To question is to think. To think is to introspect. To introspect is to seek. To seek is to be aware. To be aware is when the journey begins.
--“Startup founders, ‘bootstrapped to luxury’ fixation and poor optics ”
--“Have I arrived ?”
--“Should I announce it ?”
--“So what if I have not broken even at my venture?”
--“So what if I have tight cash flow problems at work? This purchase was made personally.”
--“So what if I miss my employee or vendor payments, at times?”
--“Since I gave up my old lifestyle for the past 4-5 years in building my venture frugally, and now that I have raised more funding (despite no profitability), can’t I enjoy some of these simple pleasures of what others think as luxury?”
--“After all, I bought only a secondhand Beemer. My old car was used for 11 years. So this is not a luxury.”
--“After all, I did raise another funding round recently.”
--“After all, my valuations made money for my investors.”
--“I need to have a certain minimum lifestyle to meet my current and potential investors. Think of my expenses as investments for future-shaping the venture.”
--“I only did a week of foreign travel with my wife, at company expense - that was for my strategic thinking to benefit the company. Why should anyone object?”
--“Frugal startup that we are, we still spend decently in employee amenities. Yes, we do have delayed salaries or mass-retrenchments every then and now. Those should be seen as business strategic decisions and not as cost cutting.”
Well, these are oft-heard statements by many founders. Interestingly, if they are successful and or pally with their investors, they can get away with those quotes. If not, or during a downturn, these very statements may be used against them.
Frugality is different
Frugality is being smart about what’s a livelihood enhancer (for the business, in the case of a startup founder) versus what’s a lifestyle statement. Cringing is being miserly and living in a state of denial. A good practice will be to be frugal.
Frugality in entrepreneurship means generating greater business value while using fewer resources. It does not mean stopping resources including funds but rather using them efficiently.
After initial years of venture struggle and being frugal, the fact that your venture is now decently funded and your attention is on the lifestyle of your investors is a dangerous sign. Do not try to ape the lifestyle of your investors.
Your investors might be friendly but not your friend. Their primary role is to make returns for their investments, sometimes at your cost. Their lifestyle is their own, don’t try to cope with it.
You still are answerable to your stakeholders if the venture fails. Your fundraise success does not mean you can start living life full size. Even if you have made some small (or big) wealth creation with the secondary sale of a part of your equity holding in the venture.
Enjoy the fruits of your hard work and success but not at the cost of what is the right optics of your lifestyle. If your venture is still bootstrapped, and if you are expecting to conserve cash burn, any luxury shopping is bad optics.
Postpone that spend decision (even if it’s a personal spend) to a later date. When your investors ask for cost-cutting measures, you can’t be seen buying new luxury goods. Importantly in today’s social media world, the poor optics will be splashed all over and criticised across the industry.
Businesses generally see a cycle of highs and lows. That does not mean your lifestyle has to swing across the economic spectrum. Successful founders, including many tech startups globally, have a stable personal lifestyle, however wealthy they are.
Industry cycles don’t make them flaunt or cringe. There are learnings from many Indian industrialists whose businesses speak volumes. Their personal wealth or lifestyle is not even heard or seen, rather their businesses are lauded.
– The author, Dr Srinath Sridharan is a Corporate Adviser and Independent Markets Commentator. For other articles in the Coach Soch series, click here. 
