founder mode: when to raise vs when to bootstrap? | The Trenches 008

Welcome back to another episode of The Trenches. This is crypto's number one livestream where we discuss the most important questions in crypto. I am absolutely thrilled to have my longtime friend Bruno Faviero with us. I've known Bruno for 3+ years as of this point, and I remember we first met in person on a rooftop in Miami, and I was like, this guy is a true one of one in the crypto space, an experienced multi-time founder in Web2, that MIT graduate that then transitioned into crypto and is now launching the most, if not one of the most, token vesting platforms that's securing hundreds of millions, massive amounts.

$10 billion.

$10 billion. $10 billion worth of assets. And that is Magna Digital. So what I wanted to do is, again, this, this channel is not just for the token lovers. This is actually for the builders. This is for the founders, the creators, and the doers. So I want to make sure we have insights and guests that I think have some of the best takes on how to start companies and how to grow your and scale your company. Again, throughout Magna's lifecycle, they've raised close to $15 million, if not even more at this point. And so we're going to talk about fundraising. We're going to talk about scaling a business, we're going to talk about how to go out and touch grass and how to maintain a long-term outlook in the way that you use your time. So Bruno, welcome to the show.

Very excited to be here. It's my first time participating in or even using Pump Livestream, so I'm excited to, you know, love using crypto-native tools.

Exactly. And again, one of my takes is that live streaming is the future. One of the things I love about this is the community, community can directly interact. So people can post questions, I will make sure we get to them. And I think this is much more of a dynamic way to discuss content than let me go record a podcast, then gets released 3 to 4 days later. Um, though we will also record this. So by the way, for those of you recording, please do, uh, if the YouTube channel is live, make sure you click like and subscribe. For those who are interested in getting in touch with the community, we actually have a Telegram channel, has over 200 people in it, people that are interested in the trenches and what's going on. So feel free to join us. It's posted directly on our X. Okay, well, let's go ahead and jump in. So, uh, Bruno, we're gonna— I think one of the things that's interesting is I want to start by asking you when to raise versus when to bootstrap. And again, for those who are listening, I went through 3 years of Bruno's great takes on X with the help of Grok, of course. And, uh, I'm going to be pulling out some, some OG takes. So Bruno has seen none of these. I'm just going to put him on the spot and, and ask for his takes. So let me pull up the first one here.

I, I fire from the hip, so I'm, uh, sometimes I don't even know if I'll know what context.

Yeah, right. Something in Let's, let's go ahead and get at it.

So I think I have to preface by saying none of this is financial advice.

Yes.

Nor, nor an endorsement of the Trenches token. Exactly. So this is here in a personal capacity.

No, exactly. I totally agree. That is always a good endorsement. All right. So one of the things Again, this is actually a question that I get from founders all the time is, should I raise venture capital money or should I not raise venture capital money? And it's a really important question for founders because it has to do with— I mean, actually, let me just pin this globally so that way everyone could see it. Here we go. Um, it has to do with the structure of the business. It has to do to, uh, the urgency at which you move. It has to do with the types of relationships you can build. Through raising venture capital or, or let's say bootstrapping. And so what I wanna do is start by asking your take here. So you said, I think a bootstrapped community's the purest form of entrepreneurship. When you take VC capital, you have a boss, whether you realize it or not. And so I, I'm curious, when you're talking to founders and even in your own journey, talk us through when did you feel like was the right time to raise venture capital dollars and why?

