Ep. 8: Elizabeth Yin - Founder & GP at Hustle Fund, Investing in "Hilariously Early Founders"

 
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Brian Scordato:
Hello. Welcome to the Idea to Startup podcast brought to you by Tacklebox; an accelerator for super early stage founders with full time jobs. We've got applications open for our seven week cohort starting July 15th in New York City. If you're working on a startup idea and want to validate it before you quit you should definitely throw in an application at gettacklebox.com. Today, we've got something a little bit different. Instead of a founder, we've got Elizabeth Yin, the general partner at Hustle Fund. An early stage of then invests and I quote "hilariously early startups". It's definitely my favorite tagline out there for any VC. Previously, Elizabeth ran the accelerator program 500 Startups and before that was the founder of a company called Launchbit that was acquired back in 2014. Elizabeth has a ton of experience as a founder and investor and obviously spends an enormous amount of time with early stage founders, thinking about early stage problems.

Brian Scordato:
We had a great conversation and we cover a ton of ground. We talk about who should and shouldn't raise money, how to target and find angel investors, tactics for getting an early customer base before you've got a produc, how to prioritize as an early stage founder and Elizabeth describes how a number of companies have been successful in unique ways that hopefully can spur some thoughts and ideas for your startup. You can find Elizabeth at elizabethyin.com. I mentioned it during the podcast, but she is a terrific writer. Probably my favorite VC blog to follow. It's an incredibly actionable and tactical blog, especially for early stage founders and it is definitely worth a subscription. I'll pop all the services and books she mentions in the show notes and I hope you enjoy. Have a great week and here's Elizabeth.

Brian Scordato:
Thanks so much for coming by.

Elizabeth Yin:
Well thanks for having me Brian.

Brian Scordato:
Of course. I thought to get started, a good initial question would be "Why Hustle Fund and why hilariously early startups?"

Elizabeth Yin:
That's a good question. Well thanks for that kind of intro Brian and I think actually that really ties in well with Hustle Fund. You know at my last job I was a partner of 500 Startups. I ran the accelerator program there and one of the things that I noticed while there, was that, you know there were all these investors out there claiming to be early stage investors. But when you actually dug into it, almost all of the time they were investing in companies with a fair bit of traction. And at the seed stage, which you may think is very early, like many of these investors were investing in companies that had maybe 30 thousand dollars per month in revenue, which is fairly significant, obviously still early but pretty significant. And it's not just um the earliest stage you can beat. And so I thought that that was actually a real opportunity to start a fund that would go even earlier yet. And so our sweet spot for wholesale fund is actually investing in startups that don't have any traction. We do like to see that the founders have done something. So you didn't just think of the idea yesterday but you've built a product like a B1 of sorts and maybe you have a couple of users but we don't care about traction when we evaluate a deal.

Brian Scordato:
Wow that is really, really interesting because when I speak with other venture capitalists, early stage investors, it's sort of all about traction. So that's really interesting. One of the things you talk about on the site is how you make really fast decisions. I'd love to dig in on that a little bit, about how you're able to make these quick decisions on bets that seem extremely risky.

Elizabeth Yin:
Well I think it's also a byproduct of stage. Like if you had a lot of data to dig into, if your Series B company, then I understand why it takes a long time to do due diligence. But at this stage, where we're talking about, there's some sort of product and maybe there are a couple of customers, there's really not a whole lot to look at. So it's very intuition based investing and you just have to have conviction and make a decision. So we make our decisions after chatting with a founder for about let's say an hour and we make that decision within say 48 hours in most cases. And we only need one partner, we have three general partners at our firm, we only need one partner to do that conversation. We don't need to have an all partner meeting or consensus or anything like that.

Elizabeth Yin:
And so actually as a result, we don't necessarily see eye to eye about all the decisions we've individually made. There are some deal, that I've done where one of my business partners might be like "that's kind of odd. I wouldn't have done that" and vice versa. But actually we see that as a good thing because I think diversity of thought is really important because it's actually the most contentious deals that historically go on to generate the most revenue. Airbnb is a great example of that like, sleeping in someone's guest room or on their air mattress in a really bizarre business and many people thought it was a very niche thing or something that no one will do. But many years later it turns out to be a great idea.

Brian Scordato:
Yeah definitely. One more question on Hustle Fund, you mentioned on the site that the process for raising money is broken and I totally agree and I'm wondering if it's for similar reasons or for different reasons. So I'm wondering what your thoughts are around that.

