Fiscal Responsiblity

My childhood programmed fiscal responsibility into me. The constant financial tension that ran through my house when I was a kid made it so I was wary of getting myself into a situation where I spent more than I had. As a result, I consciously feared financial trouble. I credit these financial trials and tribulations of my childhood with pushing me to focus on personal financial success.

Even though I have more money to play with now, and my family takes big financial risks, we are nonetheless still financially responsible. I can’t help but link fiscal responsibility to investing and running companies. I frequently lament about the insanity of high valuations and huge amounts of capital being tossed at founders and companies, all of which makes zero sense to me. I spoke to someone a while ago that raised $10m without an idea really flushed out in an industry that he had never been in. This is not always the case, obviously. On the other hand, I am seeing companies who are under-capitalized that are making it work with very little capital. I realize that there are no rules here and trying to understand why this happens is just pointless.

There is a balance between spending money to make money, aka spending money to grow a company. Yes, it does cost money to build a business, and profitability takes time, but focusing on fiscal responsibility from the onset is absolutely crucial. What is the true ROI on those costs? How quickly can you get to profitability so you can be master of your own destiny? Take a look at StitchFix. Katrina Lake only raised $35m and figured out how to build a business and an IPO. She didn’t raise hundreds of millions. I don’t know Katrina personally, so I have no insight into how she built the business, but if she did it with $35M then she had to be very smart with the capital she had.

A reader of this blog sent me the following quote from Robin Williams in the 90s: “Cocaine is God’s way of telling you that you have too much money”. This quote perfectly captures current behavior in the start-up world, pointing as it does to fiscal irresponsibility.

Comments (Archived):

  1. Pointsandfigures

    Ha. Great quote. Heard a good one the other day. “Every dollar we expense needs to bring back at least two dollars”. Interesting way to look at spending. Is it bringing you ROI. Discipline is a very hard thing and you can almost rationalize any expenditure.

  2. Semil Shah

    I try to ask questions about the values folks grew up with. So many of these values (including around money) carry over.

    1. Gotham Gal

      money is a very strange thing.

  3. Julie Lerner

    There was definitely tension around money in my household growing up as well. And then there wasn’t due to my father’s success. As an adult, I read The Millionaire Next Door which had a big impact on me. I think the message in that book is a valuable one for both one’s personal and business lives.

    1. Gotham Gal

      Most people have tensions around money. Nobody likes to talk about it.

  4. Ramona ortega

    This is such an important topic both from the perspective of a company but also as a matter of personal finance. I am a women of color founder in Fintech and we have built a platform to provide financial guidance to a new generation, specifically multi-cultural millennials because we have an opportunity to be a trusted resource for those who have not had access to quality financial guidance. Like many female founders we’ve had to be conscious of the RIO of every dollar spent because we have received a fraction of the capital that most companies receive in the industry. We are hopeful that more investors will focus on “lean startups” and that as a result there are more dollars in the ecosystem to support non-traditional entrepreneurs.

    1. Gotham Gal

      Let’s hope so.

  5. Laura Vaime

    Writing from Rome is it possible to have an email for business proposals? Thank you take carelaura