Ryan Rutan: Welcome back to another episode of the Startup Therapy podcast. This is Ryan Ran joined as always by my friend, the founder and CEO of Startups.com, Will Schroeder. Will, it is no secret, we talk about a lot on here. We talked to a lot of founders, lots and lots of founders, as many as we can find. One of the things you may not know is that we also talked to a lot of repeat founders. In relation to funding, I think we consistently hear the same thing over and over and over and over again, which is If I do this again, here's what I'll do differently. Now, are we saying that we would never raise funds again? Are we saying we shouldn't raise funds? What what are we actually saying here?
Wil Schroter: I think you talked to enough founder, they talk literally every founder ourselves included, who who's raised capital from VC investors, whatever. Their first response is always, I'll never do. That again. Now I think that's funny. I think that's funny because you think about how it's like the dream for all of us, ourselves included, to go raise money and how it's, it's, you know, this big validating point, then, then why is it that all the people have done it, almost every single person is like, yeah, I'll never do that again, never do that again. Now that doesn't mean they don't. Yeah, right, right, right, it, it, it's like people who get married and divorced and they're like, I'll never, I'll never get married again. Now you probably will, but, but, but you sure will do it differently.
Ryan Rutan: That's at least in, in, in let's hope so, right? Like the the the hindsight being 2020 there, there are a lot of things you can look back on and go, here's here's what I would do differently.
Wil Schroter: And I think, you know, what we can dig into here is for the multi-time founders, like this is a trip down memory lane, they're just gonna be going, yep, uh-huh, that's exactly what I told, but I'm curious to see how many of the things we're gonna talk about apply to you in your situation and how how well that lines up, as important. For the folks who haven't raised capital or even, you know, for folks that have already done it before, let's talk about what to do differently, right? Knowing that everybody kind of says the same stuff, everybody kind of has the same solution. So I want to walk through all of the gripes that people have about having had raised capital before. And then really what we found among all these founders, uh, in our own experience. What were the best solutions? Love
Ryan Rutan: it. So for those of you who've been through it, this will be catharsis, this will be a little bit of healing. Uh, for those of you who haven't been through it, let's hope this helps you avoid some of those pitfalls. All right, we want.
Wil Schroter: Well, you know, I, I think that the first part that it's the hardest to ignore is that no one gets paid. We talk about the perils of funding a lot. Which isn't the same as us being anti-funding, which is hilarious. We run a funding platform, funding's a huge part of our business, right? Obviously it'd be pretty hypocritical for us to say we don't think people should raise. Right,
Ryan Rutan: but it'd be just as hypocritical for us to not open up all of the doors and and and make people aware of the process. Like anything we do in the founder space, we want to make sure people come into this eyes wide open, right? This is an anti-funding prof funding. This is pro awareness of what the hell is gonna happen if you go down this path.
Wil Schroter: You bet, you bet. And so the first thing I would say is, folks always argue, number one gripe, not getting paid. I didn't get paid two ways. I want to make sure people misunderstands. What they mean is maybe I didn't get paid at the end. Obviously I haven't had an exit less of a complaint, but most people don't, so. That's where it starts. But the second part is along the way, if you're raising money, you're almost invariably gonna be tied to this ship for 5 to 10 years. In that time, you are gonna get a fraction of your market rate. Most people don't get that. They're like, oh, when we raise a lot of money, I'll just get paid all the money I was getting paid at my last job. False,
Ryan Rutan: right. You, you will get that the high water mark, and then we'll make that the low water mark, right? So whatever was the the most I've ever been paid in the past, that's when I want to be paid now, unlikely, very unlikely.
