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.


  1. Disclosure: I am the founder of Earnest Capital, which created the Shared Earnings Agreement

  2. Again, full disclosure, I run Earnest Capital.

  3. at least in the US

How to Get Startup Ideas: The Meat Grinder Approach

There are a million books and blog posts on how to get startup and business ideas. Many people think the biggest road block to successful entrepreneurial life is having that one great idea. Once you get even a modicum of success, lots of people will start asking you about how you got an idea like that, and for any tips and tricks on how to “come up” with a similar idea.

The concept is extremely tantalizing and sounds so imminently teachable that it’s a favorite tool of lifestyle business spammers everywhere. 7 Step Guide to Profitable Business Ideas. Join My Webinar on Finding Your Dream Business Plan.

But this is entirely the wrong way to think about it.

First of all you should be coming up with at least five possible business ideas every day. This part should be basically effortless. People trying to sell this part are scamming you.

If you are going to be a successful entrepreneur at all you should innately be looking around you at your life and the lives of others, thinking what are their problems. What are their desires. What do they spend money on. Which of those things are broken or could be done massively better or cheaper or faster. You should be constantly thinking this way. It should annoy people who spend a lot of time around you.

If you’re not doing that, you’re probably not going to be an entrepreneur… sorry. It’s okay. There are lots of other great life paths but this one isn’t for you.

There is one common exception to the rule. You might be hung up on one idea, and that stops the process of thinking of new ideas. It’s cool, you just need to build yourself a better meat grinder.

The secret to coming up with a successful business idea is putting hundreds of ideas through the meat grinder.

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Human-powered Software Services

Your bookkeeper, now with superpowers

Your bookkeeper, now with superpowers. Bench.co

I’m very interested in human-powered software services. I recently signed up for bookkeeping services from Bench which replaced my frustrating experiences with purportedly easy to use bookkeeping apps like Quickbooks and LessAccounting. Which is not to say that those options are bad software options, but Bench takes a completely different approach that I like much better.

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Technical skills for non-technical people in tech

Tech is one of the few growing bright spots in the job market and understandably a lot of folks want to figure out how to get a job at tech startups.

When I quit my job and started getting into tech/software/startup things I was “not technical” — meaning specifically that I didn’t know how to write software. I’ve had lot of conversations with people trying to break into the market who are also not technical, didn’t grow up hacking, didn’t get a computer science degree and can’t write a line of code. I taught myself to code so a lot of the conversations start there: “Should I learn to code?” While I was technically non-technical in startup parlance, I am in fact a pretty technical person and spent a good part of my pre-startup career mastering nerdy things like Excel Macros so it made sense that I would eventually learn to write my own software. But for many people I’ve talked to, I don’t think learning to code, to the point where they would actually be able to get a job as a software engineer is a good idea.

So how do you get into tech if you’ve decided that you don’t want to write code.

Many people respond by really emphasizing things they believe to be the antithesis of technical skills: salesmanship, networking, being a people person. Maybe it was once the case that all software engineers were antisocial nerds incapable of expressing themselves in public who were dependent on non-technical people to get things done, but that is not at all the case now. Startups increasingly brag about their focus entirely on products, their salesforce of zero, their T-shaped team fully capable of writing and speaking convincingly among everything else.

It’s true, if you are good at sales you will always be able to get a job, but if you are young, or without a ton of relevant experience, and trying to get into tech, there are just too many applicants claiming to be able run through walls and sell snow to eskimos.

Learning to write server code and deploy apps is not a good fit for everyone at a startup, but there are quite a few non-coding but still a bit technical skills that I would highly recommend acquiring. Every startup will value this skill set and in many cases developer/designer colleagues will love you for having them.

So this is my proposed list of technical things non-technical people who want to get into tech should learn.

Know how to use a task managers correctly

Create some test projects and learn how to use Asana, Trello or Basecamp or all three. Learn all the features. Read the companies blog posts and tutorials. Because they are so product and engineer heavy, tech startups tend to live and die by their task/project management apps. Nothing is more annoying than adding someone to the team who keeps adding tasks as subtasks, not tagging correctly, forgetting to add due dates and so on.

Onboarding someone who seamlessly jumps into the project, and even starts cleaning up the task manager and making others lives easier is a dream come true for startups trying to grow the team rapidly.

