years together.

    3. FAKE GRIMLOCK

      YES.HACKATHONS. STARTUP WEEKENDS. CODE FOR CHARITY EVENTSJUST LIKE DATE. BEST WAY FIND FOUNDER IS DO SOMETHING WITH GROUP.

  29. jason wright

    The differences of opinion on this subject must come from the differences of experience. That has to be encouraging as it’s saying that it’s possible to get it done in different ways and from different beginnings.I think it’s mostly about character.

  30. george

    From my POV, the initial team size has more to do with decision-making during product development? I believe that’s why large companies such as apple and google still organize like a start-up when undertaking new product development; beyond that inner circle, you build capabilities…I definitely agree with the small management dynamic approach; it’s critical to eliminate noise and execute!

  31. Youssef Rahoui

    Agreed. And I can see it in our startup: it is just amazing how much you can accomplish with so few people, when they are talented, focused and driven. Looking forward the next post because it is really difficult to add people with the same level of everything!

  32. Miljenko Hatlak

    Today we have on our menu a debate whether it is good to outsource your product development at early stage, when you are in phase of your product or prototype development. I would say this is a dumb idea.I have just installed the newest update of¬† Firefox to it’s latest version ( 9.0.1.). They¬† have promised up to 30% better performance. But as I realized after update, my bulletproof code that has worked well for years,¬† has suddenly started showing some unexpected behavior. ¬†When developing¬† our product, we all do our best to build product that is fully operational in all mainstream browsers or mobile platform. By outsourcing your product development in early stage, you are facing a risk of receiving a product that suddenly doesn’t work the way you imagined. And you are left being continuously dependent upon your outsourcing company and their developers (that may leave anytime). At that stage it’s hard to keep your own developers, and is definitively much harder to assure your outsourcing company to keep their own developers on your disposal.Just imagine situation when you presenting your product to potential investor who has freshly installed newest browser or has just bought its new smartphone featuring newest OS version. In case of minor error, your would be capable to fix it during presentation or at least you’d know to explain what’s went wrong. By having your product built by outsourcing company, it’s much harder to save yourself from unpleasant situation.

    1. fredwilson

      that is a good description of the value of “owning the code”

  33. Donna Brewington White

    Even though you are speaking from a particular vantage point, so many of the points made in the post and in the comments are transferable. ¬†I am approaching this series from several perspectives — including both current and (possible) future scenarios — and already the wheels in my head are turning. ¬†I’m excited. ¬†One of the things that struck me is how helpful it is that the companies you used as illustrations are ones that seem familiar to this community– you have introduced the companies in a post and/or have referenced them from time to time — and some of the founders have interacted here.

    1. fredwilson

      it wasn’t intentional. but as my friend Kirk says, i do “pimp my portfolio” quite a bit. so they should be familiar to the community.

  34. Donna Brewington White

    I get it when you say that management skills can be a hindrance at this stage — but what happens if these skills are not present on the founding team — especially given some of the other statements you have made about founding CEOs over the years?However, I’m not so sure that it is “management” skills that are needed, but rather leadership — both in terms of inherent ability and skill (skill can be developed as you go as long as the ability is there). ¬†A leader can hire managers at some point, but it seems that if someone on the founding team is not a leader, then this will become problematic. ¬†I am hoping that you or someone else will talk about this in this series. ¬†The importance of leadership and at what stage of the business it becomes critical — and what to do if this is a weakness in the founding team.Also given some of the comments, I wonder if the topic of “friends and family” as co-founders and even employees should be addressed at some point. ¬†Seems like this would be really relevant. ¬†And the balance or trade-offs between hiring people you like versus those who are more effective — and where/how objectivity factors in.

    1. FAKE GRIMLOCK

      WHEN DOES STARTUP NEED LEADERSHIP? AS SOON AS IT HAVE PEOPLE TO LEAD.

      1. Donna Brewington White

        Sure, but who provides that leadership?  

  35. Brad Lindenberg

    I wrote a post a couple of weeks ago entitled:THE DIMINISHING VALUE OF TECHNICAL CO-FOUNDERSI describe why giving a purely technical person equity is not the smartest thing to do. It’s very relevant to this discussion.http://www.lindventures.com

    1. fredwilson

      thanks for the link. i’m off to read it now.