Yeah, so, um, after I sold my last company, you know, that, that one went, um, you know, I don't think we had any issues with the investors. Actually, I take that back. We, we had a couple issues. Our investors were our last company where I think we thought we were doing great. We were doing fine, um, and then it was my first company, so I was a bit more I don't know, like, you know, learning the ropes of running a company and being a CEO. And we had some like antsy investors that at one point, um, they were like, oh, like maybe we— I was the CEO, they're like, oh, maybe we should bring in a new CEO. You know, these are some old school Silicon Valley types, these particular investors. Um, and at the time I didn't know much better and I was like, oh, maybe, maybe that is the right call, right? But they were like, yeah, like let's get in someone that like knows how to, you know, do big deals. So we were selling the government and The specific expertise we needed was like negotiating large government deals and building a global supply chain network and literally managing overseas, uh, um, sub, you know, uh, contract subcontractors and overseas, literally like international cross-border supply chain, but like very hands-on physical business. Um, and they're like, yeah, we should bring in a CEO that knows how to do that stuff. And I was like, yeah, sure, maybe that sounds like a good idea. They were like kind of annoying me, a little pushy about it. Anyways, we ended up bringing in that CEO and it kind of destroyed the whole business because, you know, that, that's when you learn. I think there's a lot of things that you appreciate that a founder CEO in particular, like a founder CEO does that relate to culture, that relate to product strategy, that relate to vision, and just generally like vibes of the company. That if you bring in, uh, you know, kind of a stodgy business type, you realize, okay, maybe they do crush it at that, right? And that guy that we brought in was very good at making a global supply chain, but very bad at all the vibe stuff, which I think we took for granted until we didn't have, you know, someone with kind of the founder CEO context or charisma in that seat. And so that was like a first experience I had, like, man, maybe investors don't always know what's best for the company, especially the class of investors that sometimes can get very pushy about change and with very little context. So that's one context. I think the other context is like You know, I have friends that are, you know, if you think about who amongst your friends has like an incredible lifestyle, I'm talking, you know, flying business class, uh, you know, maybe even flying private sometimes, right? Like staying at top hotels on their own dollar, right? Personal dollar. It's usually either they're like, they're founders of companies that are worth many billions of dollars, like many billions of dollars, or They like run their own agency and do a couple million in revenue, but the difference being that it's all their money, right? It's like their lifestyle, right? Like if you are a bootstrap founder, you run your own agency, you run your own trade or whatever it is. If you don't raise outside venture capital, it is your money to do whatever you wanna do with it. The moment you raise outside venture capital, all the money that you make has to go in service of making the company bigger or, you know, returning funds to investors. So. Number one is an element of like control, right? That was the previous one. Decisions about what the company, what kinds of deals you do, how you expand, how you run it. Um, once you raise outside money, you give up some of that control over the direction of the company. The second is just financial, right? Like, you know, if you can get to a million in revenue, um, you know, $500K in profit, if it's just like a two-man shop, three-man shop, great. Like, it's $500K or a million a year, you know, you can just pocket and go spend and do whatever you want with. But if you're a venture-backed founder, you're in founder mode, you know, ramen, you know, maybe a step above that until you either sell the company or become worth so much that, you know, you can start to pay yourself a bit more, take some secondaries. So the second is like financial, right? Like, and from that perspective, you are signing up for a long-term grind where your mission is to return value to shareholders. And then the third is just, you know, like sometimes, you know, it's a time horizon, right? I think, you know, there's a lot of companies that, you know, don't work out from a venture perspective because they don't have a huge outcome. Whereas, you know, if you have a bootstrap company or an agency and maybe all it does is, you know, make a few million a year, $10 million a year, that is wildly successful by any measure. If you have a venture-backed company that's making $10 million a year after 5 years, that's like a failure, right? Because I mean, you're probably not doubling, tripling, like, that's a lifestyle business and you try to wind it down and just return all the money. So that's the other thing. The third is that, right? It's like the moment you raise venture capital, you're signing yourself up for either— for a binary outcome, either explosive success or you got to wind it down or just be very sad about the state of things and grind along. So I think from that perspective, right, like then why raise venture capital? Why give up control, give up, you know, maybe personal financial upside, or at least in the short term, and force yourself into this gotta go big or go home mindset. Like, the main reason of venture capital is like you're trying to do something that if it works will be really big and it needs a lot of capital to prove out, right? And so, um, I think the answer is there's like two questions here. One is like, should you raise venture capital at all? How much should you raise? Should you raise venture capital? It's like, if you are down to sign up for that journey, You're giving up control, you're giving up personal financial upside for the possibility of a huge win. You're signing up for this head-on-a-treadmill of investor expectations. And, you know, for some people, if what they're doing, you know, it's like if it works, it'll be huge. If it's not that, maybe you shouldn't raise venture money. If you think there's a clear path to get to a few million in revenue and you don't think you need investor money to do it, probably shouldn't do it. You should really only raise venture capital if you absolutely need to. And then how much to raise? And that's where I also tell founders, like, you should only raise as much as you need to de-risk the next level of the business, right? So if you, you know, that's why people raise small pre-seed rounds, small seed rounds, because then if the thesis doesn't work, if it doesn't really get traction, if it's not really taken off, you can say, hey, we tried the experiment, you know, this experiment capital that we received, it didn't work out. Like, hey, sorry. No one will care if you return $500K, if you want, if you spend $1 million and it doesn't work, spend $2 million, it doesn't work. You give it your all. But if you raise $10 million, $15 million, then it kind of has to work. And you're no longer raising money to test the thesis. You're kind of raising money to take it all the way. And so it's like it better work or else you'll find yourself with a ton of capital and, you know, not really sure what to do with it. So that's what I tell people. Like, hey, if you're going to raise money, know what you're signing up for. And if you've already decided to raise money, like, don't raise more than you need to hit milestones that will be exciting to then, you know, take the company to the next level to raise more money. Like, think about what are those milestones that if hit will not only de-risk the business but also make investors feel more confident in giving you more capital. Because it should be a milestone, it should be an opportunity that if it is de-risked, if it is unlocked, should get everyone excited by the potential.

Yeah, I, I agree with a lot of what you said there. Just starting at the end, there was actually a team I was talking with last week at the Monad Foundry event, really incredible team, and, uh, but they were, let's say, junior founders. And so they, they said, well, our, you know, there was a competitor that raised X amount, therefore I should raise X amount. And I kind of had to walk them through that framework, like What you actually really want to start with is, what am I trying to de-risk? Like, running a business, especially at this— these early stages, all about de-risking and testing hypotheses. It was like, what are you trying to test? What are you trying to de-risk? And how much capital do you need to get there? And you know what, build in a little bit of a buffer because, as you know, markets change, sentiment changes, uh, the technology might take longer to develop than you think. So you always want to have a margin of safety, but at the same time, if you're not having, having a clear and communicating a clear point of view on the milestones you're aiming for, then you're just raising capital for the sake of raising capital, and you're probably going to misallocate that capital. To your point, if you're not actually working through, hey, this is what I got to test and validate, you're not doing that throughout the course of the business, it's going to be really hard for you as a CEO or founder to make prioritization decisions because you actually haven't established what are those true priorities.

Yeah, and I agree. And, and I think like, you know, we felt victim to that where we raised $17 million and all of a sudden the original thing by itself didn't seem big enough. And then we had to work on multiple products. We're working on a fund admin product at one point. We had investors pushing us to do a Magna Launchpad and start a token because like the moment you raise that much, then it is the pressure to hire more, the pressure to expand the portfolio of products, the pressure to expand the TAM. Like, you, you know, the startups that work out the best, and I think all the startups that have done the best in history were ones that were maniacally focused on like a single product and a single vision. And then once that worked really well, then, then they expanded. And that focus either came from extreme, uh, constraints— like, we just don't have a lot of money— or, you know, it came from just having such a singular, well-defined vision that the team was just naturally on track. Like Linear is a good example. No matter how much money Linear raises, you just know that they're going to be singularly focused and have such a tight goal with North Star versus there's others where they pumped out fund initially. I'm sure they were trying a lot of stuff out, but they were capital constrained early on. They're like, hey, we got to do one thing at a time and see if that one thing is going to work. But then, yeah, it's kind of like the you know, you can't have a baby, you know, in one month with 9 people, right? It's like the mythical man month. Like, you can't, you know, if it'll— if you think it'll take you a year, year and a half to find product-market fit, raising 10 times more money is not going to shrink that, right? In fact, it'll increase the distractions and temptations that come with having that much more money. And then it makes it way harder to get investors excited about that traction as well. So like Magna, we basically raised a Series A-sized pre-seed round, which meant we don't get the excitement of achieving those intermediate milestones because if we get to a million in ARR, no one's like, yay, let's raise another round. They're like, okay, that's obviously one of the many steps we already expected you to reach.

We need to get to $10 million.

