Tag Archives: Small Business

The Burn Multiple: What Is It, and What Can It Do for You?

Today, I want to talk to you about a startup metric you don’t hear much about: the burn multiple. The burn multiple measures how efficiently you’re using your cash to drive growth.

This number is more important now than it’s been in many years. We are in a more difficult fundraising environment and investors are heavily scrutinizing how companies use cash.

In the boom times we’ve had for the last couple years, high growth startups could get funded no matter how inefficiently they spent. Shoot, even startups with no revenue or product often raised big rounds!

Those days are over.

The NASDAQ is in a bear market, late stage funding is down, and investors are asking themselves not just “Who will thrive?” but “Who will survive?”

The startups that make it will be those who know how to use money to efficiently drive growth.

So now that you know why the burn multiple matters, how do you actually calculate it?

It’s pretty simple. For any period (usually a quarter or a year), divide burn (losses) by new revenue added in that period.

Burn Multiple:

Net Burn / Net New Annual Recurring Revenue (ARR)

Your burn multiple calculation should account for the length of your sales cycle.

If it takes you around 2-3 months to close a new customer, it’s appropriate to compare burn in Q4 2021 to new ARR in Q1 2022, for example. If your sales cycle is 6 months, compare Q3 2021 to Q1 2022.


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Now you know what your burn multiple is. But how can you tell if it’s good or bad?

Use these benchmarks from a superb post by David Sacks, one of the leading SaaS entrepreneurs and investors:

Burn multiple is especially relevant for SaaS companies with their sticky revenue. Burning cash to get lots of revenue that sticks around makes sense.

But the burn multiple is still quite relevant for all startups. It helps you understand if the cash you’re burning is actually building your business.

I recently saw a deal memo for a company that had burned about $1.1 million in a quarter to add just $80,000 of new ARR. That’s a burn multiple of 14.

A burn multiple like that is an emergency!

So let’s say you’re that company. What should you do?

Get that burn down right away! If you can’t show cash efficient growth, it’s going to be hard to raise money right now.

You’ll want to extend your runway (time before you run out of money) as much as possible. This gives you time to figure out the issues in your business before the cash runs out.

Another advantage of knowing your burn multiple is that you can share it proactively with prospective investors. Especially if you’re a seed stage company, your awareness of this important metric alone will impress investors.

Of course, you’ll impress them even more if you can show a good burn multiple!

I’m writing this because I want to see your company survive and even flourish! But we won’t get there with happy talk alone.

Calculate your burn multiple regularly and act when it gets out of line.

What issues are you seeing in today’s fundraising environment? Leave a comment at the bottom and let me know!

More on tech:

Inside Today’s Early Stage Venture Market

What the Best Founders I Know Have in Common

The Startup Pitch Checklist

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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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Venture Capitalists Don’t Invest in Ideas

A few months back, a very nice young lady contacted me. She had an idea for a software product and wanted me to hear it.

I had to think of a very polite way of explaining that…

Venture Capitalists Don’t Invest in Ideas.

Many people think that angels and VC’s spend their days evaluating ideas. When they find an interesting and original concept, they shake hands and write a big check.

This isn’t how it works.

There are countless ideas, but only a skilled and determined founder can turn her concept into a real product. And then it takes even more perseverance to find customers who need the product and get their money.


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Traction Over Everything

So rather than attempting to read the tea leaves and find out which idea will work, most investors look for evidence that it’s already working. That evidence is called “traction.”

If you have several thousand dollars a month in revenue coming in the door, growing 30% month over month, there is clearly a very strong demand for your product. You’ve proven its value in the market.

If you can show an investor traction like that rather than just a deck or even an MVP, your odds of getting funded skyrocket.

Why are investors so stingy? Because they know that most startups will never even get to dollar 1 of revenue.

If investors dump cash on too many companies that don’t succeed in the market, they will soon have no more money left to invest. And then, even the best startups won’t be able to raise capital.

Venture Capital Is to Help You Scale, Not to Help You Start

Venture capital is really for scaling a business, not starting one. If you clearly have strong demand for your product in the market, we can help you staff up and meet that demand.

