Visible Blog

Remote work is here. Even if it is only for the next couple of weeks/months, companies are transitioning to remote work. The obvious distractions combined with companies transitioning to remote work who do not have a system in place will lead to many companies’ productivity and growth taking a hit. At Visible, we believe in remote work. We have been fully remote for 5 years and have learned a lot along the way. We’ve tested just about everything — especially when it comes to weekly communication. Slack and Zoom are essentially our office. We’ve been using Zoom to power our meetings since day 1 (we love Zoom but love them even more after offering their product for free to educators and students). In order to (hopefully) help more companies increase productivity while working from home, we’ve shared weekly meeting examples and guidelines for Zoom calls below. Zoom Meeting Guidelines As a remote team, meetings are a crucial medium for our team to connect, share & collaborate. Here are some general guidelines for all meetings. Video should always be on by default (unless you have some serious connection issues). Your microphone should always be on and not muted. We want to feel like we are next to each other in a meeting. Visual and verbal queues & feedback are important ways we communicate. Try to find a quiet place with limited background noise. When applicable, send out an agenda, documents, etc prior to the meeting for the attendees to review. Below are a few examples of different meeting formats we have found to be most valuable: Weekly kickoff and standups Collaboration and brainstorming One on Ones Show & Tell Monday Kickoff & Standup This gets us warmed up for the week. We’ll see how everyone’s weekend went and dig into the week ahead. Mike (our CEO) will start by giving a quick recap of our company-wide metrics, goals, news from the previous week and priorities for the coming week. We will then review our current product & marketing boards to see if there are any obstacles, outstanding questions, etc. This is not a time to go in-depth but rather schedule a follow up time to pair with your colleagues. Collaboration Calls Collaboration calls are a time for us to get together as a team and work on a larger project or idea. Generally we will decide on our Monday kickoff call what we will discuss on a team collaboration call. Some ideas: Review a product cycle item — What is the status of a current product cycle item? What is needed from others here? Is there a mockup that someone would like to present? Etc. Play a game — Use this as a time to play a collaborative game as a team. Brainstorm — Working on a bigger product or marketing idea that you need input from others? Use this as a time to present and collaborate on bigger ideas that involve the entire company. Be prepared with activities to guide the brainstorm session! Other talking points: Give a shout out to a team member and thank them. Tell them why! Tell us a story about something Visible related! Could be a customer story, a bug you found, something you designed, etc What did you learn last week? (Doesn’t have to be Visible related!) What is something you are proud about from last week? One on One Meetings One on one calls are to make sure we are identifying opportunities to serve one another better, a chance to deepen our relationship as well as uncover any challenges before they grow into something larger. The time should also be spent talking about near terms goals & priorities but also long term development as well. Every one on one is the employees time and the time can be used for whatever they deem most valuable (90% of time for the employee). To make sure the time is used in a mutually beneficial way we want to make sure the employee is providing a quick update (before the call) with how everything is going, how they are feeling, and what challenges they are facing. A couple of blog posts we used as inspiration for our meetings: Managers, Take Your 1:1s to the Next Level with These 6 Must Reads 28 Questions For Insightful One-On-One Meetings Show & Tells Every Thursday a team member presents a show and tell. The topic does not have to be work related. It can range from your favorite tacos to how venture capital works to budgeting apps for personal finance! Every week a team member presents a show & tell — @VisibleVC related or can be anything you are passionate about… This week we learned about mechanical keyboards. I had no idea the massive community that exists! pic.twitter.com/mhFyS7m3C0 — Mike Preuss (@MikePreuss) December 18, 2019 We hope this helps with how your team can use Zoom as you navigate remote work. If you have your own tips and tricks, we’d love to hear them! Or if you’d like to learn more about how we successfully work from anywhere, feel free to reach out.

