304: Tyler Tringas — Investing in Bootstrapped SaaS
Mar 20, 2024
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Tyler Tringas discusses investing in bootstrapped SaaS businesses, focusing on sustainable growth, mentorship, shared earnings agreements, and innovation with AI and No-Code tools. The conversation explores the challenges of rejecting investments, navigating fund operations, and building calm and profitable ventures in today's entrepreneurial landscape.
Investing in calm, revenue-focused, sustainable businesses with intentional growth is the focus of the Calm Company Fund.
The fund's strategic approach diverges from typical venture capital models focused on high-risk, high-reward investments, advocating for mindful, sustainable growth rates.
Investors and founders align incentives through profit-sharing agreements, prioritizing mutual success and fostering collaboration.
Deep dives
Approach to Building a Business in a Calm Way
Investing in calm, revenue-focused, sustainable businesses with intentional growth is the focus of the Calm Company Fund. By running a fund supporting nearly 80 companies, with only four closures in five years, the fund showcases success rates exceeding industry norms. Unlike traditional high-risk venture investments, this fund emphasizes a more stable and sustainable business approach.
Differentiating from Traditional VC Funds
The fund's strategic approach diverges from typical venture capital models focused on high-risk, high-reward investments. While traditional VC prioritizes rapid growth and extensive funding, the Calm Company Fund advocates for mindful, sustainable growth rates, avoiding excessive capital influx. By deviating from the venture scale mindset to focus on profitable, long-term growth, the fund supports entrepreneurs aiming for solid, stable business development.
Investment Approach and Portfolio Diversity
The fund's investment spread ranges from early-stage companies with minimal monthly revenue to those approaching seven-figure ARR, providing a diverse portfolio landscape. With a limited number of closures among invested companies and a broad spectrum of business stages, the fund faces challenges in aligning resources effectively due to the varied needs of companies. Despite the complexity, maintaining a community-based support system allows for tailored mentorship and strategic guidance.
Realigning Incentives for Founders and Investors
Investors and founders often have misaligned incentives due to funding structures that prioritize exits over profits. The podcast discusses a shared earnings agreement where founders pay themselves first, and once profits exceed a certain level, they share a portion with investors. This system aims to create alignment by ensuring that both parties benefit from the company's success. The episode highlights examples of companies making profit share payments, showcasing the effectiveness of this model in fostering collaboration and mutual success.
Embracing No-Code Tools and AI Automation
The podcast dives into the use of no-code tools and AI automation within the fund's operations. The discussion focuses on leveraging these technologies to streamline internal processes, analyze deal flow, and enhance communication. By building backend tools and incorporating AI for tasks such as competitor analysis and workflow optimization, the fund demonstrates a strategic approach to efficiency and innovation. The episode underscores the value of integrating these tools to drive productivity and support portfolio companies' growth.
Tyler Tringas (@tylertringas) invests in bootstrapped businesses. Wait… Aren't those supposed to NOT take investment money? What's going on here?
Alignment is what's going on. Where traditional VC's often have very different goals from founders, funds like Tyler's Calm Company Fund focus on helping niche software businesses that don't chase hypergrowth. Instead, Tyler supports those who want to build calm and profitable ventures. You know, the regular kind of business. The one that focuses on making money.
In our chat, we dive into how bootstrapping and investment go together, how a fund manager makes investment decisions, why NoCode is a massive business accelerator and how the Calm Fund has adapted over its 5-year history.
00:00:00 Sustainable Businesses With Calm Company Fund 00:07:53 Rethinking Valuations and Company Building 00:18:04 Investment Strategy and Sustainability 00:25:33 Challenges and Opportunities in Fund Mentoring 00:29:31 Challenges of Saying No to Founders 00:34:36 Investor Alignment and Profit Sharing 00:44:51 Exploring AI and No-Code Tools 00:51:10 Navigating the Future of Calm Companies