    2. LE

      I agree with what you are saying in your post. And this reminds me of what I used to tell people many years ago who wanted to have an attorney as a partner in their business. This is a bad idea for many reasons (one is that everything is looked at from a legal angle which can really hold back the business by layering it with all sorts of things that you don’t need to worry about. A sort of business hypocondria.)Anyway back to your point. The main reason people have to include technical co-founders is that they get the free labor to build things and they don’t have the money to do that without the free labor. I think that’s the major reason and of course you touch on this.Fred commented”one thing that is different between a house and software is that software needs to be maintained, upgraded, modernized, and scaled once you’ve shipped it. a house is more of a static item.”I think (sorry Fred) that shows a lack of understanding of the difference between something that can be bought in a business (like legal help) vs. something that can’t be bought (like high level thinking that realistically can’t be outsourced).¬†Not only that but I would imagine there are also cases where the technical co-founders become sort of prima donnas ¬†that actually prevent the organization from doing things that they might do if they could freely make a decision based on the best technical solution. Since any existing person is going to have their bias and you ¬†can’t easily get beyond that (especially if you don’t have the technical skills to fight that battle).Now on the other hand there are people who are technical who also have other skills but they are probably few and far between. While I don’t know¬†@FakeGrimlock:disqus¬†actual coding ability I would say that based on his comments he goes well beyond the business knowledge in a typical coder.¬†

      1. Brad Lindenberg

        Exactly my point Рfree labour on day zero in return for equity does not make good business sense in year 2 after the startup ecstasy has worn off and you actually have to run and build a business where a much broader set of skills are required. 

    3. jason wright

      It might still be necessary to offer equity. The key is always the terms. There could be a buy back clause at a particular time and value indexed to the hopefully rising success of the enterprise. These tech people don’t have to be taking a ‘free’ ride ¬†to the summit on the cable car they helped to build. They can be ‘dropped off’ at some point on the way up and walk back down with a backpack filled with relative reward.The bigger point for the entrepreneur is this – is the journey to the summit worth the view?

  36. noam makavy

    Web start-ups can and should get their product out in the first few weeks. In these cases I think it’s best that the non-technical people (person) focus on recruiting early adopters (guerrilla marketing), compiling feedback and analyzing data and then feeding it back to the product development process. It’s a specific type of product management that requires very different skills than what you need for B2B software companies.

  37. Brendan

    Seems suspicious that a VC discourages partners that have a clue about funding. ūüôĀ

    1. LE

      I think that’s an interesting point. But I could argue the other side of it as well negotiation wise.¬†Here’s how.If I am negotiating with 3 people who don’t know anything about money issues (what you are referring to) then what are they going to do? They will ask the proverbial “everyone and their uncle” for advice. I don’t have any decision makers and therefore I loose control (you always want to deal with decision makers in any selling situation). And the people who they ask want to appear smart so they will put all sorts of ideas and demands into their head (because they don’t need to clean up the mess if things fail so they can be bold in their ideas they have less to loose). ¬†And it’s even worse. The people they ask can’t be sized up because you probably won’t meet them. That makes things much tougher then dealing with someone in person.But now let’s pretend for a second I have 3 people of which 1 guy is the “guy who knows about this stuff” that the team trusts. Then I am dealing directly with that one person so all I have to do is try to control the negotiation with him/her and get what is best for me. To outsmart them.I’m writing this to try and be realistic to show what happens in actual business negotiations in which people are angling for the best deal they can without loosing a deal.¬†

    2. fredwilson

      i’ve back those types too. didn’t work out so well.

  38. Dino Dogan

    yup…thats us. A two person team (we’re adding a 3rd this month). Lemme tell ya, it’s hard as hell. The amount of work and the demand posed by our community can be overwhelming. So far so good tho ūüôā¬†

  39. Volnado

    Loving where the series is at right now. Keep it up.

