Upstarta

So much like last year, the Linux Australia face to face meeting has somewhat spoiled my WoBloMo posting frequency. Though, technically it’s still the 13th in UTC, New York and Hawaii, so there’s that.

Anyway, I’ve bitten the bullet and signed up for the Upstarta Meetup. I’ve been in two minds about Upstarta for a while — on the plus side, cool local people chatting about startups; but on the minus side, I disagree with some of the Upstarta Principles. But I’ve decided I like them in practice enough not to care.

But like that’s going to stop me disagreeing about them on my blog! The main one I don’t accept philosophically (as opposed to in practice) is the first one:

Neither a borrower nor a lender be: no credit or external funding.

In practice, or on a day to day basis, I think it’s a good idea — Paul Graham’s essays on ramen profitability or the challenges of fundraising argue for a similar approach for startups specifically, and in the broader sense of things you don’t have to look far for negative consequences of either borrowing or lending more than (it later turns out) was affordable.

But on the other hand there are a bunch of times when I think borrowing and lending is useful.

I wouldn’t have had the opportunity to go to university straight out of high school without borrowing money in some form or another — as it happened it was paid via HECS which meant paying a fairly small portion of my course’s cost to the government explicitly either upfront or through my taxes at a low compounding interest rate, and having the rest of it paid by taxpayers at the government’s discretion. The new HELP system does the same. If I’d had to earn enough cash to pay for that education in full in advance on my own — no loans from family even — I can’t see how I would have had the opportunity to learn the same stuff, which would have resulted in not knowing how to make Debian’s “testing” actually happen.

In theory at least, I’m also something of a fan of self-funded pensions — that is, investing some of your income over the course of your life, so that you can eventually live off the proceeds without having to work. Personally, I’d love to be able to put a million dollars or so in the bank at 5% or more and get fifty grand or so every year before I even have to lift a finger — but the only way that works is if that million dollars is being lent to some borrower, who’s making enough use of that million dollars that they can afford to give me fifty grand just for the privilege.

And it seems like in at least some cases investment of cash — borrowing — is a valuable contribution: per this criticism of StackOverflow’s VC hunt, giving a bunch of Starbucks franchisees money to open stores to follow a proven business model seems to have worked out pretty well for pretty much everyone involved.

But there’s a lot of space between all of those and giving people millions of dollars to spend on foosball tables and beanbags because they’ve had an idea for a webapp; and ultimately it’s not entirely worth making sure there’s a clear distinction between things that are “good advice in the here and now” and “fundamental principles to be adhered to forever” when the aim of the moment is to make an interesting business from nothing.

One Comment

  1. Arjen Lentz says:

    Late reply – I forget which one of my reference books cover it, but essentially there is “good money” and “bad money”. The trick is to distinguish – now for starting a business and various aspects of the innovation, time to market, chance of success/failure, and the type of company that comes from it, most money turns out to be bad.
    The added problem there is that most people involved with starting/building a company will not have an angle on the good/bad money thing or an appreciation of how little early decisions can build a monster.
    So, as a baseline, “the polonious rule” works really well. It forces people to think about it rather than take “get some capital” as a standard approach.
    It does need more documentation/references for full background – work in progress!

    Btw pity we only saw you at a meeting once – you have excellent insights, it’d be great to have you there!

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