Fred Wilson’s “Resource Constraints”

As per the norm, a thought provoking piece by Fred Wilson of Union Square Ventures today.   Full text below.  It reminded me of a time when one of my companies, which was bootstrapped, was generating more than sufficient cash flow.  I started spending time looking at new, shiny businesses to start rather than focusing on executing at 100% and continuing to gain market share for the existing company.  In the end, the distraction of too much cash flow hurt the company.  I do not disavow cash flow, but need to be mindful that the cash flow from any business line is merely a scorecard of where you are to date; it is not an excuse to look around from your core mission and market.

Resource Constraints

Most of the companies I work with tell me that they are resource constrained and do not have enough capital and engineers to do everything they want to do.

I tell them that is a blessing not a curse.

They look at me like I am crazy and rationalize it as me being an investor and not an operator.

I will plead guilty to both (being crazy and being an investor) but I am extremely confident that being resource constrained is a blessing in the hands of a great operator.

I have seen companies do amazing things with no money and tiny teams.

I have seen companies do absolutely nothing with all the money in the world and hundreds of engineers.

This experience, built up over thirty plus years in tech and startups, has convinced me that resources are never the limiting factor to doing great things.

The limiting factors are;

  1. having great management that can make the right decisions and drive exection
  2. knowing what to do and what not to do
  3. playing your game and not someone else’s

Resources, measured in available capital and headcount, often make #2 and #3 more challenging.

Organizations start to feel that they can do more than they can and should.

They start looking around enviously and counting the size of the fundraises and engineering teams of their competitors.

They stop knowing who they are. And that is death.

I believe that excess capital makes companies weak and unfocused.

I believe limited capital makes companies strong and focused.

And I don’t believe capital has ever helped a company win a market. Many have tried that approach and it always ends badly.

So I encourage all of you entrepreneurs out there to embrace being resource constrained and learn to love operating with less.

It will serve you well.

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