An 8 Part Test to Identify Bad Investors Before Signing a Term Sheet

Wednesday, Workshop Wednesday. Are we good, Amelia?

You're good, you're live.

All right, well, welcome everybody. Um, we are continuing to, um, re-kick off our Workshop Wednesdays after SaaStr Annual. We had some great ones recently. I hope you guys saw the one— I really like the one that Lauren Padleford, CEO of Slice, which is a $100 million ARR, and I did. Definitely catch that one on our YouTube if you haven't. Um, we We've got a bunch of great ones next week. Dave Kellogg, who is OG Saastr speaker, and many of you follow him on Saastr Metrics. We're gonna do a deep dive on what really matters in 2025 in SaaS, and we'll do a lot of AMAs. So if you follow Dave over the years or on his own through his blog or Saastr, come join us next week and bring your questions. We'll go as long as we can until he passes out. Yeah, so no politics in this. There's no politics at Saastr, but I don't know if you watch any of Elon Musk's like town halls. He goes for like 3 hours. So maybe we'll change that with Dave Kellogg. We'll go for 3 hours next week. No politics, no politics disaster. It's politics-free zone. But if Elon can go for 3 hours standing, maybe Dave and I can go sort of— okay, bad jokes. Anyhow, so this week we're going to do a very niche topic, um, but then we'll take questions on VC financing, bootstrapping, all this stuff. Any questions that you guys have? And there is, um, You know, there is, there's almost, there is a surplus of content on venture capital on social media, mainly because a subset of VCs are so active and sharing so much. And I think it's great. You know, when I was a founder the first time, there was no content on venture capital. It was all a ripoff industry. Um, and it is great to have a lot of transparency, but everyone, if I could give you one bit of advice from the content from VCs, It's that everybody's talking their game from the earliest stage folks, which I love, like YC, to the latest growth stage folks, like great ones like Visteur, Iconiq, incredible content, incredible advice, great stuff. But everyone's talking their game. They're all biased from pre-seed to B to C to IPO. So I put together this list a little while back and then wanted to do it live and we can talk about it. Some hard-earned lessons on an 8-part test to identify bad investors before signing the term sheet, because People get this wrong. Founders get this wrong. Founders think their guts tell them what a good investor is over the long run, but I've found over the years their guts are generally wrong. Um, most founders have a lot of life experience with their products, with, with their industry, with selling, but you just don't have a lot of life experience meeting investors and venture capitalists. And so people make decisions based on guts, based on celebrity, based on vibes, and that's all fine, but it's not enough. It's not enough. Because if nothing else, and this is what a lot of founders in the beginning meet, well, you know, in the beginning, you're, if you're just trying to raise money, you're just trying to get the money in the door. You're literally just trying to get a little bit of capital into your startup. And we sort of forget that our investors, we're sort of stuck with them for decades. Like they don't come off the cap table until you sell the company or years after an IPO. And so much happens that next decade. Um, so much will change. You'll probably have to hire 3 or 4 management teams. It's possible one of your co-founders will leave. Always rough. But the cap table, you can't get rid of the VCs on your cap table. You just can't. So I want to do an 8-part test. Maybe it'll spur a little conversation, a little thought. And when you go to raise capital for the first time, the second time, the next time, maybe dust off this 8-part checklist. It's also on saster.com. And if you have options, think through this. If you don't have options, if you need the money and only one person will give you the money, well, you know, 95 times out of 100, not always, 95 times out of 100, take it. But if you do have options, here are 8 things to think about. Okay, so this first one sounds like as blindingly obvious as it could be, but I'll tell you the mistakes founders make. The first one is so blindingly obvious, and then we get into some after this that are a little bit less obvious. Talk to as many founders they've invested in as you can. Do reference checks. And you will see this advice on Twitter from a lot of folks. But I think the advice they give is just slightly wrong. First of all, some folks say don't talk to their successes, talk to their losers, talk to the founders that fail to really get to know VCs. And by all means, do that. If you can find someone they invested in that absolutely failed, go talk to them. But, you know, I find no matter what advice there is on TikTok, you don't learn much from failures and founders that never got anywhere, that never got any revenue, that never built anything. They don't even really know what to look for in an investor. And when you fail, I'd like to tell you that most founders act ethically, that they act their best when their companies fail. And some do. Some do. One of my very favorite stories, you can see it on the Andreessen Horowitz blog. When Slack— before Slack, it was, it was a gaming company and it was failing. It was failing. It was failing. And Stewart reached out to Andreessen and said, I want to give you the last money back. I've got this chat app. I've got this business chat app. We're calling it Slack. I think it might make it. We've got no revenue and I'm giving up our game companies and work Tiny Speck. And they said, no, keep the money, keep the money, Stewart, keep going. We're fine losing the rest of the money. We think you're a great entrepreneur. I'd like to tell you that I've heard that story from the handful of founders I've invested and worked with that has failed, but I often haven't. I've often actually heard founders maybe not handle the situation as well as they can, and I get it. As a founder, I almost failed every single time. I get the stress. But my only point is I'm not sure you learn too much from the failures. You probably learn from the folks that went the distance. And the folks that went the distance know the VCs that invested in them and on their board the best. So in any event, talk to— if you really aren't sure whether you want Lemkin on your board or whomever, or Byron Dieter or whoever, lots of great folks, Keith Rabois, Eileen Lee, all these great folks. If you're not sure, talk to as diverse a set of founders they've invested in. And just two notes on this. Don't expect, just like you will expect in a stretch VP many times, don't expect all the founders to love them. If all the founders love them, you have what I call, there's no gender attribution in this. I should have come up with a gender-free term. The good guy, the good guy. Everything's great. Everything's great. Now you could do worse than the good guy. The bad guy, of course, is worse. The one that sort of tries to destroy your company, but that's less common than the apocryphal stories say. But the ones that are really engaged, the ones that are were there, they, they, there may have been some frictions. Don't expect every single founder they've invested in to love them to death, but get as many stories. And most importantly, listen, don't listen to how good they are, how nice they are. Oh, you know, Amelia was such a good person. Ask how supportive they were. This is the question that matters. How supportive were they and how, how supportive? There aren't, your investors are not that important. They don't work there every day. They come and go. but they are one of the few people that will be there the entire journey. You're stuck with them, as we talked about. So ask how supportive they were and find out. That's the number one way you can reference check your investors. Okay. This one is something that almost no founders understand, and it is so important when you go to raise money. It is so important when you go to raise money. Ask how many investments they wrote— they write second and third checks into. Ask how many investments they write second and third checks to. The reality is, if you, if you read the stories of a lot of successes, almost all of them had patches where, as mediocre as the growth seemed, there were patches when growth slowed, when things were harder, when they needed more money, when they almost ran out. And never expect an investor to give you more money. That is one of the top— if I, if this presentation was a top 8 mistakes founders make after they raise money, Number 1 or number 2 is never expect anyone to give you any more money. That's not how it works. But when you're in the middle, when you're doing okay but not great, some VCs will give you more money and some won't. And, um, there's some judgment calls here. There's some other reasons, but the other fact is some, uh, most smaller funds are not wired to write these checks. They're just not wired to. And ask, ask how many checks they write into. The, the nerdy question is how many reserves do you keep per investment? Like how much extra money Do you hold back? You'll find that large firms, that the multi-billion-dollar firms often have a 1-to-2 ratio. In other words, for every dollar they put into you initially, they earmark another $2. They might put in more, they might put in nothing, but they sort of, of their pool of capital, they might earmark it. So a billion-dollar VC fund, which sounds large and it is large, but of that, maybe only $200 or $300 million might go into first checks. And the rest might go into second checks and expenses. So, but just ask, And what founders get wrong these days is a lot of both new funds, smaller funds that have cool VCs and cool social media personalities running them. They don't have any money for second checks. And look, that's not all bad. Number one is find the people that are supportive and will help you. But I, I'm just gonna summarize with this first line. VCs that don't write second checks are less valuable to you cuz you'll probably need one. VCs that write second checks are less valuable. So for me, All things being close to equal, if I liked Amelia and Jason, if they both gave me a term sheet, but Amelia has reserves and writes second or third checks, and Jason's so great and he has that cool SaaS-ter thing and he does those Workshop Wednesdays, but he doesn't write second or third checks, I would go with Amelia, right? And when I invest, I've got about 1-to-1 coverage. I save a dollar for the next check versus the one. But I would say most folks that invest in my stage, which is late seed, they don't. So something to understand that I've literally never seen a founder ask about, that every single founder should ask about. What are the— when do you write— how often do you write second and third checks? And what are your criteria to do so? Because you're probably gonna need one. You're probably gonna need one.

