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About two years ago I got involved in a startup. This was very early in my career and I didn’t know anything about starting a business. I didn’t understand the implications of an operating agreement, or how a software startup should be structured. I was just ready to jump in head first, make this awesome SaaS product, acquire hundreds of thousands of users, effortlessly, sell out, retire, live the good life, ya know? ;)
So here I’m two years later. The product still isn’t finished, although there is some light at the end of the tunnel, but a LOT of work to be done yet. Over the last two years I have expanded my development skills and my business acumen. The more I learn and research, the more I have come to the conclusion that the structure of this company may be its downfall before it ever even gets off the ground; which is what I would like to get serious feedback on today. Let me say this, I’m positive that there are some serious issues with the structure of the company, but I’d like to understand exactly just how detrimental.
My main concern with this company strikes it at the very core of its heart; the operating agreement, founder roles, and equity division. The company equity is divided equally between 5 founders/roles. The roles are as follows:
CEO – This guy came up with the idea, and has some business knowledge associated with our area of operations.
2 Developers – I and one other have been programming the entire application over the past two years. We both do full stack development. Needless to say, our work on this project could be infinite.
Infrastructure – Handles the setup of AWS services, environments, email, not really sure what else tbh…
Marketing – I’ve never been presented with a marketing ‘plan’ so to speak. So I’m not sure exactly how they are going to fulfill their role. So far it seems like they are planning on doing some blogging, but of course “We need a product to blog about”. Two years ago, I kind of went along with that reasoning, but knowing what I know now, this might be the single largest flaw in the whole company (to be continued…)
There we have it. 5 Roles. 5 equal shares of equity. And some MAJOR disparity between work loads, expectations, responsibility, commitment, etc. I’m honestly just trying to find a way to go forward with this. But this structure is so drastically different than anything I have been able to find. It’s basically do or die on the shoulders of the two developers, who both work full time jobs. I found the following company structure for a SaaS startup to seem almost infinitely more promising:
• Co-Founder, The Visionary (30% equity). The grand visionary and leader. Ideally I believe this comes from one person, even in a two-person founding team. This person provides the future points of direction, prioritizes near-term versus long-term and sets strategy. Sees the whole picture A-Z.
• Co-Founder, The Executioner (25% equity). This execution-obsessed founder focused on getting things done and the operational side of the business. Ideally with a technology background. Understands the whole picture A-Z, but focused on A-B.
• Employee 1, The Technology Lead (10% equity). The CTO or single starting programmer for an early stage startup. This person is focused on developing the roadmap established by the founders and setting realistic future markers for product. Understands the whole picture, focused on development and impacts of A-B-C.
• Employee 2, The Growth Hacker (5% equity). A crucial next role in the tech startup. This person has a programming background mixes with analytical marketing experience. Could also be called the Pirate, this person is finding creative ways to drive early stage growth.
• Employee 3, The Unicorn Programmer (4% equity). A rare mix of design, front-end and back-end development skill. A mythical creature that deserves at least a 3% ownership stake.
• Employee 4, The Sales/Marketer (4% equity). Dependent upon the startup vertical, either a strong Sales person or traditional Marketer. If Sales in a B2B space, this person brings relationships to the table. If Marketing in a B2C space, this person brings PR relationships.
• Employee 5, The Focused Programmer (2% equity). Dependent upon the technology, either a front-end or back-end programmer. The design needs can all be freelanced at this point, but the hire of back-end talent will be most efficient at this stage.
The Option Pool (20% equity). The above list represents a key set to gain traction. From here, a pool of 20% ownership is set aside to build teams in each of these sections. This list covers technology so gaps will obviously vary for other startup teams. This was stolen from this link
Notice, the people actually providing value from day one are getting a proportional division of equity in order to their importance and value contributed. Notice, arguably, 4-5 of these initial 7 roles, are programming roles. This seems to make since to me if your whole company is a web application. Also, Marketing is getting a grand total of 4%. And here’s the greatest kicker, and something that is wholly ignored in our current operation agreement, The Option Pool. Just imagining the implications of a good company structure like this seems to sap my motivation to move forward with this project.
To conclude I guess I’ll just summarize my question: How exactly ludicrous is the current setup of my startup, or am I just way off base here and need to gain some hubris?
Thanks in advance, sorry for the novel, would love some thought out serious feedback. Cheers!
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