Having non-technical founders who failed to even outsource their project is an enormous red flag. Nobody there knew how to make the product a reality and if it is you who is doing 100% of the work, then you obviously deserve 100% of the equity. "Having an idea" is not worth equity.
If you thought the idea was great, there was an obvious golden opportunity for you, none of the people there are going to make this into a product, but you can. If the idea was bad, getting paid in equity means getting paid in something worthless.
The only situation where it is reasonable to deal with such a totally defunct organization is if they pay you a lot of money. And if there is a single missed payment you stop any work until you are paid.
Too many fantasy tales of overnight successes out there. It takes an enormous amount of work to make things look easy - in a commercial setting. Some people just pick things up and are relatively good at them but they cannot productive it. To do so you have to be able explain it and they don’t understand it, they just do it. So they can’t make a business out of it and they cannot become top of their field because they lack the fundamentals and the work ethic.
I could talk anybody to death with all of my ideas. I only get to work on very few of them. I can’t imagine how sad a life it would be to only have one. It’s great for mentoring though because there’s always something shiny on the shelf and I can let them window shop for one they like.
I certainly should have spotted this as soon as they offered me a contract that was a clumsily-reworded version of the contract for the awful overseas contractors
Oh hi! Are you me?
In fairness I think "non-technical" needs to be clarified a little. I can easily envision (and have seen) founders who are not themselves actual software engineers but who have some background in project management or otherwise managing tech teams hiring an offshore team and moving very quickly to a viable product cost efficiently.
In fact I'd bet it's at least a coin-flip that this profile would actually be more effective than a hardcore CS background engineer who hasn't ever managed teams or launched and sold a product.
Of course that's a small caveat, since that's almost never what we're talking about, like in this example. But still, seems worth noting that the outsourcing of the build isn't necessarily the red flag, the red flag is the leader of the project having no experience in building and launching useful software.
> I think "non-technical" needs to be clarified a little
> non-technical founders who failed to even outsource their project
Like many, I also had an experience like this in my younger days: obviously unfit product, early prototype made by bottom-of-the-barrel contractors, co-founders who can't code, no salary, no users.
I got lucky, and spent only a few months while not working that hard.
But at the same time, this quote hits home:
>I was doing a startup. I was executing, and for the first time in my professional life I wasn’t insulated from the results. I didn’t achieve my destiny of great things, but I’d built something.
Right? I literally can't even call it a proper warning because of how much I took out of it.
My whole career was jumpstarted by my second startup (we only got to preseed but it was a great two years) and there's no way I'd have been as good a fit without this experience
I think you nailed it here.
>> I hope that by reading this story, I can protect some of you from 11 months of pain.
That's not how experience works. What you really did was get an 11 month business education. And again, you can tell your story, but you can't pass on that education.
I'm glad you moved on to better things. And I think you're saying that this experience prepared you for that, and you were a better overall entrepreneur because of it.
Thats how experience works.
But maybe he can compress someone else's terrible experience down to 6 or 3 months, or stop them from sinking their own money (or that of family/friends) into an obvious faliure. There's another failures to go around; we don't all need to life every one of them.
It would be nice if it did, but that's not how experience works.
Which is to say that yes, we can learn from the mistakes of powers, and the story is worth telling.
For 99% of people, who want safety and security, they'll just ho get a job anyway. For the 1% who want to start something new, well 4 in 5 will fail either 5 years. Those failures are the experience needed to find success. Some get there quicker, some abandon good ideas too quickly or bad ideas too slowly.
That's how we learn along the way, and yes, absorb the lessons of others.
Yeah honestly I’m not sure what someone is meant to take out of this. The experience is really useful. But if me and Gus worked this out after 3 months, we could have cofounded our own thing!
Yes, and no. Sure you might have figured it out sooner. But there's a lot you learned in the other 8 months which you shouldn't negate.
You could have taken Gus' dad's advice - and you'd have saved some lot of time, but equally missed out on so much learning.
Look, most opportunities are bad, or at the very least risky. But if you wanted safe and secure you can just go get a job. Some risks are worth taking on, even if they look risky, and even if they fail.
Experience helps you at least identify the risk. Both in product and in people. Some products will just never work (), some people aren't worth working with.
() your mechanic program was likely doomed because "that's not how cars work". I was never going to be a customer because I have a mechanic who's been looking after my cars for 30 years. He always seems to have cars to work on, do I guess he's not a customer either. If I buy a car new it comes with a service plan, so I'm out that loop.
In other words I suspect your app solved a problem that's only a problem to fresh grads with their first car. And they just ask their mates, or their dad.
As you discovered you can't feature your way out of the "no market" problem. You discovered that finding a market is more important than building a product. All excellent lessons.
