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CHAPTERS
- 0:00 – 2:17
Why Founders Keep Wasting Money Despite the Advice
The hosts introduce the topic of what early-stage founders waste money on. Brad notes that founders will probably still try these things, and Harj and another speaker say nearly every founder can name expenses they could have trimmed.
- •Group Partners repeat the same advice to startups many times
- •Brad expects founders to try these things anyway, even if some advice sticks
- •Harj doesn't know a founder who can't point to trimmable first-year expenses
- •A speaker recalls keeping a whiteboard list of wasted money in the early days of Twitch
- 2:17 – 4:50
Hiring Lies: The Big-Salary FAANG Engineer
The hosts start with hiring as the first big money sink, led by Harj's example of recruiting a highly paid big-company engineer. A speaker links this to the belief that a mythical hire will fix everything, and notes that such engineers lose the systems that made them productive.
- •Founders are tempted by FAANG hires who need near-FAANG compensation
- •The psychology is described as Sebastianism, waiting for a savior hire
- •FAANG engineers lose the workflow, tools and support they had at a big company
- •They bring the same cost without the same productivity
- 4:50 – 6:54
Contractors and Learning to Do It Yourself
The conversation turns to using armies of contractors as a cheap alternative to hiring. Speakers say contractors lack skin in the game, the temporary fix rarely becomes a permanent hire, and founders often need to learn the work themselves.
- •Replacing one person with five contractors tends to go badly
- •Contractors have different incentives and aren't part of the company
- •The contractor Band-Aid never gets ripped off and ends up expensive per hour
- •Founders may need to learn new skills, like building an iOS app, themselves
- 6:54 – 9:46
Marketing Spend: Ads as a Substitute for Building
A speaker who ran an ad tech company warns that ad platforms take unlimited money while teaching little. Harj tells how Triplebyte's Facebook ad budget crept up to nearly a million dollars a month, delaying a better growth channel.
- •Ad platforms will gladly absorb unlimited spend
- •Early heavy ad spend teaches you little
- •Triplebyte's ads were profitable for years but eventually stopped being so
- •Harj says they should have found their new growth product in year two, not year six
- •Ads are often used as a substitute for building
- 9:46 – 12:20
Events, Sponsorships and Brand Advertising
Harj describes how events, sponsorships and brand advertising tempt founders who copy successful companies. The group argues that big spend can't create a brand before product-market fit, and shares scrappy stunts from YC companies instead.
- •Founders cargo cult big conferences from companies like Twilio and Salesforce
- •Big spend works once you already have a brand, not to create one
- •Scrappy founders get more value than those who pay for booths or talks
- •WePay's block of ice with money frozen inside at a PayPal conference
- •Founders slipped flyers under hotel doors and set up a phone-call space
- 12:20 – 16:01
PR Agencies and Retainers
The group says PR agencies are one expense founders will make anyway. A speaker explains why the media seems out of reach, and Harj tells of paying a roughly $50K retainer, then firing the agency and getting better coverage on his own.
- •Founders feel the media is mysterious and out of reach
- •Agencies pitch retainers of around $10,000 a month for access
- •Journalists want direct relationships with founders, not intermediaries
- •Harj's agency handed his Series B launch to junior staff who didn't understand the company
- •Several speakers say they fired a PR agency, and one paid with equity
- 16:01 – 20:13
Lawyers: Specs, Payment Plans and Startup Firms
Michael recounts spending $50,000 in a month customizing employment agreements with a junior lawyer. The speakers give tips: get quotes up front, avoid customizing, use payment plans from large firms, and pick firms that work with startups.
- •Don't customize things like employment agreements that aren't your innovation
- •Get lawyers to spec the cost of work before they do it
- •Large established firms may offer interest-free payment plans over 12 months
- •Pick firms that work with startups and play the long game
- •Weird legal work should only happen if it is the focus of the startup
- 20:13 – 24:37
Advisors and Equity
The hosts discuss paid advisors, who are usually compensated with equity. The speakers say they've never seen a compensated advisor make the difference and that useful advice usually comes free from investors and domain experts.
- •Founders feel pressure to give advisors equity, such as 3%
- •No speaker has heard of a successful startup crediting a paid advisor
- •Valuable advice usually comes free from investors and executives
- •Professors in hard tech may ask for 20–40% and drop to 1% when founders push back
- •One speaker's trick, from PB: ask would-be advisors to invest instead; four of five did
- 24:37 – 27:18
Devil's Advocate: When to Spend Money
The host plays devil's advocate, asking why successful companies spend on all of this. The speakers say spending belongs after product-market fit, and founders should earn the right to spend by testing cheaply and doing it themselves first.
- •Spending on these things makes sense once you have product-market fit
- •Problems arise when founders without fit have money and spend it anyway
- •Earn the right to spend by finding low-cost ways to test ideas
- •Doing it yourself first gives you the authority to hire for it
- •Founders with a couple of million dollars need another mechanism to judge spending
- 27:18 – 28:13
Closing Summary: Stay Disciplined Pre-Product-Market Fit
The hosts sum up and say that even preventing half the waste would make the video valuable. They advise going nuts with spending after product-market fit, while staying disciplined before it.
- •Preventing half the wasted money would make the video worthwhile
- •After product-market fit and a big round, spend freely
- •Even then, some of these things will still prove a waste
- •Pre-product-market fit, stay disciplined about spending