At this point, it is expected that most companies and corporations will be exploring working from home/remote work for the coming weeks. There has been an explosion of “work from home” blog posts, resources, tweets, etc. over the past couple of weeks. In order to help cut through the noise, we have shared our 9 favorite blog posts on remote work below. The post are largely curated from our weekly Founders Forward Newsletter. We search the web for the best tips to attract, engage and close investors, then deliver them to thousands of inboxes every week. Want in? Subscribe here. The Remote Work Report by GitLab The team from GitLab surveyed 3000+ remote employees to explore the future of remote working. Work From Home Seth Godin, business author, offers a framework to help employees determine when and how to work from home. REMOTE: Office Not Required Jason Fried, CEO of Basecamp, is temporarily offering full refunds to anyone who buys the Basecamp book, “REMOTE: Office Not Required.” The State of Remote Work 2020 The team at Buffer share insights and data from surveying over 3500 remote workers. Upside.fm Podcast: Powering Communication for Founders and Investors Our founder, Mike Preuss, had the opportunity to join the Upside.fm podcast to discuss all things remote work, investor communication, and portfolio management. Best Practices for Managing Remote Teams: A Psychological Perspective Steph Smith of Toptal discusses how remote work can deeply influence the dynamics of workplaces and individual teams. How to Create a Remote Work Routine That Works Marcus Wermuth of Buffer shares his remote work tips to help form a routine that maximizes creativity and productivity. How to Build Social Connections in a Remote Team Claire Lew, Founder of Know Your Team, offers 7 tips to help remote employees and managers build a social connection. At Visible, we have been fully remote for the last 5 year. Next week, we will share more specifics and advice form our time as a remote company.

When I started drafting the note earlier this week I was going to ask you about Covid-19 and how it will impact your business in the short, medium and long term. Well… a lot has changed in 72 hours and you would think we are going through GDPR again with how many emails I’ve received from vendors that I haven’t heard from in years. I don’t want to make light of the situation, it is serious, but figured you might be tired of the constant reminder. (*some extra notes at the end) Instead, I want to share the story of Richard Montañez. If you haven’t read his story yet — please do. It made the rounds a couple years ago but want to re-share as it is one of my favorites. In short, Montańez was a janitor at a Frito-Lay plant but became the inventor of the Flamin’ Hot Cheeto and is now a VP at Frito Lay. Two of my favorite quotes from the article: “There’s no such thing as ‘just a janitor” “Act like an owner” Great ideas, innovations and processes can bubble up from anywhere in an organization. It took guts for Montańez to call Roger Enrico (CEO at the time) to pitch the idea. It took equal guts from Enrico to be open and receptive to fielding a call from someone at the Cucamonga plant. Last Week’s Note – The Press “Whenever that happens, I’ve called it “the floodgates have opened” and I do the exact same thing. Love it” “To me, skills are highly influenced by your state of mind, mind and body fitness, your relationship with your loved ones, what you ate 2 hours ago… And much more. In some days, you’ll be able to overcome some challenges much more easily than in some others.” “I just wanted to say thanks for the email below; coming during the cancellation of a major event, it was a calming and encouraging read”

If you’ve been following along at home it may feel like seed rounds are exploding in size. However, this is not just a feeling but a fact. Not long ago, it felt like $500k to $1M was getting up there in size for a seed deal. Fast forward to today and we are seeing seed deals pop up well in excess of $5M. As Elizabeth Yin, Founder of Hustle Fund, put it, “I’m seeing massive party rounds here in San Francisco — $3 million – $5 million seed rounds. Sometimes $10 million rounds right out of the gates! My friend, a fantastic serial entrepreneur with an exit, raised $8 million recently at $30 million+ post-money valuation with only a very early version of a product. Investors literally threw money at her and her round was oversubscribed.” Defining exactly what a seed round is today has become more subjective. You’ll often see companies raise a pre-seed, a seed plus, or seed extension, etc. The explosion of the traditional seed round size has cemented the rise of the pre-seed round. No doubt the pre-seed round has been around for years but is becoming more prevalent. What is Pre-Seed Put simply, “a Pre-Seed round is a pre-institutional seed round that either has no institutional investors or is a very low amount, often below $150k.” The pre-seed round gives a startup the opportunity to continue developing a product and create a plan to generate significant revenue. How to Raise a Pre-Seed Round If you set out to raise a pre-seed round a few things must be true: You have some proof of concept or early product The market has desired some form of need for a product/solution One of the interesting aspects of raising a pre-seed round is the lack of traction and metrics you will likely have. A later stage fundraise will likely revolve around metrics, financials, and data (on top of your product, market, and team) but a pre-seed round will revolve around concepts and vision. The lack of traction will also add an extra focus on the founding team. If you have no traction but a proven track record it will ease the decision making process for a pre-seed investor. If you have no traction and no track record, raising a pre-seed round will be even more difficult. Your ability to pitch and demonstrate your ability to build a product and model your total addressable market are a must. Successfully closing a pre-seed round is just the start of your startup journey. Being able to deploy the capital to build a product, sell to customers, and attract top talent will be vital to raising future rounds (seed, series a, etc.). If you’re just getting started with your pre-seed pitch, be sure to check out our other fundraising content. Good luck!

