Tag Archives: Entrepreneur

Shopify’s Tobi Lutke on Layoffs and Building for the Long Term

Few people did better during the pandemic than Tobi Lutke. The Shopify founder signed merchants to his e-commerce platform at a record pace, doubling revenues in 2020.

It was all systems go. Lutke hired like crazy to meet demand and locked up every server he could.

Meanwhile, Shopify’s stock price more than quintipled, putting the company’s valuation at over $200 billion.

In an excellent episode of This Week in Startups, Lutke tells us what it was like to guide his company through these heady times.

Employees were so distracted that Lutke had to make a rule: anyone caught checking the stock price had to buy donuts for everyone. Tim Horton’s, if you please.

But as the pandemic receded and stores reopened, consumers retreated from e-commerce. This left Shopify overbuilt and overextended.

Lutke was in a position he’d never been in throughout Shopify’s heady expansion. He had to do layoffs.

Shopify laid off 10% of the company this summer. For Lutke, the decision was wrenching.

“They were some of our hardest days.”

Tobias Lutke

Because Shopify had expanded ahead of demand. When demand dropped, that left Lutke with no choice but to lay off workers.

However, many of those workers would’ve never had the job in the first place had Lutke not expanded aggressively. And as well-paid tech workers, they’re likely to land on their feet.

Shopify’s tough times show how even large businesses struggle. A company with a $200 billion market cap can see its stock crushed and be forced to do layoffs just months later!

Take heart, early stage founders! The big boys face huge challenges too, just like you.

In all, I think Shopify is well positioned for the long term. It focuses on providing amazing service and doesn’t copy merchants’ products like Amazon.

When your livelihood depends on a platform, you want someone you can trust. Shopify fulfills that role better than Amazon.

I also commend Lutke for building a more honest culture at Shopify than most companies. He calls Shopify a team, not a family.

We all know the “family” rhetoric is nonsense. I have to give Lutke credit for telling it like it is.

I think his employees will too!

What do you think of Lutke’s leadership during the pandemic? Leave a comment at the bottom and let me know!

More on tech:

When Are You Ready to Raise a Seed Round?

How to Avoid Scams, Find Investors, and Lead Like the Best

The Founders: The Story of PayPal

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When Are You Ready to Raise a Seed Round?

It’s a huge moment in a startup’s life: you shake hands with VC’s and seven figures hit your bank account. But when are you ready to raise a seed round?


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One of the biggest mistakes I see founders making is trying to raise money before they’re ready. They wind up beating their heads against the wall, simply because they’ve put the cart before the horse.

Here is how you know if you’re ready to raise a seed round:

1) Your product is launched. Believe it or not, companies try to raise seed rounds all the time without even having a product in market.

Sometimes they don’t have anything built at all!

If that’s you, your time would be much better spent finishing your product and launching it. Few people will invest pre-launch.

2) You have real customers and revenue. In addition to being launched, you want signs that you have a real, viable business.

And you can’t have a viable business without paying customers!

Most companies that successfully raise seed rounds have about $3,000 to $25,000 a month in revenue. Less than that, and you may not be ready to raise yet.

Meanwhile, when your annual revenue tops $1 million, you’re getting into Series A territory.

3) You’re growing fast. You want to be growing revenue at least 10% month over month in order to raise a seed round.

I generally look for the most explosive growers, who are scaling at 20% a month or more.

If your revenue is flat, raising capital is tough. People want to be on a rocket ship!

4) You have a strong team. You want around 4-6 people, at least half technical.

If you’re a solo founder or you don’t have anyone technical on the team, you’ll struggle to raise. You’ll also struggle to build a product and iterate on it.

Those two are not unrelated. 🙂

5) Your valuation is reasonable. Seed valuations are around $8-10 million post money these days.

Startups generally raise $1-2 million in their seed round.

6) You’re incorporated properly. I know, I know, I keep harping on this!

But make sure you’re a Delaware C Corp if you want to raise venture capital. More on why here.

I’ve had founders tell me that fundraising is the hardest thing they’ve ever done in their career. One of the biggest reasons for that is companies try to raise money before they’re ready.

You’re better off building your company up a bit first! Then, fundraising becomes way easier.

