I have repeatedly getting disturbed by VC-backed startups, and it is not the VCs who are thinking extremely short-term, which to the contrary, a VC is in a long game most of the time, as most of the VC funds are structured for 10+1+1, or 12 years.
What worries me are the entrepreneurs and the abrasiveness that comes their way while building the company. It sometimes feels like the startups are in the race to raise capital vs. building a long-lasting business that cares for the employees, partners, shareholders, and stakeholders. An entrepreneur should be driven by substance, actual value creation, and, if possible, far away from foam and trends.
I believe building a company for a particular market cap is fundamentally flawed because the company is chasing a “unicorn” status. The founders need to find their niches in the early stage of the company, crack the first 100 million niche and get 50% plus share out of it, then move to the next niche and do it again, and if you do it sustainably, trust me, the outcome going to be like Bloomberg, Patagonia, etc. When you build in your niches, remember don’t go to the red ocean in your product strategy, go-to-market, marketing, etc., as in the end, you will flush the investor money into the drain regarding acquiring the customers, and your business will always be replaceable.
If you go back and read biographies of great founders like Benjamin Franklin, you will come across quotes like these.
"Beware of little expenses; a small leak will sink a great ship" and "Industry pays debts, while despair increases them."
"A penny saved is a penny earned"
A good entrepreneur wouldn’t change how he lives or spends when he raises money or has cash in the bank because that money can be better invested in building the company. If you are frugal, you become a better capital allocator and better bet on the risks, tradeoffs, and upsides.
"I always knew I was going to be rich. I don't think I ever doubted it for a minute. Not because I had a lot of money, but because I had a lot of frugality. I never stopped me from doing anything, but I was always careful. I never bought anything until I had saved the money to buy it”
Frugality is not just a virtue but also a powerful catalyst for entrepreneurial success.
Resource Optimization - Optimize resources and extract maximum value from every dollar spent. Learn to prioritize, eliminate waste, and allocate resources effectively, fostering sustainable growth.
Financial Discipline - Frugality cultivates financial discipline, urging entrepreneurs to track expenses, avoid unnecessary debt, and maintain a healthy cash flow.
Alignment of Long-term Incentives - Frugality allows the entrepreneur to think critically about short-term gains versus long-term gains, creating the right incentives to align for the company's long-term success. Frugality is not just about short-term savings; it lays the groundwork for long-term sustainability. By keeping expenses in check, entrepreneurs can reinvest profits, fuel growth, and build a resilient busi by keeping expenses in checkness.
Better for the Planet - Promotes a culture of efficiency and sustainability, reducing waste, and minimizing the ecological footprint—an increasingly vital consideration in today's conscious consumer landscape.
Innovation - Jeff Bezos said it well
“Frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out."
Additionally, if you are frugal, it would be really tough to be bankrupt. So, let frugality be your secret weapon, propelling you toward entrepreneurial success and transforming your vision into reality.
What do you think? Ping me at sagar@idexaccelerator.com to tell you about your frugal venture.
Frugality is indeed a valuable skill, but the very structure of our current economic system makes it hard to scale this virtue up because the current mode of operation is all about maximizing company profit, shareholder value and ROI for the investors.
Now a (long foreshadowed) recent development is that machines are catching up fast to human skill level which means within only few years, human beings will not be competitive economically on any field.
That is an opportunity to establish an entire new paradigm into our economic schemes: cooperation instead of competition. A cooperative open access economy with non-transactional distribution of goods and global, decentralized resource stream coordination. Clever (frugal!) automation, the open-sourcing of all technology and active transfer of best-practice know-how will enable the decoupling of human work from survival. Only then will be to reach a truely sustainable steady-state economy and slow down life on this planet enough to allow us mortals to heal, flourish.. and prepare for the singularity. My hope is that life in India as anywhere else will be transformed to become less of a grind and more of a journey of hope and human development. Frugality will then become natural again to our civilization and people will appreciate living with less consumption and worries.
Best Regards from Dresden, Germany! ; )