This won’t be the first or last time we write this: being a startup founder is hard. On top of your day-to-day tasks you have to worry about your customers, employees, and investors. You can often feel like you’re buried when balancing the communication and relationships with all of your stakeholder groups. Concisely sharing strategy with your stakeholder groups is an effective way to set expectations and build relationships. One tool we’ve seen pop up more frequently in the last few weeks are strategic memos. Memos are a clear and concise document to lay out strategic vision, rationale, and expectations. We’ve shared 3 different “memos” below that can be used for your investors, team, and executives. Y Combinator Fundraising Memo In case you missed it, YC recently published a Series A Fundraising Guide. The guide is full of useful information covering every aspect of a fundraise. One of the areas we found to be most interesting was the idea of writing and sharing an investment memo. YC makes the case that founders should write an investment memo is two-fold. First, it can set up a meeting with a potential investor nicely when sent in advance. Secondly, it helps you as a founder clarify your pitch, thoughts, and rationale. As the team at YC writes, “A memo is particularly effective if you can write well. It stands better on its own as the deck (sent ahead of time) can miss context provided by your voiceover. Founders tell us that memos sent before meetings in place of a deck provided the necessary to set up an engaged conversation from the outset.” They go on to share a template of a memo that you can find here. We’ve turned it into an Update Template so you can share it out via email or link! Executive Team Strategic Memo Andy Johns is a seasoned startup professional and currently a partner at Unusual Ventures. Andy recently published a blog post, A Simple Tool for Managing an Executive Staff as a First-Time CEO, to help first time founders deal with their first executive hires. As Andy points out, managing an executive can be quite different than managing team individuals. “An executive’s job is to focus primarily on taking strategic risks. Each year, they should identify 2–3 major initiatives, large enough in impact to shape the direction of the company and enforce great execution against those initiatives. This is in contrast to non-executives, who you want to be focused primarily on tactical execution.” So how does a founder enforce execution against those initiatives? Andy suggests having your executives fill out a quick memo template for your executives to share with you. As Andy puts it, “Ideally, what they come back with is a strategy that has 2–3 major initiatives that they find are important, along with a list of success metrics and resources they need to get it done.” Once a founder gets a strategic memo from each executive it makes forming strategy and roadmap for the company as a whole easier. These memos can be used to fuel your strategic and financial plan for the year, create performance plans with executives and individuals, and the kickoff discussion points for annual planning. Check out the strategic memo template from the team at Unusual Ventures here. The EVERGOODS Product Brief The last memo is slightly different than the first two. EVERGOODS is a small equipment and apparel company based out of Bozeman, MT. EVERGOODS has a strong focus on building an incredible product and puts a great deal into R&D and perfecting every minor detail of their products (a couple of gear junkies on the Visible team can attest to this). As the founders, Jack and Kevin, put it, “Our experience lies in product design, development, R/D, and manufacturing for the likes of GORUCK and Patagonia. We believe in product and the processes of doing the work ourselves. Each project is an exploration, and ultimately a discovery, aided by our triumphs and our failures. This evolution inspires us and is at the heart of EVERGOODS.” Being gear junkies and product focused ourselves, we found their product brief to be interesting and useful to more than equipment and apparel companies. While it may not translate directly to every industry, their brief is a great tool to help product-focused founders understand why and how they are building certain products and features. Check out the product brief memo from EVERGOODS here. Each template above serves a different purpose. While each template may be entirely different they all have one thing in common: clear and concise communication. Setting up a system to properly share strategy and rationale in a concise way will not only strengthen relationships but keep all of your key stakeholders aligned. Do you have a memo or strategic doc that you share with your stakeholders? We’d love to check it out. Shoot us a message to marketing at visible dot com.