Wil Schroter: How about this? How about a job, because essentially you're taking the job as the CEO or whatever your sea level title is at this company. How about a job where you can almost guarantee that the boss always thinks you're an asshole. Yeah. And that boss is the bottom line, that boss is your investors, etc. No matter how well you do, it'll never be good enough. Now, you have errant examples, and I say errant cause it's such, it's such an anomaly. You have a Brian Chesky at Airbnb, just crushes it, right? Eventually, but you talked about the formative years, remember we interviewed him, wasn't
Ryan Rutan: pretty, right? He was eating leftover boxes of Obamaos for a long time, right?
Wil Schroter: Yep, yep,
Ryan Rutan: sleeping on his own couch.
Wil Schroter: Let's first unpack why you don't get paid, OK, cause I, I don't think people don't get it again, people have done it before, they're all too familiar. First off, you're raising a small amount of money relative to the company, over time, over a fairly long period of time. Which means there's room for everybody in the salary line, but you, the quintessential response to founders asking for more salary is you got paid, it's your equity stake, which ironically you already had.
Ryan Rutan: Yeah, but I mean, and you think about it too, it's like the negotiating position for the founders here is is zero. They're like, OK, we've taken on capital. Here's all these things we need to use it for. I'm also gonna use some of it for myself, like, no, you're not. Yep, right, because if we don't pay the the marketing company, they don't do marketing. If we don't pay the developer, they don't do developing. If we don't pay our rent, we leave the building. If we don't pay you, what are you gonna do Tiger? You're gonna leave, right? This is your company,
Wil Schroter: right, yeah, exactly,
Ryan Rutan: right? That you're gonna leave you, you have zero leverage in this conversation.
Wil Schroter: You do. And the last thing on anybody's mind is how do we pay the founders more money, like in salary, right? It's the last thing on anybody's mind. It, it sounds weird if you haven't been through this, you don't quite get it. Again, you think, well, didn't you raise like $10 million? Like there's plenty of money to pay you. There's plenty of money, but it doesn't go to you. As weird as that sounds. Let's play out a scenario, just so people can have some actual facts and figures to work with, right? Let's say that Ryan, you and I are starting a company and we're 50/50 partners and it doesn't matter what our titles are, but we're both the C level people, right? And we raised $700,000 on a seed round. What's your guess at how much we would allocate for both of our salaries at that point?
Ryan Rutan: Do we get salaries at that point?
Wil Schroter: I mean, the second thing I was thinking, yeah,
Ryan Rutan: yeah, I was like, jeez, I like, I guess it kind of depends like what what's what's revenue look like? MR look like, do we have AR or do we have revenue, right? Or is this, are we, are we pulling from because that that is part of the dynamic there, but dude, it's gonna be 100K would be fantastic, and it's probably unrealistic. Right,
Wil Schroter: so I'm, I'm guessing 100K on the max because we have to also pay other people, it's only 700K which isn't isn't gonna last us very long, maybe 80K right now, start with that. Before we raised any money, we weren't getting paid anything, right? Presumably. So let's say we went a year, this is gonna start to add up. Watch this. We went a year, maybe longer, probably longer, without getting paid, OK, so getting $0. In that time, in that first year, and it's probably 18 months, it's probably longer. In that time, we were burning through savings. We, we were burning all of our, our capital reserves, OK? People forget this part. Yeah, exactly, right. Now we raised 700K, it's our precede round, whatever it is, and now we get 800, 100K, which is still way less than we were making before, not for everybody, but for most people, and we still can't pay our bills. We're still like pulling out of savings to to make our mortgage payments, so to speak. That capital lasts us, let's say 18 months. Typical 1824 is how long uh capital raises will run. And now we go out and let's say we're successful at a seed round. Now we've raised 3 million on a seed round, not a bad seed round, you know, bigger, smaller, whatever. Where do you think our salaries are then?
Ryan Rutan: About 80,000, right? That's kind of like right, right, right where we start. Now at that point we we may be able to level up a tiny bit here, but maybe not 20 and it all depends on what it's earmarked for.