Absolutely - I mention this at the end. This experience was a springboard into my first “real” startup, and I’ve been working my way up fast since then!
I had a similar wake-up call when I joined a startup. I had over a decade experience working in stable companies, but I learned so much in a short time.
What surprised me the most, was that I did not improve much technically, as we chose well known technologies to get the job done. Focusing on product over tech was one of the best decisions we made.I also learned to make compromises and accept some technical debt in order to get the product out in time. You get a much deeper view of the business needs when you work in a smaller group.
Currently at a startup that did the same thing wrt having their app built overseas. Protip: don't. Endless bullshit, excruciating trying to get anything out of them. We ended up with an app just like this guy's, locked aspect ratio and all.
If I find another startup whose product is an app, and they can't find a local developer to write that app, I'm running. Why outsource your core product!?
It's the classic case of believing that ideas at 90% of the value and execution is something you can delegate. Think Kendall from Succession.
This is very common. Lofty idea folks often see developers as a commodity, so why not just outsource to the cheapest bidder? You might luck out and get a smart person who doesn't know what they're worth yet... but, 9 out of 10 times, you get what you pay for.
If you don't know the value of what you are buying you are most likely to get even less than what you payed for. In the story they basically got scammed by overseas shops who probably pocketed most of the money and farmed out the effort to minimally-skilled and minimally-paid developers who were in way over their heads.
Totally true. If you can't supervise the work, at least minimally, you're going to be taken advantage of.
I think there are ways to outsource too. Outsource to an international team that benefits from your success rather than viewing you as a money-making goose. Build a different incentive model, and give away some equity. Sell them the dream.
Because there are legions of people out there who want to be "entrepreneurs", so they come up with "business ideas". They can't make these ideas into reality by themselves, as they lack all technical skill. This lack of skill also means that they can not manage a project, as they lack a basic understanding of how software project works.
I can only guess, but maybe they think the product is just something you pay some of those "other people" to whip up, and the whole game is about your business and marketing and metrics etc. The app is just some necessary cost that must be minimized to check the box on their business template.
This article reminded me of the time a guy wanted to pitch his startup idea for me to develop. He wanted me to sign an NDA before telling me, as the idea was so great that I would obviously steal it, which I refused.
So all he would tell me is that it was “the next Twitter”, and from what I could gather, he would retain the majority of the equity and I would do all of the work, while he lobbed ideas at me from on high.
I passed on it, but only because the red flags were extremely obvious. I could certainly see a situation where I might have been sucked into something more subtly exploitative.
This needs to be highlighted: Everyone who does anything at all in the realm of business or tech should basically never sign an NDA unless it is already positively guaranteed they are getting something out of it. You might be required to sign an NDA once you have been hired at a W-2 job if the company handles sensitive data. Or if you have already been offered a contract. Event then, make sure it is actually necessary, and run it by your lawyer.
But if someone wants you to sign an NDA just to hear about their idea or business, or as a condition of being interviewed for a job, ALWAYS say no. VCs don't sign NDAs and neither should you. It's plain and simple uncompensated risk.
https://blog.jpl-consulting.com/2012/04/why-i-wont-sign-your...
https://www.markwelchblog.com/2009/08/26/why-i-dont-sign-nda...
Reminds me of this classic bit: https://www.davar.net/HUMOR/STORIES/MS-CUISN.HTM
I used to get these “opportunities,” on a weekly basis.
As soon as someone hears what I do, and that I’m retired, and doing it for the fun, I hear cha-ching! in the background, somewhere, and their eyes light up.
But yeah, we’re a dime a dozen.
I can't even count the number of times I've heard this pitch, complete with NDA demand. The only answer is "Thanks, but no thanks". I have never had to regret it.
I've seen this on reddit or similar. Guy has an amazing idea, all he needs is a developer, sales person, finance person, management team, ....
It reads like a parody but it was serious.
Oof. Sorry. Missed in this story because Jacob is in Europe/UK is that this level of absolute incompetence in a launch team is, in my experience, extra common on that side of the pond.
There are of course some fantastic startups launched out of the UK and Europe. Spotify, Deepmind and Raspberry Pi come to mind. But, as a rule on the investment side, I'm always super skeptical. Inevitably cap tables are worse, investors have a very different view of their roles than they do in US or Asia, and there's so much less startup infrastructure than in SV or say Singapore or Shanghai that it's a very different world. Ironically, it's self-feeding -- investors think startups are shitty business, they charge more, high quality founders head for greener pastures -- rinse and repeat.
Haha to be fair I have been adjacent to lots of startups like this. I also spent a few months attending weekly zoom calls for a side hustle that was effectively some mid level bored corporate people blowing off steam. They were a few steps behind getting a bankloan.