Show us a company with delighted customers and rapid growth, and we’ll be knocking each other down to get in!

What questions do you have about raising a seed round? Leave a comment at the bottom and let me know!

More on tech:

Why Your Startup Shouldn’t Be an LLC

How to Avoid Scams, Find Investors, and Lead Like the Best

The Startup Metrics That Make Investors Drool

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How to Avoid Scams, Find Investors, and Lead Like the Best

Happy Monday everyone! I wanted to share an interview I did recently on startups and fundraising with the Finance Videos Network.


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We cover a lot of great topics, like leadership, finding investors, and red flags founders should look out for.

Here are some interesting points:

2:40: What great leadership looks like in early stage startups.

5:02: How to find investors.

6:30: What if you didn’t go to Harvard or Stanford?

8:18: When is the right time to raise money?

9:30: How to do a first meeting with an investor.

10:26: Signs that an investor is a fraud.

11:48: Should founders move to a tech center?

What do you think of today’s funding environment? What did we miss?

Leave a comment at the bottom and let me know!

More on tech:

The Startup Metrics That Make Investors Drool

How Startup Founders Get Scammed

The Founders: The Story of PayPal

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The Startup Metrics That Make Investors Drool

Many entrepreneurs can tell an amazing story. But what about the hard numbers you need to back it up?


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Here are the type of figures that get me salivating:

1) Revenue growth. I like to see startups signing up customers at a rapid clip.

Companies I invest in usually are growing their revenue at least 20% month over month. These represent the cream of the crop of seed stage companies.

As startups mature, that benchmark goes down. For a company at Series A or later, 10% month over month growth is excellent.

You can calculate your growth using a tool like this.

Growth is critical because the best startups tend to catch on fast. Google, YouTube, PayPal and countless others grew at incredible rates shortly after launch.

2) Gross Margin. It’s not hard to grow if you’re selling a dollar for 90 cents. Knowing your Gross Margin makes sure that doesn’t happen.

Here’s how to calculate it: take the money left over from a sale after variable costs (marketing, etc.) and divide it by the revenue from the sale.

A SaaS business should shoot for a Gross Margin of at least 75%.

3) Burn Multiple. Many startups lose money to fund growth. But how do you know if you’re losing too much?

That’s where the Burn Multiple comes in. It measures how much money you burned in the prior month divided by how much new revenue you signed.

Seed stage companies should have a Burn Multiple of 3 or less. More on the burn multiple here and here.

4) Runway. This is how long you have until you run out of cash.

If you’re burning $50,000 a month and you have $300,000 in the bank, you have 6 months of runway.

I want a startup to have a bare minimum of 18 months of runway after the round closes. In today’s down market, I’d prefer to see at least 30 months runway.

This way, you have plenty of time to wait out a difficult market.

And if you’re “default alive” (break even or better), congrats! Burn Multiple and Runway don’t apply to you and you’re in an exceptionally strong position.

Is it hard to hit all these benchmarks? Absolutely!

That’s why I have to look at 150-250 companies to find a single investment. Performance at this level is rare.

But if you can hit these hurdles, you’ll find investors breaking down your door. And I’ll be one of them. 🙂

What key stats do you track as a founder or investor? Leave a comment at the bottom and let me know!

Have a great weekend everyone! 👋

More on tech:

How Startup Founders Get Scammed

The Founders: The Story of PayPal

Midas Speaks: Sequoia’s Don Valentine at Stanford GSB

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How Startup Founders Get Scammed

Startup founders sometimes tell me about mysterious “services” they’re thinking of paying for. That’s when I get out my megaphone and shout into their ear “Never pay for that!”


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Entrepreneurs are hopeful people. They have to be.

But some scammers take advantage of that optimism to make a buck. And sadly, they like to prey on women and minorities.

They know that these folks have a harder time raising money and may be more desperate.

Let’s avoid you getting scammed. Here are some things you should never pay for:

1) Pitching investors. Investors like me listen to pitches all day, every day.

We don’t expect to be paid for it. We get paid when we invest, you grow your company, and go public!

Never pay to go to a pitch event. Ever.

Real investors will never charge you. Anyone who’s charging you is pretending to be a VC and isn’t worth your time.

2) Investment. Some so-called venture funds will charge you mysterious fees to get the investment.