But few investors, if any, want to give you money to build a product.

What we’re trying to avoid is a team that raises money, works on the product, but misses their launch date. The date is postponed, and they miss it again.

Soon, they’re back asking for more money with no real progress to show.

But What About Pre-Seed?

Even for pre-seed deals, most investors want to see a Minimum Viable Product (MVP) built. Without that, it’s difficult to tell what you’re even investing in.

It’s also hard to say if the founders will ever be able to deliver on their plans.

Even the Best Bring More Than an Idea

Last year, I got a deal memo in my inbox for Callin, a social audio app co-founded by David Sacks.

Sacks is part of the famed PayPal Mafia and served as the company’s COO. After that, he founded Yammer and sold it to Microsoft for $1.2 billion in 2012.

He has a stronger track record than almost anyone. But even he didn’t show up with just an idea.

Sacks and his team had a nicely functioning app in private beta available for iOS. Numerous users were already creating podcasts on the platform.

Alas, the round was massively oversubscribed and I never got my allocation. But I did come away with an interesting lesson.

Wrap-Up

If you want to raise money, show up with more than an idea. Show up with an MVP you can show investors.

Better yet, come with a couple of customers and a little money coming in the door. Nothing impresses investors like real customers and real revenue.

Building an MVP with minimal resources and finding customers on your own is very hard. But so is contacting investor after investor with little chance of success.

What misconceptions have you seen about fundraising? What still mystifies you about the process?

Leave a comment at the bottom and let me know!

Have a wonderful weekend everyone! 👋

More on tech:

Inside Today’s Early Stage Venture Market

What the Best Founders I Know Have in Common

Amp It Up

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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. 

What the Best Founders I Know Have in Common

Hi everyone, hope you had an awesome weekend! Today, I want to talk to you about some of the smartest people I know.

As an angel investor, I meet with a lot of startup founders. As I took a walk on the Hudson today, it occurred to me that the most successful ones all remind me of each other.

So what distinguishes the best founders from the rest? Here are a few thoughts:

1) They have all the facts at their fingertips. Whenever I ask them a question, they tend to know the answer cold.

I could be asking about a product feature, customer acquisition strategy, or a metric like gross margin. Whatever it is, they’ve thought about it already and know all the relevant facts.

2) Strong customer focus. The most successful founders I’ve seen are obsessed with their customers.

They know everything about them and what they need. And they tailor their product ever more carefully to those needs as time goes on.

What are the less successful founders focused on? Often their competitors, someone “stealing their idea,” or endless fundraising.


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We should always remember that the business’s goal is to serve the customer. Don’t let distractions take you away from that.

3) Openness to questions and criticism.

The best founders I’ve seen gladly answer any question an investor asks. They’re eager to show off their awesome product and happy customers!

The less successful ones evade questions and try to convince investors the business is going better than it really is. I sometimes suspect they’ve convinced themselves too, at their peril.

If we’re forthcoming with information and open to constructive criticism, we can learn from others and improve!

One of the most exciting moments for me as an investor is when a new founder reminds me of one of the best I’ve met. That’s when I start to salivate and reach for my checkbook. 🙂

The good news is that the best founders have a lot to teach all of us about how to up our game, if only we’re willing to listen!

What do you think makes a great founder? What did I miss?

Leave a comment at the bottom and let me know!

More on tech:

The Startup Pitch Checklist

Amp It Up

How to Write a Deal Memo

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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 to Write a Deal Memo

Everyone running a startup knows about the deck.

There are countless tutorials about how to write this PowerPoint presentation that forms a key part of a startup’s pitch. Shoot, I’ve even written one.

But what about the deck’s mysterious cousin: the deal memo?

Founders generally send potential investors a deal memo along with the deck when they’re trying to raise money. You would generally send one once you’ve confirmed some interest from the investor. (For the first introduction, a short deck is good.)

But when an investor is ready to take a serious dig into your business, it’s time for the deal memo. So what does a good deal memo look like?

