September 14, 2023 | Read Online​

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Hey — It's Nico.

90% of startups fail. Learn how to avoid it in Failory's newsletter.

Here's what I got today:

• 📃 Story: How Vanta Achieved PMF
• 💡 Idea: A Service That Handles Basic Needs
• 🔥 Hot Take: Cash, Equity & “Total Compensation”

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🔗 Picks

Fundraising:

Latest startup valuations and round sizes data from Carta (Link).

Partner at Patron shares tips on how to raise a round pre-YC’s demo day (Link).

Substack’s CEO discusses YC, Demo Day, fundraising, and more (Link).

AcceleratorCON, a New York event connecting founders and accelerators. Use the code “ACCONFY30” to get a 30% discount (Link).

Growth:

Who owns growth in product-led vs. sales-led SaaS startups (Link).

How to get your first 100 customers through Facebook Groups (Link).

4 methods for onboarding new customers (Link).

Ideas:

An automated URL-to-print service (Link).

Faux podcast clips as a service (Link).

“Roast my Airbnb” as a service (Link).

News:

Clubhouse makes a comeback as an audio messaging app (Link).

SimpleClosure raises $1.5M to help startups shut down faster and cheaper (Link).

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📃 Story: How Vanta Achieved PMF

In 2010, Christina Cacioppo left her role at Union Square Ventures to teach herself how to code.

She had decided she wanted to start a software business, but she lacked the technical knowledge to do so.

Over the following two years, she tinkered with different software projects and worked on Product at Dropbox.

But eventually, she started getting impatient and wanted to see if she had what it took to be a founder.

A decade later, Christina is the CEO of Vanta, a security and compliance SaaS valued at $1.6B.

​This week, First Round Review published an article exploring Vanta’s journey towards Product-Market Fit.

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The Origins of Vanta

Christina played with a few concepts before arriving at Vanta’s idea, but all of them failed to gain traction or had very limited markets.

That’s when she shifted her strategy: she stopped building and started talking to customers. She wanted to find a problem.

Eventually, she came across an interesting challenge many startups were facing: security.

Many large companies were requesting startups to prove their security before becoming customers, but these startups struggled to prioritize security over product features due to resource constraints.

That’s how Vanta’s idea surged: Christina would build a platform that would automate the SOC 2 compliance certification process for startups.

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Pre-Sell a SaaS as a Service

Before Vanta became a software-as-a-service, it was a service without software.

Christina knew she needed to validate her idea, so she and her team became SOC 2 consultants.

They went to Segment, a customer data platform, interviewed them, and provided a spreadsheet with what they needed to do to get the SOC 2 certification.

Then, they re-used that spreadsheet for two other startups.

The three clients were happy and were already spreading the word about Christina’s services.

The idea was validated and was enough traction proof to get into Y Combinator.

If you have read this article I’ve written or taken my course, you may know I believe pre-sales are the best validation indicator.

This is why I love Vanta’s story.

If you have a SaaS idea, there’s no better way to validate it than by selling your solution as a service.

You spend no time coding an MVP and can quickly verify your customers’ willingness to pay for such a solution.

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💡 Idea: A Service That Handles Basic Needs

How much more productive would you be if you lived in a hotel with laundry, cleaning, and cooking done for you?

I guess you’d have at least 1-2 more hours of work every day.

​That’s what Avi proposes as a way to abstract himself from his day-to-day tasks and “focus more on product thinking”.

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How This Would Work

I know laundromats, cleaning services, and personal chefs exist.

What Avi suggests is a service that integrates all of these services nowadays provided by different agents and delivers it to customers in an extremely straightforward and smooth way.

For example, the customer could set cleaning to happen every Tuesday and Friday at 4:00 p.m., or it could request laundry by defining an hour for the pickup and drop-off of its clothes.

If the customer has an electronic door lock, the service could go one step further and manage the entrance of the personnel to the customer’s house.

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How to Build This

This is a good startup for someone based in the Bay Area or New York, where there’s a high concentration of founders and executives who would be willing to pay for something like this.

Start by providing only 2 or 3 services. Each service is different, so it’s important to master the operations behind each one.

Initially, you can start by outsourcing the work to other cleaning, laundry, and cooking agencies, as it’ll be hard to match demand and capacity. You can take a margin for integrating all services and providing a better experience for customers.

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🔥 Hot Take: Cash, Equity & “Total Compensation”

Jobs that offer cash-plus equity are celebrated and positively symbolic of Silicon Valley ethos.

But Anu Atluru believes that seeking both cash and equity from a single opportunity has tradeoffs.

​In an article she published this week, she proposes a career strategy to unbundle cash and equity.

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Cash-Equity Tradeoff

There are 3 major compensation types: cash-only, equity-only and cash-plus-equity:

• Cash-only: “9 to 5”, part-time or contract roles offering a high base salary or a moderate base salary plus a bonus.
• Equity-only: When building a startup.
• Cash-plus-equity: Big tech companies offering a high base salary and public stocks or early-stage startups offering lower salaries plus equity that promises a large upside.

Anu suggests there’s an inherent tradeoff with cash-plus-equity offers: if you take more cash, you get less equity, and vice versa.

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Unbundling Cash & Equity

Anu proposes to unbundle cash and equity. This means pursuing multiple distinct opportunities at the same time, each offering either only cash or only equity.

For example, you can have a medium-salary, medium-effort job with a part-time or flexible schedule and, at the same time, bootstrap a side-project turned nascent startup, alone or with 1-2 trusted people, and keep 100% of its equity.

This way, you can maximize cash and equity value in your portfolio, avoid concentration risk, and have greater control and flexibility in how you work and earn.

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❓ Looking For More?

💡 Struggling to validate your startup idea? I've created a course on how to use pre-sales to validate it.

📈 Struggling to achieve PMF? I've written an eBook about the exact strategies used by Slack, Intercom, and Airbnb to achieve it.

💰 Struggling to raise funding? I've curated lists of 2,100 accelerators and incubators and 1,000 VC firms.

📊 Looking to get in front of +40k startup founders? Sponsor Failory's newsletter.​

📞 Looking for help with your startup? Book a one-hour-long consultancy call with me.

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That's all of this week.

Cheers,

Nico