21 November 2020
In this newsletter, I bring you 18 interesting reads with summaries and links for further reading. If you find them valuable, make sure to drop a line to me and share it with relevant people in your network. Enjoy!
“For an industry that doesn’t do it for the money, we sure talk about money an awful lot in the world of startups”
Bryce Roberts on Venture Capital
Topic: Startups, M&A | Source: Josh Pigford
I loved reading this article for two reasons –
Transparency: Josh is kind to share the details of the acquisition of Baremetrics and his thought process on why he decided to sell now.
Financial Details: Not many founders are willing to share the financial details of an acquisition (unless you know them personally). Josh shares the ups and downs that he went through over the last 18 months.
Achieved financial independence = $3.7 Mn paid over 3 installments across 18 months.
Valuation: I really enjoyed learning how Josh looked at the valuation for Baremetrics and how he structured the deal.
“We’re also a company that has purposefully operated right around breakeven for years. So, unless you’re a “strategic acquisition” that throws acquisition multiples out the window, a slow-growth software company without lots of profits and a product that’s technically quite complex is ultimately just not going to get a huge multiple”.
I wish more founders shared their stories out in the open. This article led me to read everything about Josh and Baremetrics and here is the high-level view with the links.
The Acquisition Deal that fell off by Josh Pigford
This article just shows how little we really know. We may think we know and have done our due diligence on people but do we really know? It’s great to see Josh share the details and I found the below statement really important as a founder.
“In many ways, I feel like my job as CEO and Founder is to absorb all of the insane parts of running a business so my team can focus on building, learning, and enjoying their jobs. They didn’t sign up to get on the rollercoaster. I did. I hated keeping all of this from the team, but in hindsight, I’m very glad they didn’t get pulled into all of it, especially as things started to fall apart.”
Here is all the Incredible stuff! All the projects by Josh Pigford are here. Wow!
Topic: venture capital, startups | Source: LinkedIn post from Sajith Pai
I found this essay incredible for multiple reasons. First (and obvious one) – how the heck do you create/incubate not one but multiple multi-billion dollar companies that IPO? Second, building a system that identifies and captures such business opportunities each year! (Yes, you read that right). Lastly, Speiser’s approach breaks from venture convention.
Every year Speiser incubates around one company. The core of his model is to find 2-3 co-founders and be the founding investor. Often he takes on the interim CEO role himself for the first year or two. This has many advantages. The biggest is that it reshapes the ideal founding team profile.
There are people who often don’t want to be CEO, or even to start a company. They are driven by their conviction of what the future should look like, as well as their frustration with the internal dynamics they confront at legacy incumbents that prevent them from creating that reality.
Considering Eric Yuan was VP of Engineering at Webex and still unable to build what he thought was important should be a very discomfiting reality shock to large companies about the very real economic harm the malaise of their internal processes have caused.
By starting a company with Speiser, the co-founder can stay focused on what they want: deciding what to build, hiring the team, and building the product. Speiser will handle fundraising, handling the operations generally, and setting up the sales motion and machine.
Speiser currently has a roughly 20% hit rate of his companies achieving multi-billion dollar valuations. Comparatively, top VC firms are typically at single-digit percentages.
He favors companies where the demand if it works is high—but the technical risk is high and most don’t believe it can be done yet.
A Thread on Financial independence
Topic: Personal finance, motivation | Source: Jelmer Pe / Indie Hackers
Here’s Jelmer Pe starting a thread on why Indie Hackers want financial independence. Some good resources that came through this thread, namely, Cal Newport and book DRIVE.
A lot of people have thought a lot about gaining financial independence.
The decision comes down to Lifestyle-first or Business-first approach.
Keywords: autonomy, competence, relatedness, purpose, mastery.
Questions on how your time is distributed, how business is (supposed to be) done, living around the world, among other factors.
A majority of people want to create stuff – without externalities and learn new stuff.
Career Advice by Cal Newport
Topic: Career, Lifestyle | Source: Cal Newport
I wish I had read this 15 years ago! The second best time is now 🙂
Fix the lifestyle you want. Then work backward from there.
Some questions to answer on expected lifestyle in order to choose your career:
How much control do I have over my schedule?
What’s the intensity level of my job?
What’s the importance of what I do?
What’s the prestige level?
What type of work?
Where do I live?
What’s my social life like?
What’s my work life balance?
What’s my family like?
How do other people think of me?
What am I known for?
By cutting to the bottom-line — what would make you feel best? Then by working backward from this answer, you can maximize your odds to actually get somewhere worth going.
Community Frameworks curated by Rosie Sherry
Topic: community, frameworks | Source: Twitter
Communities are becoming more and more prominent and important in the digital world. Here is an exhaustive resource for anyone looking to build communities. I’m going to dig deeper into these over the coming weeks and you will likely hear about the development.
