Constraints are Awesome

(No… really)

First — what do I mean by constraints? Broadly: limited capital / people / time / other resources so that you’re required to make hard trade-offs (when building a business).

Its really easy to view constraints as a bad thing. I don’t have enough budget to hire X role, I don’t have the time to build Y feature, etc. This is especially true in the world of startups / fast growing companies. One thing I’m convinced of is that these same constraints that we bemoan are often the advantage a fast growing company needs to succeed. I think of many times in the lifecycle of companies I’ve worked or invested in where this rings true.

There are 3 key things that constraints force:

  1. Constraints force Focus. Focus is often preached and rarely practiced in companies. Businesses can get distracted by shiny initiatives that sound cool, extra features that a customer doesn’t need or other investments that distract from your company’s mission & clear strategy. When you have a limited ability to execute, you need to peel away these extraneous things and pour your energy into a few areas.
  2. Constraints force Commitment. This is a big one that flows from focus. When you’re building something new things don’t always come easy. There are really hard patches when things don’t go well (read Shoe Dog as a case in point); if you have the luxury of quitting and trying something else you’re not going to scale the Everest-sized problems you encounter (and likely won’t see the Everest-sized results).
  3. Constraints force Creativity. This is what it all boils down to. When you’re building something new you encounter hard problems that require creativity. Budget & people can compensate for creativity; when you don’t have this you have to figure things out. I think about the early days of Top Hat — the company I work at — when the top-down sales process to universities was taking to long so our founders pivoted and took the more novel approach of selling directly to professors in a student paid model; this go-to-market has propelled the company for the last seven years and would not have been a solution we would have resorted to if we had had 3 years of runway in the bank and could afford to wait for the long sales cycle.

To be clear — I’m not saying that Focus, Commitment and Creativity require constraints (a strong leader can force these); I’m saying that constraints are helpful to force these three things.

What does this mean for startups/scaleups? Capital constraints / people constraints can be painful in the short term but they’re important for the long term. Two thoughts:

  1. Don’t always focus on raising the maximum amount of capital; raise the right amount of capital (nothing wrong w/ some buffer). Many companies suffer early in their life from too much funding which causes too much early investment before a business is ready to scale. Despite Jeff Bezos seemingly limitless cash reserves, he imposed 2 strict constraints on the Washington Post — that it grow and be profitable (something it has done).
  2. Build clear constraints into your business model (sales efficiency, expense ratios, etc.) that you understand + dissect them. Just because you have the money doesn’t mean you should go crazy; pull apart every part of your business and understand why you’re investing more or less into that area.

Celebrate constraints & don’t run from them; they are often what fuels the future of your business.

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