How AI Saved My Company From a 2-Year Litigation Nightmare

After 2+ years and a tremendous waste of energy and money, my firm Calm Company Fund resolved a lawsuit against us on very favorable terms.

What started as one of the most challenging periods of my life became an unexpected masterclass in using AI to level the playing field against well-funded opponents. If you’re an entrepreneur, especially one without a massive legal budget, this story contains lessons that could save your company.

The Broken System: Why Defendants Always Lose

The Delaware legal system is fundamentally broken for defendants. Due to the ironically labeled “American Rule,” even if you win, it’s extremely rare for the other side to have to cover your attorneys’ fees, much less compensate you for lost time and energy. The best case scenario is spending a small fortune to maintain the status quo of: not guilty of anything. By and large, the U.S. legal system seems to imbue people and companies with a strong right to file dumb lawsuits, even if they are mostly fabricated or based on incredibly weak claims.

And the legal costs to defend against a lawsuit all the way through trial can be enormous. $1 million is a reasonable expectation.

“But wait, if the lawsuit is truly dumb, won’t a judge just ‘throw it out’?“

This is the first question you get from anybody who has not actually had to interact with the U.S. legal system. And, yes, while there are two primary opportunities for a judge to throw out a case without it going to a jury trial, once you look at the basic details of each phase, you realize that they are pretty poor protection to defendants from the cost of a defense. Let’s look at the two of them.

Motion to Dismiss: This is usually what folks who don’t have legal experience are thinking of when they think of a judge throwing out a dumb lawsuit. That somebody will file a lawsuit with basically no actual supporting facts or evidence or founded legal claims, and a studious judge will look it over and say this is BS and throw the case out. It happens relatively early on in the process. And it’s true that if you win a motion to dismiss, you will be able to wrap the case up quickly without too much cost. But here is the standard in Delaware for winning a motion to dismiss, and the standards are pretty similar in other U.S. jurisdictions.

The court must accept all well-pleaded factual allegations as true, draw all reasonable inferences in the plaintiff’s favor, and dismiss the complaint only if the plaintiff could not recover under any reasonably conceivable set of circumstances.

Put another way, you basically have to accept almost all of the entire initial lawsuit as true, in particular, the facts being alleged as true. And then determine that even if all of this stuff was totally true, the case should still not proceed. This really only works if there are technical flaws in the lawsuit that render the entire thing invalid regardless of the truth of the matter. A classic example would be that this is a federal issue being filed in a state court, or vice versa, or that the statute of limitations has passed, or that the plaintiff does not actually have standing to bring this lawsuit even if what they say happened, happened. It cannot in any way look at the truth or falseness of the claims being made or at the real meaningful validity of the legal arguments being weighed. All of those have to simply be accepted as true, and otherwise you basically can’t win a motion to dismiss.

Unfortunately, if you can’t win a motion to dismiss, you will essentially be forced to move to discovery and several other shorter phases of the trial. But discovery ends up being an incredibly time-consuming and expensive process where you’re forced to hand over all sorts of internal documents and communications and all sorts of things that could potentially be relevant to the lawsuit.

There can be plenty of fights over what does or does not get included there, and you also typically have to involve third-party vendors to ensure that it is happening appropriately. And all this stuff is incredibly expensive, potentially to the tune of hundreds of thousands of dollars that you are forced to do before you can make any further arguments that this case should be over.

Summary Judgement: Once discovery is over, both sides would have an opportunity to file a motion for summary judgment. You have probably at this point already spent months or maybe up to a year of work and hundreds of thousands of dollars, and now this is your first opportunity to make a strong argument that the legal claims against you are so weak that they should be thrown out. Here is the standard for it:

“The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”

Summary judgment is a two-part standard, and you have to win both parts in order to win summary judgment.