Wil Schroter: Right, probably buck 20, 130, 140 on the high end, right, again, everybody's mileage varies, but you gotta look at it from the investors' eyes. The investors are like, you guys are already stuck with the company, right? I'm more concerned about paying everybody else, and honestly, by that point, so are we. Let's say we move to 120, which would be pretty gracious, if you will, OK? Now, we've got another 18 to 24 months at that price point. Let's build on this, year 10, year 2.5, 800, right? You're 3.5, you're 4.5, because I'm stacking all these together. $120,000. We've averaged less than $100,000 a year, right, probably closer to like 80-ish,
Ryan Rutan: right 3 to 5 years.
Wil Schroter: Well, for 4 years so far, right? Now pause there, going back to never got paid. We did everything right. I want to point out we did everything right.
Ryan Rutan: We were successful. We raised, we raised
Wil Schroter: again.
Ryan Rutan: We
Wil Schroter: raised, we raised again, we raised on the right timelines, we're able to close our rents. We did everything right. And you and I each made less than $100,000 a year as sea-level executives of our own company. Yeah, now. like, OK, and we're 4 years deep, a lot of bad shit can happen in 4 years.
Ryan Rutan: Yeah, well, because we didn't talk about that, right? There was the, there was the the drawdown on savings, there was the increase in debt, there was all the other stuff that was going on. Yep, that makes that 100K averaged out even less valuable, right? That time we normalize that down.
Wil Schroter: By year 4, we have long since exhausted our savings by by trying to like whatever. So we're so fortunate, we're one of thousands of companies per year that's able to raise a Series A. So we raise a Series A at $8 million right? Just pegging a number. And now we're like finally we can get paid a little bit more, buck $50 buck $75 maybe it caps out fast. Now here's, here's where we get really screwed. That buck 50 is gonna run us for the next 2 to 3 years, assuming we're very capital efficient, and we don't get to a B round, etc. But now we just added 3 years at a buck 50, plus with what we averaged before, we are now at 7 years at barely breaking 100K and likely the prime income earning years of our lives. And again, We did everything right. Like we nailed it every single time. People were high fiving the shit out of us the entire time about how well we executed. Investors were praising us for getting our rounds done, we're hitting our milestones. All the while you and I are going back to our wives like, we're pretty broke. And there it is, and there's never got paid.
Ryan Rutan: So what, what do we do about it, right? So like, cause I think everybody listening now is like, yeah, we get that part, it sucks. So is there an alternate path here, and there are, right, but they're they're not necessarily easy, right? Takes takes some doing.
Wil Schroter: There's a couple parts. Number one is recognizing that this is a thing. Yeah. It's like a hidden secret. Like you talk to CEOs that are 7 years deep in a funding round, you know, in in funding world in their startups, and you're like, hey, how old do you get paid? And, and they'll just laugh at you, right? They'll be like, are you kidding me? I get paid. Um,
Ryan Rutan: how old do you get paid sometimes.
Wil Schroter: That's about right. And then begging for that paycheck, are constantly hands out to get that money. The best way to do this differently, like if, if you and I were doing this for our 3rd time, 4th time, whatever it would be for us, the first thing I would say is we need to establish an incentive comp structure so that our base salary is just a reference point, you know, it's almost like being in sales. And our performance metrics that we insist on having every single year, allow us to earn more money.
Ryan Rutan: I think it's the only way I've seen it work, right? Because it's something that the investors might agree to, right, as opposed to just like, and here's how I'm going to step up my salary over the next 5 years. No. That's such an easy
Wil Schroter: no. That's why I say incentive based. There's 2 reasons for that. The first reason is everyone will say yes to it. Like, who wouldn't want to create incentives for a CEO? Now you might not hit him, OK? Sure. The second is, because it's dynamic, it gives you the opportunity each year to kind of reset those milestones, because your business is totally different every year in a startup, right? So to your point, if you say, hey, we're gonna do a salary ladder and it's a guaranteed, I go to 120 to 150 to 180 to 20, you know, etc. no one's gonna say yes to that. But If you were to say, hey, uh, I wanna have um my base comp, and then milestone bonuses based on hitting milestones that I'll agree with, you know, with the board, everyone will agree to that, generally, if the money is there, because it implies that you're doing what you're supposed to do.