I see over 200 of them every month as an investor. Here are how some of the best look:

Length

Generally more than 2 but fewer than 10 pages. About 6-8 pages is good.

More important than the exact length is that you cover important elements thoroughly but concisely.

Which brings us to…

Topics

Here are the sections I like to see, ideally in this order.

A paragraph or two for each section is good.

  • Deal Terms: How much are you raising at what valuation? And what type of security is it (SAFE, priced round, etc.)?
  • Prior Investors: Who has invested before and who is investing in this round?
  • Company Description: What do you do?
  • Traction: Show us your revenue growth in a monthly or quarterly chart. If you have no revenue, at least show us user growth. You should also compute the growth rate for the last 6-12 months using a tool like this.
  • Market Opportunity: How big is this market? Show VC’s that your market is big enough for you to become a billion dollar company, because that’s what they’re looking for.
  • Why Now?: Why is now the right time for this company to dominate? Why is the market ready? For example, imagine starting a videoconferencing company in 2019 versus 2020. The 2020 market would’ve been far more receptive.
  • Why Us?: Why are you and your team the right people to take on this problem? Tell us about your skills and also why the problem matters to you. If you’re solving a problem you’ve had yourself, you’ll probably be better at it and less likely to quit.
  • Competition & Defensibility: Who are your competitors, and why is your solution better? Many companies say “We don’t have any competitors. No one else does what we do.” That’s usually not a good answer. Maybe no other company does exactly what you do, but who is close? And why are you the better bet?
  • Use of Funds: What will you use the money you’re raising for? A simple breakdown like 60% engineering and 40% sales is fine.
  • Hiring: Who are you hiring now? Investors might be able to introduce you to a great candidate!
  • Key Risks: What are the top few reasons this business could fail? For example, you may struggle to hire talented engineers in this tight labor market.

Wrap-Up

Writing a good deal memo is a lot of work. But when investors are seriously considering your company, this document can seal the deal.

Leave nothing to chance! Get the deal memo right and give yourself the best shot at a fat check.

What questions do you have about deal memos? What did I miss?

Leave a comment at the bottom and let me know!

Glad to be back with you guys for another fun week! 👋

More on tech:

How to Ace a 3 Minute Pitch

The Lean Startup

Robot Pizzas and the Future of Fast Food

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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 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Judging a Startup Pitch Competition

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Last night, I had the honor of judging a startup pitch competition. Each founder in the Starta Accelerator in NYC had 3 minutes to pitch a panel of judges in front of a live audience.

I was so impressed with the hard work these entrepreneurs are putting into building their companies and pitching investors!

I also came away with some insights that might help other founders. Maybe you!

1) Be sure I know what your company does within the first minute.

Some founders do an amazing job of summarizing a problem, but aren’t as clear on how they’re solving it. The most important thing you can convey in your pitch is what your company does.

Don’t bury the lead!

2) Tell us exactly how you make money. Some founders do a great job of explaining what their product does, but don’t tell us how they actually get paid.

One of the key things investors are trying to learn about your company is the revenue model. So make it a big part of your pitch.

3) Clearly state the terms you’re raising at. After watching 6 companies present, I noticed they all had one thing in common: not one said what valuation they’re raising funds at!

Tell us how much you’re seeking to raise and at what valuation. And be clear as to whether the valuation is pre-money or post-money.

You also want to mention how much money is already committed to the round, if any.

Here’s a good example sentence: “We are raising a $1 million seed round on a $7 million pre-money valuation with $500,000 committed.”

Some founders are reluctant to ask for anything out of modesty. Others don’t want to be pinned down to a particular valuation because they want to negotiate it later.

But you must ask investors for something specific. Otherwise, what’s the point of your presentation?

You can always negotiate those terms later, but be sure to offer a starting point.

4) Give us some key numbers.

We investors love metrics. So show us your month-over-month revenue growth rate, gross margin, churn rate, net revenue retention, etc.

A good story is essential, but good metrics close the deal.

And finally, on a hopeful note…

5) You can improve your pitch enormously in a short period of time, if you do the work.

I saw one of the founders that pitched last night two weeks ago. In that early pitch, I honestly had no idea what the company did.

