Slow money

Slow Money Square 220.fullThere is something to be said for slow money.  What do I mean by that?  I am involved in a lot of companies that honestly do not need millions of dollars to get them to the next level.  They need a nice shot of cash like $1/1.5m to get them to the point where they are creating revenues and building engagement.  Sometimes too much cash at the wrong time can lead someone down the wrong path.

It is easy to forget how hard it is to build a company and how long it takes.  Throwing money at a business is not the end all be all.  There are steps.  Building a foundation is essential.  Being strategic about what roles need to be filled, what the model is going to look like, what the product will be and how money is going to be made.  That does not mean hiring a bunch of people at once because an endless stream of cash has been brought into the company.  Businesses do not grow over night.  They take time and patience.  Sometimes it takes a little longer than you think and other times it takes off like wildfire.  I believe in slow money at the beginning not just an overwhelming amount of cash that can stop an entrepreneur from forgetting how they got to the place they did in the first place, by being scrappy, smart and calculating. 

In addition to the concept of slow money is what role does an entrepreneur want to play in their company.  An entrepreneur asked me this past week if it was okay for them to build something but not be the CEO.  Would that be ok?  I actually believe that it is totally ok as long as they understand that their vision is what needs to remain in place.  Understanding that if the CEO does not work out that the entrepreneur has to step back into that spot.  In many ways, an entrepreneur who understands their abilities is refreshing.  Someone told me that the first thing they did was hire someone who had the skill sets they did not.  One entrepreneur told me that she knew she did not have the skills to necessarily build the company out but wanted to hire the right person who did.  I applaud that.  John Doer talked about that in his interview that I watched over the weekend and from a wise investor it is really great to hear that it is okay to realize your skill sets as an entrepreneur. Sometimes those are the best ones.

We read about companies being funded, successes that we believe happened over night, valuations that seem extreme etc. etc every day but it is the companies that have entrepreneurs who have spent time thinking of the strategy, building up the foundation slowly and intelligently are the majority of the real successes.  The latest jello shot usually does not work in the long run or tossing money and increasing valuations at a brand that might have hit a ceiling or can not grab anymore marketshare.  Know what you need and be smart about growth.  In the long run it will be the smartest decision an entrepreneur can make. 

Comments (Archived):

  1. awaldstein

    It’s a marathon to turn an idea into a market. Long and hard work.Oh so true.

  2. Ali Shapiro

    This October, my business will be six years old! I’ve been profitable and able to live a comfortably (including paying a mortgage!) since day 1 with no investment money. I was also in graduate school for part of that time to build my service (I’m in the health coaching field) while also refining my model with real clients. I’m finally really clear on my process and what I’m doing so am able to begin to scale and hopefully make the kind of money to match so much effort. I sometimes have felt discouraged because my growth has been slow and steady and I’m not sure it’s even necessary for investment $$$ so this is so refreshing. It’s always easy to see other people and think they figured it all out one night and my slow pace means I’m doing something wrong. Thanks for the reality boost!

    1. Gotham Gal

      many times the slow and steady win the race. aesops fables teach that lesson to the young, the tortoise and the hare.

      1. Ali Shapiro

        When I was young, my Dad called me a “jack hammer” saying I would just pound and pound away till I got what I wanted. Today, it would be called persistence! I’m hoping it’s a secret weapon in this age of instant everything. BTW, I was at SHE summit and the disruption panel was my favorite! I think I’m actually moving to NYC now (I’m in Philly) in part after hearing you talk about what a unique period of time we are in when all industries are being disrupted!

        1. Gotham Gal

          jack hammers belong in nyc!

          1. Ali Shapiro

            HA! I knew I liked you!

        2. takingpitches

          “Water dropping day by day wears the hardest rock away.”Congrats!

    2. ShanaC

      mazel tov!

      1. Ali Shapiro

        Thanks Shana! I guess it is something to celebrate. When you are in the thick of it, you can forget how far you’ve come!

    3. Brandon Burns


      1. Ali Shapiro

        Thanks Brandon!

  3. William Mougayar

    Well said. True that the size of the market opportunity is very related to the size of the investment needed. Recognizing that is important.

  4. BillMcNeely

    When I read about the CEO who ask if it would be ok not to be the CEO I thought wow this individual is pretty self aware. That person is going to be a good leader at some point in their life.It cause me to remember the 11 Leadership Principles I had to chant every morning at Officer Candidate School.1. Know Yourself and Seek Self Improvement…Develop a plan to keep your strengths and improve on your weaknesses;2. Be Technically Proficient…Not only do we know our duties and responsibilities, we know all those of our team members, and we look to our leaders and concern ourselves with learning their duties and responsibilities;3. Seek Responsibility and Take Responsibility for Your Actions…We are not satisfied with performing just our duties to the best of our abilities, we look to grow and seek further challenges, and always, when in charge, accept the consequences of our decisions, absorb the negative and pass on the praises;4. Make Sound and Timely Decisions…Leaders must be able to reason under the most critical condition and decide quickly what action to take;5. Set the Example…No aspect of leadership is more powerful. Our personal example affects people more than any amount of instruction or form of discipline. We are the role model;6. Know Your Personnel and Look Out for Their Well Being…Leaders must know and understand those being led. When individuals trust you, they will willingly work to help accomplish any mission;7. Keep Your Followers Informed…Our team members expect us to keep them informed, and where and when possible, to explain the reasons behind requirements and decisions. Information encourages initiative, improves teamwork and enhances morale;8. Develop A Sense of Responsibility In Your Followers…The members of a team will feel a sense of pride and responsibility when they successfully accomplish a new task given them. When we delegate responsibility to our followers, we are indicating that we trust them;9. Ensure Each Task is Understood, Supervised and Accomplished…Team members must know the standard. Supervising lets us know the task is understood and lets our team members know we care about mission accomplishment and about them;10. Build A Team…Leaders develop a team spirit that motivates team members to work with confidence and competence. Because mission accomplishment is based on teamwork, it is evident the better the team, the better the team will perform the task;11. Employ Your Team In Accordance With Its Capabilities…A leader must use sound judgment when employing the team. Failure is not an option. By employing the team properly, we insure mission accomplishment.

