Being an entrepreneur is about money. That’s an inescapable truth. It’s about money. Making it, maximising it, getting value for it. You can talk about startups and the future and colonising Mars all you like, but for most of us, this is and has to be about business first. If we don’t have a working business, the lofty goals — which are important, don’t get me wrong — will never be achievable.
I’ve known a lot of founders with a hugely unhealthy view of money. They don’t know how to spend it, or what to spend it on. They talk about their burn rate as a loose concept that has little to do with money in the bank.
Rich Founder Versus Poor Founder
Rich founders are entrepreneurs who understand the value of the money they are making, spending and receiving as investment regardless of how much money that is.
When you understand what your money can do and what it is doing, you have a better grasp of what it’s worth and how powerful it is. You’re not throwing it away without a second thought.
Poor founders are entrepreneurs who see investment money as an endless supply, who spend on crap they don’t need to put a big fuck-off slide in their office, like that’s going to make their startup. Poor founders don’t see their money as having consequences, and that’s a pretty crucial point.
Which One Are You?
The important thing isn’t to say that raising money or not raising money are the right path. The important thing is to recognise that spending habits make the founder. Spending on the right stuff, not the nice to have stuff.
I’m not against startups raising money. We’ve raised at Speedlancer, but I’m not raising to build Creatomic. Neither path is right or wrong.
It comes down to being aware of what you want to do with your money, and what plans you have for it. If you know where your money will be spent, and you understand the impact that it will have and why that impact matters, raising money is a fine path to follow.
Where it falls over is when you’re raising Fancy Office Money — going into a funding round without a clear idea of where the money will go, beyond the vague concept of growth.
There are a wide range of areas where you can ask yourself if you’re spending for the right reasons.
What About The Tools You Already Have?
Is there a reason you’ve outfitted everyone from the guy in reception to the marketing department with a high-end Mac when it’s really only the developers and designers who need that kind of power?
Is there a reason you’re spending on that office space in the first place, and did you consider running a distributed team to reduce overheads? Is there a reason you’ve printed hundreds of T-shirts before you’ve made enough money to pay for them?
If you’ve got decent answers for questions like these — awesome. We’ve got no problem here. If there’s no answer, because you just haven’t thought this shit through before doing it, because there’s no strategy or thought behind your spending, you’re not a rich founder. You’re dirt poor.
Don’t Spend Without A Reason
That’s the best rule to follow if you want to be the Rich founder.
- Don’t spend anything without a real, tangible, thought-through reason.
- Don’t spend anything for the sake of it.
- Don’t spend anything just because X founder did it and then achieved Y so it must be right.
- Don’t spend anything just because you read it in some tweet.
- Don’t spend anything just to keep staff. (If your spending is the only thing keeping them, you’re not really keeping them!)
[This post by Jon Westenberg first appeared on Medium and has been reproduced with permission.]