David Rusenko
  • Blog
  • Photography
  • About
  • Contact
David Rusenko

Expenses are like spending equity

2/8/2011

47 Comments

 
It's hard to conceptualize the value $500 when you've just raised a couple million from investors. The measly few hundred -- or few thousand -- dollar expenses seem to be too unimportant to even consider.

Over time, we've started looking at things in a way that can bring it all in perspective. Consider this: if you've raised $2M at an $8M pre-money valuation, that $2M is worth 20% of your company. Each time you raise money, you are giving up a certain amount of equity to someone else in return for that money. And each time you spend money, you're spending equity in your company.

While it might seem like a $20,000 couch isn't an expense to fret over, that couch cost you 0.2% of your company. Likewise, a $250/month expense, while seemingly too insignificant to worry about, represents almost 0.1% of your company over 3 years.

The lesson here isn't to be penny wise and pound foolish -- certain expenses pay for themselves many times over -- but rather to carefully consider where you decide to spend your equity.
47 Comments
michael arrington link
2/8/2011 10:11:18 am

Exactly. Also, salary is like double dipping with payroll taxes, income taxes and all the rest. When I first started techcrunch I didn't pay myself anything and ran the company out of my house until we had over 20 people, but I bought the best computers I could afford. I can't even imagine what a $20k couch costs, though.

Reply
David Rusenko link
2/8/2011 10:19:37 am

@Mike,

There seems to be this belief that there are only two extremes: spending money exuberantly and penny-pinching. Any time anybody mentions the virtue of spending money appropriately, the "better to own a small piece of a big pie" people come out in droves -- as if you have to spend money foolishly to have a big pie.

Totally agree with you: why can't we have a middle ground where we just spend money appropriately?

Reply
Tyler Beerman link
2/8/2011 10:39:07 am

Great article, I really couldn't agree more with your contrast and comparison of expenses & equity....

Reply
Ben
2/8/2011 10:51:23 am

I like to frame all spending like an investment. Is what you're spending on going to grow your company's value?

@david i think the 2 extremes are most often talked about because. After raising money, but before product-market fit you should be penny pinching to increase your chance of succeeding. Once you've proved a viable market and you have competitors, you need to spend exuberantly to get to #1 since most web markets seem to be winner take all markets.

Reply
v
2/8/2011 10:55:00 am

@Mike

The reason why we can't have a middle ground is because moderation is unsexy. Polarisation is what attracts people, black and white with nothing in-between. But when you look at the world, it's full of greys.

You'll never hear someone with the shrill cry of "Converge to the centre!" or "Moderate is the best way forward!"... probably because they're being moderate with their position...

Reply
Graham link
2/8/2011 10:56:25 am

@michael I think the $20k couch costs about $20,000.

Reply
stephensebro link
2/8/2011 12:37:45 pm

@David & Mike,

You both either don't understand finance or you've glazed over the problem. Let me explain it to you. If your company is worth 20k, and someone gives you $20,000 for it, they own 100% of the company. If you went out and used that 20k to pay someone external to develop your product for you, that does not mean that the company's owner now owns nothing. It just means that the money has been converted to another form, for better or for worse. That other form could make you money, and it could lose you money. But the act of spending money is certainly not the same as spending equity in your company.

Reply
Niraj Shah link
2/8/2011 01:05:11 pm

Great post David. We are struggling with that right now. Between opening our office in SF vs virtual, to outsourcing options, and which marketing software to buy there is a lot to consider. The ROI should really be analyzed for any expense at such an early stage post-financing.

Reply
Mark Hall link
2/8/2011 01:05:59 pm

It appears that the startups that fall into one of the two categories are often imitating the actions of other startups as opposed to considering their unique situation. As a founder, I take the approach that Mike took and feel that it provides a more responsible and self-guided result. Only time will tell. Bottom line: every situation is unique.

Reply
David Rusenko link
2/8/2011 01:14:03 pm

@stephensebro,

Not sure you're getting the analogy. If I sell my company to someone for $20k -- they now own 100% of the company -- and I turn around and buy a $20k couch with that money, I've essentially just bought the couch with my ownership in the company, which I no longer have.

The article was obviously written from the founder's perspective, not the company's perspective.

Reply
Fredrick Nijm link
2/8/2011 01:29:56 pm

Exactly on point, that is why it's also better to run as a bootstrap as long as you can. Every little penny counts and everything is scrutinized. I am going to keep this philosophy even after we raise.