I’ve been running an outsourcing business for a while and can confirm - 99% of people paying for development have no idea what they are doing and how to sell it. They are destined for failure unless the outsourcing team builds a product that is 3x better than a competitor with 100x funding.
Success stories I’ve seen always involved extremely active customer. They become part of the team, helping devs to build good product. Also it always took much more time and money. If you think you can build marketable product with fix-cost-scope contract - think twice.
Rather than being a cautionary tale, I actually think this is the kind of misadventure that everybody should have. You learn so much about the real world from a failed startup where nothing is done right (at least I did). Your early 20s are the perfect time to do it with little risk. Lots of painful memories I laugh at later. Highly recommended.
Yep this is exactly my summary at the end! I'm glad I sat on this story a few years to let it develop and let the positive career consequences play out.
It's an entertaining and well-written story. After reading it I momentarily entertained writing up my own similar misadventure, but even 15 years on, I think I'd find it too difficult to write about. I'm glad you were able to pull it off though!
An additional red flag - if your company lists "being SEIS registered" as a point of traction, run a mile. Literally every newly registered UK company can get this by spending 60 minutes filling out a form that says "my company is risky, I intend to raise money from VCs".
“This will be a great differentiator when looking for funding!”
"Marketplace startups are often considered the hardest software startups to build, because you have to create two markets at once. They work best with frequent and inexpensive transactions (from which you can reasonably take a 20% cut)"
2 sided markets get started by buying one side of the market. This is why this model is very expensive to bootstrap. You typically start by offering free or very discounted services to the consumers and pay the difference to the producers until you have captured the consumers and the producers pay you for transactions. All the while you have to mitigate disintermediation, so that producers can't bypass you to access the consumers outside of your market platform.
> If you aren’t sure what your cofounders are doing, trust your git instinct.
That's good advice to not lose your HEAD.
In the later part of my career, I’ve had all sorts of “opportunities” to be a “technical cofounder” or a “CTO” (which was barely a glorified overworked tech lead).
My motto is “FYPM”: https://youtu.be/3XGAmPRxV48?si=zSXRVQibvli1QTk1
Cash not illiquid equity at my market rate:
“You’re getting in on the ground floor of something huge.”
“We can’t offer big salaries yet, but the upside potential is enormous.”
“You’ll have massive impact here — way more than at a big company.”
“We’re looking for people who are mission-driven, not just here for the money.”
“Everyone is making sacrifices right now.”
“Once we close the next funding round, we’ll revisit compensation.”
“The real reward is in the equity, not the salary.”
I love this story. Why? Because it is the story of so many startups. I was so perplexed in the mid-90's when the dot com "boom" had started by people who wanted to do a "startup" but had no idea what that meant. Like the author, people with a feeling of Destiny that they would be some leader of something that everyone talked about. I had the same beliefs when I left Sun where clearly I would never be "famous" but by starting a company that became big? Sure anyone could do that. And in fact, a peer at Sun for whom I felt was not particularly qualified at anything, had gone on to a startup which had then gone public and made millions! And if he could do it, well it was guaranteed for me, right? Yeah, no.
At the other end of my career and looking back it becomes possible to see things that you missed on the journey, the role of luck, the difference between talking hard and working hard, and the critical importance of the people involved. A million monkeys with a million typewriters won't eventually create Shakespeare's works, they will waste a lot of resources and create a bunch trash. I also discovered that there are people who, when they speak, you really want to believe what they are saying. Being able to step back and say "what's the foundation here? Why should I believe this?" can be very difficult.
Pitch: It's a replacement for Blockbuster. But instead of going and getting instant gratification and getting to watch the movie you want to watch tonight, you create a wishlist and we send you 3 titles off that list (normally the 3 least popular), which may or may not be what you want to watch right now, and add the convenience of injecting the United States Post Office into the process.
https://xkcd.com/2618 right?
Do you think a million monkeys with a million typewriters could come up with Oracle Database 11?
Is an existence proof allowed?
A million monkeys with a million typewrites will statistically have one lucky monkey who creates an extremely successful product which also looks very dumb and very unconvincing ("Srsly? You want to make money from random people hosting strangers in their own rooms?" Bang, AirBnB)
The problem is selection bias. A startup is 3 monkeys tops, so the chances of that are appropriately low and if the product looks dumb and unconvincing, it probably is ("...but they also laughed at Bozo the Clown.")
I joined a startup after working for 10+ years in regular companies and there was an incredible mix of highly competent and experienced people who knew how to get things done and were willing to put their egos aside to grow the product. As a small group, we made a product that was easy to sell. It was our market's "Iphone" moment. Our competitors were shaken and concerned because of our momentum and modern approach (they used Windows software on a yearly update schedule, while we were based on ios/android/web and updated daily).
