In the age of unicorns, startups that are increasingly reaching valuations of over $1 billion, it's easy for entrepreneurs to get caught up in chasing as much capital as they can raise - often more than they actually need in order to maintain and scale their operations.

As the CEO and co-founder of an emerging growth company that just raised a Series B, I understand where the desire comes from. Without a healthy supply of capital, a startup can't grow.

But rather than chasing gobs of capital, I would advise early-stage startups to chase capital efficiency - that is, doing more with less. In addition to burning less capital, it has the benefit of instilling discipline in the team early, planting the seeds for a company culture that is focused on the long-term. Sean Jacobsohn, a venture investor at Norwest Venture Partners, recently wrote that establishing capital efficiency early and maintaining it to scale helps startups develop passionate, insightful leadership, in addition to a targeted and loyal customer base.

Here are three of the most important things I've learned as an entrepreneur about capital efficiency that any startup leader can apply. All of these boil down to one common theme: the importance of embracing capital scarcity. 

1. Capital Scarcity Is: An Enabler of Resourcefulness and Creativity

With limited resources - whether money or people - you have no choice but to be resourceful. That doesn't mean you need to shy away from activities that may initially seem out of your budget, though. It just means you need to be creative and leverage what you do have.

When my company was just starting out, before we even launched our pilot program, we hosted a summer gala in New York City with over 300 people on a rooftop, to raise awareness for our nascent company. That event should have cost tens of thousands of dollars in NYC. But for us, it cost nothing. In fact, we ended up donating thousands of dollars from the event to our non-profit partner - all before we had our first investor or first customer.

How'd we do it? Hustle. We reached out to friends to help us execute the event, lined up companies to sponsor it, and called scores of venues in NYC to find the needle in the haystack that was the perfect space for practically free. We charged a nominal fee for tickets and gave all net proceeds to charity.

If you're an early-stage founder, chances are you have the right amount of grit to make initiatives like this possible, at little to no cost. It all comes down to how resourceful you are.

2. Capital Scarcity Is: Negotiation's Best Friend

With limited capital, you cannot pay more than you should - literally. You don't have the money for it. As an early-stage founder, this can be one of the strongest pieces of leverage you have in any negotiation. You tell your counter-parties you just can't do anything higher than where you need them to land - you just don't have the budget for it. That truth can get you far in a negotiation. I estimate that we've saved at least a million dollars over the past three years because of this very truth. 

If you're trying to conduct a marketing campaign with a large vendor, for example, but can't afford the price tag, the best path forward is to tell them about your runway and trajectory. Share your company vision and traction, and make clear that by building a relationship with your company now, they have an opportunity to have a much larger account in the next six to twelve months. 

We've built effective marketing relationships using this strategy. We've done the same with tech vendors, law firms and others. In each case we paid significantly under-market in the beginning, and have delivered on our end by growing our business over time with them - significantly. We want to make it clear to our partners that they made the right choice by partnering with us early. 

3. Capital Scarcity Is: A Recruiting Tool for Top Talent

As a seed or Series A company, you're less likely to be able to pay market salaries for your earliest hires. For some job applicants, that will be a turnoff. Others - the true believers -will take the lower-market salary and risk because of the equity upside and their desire to be part of an incredible ride. You want to get true believers in early. 

I look at our earliest hires, and many of the best are still here two years and two funding rounds later. Their belief and persistence has been rewarded with incredible work experience and increasing equity value. These people joined because they loved what we were doing, and they are a big part of our company's heart and culture today that attracts new hires.

Capital efficiency isn't easy. But the discipline with which you practice it early will heavily influence the company you are one, two, three funding rounds down the line. 

And that influence can and should play a big role in a company's long-term viability.

Published on: Sep 29, 2015