I had several side hustles as a kid. Mowing lawns, selling CDs, selling automotive parts, washing cars, selling bailed hay . . . I was always down for a side hustle. I even worked 12-hour days building houses one summer and earned a cool $125 a week (yes . . . per week). A friend recently asked me what motivated me at such a young age.

The driver was wanting independence. I vividly remember my parents telling me they wouldn’t buy certain things for me. Their reasoning was solid. We weren’t rich. Money didn’t grow on trees. I needed to earn the expensive things I wanted. My parents controlled how money was spent (and rightly so because they worked hard to earn it), which meant my buying decisions depended on what they’d allow.

I hated this dependence. It felt suffocating. I was limited because my funds were limited. I decided to start doing things to earn money and reduce my dependence on my folks. To their credit, when they saw what I was doing and why I was doing it, they encouraged me. They didn’t try to reassert control (even though I was still living under their roof). They told me I could do whatever I wanted with the money I earned, with a few exceptions.

Disliking feeling dependent and doing what I could to break away from it led me to entrepreneurship. The more I learned about entrepreneurship, the more I saw it as the path to a life of independence (and not just financial independence).

This is my one-hundred-seventy-first weekly reflection. Here are my takeaways from this week:

• Adjust solutions, not people – Trying to bend customers so they can use what you’ve built doesn’t end well. The best solutions are built and scaled when you’ve listened to what customers want and adjusted the solution to meet their needs and solve their pain point. Adjust the solution to people, not people to the solution.
• Holiday – It was great to spend time with family and friends. I was able to get some good reading in, too.  

Week one hundred seventy-one was a short week. Looking forward to next week!

Today I read a WSJ article about deposits at Main Street banks and interest rates. It’s an interesting read that explains how the rapid increase in interest rates is affecting community banks’ ability to attract and retain deposits.

In a post a few months ago, I said that banks will start having to compete for deposits, which we haven’t seen in almost twenty years. The willingness of consumers to move funds in search of higher yields will be the forcing function in this competition.

According to today’s article, Randy Chesler, CEO of Glacier Bancorp, explained, “We went through a decade of zero to low rates, and so there was a little muscle memory that had to be developed in terms of competing for deposits.”

Chip Reeves, CEO of MidWestOne Financial Group, has been in banking for thirty years. He was quoted as saying that “[i]t’s probably the greatest deposit competition that I’ve seen in my banking career.”

The competition for deposits is on. Non-mega banks (sub $250B in assets) will be fighting each other to attract and retain deposits. The first-order effect is that depositors will be paid more than in any other period in the last twenty or so years. I suspect the impact from this competition won’t stop there; we’re likely to see material second-order effects as well.

I caught up with a founder recently. He’s started several companies. He’s got one running smoothly, with a management team installed. He’s got another off the ground and is currently installing the management team. Even with all this, we talked about new ideas he wants to pursue.

This founder is a zero-to-one person. He gets energy from taking something from the starting line to the end of the first leg of the race. He isn’t the person who’ll finish the rest of the race. He wants to get things going and put the right people in place to win the race. The idea of taking an idea and turning it into something—not living the entire journey—excites him.

When he’s asked why he doesn’t keep running his companies himself, his explanation is simple: He gets bored working on the same thing too long.

Entrepreneurship is a choose-your-adventure journey with lots of ways to achieve success. This founder is a good example. He’s founded several successful companies, taking them only from zero to one. After that he’s let other people capable of growing beyond one take over. He’s happy watching the companies he founded from the sideline while he incubates his next big idea.

Happy July 4th!

I hope everyone had a safe and happy holiday!

When I decide to take an action and it doesn’t turn out as I’d wanted, I reflect on it. I try to identify what caused the outcome (a bad decision on my part, or bad luck?) and take those lessons forward. As I began investing and studying successful investors, I started to reflect more on my decisions that resulted in missed opportunities. It’s not something most people think about, but the actions you don’t take can have a bigger impact on your trajectory than the actions you do take.

For example, if I make an investment and it goes bad, the most I can lose is the amount of capital I invested (assuming I didn’t use leverage). If I decide not to invest in an opportunity and it ends up returning 10x, not acting was a bigger error. Let’s quantify this:

Decision A: Invest

Investment: $10

Return: –100% (lose everything)

Capital returned: $0

Loss: $10

Decision B: Don’t Invest

Investment: $10

Return: 1000%

Capital returned: $110

Loss: $100 ($110 capital returned – $10 investment)

The decision to not invest was 10x more costly than the decision to invest. Of course, these are made-up round numbers—the extremes of both decisions—that I’m using as examples. Naturally, you won’t miss a 10x return every time you don’t invest, and every investment won’t go to zero.

