Today's tweet storm is about business strategy at your startup.

If you think about building a company, it's a bit akin to one of those resource allocation board games. You know - like Catan or Tzolk'in or 7 Wonders -- stuff like that.

What is the strategy for your startup? >>
1) If you don't play resource allocation games, the general premise is that you try to amass resources (i.e. an audience), and then at some pt in the game you need to figure out how to turn those resources into victory points (i.e. monetization).

The same applies to startups.
2) In the most ideal world - infinite time and runway, the strategy is always focus on amassing resources. Then you can in one fell swoop monetize super easily all at once (more or less).

However, in both the game and real life you don't have infinite time and runway.
3) The opposite is also true. You wouldn't want to try to *only* focus on snagging just any points here and there in the beginning. This is most notable with companies like Twitter or Instagram -- consumer apps monetize only after you have TON of users.
4) So there's some happy medium depending on your runway and the specifics of your biz.

If you're in it for the long haul, the most ideal state IMO is to charge the min needed to stay afloat while maximizing your audience growth.
5) AMZN is a good example of this state. They constantly aim to break even. You don't want to go negative on your cost of goods (COGs) at scale, but they don't try to maximize profits. They play the long game & continue to focus on making their audience eager to keep coming back
6) But AMZN also raised a LOT of $$ & not every startup will be able to do that. @buffer is an example of a co that raised very little angel $$ that plays the long game really well.

@LeoWid wrote amazing content to amass a large audience & gave away a lot of product for free.
7) In 2012, Buffer was doing < $800k / yr in rev. 7 yrs later, they were $20m+. (rev up 20x in 7 yrs!)

There are TONs of examples like this, where the founders just "stayed afloat" and stayed super lean for the first few yrs, but kept amassing an audience.
8) Note: there's still a key metric even though revenue isn't that. Some sort of audience metric -- free users, newsletter subscribers, whatever.

The audience has to be REAL & has to be ENGAGED & has to LOVE you.

If that isn't the case, you don't really have an audience.
9) Lastly, once you have that loyal audience, that's when things are really interesting -- you can monetize / upsell really well.

I often wish startups started building their audience BEFORE they build and certainly before they pitch.

That's the most ideal.

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More from @dunkhippo33

20 Feb
VCs and fund-of-funds are going to throw tomatoes at me with today's tweet storm:

Ownership *doesn't matter* for early stage investing.

And yet almost every VC and fund-of-fund cares about it. 😮

Here's why >>
1) First some context. Fund-of-funds and VCs are always talking about needing to buy enough ownership in their portfolio companies.

But almost no one questions why.
2) But here's a thought experiment. If you invested $5k into Uber's seed round and held on to the IPO, you would have made ~$25m.

$5k doesn't buy you any ownership. So is that a failed investment? Obviously not.
Read 25 tweets
17 Feb
Today's thread is on cap table 101 for new founders.

What is a cap table? Why it's impt? What investors typically ask for? Where founders often go wrong w/ re: to cap tables?

Read on >>
1) Let's talk about company ownership:

When you have a company, in the beginning it's owned by you and maybe a co-founder or so. If you think of your company like a pie, in the beginning, the co-founders own the whole pie. And then you start allocating pieces to others
2) What is a cap table?

A cap table is a spreadsheet that has a list of all the ppl and entities that own pieces of your pie (your company). In the beginning, there may just be 2 line items or so for you and your co-founder.

It will list your name and how many shares you own.
Read 22 tweets
17 Feb
Today's thread is on SEC limitations in raising a fund.

This may sound like a BOOOOOOORRRRING topic but it has incredible ramifications for any emerging fund manager and to some extent, founders and how they get backed.

More >>
1) VC funds (right now) require their investors (LPs) to be accredited. (LPs must be worth $1m+ excl primary residence OR earning $200k+ per yr as an individual)

This in itself is limiting, but today's thread is not meant to debate who should be accredited.
2) But that being said, fund managers cannot just accept all accredited investors who want to invest. There's a limit of 99 investor slots.

This means that I, as a fund mgr, have to pick my LPs carefully.
Read 21 tweets
15 Feb
Tonight's weekend tweet storm is a little more fun. Some of my favorite, somewhat off-the-beaten path, non work-related places in the SF Bay Area.

I've lived in SF, Silicon Valley, and the East Bay for about 30 years.

1) Food! This is one of the best parts of the Bay Area. I know ppl from NYC & LA may disagree, but I think the Bay Area goes toe-to-toe with just about anywhere on food.

And certain foods are clear winners.
2) For ex, as someone who is Burmese, I think hands down, there is no other place (outside Burma) that is better for Burmese food.

Heck, I cannot even find a *single* Burmese restaurant in NYC.

Kyain Kyain in Fremont is my fav. But most Burmese restaurants here are good.
Read 11 tweets
11 Feb
A thread on employee equity in early stage startups -- what are the compensation norms? What every early employee should ask? Some thoughts on whether the structure is fair.

Read on >>
1) First, there are NO NORMS! Hah. I have literally seen everything from giving early employees no equity to giving employee #1s near co-founder level of shares.

But what is more common than not?
2) In the Silicon Valley, if you're hiring your 1st employee, & you've raised NO $$ & are paying very little (e.g $0-$10k / yr or thereabouts), your first employee is basically a co-founder.

And the equity tranche for employee 1 should be closer to a co-founder level.
Read 21 tweets
8 Feb
Some Monday thoughts on burn out in startups. We've all been there. There's SO MUCH TO DO in a startup.

How do you avoid burning out? >>

1) Mindset: Unpopular opinion - one of the biggest reasons founders burn out is their startup isn't their life's mission.

I thought about my ad startup in terms of a 5 yr horizon. Think about @HustleFundVC as a 30-40 year mission (hopefully longer).
2) What is a problem you want to work on for 30+ years? And if what you're working on is not it, then maybe you shouldn't be working on it?

You have to have something that will keep you going through all the ups and downs for decades not years.
Read 28 tweets

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