Like nearly everyone else who works in the world of technology here in LA, I was curious to see how the first episode of Silicon Valley unfolded. The term “Silicon Beach” has become a very real part of the lexicon locally and Mike Judge is pretty much the man—mostly for Office Space (but don’t forget Beavis and Butthead). How could I not watch this? This post isn’t about the show—it’s about the decision made by its protagonist in the closing moments of the first episode…
…he doesn’t take the pay day. Instead, Richard elects to take $200k from a different investor in exchange for a small chunk of equity, with the hope of changing the world by further developing the amazing code that he accidentally developed.
Pro-tip: If you accidentally make something rad, haven’t had an exit before, and get a $10 million cash offer, then sign something binding immediately.
Some might argue to take the investment and let the idea run its course, and that’s fine—maybe that is an option worth considering if you already bagged your first seven-figure check. The purpose of this post is to articulate the value of having expectations defined and multiple outcomes considered before engaging in any money-making endeavor.
Are you starting a company? Great, how much do you want to make? If the answer isn’t succinct or tied to a rational and well-reasoned plan, you are not ready for market. If your answer is “none,” “it doesn’t matter,” or “USERS!” and money is of no consequence—that’s great (but a rare position to find oneself in).
Richard’s problem isn’t that he doesn’t know which option to choose—it is that he hasn’t set a measurable benchmark for success. This is the hallmark of many modern-era tech/e-commerce/mobile/SaaS companies in frothy environments where everybody seems to be cashing in. Acquisition, successful exit, market disruption, growth-hacker, etc. are interesting terms and fit nicely in a pitch deck, but are they measurable and objective? Far from it. Do they help you to know when you’ve got something worth celebrating?
Bringing this down to a relevant level here at Hawke Media—it’s about planning and understanding the costs and potential outcomes that might come from a marketing campaign. Is this your first or hundredth spend online? What is your current level of advertising/marketing? Are you earning any money at this point? What are your revenue goals? What is an acceptable return on investment (ROI) on your overall marketing budget? How much of your budget is allocated to creating market awareness or brand-building? What is an acceptable cost per acquisition (CPA)? What is the lifetime value of a customer (LTV)? What is your average order value (AOV)?
These (amongst many, many other questions) will help any marketer, novice or expert, online or off, build a rational and fundamentally grounded campaign.
I really enjoyed Kelly Odell’s “World’s Shortest Marketing Plan” when I first stumbled across it some time ago. It may seem ultra-basic, but the template is a great guide for many fledgling companies unsure of their marketing strategy.
So, if you find yourself in a position to catch an 8-figure payday and haven’t put the time in to understand your opportunity in the market or how to capitalize on a niche, don’t be a goon—cash in the chips. However, if you have taken the time to craft a strategy to bring your product/service/idea to market and know with 100 percent certainty you’ve got more money on the table than a paltry $10 million, take the investment, slice up the pie, and let it ride.
While that’s the risky, scary, regret-laden world of the entrepreneur, that is also where most of the fun stuff happens.