Tremendous

An angel investor's take on life and business

  • How I Fixed My Sleep (and Started Making Better Decisions)

    My entire job is making decisions. If I want to make good ones, I need sleep. Here’s how I make sure I get it…

    Cut the Lights

    When evening rolls around, it’s all about winding down.

    One of the best ways to do that is to lower the lights. Come evening, I only have dim lights on. This helps me relax. 

    When it’s time to go to sleep, I go even further.

    I have a wonderful eye mask that blocks almost all light. This makes falling and staying asleep much easier.

    I’ve tried quite a few eye masks, including a fancy $40 one from Manta Sleep.  But this $10 one from Amazon is my favorite. 

    Showering Japanese Style

    Every night, I like to take a nice hot shower.

    I picked up this habit in Japan. Most Americans shower in the morning, but Japanese usually shower at night.

    Showering at night helps promote sleep. It’s also nice to be super clean before you lay down!

    Winding Down

    After my shower, I like to put on a little mindless TV.

    I’ve tried reading before sleep, but reading makes me too mentally active. I’m trying to shut my brain down, not ramp it up. 

    Some people say to avoid screens before sleep. But for me, it’s what I’m doing with the screen that matters.

    Avoiding social media is definitely a good idea. It’s too interactive.

    But mindless TV is perfect. 

    Lately, I’ve been enjoying 90 Day Fiancé. It doesn’t get much more mindless than that! 

    Soon, I find myself nodding off.

    Different things work for different people. If reading a novel before bed helps you fall asleep, by all means do that! 

    Bedroom Is for Sleep

    I’ve finally watched enough 90 Day Fiancé, and it’s time to hit the rack. 

    When I lay down at night, I want to feel relaxed. Part of that is associating my bedroom with sleep.

    So I never, ever work in my bedroom. Not a single Zoom call or e-mail ever happens there.

    When I come into the bedroom, I want to be thinking about drifting off to dreamland. 😴

    The 8 Hour Sleep Opportunity

    I almost always leave eight hours for sleep.

    Once in a while, I’ll find myself rolling around. But usually, I’m out like a light.

    Everyone sleeps fitfully from time to time. The key is to give yourself enough time to sleep.

    Try your best to allot eight hours a day. If you make the time to sleep, sleep will come eventually. 

    Wrap-Up

    I used to only sleep about four hours a night. But for the last six years, I’ve been making sleep a top priority.

    The quality of my work has gone through the roof.

    I know it’s hard to find the time for sleep when you’re running a company. But you’ll do a better job when you’re healthy and well-rested.

    Pick one thing from this post and try it tonight — dim lights, hot shower, or banning work from the bedroom. Then let me know how it goes! 

    More from the blog:

    My Christian Health Share

    What Is the Ideal Amount of Exercise?

    What the Best Founders I Know Have in Common

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • How First-Time Founders Can Master Fundraising

    Venture capital can feel like a secret club with its own language. How do you actually get money?

    Here are three great ways to get up to speed on how fundraising works…

    Founder University

    “Where did he learn to pitch like that?”

    Founder University, that’s where. 

    I was at a demo day in NYC a while back, and one founder blew everyone away. His pitch was clear, crisp, and concise. His deck was polished to a fine sheen. 

    Founder University is a 12-week pre-accelerator program run by Jason Calacanis’ venture firm, Launch. Founder University helps you with sales strategy, marketing, and fundraising — everything you need to run an awesome startup. 

    The program costs $500. Launch will give that $500 back if you attend all the sessions.

    Best of all, Jason invests $25k into the top companies.

    You can apply for Founder University here. The next cohort starts in early 2026. 

    YC Startup School

    Not everybody gets into Founder University. But anyone can take courses from Y Combinator Startup School, an online program that teaches you how to run a startup. 

    If you haven’t heard of Y Combinator (YC), it’s the best startup accelerator in the world. Massive companies like Stripe and Airbnb are YC alumni. 

    Sign up here!

    The Founder’s Library

    Another fantastic way to learn about raising venture capital is by reading books written by insiders. Here are my three favorites… 

    • Angel by Jason Calacanis. This book got me into angel investing. Jason explains what venture capital is and how to get it. This book is targeted toward investors, but getting inside their heads is the best way to get a check.  
    • Secrets of Sand Hill Road by Scott Kupor. A friend of mine bought me this book as a gift, and what a wonderful gift it is! This book does a great job of breaking down how venture capitalists think and what they’re looking for. 
    • Venture Deals by Brad Feld and Jason Mendelson. This book breaks down everything you need to know about fundraising in incredible detail. Don’t know what a term sheet is? Not familiar with SAFE’s? Brad and Jason have your back. 