I don't think the founder realised how lucky they were to have this combination of people, as this was their first startup after years in enterprise sales. There were other competitors that started around the same time as us, but they failed to deliver. I don't think we were necessarily better at developing, sales or marketing individually, but as a team we were able to work together really well.
When the founder raised a significant amount of money, they decided it was time to scale up and become a "real" company with proper hierarchy, reporting lines and processes. They hired people from FAANG who had impressive resumes, but were more concerned with titles and proving themselves. Constant rewrites, re-orgs and workshops to improve working processes made sure that progress halted, and most of the original team left. Today, the product is still alive as a minor actor, but they lost a lot of momentum and the competitors had time to launch their own "cloud" products.
It was painful at the time, but now I look back and I see it as an important lesson.
There should probably be an entire chapter written on "Okay, but what if the product was desirable but not 'technically' legal, hmmm?" :-)
It would say "we all know how it went" :)
Had an interesting discussion this past weekend on whether or not Silkroad was a criminal enterprise or a very successful startup. It was an interesting look at the question of 'business first' versus 'lawful first' societies and their relative success through history.
I would say good luck finding enough very successful companies NOT matching that description to fill a chapter.
This is the classic dead-end startup story from beginning to end. It checks all the boxes:
- 3 non-technical cofounders
- Flurry of activity for everything other than acquiring customers
- Attempt to outsource development followed by disappointment
- Relentless scope creep
- Zero go to market plan, just an incessant belief that more features in the app will solve all problems
There is also one less obvious point that is buried in the article:
> Simultaneously, my underpaid mid-level consultancy role passed me up for promotion again. I wanted out, double-time.
I did volunteer mentoring for a while. Few people went all-in on unpaid startup jobs as their primary role, but many were tempted to do it as side projects. They always believe it’s less risky. The risk they don’t see is that it distracts them from their main job, either slowing career growth or risking a PIP or layoff.
The common thread I kept coming back to was this: Ignore the side projects. Focus on career growth at your day job. Put your primary energy into growing your career or finding a job where you can.
Something about the side hustle continues to lure people into thinking it’s a way out, until they burn themselves out and sabotage their day job while doing it.
Throughout my long career in the tech industry, from established giants like Oracle to a hyper-growth pre-IPO Airbnb, I've observed a consistent pattern: engineers rarely advance more than one level above their initial hiring position, regardless of their performance or tenure.
The only exception were juniors who could rise to a senior. But senior to staff, or whatever you want to call it is almost unheard of unless you jump ship.
It's a professional version of "a prophet is not without honor, except in his hometown and among his relatives."
Familiarity begets being taken for granted, and undervaluation, which hurts one's promotion case.
Over about 10 years I moved from mid level developer to director (through senior, team lead, engineering manager, sr engineering manager) at the same company. It was a small company that grew and the founders/high level engineers actually saw the value in retaining and growing people and had interesting enough work to keep people from getting bored, so we had high retention.
Many of these promotions were out of cycle (because there was no cycle) and now that I’m at a bigger company I see how this would be much more difficult. There seems to be little interest in really retaining and growing engineering talent and all promotions are at the mercy of an entrenched HR org that doesn’t understand the work that anyone is doing. On top of that budgets are generally much tighter now than I’ve ever seen during my career.
It may still be possible to do this at smaller companies, with the obvious caveat that there’s always the danger of title inflation, though now that I’m at a bigger company I feel like I see more title inflation around me than I ever did at the smaller company. There are also entrenched structures of power that are obviously working against the success of the company and are causing good people to leave.
I do wonder if more companies embraced promotions it would lead to a healthier organizational culture in general since you’d have more people around who were involved in creating it.
It seems like the simplest reason for the discrepancy in behaviors is that in the small company, the higher level roles came into being organically as the company grew. Where as at the already established large company, to get a higher level role you almost have to take it from someone else. Or wait for a vacancy.
Lol I have had one promotion in my life and it was mid-Junior
That said, I have only moved jobs 2x in 9 years (my second startup failing doesn't count)
Just over 10 years in space stuff, I have noticed exactly the same thing.
What kind of "space stuff"? Spacex/blue origin/nasa?
Yup. You get Bucketed and there is no growth
> The only exception were juniors
The article mentions being an early career junior in the first few sentences.
"Flurry of activity for everything other than acquiring customers"
In 16 years on HN this is one of the best pieces of startup advice I've seen.
Default should be 10% of time on MVP and landing page, 90% on distribution until you smell PMF.