The first argument you need to make is that there are no genuine issues of material fact. So you essentially need to persuade the judge that the facts that they need to understand in order to rule on the case are known and not disputed between the two parties. You, in this case, can’t really make any fact-based arguments. If one party is alleging that somebody said something and the other party says, “Well, we didn’t say that,” that is a disputed fact. That’s the kind of thing that a jury trial will need to hear evidence and look at testimony and do all that to determine facts. So you need to argue that all the facts that you need are here and are undisputed. For example, if all the information is in contracts which we have the text of and emails that we have the text of, and certain things are not disputed between the two parties, then you have to establish that there is not any fact-based questions that need to be sorted out by a jury trial. And you then also need to win the idea that, based on these non-disputed facts, you should win as a matter of law. So you really can only be making arguments about the legal invalidity of the case against you, not about the truthiness of the case against you. This can be an incredibly high bar to clear because most cases are probably going to have some disputed facts. So even if you have an incredibly compelling case here, you probably will have a tough time winning summary judgment if there are any material facts that you know the parties are disputing. This is your second and potentially last time to have a judge throw the case out before it goes to a jury trial, and in both cases, the standard for the judge to throw it out is just incredibly high. The odds are very high that you’re going to continue having to go through the case process and continue spending a lot of money unless you come to a settlement.

So here’s the asymmetric trap every defendant faces: Defending yourself all the way through trial will definitely be incredibly expensive, no matter how strong your case is. The chance of losing in a jury trial is always more than 0%, and even if you win, you will almost certainly not be able to recover your legal costs. So the Prisoner’s Dilemma most defendants face is: Do you want to pay us some amount for a 100% chance of making this go away now, or spend much more money with at least some chance of losing at trial? This is why ~98% of civil cases settle before trial.

Founder Takeaway #1: Understanding this reality has profound implications for how you structure deals and contracts. The actual language of a contract almost doesn’t matter unless the underlying issue is worth $2-3 million or more. No matter how iron-clad your contract language, the other side can always raise enough doubt to force the matter to trial, and it can cost $1 million+ to litigate through completion.

This means contract disputes over smaller amounts mostly depend on leverage or a willingness to outspend the other side. Consider this in your future contract negotiations—you’re better off identifying risks and potential areas for dispute upfront than spending money having a lawyer “button up” language you can’t afford to enforce anyway.

I also now deeply understand why experienced business people have a strict “no assholes” policy. I always thought this was throwaway advice, but it only takes one lawsuit to make it clear how incredibly valuable it is to work with people you trust.

Into the Litigation Black Hole

Two years ago, I was sued for the first time. I’m going to leave out many of the specific facts and focus on what I learned about the process of dealing with litigation—the decisions I made and how I was feeling along the way.

This was uncharted territory for me. The first curveball: our primary counsel wasn’t based in Delaware, and when someone files a lawsuit in Delaware, you immediately need Delaware-barred lawyers to defend you. You’re suddenly scrambling for referrals to lawyers you’ve never worked with to help you with what is now the most important legal issue of your life. And you don’t have much time—litigation comes with tight response deadlines.

Are They An Oncologist or General Contractor?

When working with paid professionals, I think people tend to put them into one of two categories: doctors or general contractors.

With doctors, if your oncologist says you have a lump that needs to come out, you pretty much do whatever they say. You’re the patient. They’re the expert leading the charge.

With general contractors doing home renovations, most people intuitively know that’s not the right approach. You stay on top of them, give clear instructions, try to understand the issues yourself, and assume you need to provide lots of direction and monitoring to get what you want done.

Most people—entrepreneurs included, certainly myself—default to putting lawyers in the doctor category when they should really treat them more like general contractors.

The Delegation Trap

When the lawsuit hit, I asked various people I trusted for their take. Almost across the board, the perspective was: “This is ridiculous. It doesn’t make any sense. I can’t even understand how there would be damages.”

It seemed like something that didn’t really need my full attention. So I made what seemed like a rational, delegating-CEO decision: don’t let this take up too much brain space. Give it to lawyers and let them handle it.

In retrospect, this was a huge mistake.

This approach might be right if your business can comfortably spend $500K-$1M to defend a lawsuit. But if, like many entrepreneurs, you don’t have that kind of money, and the mounting costs will become a source of leverage against you, then you need to take it seriously and go “Founder Mode” on the legal process.

The Expensive Treadmill of “Best Representation”

When you ask lawyers “what do you think we should do?” they’re going to give you the “best representation” they can—because that’s what they’re incentivized to do. This means ticking every box, being as thorough as humanly possible, and taking everything the other side throws at them as seriously as possible.

