I feel frugality is one of the most important points for startups and entrepreneur. I'm curious to hear more from you guys regarding this, as what's your take on frugality and any other need/must to have qualities to be a successful entrepreneur?
You can generate revenue to infinity, but you can only cut costs to zero.
This alone means that a bias toward frugality will probably cause you to spend time on the wrong things. It's the equivalent of a freelance developer who charges $100/hr spending 5 hours on Amazon trying to save a couple bucks on an iPhone cable. Cool, you saved $3. But you spent $500 to save it!
Of course, if you haven't found product-market fit, frugality can help give you more time to find it. But once you have a proven business, frugality is a death sentence. While you're trying to save $20/month on your email marketing tool and $50 on cheaper coffee for the office, your competitors will be spending their time and money to acquire your customers.
Generally, you get what you pay for. So if your gut is to always pick the cheap option, you're going to be using bad tools and hiring bad people, and creating bad products.
There's another useful way to look at this mathematically and practically: survival time. If you cut costs to nearly zero, you can survive nearly infinitely.
There are plenty of small companies that serve a small market and last for decades by being careful about spending. That doesn't mean scrimping on coffee, but it means not paying $20k for a stylish sculpture for your office reception or $2M for a beach concert with the hip artist of the day.
The exact same thing applies to personal finance. Often, working towards making a lot more money is the fastest way to get rich, rather than spending a lot of time eliminating small costs (e.g. cheaper coffee). However, for a typical person, eliminating big costs such as expensive luxury cars makes a big difference. If you want your money to last, you need to be frugal relative to the scale of your assets, revenue, and growth.
>There's another useful way to look at this mathematically and practically: survival time. If you cut costs to nearly zero, you can survive nearly infinitely.
Only if you don't enjoy doing things like eating food and living indoors.
The point is that you need to count time spent by the founders as an expense. Roughly somewhere between 15-20k per month per founder. Even if you're surviving by eating ramen in your parents basement there's still an opportunity cost from not having a job. You have to account for it.
I’d argue that most people absolutely should not account for it. There’s enough to stress out about when trying to get your startup off the ground. The idea that your “spending” 2Ok a month due to opportunity cost is not helpful and probably likely to lead to burnout. On the other hand, saving a little money and knowing you’ve extended your runway an extra 3 months can be very helpful.
There’s another way to look at it too: a waste of time. If what you enjoy is lowering costs for the sake of it, living an extremely minimalists lifestyle, and focusing all your energy on finding ways to avoiding spending money then good for you. But for the rest of people? Probably a waste of time. And most individuals will never accrue the level of wealth necessary to live a FIRE life. After all, you can’t actually reduce your costs to anywhere close to $0 in the US. Healthcare, food, shelter, and more can cost a lot. God forbid you want to live a somewhat normal life and have children who grow up with some normality.
The post above is explicitly not advocating attempting to cut costs to $0, but to consider survival time when evaluating expenses. The extreme example is just useful for projecting an intuition of the relationship between spending and survival.
Same as how "You can generate revenue to infinity, but you can only cut costs to zero." shows the edge cases to build the intuition.
I feel like this is the popular sentiment these days but I don't fully agree.
I've seen so many companies spend themselves to death and its easy to have it happen much faster than anybody in charge realizes.
I've also seen companies grow expenses as things go well and suddenly there's a massive downturn in the market and they can't recover in time. Meanwhile, more frugal companies have the runway to weather unexpected events.
So I still think there's more value in frugality than is generally accepted.
I'm not saying the alternative to frugality is to spend your way to death.
But it's important to remember, if generating revenue is so difficult, you don't have product market fit or even a business then.
Pinching pennies is only valuable in the sense that it can extend your runaway long enough so you can find product-market fit.
It's not a means to an end by itself.
Irrational frugality is pretty much the default impulse of all American software engineers (and the entire HN crowd), so I don't think HN needs any more encouragement to be frugal.
It takes money to build up revenue and get new clients, this are typically called the "customer acquisition cost" or CAC.
The time it takes for a customer to pay back this initial CAC is called the "payback period" which can be 1 month or 10 years.
The longer the payback period is, the more investment you need to bridge the gap.
The business may be super-profitable from a unit-economic point of view, but from a cashflow point of view is a nightmare.
Businesses with long payback windows are very common, but if the theory is that a customer stays for 7 years and you are in the 3th year of your startup, you will have to convince investors that this is true which depending on the fashions of the year they will lean towards true or false.
That's one important point, the other point you mis is that fixed costs cannot be avoided and don't prove anything vs. the viability of your business.
A good example is accountancy costs, office costs and hardware for employees... it's a must to pay for these things but every business needs them but they don't generate revenue.
Pinching pennies is a very healthy habit because again, everybody wants you to spend money (on them).. that's everybody's business model.
Getting a client to spend money on you and getting enough of them to cover the variable and fixed costs is the real litmus test whether you have a viable business.
There are examples of irrational frugality that we can agree on like hiring a zoo of interns that then take up all your attention to manage and train but then immediately quit once they actually get some experience.
Another example is hiring 3 junior devs that can't match the output of 1 senior dev for a combined cost of 1.6 times the cost of the senior dev.
Either way, frugality is a good thing but obviously you need to make the money that you do spend count.
I'm coming at it from the perspective of the irrationally frugal (a common problem I see on HN and how engineers typically behave even when they've found traction).
You're coming it from the angle of the irrational big spenders (VC-funded stuff you hear about in the media ie. WeWork, etc.).
We're both saying: be ruthlessly rational with your time and money.
However, I think a bias towards spending (vs. irrational frugality) is actually much more rare than you think. Everybody knows about WeWork, but they don't hear about all the engineers who spent 6 months optimizing their AWS bill to save $500 when they hadn't even found product-market fit yet.
Curious - what startups are looking at the kind of time horizon for getting their customer acquisition cost back? That seems like an idea that investors would not want to pour their money into unless it’s an incredibly sticky market... in which case, why would they switch to you and not a competitor shortly after you paid for their business...?
I think the crux of OP's opinion is, "it depends". If you can easily save a couple hundred dollars a day and are bootstrapped, do it. Otherwise, it may not be worth it in the grand scheme of things. Thus, no one size fits all, but one size can fit most.
Developing a tech startup is hard, and 90% of the costs are usually in labor (real or opportunity cost if you are working "for free").
Trying to save a few bucks each month when you are paying engineers $10K+ per month just doesn't make sense. Many engineers are also not good at thinking in "analog" (vs digital) and obsess on things that just impact the wrong thing.
