Thoughts on startups by investors that
fund them & entrepreneurs that run them

Best Practices for Wasting Money

It seems that everyone is writing about best practices these days, and I certainly agree they should be followed whenever possible. There has been a disturbing lack of guidance on one of the most common activities of early stage companies: throwing money out the window.  So, I’m here to help. Of course, this is a huge topic that can’t be covered in just one post.  So, for today, we’ll focus on just three key ideas that, if followed correctly, can essentially guarantee you’ll be looking for another round much sooner than anyone expected.

First, attend lots of conferences, especially when accomplished without extensive pre-event work to ensure a solid calendar of meetings. This can be a fantastic way to run up expenses.  Just airfare, hotels and food for several people for several days will make a significant dent. However, when you add in conference fees, union labor at the site to set up your booth, and company materials that will never be looked at, this is a “best practices” home run.  The number of genuinely useful relationships actually developed for the first time at large conferences—and which couldn’t have just happened through LinkedIn – is statistically insignificant, so don’t worry that they’ll upset the cost/lack-of-benefit ratio.

Second, try to develop business overseas.  This has the benefit of seeming  perfectly logical to investors and cohorts alike: after all, its called the world wide web, right? What few folks appreciate is how profoundly the matters of culture, language, fulfillment, and competition impact your offering, and how much harder it is to figure out what’s really working, and not, in places you aren’t familiar with.  The strain on management, always underestimated, makes this a particularly effective way to reduce velocity.  If you actually hire a team in a foreign jurisdiction, you win: just go ahead and start applying for jobs yourself.

If, however, those two strategies fail to deplete the bank account adequately, you can always resort to my favorite, fail-safe, and shockingly common approach: retain a PR agency.  You and I both know that if the company has a great story, .

Foster Brand Advocates – Parker Gilbert” href=”http://videos.gust.com/video/Foster-brand-advocates;search%3Atag%3A%22build-your-brand%22″>it doesn’t need an agency; and that if it doesn’t, an agency won’t help.  Even significant  PR rarely delivers benefits beyond ego gratification.  To the outside world, this can look like a totally reasonable expense, which earns it extra points as a best practice… hey, with luck, the investors won’t even ask why you didn’t invest the dollars in paid search.

Even used sparingly, these best practices should turn your burn rate into an inferno in no time.  Good luck.

 

 

 

All opinions expressed are those of the author,  and do not necessarily represent those of Gust.

Written by Bob Rice

user Bob Rice Managing Partner,
Tangent Capital

Bob is Managing Partner of Tangent Capital, a registered broker-dealer and merchant bank focused on alternative assets and strategies. He is the resident industry expert on early stage and other private investments for Bloomberg TV, appearing daily as Contributing Editor on “Money Moves.” Bob is a Director of asset management companies with over $2 billion in AUM. Bob began his career as a trial attorney at the U.S. Department of Justice and then became a partner at Milbank, Tweed, Hadley & McCloy, where his practice centered on financial products. He left the law in 1996 to found a 3D graphics technology startup that eventually became the publicly traded Viewpoint, provider of the web’s first “rich media” advertising platform. He has been an active angel investor and startup mentor since 2004. Along the way, Bob also served as the Commissioner of the Professional Chess Association and authored the business strategy book Three Moves Ahead.

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Comments

One thought on “Best Practices for Wasting Money”

  1. Muir Woods says:

    I’m surprised you didn’t add, File for Lots of Patents, hire a Big Name Accounting Firm, and hire Big Name Lawyers to devise a clever off-shore tax shelter scheme.  After all, you new idea is going to make so much money that you’re going to need all the spadework done early.