The Art of ‘Ware (V 2.0, maxim 2:3): financing and hiring

[From The Art of ‘Ware (Version 2.0) by Bruce F. Webster (forthcoming), Chapter 2, “Supporting Development”]

Those who handle product development skillfully don’t build engineering teams twice, nor raise capital three times.

Building product development teams twice means having to replace the original engineers with new ones in the order to complete the product. There can be any number of reasons for having to do this: the engineers get burned out; the engineers get disgusted with upper management and leave; the engineers lose faith in the company and its directions, particularly if they view the product as being “hijacked” and taken in a different direction by latecomers to the company, or the engineers are replaced and/or fired, either because of insubordination or because they weren’t the right ones for the job in the first place.

Raising capital three times before product release indicates that development and launch have taken too long. (Believe me, I know.) The first round is usually essential to get the company off the ground. The second round may be necessary because of changes in product direction or the all-too-common delays in production development. But you’re in trouble if you raise a third round of capital for anything but product launch, and possibly even then. Not only does that mean that you’re late in shipping, it also means that you’re surrendering equity — thus reducing equity incentives for existing employees — and that you do not have sufficient cash reserves to keep the company going once the product does finally ship.

Focus on creating your own development resources, and recruit from your competition. This way, you can be sufficient in both tools and personnel.

Invest in development resources, that is, the tools needed to actually create the product. All the money you can think of possibly spending on those resources probably won’t equal what you’ll lose each and every month if your product is late. Likewise, be willing to devote people and resources to creating custom in-house development resources. It’s easy to chose not to do this, because you can often “get by” without such tools and you may be concerned about the return on investment. But the right tools can make significant difference in product quality and time to completion.

Some of the best people to do your product development are at other companies and are probably at your competitors. Recruit aggressively and hire the best, strengthening yourself and weakening your competition.

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Compare suntzu pingfa (Chapter 2: “Doing Battle”):

Those skilled in doing battle do not raise troops twice, or transport provisions three times. ?

Then the army will be sufficient in both equipment and provisions. (Sonshi translation)

About the Author: bfwebster

Webster is Principal and Founder at at Bruce F. Webster & Associates, as well as an Adjunct Professor for the BYU Computer Science Department. He works with organizations to help them with troubled or failed information technology (IT) projects. He has also worked in several dozen legal cases as a consultant and as a testifying expert, both in the United States and Japan. He can be reached at 303.502.4141 or at bwebster@bfwa.com.