thoughts on pre-founders (founders)

i’ve been thinking a lot about “pre-founders” recently and wanted to collect my initial thoughts / frameworks here. this will be a document that’s constantly evolving, this is the first iteration :)

definition

👉

a “pre-founder” is someone who might eventually become a founder, that has 1. entrepreneurial instincts + 2. a solid base of skills useful for starting a company

entrepreneurial instincts: oftentimes these are people that are full-time at a fast-growing company that are hacking on stuff on the side / tinkering on ideas. some key traits are that they’re naturally curious, are not satisfied with being an employee [or student] somewhere (want to start something), and have a lot of ambition (a key ingredient for founders seeking large outcomes)
solid base of skills: from what i’ve seen, it’s rarely the case that the first idea you have ends up becoming a unicorn startup (though there are exceptions). what’s more common is people build up expertise in engineering, product, design, etc; then you spend time talking with potential customers / doing deep diligence on an industry; then you leverage your superpower and your unique insights into a semi-risky bet that you’re distinctly qualified to win at. for young people that are in college or a few years out, sometimes this manifests not just in “hard skills” but also in hustle / ambition

common pre-founder questions

let's dive into each one:

going full-time on an idea

this is a very personal choice and varies person-to-person. you have two main choices:

if the company you're at has good work-life balance / you have extra time to work on stuff, that could be a great time to spend extra hours tinkering on side projects
if you're fully committed to leaving and building a company, why wait to make the jump? working nights and weekends will be tough, and sometimes the push you need involves committing to exploration of a problem / idea full-time

the most common approach i've seen is: stay at your full-time job and hack part-time. so how do you know when to leave? here are a few common ones:

build a bunch of stuff and see what takes off traction-wise. you can launch a bunch of products on product hunt / hacker news if it's consumer-facing, or build prototypes and share with potential buyers if it's b2b saas an gauge the reception. if something shows promise, you can take that as the signal you were looking for to go full-time
tinker on stuff and use this as an excuse to meet other fellow tinkerers. here, you could leave once you find a really solid co-founder that's equally committed to building something with you
put some feelers out and see if you can attract funding. maybe this means applying to accelerators or reaching out to pre-seed vc firms - in this case, you'd obviously leave when you get monetary commitments

co-founder matching

picking a co-founder is one of the most important decisions you can make, but can be daunting if you're not sure how to go about it. here are a few suggestions:

ask your founder / operator friends if they know of anyone who's tinkering on stuff on the side and might be down to chat
yc co-founder matching: i've met a lot of high-quality teams who met through this platform, it seems to work pretty well
ask your friends who are vc's to connect you with other people ideating / in the "-1 to 0" stage. chances are the vc is tracking a few people at this stage already and would be happy to make some introductions
go to events where there will be a bunch of pre-founders in attendance. this can be very hit-or-miss - lots of happy hours involve having 2-minute conversations with 30 people and you might get a few solid leads out of it; this can be worth it but also depending on the event can be a waste of time. so vet carefully!
post publicly - you can try and find potential co-founders through twitter, hacker news, slack groups, or other communities you're involved iwth

idea validation

how do you figure out what is a "good idea" to work on? the best way to go about this is to first find a space you're interested in (it'll be hard to build a company in a space which you don't feel very passionate about), and then do a deep dive into the current problems people face.

at this point you're trying to do "customer discovery calls" (not customer calls - that comes later when you have a product). say you're a software engineer and your mom is a dentist and you've seen first-hand that the software she uses is pretty bad, and feel like you could build in this space. before trying to come up with a solution, try and call as many of your mom's dentist friends as you can and figure out what their biggest pain points are. you might find that your first instincts about what you should build are a bit off - for example, the biggest pain point for dentists isn't the scheduling software they use, but that they have lumpy cash flow and need working capital / loans to smooth out the periods where they're waiting on payments from people.

how do you go about finding people for customer discovery calls? i've seen a lot of successful founders do outbound here (finding people on linkedin, maybe even scraping their emails, and saying whatever they need to to get on a call). you can also ask investor friends for intros to customers in a space you're diving into - they'll likely be pretty connected and willing to help you validate ideas.