Yeah. Let us know when you get to $5 million. Right. And we're like, okay, well, that's not— it kind of takes a bit of the the ability to celebrate the wins kind of, you know, takes the wind out of your sails a little bit because the expectations get set so much higher. Um, so it's like there's rarely, if ever, any need to raise that much. The only time you need to raise that much capital is if you truly have capital expenditure requirements. You know, you're a hardware company, you're an AI company, you like actually need the money to train. You know, maybe you need to hire really specialized talent, right? You're Maybe you are a monad where you need to hire cryptographers and literal ex-Jump Quants that have that specialized C++ knowledge, or you're in a usually consumer winner-take-all, suck the air out of the room where that money in those instances goes toward spamming the airwaves and owning the brand and owning the message. Think Uber. Think WeWork, right? Like where the strategy is explicitly we are going to blow money on owning this category. But if you're in B2B, if you're in infra, that, that, you know, that the money doesn't work like that.

I agree, I agree. Um, one of the— yes, the way I recommend it to founders is if you actually, to your point, need the money. Like a lot of these founders might have a partner or kids and they're like, look, I just, I just can't I can't give my 8-year-old kid ramen indefinitely, right? So sometimes you just, sometimes you just need the money. Sometimes you want access to a particular set of people, and that venture investor might help unlock that set of— yeah, you know, that network much faster than you try to knock on 100 doors. They can just introduce you to the 5 people you need. So in that case, it makes sense. Angels can also help in that capacity where you Maybe you're not bringing on institutional capital, but there's one or two angels that can help get you a lot of those introductions.

Yeah. Um, yeah, and it's like definitely like the reasons I listed are not like, you know, mutually exclusive and collectively exhaustive, right? It's like they're kind of what I would say that the highest level of, you know, Maslow's hierarchy of why you should take VC money, you know, maybe the, the most foundational one is like because you're okay with giving up control. And then there's like the product technical stuff, which is like, oh, they can help you get customers, they can give you good advice. I think there's a lot of ways in which even sometimes being an accelerator can help push you and help give you like a sounding board and people that can keep you accountable to your milestones because that is tough. If you're bootstrapped, it's hard to— the people that do it well are the ones that just have naturally an incredibly high sense of accountability and goal setting. And sometimes The investor structure does create some of those, uh, accountability, uh, feedback loops.

Let's talk about a little bit about accelerators. I actually didn't prepare any quotes on any, uh, posts on this, but I think it would be fun. So do you recommend founders go through accelerators? And if so, when is the perhaps right time or the right mindset to go through an accelerator?

Um, I think that there are very specific accelerators that I recommend, right? I think if you're a first-time Web2 founder and you get into YC, I think there are very few reasons why you shouldn't do it. I think the only people I say that shouldn't do YC are people that are already surrounded by entrepreneurship and already have advisor-like figures and already have—

and you did, you did YC with your prior company, right?

Yeah, we did YC, but I'm saying like most—

I'm saying so you're speaking from a place of experience, like you've been through this and you can see the tangible benefits. See, for what?

Yeah, yeah. So, so yeah, and I'll double-click on my own experience because that was my second company. But for first-time founders, I almost always recommend YC. I think the closest thing to YC in crypto is Alliance because you're like surrounding yourself with great other founders that you can learn from and watch how you all do it. And they're at the same stage. You have great mentors and advisors. And like for those 3 months, like they are going to push you in a way that most people are just not going to push themselves, right? Like, like, like even at OrangeDAO, which, you know, like I think, you know, is a smaller program, you know, we like push people like they'll come in and they're like, oh, we're trying to hoping that we sign 2 LOIs this month. I'm like, why isn't it 2 tomorrow? Like why? Why are they LOIs? Why are they not actual contracts? Like, why is the product not launched? Like, we really push founders and give them that outsider perspective of like, I think you could do more. I think you could be doing it faster. If you're talking about users, we could be talking about revenue. If you're talking about revenue, we could be talking about bigger revenue. And it's really hard again to find that feedback with people that are going to really push you, push you, push you. And so I recommend most first-time founders do a program like that. And they'll also, by the way, another thing I always talk about is it will cover the bases. Founders don't really see a lot of founders. I'm an investor. I see a ton of founders. You'll never, if you are investing in a YC company and an Alliance company, you know they are not gonna make fundamental errors, right? The thing is sometimes you take a company that's winging it, maybe they're coming from a non-target geo, and off school. And like, those are the companies where they make wacky errors. Like, they have some like basic cap table fuck-up, they have some wacky IP agreement with some dude somewhere that secretly owns 10% of the company, they have some weirdo VC agreement. Like, you just don't see that kind of stuff with these YC or Alliance companies because they get the fundamentals covered through the education and through the, the partner advisor. So you know they're not going to have some wacko cap table structure or legal agreements or crazy stuff. So you're like, all right, the company at the basics level is going to have its shit together. And so that's why I recommend it for first-time founders. Now for second-time founders like myself, and there's even programs out there too, like HF0, which has a different spin. Their spin is like, you live with us for 3 months, we do your laundry, we get you food. You know, you don't have to worry about food, housing. Like sometimes it's just founders will go back into Obviously, if you are selling to companies in crypto, in Alliance, you know, in YC, like, you will do it for sales. But some people just like being in that environment. Like, I like being back. You know, I had started a company, I'd sold it. I wasn't hanging around founders every day. It was COVID. I moved to Miami at the time. I'm like, you know, I want to be back in the arena surrounded by other people in the arena. And so that's why I did YC even with my second company. And then no matter how good you are at fundraising a program like YC, for Web2, or, you know, like Alliance for Web3, or like OrangeDAO for Web3, like, for most people, it will almost strictly boost your fundraising, like, because they're going to put you in front of more investors, your round's going to be more competitive, you're going to have advisors helping you with the round. And so again, maybe not everyone needs that, but for most people, these accelerators will help you cover the basics of founding and running a company. They will boost your fundraising odds or boost the terms or boost the amount that you're raising. Like no chance we would've raised a $17 million oversubscribed pre-seed if we weren't in NYC, as good as I am at fundraising. And you'll be like in that arena, in that mindset with other people. Now, again, if you are able to cover that without it, right? There are people that crush, you know, from Kansas City and they're just like cracked, you know, they're, they're good at keeping themselves driven and accountable. They're able to network into the right people. Like you don't need it. But it certainly helps a lot.

Yep. Yeah, one of the— there's a founder I was talking to, they said they're considering doing alliance, and the primary reason was for fundraising. And I think that struck me a little bit weird because you need to take, you need to take, uh, a pretty good amount of dilution. I don't know exactly what alliances is, but I'm pretty sure you give up 7% of the company. Maybe it's 5, maybe they've updated for, you know, $500K, which values your company somewhere in the $2 to $3 million range, $2 to $4, which is like pretty valuable. So basically to say, hey, I'm going to be able to fundraise after this, you're basically giving up so much dilution early that the net effect versus just spending the time and grinding and getting the right introductions, I think, you know, if you, if you're the type of person that first-time founder just wants to know the playbook, have build confidence, maybe get pushed and build a network, I think then it can start to make sense. But yeah, the fundraising piece is one where I don't know if I'm fully bought into that.

