Always New Mistakes

September 22, 2008

Why well funded startups waste money?

Filed under: Business, entrepreneur — Tags: , , , , , , , — Alex Barrera @ 12:49 pm

Sometime ago I had a conversation with a friend who asked me how much money I though was needed to get my startup going. I told him I though it would take 100.000€ to bootstrap it in the US, but that  it might be less. I still remember his skeptical face. I though he was going to tell me it was way too much, but to my surprise he told me it was way too low. I realized then that there is a great gap between bootstrappers and corporate drones. Enterprise people need like 5x to 10x more cash than what a bootstrapper needs but the truth is that this is just an illusion. It’s not true you need 10x more cash, it’s just that you aren’t used to save money.

As always, nothing is black or white and there are exceptions to this, but most of the time it’s just people flushing money down the drain without any real results. I really feel it’s because the money isn’t theirs and so, they don’t feel the pain it is to earn that money. Nothing like having your own savings at stake to think twice about spending it in stupid things.

The problem isn’t that corporate guys think this way, the problem is that I’ve seen many startups behave the same and I must say, it really shocks me. Wasting money is a bad habit, specially if you
are starting up and I think most companies don’t make saving money and resources a critical part of their company’s culture. For me it’s something fundamental in an organizations culture. Everyone should think about this, even when there is plenty of money, wasting it should be avoided.

What really strikes me is that the same behavior can be observed on peoples lives. Plenty of people ask us how are we (me and my girlfriend) able to live the way we do. The answer is that we don’t pay for stupid things. When someone tells you that they’ve spent 600€ in a pair of shoes I just roll my eyes. And don’t get me wrong, if you can spare 600€ a buy some awesome handmade shoes, please be my guest. The problem is that 99% of the times, people just can’t afore to do that and they buy them either way, which I must say, it’s just stupid if you ask me.

Sadly the only times I see companies trying to save money is when they need to bump their profits for the next quarter. The problem with this is that it’s too late. Creating a culture takes time and you can’t just reverse crazy spending overnight. Employees should feel that if they waste resources it’s their own payroll money they are wasting. The more you save, the more you get back at the end of the month.

And yes, I know, some readers are thinking, hey but I do save and my payroll is the same, instead those greedy bosses of me are earning much more to my expenses. This is both, true and sad, that’s why new entrepreneurs should start thinking about this issues from day one. Transparency is key for this to work and the problem is that not everybody is willing to be transparent. I would love to think
that money doesn’t changes people, but it’s not true, but if you have some solid guidelines and stick
to the basics I’m sure we could do much better.

Have you seen crazy spending in your company, in your startup? Tell us about it!

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Would you buy a cool Twitter name?

Filed under: Blogs — Tags: , , , , , , , — Alex Barrera @ 12:07 pm

Leo Borj asks a very interesting question, should we start registering potentially valuable Twitter names, like if they were domains? This is a very common practice with domain names known as cyber squatting. You register a domain name with the idea of selling it in a future for a higher price to a 3rd party. You could also call it, name speculation. The domain squatting is a quite profitable market, albeit it sometimes touches some ethic boundaries. Anyway, the real question is, is it worth doing the same with Twitter names?

In my opinion, it might be worth trying, although there is a fundamental flaw. With domain names, it gets down to who registers it first (except in cases where you can probe that someone else is using a registered mark with nasty intentions and even though, it’s hard to get it back if you aren’t a multimillionaire corporation). In Twitter that law doesn’t holds, or better of, doesn’t holds always. Instead you have the following general condition:

We reserve the right to modify or terminate the service for any reason, without notice at any time.

As you can see, if you play the squatting game, you have a very high risk of having your account suspended if Twitter deems so.

Another question that arises me is, would people follow an account that isn’t from a real person nor a company nor a brand? I mean, would you follow a Twitter user named: @sexy_toys ? Personally I wouldn’t, but hey, I’m sure some people would if that account follows them first (the problem with this is that after the recent spam limits imposed by Twitter you have a fair chance of having the account suspended).

And finally, would you sell your Twitter account, either directly to 3rd persons or indirectly selling ad Tweets? I’m sure this is going to hit hard, I do think it would work if you play it well. Some basic ground rules I would like to see:

  • Don’t spam your followers. Some recommendations are ok, but don’t transform the account into a damn billboard
  • Don’t advertise things that no one cares about or that don’t have nothing to do with your Twitter audience.
  • Don’t advertise or recommend something you don’t like or haven’t tested. It’s bad for your followers and it’s bad for your reputation.

After all, I’m a true believer of what Dave Winer sometime said: “because perfectly targeted advertising is just information.

What are your opinions on the matter?

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