Those comments about people using a couple $100s for monthly SaaS service a few months ago baffled me. The real question is: do those multiply/improve the output of your most scarce resource?
Saving a couple $1000s per year is good all else being equal, but in the end it's creating $100,000s more that matters in business.
Yeah the key to having the penny pinching DIY approach pay off is to have your time already close to zero. Then you can take as long as you want to perfect your CI/CD pipeline and loading screens, they will all pay for themselves in the end.
If this were true, everyone would do it. This isn't, actually, true at all.
You might say "in theory," but there is a finite amount of money, most of it isn't available, and of what is, most of it won't be interested in any single thing
Besides, more importantly, in practice, you can't just generate revenue. At all. Generating revenue takes the investment of work and money.
All you're doing is failing your null hypothesis using stories.
I can name a startup whose founders talked like you.
They burned more than $50 million in about four years. But they were always talking about how you can just scale revenue, so they needed to spend everything they had to scale sooner.
They had a staff of almost 150 people.
They never had 150 concurrents on-site.
They'd still be searching for product market fit today if they had had even some remote frugality. They'd probably have found something by now.
Worked for a company like this in the first dot-com boom. VC funded. Spending money like mad. Lavish offices. Big sales staff. Top-of-the-line Sun servers and Cisco networking gear. It was all focused on being ready to scale. Never had one paying customer. When the last funding round didn't materialize, the burn rate killed them in a matter of weeks.
But you're only describing poorly executed / counterproductive frugality.
Spending $500 of time to save 10 bucks isn't frugality, it's idiocy.
Spending time reducing unit cost as opposed to customer acquisition or building features might be a different discussion, especially if the next marginal customer acquisition starts bumping up against your cost of services/product.
> Spending $500 of time to save 10 bucks isn't frugality, it's idiocy.
I could also argue my point about not being frugal doesn't mean "spend irrationally," but I think we're just arguing semantics in no true scotsman fashion.
> ...charges $100/hr spending 5 hours on Amazon trying to save a couple bucks on an iPhone cable. Cool, you saved $3. But you spent $500 to save it!
I agree in general with the sentiment that people need to really value their time more than they do. It is a precious ever-depleting resource. That said, we mustn't discount the fact that:
1. One may get better at saving and wouldn't always have to spend 5 hours on Amazon when looking for better deals the next time around.
2. It is not just $3, but might also be that one is learning along way (reading reviews, getting better at identifying quality signals, etc).
3. Developing a habit because every buck one spends could have been saved for (future frugal expenses), because not every waking hour is worth $100 anyway.
4. Valuing all of one's time in terms of billable-hours could be actually used to justify not doing anything else at all; and life/learning/experiences would simply flash-by.
The thing you're missing here is that big upsides are low probability, and reduced downsides are high probability. Swing big, and you might be the guy that knocks it out of the park, but you'll probably be the guy that gets struck out, whereas the guy hitting the ground ball might not get a grand slam, but he's got a good shot of getting on base.
I suspect that the expectation value of cutting costs is going to be higher, but with a much lower variance.
> a freelance developer who charges $100/hr spending 5 hours on Amazon trying to save a couple bucks on an iPhone cable. Cool, you saved $3. But you spent $500 to save it!
Only if you have more work lined up than time to do it. Otherwise it's just another part of your day, that was never going to earn money.
Seeking a client's still work though, nobody's working all the time. At least, if you're reducing sleep so that you can spend more waking hours on billable work, you should probably take a step back!
And I assume the starting point, 5h on $3, was an exaggeration. There's time for saving money, and there's money that's worth the time to save. My point really is that 5h doing non-work hobbies, spending time with family, or whatever, isn't a 'cost'. Not even necessarily an opportunity cost, since for that there had to be abundant supply, that doing it now doesn't mean you're not doing it next week, that there's always more already lined up 'for free'.
First of all, who said this is the #1 rule of business? Lol. Did you write the only book on business? Are you Steven P Jobs?
Secondly, revenues can't go to infinity. Not only is infinity an uncountable times bigger than a Googol, but market sizes are limited. Organic growth is limited.
It is much easier to cut costs than increase revenue in business. This is why most large companies prefer to cut costs rather than invest in innovation.
The best entrepreneurs are frugal. Warren Buffett is famously frugal and prefers to invest in frugal entrepreneurs. To the point where Buffett once bragged about investing in an entrepreneur who was so frugal he resorted to counting the sheets of toilet paper at his business because he thought he was being cheated (he was).
It depends on the company and how detached the money people are.
In my experience, companies with full closets of office supplies and lots of stuff don’t last. Exception: when investors are plowing unlimited cash.
First rule of procurement is to get 3 quotes and second is to buy intelligently. Engineers shouldn’t be buying cables, and if you just buy the first thing you see, the pennies you miss add up. It also avoids putting you in the position where you’re firing a valuable engineer because he’s buying stuff inappropriately to accumulate loyalty points or helping out a friend selling stuff, etc.
> Of course a frugal person doesnt spend an hour trying to save $5
Have you ever seen a reddit thread on any personal finance related topic? You can find millions of people who regularly defy this logic every single day.
Partial disagree. Pay for good people to make the most out of the tools available. If there is something you need that would improve revenue then get it when it becomes clear but don't just buy top tier X because. Start-ups need as much runway as possible if things dip until the business model is sustainable.
Edit: Even if the business looks sustainable just wait till a disaster like covid comes by and rocks your supply chain and your customers prioritize other expenses.
It is not always revenue vs. cost, there is also a time factor. Being frugal might help staying longer in business, it doesn't matter what the competition are doing, not everything is a zero sum game and sometimes success come because of some event and if you are there to capitalise it you might succeed, like what happening these days with messaging and twitter like apps. So it is all a matter of balance and there is no one way to do those things.
"While you're trying to save $20/month on your email marketing tool and $50 on cheaper coffee for the office, your competitors will be spending their time and money to acquire your customers" - How if they are wasting their money as where you are saving? Wouldn't it give you more resources to go after their customers?
It really depends on how your business is financed and on your access to capital.
As many of the comments (correctly IMO) point out, VC-backed start-ups trade money to compress timelines: for example, hire in two weeks what a non-VC might be able to hire across two years. When you have VC funding and more of it is available, it is in your interest to leverage that money as efficiently as possible to make the case for growth and further investment. Frugality can further hurt you if you are in a VC-fueled industry race because you’ll be outspent and outbuilt by your VC-fueled competition, and it will be harder for you to raise $.
