Thursday, 23 January 2014

Why you shouldn't use your investment capital to fund your trendy office space

Working for Google, Microsoft or Apple is really fun. They have a great office experience and they do it this way to keep people hooked on the company. Fun, trendy office spaces also make the job feel much better. It is certainly better than working in a cubicle in a big room.

So let's say you are an out of work millennial, who maybe studied underwater basket-weaving and is surprised when Google doesn't return your email when you apply for a job. Instead of getting a job you decide to come up with an idea that needs venture capital. Let's say this idea will bring underwater basket weaving to the masses with a trendy iPhone app. So you manage to secure a million dollar investment from an investor.

What should you do with this investment? Work on the product? Secure a distribution channel? Do market research? Advertise?

How about spending all of the money on a trendy office. The kind of office that you wanted to work at Google or Apple. That would be alright except for there is one major thing you forgot to take into account. Having a good office space is something you earn and you shouldn't expect it.

The first major reason you shouldn't get a trendy office is that office space is ridiculously expensive in major cities. Sometimes the trendy office spaces are more. Im sure there are a few exceptions people can find but office space can be your biggest expense and for most unproven startups, its an expense that you shouldn't take on.

Instead, find a room with a table in it and go from there. Even bad office spaces can cost several thousand dollars a month. Remember profitability should be your first concern as a startup.

Tomorrow we will talk about why you should pay for your office space.

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