Email marketing and marketing automation

For all the times journalists have proclaimed the death of email to be nigh, sending email is still an essential activity for all startups. Despite evidence that building an email list and talking to it regularly is very profitable activity, most startups actually don’t send enough email to their customers and prospects.

This is mainly because email marketing systems are still not that easy to use. Brilliant copy can get completely mangled by a poorly edited email template. Forget to check a certain box and your email is completely unreadable on mobile devices. Did you insert the FNAME variable correctly or did you send 12,000 emails addressed to “Dear insert name,”

Make a newsletter of your family and friends and practice sending emails, playing with templates, add call to action buttons and learn how the analytics dashboard works, how to track opens, read and click throughs.

Learn some basic email marketing automation such as how to build a welcome/onboarding course the sends new users an email each day after they sign up.

Mailchimp, Aweber, Drip are a few good options to try out.

Become a form wizard wizard

Forms are still the most underestimated web tool and with form wizards like Wufoo, Google Forms and Typeforms, they can be deployed in powerful ways without any coding at all.

It’s amazing how powerful a good form linked up to email marketing can be. Learn all the different field options. What other apps can be integrated. Should you build a Google Form and output the data directly into a Google Spreadsheet, or a Wufoo form that automatically enrolls signups in an email course on Mailchimp?

Do you really need an engineer to deploy a payment processing system when you can accept payments directly in Typeform without writing a line of code?

CSS tweaks

CSS is not coding and basic CSS is very very easy. It’s just a matter of learning a simple, declarative vocabulary. There are no complex functions, no math, and basically no variables. You can want to turn the text on your embedded form the same dark gray as your company’s landing page text you just need to learn how to say that in CSS:

#my-form label {color: #333}

Take a Codeacademy course and watch a bunch of videos on CSS Tricks.

Learn the most common Content Management Systems

Every startup has landing pages and almost every startup has a blog. Most of these are run on WordPress or Squarespace. Learn how to add and edit a simple page in each of these, learn the default options and how to add your forms and email signups widgets to each of them.

Being the idea person is one thing, but being the person who can create ideas, put them on a landing page and A/B test pricing options is a 10x more valuable.

A little knowledge of forms, email automation, CSS, and how to create a page in a CMS and you can execute that without writing a line of code.

Internet superpowers: Zapier and IFTTT

Here’s where you can out-tech the tech people on your team. When faced with basically any problem: Coders gonna code. This frequently leads to unnecessary custom-built solutions for fairly simple automation.

Two services: Zapier and IFTTT let you automate interaction between hundreds of apps and services without writing a line of code. Do you really need a fancy dashboard to run a cohort analysis of you email signups or can you just have Zapier export every signup into a spreadsheet and run a few Excel functions on it? Taking that off your engineering team’s plate so they can focus on the core product is a huge win.

Learn how to automatically create a support ticket for everybody that tweets at your company, send your inbound leads directly to your task manager so they all get assigned properly and followed up with quickly.

Bring your own army of outsourcers

Your startup’s lead designer is spending the afternoon redesigning the app onboarding process but you really need someone to remove the whitespace from a few logos so you can get a press release out the door. Interrupting their flow for such a little task is a huge drain, instead you should get very very good at using oDesk, Elance and Fiverr to outsource little jobs like that. You can often find freelancers to do things for incredibly low cost (e.g. $5) such that even if you were paying for it yourself it would still be worth it. But there is some overhead of time that you have spend familiarizing yourself with the process, learning how to select candidates and learning the hiring/managing workflow for each one.

Start spending some time and little money now developing that skill. The best part is you can save those freelancers in your account to call on later, an incredibly useful resource for you and your company.

Conclusion

Even if you had literally no other valuable skills, proficiency in all of these categories would be enough to get a job at a tech startup. You’d probably have to call yourself a growth-hacker or technical-marketer but you would definitely be valuable to almost any startup.

The last question is how to express this skillset to potential employers. The answer is LINKS. You must send links to THINGS. Startups do not care where you went to school, what your GPA was, who wrote you letters of reference. They care about what you made. So build a personal website, hire a freelancer to spruce it up, manage that freelancer in Basecamp, write about the process of hiring and managing that freelancer. Start a newsletter for a cause you care about, build a cool form for it on their site and learn from the analytics. Write a case study about that and put it on your site. Then send links to all of those things somewhere very early on in your job application.

Good luck.