I love being in the position of a student, and in my conversation with Tyler, I was more than happy to take on that role. To be honest, I was completely fascinated by Tyler Tringa's approach to venture capital. After doing my research, I found his model for venture to be exactly what the growing remote-economy needs. As a bootstrapper myself, I know the narrative and desires of a founder who chooses the grind over taking venture capital. I also know that there are certain times in business, where it is strategic to take financial help to get to the next level. What Tyler Tringas is doing is exactly that, at Earnest Capital.
Tyler, like many VCs came from a career in finance, not technology. After joining a startup in the clean energy space as a consultant. From there he started a software company, going through the entire lifecycle and ending with a shuttered business learning a ton about what is and what isn't a backable company. Tyler sought out to build a micro SaaS company with a solid recurring revenue stream. After many years and a blog entry worth reading, he sold the business at a point where many would have enjoyed the fruits of an ATM printing recurring revenue. So why did he sell it?
"Do I want to be the king of this really small niche market, or do I want to level up and try something harder?"Tyler Tringas | VCHunted S3E6
Through his blog posts about his experiences and his worldview of #radicaltransparency (which I adore too), he eventually created a community where bootstrappers like himself could go to find help and support. This grew into something powerful, and eventually, a unique type of venture fund emerged:
"I was really inspired by the folks at Buffer and others who are practicing radical transparency around building companies. Through the process of writing those blog posts, I got access to a lot of founders who are currently doing the same, or ahead of me, or aspire to do the same. So I built a network of bootstrap founders by asking questions."Tyler Tringas | VCHunted S3E6
Through all of Tyler's conversations, he clearly saw an opportunity: The earliest stages of building a bootstrapped company are horror stories. I would know, it's just ridiculously hard to build a startup. While venture-funded startups are hard enough, bootstrapping a startup is sadomasochism. After asking many questions and trying to find good answers to how to help a bootstrapped founder, Tyler saw a clear demand to help them:
"So I thought, maybe I can solve this. Maybe we can build a financing product that can bridge the gap between this really pent up demand at the early stages of bootstrapped businesses to these incredibly powerful economic assets that I'm also familiar with. This was the thread that I began pulling."Tyler Tringas | VCHunted S3E6
As a community builder myself, I'm all about engaging the people and leveraging community for support, feedback, and help when appropriate. I loved this part of Tyler's story as I'm passionate about communities!
"Earnest Capital has been very fortunate to build up a pretty significant community audience and that comes out of two things. First, by necessity. Second, we had a unique challenge of launching Earnest to a self-identified group of folks who are highly skeptical of the idea of investment, period. The only strategy I knew to counter that was radical transparency. I needed to be open-source and inspectable as possible."Tyler Tringas | VCHunted S3E6
Tyler hit it on the head. If you want help, you have to be authentic to your audience and to the world. It's the best way to bring people together for a shared purpose!
One of the things I wanted Tyler to unpack for us was a new financial vehicle called a Shared Earnings Agreement or SEAL:
A Shared Earnings Agreement (we shorthand it as SEAL) is typically used as a substitute for equity-like structures like a SAFE, convertible note, or equity. It is not debt, doesn’t have a fixed repayment schedule, doesn’t require a personal guarantee. The goal of a SEAL is to align the interests investors and founders in a wide variety of outcomes, while giving founders full control of their business and keeping as much optionality as possible open for the business. A SEAL is a long-term commitment that in most cases lasts for the lifetime of the business, so pick your partners wisely.Earnest Capital Homepage - Link
I really loved this idea because it fits perfectly within the rise of the remote-worker and the solopreneur who can create a sustainable business model but may be open to the opportunities afforded by venture capital injection.
I especially loved the fact that this type of model requires much more communication between the investor and the founder, much more thoughtfulness in the approach and agreement, and really finding alignment and incentives that both parties can agree on. Not only this, Tyler sees that this type of company is only growing and venture firms are starting to take notice:
"A couple of big private equity funds like Vistaequity and Constellation have essentially proven that these bootstrapped profitable SaaS businesses are unbelievable economic assets that once they reach a certain scale, they essentially throw off profits forever. The consensus is in that these are amazing assets to own and there is humongous demand building up on the buy-side."Tyler Tringas | VCHunted S3E6
This is great as it gives the bootstrapped founder even more options. A big company can buy you out, not gut it, change nothing, and let the profits roll in. Obviously, there needs to be a multiple that is agreeable to the founder, but this type of venture consumption is encouraging indeed!
Finally, we discussed a bit about Tyler's recent move to Mexico city... it involves his wife, so you listen to the full episode!
Oh, and want to know how to automate your life?
This was a life-giving conversation and a great learning experience for me. I was super encouraged that new financial models are being explored for every type of varied startup founder. I hope for the best for Tyler and his companies, I'll be following his progress for sure as I leverage models to build my own fund!
Enjoy my retrospective!
Tyler Tringas Social Media
May your aim be true.
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