Fight violently against any suggestion you invest more heavily in product until somebody is in tears about keeping up with demand for your MVP.
You see this with internal projects at larger companies too, just with fewer constraints. At big companies, the same impulse leads to empire building and vanity projects. Far too few people ask, “how does this deliver value for the company? How does this serve the mission? How does it benefit the customer?”
Bingo. Tbh I have done personal projects where I am guilty of this.
Excellent analysis.
> Something about the side hustle continues to lure people into thinking it’s a way out, until they burn themselves out and sabotage their day job while doing it.
Side projects are a way to assert control. The siren song is that you can build your own way out of corporate hell and have a shot at growth (be that financial/personal/etc) without needing 10 randos and 3 committee meetings from your company to sign off on a promotion. In that light, I think it is a very reasonable response.
I think it's a symptom of how crappy and ambiguous leveling feels over the long-term. You're told that nothing's definite, just work hard and deliver results, and you'll make it.
> This is the classic dead-end startup story from beginning to end. It checks all the boxes:
Oh my... I concur. I've been in the very exact same stupid play about 10 years ago. 3 cofounders, not one to understand tech, 1 hired me as a consultant, then invited me with a few shares and a salaried CTO role to build the solution, and it's been the exact same scenario.
Do not, ever, associate (figuratively or contractually) yourself with people you wouldn't go hiking with in the wild for one full week, and coming back from it craving for the next time.
Even if you can't stand being in the same car for one hour, don't work with them at all.
Side hustles can be very fruitful! While not tech related, I side hustled with a friend into starting a specialty wet wipe manufacturing business that we ran for 4 years and sold. The side hustle phase was done on PTO and weekends. We worked with the machine maker to get samples that we took to restaurant/hospitality expos to gauge demand. We made a deal with the machine supplier to send finished goods until the machines arrived. Four years later we sold it and I went back to corporate life. It was worth 100x an MBA.
> The side hustle phase was done on PTO and weekends.
Having a physical business and operating it on PTO and weekends is the cleanest way to keep it separate from work.
The tech side hustle mistake is to get a tech job, then think you'll do some more tech work as a side hustle. Some people can keep a clean separation, but more commonly people slide into blurring the lines between day job and side job. Trying to build a startup MVP while working a consulting job is basically doing two tech jobs at the same time, with predictable outcomes for both.
Amazing analysis. To be fair, I think there were a lot of reasons I was passed for promotion at Deloitte. I can grind like a mofo but am a terrible fit for client-facing roles (AuDHD).
TIL AuDHD = "Autistm + ADHD".
Same, I saw it on Twitter and just wanted to use it :D
You can stop at - 3 non-technical cofounders
> - Relentless scope creep
I'm in tears reading this, I've never seen it worded so perfectly. Have we all experienced that founder who has zero vision for what they're building and is so brutally relentless with ancillary asks?
PIPs and layoffs happen to anyone, often randomly. A manager doesn't like you? Here, have a PIP. Good luck trying to seek justice in this situation. You could be working perfectly fine, but the company is complete trash with with hideous ethics.
Side projects help finding a better job, or at the very least work on getting certifications or self-development to find a better job.
> Something about the side hustle continues to lure people into thinking it’s a way out, until they burn themselves out and sabotage their day job while doing it.
Sample size of 1
- Side hustle #1 funded my toy habit for a long time and gave me the confidence "I can build & support something from start to finish".
- Got to C Level working for 'the man' (aka the board). But regardless of level you're never in control of your destiny, especially with the eventuality of PE. For some that's okay, for others that's not...
- Which lead to Side Hustle #2. Left my day job 3 years ago....
Now have some of the best in our wee niche using our product, a number of team members, gradually growing it in bootstrapped fashion.
No investors, no funding rounds, no chasing growth targets. As "pure" as it can get - adding features, capturing more market, getting positive word of mouth, picking up new countries, finding new edge cases, adding new package upgrades. I think we're around 40% of new clients are referrals/word of mouth.....
In the first 6 months of turning billing on you're going "what the heck am I doing...." now I'm "oh I wouldn't give this up..." immensely rewarding bringing other new people into the business, and seeing that flow through to the finished product for our clients.
At least in NZ, side hustles are the genesis of a lot of tech companies.
> unpaid startup jobs
Unpaid job is an oxymoron. If they can't or won't pay you, it's either volunteer work, or a hobby. Why do charity work for a business that thinks it's going to be big; there's plenty of funding out there, let them find it and then they can pay you, and you can do work for them.
If you want to do an hour or a day or maybe even a week of work for free, ok. Maybe that's fun and interesting and you get something out of that, but after that if you're not getting anything, why would you keep doing it?