That said, if you’re a regular entrepreneur or business owner, the script is flipped. You are always working within the constraints of profitability and (assuming no major investments are made in you), access to capital is difficult and expensive - debt and credit financing can only grow as a function of revenue and needs to be paid back (whereas VCs give you ‘free’ money, free-as-in-equity). Given that, if you make a dumb financial decision it makes more of an impact on your business. While you still want to go in on big (validated) bets, in general it makes sense to err on the side of frugality and spend less than you bring in.
Equity is actually the most expensive form of capital (measured by an investor's required return on capital). If a startup could raise debt financing, that would no doubt be preferable. However that's quasi-impossible with no revenue. I do agree with the other parts of this answer though.
Minimum rate of return is only one measure of cost. If we look at cash flows, the story is much different. Startups are usually cash-constrained, and equity financing is a way to raise cash without negatively impacting future prospects. Debt financing causes a drag on a company's cash flows and reduces flexibility, since now the company must divert a portion of its cash flow to interest payments. For a young company with low revenues and no profits, and thus unable to make tax deductions on interest, debt financing is actually a highly unattractive proposition.
Not true. If a startup could access debt but future uncertainty about its cash flows (say between series A and Series B) combined with the cash pay requirements for such cash flow (likely 18%) make the debt vs equity calculation not as straight forward as it seems.
> That said, if you’re a regular entrepreneur or business owner, the script is flipped.
The problem is that regular entrepreneurs and business owners still must share the market with venture backed startups. You're always one pivot away from some hotshot startup or bigcorp going to war to take away your marketshare by forcing you to address that "the market can remain irrational longer than you can remain solvent" -- in order to compete with VC-backed startups, you need /more/ than just frugality. You need actually better execution -- execution which more effectively serves market demand than your competitors.
Correct - execution is more important than $, but I'd say that 75% of the time, execution is the byproduct of some intersection of capacity and access to capital. Not always, but often enough. So if you're competing against a VC-backed startup, you have to be both frugal enough not to breach the walls of fiscal solvency and really wise about your features, positioning, allocation of efforts, etc etc etc because you'll never beat them competing dollar-for-dollar. Speaking more broadly, venture capital distorts markets. I've called it the "capital-accumulation-market economy" elsewhere and it continues to ring true.
Somebody bigger than you stomping on your toes is always a possibility. This is somewhat mitigated by the fact that VCs are looking for super huge 1000x growth possibilities. If your market will only bear a modest level of growth and possibility, most likely nobody will be interested in investing millions to squash you.
> If your market will only bear a modest level of growth and possibility, most likely nobody will be interested in investing millions to squash you.
I used to be a lot more bullish about this before 2020's interest rate drop and subsequent declining bond yields, and the insane injection of capital into the markets. But now, I'm not so sure. Investors are reaching quite a bit further than I originally had expected in order to seek yield.
No. VCs back an extremely limited number of companies. Most startups target such a limited market (geographic or otherwise) that the VC-backed companies don't bother to compete in such a small market.
>I feel frugality is one of the most important points for startups and entrepreneur.
If you look at some startups, it seems like they're simultaneously frugal and not frugal. E.g. early Google 1999 paid for meals cooked by a chef and onsite massage therapists even though they had no revenue and profit until 2002 -- but on the other hand -- they were very frugal with spending the least amount of money for computer parts[1] and datacenter rack leases.
Likewise, Amazon was famous for being cheap by having employees make desks out of doors but they were bold in spending money on acquisitions that were strategic to their goals or taking expensive risks on Prime's "free shipping" getting abused by customers.
The way to reconcile the inconsistency is that being frugal can't be applied in every area of the company.
So maybe a more realistic tactic for a new YC company is ... it's ok to splurge $5000 on an automatic cappuccino machine in the office for employee well-being, but at the same time, be ultra frugal in AWS costs and analyze the line items like a hawk to make sure the developers are not leaving up idle EC2 instances and wasting money.
+1. I think it is the same on spending and income: you must understand what scales with what. The number of coffee machines scales with the number of employees (and office layout), but the cloud service spend depends on many factors. If nobody ever was asked to keep an eye on that, it can run away quickly and it will be hard to regain control. I've seen people routinely reserve entire vCPUs in Kubernetes for tiny test systems, instead of 150m which would have easily sufficed.
Here’s what I don’t get. Being frugal with AWS costs seems to be another contradiction, like having a Michelin starred chef cook for your employees every day yet penny pinching the cost of the ingredients...
Sure it’s great that you’re saving money somewhere, but you’re still handing the limited runway money hand over fist for unnecessary luxury, no matter how much you save on the little details. If you were actually frugal, you could have much better service without having to worry about each line item as much.
Penny-pinching the cost of the ingredients makes sense if and only if you don't value the impact or you want to pay a team which has "maintaining food supplier relationships" as 1 out of 3 ongoing focus areas. If there is a team with that ongoing mission, it can build the skills needed to reduce the cost of inputs without reducing the quality of impact.
Penny-pinching AWS cost makes sense if and only if you want to pay a team which has "responsively manage compute resources" as 1 of 3 ongoing focus areas.
Having the chef prepare a great meal allowed them to have people working 12 hour days instead of 8, and saved them the cost of hiring more staff. It probably was worth it.
Frugality =/= cheap. Frugality is about spending wisely; getting good value.
Yeah, agreed. Especially when they try to "save costs" by spreading itself over several AWS services ensured they're locked in the most to the ecosystem.
Though yes EC2 is not the cheapest but if you're using "only that" (or maybe S3/R53, etc) and being cheap I can accept you're being frugal.
Yup, it's far too easy to hemorrhage money on cloud/hardware without actually achieving anything, and it's similarly easy to undervalue employee satisfaction, motivation, and loyalty.
Have a good sense of what the O(1), O(logN) and O(N) costs of your business are. O(1) costs are stuff like incorporation and legal compliance, O(logN) costs are stuff like the product team and O(N) costs are stuff like server costs and customer service staff.
Didn't this bite them too, via a lack of ECC and associated software development costs? Meanwhile, Amazon used off-the-shelf expensive Sun/HP machines for many tasks.
Well, I suppose back then Google’s and Amazon’s risk tolerance was different. What would be an impact of bit flip in repeatable crawling and search results vs product listing and atomic financial transactions?
great insights, instead of going all out on frugality, it can be strategically optimized in various departments depending upon the overall impact. Thanks for sharing your perspective:)
It's pretty easy to make desks out of doors. Especially if you don't need drawer or rackspace. I read somewhere that they got the doors as salvage from a waste disposal firm. Putting a few screws here and there would have sufficed. Not to mention door-length desks would be really spacious, for leg space and desk space.