  40. Edoardo Piccolotto

    From my point of view and personal experience, to create a prototype of a web application or product, the creators need to have different skills in different business parts and know a little about everything.By doing that people are able to create something by keeping the costs low, and then after launching their product and see how the market reacts, they can choose to invest money and time to find people that are experts in specifics areas of the business (like developers or marketing managers). Doing so they can later develop a better product and grant their business  better possibilities to succeed.

  41. Andys

    And you would know because you got lucky with twitter and foursquare???Seriously??? Does this pass for wisdom nowadays?A company is usually started by N (0<n<15) or=”” more.=”” yes=”” there=”” have=”” been=”” successful=”” companies=”” with=”” 10=”” co-founders.=”” and=”” they=”” will=”” hire=”” based=”” on=”” whether=”” they=”” need=”” more=”” personnel=”” or=”” not.=”” duh!!!=”” hardware=”” startups???=”” energy=”” startups???=”” services=”” startups???=”” of=”” course=”” if=”” you=”” want=”” to=”” build=”” one=”” more=”” ‘disruptive’=”” social=”” ecom=”” company=”” you=”” don’t=”” need=”” more=”” than=”” 1=”” guy=”” with=”” html=”” javascript=”” php=”” skills.=”” my=”” goodness!!!=”” you=”” vcs=”” and=”” your=”” inflated=”” superstar=”” status!!!=””>

    1. fredwilson

      25 years in the VC business150+ startups in that timejust sharing my opinions based on those observationsif you find it useless, there are other websites out there to hang out on

  42. Andys

    And you would know because you got lucky with twitter and foursquare???Seriously??? Does this pass for wisdom nowadays?A company can be started by any number of co-founders. There have been successful companies with 10 co-founders too.They will then hire based on the requirements. DUH!!!hardware startups??? energy startups??? services startups???Of course if you want to build one more ‘disruptive’ social/ecom company you don’t need more than 1 guy with html/javascript/php skills.My goodness!!! You VCs and your inflated superstar status!!!I guess my previous comment showed up a bug in DISQUS :)or I am too stupid to comment properly ūüôā

  43. PrasannaKrishnamoorthy

    Looks like there’s no current edition though :/ (At least not on Amazon) And the reviews are polarized :)I’m a fan of Steve Blanks, read and trying to follow CustDev. Let’s see where we get to!And getting ‘rare, out of print’ books like this in India is tough :/Looks like this inc article covers the important stuff http://www.inc.com/magazine

  44. Rob Hunter

    Totally agree with the team v solo remark. ¬†I did the solo thing for 2 years right out of school, and it made for difficult times. ¬†Someone remarked that if you can’t get a cofounder on board your idea must not be that good in the first place (a gross oversimplification that I disagree with, but I think that the underlying thought has merit).That being said, it’s nice to see Fred point out some solo successes – it might be tougher, but it is possible. ¬†Best of luck, Charlie.

  45. Shawn Cohen

    While I’m not a founder yet, I can totally see this principle play out on the projects I work on at our business. When I make collaboration a priority, answers to my dilemmas come much faster than I could have imagined. Nothing beats a team.

  46. abhic

    I think this is the crux of the whole Team > Solo argument people keep on about. Its this that lends credibility to various reasons to mitigate ‘operational risk’ on paper.¬†However, practically you could do a bunch of things. Figure out how to jumpstart an advisory board.¬†You could try to do it with people you know, people you have never met, people you wish you knew. I am almost always amazed by what a succinct email to the unknown stranger results in.¬†You could also setup an Advisor Options Pool much like you would want for future/long-term Employees. Some advisors are easier to engage with some sort of vested interest, but that’s not too bad as long as you value their participation enough.I would love to hear more about your experience as a solo founder.

  47. FAKE GRIMLOCK

    IF NO ONE HELP YOU BUILD IDEA, NEED NEW IDEA. #COFOUNDERMATTERS

  48. Rob Hunter

    Maybe it was FAKE GRIMLOCK that I heard that from.It’s not a mistake I’m in a hurry to make again.And way to get on CNN today!

  49. FAKE GRIMLOCK

    ME SAY THANK YOU! IT FUN.