Earnest Capital invests in Mailbrew to reclaim your Inbox

Newsletter Overload. Reddit Rabbit Holes. Doomscrolling. The internet has never had more ways to suck up all your time and attention and we need to take back control over our information feeds.

Mailbrew lets you take control and curate all your favorite feeds—from Twitter accounts, to subreddits, ProductHunt, RSS, YouTube channels, and more—into one aggregated daily “brew” email delivered to your inbox on your schedule. Read through all the best stuff on the internet and then get back to living your life.

Eventually your daily brew becomes the hub of everything you want to read or watch, so the Mailbrew team is continually adding ways import content into your brew. Currently the offer a dedicated email inbox that you can use for all your newsletter subscriptions and a “read it later” feature to save anything on your content to-do list.

Although you may have seen one or two of these kinds of features in other apps, the daily brew structure is a great psychological approach to making all your feeds more finite and manageable, making time and space for you to get back to creating things. But when you can’t resist, there’s also a beautiful reader interface on the site/app to catch up on your newsletters and other sources.

Mailbrew gets even cooler when you start thinking in multiplayer terms. You can easily set up a subscribe form for other people to subscribe to your own custom brews. We used this feature at Earnest to create a daily email, that anybody can subscribe to, of all the top tweets from everybody in the Earnest community. We’re thrilled to back Fabrizio and Francesco. Check it out at Mailbrew.com

Earnest Capital invests in HOA Life

One of the main things we do at Earnest is invest in founders building software for niches: parts of the economy that seem too small, to the casual observer or Venture Capitalist, to justify building a company around and raising money for. We love these opportunities and believe, as we enter the Deployment Age of Software, that they make great businesses for entrepreneurs.

One of the best way to discover these niche opportunities is to work in that industry, discover that the software isn’t great, and either learn to code or find a technical co-founder to build software for an industry you know exceptionally well.

So when I met Tom, the founder of HOA Life I knew pretty quickly we were going to invest. After running a company that managed homeowner’s associations (HOAs) he realized the software they were all using was pretty terrible and decided to scratch his own itch, get a technical co-founder, and build tools for himself and HOAs around the country.

One might think this is a tiny market, but there are actually over 370,000 HOAs in the US alone representing 40 million homes or (>50% of all homes in the country). Thanks to the magic of software and the internet, there’s no reason HOA Life can’t be the default best software for managing every HOA in the US.

Although HOAs (or their managers) are the ones who pay for the software, HOA Life also has tools and a mobile app for homeowners to make it easier to pitch in. So if you run or are a member of a homeowners association, check it out at HOALife.com.

Job Opening: Dealflow Analyst

From day one Earnest has been fortunate enough to get a firehose of inbound interest from entrepreneurs. I’ve done my best, but frankly, I haven’t been great at managing that dealflow, moving things along efficiently, and ensuring we respond to all inbound in a timely fashion. It’s time for us to up our game here – Tyler

I’m hiring an analyst to directly help with the day to day operations of connecting with founders, managing our deal flow database, researching companies, and keeping the whole team in the loop on what we are learning from applying our thesis to specific investments.

Responsibilities:

  • Maintaining the various initial touchpoints from entrepreneurs and guiding them to the right entry point into Earnest.
  • Fielding initial questions from founders and helping to build out our public documentation.
  • Researching companies and investment applications and providing memos directly for me.
  • Owning our Dealflow Database (a somewhat complicated machine of Airtable, Zapier, and other no-code tools). You’ll be supported here by our Head of No-Code Operations on technical questions so you’re mostly using it not necessarily having to build it yourself.
  • Helping me prioritize and schedule deal reviews, responses, and next actions. Keeping founders in the loop through the process.
  • Ensuring investments are closed in a timely fashion.
  • Making our investing decisions and framework more legible to the entire Earnest team through periodic updates and internal memos.

The ideal person for this role:

  • Is extremely organized, a great note-taker, and fluent in spreadsheets and Airtable.
  • Has excellent communication skills. Very comfortable spending a lot of time sending thoughtful emails.
  • Is curious. Digging in and learning about each new company is a core part of this role.
  • Is high initiative. I strongly prefer working with people who can take action and course-correct rather than waiting for permission.
  • Likes reading memos! There will be a lot of them. Start with this one.
  • High output and low ego. That’s just the general vibe across the whole team.