We all use automatic standing desks now, fwiw. Allegedly for period the door-style desks were actually more expensive than normal desks but they were kept as a "cultural statement". Don't know how true that is.
This was corporate myth-making. They did it to drive home the point that Amazon was a scrappy place. Obviously it wasn't a logical decision from a pure cost basis. But from a story-telling perspective it was a heckin' home run.
A piece of advice I once got from an old boss and very successful entrepreneur was to focus on increasing revenue, not on decreasing costs. I said don’t both ways increase profits? He responded that your costs could only go down 1x but your revenue can go up almost infinitely.
Not to say that frivolity is good and frugality is always bad. But it shouldn’t be an obsession.
As an employee I would much rather work for a company with soaring revenues than one with quickly decreasing costs :)
It really depends on the costs. If your cost scales with your users/usage, then reducing those costs is even more worthwhile. A 20% decrease in cost is 20% more revenue now and forever. And many of those reductions are easier to make now than when you're fully scaled up.
That's a good point, but generally "frugality" doesn't refer to unit costs, which are the thing you're describing. It usually points to things like "buy laptops on craigslist instead of new."
I don't think that's necessarily true. There are plenty of cases where frugality would be reasonable with unit costs. A team running a k8s cluster on eks with redundancy while they're working on an MVP is likely spending 5x what they need compared to running a single fargate container/DO droplet. I would definitely consider the reverse of that being "frugal".
There was a post on HN recently about a SAAS that listed out all of the SAAS products they were using, and for a team of 5 they were purchasing g suite, an email productivity "enhancer" to avoid conversations moving to slack, and a meeting scheduling tool, for 10% of their revenue (something like $150/month). Being frugal would likely have cost them less than percentage points of productivity, and increased their runway.
Sure, there are definitely cases where you can be frugal on unit costs. I think your examples are not very good ones, though.
The cost of a kubernetes cluster while working on an MVP is not a unit cost. It's a development cost. If they don't even have the MVP yet, then I don't think it's fair to say they're going to pay a multiple of that kubernetes cost for every sale - I could be wrong of course, the details matter.
Your second example to me seems more clearly totally fine. Those costs scale with the number of employees, not with the number of sales. If their sales scale linearly with their number of employees, they are totally screwed under the VC funding model. As somebody upthread said, frugality is important for traditional businesses, but not so much for software-y startups.
$150/month is peanuts for their runway almost certainly, too. Think about it this way: even at a meager $50k/employee/year, their costs are 99.3% in the employees, and 0.7% in those software products. Or think of it this way - $10k will cover the $150/month for over 5 years, which is a really long time.
> A 20% decrease in cost is 20% more revenue now and forever.
Cost and revenue are not related like that. You're thinking of profit margin, but even then it's not that simple. Most expenses can be written off, but profits are taxed. Revenue can be increased by spending, by adding features that increase demand, or just by plain advertising. You can have high profit margins but low profits due to low revenue, all because you cut spending.
Moreover, for a new company, being profitable is far less important than (an expectation of) growth. A mostly unprofitable company like Tesla has incredibly high expectations of the future already priced in.
For unit costs, sure. Some HFT funds are relentless in shaving fractions of cents off of their costs. I’m not sure I would call them frugal though. When I hear frugality I think more in terms of buying used furniture or decreasing travel budgets. Might be wise, but probably shouldn’t be the focus over increasing revenue for most companies.
On the other hand, spending money on things that have no link to profitability may shorten your runway and running out of money can put a crimp in your ability to generate profit. Amazon's homemade desks are an example of this. Amazon is very willing to spend huge amounts of money on thing that have a chance of increasing profit, but frugal in areas that can't be tied to long term profit.
> costs could only go down 1x but your revenue can go up almost infinitely.
Love this.
The one caveat though, and why it's
important to keep costs low (maybe
wait until after you sell the startup),
is because when you are profitable, then you are
in control of your time and get to
set your own schedule. Or, in the form
of the above quote: your revenue
can go up to infinity but your time
left is capped at 100.
> and why it's important to keep costs low (maybe wait until after you sell the startup), is because when you are profitable, then you are in control of your time and get to set your own schedule
This presupposes that you can get to high marketshare profitability while keeping costs low. That's not always realistic. A more growth-minded competitor can push you out of the market entirely by willing to execute where you won't.
It hadn't yet crystalized in
my mind but to clarify my advice
is keep your personal cost of living
low as a rule of thumb. Optimize
for free time over more money.
For business, spending money
is essential. Ideally try to
spend other people's money.
I would say frugality is very underrated. It's also not just about saving money. Reducing complexity in your operations (saving time) is arguably more important. Every purchasing decision we make at our 7-person company usually passes through me at some level, and the first question I always ask (in my head) is:
"Would I spend this capital if it were my own money?"
If I answer yes, then it is an automatic approval. Examples of this being petty cash expenditures like one-time licenses for software tools, or very-low-cost on-going services (<$50/m).
If I answer no, then I usually have to engage in a conversation with other stakeholders in the business to build an understanding of how the expense will add value to our business over the long term.
What I like to try and do is push all purchasing decisions into the trivial camp if at all feasible. Outsourcing to 3rd parties is the most obvious way to do this. E.g. instead of hosting your own git repositories on your own servers, look at using Git[Hub/Lab] public/enterprise. This can take a $10k+ capex and diffuse it out into a monthly concern that is lightyears easier to account for and change over time. The challenge is making sure that you aren't outsourcing your key value drivers to 3rd parties. Compliance & industry fit are also a consideration here. Developing some things in house can potentially save you a ridiculous amount of money depending on the specific problem you are trying to solve. And, in-house development will ultimately contribute to a far more important basis of value - your company's intellectual property.
That is an excellent observation to make. If you are planning to start a business and come to the realization that you could outsource your principal value driver, then you probably should not go into business doing that thing.
What kinds of value drivers exist? Are there any examples of outsourcing value drivers, either potentially or actually? I'm not quite understanding the statement.
If I ran a digital agency, I could build websites, but I could also hire people to build websites, is that outsourcing my value driver?
I would say that some (not all) digital agencies add value not by coding a website up but by providing their service, for example:
- They can build better overall experiences (not just the website, but whole UX). Some agencies/ people do have success in outsourcing the technology, because they might do QA and leadership, which these off shore teams would not get right.
