The Boomerang Founder: read this before founding a company

David Cohen, and entrepreneur investor and technologist from Colorado has a post on his blog about the perils of co-founder relationships. I would recommend that anyone contemplating forming a company takes a look not just at the article, but equally at the comments of the people on his blog. It describes a problem very well that we see in a significant proportion of the companies that come to us for funding.

Startup 2.0

Manoj threw another great event tonight with interesting speakers and audience alike. Stuart Scott-Goldstone of Aaron and Partners gave a thorough introduction to the range of legal issues that startups face on raising their first round of venture capital. the long list or issues seemed seems like it must be scary to any startup listening! Doug Stellman of YFM Private Equity started his presentation with a disclaimer of small print lest any of us fancied investing. Interestingly the proportion of Software and IT deals had shrunk from around 35% in 2006 to 20% in 2007, apparently due to concerns about the ease with which software companies could be established. His presentation focused on the management team as a key driver for their investment decisions. He cited that he sees applicants with a management team with a prior record of success "more often than you'd think". Paul Barraclough of TecMentor praised the Crossing the Chasm approach to getting to early sales momentum in startups. For me, Pam Holland gave the star presentation- starting off with a video (link to follow if I can persuade Pam to let me upload it) portraying how rapidly Telecity had grown pre-dotcom crash. She explained how they'd managed the spectacular growth in staff numbers and the attendant HR issues. I loved the story about how she had to persuade the founder to go home for his meal in the evening to encourage the staff to go home at night- even if he returned later each night! She explained the "competency based" recruitment approach she used, biased towards the attitude and raw capabilities of the individual rather than solely their technical skill-set. She also related that it was a "little bit disappointing" when the share price slumped from £23.00 to 2.3p, and she had to handle a new set of challenges!

"Engineers can't sell new technology"

Interviewing a potential CEO for one of the portfolio companies today was really thought provoking. He's run and grown technology companies and is a great engineer by heart, therefore I was really surprised when he told us that you "can't use engineers to sell new technology". My gut was screaming "no!", but on reflection I think maybe he had a really sound point. His argument seemed to come down to some prejudices about engineers which might have some grounding:

• Bright sales people can communicate the product well enough for bright engineers at the customer company to work out how/where to apply it
• Engineers have a tendency to dive too quickly into the details of the technology before really getting a good picture of the company's needs- so they don't give themselves the chance to listen properly
• Sales people in the front line tend to be more reassuring to the non-technical contingent of the customers and send the right messages about the nature of the vendor

I think his bottom line was that this kind of thing can be a cause of delays in customer take up of the offering from a new technology vendor. I'm going to chew on this a little, but there may well be something behind this thesis; what do you think?

Further thought

On dicussion with a colleague, we wondered if perhaps the distinction is:

Technically capable customer looking to understand how he can use your technology/product	Send a technically literate salesperson to first meeting
Technically ignorant customer looking for help understanding what he/she needs	Send a sales engineer to first meeting

The other suggestion the candidate made which I'd wholeheartedly endorse is that for early stage tech companies you can always afford to send two people to the meeting- so that someone is always listening.