Grow as fast as possible with the least amount of money

Hey all, even in this big, bad economy, we still get asked by clients from time to time to provide input on structuring a VC-sensitive share capital structure, and it certainly is more art than science. Tech diva and all around guru Carole Leaman (currently CEO of AideRSS/Postrank) recently passed on a great post by Paul Berberian into startup economics in order to condition the dilution expectations of a founder that we jointly advise, and I recommend it to you. Paul’s best advice that should resonate with startup founders these days: “Grow as fast as possible with the least amount of money. If you think you’ll need lots of cash – resign yourself to dilution – and raise money when you can.”

And if this all sounds pie-in-the-gloomy-sky, kind of like worrying about the colour of the upholstery in a car heading over the cliff, don’t despair. I recently hooked up in Toronto with Stephen Pollack, the founder of Platespin recently acquired for big dough by Novell, and here is what he had to say about Paul Graham’s recent feel-good post about starting a company in tough times:

I tend to agree with the perspective in Paul’s piece. Success comes from focus on the right ideas at the right time regardless of the economic environment — the economy can of course get in the way and you do have to tune yourself for its impact, but you do learn to be more efficient in hard times which can hone a more efficient and hence competitive team down the road to achieve the kind of success great ideas deserve.

During tough economic times, you can expect extra conservatism from investors but you can also find better customers who are making true value-based purchases which are important to take advantage of when times get better — a strong base of customer loyalty carries you far in tough times but certainly more so in bullish times as well.

There remain many innovations needed for IT to fully reach its potential and now is as good as time as any to get started — quality people are out looking for work, customers are looking for ways to save money and be more efficient, investors need to place their money to see it grow.

So stick with it folks, and keep aiming high.