10 Things keeping founders up at night (and what to do about them)

Hello, I’m Anthony, founder at SeedLegals and over the years of my career I’ve built and sold a few startups. I’ve been an employee at other startups and at SeedLegals I talk to literally thousands of founders, not the life of the founder is not easy. There are many things that keep you awake at night. So I’m going to cover the ten things that I’ve chosen as the most popular, or least popular things that keep founders up at night, sharing some thoughts on each so that you can hopefully sleep better.

Thing number one “how do I find a co-founder?”. So finding a co-founder is one of the hardest things. Well you’ve had an idea, you want to co-found it.You can’t exactly put a job ad out saying “WANTED : Co-founder, can offer no money for, risky new venture, success not guaranteed, no revenue. And you have to put up with my cranky temperament and late night emails for a few years until hopefully, we get a good exit.”

 The problem when people I see looking for co-founders, it’s a bit like, being on a dating site and saying “WANTED : person for marriage”. You don’t do that. You say “WANTED : Person to go to the movies”. And similarly, when looking for a co-founder, particularly a technical co-founder, I would start by looking to hire somebody as an employee, as a tech lead or senior developer with a path to becoming a co-founder. So start with something that’s much easier, because the bar for finding a co-founder is impossibly high. They have to share your vision. 

Share. Once you like working, you want to work for almost no money for a while. It’s much easier if you say looking for a tech lead, maybe you CTO call it, and then the path, if you love each other and love working together, to turn it into a co-founder. So start with a simple thing to fill that also lets you try before you buy.

Because if you have a co-founder and it doesn’t work out, you’ve given away half the equity. Everything falls apart. Whereas if you’ve got somebody who’s a CFO role or a CTO role or other role and it doesn’t work out well, the business can continue without them.

Thing number two, keeping founders up at night is, what if I build it and nobody wants it? And this, I think, is really ultimately the biggest problem in an early stage company, because for most founders, many of them are technical. They think the thing to be solved is building something. And only a couple of years later, a year later, you wake up in a  cold sweat thinking, I’ve built all this stuff. And actually I realize now nobody wants it.

It was a vanity idea. It was my idea. Even I don’t want my own products and you definitely don’t want to be there. So how do you avoid not being there? Well, it’s to do user testing and real validation. The problem is, you asked people, wouldn’t it be amazing if there was this or, you know, there’s this amazing new thing, don’t you think it’s awesome?

And people will tell you you sure. I mean, I don’t know what he’s talking about, but yeah, absolutely. It’s amazing. And so then you go off and build it. What you should be doing is asking people, have you ever looked for one of these? How much would you pay for it? Are there any other similar things you’re using?

And if someone’s never looked for it or wouldn’t be looking to pay for it, this is a clear indicator that either you’ve got something so new that’s amazing, or more likely, it’s not really a problem people are looking to solve. And that’s the one that gets you up in a cold sweat later. So really put the effort into creating a mock up, a prototype, even an MVP as quickly and inexpensively as possible.

Get the actual thing in front of users, even if it’s a clickable prototype. Ask them what does this do? And if they can’t figure it out and it’s not solving a problem and they wouldn’t pay for it, keep iterating or drop the idea and do something else before you get people to follow you for the next year of your life and get investors to give you money, and only then realize that. 

Thing number three can I take investment money from investors and in particular from friends and family. So this is a really tough one for founders because, you know, it may not work out. Will your family ever invite you for Christmas again if you take money and lose it? And it’s a tricky one. In the UK, it’s made much simpler by the SEIS and EIS rules.

So the wonders of this mean an investor can tax deduct 50% of their investment at the point they invest. So if they invest 10,000 pounds into your business, they can deduct 5,000 pounds from the last tax bill, which is great if your business does well and they keep the shares for three years, they’ll pay no capital gains tax.

And if the business doesn’t do well and folds, they can tax deduct the loss they made. So the result is for an SEIS investor their risk is something like £0.20 in the pound. Which means if it fails of course it’s not good. They have lost money, but they’ll still hopefully invite you for Christmas. The other thing, of course, is if you are taking money from friends and family, really don’t take money from people who can’t afford to lose it.

So if you’ve got family members, they’re 5,000 pounds or whatever it might be that they invest, it’s not going to hurt them. It’s not going to kill them. Great. Take the investment, by all means. Explain the risks and rewards of a startup. The worst I see on C legals is when naive family members believe that this is a loan that’s going to get repaid, as opposed to there’s a 60% chance your business will fail and there’s a 20% chance they’re going to make ten x or 20 x an investment.

