A while back I listened to an interview with a NYC entrepreneur, and this is what he answered when asked the best advice he’d give other starters. Does it sound rude? I think it does. I would be more inclined to say “be smart about your money” or a little more lady like “don’t pee away your money” maybe. But New York men say: “piss”. And I must say for something important to stick to you like a good mantra — he nailed it perfectly.
It’s a 6 minute read — rather listen?
And it should stick — cause this is the most important lesson anyone can ever tell you. Making smart choices about what to spend your business funds on, and especially what not, is the one thing that separates successful companies from the unsuccessful ones.
Starting a company money is always tight — make your runway as long as possible.
Moving from concepting phase to building your idea into your software stack there are a lot of options. Depending on your financial status — are you bootstrapping or trying to get funds in from investors — your journey will be different. And you must be aware of that.
Going for the pitch and fund route, it will take you longer before you can build and validate. And on top you should invest in a prototype & pitch that speaks to vc’s — not to clients.
In my opinion if you do not have enough money to do some initial market validation or build a first prototype: don’t waste your time seeking seed investment.
Bootstrapping will give you a lot more freedom but you’ll need to validate your product as soon as possible with a potential customer market. That means building your awesome idea into a first prototype.
As from your earliest idea onwards you’ll be answering two simple questions. Two questions that force you to prioritize your resources, and consider long term financial consequences. “Do I build or buy?” And “Do I build or buy it now?”
And in this order. You might be inclined to ask the question if you need something now, first. But contrary to your instinct make the assumption you need it first, and consider what it takes to build something and compare purchase options. It forces you consider long term impact for your business first and from there it will be easier to motivate the decision to pursue this option or not.
These simple questions will help you to invest in things that will generate income or save you money in the long run.
Build or buy
I. Your Team
The first hurdle is right there at the start of your venture. Do you have all skills available in your team to conceptualize, market validate and build? The options available depend entirely on your situation and your personal & business skills.
When you are a small team — you could have all the bases covered. If you are a solo founder you might not. But no matter if you are a solo founder or team lead — make sure you know your (team) strengths.
Know where you are lacking or need some outside help. The strongest teams and founders are the ones who can be introspective when needed and consciously examine their skills and personality.
Here’s something for those who think the word “Buy” means asking a developer to join the team and promise shareholder rights if your great idea takes off. Never — ever- go that route.
You might even find yourself asked this question by a developer or a company you are in contact with. Be smart — it always costs you plenty more and you are not in control of the quality that you onboard.
The magic words here: “stay in control” whatever decision you take.
Our company has always stayed far away from constructions like these. I have been glad to this date that we have. We have added quality to the team when and for the time that we needed it — which has given us control but also the flexibility we needed.
II. Your Product
When it comes to making investment decision about your product your leading principle should be: own it and control it. Every part of your product that is essential to your value proposition you should build and own — period.
Make sure you or your company owns all ip. All tech stack and resources should be in your company’s name and control. Not on the server managed and controlled by the contractor helping you build YOUR product.
It has cost us a lot of time and money to get everything from our initial supplier towards our own environment. A decision hastely made out of convenience in the early stages — proved a big and costly mistake a year into the project.
That is not so say buying in services to support your product isn’t something you should consider. Depending on the stage of your business using third party server & compute space, for example, is a very efficient decision.
Beware of entering into contract with smaller private companies. Like those offering so called dedicated server space. How reliable are these companies long term? What are your other options? And what if you scale — these smaller companies usually end up becoming a costly affair.
If this world is new to you or your team — the smartest decision you can make is to ask other companies what mistakes they made that you want to try to avoid. Smart companies inquire, compare and do the math for their own business proposition.
III. Your Office
It seems the general consensus on when a business is flourishing is when they have reached the stage where they can afford a good size office for their team(s). Don’t believe the hype. Investing in personnel on your payroll is a huge amount of money out of your budget every month.
Having them set up in a brick and beam office — same. In times when revenue is not a steady stream of income yet, this is not something your company can afford. And there is no need to afford it.
There is plenty of opportunities to go remote — even be a completely distributed company. In increasing number of well established companies are (i.e. Github, Zapier). In an earlier article for our company I touched upon the challenges of a remote work infrastructure and culture.
Finding smart people to work on your product is not cheap — it probably is the highest expenditure. Never compromise taking on juniors or trainees. Not something you can afford in the early stages of building your company. But do invest in a remote infrastructure and culture. You’ll start reaping the benefits early and these will only increase as you grow.
Go create something amazing
Now here just a short summary of tips to consider for the main areas of your tech business. There’s many more business challenges that you can solve by asking yourself the two simple questions phrased earlier: Build or buy? And do we need it now?
Now create something amazing — make your investment decisions smarter — and your future brighter.
Originally published at https://carolinevrauwdeunt.com on October 4, 2019.