Elizabeth Yin

A decade ago, I wrote a blog post about how I was not crushing it with my startup LaunchBit.

In that post, I added this graph:

It looked good — up and to the right (though no labeled axes publicly disclosed). But, on a day-to-day basis, the graph looked like this and more importantly, *felt* like this:

Doing a startup is HARD, because it’s hard to see the long-term ups of where you’ve come from and how much you’ve accomplished. And it’s easy to see all the troughs you have to stomach today.

The headfake about my current company Hustle Fund is that even though we are a VC fund, we share many more similarities to our startups than we share with other VCs. This may sound counterintuitive, but we have revenue (with ups and downs of it – just like our startups) and lots of people (30+) who count on a paycheck. Managing money and lots of people is what makes companies hard!

I write this post, because I know that a lot of startups are struggling right now. Capital is tight. It’s hard to make money. It’s hard to console your team who may be worried about the market. I know – I get it.

An example of one trough that I’m going through right now is that I recently learned that I will have to personally chip in a lot of cash — more than I made last year — to cover a company tax situation. I know that so many startups often have founders contribute to their respective businesses to make ends meet. We all face the same issues. This won’t be easy for me. But we’ll figure it out.

In fact, the past couple of weeks or so have been the toughest point for me in our journey — even tougher than those first few months when my business partner Eric and I couldn’t raise that much money for our Fund 1. In many ways, it’s much harder to go through troughs when you’re a bigger company than when you’re two people working in a garage. (Ok, Eric still works in his garage).

A decade ago, I felt every trough so deeply. I was stressed. But there are a few things I’ve changed over time.

Gratitude

A few months ago, I spoke with one of our founders whose company is thriving. But, she saw her business go to zero during the pandemic and recounted how one day during the pandemic, it was just so stressful, she cried her eyes out in her empty office. I asked her, “What made you decide to continue your company and how did you ever pull through?” She told me that she realized that just being able to sit on the floor and cry about her startup was a privilege and that she wanted to continue.

That conversation summarizes how I think about my own startup problems now. It’s a privilege to be able to do this work day in and day out. No one is making me do a startup. It is a gift to be able to work with the amazing Hustle Fund team to get through problems – I am so so grateful.

So even though there are a tons of ups and downs in doing a startup, there’s no way I would give this up to do something else.

My health / habits

I’ve talked a bit on Twitter about how I’ve changed some of my habits which has made it immensely easier to handle stress.

With my first company, I used to feel stressed all the time and had lots of trouble sleeping.

The ups and downs never go away in building a company, but here are things that I do differently in building @HustleFundVC

More >>

— Elizabeth Yin 💛 (@dunkhippo33) May 4, 2023

Some key changes that come to mind include:

• No phone before bed. I keep my phone in the kitchen
• Use phone meetings to walk / jog to get exercise – there’s often no other time
• Reduce meetings with voice messages via Async.com
• Sleep early and wake up early to get a better handle on the day

These changes alone have helped me get a better grapple of not only my time but also my stress.

I also think being a second time founder helps. You know what issues can crop up and not much is surprising anymore.

But, The Ups and Downs are Always There

I think founders often think that if they can just get to the next milestone or the next round of funding, there’ll be more stability and fewer ups and downs. This couldn’t be further from the truth.

On some level, there’s more stability — there are more people to mitigate the chaos (assuming good processes in managing the team). But there’s also just more at stake and issues always arise, so the problems become bigger.

This is fundamentally what startups are all about. Constantly ploughing through and getting pummeled and rinsing and repeating. And this can be depressing for some founders. And, this is not for everyone — and that’s ok to move on.

But if you’re still excited to try to surf your startup wave, keep going! Everyone gets pummeled over and over again — you’re not alone — but just get back up on the board and continue. You’ll figure it out.

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Although I invest in a lot of pre-revenue startups, a stage where I see most companies get stuck is the pre-series A stage. There are two primary ways that companies tend to get stuck. A startup:

1. Has product-market fit but is too chaotic in trying to serve demand
2. Doesn’t have product-market fit but thinks they do and overly spends money and runs out of money

What is product-market fit?

At a high level: You have found product market fit when you can repeatably acquire customers for a lower cost than what they are worth to you. This is not earth shattering. This is a simple business statement. Are your costs lower than your revenues? Are you profitable? And can you get more and more customers over time in a systematic way?

I’ve written about this before on Twitter:

What the @#*($&# is product market fit?

I've been trying to study PM fit for the last decade. First with my own startup (that never reached PM fit) and then with my < 300 companies I've invested in and the tens of thousands I've reviewed. Here are my thoughts on PM fit:

— Elizabeth Yin 💛 (@dunkhippo33) July 23, 2019

How do you know you have product-market fit?

This is something I didn’t understand when I was a founder. Investors would often go around saying “you just know you have it,” which I didn’t find helpful back then. Now on the investor side, I think this is a true statement: if you can’t keep up with sustainable demand, then you have product-market fit. If you are overly spending — i.e. payback period is longer than say 6 months at the seed stage — to get demand, then you don’t have it. You are just spending money unsustainably.

It’s important to be honest with yourself about whether you have it. The truth is – most companies never achieve product-market fit. And, my startup certainly never had it. The market doesn’t generally need most companies. And that’s ok.

Even companies with product-market fit can fall apart

However, even if you have product-market fit, that’s only half the battle in running a company. I often see companies still get stuck. I’ve had many portfolio companies find product-market fit but get close to either running out of money OR actually run out of money, because they didn’t keep a close eye on their cash management.