Elizabeth Yin:
Yeah I think raising money is broken for many many reasons. I think just one, there isn't a whole lot of investor competition so investors can behave badly in so many ways. I think certainly in 2017 we saw a lot of regard to sexual harassment and sexual assault news from the VC community. That's one category of issues. I think the other is just general courtesy. Like investors will ghost on people investors will change your meeting at the last minute. Investors will be really douchey or rude. And that's something I've also personally experienced when I was a founder and pitching investors so I hope they understand that and I think one of the reasons we decided to start a VC fund is that we actually want to have an impact on the larger industry, we want to change that. And I think market competition will take care of that. If a founder has a lot of choices, like if you have a choice to take money from a root investor versus an investor you actually like, you know great with people, like who would you pick? And so that's something we want to change in the broader industry as well.

Brian Scordato:
Great yeah. I love that and I think it's obviously very true. Something we've focused on a lot at Tacklebox is making sure that our founders look as much like the general public as possible because I think the reflection there is obviously important. So we've got a lot to talk about. I'm wondering what you think about the title of the podcast "Don't Raise Funding". But we can, we can get into that. But one of the things that I wanted to jump into quickly is at Tacklebox we have probably hundreds of companies that come through each month that reach out to us and I'll ask quick questions about milestones. And without fail the milestone that basically everybody, and these are all founders who are pre product so they're people just getting started, the milestone that they're working towards is their first fund raise. And we've pulled some stats and there's a number that says that ninety nine percent of startups or of companies have not raised any sort of institutional capital. So there's this tension between people assuming that that needs to be their first milestone and the reality of what actually happens. So you've talked about red flag businesses in your blog posts and these are companies that might be seen as unfundable and I'd like to talk through that and how a founder might know that they're working on one of those startups and potentially navigate it.

Elizabeth Yin:
Yeah, I think a first clarification is around unfundable in the eyes of a VC. I think there are plenty of other funding forces, like angels for example, that's actually even a much bigger funding source, like there's a limited number of VCs but pretty much the world is filled with angels, basically any rich person. So what VCs are looking for is a very specific profile of company and I think specifically the ideal scenario for a VC is when you take their money you can deploy it immediately into customer acquisition and that customer acquisition is immediately effective in growing your revenue. And so if you don't know what that is yet, like what the customer acquisition process is yet, it could be too early if you don't have a business where plowing money into the customer acquisition makes sense. And maybe these things don't make sense in terms of taking VC money. Now it doesn't mean that you shouldn't raise money at all. Like maybe there are angels who just love your product and they want to invest for that reason. But VCs have a certain profile that they're looking for and we can certainly dive into that.

Brian Scordato:
Cool. Very interesting and I want to, I want to jump into the angel stuff as well. Maybe first, what are some sort of common red flag areas and I don't know if you have any examples of companies that have done well in those sorts of spaces without raising funding or raising through angels or other means.

Elizabeth Yin:
Yeah. So building off of my point around being able to deploy money effectively, a class of businesses that VCs will likely not touch, at least not at the earliest stages, would be affiliate revenue based businesses. So, an example actually of a company that has done phenomenally well, but actually was not able to raise VC money in the early days, is a company called Nerd Wallet. So Nerd Wallet is a financial services company. In the beginning, their earliest product was basically a web site giving you financial advice. And as part of that, they also gave you great balanced advice around credit cards. And they made their money based on generating leads for credit card companies. And so in this type of business, when you think about the unit economics they make money, let's call it one hundred dollars from bringing about a successful lead, to let's say Chase credit card. And then on the flip side and they have to drive traffic to those credit card application pages. The problem is, you know in businesses where the margins may be pretty tight, it's very difficult to actually use paid acquisition to drive that kind of traffic. In fact actually most of Nerd Wallet traffic, to these pages are through SEO. And Search Engine Optimization just takes a really really long time, like you write a lot of content but it doesn't necessarily mean that Google will index it or or you will necessarily be ranked well in their search engine. And that can take years to really optimize.

Elizabeth Yin:
So in that kind of business, for example, you wouldn't be able to in your one take, call it a million dollars and just pour it into trying to drive traffic to these pages on a profitable basis. And so, VCs didn't touch this business and in fact actually the business didn't make that much revenue in the first three years. Like in year three, a good month they made two thousand dollars per month. And so, this is a business that took many many years to get going, but in the long run like once they got going and they're now almost a decade into it, you know they do hundreds of millions in revenue per year, but they've only been able to raise late stage VC money once, you know, this really got going. And now actually they have other products so they can effectively deploy money into building out customer acquisition channels that then returns profitable revenue.

Brian Scordato:
Really interesting on that point if you're starting a business and growth is sort of slow early on, how do you think they were able to or what can founders look for after like a year of slow growth that is going to encourage them to keep moving forward, because obviously Nerd Wallet, they were building a relationship with their customers and that was sort of setting the stage for later faster growth. What are your thoughts around how to either prioritize or create milestones so that that first year that maybe you're working on something part time you're able to see progress or recognize you're making progress.