When I saw him last night, he was polished and crisp. I knew exactly what his company did and why.

And I almost found myself reaching for my wallet. 😄

If you put the work in, you can improve. Repetition goes a long way!

What do you think makes a great pitch? And what questions do you have for me about speaking to investors?

Leave a comment at the bottom and let me know.

Have a wonderful weekend everyone! 👋

More on tech:

How Startups Can Dominate the Elevator Pitch

Why Your Startup Shouldn’t Be an LLC

Find Code Faster Than Ever

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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 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Why Your Startup Shouldn’t Be an LLC

Every now and then, I see the unthinkable: an LLC trying to raise venture capital.

You want to give your startup every chance of success. So don’t shut yourself out from venture capital with this rookie mistake!

Repeat this mantra every night before bed: “investors want a Delaware C Corp.”

Why Don’t Investors Like LLC’s?

Here are a few reasons:

1) Issuing stock options to employees is difficult and expensive.

Almost all startups use options to recruit and retain employees. You don’t want your legal structure to make that nigh impossible.

2) Investor taxes become a nightmare.

3) The venture fund’s own investors won’t have it.

These limited partners (LP’s) who put their money in the venture fund don’t want to deal with the tax complexity of LLC’s.

What’s more, many LP’s are tax exempt foundations and endowments. They don’t want the taxable income an LLC will pass through to them.

4) LLC’s don’t qualify for a big tax loophole.

Qualified Small Business Stock (QSBS) can shelter up to $10 million in capital gains from any taxation whatsoever. Pretty sweet, eh?

But LLC’s don’t qualify. C Corp’s do.

LLC’s Advantages Are an Illusion

I know, I know, C corp’s cause double taxation of profits, both at the corporate level and the individual level. But given that most startups make bupkus for years, you don’t need to worry about that.

And yes, LLC’s are very simple to form. But if you’re issuing options and raising capital, the LLC soon becomes far more complex than the C Corp.

From Harvard-trained attorney Jose Ancer:

The amount of tax and legal analysis that has to be done to issue equity compensation and/or raise capital in an LLC is (without exaggerating) 10x that of a corporation.

What’s the Obsession with Delaware?

Simply put, it’s the standard. Delaware has well-established corporate case law and investors are used to dealing with Delaware companies.

Delaware also has some sweet tax advantages.

What If I Already Screwed Up?

I’m sending you to bed with no dinner!

Just kidding. If you initially formed an LLC and now realize you need to be a C corp, it’s okay! Just make sure to convert before raising any money.

Once you’ve raised money, converting becomes a lot harder and more expensive.

Here’s Becki DeGraw, a partner at top tech law firm Wilson Sonsini, explaining the conversion process on This Week in Startups:


How Do I Make a Delaware C Corp?

You’re in luck! It’s much easier than it once was.

There are online services that can handle the whole thing for you. Stripe Atlas is one popular choice.

Another is Capbase, which can not just form the company but manage your cap table (list of company owners) and a lot more. Full disclosure: I’m an investor in Capbase.

Whichever method of incorporation you choose for your tech startup, just be sure it’s a C Corp registered in Delaware and you’re off to a great start!

Happy building!

More on tech:

Why I Just Invested in Capbase, The Startup in a Box

How Startups Can Dominate the Elevator Pitch

The Lean Startup

If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

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 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

The Lean Startup

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“There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

Peter Drucker

You’ve written a 92 page business plan. For three years, you hunched over your laptop coding, sustained by Red Bull and Cheetos

At last, launch day is here! You press the button and…

Nothing happens.

You keep refreshing the page, but no one is signing up. You try one marketing channel after another, convinced that massive growth is right around the corner.

But the hard truth is, no one wants what you’ve built.

That is a hard moment for anyone. And it’s why Eric Ries wrote the seminal book The Lean Startup, which I just finished this morning.

The Lean Startup framework involves creating a Minimum Viable Product (MVP) and getting it to customers ASAP. Then, by seeing how customers use it, you make changes to the product (“iterate”) to see if you can serve customers better.

