Overspent.

Almost two years ago I quit my consulting day-job to go full-time launching my startup Uptrends. It has been a helluva journey.

Throughout that time I raised a few hundred thousand from investors, built and launched a consumer app, did everything we could to grow it to 20,000+ users and a humble recurring revenue number, and now we are in the process of selling it in an asset sale to focus on more exciting business projects.

Today I was looking back over our monthly finances from the past two years post-fundraising. And I realized just how much stupid money I spent. How naive I was.

Early on we were elated to have investment. We had spent months dreaming of what the business could look like if only we had more than $1,000 to grow it.

Once we got it all we had the opposite problem — “Holy crap, now we have all this money and we need to figure out how to spend it soon enough for investors to be happy”.

So we went out and tried a little bit of everything. We went to expensive conferences ($10K+), we hired expensive contractors to run Google Ads or write tweets for us ($5K+ per month), we paid salaried employees who had no business being on the team. At a certain point in 2023 our monthly burn was $30K+ with a product making $800/mo at the time. We justified it because “we’re a startup, you’re supposed to be cashflow negative when you’re early”.

In hindsight I’ve realized how broken this model is. And how the entire VC and accelerator industry has really done many founders a disservice by incentivizing this type of behavior.

Justu a couple months ago, we took a look at our bank account and realized that our product was not going to have the product-market fit we needed, that our unit economics made no sense, and that ultimately we’d have to change everything about how we do business if we were going to survive at all.

We cut all the unnecessary expenses, we found other products to test and are in the process of piloting them, and we’re selling off the consumer business because it was a distraction.

Nowadays we’ve cut our monthly expenses by nearly 75% compared to this time last year, while not only maintaining our previous MRR, but adding more users per month than we were before.

This is what happens when you know how to spend. And maybe we need to make those mistakes early on to find it. But now here we are. And if I ever go out and raise another funding round I’ll understand that my goal is to make that money last as long as it possibly can.

For now I’m just doing what I can with what we’ve got. Which is about 3-5 months runway. Here’s what I’ve learned about spending money on a startup over these past two years:

1. Payroll is the biggest expense. So if you can afford to, don’t pay yourself. Instead you should find another job that you can work 20hr a week to pay the bills. If you’re smart and experienced this should be enough, and will still allow you enough time to be mainly focused on your startup. You’ll still be in ‘default founder’ mode, and perhaps cutting out 20hr a week will actually force you to focus only on the important things.

2. Positive Unit Economics come FIRST. Before you spend a single dime on ads or marketing or any sort of growth mechanism, you need to understand your unit economics deeply. This means making sure your cost of goods sold per user are less than the amount you’re charging them monthly. Makes sense right? But for a consumer SaaS business it’s rarely considered, and never taught — everyone thinks you can just go out and get a million people to use your product then the math will work itself out. It doesn’t, and you should be prioritizing it FIRST before you worry about getting many users. (Cost of Goods Sold = hosting, compute, data licensing, and support)

3. Free Marketing Channels come NEXT. Once you understand your COGS and unit economics, you can start thinking about marketing. But even then, you should always prioritize free channels, because they take the longest to build and are the most robust once established. By free channels I mean primarily 3 channels: 1) search engine optimization (SEO), 2) social media marketing (grow a following on TikTok, Twitter, etc.), and 3) email marketing (ie. build a newsletter). I wrote about these extensively here. Don’t spend any money on influencers or ads (or god forbid on people who run ads for you) until these are doing absolute numbers for you. Ideally you already have a following before starting a business (this is the defacto for starting a business in 2024)

4. Paid Marketing cnhannels → Pick ONE. Even once you get to the point where you DO have some money to justify spending on bringing in customers, the best thing to do is experiment on a few (maybe ads or affiliates or influencers), then pick ONE channel that you can stick with and optimize. The only companies that should be spending money on multiple paid channels are cash flow positive. And even then there are better ways to do it. For us this has been an affiliate deal with AfterOffers to our newsletter and drip campaign from there. Works really well for really cheap.

5. Put expense checks on the CALENDAR. No matter what you do, the only way to keep tabs on your spending is to schedule regular time to review. We made the mistake early on of going months without really checking what we were spending on (this is where having an Op’s person on your founding team can be a game-changer). So for me I started putting biweekly expense check reminders on the calendar to simply review our bank statements and earmark any spending that was worth addressing.

Overall, these are just a few ideas to get you started, but 5 things I wish I would’ve known before starting a business or going out and asking people for their money.

These things have been engrained into my head, and hopefully they’ll rub off on you too.

Peace,

Ramsey