Ryan Rutan: But in this scenario where we're doing everything right, we're actually benefiting from as the founders as opposed to just being left behind.
Wil Schroter: Yeah, exactly, exactly, and and there's no lack of founders out there that I talked to that again like 78 years deep in a funded company, and they're like, actually the company is doing pretty well, like if I owned this company, like I'd be I'd be making a ton of money. But because I'm restricted from it like enjoying any of the profits or or or or upside to the company, I don't have a way into or out of this thing so I'm I'm fundamentally stuck.
Ryan Rutan: Stick on that for a second because I think there is a miscon. Conception or or in in in the overall space, it's like, OK, but if we're, if we're really profitable by that time, that's a big ass if like what if, if we're, if we're profitable by that time, then I'll just start taking distributions and that'll make up for for the salary. Yeah, that happened
Wil Schroter: yeah. That happens exactly never. There's nothing worse than seeing a profitable company that you built from scratch that you can take no money out of. It's bizarre to me. I watched a friend of ours, a guy we both know, I'm always mindful of being keeping people anonymous, but a, a friend of ours grew. Company I'm actually need two of them now. Both of them almost in the same pace, grew a company to about 15 to $20 million in revenue, and because they had an investment structure, investors, right, and the company was profitable, like really profitable, they couldn't take any money out. And I remember one of them coming to me at some point saying, hey, we have like $7 million in the bank now, right, of, of like earnings, not like, you know, we raised money, right? Earnings money we earned. Yeah, yeah, like, can I get some of this? And I remember he was trying to buy a house at the time, and I remember having this conversation, and it's so funny, he's a great founder. He's like, I've got $7 million in the company, you know, whatever, and he's a majority holder, but that doesn't really matter. Talk about that. And all I need is like $500,000 to put down for the house, right? And I'm like, you realize that's your money, right? That's the whole point of starting a company, and he's like, yeah, but I don't, I don't think I can access it. Right? And the truth is he couldn't. He ended up selling the company and doing great, so he had all the money he needed, but my point is, $7 million. Another friend of mine, uh, uh, somebody you and I both know, uh, had, uh, $2.5 million in a in a slightly smaller company. And same thing, like it's never taken more than $100,000 out because he had a bunch of investors that were like, no, that's company money, that's not your money. Com money,
Ryan Rutan: it's gotta be reinvested for growth because that's how investors get paid, right? They, I think again, another misconception, right? Not only can you not take it, the investors don't take it. This isn't like, oh, they kept it $7 million. No, no, it has to be reinvested so the company can grow, so that it can exit, go public, or cease to exist, right? Like it's, it's grow or bust at that point. You have to grow so that the investors can get their money back. It's the only way it happens.
Wil Schroter: Another one that I think is really interesting that you, it's hard to understand until you've already done it, is actually having raised too early. You see that, right, like the first time out, they raised too early, the second time, like, I'm gonna hang back a second and develop this thing for a while before I go out and raise.
Ryan Rutan: The irony is at the moment, everybody thinks they're raising too late. They're like, we should have done this 6 months ago, we should have done this a year ago. Why are we so far behind the funding curve? And then after the fact they're like. Damn, we shouldn't have taken on money in the 1st 18 months, the 1st 24, 36 or whatever it is.