Elizabeth Yin:
Yeah that's a great question. And in fact actually in the Nerd Wallet story, I mean they are clearly a successful case. Actually at this point, as I mentioned, they generate hundreds of millions of revenue per year and they are profitable. So it's a great business. But it took many years to build and those first few years, it didn't really feel like they were making progress because it was very slow and then became exponential over time. And I think that's a personal choice. I think there are some people who want to go big or go home quickly. I guess you could call it the fast wins and you know I think a good example are businesses in this category might be some of the scooter companies or in the earlier days of food delivery companies where businesses were let's say in hot spaces. And I'm actually not sure if the customer acquisition unit economics work out but for whatever reason a lot of money was thrown at them., they built up these big teams and then, you know the other one somewhere they didn't. And that's one type of business. And then the vast majority businesses actually we'll be much slower growth and you know even a sass business many of them are bootstrapped in the early days and then maybe people raise money as it looks like it's going well.

Elizabeth Yin:
But, you know you look at, I'd even say at dropbox. It took them 15 years to go IPO. So that's like a great scenario obviously, but still takes a long time to build. Then the question is a couple things. One is for you personally as a founder. Like what is it that you want? Like are you looking to build out a business for the next 20-30 years? Do you want to be part of this problem that you're solving for the next 20-30 years? Because if the answer is no, you probably shouldn't be starting that business because most companies fall under that category. So that's one question which is a lifestyle question, that everyone has to answer for themselves.

Elizabeth Yin:
Finding a second is "Ok, well, how do you know when to pivot?" like in the case of Nerd Wallet. Why didn't they pivot or why didn't he go and get a job? I actually asked Tim Chen one of the founders of Nerd Wallet, "why didn't you go and do something else because it seemed like it was so slow in the beginning?" and I think he said it was because when he built this business it was actually during the recession and he previously was in the finance industry and he couldn't get a job. And so he felt like if he had built a company at any other point in time, he probably wouldn't have stuck with it. And so I don't know if that's necessarily a good, good thing to point to, but sometimes just fortuitously you just keep o going.

Brian Scordato:
It's such an interesting story and it's we get this question a ton and I tend to pass people to a book called "The Dip" by Seth Godin, where he sort of talks about thinking through the opportunity costs, but things like, external forces like timing and not having a job. It's really interesting because I think about a lot of our a lot of companies that have done well through Tacklebox that haven't raised funding have been that type of much slower burn company and I guess that, I mean that's that's certainly an offshoot of the fact that they don't have the capital to try and invest deeply in customer acquisition right off the bat, but they tend to be really vertical companies where they're saying like " alright we've got a very small number of customers and we can continue offering value to them" and maybe that was something that allowed them to keep on going was the ability to have more of a like a tighter relationship with a customer or a more loyal customer that you work with. I don't know it's really interesting that they kept going and it's awesome that they've been able to sort of turn that corner.

Elizabeth Yin:
Yeah I think from high level just asking yourself "Do you love the audience you're serving?" "Do you like the problem that you're helping them solve.?" I mean I think in my personal experience Hustle Fund, most people don't think of it as a startup, because we're fund. But actually we're much more akin to a startup than a VC fund because we have to raise our money as well. We have no brand. We have to go and market it as well. And so when I compare this startup with launchbit, my ad tech startup, I'm much more passionate about Hustle Fund. You know even though my salary is so low and I won't see returns for at least a decade and all of that, you know, I get up every day really excited because it's like I am going to change the funding industry and make it better and I love working with entrepreneurs and that keeps me going.

Elizabeth Yin:
In contrast at launchbit, a good business but I am not in love with ads and you know there's obviously a lot of negative things in the ad industry as well that I didn't love and so I just didn't really love that and I couldn't really see myself building in the ads world for 20 to 30 years. And so I think actually that's a really important question that every entrepreneur should ask himself or herself.

Brian Scordato:
Yeah I have a similar story and I give you so much credit for Hustle Fund. I don't think entrepreneurs actually understand how difficult the economics of a fund are. Especially an early stage fund like you're working on. I couldn't give you more credit for it. It's so valuable. And your story resonated with me because my previous startup before Tacklebox was Find Your Lobster, which is a mobile dating app, which I don't know if we ever talked about but it was similar to Tinder but about almost a year before Tinder. And things were going well and Tinder came out and things are going really badly. And I moved home to my parents place and I'm like living in the basement trying to make this thing work,it's you know 2:00 a.m. on a Saturday night and I just remember thinking like I just don't care. I don't care. People are gonna go to the bar and they're going to get a date and they're going to be fine. Like they don't need me. And that was sort of it. Whereas with Tacklebox I'm so excited to work with earlier stage founders it makes those harder moments a lot easier.

Brian Scordato:
So I want to I want to circle back to something you mentioned which is, I really don't have much knowledge in it or experience with it, but you talked about Angels being everywhere. So if there are companies that are early stage that maybe they're in these um, red flag business areas where where VCs won't invest or they're it's just too early or they need a smaller amount of funding, how would you go about finding an angel and positioning yourself to one? And really what does that process look like?

