The Dream Tax: Why Rushing To Scale Can Drain Startups

February 18, 2024 (3mo ago)

Launching a startup is exciting. We all dream of making it big, solving problems, and becoming well-known. But, did you know that rushing to grow your startup too fast can actually set you back? This is what I like to call the "Dream Tax," a concept every founder should understand.

So, what is the Dream Tax? It's the hidden costs and problems that come from focusing too much on future possibilities instead of where your startup is right now. These costs aren't just about money; they can be anything from overly complex code to over-engineered infrastructure.

I decided to write about this after seeing a tweet about a startup facing a huge $23,000 bill. This was a wake-up call about the dangers of scaling too hastily.

The Danger of Wanting to Be Like Big Tech

A common trap startups fall into is wanting to scale like big companies, like Meta (Facebook). Some people think if it works for Meta, it should work for them, leading to choices like using specific technologies because they're seen as more scalable. I knew someone who kept rebuilding their app because they thought it wasn't scalable enough, always trying to mimic big tech. This mindset is risky and can prevent startups from ever launching.

In reality, the choice of technology (like PHP or React) is less important than many think. What matters is what works for you. PHP can scale well, and real servers are often more powerful and cost-effective than popular opinion suggests. What truly matters is solving your customers' problems effectively, not the technology you use. Focusing on practicality, cost, and maintainability should be the priority.

The Underrated Value of Servers

Many new founders worry about the drawbacks of managing servers, fearing unexpected issues. However, in my experience running a game analytics platform, using a dedicated server has been incredibly reliable and cost-effective. We've handled 100's of millions of monthly requests using PHP (through the Laravel framework) without focusing solely on scalability, which allowed us to move quickly and keep costs predictable.

We have ran on the same, $40 a month bare metal machine (a AX41-NVME from Hetzner) for over 2 years now.

Some founders face huge bills because of their choice of infrastructure, not realising that traditional servers can handle high traffic efficiently and economically. As apps evolve, they often become more optimised, making servers an even smarter choice.

In summary, it's crucial for startups to balance the dream of scaling with the practicalities of their current state. Avoid the Dream Tax by focusing on what truly matters: solving problems for your customers and making smart choices that keep your startup lean and flexible.