The Visible team has been hard at work on our investor platform. Check out the updates below. Over the next 6 weeks we will be rapidly rolling out new functionality — stay tuned! Our team is happy to jump on a quick call or demo to walk you through the latest changes and answer any questions. Schedule your demo today! Reports Our new report builder allows you to create and save reports for your portfolio. Reports will provide instant insights into company performance and custom views — great for weekly meetings! In our initial release, reports can include: Metrics Metric Insights for changes between periods — % and actual (WoW, MoM, QoQ and YoY) Custom Properties Request Metadata Sorting Advisor Roles Want to share specific portfolio companies with advisors, mentors or individuals that work closely with your portfolio companies but don’t want them to get full access? Advisor Roles are a perfect fit for you! Custom Properties Custom properties are now live in the UI. In your portfolio click the secondary dropdown and create custom properties for your portfolio. Properties can include: Numbers Percentages Currencies (Full currency support) Dates Short/Long Text Dropdowns URLs Revamped Portfolio Company Metrics We re-architected how company metrics are created and handled. Metrics can be assigned to all companies or on a per-portfolio company basis giving you ultimate control and customization. Want to learn more? Schedule your demo today!

Ever have one of those days where everything is clicking? Customers are signing up, the team is excited and your vision is being executed. I had a day like this not too long ago. I was sharing the feeling with one of my mentors. He gave me some great advice, “Those are the days to work late… Call up leads that went cold. Write up a product spec. Do some strategic planning.” I call this the press. Doubling down when the going is good. What if it is the opposite? Customers are leaving. Partnership agreements are falling apart. You missed an important deadline. Call it a day early. Spend time with some loved ones, work out or get some sleep. Just last week I had a day when I was pressed. We had an awesome day and then saw a potential customer signed up last minute for a demo late in the evening (we love all of our Australia, New Zealand & Singapore customers :). If I was having a crap day I would have asked to rescheduled. I pressed, took the call, and fortunately converted a customer right there. What do you do when everything is clicking? Seems like it is falling apart? Have a great weekend all! -Mike

When times are tough (which they will be) being a founder can often feel like you are alone on an island. Having people to open up to and work your way through the troughs is key not only for your mental health, but your company’s health as well. Establishing a trusted circle of mentors, advisors, and peers, your personal board of directors, from day one is a great way to prepare for what lies ahead in your company building journey. What is a personal board of directors? A traditional board of directors is “ a group of people who jointly supervise the activities of an organization.” A personal board of directors is a group of individuals that can offer advice and direction for both personal and life decisions. Your personal board should be a trusted group you can lean on when making difficult decisions. Just as a board of directors holds an organization accountable, the same could be said for your personal board of directors. Who should be in my personal board of directors? Finding the right mix of individuals for your personal board of directors can be tricky. They should be a collection of individuals that are willing to give honest and candid feedback. Generally speaking, this means leaving family and close friends off of your board of directors. The team at Harvard Business Review suggests including a mixture of the following people: “First, you need fans — people who support you and will deliver tough feedback with kindness and good intent.” “Second, recruit potential sponsors — senior leaders who can advocate for you when it’s time for a promotion.” “Third, include at least one critic. These people may be the toughest to approach, but they can be the most valuable.” No one wants to face criticism; but it is an important aspect of personal and company growth. This mixture of individuals will be able to help with professional development, company strategy, and major life decisions. Assembling your personal board of directors Asking people to be on your personal board of directors can be an intimidating tasks. We suggest building a list of people you would find to be a good fit (using the criteria from above). Start with your top choices and make your way down the list. If you get no response or a simple “no,” don’t fret. Simply move on to the next person on your list. If you’ve done your research and built a proper list most of the people should be eager to help you. As we wrote in our post, “Startup Leaders Should Have Mentors. Here’s How to Find One,” we suggest when reaching out, “you should make sure to 1) explain why you’re reaching out to them specifically and 2) ask to meet with them once instead of asking them to commit right away. Those two things will make them much more likely to say yes.” Well a personal board of directors can’t guarantee success it can certainly help as you struggle through the inevitable tough times of building a startup. If you’re interested in learning more about approach mentors and advisors, be sure to check out our mentors post here.