Elizabeth Yin:
Yeah that's a good question. So first off, I think it's hard but actually I think I have much more perspective on it now through Hustle Fund, because just to give you some context, when you're raising a fund if you are an established fund like you've been around for a while and you have a brand name or or whatnot you can go and raise money from fund of funds. These are other funds that specifically are designed to invest in VC funds. And that's great but if you're starting a fund and you don't have a brand and you're kind of a nobody, so like myself, they're not going to fund you. It's actually very akin to being a startup at the earliest stages, like this is the pre-season stage for me. And so the question is how do you get your fund going? Because unlike a product startup, you can't really bootstrap a fund unless you have a lot of money. And my business partners and I have a little bit of money but not, not like millions of dollars to deploy into a fund.

Elizabeth Yin:
So we needed to raise from other people and essentially our fund one for Hustle Fund is almost entirely funded by angels. And so we had to go and meet all these people whom we didn't know and tried to convince them to give us money. And how do you do that when you don't know who they are or where they exist and how you find them and how you convince them, when they're not signaling that they're investing. Like there there's a very small subset of angels out there who signal that they're investing like Ashton Kutcher and everyone pitches him. But you know your doctor or your dentist could potentially be your angel investor.

Elizabeth Yin:
And that's the way I would think about it actually, I did actually pitch my eye doctor for Hustle Fund and I did that at my appointment, so I think there are there are people out there. Just some tactical tips: I think one is, anybody can be helpful to you. Actually one thing that surprised me is that I ended up actually getting a lot of help on fundraising through people I didn't think actually had money or entrepreneurs I had backed even, who may or may not have had money. But, it's a small enough community where everybody is actually connected to somebody else who has money. So for example, one of the entrepreneurs I backed, while she doesn't have money to invest, she introduced me to so many of her friends who were in finance who actually invested. So you know that's an example of you just never know where money can come from.

Elizabeth Yin:
I think the other thing that surprised me is, we have a number of friends in Hustle Fund one, whom I didn't even think had money but they, they did. And so and actually maybe they don't, but they're taking a big risk and I really appreciate that. And so I think that was my number one learning, like you just actually don't know what the right avenue is. I think our initial thinking was let's go and try to chat with our richest friends. And as it turned out actually, our richest friends didn't necessarily write the biggest checks. That was sort of another learning, like it's a matter of fit, of whether you can get somebody really excited about what you're working on or the problem you're solving, and obviously their amount of liquidity is important too, but also their risk level. And the richest people don't necessarily have high risk levels. In fact, if you're so rich you may not want to take any risk you may just want to preserve your wealth in which case investing in startups or funds is a bad idea right? Like you may just want to put that in cash under your bed. But on the flip side somebody who actually doesn't have a whole lot of money, may want to take a lot of risk because they may want to actually potentially get to be really rich.

Elizabeth Yin:
So I think part of the problem is, you have to be able to qualify people very quickly, so you don't spend time barking up the wrong tree and you have to meet with a lot of people because you don't know what the right avenue is. And that I think at a high level is the name of the game in raising money from angels. So and then the next question is "OK well how do you start a conversation when you're not in the context of fundraising?". So, like for example, at my eye doctor, I, You know I went in for my appointment and it's like "how are your eyes?." And they're fine and everything. And then of course people always ask you "what are you up to?" or "how have you been?". "What are you up to?" Or something along those lines. Like any party you go to, any meeting you go to, people ask that question because culturally it's just what we do. Nobody actually expects you to answer right? But it is your window. That's where we get the pitch.

Elizabeth Yin:
And so for my doctor, when he asked me what I was up to, that was my window to pitch. And in this pitch, obviously I'm not pitching him an hour long pitch about why he should invest in the fund or anything like that, in this pitch it's just a couple of sentences like "oh I've started this new VC fund..." and you know one line about why we think we have edge. "And these days you know I've been spending a lot of time fundraising, so if you're interested you know we'd love to chat". And then like this, it's like it's on his way out of it, but if if somebody is actually serious, actually they'll be like "oh yeah that actually sounds kind of interesting".

Elizabeth Yin:
And so actually in the case my doctor you know, he didn't end up becoming an investor but you did say "oh I have invested in funds before and that is something I'm very interested in "etc.. So now I know right? Like I can go back to him maybe for fund two or down the road or whatever. When you know he's in a better place with liquidity and actually pitch him. That is my window where I can bring it up again like "oh you know, you mentioned that you like investing in funds and whatever I would love to get your thoughts". I can bring that conversation up any time going forward. So that's the kind of companies you want to have with everyone. So you go to a party you meet somebody new and find out there are software engineer or whatever. Like that's perfect. Boom. One liner about what you're working on, one liner about why you have edge, and really busy with fundraising. Like, so you're.... Right? Like it's, it's subtle. They're sort of an art to it I suppose. It's not a hard sell, but it allows you to test the waters. And then you should be testing the waters with everybody. So anyways, that's what I do.

