Some sense to startup frugality

I am not a frugal individual.  I like to live well, spend money, buy expensive toys, and fly first class.  My money, my choice.  I always believed in what I once expressed to my friend Glenn Kelman in his early days at my first company:  ”Glenn, the idea is not to spend less, but to make more.”

I have made plenty of mistakes when it come to costs in the past.  I have learned my lessons the hard way over the past few years…  and there are things I would never do again (like hiring expensive marketing and sales people before it was time or getting an office that was too large with “growth in mind.”).  There are things I would never spend money on again.  

However, there are big costs and little costs.  There are certain things that I have seen during my wanderings around New York startups that, while driven by the need to frugality, make me cringe.  The baby goes out with the bath water.

Here are things I would always do at any company I start:

  • Pay people, and pay people what they are worth.  It’s true that startup pay is lower than the corporate equivalent.  But I get extremely annoyed at founders who expect people to work for subsistence wages.  No.  And simply because someone made money in the past and may not need a salary per se, does not mean that he should be expected to sponsor your business with his labor.
  • Large monitors.  I know notebooks are cool.  I am typing this on a MacBook (17”).  But I am amazed to see rows of developers sitting there staring at a 17” monitor.  A 30” monitor costs about $1,500.  I’d buy every developer two.  Sales people should be using notebooks.  But developers?  A large monitor is the single most effective productivity tool you can get.
  • Conference Rooms with Whiteboard. If you can not afford private offices, that is fine.  But “teamwork” has nothing to do with not having a place where people can gather together and think.  A room with a door that closes and a whiteboard that is as big as the wall can bear is an essential to any software company.
  • Free sodas.  Sodas cost nothing.  Especially when compared to the cost of an employee’s time.  Sodas, coffee, water, snacks should be free and plentiful.  I still see offices with soda machines.  What a shame.
  • Sponsored lunch.  I did this at all of my startups.  Four days a week, employees could order lunch as part of a group order that came to the office.  They picked from a menu (and SeamlessWeb lately), and the company paid for the lunch and billed the employee back for the other half at the end of the month.  This served the dual purpose of not wasting people’s time looking for lunch places, tended to foster discussion and camaraderie during the inevitable group lunch in the conference room (see above), and cost relatively little.

People should be more frugal then me.  I don’t dispute it.  And there are valid reasons for watching the cash.  So…

  • Skip the bullshit.  No chair massages, no gurus on site, no sushi (unless the lunch is sponsored and you are paying for your half of the Toro Sashimi).  No lavish events — trivia night at the bar is fine.

But keep the basics mentioned above cost so little compared to the salary of an average engineer, that it makes me thing that new CEOs who go on a cost cutting kick are taking a perverse pleasure in learning to use a spreadsheet as oppose to calculating the real human cost of running a frugal but miserable business.

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