Community Canvas by Fabian, Nico, and Sascha
CMX Hub by David Spinks
Orbit Model by Orbit team
Community Readiness Canvas by Crowded
Josh Pigford and Jon Yongfook sharing how to approach building a business part-time, and related money management
Topic: Startups, Personal finance | Source: Twitter
It is not uncommon to start a business part-time while working full time or consulting.
Equally important to having some financial cushion before plunging into business full time. Some people went in with $12k while someone else at $200k in the bank. It varies but I guess having a 12-month financial cushion sounds reasonable.
Hard Choices, Capitalism and the Free Enterprise by Seth Klarman
Topic: Decision making, capitalism, values | Source: HBS
Capitalism is far from perfect. While it’s superior to any other system yet devised, it’s subject to sometimes intense cyclicality that can result in turmoil and hardship for many.
There is and has always been, a gap between what business is and what it can be, the actual versus the ideal. Every one of us can contribute to widening that gap, or to narrowing it by raising the bar. We will have countless opportunities to choose from.
A big part of leadership is deciding, and good decision-making benefits from intelligence, thoughtful deliberation, and experience, but also, as I hope you agree, from sound values.
As John Maynard Keynes famously noted, “In the long run we are all dead.”
Choosing what to maximize, how, and over what time frame, is an expression of those values. The commitment to reconsider, evaluate, question, and modify your decisions in light of your values is an expression of character.
Semiconductors = Magic (AI) by Christoph Gisiger & Gavin Baker
Topic: Deep tech, trends, investment | Source: The Market
To succeed as an investor, you have to be able to deal in paradoxes. You have to find the right balance between conviction and flexibility, between arrogance and humility: The arrogance to believe you can have a differentiated view on the stock in such a competitive market, and the humility to recognize that you could be wrong. As a technology investor, in particular, you have to balance imagination with reality. You have to find the right balance between enthusiasm and dispassion. You also have to be very knowledgeable.
If you have a great product like a search engine, more people use it, you get more data, the product gets better, even more people use it, and so forth. That flywheel just spins and this is why it’s hard to replicate Google. It’s a game of cumulative knowledge and data.
Data quantity is so important for quality in AI, thereby making semiconductors much more intensive.
GPUs are very important for artificial intelligence, but so is memory. In fact, AI uses six times more memory computing power than software written by human beings. So memory chips are an interesting subsector of semiconductors today, and it’s heavily consolidated. It is a cyclical industry, and it’s slowly becoming less cyclical.
Analog is like black magic because there are only a small number of people in the world today who can design these analog chips.
Finding Startup Ideas by First Round
Topic: Startups | Source: First Round
Another superb article on how to go about thinking of new business ideas. In this post, Ayo Omojola gives a framework that can be applied to the problem-selection phase of finding startup ideas and the art of shaping nascent products.
Choose what to work on – If you pick a big domain that’s rich with opportunity, it of course matters how hard you work, but you also get so much more leverage.
“I have a hypothesis that the age of the leading product in the industry or the age of the fastest-growing product in the industry is a strong indicator. The older that product is, the more opportunity there is”
“It’s important to not be afraid to go to whatever depth necessary to get an answer that you really understand.”
“The easiest thing to do would have been to send an email to someone and say, ‘Make the (credit) card look like this.’ The hardest thing to do was to actually understand all of the toggles. In a lot of cases, you look at those toggles and you think, ‘I’m not an expert on this, I have no idea.’” But for Omojola, that’s precisely where you have to dive deeper.
“It’s easier to take the thing that you’re told as fact. But there are enough cases where the thing that you were told is just a series of interpretations. The person telling you just got it from the person who told them, but it’s been a long time since someone’s really interrogated those assumptions”
“You have to be willing to read everything on the topic from a regulatory perspective and build a perspective. Then I find a person or a group in the legal community that’s on your side to talk through it. ‘Hey, I read these things this way. Here’s how they might play out. What do you think?’ I actually try to do this as early as possible, because the legal community can give you shortcuts — ‘The question you’re asking was really already addressed here, go here and look at this thing”
You’ll find an area that you want to go after and you ask, ‘Hey, can we do something else here?’ And people tell you no, but they can’t tell you why. Or ‘the why’ they give you is so ambiguous.
“The further you go from when the regulations were written, the more ambiguous they seem, because a lot of the time, the things that were available at that time have really changed.”
I think founders that have not necessarily had these massive exits are really undervalued by the job market.
Zerodha – AngelList India Podcast with Nithin Kamath
Topic: Bootstrapping, Startups | Source: AL India Twitter
Zerodha is an incredible story from India. Not many fall in the category of being bootstrapped and billion-dollar valuation companies in a regulated industry. Definitely listen to this one.
Zerodha origin store – Nithin Kamath using leverage (brother being a better trader than him) to start this off.
8-9 million Indians are investing actively (once a year) today.
Potentially one more crore Indians are likely to open new trading accounts in the coming years.
