The Untechnical Founder Death Spiral – Stage 3

This is the last in a series of posts where we’re talking about some of the most common pitfalls that un-technical founders face when starting a technology company. I’ve called this the Un-Technical Founder Death Spiral because once you get started, it’s very hard to pull out and course-correct.

As a quick review, we identified three stages:

Stage 1 – The “Find a Friend to Do Work For Free” Stage
Stage 2 – The “Outer Mongolia” Stage
Stage 3 – The “Raise Money and Hire a Contractor” Stage

You can read the introduction here, Stage 1 here and Stage 2 here.

Let’s talk about Stage 3 – Hiring a Contractor.

Before you even consider hiring a software development shop, here’s a list of questions to ask yourself before you go this route:

Have you tried building it yourself with off-the-shelf software like we talked about in Stage 1?
Have you gone through the discipline of something like the Business Model Canvas to ensure you’re building something people will pay for and want?
Have you talked to at least 50 prospective customers?
If you’re sure you’ve got something worth building, have you tried every possible avenue to find a technical co-founder?
Are you in a spot where you can afford to spend the money you’re about to spend and have nothing to show for it?

Why all of the additional checks? Well, remember that even if you haven’t gone through all of the stages of the spiral we’ve talked about in this series, Stage 3 is by far the most expensive and carries the most risk.

Why Contract Shops Won’t Work For You

As I touched on in my intro to this series, it’s extremely rare that you have a positive experience with a contract shop if it’s your first time building a product (and many times even if you’ve done it before).

Here’s a short list of reasons why it’s so hard to make this relationship work:

You need to spend as little money as possible. The shop needs you to spend as much money as possible.
You need the flexibility to stop development while you figure out the next right move. The shop needs to keep resources busy or they lose money.
You need a consistent team. The shop needs to allocate resources the most efficient way to maximize returns on their people’s time. Often this means moving people on and off of your project as they see fit.
The best possible arrangement you can have is to have payments tied to the product being released. The problem is almost no shop will work this way because they know you’re going to move the goal line during the project. It’s inevitable. As a result, there’s incentive misalignment that makes the relationship adversarial.
Because you are not technical and can’t evaluate work product, there’s a really good chance that you’re not going to get high quality work, or at least not the quality of work that you’d get from an employee or co-founder who’s invested fully.

I could go on and on. The horror stories in Stage 3 are many and bloody. As one Un-Technical Founder told me, “Everyone’s gotta pay tuition.” Almost all of the stories end with “and we didn’t even get a working product” or “and we had to start over once I found my co-founder.”

Let me be clear: The reasons for failure have as much to do with the founders not knowing how to make this relationship work as it does with the contract shop not living up to their end of the bargain.

What’s Your Next Move?

By now, you might be thoroughly discouraged. It seems like every possible path to getting your product built is riddled with landmines. The bad news is that your feelings are justified. The good news is that you can do something about it.

As with anything else where there’s a knowledge gap, there are a wealth of resources available to you to get smart. Books like The Lean Startup, Disciplined Entrepreneurship and Value Proposition Design are tremendous resources for getting started building technology products. These books all emphasize that, in most cases, the technology is secondary. Invest heavily in understanding if you have a business worth spending money on before you start building something in earnest.

If you’ve done the work on the business up front, the likelihood of being able to either raise money or find a technical co-founder increase dramatically. But what to do if you can’t? Are all contractors charlatans?

The short answer is no, but you need to know what to look for. Here’s a few simple tips for hiring a contractor if you’re convinced it’s the right next move.

Understand the economics of contract development fully.
Insist on having dedicated resources (presuming you can afford it). Make it a part of the contract.
Define as much of the product up front as you can. You wouldn’t hire a contractor to work on your house and start by saying “I think the house is going to look something like this, but we’ll figure it out as we go.” The same is true here. You should have a crystal-clear picture of the deliverable before the project starts.
Never pay by the hour. Ever.
Find other founders who were in your position and ask them for recommendations. Startup-friendly contract shops are out there, but you’ve got to work to find them. If you can’t find at least three completely satisfied references through back channels, don’t hire them.

Wrapping Up

As I wrap up this series, there’s a few things I hope you’ll take away.

Remember that advice is one person’s experience, generalized. So while I’ve been doing this for a long time and have seen lots of different situations, I still run into new problems every day. The tips and information I’ve provided are useful as guiding principles, but ultimately you’ve got to decide what’s best for you in your situation. No one can give you a formula.
You’re going to make mistakes and waste money and time. Don’t beat yourself up about it. If you can preserve the ability to persist, even if your choice is completely wrong, you’re going to be OK.
If you sense that things are getting out of control, stop. The voice that’s niggling at you is worth listening to. This is YOUR business and YOUR money, not someone else’s. Don’t continue down the Death Spiral because you think that’s what real founders do. There’s a time to persist, and there’s a time to understand what’s wrong and fix it. There’s no romance in going out of business.

What did I miss or not cover in this series that you’d like to know more about? Leave a note in the comments and I’ll do my best to answer you directly or in a future post.