Even if you are basically profitable in serving your customers, you can still go out of business. For example, if you have a large cash outlay upfront to buy materials for your product before you bring in revenue from selling said product, you could easily run out of money. If you haven’t read the book Shoe Dog, by Phil Knight yet, I highly recommend reading it to dig deeper into this particular conundrum. Shoe Dog is the story about Nike and how they almost ran out of money quite frequently. In Shoe Dog, Nike needs to pay for materials to make their shoes upfront and then sell them later. But, the more shoes they sell, the bigger their outlay of cash has to be each time they buy more materials. So although Nike has a ton of demand for their shoes, it’s incredibly difficult for Phil to solve for their liquidity issues to keep up with demand. Their success actually creates cash problems for them.

This issue doesn’t just happen with e-commerce companies. It happens with logistics companies, ad companies, and B2B companies as well. There’s often a hefty outlay of cash upfront to pay for people to help serve a deal or pay for the cost of goods.

Pre-series A companies need to optimize

For all the reasons described above, I’ve thought a lot about the optimization of growth and startups. Everyone – investors and founders – are all fixated on growth. But once you have some growth, especially during tougher financial markets when it’s less easy to raise money, it’s the founders who can optimize their companies well who will be positioned to be successful.

Truthfully, Hustle Fund recently has been working through its own growing pains of optimization. We have 30+ people now at Hustle Fund and beyond our VC funds, we have several business lines that all work together. Some business lines have product-market fit. Others are more nascent and are too early to tell.

With my last startup LaunchBit, we never hit product-market fit, and we never were this large either in team size or revenue. And with so many people, at Hustle Fund, it’s sometimes hard for us to figure out what cash outlays are happening to ensure profitability when we are paid. In addition, with so many new people at our company, sometimes there’s just a lot of chaos. So we had to make some changes to our own business:

We now have a Company Operating System that allows for scale

For most of the last five years – esp in the beginning – most of the knowledge of how we do work at Hustle Fund has been in people’s individual heads. After a while, this made onboarding new hires challenging and it slowed down work.

Every company goes through this transition where at first, it’s fast to not have documentation and processes (e.g. 2 people in a garage who are still figuring things out). But at a certain point, this way of working becomes a crutch and then you have a lot of inefficiencies on your team when no one knows where things are or what is happening or who does what.

Spearheaded by Thenuka Karunaratne, he set up the system for us to help level us up to do business at scale. Thank you Thenuka! In our Company OS:

• There’s a single source of truth
• Everything is documented there
• If you do something more than once, we record a video and just add the video to the documentation to make it faster / easier to document. No one has time to write documentation
• Done is better than perfect. Revisions happen all the time

Consistent communication channels creates prioritization

Hustle Fund is also a fully remote company across the globe. Most of the people who work here had never worked at remote companies before, so we had a tough learning curve in how to communicate – especially across time zones.

We had to set up guidelines on what communication channels are for what and everyone must be aware of these from day 1.

E.g. Email — this is where work gets done. Subject lines with [ACTION] or [ACTION by 3/1/2023] get higher priority within our team.

In contrast, Slack is where messages go to die. BUT, Slack is important. We have a Shoutouts channel to praise people on our team publicly. We have a channel for news articles. A channel for our own weekly updates. As you can see, these are all great channels for getting to know team members and staying in the know.

We also use Async.com and Loom videos a lot to remove meetings. Instead of a meeting, we send a Loom video or an Async voice memo. It’s way quicker than writing details in an email, and the recipient can quickly read the transcription to digest it. And, you can also convey emotion, which is so so important when you are sending feedback on ideas.

Templates, templates, templates

Lastly, we write and share templates with our team on what to say to various scenarios. This allows us to have consistent messaging and with two clicks, we can respond to most inquiries fairly quickly. There is no reason to re-invent the wheel.

As you can see from our own journey of leveling up both at Hustle Fund and helping our portfolio companies level up, I’ve always wanted to create an epic guided offsite for pre-series A founders.

So, I’ve been working closely with Tam Pham, the newest addition to our team, in creating a Hustlers’ Retreat–a guided strategic offsite for leadership teams this year.

Here’s the thing: Lots of founders get bogged down in the weeds with things that seem important, but don’t actually move the needle on the business – for all the reasons above.

So here’s our vision for Hustlers’ Retreat: we’ll take ~25 leadership teams out of their daily chaos into nature. They will finally have time to slow down and think strategically about their future.

We’ll facilitate workshops to help founders with their top priorities and build their company operating system. We’ll also offer sessions on customer acquisition and fundraising.

The goal is to help pre-series A companies with:

• Prioritization
• Getting leverage on their time: Going from an individual contributor to a manager
• Raising money beyond the seed: What they should do today to prepare for future raises
• Attracting A-players to work for their tiny startups: Plus retaining those key employees when you have limited cash
• Acquiring customers: Growth will always be a constant at every stage

The best part? We’ll take care of the whole experience. The Hustlers’ retreat will have:

• a private property that spans hundreds of acres in beautiful Sonoma County
• cooks on-site to provide nutritious food for you and your team
• our team and guest speakers to facilitate all the workshops and sessions 
• fun activities to recharge & connect like volleyball, board games, a pool party + more
• a community of hustlers just like yourself to connect and learn from each other

Our goal is that every leadership team will walk away feeling recharged, aligned, and energized to tackle the next chapter of their business at scale.

Anyone can join, but the sweet spot is for pre-series-A cos. 

• You have a live product
• You’re making at least 6 figures/yr w a path to 7 next yr
• You have a team

So if you’re a founder who is at a key inflection point in your business, we designed the Hustlers’ Retreat for you. It will take place Aug 20-24, 2023. We’re also doing something crazy and paying for your lodging (4 nights) onsite to the first 35 tickets, use code “HUSTLER”.

My teammates and I will be connecting with founders throughout the week and facilitating sessions. Hope to see you there!

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