Three Things Your Startup Should Put Off As Long As Possible

Sachin Agarwal is operations lead at Oneforty, the Twitter App Store, and CEO at Dawdle, the gamer’s marketplace. This post was originally published on his blog, and is reprinted with permission.

While there are often investments that should be made upfront, often times new founders and new startups will waste money and time on things that they shouldn’t. I sure know I did during my first go-round. Don’t make my mistakes. Here are three things you should put off as long as possible:

Don’t incorporate until you’re playing with Other People’s Money.

There are two kinds of other people’s money. The first is Other People’s Money — investment dollars from outside sources: friends, family, angels, VCs, certain grants, and so forth. The second kind of other people’s money is even more important — paying customers.  

Any concern about your personal liability is misplaced; if your site has a bunch of Google AdSense ads, no one in their right mind is going to sue you. You’re going to need to be incorporated to deposit any investment (if you’re so lucky) and you’ll need to be incorporated to get an internet merchant account.  You can probably get by with a PayPal account (under the domain of the site; don’t use your personal PayPal account) for a while, as well.  And don’t worry about the intellectual property you create before incorporation; you can always assign it to the company later.  That’s what Google did when they got their first check before they were even incorporated

Don’t do any paid user acquisition until you can calculate your CAC and LTV.

It’s very, very tempting to “experiment” and “test” various paid customer acquisition channels. You start with AdWords, then do some cheapo banner ads on a couple of ad networks, and soon you’re hooked on some hard affiliate stuff and paying thousands of dollars a month to an Outsourced Program Manager.

AdWords are a gateway drug to unprofitable user acquisition. Only start throwing your dimes at paid acquisition when you’re damn well sure your dimes-into-dollars machine is humming nicely. And you only really know it’s humming nicely until you have enough metrics around your unit economics — what your costs are to serve every new customer, and how much she’s worth to you in revenue (if you’re rigorous, gross profit). These numbers have to come from real users using your real product; they cannot come from a financial model — that’s just guessing.  Get hard data.  Then and only then can you think about customer acquisition channels that have direct costs above zero. Until then, you’re much better off engaging in inbound marketing — making remarkable content (you blog regularly, right?) and a remarkable product — and really thinking about your on-site SEO. 

Don’t hire a PR agency, part-time sales force, or any other outside consultant.

You want to be focused on the product.  You get the market well from your industry background and you know you have your problem statement nailed from your in-depth customer development interviews.  You need to focus on building your product solution hypothesis and you just can’t be bothered to do the legwork of developing relationships with bloggers, press, potential customers that you don’t know, or potential business development partners.  You met some smooth business guy at some tech meetup who says he can do all this for you for a small amount of cash and equity.  Seems like a good deal, but it’s not.

Managing someone who isn’t a full-time employee and who isn’t as invested in the company’s success as you are is a path towards hurt feelings and wasted time, energy, and cash. There are certainly times and places for help in all these matters, but pre-launch isn’t it.  (The only exception is if you’ve raised millions of dollars in Other People’s Money and you can afford to pivot your product, positioning, and or price if your big splash fails.)

You probably won’t be as good as someone whose work life is dedicated to press, PR, sales, marketing, or whatever. But you’re going to be a lot cheaper and you may not be all that bad at it yourself.  A passionate and articulate founder can go a long way. I was able to do all of this myself, getting into TechCrunch, landing new customers from cold-calling, and striking business development deals.  You can too.

Sachin Agarwal is operations lead at Oneforty, the Twitter App Store, and CEO at Dawdle, the gamer’s marketplace. This post was originally published on his blog, and is reprinted with permission.

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