Getting to "yes" in a world of "no"…

Posts tagged ‘Al Shugart’

“Cash Is More Important Than Your Mother”…

…A.K.A. “CIMITYM“. Even though I first heard this phrase from Paul Dawalibi’s “The VC Whisperer” blog, I didn’t realise it was from Al Shugart, the colourful disk drive innovator who cofounded Seagate Technology in 1979. He also¬†helped his dog Ernest run for Congress in 1996 (as a protest), but apparently didn’t realize that only poodles are allowed in. ūüėČ

Anyhoo, it’s a great phrase for entrepreneurs to bear in mind, because I’ve heard so many of them outline their world domination business plan solely in terms of growth through hiring people – we’ll hire two developers immediately, then a marketeer, then we’ll buy X¬†& Y and rent an office in Z (etc etc).

In the real world, spending money is¬†all too¬†easy: probably the biggest skill a startup can have is not spending money. The basic equation goes that each $ going into a¬†startup is worth ~10$ in two years’ time, so startups should spend¬†each¬†seed dollar¬†as if it is printed on gold leaf.¬†This is the core reason why¬†investors often fixate (and rightly so!) on¬†an investee company’s¬†burn rate: probably their #1 fear is for all their hot investments to burn out in six months, leaving only a singed, empty smell in their once-full wallet.

The full quote from Shugart goes: “It is important to remember when starting and growing a new company that cash is more important than your mother” – hence you can also see why many current angels focus on prospective startups’ cashflow projections, because looking at them is often an effective way of bringing faulty assumptions to the surface. Really, if your company can survive 18 months without running out of cash and still make¬†good progress to market, then it’s in the top 10% of startups, surely? A thoroughly good place to be!