Build-Measure-Learn is the loop you want to go through as frequently as you can. Build something you think customers need, measure how it does with customers, and learn how to do a better job meeting those needs in your next version.

“The question is not ‘Can this product be built?’ In the modern economy, almost any product that can be imagined can be built. The more pertinent questions are ‘Should this product be built?’ and ‘Can we build a sustainable business around this set of products and services?’”

Eric Ries

Ries gives some incredible examples of just how minimal that MVP can be.

Nick Swinmurn started Zappos by taking pictures of shoes in nearby stores. He put those pictures on his website and if anyone ordered a pair, he went to the store, bought and shipped them.

“But that doesn’t scale!”

Sure it doesn’t! But in 1999 when Swinmurn founded the company, no one knew if people would buy shoes on the internet.

Starting with a mostly manual process was a lot better than Swinmurn spending months if not years and untold sums building infrastructure to accomplish what no one wanted in the first place.

Early stage startups have limited capital and only so much time to prove their business can work. By getting through as many cycles of Build-Measure-Learn as possible, founders give themselves the best chance at finding a viable business before the clock runs out.

In just 11 years, Ries’ ideas have gone from unusual to being the accepted way to run a startup. His book, while at times a slog, is essential reading for both founders and investors.

I’ll leave you with the quote that struck me most. It’s one I aim to live by:

““…if you cannot fail, you cannot learn.”

Eric Ries

More on tech:

The High Growth Handbook: Scaling Startups from 10 to 10,000 People

How Startups Can Dominate the Elevator Pitch

What I Look For in Startups

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Photo: “Eric Ries – The Lean Startup, London Edition” by betsyweber is marked with CC BY 2.0.

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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 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

How Startups Can Dominate the Elevator Pitch

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You walk into an elevator. As the doors close, Doug Leone of Sequoia steps in.

Suddenly, a lump appears in your throat. Your palms sweat.

This is your moment.


Last night, I went to a fascinating pitch event at a startup accelerator in New York City. Each one had just a single minute to deliver an “elevator pitch” to an audience of operators and investors.

In this challenging format, many managed to paint a compelling vision. So what key elements should you make sure to include, and what should you leave out?

Here are some do’s and don’ts.

Do:

1) State a company name, clearly. Sometimes the name doesn’t pass the “bad telephone” test. I’m left wondering “did they say ‘Aleck Watt” or “Alley Cot’?” and it’s actually “Aliquot,” to take a fictional example.

Make the name clear and easy to understand.

2) Clearly state the value proposition. Instead of just talking about the market, talk about exactly what you do.

If Uber pitched, they could tell us how broken the taxi market is. True, but what does Uber actually do?

Make that value proposition for the customer very clear. “Uber can get you from anywhere to anywhere quicker and easier than a taxi.”

You also want to identify the customer clearly. Is it individuals, businesses, governments?

3) Explain the business model. Too often, it’s unclear how a startup actually makes money.

To take the Uber example, just say “We take 30% of all rides on the platform.” Keep it simple and avoid discussing numerous different revenue streams.

If you don’t tell us how you make money, we’re left to assume that you don’t make any. No bueno.

4) Tell us what traction you have. If your revenue is growing 20% month over month, definitely mention that.

If you don’t have any revenue yet but your user sign-ups doubled this month, talk about that.

Of all the areas of a pitch, this is the one startups miss the most. Give us a reason to think your product is catching on!

Don’t:

1) Leave us wondering what your product does. If we don’t know that within that first minute, you’ve failed.

2) Don’t talk about Total Addressable Market (TAM). Founders often think they can get investors salivating by mentioning that they’re taking on a $500 billion market.

But we know those numbers are often plucked from the air (or a Gartner report). Save it for a second meeting.

3) Mention other business lines you may pursue in the future.

Just stick to the current business. There’s no time for anything else.

The elevator pitch is simple: introduce the company, what it does, and what traction it has. It should give the investor enough information to say, “I want to hear more.”

Best of luck!

What do you think makes a great elevator pitch, and what should be avoided? Let me know in the comments at the bottom.

