02. Getting Started with Limited Money

Estimated Time

• Reading: ~5 minutes
• Video: ~23 minutes
• To Do: ~TK minutes

To Do

Top Insights

• Don't spend money just because you have it
• Use free versions of tools until you outgrow them
• Negotiate contracts for vendors
• Save money everywhere that you can
• Put the money you save back into your product

Intro

• Do more with less - this is important because a founder has limited resources to deploy in a competitive world
• You are in a race that is unfair and brutal
• You need resources
• You have to prove, as an entrepreneur, that you know how to deploy resources intelligently
• Then the people with the resources will feel confident that the money they give you will be well spent

Take advantage of free or inexpensive resources

• As you saw in "Learning how to Learn" there are hundreds of tools available
• Leverage free tools as long as possible
• The free tiers of must solutions will take you much further than you might think
• Don't spend money just because you have it
• Why pay for a resource that Google Sheets solves for free?
• When you reach a point where you need to pay for tools - ask for a discount!
• It is not uncommon to get several months free or a discounted rate if you ask

Financial tips when you're starting your company

• Don't rush to get unnecessary office space
• Working from home has become the norm
• Take advantage of that cost savings if you can
• Never sign a lease in your first year of business
• If you absolutely need a space - rent a desk for a couple of hundred dollars per month
• Or if you have early investors, see if you can share their space
• For perspective - Jason shared his personal experience from ~10 years ago
• The Launch company was doing ~$3 million in annual revenue at the time
• The team worked out of WeWork for ~$6500/month
• When you can afford an office and need one, get the least expensive office space where you can work properly

"People start thinking 'Ah! We have this great space, now we can all start spending money like idiots.'" - Jason

• You don't deserve any high-class setting — yet.
• Act like a startup
• If you get a big fancy office space, it will set the tone completely wrong for your startup and the people you hire

Do as much as you can to save money

• Put all the money you save back into your company!
• Don't rush into hiring when you can do the job yourself
• The process for finding the right fit, and paying new hires is expensive
• Make sure you truly need to make the hire
• You're well within your right to defer salaries
• For example: If you have a 6-figure engineering candidate
• Ask them if they would be willing to take 50% of their requested salary until you get your next round of funding.
• You can give them a little more stock compensation
• Keep in mind - it's a bad idea to lose critical talent because you want everyone to live like a monk
• Be balanced in your approach

Outsource

• You can negotiate deferred payments and flat fees with great law firms
• Outsource HR and accounting during the early stages of your company
• Get minimum of 3 quotes from different service providers
• Negotiate with them on prices. You can even ask for deferred fees.
• Re-negotiate with your vendors every 6 to 12 months so you can free up money to put to work on other things.
• Anything you spend more than $1k/year on is open for negotiation
• Avoid signing contracts that are more than a month to month.
• If it's a longer-term contract, there should be a 30 to 60 day mutual out.
• That means either party can cancel within 30 to 60 days notice.
• If you're not locked in, you have the power to re-negotiate.

Big Company Interactions

• If you don't have money you can go to your clients and ask them if they would be willing to pay in advance.
• A few may agree - especially as an enterprise software company
• Big companies like Microsoft, Amazon, and Google often have programs or credits to help startups get started - use them!
• Especially if you are doing any cloud computing
• Monitor your credits carefully and they can go a long way
• When hiring be aware that it is not uncommon for former big company employees to feel entitled and spend money frivolously
• If you hire individuals with this experience make sure they understand it works differently in a startup
• These conversations can sometimes be uncomfortable
• But setting a tone of frugality early will seep through your employees
• After that, if you see unnecessary spending, it's a sign you should let them go.

Travel

• If (or when) people at your company begin to travel - be smart with your money
• Booking of travel should always go through a central person in your organization who you train to be as money conscience as possible
• Otherwise, employees may try to build up points for their personal use at the expense of the company
• It's fine if they get points incidentally
• But don't allow employees to choose which airlines they use for a personal advantage that will not benefit the company.
• Look into renting an Airbnb instead of a five-star hotel when possible
• Find an affordable hotel that provides breakfast to avoid an extra meal
• Per diem (how much employees get when they travel) should be set reasonably

"The points from all the credit cards should go to one account. That account is where we book our travel from first so that we can conserve cash. We're all here for the bigger prize, which is the equity value of the company." - Jason

Advisors

• Find great advisors who aren't rich enough to put money in but have massive credibility
• You can offer 25 basis points for 4 years of service
• Give them a vesting schedule that involves a 1-year cliff with monthly vesting after that
• Continue to get better advisors over time
• Create a list of qualities you value in an advisor, and begin to document individuals in your network you could reach out to

DO NOT WASTE MONEY!

• At all costs save money and put it into the product
• You don't need swag
• You don't need expensive offices
• You don't need the best snacks in the office
• You need a great product made by a great team that delights customers!

Additional Resources

To Do

More info on creating an Application Tracker

• You spent the previous section testing out new tools
• Some are going to help you accomplish your goals more than others
• Start tracking the tools you plan to use going forward

A few ideas of items to include in your Application Tracker:

• Name of App (with link)
• Description - what it is and why you need it?
• Status - are you paying now? will you?
• Cost - is it really free? will you pay monthly? yearly?
• Notes - plans?
• Owner - who is in charge of learning & maintaining it?
• This will be more important as your team grows
• Start date - when did you start using this tool?
• Use this to anticipate billing and negotiate new deals
• Decision by - when do you need to decide if you'll pay?
• Could also be a "Last Used" to track how often you are using it
• Anything else that will be valuable for you to have as reference later!

Example

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