This approach can cost you a fortune.

What lawyers typically won’t do is come up with creative ways for you to accumulate leverage against the other side to get them to back down. If you understand the dynamics I laid out earlier—that you’re almost always headed toward a negotiated settlement rather than an actual reckoning of the truth—the standard approach is exactly the opposite of what you should be doing.

You want to spend as little money as possible so costs don’t become leverage against you. And you want to find ways to make it clear that pursuing litigation against you will be a costly endeavor with little upside for the other party.

How exactly to create that leverage is more of a conversation to have with me over beers than something I can cover in a blog post. But this should be your primary focus—not perfectly playing the tit-for-tat game of legal proceedings that will mostly end up being irrelevant when two sides sit across a negotiating table.

The Breaking Point

I learned this the hard way. We spent a large portion of the initial proceedings allowing lawyers to follow the standard process, charging us $1,000/hour to check all the boxes and respond to every silly and pointless motion line by line. The mounting legal bills became an accumulating source of leverage against us as I stared down the possibility of not being to able to afford the full costs of defending ourselves.

Meanwhile, my lawyers weren’t presenting me with any viable options other than continuing to fire-hose money into an absurd litigation process. The bills piled up and the prospective costs froze our ability to make nearly all strategic decisions—like hiring or raising new funds.

As I expressed my enormous frustration with this black hole of time, energy, and money, my partner gave me the pep talk I needed: she told me I needed to take control of the situation myself.

She was right.

How AI Became My Secret Weapon

It was at this breaking point that I started using AI to review all contracts and filings, understand case law, and consider courses of action. I showed up to meetings with our lawyers with a strong point of view on where we should minimize costs and maximize our leverage. My general sense is that most lawyers are used to being totally deferred to by clients, and in this case, the Delaware counsel we had started working with really did not like my new approach.

So, I fired them and got new lawyers.

It worked—but there’s no way I could have done it without LLMs getting good enough at exactly the moment I needed them.

My AI Legal Research Workflow

Here’s the specific process that saved my company:

1: Upload Everything to AI Projects. Use the projects feature in Claude or ChatGPT to upload all relevant documents—contracts, motions, emails, anything relevant to your case. You might need to be selective if you hit context window limitations with thousands of pages, but include as much source material as possible.

For what it’s worth I didn’t necessarily find one platform (Claude or ChatGPT) or even specific models to be materially better than others at this work.

2: Treat AI Like a Coach, Not an Oracle. Instead of asking “what do we do next,” I would ask the AI to explain the principles involved, the mechanics of what was happening in each motion, where we were in the process. I wanted to understand the controlling variables myself, not just get answers.

The AI is infinitely patient—you can drill down into anything you don’t understand and ask “explain that to me” or “how does that work?” This coaching approach was incredibly effective.

Mental Health Tip: Do this research using voice mode while walking. Legal research isn’t fun, but being outside in fresh air using your voice rather than staring at a screen makes it much more bearable.

3: Leverage AI for Contract Analysis. AI excels at reviewing lengthy contracts. When you have a 400-page agreement where page 6 references “customary exceptions” that are finally listed on page 421, AI can instantly find and connect these references without you having to jump around through table of contents.

Always have the AI excerpt the actual contract language with page numbers, then verify by searching the document yourself. Don’t take the AI’s word for it—confirm everything.

4: Have AI draft arguments and briefs. Writing from a blank page is always much more work than editing. I started showing up with outlines or drafts for our filings and briefs and asking my lawyers to discuss it with me and then edit them, rather than crafting everything completely from scratch. This is a huge time and money saver.

Working with Lawyers in the AI Era

I wasn’t always upfront with even my new lawyers about using AI—I was worried about the “quoting WebMD at the doctor’s office” dynamic. Instead, I made it clear that I wanted to take an active role in strategic decisions.

This is tricky. Most lawyers are used to being delegated to completely. People treat the legal system like a complete mystery, with lawyers as spirit guides. If you’re going to take a more active role because you’re empowered by AI, you need to set that tone early.