Okay.

Third one, and this has changed a lot over the years. Um, control is not as big a deal with VCs as it used to be. If you talk to folks that have been around for 10 years or longer, 15 years or longer in startups, they'll tell you some horror story about how Some old fuddy-duddy VC pushed me off the board. Some old fuddy-duddy VC pushed me out of my own company that was so great. I mean, that stuff did happen. But, and it still happens today, which we'll talk about, but it doesn't happen like it used to. Like the, this, in some ways it ended with Google. And when Kleiner and Sequoia invested in Google, they forced the founders to give up control of the company and bring in Eric Schmidt. And obviously Google had a good run. Okay, it had a good run, but that was about it. After that, founders that had a hot hand were like, no, the next Larry and Sergey, we're just going to run it ourselves. And there's a great Saastr post if you look at it about how many SaaS companies when they IPO are run by their founders. It's like 90%. It's like 90%. And you can look through all of them. And I think of the, of the 10%, most of those founders said, hey, it's not for me. Like, I want to bring in a professional CEO. So it's pretty rare. This drama that you hear on in old movies and from folks. It's just not the vibe. What's more common today is that VCs just check out when they think you're not doing well. They just, they just ghost you. We could talk about why they just move on to do another deal. But control is still an issue for a variety of reasons. And what you don't want— so I would worry less and we'll talk about this. I would worry less about whether these VCs are going to push me out or take control of the company. Nobody wants that. Nobody has time anymore. But you don't want them too controlling. And there's a rough metric Just rattle around in the back of your head. This is a rough metric. For each 10% of your company you sell, roughly, you're going to give up a board seat. So if someone buys 10%, 15%, 20% with a big check in your round and they ask for a board seat, like you can argue, but like it's pretty accepted, right? If you think about a pie chart of 100%, let's say you sell 3— this is very rough math, but let's say you sell 3 chunks of 20% and each of the founders own 20% each. 5 times 20, there should be 5 board seats. The founders each get 1, and, and the investors that buy 20 each get, each get 1 too. Think of it as roughly proportionate to your cap table, roughly. Um, so I think the biggest flag is when someone that doesn't buy double digits asks for a board seat. That's a problem. Um, and that does happen. And I think when someone that buys enough of your company for 1 seat asks for 2, that's an issue too. That's when you should push back. And if you— and if you push back. If they ask for a little bit too much control, I don't know that I would take it too seriously. But if they do, just push back once if they ask for too much. And if it's an issue, I would move on. I would move on. But don't— but if you have nobody on your board, if you have nobody that cares, sometimes that can be great. Like it does. It's sometimes going to be great in a very capital-efficient company. If you're just going to raise a little bit of money and you're already profitable, you know, you don't need to give up a board seat or much. But If you want to go big, what you will find is someone on your cap table has to care. And there's no matter what it looks like on social media after a big exit, everyone patting themselves on the back. I found usually there's only one investor on your syndicate that actually cares, that's actually there for you in the tough times, that actually will write that second or third check when others won't. Someone has to do the work. And I used to think that this idea that VCs did any work, I used to laugh. I'm like, what do you mean work? You don't build the company. You don't go out and sell the customers. You write a check and pop over to do a few meetings and read some emails. And that is true for the— that's frankly, that's probably what the majority of VCs do. And it's not bad because you need the capital. It's risky capital. It's hard to make money in venture. But at the end of the day, when things are tougher, when you need help, when you need more money, when you need to recruit other executives, I find only one of them really does the work. And it's usually someone that's going to be on your board. So I wouldn't be totally— I wouldn't read all the stuff on the internet and say nobody should be on your board if you're raising tons of money, but make sure it's proportionate. To your cap table, to the size of your cap table. Okay. Number 4, this is another one that nobody asks. These are the 2 things you gotta ask investors today that nobody asks. The one I talked about is how much do you keep in reserve? How many second and third checks do you write? How much do you keep in reserve? Just ask. No one asks that. That way, you know, that way, you know, the odds that they will write you another check. This one is accelerated. Ask 'em if they're gonna be there in 10 years. Ask them if they'll be— you're gonna be there in 10 years, probably. It takes 10 years to build something big in SaaS. Aster's 10 years old. We're just getting going. We're just getting going. It takes 10 years. And you will find, you know, there was a, a great fund of some incredible investors just today raised their own fund of $350 million, but those were 3 partners from other funds. They don't work at that fund anymore. No, not judging. I get it. But there is a lot of turnover in venture, and there are, there's two reasons there's turnover in venture to learn. The folks that maybe are not great investors get fired slowly. Usually don't get fired in a month or a year, but after 2 to 3 years, 4 years, 5 years, if you can't, if you can't get any good ones done, you'll be slowly moved out of venture funds. And also maybe after 8 or 10 years, if you used to have a hot hand, and your hand is decayed, you will be slowly moved out. And what happens is when it typically happens, when a VC firm raises a new fund, Fund 2, Fund 10, Fund 12, and you'll see a nice article in TechCrunch, you know, Jason and Amelia have moved on from big, big venture fund when we raise a new fund. But really, we kind of got fired or moved out. And it's part of, as it should be, investing is about returns. If you can't deliver the returns, ultimately you should be moved out. It's not a charity. Let me tell you, it's not a charity, which we can talk about. It is a brutal industry. But what it frankly means is if you don't run the place, you may not be there. You may not be there if your returns are mediocre. And also, if you're— if you have a hot hand, if you're the hottest person at a VC fund and they don't treat you well, they don't cut you in properly, you will just go raise your own fund. You will just go raise your own fund. Right. There is no economic reason to sit around at a large fund with a tiny amount of economics when you're bringing in all the winners, when someone will give you your own fund and you can keep all the economics, right? Going out on your own, if you have a hot— if you're a good investor, can be 10, 20 times more lucrative than working for somebody else. So whether you're the VC that you really love, that good guy— no gender here, good guy, woman or man— that good guy that you love, maybe a mediocre investor, or they may be so hot they're going to leave.