Reply
Liam Carton
2/8/2011 07:20:41 pm

Anyone who "sells" 100% of a 20K company for a 20K investment is getting royaly screwed.
The company at the end of the *investment* is worth 40K (20K value + 20K injected cash), so the investor should only get 50% of the equity.
If you actulay sell the company (rather than trade equity ofr investment capital), then, yes, you would "loose" 100% stake, but YOU would have been paid 20K for it (it would not be in the company bank account, it would be in your bank account).

Reply
Natalie Hodge link
2/11/2011 05:55:40 am

Seriously, are people really buying 20k couches with investor dollars?

Offices altogether are optional...

Wow.

Reply
Will link
2/13/2011 11:00:34 am

@David Unless you spend money on things like $20k couches, nobody will want to work for you. That's the problem with Valley culture. Illiquid companies like Twitter have to spend hundreds of thousands on cool offices because they feel like they won't attract the best talent if their offices aren't cool enough. Sadly, they are correct. And that says something very horrible about the work ethic and value system of this generation--my generation.

Buying expensive couches, pool tables etc. are things that shouldn't be done until you're in profit. We must ultimately learn that if we want to escape this "bubble culture."

Reply
North link
2/27/2011 03:28:36 pm

expenses are good only when they show some possibility for return. we should think before spending our money because it won't last long. no money=more chance of asking for debt = less credit

Reply
pepper link
3/6/2011 05:33:33 am

I love weebly!!!!!! go to my site PLEASE! I am going to check out yours!

Reply
Carla
3/10/2011 12:14:37 am

David, I really enjoyed your blog. It was very enlightening. I will definitely tune in for more. I would love to hear tips on how to survive without paying yourself for an extended period of time. That is what I am struggling with. I read that you are a part-time DJ. I am sure that helps some. I am new to Weebly but lovin it! Thanks!

Reply
Tony Plummer link
3/17/2011 09:22:11 pm

This is a good point and should be thinks about. Expending $20,000 just for a couch?
There are a lot of things that should be considered off course.
Try to check this out, it is worthy. www.familyprivatecarellc.com

Reply
Gina
3/27/2011 10:24:50 am

Sorry but you lost me on the $20k couch. I mean I am so far removed that I didn't even know there were $20k couches. so forget me.

Reply
Zeiss conquest link
5/4/2011 07:44:36 pm

David where have you gone? It's been three months since you last blogged! Come back!

Reply
Alex
7/12/2011 04:11:14 pm

Nice really very nice

Reply
George Anderson link
7/18/2011 06:54:52 pm

I agree. Can you pay 20,000 for a couch? I kind of get what you mean over all though. It is all relative to your total worth I guess?

Reply
JSallette link
7/29/2011 10:47:25 pm

Great post.. You are truly a genius to have created weebly. I wish you and your team all the best with your new venture capital people.

Reply
Alex link
8/18/2011 02:39:58 pm

Great post David. We should think before spending.

Reply
Erica
8/29/2011 05:03:45 am

Great blog!

Reply
Jake
8/29/2011 11:45:10 pm

Lot's of talk about couches and percentages of dollars and who owns what. What I noticed is 2M is actually 25% of the 8M in the example. However, that is neither here nor there and paradoxically unimportant in contrast to the intended message of the the considerably well thought out example. Moreover, this observation is equally as unimportant as my intended message. Obviously as unorthodox as this form of communication may be for this subject matter, I thought it appropriate to contact you. David I wanted to let you know that I'm developing a product which will compliment Weebly. It is an idea I thought of which fills a gap in your market. It will actually promote Weebly. However, I thought I would give you a heads up and perhaps an opportunity to jump on board and broaden your source of revenue, since it is your company that will be involved. I'll leave it at that. Thanks for your time.

Reply
amit link
9/2/2011 08:44:18 pm

This blog seem to good... i like it.. keep it up dude..

Reply
que que des queso
10/6/2011 12:10:55 pm

an amigo fueda flash fueda ec cul gato medico!

Reply
Skad link
10/10/2011 02:02:47 pm

Weebly is great - but I now have a problem editing my website.
Please ask someone to fix the problem now
Many thanks
Skad

Reply
appletree1 link
10/12/2011 12:00:46 pm

Wow, dude, it seems the stylesheet lived through a typhoon as your website looks screwed. I feel you wish to take a look at it

Reply
kazi Hossain
10/16/2011 02:54:27 am

David,exactly it's very man to man,some enterprenure offer lavish facilites some not.For startup Business should count every penny and scrutinazed,specially when it's aquestion to rise your fund.

Reply
Becky link
10/21/2011 02:27:30 am

At first I thought you were saying you had to spend money to make money but upon reflection I think you were just asking each of us to think about the return we are getting for what we're spending.

Reply
Neil Wacaster link
11/1/2011 02:50:28 pm

You have an awesome blog! Thanks so much for the advice.