With the seed to series A conversion rate estimated to be under 20% having the right resources, framework, and mind set for conducting your series A fundraise are vital. The team at Y Combinator recently published a thorough guide on raising your Series A that helps lay out every step of the process. The guide is full of helpful tidbits so we pulled our favorite takeaways and shared them below. Consistency with Metrics As most fundraising related articles will tell you, having your metrics in place before a fundraise is required for a successful fundraise. As they simply put, “if you don’t know your metrics cold, you’re not ready to fundraise.” The YC guide takes a deep dive here but also focuses on the importance of consistency with your metrics. The decision to invest in a Series A round is likely still a gut instinct for investors. You have more data than your seed round but likely just a few months so being able to demonstrate consistency and emerging trends is key. Always know your metrics off the back of your hand so when things start clicking you can kickoff your fundraise with conviction. Managing Your Relationships Just like we’ve covered in the past, fundraising starts by building relationships. This is over the course of the 6-12 months prior and should not be confused with your formal fundraise. YC suggests building out a sales/investor funnel to manage the process. Just like a sales process it starts by building a list, getting connections, having conversation, then starting regular conversation if it makes sense. Once you push investors towards the bottom of the funnel you will likely have formed a strong relationship, know one another’s expectations, and have built up the excitement to pull the trigger when you’re ready to launch your Series A raise. The team at YC found that, “On average, we found that companies that raised A’s started with coffee meetings with at least 30 individual investors.” You are likely talking to 50, if not 100+, different investors throughout a fundraise so having a system in place is key. Check out our free Fundraising CRM to help keep tabs on the process. How Much Should I Raise? The requirements/size of a Series A feel more subjective than ever before. There are not cut and dry guidelines for what revenue, traction, metrics, etc. you need to have. The average round size for a YC company last year was $9M. However, we’ve seen Series A rounds ranging from $200k to $50M over the past year and seed rounds that have exceeded their $9M average. The team at YC summed it up perfectly by saying, “You should raise the minimum amount you need to hit your Series B milestones, typically ~3-5x your current numbers. We suggest picking a single number, not a range. Ranges look indecisive and investors will assume that your numbers can flex, so pick the amount you actually need.” Sharing (the right) Data One of the things we get asked about most is when and how you should share data with potential investors. While it can be intimidating to question or reject a potential investors requests, YC offered a tip we found to be very useful — “A good strategy is to ask the investor what question they are trying to answer by requesting information. This can help you (1) figure out a more efficient way to answer their question and (2) suss out if they are only trying to create busy work.” Own the Schedule When it comes to scheduling meetings and running the actual fundraising process, YC is adamant about batching your meetings. For example, having all of your partner meetings within as 1 or 2 week window. The idea being that (1) investors will make offers around the same time and (2) they will not be able to collude and/or see other investors passing. Additionally, this gives you a chance to quickly iterate on their pitch and spend more time on the day-to-day of their business. However, this is easier said than done. YC warns that founders will often let the first meetings drag out for months or on the flip side; founders will create a tight timeline by accident. Losing track and control of your schedule is an easy way to kill a fundraise. Raising Money Isn’t the Goal One of my favorite lines from the guide comes towards the end; “If you’ve succeeded in raising an A, there’s one final challenge: remembering that raising money isn’t the goal.” Raising a Series A is an incredible feat and one that very few companies will get to. However, it does not make your company a success. Successful founders will remember why they raised their Series A and set their eyes on tackling the goals they laid out during their fundraise to begin with. If you’re interested in reading more about raising your Series A, be sure to check out our Series A Funding Guide.

I’ve been grappling with the idea of getting a CEO coach for a while. In particular, I’m always looking for ways to level up my leadership skills. Sidenote: I recently read Conscious Leadership based on a referral from one of our customers and loved it! I’m curious, do you have a CEO coach (or any type of coach)? What types of issues do you work through? If you have 2-3 minutes, I’d love for you to respond to this survey — I can’t promise your typical 10-20 seconds 😉 Transparently, we’re thinking through ways how we can offer coaching services to our customers. It appears that wellness and vulnerability are resonating based on responses to last week’s note. -Mike