    Wrap-Up

    If you’re an outsider, venture capital seems like a dark art. Luckily, it’s never been easier to learn about fundraising.

    There are whole schools like Founder U devoted to teaching you how to raise money. There are wonderful self-paced courses like YC Startup School to guide you. And there are fantastic books like Angel to give you an insider’s view.

    If you’re a first-time founder, sign up for one of these programs and read one of these books. In just a few weeks, you’ll go from newbie to savvy fundraiser. 

    More on tech: 

    Your Deck Probably Sucks. Here’s How to Fix It.

    How to Tell If Investors Are Really Interested

    The Perfect Pitch

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • My Top 3 Startups from Launch Accelerator Demo Day

    I never miss JCal’s Launch Accelerator Demo Day. Yesterday’s event was one of the best yet. Here are my three favorite startups… 

    3. NextVisit. NextVisit helps psychiatrists document their visits easily using AI. The app listens to the doctor and patient speak, completing notes and other charting for you.

    Some doctors have to work late into the night just to finish their charting. I saw this myself when I worked for Epic, an EMR company.

    NextVisit could make their work much easier. 

    What struck me most in founder Faisal’s pitch was how much he cares about this problem. I could see it written on his face.

    No wonder — Faisal is a psychiatrist himself! A founder this committed won’t give up.

    2. Redii. Redii helps you create retirement plans for remote employees based outside the United States.

    Some of my startups employ folks in Argentina, Colombia, India, just about anywhere you could think of. Imagine trying to set up retirement plans in all those different countries!

    Now you don’t have to.

    Redii was Roelof Botha’s top pick in the Launch Accelerator when they presented at Sequoia recently. With so much potential in this market, I can see why!

    In particular, Redii will be great for AI data labeling companies. They’re hiring folks all over the world at an incredible pace. 

    If AI data labelers could provide employees with great retirement benefits, it would be easier to attract and retain great people.

    1. Path. Path makes it easy for companies to create internal apps.

    Say you want to build an application to track problem tickets at your organization. Path can help you create a new app without using code. 

    You can spin up any app you want easily and include enterprise-grade profiles and security. 

    Lovable makes it easy to create an MVP using no code. But Lovable apps don’t have the scalability and security enterprises want.

    Cursor, on the other hand, is wonderful for developers. But if you don’t have a strong coding background, you’ll probably find it difficult to use.

    Path gives you the best of both worlds. You can build enterprise-grade apps easily with no coding background.

    Companies all over the world will create apps on Path. This is a startup that could grow at incredible speed.

    With strong early traction and a great technical team, Path is off to a great start. That’s why it’s my number one pick in this cohort.

    Wrap-Up

    Jason’s program produces some of the best startups in the business. At every Launch Accelerator Demo Day, you’ll find strong technical teams with great traction raising at reasonable valuations.

    I find a great investment in almost every cohort.

    If you’re a founder, I strongly encourage you to apply to the Launch Accelerator. And if you’re an investor, join me at the next demo day!

    What was your favorite startup in this cohort?

    More on tech: 

    Request for Startups

    Raise Money Faster by Targeting the Right Investors

    Should You Take a Low Ball Offer from a VC?

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Request for Startups 

    The solution to every problem is a startup. Here are three problems I’m itching to solve. If you’re working in any of these areas, hit me up… 

    1. Capturing Data on Mass Production. I dream of androids in factories making us everything we need. But to do that, we need very specialized data.

      I’m looking for startups that are collecting data from factories to help train AI models.

      You could have the workers wear something like Meta Ray-Bans, which would capture their movements. But that could be very controversial — the workers will know you’re trying to replace them.

      A better approach might be to outfit factories with tons of high-res cameras. They could capture everything that happens and use it to train AI.

      You could even create small factories solely for AI training. The purpose of these factories would be to generate data on production processes, not to make actual products.

      A good place to start is textiles. This is one of the simplest forms of manufacturing. When a country begins to industrialize, they often start with textiles.

      Replacing factory workers will be a painful transition at first. But you can’t stop progress.

      What if we’d never adopted tractors for fear of displacing farm workers? We’d all still be doing back-breaking labor on farms, barely scraping by.
    2. Help for Endometriosis/PCOS. Hundreds of millions of women worldwide suffer from endometriosis and polycystic ovary system (PCOS). These conditions are major causes of pain and infertility.