Brian Scordato:
I love that, I kept on having questions in my head and then you answer them, so that was really awesome. I have a few stragglers. One that's really really helpful and something I think about, so, so one of the reasons that I think venture is not great for a lot of startups, is I think that the just the model, the economic model of like they are doing this for their full time job and you need to get 10x returns and that sort of thing. So their job to be done, is very clear. It's to get a, to invest in startups that have pattern matched startups in the past that give them a certain type of return. Angels are different. Each individual angel might have a different job to be done for investing in a startup. I'm curious to hear about any jobs to be done or like any reasons behind investment that weren't necessarily just monetary, that might have come through your fund raising for the Hustle Fund.

Elizabeth Yin:
Oh for sure, for sure especially on a fund one where you have no track record. And so people wonder you know are you the best fund manager ever. And so there are a lot of reasons that are not ROI based for why people invest and not just in funds but just in general. And so actually that's something that's really important to assess when talking with someone. When you're talking with a VC they're entirely R or Ybased. Like trying to optimize our why. Like, can they make the most money by backing this founder? Not, do you have a good business? But, if I put my 100k in this business is that the best decision of all the other startups I am going to be seeing in the next qualified months. And that's a very hard game to play right? Because there's so many people pitching and this and that. So even if you have a great business, you may not be that top check. That's kind of the mentality I would get into, with really understanding what makes people tick. Versus when you go to an angel, somebody could invest in you because they love your product, especially you're building let's say a consumer product. If they believe this product should exist in the world or they're an avid user or for whatever reason they love it, they could invest for that reason even if they don't believe it's the best investment. They could invest because they really love your drive.

Elizabeth Yin:
I think especially in this day and age, where it's getting talked about more, you know there are certain demographics of people who may have not have advantages either because they're in a geography outside Silicon Valley, they don't have a particular resumé, they're female or and under represent minority or whatever it is. If people really want to help a certain group of people that's another reason why investors may invest. Or if it's like a mission that somebody really believes in. I just heard a pitch from a company this morning. They really want to change things around lifestyle and mental health and time. And that's that's the vision that they're selling and I'll bet there are a lot of angels who would just love to hop on that vision. And so there are lots of reasons why people invest.

Elizabeth Yin:
And I think for Hustle Fund a couple of reasons why I think some of our investors invested was, even if they do, obviously everyone wants to make money, even if they do make money, what they also want to achieve through Hustle Fund is, I think you know, they you know one of the tenants of Hustle Fund is we are investing in founders outside the valley with unconventional backgrounds for any sort and so they want to see those entrepreneurs succeed. So that's like a reason. Another is around our model of investing or the stage that we're investing. They believe there's a real need there and they just want to see more done there. And so there are plenty of non R Y reasons an Angels invest and that's why it's often easier to get angel funding, if you can just get the conversation going.

Brian Scordato:
Very interesting. One more tactical question on that. You mentioned keeping people in the loop. Do you have a CRM. Do you send, I know you send the blog. Do you send monthly newsletter to folks who have shown interest. How do you sort of handle that type of inbound?

Elizabeth Yin:
Yes. I think for fundraising regardless of who you're raising from, one of the biggest reasons people are successful in fundraising is their organizational skills. I don't think people necessarily have to use a CRM, but they have to be very systematic about their process. We do use a CRM at Hustle Fund for our own fundraising. We use Propeller, but I think any CRM is useful as long as you use it. And really what it is, is you're making a list of leads just at a very simple level. Just a whole list of names. In fact when we first started, we used Google Spreadsheets. We just started typing names of all the people we knew whom we thought had money. And from there we asked every person we met for one to do introductions. Not "do you know anybody?" but "can you recommend one person in your network I can chat with whom you think may be interested?". Everybody can think of one person. And so it's a very concrete easy task. And from there you add those new names, you meet with those new people, you qualify them like, whether they're actually interested or not really interested.

Elizabeth Yin:
It's OK if they're not interested you just want to learn that very quickly within one meeting. And then people who are interested and seem like they would be fast decision makers, you continue to cultivate. For people who are not interested at all. Like we don't send them our communications, but people for whom are, they're mildly interested but they're not going to be able to make a fast decision, like maybe they might be good for Hustle Fund 3, then we keep them on our newsletter. We first ask them if they'd like to get updates from us. Most of time people say yes, if they are actually interested, and we do send a monthly newsletter to those people including our investors and we just tell them everything like, the good, the bad, the ugly, because it helps them get to know us as people and what it would be like what the experience would be like to be our investor.