If they—

if their name isn't on the door, right? If it's not Lemkin or Ibarra Ventures, ask. Ask if they will be there in 10 years and you will— if you will probably hear a hesitation. Uh, uh, yeah, of course, Darryl, I'm planning to be. Darryl, I might be. Ask. And does it mean you shouldn't take their money if you don't— you're not sure they're going to be in there in 10 years? No. But I got to tell you, all things being equal, you are so much better off if they're there the journey. Imagine you need that second check or your third check. It's hard enough in general if you're only doing okay. What if your partner's gone and they bring in this new guy, new person, Tricia, who's never even heard of you? You think Tricia has any juice at the fund? Do you think Tricia's gonna put her neck on the line for you to get that extra check? No chance. When I've invested and I see this happen, someone leaves and someone new comes on the board, they're always very nice people, but they don't stick their neck out for the company. So it's a big negative. When the investor that invests in your company leaves, it is a big negative. It is a big negative. You're stuck with a placeholder for years and years and years. So ask, ask. And that's why if you can, the person that's running the place, they may not have as much time. They may have more on their plate. That's a negative. We can ask about, talk about in the Q&A, but boy, I'd rather have someone that's actually there with me on the journey. It, it's a big negative. Okay. 5. Um, The, if you really wanna learn what it's like to work with a VC sitting there in their fancy office, driving their new cars, getting really fit, doing a lot of lunches and dinners and meetings. Just got back from Cotton Lions and then off to somewhere else, Tokyo SaaS Summit, where we'll be in November. Come see us. It'll be great. This is one that you ask and then, because they won't, they never, they won't be ready for them. Ask them what's the toughest founder VC experience they've ever been through and what they learned from it. Ask what it is. No one asks. You're going to get an honest answer. Are you going to get a perfect answer? Are you going to get a slightly political answer? Yes. But just ask what's the, just ask ideally at a meal, like always before you sign a term sheet, have a meal with this person. VCs used to always have meals with founders when they gave them a term sheet to get to know each other. But you should, it's a great way to do reverse diligence and You know, when you're waiting, when you, when you're waiting for the, for the, for the, for the, for the tiramisu to come, just say almost just like a, a casual question out of nowhere. Hey, what's the toughest experience, Amelia, you've ever been through with the portfolio company? What'd you learn from it? They're gonna take a beat. It's gonna be awkward, but you're gonna learn a lot from that question. Because there's always frictions. See what they learn from it. Okay. 6, this one's a niche one. This one's a niche one, actually going to my prior point. I actually don't think this is important, but I think it will allay your fears in some cases. Ask when they've brought in outside CEOs to run their startups. Ask when they've brought in outside CEOs. Ask when, and as a rough rule, the bigger the fund, the more often they are able to bring in outside CEOs because at big funds and, and, and they have benches, like they're, they're, they're grooming these benches, bringing in ex-CEOs, ex-CROs, ex-CMOs that they know in case they need one to run one of their portfolio companies. At an extreme, the huge private equity firms that buy SaaS companies, the Vistas, um, Thoma Bravos, they, they explicitly have these networks because a lot of times the CEOs don't stay with the deals after they buy the company. So the bigger the funds, the more they groom these networks of outside CEOs. A small fund doesn't do this at all. I don't know any seed fund that has out a network of outside CEOs to run their companies. It's not their business model. Um, and again, as we talked about in the beginning, it's, it's pretty uncommon these days that unless there's fraud or mismanagement or you run out of money twice after— if you burn that second check and you run out of money, people get stressed. But it just doesn't happen that I just don't see that anyone's asked to step down for their company. But ask what— but it does happen. So ask what happened. Ask when they brought an outside CEO and what happened. So if this is something you're anxious about, and I find a lot of founders are still anxious about control, just ask when it hap— when when it last happened. And again, maybe between tiramisu and coffee, or I don't know, maybe when the salad comes in, in an angara, just ask when it happens. And you'll find out, like, I've never done it. I've never even, not only have I never considered doing this because I don't care, I wouldn't even know somebody. Like, I think virtually I wouldn't invest in a founder that I didn't think was better than me and go the distance. And I don't know any magical outside CEO that doesn't know the product, that didn't work on the code base, that hasn't visited 1,000 customers. I don't know anyone that I would trust to go in and run a startup. In fact, I've had the few times in my career I've seen outside CEOs brought in by other VCs. I've fought it pretty hard. Once I asked for all my money back from that VC. I said, if you're gonna, if you're gonna get rid of this founder, I don't believe in the company. I believe it's this, this, this, this product's too complicated. I believe that, yes, the growth has slowed, but I believe in this founder. I just want my money back. I didn't get my money back. But, but just ask this question. Okay, just, just 2 more and then we'll open up to any questions on this theme that's even, that, that's related. These are just fun ones again. I would almost, let's maybe Amelia and I will make a little, a little, a little small little sheet in Canva. You could print it out and put it on your phone and kind of, you know, peer out when you're having that dinner. You can go, here's number 7. Mr. Ibarra, what was your worst investment and why? Okay, now This one is a friggin great question. It's a great question. And you might not get it. You might think this is a throwaway question. Okay. You might think, oh, worst investment. I want to hear about how, you know, I want to hear about how you made all the money in WhatsApp and how you were the first investor in Canva and Samsara and Toast. Those are kind of good stories. But the worst one, I mean the worst, because I will tell you, a lot has changed the last 4 years in particular. Every investor that has been around for a while has fraud in their portfolio. It is not just FTX. It is not just Fast. There is micro fraud. There is fraud on a $2 million round, a $10 million round. It's all over. And there is bad behavior all over the place on these imploding startups. And if you want to know what it's like when the chips are down with the VC, just ask what— they'll all know this question. What's the worst investment? I know mine. It's the biggest, the investment I lost the most. And I know why. And if you ask me, I would tell you. I would tell you, I would tell you why it was ethical lapses, why it was other issues. But you will get— no one asks this. And if you get— if you ask it at an unguarded moment, they're going to instantly remember. They're going to instantly remember the one where the behavior was problematic and tell them. And you'll just learn a lot about them as a human, what their values are, what they care about. I think it's a great one. And again, I've basically never seen this question asked. And it's a gift to hear the answer to just Listen. And the flip side, this is the final one I'm gonna have for your little cheat sheet. Because people ask, what's your, what's your favorite? What's the fa— what's your best investment favorite? Blah, blah, blah, blah. Everyone that, you know, was early in Slack will tell you how great Stewart was. And he is great. He is great. They'll, they'll tell you how, how, how rewarding it was to invest in Figma in the early days when, when Dylan was still an intern at LinkedIn. It was so rewarding, so great. Of course. I mean, Figma's worth $20 billion. They're gonna tell you these great stories. But this one is a better one. If you want to get to know this investor before you're stuck, stuck for a decade on their cap table, ask what CEO they've invested in that they respect the most. It might not always be the biggest exit, and you'll learn. And this is what they want from you. This is what they— when you hear what they've invested, what they respect the most, this is what they value. This is what they value. And if the more you're like that, whatever you hear, the better, the better, the better you're going to get along. So, and yeah, this is my cheat sheet. Ask 'em these questions, make sure you find out if they save money for a second check. That is so, so important. And the other one is just, you know, ask if they'll be there in 10 years. No one does this. Okay, with that, we'll open it up to questions if we have any.

