What's your ideal fare offer for CTO/agency on the early stage?
Hi, I'm a CTO in 200-people startup studio founded in 2009.
I believe that the traditional outsourcing agency model (quoting an expensive proposal to develop an MVP based on billed hours) is wrong and won't work for many founders.
First, there's no single MVP to build — you need to build dozens of smaller iterative MVPs to validate. Second, incentives are misaligned: agency will try to bill more hours (and 95% of them will scam their clients) while founders will fight to get funding or cashflow going.
To fix that I'm building the most compelling no-brainer offer for early-stage non-tech founders to provide them the best possible outcome.
I'm a big fan of building in public, indiehacking culture and I want to bring this mindset to the offer. My goal is to be the best tech partner for early-stage startups. I'd appreciate if you give me any hint so you help other fellow-entrepreneurs succeed without going broke.
So, my question to you is:
What would be your ideal terms to hire a tech partner/CTO on the early stage?
e.g. what results would you expect in what time; what guarantees would you enforce; how much you'd pay in cash/equity; where would you search; what red flags would avoid?
Share any crazy idea below.
Thank you.
Not sure if this exists already but maybe just adding more fee structure options to reflect your risk. Criteria would be depending on what the founder needs, where they are at in their journey and most importantly, the probability that they will be successful. Based on your own assessment, maybe instead of a per hour or package fee, you take a chance on the founder and take equity stake instead? Just because a potential startup founder doesn't have liquidity atm, doesn't mean they have a lower chance of their startup being successful.
Maybe this already exists in the fringes but I haven't come across this option yet. You could make this part of your selling-point/marketing and be an industry leader. You don't necessarily have to take on a-lot of risk, just open a round or two of pitch competitions (i.e. founders send in decks or videos like YC) and pick 1 or 2 startups which you think could be the next Tesla.
I come from a non-techie background, just another guy on the street with what he thinks is the best idea ever. Just like everyone else I think I've got a great shot at being successful, but I only have my equity to give right now vs. cash. This doesn't mean I'm not willing to part with cash later on if I get funding tho!
Thank you for your comment, your suggestions make sense!
We already do something similar but it's not perfect hehe:
• When founders don't spend cash (aka invest themselves) there are higher chances that they won't take their startup seriously enough
• Competitions/Pitch deck review helps, but it's difficult to create a solid deal flow to get 'next teslas' and it's one of the main interests in VCs
I'm leaning towards taking risks on our end, but also keep some risks for founders (ask them to spend cache) like they'd do if hire CTO.
i mean there is a reason why devs / agencies want to be paid by the hour.
If you set a set quote for a project, you're just gonna be discussing constantly "no that wasnt in the requirements" "yes it was", also no one knows the requirements. No you dont.
In a software project with a set amount of money someone WILL 100% get fucked over. Either the developer or the client.
If its billed by the hour, your goals are more aligned... its not perfect, but at least the developers don't have an incentive to rush the project, hide bugs, hide information that will lead to more hours of coding etc.
Thank you for the reply!
Agree with you 100% on fixed project issues and back-and-forth discussions.
I wonder: what model can be better than paying by an hour? Like what outcomes can be included right into the offer to guarantee founders that they push their startup forward during the engagement?
Don't think in developer-only terms (probably you even don't need developers), but rather what milestones would you like to hit