I think for most founders, if you think about a founder that goes through an accelerator, I think the accelerator effect is a little similar to the overall venture investor effect where you are pushing, you're pushing, right? And so for example, a company because of the dilution of the accelerator, a company that comes out of an accelerator is going to naturally need a bit of a higher valuation so they net out, you know, not overly diluted. And so they're going to be setting more aggressive milestones, going to be setting a more aggressive valuation. And so like even so with YC, my take was always that, um, and that's just where I have more experience, the top YC companies go from great to holy shit, right? The good YC companies go from good to great, But the bottom half are, are probably actually worse off because if you are only okay coming out of alliance and you're not going to get that boost on the valuation, then you're probably going to be worse off because you're probably not going to raise around at that much a higher valuation than you would have otherwise.

And you dilute it and you dilute—

you have this extra 7% for no reason. So it's like you should take the extra 7% if you think you're gonna come out of it so much stronger, so much better, so much faster that it will have been worth it. And for the good companies and the great companies, absolutely worth it. But maybe there are companies out there. Sometimes I meet a company where just by the nature of their product, the nature of the business, I tell them, look, like, I don't know that in 3 months you're going to be able to hit exciting enough milestones to have a blowout demo day, in which case it might not be worth it. And that was even a conversation we asked ourselves when we asked the YC was like, are we going to make enough progress in 3 months to make YC worth it? Or make, you know, again, I don't have as much experience to make it worth it. But it's like, that's something to consider is like, do you think you will come out of that program so much stronger that it will have been worth the dilution? And I do agree that that is a consideration. But, you know, it's something that founders have to be real with themselves. If they think they need more time, they think it's going to take a lot longer, if they think maybe for some reason what they're doing is so non-sexy or hard to pitch that it might not be among the strongest in the batch coming out of it. But like, again, if you're a first-time founder, it'll cover the basics. If you're a great founder, it'll be great. But I do think that for a lot of founders, I don't— again, I don't know the Alliance one, I don't know the OrangeDAO Accelerate application process as well, I mentor the Orange Cow companies. I don't help select them. Yeah, I don't help select them. So I haven't been as in the loop in that process. But a lot of founders actually will tell to apply to YC because the questions that they ask are oftentimes a good forcing function to think, reflect on your business. It forces you to think, how big can it get? How fast can it grow? How much money can you make in 3 months, 18 months? Because a lot of founders, when they don't we aren't forced to ask those questions. It's easy to make a lot of excuses. It's easy to say, oh, it'll take longer, you know, we can't grow that fast. But when push comes to shove, the answer is almost always yes, you could be doing more faster, more aggressively. Or when push comes to shove, it's like, hey, this maybe just is not that big of a business, not that big of an opportunity. Maybe you should pivot or consider something else. But again, sometimes it's even the application to the accelerator that forces founders to ask those questions of themselves that they might not otherwise tackle, because they can be very hard questions to ask, and it can be very hard to face the fact of like, maybe what I'm doing is not that big of an opportunity or does not have that big of a TAM. And I think it's okay if you do that intentionally, right? Like, some of the founders Sometimes founders will intentionally say, we're going after something that's maybe really niche right now. We think it'll blow up or it doesn't exist today and we think it will be huge tomorrow. You know, think of people doing stablecoins in, I don't know, 2017, right? Like I'm sure they were out there. But if you do that unintentionally, I think that's when you end up kind of maybe floundering with a company that, you know, should have been shut down a long time ago. I tell founders the saddest situation is not that you flame out or that it fails. It's that you're like limping along 4 years in working on something that everyone already knows you should either shut down or pivot from, but like you keep going stubbornly anyways. Yeah. And the YC partners will give you that feedback very directly, but maybe some VCs will give you that feedback correctly, but most investors would not have the courage to give you that feedback that directly.

Oh man, there's so many things I want to, I want to jump into here, but let's talk about Good product. So you talked about this a little bit, like maybe, you know, you've been going for 4 years and you might have a great product, but maybe not a great business. And so this was one of the tweets I found interesting where very simple, but a good product idea is not necessarily— let me just pin it so people can see it.

Oh gosh.

A good product idea does not equal a good business idea. And I think this is a good insight, by the way.

Yeah.

And I, I find I actually have a keynote speech that I give. I gave it at, um, uh, the Salon Accelerator. I gave it at a Monat Accelerator and I've given it to a couple more, but it basically talks about how do you build a company versus how do you build a product? And there's great products that never translate into good companies. And there's people that actually can build a really good, I'll say company and enterprise, but they can never actually really figure out like what the killer product is. So what, what was going through your— if you remember, what was going through your head at the time? And maybe more specifically, what are some examples where we might have a good product but not a good business idea?

Trying to see what, what call was I on when I talked to that company. Uh, oh, I remember now. Okay, I'm not gonna name the company.

Yeah, this is, this is a friendly, friendly—

they were building a tool for crypto investors, and that's his generically and I'll leave it. And the tool was very useful. I'm like, you know, like the product feedback and the business feedback most of the time relates to willingness to pay and how much you're willing to pay. So I remember this product and I'm like, this is really neat. Yeah, this looks cool. I would use this. And they were targeting crypto investors that had enough money to worry about this problem. I won't say what the problem was. and they were— but, and they kept asking me, would you use it? Would you— I'm like, yeah, would you try it? Sure, I would onboard today. Um, but then like when they're like, how much would you pay for it? I'm like, I don't know that I'd pay anything for it. If you—

it's not a big enough problem, right?