Yeah, there's a few. So the first one, let me find it. The first one from David.

He said he's on the treadmill, so I'll ask for him.

Given that, given that money, given that money is loath to sign blank NDAs, are there any other strategies or tools to avoid copycat behavior? The stock answer I've gotten is just to run and run fast, but that's less ideal. I understand that. But if you—

It's a good question. It's a, it's a good— and this is something that I think a lot of founders still worry about, but maybe a tiny bit less. Than in the past, but it's a big issue. Look, no VCs will sign an NDA. Some, like these late-stage private equity firms, the Vistas, the Tomorrows, which are not relevant, they will actually sign NDAs. They have the capabilities to thoughtfully sign them, but no VCs will. And the simple reason is they see, like, not only do you meet hundreds of startups a year, but you get like thousands of random inbounds, right? And like, I can't even tell you, like, I must have gotten 100 emails from folks making a an AI SDR app. Like if I signed an NDA, like I can't even tell the difference anyway. I couldn't sign an NDA, right? You just can't. You just can't. So that's the practical reason. But here's the thing back. So just get over it. It's the reality. The thing is, look, most VCs don't care. They don't care. They just don't care. They're not going to steal your ideas. Most VCs are not founders and creators. Who come in and they hear your amazing idea, then, then they whisper to their 20 engineers in the back of the office, let's go, let's go copy Alan and Bob's great application. I mean, it has happened, I guess, in the history of mankind, but it almost never happens. They just move on. They just don't care. They just move on. Right. And the third point is, and this is my advice to you at any stage, including in potential acquirers and everything, like a lot of the crap ain't confident, that confidential, man, just go on Google. Go on your website. Could I figure this out on your website? Could I figure it out by using your app? Is it really so confidential? I think that the amount of stuff that actually is confidential is about 5% of what we think it is. There is some secret sauce in our apps. Don't share it, but share— you will gain so much in this world if you share the stuff that people think is confidential, but it's not really that confidential. It builds so much trust so quickly. I share so much stuff all the time. What are Saastr's numbers? How many people came? How many sponsors do I have? What do they pay? I share everything. You can see it on our blog. Like, there's like a couple things about Saastr I don't want to share, but you wouldn't even know because I share so much. It's like such a great tactic to share stuff people think is confidential. It should build trust. It's genuine because people don't do it. But calm yourself down. There may be a few things like, you know, what really is your special feature where you beat the competition? You know, whether you want to share that or not, I don't know. But like, Get over it. Almost nothing's actually confidential is my final bit of advice. So thanks for the question.

That's a good one. Ash, you've had a few comments. I don't know if you have a question you want to ask. I see you're going to unmute.

Sure. I didn't have one actually, Amelia, but I do have one. I mean, I do have questions always for Jason M. Lemkin. Can you guys hear me?

Yeah, we can hear you.

