Dear [Under-Capitalized Business-Guy who wants me to work on your site for 'equity'],

[Note: This was cut/pasted from an email response I sent an individual I had a meeting with. I did not enter into a business relationship with this person. I posted this here since it seemed to contain general advice that might be useful to others. - Kevin]

Dear [Under-Capitalized Business-Guy who wants me to work on your site for 'equity'],

Thanks for taking time to meet today. It was interesting to learn about what you’re doing.

I’ve put some thought to what you’re trying to do and I have to be honest, I have some reservations about it. The business model itself may work, though I don’t know that much about the kinds of businesses you’re hoping to get as customers. But the very rough proforma you’ve put together gave me a bit of pause.

I appreciated that you’ve had the foresight to put together some financial modeling — that was reassuring. But it concerns me that you felt you could somehow spend only $50,000 on developer salaries over a 5 year period. And while I understand that at this point the numbers are all pretty rough, it just seems way low for what you’re trying to do.

A single developer (one with the skills to handle all aspects of the site, build it and keep it running, backed up and responsive as your customer base grows) would cost a very minimum of $75-80K/year (plus benefits, etc.) For $10,000/year you might be able to hire a single person at far less than half-time. That’s to me just so unrealistic as to be almost impossible. I can’t imagine it. You can’t build a software-based company without software developers. To realistically handle what you’re trying to do would likely require an ongoing staff of 2 or more people once you got to 2-300 or more customers using the application.

And if you can’t find someone willing to work for free I’d recommend a budget of closer to $50K to have enough to get things live with a decent design and cushion for when things go wrong — which they will.

But given your current funding level you probably can’t afford that. So what I’d recommend is finding a ‘technical co-founder’ that you can partner with. The only appropriate thing to do, though, would be to be up front that you don’t have money and are looking for a co-founder — and provide co-founder-level equity participation for their efforts (meaning probably no less than 30% ownership). Otherwise you won’t likely find someone with the level of skill and experience to make this thing work. You have sales experience and the idea, and that’s worth a lot.

But either way, given your current unrealistic expectations regarding cost I don’t think I can in good conscience refer you to contacts of mine as a potential partner. I wouldn’t feel right about it.

Maybe we can get together in a couple weeks and talk about where you are. I’m happy to meet and provide what guidance I can over coffee periodically.

Best of luck,

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