Derek Sivers

Entrepreneur, programmer, avid student of life. I make useful things, and share what I learn.

Nothing to waste: The advantage of being under-funded

In the comments to Version 0.1 = Start lo-fi, Larry Rood pointed out that start-up companies who have too much money often blow it. That there's an advantage to being under-funded to keep you from making mistakes.

It reminds me of what it was like to have a CD Baby booth in the exhibit hall of conferences:

1998
Me at a plain table, talking with people and handing out flyers. Not many other booths.
1999
Me at a plain table, talking with people and handing out flyers. Other booths have big LCD displays and fancy corporate backdrops.
2000
Me at a plain table, talking with people and handing out flyers. Other booths have booth-babe models, fancy multimedia displays, and giving away $50 items.
2001
Me at a plain table, talking with people and handing out flyers. Others have bought out an entire pavillion, laser light shows, giving away cars, offering a million dollar prize.
2002
Me at a plain table, talking with people and handing out flyers. Not many other booths.

I remember being pressured during the dot-com boom to take venture capital. But my response was always, “I'm profitable and have plenty of cash. The company doesn't need more money.”

They'd come back saying we could “expand our reach” or other vague terms that to me sounded like blowing money on ineffective advertising.

They'd say we could have a big marketing budget, but I'd say, “Marketing doesn't cost money. ‘Marketing’ is another way of saying ‘being considerate’. It's all in how you talk with people.”

By then they'd decided I was just crazy and would surely fail, which was fine with me, because it let me get back to focusing on my clients and customers, undistracted by investors.

http://www.flickr.com/photos/26745132@N00/201520772/