Yeah, go ahead. Okay, cool. How does somebody think about— so somebody who's kind of always bootstrapped, always bootstrapped many of the companies. And I think it's really helpful to hear from people who are making this transition from sort of this bootstrap mode where you're kind of like always capital constrained, always resource constrained. And just like sort of talking to other founders or people who are like thinking about making this leap to kind of a venture model. What's your sort of advice for maybe either talking to other founders or talking to VCs? Because it's like a very different, this is a very different thing. It is. I think everyone gets this wrong. Everyone gets this bootstrap discussion wrong. Couple of things, two larger things. One, it all normalizes around $8 to $10 million in revenue. By the time you get to $8 to $10 million in revenue, If you're doing software, we have 80% gross margins, 90% gross margins. One way to think about $10 million in revenue is that's $8 million of cash to invest each year. Each year. Right? So that's like raising a $16 to $20 million round, right? So what you'll find is outside of, outside of frugality and other things, there's not a lot of difference between a $10 million bootstrap company in most cases and a $10 million ARR, $10 million ARR one that raised $20 million. There's just not a lot of difference. So it does normalize. So, and I remember we did a couple years ago, we did, I did a great interview with Ben Chestnut right after MailChimp sold for $12 billion. And you can watch this one. It's great. He's like, yeah, we, you know, in the early days, no one wanted to give us any money. We had, we were in another, yet another email app. We had high churn, we had this. And then by the, by the time the VCs finally wanted to give me money, I didn't need it anymore. We were so profitable. So that's a, that's an example of the crossover line where it doesn't, doesn't make any difference, right? Or today, the more subtle point is after $8 or $10 million, you could— a lot of times you could raise the capital, but you don't have to, right? So a lot of times we're asked, like for SaaS or annual and other things, why don't you have more bootstrap content? And we have done that. But what I've found is that it's not as useful as you think because of this crossover. Because of this crossover. Right now, having said all so and, and so and then the second point I'll make is, and this also goes to the Ben Chestnut story, it's rarely a choice. No matter what the internet says, no matter how many people selling their courses and hawking things say, most folks, 99% of folks cannot raise venture capital. It is a niche asset class. It is a— no matter how it looks on the internet, venture capital is a tiny, tiny, tiny portion of private equity, which is a tiny, tiny portion of investing. It is not for everybody. It is a small— no matter how it looks with these unicorn rounds, it is a small amount of capital in absolute terms designed for a very small subset of companies. And that means that 99% of startups can't even raise venture capital. They just can't. So like this idea that it's a choice that I get to choose. So, you know, should I take $4 to $5 million or $8 million or keep going? There are some startups that do make that choice, but it is so uncommon that it's almost— there's almost too much breath wasted on this as a choice. Like, You have to brute force it. You have to be founder mode. And then at some point, like, you will be able to raise capital or you won't. And, and it may be when you need it, or maybe like Mailchimp when you just don't give a rat's ass anymore, right? Or Atlassian because you, you didn't need it, right? Um, so I think these differences are overstated. Is it harder to do it with less capital? Of course. Right? I wrote up a post a couple years ago in the, you know, in the, in the, in the Bessemer Cloud 100. I think 94%, you know, the average— sorry, the average one raised, I think, over $300 million, and only like 3 out of 100 were bootstrapped. So it's hard. Capital helps. There's no question. But at the end of the day, I think the real— and this is my— I know it's a long answer. I think the real answer is that bootstrapping takes longer on average. It took Atlassian 4 more years. For most folks, it takes longer. That's a reality. And it forces you into business models where you have to focus on where you always win. One of the best parts about capital— capital really, if you, you can piss it all away, that's really surprisingly easy to do. But capital really lets you do a couple things. It lets you hire more executives earlier, and that's a big benefit, no doubt, if you do it well, right? That's the number one thing. And the second thing it lets you do is it lets you compete in areas where maybe— this is subtle— where maybe you're less competitive. If you're bootstrapped, you basically need like a $0 CAC. You could do like 1 or 2 things in marketing. You basically either need to be insanely good at outbound or you need to be insanely good at inbound. And the CAC is always almost nothing. And you just can only compete in the categories where you, for some quirky reason, you have a competitive advantage, a 10x feature, a niche thing. Capital lets you expand at the periphery in areas where you have more competition, where you're less competitive. And so those are negatives, but just stick to your lane, right? And hire sequentially. That's life as a bootstrapper. It's hiring sequentially and sticking to your lane and then suck it up until $8 to $10 million. And if you get to $8 to $10 million and you're growing even 40%, 50%, you will find you can hire all the people you need. That's the thing. If you get to 10%, you're growing 40%. That's another $4 million of cash next year. You can afford to hire a VP of sales or a CMO or whatever you need. The excuses sort of end at that point. So that's why I think it normalizes and it's not really a choice for almost everybody. But thanks for the question.

Awesome. Okay, Alfonso, do you want to come up and ask your question next? I can ask it for you.

Um, sure.

Hey, we can hear you.

All right. Um, do you put provisions in the term sheet, or should I expect provisions in term sheet for the most common startup failings? Do you— sorry, is that a question? Do you put in the term sheet provisions for the failings? Yes. The types of things that you see occurring most frequently. Look, a lot— this is another thing that people spend— it's worth spending a minute talking about because there's so much on LinkedIn and social media. The only thing— listen, if the early days startups run out of money and the money's gone, I mean, that's either seed startups make it or they don't. It's usually fairly binary. There's no— there's not much out there. But as you raise more capital, the only term that really matters, and it doesn't even matter that much, is this liquidation preference. And I'll tell you why it doesn't even matter that much. It's, let's say you raise $10 million and you sell for $11 million or $5 million, how does that money get, get divided up? And, um, people, founders get very emotional about this. People get very emotional, not even founders, actually VPs and executives get very emotional that the way, the number one term that really helps later stage VCs is they get their money out first. So if you raise $20 million and you sell for $20 million, if all things were equal, and they aren't, but if all things were equal and you raise $20 million, sell for $20 million, the VCs get 1x, which isn't that great. It's no profit, right? After 5 years, 10 years, they get 1x and all the common shareholders get nothing. Okay? Because the VCs get their 1x out first. Now, people get outraged and you'll hear stories, hey, I was the CRO at whatever company for 4 years. I was so great. And the idiot founders sold the company and I made nothing. And what happened? Oh, we raised $200 million and we sold for $80 million. Okay? That's not the job. It's not the job to— the job is to sell roughly. If you sell for 3 times more than the amount of capital you raise, 3 times more than the amount of capital raised, everyone makes good, decent money. I mean, if you sell for 100 times, everyone makes a lot of money. Your job as founders is to be cognizant that this is not free money. And forget about valuations, which we could talk about. Your job is to sell for at least 3x what you raise. Otherwise, it's, it's a failure, right? And this liquidation preference where people get their money out first, frankly, it really only helps these late-stage investors. The early-stage folks that do seed, usually they just lose it all. This doesn't even help them that much. That's why you'll find that early investors don't even really care about this. But it's just a reality. It is a reality that somewhat protects late-stage investors. It's not even that simple. Let's say you raise $20 million and you sell for $20 million. It's not like if Stripe buys you, they're going to be like, oh cool, the founders who now have to work here for 4 years make nothing and the VCs I'll never talk to get all of it. So in essence, gets renegotiated at the end. And like, if Stripe— I'm just not literally Stripe, but Stripe just did a billion-dollar exit. If someone, if some big company buys you for the same amount you raise, they'll typically set aside 30%, 40%, 50% of it for the founders and some other folks, no matter what the documents say, and they just won't do the acquisition without it. So even this liquidation preference stuff is overdramatized, but it's really, at the end of the day, it's the only term that VCs can put in a term sheet to protect themselves. And it's of— no matter what it says on LinkedIn, it's of limited, it's of limited value. But certainly, look, if you raise a bunch of money and you sell for less than that, the folks that have left, the common shareholders that aren't even there at the deal, they're going to make nothing. They're going to make nothing. It's not a success. It's not a success. No matter how hard it is, it is not a success to sell your company for less money than you raised. You failed. I mean, it happens. The model. Venture VCs can survive losses. We can talk about that, but it's not a success to sell your company for less than you raised. You should, you should have bootstrapped or you should have raised less. You should have raised less. I don't know anyone that raised a ton of money and sold for less than that said, oh, I'm so glad I raised all that money. They're all, they're all like, you know, looking back, I could have done it for, for 80% less and everyone would've been better, right? Lots of money is, should only be go to once you know it's frigging gonna be huge. And that's, that's the trap so many, so many scale-ups are in today. They're not going to be huge. And they raised so much money in 2021, and now they're doing it again in 2024 with AI. They're raising so much money and it's not huge. And the math just can't work. They raised too much money. Like, it's perpetually broken. So, so that's the only term. And despite these horror stories, it doesn't really— it does help VCs a little bit, but it really doesn't get— it doesn't make any money, this, this, this liquidation preference. Thanks for the question.

