Good question. There is a huge correlation. People who are cheap are much more likely to succeed. And not just because their money lasts longer; a frugal attitude seems to correlate with success.

Frugality is useful, but so many people who are tight with money tend to underestimate the cost of time. Or the cost of friendship when you refuse to pay your share. Or the cost of a bad impression when your clothes look old.

Be careful with money, but be careful to also spend money.

I had the same question about a year back, and I'm sure some of you will remember it. I saw myself as the 'business major [I don't have a major] who loved the web and had a good idea about a web based business.' And there's one thing I found out through posting on web bulletins, posting flyers around school, and trying to network - it's extremely difficult to find a hacker cofounder who is willing to jump on board. How could I, a non-hacker, possibly play an equal contributory role has my hacker cofounder? And furthermor, how could I accurately convey my ideas coming from a frame of mind completely different from that of a hacker? I realized that if any sort of relationship was forged for the sake of having a team, these issues would soon arise in the future and cause much bigger problems, and would ultimately hinder the success and growth of a startup. So I started to learn how to hack, and it literally changed the way I think about ideas. I try to conceptualize how I can tackle problems with code, and how feasible it'd be to do so. And it's this newly found understanding that will help me play a more integral role in my team, and allow me to communicate with hacker cofounders on a leveled playing field. Even two of the Auctomatic founders eventually learned how to hack.

At the beginning, I was irritated by the response I got here. People told me left and right that business people are useless and that if you don't know how to hack you can't go anywhere. But, after getting my feet wet and thinking about it, I understand where they were coming from.

So I guess a business guy can in fact lead a successful startup. But do I think that business savvy guy who knows a bit about hacking will have significantly higher chances of succeeding in the web world? Yes.

"How could I, a non-hacker, possibly play an equal contributory role has my hacker cofounder?"

As the hacker co-founder in a shop of two people, let me tell you, you can play an equal role. Okay, so my partner doesn't setup the servers or write the code or design the site; I do all of that. So what does he do? _Everything else_. Ask most any hacker and they'll give you a laundry list of things they hate doing when it comes to starting/running a business or working on a project of any kind. In fact, it's usually easier just to ask them what they _do_ want to do; the answer will almost always be "code." In my case I add design and a couple other items to the list, but I digress.

You're the one out there networking and making deals, finding advertisers, building a list of beta testers, writing up details on the competition, handling the finances and the ho-hum paperwork, handling the customers/visitors/whoever, and _much_ more. My co-founder has been invaluable to the business (I hope he stays invaluable, too, so he never gets paid ;). He describes his job as essentially making sure I am never bothered. I'll take that over another hacker any day of the week because with another hacker I'd end up getting stuck doing at least half of all that stuff that is no fun, very time consuming and highly distracting (in a job where small distractions can cost huge time).

And (briefly!) on the subject of conveying ideas: Hackers may have different mindsets, but unless your idea involves conveying something in code, you're not going to notice too many issues. My co-founder has come up with a lot of ideas and not once did I not understand him... unless he started talking about differences between LLCs and C corps and crazy talk like that.

So, in summary, if you are "just a business guy," don't give up. Sooner or later most of those one-man-band hacker founders are going to realize turning you down wasn't such a great idea; they needed you after all and now _they_ have to search for a CEO.

EDIT: And I'd like to point out that we got into YC this summer, too. I'll leave you to guess who wrote most of the application, did 99% of the talking in the interview and who had the market knowledge to pitch the idea in the first place. (hint: it wasn't this guy!)

That is definitely a large part of it. When Greg Mcadoo from Sequoia spoke at YC this winter, he said he'd also noticed that frugal startups did better. When I asked him why, he said probably because frugality was an instance of focus, and that focus is the key to success in a startup. Overspending = spending on inessential things, which in turn implies you don't understand what's essential.

For the same reason, it's bad when founders can't explain what they're doing concisely.

"raising and slaughtering rabbits"

"catching and cooking fish and turtles"

"distilling your own moonshine"

Those late night coding sessions with macaroni & cheese and Milwaukee's Best are looking better and better.

