Finally an answer to the age-old (at least the past 20 years or so) conundrum of how to get your start-up off the ground if you're a hustler with no money or programming skills, or you're a coder with no idea how to run a business. This gave me one of those, "Why didn't I think of that?" moments when I read it.
Late Labs is the latest crowd-coding website, but this one comes with a twist: it's a crowd-coding site where coders can pick the project they want to work on and receive equity in the company when their code is accepted. The company is then managed from start-up to (hopefully) exit by Late Labs.
In that sense, it's not ideal for a really hands-on entrepreneur, because you'll be signing away a lot of the direction of your company. But for someone who just has a really cool idea and no real execution plan, it might be the perfect solution.
It's obviously more advantageous to the coder looking for a side project, or projects. Sure, there's a risk that your equity will never be worth anything (a statistically significant risk), but it all looks good on the resumé, it enhances your chances of being hired full time by the company if it does take off, and then there's always the minuscule chance that you're coding a module for the next Facebook.
I've always been a big fan of collecting equity. I've got a pretty healthy stack of worthless stock certs in my office, but I enjoyed acquiring every one of them. Perhaps my favorite is my stock in International Brewing & Manufacturing, Inc., the company who installed (with my actual physical help) all the brewing equipment in the original Pizza Port in Solana Beach.
Even though they went tits up shortly after that, I've had a few that worked out and they've helped keep me in the lifestyle in which I'm accustomed. Needless to say, I'm a big fan of equity.
What do you guys think of the concept? Would you spend 100 hours grinding out code for some equity in a start-up? If you're an idea guy, would you be willing to let someone else take a crack at executing your idea if it meant you only retained 5% equity (but all you gave up was the idea itself)? Is it worth the risk for the potential payoff?
Eddie,
Love the image. How Tech Bubble. That said, I think that if I had a great idea and no way to execute it myself, it would be an option to seriously consider. Like you, I'm a firm believer in equity but I think that it's a reasonable tradeoff if you are having someone else provide the bulk of the labor, sourcing and management. Then again, I dislike not being able to have any control over my idea. This is definitely something I'll keep an eye on though. Even if I don't retain full ownership of my idea, a 5-10% stake in a project is still worth something whether the project crashes and burns or not.
Frieds,
I just wonder about the peptic ulcers a huge success would cause. Imagine, for example, you had the idea for Twitter and gave away 95% of the equity to have someone else execute. You're still gonna be rich, but IPO day has to be pretty bittersweet when you get a check for $50 million but some other jamoke in a hoodie gets one for $1.6 billion. Or am I wrong? That's the one thing I wonder about.
This sounds vaguely familiar.
LMAO
Truthfully, 5% seems terribly low, it's the type of cut I'd expect from the mob, and I'm not sure what caliber of startup / crew they think they're going to attract for that pittance. The only time I ever watched SharkTank, some dude flat out told the panel "NO, I'm keeping 60% of my company because it's making money and I'll still grow without you" and they eventually caved to all his demands: that's the type of business I'd invest actual money in. But that's me.
im a lil confused...if u have a cool idea, how is posting that cool idea on some website not a rookie move ? wats to stop someone from just takin that idea and run with it themselves ?
tech bros gotta protect their intellectual capital
You don't actually post it on a website for all to see, you share it exclusively with Late Labs and if they think it's an executable idea and they accept it, you get 5% equity. Once they've decided to launch a company with your idea, they then put it out to the coding community to get whatever it is built. Hopefully that clears it up.
hmmmm....well two follow ups
1) legally speakin, what is protecting your idea once u give it to late labs? like whats to prevent them from sayin ur idea is junk and then 2 weeks later one of their employees quits and takes that idea and starts up a company w/ it entirely on his own? maybe i need to watch social network again...
2) where will these late labs fellas be gettin all the $$$ to start up all these companies?
Great concept and idea. There are many people who can see Point A to Point C, but can't figure out Point B (or don't have time). For 5%, yes you lose a lot, but at the same time you don't have to do any of the grunt work. For best or for worst, especially if you still want to be heavily involved in the process.