    1. Gotham Gal

      This is great. Thanks Bill

  5. AlexBangash

    Very inspiring and thoughtful article, Joanne. Thank you for sharing. 🙂 We have been working to create a impassioned community of institutional investors (LP’s) at with a great user experience.

  6. NickN

    Completely agree! A few thoughts.The relationship between startups and money is much more complicated than “they need it and investors have it”. Like any relationship, it can be good, or it can be abusive (accidentally or intentionally).Most startups understand that it takes a lot of effort to get something started. What many don’t understand is that effort is a vector, not a scalar. Flashing back to high school math, vectors have size AND direction. Finding that direction is always tricky and without it, your efforts won’t get you anywhere.Taking in money ups the pressure to find that direction. But it also muffles the signals that tell you if the direction is correct. Too much money too early will definitely cloud your judgement. When you aren’t afraid of imminent death, you tend to let things slide more.I’ve also seen situations where less experienced investors have made it clear, either overtly or subliminally, that the startup should continue on a path that doesn’t seem to be working since that is the concept the investor fell in love with. Needless to say, that ends badly.I do think it varies by product and market. In my area (gaming), too much money too early is never good.One last thought: unfortunately many investors are part of the problem. Asking for slow money is usually interpreted as either a lack of ambition, or (worse!) a lack of confidence. Personally, I would rather get real data on a shoestring than have vague data in comfort.

  7. Brandon Burns

    Of course, everything depends on the type of business and its needs. But one area that for sure can get away with slow money, but often doesn’t, is ecomm.Lets take I’m not going to knock them or their successes, not at all, but an ecomm company that sells products for twice the cost at which it buys them yet still can’t figure out how to get cashflow positive its a bit ridiculous.But its really the startup community / culture that screws it all up. The Facebooks and Tumblrs of the world had convincing excuses for why they needed to operate on funding rather than revenue for years on end — they needed to gather eyeballs en mass before they could sell them. They set a tone that everyone follows… even completely unrelated businesses. But here’s the thing: if two entrepreneurs open shops on the street, one a restaurant and one a laundry, they know their businesses don’t have much in common; but take a food startup and a laundry startup and throw them both online, and all of the sudden they’re both in the same technology industry, but identifying as “startups,” whatever that’s supposed to mean these days.That’s a whole ‘nother conversation altogether, but its the root of why you get companies like Fab thinking they should be funded like Facebook, and why slow money is frowned upon in general. Its cultural.

    1. Gotham Gal

      really good points…and i agree with you completely. i do believe that you will see the next generation of businesses coming to profit much quicker as they should.

    2. ShanaC

      they have a huge ad burn thoughand yes, we need to clarify what is a startup – it is unfair to investors and to users who lose products by having too much cash being thrown in too early

      1. Brandon Burns

        The whole point of advertising is to get more out than you put in. A business should know that it takes $X to get a customer who’ll spend $Y, and Y better be a good order of magnitude larger than X.I get that Fab’s spending to grow, but that’s a choice that they didn’t really have to make — which is Joanne’s slow money argument. Did Fab really need to gain 800 employees in 2 years? What is that going to do to their company 5 years down the line? Will it even still exist?I’m with ya on clarifying what is a startup. First step — no two startups, or any two businesses, are alike.

        1. Gotham Gal

          that is exactly what my argument is.

          1. Brandon Burns

            And its a good one. Earlier this year I met an early employee from Groupon. His description of his time there, which he thought was great, read like a brochure for my own personal hell. Really made me think about the kind of business I want to build / life I want to have.

    3. takingpitches

      great great perspective:”But here’s the thing: if two entrepreneurs open shops on the street, one a restaurant and one a laundry, they know their businesses don’t have much in common; but take a food startup and a laundry startup and throw them both online, and all of the sudden they’re both in the same technology industry, but identifying as “startups,” whatever that’s supposed to mean these days.”

      1. takingpitches

        A lot of it, I think, boils down to the “sexiness” of being funded — the press, the shoutouts, the people you roll with.And yet, of course, it makes it harder if it is not the right thing to do, even if all you want to do is eventually sell. Bill Gurley discussed this smartly last year:

        1. Brandon Burns

          In the end, I guess everything is about sex. Lol.

  8. Adda

    Joanne, I love this post!! Especially the bit about how entrepreneurs can forget what got them to that place – being smart & scrappy. Love love love!

    1. Gotham Gal