Leadership

Entrepreneurs: Get Lean and Mean, Get Funded

By Steve Tobak

Updated on: October 8, 2009 / 4:14 PM EDT / MoneyWatch

A couple of months ago I interviewed Nagraj Kashyap, the vice president and head of Qualcomm Ventures, who had some excellent advice for entrepreneurs:

In this market climate in particular, we tend to look for teams that have demonstrated a track record of conservative cash management, who prove they can do more with less. If you think you have a good idea, conserve spending as much as possible and come to VCs once the idea is more fully developed.

There are some rather obvious ways to accomplish this and there's no shortage of advice there, including a laundry list in an email from Benchmark Capital's Bill Gurley to portfolio companies. But VCs are an unusually intuitive and perceptive lot. There are quite a few less obvious ways for them to notice how well you are or aren't conserving cash.

Here are ten not-so-obvious ways to look lean and mean for your investors, from someone who lived through several downturns and recessionary cycles (that would be me). If you think they're trivial or "shouldn't" matter, that's immaterial. Make no mistake, VCs and other investor types will notice and it "will" matter.

Travel coach, even internationally. Those who know me will laugh at this - I can't stand traveling coach on international trips. But I'm not out looking for capital.
If board and executive staff meetings intersect with lunch or any other meals, get them from a local sandwich/salad shop; do not cater.
Top executives: take voluntary salary cuts and eliminate bonuses before employees and without being asked by investors.
Do not add any new executive or management positions or layers for any reason, period.
Eliminate all non-technical consultants and contractors unless they're absolutely necessary or demonstrably the least expensive alternative.
Do not expand office space, buy furniture, or add frills of any kind. Keep it lean and mean in the lunch or break room. Folks can bring in their own "specialty teas" from home.
Don't host expensive events on the company. There are loads of major milestone, team-building, and blow-off-steam exercises - barbecues and the like - that cost virtually nothing.
Hold regular ZBB (zero based budgeting) and line-item budget meetings to ensure you're only spending exactly what you must.
Keep signature authority levels high, dollar limits low, and expense scrutiny enforced.
Buy office supplies, computer equipment, printer cartridges, even coffee, tea, and cases of soft drinks and water in bulk from Costco or a low-cost internet reseller.

Sure, some of this stuff may seem penny wise and pound foolish. In a fat economy, that may be true. But in this economy, they can make the difference between getting funded and shutting the doors for good. Folks will whine, but if managers also suck it up, they'll get over it.

Any other tips for looking lean and mean for investors?