Right now sending money out of India is a pain (to invest in the US stock market) but it is something in the works.
Bootstrapped unicorn – factors for success – luck has played a big part, Nithin didn’t want to answer to people (investors), frugal in operations, focus on growth, and keep customer interest ahead of business interest.
Podcast Highlights: Tagging and Retaining key takeaways
Topic: Productivity, podcast, notes | Source: Twitter
I have often enjoyed listening to podcasts but over time never really adapted to them. The primary reason is my ability to capture notes while listening. Simply put, I find it easier to capture notes and tag them when I read stuff. This article by Nat Eliason helps figure out a way to capture key takeaways from a podcast and subsequently linking the notes with your own productivity app.
If you want to do it yourself, all you need to do is:
Sign up for Readwise
Connect Airr to Readwise
Connect Readwise to Roam
Customize your Readwise metadata template (here’s mine)
The whole thing should take you 5-10 minutes, and then you’ll be able to start getting much more out of your podcast listening.
Pricing a SaaS startup and/or building a pricing page
Topic: Pricing, SaaS | Source: Jeff Chang on Twitter
Pricing any product or service is a tricky one. Having worked with both physical and digital products with margins from <10% to all the way up to 70%, one thing I have learnt is that everyone needs to learn the basics about pricing. Here are two articles that I found interesting.
Pricing low-touch SaaS by Patrick McKenzie
This is a long post so take a cup of coffee and enjoy the essay with some great case studies.
How to price your SaaS product by Patrick Campbell / Lenny Rachitsky
The most successful companies optimize monetization in some manner every quarter.
Put simply, your price is the exchange rate on the value you’re creating in the world.
In the beginning, the actual number you’re charging isn’t that important.
Two other factors that matter more:
Your value metric
Your ideal customer profiles and segments
Companies using value metrics are typically growing at double the rate with half the churn and 2x the expansion revenue when compared to companies that charge a flat fee or where the only difference between their pricing tiers are features.
When used properly, quantified personas and segments are beautiful tools. Here is a link to a template.
Remember, monetization is something that’s important, uncomfortable, and something you likely don’t know much about, so progress is better than nothing. Start small. You can (and should) always do more.
Topic: Venture Capital, Startups | Source: Bryce Roberts
Play the VC game or not to play the VC game (as a founder)? Well, this article looks at probabilities and potential outcomes for founders.
According to Samuel Gill’s math, a meaningful exit for a fund should have the ability to return 33% of a given VCs fund, a “home run” exit should be able to return their entire fund in a single investment.
Lifetimes of work and risk lie between a Seed round and a Series D round. And, despite increasing the value of the underlying business 7x, the dollars at the exit for the founder remain roughly the same.
Setting up your own online courses quickly by Daniel Vassalo
Topic: information products | Source: Twitter
I know a thing or two about online courses and about using technology for learning and development, and I’m mightily impressed with the simplicity with which Daniel has gone about turning something you know (expertise) into an information product.
Focus on information quality (expertise) over (video) production quality.
Time-box to create the product in under 2 weeks, and use existing tools such as zoom, loom, gumroad, screenflow, etc.
Customers are extremely price-sensitive for online courses, e-books, etc. so keep it in the $25-$50 range.
Topic: Fitness | Source: Tim Winstone
One of my teammates Tim is testing himself in this awesome 12-hour adventure race this weekend in New Zealand. The 12-hour race is apparently perfectly suited for those ‘newer to adventure racing’. I hope to participate in such an adventure race in 2021 so any tips are welcome!
The Age of Infinite Leverage by Andrew Yu
Topic: Leverage, scale | Source: Value
For decades, one of the biggest mindset we’ve had is that creating/earning/output ∞ time. With technology, we can break this relationship between output/income and time through leverage.
The economic rewards for genuine intellectual curiosity have never been higher – it’s time to make today’s labor tomorrow’s leverage.
You can maximize your output exponentially through capital, cooperation, technology, productivity, all these means.
Old school thinking contains labor and capital leverage.
Modern people can methodically apply, increase, and compound leverage until they stand on a MOUNTAIN OF LEVERS — accomplishing 1,000x their peers, and the gap between the levered and the un-levered is going to keep growing.
An excellent resource for various ways to run Validation Experiments for your ideas by Jelmer Peerbolte.
A Twitter thread on tools for MVP by Indie Hackers.
What I am learning
Signed up for a course on Cryptocurrency by Preethi Kasireddy. You’ll hear about this in the coming weeks.
I have been trying to find someone who can teach me ‘Gujarati’ language. Is there a Duolingo for Indian languages?
Hope you’ve enjoyed reading this weeks’ newsletter as much as I have enjoyed creating it. Share it with your friends who may be interested.
Remember to drop me a line – share what you’re reading, any topics that are of interest to you that I could cover, suggestions for improvement, or simply say hi!