Hey — It's Nico.
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Here's what I got today:
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An interview with Plausible’s founders on how they went from $400/mo to $188,000/mo in 3 years (Link).
A deep dive into $13.4B-valued FinTech startup Plaid origins and future (Link).
Kenyan logistics startup Sendy shuts down after raising $26.5M in funding (Link).
The marketing tactics that took EmailOctopus to over $3M in ARR (Link).
Balaji shares his LegalTech startup idea of a “Github Copilot but for corporations” (Link).
Gumroad's open Q2 board meeting, showing a 99.48% YoY growth in revenue (Link).
Driverless taxi companies Waymo and Cruise were permitted to expand in San Francisco (Link).
A podcast interview with Kendall Baker on how he launched and sold to Axios his daily sports newsletter (Link).
Friend.tech, an invitation-only social app where you can buy a "share" of a Twitter user, is going viral (Link).
WeWork’s shares near zero after they warned there’s “substantial doubt” about their ability to stay in business (Link).
A Reddit post went viral this week, in which a founder shared his story growing his SaaS to 7 figures, raising VC money, and going to 0.
This raised discussions in the comments and on Hacker News around fundraising vs. bootstrapping.
Many founders empathized with the OP and shared similar stories; others wondered about the founder’s responsibility in the startup’s collapse.
Here’re my main takeaways.
If you’re raising VC money, you need to understand VC firms’ game.
Portfolio theory says they make 30 bets on each fund and need at least one of them to return x100 in 7-10 years. That way, they can do an x3 on the total fund’s money.
For a startup to generate an x100 return, it needs to become a unicorn (aka $1B company). The startup’s 7 figures/year was a failure from a VC firm perspective.
A lot of great companies shut down because of this VC game. That’s why you should not enter this game if your company isn’t designed for it.
Running a small, profitable SaaS? Don’t take VC. Bootstrap it.
“Their method of driving my company towards that led it to fail.”
This is only one side of the story, but according to the founder, VC’s advice wasn’t accurate, which is something other startups in our Cemetery have suffered.
In general, VC firms give enough freedom for founders to operate their businesses. But some investors are more hands-on in the business and can sometimes provide wrong advice due to their lack of experience running a startup or lack of industry and context knowledge.
So be careful with taking all VC advice as holy words.
Y Combinator published a video this week surveying 50 founders of their S23 batch on how they got their first customers.
I think there were two interesting patterns in the founders’ replies:
The first pattern is that all founders went with one of these three strategies:
Those founders with longer work experience were more likely to have gone with strategy #3. This is the best way to go for founders working in industries they have experience in.
Cold-selling and social networks were more common strategies among younger founders. That’s reasonable, as a network is something you build over the years. In this sense, strategies #1 and #2 are accessible to everyone, which also means more competition.
The second pattern is that various founders mentioned acquiring their first customers without even having a product, or what’s called “pre-selling.”
I’ve previously written about how founders could validate their startup ideas by pre-selling in an article titled: “A 4-Step Framework to Validate Your Startup Idea.”
What I also like about this strategy is that pre-sales are the strongest signal a pre-product startup can demonstrate to investors when fundraising, as it’s the ultimate way of proving to them you’re working on solving a problem that causes a lot of pain to someone.
Therefore, a startup with pre-sales is much better positioned than another one that just shows feedback they received on customer discovery calls.
How did I do it today?
If you like this week's issue, can you reply to this email with a simple "YES"?
If you think there's room for improvement, I'd appreciate an honest "NO".
That's all of this week.
Cheers,
Nico
