THE BLOG

Beware of Startup Buyer's Remorse

04/01/2015 03:25 pm ET | Updated May 30, 2015

This month over 100,000 people traveled to Austin to attend South by Southwest. I wasn't one of them.

Once a small music festival in a southern college town, SXSW has exploded into a behemoth conference where out-of-the-gate startups are competing with established brands for eyes and dollars.

Investing in event marketing can make sense if it will result in a win for your company. But most of the time, you come home feeling like you just got back from a terrible bender at the bar: you didn't meet anyone worthwhile and someone stole your wallet.

Whether we're willing to address it or not, times have changed. We can no longer treat marketing like a checked box. Over the years technology has evolved, enabling us to focus marketing efforts on the ROI. This forces us to stop and evaluate: is spending big bucks on brand awareness going to build the sales funnel?

Digiday estimates that splash marketing can run the gamut from $5,400 for 4,000 branded napkins to $75,000 for a street team to canvas the city with your marketing message. Or, if you're American Express, you swoop in and host a concert with Jay-Z for upwards of $2 million.

Blowing capital to compete at a large event is a common pitfall, but it's not the only way startups are burning through their runway. There are plenty of other expenses that can give a founder serious buyer's remorse. The key is evaluating what will work for you. What worked for one startup might be a complete disaster for you.

People
Headcount is the highest line item in your budget. Yes, talented people who believe in your vision are priceless, and you couldn't grow your business without them - but scaling too quickly will result in layoffs and damaged morale. If your team is drowning in work, congrats! But before you decide to grow your team, take a step back and decide - is this really what's best for the business? Consider hiring a freelancer or contractor for six months. Or connect with a local university and start an internship program. Before you onboard a ten-person sales team next week, pause and ask if you can do more with what you already have.

Places
The second highest line item in your budget is office space. Commercial real estate is as inflexible as it is expensive and is excruciating for most startups. It's the age-old battle between dynamic businesses trying to operate within a static infrastructure. Making a big bet on a lease is absurd when you don't know how big your company will be in five months let alone five years.

But what if you want to have a private space that will help you build your business and your culture? Ask yourself - "will leasing an office space help my business grow?" If the answer is maybe, try an alternative solution for a few months. Office sharing is growing quickly in competitive markets such as New York and the Bay Area. And services and plugins enable businesses to adapt CRE to the way they need to grow their business.

Things
"Things" are often the root cause of buyer's remorse but somehow a ping-pong table has become synonymous with 'startup.' A Tornado Elite Foosball Table costs $2000; a Keggermeister kegorator: $450. Alone these investments are relatively minor, but combined with 20 MacBook Airs, 30 Herman Miller chairs, and a conference line subscription, you are quickly eating away at your business' runway. What is really going to keep employees engaged and coming back day after day is your vision. A strong vision will attract good people- it's invaluable.

Entrepreneurs think having the biggest voice and fancy toys entice talent and differentiate their companies. They are wrong. If your vision is strong, people will work for you on a desk made out of a door and two sawhorses (it worked for Bezos). Stop trying to follow in someone else's footsteps and start investing your money where it matters: actually growing your business.

Do you have buyer's remorse or know somebody who does? Share your thoughts below.