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I would guess that it's bad for a startup to blow through their investment money, but how big of a factor is day to day frugality for a startup?
Be careful with money, but be careful to also spend money.
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.
when the investment is micro (10-15k) I suspect (as said in their documents) that Ycombinator doesn't even keep track of where the money goes.
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.
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.
Any thoughts on why this is? My first thought is those that are frugal understand the long-term consequences of their decisions, understand the fragility of their position and are otherwise more measured decision makers. All qualities which I think translate well to running a successful business.
However, I'm beginning to notice now that our customer base has grown and our revenues have doubled a couple of times over since our time in YC that what used to seem extravagant (paying people to do things for us) is now becoming the smartest way to make problems go away. I just paid Google $500 yesterday to handle search on our site, because it is a problem that has effected me on a couple of occasions, and I decided that even one more day of me fighting with full text search in MySQL and PHP (which is not a comfortable language for me to work in, as I use Perl mostly) was one day too many--the opportunity cost was just too high, when that one day spent talking to customers could close a deal worth many times the $500/year that I pay for Google Custom Search.
But, that's frugality of another kind (one that considers the value of both time and money), of course, so it doesn't invalidate the idea that frugality is pretty much always a net win. I just thought it worth mentioning since I've seen plenty of entrepreneurs take frugality too far. Colocating their own box instead of renting a server in order to save $10/month, for example...if you have a single hardware problem during the 18-36 months that the server is in service you end up with a raw deal (because you either have to go to the colo and deal with it, or hire the colo service folks at $100/hour to deal with it). If it's not the focus of your business, try to find someone else who does have that as their focus to do it for you. Work on your differentiating factors, not the day-to-day crap that every business has to have.
But, you have to value your time properly. Otherwise your perception of being frugal is really just an accounting error.
Our competitors outspend us by orders of magnitude. But we've been frugal and focused. So while they're worried about raising their series X and lining up an exit, we're worried about serving our customers better and how to spend our profits. I wouldn't want to switch places.