Some lawyers bristle at clients setting strategic direction. They believe there’s a “correct way” to do things, they know it, and they’ll fight you if you disagree. In that case, get different lawyers. Ultimately I was able to find good counsel who were willing to work with me taking an active role.

The Cost Arbitrage Advantage

The US legal system is optimized for wealthy people and businesses to extract leverage against those with less money. As litigation proceeds, expensive steps just automatically trigger—filings, motions, discovery, disclosures. If you just show up and ask “we got sued, what do we do?” lawyers will walk you by the hand through the most expensive path possible.

This creates a vicious cycle: if you’re ultimately going to settle (which 98% of cases do), it’s almost entirely about leverage and negotiation. The most effective leverage wealthier opponents have is simply bleeding you dry through expensive procedural steps.

Founder Takeaway #2: You must proactively set budget constraints with your legal counsel. Be completely upfront: “Here’s where we think this is heading. We need to spend very little money so we don’t get bled dry and forced to accept a terrible settlement.”

When I radically reduced our legal costs using AI, it became a form of serious leverage. If the other party is spending 10x more than you, that creates negotiating power.

Where AI Falls Short

AI works best as a coach for your own primary research—don’t try to fully delegate legal strategy to it. The main limitations I encountered:

Case Law Hallucinations: Earlier models definitely hallucinated case law that didn’t exist. Always double-check any case citations using open-source legal databases. Asking the AI to provide links to the caselaw it is citing seemed to reduce hallucinations. This is getting better with newer models, but verify everything.

Strategic Decision-Making: Neither AI nor your lawyer can make the truly strategic decisions for you that you’ll need to get to a settlement. AI can help craft strong legal arguments, but you need to develop the overarching strategy yourself, balancing risks and negotiating position.

The Psychological Toll and Unexpected Growth

Going through protracted litigation is one of the most psychologically challenging experiences I’ve ever faced. As an entrepreneur, I’m used to hard things, but my saving grace has always been knowing I’m choosing the challenge. With litigation, you have zero choice—it soaks up enormous amounts of time, brain space, energy, and money for something you have less than zero interest in doing.

This forced me to develop practices of radical acceptance and get comfortable with circumstances I couldn’t change. The Untethered Soul was particularly helpful during this period. Ironically, I later learned it was written by a tech entrepreneur during his own multi-year litigation ordeal.

Communicating Through Crisis

Balancing transparency with stakeholders while managing legal constraints is incredibly difficult. Your counsel will advise against sharing anything that could end up in discovery, but litigation might be the most important thing affecting your business.

For entrepreneurs in litigation: Be transparent, don’t sugarcoat, and ask for help. Your stakeholders want you to succeed and will offer advice or introductions if you ask.

For investors/stakeholders: Give entrepreneurs in litigation grace and patience. It’s incredibly difficult to strike the right balance between keeping you informed and following legal counsel’s advice.

Your AI Legal Playbook: Three Actions to Take Today

Before you’re in crisis mode, take these steps:

Set up your AI legal research system: Create projects in Claude or ChatGPT specifically for legal documents. Practice uploading contracts and asking the AI to explain key terms, potential risks, and ambiguous language.
Audit your legal insurance using AI: Upload your business insurance policy and have AI analyze your coverage gaps for the most likely litigation scenarios in your industry.
Establish your “no assholes” policy: Start assuming that you won’t necessarily be able to hide behind ironclad contracts if you’re working with people that you don’t trust, and really start to factor that in to who you decide to do business with. The cost of one bad actor can destroy years of progress.

The Bigger Picture

I’m convinced every entrepreneur should start using AI to take charge of legal issues now. Contracts are language, and Large Language Models are exceptionally good at reviewing and even creating them. Use actual lawyers more like strategic consultants rather than paying them to do all the laborious work of contract review or drafting.

This experience taught me that while the legal system is broken for defendants, AI can level the playing field for entrepreneurs who can’t afford to be outspent. The key is using it as a force multiplier for your own understanding and strategic thinking, not as a replacement for human judgment.

