The best investment I never made

The best investment I never made was not having a student loan and not buying a property.

As an entrepreneur, I’ve ended up better off (so far) by not doing these things than I would have had I done them. If I had bought a property when I was able to afford one I would have not had the working capital to start Lind Golf. Had I bought a property after I sold Lind Golf, I would not have had the working capital to start BuyReply.

If I had bought a property I would have had to service the gap between the rent and the interest repayments along with other costs like maintenance etc. If I could buy a property outright, or if rental income serviced the debt and made me money, then I’d buy property but it never does. If you are negatively geared you are “hoping” that your property increases in value at a faster rate than your interest accrues.

Nobody likes to have debt and as soon as you have it, you become restricted in what you can do. If you live in your place you become tied into repaying a loan which means you become a slave to cashflow. You need cashflow to pay the interest, at that means being locked in a job whether you like it or not.

The same applies to student loans. It’s less of a problem in Australia because we have HECS and that is paid off over time as your earn, however in the US student loans are toxic. In the US there is more outstanding debt from student loans than credit cards AND auto loans combined. Starting life $160,000 in the red is like trying to run a marathon with weights attached to your ankles, yet this is what most young people are committing to. As Mark Cuban puts it:

“The crush of college debt has taken an entire generation of graduates, current and future out of the economy. Which is exactly why the economy hasn’t grown and won’t grow beyond microscopic growth rates we have seen so far.”

I’ve always tried to keep costs low and financial obligations at a minimum. While popular belief is that buying a property is the right thing to do with your money, if you have a vision and the confidence to back yourself into a venture, you are more likely to create incremental value that way than you would by purchasing a property. If you can afford to do both, then you are lucky.

If you can start a venture then raise further capital off of the back of your early efforts, chances are that the valuation you put on your venture will be more than the increase in value of a property during the same period of time.

For example if you can start a new business with $50,000 then sell 20% of it to an investor for $200,000 in 1 or two years, you’ve created $1m worth of value in that time. Do you think if you bought a property for $1m with a 10% deposit, it would be worth $2m in two years or less? No way.

Having debt (even good debt) stifles creativity and entrepreneurialism. It locks you onto the cashflow treadmill and before you know it you can’t leave your job or take a chance, and if you do decide to start something, you’ll most probably have to sell 50% of your equity to a financier first.

I never had to do this when I started Lind Golf and never had to do this when I started BuyReply. I made a conscious decision to remain debt free so that I could take chances.

Most people can’t take chances. They’re already on the cashflow treadmill. They have commitments. If you can take chances and have the confidence to back yourself, go for it because you’re already in a privileged position.

Product Demo Vs Presentation

While we’ve been building BuyReply I’ve been careful to ensure we drum up enough interest from customers without over promising and under delivering. The key has been to know roughly how long our product development + testing will take, then ensure that we can deliver on any commitments we make to clients.

I’ve been amazed at the response we’ve received without having a working demo. We’ve met with the best and brightest in Australian media over the last 6 weeks and have stepped them through our platform and what it means for them, however we never showed anyone a full working version until last week.

The issue when building a transactional platform is that a demonstration requires all moving parts to be working. You need to be able to add a product to inventory, having a working checkout, process a payment and record the order amongst other things. We’ve been building the platform for 8 months however only last week were we able to demonstrate a complete transaction. Everything comes together at the very end.

We have been selling off of a PowerPoint slides however being able to demonstrate the system in a live context has changed the game. It’s provided our customers and investors with a real insight into how easy BuyReply is to use and how quickly a consumer can make a purchase. Being able to demonstrate our technology has fast tracked our discussions with partners and merchants. It has also mean’t that we can email a list of instructions to potential customers and have them try BuyReply for themselves. This speeds up sales cycles and saves time.

I look forward to introducing and demonstrating BuyReply on this blog in the next new weeks.

The death of the resume

I’m going to make a prediction that the resume will be dead within 3 years. Companies who want to hire the best talent won’t be looking for credentials on 1 page. They will demand a deeper insight into their candidates. Employers will want to see evidence of candidates enthusiasm for their profession.

The best way to understand a candidate is to look at their public Internet presence. Do they blog? Do they tweet? What are they blogging and tweeting about?

When hiring, a 1 page resume doesn’t won’t cut it. An interview won’t cut it. What will set the good from the great is a longstanding history of their thoughts and professional opinions and the best way to communicate that is by blogging.

As companies seek to hire candidates with an Internet presence, those without one will need to lift their game and start creating a public professional web presence that conveys a sense of depth that an interview and resume simply cannot do justice to.

Staying small

I read AVC every day. It’s the last thing I do before I go to sleep as it is early morning in New York. Today Fred wrote a piece on hiring and he speaks about the advantages of staying small which has lead me to think about my experiences in startups while we have been small.

In the two tech companies I’ve started, our largest leaps have been while we were tiny – maybe 2 or 3 people. This leads me to think that the DNA of companies and their products are generally cut in their most early days when there are just a few people. Think Zuckerberg in his dorm room. Successful products don’t usually don’t change all that much over their life. I would say that 80% of a product is built in the really early days, and that 20% of the product changes incrementally over time. A good example is Google search. Google today is mostly what is was when it first started, a great search engine. Sure they have added features like Google Image search and more, and they have tweaked their algorithms to deliver more relevant results, however the Page rank algorithm is still at the core of Google and that was built in a dorm room somewhere in Stanford many years ago by a small team. Another example is Microsoft Word. What features do you use in the most recent version of Word that wasn’t available in Word 95…!

The magic of startups usually occurs in the founding months by the founding team, with improvements being incremental iterations on a core product. Small teams can achieve more than large bureaucratic teams because communication is direct, decisions can be made quickly and things get done fast.

That is why Fred’s post resonated with me. It reminded me to keep my team lean and focussed and not to try and get big too quickly. It’s easy to think you need to grow into this big thing, especially after you raise money however that is not the case. I’d rather take my time to hire right, then hire wrong and have to hire again. If that means staying small for longer, and working harder, so be it.