Okay, next question is from Kumar. If you want to come ask a question, we'll ask it.

I think I'll go next. Thanks, Jason, for doing this. Appreciate it. For sure. How do you essentially say no to a VC, right? If they come in a sequence and you don't know what's coming next, what do you essentially say no to a VC and how do you keep the doors open in case you want to second go at them in case you didn't find anybody else beyond the line? It's a, it's a great question. One of the earliest SaaS posts I wrote in the very beginning, probably 2012, was how I totally pissed off a VC by saying no wrong. Like just furious at me, furious at me. And actually the world was smaller 10 years ago. It created, created some downstream damage and I thought I did the right thing. Like I feel like you guys can challenge me. I feel like I'm a pretty ethical person. Okay. I feel like every day I try to do the right thing. And, but even sometimes we think we're doing the right thing. It doesn't mean that we either do or that people perceive it that way. Right? So the simple answer to your question is, and actually this is easier today because we're all remote, you know, distributed hybrid, just be direct, but don't be a jerk. You know, there's a lot of stuff on social media about, and we could chat about it, about why VCs ghost founders. I'm so mad. You'll see people and they'll tag some firms. Some great fancy firm ghosted me. Like, they're horrible human beings and the VC will be like, I never even heard of this person. They sent me a cold email or I met him for 3 minutes at SaaStr Annual. Can't even remember him. I didn't ghost them. Or— and remember, VCs get— I mean, you get hundreds and hundreds of emails. You know, it's just there are— ghosting is annoying. But I've written this SaaStr post a couple of times. Realize that when you raise capital, it's sales. Someone's in sales. If you're hot, if you're, if you're on fire, then the VCs are selling you. If you, if you scale, there will be a moment if you're hot, when you, when you're like overwhelmed with VC interest. Okay. All the rest of the time, you're the one doing the selling. It's your job to convince VC. You're selling stock, not your product. It's the same thing. And so have you ever been ghosted by a prospect? Of course. Has a prospect ever not shown up to a meeting because they didn't really want to buy your product? All the time. If you take this personally as a founder, your company will fail. And if you take VCs ghosting you personally, you're, you're drawing the wrong lessons from a sales process. You're just not a good enough product. And there's another VC. There's, there's not millions, but there's hundreds. Go find another one. It's like sales. Go find another prospect. If they're not the right fit for your product, go find someone that is. It's that simple. So let's flip it around. How can you handle when you do, when you want to ghost a VC, when you want to deal with them, don't ghost them. We know founders hate being ghosted. VCs hate it too. If they like a deal, be honest. Send them an email. You don't even— I used to have to call them. I remember having these calls to tell some top funds I didn't want their money. I dreaded it. And you get in, like, we get their— yeah, and get them on the phone. Hey, Jason, how's it going? Thanks. Thanks, Kevin. I don't want your money. Like, you know, it was the worst. Now you can send an email. At least it's socially appropriate to send an email. But don't be a jerk. Send a nice one. Like, maybe be actually nicer than you need to be. Thank you, Amelia. It actually has been great getting to know you. And I found another investor that I think is an even better match. You are great, but I found someone that I think is a perfect match for my company at this time. Leave the door open. At this time. It's been great getting to know you. Let me know if— can I keep you in the loop for the future? That tells them there's still another opportunity. That's what I would do. Just be direct, be nice, be respectful. Thank them for the time and tell them they were great. There's just someone even better out there for them, right? In your own words. When you do that, they either may not respond. Sometimes they'll argue with you. Like, you sometimes try to argue with a prospect that doesn't want to buy your product. That's okay. And then if you're hot, what you'll often hear instead is actually, can I put in a little bit of money? Like, let's say they wanted to write a $2 million check, like, and that's their minimum because they have a, whatever, $100 million fund. Like, 2% is a, is a typical target investment size, 2% of the fund. But even though they want to invest $2 million, they might in the end say, hey, can I put in $200,000? Because they want it, they want to get a toe in or do a little bit. You can think about how you want to deal with that, but if you build a good relationship and they want to do it, just expect they may lower their check just to do something. And that's up to you. You might be surprised how small a check they're willing to take once you say no. And the last thing I'll say is, look, if it's a tiny seed fund and you say no, they're not going to be big enough to write the next round check. They're not going to be. It's just too small, right? But if it's a bigger fund and you have to say no, say kindly. And you, one, keep them in the loop, or two, maybe let them write a very small check. You know, I've seen a lot of times these days they come back and wanna lead the next round. And I wrote this up on Saastr not that long ago. It's so hard to just to tell what's really happening with funding rounds on TechCrunch and others. But you see more and more, I, I would say that in my portfolio, the majority of A rounds, B rounds, C rounds are led by someone already on the cap table. It's so hard these days to know what's going on. There's so much fraud, there's so much noise, there's so much froth. If every month I get it— okay, let's say I'm not on the cap table. Let's say I only invested $25,000 in the round, but for a year and a half I've been getting these updates the first of every month. Timely. They're great. I'm getting more and more excited. You cross $1 million, $2 million, $3 million. That's the best. That's the best group of investors to draw from. Not someone you randomly met. And I mean, it's great, but like, if I can track someone for 3, 4, 5, 6 months, you almost never get that. And so letting a big fund Saying nice, but keeping them in the loop alone, keeping things good to keep them on and drop them. Ask if they want to be in your monthly updates and if they want to invest a tiny bit and there's room, maybe let them. That's my, my long answer to the question. Good question. Thank you, Jason M. Lemkin.

Thanks, Kumar. We actually have a question from the livestream. Rephrase slightly just to make it shorter. But what if you have discerned— the question is, what if you've discerned that they are not the right investor for you? After you've already taken the check.

After you've taken the check?

After. Yeah.

Well, I wrote this, these 8 questions. So you're supposed to use these 8 questions on your phone at that dinner.