- They have deep expertise in some technology which you can't just hire someone for. I guess you can argue, everyone has a price and a company can just pay that rate, but if that employee is doing all the work, that employee would probably have a high rate and would be, themselves capturing the value, not the company. I think this point is almost just a repetition of the first example.
Overrated. When you are running a business you have to consider income, labour and employee retention. Businesses generally spend "extra" money in order to save labour or generate income. That skiing trip to the Alps that you organised for your workers last year? That saved you 10 times as much in recruiting, on-boarding and pay rises. That really expensive enterprise SAAS that you bought? Its boring, but it freed up time for your sales people to generate 3 times more business. etc.
>"That skiing trip to the Alps that you organised for your workers last year..."
In my other life when on job interviews sometimes they would describe various perks (free food, drinks, twice a year retreat, pool tables, Friday night outings etc. etc. ) as an advantage of working for their company.
Maybe I am weird but my internal thoughts were - can I just have it in cash and I'll find my own ways to organize my life. Do not need any help in this department.
You are not weird but you are missing the point of why companies do it.
These things have the benefit of enabling you to get to know your colleagues, establish networks, break down communication blocks, etc. In other words, in addition to being fun, they also benefit you as an employee and the company overall.
That's why the companies spend money on it and in my experience they get return on it.
>"These things have the benefit of enabling you to get to know your colleagues, establish networks, break down communication blocks, etc."
Frankly simple work related interaction were more than enough for me to "get to know". If both parties felt interested enough we'll hook up out of work. At least that was my experience.
Think about it like this: "employer-mandated fun creates opportunities for me to expand my network and connections which help me make more money. As an added bonus, I might as well enjoy it."
At my last job, we had a 2 day off-site on an island that in all honesty was a lot of fun.
What wasn't fun was the month of extreme anxiety (I have social anxiety) and sleepless nights that led up to it. Up to the moment of departure I fantasised about "accidentally" oversleeping and missing the coach.
It's pretty hard to assess (at least for me) whether the upside (fun) was outweighed by the downsides (prolonged feelings of anxiety). In all honesty, I bonded more with colleagues on typical Friday nights at the pub (yeah alcohol, but plenty didn't drink).
Sincere question - now that you had been through that month of anxiety and then enjoyed the event, would you have the same amount of anxiety next time around or does the repeat experience help it abate?
In my life, I found that "diving into" the anxiety repeatedly helps prove to me (both logically and emotionally) that it's actually fine and reduces anxiety over time. So for me, the experience you describe is valuable because it contributes to overall "liberation" but it may not be that way for everyone.
Erm, so we're mandating what people should do now? Yours seems to be a rather black/white view of such events, when (since it involves humans) it's on a spectrum:
There are people who do not want to spend their time with their work colleagues.
There are people who do not want to be forced to spend with their work colleagues.
There are people who dislike that unless you spend time with their work colleagues in corporate sponsored events you will be sidelines.
And that's assuming that the corporate event is good at all. Which, quite frankly, most aren't.
>> Erm, so we're mandating what people should do now?
I am just a guy on the internet but I've been around the block so I share what I truly believe is the best advice.
>> unless you spend time with their work colleagues in corporate sponsored events you will be sidelines.
That's a naïve view. People don't sit in a conference room saying "ftoscano didn't come to the bar last night, let's ostracize him" - it's just that the more opportunities to bond with your team that you pass up, the worse your communication with them is (compared to what it could have been if you invested in it) which legitimately makes you less impactful at work.
>> And that's assuming that the corporate event is good at all. Which, quite frankly, most aren't.
Debatable but not the point. The point is that these things already exist and they are opportunities for you to build up your career (and maybe even allow yourself to have fun.) You can chose to hate it and not participate but like I said, that's strictly worse for you so why adopt that attitude?
I don't mean to insult but I think your view is pretty naïve in its own way. You see the rapport built from going to the bar as an advantage that you shouldn't pass up on. In your example where failing to go to the bar makes you less impactful at work, I see a team that is doing a shitty job at team building, which will probably harm their chances of success. The blame for that can go in any and all directions, it's on everyone.
If every potential detractor involved just says to themselves "this is what everyone else likes, so I'll fix my attitude and head to the bar", you can end up with several of them contorting to fit in, and then you're just cargo culting a good culture instead of really having one.
Smolder, I don't mean it as black and white as it sounds. Here's an analogy:
If you see $5 laying on the ground, it's better for you to pick it up. That's different than saying we must structure society in a way that people are relying on finding money on the ground (which is where you are taking it.)
It's OBVIOUSLY possible to have teams and employees that operate fine without these experiences. My point is that these experiences are just opportunities to make it better (like picking up the $5) so why wouldn't one try to be the kind of person who is happy to pick up the $5 rather than someone who grumbles about it?
What inevitably happens with your approach is that people will soon gradually feel forced into taking part in bar meetings, else their "rapport" would be affected, which would have further detrimental effects down their career at that place. Hence people get herded into team building exercises for the group against their will, even though they might have zero interest or capability in such exercises. This leads to the cargoculting mentioned in the previous comment.
Sure, it's good to find and pick up $5 on the street, but in this case it will inevitably lead to a place where people have to rely on finding money on the ground.
Sometimes people do not enjoy things that are safe bets for others. They are not wrong for having those preferences, and shouldn't need an adjustment. Conformity is not a virtue, IMO, and it's not productive to get hung up on it. Networking and developing a rapport with people can be done lots of ways. Everyone can afford to cut the "weirdos" some slack in how they approach it, just as the inverse is true.
G-d forbid! Conformity is the worst thing ever. I am probably more in favor of that view that anyone else. My appreciation for weird people is extremely high.
I am approaching this from a different angle - from the individual's point of view. As an individual, you "should" want to be as capable and versatile as possible. The version of you which is capable of enjoying socialization with your coworkers is strictly more flexible that the version of you that fears it. It doesn't take away your option to go home and do introverted activity when you want to.
I have infinite examples of this in my life. Just a quick one - I grew up extremely introverted and shielded from human interaction, spent much of my (especially) highschool and college years behind the computer. This was very helpful to me developing great technical and developer skills.
Fast forward many years, I had the opportunity to go to business school. One of the most painful parts of b-school for me initially was the happy hour. I didn't know how to small talk or just hang out and "be." It was rough and I hated it. But over the course of the years, I got used to it, relaxed about it, and found myself enjoying it. It's one of the things that enabled me over time to move to product management - the realization that I went from someone ill at ease speaking with new people to someone who doesn't think twice about it.
