Seeing your startup thrive is one of the most satisfying feelings in the world, and making your first million is certainly a milestone worth celebrating. If you spend your money wisely now, it will ensure your future success.
Entrepreneuer.com asked three young founders how they would recommend spending a million dollars. The answers varied, but a common theme emerged: Don’t let a million dollars get to your head. Spend it wisely on things that have a lasting impact on your company, or save it and stay hungry.
Invest in people
“I would allocate 99 percent to people, and maybe a little bit to server cost,” said Sahil Lavingia, founder of Gumroad, a San Francisco-based company that wants to make it easy for creative people to sell intangible products like songs, photos and written word. “People should be the only expense at an early technology company. You’re not providing a human-powered service; you are building products. Products need code to run, not money.”
Focus on developing talent, then get to work
“I would spend my first $1 million almost entirely on talent — on building the team that is going to help you succeed,” said Kathryn Minshew of The Muse, which caters to young professionals trying to climb the ranks. “If they’re joining a startup with their first $1million, they should be getting equity and understanding that the position likely doesn’t come with market salaries. With that team and that first million, I would carefully plot out what metrics are key to your success and what they need to look like to prove your idea is working and get to the next level. And then I’d get to work!”
Forget your first million
“You should act like you don’t have that first million in the bank,” said Cory Levy, co-founder of One, a mobile app that’s attracted angel and VC funds. “Even today we still act like a company that’s not funded. The more you can act like you’re not funded the more successful you can be,” he says, adding: “Don’t stay at five star hotels or fly first class. If you’re letting money get to your head, it’s going to get your head, and you might not have that tomorrow. As a startup company, you should use that money to grow. Grow your team size using your product to get more users.”
You’ve Made Your First $1 Million. How Do You Spend It?