Is Your Start-up Like B.J. Upton?
As a regular reader of the business press, I often notice stories about start-ups announcing their latest round of venture capital funding. While I cannot keep straight the significance of the numbers and letters – series A, B C, 1, 2, 3, the investments are denominated in the millions of dollars and announced with acclaim.
No doubt, there is something for the founders to be proud of. Sophisticated investors have sufficient confidence in the business model to invest large amounts of money. However, as a long-time observer and founder of a company that provides human resource services to many start-ups, I look upon these announcements with mixed emotions. Easy money early in a startup’s life cycle can be ruinous. Conversely, financial limits often produce innovation and long-term success. Call this the B.J. Upton law after the baseball play who had a solid career, until after signing a long-term guaranteed deal with the Atlanta Braves, suddenly could not hit the baseball (this could also be called the Josh Hamilton law for those from LA).
The company I founded, Cannae Solutions, provides a fully outsourced Human Resources function to companies ranging in size from start-up to mid-size. We are a start-up ourselves, so I experience the B.J. Upton law from both angles. Cannae, with limited funding, is always searching for innovative and cost-effective ways of doing business. We look for diamond-in-the-rough employees and are flexible to employee work locations and hours. Our favorite type of software is open source. We are nimble and open to adjusting our service mix depending on changing customer needs.
Cannae’s customers self-select as innovative and cost-conscious. They are eager to try our unique model of obtaining human resource services: outsourced. No doubt they are attracted to the cost savings but they recognize the value a strong HR function can add and are sold on our process improvement, best practices and talent management approaches. They do not see forgoing a traditional internal HR function as a risk but an opportunity.
Conversely, we have less luck with those companies that are “establishment” in outlook. They are more concerned with risk management and value maintenance than in seeking out innovative ways of doing things. Fundamentally, they like having a traditional human resource function. Invariably these companies are well funded and/or reasonably profitable. Unfortunately, they simply do not have the same urgency to be innovative that a skinny bank account requires.
There are many examples of both sides of the BJ Upton Law. The biggest names in established technology companies today Apple, Microsoft, Uber, Google, Facebook all started on nothing but the founder’s checkbook. Often, significant outside investor money did not come for years. Companies like Beepi, Aoptix, Kior, to pick a few public failures at random, all started off with large outside investments. They did not keep spending remotely in line with revenue and failed to adjust faulty business models until it was too late.
Don’t fall victim to the BJ Upton law. Look at Cannae as your innovative HR partner.