Wil Schroter: Yeah, yep. I don't think you realize how incredibly vulnerable you are in those formative stages. The, the problem is it's at a stage where nobody has any money, so it's so obvious that, you know, quote, I need money. So it's like, you know I start something, we're 12 months in, and it's like damn, we need to hire this and this and this, we need to pay for this and this, this, it's money we don't have and therefore, any money is good money, etc. What we don't think about, cause again, we typically haven't been through it before, is what's the benefit of waiting? Cause in our minds this idea is hot, someone else is gonna do it. If we don't raise money now, we're totally screwed, right, which almost never happens, right? Instead, Founders who've done this before, like, you know, I'm gonna like get through prototype MVP first customer, do whatever I gotta do, right? I'm not gonna go out for money when I'm vulnerable. I'm gonna say that again. I'm not gonna go out for money when I'm vulnerable. I'm gonna go out for money when I feel like I've got something that gives me leverage, which simply means product, customers, and traction, right? And I think that the difference is for for a first time founder that's never raised before. They don't understand how vulnerable they are. They just know they need money. You know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done 1000 times before you, which means the answer already exists, you may just not know it, but that's OK. That's kind of what we're here to do. We talk about this stuff on the show, but we actually solve these problems all day long. At groups.startups.com. So if any of this sounds familiar, stop guessing about what to do. Let us just give you the answers to the test and be done with it.
Ryan Rutan: And they know they need money and I think that the the challenge that I always run into here is that really what it's gonna do is, is maybe move them a little faster, but at a time where the path is so poorly defined, we're just gonna go faster. We're not necessarily gonna get somewhere better, we're just gonna move faster. Right, and I think that's what a lot of them will go back and regret and like, you know, we could have gotten there 6 months later, or a year later. And retained another 15 or 20% of the company, and then there's a whole bunch of other things that that come with this, and I, we'll get to some of them, including loss of focus, which I think is is a huge one that starts to come into play when we take on funding. We take it on really early and we start to divide that focus at a point where we still really weren't sure where the hell we were going. Yeah. Right, massive compounding of problems at that point.
Wil Schroter: Agreed, and I, I think what happens is we don't realize how months and tiny milestones have major impacts on what we do. If you and I are in the idea stage, we just have the idea and we want to raise like 100K, let's say, in order to kind of get the idea going to build an MVP. In our minds, our logic, and this is kind of everybody, so I, I get it. Our logic is, well, we need the MVP, we need that, you know, that initial product in order to have anything, so. Whatever we have to give up now to get it is worth it. But we look back later, not even that long, like 2 years later, look like, like, dude, I give up 20% of my company for $100,000 like you've got. For
Ryan Rutan: a shitty MVP that we built, yeah yeah
Wil Schroter: that we never even used or like, you know, like we hired some consultant that we that never even worked out or like whatever, right? And we look back and like damn, had I just toughed it through. That one milestone, which really would have only cost me like 6 to 9 months. I would have absolutely saved a major chunk of equity, not have to take on this this investor, all this other stuff, and they're like, this time around, I'm not gonna raise until I've exhausted every option for just that reason.
Ryan Rutan: Yeah, exactly. Yeah, it's again, it's so hard to see when you're when you're on that path and you feel like this is the one thing I need, you know, the, the moment I do love seeing is when people are like, they're they're really at the early stage when they're vulnerable, where we like it really is a a huge question mark as to whether raising at that point is a good idea or not. Sure, sure. Customer, they're pre-revenue, right? And they're like, we have to go do this, we have to do this. There's no money, we have to do this. We have to watch them get to revenue somehow. And oftentimes this is us pushing them or somebody pushing them to say like, well, hey, take, do a service-based thing, right? If you're trying to build a product, do service first, do something else to get some revenue going, make the side hustle within the company, figure it out. We've talked about some other episodes. All of a sudden the tune changes significantly, right? Like they were willing to go and give up 1520, 30% of the company to get money to go get to revenue. Now they've gotten to revenue and they're like, shit, I'm, I'm glad we didn't do that, right? I'm really glad that we didn't execute that funding round cause now here we are, and now our valuation is completely different, right? Our, our traction is completely different. Our leverage in the investor conversation is completely different. By the way, we've started paying. ourselves, so that won't be a question going back to point number 1.
