Over a TechCrunch, Michael Arrington wrote a post agreeing with some parts of Jason Calcanis’s post on how to save money running a startup. The two great points Arrington brings up strike a cord with my small startup experience with Nexopia here in Edmonton.
Arrington says that startups must:
- Watch every penny, and
- Hire the right people
I’d like to share a few of my experiences with these two points.
On watching your pennies
My first experiences with social networking, doing business online, web 2.0, etc. were both young and brash. I was 18 and I loved working with computers and Nexopia and I was full of huge dreams and couldn’t wait to make a million bucks. I was one of the original employees for Nexopia and in the early days we worked out of Timo Ewald’s kitchen! I thought it was pretty cool that we were so small that we didn’t need an office, yet we daily effected the lives of hundreds of thousands of Canadian youth.
The first half a year I was with the company I would come up with grand, money wasting, ideas. Of course the brilliance that was actually in charge shot down each one. It took me a while to realize that money wasn’t just sitting in a big vault that we could draw from. Sure the company was making lots of money, but it also needed it for future expansion, not for iMac’s or to send me to some stupid conference in Fiji! Yes.. I literally pitched that…
So Michael is right, startups need to pinch pennies. Timo and his personal advisor’s were very smart to be frugal in the early days. Now that the company is self supporting and doing well there is room for more extravegance. Heck, last year we moved into a nice loft office that houses almost 30 employees. I’m relearning this with my own business. I shouldn’t be buying things I can make myself, for example: a sandwich board or assembling a computer. It boils down to laziness and sometimes I’ve kicked myself for it. Live and learn.
On the flip side you need to spend money to make money. However, this is often misconstrued by us young brash entrepreneurs. What is really means is spend only what you need to make money. So if you’re trying to get your own business off the ground don’t go blowing a thousand dollars on classy fancy business cards or buying top of the line desks for every employee; you should order the cheaper regular cards and use your (free) personality to generate a relationship when you hand a card over. If you need a fancy desk or card to make up for your lack of sincerity and leadership you probably shouldn’t be in business anyway.
On hiring the right people
From personal experience, both in working for other companies and myself, hiring the right staff is like paying yourself more. Again with Nexopia, one of the first things I realized when I was working there is that we made some bad hires. Some people are just hired to plow through data, some as developers, and some as marketing or sales. Regardless of the position, someone who works for such a user driven site like Nexopia should be in love with their job and most importantly the website itself. This is especially true for small companies where everyone’s opinion actually matters.
Now obviously you don’t want to only hire employees who were members of your service. It’s important to draw from your outside resources and grab the best hires you can. However, being the best means willing to adapt to what your customers know, want, and love. In our case this was Nexopia, a Canadian social network mostly dominated by youth.
I realize that I’m not always right, but I firmly believe that if an employee is simply working to make the company as much money as possible then you have a problem. That’s the role management should play, to manage your employees so they work for the right reasons which then bring in the most money for the corporation. Yes, of course the sales team needs to try to make money, but never at the expense of the customer. There were many frustrating times when we would try to do things that were in our best interest, and not that of our young customers who have many social networks to choose from.
Don’t get me wrong, I love Nexopia and the people working there are great. It’s a good company that I hope finds it way through the maze of competition down south.