      What if a platform could help women get better treatment? It could guide women to specialists and help them with medication and lifestyle changes.

      In the world of startups, we look for big opportunities. Helping hundreds of millions of people avoid crippling pain is one of the biggest opportunities I can think of.

      Moreover, fertility across much of the world is at rock bottom. Better care for women with these conditions would make it easier for people to start families.
    3. Superpower for Dogs. As much as we love our pets, the care available for them is rudimentary.

      Humans have services like Superpower, which provide tons of lab tests and health advice. We need Superpower for Dogs.

      I’m picturing a platform that would get dogs lab tests, telehealth visits with vets, and in-person appointments. The platform could make a deal with certain vets to get a bulk discount.

      Veterinary care these days is incredibly expensive. Superpower for Dogs could help. 

    Wrap-Up

    We’re really lucky here in startupland. Every day, we have an opportunity to solve the world’s biggest problems.

    Automating manufacturing, helping women have better health and fertility, and helping our little friends live longer — these are three problems I’d love to solve. 

    If you’re working in these areas, contact me on X or LinkedIn. Looking forward to hearing from you!

    More on tech:

    Raise Money Faster by Targeting the Right Investors

    How to Get Warm Intros the Easy Way

    Should You Take a Low Ball Offer from a VC?

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Raise Money Faster by Targeting the Right Investors

    Are you getting a lot of no’s from investors? Maybe you’re pitching the wrong people. Here’s how to find the right investors for you….

    Different investors specialize in different parts of the market. You need to find the investors that focus on companies like yours. 

    What’s Their Sweet Spot?

    First, you need to find investors that invest at your stage. 

    Most investors specialize in companies at particular stages. We call it a “sweet spot.” My sweet spot is companies at around $200k to $500k ARR. 

    So, which stage are you? Here’s how early funding stages usually break down…

    • Idea or MVP: Accelerators, friends and family
    • Trickle of revenue (< $100k ARR): Pre-seed
    • Early revenue ($200-500k ARR): Seed
    • Early PMF (> $1 million ARR): Series A

    Where Do They Invest?

    Like most investors, I only invest in certain countries. For me, that’s the U.S., Canada, UK, and a handful of similar markets. 

    Those are the markets I know best. They’re also the places where I have the most connections.

    Be sure to pitch investors that invest in your country. 

    If you’re in Nigeria, focus on investors that invest in Africa. Pitching a bunch of VCs that only invest in the United States is a waste of time. 

    What Sectors Do They Like?

    Investors also specialize in certain sectors. Some investors only do SaaS. Others only do marketplaces.

    Then there are firms that only do deep tech, like satellites and microchips. 

    Find investors that invest in your sector. If you’re a biotech startup, don’t bother pitching people who only invest in SaaS. 

    Find Out Their Check Size

    Finally, you should find out an investor’s check size. 

    It’s a good idea to pitch investors at a variety of check sizes. Sometimes, a small investor like me ($10k checks) can connect you with a big fund.

    Knowing each investor’s check size will help you put your round together. 

    Most seed rounds include a lead investor writing a check of over $1 million. They also often include some smaller funds and angels like me.

    Where to Find Investors

    I’m a big fan of OpenVC. They make it easy to find investors in countless countries and sectors. 

    When you’re searching on OpenVC or whatever platform you choose, filter based on the criteria above. Find investors that match your stage, sector, geography, and check size requirements. 

    Once you find the investors you want to target, send them a brief message. Tell them about your vision, team, and traction.

    Try something like this:

    Hi Jim!

    UberCab lets you call a black car using your smartphone. You can see the car’s location and you know your fare in advance.

    We are at $10,000/month revenue, growing 50% MoM. 

    My co-founder and I are both engineers. We’re raising a $2 million seed round.

    Got 20 minutes?

    Thanks,

    Travis Kalanick

    Keep it pithy! Investors are much more likely to respond to a a shorter message.

    Wrap-Up

    If you target the right investors, fundraising will get dramatically easier. 

    No more beating your head against a wall talking to people who are never going to invest. Instead, you’ll be talking to investors that are excited about companies like yours.

    Just like when you’re looking for customers, targeting the right people is everything. Target the right investors and you could find yourself raising millions.

    Have a great weekend, everybody!

    More on tech:

    Your Deck Probably Sucks. Here’s How to Fix It.