You really forced me, maybe I would pay $20, maybe $50 a month, which is great if there are millions of potential users. This market that they were targeting, I would be hard-pressed to guess that there are thousands of potential users for this product. And so it's like, I don't know, man. Like, I don't think the opportunity as you are defining it is there for this thing that's kind of neat, kind of cool. Um, you know, there's this good book about this called The Mom Test, which is how to interview people about product. And it's basically like, it teaches you to avoid asking questions that you get like false feedback on and the types of questions they were asking, which is like, and they call it the mom test because the kind of archetypal example is going to your mom, be like, mom, what do you think of my business idea? And she'll be like, oh, that sounds great. I love that. Good. I think this has a lot of potential versus asking questions that more directly lead to like, do you need this tomorrow? The product market fit test that Superhuman has. If this were to disappear tomorrow, how disappointed would you be? They index for how many people say severely disappointed, right? I'd be so pissed. Um, and so that, that was my question there. It was like, yeah, they have a great blog post. It's called Superhuman: How We Test for Product Market Fit. You, you should check it out if you haven't. It seems very up your alley. Um, but that's kind of it, right? It's like, for most of these products, they need to be mindful of how many people have this problem. Okay, if it's a lot, then it's okay that maybe it doesn't cost very much, but then it's got to be self-serve. It's got to be super completely hands-off. No, just like hands-off onboarding. Like it should be able to grow like a weed. If a million people wanted to use tomorrow, you should be able to accommodate that. If there's not that big of a market, well, then are people paying $100,000 for it more? Right? I think I saw HyperNative on Twitter the other day. They raised a $40 million Series B with, I think, 200 customers, something in that order of magnitude. It must mean that people are paying a hell of a lot for it, right? Like, yeah, at least six figures. And so but you can have somewhere in between and that's where the business and the product intersect. And so this company had a product that was neat, but I wasn't willing to pay that much and the onboarding was pretty hands-on. I'm like, okay, all this leads to not necessarily good fundamentals for a scalable business. And I think again, you can be intentional about that. You can say maybe we're doing this to onboard people, maybe we'll have an upsell, maybe we're learning about this market. But for most people, they kind of approach it as, yep, this is the idea. And I'm like, as it is, it's not very good.

Yeah. One of the frameworks I have, which I think builds on what you're saying or is a different way to phrase it, is like customers lie. So you ask them, how much are you willing to pay for this? And they might even tell you an answer. But when it comes to actually them prioritizing integration of the product, prioritize getting this through their process, you know, it just falls off. And so like even retail customers, oh, I would use this, I would pay for this. And then all of a sudden it You build it and they're like, oh, actually, like, we found a process that works good enough. And so instead of asking, are people willing to pay for this, or what would you pay for this, it's better to ask, you know, how do you do this today? It's like, what is your process today?

To understand that, I'll give you, I'll give you a much better question that I like to ask. Okay, a question that I, I sometimes hate to ask because you don't like the answer is, where on a given day, week, month Where does this rank amongst all of the other problems that you have? Right? Because the thing is, you might drill into someone, like, let's say you're, you know, dealing with, you know, token vesting, right? Like, you know, I guess that one's a weird one because it's a very specific thing. Let's say like, I don't know, like, maybe that one, right? Like personal like personal custody, right?

Yeah, we actually, we can use the example if you want, like the Fireblocks, where it's like, hey, you're an institution, you want to be able to custody crypto assets, you want to move quickly and do self-custody.

So let's use that as an example. Like, where does this rank with all the other problems that you have? Right. And this is a great question to qualify customers across segments because I think Fireblocks is a great example. What is an example of a good Fireblocks customer? Someone that has a large number of transactions that they're doing, where these transactions look very different and has a lot of access problems, right? Someone that cares about Fireblocks' value proposition is someone that does a lot of transactions and needs these finely crafted access policies.

Across many different blockchains.

Across many different blockchains. So if you talk to a liquid fund, they— you'd say, where does this rank across other problems? They would say very high. Right. Like, I'm always thinking about which wallet are we doing this out of? Who has access to it? Where's the ledger that's a signer? Huge. If you talk to a venture fund that makes very few investments and you ask them, where does this rank? They'll say very low. We make one investment a quarter. When we make it, you know, we get all the ledgers together and we sign the notes safer or whatever. Maybe we use off-chain cold storage custodian, right? They're not going to care about access policies. They're not going to care about multi-chain stuff. And they're like, you know, most of our investments are on Ethereum. Actually, we even wire half of the investments. So that's the problem. But if you take that fund and you like isolate the problem in— that's not the cause of all the other problems. I'm sure they could wax poetic about it for hours, right? You could be like, hey, how often, you know, like, would you want a tool that lets you set access policies for different members on your team. They're like, yeah, that sounds useful. Um, you know, but like they could probably give you hours of feedback, but then you ask them how many of these are you doing a month and they're gonna be like 1 or 2. And then they're like, great, are you willing to pay, um, $5 grand a month for it? Absolutely not. That first liquid fund, that would be cheap. That first venture fund, that would be very expensive. And so that, that's a question that sometimes is scary to ask because you might not like the answer of like Hey, let's zoom out. Where does this fall on your priorities list? How would you stack rank this with everything else on your plate? Um, where that mom test fails is where the answer to that is, yeah, this is actually very low on my priority list.

Yep. That makes sense. I wanna transition gears a little bit more specifically to fundraising. I thought this was, and I, by the way, I've seen this firsthand cause I've known you for a while where, let me see if I can just pin this. For those that are viewing later. So unpin. So you basically say you saw an amazing founder with a lead term sheet at $6 million, hope to push back for the pitch, and he raised to $20 million a month later. Too many VCs wanted to pounce on a low balance indicator to help them, helping them get the best value they could get. That's why you need angels in your corner. But I think it's interesting to talk a little bit about the role of angels and, you know, maybe this company specifically or other companies where you, you help them reframed, like, what mistakes do founders make when they're pitching their business that, you know, the company didn't grow in value like 2 to 3x over the course of a month, but it was about how do I position a narrative that better aligns to the long-term potential impact I can have? And I think that's what you did here. So walk us through a little bit, uh, what, how you help founders like this, because I've seen it multiple times.