The most important lesson? Don’t let anyone—even expensive lawyers—convince you that legal strategy is too complex for you to understand and influence. With AI as your coach, you can take charge of your legal destiny and turn cost efficiency into competitive advantage.

Announcing the Founder Summit 2020

On March 12-15 in Mexico City, my firm Earnest Capital (with our friends SureSwift Capital) will be hosting the Founder Summit. It’s a gathering of entrepreneurs, founders, makers, and indie hackers to learn from one another, build relationships, and have a blast. No slide decks, no sales pitches, no ‘speakers only’ section, just awesome people hanging out, doing workshops on everything from leadership, mindfulness, persuasive writing, building culture, and working remotely. Tickets are only available by filling out the pre-registration form at foundersummit.co.

The Entrepreneur’s new path of maximum optionality

“Bootstrap a lifestyle business, strap yourself in to the VC roller coaster, or take out a loan with a personal guarantee and risk losing everything if the business fails.”… For as long as I have been an entrepreneur this was pretty much the menu of options available to most founders of software companies. Before you even tested the business you had to commit to one path and hope you chose wisely. Choose incorrectly and you could kill an otherwise great idea by setting yourself down the wrong path. Raise VC for a business that tops out at $10m a year in revenue; you’re headed for zombie status or a forced acquihire. Carefully build a small profitable business; well you’re obviously not the kind of ambitious dent-in-the-universe founder VCs want to back, so get ready to burn through your savings. Good luck even getting your local bank to talk to you about a loan to start your new SaaS business; you’d be better off asking them to finance the 5th Taco Bell in town.

But recently, a proliferation of new tools and funding options are creating more pathways for entrepreneurs to build and fund software companies while maintaining flexibility and optionality. Let’s follow the path.

0/?You find a unique pain point and have an idea for a product that will solve it

What you don’t do is put together a pitch deck, finagle a multi-billion-dollar total addressable market and spend the next 6 months fundraising. You know that for all the new “pre-seed” funds popping up and all the talk about how “it’s never been easier to raise money” that fundraising on a pitch deck and an idea is a long, hard, time-consuming process that’s unlikely to be successful. Better to just get started on the business without asking investors’ permission. So you do…

1/?‍♀️Launch a minimum viable product and get your first customers

The path starts by just getting started. You work directly with your potential customers and validate that they actually have a problem and want to pay to solve it. Here your options have never been better.

You could start a consulting business first. Spin up a simple LLC with Stripe Atlas and use recurring invoicing tools like Harvest or Freshbooks and you have yourself a side-hustle consulting business. From there you can test if there is true willingness to pay in this market and learn more about what kind of product your customers would pay for.
Use no-code tools to stitch together a prototype of your product. You could use Makerpad to find the right combination of tools that let you build a software product without code. This could either be a duct taped version that actually does what it says on the label, or a “Wizard of Oz” version that looks and feels like software, but actually you are doing the heavy lifting by hand behind the scenes.
You could learn enough code to build the first version. Depending on your learning style, budget, and time, you might prefer coding bootcamps or online tutorial repositories (like Pluralsight or Egghead) or both. Starting with a product to build is the best way I know to stay motivated while learning to code. Even if the product fails, you will have learned a valuable skill.
You launch your MVP and get your first customers.

2/?$2-5k MRR (monthly recurring revenue): “rent money” and growing

Your product is live, people are paying for it. Those people stick around (retention) and more people continue signing up (growth). You’re in business now. Once you get to a few $1,000 in monthly revenue, “rent money” level, you have several options on how to proceed.

Continue to bootstrap the business on the side. If you can continue to balance a job or freelance work, you can run your business on the side and keep it growing until it generates a full-time income for you.
You could go “digital nomad” and move somewhere like Thailand, Bali or Budapest, with a very low cost of living and where your new product can support you full-time. This isn’t an option for many people with a mortgage or family to take care of, but for the right entrepreneur it can be a great way to cut your personal burn rate and keep your options open.
With this traction you could raise $50k-150k on a Shared Earnings Agreement (or SEAL) which would allow you to go full-time 1 on your business. A SEAL is designed to bring on investors who will back you early on and let you decide later whether you want to build a profitable sustainable business or a high-growth rocketship.
At this point you would likely have a great shot at joining your accelerator of choice. But know that most accelerators’ business model is predicated on getting as much of their cohort funded by VCs as possible. If pivoting the business to larger markets, focusing on short-term growth, and honing your pitch to maximize your raise on demo day isn’t what you want, either skip the accelerators or be very clear upfront that you aren’t sure you want to go down the VC path… yet or ever.

