What’s up, Startup Investor?

Daymond John here. Pop quiz time.

If you had a $100 bill in your hand to invest in just one startup right now, which would you choose?

  1. The startup with a team that’s never struggled to access the capital and resources it needs to grow.
  2. The startup with a team that has struggled and ultimately learned how to make every single dollar stretch.
It might be tempting to pick the first startup. I get it. At first glance, it might seem like the safest option.

But let me tell you something.

If it were me, I’d choose the second startup every single time. Here’s why.

I call it “the power of broke.”

Now, I’m not here to romanticize the idea of not having any money. Being broke is tough, and I’m not saying people should work hard to have zero money in their bank accounts.

But the skills that come along with being strapped for cash are priceless.

And at the end of the day, it’s the single best competitive advantage any company can have.

I learned that lesson the hard way. Once FUBU took off and money was consistently rolling in, I started to get comfortable. Too comfortable.

The times when I had the most money in my bank account were the times I made the biggest mistakes. I didn’t focus on building the right parts of my business, I didn’t spend enough time connecting with my customers, and ultimately, I let millions of dollars go to waste on stuff I didn’t need and the consumers didn’t want.

But the times when money was tight? Those were the times I was the most creative and resourceful… the times when I pushed myself to make the strongest connections, to put myself out there, and to find a useful place for every single dollar that came through the door.

It’s a mindset. And for early-stage founders, we have a couple of words in the startup biz to describe it:

The first is “bootstrapping.” That’s the idea that some founders – especially the ones just starting out – will use any resources available to them to get their business off the ground.

That goes hand-in-hand with “sweat equity“, which is when a founder invests their time and energy into their company long before they have the capital to pay themselves.

The founders willing to throw that kind of weight behind their company right from the start, even without the guarantee of a solid paycheck, are the ones worth their salt.

They’re the founders who realize that you don’t need money to solve every single problem your startup faces. Sometimes, all it takes is a little bit of grit, some guts, and a solid appetite for success.

That kind of dedication, hunger, and drive to grow a business sticks around long after the capital starts pouring in. Founders should always maintain that “broke mentality,” even if their startup grows to a multibillion-dollar corporation someday.

In your own research, it’s important to seek out the founders who aren’t just in it for the paycheck. Look for the founders and team that embody that “power of broke” mindset instead, and continue to use it as their company grows stronger and attracts more capital.

Because ultimately, a resourceful founder will make sure that your investment is spent wisely.

These are the founders I always seek out, and that’s exactly what you should look out for, too.

A founder that’s never had their back against the wall, wondering how to grow their business with limited funds, doesn’t know the value of a dollar in the same way.

That’s all from me today, but stick around. Next week, I’ll be back to dig into the power of generational wealth… and how you can start building it for you and your family right now.

We’ll talk soon,

Daymond John