BC STARTUPS
Saved by @Jacobtldr

Saturday thoughts on funding: Where it helps. Where it doesn't. And how it affects team, success, and PM fit.

This is just my $0.02 after looking reviewing 30k+ early stage startups personally and having led 350+ investments across 2 VC firms & as an angel.

Let's begin! >>

 1) Money is great to have in building a startup (for the least dilution and pain possible) That's true and always will be true. 😆

But just like how money can't buy you happiness, it also can't buy you PM fit.
2) PM fit is the holy grail for software startups. (we're not talking biotech - if you have a cure to cancer, I guarantee you everyone wants it).

But for software startups, it's unclear if ppl want your product at your price pt.
3) If you don't find PM fit, in this day and age, you will be able to get some sales. Maybe even say $1m in sales (or more!) per year, and you can still make a living.

But having sales does not mean that you have a repeatable customer acquisition process that can be sustainable
4) As an aside, that is why we invest at pre-seed & don't care about startup traction, because I don't believe traction at the earliest stages suggest PM fit. Traction only shows that a founder can execute (& that's impt too) but there are other ways to assess execution earlier.
5) So going back to the crux of software startups.

Frankly speaking, finding PM fit is a LOT of luck. This explains why a lot of serial entrepreneurs who were successful on 1 venture have a hard time repeating that.

It's not a lack of capabilities.
6) That being said, experience from seeing a lot and doing a lot in startups helps you take a better guess at where there may be opportunities to find PM fit. And, serial founders can often execute more quickly on certain things they've done before.
7) But at the end of the day, there's still a lot of LUCK.

This is why SV VCs will often back "failed founders" again, because that failure isn't (always) an indicator of the founder -- there's also that big LUCK component of finding (or not finding) PM fit.
8) So then the q is how do you increase your luck?

I mentioned 1 way -- experience in seeing and doing a lot. (and learning)

Another way: focusing on only things that matter (mostly derisking sales) & ignoring all else to utilize time and resources efficiently and quickly
9) This speed and focus should not be taken likely. Every time you say no to something, you get time back A) by not spending time + mental capacity time on what you said no to and B) by also using that time to pour more focus into advancing PM fit experiments.
10) E.g. If I say "no" to doing a talk. 1 hr of talk time + 30 min of prep call / slides time + mental capacity time = ~10 cust calls to gather insights into their day-in-a-life to work towards PM fit.

But doing just 1 talk feels like nothing but it adds up.
11) So relentless focus and time is impt that most entrepreneurs disregard. Focus and limited are also things that ALL entrepreneurs have limited supply of. We all get 24 hours in a day. So making the most of this is impt.

Now where does money come into this?
12) The obvious one - everyone has a livelihood that requires money. Everyone has a diff cost on this.

And that affects runway. Runway affects # of PM fit experiments.
13) I have seen well-networked teams (both in my own portfolio & friends' cos) clearly not have PM fit after burning through lots of $$ and still be able to raise a LOT more $$ to keep trying.

Then, by extension of their runway, they find strong PM fit and the rest is history.
14) I would argue in both (near) unicorn cases that I'm thinking about, both teams are exceptionally strong. And these particular cos are not examples of VCs throwing $$ down the toilet.

However, I'm very aware that MOST founders don't get 2nd or 3rd chances like this.
15) This also happens in cases where the founders are well-networked AND also not strong and they are able to raise large amounts of money and end up fizzling out because they never get to PM fit and it's a disaster.
16) Money doesn't guarantee PM fit by any means. It does give ppl more shots on goal.

Should ppl get more shots on goal? That's a philosophical q above my paygrade. But the way we operate @HustleFundVC is that we just assume that each of our cos will only get 1 shot on goal.
17) As another aside, what ppl also don't talk about is how much you get diluted down as an early inv even if a co finds PM fit after raising so much more $$.

3 addl rounds -> your ROI is cut in half & that may not even return the fund even if the co "wins".
18) Raising $$ can help in other ways -- recruiting. Many would-be employees like to see some semblance of security & the big rounds help w/ that.

The flip side is if you don't have PM fit, having more ppl on the team makes getting to PM fit HARDER not easier in many cases.
19) So the tl;dr is

a) Money is great to extend your PM fit experiment runway. But only if you use it efficiently and stay lean until you find it.

b) Often ppl who raise big $$ w/ out PM fit end up blowing it / spending it unwisely & hiring too many ppl and never find it.
20) (cont)

c) PM fit is hard to find w/ or without money. This is why the IDEA matters so much. and market pull >> founders.

Good founders + great idea >> Great founders + good idea

Combined with money goes far.

More from Elizabeth Yin

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Today's thread is on the affiliate business model. Many years ago, I used to be an affiliate marketer. If there is any way to get schooled in marketing, becoming an affiliate marketer is probably the best way.