Wil Schroter: It's unreal. So, so let's shift. I think the third, I would say biggest category that we get is the massive, massive loss of focus. Yeah, yeah,
Ryan Rutan: this is what I was touching on it just a few minutes ago, but 100%.
Wil Schroter: Yeah, I think what ends up happening is if we've never raised before, we, we can't possibly appreciate. What a massive loss of focus, time, energy, that we've basically created an entirely new customer set, right, in an entirely new product, the customer's investors and the product is our fundraise, right? And we have to keep working on that part of the equation, on that part of our business, which by the way, is a part of the business that doesn't exist for most companies, right? It it's it's a whole other set of liabilities and focus. That is unique to funded companies. When you've never done it before, you just assume, hey, I get money, and I get the help of investors, those are all upsides, right? Hell no, it's not. When you start raising money, you've opened up an entirely new line of business that is wildly unforgiving, totally uncertain, and you can generally never win. I think if you talked to enough fun defenders, they're like, that's it. They're like, hey guys, double down on the you can generally never win. It's never good enough. Whatever you do. It's not good enough. If things are going really well, which is such a small number of companies, you get some reward maybe. And then at that point everybody's sharp elbowing into your deal.
Ryan Rutan: Let's break the the division of focus into two major buckets here, because I think there there's two, the way I look at, there's 2. Major buckets here. There's the fundraising itself, which is a massive distraction,
Wil Schroter: right? like an energy suck, yeah,
Ryan Rutan: yep, energy suck, time sucks, but just like attention all of it, right? You end up and then you start to maybe do things differently within the company. To try to appease and appeal to investors, which starts to to create the secondary bucket, which is then, let's just say we are successful, we go raise funds. This creates a whole bunch of new distractions and a loss of focus because now one of the beautiful things about being poor is you can only do one damn thing at a time, right? Like you are when you're a poor start. when you're bootstrapped, you're gonna focus on whatever the thing that you think is gonna do the best to move you forward. The minute you've got money, now the expectation from the investors, from everybody that get to put money in is like, OK, now you got to go do 20 things at once. You got to go build the marketing team. You gotta go build the sales team. You gotta go build more products, get past the MVP, find customers, find partners, grow the team, all this shit. And like all of a sudden you're moving faster in a lot of cases, in my case in particular, I then had to move at a pace that at that time I wasn't capable. All of a sudden, yep, I was accelerated beyond my capabilities. Like I could keep up with what was going on when when I was unfunded. The minute I was funded and all of a sudden I had 20 new jobs, like shit, I don't know how to do some of this stuff. I gotta figure out on the fly, which is, you know, part of it I suppose. But for me that's the two, the the bifurcation, you've got all the distraction and and the loss of focus during the fundraise. But then there's a whole bunch of new activities that come into play once you're funded, that also divide the focus.
Wil Schroter: That's what I'm saying, and and ultimately your mindset changes. You go from, hey, I'm worried about building products for customers to I'm worried about whether we do this thing. is going to have some sort of impact on whether it will raise more money. And you hear this nonstop, and I've been through this before myself, is what will investors think? Signaling. No one ever talks about signaling that doesn't have an investor. They just talk about revenue and products. That's like what a business is supposed to be. But when you're out raising money, it's like, hey, if we partner with this company, it'll signal to investors that they might want to invest. If we hire this person at this skill level, it'll signal to investors that, you know, that we're we're this next generation company. And you start to realize that like, that's not what you're supposed to be building a company for, but you sure as hell do. Yes,
Ryan Rutan: funding is, is a major distraction, uh, particularly, you know, I think this is a coupled with when it happens too early, right? So I think if we look at That the the previous point we're talking about, which is that like if you raise too early, this creates some some additional challenges. I think that it's even more of a distraction to focus at that early stage. So what's the solution? The solution is at those early stages, stay focused on things like generating revenue, being efficient with your costs, do all the things that you can do to avoid needing the funding at that point in the first place. And honestly, like, you want to send a signal to investors, you wanna become attractive to investors, become attracted to your customers. Investors really do like that, right? At some point it's an expectation. Don't forget this. They're like, well, we'll worry about revenue later. We're just gonna keep raising money. Like at some point that stops, right? You can't raise. To victory, right? At some point, somebody has to buy your stuff. So I would say like the solution here is, is stay focused on the things that are truly core fundamental principles around how do we drive revenue? how do we, how do we get where we need to as efficiently as possible, not necessarily as fast as possible. Until we're really sure where we're going.
