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.
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.
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