What is affiliate marketing and why should you care?

Read on >>

1) Affiliate marketing is selling products or generating leads on behalf of other companies and getting paid a commission for those products.

2) Some notable examples you've seen before:

NerdWallet - you read their articles on best credit cards. You click on a link to one of those cards. You fill out an application. They get paid for delivering that lead to the cc company.

3) In https://t.co/kSfWS69ybp - same thing. Any of their financial products -- you fill out an application, and https://t.co/mCrBT43mOj gets paid for that.

But the affiliate revenue model applies beyond financial services products.

4) Wirecutter -- you see a neat product they review or talk about. You click through and buy.

Wirecutter gets a cut of that transaction.
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today's thread is a continuation on *how* you generate momentum in fundraising.

Here's a rough conversation I had with a founder (called 'C') over the course of days a few months back.

Read on >>

1) C: I'm having trouble raising. VC A and VC B are taking so long to get back to me.

Me: Oh, when did you meet w/ them?

C: 3 weeks ago.

2) Me: Oh, are you mtg w/ anyone else?

C: No, I got busy working. I had all these sales calls to make.

Me: That's the problem - there isn't a reason for them to move quickly. There's no investor at the table.

3) C: But I have all these sales calls to make!

Me: I really don't have a great answer for you here. This is probably the hardest part about fundraising - juggling your actual job w/ your fundraising job, which is full-time too.

4) Me: You need to hand off your sales calls to your co-founder. And then you can do mtgs back to back.

C: Ok...

[some time passes]

C: Ok - I'm ready.

Me: How much do you want to raise and what are you using the money for?
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Last week, I wrote a thread about generating momentum for startups.

Today's thread is on how emerging fund managers can generate momentum for their fund.

Whatever you do, momentum is so impt to get ppl onboard -- for hiring, for sales, for fundraising.

Read on >>

1) First, why does momentum matter?

Think about it from the "buyer's perspective" -- it is almost ALWAYS better to wait and get more information if you can get the same deal. Right?

More info on a potential investment. More info on a new product. Etc.

2) There are few situations where it's impt to be a first mover.

If you're a product buyer, it could be you have a dire situation at your company that alternatives can't handle.

But if you have a decent alternative (alternative product or alt investment), it's better to wait.

3) That means it's YOUR JOB to create momentum. Whether for fundraising, sales, or hiring.

So with that in mind, how do you generate momentum for fund fundraising?

4) In a prior tweet about generating momentum for startup fundraising, essentially I said to limit your supply (the amnt you are raising) in tranches AND to increase demand by packing in mtgs.

Unfort this doesn't quite work well for funds.
STARTUP , FUNDRAISING
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today I want to talk about the legal aspects of startups. How to set up? How to think about legal costs?

Fun!

Read on >>

1) Lawyers are expensive -- oof! A startup lawyer can cost you $300-$1k per HOUR! An associate paralegal may be slightly cheaper. But still pricey.

What do you need from a lawyer?

-company setup costs
-doc creation and review for financing rounds
-exit negotiation

2) For the purpose of this thread, we're just going to focus on setup costs, because this is where I see the most mistakes.

Once you get going, you may quickly realize you need a better lawyer - hah - and that generally helps w/ solving for financing rounds and exits

3) If you want to potentially raise money from VCs, you'll want to set up as a Delaware C Corp. If you don't ever want to raise from VCs, an LLC is fine.

Lots of ppl start out as an LLC because you can get tax benefits if you are not profitable.

4) But to me, if you know you want to raise VC money, it feels a bit penny wise / pound foolish, because you will need to spend $$ to convert your LLC to a Delaware C corp.
STARTUPS
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
A thread on employee equity in early stage startups -- what are the compensation norms? What every early employee should ask? Some thoughts on whether the structure is fair.

Read on >>

1) First, there are NO NORMS! Hah. I have literally seen everything from giving early employees no equity to giving employee #1s near co-founder level of shares.

But what is more common than not?

2) In the Silicon Valley, if you're hiring your 1st employee, & you've raised NO $$ & are paying very little (e.g $0-$10k / yr or thereabouts), your first employee is basically a co-founder.

And the equity tranche for employee 1 should be closer to a co-founder level.

3) For ex, a friend of mine gave his employee #1 10% (vesting over 4 yrs of course) of the business. This employee was only getting his housing paid for. And this was 10 yrs ago, so it was during the bust.

4) On the flip side, if you have raised some $$ & are paying employee #1 near mkt rate, typically I see around here ppl get 1-5% (w/ vesting).

Caveat - near mkt rate doesn't mean compared to Google or FB salary rates. I mean compared to "normal big cos"
STARTUP

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Something that doesn’t get talked about enough is how much money do you need to become an Indiehacker?