my friend ish wrote a great article about “how to identify hair-on-fire problems” that is worth a read here

good operating principles for pre-pmf companies:

marry the market, date the product: it's better to fall in love with a problem or market and be willing to nimbly iterate around the space, than to fall in love with an end product. there are some times where dev tools / consumer internet founders are able to be opinionated about a product without consulting users to get feedback, but these are edge cases rather than the norm
sell before you build: most of the time you don't have to wait for the product to be perfect before showing it to people. test the waters, pre-sell the product, and use a sales deck as an iteration tool
payment is the ultimate validation: way better than people telling you they like your idea (they could be trying to be nice - very few people will tell you your baby is ugly). see if you can get people to pay some amount (even if small), maybe by offering early access at a price
shorten your iteration cycles: in some industries like fintech, healthcare, or highly-regulated spaces this will be tougher as you'll be waiting on certifications / partner institutions. but it's still a good idea to try to move quicker than your counterparts. and in other industries, if you're able to ship quickly, get feedback from users, and iterate rapidly, you'll have an edge

pre-seed fundraising

say you've found a co-founder, quit your job, and validated an idea to the point where you're ready to think about fundraising. how do you decide how much to raise, and when? the answer to this question varies depending on a few factors. here are some tips:

funding options

eir programs: these programs often lead to incubations and are designed for pre-founders. vc firms will oftentimes make people-focused bets here, and give founders the space to explore stuff (by providing a stipend, helping with customer intros and idea validation, etc).
venture studios / incubators: an interesting model that takes industry experts that are also entrepreneurial, and provides an idea + budget + team + support. my thoughts here are that if you’re going to incubate, a good route to go is low-volume / high-quality (think: sutter hill, thrive, etc)
recruiters: i’ve realized recently that what i do on a day-to-day basis is very similar to what tech recruiters do. we’re both often reaching out to sharp engineers (often using the same tools like linkedin sales nav / recruiter), recruiters are trying to get them to join their clients’ companies and vc’s are trying to see if they’ll start companies in the next year or so. recruiters might make for great pre-founder scouts!
scouts: on that note - scouts and angels oftentimes are the first-believers in pre-founders (before any institutional investor gets conviction to write a larger check). also angel investors are often very value-add (have deep domain expertise and are great at potential customer intros). scouts and angels are a great source for pre-founders (esp if they’re super-connectors) and i find they have very interesting thoughts around support and value add too

general tips on fundraising

there are now lots of great programs focused on the "-1 to 0" or generally earlier stages including afore's founders-in-residence program, south park commons, sequoia arc, a16z start, greylock edge, hf0, soma fellows, etc. if you're looking for a bit more structure (space to work out of, tailored support from experienced investors and customer intros from them, a small amount of funding to get started, etc), these are the way to go
when it comes to how much you should raise / what valuation you should raise at, it's probably a good idea to crowdsource this question to founders and investors in your close network. people will probably give you wildly different answers here which is why i think it's important to get a bunch of perspectives and then see where you gravitate towards
there are some funds that are more opportunistic and founder-driven in the way that they invest, other funds that are more thesis-driven, and many firms that are traction-driven. if you're early, getting larger traction-driven funds interested can be a bit tough, so you can target pre-seed software generalists like afore or industry-specific vc's who might see something they like in what you're building and take an early bet on you
you can choose to bootstrap to a certain amount in revenue and then raise. this might take a bit longer so depends on your general timeline
there may be some bias here given i work for a pre-seed fund, but i think raising a pre-seed instead of a seed is a great choice for most founders. if you keep your raise to <$2m or so, you give yourself optionality. if you grow like a rocketship to $1m+ arr in the next year or two, you can call your first round a seed and then raise a series a because you have the metrics to do so. if you grow a little slower to a couple hundred thousand in arr, you can call your first round a pre-seed and then raise a seed as your next round. so raising <$2m preserves optionality. if you raise a larger round that you have to call a seed, you should be confident that you can get to series a metrics / $1m arr pretty quickly - the amount you raise determines the trajectory that you expect your company to follow

what pre-seed investors may be looking for:

unique insight: some kind of unique angle you have that makes you stand out from other people building in your space (oftentimes this comes from being in the industry and seeing the problem first-hand). maybe everyone else is building their products one way, but you've found a killer feature that will help you succeed. or you have an interesting approach to go-to-market that will let you dominate. or there's some tailwind you see that others don't (regulatory-wise, a tech inflection point, etc)
clarity of thought / succinctness: when you know a lot about a topic you're often able to describe it succinctly and in a simple way. try to start with your one-liner, then lead into your pitch with the insight, then give a few more details and wait for questions to come. you'll likely have to dumb down whatever you're working on so that industry outsiders (vc's) can understand it.
fast learning cycles: again, certain industries are harder to "move fast" in (for good reasons), but it's oftentimes clear to vc's when you have a bias towards action / are high agency / move as quickly as you can. it helps a lot at the pre-pmf stage when you're able to validate and invalidate multiple ideas quickly

constantly refining my thinking here - please contact me at jack@afore.vc if you have any thoughts here / anything to add!