Building your own storage startup: Whatever you do, don't let lead dev be CEO

How to make it through the crucial angel-investment round

The angel round is key. In today's world of tech startups, it's not unheard of to get $1m in angel funding with the expectation that this will last you about a year. The goal of the angel round is not to produce a sellable product. The goal of the angel round is to produce an investable product. These are different things.

A sellable product is more than just code that works on devices that don't fail. A sellable product has an entire support infrastructure behind it. It has a sales channel functional enough that customers buying the product can be assured the company is likely to still be around until at least the end of the current refresh cycle.

Startups burn investor money to survive. That's a fact of life. But a startup with a sellable product is not 100 per cent reliant on that investor money. They have cashflow from keystone customers and an organized sales and marketing apparatus bringing more in all the time.

An investable product needs to work, do so reliably, and there should ideally be around five keystone customers using the product. These customers won't likely have paid for the product. Most will be using the product in test and dev only, but before you hit up the angel investors try to find at least one who is willing to put your product into production, even if it is in one branch office that nobody cares about.

With ~$1m to burn in a year Kickass Developer will be getting some friends. Expect the development team to be four devs, in addition to Kickass Developer, and one very overworked Documentation Monkey, who documents the code.

Documentation Monkey is needed so that Kickass Developer doesn't have to waste months onboarding every new junior developer. Code is documented, styles, policies and procedures are documented and new developers can be added into the mix without hurting deadlines.

Technical Writer will take Documentation Monkey's work and build a formal API manual for both internal and external use. Technical Writer will also keep cranking out newer and better salesy and marketing work for Gladhander.

Gladhander will be spending most of his time briefing tame analysts and journos, meeting with potential A round investors and cracking the whip over everyone to get things done. Their job is also to work with both Technical Writer and Documentation Monkey to find something – anything – they can patent. The more patents the better. Patent submissions probably won't be granted in time for A round funding, but they help a lot in securing a solid A round.

Johnson has worthwhile insight: "The typical time from inception to General Availability (GA) is 18-24 months. This is how long the VC community will fund a startup before they want revenue. The company will not be close to profitable, but they need to show the product works and customers will buy it to get the next cash injection. This 18-24-month window creates a limit of the scale of the problem the typical startup can address."

Given that GA tends to occur towards the end of the angel round or just slightly after the A round, this should give you an idea of the outer bounds you have, time-wise. Exceptions do exist and you’ll find cases of the CEO funding things from concept to GA. This, however, is highly unusual and it is a good idea to get your Tech 2.0 ready for GA in less than two years.

OK, you’ve got the idea for the product. Now you’ve got to think about how to make this thing not just work, but usable – make it good for real people in the real world. How? That’s for next time. ®