There is a real danger to raising a big chunk of money. It could make our company drunk with success, it could make us feel like we have succeeded. It could make us complacent. If we build a big organization because we think we need to spend the money we just raised, we are going to end up with a fat and lazy and ineffective organization.
We need to simultaneously operate with a mindset that we have no money, but be on the lookout for ways to optimize our future. We can not let money burn a hole in our pocket.
The thing about hiring more people is that you get less effective on a per capita basis as you grow. Even more dangerous, I think some orgs, if they do it wrong, get less effective on a company wide basis even as they grow. Keeping teams lean is basically the only want to keep moving fast. Here are my comments on investing in the three functional areas of S&M, R&D, and G&A.
Ramping up sales and marketing spend is dangerous because it will engrain bad habits in the GTM business. We need to evaluate spending a dollar on S&M on its own merits. If the spend is efficient and effective, we can continue to do more. But we need to ultimately understand that we are trying to build a business with millions of dollars of revenue per employee.
Spending more money on research and development may be a better area to invest in, but product building runs into the coordination problem. As you hire people linearly, the number of connections grows exponentially. If there are two people, there's one possible connection. Add a third person, and now there are three potential connections. With four people, the potential connections jump to six. With 20 people, there are 190 possible connections. Add one person, and now you have 210 possible connections, and the costs of coordination go up. This is why you must have small teams.
In general and admin, or business operations, we will always run much more lean than we have to. Keeping resources scarce is the only way to make sure employees prioritize only the most important things.
One area we could invest in with this money is to invest in our infrastructure and make sure we can scale. We can afford to price our product low in order to get usage going, and squeeze competitors who are less well funded. And then we bet that we can drive our infra costs lower.