Did I "conform" or lose a part of myself? No, I am currently hiding out on the balcony learning React and playing with Serverless while my wife is hanging out with the baby. I am choosing right now to spend my time not much different than how I spent it in high school, and I am loving that. The point is though if I had a social family or work obligation to go to in the evening, I wouldn't lose my shit about it anymore - I'd get dressed, go, enjoy it, and possibly get the networking/wife brownie points out of the experience. It's a strictly better way to be than dreading/avoiding it.
PS: thank you for your comment, it made me reflect on what I am trying to convey and, hopefully, convey it more clearly in this response.
Yeah it's funny - sometimes it takes someone reacting/challenging me to pause me so I can figure out how to articulate it in a way that makes my intention and logic more clear.
it is more of team building & family time means the employee and company in itself is a family and that makes the difference for the outings for employees, trusted vision-driven folks out relaxing and enjoying in between the work. This definitely has a great impact on team morale.
So are the bonuses. Have extra money to spend - give it to me. Do not throw party in remote location which I am not looking forward do attend. Of course it is you money and you are free to spend those however you like. But this way of team building does not work for every person. I have no lack of friends but I do not remember acquiring those in on company outings. Not denying it might work for other people though.
yup true that instead of just been frugal everywhere try to optimize for the overall growth even if the effects of it might be indirect or may be seen in the near future. Thanks for sharing your perspective:)
I think it's a bad thing for the lower ranks and a really good thing for leadership.
Frugality can mean being penny wise pound foolish. Not buying tools people need, building things when you could buy them, and settling for less. It's hard to evaluate people on frugality without it being about cheapness. I would argue buying top of the line monitors, software, computers and chairs for your engineers is the frugal choice with the best mid and long term value for your money, but will it look like that to others? Likewise I've seen cultures where the CTO had to approve buying a $50 replacement laptop charger - that's just a waste of time.
That said, leadership should be very deliberate in how money is spent. Taken too far, you can end up with a bunch of high cost low value tools. For example many times I've seen AWS bills where a few weeks of work means millions in savings per year, or tools that cost $10s of thousands per month but are only used by 1-2 people. And that adds up.
Just to follow on from that - I think the thing that irritates is 'cheapness' rather than lack of overt generosity.
To give a couple of examples. The office was kitted out with poor monitors - cheapest Dell sold. Some people bought their own but most people were fine with them - they're just monitors and they're 'fine'. Then a small group were rewarded with 'premium monitors' as a prize for some internal competition - and this did cause annoyance, as it recognized that the company knew it was being cheap.
Second example. "We're getting new chairs!" Supplier dropped off half-a-dozen different models for us to try out and then we collectively chose our favourite.
Except we couldn't have it, as it was too expensive, and we got the "second choice".
Now that second choice was amazing compared to what they were replacing. An office full of premium ergonomic chairs cost the company a small fortune - but decision was tainted with cheapness. We weren't worth the chair we'd chosen. If they'd just pulled the chairs they couldn't afford from the competition, it would have cost the same and made us happy.
>If they'd just pulled the chairs they couldn't afford from the competition, it would have cost the same and made us happy.
That just seems like a very poorly executed trial. Clearly the company should have decided on its price limit up front and brought in chairs that conformed. It's not even really unreasonable to decide that the price of Mirra 2s (which are perfectly good chairs) is fine but Aerons is not. But, in that case, don't bring in Aerons for people to try.
Most important is how you stop frugality from becoming cheapness. If one of your values is frugality, you have to figure how people are evaluated on it. The big risk I see is it becomes about spending the least money, not spending money with the best long term return.
I'd always looked at it as there being '2 strands' within the company.
There's the main one, where you "make the money" - this (obviously) has to be profitable at all costs. Then there's the other than intertwines around this to serve the first indirectly - and you can be more flexible here.
e.g. Revenue from google's adwords has to support the cost of their infrastructure and free services - if that's ticking along well, you can have the nice buildings, free chef meals etc. This can be turned up and down depending on the market.
Their product was lavishly over-engineered and beautifully made at vast expense - they were never going to make their costs back however over-priced their fruit-pods were. The more customers they got, the more it was going to cost. Frankly didn't make any difference if the Juicero staff were getting free meals or not (or had their salaries halved) - the lack of frugality at the core of their business doomed them.
thanks for sharing your insights. true that, it can go in both ways, there has to be some sort of frugality at the core and also not to be overly obsessed with it.
Joel Spolsky wrote a classic blog piece on this 20 years ago. If you're in a new market trying to grab leadership, frugality is not important, speed is. If you're in a competitive market keeping costs low is very important.
https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...
> Another extremely strong network effect is proprietary chat systems like ICQ or AOL Instant Messenger. If you want to chat with people, you have to go where they are, and ICQ and AOL have the most people by far. Chances are, your friends are using one of those services, not one of the smaller ones like MSN Instant Messenger. With all of Microsoft’s muscle, money, and marketing skill, they are just not going to be able to break into auctions or instant messaging, because the network effects there are so strong.
This is an interesting line, at the time AIM seemed like it was here forever. And honestly, I still have better memories of the usability of aim than modern services.
Would be interesting to take a deep dive into all the factors, was it mobile and phone text messaging that did it in?
I think frugality is absurd, and minimalism is what you wanna be aiming for where you are highly sensitive to the ROI of your each and every spend.
Frugality is being cheap just for the sake of not spending money. Most startups on the other hand have more incentives in maximizing their spend towards increasing and retaining their current and future cash-flow.
If we combine that with network effects, your cash-flow is technically growing relative to the exponential growth of your network / userbase / community.
I think frugality is what you define as the word cheapness, ie the difference between frugality and cheapness is the latter is about spending money in a useful way versus not spending money at all.
This may not be exactly what you mean, but I worked for a successful startup that chose to cut certain costs in favor of others. I appreciated this practice--no excessive waste, only spending on what felt like mattered. My salary was above average for the market, with best in class health care. Those matter way more to me than pool tables and beer kegs.
For example: 1) no free lunches or snacks (though there was always lots of free food around from leftover meetings with customers); 2) "swag" for employees once per year, one item, thoughtfully chosen and good quality. This resulted in everyone getting really EXCITED about it and rallying around it; 3) a Bevi machine (effectively a bubble water fountain) instead of coolers of free drinks.
I think spending smartly is more important than simply being frugal.
For instance, when you are buying equipment, you don't buy the cheap stuff just because it's cheap. You buy the best stuff the first time, because you will usually save money over the long run. If you bought the cheap stuff first, and it didn't work or didn't last, but then bought the best stuff later, now you paid extra and wound up at the same place.
