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Ask PG: Correlation between frugality and startup success?

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Re: Ask PG: Correlation between frugality and startup success?

#21

Post by dhouston »

like anything else, it's a matter of balance. i used to be a hardcore bootstrapper and would pride myself on getting something to market on a $x,000 budget, or saving a few bucks on an SSL certificate, laptop, office space, tax deductions, etc. but the result is i'd waste a lot of time and emotional energy on shit that didn't really matter to our core business.

but there are two things to remember:

- your time is a lot more valuable than you think (as others have pointed out)

- often money, wisely allocated, (i.e. hiring a couple engineers or investing in a good work environment, not all-around extravagant spending) can help you get to market and achieve your goals faster

and since speed is a startup's only real advantage, this is often the difference between a 1 or 0 outcome.

Re: Ask PG: Correlation between frugality and startup success?

#22

Post by jamiequint »

rms wrote: post #18
pg wrote: post #5

Good question. There is a huge correlation. People who are cheap are much more likely to succeed. And not just because their money lasts longer; a frugal attitude seems to correlate with success.

Crystal Towers is definitely an outlier...

crystal towers actually isn't that expensive. I'd say its pretty price competitive for the area (North Beach). YC startups actually probably bumped up the price by filling the place up (and the latecomers had to pay more)

Re: Ask PG: Correlation between frugality and startup success?

#23

Post by rms »

jamiequint wrote: post #22
rms wrote: post #18

Earlier quoted context omitted.

Crystal Towers is definitely an outlier...

crystal towers actually isn't that expensive. I'd say its pretty price competitive for the area (North Beach). YC startups actually probably bumped up the price by filling the place up (and the latecomers had to pay more)

I got this quote last December, for anyone curious. Price has probably gone up by now.

>One bedroom units here are priced from $2500 to $3000. Two bedroom units are priced from $2550 to $3300.

You're right, it's definitely not too bad if you have three or four people in a two bedroom. And it's also furnished and on a 3 month lease.

Re: Ask PG: Correlation between frugality and startup success?

#24

Post by jdavid »

SwellJoe wrote: post #15
fallentimes wrote: post #12

Earlier quoted context omitted.

How does this work come tax time? From my understanding, you can only write off hosting, half of food (sometimes) and maybe a part of rent. How did you guys deal with this?

I don't know that we're representative, but, so far, I mostly just wave my hands around and go, "This sucks." And then leave it for later (meaning we haven't been doing much with write-offs or expenses on our tax filings). Pretty much all of my bookkeeping to date has been of the form "put it in a folder for when we hire a bookkeeper". Luckily, this will be the year in which we hire a bookkeeper, and I won't have to…

on a failed startup of mine, i redid my taxes 3 years after i closed the company. i received $25k as a refund, and it cost me $4k for the accounting. good accounting is WORTH IT. had i used that firm in the first place i might have saved an additional $50k and spent $4k on fiscal advice. Since i self funded i did a lot of stupid things when it came to managing cash flow and spending personally for my company. also for being able to better leverage credit vs opportunity cost on selling stocks and paying employees, i could have much better used my available margin trading ability that had an interest cost of only 5%, and with some stocks, waiting till the fiscal reports would have been worth 20%, which would have kept me in the black personally, vs. having a burn rate.

oh the things i would do differently, and well, the things i am doing differently with social helix.

Re: Ask PG: Correlation between frugality and startup success?

#25

Post by menloparkbum »

rms wrote: post #23
jamiequint wrote: post #22

Earlier quoted context omitted.

crystal towers actually isn't that expensive. I'd say its pretty price competitive for the area (North Beach). YC startups actually probably bumped up the price by filling the place up (and the latecomers had to pay more)

I got this quote last December, for anyone curious. Price has probably gone up by now. >One bedroom units here are priced from $2500 to $3000. Two bedroom units are priced from $2550 to $3300. You're right, it's definitely not too bad if you have three or four people in a two bedroom. And it's also furnished and on a 3 month lease.

Crystal Towers is one of the worst deals in SF. The only thing it has going for it is 3 month leases. For the same price, you can get a similar corporate housing vibe, but in a new building, if you look near the Caltrain station. If you are really into the George Jefferson retro hi-rise aesthetic, there are plenty of places around Japantown that are $700-$1200 cheaper for the same square footage.

Re: Ask PG: Correlation between frugality and startup success?

#26

Post by abijlani »

Frugality makes you creative. If you think you have abundant resources then you will always throw money at the problem. Whereas if you feel your resources are limited then it will force you to come up with creative solutions to make the most out of what you have.

Re: Ask PG: Correlation between frugality and startup success?

#27

Post by manmanic »

xlnt wrote: post #8
pg wrote: post #5

Good question. There is a huge correlation. People who are cheap are much more likely to succeed. And not just because their money lasts longer; a frugal attitude seems to correlate with success.

Maybe this is because excessive spending is caused by not thinking carefully and precisely about all the factors relevant to the startup, whereas frugality comes from trying to maximize everything to one's benefit. So even if the actual money savings doesn't make a huge difference, it's a visible indicator of doing the right kinds of things.

I've think there are a couple of hidden factors which help explain the correlation between frugality and startup success - economic intuition, and the sense of entitlement.

Many startup founders don't have good economic intuition, and this expresses itself both in a lack of frugality, and an inability to come up with a realistic business model. In other words, similar skills and experience are needed to answer both these questions:

1. How long do we need our investment money to last, and what is the best way of spending it over that time?

2. What kind of products will people will pay for, and how much will they be willing to pay?

So you'll often see a startup which is spending money unnecessarily, and also finding it impossible to bring enough in.

On the second point, some startup founders have a sense of 'entitlement'. By this I mean a belief that the world owes them a good life without them having to earn it. Perhaps this is because investment is too easy to come by in the current environment.

Instead of feeling a heavy sense of responsibility and guardianship over their investors' money, and focusing on providing a return, these founders think they've been given a free ticket to go pursue their dreams. This will express itself both in a lack of frugality regarding money, and also an unwillingness to put in the long hours necessary to make their startup succeed.

Re: Ask PG: Correlation between frugality and startup success?

#28

Post by babul »

pg wrote: post #5

Good question. There is a huge correlation. People who are cheap are much more likely to succeed. And not just because their money lasts longer; a frugal attitude seems to correlate with success.

That is good to hear, because I am very frugal.
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