    An Investor’s Dream Cold E-mail

    How to Get Warm Intros the Easy Way

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Three Easy UX Wins to Make Your Product Better

    If your product is easy to use, you’ll get more customers. Here are three simple tweaks to make your product better…

    Make Sign-In Easy

    Always offer Google and Apple sign-in options. If you make it easy for customers to sign in, more of them will complete the flow and become users. 

    When an app makes me enter my email and create a password,  I often just close it and delete it. It’s too annoying and time-consuming. 

    One startup I spoke with recently saw a huge lift in conversion once they included Google sign-in. Make your app easy to use, and more people will use it! 

    Autofill 2FA Codes

    If your app sends text messages to users with two-factor authentication codes, make sure you fill in the code for the user. Don’t make them click or type anything. 

    Whenever an app grabs that 2FA code and inputs it for me, I think, “These guys know what they’re doing.” 

    Like offering easier sign-in options, 2FA autofill makes your app easy to sign up for. Make it easy, and more people will sign up!

    Make The Next Step Obvious

    In many work flows, you know the user’s next step. Make it obvious!

    Let’s say I need to input my address. After that, I need to click Next.

    Make that Next button pop. Go with bright yellow on a black background, for example.

    The user has no doubt what you want them to do – click this button! Customers love software that’s easy to navigate. 

    Wrap-Up

    You want people to use your product. So make it as easy as possible.

    Cut the number of clicks. Cut the number of things I have to enter. Make it obvious what I’m supposed to do next.

    Even some small usability tweaks can really increase conversion and usage. The more usable your product is, the faster you’ll grow!

    More on tech: 

    Should You Take a Low Ball Offer from a VC?

    Your Deck Probably Sucks. Here’s How to Fix It.

    Do Investors Take Forever to Get Back to You? Here’s What I’m Doing Differently.

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Why Seed Rounds at $40 Million Will Be Bad Investments 

    I’m seeing tons of seed rounds at $40 million and up. Here’s why those will turn out to be bad investments….

    Venture Funds Need Massive Growth

    Startups raising seed rounds at $40M need to hit $1B ARR within 10 years. That is a near-impossible task. 

    But any less, and it’s not a great investment.

    To justify investing in startups, we need to hit at least a 15% annual return. Stocks give us 10%. We need to beat that handily to make up for the risk and illiquidity.

    That means that we need to hit a 4X fund in 10 years. 

    A typical early-stage fund might contain 35 companies. Most funds have nearly all gains come from one company. 

    So, we need one of those companies to grow its valuation by 280x to get our 4x fund, after accounting for 50% dilution (35 x 4 x 2). 

    The Difficult Math of $40 Million Seed Rounds

    The average public SaaS company trades at 5.7x ARR. Let’s be generous and assume that our newly public startup trades at twice that, 12x, to account for high growth. 

    Our $40M seed stage company needs to grow to a valuation of $11.2 billion to give us our 280x. Unicorns aren’t enough anymore — we need decacorns. 

    At a 12x multiple, hitting a valuation of $11.2 billion requires $933 million ARR. If we get the average multiple of 5.7x, we need $2B in ARR. 

    Very few companies ever reach that much revenue. 

    If we had done that seed round at a more reasonable $15M valuation, we’d “only” need to hit a $4.2 billion market cap on $350 million in ARR to get our 280x (assuming a 12x revenue multiple). 

    Even that is very difficult. But it’s a lot more realistic. 

    But What If…?

    “But what if it’s the next OpenAI?”

    I can practically hear you saying that now.

    True, if that high price seed round becomes a company worth hundreds of billions, it will be an excellent investment. But those companies are vanishingly rare. 

    We can’t count on hitting one of the couple best companies in an entire generation.

    A more typical successful investment is a company like ServiceTitan. And while ServiceTitan is a great business, it’s no OpenAI. 

    What the Typical Unicorn Looks Like

    ServiceTitan went public a year ago. It’s trading at an $8.5B market cap on $866M of revenue in the last year. 

    That’s a 10x revenue multiple — well above average.

    But even for ServiceTitan, the $1B ARR milestone hasn’t come yet. And while it receives a generous multiple, it’s not high enough to make it a decacorn. 

    Making Exceptions

    Once in a great while, we’ll see a truly extraordinary company. Founders with incredible backgrounds. Off the charts growth.

    In a situation like that, we can make an exception. We can do $30, $40, or even $100 million if we really want to. Then, we can balance that out with more reasonably priced deals. 