This doesn't apply to everything, though. The boss I had who operated this way strictly decided he didn't want the $80 video card in his computer, he wanted a $200 one (which back then was like buying a GeForce 3070 just to run spreadsheet applications on a single monitor).
> For instance, when you are buying equipment, you don't buy the cheap stuff just because it's cheap. You buy the best stuff the first time, because you will usually save money over the long run. If you bought the cheap stuff first, and it didn't work or didn't last, but then bought the best stuff later, now you paid extra and wound up at the same place.
Cue: Sam Vimes's "Boots" theory:
"The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness."
What you describe is a perfect example of what I think of as frugal vs cheap. The cheap person goes for the lowest immediate cost. The frugal person goes for the lowest long term cost.
It depends based on the type of business you're in.
I help run a physical goods business.
Margins on these types of businesses (for the most part) 10-15%.
If we find a way to reduce expenses by 0.5% (of revenue) by spending 10 hours, it's worth it. On the face of it, it seem trivial and not worth it. But at the end of the year, these cost saving tactics add up and contribute to profitability. Sometimes it's the difference between giving our team a bonus or not.
Whereas in a SaaS business, the margins are far higher and your time is better spent (probably) on increasing revenue, rather than shaving expenses.
As someone already said, there's only so many expenses you can cut.
Being frugal is only half of the equation. It depends what you do with the money you save. Are they being frugal to make targeted investments in the things that have a good pay off or are they frugal in ways that prevents them from even taking advantage of opportunities.
By way of analogy, consider a household that is really frugal and doesn't spend most of the money the could spend. If that is part of a goal to put their kids through college with no debt, save up to buy a business, pay off debt, etc. then there is a plan. If they are just stuffing money away into a mattress it isn't quite the same.
If anything I'd say it's overrated. For all the hype, how many Lean Startup success stories do we have vs. VC-backed, burn-money-for-time plays? How many IPOs in the past 10 years have come from turning old doors into desks instead of going to Costco?
There's obviously no one way to success in entrepreneurship. If times are lean and you have no easy access to money, sure, being frugal is phenomenal. If you're a 40 year old PM at Facebook thinking of doing your own thing? Pay to delegate every single thing you can. All in all, play to your strengths.
> How many IPOs in the past 10 years have come from turning old doors into desks instead of going to Costco?
I know Bezos' perspective was that the door desks were a way of creating the culture he wanted in the company both for employees and for investors. A desk from Costco would probably cost $400 to $2000 whereas the cost of what you need for the materials for a door desk from Homedepot is $50 to $75. Having put together some furniture from Costco, I'd guess that the time spent creating a door desk is probably less than the setup time for a Costco desk. Folding tables might be another option in the same price point / setup time as the door desk.
A lot of those VC backed companies had a pretty good chance of growing into mildly profitable companies but they were overfunded and forced to grow faster than their market could support. In the end they wasted 100% of the money.
I personally think frugality is always important, regardless of whether you're well funded or not. It helps set the tone for your company as one that wishes to avoid frivolousness, which helps you and your people make good decisions, in addition to preventing you burning through cash too quickly.
Balance is more important than frugality. Know where to spend and where to cut costs. I've been in more than a few small companies that took penny-pinching to extremes.
You can't architect a complex application stack with a couple of interns and a newbie developer with no oversight. We'd pay below-market salaries for senior engineers and architects, because "a programmer is a programmer", and we'd lose them.
We'd refuse to pay $150 to have our DevOps guy get his AWS certification because "he may get a better job and leave"... which he eventually did anyway.
Yet the same company was burning $4,000 a month on AWS services that were severely under-utilized, because the DevOps guy left and no one knew how to optimize our AWS usage.
None of these products eventually succeeded. One of the two companies above shut down years ago after a multi-year schedule slip that resulted in the private equity funding drying up. The last time I looked, the other company has been struggling with cash flow problems for the better part of a decade, barely making ends meet, slashing salaries and jobs several times, pushing the better devs to greener pastures.
A few other companies I worked for had sound leadership and a clear vision. Not being a unicorn or a FAANG means we paid above market average salaries and empowered our engineers to make decisions (and mistakes!) to retain great talent and build cool stuff, which we shipped and sold. We invested in growing our people while keeping other overheads (such as unused conference rooms, wasteful pantry supplies, AWS expenses, etc.) low.
At the moment we are living in a time with very strange monetary policy, in any situation where we have zero (or more absurdly negative) interest rates any venture that has potential to be profitable while growing will find that the easy funding tends to be valued more than frugality from the perspective of those providing funding. In a negative interest rate world burning money for time plays get a whole lot more attractive.
I've seen so many startups, first thing they do once they get that VC money, they move to a flashy new office, add top of the line coffee machines, craft beer on tap, fridges and catering, hire masseuse, team building coach, lease some supercars or executive cars, get some graphics designers, spend days on photo shoots praising their future product, take teams to fancy restaurants, find and fly business class to every possible conference in the tropics, meanwhile developer salaries stay the same or get cut, as company is in a "growth stage". Then people who did the most work and feel most exploited leave, they get replaced by young and energetic Udemy / boot camp taught developers and once the money gets close to run out, they get on a crunch to convince investors to pour even more money, whilst the board is thinking where to build their next house.
The need for frugality depends on where the underlying leverage of the business comes from. If your leverage involves a large capital pool - maybe you need equipment or facilities - you're gonna have to spend. And if you intend to recruit and keep top talent in the field, your spending has to bias towards keeping them happy. In those senses, you can't afford to be frugal.
But once you have the outline of the budget, you can look at it and say, "well, we aren't using that, actually". It's just really dangerous to go in doing that first thing, since it takes possibilities off the table and locks you and your staff into the logic of the balance sheet, and in businesses where growth can scale immensely, you have different ways to save at different scales.
I've observed that frugality is one of the least important values for startups and for founders. The vocation of an founder is to find product market fit and grow revenue. Frugality can be a useful tool for growing revenue. But without product market fit, it's a premature optimization, and a seductive one.
The graveyard of dead startups is littered with stillborn corpses as a result of founders who focused on frugality to feel productive rather than engaging in the necessary user research and product experimentation to validate product-market fit. If nobody wants to buy the thing you made, it doesn't matter how cheap you can make it. You won't survive long term.
yup true that accountability of money/cost has to be there but just been frugal at all cost doesn't work and can be disastrous in turn. Thanks for sharing.
The main distinction in investment. If you take investment, especially VC investment, no one gives a f*ck about cost savings. Your job is to provide an exit to investors are soon as possible, and you do that by growing market share.