Because you need experience. At least in my country, unpaid internships are the norm; and you won't be taught anything, or held to a lower standard. You just do the job that you'd be normally paid for, just for free.
And even then, I had a few friends that had to go for another few months of unpaid job (not internship) later on. Because nobody would hire them without experience, and some companies don't consider internship to be one.
- [deleted]
It's easy to be naive as a dev in your mid 20s. It's easy to sell a vision of billionaire startup success to a naive person. Often we sell it to ourselves.
Feels like there should be the equivalent of Matt Levine's "Certificate of Dumb Investment" for this scenario. ~90% of startups fail. Your equity is statistically likely to be worth $0. You will likely grind for years with nothing to show for it except the experience, your network, and whatever cash comp you collected. Proceed accordingly.
https://news.ycombinator.com/item?id=24285305
(edit: totally fine to still jump into a startup role if you're not optimizing for quality of life and economics; I did because I enjoyed the work and the team)
Yeah, the only real regret is I could have got this experience more quickly with less pain and time not spent with my wife
Edit: just realised that made it sound like she died. She’s fine! We just had baby #2! But we could have spent lockdown making bread and playing RuneScape instead of me grinding
I think its completely possible to start a side business, people just dont 100% validate business ideas before building
Lovely article. The payoff of "I loved every minute of it" after all the agony and missed red flags really hit home.
Thank you for reading :)
I get it, why a young ambitious 20-something would be sucked into this.
Sometimes you just need to make your own mistakes to learn, even if you read / hear from others that you shouldn't do that thing.
C'est la vie.
I would even say it was a worthwhile experience. I've built my career off the startup I landed in, I probably wouldn't have got there without being burned here.
Any advice for leveraging a startup role to boost your career? I’ve seen friends turn their positions at early stage companies (Pre-Seed/Seed/Series A) into things like raising funding for their own ventures, hosting galas at SF museums, putting on international fashion shows with their alma mater, or even speaking gigs. And honestly, I have no idea how they pulled it off.
Feels like you might get better advice asking your friends who’ve done the thing you can’t understand?
I've worked with many startups and many VCs. The best VCs are investing in the team, not the product idea. The idea itself is basically nothing. It can get blown up in an instant and require a pivot. But the investor wants to know that the money they're giving out is going to people actually recognizing that and capable of successfully switching gears.
They're investing in people, not some singular half-baked idea that very likely goes nowhere.
In this case it sounds like both the idea was bad, and the team was bad.
Many such cases!
Very surprising that well-designed contracts (with well-designed exit clauses among other issues) aren't at the top of the 'ten red flags' list. This isn't just a problem with tech startups - business partners down the ages have been burning each other with flimsy contractual agreements and 'trust me buddy' rationales when questioned about the contracts.
This is one of the best use cases for LLMs by the way - they can often explain contracts to you, or find flaws in contracts. Try pasting one of those long-winded click-through contracts from Apple etc. into any LLM and see if they can help you decipher the terms - then do this with your startup's hiring contract. Also, watch 'The Social Network' and pay attention to things like stock-split clauses and so on.
Some claim the world is split between those who understand compound interest and those who don't but I think it's understanding contract law that matters more.
> This is one of the best use cases for LLMs by the way - they can often explain contracts to you, or find flaws in contracts.
I respectfully disagree. Just hire a lawyer. You don’t want your understanding of your contract colored by the opinions of an LLM. The lawyer carries liability insurance if he gives you bad advice. If you don’t have a few hundred dollars to spend on independent legal advice, you might want to reconsider if you are in a position to be starting a business in the first place. The amount of money you could potentially save is nothing compared to what it could cost you in the future if something goes wrong.
Interestingly Ben Mezrich (author of The Social Network) said the Facebook partner who got hit by the stock-split clause terms had hired a team of lawyers - but he claimed they were really working for the Zuckerberg side, possibly in-house lawyers.
There might be great value in LLMs fine-tuned to deal with contractual law, regulatory law, and legislative interpretative dance. At present I'd be sure to run the legal contract through multiple different LLMS at the very least, and analyzing it paragraph by paragraph in debate club manner (LLM A: tell me why this is a good contract, LLM B: tell me why this is a bad contract, LLM C: analyze the flaws in the arguments of LLM A and LLM B, etc.) Doesn't replace a good contract law specialist human, certainly, but at least you can then talk to your lawyer in a semi-informed manner.
LLMs are like compilers in that unqualified faith in their initial output is never a good idea.