3/ ?$5-25k MRR: ramen profitable + team

You choose a path that gets you working on the business full-time. You start to get initial product-market-fit and feel like your product really solves a genuine pain point. You find a few channels of organic (ie free) growth and begin hiring your first team members. This gets you to “ramen profitable” where you can pay the founders a reasonable salary, at least to where you aren’t burning through your savings or the capital you raised. So what will you do to power the next phase of growth?

As always, you can stay bootstrapped, grow organically, hire slowly, and run a Calm Company. This is particularly good path if you have a product with high retention, good free sources of new customers, and you are focused on a niche without too many direct competitors.
But maybe you want to make a few key hires—a top tier marketer, the first person in outside sales, or a senior engineer to take the product to the next level—that current cashflow can’t support yet. New funds like Indie.vc and Earnest Capital 2 are ready to back companies at this stage that want to stay focused on building real, profitable, sustainable businesses. You could raise $100k-$500k to see if you can meaningfully change the growth of the business while still planning to return to profitability.
You might run some growth experiments, either with your own cashflow or the capital you raised from Earnest or Indie, and discover that there are a ton of ways to turn cash into growth for your business. Now might be a great time to raise a few million in a Seed / Series A venture round on much better terms than before you had this traction.

4/ ?$25- 100k MRR: maximum optionality

You continue growing the business with several proven channels for customer acquisition. You have a minimum awesome team in place that can ensure the product is the best in its class. Somewhere in here you hit or have line of sight to a $1m/year business with a diversified customer base and likely some nice profits. If you’ve gotten here without taking too much outside capital, you have navigated the path to maximum optionality because the number of options for taking your business from here are numerous. You could:

Keep funding your business with the most optimally formulated fuel that keeps you absolutely focused on building the best product you can: customer revenue.
Somewhere in this range, the traditional banking system3 will finally become helpful. You’ll be able to fairly easily access a $100k line of credit or $50k+ in credit card limits to alleviate any short-term cashflow constraints.
You may still want to bring on some more long-term aligned investors for a mix of patient capital, mentorship, and network. In which case the funds from #3 are still a good option, but you could also probably do a large enough raise that a priced equity round might make sense.
A huge array of specialized revenue-based financing lenders are now interested in your company. Folks like Lighter Capital, SaaS Capital, Bigfoot Capital, TIMIA Capital, and RevUp will lend upfront capital in exchange for a percentage of your monthly revenue. Unlike traditional banks, these funds do not require a personal guarantee. They are debt instruments and typically become really viable around $50k MRR when the business has become fairly proven and predictable.
You might also find that your business has a few “money machines” where you can plug money in and get more money out. Specialized funds like Clearbanc, which will finance your paid marketing budget (ie Facebook or Google ads), or Braavo, which will finance your receivables from app stores, are available.
☝️All the options to this point are not mutually exclusive and can be layered on one another in whatever way makes the most sense for your business.
But also, at this point you could likely sell your business for a life-changing amount of money. You’ve kept most or all of the equity in the business. You likely don’t have a board that can block a sale or giant liquidation preferences that make a sale for a few million unattractive. Even if you don’t sell, knowing that you could at any time is a powerful source of freedom.
Or, you could look at your $1m/year business and realize at this point you are in or adjacent to a $1B market. You are a proven founder. Your product, sales, support teams are well-oiled and scaleable. You talk it over with the team and decide to shove all your chips in and raise a monster round of VC on far more attractive terms than you could have at the beginning of this process. You could, but you absolutely do not have to.

5/ ?To Rocket or Not

The beauty of all of these options is that most of them can be mixed and matched. Entrepreneurs now have far more choices and paths that allow them to test the market, grow their business and move forward with or without funding. The choice is up to you.