Frugality is just a basic life skill. It serves you well in anything.

However, I'm beginning to notice now that our customer base has grown and our revenues have doubled a couple of times over since our time in YC that what used to seem extravagant (paying people to do things for us) is now becoming the smartest way to make problems go away. I just paid Google $500 yesterday to handle search on our site, because it is a problem that has effected me on a couple of occasions, and I decided that even one more day of me fighting with full text search in MySQL and PHP (which is not a comfortable language for me to work in, as I use Perl mostly) was one day too many--the opportunity cost was just too high, when that one day spent talking to customers could close a deal worth many times the $500/year that I pay for Google Custom Search.

But, that's frugality of another kind (one that considers the value of both time and money), of course, so it doesn't invalidate the idea that frugality is pretty much always a net win. I just thought it worth mentioning since I've seen plenty of entrepreneurs take frugality too far. Colocating their own box instead of renting a server in order to save $10/month, for example...if you have a single hardware problem during the 18-36 months that the server is in service you end up with a raw deal (because you either have to go to the colo and deal with it, or hire the colo service folks at $100/hour to deal with it). If it's not the focus of your business, try to find someone else who does have that as their focus to do it for you. Work on your differentiating factors, not the day-to-day crap that every business has to have.

>Frankly, I think that I'm better at evaluating how much risk is acceptable to me than some government bureaucrat in Washington.

Then you would love living in China. I guess going to a restaurant or grocery store where much of the food contains various poisons wouldn't bother you, since you're able to tell the difference.

Weellll, it's okay. It does what it does, but what it does is not really for me. Sure, I'd like to click on hot chicks, but you know what I'd really love? If, when I clicked on that chick long enough, she begins to like me! Then she calls me and buys me dinner.

Now that's a problem you startup founders should solve! Getting me laid is a killer application, I tell you.

You're probably going to want a design firm, rather than a manufacturing firm, to get you to the point where you have a physical prototype, CAD files of manufacturable parts, and choices of materials and processes. Then they can guide you to a contract manufacturer.

Some resources:

Design firms that work on toys:

http://www.dexigner.com/directory/cat/Toy_Design/Companies.h...

MIT product design course:

http://ocw.mit.edu/OcwWeb/Sloan-School-of-Management/15-783J...

Berkeley's course covering rapid prototyping and manufacturing, including lecture videos:

http://bmi.berkeley.edu/Me221/me221_resources.htm http://webcast.berkeley.edu/course_details.php?seriesid=1906...

The Berkeley videos totally opened my eyes - I was a computer science guy with no clue about making physical products.

His point about how ridiculously unfair the current system can be is well taken, and it's very frustrating. But, the paternalistic state exists because people cry out for it. There are efforts to ban completely ridiculous offenses, like your pants (url, http://www.cnn.com/2007/US/09/17/baggy.pants.ap/index.html )"There should be a law preventing that." When it comes to things like medicine, the current overbearing system seems necessary because people at large seem nearly incapable of rejecting obviously false medical treatments ("smart" water, echinacea, magnet therapy, colon cleansing, Kinoki foot pads).

And the other problem... Having faith that people will do "the right thing?" People often don't, especially when it comes to even slightly complex things. Homeopathic remedies are a massive industry, but they've been definitively shown over and over to have no discernible effect. Religious cults still flourish in every civilized nation, despite their policy of taking everything from their members and leaving them as broken, one-dimensional caricatures. Chemical and drug abuse (as opposed to recreational use) is rampant, and our laws cannot differentiate between the two. People even deny proven science because they don't like the implications, stifling scientific progress that could help sick and dying people.

It's not a new dilemma, but it's getting more complex and urgent as our population grows. On the one hand, some people make the world better. On the other? Some people make it worse, sometimes simply through their ignorance. Distinguishing between them and giving the helpers the latitude to improve without giving the destructive forces latitude to destroy is the fundamental dilemma of any society.