More on tech:

This Is How Startups Pitch Investors

Fathom: The Podcast Player from the Future

The #1 Reason I Say No to Founders

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Photo: “Help is on the way, elevator, Chicago Tribune, Chicago, IL.JPG” by gruntzooki is marked with CC BY-SA 2.0.

If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

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 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

The Biggest Challenges for Startups Now

Lately, I keep seeing startups running into the same problems.

As an angel investor, I work hand in hand with numerous startups. I also see presentations and deal memos from hundreds more.

Let’s dig into some of the biggest challenges they have in common:

Recruiting

The labor market is red hot, especially for top tech talent.

So how can you get an edge in recruiting? One tactic I’m seeing successful startups use is hiring worldwide.

The pandemic has most of us working remotely anyhow, so an engineer being in Canada or India is less a barrier than before.

Startups probably don’t have the resources in house to handle the complicated legal and tax implications. But fortunately, International Professional Employer Organizations (PEOs) can help.

These companies hire your employees, wherever they are, and handle all the regulatory issues. You just cut them a check.

So you’ve got the tax and legal down pat…but how do you get that amazing engineer to accept your offer?

Amazon sends a gift to prospective employees who do well in interviews. They generally choose the “book bomb,” or a bunch of books they think the prospect will like.

I might favor some yummy food through SnackMagic or Goldbelly. 🙂

CAC Expansion with the iOS 14 Update

For consumer companies in particular, the iOS 14 update stung. iOS devices now prompt users to block ad tracking, and most do.

If you were advertising on Facebook or Instagram, that tracking data helped get your ads in front of the right people.

Let’s say you are a D2C underwear brand for women and only ship in the US. Without tracking, you could be spending your precious ad dollars advertising to men in Germany!

The upshot: Customer Acquisition Cost (CAC) expansion. The cost to get a new customer increased by 3x or more at a lot of companies I’ve seen.

So what should you do?

How about YouTube ads? One successful startup I saw recently doubled their YouTube ad spend with a mere 5% increase in CAC.

Users on platforms like YouTube are often searching for something, not scrolling through a feed. There’s greater intentionality.

If they’re searching for information on women’s underwear, you know that they could be a good prospective customer, and you can show your ad.

This would be even more true for search engine ads.

Another great option is influencer marketing. Platforms like GRIN or Outfit Talent make it easy to find and pay influencers whose audiences are interested in products like yours.

Wrap-up

Being a founder can be lonely. You always want to tell everyone “how great things are going.”

Being an investor is different. You see countless companies struggling with the same issues.

So know that you’re not alone and there are good solutions! The main thing is to keep trying.

I hope this was helpful to someone. And if you have any feedback, please leave it in the comments at the bottom.

Have a great weekend everyone!

More on tech:

3D Printing a Human Ear

Why I Just Invested in Capbase, The Startup in a Box

Inside a Startup Accelerator Demo Day

Note: I am not an investor in any of the companies mentioned

Photo: “defeat” by katiew is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Facebook/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

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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 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Why I Just Invested in Capbase, The Startup in a Box

Knowing who owns your company should be easy, right? Just keep a spreadsheet with the names and percentages and you’re all set!

Unfortunately, company ownership is a lot more complicated than that. Different investors buy in at different prices and different terms over time. 

That’s where Capbase comes in. Capbase can handle your incorporation, capitalization table (list of company owners), stock options and a lot more. Capbase is so advanced that when you raise a fundraising round, it can automatically update your cap table as the wire transfers come in!

It’s basically a startup in a box. And it’s taking over the industry. 

Very few corporations use any software solution to manage their cap table. In the future, I think all of them will. And Capbase is hard to beat. 

Best of luck to this awesome team!

More on tech:

Inside a Startup Accelerator Demo Day

What if Everyone on Earth Had Super Fast Internet for $1?

Why I Just Invested in Gauge, the Best Way to Sell Your Car

Photo: “wrapped gifts with string and paper tape scissors on wood table” by PersonalCreations.com is licensed under CC BY 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

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 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! 

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order.