This is the entrepreneurs new path of maximum optionality.

Disclosure: I am the founder of Earnest Capital, which created the Shared Earnings Agreement↩
Again, full disclosure, I run Earnest Capital.↩
at least in the US↩

Transitioning from Maker to Manager

Ira Glass, the creator of the radio program This American Life, has this famous quote that’s worth reading in its entirety:

“Nobody tells this to people who are beginners, I wish someone told me. All of us who do creative work, we get into it because we have good taste. But there is this gap. For the first couple years you make stuff, it’s just not that good. It’s trying to be good, it has potential, but it’s not. But your taste, the thing that got you into the game, is still killer. And your taste is why your work disappoints you. A lot of people never get past this phase, they quit. Most people I know who do interesting, creative work went through years of this. We know our work doesn’t have this special thing that we want it to have. We all go through this. And if you are just starting out or you are still in this phase, you gotta know its normal and the most important thing you can do is do a lot of work. Put yourself on a deadline so that every week you will finish one story. It is only by going through a volume of work that you will close that gap, and your work will be as good as your ambitions. And I took longer to figure out how to do this than anyone I’ve ever met. It’s gonna take awhile. It’s normal to take awhile. You’ve just gotta fight your way through.”

It’s such a useful insight for creative work. It’s also a broader lesson that the thing that will be your ultimate strength can be, during a transition phase, a weakness that you have to overcome. Having great taste is ultimately something that will make your work great, but in the short-term, when you are beginning to learn a craft, that same taste tells you that your work is worthless. Your taste makes it hard to persevere through the practice and master the craft to a level a worthy of your own taste. To make it through that phase, you have to let some bad work happen—your own—and have faith that the process will improve it over time.

Something similar happens often when making the transition from a maker to a manager. Credit to Paul Graham for pointing out some important differences between makers and managers in the modern workplace. Although in this instance I’m not talking about scheduling, but taste or something like it.

Most of the people I know who are now managers, didn’t go to business school and train to be a manager, they started as makers. They started as founders, doing all the making at a company they created from nothing, or they started as key individual contributors, the first marketer/designer/developer at a small organization. Over time the organization grows, to hit its goals it needs a design team and an engineering team, and so talented individual contributors start hiring, resourcing, planning and managing.

And here is the most important skill I know for making this transition smoothly and effectively:

Let bad work happen.

Continue reading →

Selling My Bootstrapped SaaS Business

Five years ago I built and launched the first version of a SaaS app on a single flight from San Francisco to Buenos Aires. Slowly and steadily, Storemapper grew into a healthy location-independent business for one person and then later a small dedicated remote team. At parties, I would describe it as, “not a startup; a healthy growing internet small business.” This year, almost exactly five years after launching, I sold the business for what, to someone growing up middle class in Florida, is a life-changing amount of money that will enable all kinds of exciting new projects and adventures. From start to finish, it has been an exciting ride, much of which I have documented here on the blog. With the sale concluded, I wanted to share as much as I could about the process of building a business that can be sold and how I sold it.

There’s always a risk that these posts turn into a 5,000-word humblebrag. But I really do think it’s worth a read because, unlike most business acquisition stories, which often feel like an out of the blue stroke of good luck, the way that I sold Storemapper feels very replicable for other entrepreneurs. When I spoke to someone two years ago about what it would look like if I ever sold the business I would say, “I’m not trying to sell it now, but if I ever did it would probably look this…” And six months ago I would tell a few folks privately, “I think that one of the people I met recently might be the one to buy Storemapper and if they do it will probably go like this…” And, then basically when it all went down it looked more or less like… that. There wasn’t some single huge stroke of good luck, though of course, I got lucky in the little ways that every successful business has to. An excellent outcome, but also a perfectly reasonable and achievable one that I think can serve as something of a template for other bootstrapped entrepreneurs.

This is a long and detailed post. I had so many questions going into this process and I didn’t find a ton of good posts from the founders perspective on selling bootstrapped businesses. So I thought I would just throw everything I could think of into a post and let you skip around or save it for reference when you’re considering selling your own business. Grab a pot of coffee and let’s get started.

First the obvious: why sell your software business?