Explain how it works and explain the median time to an exit in a startup is 5 to 7 years. Get that right. And if they still want to invest, then a year or two in or 3 or 4 years in when things are going well and not well, they understand  and they’re sympathetic and empathetic and part of the journey rather than going, you took my money. I want my money back.

Thing number four keeping founders up at night is when can I release it? How many features do I need to build before I can release it? And one of the problems is many founders are technical. I’m a technical founder and technical founders love building stuff. So you start by making a big list of features of all the things that you think your customers might want, and then you go and build all of it.

But the problem is you haven’t got any real customers actually using it. And guess what? When you find real customers, it’s going to turn out half of the things you built. Nobody’s interested in, and half of the things people are interested in you never thought to build. So what you want to do is you want to create the simplest proposition that you can get in front of customers. It’s said if you’re not embarrassed by your first release, you’ve left it too late.

 The other thing you can do is fake it till you make it. And what I mean by that, I mean that you can create a nifty front end, that looks great. It looks like the real thing to users. But behind the scenes you’re doing things manually. You’re doing things that don’t scale, that will get you to, initially learn whether people love it or not faster. 

So when we built SeedLegals, the whole document automation platform creating funding round documents with thousands of variables, in the documents filled in from – this is all already complicated, but we had no idea if founders would want it, if investors would allow founders to use it.

So how could we get it out sooner? Well, obviously, being legal documents, we couldn’t go. These are minimum viable eagles. They’ll probably work. What we could do is make a fancy front end for the website that looked like the real thing. But behind the scenes it was creating a G sheet, and our legal team was busy creating the legal documents in word, and then popping it back into the website and at the points they started going, Anthony, you’re killing us.

You need to automate it. We knew that we’d build something people wanted. We’d learn the key deal terms and the features they wanted. And I think, perhaps most importantly, we’d realize all the stuff we thought they wanted, no one was interested, and many of those features. Only two years later, we added on SeedLegals. So, get it out sooner.

Don’t wait. Don’t be embarrassed. The reality is your early users will know you’re an early stage startup and actually frame it correctly, will love to give you feedback and will be big advocates.

All right things keeping founders up number five. How do I find investors? So you get on Google and you start googling funds and you find all these VCs have write to VCs, and they probably never write back.

But if they do and you manage to get a meeting, which is great, at the end of it all, they’ll go “Great! How much revenue do you have?” And you go “I don’t have any revenue.” And they go “Okay, how many users you got?”  “Yeah, I don’t have any users. And they go, “well, do you have any users?”

“Well, we’re still working on it, we’re building it. We haven’t released it.” And then the VC will go “Love what you’re doing. Come back later.” And it’s a story of your life when you go to VCs, come back later when you’ve got revenue. And how do you get past that impasse? And the answer is angel investors. And that means you need to go out and find angel investors. Angel investors are everybody. 

Everybody might invest 5000, 10,000, 20,000, 500. So you’re going to find as many people as you can to make up your funding round. You probably also going to raise a smaller amount than you might have had in mind because, you know, maybe you wanted to raise half a million, but you’re going to start with 200,000 because you can find that.

So angel investors are your friend initially, and then you’re going to shamelessly tell everyone, you know, you’re fundraising. You’re going to post on LinkedIn about this amazing idea, making sure it’s not a financial promotion. You’re going to get on chat groups, you’re going to go to friends and colleagues. You’re going to go to people in the space. Everyone needs to know these fantastic things you’re working on but phrased in a way that you’re solving a problem, they understand it’s about investment, and they want to be part of it. Thing number six keeping founders up at night is “I’m messaging investors looking for investment and nobody’s replying”. So here’s a typical problem, which is you write to investors and they don’t reply. So now you think, well, maybe 1 in 10 replies.

So now you think it’s a numbers game. So you start creating these emails that go out to hundreds or even thousands of people. So is scaling, and with a 1% reply rate, the way to go or is it customizing? And the thing to realize is any well known investor is going to get lots of incomings. I mean, a VC will get hundreds of incomings per month, sometimes per week.

