Managing Money at a Startup

I’ve spent my entire career in small companies. The largest was when the original Clear Ink ballooned to 150 folks on three floors of a big building in Walnut Creek. Aside from running a sole proprietorship, I was employee #1 at Quantal International. I’ve been much more comfortable on the lower-headcount side of things, perhaps because when there’s only 40 of us, I can have a real relationship with each person. The handbook of 20th century management would argue that it doesn’t matter, but I know it does. There is no more productive team than one that considers itself a community.

Today I was thinking about how at any given moment, the companies I’ve worked for have treated our working capital in two different ways: a precious resource to be saved or fuel for a list of entitlements. The latter attitude only works when there’s an embarrassment of wealth coming in. Sign up a client who wants to give you more business than you can handle and it’s all too easy to try to spend it as fast as you can.

Startups cannot afford this attitude. You can’t have employees walking around talking about how some piece of software is the industry standard and having anything else is a personal insult. Likewise, a startup cannot afford to have employees sticking to a strict 40-hour work week. A lumbering giant of a company can sustain itself with one-size-fits all policies. It’s probably a requirement if you accept a command and control style of management. The agile startup works best when no one leaves anything on the table.

Therefore, when it comes to managing money at a startup, my attitude is “don’t”. Try to keep your wallet in your pocket for as long as you can. In addition to managing developers, I’ve been running the IT effort at Clear Ink. Yes, people would love to have a new laptop every year. Our policy is that PCs are usable for three years. Servers last for four years. And we’ll make them go longer if we can. A three-year-old desktop machine is a good temporary server.

I don’t want to drop context, because sometimes you must buy your new hire a top of the line Mac in order to have them accept your offer. But when you’re considering spending money at a startup, your first question should be, “how can we not spend this money?”