> watch 'The Social Network' and pay attention to things like stock-split clauses
> but I think it's understanding contract law that matters more
It's best to just pay a real attorney instead of trying to learn something from a TV show or fact-check the hallucinations of an LLM.
any extremely long contract with obtuse terms is designed to screw you in some way. you just wont know until you get there, unless you are willing to spend 10-20k on lawyers to argue the terms
This is not true. There's plenty super friendly contracts that just happened to be written by lawyers who are into legalese maximizing. I can imagine that someone trying to screw you over might use obtuse terms to hide that, but the reverse isn't always true. Sometimes things are just obtuse for stupid reasons.
in my experience it is 100% true, every contract i have seen with over legalese is created by people who expect to be acting on those terms
Bingo. It's why using SeedLegals (boilerplate contracts with simple customisation) was such a breath of fresh air.
I've even worked at bigger places with very scummy equity contracts, like a lawyer drafted it specifically to obfuscate how badly it was screwing you over. Not there anymore lol.
Another red flag: [phantom stocks](https://en.wikipedia.org/wiki/Phantom_stock).
Invented a few things, implemented in product, CEO & CFO sold company from under us. Ended up with nothing.
This isn't so much about the Author's story but the space. He is correct that marketplaces are hell, and especially auto repair market places. I was one of the several devs that went through trying to make Openbay work (a US based market place for auto repair). We actually did have service providers signed up and we did have a way to acquire customers who wanted auto repair. So you had the illusion of product market fit - but the problem is that it's really really hard to get people to actually click "buy this brake job" and then, more importantly, they have no reason to come back to your app because 1) you don't need brake jobs all that often and 2) they can just go back to the service provider. And many shops are happy to still take phone calls as their default way of booking work.
The reason the company existed is the rich founder was upset that a shop wanted to charge him a fortune to get his BMW M5 repaired. He wanted better quotes. So we built a marketplace to get better quotes. But that's not what real customers want (because most people have Toyotas not M5s). And also we didn't do the customer development / research to understand how repair shops work. You want to know how my repair shop manages their repair schedule? They have a paper calendar and write down your phone number and the job. sure there are better ways to manage the work - but this paper mechanism has worked for them for years and why change it? And you know what - I go back to the shop all the time because I trust them. Ultimately people tend to have a fairly personal relationship with their local mechanic. You can build a leadgen product but the ultimate relationship is between the customer and the repair provider.
TLDR - everyone should understand the lean startup. /working backwards model and relentlessly focus on the customer.
> Ultimately people tend to have a fairly personal relationship with their local mechanic.
This is the money line. And it goes for all skilled trade work. Mechanics, plumbers, building contractors, roofers. Most of the people doing this work are just surprisingly bad at it, especially for how much they charge for it. It takes a LOT of time and effort to find someone good. I'd even lump doctors and dentists into this.
I don't want a marketplace to tell me who's the cheapest, I want a marketplace to tell me who's the best. And unfortunately there's no way to build that. (Why is a long story, but the short version is: because there's no way to build the correct incentives into it.)
> Most of the people doing this work are just surprisingly bad at it, especially for how much they charge for it.
A friend quotes a sometime co-worker of his: This is C+ world, and if you can do a solid B- you won't starve.
Yes, exactly! I keep telling my kids that literally just consistently showing up and doing the work you are asked to do will put you far ahead of most of your peers. I'm not sure they believe me now, but eventually they will.
The law of averages. Most in any field are going to be mediocre. It's unavoidable.
Really cathartic read! Thanks so much for writing this. I really related to parts of this and the red flags you point out are very much the red flags I've also noticed with other startups. I almost feel like this could be "required reading" for some.
I hope @paulg asks me to give this talk at demo day
I can make it funnier!
Everyone wants someone else to do the hard part, but wants to "own" something
Bitches, owning something is doing the hard part !
This attitude is also very common. When I see a small company with lots of "leaders" and far fewer doers, it's a huge red flag.
I'm an entrepreneur, bitch. Ideas + delegation!
Extremely relatable. I was the first technical hire for a startup that ultimately failed last year. I did at least have a (below market) salary, and there were no outsourcing headaches, but I really did spend an inordinate amount of my time trying to perfect a product that the founders had no idea how to market. I certainly learned a lot, though it made me a little cynical about startups and the tech industry in general. Maybe in a couple more years I’ll feel more positively about the whole experience.
I find it's all about hitching your wagon to the right horses
That’s the trick, isn’t it. It’s just so hard to figure out which horses are the right ones and which ones are going to bolt off track. In my case, the founders seemed to have good bonafides - former execs from big name tech companies - but had very limited startup experience. Turns out it takes a different skill set to build a company from zero versus running an already successful one.
Liked this: "Startup pitch competitions are mostly a waste of time—validation comes from talking to users and iterating, not from impressing a judge."
