Founder Fridays No. 92
Founder Fridays No. 92
Now Is the Best Time to Start a Company -- Addiction to Paid Marketing -- The Best Sales Letter
Happy Friday.
Now Is the Best Time to Start a Company
Now is an excellent time to start a company, with two key factors at play. First, creating a new software company is cheaper and faster than ever due to artificial intelligence (AI) and new tools, but this also means more competition. Second, established businesses have more power and leverage than before, with big customer bases and trust. So, having a unique and unfair advantage is more important than ever for success. This could be specific to your industry, focused on distribution, based on intellectual property, or a way into a tough market. While it won't last forever, your advantage must be strong enough to help you break in, win customers, and compete against other startups and big companies. Harlem Capital (7 minutes)
Addiction to Paid Marketing
Many of the biggest implosions in recent history — especially e-commerce — have been due to startups getting addicted to paid marketing. Customer acquisition costs inevitably increase as spending scales. Initially, increased marketing spend leads to profitability and growth, encouraging more investment and spending. Eventually, the top line hits a ceiling, and payback periods lengthen, rendering the business unprofitable. Knowing that paid marketing is addictive and difficult to scale down, companies should always explore secondary or tertiary channels and organic/word-of-mouth strategies to reduce reliance on ever-increasing ad budgets. Empowering creative teams to develop viral product features, invest in referral programs, and build long-term content/SEO strategies is crucial for sustainable growth, despite the time and effort required. Andrew Chen (8 minutes)
The Best Sales Letter
Read this remarkable sales letter that legendary music producer Steve Albini sent to Nirvana to convince them to let him produce their album In Utero. You should read the whole thing, but here’s an excerpt for you: I consider the band the most important thing, as the creative entity that spawned both the band’s personality and style and as the social entity that exists 24 hours out of each day. I do not consider it my place to tell you what to do or how to play. I’m quite willing to let my opinions be heard. (If I think the band is making beautiful progress or a heaving mistake, I consider it part of my job to tell them.) But if the band decides to pursue something, I’ll see that it gets done. I like to leave room for accidents or chaos. Making a seamless record, where every note and syllable is in place and every bass drum is identical, is no trick. Any idiot with the patience and the budget to allow such foolishness can do it. I prefer to work on records that aspire to greater things, like originality, personality and enthusiasm. If every element of the music and dynamics of a band is controlled by click tracks, computers, automated mixes, gates, samplers and sequencers, then the record may not be incompetent, but it certainly won’t be exceptional. It will also bear very little relationship to the live band, which is what all this hooey is supposed to be about. Moontower (12 minutes)
Founder FAQ: What Is Restricted Stock?
Restricted stock (sometimes referred to as RSAs) is a common form of equity compensation in early stage startups. Restricted stock is a grant of common stock to a startup. It is often granted to founders or employees instead of or in addition to cash salaries. There are two main restrictions on restricted stock: 1) Vesting: Those who receive restricted stock typically earn their stock over time. 2) Transfer: Recipients cannot sell or transfer their shares except under certain conditions set out in the restricted stock agreement. Westaway (7 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.
Convertible Note: Guide / Video
Certainty in an Uncertain World
The startup journey is filled with uncertainty. A fractional General Counsel (GC) provides the certainty of on-call legal expertise. Having an experienced GC gives founders invaluable peace of mind. With a seasoned startup legal expert on demand, founders have a steady guide through uncertain legal terrain. The GC acts as a trusted strategic advisor while handling day-to-day legal tasks. This lifts a huge burden off of startup leaders, allowing them to focus on growth with legal confidence. Rather than getting bogged down in legal details, founders feel empowered delegating tasks to an expert and focusing on their vision. Founders sleep better knowing their GC can swiftly handle any legal issue that arises. If you’re curious how a fractional GC can give you peace of mind, let’s talk.
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