The big takeaway is that missing an opportunity can be as important, and sometimes a bigger mistake, than the opportunities you take advantage of but get wrong. I used the example of investing to quantity this concept, but it applies in many other aspects of life too.

In David Cummings’s blog post yesterday, Customer Value Financing Example, he referenced David Skok’s SaaS Economics posts (part 1 and part 2). I hadn’t heard of Skok or those posts, so I took a look today. They’re older posts from 2010, but their wisdom is still relevant. They do a great job of explaining the cash-flow trough of recurring-revenue businesses and how cash flow is impacted when companies scale by increasing sales and marketing spend.

I’ve spent today going through part 1 and will dive into part 2 over the holiday. This post contains wisdom that founders building recurring-revenue businesses need.

I first heard about customer value financing a few weeks ago when I read a blog post by David Cummings, a successful Atlanta-based entrepreneur and investor. The concept intrigued me. The idea, as I understand it, is to finance growth of a company by providing a loan to fund the cost of acquiring new customers. Think sales, marketing, and other costs incurred to convert people into paying customers. The expenses of acquiring customers are paid upfront, and recouping those costs (and eventually making a profit) from revenue from customers can take time. This creates a drain on cash flow and can hamper growth if capital isn’t available.

Customer value financing sounded great in principle, but I wanted to see it in practice. This week, General Catalyst and Lemonade Inc. announced a $150 million customer value financing deal. This caught my attention because Lemonade is publicly traded, so more details of this deal and the outcome will be available than if it were private. I figured this would be a great opportunity to understand customer value financing.

Lemonade filed its form 8K with SEC with high-level deal details. It also published a blog post outlining the deal rationale and shared metrics and projections to support the rationale. This is great information for better understanding this deal and how it adds value to the company. David, who understands customer value financing, published a great blog post today with his thoughts on this deal. I’ll defer to his post to interpret the above-mentioned posts.

Lemonade’s total 2022 revenue was $256 million, making it a late-stage start-up that happens to be public. For the last decade or so, most companies at this stage in their life cycle have been private, so details about them (including growth strategies) were closely guarded secrets. For those interested in understanding customer value financing, I think this deal is an opportunity to understand and track the outcome of a new (to me at least) growth strategy available to entrepreneurs.

This is my one-hundred-seventieth weekly reflection. Here are my takeaways from this week:

• Entrepreneurial swings – I caught up with an entrepreneur friend. Two years ago, things didn’t look good, and he wasn’t sure his company would survive. Today it’s thriving and kicking off more cash than he knows what to do with. Things can swing from one pole to another fairly quickly for entrepreneurs. The key is to persevere.
• Q2 – The quarter is officially over. It went by quickly. Hard to believe we’re halfway through the year. Looking forward to the second half of 2023.
• Workflow management – I’m optimistic about workflow management technology. Companies can’t just throw people at problems anymore and will actively be seeking software solutions. Many companies’ focus on efficiency is blowing up a strong tailwind for start-ups solving painful workflow management problems. These are B2B companies solving unsexy problems, which is a combination that can create a great foundation for a business.
• July 4th – Next Tuesday is a holiday. Looking forward to spending time with family and friends and reading a few new books.

Week one hundred seventy was a steady week. Looking forward to next week!

I listened to an interview of Scooter Braun recently. Scooter has had a wildly successful career in the entertainment industry. He’s credited with discovering Justin Bieber, and he managed several other top entertainers. He recently sold his firm, Ithaca Holdings, for $1 billion and acquired Quality Control, one of the most successful rap labels—which happens to be in Atlanta—for around $250 million.  

Braun shared advice he’d received from Jeff Bezos, founder of Amazon.com, on work–life balance. Bezos thinks you shouldn’t have to balance two things you love and that harmonizing them makes more sense. To do this, he communicates to people in his personal life how much he loves what he’s doing at work and what the latest developments there are. At work, his team knows how much he loves his children and what’s going on with them. The idea is to integrate and harmonize your work life and home life by making everyone feel in the loop, part of what’s going on in the parts of your life they can’t see. If you must miss a work event because of something child-related, everyone understands because they’re in the loop and know your children take priority.

Braun went on to share that for many years he kept his work and personal lives very separate but cared deeply about both. This ultimately created issues in his life because, as he put it, “it was like being married to two different people,” which wasn’t fair to the important people in his life.

I’ve been more of a balance person historically—I tend to try to keep work and my personal life separate. Sometimes it’s worked and sometimes it hasn’t. The advice Braun received from Bezos definitely resonated with me. It has me thinking about sharing more about the important parts of my life with people who are important to me. I’m naturally a private person, so I want to harmonize in a way that feels comfortable, given that trait.

Here’s the clip of Braun sharing what he learned from Bezos and how it affected him.