This seems like a great idea, I am interested and will signup, and hopefully be able to do some coding. However, the criticisms against this platform have been valid.
i have an idea: a sporty car that runs 100mpg with great maintenance and handling.
if someone would execute this for me i'd be happy with 5% equity.
http://enemyofthestatist1.files.wordpress.com/2010/03/fred-and-barney-t…
http://enemyofthestatist1.files.wordpress.com/2010/03/fred-and-barney-t…]
i'm late again.
Taking funding for my new start-up idea: Early Labs.
Early Labs is a crowd-ideating site where idea people can pick the idea they want to work on and receive equity in the company when their idea / product is accepted. How it works is that dreamers submit dreams of what they want solved, Early Labs curates those dreams and only presents the best dreams to ideaters, who then work on turning those dreams into ideas. Dreamers get 5% equity in an accepted dream and ideaters get equity depending on the piece of the dream they idea.
Early Labs then submits the idea to Late Labs and hopes for the best.
GOAT post.
Seconded. If I had any nanners I'd give em.
double
That's awesome!
As everyone knows, programmers have very little creativity or imagination, so obviously they spend most of their time looking for an 'idea guy' to come up with cool ideas for them...
Which is also the reason why startups are usually founded by 'idea guys' and not by engineers or scientists with actual skills.
http://www.paulgraham.com/ideas.html
Great post, Eddie. Many entrepreneurs with limited capabilities pose themselves a similar question (I know I have!). It is a valid dilemma: do you sit back and watch someone else take over your "idea," or do you try and learn programming yourself (highly unlikely, everyone's gotta put in their hours)?
However, every aspiring entrepeneur must understand one crucial reality of the start-up world: ideas are cheap. Executing ideas is almost always 95% of the work. Ideas come and go, but it is execution and the availability or time, skills, and resources which turns them into real, functioning products/services or, as we are used to seeing, billion dollar companies. Subsequently, you have a trade-off: either wait forever to find the "perfect partner" who will only ask for 50% in equity and execute together, or let services such as Late Labs handle the sourcing and take 5%-10% in equity. At the end of the day, it is important to realize that your idea could have been worth next to nothing had it not have been for the executor.
Richard Branson said it best: Ideas are like buses, there's always another one coming.
The catch is, can you execute?
I was looking for guidance on how to divide up and value start-up equity recently and this article values ideas @ 5%; it gives valuations for differing roles and levels of commitments among founders. It's worth the read.
http://www.geekwire.com/2011/wrong-answer-5050-calculating-cofounder-eq…
[quote=fuquamarine]I was looking for guidance on how to divide up and value start-up equity recently and this article values ideas @ 5%; it gives valuations for differing roles and levels of commitments among founders. It's worth the read.
http://www.geekwire.com/2011/wrong-answer-5050-calculating-cofounder-eq…]
That link just found its way into Bonus Bananas. +1
To those who wonder why would anyone want to sell his idea for 5% : First of all ideas are worthless - it's only the execution that matters. I'm sure there are tons of people who came with the social networking idea before FB. For what it's worth, I not only had the idea of twitter before it was launched - but I built it myself (a year before twitter came out), but couldn't get more than few thousand users. Needless to say, twitter's success pisses me LOL.
Any programmer worth anything, has tons of ideas himself and the last thing he wants is to write code for an "idea guy". But if you are an idea guy, who can do monster sales, partnerships and use your network to get funding, then that's a different story. But if you just have an idea and don't bring anything to the table other than your "idea", well good luck finding half a decent programmer.
Speaking as a programmer myself( and knowing literally hundreds of others), nobody is going to program your idea for equity, unless you do sales,marketing,pitching etc. Marc Andreeson said it best - Startups need people who can make shit(programmers) or sell shit(sales guys). If you succeed at those two, you can hire people who manage shit.
Pretty intersting site - I just submitted an idea. Althought I'd only submit ideas that you have no intention of acting upon. So if they decide to run with it, then it's all upside.
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