In addition to day to day work, expect a few special projects like:

  • Helping Earnest continue to connect with and invest in more underrepresented founders
  • Reviewing and editing our growing corpus of writing on here to make sure we’re consistently communicating our thesis to founders discovering us for the first time.

Compensation:

We are flexible here but budgeting this as a fairly junior remote full-time salary. This role will participate in the carry-sharing plan which earns “equity” in the upside across all future Earnest funds.

How to apply:

Send an email to tyler@hey.com with “Analyst” in the subject line. Please do not just send a resume. I strongly prefer to see links to any actual work or writing you may have done. The last person I hired applied with a detailed multi-level Notion doc including screencasts breaking down some of our public spreadsheets. The bar is high so make it count.

Deadline: there’s no official deadline but I would strongly recommend getting something in our inbox by Nov 1st.

Also take note 👇

Profit Sharing Plan for Earnest Team & Early Investors

Earnest is introducing a plan to share at least 20% of carry (profits) with our team, early investors (LPs), and other stakeholders who help us succeed. This is Earnest so we’re doing it differently and we’re going to tell you how and why we’re doing it that way. I’d also love thoughts and suggestions for how we can make this better before we finalize it.

What is Carry?

Carry is the primary incentive for the owners of funds in venture capital, private equity, and new weird investors like Earnest. Our business model is to raise money from other investors (LPs), invest that money in entrepreneurs’ companies, get money back from the companies via profit share (Shared Earnings) or a portion of a sale of the business, return more money back to our investors than they gave us and take a slice of the profits: the net amount of money we returned to our investors above what they originally gave us. The typical amount of this slice (and the one we use) is 20% which, fun fact, dates all the way back to the financiers of risky whaling voyages who used to take their cut as 20% of the returning whale… blubber, I guess?… which they “carried” off at the docks.

While funds do take management fees to cover their cost of operations, and sometimes those fees do get outrageously high, the primary incentive for funds of our size is the potential for millions of dollars in carry if we do our jobs right and our portfolio companies succeed.

Carry, or the right to receive it, is essentially the “equity” of the funds business.

Why share it at all?

The way most funds are structured is there is a management company owned by the Managing Partners or General Partners (GPs). The management company is the actual business that manages each fund, pays payroll, etc. Each time a new fund is formed, the management company is the one that gets any carry (profits) from that fund, which is then split among the owners of the management company. In our case, Earnest Capital LLC is the management company and it’s owned just by me as the sole founder. So by default, and from the start of Earnest, all carry from all funds goes just to me [insert scrooge_mcduck_swimming_in_money.gif]

So technically, I (and other fund owners) don’t have to share the carry with anyone but there are some really good reasons I want to:

  • Growth Trajectory: Earnest is a lot more like a startup than a traditional established fund. We’re doing new ground-breaking stuff and if we do it right there is a huge market of entrepreneurs who want to build modern, profitable, technology businesses to invest in. To do that we’ll need to break through successive bottlenecks which include building a bigger team and getting a ton more capital to invest in entrepreneurs. By giving folks a slice of the total long-term profits of Earnest Capital, they become incentivized to help us grow and meet that trajectory.
  • Long-term Alignment: With everything from the Shared Earnings Agreement to ‘skin in the game’ mentorship, we are obsessed with creating a strong alignment of incentives. Sharing carry helps everybody look beyond just this moment and just this fund toward our larger vision. I recently tweeted our 10-year vision and I want everybody in our orbit on board to make it happen.
  • Reward those who bet on us early: Getting a new fund, let alone an entirely new model of investing, off the ground is very hard. It takes early backers who believe in your vision and put their money in your hands to build a fund. But those early investors (or Limited Partners/LPs) only see the upside of their actual investment in the Fund 1, Fund 2, etc. If they end up being the catalyst that gets Earnest Capital to managing $100s of millions and backing 1,000s of entrepreneurs per year, they don’t see any benefit. Giving them a slice of the carry (I think appropriately) rewards that bet they made on us. We’re offering carry sharing retroactively for our Fund 1 as well as for our current Fund 2. Future funds are TBD at this point.

Structuring the carry sharing

It works like this:

1/ I’m committing at least 20% of the carry/profits from all Earnest funds to a pool (code-named Carry Corp, though it’s not actually a separate entity). It’s 20% now but could increase over time.