They just don’t have time to reply. In order to increase your reply rate, you want to do a few things. Firstly, don’t waste your time on ones that are not in your sector. So don’t go to VC when you’re raising 200K because that’s just not them. Don’t go to a VC that specializes in, you know, only eco things if you’re doing a crypto fund or something like that. Find one that’s relevant.

The next thing is create personalized messaging. Don’t send a pitch deck, don’t go “We’re raising”. I’m trying to find something personal. So let’s say I’m doing a LinkedIn outreach to an investor. I might say “Hey, I’ve been following me for a while. Love your articles on legal tech. I saw you invest in this company. Actually, we’re doing the next generation. Can I tell you more about it?”

And if, when I get an incoming, somebody has researched something I’ve done in the past, they’ve watched one of my videos, they’ve commented on something, I’m really likely to want to respond. Everyone wants to be nice. If someone says “Anthony, I’ve watched one of your videos and you spoke about something about SEIS and I like what you’re saying. I disagreed with this and actually I’m working on one of these. Could I ask you some questions?”  I’m probably going to say yes. So create a personalized message. 

The other thing is when you do your LinkedIn outreach, try to get a warm intro. Now everyone says get a warm intro. It’s easy to say, difficult to do. A warm intro is, of course, somebody, to introduce you to the investor who the investor already knows.

But how are you going to do that? Well, nice trick on LinkedIn. Look up the person you want to connect to. LinkedIn will see, show you who you’ve got in common, and then reach out to the one or more people you’ve got in common and ask if they can make an intro. When people do that with me, please don’t all write to me.

I’ll go look at when I connected with this person on LinkedIn, when I last chatted with them, and, if I’ve chatted with them recently and have a reasonable reason to write to them, I’m generally delighted to help. If it turns out I last spoke to them in like 2010 or something like that several lifetimes ago, and we haven’t spoken since, you know, it’s not going to work.

So those techniques for helping to find investors. And then the reality is, if you talk to many founders, you probably need to be talking to a hundred or more or reaching out to 100 or more investors, you’re unlikely to be lucky, by just reaching out to five. So if you’ve reached out to ten and haven’t gotten anywhere, do not be despondent. You’re just at the start of the journey, you need to scale up. That. what’s relevant, targeted and ideally warm intros. 

Thing number seven keeping founders up at night is how much money should I raise? So I think it usually goes like this, which is “I need two developers, I need a data person, I need a product person, I need a designer. They’re the two founders”. I think it always comes to like eight people and then, you know, you have to raise for 18 months. Maybe they need 600,000 to 1 million that I need. I’ve now worked on a spreadsheet.

How much do I need to raise? Let’s say it’s a million. Now, in an early stage funding round, your dilution is usually on the order of 15%. And that means that your valuation will be five times the amount you’re looking to raise. It’s a good rule of thumb. So if you’re looking to raise a million on a 5 million valuation. So now I go to investors and I say, “great, I’m raising on a 5 million valuation”. Investors go “Have you got any users yet?”

You go “No”.  “Have you built the thing yet?”. They go “No”. And now you discover that your valuation is at odds with the stage that you’re at. So what you really want to do is you actually want to raise much less initially. And here I think, is the interesting dilemma. What do you, as the founder really in your dreams, are thinking is this is time and this is money, you’d like to raise a huge amount of money like today. Unfortunately, it doesn’t work that way. And so now your trade off is do you have to kiss a lot of frogs and talk to lots and lots of investors to try and raise that big amounts that you have in mind? Or should you raise in smaller amounts upfront using a SeedFAST or a SAFE to raise incrementally, or doing a smaller round and then a bigger round?

And so I think really where when I see, on SeedLegals, founders looking to raise a larger amount, initially it might work if they’re well known in the industry, they’ve had previous exits and so on. Or more often, I think to myself, they’re going to be back in three months, going with the plan that I originally suggested, which is start with a smaller amount, we call it ‘agile fundraising’ to raise enough to get the developers you need, get the prototype to show something tangible, to then increase your valuation and raise more. So it’s all about raising smaller amounts to get the faster thing. 

Number eight keeping founders up at night. And this is more of a later stage problem, which is you wake up one night going “Oh my God, what if Facebook, Google, Amazon, DeepMind, somebody hires all my engineers and I’m dead?”. And over the years I’ve wondered and and woken up about that as well, particularly when some company raises huge amounts of money. And what are they going to spend the money on? Developers.

