Founder Fridays No. 47
Helping founders and operators scale smarter.
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In situations of uncertainty, we tend to assume that those around us, such as experts, celebrities, friends, etc., possess a greater understanding of the situation and can guide us towards the right course of action. This phenomenon is known social proof. Social proof can be categorized into six distinct types: experts, celebrities (both paid and unpaid), users (past and present), wisdom of the crowd (approval from a large group of people), peers, and certification. In addition to traditional methods like testimonials and user-generated content, there are three remarkably effective approaches through which your brand can creatively leverage social proof. 1) Emphasize authentic interactions with customers or fans. 2) Share negative feedback as well, demonstrating transparency and the ability to address concerns. 3) Utilize specific numbers to provide concrete evidence of your brand's success. Why We Buy (6 minutes)
Bootstrapping v. Venture Capital
Bootstrapping or venture capital—which path should you take for your startup? This thread explores both sides, the pros and cons, and what it takes to make either path a success. Bootstrapping Pros: You maintain complete control. No need to answer to investors. Focus on profitability. You get to build at your own pace. Bootstrapping Cons: Limited growth potential. Limited access to resources. Longer time to market. Higher personal financial risk. Venture capital Pros: Rapid growth potential. Access to resources and expertise. Shorter time to market. Lower personal financial risk. Venture Capital Cons: Loss of control. Pressure to achieve high growth targets. Need to answer to investors. Dilution. Choosing a path depends on the type of startup, founder's goals, and resources. Bootstrapping suits those who want control and focus on profitability while building steadily over time. Venture capital suits those who want rapid growth, scalability, and access to expertise. Hackernoon (3 minutes)
Making Better, More Informed Decisions
As humans, we tend to interpret information in a way that confirms our existing beliefs and serves our own self-interest. In situations that lack clarity, we often make assumptions that serve to bolster our egos and self-esteem. We selectively interpret information to support our own position, and overlook or dismiss information that contradicts our views. This is known as the self-serving bias, and it can lead to suboptimal decision-making or even contribute to conflict, as we become more entrenched in our own positions and less willing to consider alternative perspectives. The author offers three strategies to help you combat this bias: 1) Consider the source of the information you’re relying on; 2) Think counterfactually about previous decisions you’ve made; and 3) Seek out information that challenges your assumptions. Harvard Business Review (6 minutes)
Founder FAQ: What is anti-dilution?
Anti-dilution protection helps protect the value of investors’ shares by granting a larger percentage of a company’s pre-financing equity ownership in the event of a down round. A “down round” occurs when a company raises less money at a lower valuation than the previous round. Down rounds should be avoided if possible, as they are generally seen as a signal that the company is not doing well. When a company issues new shares during a fundraising round, existing shareholders’ ownership stake is generally diluted. In a down round, earlier investors experience more dilution because new investors pay less per share. To prevent this, founders and investors use anti-dilution provisions. Westaway (6 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term by term and give you negotiation tips so that you can speak to investors with confidence.
Move Fast. Don’t Break Things.
Hi! I’m Kyle. This newsletter is my passion project. When I’m not writing, I run a law firm that helps startups move fast without breaking things. Most founders want a trusted legal partner, but they hate surprise legal bills. At Westaway, we take care of your startup’s legal needs for a flat, monthly fee so you can control your costs and focus on scaling your business. If you’re interested, let’s jump on a call to see if you’re a good fit for the firm. Click here to schedule a 1-on-1 call with me.