Yeah, but if it's too late, it's too late.

That's why we— this— see, I was being lighthearted. I actually think this might be one of the most important presentations in venture capital, not in the world. That's the stuff about scaling your company. This is so important. This— no one talks about these 8 things. Because I don't want you to be that person. It happens all the time. It happens all the time. You're stuck with these investors. What can you do? Nothing. Nothing. Nothing. You're stuck with them. You're stuck with them forever. Can you— can you ask if their fund will put another partner on your board? Sort of like once in a while that works. It's not worth— it's usually not worth it. You're going to piss them off, their egos. Now, let me make an exception. If you have the head of the firm, if you have someone, I mean, if you have Mamoon who runs Kleiner, if you have Marc Andreessen, for some reason, Andreessen Horowitz, and they're not the right fit, I think you can be pretty honest with those guys. Okay? They'll be cool. They're like, if they run the place, there's like, they may have ego, but it's not this kind of ego. They'll be like, okay, if I'm not the right, if you sent Mamoon or Marc Andreessen an email saying, thank you, I love Andreessen Horowitz, but you're so busy, I'd like to have someone else on my board. They'll probably be thrilled. They'll just forward the email to somebody else because they're busy. If you run the place, but there's so much ego in venture, there's so much insecurity. No one has enough great investments. You need— in venture to win, you basically need a great deal every year. And to not get fired, you need a great deal every 3 years. And they're not as common as you think. They're not as common. And there's just so much ego. And so, it's very hard to do anything about it is the simple answer. You're stuck. So, I think if you have someone on your investor board that you don't like, You just have to treat them with respect even if they don't deserve it, right? You have— because you have no choice. You can't fire them. You cannot fire them. That's the horrible part. So if you get passive-aggressive, if you get angry, if you let the stupid things you say drive you nuts, it will only get worse. You have to treat them like you'd want to be treated, and you have to treat them with an amount of respect they probably have not earned. And you're stuck with them for a decade, and that's the condition. This is not— venture capital's not a joke. It is, uh, most VC firms do not beat NASDAQ. It's a terrible asset that has a lot of— VC doesn't have the same kind of stress as being a founder, but it has this latent stress because either you're building up larger and larger positions, more success, or you're slowly failing and ultimately getting fired and probably are unemployable afterwards. It's, it's a— it is what it is, and it's a tough industry to make money in. We can walk through the math. If anybody wants to, and you cannot get rid of that investor. What you can do is neutralize them in a couple of ways. First of all, make sure if you raise more, another round, bring in an investor that you do trust, that past 8 questions trust, and add them to the board. You probably can't get them off your board if they're on it, but add them to your board. Two, most VCs want an industry ex— what they call an industry expert on the board. Okay. Some of it's due to control dynamics. Some of it's due to history, but go out and find a CEO in the industry that you trust, someone that is ahead of you, and add them to the board. That almost always helps, having this great industry outsider on your board that then dilutes sort of the negativity and the issues of who you have on your cap table. And then the last point I will say, because this is the opposite of what people do when they have an investor they don't like, do more. And what I mean is do more board meetings. Don't not do them. Don't not do— don't not prepare and do them once or twice a year. Do them every month. Do investor updates, do investor meetings all the time. If you do so much, you'll kind of neutralize, even though you'll hate doing the meeting, you'll kind of neutralize the negativity, the toxic— the toxicity of every month or every 6, at least do a board meeting. I would do a board meeting every 60 days and get your investor meetings out on the first of the month if you don't like your investor. Then there's, then there just, at least there will be extreme transparency and awareness. And the number one issue with VCs, the number one issue, whether you like them, whether they're great, whether they're mediocre, whether they're the wrong person, the number one issue in venture is not losing money. That's, that sucks, but it happens. It's part of the model. Most VCs can lose money on 40% of their investments, 30% of investments, not always by dollars, but logo, but surprises. Surprises are what breaks the relationship. Surprises. I would say all, even the best founders get this wrong for a long time. And almost all the one, almost all founders get this partially wrong. Surprises. Venture is wired for tougher times. Venture is wired to think about those second and third checks. Venture is wired to write down some investments, but there's nothing worse than getting an email, oh, sorry, I know we said we were growing 40% this quarter, but we're, we're shrinking. Oh, I know I forgot to tell you, I fired my CEO 4 months ago, my CRO 4 months ago. Oh, I know I forgot to tell you, but we lost our largest customer, but I didn't tell you. I didn't tell you, right? It just instantly breaks, stretches and breaks the relationship. You can't come back from it. So whenever you're hesitant to send that email, whether you're, whether, you know, a lot, almost every investor will tell you a story of a startup where they invest, like where the investor updates just stopped and then A year later they went under. It's just natural as a founder to want to bide your time or not send that bad news update, but run toward bad news, run toward bad news and get your investor updates out on the first, and that will help neutralize this investor you shouldn't have taken. All right. Thanks for the question.

Yeah, good answer. You've got a couple more that we'll try and squeeze in. It is about— hold on. Lost in the queue here. Okay, Tim had to leave, so I'll ask this question for him. How should founders act different— should— okay, should founders act differently if they're thinking about taking private equity or a growth equity investment instead?