Wil Schroter: I heard a founder say something uh recently, and he said to me, hey, we're just closing our round, and I'm, I'm like, cool, uh, you know, what are you gonna do with the funding use of funds, whatever. And he said, uh, cut a bunch of costs. And I thought that was so interesting. I was like, again, this is a little bit more relative to to our our time period, right? But like, I thought that was interesting and I was like, that's genius, right? At the moment
Ryan Rutan: tooling, build process, buy systems you didn't have access to before to reduce costs. Yeah, I love that.
Wil Schroter: And and the idea was, I'm gonna take a moment when I have the money, to reduce my reliance on money. That's the polar opposite of how most people go about it, and this is exactly what leads to them being so stressed. They say, hey, I raised more money, so I'm gonna exponentially increase my liabilities, even if I don't have the revenue to go with it. Part of that is, um, hey, I'm making investments, but I also think it's a dangerous, dangerous gambit because people could easily say I'm making investments without actually having to pay any of those investments off.
Ryan Rutan: There's a big difference between making invest. Investments that are speculative and making investments and assets, right? So what this founder was talking about is making an investment in asset, which is a cost reduction, which has permanent benefit.
Wil Schroter: You bet. And I, and I just thought what you're doing is you're saying, in order to get some of my focus back, so I'm not constantly distracted by talking to investors, I got a crazy idea, wanted to become more self-sustainable, right? I remember this a long, long time ago, uh, Jason. Can a lot of people don't remember this, uh, is the all in pot, etc. But, uh, years ago, many years ago, Jason did a company called Mahalo, and Mahalo was a, yeah, right, I'm going way back like 2007ish, but Jason did a company, it was a search company, it's irrelevant. But I remember what he said at the time is this was during the financial crisis, we were sharing office space with him, right? And uh it was during the financial crisis and people were asking like whether Mahalo would make it. And Jason said, we've got cash for 5 years. Now, what I thought was interesting about that is he hadn't raised that much money. Fun fact though, at the time, this is just so funny when you look back now, you know whose board members were? Elon Musk, Rulaf Bota, who's the uh the the head of Sequoia now, um, like all these people who were not no names back then, but like not that big of names, like
Ryan Rutan: they didn't ring out like they do now.
Wil Schroter: Yeah, yeah, yeah, it's pretty amazing anyway, uh prost Jason. So anyway, but what he said was While everybody else is going to be spending all the money and going crazy with it. I'm gonna stay as cheap and focused as possible because I don't want to have to need more money. And I thought that was genius. Now Mahalo didn't work and Jason will tell you, trying to beat Google at being Google up until now, hard to do in their heyday, right? But his focus, I'll never forget that, was so spot on. He was like, reduce my reliance, that's how I get further. And think about who was in his ear, Elon Musk and Rula.
Ryan Rutan: Not exactly capital averse guys.
Wil Schroter: Yeah, exactly, exactly. All right, so the last one, you know, I think we should, we definitely have to, to touch on. I hated my new boss. Now when people hear that way, I don't think I heard you right, you, you are the boss. What do you mean you hated your new boss, no no. When you raise money. You are basically hiring a boss, so to speak, right? Hiring by virtue of taking on that investment, OK? And that person or persons. Is your boss until the end, and there's a 90% chance they're not gonna be a very cool boss, cause startups are hard, right? Things generally go poorly. So when you made a fairly cavalier and probably leverage decision. To take that person on as an angel investor, a board member, etc. you just want to get the capital and get get on going. You don't really think too much about who that person was or what they might be like in the future, and, you know, like anything in life, people change. Boy, after having to go back to that person hat in hand, year after year, getting browbeaten. Nonstop year after year. The last thing on your mind on round two of doing this, you know, as a second time or 3rd time founder is, let me bring that bro back.