Reply
Tobias link
11/2/2011 08:39:16 pm

David you have a nice ukraininian Surname...thank you for this website and all the clear information

Reply
Diane Griffin link
6/23/2012 08:47:11 pm

I love this blog layout, where can I download it?

Reply
Commodity Tips link
10/10/2012 02:50:33 pm

First of all let me tell you, you have got a great blog .I am interested in looking for more of such topics and would like to have further information. Hope to see the next blog soon.

Reply
Maria link
9/1/2013 07:24:53 am

First time reading this blog, just wanted to say hi.

Reply
Ludwig link
9/9/2014 09:29:50 pm

Very good, I like it!

Reply
Roger link
11/10/2017 07:41:32 am

Get quick support + 1844-516-0689 & complete Symantec Norton Activation technical help at by just one call at our Norton Antivirus Customer Support Number + 1844-516-0689.We are a Norton Activation Customer Support Company providing quality Symantec Norton helpline with Norton Support Number-+ 1844-516-0689. Contact us for the quick Norton Symantec customer support number+ 1844-516-0689. Our experts provide quick Norton helpline number+ 1844-516-0689. Norton.com/setup + 1844-516-0689. http://www.notroncomsetupactivation.com/
Norton Setup Help & Norton Customer support will help you resolve any Malware/virus related issues remotely Call Toll Free Number + 1844-516-0689.For any help regarding Norton Antivirus you can directly call on Norton Antivirus Phone Number + 1844-516-0689.Toll-Free to get instant solution Norton contacts number + 1844-516-0689.Call us at our Norton 360 by Symantec Helpline Number+ 1844-516-0689.to experience the quick and best Norton Antivirus Activation Helpline Number+ 1844-516-0689. http://www.notroncomsetupactivation.com/
Get quick support + 1844-516-0689 & complete Symantec Norton Activation technical help at by just one call at our Norton Antivirus Customer Support Number-+ 1844-516-0689.Norton.com login, enter Norton product key, norton.com/setup sign in, Norton antivirus setup, Norton product key activation, download Norton security, norton.com/setup usa, reinstall Norton, Norton security, Norton internet security http://www.notroncomsetupactivation.com/
Norton.com/setup + 1844-516-0689 norton.com/setup Norton product key activation, install Norton, Norton, norton.com/setup , Symantec Norton, Norton setup, Norton technical support number, norton.com login, enter Norton product key, Norton antivirus, Norton internet security, Norton security, norton.com/setup sign in, Norton antivirus setup, Norton product key activation, download Norton security, norton.com/setup usa, reinstall Norton Norton.com/setup + 1844-516-0689 . http://www.notroncomsetupactivation.com/
Norton Setup Help & Norton Customer support + 1844-516-0689. Norton Support Phone Number, Norton 360 Phone Support, Norton Security Phone Number, Norton Helpline ,Norton Tech Support Number, Norton Tech Support, Norton antivirus customer service, support for Norton, Norton toll free number, Norton Tech Support phone number, Norton antivirus tech support phone number ,Norton antivirus tech support number, Norton antivirus technical support number ,Norton technical support number, Norton tech support number, Norton tech support phone number us, Norton tech support telephone number, Norton 360 phone support, Norton 360 telephone number, Norton 360 helpline, Norton 360 support phone number, Norton security phone number ,Norton support phone number ,Norton support phone number us, Norton helpline, Norton helpline phone number . http://www.notroncomsetupactivation.com/
Norton.com/setup + 1844-516-0689 Norton.com/setup product key,Norton.com/setup , Norton.com/setup product key , Norton.com/setup with product key , www.norton.com/setup , https://norton.com/setup ,Norton Setup,www.norton.com/setup, Norton Setup with Product Key, Norton.com/setup product key,norton.com/setup | Norton Product Installation | norton.com/setup,norton.com setup,norton.com/setup,Norton setup,Norton Install,Norton Setup Support, Norton Download norton.com login,enter norton product key,norton antivirus setup,norton product key activation,norton.com/setup sign in,download norton security,reinstall norton, norton.com/setup create account,norton.com setup | Norton Security Install,Norton.com/setup product key + 1844-516-0689 |Norton.Com/setup,Norton Setup - How to Install & Uninstall Norton Security,www.norton.com/setup | Norton Setup | Norton Product Key,www.norton.com/setup - Norton Product Installation,Activate your Norton Product key,Norton Product Key | Norton Setup Norton Product Installation Install Norton ,manage.norton.com/setup Norton product from a retail or install Norton with Product Key ,suppor Norton Setup - www.norton.com/setup | Install Norton Norton Setup norton.com/setup| Norton setup & Activate Norton.com/Setup Norton.Com/Setup - Norton Setup & Product Activation Norton.Com/Setup, Norton Setup, Norton.com/Setup Install, www.norton.com setup, Norton com setup product key www.norton.com/setup and get activate, install and setup norton antivirus onto your computer. Norton Setup, norton.com/setup, www.norton.com/setup,www.norton.com/setup, Norton Setup+ 1844-516-0689 Norton.com/setup, + 1844-516-0689 Norton.com/setup Create Account, + 1844-516-0689 Norton.com/setup Login, + 1844-516-0689 Norton.com/setup Download, + 1844-516-0689 Norton.com/setup com/setup, + 1844-516-0689 Norton.com/setup Internet Security, + 1844-516-0689 Norton.com/setup USA, + 1844-516-0689 Norton.com/setup /setup, + 1844-516-0689 Norton.com/setup Sign Up, + 1844-516-0689 Norton.com/setup.com, + 1844-516-0689 Norton Setup, + 1844-516-0689 Norton Setup Help, + 1

