$400 snack closets

$400/mo snack closet
My new co-working neighbor’s $400 per month snack closet

If I launch another software company in which remote work isn’t a big part of our culture (I don’t think I’d do this, but if I did), I’d be looking to the South’s secondary and tertiary markets: Greenville, Rome, Chattanooga, Birmingham.

Why would I look elsewhere? Because I have always had an odd interest in the expense side of a startup’s income statement.

Here’s my observation about what’s happening right now in Atlanta:

A Bay Area startup raises a $5M seed round and immediately opens an Atlanta office because our city is awesome and there is no more talent on the West Coast. They maintain their Palo Alto HQ because they want to be close to investors. Their CEO’s key metrics are 1) dollars invested and 2) headcount. They are going to make the world a better place, and their first step on the path to world-changing is to rent a snack closet for $400/mo in an ATL co-working space.* Their investors have to put the money to work, so paying attention to the expense side is not only quaint, but it’s counterproductive.

More and more Bay Area companies follow suit. Soon, even Atlantans begin adopting the growth-without-regard-to-cost mindset. Institutional investors have the money, and Atlanta seems like a good place to put it. Over time, rents and wages rise to levels not supportable by profit-generating businesses, so the entrepreneurs leading them react by embracing remote work and/or moving HQs to Birmingham, Chattanooga, Greenville, etc.

Eventually, the dialog in the Atlanta startup community stops referencing things like profit, churn, fully-loaded CAC, or really any metric that might be indicative of true value creation for customers and owners. All the talk turns to investment rounds, new office square footage, and hiring plans.

The Atlanta scene drifts away from being entrepreneur-oriented and increasingly exists to serve the interests of bankers, institutional investors, lawyers, and real estate developers. Atlanta stops being a good place for the ambitious young entrepreneurs who want to retain a big stake in their new ventures. “Founders” have less and less skin-in-the-game and they begin to look a lot more like early employees than entrepreneurs.

Flash forward twenty years: Elsewhere in the South’s wonderfully livable secondary and tertiary markets, yeoman entrepreneurs have been creating real and enduring value. The Bay Area is now home to luxurious and thinly staffed HQs for investors and their portfolio companies’ C-suites. Actual business operations happen here in Atlanta, but Atlanta’s leaders are struggling to find talent. Fortunately, great people and a strong startup culture has emerged in places like Birmingham, Chattanooga, and Greenville, so the Atlanta satellites start opening satellite-satellites.

* A friend once relayed something he heard from the owner of several storage facilities: “Give me any address in the entire country. My team can tell me with uncanny precision exactly how many 5x10s to build, how many 10x10s, how many 10x20s, and how many of each should be conditioned. I will know how much it will cost to build the facility, exactly how much to charge for each unit, and how quickly the place will reach 90% occupancy. I can tell you all of that, but what I can’t tell you is why someone will pay me $125 per month to store $25 worth of crap.”

What works for big doesn’t always (or often) work for small

arya-season-7

Early in my career, I thought seasoned executives from especially big companies could really help small companies become big. I assumed the systems and processes—from the software they used to how they recruited and hired to the manner in which they built their products—must naturally be better because the company was so big. Surely that must have been how they got big! Through painful (and expensive) trial and error, I quickly learned that what works well for big doesn’t always (or even often) work well for small.

Scale matters: A two person development team needs to work differently than a ten person development team. Many of the things that make an enterprise sales executive effective are different than what breeds success for an SMB sales executive. A ten person company with a relatively small amount of leads can’t effectively leverage a marketing automation solution. Worse, implementing one will probably hurt their marketing (as it did ours—we adopted it, then ditched it, and later returned to it once we reached a scale where we could not longer function without it).

So when you’re small, doing what works well for big companies can be downright dangerous.

The same warning is relevant for all sorts of organizations—from families to cities to nations. The allure of complexity is dangerous. Patrick Lencioni makes this case for families in The 3 Big Questions for a Frantic Family. Kirkpatrick Sale makes this case for institutions in Human Scale and Human Scale Revisited. Leon Krier makes this case for cities in The Architecture of Community.

When you are small, be small. Embrace the advantages. You understand every facet of your business and can make quick decisions. You can easily communicate to everyone in the company. You’re nimble.

Don’t shoulder big company systems until your small company processes aren’t working anymore. And when you are looking for inspiration, avoid people who only have big company experience. Talk to the folks who have taken something from smaller than you are now to twice your size. They have fought successfully in the same arena in which you’re battling now.

Kid ventures

Like most young people, both my kids enjoy building and creating things, and they often enthusiastically pursue various entrepreneurial projects. In the last few months, they’ve each launched a website featuring very different things.

Dual Blade Games

With dualbladegames.com, my son Alex unveiled his first publicly available video game, Testing Cube. Testing Cube has been called* “the greatest and most exhilarating new game of the last decade.” Check it out and you’ll see why. Keyboard recommended. People have been generous with feedback and if you have any ideas for him, he would enjoy hearing them.

Rhea’s Recipes

S'mores on a stick

Rhea has been baking up a storm for the last year or two and recently decided to start blogging her favorite recipes. S’mores on a stick (above) is her most recent addition and she’s adding new ones all the time. Her meringues are my favorite so far. If you visited the Botanical Garden Lights this holiday season and parked in our neighborhood, you may have walked by Rhea’s dessert stand. If so, you might have been wise enough to buy some of her delectable meringues. The wee desserts were a huge hit, and have been called* “a dazzlingly timeless reinterpretation of a classic favorite.”

Firewood

Firewood delivery. He left his helmet at a customer's house.
He left his helmet at a customer’s house.

Alex still finds time to sell firewood to anyone in Ansley Park or Sherwood Forest. He buys it in bulk from a tree care company, splits down the big logs to a good size for fireplaces, and delivers loads one bundle at a time via his bicycle. Rhea has picked up his marketing torch; she spun up a firewood order form and any sales that come via that form earn her a commission. So if you are getting cold this winter and live nearby, you know what to do!

* Called by me.