Life of a Founder: The Story of Collarfree.com

A few of the things we preach at Collar Free are now becoming mainstream thoughts and for some companies a priority. Focus on revenue, conserve cash, and spend money on needs over wants.

We all know the financial market has been getting hit lately, but the Venture Capital and funding market is starting to tighten up and put the pressure on their portfolio companies as well. The truth was blatantly showcased with Techcrunch’s recent post showcasing Sequoia Capital’s power point presentation sent to its portfolio companies.

The message: Conserve cash, cut operating expenses, hire sales people vs engineers, and figure out a revenue model.

What I never understood was how these are not the primary focuses of every business especially in technology vs “lets build something cool and hope we can sell it or someone buys it”.

I think one of the major differences I’ve seen is the difference between sales people who run companies and engineers who run companies.

• Engineers want it to be perfect then go to market. The problem is this costs a lot of money and many if not most of the time the product misses the mark.
• Sales people realize that customers will always want improvements and you will never know what they want till you ask them. Plus selling a product right away creates revenue, improves the product, and reduces the risk of missing the mark

Reality is setting in and it is ironic that the ones who start the boom also end the boom. Kara Swisher wrote about this exact topic on her Boom Town blog.

Anyway, my goal with this post was not to cover this topic, but to talk about how to run a start-up on a shoestring and in a bad economy. Plenty about the state of the market can be read about on TechCrunch, GigaOM, and just by searching the web.

So here is what we do at Collar Free and how we run our company. We hope other companies and founders can benefit and do the same.

1. Manage your cash flow monthly. Each month we look at our expenses from the previous month and evaluate what should stay the same, be increased, or be cut. Last month we cut almost $6,000 out of our opex and reinvested that money in advertising and designer incentives. As a result our site traffic grew 345% in one month
2. Focus on revenue driving activities. We spend most of our time asking “how can we can grow revenue” and “what partnerships will grow revenue”. These are the questions that balance our development cycle. It’s easy to say hire another engineer and we can go faster, but it’s more important to hire a sales person or focus on sales and bring on more customers. Many companies have awesome products, but I’d rather have awesome customers.
3. Focus on strategic partnerships and accounts. One of the best ways to grow a company and get great PR is to partner with other companies even if the revenue isn’t instant. We are launching a Toys for Tots competition and expect to get lots of great promotion through the holidays as a result. Strategic partnerships are also a great source of funding in a down market. Vendors and accounts not only believe in your company but see you executing your plan and see the potential.
4. Understand cash is king. I saw a startup with oceanfront real estate, great office, lots of space go out of business the other day. They had a great product and looked like a great company but then shut their doors. We on the other hand run our business out of a 3 bedroom apt, rent is $1000 a month, we have 3 employees, and are doing great. A nice office and furniture is a reward for success not a reward for starting. Most companies spend a couple years figuring out their business model. The key is not to figure it out quicker, but keep the company alive long enough to figure it out which is through cash managment.
5. Run your office like a co-op or workshare. When you are are startup company and need alot of space, office space can be a big cash suck. One option is to divide up part of your office and sublet cubes or rooms out to professionals who need a place to work. You can offset a big part of your office rent this way. We are taking it a step further and pursuing a boutique co-op where we have small retail stores or designers in about 1000 sq. ft. paying rent and selling apparel. The market is bad so it’s good for tenants in regards to lease terms and we think we can offset all our rent or even make money off having a bigger office. 
6. Start a CEO Panel. It would be great if we could all have a seasoned board of advisers or a group of high paid consultants to advise us but for most of us running start-up companies we don’t have these luxuries. We are organizing 6-8 other ceos/founders in town and starting a lunch once a month where we share ideas and focus on growing each others business. This is a great way to grow your company without spending valuable resources. Advice from your peers is always the most valuable.

We implement these strategies and hope more companies will as well. If more companies were financially responsible the capital markets would be much stronger. Everyone is in such a hurry. “Slow and steady wins the race” more times than not.

It’s seems cool at first to be a ceo/founder of a startup with a Series A round of funding. It is much cooler to sell your company and give your investors a return on their money.