If you want funding, don’t pay freelancers (or agencies) to have your first product version built. Doing so is a dead end, a trap, a red herring, and generally expensive.
This trap is easy to fall into because investors truthfully claim that they need to see a product before they can invest. But they also need to see a product team, and hiring someone to build your version 1 does not bring you any closer to finding a team. You end up with an expensive prototype and are still unable to fundraise.
So is there ever a time when it’s wise to hire out your prototype?
I think it’s acceptable (but far from ideal) if you plan to bootstrap or self-finance the entire company until it’s profitable. The caveat being that it takes much longer to build a profitable tech company than one tends to expect. It’s also okay if tech is non-central to your business. For example, if you are a service business that has a website, hiring out version 1 makes perfect sense. However, for anything whose core is tech, you need the team.
You need to find someone willing to put in sweat equity, or to at least join as a full-on part of the team with a bit of a salary and a bit of an equity stake. Building the right team is a necessary and unavoidable step. Buying your product doesn’t let you skip that step… it just front-loads your development cost.
 And front loaded development costs are a Bad Thing.
PS. Are you in London? I’m running a 40 quid, full-day workshop on the foundations of lean startup strategy with Sal Virani. It’s this Saturday, September 1, at Central Working Bloomsbury, and you should come. It’s cheap because Capital Enterprise & Open Innovation are kindly picking up the bulk of the tab. Ping me if have any questions!
How much equity do I give an advisor? What do they give me? Next Post:
Close your eyes and jump twice, then walk uphill