Elizabeth Yin:
I think one more reason why some people invested in Hustle Fund was that, we often write about trends or things that we're seeing in the market and many of these people may be interested in doing their own direct startup investing and want to understand that. And so we write that in our monthly newsletter as well. So there are many reasons why people invest. Actually one other thing that might be helpful is we do a lot of events. And I actually think that investors love meeting other investors and so that could be another compelling reason to invest. Obviously, not related to your business, but it's like "hey I am an influential person and I bring all these influential people together". So you know it's a great experience to be an investor in Hustle Fund or whatever. So, there are all these sort of side reasons why people may invest that actually have nothing to do with your business.

Brian Scordato:
Wow. Very very interesting. And the, I mean there's a few things there that I think are really helpful and I'll sort of break out some CRM options and things in the notes. So you mentioned having value of bringing people together. I think that's a good opening. We were talking prior to this podcast I thought one of the interesting things that you did with Hustle, specifically with like Hustle Con, was this big conference and I think that's an interesting way to potentially start to gain traction without raising funding. I'd be interested to hear about any tactics that included, that founders can use to start getting traction before they would get to the point where they're raising from angels or looking to raise from angels.

Elizabeth Yin:
Yeah I love events. I think events are underrated. Events actually can really help you with your fundraising. So, a good example of an event actually that was both beneficial to customer revenue and fundraising is many years ago in 2013 my business partner Eric Bond and I started an event called Hustle Con and actually we did not have any intention of starting a business. We just wanted to start this conference. The premise of the conference was that back in 2013 everybody was saying you need to learn how to code to start a company. And all these coding bootcamp that we're doing really well and I think it's great if people want to learn how to code. But I'm actually of the opinion that if you want to start a business, you actually really need to learn customer acquisition. In fact, that was the whole premise of Hustle Con, that actually you could start a business without needing to code. And here are some tactical ways that you can do so. And so at that conference we brought in all these speakers to talk about this topic. Anyway long story short, it ended up taking off as a concept and actually half of the audience turned out to be engineers who wanted to learn how to bring in customers by building out the least amount possible or that they needed to. And so that ended up becoming a business called the Hustle, which is a media company that runs both Hustle Con and other events, as well as, their newsletter The Hustle.

Elizabeth Yin:
The interesting thing from that experience there, you know, Eric and I are not day to day in the Hustle. Sam Par is the CEO and really the founder who has grown it to where it is, but what is very interesting is, one that the initial Hustle Con event was a great way to get people to pay to be part of your audience. Like they were paying hundreds of dollars for a ticket. I think now the tickets are more expensive and they're basically paying to sign up to be part of your email list. And then after that, you can send them content and The Hustle's content, you know I'm biased, but it's actually really great and engaging. So people love being part of that. And from there you can grow it out into a business of other things which The Hustle's now doing, they're now launching products to this audience. So that's a great way to jump start a business.

Elizabeth Yin:
And then the second thing that was very interesting to me from this experience is that actually many of the speakers who we invited to Hustle Con ended up becoming the initial investors. They got to experience essentially a Hustle Con event, loved the vision and the premise and the community and invested for that reason.And so the Hustle actually has done most of its fundraising from speakers. And then later as they amassed a much larger list, so now they have over a million subscribers, but even when there were much smaller, they did a crowdfunding campaign for their audience to be able to invest in The Hustle. So The Hustle is almost entirely funded by customers and by speakers. And that has been really fascinating.

Brian Scordato:
Yeah, I mean it's incredible. I mean the point of an early company is to build that sort of relationship with your customers. That sounds like the maybe the best example of that I've ever heard. That's really really cool. I'm trying to think of how founders can think about building events or creating this type of community early, events are a great one. I guess do you have any other ideas or any other tactics that have been really valuable that you've seen early stage companies come pitch you with and you, you've thought like wow this is incredible that you've been able to create this much interest or traction from sort of humble means or however they got started?

Elizabeth Yin:
Yeah. One last thought about events. So I think our initial event for Hustle Fund was relatively small, about two hundred people. And, the main thing that we got out of it was one, you know it signaled all these people who were willing to pay to be part of your audience. But I think two, once you have that list, then you know we called so many of those people to understand who they were, what their problems were and that allows you to really shape out your product and what it is you're actually building. So I think just being able to have that high touch with an audience that has clearly signaled that they're willing to pay for something here, is I think really the power of events. So that that's one thought.

Elizabeth Yin:
I think to your question about, how do you really get people going to be part of your audience. I think another tactic that I've seen done quite well is around some of these wait lists for some products. I would still go to events as number one like you can build on an event around anything. You know if you're building something in health, you can have an event around health. If can build out an event around company culture. So you can build out an event about just about anything. If you're brewing beer you can have a beer event. You can do any kind of event.

