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=”;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.

prev next

You might also be interested in

Co-founder Equity Split: A New Framework to Objectively Divide Startup Ownership and Get Back to Building a Business

We’ve just released our free Co-founder Equity Split tool. It’ll give you a fair and objective recommendation about how to divide your startup’s ownership, so you and your co-founders will have a sensible, real starting point for this notoriously hard, crucially important conversation.

Many startup founders find themselves lacking clarity and direction when it comes time to divide their

Read more >

From Accelerators to Venture Capital: What is best for your startup?

With startup growth up 61% since 2014 and more investment programs emerging, it can be overwhelming for founders to know just where to jump in. As the most startup-friendly accelerator on the planet, MassChallenge has helped 835 startup companies around the world, who have raised over $1.1 billion in funding and created over 6,500 jobs. We have seen startups at

Read more >

Valuation Part I: Peeling the Onion, or How Top Investors Value the Startups They Invest In

Update 2017: To help you understand how your startup will look to investors according to this methodology, we’ve created a fundraising feedback tool that will give you investor-level insight into your startup’s performance. In just about 15 minutes, it will tell you how much money your startup is likely to raise, where you can find that capital, and what to

Read more >

Starting a Startup as CTO / Head of Product

After less than a year, Glassbreakers is now a team of 10, we have thousands of active users on our free product, we’ve expanded into enterprises with paying customers and raised over a million in seed funding. After a few of my Glassbreaker matches inquired, I started to reflect on what it’s like to build a startup

Read more >

18 Ways to Make Your Financial Model Stand Out to Investors

The median investor looking at your proposal is in her 40s. Her eyes are going, not to mention her brain. I look at a lot of spreadsheets and analytic reports, and way too many are difficult to read and therefore hard to understand.

In an effort to make my life easier, I’ve summarized here the steps that will

Read more >


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.