When I ask entrepreneurs what their most valuable resource is, I ALWAYS get one of two responses: money (aka – funding, cash) or people. And it’s hard to argue about the relative importance of these two things. But those resources are replaceable. There’s another resource that isn’t, and it’s Time. Time is an entrepreneur’s most valuable resource and is the subject of this article. Given the various other tools and resources you have, how can you maximize time? Let’s explore further.
If the startup reaches their cash fume date, they have to pack up their toys and go home. And that’s no fun. But with an infinite amount of time, just about any startup could build their product, refine their business model after some number of needed pivots, and grow into a viable and sustainable company.
Basically speaking, with infinite time any startup can eventually figure things out. But there isn’t infinite time available and so it becomes the depleting fuel for a startup’s engine. I believe that, subconsciously or not, the best startups do amazing and creative things to gain more time, because it drives them crazy to think about running out of time before becoming self-sustaining.
I’ve been using the word “time” but, in many cases, what I really mean is “runway”. Runway is the amount of time you have until you run out of money (called your Cash Fume Date). When I mentioned in the opening that time is not replaceable, what I mean is that a moment in time is not replaceable. Once it passes you can’t get it back. So although a moment in time can’t be replaced, more runway (amount of time) can be generated and that’s the purpose of this article. You’ll see me use time (meaning, amount of time) and runway somewhat synonymously.
Adding Fuel to the Tank
Time is not a native resource but rather a derivative one. Much in the same way that steel isn’t a native resource but rather a derivative one created from iron ore and carbon, or jet fuel, which is derived from crude oil and other hydrocarbons. But perhaps since time isn’t something you can physically hold in your hand, a better analogy might be happiness. You can’t purchase a dose of happiness but might gain it from going to a concert, working for a charity or having a romantic evening with a loved one.
If time is what you want and understanding you can’t just go online and order it, how can you get it? There are possibly more ways than you’re immediately thinking.
When the entrepreneurs answer that funding is their most valuable resource, they might not know it but they are at least partly thinking about the extra runway (time) that funding grants them. It’s true they could instead use all of the funding to hire more employees or spend on marketing, thereby not gaining any additional runway. But employees and marketing can be unwound (terminated), thereby converting the remaining funding back to extra runway/time. Also remember that there are numerous sources of funding, including bank loans or lines of credit, angel and venture funding, grants, pitch competition awards and more.
- Side Note: One or the reasons I often recommend optimizing your fundraising strategy and terms for growth rather than dilution is because arguing with investors over small terms in order to reduce dilution by an ever-so-slight amount just wastes valuable time. And worse, it also puts the funding round at risk.
When someone buys your product, the resulting transaction puts cash (fuel) back in your tank, which in turn gains time. Best yet, it’s non-dilutive and also provides hugely valuable validation.
- Recommendation: If your product is paid for via subscription, try to get customers to pre-pay multiple periods in advance (ie – annual versus monthly), even if you need to offer a discount incentive. That extra up-front cash buys you time. Same thing for licensing deals. Ask your licensing partner to pre-pay for a bulk quantity that gets consumed over time.
Founders that take another job (or hang onto their existing one) or draw from their savings account while working on their new startup venture are essentially buying themselves time.
Equity as Compensation
When you convince an employee to take a job for 0-50% market rate cash compensation in exchange for equity-based compensation (ie – stock) you are reducing your cash burn and, therefore, buying yourself more time. You might even be able to use equity as full or partial compensation for various freelancers and service providers (check out an online marketplace named Loom to find some candidates willing to accept equity as compensation).
Planning & Decision Making
Most startups waste a ton of time due to a lack of planning and poor decision making. And while it’s impossible to have everything perfectly planned out and to not make any bad decisions, improving your track record in this regard will pay huge dividends in gaining time. So make sure to incorporate some tools and methods for planning and prioritization into your management system (see related articles titled “Tools for Maintaining Focus”, “Try Strategy Horizons Versus a Timeline” and “Prioritizing Your Product Roadmap”). Think about it through time-consuming examples like the following:
- Fixing an excessive amount of software bugs due to poor internal communications or insufficient testing
- Producing 4th and 5th versions of a hardware prototype because the electrical engineers and mechanical engineers aren’t working closely together or because of a poorly-selected contract manufacturer
- Realizing after participating in 5 trade shows that they aren’t an effective form of lead generation for your product
- Rewriting 30% of your code because you later discovered it was downloaded from the open source community and greatly enhanced by your developers but licensed via GPL and critical to the functionality of your product (see related article titled “Misuse of Open Source Software Can Kill Your Acquisition Exit”)
Not So Easy
So far, the advice seems pretty straightforward. When developing your strategy and later faced with decisions, always go with the options that give the company extra time – right? Not so quick. This is where the practical implications of time optimization get really difficult.
Hiring that extra sales rep should help you close more deals but she needs a few months to ramp up and that means spending extra money without immediate return. Hiring an extra software engineer will accelerate your product roadmap but only some of the new features allow you to charge more money and, in the meantime, you’re paying for an extra developer. The list could go on and on with many of the things you’d like to spend money on. It’s called “investing in your business” and the hard part is prioritizing the initiatives to fund at various points in your company’s evolution and doing so with fairly high odds of getting a return on that investment.
The next time you hear yourself saying “we need more funding” or “we need more people”, ask if what you really need is more TIME and, if so, broaden your perspective to figure out ways to accomplish that. In other words, how can you take an hourglass that’s more than half emptied and flip it over? Hopefully you now see more ways to gain time than just fundraising.
Also realize that until your business becomes self-sustaining, you will always have some projected date when you run out of money and need to raise more (have you seen the Startup Death Clock?). So get used to it.
The purpose of this article isn’t to cause you to hoard every last dollar in exchange for near infinite runway because that will just cause you to move slow, lose out to various competitors and miss huge opportunities. Instead, be mindful of waste, unnecessary rework, bad decisions that could have easily been avoided and the need to prioritize and run a disciplined organization (see related article titled “Establishing a Management System”). These things will pay huge dividends in the form of extra time with which you can grow a great company.