Thank you :)
[flagged]
So an app that would probably serve a real need fails because the team is unable to bootstrap the two-sided market. The best dev moves to a bullshit "green habits" app that doesn't suffer from such problems because... it doesn't really do much in the first place. Not the greatest outcome for the world.
Hey man, don't knock 2020/2021 ZIRP era projects
Don't you remember before inflation when we were able to focus on climate change!
But you totally got us there, the startup failed because we were a vitamin (and because our on-the-fence seed round was scuppered by Putin cooling some feet)
Yeah, not so much harping on you as on the whole ecosystem. You seem to have done your part well.
The first red flag is a startup that is contingent on a two sided marketplace... damn that's a tough place to be!
The only times I've ever heard of this working are when you have a huge war-chest to subsidize both sides of the marketplace to come out and play on your app. If you can offer better prices than normal to both sides (with the gap made up from your raises) it can work. Otherwise? I'm not sure it can.
Yeah it turns out those are hard to go to market with, who would have thought
Only way it can work is if you can bootstrap something hyperlocal to start with (think Uber in San Fran)
“Look at the specification. It does not specify anywhere we were asked to support screen dimensions larger than iPhone 4s sized.”
I wonder how many outsourcing firms are going to be replaced by vibe coding. This response is pretty on par with many of the horror stories responses I've seen over the decades...
Sounds like a nightmare. Red flags were visible early on but obviously everyone was blind
The only person you have to convince is yourself!
That was such a great read. And way too relatable at parts. Loved it. Makes me want to write down my startup stories one day, even if it's just for friends and family.
Thank you :D
Loved this article! And I appreciated the BCS references - especially the subtler ones like the use of the word 'chicanery'
I like to think we are the only 2 people who noticed :D
Can someone knowledgeable explain this part?
"The guy whipped out a rudimentary financial model in a few hours. Turns out it’s not that important—it’s for illustrating your runway and spending plan, not to justify an imaginary revenue number."
> In one Monster-and-Elvanse-fuelled night of passion, I was light years ahead of a build that had taken 3 years. They were sold.
MY MAN!
AuDHD represent :ok:
An incredibly good write-up. Had I been the author, I don't know if I could put ink to paper like this without bitterness and resentment burning through every page.
This just makes me glad I don't work in the startup space anymore
Eh, it gets better. I've gone from (this) to my own preseed, to a seed, now in a series A. It's always fun and there's always lots to learn.
I'm thankful I got to experience working at very early startup as a summer intern rather than full time
That gave me enough info to know I'd prefer working for a big company
> The cofounders didn’t have access to the code repo
Get the fuck outta here. I couldn't read past that. I'm done. Thanks for the writeup. Godspeed.
"This is just object code for my idea why would I want to read it"
OMG I laughed so hard with this post. You're a very funny writer!
Well at least he took learnings from it
Hahah it was probably just about worth it. Wouldn't if I had kids or it wasn't mostly in COVID time
Advisory roles only advise. Once you start doing work, you're basically an employee.
I do all that by myself and play all those roles at the same time.
I've always been surprised at the sheer amount of work that's outsourced in software/IT.
Even companies that had staff of developers would often outsource work that should be part of their core competency. Without fail, every time, they ended up with a bill ~an order of magnitude higher than they'd pay if they were just hiring competent staff to deliver the project.
In many of these cases, these same firms would then hire another (lower quality) company to maintain it for them. This typically went as expected.
I could never understand the rationale for a lot of these cases.
"The existing staff is busy"--but they could have two hours of meetings with us daily?
"They don't have competence in those areas"--they're already using $CLOUD and $THAT_STUFF? It often was working with existing systems?
"Costs"--again, see above.
I really could not understand the motivation. I get it for clients that had no experience in what we were sent to do or got sold on something they didn't need, but a majority surely had or could get the resources to do the projects that were done, but opted not to, for whatever reason.
I've seen this kind of thing fail on many occasions.
If it's critical for your business, (ya know, not some LLM demo or something), you need ownership, otherwise you end up with a far larger cost of ownership and piles of logistical and quality problems.
I genuinely can't imagine a start-up doing this. Everything I've seen is private sector companies, most ~competent companies.
I'll say this, the cases where I have seen success in consulting (from the perspective of the 'buyer' is those that were intimately involved with the process from the start, providing feedback and pushing back when needed and taking initiative deliberately to "on board" so they could maintain and use whatever it was they got, and typically working alongside consultants)
You also have to basically avoid most consulting companies. I won't name them, but it's not hard to guess.
Yeah, sounds like the product was DOA. All that time not spent on acquiring customers - but chasing the "perfect product".
So much time could be saved by listening to 10 hours of YC podcasts ...