2/ Various stakeholders can generate credits for doing certain things that we will lay out shortly in specific detail. Examples would be working one month in a certain role might earn you so many credits each month, investing in Fund 1 or Fund 2 as an LP might earn your so many credits per $10k of investment.

3/ These rates are reset by Earnest management each year and will change. So working in a given role this year might have a different credit rate than 3 years from now. Generally doing the same thing but earlier will generate more credits

4/ You keep these credits indefinitely (there is some chance we may have to have some kind of cut-off date for administrative purposes but call it 20+ years)

5/ Whenever Earnest Capital starts to receive carry, we do some simple math. 20% goes in the pool and then everyone gets their proportional slice based on their credit ownership in that year. So in each year:

Total carry to Carry Corp * (your current total credits / all credits outstanding) = your carry share check.

That’s it.

What are the exact numbers?

We’re still working on that. Since this sets something in motion that could have implications for 20+ years we want to make sure we’re modeling the numbers really well and aren’t missing any key considerations. Hence publishing this and discussing with the Earnest community first.

Why this is a good structure

Big tip of the hat to Michael Grosser for originally proposing this idea and helping me think through the math and incentives.

We think this is particularly good way to structure incentives in a fund (though if you think it’s bad, I want to hear it). here’s why:

  • Early work is rewarded by the different credit earning rates. Backing us in Fund 1 for $100k counts for more than the same amount in Fund 2. Working 12 months in the same role in year 1 earns more than year 5.
  • Built in dilution: many carry sharing agreements are structured as a fixed % of carry in perpetuity. This is weird because now you’re drawing down from a fixed 100% pool. The Carry Corp model recognizes the early contributions and you get to keep them indefinitely, but as the team grows or new LPs join, the pie automatically grows to accommodate the larger pool. Want to keep your proportional share of credits? You have to keep pitching in to earn more.
  • Automatic vesting: by structuring credit earning as a monthly we don’t need complex vesting structure where we allocate you a big chunk and then claw back most of it if you don’t stay for 4 years. You come, you earn some credits, and if you leave you keep them. Easy.
  • Liquidity: This model bypasses all the complexity of options. There’s no need to exercise them, no huge bill you have to pay to convert them when you leave, no ongoing uncertainty of whether they’ll ever be liquid. Profits come in and you get a check, the end.
  • Just profits: this method is a lot simpler than actually giving a ton of people ownership in the fund which has all kinds of complexity. Everybody gets the upside in a straightforward way but ownership and management stays streamlined.
  • Broadly Applicable: the credit structure can be used to reward all kinds of efforts not just team and LPs. We have some plans to expand that group in a small way below, although you of course have to be careful to have too many people splitting the same pot. Although it can easily be augmented by just allocating a greater percentage of total profits to Carry Corp.

Who gets this at Earnest?

1/ Everybody on the team including retroactively to past employees.

2/ All LPs in Fund 1 and Fund 2 (the earlier investors in Fund 1 get a better rate of credit earning which will persist into Fund 2). TBD on future funds.

3/ We’re also exploring how to use credit earning as a way to incentivize scouts, mentors who are unable to invest in the funds, and a few other roles.

What about founders?

The good thing about employee months worked or LP dollars committed is they are reasonably standard contributions to Earnest. Earnest investing in a company is… different and quite hard to connect to carry sharing in a way that feels equitable.

To state the obvious, any carry at Earnest will only be a fractional share of our portfolio founders’ collective success. So for founders who’s companies really succeeds financially, we’re just taking some of their success, running it through the fund, through Carry Corp and then back to them… they might as well just keep slightly more equity on the initial investment. The only founders for whom this would potentially move the needle would be ones who’s companies do less well, which quickly gets into the realm of ideas around portfolio founders swapping equity or otherwise “diversifying” their risk within the fund portfolio. We’ve thought about and modeled every permutation of equity swapping and carry sharing we can think of and nothing seems to be a standard and fair way to do it because each investment can’t really be compared in an apples to apples way. Fundamentally how many credits should each company get as part of joining the fund and do they even care about that?

For the moment, our offer to help founders diversify their exposure to other portfolio founders is simply to essentially remove the minimum LP commitment on our subscription fund structure for portfolio founders to allow them to invest as much as feels comfortable in Earnest funds (which several founders have taken us up on already).

We may re-evaluate this if we can find a carry-sharing approach that incorporates portfolio founders in a sensible way.

