The (decreasing) importance of early revenue, how to keep your cap table clean and why slow-growing businesses don’t interest investors.

Happy Sunday.

Once again, I’m in flight today. This time, I’m heading back to Chicago to begin moving the Airstream over to Waterloo, ON for the week. I’m coming for you, Canada.

I launched my first syndicate deal this past Wednesday and it was oversubscribed by Friday morning. (I can’t publish all the details here but at a high level: I’m investing $25K and the syndicate is investing $75K — this will represent the last $100K going into their $500K round which is closed already. They’ve got strong revenue, killer team, reasonable terms and the growth engine is clearly working. All the specifics are listed inside the syndicate deal so click the link above if you want to learn more.) If you’re still interested in backing the deal, you should do so — I’ll be speaking to the founder early next week to see if he’s willing to take more from us. 🙂

If you’re an active investor (angel or VC) or founder/entrepreneur (with revenue, growth or other skills to share), I’d love to have you join me on some of the upcoming tech tour stops. You’ll meet policymakers, investors and founders and share your story / skills along the way — hit reply if you’re interested. Upcoming stops include Waterloo, Fargo, Kelowna, Vancouver and many more. I hope you’ll join me.

Last week, we had Neville Medhora on the weekly Brain Trust call. Suffice it to say, it was the best call yet. You can apply for the Brain Trust

1. “Early revenue (and early revenue growth) is probably less meaningful than it was a couple of years ago.” [Link] [Tweet]

Three scenarios you should consider when deciding how to grow your business:

  • Unprofitable unit economics and unprofitable business == probably time to shut it down.
  • Profitable unit economics and profitable company == you’re living the dream — go, go, GO.
  • Profitable unit economics and unprofitable company == look into raising outside capital.

2. “Use 20 percent as a benchmark to keep your cap table clean.” [Link] [Tweet]

An observation on founders from this last week in St. Louis (and, frankly, all the other #RJtechtour stops around the country this year): if you’re complaining about the angels/VCs in your home town, you’re just lazy.

If you want to raise money from the coasts, start building/talking/acting like your peers on the coasts. Complaining locally only shows that you’re not actually willing to do what it takes to grow personally and professionally.

3. “We don’t change all that much as we put on years and gain cynical expressions.” [Link] [Tweet]

As recently as ~10 years ago, a long tenure at your previous company usually meant that you were loyal / hard working / whatever. Today, a long tenure at your previous company shows lack of ambition (unless your previous company grew fast as all hell and you were hanging on to the rocketship).

As founders, you want to be hiring people that self-identify as wanting to start their own thing one day.

4. “The problem is that the slow road to success doesn’t typically result in venture returns.” [Link] [Tweet]

I’ve said it before and I’ll say it again: if you’re considering raising outside money and you haven’t taken the time to learn about venture economics, you’re setting yourself up to fail.

When an investor chooses not to invest in your business, they’re rarely judging the idea. Rather, you haven’t done a good enough job fitting your company’s growth potential with their capital’s return requirements.

5. “Trucks are unsexy, and that’s why we’re doing it.” [Link] [Tweet]

The technology is going to be the easy part of this transition. Wait till the truck drivers lobby / unions / groups start wading into the discussion.

6. “If a product doesn’t solve a problem, no one cares.” [Link] [Tweet]

If you’re spending >25% of any conversation (or meeting) explaining the product, you’re doing it wrong. Always start with a user story — ideally, a real user that finds value in your product. Always.

7. “Having billion dollar companies sitting quietly in the portfolio’s of VC firms doesn’t do anyone any good.” [Link] [Tweet]

I don’t think anyone would disagree with this author’s assertion that we need to get these companies to go public in order to generate wealth for more people. The real problem is that many of the companies with those high valuations simply haven’t grown into them yet (and it’s unclear if some of them ever will). More importantly, the investors that wrote those high valuations aren’t excited by the possibility that they might have overpriced the previous round.

In the real world, valuations are a multiple of earnings. In the venture world, valuations are speculations on the future value. There’s a huge difference there.

8. “Account expansion demonstrates initial product market fit. Customers are buying more of the product they trialled.” [Link] [Tweet]

The three predictors of whether a company will successfully raise their Series A (in order of importance):

  1. Negative churn (or account expansion)
  2. Revenue
  3. Revenue growth.

Go read the article — trust the data.

9. “Things don’t happen for a reason. But you can find purpose and meaning in things that do happen.” [Link] [Tweet]

It’s hard not to read this and find yourself nodding in agreement with everything. The key message: find a better way.

10. “founders should possess at least a basic understanding of the different types of angels they’ll encounter.” [Link] [Tweet]

I’ll say it again: if you want to raise money now or at some point in the future, you need to take the time to learn the business of venture capital.


You can get the full stream of the things I read, it’s all on Twitter — follow me: @paulsingh. Sometimes I write stuff too. You can always find me in the Brain Trust, apply to join.

Have a great weekend!