If you are not taking investment, or otherwise get investors that are in for the long haul, and you intend to fund yourself off your revenue, then cost savings matter. This is usually appropriate for small niche markets that are too small for institutional investors. Note, such niches can still be million dollar businesses.
Replace 'frugality' with 'capital efficiency', 'cost-benefit analysis' in your search and you'll find positive articles from big names often claiming they're underrated or even only thing that matters.
Startup ecosystem just likes to create their own terminologies for things which we know is good for business and done all long.
I guess its just a matter of balance at the end of the day and finding what makes sense for your business (which is why some make it and some don't!). Its like investing. You could be conservative and sometimes that rewards you, but at the same time, you will most likely not take the risks that could return big reward.
In my opinion / experience there are two areas of frugality that are important to focus on for the types of high-growth venture-backed companies that are common topics on HN.
1. Having a non-wasteful, nonindulgent culture. I've heard culture described as "a set of rules for what you will tolerate" and you don't want to tolerate waste. If you're trying to grow fast you typically need to spend money to make money, but it's important that a culture of low-consequence spending doesn't turn into a world where you're throwing money at anything under the sun just because you have a lot of $ in the bank.
2. Having a handle on your gross and operating margins. It's really hard to dig yourself out of a whole of low/negative/declining margins, as they are often indicative of structural assumptions that get built into your business model.
Lots of great discussion here already. My own perspective is that it depends on both your goals and your source of funding. If your goal is to disrupt an existing industry, or create something brand new then speed is more important than frugality. If you are trying to create a business that solves existing problems but in a cheaper / better way (and nothing wrong with that) then frugality is more important as staying power is crucial.
In fact, staying power is IMO the most critical determinant of success. If you can stay in business then you can learn from your mistakes and pivot. In that case the discussion between frugality and speed is all about calculating your staying power, which goes back to your source of funding :)
This makes sense. When I was reading the history of Intel vs Motorola it seemed like Motorola had better chip architecture but Intel won the market and then of course pivoted from there.
Current state of intel is an entirely different matter.
No it is not underrated. It is just that frugal entrepreneurs are frugal about their comments too :)
Jokes aside. It is just not hip to talk about being frugal. You will get media attention if you say you spent million dollars on interior of your startup. That will not happen if you say you bought low-cost or second-hand furniture for your startup. Most long running successful startup founders are frugal. Quitely build the company with minimum financial overhead. The news about "non-frugality" from startups is mostly for PR purpose. If it is not, then it is stupidity on the part of the founder(s).
1) Client is king :
- On my domain ( 3D edit), I have seen countless startups with good financing come.
They all died, not because of financing (be it too much or too little) but because all has a technology no client really wanted.
So yes at the end of the day, if you spend less (ie. being frugal), you will have more time to finalise your technology.
2) $$$ for market fit:
I think the only advantage of not being frugal is only when you take the ride with your friend called Market-fit.
At this stage you have to go fast. Really fast. So, having good money is very good.
The version of frugality that makes sense to me is: mind the ROI on your expenditures. Pay for the fancier equipment if it pays for itself faster somehow. hire the expensive engineers if they speed you up and that speed pays for itself. Buy equipment on ebay if the delays in returning defective equipment doesn't cost you more than you're saving.
Different people mean different things by "frugality", but "save money at all cost" doesn't make sense as an implementation.
While this is true, I think that it's vitally important to be careful not to lose what earned you early success as you scale.
Growing your team is going to add an incredible amount of friction in terms of increased demands on collaboration and communication, and I've worked for many startups that have assumed that the processes that worked well for them as a 10-person startup would continue to function at 100 people. What nearly always ends up happening is that everything grinds to a halt, and often the company ends up moving slower than they did when they were much smaller.
That doesn't mean that you shouldn't grow, but you should be careful about it. Some absolute key things to internalize before you grow your team substantially:
- Everyone can't have input into every decision anymore. You're going to have to compartmentalize, and trust that product is going to build the right products, and marketing is going to launch the right campaigns. This is doubly true if you're a founder or CEO - your team can scale, but you can't, and at some point you can't be the final say on every little decision anymore.
- You need to be thoughtful and deliberate about how departments and teams communicate - "just bug someone in the department on Slack" isn't going to cut it anymore after a certain point.
- Whether you want to or not, you're buying into a lot of more traditional roles in a company that you probably thought you were too cool / modern for as a tiny startup. A 100 person company without HR isn't hip and modern, it's a massive risk.
Rather than looking at costs as frugal vs expensive, I'm trying to look at costs as a subtractor or multiplier.
Spend on the multipliers, great people, good hardware, etc etc. save on the subtractors. I just spent a few grand on a laptop for a new employee, and $12 on a laptop case.
We saved a few grand a month by having an office which is outside of the city center (but same travel distance for employees).
Unfortunately, no. Frugality is almost 100% irrelevant. The only thing that matters (at least in growth businesses) is product market fit and you can see that reflected in all of the megacorps today as well, which are extremely wasteful.
The other day I was being frugal and ate some But Kut Teh (pork soup) that was left in room temperature for 5 hours. And then I had stomachache and lost plenty of time.
Similarly, another day I was trying to be frugal with time and didn't refactor a React component properly before building plenty of features on top of it. And now I'm facing the consequences and have to rewrite the whole thing.
Also: When I was 17 I got my first job as a full stack developer. My boss at that time was being frugal and underpaid me and so I left 3 months later. It has been 8 years since then and his start-up has somehow survived and is doing decent. But I'm pretty sure my current start-up (which doesn't underpay talents for frugality) will be way successful than his.
I believe yc has always encouraged startups to be frugal until they find product market fit, at which point then it starts to make sense to spend money to fund growth, whether it comes from vc or nkt
No it’s not. You’ll miss the forest for the trees if you waste a second wondering if you should cut back on office snacks instead of how to grow your business.
You can generate revenue to infinity, but you can only cut costs to zero.
This alone means that a bias toward frugality will probably cause you to spend time on the wrong things. It's the equivalent of a freelance developer who charges $100/hr spending 5 hours on Amazon trying to save a couple bucks on an iPhone cable. Cool, you saved $3. But you spent $500 to save it!
Of course, if you haven't found product-market fit, frugality can help give you more time to find it. But once you have a proven business, frugality is a death sentence. While you're trying to save $20/month on your email marketing tool and $50 on cheaper coffee for the office, your competitors will be spending their time and money to acquire your customers.
Generally, you get what you pay for. So if your gut is to always pick the cheap option, you're going to be using bad tools and hiring bad people, and creating bad products.