Sometimes it’s a “syndication fee,” whatever that is. Sometimes they choose another name.

It’s like the Nigerian prince who needs $300 so $1 million will be released to him.

Whether it’s a Nigerian prince or a bogus VC fund, you should tell them to talk to the hand.

There are real costs to making investments: SPV incorporation fees, wire fees, etc.

But guess who should be paying those? The investors!

3) “Advice”. Don’t give up cash or precious equity for some amorphous “advice.”

If you want to give advisor shares to someone who has put cash into your company, feel free. Just be sure they’re spending at least several hours a month on your startup.

But if someone doesn’t believe in your company enough to put their own cash on the line, why would they want to be an advisor?

4) Introductions. Some scammers want to charge you for introductions to some magical list of investors.

This is a cousin to #1, the pay to pitch. And you should run away from both, as fast as you can.

Let me tell you how intros really work in venture capital. I invest in a company, then I e-mail my friends at a few funds I regularly co-invest with.

I tell them what I’m investing in and why. And I ask if they want to meet the founder.

How much do I charge the founder for this? Zero!

It’s part of the value I try to add at every company I invest in. It helps me win deals and helps the companies I’ve bet on.

I don’t want to see any of you guys get scammed. So be on the lookout for vultures circling trying to peck at your precious capital.

Real investors are happy to meet with you and help out for free. That’s what they do.

Anyone else is a clown who isn’t worth your time.

What other scams have you seen in startupland? Leave a comment at the bottom and let me know!

More on tech:

The Founders: The Story of PayPal

Why Drone Delivery Will Be an Awesome Business

Giving Investors What They Need to Say Yes

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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.

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The Founders: The Story of PayPal

PayPal processes over $1 trillion in payments every year. But its product began as an afterthought.


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The PayPal founders’ originally wanted to beam money between PalmPilots.

After all, everyone they knew had a PalmPilot! E-mailing money would be a backup in case you left your PalmPilot at home.

The problem was, not everyone was a Silicon Valley early adopter. Few people had PalmPilots at the time, and money beaming never caught on.

What did catch on was that throwaway product: e-mailing money. Buyers and sellers on eBay flocked to PayPal, with users growing ten-fold every month.

In the excellent new book, The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley, author Jimmy Soni tells the story of how this iconic company came to be.

A key advantage for PayPal was its laser focus on hiring the best people.

Few had experience in payments or designing internet products. But they were smart, capable and driven.

Once they joined PayPal, the company trusted them from day one. Having real influence made these new employees act like owners.

PayPal also kept very close to customers.

They used their own product frequently to suss out bugs. Employees even responded to user complaints on eBay forums, earning great loyalty in the process.

And even before Confinity and X.com merged to form PayPal, the young entrepreneurs carefully observed the competition.

One would often find the names of the other’s employees in its customer records. They were keen to learn from their competitor.

Just four years after its founding, PayPal was acquired by eBay for $1.5 billion. For eBay, it was an admission that it couldn’t beat its scrappy competitor.

PayPal has some great lessons for founders. Sometimes the market shows you what your product is — be open to it!

It also shows how critical hiring is. Indeed, PayPal’s staff was so good they went on to dominate Silicon Valley, founding Tesla, SpaceX, YouTube, LinkedIn and more.

For investors, PayPal shows the timelessness of a question from Arthur Rock, perhaps the first venture capitalist: “Who do you admire?”

PayPal co-founder Max Levchin deeply admired his grandmother.

She overcame antisemitism and sexism to get a PhD in physics in the Soviet Union, a rare feat. Later, she was diagnosed with breast cancer but willed herself to live another 25 years.

Any investor who heard that story would know that Levchin aspired to be as tough as his grandma. But how many investors would think to ask?

Fortunately, if you missed that, PayPal’s off the charts growth would catch your attention. Any startup that’s growing ten-fold every month is a bet you have to make.

Tech giants often had massive growth early. PayPal’s early numbers look a lot like those of Google, YouTube or WhatsApp.

This is why I strongly emphasize growth when I make early stage investments. Whatever its flaws, it’s hard to argue with a startup that’s 10X-ing its customer base every few weeks.

Somewhere right now, there’s another PayPal. A small group of driven people who are creating something big.