    What we can’t do is pay $40 million across the board. 

    If we do that, our upside in the winners just isn’t enough. Our fund would have little chance of an acceptable return. 

    Wrap-Up

    Roelof Botha recently called investing in venture “return-free risk.” 

    If we’re doing deals in companies with little to no revenue at $40M valuations, Botha is absolutely right. Investments like that are highly unlikely to produce the returns necessary to justify the risk. 

    I’m focusing on awesome founders raising at reasonable valuations. 

    Price isn’t everything. But it’s not nothing, either. 

    More on tech: 

    Why Entry Price Matters

    Should You Take a Low Ball Offer from a VC?

    Scouting for an AI Venture Fund

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Scouting for an AI Venture Fund

    A strange number popped up on my phone this morning. It was Boardy, the first AI venture capitalist. And it looks like we may be working together…

    Boardy is an an AI agent that helps you find customers, investors, and employees. Scrolling X last night, I saw a post on Boardy’s new Scout Program. 

    I meet many hundreds of founders per year. Why not send a few of them to Boardy’s new venture fund? 

    Working Out Boardy’s Kinks

    I filled out a brief form and got a phone call from Boardy. Boardy interviewed me on my experience investing and why I’d make a good scout. 

    The first thing I noticed is that Boardy uses a voice with a very thick Australian accent. For the first couple of minutes, I could barely understand it.

    When you’re working with a mostly American audience, don’t choose a heavy accent like this. You want the most neutral American accent possible. 

    Next Step: Boardy Scout?

    But after a couple minutes, Boardy and I got into a good back-and-forth. 

    I explained how I source companies and spot great founders. I like to see highly technical founders building in a huge market. 

    Boardy asked good questions and clearly explained how its program works. Occasionally, Boardy went on a little too long or cut me off. But mostly, the conversation flowed smoothly. 

    After around 10 minutes, Boardy wrapped up our chat and told me that it would refer me to the human team. They’ll make the final decision whether I become a Boardy Scout.

    As capable as Boardy is, humans are still calling the shots.

    Is This the Future of Venture?

    Speaking with Boardy feels like the future.

    There are a huge number of founders raising at any given time. Boardy has already spoken with 7,000 of them, more than any human could manage.

    Giving every founder a hearing could change the game of venture. Entrepreneurs without the usual connections could still get in front of investors. 

    The best pitches will probably still be forwarded to humans. That’s how Boardy’s Scout program is working today, and I think AI VCs will continue to operate that way for the foreseeable future. 

    If you’re writing somebody a sizable check, you probably want to meet them at least once. 

    Would I Use an AI to Meet Founders?

    Using an AI to do your initial founder calls could make sense at a huge fund with tons of deal flow. But for me, it doesn’t yet. 

    My deal flow is modest enough that I’m able to meet every founder myself. An AI to interview founders wouldn’t add a lot of value. 

    But I can always use more great investors to refer my companies to.  So I’m looking forward to working with Boardy to get more cash into these great startups. 

    Wrap-Up

    More and more work is going to look like my chat with Boardy — humans talking to highly capable AI agents. 

    It’s weird and unsettling at first. But you’d be surprised how quickly you get used to it. 

    AI will let us do things we’ve never done before, like Boardy interviewing those 7,000 founders. Many great entrepreneurs who would have been overlooked by humans will be discovered by AI. 

    I want to take the plunge before everyone else and start working with AI to get companies funded. More people helping startups is always good, even if they’re not technically “people”. 

    More on tech: 

    Should You Take a Low Ball Offer from a VC?

    Do Investors Take Forever to Get Back to You? Here’s What I’m Doing Differently.

    Your Deck Probably Sucks. Here’s How to Fix It.

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Should You Take a Low Ball Offer from a VC?

    You’ve got six months runway left. Finally, a VC offers you a term sheet. But it’s a low ball offer. Should you take it? 

    Browsing Reddit this morning, I came across a founder in this very situation.

    A Midwest VC offered him a term sheet at a low valuation with heavy dilution. This early round will cost him 30% of the company. 

    Here’s how to decide whether to take that low ball offer…

    Under 6 Months Runway = Danger Zone

    If you’ve got six months’ runway or less, your company is in a critical situation. 

    Funding rounds often take several months to close. Even if you accepted a term sheet today, by the time it closes, you could be down to 3 months runway or less. 

    That is perilously close to going out of business. 

