Nothing to waste: The advantage of being under-funded

Start-up companies who have too much money often blow it. There’s an advantage to being under-funded to keep you from making mistakes.

I don’t know if you’re old enough to remember the first dot-com boom of 1999. But I’ll describe what it was like for CD Baby to have a booth in the exhibit hall of these conferences:

• 1998. Me at a plain table, talking with people and handing out flyers. Not many other booths.
• 1999. Me at a plain table, talking with people and handing out flyers. Other booths have big LCD displays and fancy corporate backdrops.
• 2000. Me at a plain table, talking with people and handing out flyers. Other booths have booth-babe models, fancy multimedia displays, and giving away $50 items.
• 2001. Me at a plain table, talking with people and handing out flyers. Others have bought out an entire pavillion, laser light shows, giving away cars, offering a million dollar prize.
• 2002. Me at a plain table, talking with people and handing out flyers. Not many other booths.

I remember being pressured during the dot-com boom to take venture capital. But my response was always, “I’m profitable and have plenty of cash. The company doesn’t need more money.”

They’d come back saying we could “expand our reach” or other vague terms that to me sounded like blowing money on ineffective advertising.

They’d say we could have a big marketing budget, but I’d say, “Marketing doesn’t cost money. ‘Marketing’ is another way of saying ‘being considerate’. It’s all in how you talk with people.”

By then they’d decided I was just crazy and would surely fail, which was fine with me, because it let me get back to focusing on my clients and customers, undistracted by investors.