Sam Gibb is the Managing Partner at Resolution Ventures, a venture capital firm in Singapore focusing on early-stage fintech investments in Southeast Asia. With over a decade of experience in finance, including roles in hedge funds, private equity, and venture capital, Sam brings deep expertise to his work. Before joining Resolution Ventures, he was involved with Endeavour Ventures and Symphony Financial Partners. He holds a Bachelor of Management Studies and a Bachelor of Laws from the University of Waikato and is a CFA Charter holder.
In this article, Sam Gibb debunks three founder personas—Frugal Founders, Reckless Rationalisers, and Salacious Spenders—highlighting their distinct approaches to managing capital in today’s challenging startup ecosystem.
Highlights
A Critical Juncture for Southeast Asian Startups
We’re coming to a pivotal point in the early-stage ecosystem in Southeast Asia, where a number of businesses that have been scraping by will need to shut their doors. There are three key personas that I’ve seen in founders with how they approach the capital that they have raised.
Founder Persona and Capital Management Approaches
Among founder personas, there are those who treat capital as their own. Others are more willing to spend the capital they’ve raised but for different reasons. Some are naïve and don’t fully understand their spending. Then, there are the mercenaries who spend aggressively, believing they have a mandate to do so.
Persona 1 – Frugal Founders: Cautious and Calculated
Typically, this founder persona has spent some time bootstrapping the business, so they are mindful of spending capital. They might have come from a more conservative background where resources were scarcer and weren’t comfortable going after growth at all costs. While I’ve found that it’s typically optimal to work with these founders because there are minimal principal-agent conflicts, it can be challenging to get them to change their mindset and scale with the business when the time is right.
For example, Frugal Founders often create tools internally. They avoid focusing on core competencies and outsource other problems. They might spend too long weighing small purchases. Additionally, they are spending more than they would have spent personally. This approach isn’t always useful for business growth. Some costs are unavoidable when building a business. It’s helpful to establish spending rules. These rules can reduce friction and aid scaling up.
Frugal Founders are typically able to adjust relatively quickly and get more comfortable when they’re deploying internally generated cash flows. I haven’t had a lot of issues with Frugal Founders because they are always treating the business’s capital as if it were their own.
Persona 2 – Reckless Rationalisers: Spending Without Restraint
Next, we come to the Reckless Rationalisers, the founders that spend aggressively but not maliciously. Generally, these are first-time founders that might have come from a more academic background. In the early stages of the company’s life, it could be necessary to spend aggressively on salaries as the offering is built out with the revenues coming later. There’s a level of blind faith that’s required in this stage. However, if sales don’t materialize as fast as hoped, then it’s necessary to start cutting that spend.
Reckless Rationalisers may spend more monthly than they previously earned yearly. Large numbers might lose meaning for them. VC funds often encourage them to grow at all costs. VCs typically have more experience than founders. Founders take their advice because they’ve “been here before.” However, VC incentives might not align with company goals. VCs aim to show a mark-up to investors. Their diversified portfolios allow for some failures. Founders lack such diversification.
I’ve had problems with Reckless Rationalisers. The most prominent investor influences them. This investor may not have the most experience. Reckless Rationalisers often ignore aggressive burn rate implications. This can lead to physical illness, which I’ve witnessed. They can be coached to align their burn rate with norms. However, this requires time and patience.
Persona 3 – Salacious Spenders: High Stakes and High Risks
Finally, we have the mercenaries willing to spend aggressively. They often disregard the consequences of spending. Investors give them a mandate to pursue growth. If growth fails, they raise more capital. These founders often start multiple businesses simultaneously. They seek capital from different pools for various opportunities. Unfortunately, not all investors will see returns.
Their behavior isn’t necessarily unethical, but at times, it can operate quite close to the line. Salacious Spenders have no problem scaling up teams and can build impressive organizations at lightning speed as long as the revenue scales to quickly catch up with burn or there are sufficiently deep pockets to facilitate the growth. There are times that this strategy can work, but it’s definitely the high-beta play with a correspondingly high risk of ruin.
Personally, I haven’t had as many issues with these founders because I typically don’t work with them. Operating in Southeast Asia is fraught with difficulties because we are typically dealing with fragmented regional markets so businesses don’t scale as quickly as they would in a larger, more homogenous market. This makes it harder to generate the required momentum in sales and sufficient interest from follow-on capital to continue to operate the business.
Conclusion: The Path to Sustainable Success
It’s easier to get Frugal Founder personas to upscale their mindset than to get Salacious Spenders to reduce their spending. Different approaches may be required in different markets and at different stages of a company’s lifecycle. However, the bill is about to come due for many Salacious Spenders as investors slow down their chequewriting and upstream customers reduce their spending. In my experience, Frugal Founders are typically more successful over the long term because they can stretch out their runway and find opportunities. Salacious Spenders always rely on external sources of capital, which eventually dry up.
