[tylertringas]

hey folks, I'm the founder of Earnest Capital and love to hear questions or feedback. The gist here is I think the way we make founders pitch investors is pretty lame and we can do better. Definitely a v0.1 of our thinking here and would love suggestions for how to take it further.

[EGreg]

Tyler, this is really innovative. The VC model needs rethinking, aligning more with founders, and along the lines of what you're doing here. Your mentor model works great also.

As a founder of a company that has gotten to 8 MM users across 95+ countries, and $1M in revenues, and there is a lot more I can tell you in a private conversation. We've applied to VCs along the way, but the model is not always aligned with companies like ours, which make revenue from the beginning rather than hockey stick growth and zero revenues.

One of the major reasons is that these kind of startups often need small amounts to get to the next level, but the due diligence of a VC sometimes costs more than that amount. If there was a "roadmap" model that VC would fund, say, $10K to get to the next level, then $20K, etc. and if it falls short, then they have to seek another such VC and syndicate. A bit like taking on lenders except it would be more along the lines of your Shared Earnings Agreement + Equity. Everything would be clearly spelled out, and rather than spending tons of time on due diligence, it would just be about a history of execution.

PS: We filled out your "regular" application in early April, please check email from @qbix.com ... would love to talk next week.

PPS: If you're a startup founder chime in and add your 2c, does your own experience in early stages resonate with what I've said? That if you were able to break down what you need to get to the next level, in $10K and $20K increments, with a second or third chance on slightly worse terms, you'd be happy to be funded in that manner, and work hard to make serious progress and document it.

[loceng]

It's likely not worth the time investment to them for whatever return you'd be offering them for each $10k to $20k increments.

[EGreg]

Under the current model, that is correct.

That’s like paying a UBI of $300 a month vs paying a whole department doing means testing for $100/month and then paying $300 a month of welfare to those who qualify.

May as well do something more automated and send the money. Like what Tyler is doing here — collecting info over time. Make the entrepreneur spend most of the time providung the due diligence in the format you want. They have the time not the money — and it is reusable for other investors too.

It should be a portal. Like the “Prizes, not Patents” debate. Same thing.

[loceng]

Another thought I had: they don't want to help you succeed in small increments because then you're 1) not likely to need their help any longer (they don't have you on a metaphorical leash), and 2) the more successful you are the more leverage you have in negotiating and could find other suitors to fund you at better rates.

[EGreg]

Well, I think there are different kinds of VCs. And anyway, as usual there is a way to address this... they can just get options (but not obligations) to have preferential rights in follow-on stuff, such as right of first refusal.

[zomglings]

I suggest you make "Early stage investing for bootstrappers" more prominent on the Trailhead announcement page. It wasn't clear to me what kind of companies you invested in and at which stage until I read HN comments and looked around your site a bit.

I really like where you are going with this. Trailhead seems to be a formalization of the method that has worked best for my startup: keeping investors in the loop as to the development of our company, soliciting and then incorporating their (usually very valuable) feedback when we need it, and being transparent about where we are in terms of a raise.

Really great idea, and I hope more investors follow in your footsteps.