Elizabeth Yin:
But I think another tactic that I've seen worked really well are these waitlists. So are they SuperHuman is probably one of the more well-known companies that does this. And you know, when you look at their funnel it's very fascinating. So one, they are in private data. They've been in private data for a while, but there are actually many many paying users. In fact you have to pay to use their product. Which is amazing because Gmail is free and Gmail is quite good. But people pay $29 a month to use SuperHuman. And the way that they do that is they are able to generate a lot of buzz because it's a private waitlist. And everyone can see if you're a SuperHuman user or not, and what they do is they still actually have a really high touch. I think there are ways to do mailing lists that have high touch and I think they've done it well. So you have to be referred in to get on their list. Once you get on their list, you have to set up a consultation through their Calendly link. So it's a very well oiled machine like today just basically have you pick your own slots and then they're doing meetings all day with every single person who joins their list.

Elizabeth Yin:
And when they do that meeting they tell you you should bring your credit card to the meeting. In the meeting which is only 20 to 30 minutes, in the first 10 minutes or so they talk about you know your problems. Or rather, they learn what your problems are. So in this case they're trying to triage me to figure out my email problems. Is it I'm having trouble getting through my inbox. Is it that I want to prioritize certain people to respond to it or whatever it is. They triage me in their decision tree into a certain category and then they talk with me about my problems. They show me through screen share how I can solve them on SuperHuman. And then halfway through the meeting they asked me to pull out my credit card, give me a payment link and they had me pay right away. And then a few minutes later, we come back, I'm set up with their product and they walk me through some of the features that will help me with some of these problems I just discussed. And so very high touch, but yet are able to amass a pretty strong waitlist through, sort of, this mechanism of seemingly exclusivity, even though pretty much anybody can sign up for SuperHuman.

Brian Scordato:
And they're gathering that customer interaction so that they can further customer segment and get some transparency around where pricing should be for their I guess bigger rollout once they get rid of the waitlist. Pretty brilliant. Really really smart.

Elizabeth Yin:
Yeah. It's important to have that high touch with customers to really understand their problems. And that's something they're able to do really well through this process.

Brian Scordato:
Awesome. I think something something you touched on earlier that I'd love to dig in a bit on is around prioritization for these early founders. So talking about that high touch and interactions with customers and customer segmentation, what is prioritization, what is great prioritization, I should say, look like in hilariously early startups that that you interact with.

Elizabeth Yin:
Yeah. You know it's funny. I don't know. I'm sure you've seen this two by two of urgency versus important. And I think people tend to just always fight fires. They're always doing things in the two urgency boxes. But actually, you should be only doing things in the important boxes and kind of actually letting a lot of things go. So I think one of the issues with running a startup is there are so many things you could be doing. But the question is what should you be doing. And when you think about it, what you should be doing, at the end of the day the way your business is going to work is if you can acquire customers for less than what they pay you or what you can make. And so you should be really focused on trying to solve that problem. And in the early days what does that look like. It's really understanding the problem that you're solving and really understanding if you have an initial solution that actually solves that.

Elizabeth Yin:
And so whether it's at the customer discovery phase or even a bit later. Like that is the really the only thing that a founder should be focused on. All these other things like people email you all the time about hey let's get coffee and meet up and chat about the industry or whatever, those things actually should be de-prioritized or even other things that you could potentially push off for later. Like you know I can't think of a good example right now. But perhaps you know there are some product activities that you want to do but really doesn't actually further your knowledge around customers or whether you're solving a problem. Like, I would push that off for later. I would just push out everything that you can for later.

Elizabeth Yin:
Now obviously it's hard to do because there's something you absolutely must do that's not related to that. For example, incorporating your company, you must do that in order to really get your company off the ground but it is not at all related. So there are going to be tidbits of things that you will need to take your focus off of for a bit and move towards and then come back. But the best founders can ignore most of those other distractions and then actually are not necessarily the most responsive people to emails that are not related to those things.

Brian Scordato:
Cool and I think that a lot of our founders struggle with what important really looks like early on. And it sounds like interactions with customers is top of the list. Figuring out what the problem is being able to find it. Figure out how to acquire customers all of that. I think we do have a lot of founders that made stuff have you never done it before there's like you mentioned you can do anything in any given time and figuring out how to spend your very limited amount of resources wisely is tough. So I guess on that I've got one more question and then the final I just want to be be cognizant of your time here and then the final couple of questions which are pretty consistent throughout our guests.