And I won’t stop until I find them.

What lessons do you draw from PayPal? Leave a comment at the bottom and let me know!

More on tech:

The Power Law (Part One)

Amp It Up

The Lean Startup

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Photo: “PayPal Co-Founder Max Levchin, Allen & Company, 2015” by Thomas Hawk is licensed under CC BY-NC 2.0.

Giving Investors What They Need to Say Yes

I see a lot of awesome startup ideas every day, from plant-based salami to rocket fuels. These entrepreneurs know how to build great businesses, but often have no idea how to communicate with investors.


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Some founders give me tons of details — but none of the facts I actually need! Let’s go through what information investors need in order to give you that “yes”:

1) Explain exactly what your business does, succinctly. If if takes paragraphs to explain, you’re doing it wrong.

You should be able to explain what you do in a single sentence. For example: “Uber makes it easy for you to get a ride anywhere, anytime.”

If an investor can’t understand what you do and why, he isn’t going to invest.

2) Show revenue clearly. You would not believe how many people get this wrong.

Report your revenue month by month. Don’t just tell investors your last month’s revenue, or add all your revenue up and report it as a single number.

Investors want to see a trend. Are you growing fast, or just treading water?

Showing revenue broken down properly allows them to see that trend.

Here’s an example of how it should look. Give investors both a table and a graph, so they can see exact numbers and visualize the trend.

Bonus points if you calculate your monthly growth rate using a tool like this. At that point, you’ve done everything but write the check for them!

That’s what you want to do: make it easy for them to say “yes.”

3) Be clear about terms and legal.

If you have a lead investor, the terms and valuation will already be set. Be sure to communicate those to every investor you speak with, so they know what they’re agreeing to.

If you don’t have a lead, be sure investors know that too. Some investors, like me, do not lead rounds.

Others only lead rounds, so the fact that you don’t have a lead is actually a positive for them!

Also, clearly explain how you’re incorporated. Most investors only want to invest in Delaware C Corporations.

If you can give this basic info on what the company does, how it’s performing, and how the investment will work, you will have answered most questions right off the bat. When a founder has her presentation dialed in like that, I assume she is experienced and highly competent.

Remember, if investors don’t have the info they need, the default decision is always no.

Make sure that doesn’t happen to you! Present the key facts clearly so you’ll have the greatest chance of success.

Where do you find founders struggling to communicate with investors? Leave a comment at the bottom and let me know!

More on tech:

I Pitched a Robot VC

How Wordcab Will Change Business Communication Forever

The Last Fast Food Worker in California

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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.

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How Wordcab Will Change Business Communication Forever

Like everyone else, I get invited to a ton of Zoom calls these days. Even if the information sounds useful, I often don’t have time to attend!

But what if I could read a brief, accurate summary of every call in minutes?


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That’s what Wordcab’s API can do. This incredible new startup based in NYC can summarize Zoom meetings, customer service phone calls, sales calls, and a whole lot more.

When the co-founder, Aleks, pitched us, he even summarized his own presentation using Wordcab!

Sure enough, a perfect one sentence summary popped up.

You can even vary the length of Wordcab summaries depending on the level of detail you need.

Do you want to get the information down to a sentence or two? Or would you prefer a few paragraphs that give you more info?

Either way, Wordcab is on your side.

I was extremely impressed with Aleks’ strong customer focus. He knows exactly what his customers need and makes sure they get it, no matter what.

That’s the kind of company you want to do business with. It’s also the kind of company I want to invest in.

In time, Wordcab may be used to summarize emails, documents, and all forms of business communication. This would be a true revolution in the way we work, making us dramatically more productive.

I’m delighted to be an investor in their recent pre-seed round! I can’t wait to see this great team scale up and change the business world forever.

More on tech:

The Last Fast Food Worker in California

I Pitched a Robot VC

Mark Twain: Venture Capitalist

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Mark Twain: Venture Capitalist

Mark Twain is one of the greatest American authors. But not many people know he was also a venture capitalist.

A phenomenally bad one.

Twain lost the equivalent of nearly $10 million* in a single investment: the Paige Compositor. Invented by James Paige, it was one of the first typesetting machines.