Reply
Norton.com/setup link
7/13/2018 05:51:11 am

norton.com/setup @ https://www.callnortonsupport.com/norton-com-setup-activate/ key by www.norton.com/setup Product support for setup of Norton Product Installation. Enter your products key and started to set your Norton Setup. Call toll free at +1-888-583-4008.

Reply
priyanka link
10/31/2018 04:45:17 am

this information is very informative i also write a blog related to sahre market latest news visit <a href="www.intradayfreetradingtips.blogspot.com">click here</a>

Reply
Andy Roger link
11/13/2018 12:04:25 pm

Buying or selling an independent pharmacy. With more than 500 pharmacies sold, onlinemedishop.com has the most extensive database of active, qualified buyers available in the United States. Online Medishop, which has been in business for 9 years, is one of the leading pharmacies on the online. We deliver safe, generic medications like viagra,cialis ,levitra,stendra,kamagra onlinemedishop.com orders for us at 1-855-255-5514

Reply
RC j link
2/3/2019 11:51:14 pm

this blog is very useful for beginner. it looks like you had done lots of research. if you want any <a href="http://www.capitalstars.com/precious-metals-free-commodity-tips/"> Free Commodity Tips</a> <a href="http://www.capitalstars.com/share-market-company/"> Free intraday Tips</a> visit capitalStars.

Reply
ankita link
2/5/2019 11:35:16 pm

This article is really very helpful to many people. it looks like you had done lots of research for this. if you want any <a href="http://www.capitalstars.com/precious-metals-free-commodity-tips/"> Free Commodity Tips</a> so you can visit our website.

Reply
Astroindusoot link
1/3/2020 10:31:13 pm

#AriesRashifal2020, #TaurusRashifal2020, #GeminiRashifal2020, # CancerRashifal2020, #LeoRashifal2020, #VirgoRashifal2020, #LibraRashifal2020, #ScorpioRashifal2020, #SagittariusRashifal2020, #CapricornRashifal2020, #AquariusRashifal2020, #PiscesRashifal2020
#meshrashifal2020, #vrshabhRashifal2020, #mithunRashifal2020, #karkRashifal2020, #singhRashifal2020, #kanyaRashifal2020, #tulaRashifal2020, #vrshchikRashifal2020, #dhanuraashiRashifal2020, #makarRashifal2020, #kumbhRashifal2020, #meenRashifal2020
Regarding form: <a href="http://astroindusoot.com/dailyhoroscope">Astroindusoot</a>
Information website: https://astroindusoot.com/dailyhoroscope
Call & What’s App No On +91-9068311666.

Reply
Cooking with Katie link
12/15/2020 09:21:01 pm

Veryy nice post

Reply
pay-per-click-services link
8/26/2021 03:02:42 am

Best work you have done, this online website is cool with great facts and looks.

Reply



Leave a Reply.

    Picture
    David co-founded Weebly, an incredibly easy to use tool that helps millions of people create a professional web site, blog or online store.

    He was named to Forbes'  30 under 30 list, is a part-time DJ and has traveled to over 20 countries.

    Investments include Cue, Parse, Exec, Churchkey, Streak, Incident Technologies, Adioso and Zenefits.

    RSS Feed


    Categories

    All
    Bobbyore
    Day To Day
    Misc
    Music
    Open Source
    Product Reviews
    Raising Money
    Rant
    San Francisco
    Scaling
    Startups
    Troubleshooting

    Blogroll

    Jessica Livingston
    Robby Walker
    Adam Smith

    Justin.tv
    Venture Hacks
    Uncrate
    Juno Day

    Flickr Photos

Proudly powered by Weebly