Tuesday 17 July 2018

Startup Diary: The joys and perils of founder singledom when crafting your own startup

Should you risk being a single founder? The Voxgig boss goes through the pros and cons of his experience

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Richard Rodger, Voxgig founder

I started this company, Voxgig, as a single founder. That's a pretty big no-no in the world of startups.

I've been lucky enough to subsequently find a co-founder, Natalie Gray, who fills in the gaps on the business side. But finding a co-founder was by no means guaranteed, and as we entered a period of initial fund-raising over the subsequent 12 months, I could easily have faced quite a few closed doors from investors as a result.

So should you even consider starting a company when it's just yourself? The near-universal advice is that you should not.

The classic argument against being a single founder is that it is a really bad signal. Investors in the startup world like to use that word "signal" to describe patterns they see in the many companies that come before them. For example, if you can't name a single competitor, that's a bad signal because it means you don't understand your market. The television show 'Dragons' Den' loves to make use of this concept.

You'll often see a cut from the poor company founder saying something silly to the dragons making sour faces or shifting in their chairs.

Just remember that it's reality TV folks, and "editing" is a thing.

Nonetheless, keeping the idea of "signals" in the front of your mind as you plan your startup adventure is just good strategy.

You'll have good signals ("growing market!") and bad ones ("no CTO..."). Don't let that stop you, but don't stick your head in the sand either - you'll have to answer the hard questions sooner or later.

Being a single founder is considered a bad signal because it usually means one or more of the following.

You couldn't sell the idea of the startup to anyone else. That's pretty bad, because selling is a not unimportant job for a founding CEO. Or it means you're clueless. That's blunt, but sadly often the case. The startup world is it's own universe with it's own conventions, rules of thumb, jargon, and ways of doing things. You need to be pretty special to be able to ignore all that and still get funded.

Do your homework and find out how things are done. If you don't do your homework on funding, it's a signal you won't do your homework on the market and product.

Or being a single founder means you're obsessed with being "your own boss". That's probably the worst reason to start a company, trust me. It turns out that you work for everybody when you found a company - there's no-one else to blame when things go wrong. Your worst boss is nothing compared to your best client. Business relationships are not constrained by labour laws protecting your rights. It's tough out there.

Since investors see so many startups, and choose so few to invest in, they use signals to sort potential deals efficiently. Very many will simply not even consider a single-founder company.

Still here and still a single founder? What should you do?

Here are a two paths you can take. Let's start at the beginning.

Have you done this before? Were you part of a startup team perhaps, or a senior person in a successful startup? Reaching a senior position in a large company doesn't count, I'm afraid - you're like a fish in the ocean that can't see the water (HR, admin, accounts, office cleaners, IT…) supporting them (sorry!). If the answer is that you have no prior experience, and this is going to be your first startup, then you need to invest some time in learning the game, and providing yourself with capacity to network and find co-founders.

Leave your job, and freelance for a year. This gives you an income, which gives you breathing space to research and validate the business idea further.

You can use your freelancing work to do this - you have to be at least inventive enough to figure out some angle here to make your freelancing relevant to the business if you're going to make it as a startup founder.

Startups are all about angles and hustle. Operating as a freelancer also gives you the time to learn how to do your business accounts, send invoices and submit tax returns, work with accountants and generally get up to speed on the mechanics of business. You can operate as a sole-trader to begin with. In Ireland this is very easy. On day one visit an accountant (get a recommendation!) and they will help you get set up. A high-pressure funded startup is no place to learn basic accounting. You can see why investors like multiple founders - at least one of them should have "business" experience. If you already know the basics, great! That's more time to spend on market validation and networking.

I've written about networking before in this series. The easiest way to go about it is to attend monthly meet-ups on technology and business related to your industry. Just keep going month after month, and you'll soon develop some interesting connections.

If you're not based in a big city (I'm not), drive up and down in the same evening, or stay overnight in a cheap hotel. It's one of the best investments you can make.

Hopefully, you end your year of freelancing not only with a good grasp of basic business paperwork and a much deeper understanding of your market, but also with a co-founder or two!

Problem solved - you are now much more fundable.

If freelancing for a year is genuinely not an option, the second best thing you can do is work for a growth-stage startup.

Be careful about getting it right. By growth stage I mean well-funded, with a proven product and market.

The startup may yet fail or be out-competed, but they are poised to grow from around 10 or 20 people up to 50 or more.

This is a very special time in the life of a company. There is chaos, but it is constantly in need of containment, and you will learn an awful lot just by turning up every day and embracing the madness of rapid growth.

If your chosen startup is successful, you exit with a little bit of cash from your options to kick-start your own venture, and with credible startup experience.

The downside to this approach is that it can take years to work through. You can't really leave until success is clearly visible one way or another.

For most startups, that's at least three years from founding, usually five. That's a big investment of your time. If you're at an early stage of your career, it's not a big deal, and this might even be a better bet than freelancing. But if you're more experienced, you might give your most effective years to making somebody else rich. You wouldn't be considering a startup if that didn't irk you already.

And then the startup might fail. This is not as bad as it seems.

Even failed startups provide a great experience and in general are not held against people (unless there was fraud or other bad behaviour. If you see this, just leave, on the same day - it's not worth it). But at the same time, it will hurt you financially and, as a rule, most startups do fail, so this is the most likely outcome.

Let's consider the criteria for when you can be a single founder.

You need at least two of: the right experience, money, or deep domain knowledge.

The right experience is to have been in one or more startups before, at a senior level, and to have operated in most roles during that time.

If you co-founded a startup that failed, that's still OK. If you failed previously as a single founder, that won't work. Then you definitely need to be part of a founding team. Don't fly solo again.

I was a first-time clueless single founder, and my first company was… not great.

I deliberately sought out co-founders after that to make up for my skill gaps.

If you have money to provide the seed funding, that's wonderful. You should have at least six months' worth to get you to the first round of funding.

You can hire to fill in the gaps. But note that I said two out of three above - just having the money is not good enough. You'll have more fun buying a wheelbarrow, a jerry-can of petrol and withdrawing your capital in cash.

Deep domain knowledge can triumph over all else. Design a search engine 10 times better than anything out there. Come up with some unique new biochemistry and patent it.

Take your insider knowledge of the airline booking industry and automate obscure processes with software.

If you are in a position where you have special knowledge and insight, that's marvellous. You need to arbitrage that knowledge before it expires, because somebody else will, soon enough.

Previous startup experience is still better than money, but you're still a good bet. But here's the thing - if your domain knowledge is that good and that real, surely you can persuade a co-founder or two to come on board?

A startup is always a team effort. Single founders only make it if they can build a team around them.

If you are single founder, don't give up, just focus on building that team, quickly. And if you have yet to found a company, perhaps the best route is to seek out co-founders first, rather than fall prey to hero fantasies.

(Newsletter update: 2,493 subscribers, open rate 13pc.)

Richard Rodger is the founder of Voxgig. He is a former co-founder of Nearform, a technology consultancy firm based in Waterford.

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