OK, Which Is The Key To Startup Success: Scrimp Or Spend?


Anita Campbell makes a persuasive case that the secret to start-up success is to spend every nickel as if it were your last.

You can’t get babies to grow up quicker by spending more money on them, she says. And the same goes for companies. Blowing millions of dollars on tradeshows, marketing, hiring, and all those other things that boom-era startups do is almost always a waste of money and time.

This view rings true, especially for anyone who saw the mountains of startup cash being burned for nothing in the late 1990s.

But there’s another view, too.

One of our investors, Kevin Ryan, has also built a few businesses. Most notably, DoubleClick in the late 1990s (later sold for $1+ billion) and Gilt Groupe, a hot New York-based startup that is already doing more than $100 million in revenue.

Far from scrimping and saving, Kevin’s general strategy is to slam the pedal to the floor.


The competition.

In technology, Kevin notes, ideas are a dime a dozen. The only thing you can be sure of when you’re launching your startup is that four to five other entrepreneurs are working on a similar idea. So you need to run absolutely as fast as you can. And that often means…spending money.

Anita regrets the millions of dollars she burned for naught as an “intrapraneur” in the 1990s. Kevin, however, credits the millions of dollars he burned at the helm of DoubleClick and Gilt Groupe for enabling both companies to fight off intense competition and take the industry lead.

So what is the lesson here?

There’s no “right” way to build a company. Different times and different types of businesses call for different approaches to spending and investment. You have to assess your own business, cash resources, and competitive situation before you make the call. And you need to reassess your situation frequently as you go.

Note: this article was previously published on The OPEN Forum. Read more. >

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