Yeah, I, I think the overall situation here is how does a founder know if they are worth more or if they're getting taken advantage of by an investor? And I think an angel or an accelerator can look at a founder and be like, like, either, hey, if you were to pitch this better, you could get a way better valuation, or you're not tapping into the right networks to run a competitive around. Or sometimes it is actually, hey, you're on the verge of some great milestones. Why don't we hold off on the fundraise until those happen and you'll have a lot more leverage? And YC kind of does all of those, right? What does YC do? They think, how do you have the most kick-ass metrics at Demo Day to have the most leverage? How do you tap into the most networks to run a competitive round? And how do you run the pitch or even pitch the company in a way that maximizes investor excitement? And so sometimes, right, like, you know, I'll have a friend that's raising and they'll have an offer and it's really low. And I'll ask them those questions. I'm like, you know, have you talked to a lot of investors? Have you run a competitive round? Are you tapping into tier 1 investors? How are you pitching the company? Maybe like actually your pitch is really bad. If you were to clean it up a little bit, you could do a lot better. Sometimes it's you're raising in the wrong, the wrong bucket. You know, sometimes they're like, I have this term sheet. Like, it's not a great term sheet. And oh, Oh, you've only talked to investors in Seattle. Let's get you to connect with some Bay Area folks, uh, you know, maybe change the scenery a little bit. And so I think a founder that doesn't have an investor or an angel or an accelerator or a pre-seed investor in their corner is not going to know these things, and they might sign bad term sheets or term sheets at bad, um, terms or with bad investors. And so I think like What probably prompted that was there was some founder that was struggling to raise that had some VC. Yeah, like, what did I put up there? It's $6 million. I mean, there's so many examples like this. I'll give you one from my previous life in Web2. I had a— my, my, um, we had someone that worked for us that was based in Seattle, and they were raising for their new company, and they were former Palantir, um, But they didn't know any better. They don't know anything about companies. And they had a Seattle VC— I think that this was a separate tweet as well— they had a Seattle VC that was like, gave them a term sheet at $12 million and was like, this is a great price, you're not going to be able to do any better, you know, trust me, like, you should take this. And like, don't get me wrong, there, there's sometimes reasons you— I always tell founders, don't go automatically to the highest valuation. You should look at who's going to be a value-add, who's strategic, who's betting on you early. But sometimes in a case like that, I'm literally like, hold up, you're raising in a huge area. You're a very talented founder. I'm very bullish on this. If we get you in front of the right people, I know you could not only get better terms, but also better investors, even if it was at the same terms. And so that's usually what it means. It's like, you see these founders and I feel bad for them just because they don't necessarily have the angels, the pre-seed investors, or the accelerators in their corner to give them that advice. And especially tough for people that are new at fundraising to know what good looks like in terms of good terms, good process, good investors. And that's why I recommend to everyone, get those people in your corner early, whether it's an angel or an accelerator or a pre-seed investor, you know, like a 6-man, because they will give you not only more leverage, but more perspective on those future rounds.

Yep. And I think a lot of, one thing I see is founders sometimes struggle to communicate the unique insight about their business. In other words, like venture investors, we see hundreds of deals a month.

Yeah.

And so for us, we're looking for not what is, not just what is the market and is this a qualified founder, but what is the unique perspective or the unique assets that they bring that other competitors won't bring that is going to allow them to grow very, very quickly and de-risk the business. And perhaps sometimes talking to like an angel or a Bruno or somebody is like, hey, actually you're, you're pitching this wrong, or you're missing the whole point about why this is going to win. And sometimes just changing out one or two slides all of a sudden just reframes the market size or the likelihood of success to an investor.

Yeah, yeah, I couldn't agree more.

Yeah, so let's talk a little bit about Running a process. So you have, uh, here's the tweet, I'm pulling it up.

And, and actually, just, yeah, go ahead, double-click on what you just said. And I think sometimes the angels or the unaffiliated investors are the only ones that can give the tough love. Like, I've gone to a founder and I'd be like, look, there— I'm like, in what you're doing, there's a lot of people that come from that world that know that stuff. Like, you have no background in this, like, you know anything about this, like given that it's a very low barrier to entry space, like, why would an investor bet on you over other founders? And now sometimes a valid answer is, hey, I have a fresh perspective. I'm not, you know, maybe like, um, bogged down by what hasn't worked, right? I'm not as cynical as these insiders. But there's a lot of times that it's a hot category and I'm like, like, hey, think hard about like why you're the right founder for this and like, just have a good— again, if you're intentional about that, that's okay. But when people haven't reflected around what is going to give them an edge, what is it, what is their secret sauce, what do they know that others don't, what is their unique approach, um, what is going to make you win this category, I think you should have a thoughtful answer for that.

I agree, I agree. Because like the safest thing to invest in as an investor is founder market fit. Is this person— and just by— if you work in the ads industry for 20 years, then you go start a company, you have a set of unique insights almost by existing and making decisions.

I invested in Antonio, Antonio Garcia Martinez's company because of that.

So let's, uh, let me pull this up.

So, and just for anyone watching this, by the way, I don't want to get the wrong idea. A valid answer is we are going to iterate so quickly, we are going to ship faster than anyone ever. That's okay. But then like Make that your answer.

Yeah. Or be like, our pers— you know, our perspective is different than since it's in the industry. Right. And because we're outsiders, we're able to see things that the insiders aren't.

And I think that gets through though. My most biggest gripe with companies and the biggest point of feedback that often I give them that they don't sometimes get, which is like sometimes they pitch their company as if no other company is trying to do what they're doing. And it's like, you have to have an awareness of what other people are doing because if you're going after a similar set of customers, there's gonna be a lot of noise and you have to have a good answer for how are you gonna break through that noise. And maybe the market you're going after is so big that the noise doesn't matter. But most of the time it's like, you know, if you're, you know, Brex versus Ramp and you're building a third company in that category, you gotta have a good answer for how you're gonna compete against Brex and Ramp. Yeah.

Yeah. And I think doing your prep is really important. So you have this, I'll say manifesto here on things to consider when fundraising.

Yeah.

And we don't have time to go through all of these.

Can you do a little pinch to zoom or a Command+ there?

Let me see.

And the audience, they should be able to just pinch. Yeah, there we go. Perfect.

Okay, so number of good takes here. Yeah, we're not going to go through all these. I think the number one takeaway from this is run a process.

Run your point.

If you don't— I actually like this, this quote here. The only thing that gets the price up is multiple term sheets from similar quality investors.

That's it.

I think people forget, like, these are not liquid markets where there's a bunch of sophisticated answers constantly updating their valuations. It's, you know, we've been in situations where all of a sudden we may need to increase our bid in order to have a, uh, a similar price to that of another tier 1 investor. There's also been times where a tier 2 investor might give a higher price, but we still win because the founder wants to work with us. Over that tier 2. But yeah, if you have to run the process to get multiple input, you only talk to 3 investors and get one term sheet, you're probably leaving money on the table.