Ryan Rutan: Yeah, let me, let me bring them back. Yeah, man, I always, I love the starry-eyed young founders who are like, we're gonna go, we're raising now and we're we're trying to be really selective. We wanna, we're looking for smart money and like. Guys, just find some not mean money, find some not shitty.
Wil Schroter: I agree with you, and it's hard to tell because most people have never worked with investors before, and it's not that they're all bad necessarily. You gotta understand where they're coming from. Like, they invest in assets that generally fail, which means most of all their employees, if you can call founders their employees, are all failing and all need to get fired, right? It's not an easy job, right? I, I, I feel for them. Now that said, some of them have to do the job and they're actually kind of cool. About it. Some of them have to do the job and they're complete assholes, such as life, such as the world. We have to be tethered to that person who we didn't even realize was our boss for a really long time. And that person holds the keys to everything in our lives. They control our worlds and we take that decision so lightly. It's like getting married to the first person we went out and date on just just because they thought we were cool and wanted to go on a date, and not realizing how important that commitment was.
Ryan Rutan: Yeah, it's huge, right? I mean, as you said, it's gonna be a a long time and it permanently changes your your options within the startup, right? All of a sudden you've taken on a boss and basically what you're saying, you've taken on a boss and you're saying your outcome is primary, my outcome is secondary, right? Despite the fact that I'm the one in this thing day in, day out, making it work and and I'm the one who's taking the financial sacrifices over time. I'm the one who's putting the emotional energy into this thing. Your outcome is first. Mine is maybe.
Wil Schroter: Yeah, right. Well, I mean the the the other, you know, that we always talk about it's like, hey investor person, uh, you're already rich, you're gonna pay your bills. I already cleared out my savings, like we're we're not on the same side of the,
Ryan Rutan: yeah, we're not on the same side there are
Wil Schroter: lives that are very different as this outcome goes. And so I, I think the solution there, take real stock. In who these people are that you're aligning yourself with, when you're putting the board together and if you're gonna raise money, you're gonna have a board, don't willy nilly it, right? Don't be like, oh I guess, you know, this partner at this firm is fine, or I guess this, you know, a board observer is fine. Those are gonna be the most important people in your life. Yep. And if they're not cool, it's not gonna be very cool.
Ryan Rutan: So look, let's put a bow on this whole thing. I think we can sum up a lot of this by saying, look, Here's what most of us have learned on the other side of a fundraise, right? And if we decide to raise again, the things that we're gonna do differently come under a couple of things. One, it's like, be really, really deliberate and and really intentional about why you're gonna do this, and, and when, right? Which is point number 2, slow things down a little bit, right? Yep, you don't have to just get places faster. You gotta make sure you're getting somewhere good, right? So be thoughtful, be mindful about the timing of the race. Slow down when you get to the part where, who are we putting on the board seats, right? Who is going to be my new boss? How are they gonna feed into that other bucket that we talked about around distraction, and remind yourself that a lot of times distraction comes from that same place of wanting to move faster and and break things. Cool, right? I get it from a philosophical standpoint, but like, the less things we break along the way, the better. So take your time, slow down, keep your focus, and be really deliberate in who gets involved in this adventure. Overthinking your startup because you're going it alone, you don't have to, and honestly, you shouldn't because instead, you can learn directly from peers who've been in your shoes. Connect with bootstrapped founders and the advisors helping them win in the Startups.com community. Check out the Startups.com community at www.startups.com to see if it's for you. Could be just the thing you need. I hope to see you inside.