The Paige Compositor

The machine was a marvel, printing faster than anything else — when it worked. But with 18,000 moving parts, the Compositor was prone to breakdowns.

Paige worked on the machine for over two decades before releasing it. Twain repeatedly doubled down on his initial $5,000 investment during this time, putting in a total of $300,000.

In 1887, Paige finally put the Compositor on the market. By that time, its main competitor, Linotype, had already been on the market for 3 years.

Linotype was cheaper, simpler, and less prone to breakdowns. It soon ran away with the printing market.

Paige died penniless and Twain went bankrupt.

What can we learn from their mistakes?

Paige’s critical error was failing to get a Minimum Viable Product (MVP) to market as soon as possible.

This would’ve let Paige begin to learn what customers want and what competitors were capable of. He might have soon realized that customers didn’t like his machine because it was too expensive and unreliable.

Then, Paige could’ve simplified it, reducing breakdowns and cost. Paige and Twain just might have wound up with a huge success!

Instead, Paige kept tinkering endlessly, divorced from the lessons of the market.

Meanwhile, Twain should’ve never put so much money into a single company!

You never invest more than you can afford to lose in startups. And you must make many small bets to give yourself enough chance of hitting an outlier success.

If Twain wanted to invest in the Compositor, he should’ve placed a small bet and waited. If the company got to market and started selling lots of machines, he could place another small bet.

Investors doubling down on winners is what we call “milestone based funding.”

Companies get a little money to start. Then, if and only if they hit certain milestones, they get more.

It’s the fundamental principle of Silicon Valley, like F = ma in physics.

Today, we systematically avoid the mistakes Twain and Paige made.

We read The Lean Startup by Eric Ries and learn to launch as soon as possible. We read Angel by Jason Calacanis and learn to make many small bets instead of one big bet.

But let’s not judge Twain and Paige too harshly. After all, they never got to read those books.

The lessons of early entrepreneurs and investors taught us what we know today.

After his bankruptcy, Twain went on a world tour telling jokes and stories on stage. He traveled as far as India and made enough to pay off his debts.

Things were looking up for Twain. And then he heard about another revolutionary invention

What lessons do you take from Twain and the Paige Compositor? Leave a comment at the bottom and let me know!

Have a great weekend everyone! 👋

More on tech:

What I Learned From an Investor Who Turned $100,000 into $100,000,000

The Lean Startup

John Doerr’s Biggest Mistake

Note: Twain invested approximately $300,000 in the Paige Compositor, which failed in 1894. That equates to about $9.7 million in today’s dollars.

Photo: Twain in Nikola Tesla’s lab

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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.

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Startups’ Secret Weapon for Recruiting: Their Investors

One of the hardest things for any startup is attracting great employees. But new research from Harvard Business School points to a shortcut:

New research finds that job seekers are two-thirds more likely to apply to a startup if they know it is backed by a top venture capital (VC) investor, according to a new study coauthored by Harvard Business School Professor Shai Bernstein.

To test if the name of a top investor makes a difference in luring applicants, the researchers collaborated with AngelList Talent, an online recruitment platform, to conduct a randomized experiment on the platform.

The researchers found that exposure to information that a startup is backed by top VC investors increased job applications dramatically—by 67 percent.

“The same startup receives significantly more interest from potential employees when it is represented with the top investor badge than when it is not,” they write.

Early stage startups benefited the most. For companies at Series B and later, having top investors had less impact on applicant interest.

This points to a great strategy for startups with top investors: shouting the investors’ names from the rooftops.

If you have Sequoia, Benchmark, or any top firm on your cap table, put it in every job ad. Have your employees mention it when they recruit their friends.

Another great way to land top prospects is press coverage. PayPal got a huge recruiting boost from media reports in its early days.

And unlike capital from top investors, media coverage is available to anyone with a great story to tell.

Founders: how do you recruit top employees? Investors: what recruiting strategies are working well for your portfolio companies?

Leave a comment at the bottom and let me know!

More on tech:

Adam Neumann Was Their Biggest Investor — Now He’s Their Biggest Competitor

John Doerr’s Biggest Mistake

Talking Startup Fundraising with Travis King of Launch Point Labs

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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. 

Photo: “Sequoia Capital” by isriya is licensed under CC BY-NC 2.0.