The Mahogany finish larger than life office table can wait
After having secured his first round of investment for an innovative digital product, my upcoming and hardworking entrepreneur friend sought my opinion on opening a new office. A “full of ideas and dreams” man. I know that his ambition for a decent office is not an extravagance but being his advisor, I have the fiduciary duty to provide him with the truth I know.
His product and company background is thus: MVP produced/early-stage revenue.
My advice to him was 1. that 99.9% of the investment should flow to the goal he offered to his investors and 2. that it should also flow directly to help him raise the next round of investment.
That his goals, at this start-up stage, should be about enhancing product features, customer acquisition, and revenue and NOT splurged over having a plush interior, ergonomic chairs, or state of the art acoustic conference rooms etc.
Renting space and furnishing it will NOT add value directly to any of those goals. So my advice was to go for a per chair-tariffed low cost shared space facility or convert a resident flat into a workspace with minimum furnishing. The second option works as accommodation and workspace.
Being an optimistic entrepreneur, he argued as you too may do that the RoI (Round Of Investment) of renting out a space and furnishing it would be mathematically better. Here is my explanation to him as well as you:
True that per-chair-cost at your facility will be lesser than that of a shared space. The only problem with this argument is that your company needs to operate for the next four to five years to reach this RoI. The naked reality is that unless you raise the next Round Of Investment you will not last for months. The only thing that helps you get funded is your Sales and Product, so direct your resources to drive that.
The hard lesson I learned in my life is that never ever invest in assets during your initial days-if you burn out of funds the only people who get value out of this asset is your landlord/next tenant.
I’m not going to quote any cliched examples of Steve Jobs starting his company in a garage. But I want to share with you about someone I met last year, Mohammed Hisamuddin — the CEO of Entri- (a startup that raised multiple rounds and was in a rocket growth phase since). The CEO’s office was probably one of the smallest rooms in the entire building. Even other rooms are minimally yet adequately furnished. This evidently shows his interests are focused on the right place rather than some ‘mahogany finish larger than life table’.