    If you had a year’s runway, you’d probably reject that low ball offer. But with minimal cash, you should probably take it.

    This is why I recommend starting your fundraise with 9-12 months of runway (assuming you’re burning cash at all). You don’t want to get into a cash crunch and be pressured into taking any term sheet available. 

    Can You Get to Breakeven?

    There’s one way to be sure you have the upper hand in fundraising: get to break even.

    If this founder can simply get his company to break even, he can use that leverage to get a better offer from the Midwest VC or someone else. He could even decide not to raise money at all. 

    Maybe this founder could stop taking a salary temporarily. Perhaps he could let go some underperforming employees. Or maybe there are some tools he’s paying for that he isn’t really using. 

    Every dollar he can cut will help in extending runway. And if he can get the burn to zero, the power balance will flip.

    Is 30% Dilution Too Much?

    30% dilution is very high for a pre-seed or seed round. I typically see 15% to 20%. 

    But beggars can’t be choosers. If there are no other good offers on the table and your company is running out of money, you may have to live with that dilution.

    If your company is a success, you can make it up later. 

    Let’s say your pre-seed round dilutes you 30%. If you start to grow rapidly, you might be able to skip straight to a Series A. 

    This would avoid the 15-20% dilution of a seed round. By the time you hit Series A, you’d be in a similar position to a startup that has raised two rounds of 15% dilution. 

    Wrap-Up

    Negotiations are about power. If you’re running out of money, you don’t have any. 

    If it’s between taking a low ball offer and losing your company, taking the low ball offer makes sense. But you want to avoid getting into that position in the first place.

    Do everything you can to get to break even before you raise. Then, you dictate the terms.

    Have you ever gotten a lowball offer from a VC?

    More on tech: 

    Your Deck Probably Sucks. Here’s How to Fix It.

    How Early Stage Founders Can Save Money and Buy Their Freedom

    How to Tell If Investors Are Really Interested

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • On Black Friday,  Working Class Consumers Are Struggling

    Americans have been hit by high inflation and are worried about their jobs. Will they show up at stores on Black Friday? 

    While richer Americans have strong finances, the working class is struggling. We’re seeing it everywhere from food lines to loan defaults. 

    Inside the Other America

    “I’ve never seen lines like that for food. There were hundreds of people.”

    My cousin, who works at a food pantry, was telling me about her work over Thanksgiving dinner yesterday. During the government shutdown, demand for food aid went through the roof. 

    It’s a window into a world I rarely see. Maybe you don’t either. 

    But it’s out there. And it’s beginning to show up in the economic statistics.

    Kitchen Table Worries

    Americans are deeply concerned about inflation. They’re also beginning to worry about their jobs.

    The University of Michigan’s consumer sentiment survey has fallen to its lowest levels in over three years. Among people aged 18 to 34, about one-third think they may lose their job in the next five years.

    If you’re worried about your job, you’re going to cut spending on extras. And on Black Friday, that’s what retailers are selling. 

    The Working Class Defaults

    Americans of all social classes are beginning to worry about the economy. But for the working class and poor, those worries are all too real. 

    Subprime auto loan delinquencies have hit their highest levels ever. As expenses for housing, health care, and groceries have risen, poor consumers are beginning to default in large numbers. 

    Overall, delinquencies for credit card and auto loans are at their highest since the financial crisis. Those delinquencies are concentrated in poor neighborhoods.

    At a time of low unemployment and rapid economic growth, Americans are defaulting on loans as if there were a severe recession. 

    The Resilient Wealthy

    Strangely enough, overall household debt is low. Consumer debt as a percentage of GDP has fallen steadily since the 2008 financial crisis. 

    Total consumer spending has held up as well. Much of this is driven by wealthier Americans. 

    In order to see the stress among American consumers, you have to zoom in. 

    The wealth gap in our country has gotten severe enough that overall economic statistics only tell us so much. Strength at the top masks serious weakness at the bottom. 

    Wrap-Up

    The rich and poor in America today might as well be living in different countries.

    For the fortunate like me, the economy is great. Stocks are high and AI spend is putting lots of money in our pockets. Inflation is a minor annoyance.

    But working-class people are at the end of their rope. 

    Rich people’s spending can power America’s economy for a while. But as more people struggle, this boom could soon turn to bust. 

    More on markets: 

    Why German Industry Is Failing

    Janesville — Or Why AI Will Be a Disaster for Jobs

    The End of Human Food Delivery

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order.