In Summary

We’re sharing at least 20% of all carry/profits from Earnest Capital with our team and early investors via a nifty credit systems on the way to re-inventing modern funding for entrepreneurs. Let’s go!

For Investors: Introducing Quarterly Subscriptions to Earnest Funds

A fund structure built for founders backing founders

tl;dr we’re updating how commitments are made to Earnest funds and making them a quarterly subscription product. To get more details subscribe here. But since transparent mega posts are how we do things at Earnest, I want to walk through the thinking as well.

Building Earnest has been a slow process of re-examining the standard approach to an early-stage fund. There are rate-limiting factors that prevent us from just scrapping every aspect of fund management at once, but—from the Shared Earnings Agreement as a financing structure, to skin in the game Mentorship, to Trailhead for the pitch process—we’re working our way through each aspect and re-building from first principles.

Earnest Capital invests in ManyRequests: the all in one SaaS for productized services

You’ll sometimes hear me say things like “more founders should think about founder-market fit and whether they really are uniquely suited to build their business” or “founders should try to build an unfair advantage well before they launch their product”… well, ManyRequests, from Robin Vander Heyden and Gabriel Lecointere is a case study in both of these. We’re super happy to be backing them at Earnest Capital.

Productizing a service is one of the best ways to move from selling your time online for hourly services, to building a product and a business. It’s one of the main on-ramps to internet entrepreneurship and the current global environment will accelerate that trend more than ever. But whether we’re talking about large agencies or solo freelancers, most of these businesses are hacked together with a mishmash of different tools for handling recurring invoices, service requests, allocating jobs across the team or outside contractors, and managing the job review. ManyRequests is the Shopify of productized services, a single full-stack app that you can run your entire business on.

But what about that founder-market-fit? Many of might have already followed Robin from his journey, shared on Indie Hackers, of building a productized design services business ManyPixels and growing it to a mid six-figures in recurring revenue business, then stepping back to allow his co-founders to continue running it. From there he has kept a break neck pace launching ProductizedStartups.com as a resource hubs for aspiring entrepreneurs, 3,000+ Facebook Community, and joined forces with Gabriel to launch the first version of ManyRequests in just about six months.

That’s what I’m talking about when I say founder-market-fit and unfair advantages 👏

The platform itself is exactly what you would expect from entrepreneurs who have literally run the exact business they are now building for: everything you need and nothing you don’t. A side benefit of founders who deeply understand the underlying business is over time you’ll start to see the product go from less of a blank slate, to one already infused with best practices that sets up new entrepreneurs for success. To be clear, there’s still a lot of work to be done and the product is still in its early stages, but I’m super excited to see what the team can do and all the businesses they can help create.

Open Gig: Information Designer

I’m looking to work with someone in a freelance capacity and I don’t quite know how to describe what we need. The closest I can get is an “information designer” … let me explain.

First, we have a very simple minimalist brand/theme that I’m about 86% happy with. Mostly it needs some obvious bits of polish and tightening of some screws here and there. So I’m looking for someone with a strong aesthetic understanding of details, typography, and UX + the ability to execute those changes in WordPress (or convince me to move platforms).

But, probably more importantly, the complexity around what we do is growing along with the percentage of folks who arrive at our site/brand with very little context on who we are and what we’re about.

We have a lot going on, including ….

We also have multiple stakeholders from:

  • Prospective founders interested in investment
  • Founders with no interest in investment that we still want to be helpful to (see Trailhead, Founder Summit, etc)
  • Prospective investors in our funds
  • Other investors trying to understand our model and if they should refer founders to us or co-invest with us (example)
  • Potential collaborators on mentorship and Founder Summit among other things
  • Media and other folks who need to get up to speed from scratch on us
  • Rad people who want to work with us.

The information architecture that we’ve built to date has been mostly ad hoc and I think it needs a serious re-work from someone with an eye for both visual aesthetic, UX, information design, and the ability to hack together enough CSS and theme work to get it done.

Is that you? Know someone who fits the bill?

Tweet at me: @-replies or DMs open.

Founder Break-Even Calculator

One of our favorite checks to write at Earnest Capital is the one that lets a founder go full-time on their business by quitting their job or spinning down freelancing.

