Dharmesh... Thanks for writing this blog. t is hard to find thoughtful tips for software start-up entrepreneurs...
Guy Kawasaki 's The Art Of The Start, is certainly one of the best sources in the start-up field; but he doesn't cover to all relevant issues. So far you are covering interesting/untouched issues, and I was honestly impressed with our articles:
- Game Theory and Software Startups: Part II
- The Risks Of The Mega-Market
- Lake Wobegon effect
- Finding a Founder, Partner and Co-Conspirator
For instance I am an entrepreneur that has just left "the cave" (years of independent R&D), "armed" with a patent application at hand, which are looking for co-Founders, Partners and Co-Conspirators...
My initial plan was to talk to angels right after the patent app. to get the seed capital required to build a team and a functioning prototype. However with this tsunami of web2.0/mash-ups start-ups, it seems that a functioning prototype are a pre-condition to start any conversation with angels. So I started to look for co-founders/team members to develop the functioning prototype of the shopping path tools.
I have 2 questions:
1- How much equity is fair (or "average" at software industry) to offer co-founders and the start-up team ?
It is very easy to spread 100% (equity). Each 1% shared equity counts, at this very beginning stage; assuming a soon-to-come angel's bite, and later VC's even-bigger-bite.
2- I am right that at this market stage (2006), does entrepreneurs must have a functioning prototype to show it to angels? Or animated (flash) demos are "good-enough" as a proof of concept?
My issue: I was able to create a good-demo (in flash) that shows the GUI and business method of the tools, but I am not able to develop a functioning prototype (code it).
The conundrum: In order the get a good functioning prototype one must have good developers (a least 2), but it seems that in order to get seed capital one must have a good functioning prototype.
Truth: The developed technology is a candidate to become a future Standard graphical platform; I mean, the Demand and Supply Map/Shopping Path model&tools really presents a new paradigm/concept, and certainly will shake the status quo of current list-only shopping and marketing services. However only an excellent execution of its software/tools development (one that really influences shopping and marketing decision-making) would position its model as a standard graphical platform.