Negative Equity Startup Model: Ideas are Cheap
There is more than one way to start a business
There is a common startup model. Find an idea that will make ten-times returns, build a team, pitch and hustle, get your angels, start collecting rounds of investment, pitch and hustle, get (and probably exaggerate) traction, go through many hurdles set by investors and perhaps, just perhaps, get quite rich. You hear it at countless hackathons.
Coming up with a startup that threatens Facebook's business model -- so they buy you out and prevent and major disruptions -- leads to a few stories of truly astounding riches, and is a good way to attract investment capital if you're good at that sort of thing. But not much good in the world, this isn't where healthy drive in the economy comes from, and the stories of riches are so rare compared to the number of people chasing those dreams that the average return on time invested isn't that high.
Meanwhile there are an astounding number of real needs left unmet. There are other models, that mostly don't meet the needs of venture capitalists. But there are so many opportunities to make a couple hundred thousand dollars per person per year, while actually doing something that helps people rather than just out-racing someone else to the sweetest spots. These opportunities look a bit different: don't start just with giant markets that can make tens of millions: start with a real need, that you care about, that you would be happy to spend a good number of years focused on. Be willing to accept fast growth, instead of astronomical growth that requires ever increasing venture capital. Pick something just a little smaller and less sexy than the few topics that everyone else is fighting over.
There is more than one way to be a founder
It's my idea, I'm looking for someone to build my idea for me. The truth is, if you want venture capital, it's really helpful to have a founder with a giant ego, ready to sell their idea. If you want to bootstrap, if you want to form a team, especially if you don't already have a group of friends who know each other, then the rules are different. And there's a big gap: it's hard to get venture capitalists to listen to you if you aren't super-optimistic and probably ego-mad. This creates a challenging space for bootstrap teams to come together. At many, many hackathons, somewhat introverted and quiet people set to work, while louder folks argue with each other and take credit. It's one thing if those extroverts are obtaining and paying out venture capital to the people who do the work, but bootstraps don't work that way.
Maybe the founders could each make $200k per year, but not millions. Maybe it's a new idea, and venture capital is often a bit chicken. Good ideas much better than a corporate job are out there. But working for someone with an idea often sucks: it's their idea, all you're doing is building it.
Negative Equity Model
Want to create a place for people who want to bootstrap a good idea, need help to do it, and know that ideas are cheap: people joining your team to help implement your dreams are doing you a bigger favor than you are doing them by having an idea. In most of the startup world, the person with the idea is one with the ego and the one expecting to be the center of the team, the real owner. "Negative equity" is a symbol for: I'll put my ego in check, and at least to a tiny token amount, if you put in as much work as I do on my idea, that would mean you owned even more of the company than I do; I need to work at least a little bit harder to be your equal, I recognize that part of my pay is my dream of implementing my idea, and you are getting paid for your hours just with equity. Instead of holding on to 30% or more of equity for having the idea that we work on together, all the bootstrappers are equal, real partners.
Negative Equity is intended as a symbol more than a method of paying people: a promise by founders to reduce their pull to equal, and a promise/demand by team-mates who join to pull up to equal and not wait to be led by the person who had the (cheap) idea.