Because we do “funding for bootstrappers” our preference is to be “first check, last check” (or at least for that the be Plan A). That means we hope that right after funding the scenario goes something like: initially the founder is drawing down the investment capital either to cover their personal runway or to hire additional folks, the additional founder bandwidth and/or team grows revenue even while the team is still drawing down capital, the company gets back to break-even (and then continues on) before the money runs out, no further funding is needed.

Sounds pretty simple but there are enough variables that it makes sense to have a model to play around with and generate various scenarios around how much you raise, what you spend it on, and how fast you need to grow to get back to break-even before you run out of money.

So we made this simple model for calculating the path to Founder Break-Even.

Update: you can now use a more interactive version of this model on Causal

👉👉Open in Google Sheets & “Make a Copy”👈👈

Notes:

1/ Please use “Make a Copy” … don’t request access to this Sheet

2/ This is a very simplified model intended to give a rough view of the key variables here. We are intentionally not handling things like tax withholdings on salary or the precise correlation between MRR, users, and server costs.

3/ Share this if you like:

Earnest Capital Invests in Jetboost: the No-Code Webflow Sidekick

Have you heard of Webflow? It feels like everybody is talking about and using Webflow to build their websites these days. But while the no-code editor for designing sites in Webflow is best in class, the lack of a vibrant ecosystem of plugins, add-ons, and built-in functionality can be an obstacle for many users.

Jetboost founded by Chris Spagnuolo is on a mission to give your Webflow sites superpowers with a collection of Boosters. Chris is ahead of the curve as one of the first builders enhancing Webflow’s core features with real-time on-page search and dynamic list filters (with many more on the way). Chris also maintains Modkit, a free Chrome plugin to turbo charge the Webflow editor.

This platform is going to be huge and Chris is building the premier No-Code Webflow Sidekick. You can try all the boosters for free or clone a tutorial site and get started in seconds.

Earnest Capital Invests in Cachix

Recently Patrick Collison, CEO of Stripe, tweeted:

Can you sympathize? As programming has evolved, managing packages, libraries, and dependencies has become a constant source of wasted time and smashed keyboards for developers everywhere. The problem is compounded when managing multiple development, testing, and production environments and asymptotically complex across a large engineering team.

A Gemfile, package.json, or requirements.txt can make sure you get the correct versions of ruby gems or node packages, but what about gems with native extensions or other requirements on your local machine? The state of the art for most development teams is an elaborate README that inevitably fails to specify some mission critical local dependency. What Ruby developer hasn’t lost an entire day trying to get the exact right build of nokogiri working on a project?

Enter Nix, the modern reproducible package manager. Nix manages this complexity by explicitly defining the entire configuration in a way that is exactly reproducible, easy to rollback, and precisely shareable across teams and development environments. With Nix the entire build process for all the tools needed to run a project, is encapsulated in a single command.

For developers: read more about how and why Earnest mentor Nejc Zupan uses Nix across their development team here and watch how Shopify is deploying Nix across their 1,000+ engineering team here.

Nix—and the associated Linux distribution NixOS—is an open source project gaining popularity in the last few years with some obvious upsides and strong traction among the Haskell/Elm community, but it currently has some downsides. Namely, it’s hard to use and lacks some of the performance bells and whistles that are table stakes with other package managers.

Hence our investment Domen Kožar and his company Cachix. Domen is a long time community-builder and open source contributor in this space and launched a dedicated Nix consulting practice back in 2016. He’s on a mission to make Nix more accessible to developers and engineering teams around the world.

Cachix is free for open source and a superpower for engineering teams. With Nix + Cachix you can create a hash of your exact build, upload it to Cachix, and any one on your team from anywhere in the world can download the exact binary and get to work.

As with all package managers, the source code can be slow to build, so rebuilding binaries over and over is a time-wasting headache. Cachix is a binary cache for your Nix builds that developers and their teams can upload and query, reducing that wasted time by ~90%. The Nix community maintains an extensive cache of package binaries to keep your installs fast. However, as soon as you start using Nix for private projects, there aren’t many great options for how to cache your builds.

Enter Cachix, a caching system built specifically for development teams using Nix.

PS to the open source community – Are we a bunch of evil VCs that will force Cachix to either 1,000x or shut down leaving your development workflow dependent on unsupported projects? Absolutely not! If you’re not already familiar with Earnest Capital, we do “funding for bootstrappers” and invest in founders building calm, profitable, sustainable businesses. We’re in this together for the long haul.