Mike’s Note #3 — Is Debt the New Black?

It seems like the Twittersphere is ablaze with the idea of debt entering the market as a financing vehicle. Check out Alex Danco’s, “Debt is Coming” blog post if you missed it…Tyler Tringas and Earnest Capital have an entire fund devoted to this thesis. I’m sure there are a ton more blogs, Substacks and Tweets about it now.

These ideas mainly pertain to SaaS. The tl;dr is that the last 15 years have paved the way to build and scale a SaaS company for next to nothing while recurring revenues are (hopefully) predictable. If both of these things are true, isn’t equity an incredibly expensive thing to give away?

I suspect we’ll see more debt funding vehicles enter the market for all stages of growth. Getting started? You could use a credit card. A couple thousand in MRR and want to go full time on a side project? Take a look at Earnest Capital. $50k in MRR? Check out Lighter Capital or Stripe Capital. >100k? Private Equity and Banks will be happy to help.

At the end of the day, more options = better deals for founders so I’m a fan. However, does debt come with operational expertise? Can it help you hire? Navigate strategic decisions? I think Alex Taussing has a great response in his newsletter Capital Stack with, “My hope is that operators will constrain its use to areas where debt is a more natural fit.”

Have you taken any debt? Considering it? Any other ideas? Share your ideas below.

Last Weeks Note – Do you Sleep? I got some great reactions to the Sleep note last week. Here are some of my favorite responses.

For the sleep matter, I often feel the Hustle porn trend induces a huge bias. While we hear from folks working 100h a week that feel in their good right to brag about it, it obfuscates a huge part of the founders, realizing how much sleep & good personal equilibrium matters but that won’t brag about it.

Well that’s interesting! Just knocked together a little chart based on that DoD study. Assuming at 10 hour day, and that a person is just as enthusiastic and focussed about being at work as anywhere else (unrealistic) then yes in theory someone could extend their working day another 4 hours per day. Might explain the stereotype of the startup founder working well into the night without realizing for days on end, while there is a productivity loss, if you do it for a few days you can still come out ahead. That’s if i’ve done the math right of course!

It’s 12:46 am. I’m writing code. Should I be writing code? ever? no. But we’re behind on a deadline for an important customer, so here I am. I’ve crushed 2 critical tickets since I put my kids to bed.

I use the Withings Sleep Tracker to measure my sleep (it sits under my mattress). I’ve seen repeatedly that it is the most important variable in my control that affects everything in my life from personal wellbeing, through to cognitive ability. It’s been elevated to a level it deserves.