It seems like the Twittersphere is ablaze with the idea of debt entering the market as a financing vehicle. Check out Alex Danco’s, “Debt is Coming” blog post if you missed it…Tyler Tringas and Earnest Capital have an entire fund devoted to this thesis. I’m sure there are a ton more blogs, Substacks and Tweets about it now. These ideas mainly pertain to SaaS. The tl;dr is that the last 15 years have paved the way to build and scale a SaaS company for next to nothing while recurring revenues are (hopefully) predictable. If both of these things are true, isn’t equity an incredibly expensive thing to give away? I suspect we’ll see more debt funding vehicles enter the market for all stages of growth. Getting started? You could use a credit card. A couple thousand in MRR and want to go full time on a side project? Take a look at Earnest Capital. $50k in MRR? Check out Lighter Capital or Stripe Capital. >100k? Private Equity and Banks will be happy to help. At the end of the day, more options = better deals for founders so I’m a fan. However, does debt come with operational expertise? Can it help you hire? Navigate strategic decisions? I think Alex Taussing has a great response in his newsletter Capital Stack with, “My hope is that operators will constrain its use to areas where debt is a more natural fit.” Have you taken any debt? Considering it? Any other ideas? Share your ideas below. Last Weeks Note – Do you Sleep? I got some great reactions to the Sleep note last week. Here are some of my favorite responses. For the sleep matter, I often feel the Hustle porn trend induces a huge bias. While we hear from folks working 100h a week that feel in their good right to brag about it, it obfuscates a huge part of the founders, realizing how much sleep & good personal equilibrium matters but that won’t brag about it. Well that’s interesting! Just knocked together a little chart based on that DoD study. Assuming at 10 hour day, and that a person is just as enthusiastic and focussed about being at work as anywhere else (unrealistic) then yes in theory someone could extend their working day another 4 hours per day. Might explain the stereotype of the startup founder working well into the night without realizing for days on end, while there is a productivity loss, if you do it for a few days you can still come out ahead. That’s if i’ve done the math right of course! It’s 12:46 am. I’m writing code. Should I be writing code? ever? no. But we’re behind on a deadline for an important customer, so here I am. I’ve crushed 2 critical tickets since I put my kids to bed. I use the Withings Sleep Tracker to measure my sleep (it sits under my mattress). I’ve seen repeatedly that it is the most important variable in my control that affects everything in my life from personal wellbeing, through to cognitive ability. It’s been elevated to a level it deserves.

We are 2 for 2 in the Weekly Note! For the longest time we’ve treated lack of sleep as a badge of honor. “Hustle Porn” on Twitter & the web has made it even worse. Personally, I always felt like I was doing a disservice to Visible by prioritizing a good night’s sleep…”Should I be working instead of sleeping?” was a common question I’d ask myself. Luckily, we’re starting to see more data, studies and efforts by entrepreneurs to show how sleep is critical to just about everything we do. From productivity increases to reducing the risk of cancer and heart disease, sleep is fundamental to just about every aspect of your life. I’ve recently gotten to know Jeff Kahn from Rise Science (they have worked with NFL, MLB, and NBA teams to Basecamp to Fortune 500 companies…yeah, they are legit). I love Rise’s simple yet insightful approach to helping you understand your sleep and sleep debt. In particular, they don’t require any sensors, gadgets or putting your phone on your bed. One of my favorite features is their “peaks & dips” insights (your natural circadian rhythms). I find it to be incredibly accurate and I now structure my day around it. I’ll workout during my dips and prioritize critical thinking in my peaks. You can see my screenshot here from Rise. I asked Jeff why their model is so accurate. They use 3 different models to power this “peaks & dips” feature. One of those models comes from the Department of Defense. Turns out, the DOD has completed some extensive studies that enable us to more effectively utilize our troops in times of war. You are welcome to check out the research here. How much sleep do you get as an operator & entrepreneur? Do you prioritize it? Any stories you’d want to share that I can highlight? Let me know and I’ll share them next week (anonymously).

I’m going to start writing a weekly note (at least try!). Inspired from my great friend Max Yoder — make sure to check out his weekly note if you want to do better work. I’ll focus on something that caught my eye in the startup space, an interesting data set and/or anything that I think can give founders a better chance of success. If you unsubscribe, I totally understand but my goal is to make this as valuable as possible. Have you seen the latest buzz about founders wishing they had retained more ownership? Sam Altman from YC tweeted it here. The takeaway is founders feel like they dilute too much early on. Sam also thinks that founders dilute themselves 2x more for the same level of progress they used to 10 years ago. Suhail (Mixpanel founder) has a great response in his tweet. In short, he encourages founders to raise less money at a lower valuation early on. Easier said than done! I do love his mention of thinking through the preference stack. I think it’s incredibly important to model out how the preference stack impacts outcomes and decision for founders. Speaking of doing more with less. Can you guess which companies financials these are before going public. If you guessed Google, you are correct. How much did they raise to get to this point? Only $25M. A little different than today’s climate. Curious, have you felt like you’ve given up too much of your business?

