Stay frugal my friend
By Ray DePaul
Entrepreneur: “I’m looking for $250K to get my new startup off the ground.”
Potential investor: “What will you use my money for?”
Entrepreneur: “Well, $125K will go toward my first year’s salary so I can quit my job and focus on the startup. And then...”
Potential investor: “Oh my, look at the time. I gotta go!
One of the shortest conversations you will hear is between an entrepreneur and an angel investor where the entrepreneur is expecting to maintain their “downtown salary”. I hate to break it to you budding entrepreneurs, but you don’t get to pay yourself well until your business is really starting to hum.
Most of you that are graduating with an entrepreneurial mindset will likely go out and get a job right after leaving school. Perhaps you haven’t come up with your big idea yet or maybe you realize that you could use some industry expertise, credibility, and a good network before you go out on your own. But if your ultimate plan is to be an entrepreneur and start your own venture, then may I offer you a little advice - Stay frugal my friend.
You are exiting what is likely the most challenging financial time of your career - post secondary education. One of the key things you’ve learned is how to live with less. How to stretch summer and part-time income over an entire year. If you eventually want to start your own company, then resist the common temptation of raising your lifestyle to match your new salary. Keep at least some of your frugal student ways. Not only will you will build a nest egg that will see you through the early days of your startup, you will not have to significantly drop your standard of living when you go out on your own.
There are a lot of 30 year olds with good venture ideas, but the thought of giving up their beamer, downtown condo, and entertainment budget is too much to bear. They choose their lifestyle over being a founder. It might be the right call for them, but it’s also an opportunity for you. But only if you stay frugal, my friend.