Brian Scordato:
So the first one, I just finished this book Essentialism which I really enjoyed and one of the core tenets was that basically 99% of what people do, it really doesn't matter all that much. That it's pretty similar to what other people do and it doesn't create any sort of outside, outsized gains. But 1% of the things that you do create just enormous value. Something that I think you don't recognize how valuable it is, I think, so I've followed your blog for a while now and from afar it looks like you go through phases where you write a lot. And then, it's always consistent, but sometimes you write a number of posts and you can tell that like the wheels are turning. And reading those posts has been, it sort of keeps you top of mind. And as I mentioned I really really enjoy them. And so like even when I was starting to think about the Tacklebox stuff I was like our first person to reach out to is you and they reached out we met in California and then I'm doing the podcast. I'm like oh I have to have her on like the amount of value that she'll be able to create and get across in a 45 minute podcast is enormous because I've been following you right for so long. And not like that this is the biggest opportunity in the world to be on this podcast. But I think that that's probably created a ton of value for you and you may not recognize how much.

Elizabeth Yin:
Oh thank you. Actually that that is very helpful feedback for me and makes me think about how I should really prioritize my own life. Like maybe I should just ignore everything else and just write my blog all day.

Brian Scordato:
That is funny. I try to get down to like one metric that actually drives underlying success for whatever I'm doing and creating content has always been that. Like if I want to get applications for Tacklebox the best thing to do is write articles for Fast Company because they just always lead to 10x the number of applications I'll get from doing literally anything else. And it's good to good to sort of know that. In the last couple of questions I would say are going to be really helpful for our audience. So first do you have any books or blogs or podcasts that you would suggest early stage founders read or listen to?

Elizabeth Yin:
Yeah certainly. So for B2B companies I'm a big fan of Sasstr Web site that's written by Jacon Lempkin and his team. Very tactical information on how to build a B2B company. Like hiring sales people, how to do sales yourself, how to think about the lifetime value and how much you spend on your customer acquisition process, things like that. I think it's an excellent source of content. And um, also along those lines, if you're in B2B I think Christof Janz, who is a founder and general partner at Point Nine Ventures. They are another VC that also focuses largely on B2B. And Christof has previously been an operator of his own B2B startup, so he writes a lot on B2B specifically. So if you're a B2B founder those are the two blogs I would go to for sure for tactical advice on building your company.

Elizabeth Yin:
I think the book then to look at in this space for B2B companies is the book called Predictable Revenue. It's been around for a while now and it is making its rounds. It's becoming almost as evangelized as Lean Startup. And Predictable Revenue is really the go to B2B book written by Aaron Ross who was early at Salesforce and help them build out their customer acquisition process for Salesforce.

Elizabeth Yin:
So I think for general companies I think the blogs that are really like. So Andrew Chan who actually tends to write more about marketplaces end for consumer founders. He talks a lot about customer acquisition for those folks. So Andrew Chen's blog is a big one that I would look at for tactical tips on customer acquisition as well. He's shifted his writing a bit more towards fundraising as well but all very good stuff. I think that's a big one I would look at. Obviously Lean Startup for any founder. And those are probably my go-tos. I mean I would love to put in a plug for my own blog if you are raising money at the early stages just Elizabethyin.com. I try to keep things very tactical about how do you tactically raise money.

Brian Scordato:
Awesome. And I would very much second that recommendation on the blog. Final question for you. And this is probably hard. If you had a billboard that founders had to drive by every every day on their way to the office where would you put on that billboard?

Elizabeth Yin:
Definitely it would be, "Just keep going". And I think, you know, I get it I I've been a founder and I've also had many side projects that may or may not have gone anywhere. And so it is really really hard to build something from scratch. There are so many dark days and you feel like you're not getting anywhere and no one understands and there's no one you can really talk to you about your problems. But I would just say just keep going because if you can just turn another corner and then just turn another corner after that, actually the funny thing about all these successful start ups that you read about in the news or whatever, most of them actually were kind of on the brink of failure. And so you know, I think a big learning for me being in this space for so long is that failure and success are actually pretty tightly coupled together. You just don't know when you'll be successful and you just don't know when things will fail. So if you can just keep going that really does increase your odds of success quite a lot.

Brian Scordato:
Awesome. I love that. Really really good place to stop. Thank you so much for the time. Again elizabethyin.com, Hustle Fund. I'll put all the blogs and books that you mentioned in the show notes as well. Thank you so much. This is really really helpful. I really appreciate it.

Elizabeth Yin:
Yeah of course. Thanks Brian. Thanks for having me.

Brian Scordato:
Great, talk soon.

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Episode Description:

Elizabeth Yin is a founder and general partner at Hustle Fund, where she invests in “hilariously early startups.” Prior to Hustle Fund, she ran the accelerator program at 500 Startups, started Launchbit (acq. 2014), and she writes my favorite VC blog @ http://elizabethyin.com

We cover a lot of ground, including who should and shouldn’t raise funding, how to build a customer base pre-product, how to find angel investors, and how to prioritize during the early stages of your startup.

Show Notes:

Elizabeth’s (terrific) blog: http://elizabethyin.com

Resources mentioned: 

B2B Specific:


You can find this and all future episodes on iTunes and here on gettacklebox.com/idea-to-startup.



Brian Scordato