We recently hosted a webinar with Tyler Tringas, General Partner at Earnest Capital, covering alternative financing options available to startups. During the webinar Mike, our CEO, and Tyler covered the current state of venture and SaaS markets, all things Earnest Capital, and SEALs. In case you missed it, check out the recording and our favorite takeaways below. Financial –> Production Capital One of the driving forces behind the Earnest Capital Investment Memo is the notion that software is entering the deployment age (read more about the deployment age in the investment memo here). In short, Tyler explains the deployment age as a time when products, software in this instance, can and should be distributed to every corner of the economy. This creates a new software category where niche and sustainable business can succeed as opposed to the winner take all software companies we’ve seen in the past. Generally speaking, venture capital has been the default funding option for software companies but as we enter the deployment age there will be a need for a new form of funding. As a result, the type of capital companies need is shifting from financial capital to production capital (Enter: Earnest Capital). The Peace Dividend of SaaS Wars Another key driver to Earnest Capital Investment Memo is the idea of “The Peace Dividend of SaaS Wars.” The idea is that when countries are at war they will throw money to escalate and create new technologies. An example Tyler gives is the development of synthetic rubber during WWII. After the war, synthetic rubber could be applied to consumer goods. So how does this relate to SaaS? Investors and early leaders are throwing money to create new technologies in the winner take all SaaS markets. As a result, it is less capital intensive than ever before to start a new business. Tyler mentions that software companies can be started on a free Heroku plan where in the past you’d need to buy your own servers and space. In turn, this helps companies attack markets with a smaller total addressable market and may not be a fit for venture capital. The New American Dream Entrepreneurship is in decline in the US. Tyler believes that one major component of the decline is because, “the major area for new entrepreneurship, software and software-enabled businesses, has no default form of aligned funding.” In the past (think 1970s or 80s), an entrepreneur may have had experience or been highly qualified in a field, went to the bank for funding, and likely built physical locations. But with no physical collateral for a software company, who is supplying the funding to grow these companies? Another sign of a need for a new form of financing. Tyler argues that, “building, owning (and possibly someday selling) a profitable remote software business is the new American Dream.” Entrepreneurs can employ 15-20 people, distribute their profits amongst employees, and still create huge economic impacts for themselves and those involved with the business. Shared Earnings Agreement Tyler discovered that the traditional financing options for early stage investors (SAFEs, convertible notes) are not aligned with “Earnest” founders so they create a new financial product: Shared Earnings Agreement. Tyler discusses why they created the SEAL in the webinar and dives into a few of the key components. If interested in learning more about SEALs, we suggest checking out this post. Send Updates to Potential Investors Tyler briefly touches on the importance of sending investor updates. Tyler mentioned that he has seen investor updates as the best tactic they have seen in use to help companies fundraise. If Earnest speaks with a company they are interested in but are not quite ready to invest, they’ll ask to be sent updates about the business. From here, Earnest can be in the loop and ready to make an investment as soon as possible. Check out the Founder Summit Earnest Capital is hosting a summit for founders and startup leaders in Mexico City in March. The summit is intended to allow founders to meet and network as oppose to another conference full of presentations. If you’re a founder and interested in learning more about the summit, check it out here. Q&A Mike and Tyler tried their best to answer all of the questions at the end of the webinar. For the questions they did not get to, you can check out Tyler’s answers inline below: Q: I assume that at least some incumbents/market leaders will try to meet growth expectations by appealing and selling to niche audiences. How much weight does this threat carry in your investment decisions? If it’s not a threat, why not? A: Competition from large incumbents is definitely not something we outright ignore, it’s just that we try to dramatically lessen the risk by backing founders tackling markets that just wouldn’t move the needle for a $10B or 100B+ firm even they came in and took 100% of the market. That said it certainly can still happen. I don’t think we have a special sauce for that scenario other than to encourage founders to lean in to their startup competitive advantages. One thing we do is encourage founders to not try to make themselves seem bigger than they are (don’t use the “Royal We” if it’s actually just You). It’s surprising how much some customers really want to support an independent small brand. The Basecamp folks are putting on a masterclass on how to counterpunch on BigCos like Google with this Q: How does