Well here’s what my own finances looked like when I went all-in…

A thread 1/n

2/n

Kudos to @jrleonr for sharing a vulnerable post on IH.

Personally I don’t think $12,000 is enough financial cushion to go all-in, start an idea from scratch and get to ramen-profitability. It’s just too short of a

3/n

Here’s how much money I saved up over years of corporate work in order to take the plunge and go indie: $200,000

For context, I’m 40, single and had worked my way into quite senior positions by the tail end of my employment.

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$200,000 was enough cushion for me to work on my own projects for years without drastically changing my lifestyle too much. In retrospect, I think I gave myself too much of a cushion. I basically played around for a year before getting really serious...

5/n

...but on the other hand, trying to stretch too small amount a money to the point where it drastically downgrades your lifestyle, affects the people you love and creates a constant atmosphere of anxiety is also counter-productive.
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Jon Yongfook
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@yongfook
Candid and potentially controversial series of tweets coming up... (I hear twitter is good for that sort of thing 😅) read 👇🏻

Here’s what it feels like to launch something to the indie maker community:

Launching a free, open source tool:
“This is awesome! You’re awesome!”

Launching a commercial tool:
“TWO DOLLARS? You are literally Hitler”

I’m exaggerating for comedic effect of course. But there’s a lesson here...

I knew before I started working on Promomatic to be very wary of building a utility tool for makers. Makers are by definition problem solvers and their favorite hobby is finding a better / faster / cheaper way to do what your product does.

It’s so tempting to build things for makers because they seem accessible (thanks to PH, IH, Reddit etc) and you get an immediate feedback loop.
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Guilherme Rizzo
Guilherme Rizzo
@gvrizzo
Let's talk about defining a price for one-time payment products.

When I saw that @gumroad supported Pay What You Want, I had no doubt that this would be the pricing strategy for CSS Scan.

I'd always recommend PWYW with a minimum price instead of a fixed pricing. Why? [...]

It turns out that some people just value your product more than others!

👉 With PWYW you're not only receiving the value that you expected but also donations for a good work.

Plus, with a minimum price, you'll at least earn the same amount you were supposed to if it was fixed.

💡 You only need 1 person paying more to already make it worth.

It's not easy, though. CSS Scan started at $1.99. It was selling like water, so I raised the price to $2.99, and after that, $3.99 - in about 3 days.

❗️ What I didn't expect was that 30% of people were paying more!

I realized that the price could still be higher by looking at the average of the sales prices. E.g., when it was $3.99, the average price of it was actually at $4.69!

I left it at $3.99 for 3 months. Based on the $4.69 average, 1 week ago I decided to raise it again to $4.99.

🧐 Now let's look at the data!

📈 Previous conversion rate: 6,5%
📉 Current conversion rate: 5,7%

It received 1403 views this month. Doing math:
(1403*6,5%)*3,99 = $363
(1403*5,7%)*4,99 = $399

🤔 So there's actually a growth in revenue
⬆️ $363 to $399
🎉 +$36 or +10% per month
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Chris Hladczuk
Chris Hladczuk
@chrishlad
I just interviewed the man who invented Amazon Prime.

He started a business worth $40 billion today and served on Amazon's board for 15 yrs.

Here are lessons from Bing Gordon that'll save you years of mistakes:


When you have a business idea, take action now before it dies.

• Write 1 paragraph about the idea

• Write a 4 slide business plan

• Write your 1st line of code

When you start a job, ask your boss 2 questions:

1) Who is the best boss you've ever had and what does that mean for me?

2) What does top 10% performance look like?

Hold yourself accountable for high achievement.

If you're a cab driver, drive the most miles

if you're a fisherman, get on the best boat.

How to succeed

• Be a learning machine.
• Find a way to maintain high energy
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DHH
DHH
@dhh
20 years ago, I created the Danish gaming site Daily Rush with @mwittrock – inside a startup accelerator called Prey4, complete with fantastical projections of world domination 😂 – but now it's the end, after the proprietor of many years died in 2018.

Daily Rush was the culmination of years of using the web to do gaming journalism. I started Konsollen all the way back in 1995, then ran https://t.co/zsT3ykQcVk for years in anticipation of Id's shooter, then worked at a web portal, then Daily Rush.

This was how I got into web development, project management, organizing, writing, publishing, and how I met lifelong friends. What a wonderful time. But most good things come to an end. We should all be so lucky to see something we help set in the sea brave the waves for 20 yrs!

It's awesome to see the Internet Archive snapshots from all the way back to the early months of the site. Web design anno 2000 😍


The memory lane trip on the Internet Archive goes all the way back to the precursor to Daily Rush, that https://t.co/zsT3ykQcVk site. Here's a snapshot from 1999! Complete with all the news written by yours truly 😄
STARTUPS

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And Trump came out of AF1 and gave ol' Rod a big thumbs up!

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