Yeah, I think the more generic version of this is the only leverage you have is multiple offers. And now the leverage, you might not leverage that for price, you might leverage that for governance terms, you might leverage that to just get a better quality investor. But yeah, like, you only have leverage as a founder. It's like selling a house, right? Like, your only leverage is your willingness to walk away and having multiple offers. But if I'm buying a house and I'm the only offer, I'm not going to go up.

Exactly. Exactly.

Unless I'm so in love with them, I'm going to be like, no, there's my offer. Let me know, you know, when you want to take it.

Exactly. And there's a lot of good stuff here and it's on the screen so people can read it. But this is actually really important. And what I'd add here is macro, but also macro plus narrative. There's times we see where certain industries like 2 or 3 months. And what we see is there's some founders that have been in that, in that industry and very quickly pull together a round to utilize that momentum and all of a sudden can bring in a really large flagship round versus others that might hesitate and wait. And all of a sudden the macro environment changes, narrative changes, and then they're now ready with their nice pitch deck to go out there, but the kind of the wave has you know, they've, you know, the wave has gone by, right? And they're still sitting there waiting. You have to wait for the next wave then to go ahead and really get the type of round that they're looking for. So I thought that was also really a really good point here.

Yeah. And I think two things there that I usually counsel founders on that they have a hard time understanding. One is, yeah, like when the narrative has passed you over, like I knew some companies that were doing parallel EVM you know, a few months after both Monad and MegaEther rounds are raised. And I'm like, look, like, that in and of itself is no longer a hot narrative. Like, there might be a— like, that angle 2 months ago was alone to raise a round. Now not alone to raise. You need more. You need a different angle. You need different narrative. The second one is sometimes I'll, I'll have to tell founders that they are not pulling in the, the macro, um, in a useful way into their pitch, right? So I knew— I met a founder that I gave good pitch feedback to. She was doing like global logistics, um, analytics software, um, and her whole pitch was like basically, um, global logistics is a nightmare and therefore we are building logistics software. And I'm like, okay, you, you gotta connect the two a little bit. You gotta paint the picture. You have to make the investor really see the connection, right? And so I helped her walk through How do you paint that picture? And it's like, hey, global logistics is a nightmare. What does that mean? It means, you know, companies that have been using the same routes for decades have to find new routes. These routes are changing every year. Long-standing international treaties are getting broken. What that means is there's no— the old doesn't work and the new is unpredictable. And companies actually go from having these things be very rigid to having the sand be shifting beneath their feet on a monthly basis, and they need to be updating these things in real time, right? So it's like you've got to draw the dots a little more, because something I always tell founders is if you don't draw those dots, the investors will draw their own dots, and it might not be the conclusions you want them to come to. You have to walk them through both the data you're giving them and the conclusions that they should be coming to so they can paint, not only paint their own picture, they can understand your picture and where your company fits in.

Exactly. We tell teams that aren't as public, we say, somebody's telling your narrative is out there. It's either somebody else telling it or you're telling it. And you might as well be the person telling it. By the way, I saw that at early Magna. I mean, you guys had an events blitzkrieg of, let's say, I felt like one a week for like a year. But I think through that process, everyone knew Magna, number one, and knew what Magna was about. Like, you were at most or all of these. And so people had a sense of this is the, this is the culture, this is the product. This is why we're going to be around for a long time. We're not going to disappear in a year, year and a half. And I think that really helped you build such a dominant position in this token vesting space.

Yeah. And I think, you know, for us, you know, we have for a specific product that's kind of weird, right? Because it's only relevant to people if they're within this 3 to 6 month window of pre-TGE. And so there is a little bit of our strategy that was like, well, we just need to be top of mind when they are about to launch their token. They remember Magna. But yeah, I mean, there was a degree to which before we were on the block, token vesting was not a category, right? Like most of our competition was against internal builds, right? Like people would say, why do we need token vesting? And yeah, pretty quickly, within 3 years, the market switched from people being like, well, obviously I need a token vesting solution. Why should it be Magna? But that alone was a huge win because we no longer had to convince them why we should exist at all. And then it was just about winning on the merits of the product. And that's a much easier battle if you're confident in your product quality and your customer service.

Totally agree. And defining a category is so valuable. For example, Pump was really the first meme Coin Launchpad. They defined the category, and then we saw countless teams try to follow, both net new startups but also like sophisticated platforms. Like, I think DexScreener, right, launched one. There was a number of teams that launched them, but whoever defines the Polymarket in the case of prediction markets, whoever defines the category just has such an advantage. So as founders, also to your point about how do you— how do I present this, almost like make sure maybe very forward about this is the category I'm either defining or the category I'm completely reinventing.

Correct. And if you're going to reinvent it, it's got to be 10x better, or you have to have, you know, an angle. You just have to have an angle of attack on the incumbent because there was a crazy— so there are two quotes that shape my view on this. The other day I was watching a talk by David Senra. I love him from Founders Podcast. And he was talking about ramp. And he said when Ramp raised their seed round, Brex had already raised $300 million and they were already a multi-billion dollar company, right? And so, you know, he said two things. One is like Ramp had a unique angle in terms of the feature set, but also that he said this quote, which I love, which is there's always room for great, right? If you look at the categories out there and you don't think any of them have that room great execution, there are most cases that alone can be a big differentiator and it can compound over time. But a lot of people have to be honest about their ability to execute at a level of great. And I think there are not a lot of founders like Kareem and Eric. I think there's other companies, you know, similar to them that I think won because of their incredible excellence and execution. And but that is a very hard path to win on. It's much better to win on no one else does what we do and we are the first to do it well.

Yep, I agree. Now, do you have a hard stop in 2 minutes? We're starting to wrap up. Okay, so let's maybe go through one more, one more question then, or to wrap.

Yeah.

Um, one of the things I want to ask you is, how have you— so this is your third company, how— and it's hard. I mean, I've seen you at times where I feel like you're a little bit burnt out. And then I've seen you at times where I feel like you are sunshine and rainbows and just have a totally optimistic view on the market and where things are going. So I've kind of seen over the years the different spectrums of Bruno, and I'm curious what has been helpful to you in making sure you can stay sane and motivated over such a long period of time.

Yeah. I think 3 things. I think one is the team, right? Like, if you can build a good culture and a good team that enjoys working together and ships good stuff, like, if it's an enjoyable culture to work through, you'll be able to go through the ups and the downs, especially if you have a supportive business partner. My co-founder Rune is very solid, even-keeled. I'm the one that's the emotional rollercoaster. Coaster, right? He's often very unbothered. So it's good to have the—

unbothered, moisturized, sitting in his lane.