Earnest protect itself from a business defaulting on quarterly shared earnings payments? A: Pretty much the only “investor right” we ask for in our investment docs are the right to inspect the books. Many founders just go ahead and give us access to their Quickbooks. Which is how we would address some kind of fraud or misrepresentation of Founder Earnings. At another level it’s quite hard to accidentally “default” in the sense of being unable to make a payment, since the Shared Earnings are always a % of Founder Earnings, the business should have generated the cash to make the payment (in contrast to debt where a payment is due whether you have the profits to pay for it or not). Lastly if a company has the Founder Earnings but just refuses to pay, we are somewhat protected by the fact that a) the company is obviously doing well and therefore is valuable and b) not making Shared Earnings payments keeps our implied % of a sale higher, so the founder is kinda shooting themselves in the foot if they ever intend to sell the business, we’ll likely get more money from the higher % of the sale than they would have paid out in Shared Earnings along the way. All about aligning incentives! Q: The required “hit rate” for a SEAL portfolio to work is really high (given the capped return + long time horizon): How do you think about this question? Do you have a target % of startups that must “survive” to get a return? A: It is higher than you would see in a traditional seed VC portfolio, but our theory is that the failure rate is not a law of startup physics but rather the whole venture strategy ratchets up both a) the chance of being a unicorn and b) the chance of failure. We don’t know what the typical failure rate is for a basket of highly filtered and selected, post-revenue bootstrapped businesses, but our basic bet is it’s much much higher than is typical in venture. I go into this in some detail here. Q: For your portfolio companies, to what extent do they also have other investors beyond the founding bootstrappers? What is your range of size of investment and also the range of time horizon to large-scale recurring revenue? A: We have done a mix of being the first/only investor in a company, leading a round where several angel investors co-invest with us, and a few deals where we co-invested with other investors (least likely for us, but does happen). We’re open to anything but have a slight preference to be the first/only just because it’s so much easier to close (can be as fast as 2 weeks). As of this moment, we invest $50k-$250k which may increase over time. As a fund, ideally we would love to see business mature and get to real profitability in 7-10 years but we are early-stage, long-term investors and understand that timeline is out of our control. Q: Tyler mentioned a mix of outside capital and sweat equity, however Earnest and other micro-VCs only seem to want to invest in products that are built and have traction. How do I get help building an MVP? I’m a technical founder so I can write code, but trying to do everything myself is taking forever. A: Yea, I have to concede that one of the main advantages the venture model has over ours (similar funding for bootstrappers ideas) is that pre-seed VCs have a model where they can invest at the “idea stage”… because we are not unicorn hunting, we also can’t take the very high risk of investing pre-product pre-launch. One of the main effects of the Peace Dividend that I talk about is that it’s now pretty reasonable to bootstrap, as a side project, a real product to real revenue from real customers. So as an investor, I (and many others) now really have to wait until that stage because so many entrepreneurs are getting there without funding. Some good resources would be some of my Micro-SaaS blog posts (microsaas.co), Indiehackers.com, and Makerpad (makerpad.co) for tips on building an MVP for business ideas without writing a ton of code.

Our Community Templates are a collection of Update Templates created by our customers, partners, and friends. If you’d interested in showcasing your Update Template send a message to marketing@visible.vc Community Spotlight Company Name — Malomo Description —Malomo is a seed-stage, SaaS company based in Indianapolis, IN providing shipment tracking software for ecommerce brands Stage — Seed Capital Raised — $600k Market/Business Model — SaaS, E-Commerce The Investor Update Template If you’re a seed stage, SaaS founder this is a great template to get you started. Yaw, the CEO and Founder, of Malomo shares the Update below on a weekly basis followed by a longer form Update on a monthly basis. For a seed or earlier stage company a weekly investor Update can be a valuable resource for your company. A weekly Update gives you an added opportunity to leverage your investors and use their experience, network, and knowledge to help with early company decisions. Talk to your investors and see if they’d be interested in a more frequent Update. You may not need to send a weekly investor update to your entire investor list. If you have investors that are not as hands on or close to the business it may be best to only share a monthly or quarterly Update with them. You can view and use the Template below: Thanks to Yaw for taking the time to share his template. If you’re a founder, investor, or company operator and would like to share your Update Templates send us a message to marketing@visible.vc