The Tendency to Overspend and Overhire

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Is my idea capable of achieving product-market fit?
Is there enough demand to make this business last long term?
Can this business ever achieve profitability?
If 75 percent of venture-backed startups fail, that means 75 percent of the time, the answer to these questions is no.

On the other hand, when you bootstrap your startup, you find out the answers to those questions along the way, when there is more time and capacity to learn, pivot, and course-correct. Bootstrapping might require more patience, but it can build a more resilient, sustainable business.

If an investor gives you millions of dollars, they expect you to spend it. That money isn’t a gift—it’s the gasoline they want you to throw onto the fire.

Your primary job as a founder will be spending this money. It switzerland telegram data might sound exciting at first, but it gets old fast. It’s like the movie Brewster’s Millions, where the main character (played by Richard Pryor) needs to spend $30 million in 30 days with a complicated set of rules—and the challenge becomes a nightmarish burden on his life. (Hopefully I’m not the only person in the world who has seen Brewster’s Millions.)

When you raise millions of dollars, you become the steward of this money. You’ll use investor money to rent an office in a hip part of town and you’ll paint cool murals on the wall and pack it with amenities to attract the best talent. And, of course, you’ll go on a hiring spree.

HP co-founder David Packard, once said, “More businesses die from indigestion than starvation.” When startup founders hire fast, they can end up overhiring, creating a kind of “business indigestion.”

Hiring will take most of your time and attention. As a founder, if you choose to be heavily involved in vetting every hire because you want to create a strong culture from the get-go, that’s a good instinct—but that’s a huge time commitment if you need to spin up a 50-person team in a year.