It's a great question. It is. So for folks of color, it's such a— it's such an important topic, but it's super niche. But if people want it, we'll do it. Growth equity is this weird thing that when you get, if you get to $20 million ARR or above and your growth is even, like, I know it's all hard, but you don't have to be growing 100% like a Klaviyo or Slack. If you're even growing 30% or more at $20 million and you're not burning anything, you will get opportunities for private equity and growth equity to invest in you. And it can be a gift because Look, if you're growing 30 or 40% at $20 million, you know, Marc Andreessen is not going to invest in your startup. And maybe even no one's going to buy you. Like, you're not— Stripe's not going to buy you for $1 billion, but a private equity firm might come in and value you at $100 million or $150 million, give you like $10 million of liquidity for some of your shares, and then put some into growth. Right. There's private equity. And then it happens again. There's, there's a— usually below $20 million ARR, there's not enough stickiness. People want enduring revenue. They want 100% plus NRR, and they want low to no burn at $20 million, and they'll sacrifice some growth. This rule of 40, like 40% growth and 0% losses. They'll say, hey, this revenue is so enduring that this $20 million will become $28 million, and it'll become $35 million and $40 million. They'll take that bet and maybe even ultimately merge you with another company that's bigger. These bets happen all the time. And it's a very interesting world. And one of my investments where I was the first investor called Logical, they just did, I wrote it up a couple of months ago. They just did a deal for $300 million at $20-something million revenue where they got bought out like this or $30-something, same thing, pros and cons. And some of the folks stayed and the founder CEO moved on the next day. And that was a great deal for them. It was a great deal around. So it's a different world. It is the simple answer. It's different. It is not venture capital. These folks that are doing these private equity or growth buyout rounds, they're not necessarily looking for you to grow at the rates of Wiz or Datadog, but it's not a free lunch. They're also ruthless on efficiency. They're ruthless on how it's run because they need it to— they need to keep going. They, you know, if any of you— if any of you— we do use SaaS products that have been bought out by private equity firms. You know, renewals aren't fun. You know, innovation slows down. It's not a free lunch, but it really can be a gift for founders. Okay, so what's the advice? Just a couple thoughts. And it's, it's so important. It isn't a shot, but we could, we could ask Andy or a bunch of others to go through what it's like because it is a gift. It is a gift. It is another liquidity path after $10 or $20 million before the IPO and without hoping and praying that Stripe will buy you. It is a gift and it's still happening today all the time. It's still happening today. One, realize like there's no private equity growth. They're not interested in folks that are burning massive amounts of capital. Like, that's out. You have to, you have to be capital efficient. And two, the most important thing is if you're capital efficient, you cross $20 million, you will— and this is probably whoever asked the question— you'll start getting these emails and you'll start getting these calls from a lot of firms you've never heard of. And they may be junior people, they may be associates and analysts whose job it is to talk to every B2B company. That's at $20 million or above or in a certain industry. But you don't even have to find these guys. When I talk to founders that ask about private equity or buyouts or stuff that are at $20 million, we had, we had a great one at SaaStr Annual from the Q&A and mine at the end. He asked about it like, you know, he said he's like, he's like, I'm at $25 million, I'm growing $40 million, I'm profitable. I'm like, I'm like, what's it like? I'm like, have you gotten any of these inbounds? He's like, yeah, I've got like 20 of these in the last year, right? They'll find you. Just listen, be nice, take the meetings. My rough rule for all this stuff, VC or PE, let me go back to an old SaaS rule. Take one meeting a week. Your time is important, but as founders, this is important too. Don't wait for Marc Andreessen or whoever to reach out to you. If you, if you think you will ever sell your company or raise money, raise VC or PE, take one meeting a week. If the best meeting you can get is Marc Andreessen, Great. If the best meeting you can get is some junior analyst, uh, Jason M. Lemkin at some venture firm you never heard of, but that's the best one you get this week, just do one a week. Don't do 10. Don't let it be a tax on your time. Don't overprepare, but take one meeting a week to learn. If you do one meeting a week, that's 52 a year. You'll have a book of venture or PE relationships when you need them to send them an email to raise the round. So, um, take the meeting. It is quirky, it is different. And the last point I'll just say is Just bear in mind, in this growth equity, private equity, they are very different. They're almost different questions, but I'm going to just realize that people today, they want you to be profitable or close, and they will be very, very valuation sensitive today. So getting more than 4 or 5 times ARR is going to be tough today. Do 10x ARR deals happen in this world? Yes, but they're usually Unless the growth is there, they're usually very specific reasons. Like, I've got a portfolio, I've got one company at $100 million growing 40%, and they're willing to buy you at $20 because they think combining you will create a 1 plus 1 equals 2.5 type deal. Then they'll often pay the same AR multiple for the bigger guys, but usually they're going to be sniffing around for fairly cheap deals. But if you've bootstrapped and they're going to pay you $150 million for your company, Could be awesome even if the, the valuation isn't that great. So thanks for the question.

Okay. Last one is from Tanis. I think that's how you say her name. Hi. Yes. So my question's around the second check during these initial conversations.

Second check.

So if they're open to it, that's fantastic. But how detailed do you go in terms of locking down the terms of that second check in terms of do you lock the multiplier?

Good question.

And like, what are considerations around how detailed you go?

I was too inside baseball on my point. So let me step back for a minute. Venture is a series, at least for slightly bigger funds, it's a series of measured risks. And if you talk to super successful funds that manage more, that first check, sometimes they even see it as an option. Okay? I'm going to give Tanis $1 million now. I'm going to see how it goes. If it goes great, then I'll give you $5. If you're a really big fund, then I'll give you $20 or $100. These Lightspeeds and Andreassons, they can fund them infinitely. Right. And, you know, you look at Thrive Capital just led OpenAI at whatever, $140 billion. And I think they're one of the lead— they were the Series A investor because they just keep putting money and money, money, money in. You cannot lock down the terms in any way in the beginning. And that's why you have to ask this question in an unguarded moment just to learn how they think about it. It is an option. You will not— you cannot get it in a term sheet. And if you do get it in a term sheet, it will be— they'll be tricking you. Non-Silicon Valley VCs sometimes like to invest in tranches. Like they'll say, we'll give you $1 million today, and then if you hit $1 million in revenue, we'll give you another million. That sounds great. It's a ripoff because it's a one-way option. You have to take their money if you hit it at the same price as before. Like tranches are a terrible deal. If it's the only money you can get on planet Earth, then yeah, take it, but run from tranches if you, if you, if you can. Um, but you can't get the opposite. You can't, you have to earn it. And so the real question isn't, can I get this in my term sheet? The real question is, do you do second and third checks? Great. And what typically speaking, what would it take to earn it? What would it take? That's the right way to ask. What would it take to earn it? Right? So sorry if I misspoke or was less clear, uh, clarify it more, but it's more, what would it take to earn it? And it's just a fun question to have. What would it take to do? And they're like, oh, we love to support our companies. No, just push a little bit more. Great. I love to hear you say that, but, but honestly, your investment day, we're at $50K MRR growing at this rate. What would it— and you're— what would it take to earn a second check? And if you— if it's an unguarded moment, that's why I used to hate these dinners with VCs, but now I realize they're great because you need an unguarded moment in one of these very structured relationships. You do need an unguarded moment. It doesn't work over Zoom well. Fly there, whatever, because you want this, this off-the-cuff moment. Maybe a glass of wine after a glass of wine and just ask what would it take to earn it? That's the way to ask it. But thanks for the question.

Awesome. Thanks for all the questions. I know we didn't get through all of them. There's a bit more in the queue. We won't be able to get to all of them today. But thanks everyone for joining another Workshop Wednesday. We'll be back again next week, as Jason mentioned, with Dave Kellogg, who is a SaaS speaker, fan favorite. Back at Wednesday at 10 AM. And if you haven't yet, be sure to get your tickets to Sastre Annual, just sastreannual.com. You'll see our Halloween pop-up. Early bird tickets end on October 31st, and we will see you guys next week.