Entrepreneurs On The Side! Don’t Quit Yet. Side Startups Work!

Entrepreneurs On The Side! Don’t Quit Yet. Side Startups Work!

I read a post by Fred Wilson about Side Project the other day. Although I had a totally different experience with side projects than his own, but I agree with him that they reduce risk, and I would love to see more of them. In this post I share my personal experience with side startups and what it takes to built a successful one.

Before joining the dark side (the VC side) in 2009, I had mixed feelings about founders who start their companies on the side. I wasn’t sure if that was smart or silly.

I myself started a company in 2005, and I was fully dedicated to it. I quit my engineering job for it. And I was barley able to find some time for friends and family! Managing the startup took all my time, and I was only managing a team of seven! I couldn’t see how others can do all this on the side!

However, in founders meetups, I saw fully committed founders who failed (like me) and other founders who started project on the side and succeeded after a while. It took them longer, but eventually they did it!

So later on, when I got a job after shutting down the startup, I tried hard to start a company on the side. It didn’t work. I mean I was able to finally organize my time better, and I managed to work on both at the same time, that was a skill I acquired later in life. But having a project on the side still didn’t work! There were many of other issues.

For example, what about other co-founders? If you’re not fully committed, you can’t ask them to quit their jobs too. If you can manage your time well, can they? How much priority will they give to the project? Do you guarantee that everyone of the team is not working on another project with other teams? I worked with many technical co-founders on the side, but usually they tend to accept freelance tasks they get on the side too. At the end of the day, cash is king. Even if everyone is committing all his/her spare time for the project, are they all committed to quit their jobs if the startup raises seed capital. Seed capital is never enough to pay market salaries, so what would happen then? They usually disagree and split because some will be working day and night on the project and some will not.

As a result, when I became a VC, I decided not to invest in startups that have founders who wont quit their jobs to focus on the project. How do they want a seed investor to take the risk with them if they are not taking that risk with themselves for less than a year?! And whenever I broke the rule because of whatever reason, I ended up regretting it. As a VC, I’ve seen all the worst case scenarios happening many many times!

But now, I guess I am evolving as a VC and as an entrepreneur. In the past few years, I learned a lot about the Lean Startups, MVPs, Design Sprints and the Customer Development Methodology. I also learned about the amazing model of the Founder Institute that gives you the accelerator experience even if you’re not fully committed to your startup and have a day job, it’s all happing during weekends. They call it an “Idea Accelerator”.

To be realistic, I even attended The Lean Launchpad course every weekend for 3 months and experimented with a project. I was not lucky to take it to the next phase, but I was lucky enough to discover the secrets of succeeding in building “Side Startups”!

Now I believe I was thinking about this issue in the wrong way. Now I believe that side startups might actually work! And that they reduce the risk associated with the startup, and enable founders as well as investors to fail fast and move on to the next idea cheaper.

Whether you’re an entrepreneur starting a side startup, a talent joining a side startup as a co-founder, or an angel investor considering investing in a side startup, here are the 5 main things to look for before doing it:

1. All founders and angel investors must agree to build a fully working MVP, experiment a lot, and pivot accordingly. Everyone must be open to change course at anytime.
2. Technical co-founders must be main founders not side founders, I mean they should be the ones who came up with the idea or if not, they should have a big chunk of the founders equity to be dedicated.
3. All founders must either be co-workers working together at the same corporation, or roommates living together in the same house, if not, they must commit to see each other every single night for few months.
4. All founders must commit to quit their jobs once the startup raises seed institutional capital even if it’s not enough to match their market salaries. They all should accept that risk, and expect a tough financial situation sometime in their startup journey.
5. Founders should attend a pre-seed program such as the Lean Launchpad or the Founder Institute as this will definitely test their commitment and project viability.

After all, this is a continuous learning process, we all learn as we go. If you went through a similar situation, please share with me your story to learn more and update the list above.