Startups often waste money on hiring PR agencies, paying advisors in equity, and not trimming unnecessary expenses. They waste money by offering big company salaries to highly qualified employees who struggle to adapt to the startup environment. Startups also waste money by relying too heavily on contractors instead of hiring full-time employees. They waste money on marketing spend, especially on platforms like Facebook and Google, without learning from the process. Relying solely on ads can hinder growth and lead to high acquisition costs. Startups should focus on building and launching new products to drive growth and reduce costs. Money is often wasted on events, sponsorships, and brand advertising. Startups should approach events like a startup founder, using cost-effective strategies and creative marketing techniques. They waste money on PR agencies and should build direct relationships with journalists instead. Startups waste money on lawyers by customizing employment agreements unnecessarily. They waste money on advisors who may not provide significant value. Startups should prioritize spending wisely and find low-cost or no-cost ways to test ideas before scaling them.
Introduction
Startups often waste money on hiring PR agencies, paying advisors in equity, and not trimming unnecessary expenses. The hosts aim to provide insight on why these practices are wasteful.
Hiring lies
Startups often make the mistake of trying to lure highly qualified employees from big companies with similar salaries, but this fails because these employees are accustomed to a different work environment and support system, resulting in lower productivity.
- Startups waste money by offering big company salaries to highly qualified employees.
- Highly qualified employees from big companies may struggle to adapt to the startup environment.
- The different work environment and support system in startups can hinder productivity.
Contractors
Startups often waste money by relying too heavily on contractors instead of hiring full-time employees. Contractors lack the same level of commitment and understanding of the company's goals. Founders view contractors as a temporary fix, but they end up prolonging the need for a permanent hire. Startups also waste money in marketing without achieving significant results.
Marketing spend
Startups often waste money on marketing spend, particularly on platforms like Facebook and Google. While these platforms offer the potential for massive scale and customer acquisition, simply pouring money into ads without learning from the process is not effective. Salespeople and enticing materials can make it tempting to spend more and more on ads, but this approach does not lead to significant learning or sustainable growth. Startups may initially see profitability from ads, but eventually, they reach a point where the ads are no longer profitable.
- Startups waste money on marketing spend, especially on platforms like Facebook and Google.
- Pouring money into ads without learning from the process is not effective.
- Spending more on ads does not lead to significant learning or sustainable growth.
- Startups may initially see profitability from ads, but eventually, they become unprofitable.
Startups often waste money on marketing spend, particularly on ads. Relying solely on ads can hinder growth and lead to high acquisition costs. Instead, startups should focus on building and launching new products to drive growth and reduce costs. Other areas where money is often wasted include events, sponsorships, and brand advertising.
- Startups waste money on marketing spend, especially on ads.
- Relying solely on ads can hinder growth and lead to high acquisition costs.
- Startups should focus on building and launching new products to drive growth and reduce costs.
- Money is often wasted on events, sponsorships, and brand advertising.
Brand advertising
Startups should focus on maximizing the value they get from events by doing stunts or working the room, rather than wasting money on brand advertising.
Approach events like a startup founder
Approaching events like a startup founder involves cost-effective strategies and creative marketing techniques. Some key points include:
- Using unconventional methods to create buzz, such as freezing money inside a block of ice or sneaking flyers under hotel room doors.
- Finding alternative and inexpensive ways to engage with potential customers, like creating a separate space for phone calls at a hotel.
- Thinking outside the box and finding innovative ways to maximize impact at events without spending money on expensive sponsorships.
PR
Startups often waste money on PR agencies because they believe it is necessary for press coverage, but building direct relationships with journalists is more effective and cost-efficient. Founders should personally reach out to journalists for better coverage. Hiring PR agencies is a common mistake, as they often don't understand the business and provide ineffective pitches. Paying PR agencies with equity is not recommended.
Lawyers
Startups often waste money on lawyers by trying to customize employment agreements, which is unnecessary and costly. It is important to have lawyers who can provide upfront cost estimates and have experience in the specific legal matters. Negotiating legal bills is difficult, but some law firms offer payment plans to spread out the cost over time.
- Startups waste money on lawyers by customizing employment agreements unnecessarily.
- Lawyers should provide upfront cost estimates and have experience in specific legal matters.
- Some law firms offer payment plans to help with the cost of legal services.
- Choosing Silicon Valley firms can be beneficial as they have a long-term perspective and offer payment plans.
- Spending money on lawyers can result in giving away equity, which is not ideal for startups.
Advisors
Startups often waste money on advisors who may not actually make a significant difference. Founders feel pressured to give equity or compensation to advisors they admire or feel obligated to, but this is not necessary. Successful startups usually receive valuable advice from investors or domain experts who offer their expertise for free. Monetizing startups by selling advice or collecting percentages is common, but the most successful individuals in the ecosystem do not have time for this.
- Startups waste money on advisors who may not provide significant value.
- Founders feel pressured to give equity or compensation to advisors.
- Valuable advice can be obtained for free from investors or domain experts.
- Monetizing startups through selling advice or collecting percentages is common.
- The most successful individuals in the ecosystem do not have time for this.
Devil's advocate
Startups often waste money on unnecessary expenses, and it is crucial for them to prioritize spending wisely. Here are the key points discussed in the video:
- Startups face the dilemma of knowing what not to spend money on, especially when successful companies are spending money on those things.
- Startups should only spend money on hiring and other expenses once they have achieved product-market fit and have a growing customer base.
- Earning the right to spend money is important, and startups should be creative and find low-cost or no-cost ways to test ideas before scaling them.
- In the past, startups had less money and it was easier to prioritize spending, but now many founders have significant funding from the start and need to find alternative ways to determine what is worth investing in.
- The video advises startups to be do-it-yourselfers and try things before hiring someone, as this can help avoid wasting money.
- Various examples of ways startups can waste money are provided, highlighting the importance of staying disciplined and avoiding spending money on unnecessary things, even after achieving product-market fit.