Yeah. Um, I'm the one who's like, oh my God, this customer churn. He's like, all right, like, let's keep building, let's make it better, you know, let's improve. Um, the second is I think having that North Star vision, um, and knowing exactly, especially like the bigger the vision, the more exciting, the, the easier it is to rally the team around it, but also the easier it is to stay focused. You know, like a ship trying to discover the West Indies, right? No matter how big the storm you're going through is, no matter how battered you get, right? You're like, you know, we're, we're on this treasure hunt and we're gonna find, you know, this world. And that's what keeps the, the troops motivated. So having that vision, and, and, you know, our vision has evolved. Now we actually have a pretty bold and exciting vision that we've kind of honed in over the last few months that is keeping the team extra motivated for this next chapter of things that we're not yet ready to announce. And so it's like culture, it's vision, and then it's also just like work with customers that you're excited about, right? Like, I think your customers, you know, it doesn't matter how we're doing, like, we still get excited when we sign new customers and we're working with customers. And happy customers, you know, oftentimes can make or break a founder's psyche, right? When customers get happy, you know, and they love the product and they give a great review, you, that's like one of the best feelings in the world because it's like a validation that you're, you're doing something right. And obviously, you know, there's like ARR milestones and fundraising, but I think you have a great team if you enjoy working with the customers that you're serving and you have a vision that's going to get you through the dark times but also keep you focused on the goal and the long-term time horizon. I think that's what, what keeps a company going.

Yep, I agree. I think that's great. And so what I want to do now is again, On this stream, we always do a demo. If we're not showcasing the amazing things being built in the crypto community by founders, by builders, then we're doing a disservice to all those that are listening. So what I want to do is, Bruno, if you want, maybe just go for 5 minutes, talk a little bit about Magda and just bring us through a demo. And we're going to take clips of this. So I'm going to aim to get these clips going out. But that way, if there's a founder out there that's, hey, what is Magda and why should I use it? Give us a quick highlight and demo.

Oh boy. I actually forgot that you asked me this, Carl.

I, if you don't want to, we can just walk through the website.

I don't, I don't, I don't, yeah, I don't have a great demo pulled up, but I can pull up the website. Let me share my screen. So yeah, we, so Magna, right? Like we do a lot. We kind of have this little carousel because the people we serve, they're founders, they're, you know, the power users are sometimes CFOs. Or lawyers. And these are kind of the core things that we do, right? We help them manage their cap table for on-chain and off-chain vesting. So managing those employee tokens, those investor tokens, tracking them, and either automating the distribution in smart contracts or doing everything completely out of your custodian, your Anchorage, your Fireblocks. If you want to do it like that, no smart contracts involved, we can do it. If you want to automate everything on-chain, we can do that. That's our core bread and butter. And then, you know, we do a lot of airdrop claim portals for, you know, sometimes projects that are distributing to millions of people. We just did to MatchChain, you know, custom L1s, new L2s. And the newest stuff we have is helping teams manage their grants, their partnership grants or ecosystem grants and workflows around custody and escrow. So starting to do tri-party agreements. Basically vendors that get paid in tokens that don't want to get rugged, investors that don't want to get rugged. Magna can provide certain types of custody and escrow services. And we have a lot, you know, we have over $10 billion in our smart contracts across all EVM, you know, most EVM chains, but also Solana, Aptos, Movement. You know, we're used by 2-person companies, we're used by 200 person companies. So a lot of the logos you might recognize here for their employees, their investors, their community sometimes. And then yeah, we have this like nice overview of our different products. On-chain vesting, you know, set it and forget it with our vesting smart contracts. Off-chain vesting, distribute tokens. If you like your custodian, you can keep your custodian, keep the tokens in there, distribute from your custodian to your recipients, or keep everything in the custodian. In FBO accounts. We do that with Anchorage. White label claim portals, we do a ton of those. Take the smart contracts, the backend, the frontend off of the plate of these projects. And then, you know, for bigger foundations, grants is a new thing we're rolling out. And then custody and escrow for various tri-party workflows, bilateral OTC agreements, vendors getting paid, investors receiving tokens. Magna can kind of, you know, act as that rug-proof element with certain architectures. And then, yeah, we work with all your favorite multisigs, all your favorite custodians.

That's terrific. It seems like the big thing I've seen over the years is going from a— you found a wedge, your wedge was token vesting. How do I get tokens to different community or investors? And then you've expanded now to be, I mean, I would say more of a general token treasury management product, right? And all the things that foundation needs to do can be done on Magna, or that's, that's part of the vision.

Yeah. And we have some foundations that use us for on-chain vesting and for off-chain tax withholding and for grants, you know, and for escrow. So we have some people that really leverage the full platform. And then, you know, to your point of like, what's your advantage when people ask why Magna? I say it's these three things, right? It's like we're very hands-on with our clients. We know more than anyone I've met about 83Bs and RTAs and RTUs and warrants. And we're not lawyers, we're not CFAs, but we give clients a lot of guidance on common structures. And sometimes we catch mistakes that lawyers make and say, you should get a second opinion or you should push back here. And we're very crypto-native, right? Like we have APIs, we have SDKs, we have an in-house protocol team. You know, we ship new, you know, we do custom on-chain integrations, on-chain hooks. Like, these three things combined, I don't think anyone else has this set of value propositions. And with the clients that choose us, it resonates with them.

Love it. Love it. Well, go check out Magna, especially if you're a founder. If you're not a founder, you still might use Magna. I use Magna to claim tokens from different investments. So it's a great product. Go check it out. Bruno, this has been awesome. Is there any final words of wisdom or things that we haven't covered yet that you want to close this out?

You know, the words of wisdom I always give to founders is just whatever you do, make sure you have experienced people in your corner that can see around corners and, you know, help guide you through these big transitions, whether it's fundraising, um, finding product market fit, like having that angel, that pre-seed investor, that accelerator, um, can really, you know, save a lot of time and effort and help make sure you're on the right track and don't go off track.

Terrific. Well, this has been a fantastic conversation. Thank you so much, Bruno, for coming on. Follow Bruno on X. He has a ton of wisdom there, and perhaps some other socials as well. Thanks for listening to The Trenches, and until next time.

Thanks, Carl.