And so over the years, I’ve seen years ago, I was paranoid that Facebook, as I set up in London, was going to hire all my employees. And I found that actually they did hire a few employees. But guess what? 6 or 10 years later, Facebook wasn’t as cool as it was, and they’re not spending as much money.

And actually those employees are looking for new jobs. And I’ve got net inbound from people at Facebook wanting to work at my company than the other way around. So what I’ve noticed over the years is the pendulum swings. Sometimes you’ve got companies that raise huge amounts of money that may well be on the market looking for developers. And later on they run out of money because they spent all their money on expensive developers, and it flows back again. So what you want to do is you want to keep your team happy, motivated, make sure you’re paying reasonably market standards. Obviously you can’t pay the same as  Facebook, but, you don’t have too big a gap in the market.

And I think when you talk to a lot of developers, or people in general in startups, many of them are taking lower pay because they want the startup lifestyle. So make sure that you provide the startup lifestyle, the flexibility, the empowerment, the work from home, whatever it might be, so that your team feels happy, motivated, on a mission with purpose, and wants to stay with you rather than going to some big boring company even if they’re going to pay them more.

Thing number nine keeping startup founders up at night is “Should I force people to go back to the office? Or can they work from home?” So, you know, if you look on Twitter, they’re vastly polarizing opinions. You know, JP Morgan CEO is saying “If you want to work at JP Morgan, you’re going to be in the office because we build a great business and go elsewhere if you don’t want to be in the office”.

On the other hand, there are companies going “We’re fully remote. This in-office stuff, it’s so like last century”. And where should you be? And obviously I don’t know the answer, but my take at SeedLegals is, if I can create a great office environment that has people want to come in the office 2 or 3 days a week, then I think that is the new future.

So once upon a time when I started out, I would never hire people who would not be in the office. If you could not be, you know, within, you know, whatever commute time into the office, I wasn’t interested. And then Covid came and everyone worked from home. And you know what? It worked pretty well. But I still only hired people who could aspirationally be in the office.

So not too far away with rare exception. And now we find the hybrid work where people will be in the office 2 or 3 days a week, maybe developers less, and supports and sales team more because they’re more gregarious. And my goal is to provide a great office space, no free lunches, croissants, great coffee machine, and all the other goodies that have people want to be with each other and I think that, as time goes by, I definitely want to push that without forcing people to be at the office.

So your mileage is going to vary, but I’m super cautious when I see people wanting to just hire remote teams, because if you can’t be face to face, I think things are a bit more difficult. And a lot of the office vibe, a lot of just, you know, design ideas comes from the serendipity, literally that coffee machine. 

When I’m in the office, and I have to say, it’s not as frequent as it should be, people coming up or overhearing conversations and just solving problems, and the speed at which things happen is faster. So welcome to the brave new world. And if you can find a great space and encourage people to it, I think that’s the way.

Thing number ten keeping founders up at night. The big one, which is, “I’m running out of money. What to do next?”. If you’re fortunate and your business gets to cash flow positive or profitable fairly soon, you can sleep much better. And, unfortunately, it takes a while to get there and some businesses take a long time to get there. Often your first version of the products is not going to have paying customers.

Sometimes you’ll be working on a social networking app that will have lots of customers needed before it can get any revenue, and until then, you’re living on this treadmill where you’ve got VC money or angel investor money. The money is going down all the time and you have to run faster. And if you don’t get to the next funding round before you run out of money, you’re dead.

You know, I see these days fundraising is tougher. More and more businesses are not making it. And it’s very sad to see that someone’s worked really hard. The team have followed you and you’re out of money. So what can you do? Well, you want to I think thing number one, focus on revenue as soon as possible. And I’ve been there myself in the past, which is  forget the revenue saying we’re going to focus on growing big, we’re going to hire, we’re going to hire salespeople, marketing people scale, and we’ll raise investment money because all the grass we’re going up into the right.

The problem is things take longer than you expect, and if there’s no revenue, it’s really hard for investors who just see you hemorrhaging money to want to put more money into it. Investors will see that their money will be gone in 12 months, or six months, or even less, so they won’t put money in. So what you want to do is get to cash flow breakeven, which means, keeping your burn rate low initially, it’s going to feel painful.

Like, I wish I had more developers and so on. That forcing you to act lean, I think, is good. It forces a clarity of vision. I’m not going to do a B2B and B2C and a data warehouse. I have to pick one of them. Great. I’m just going to focus on B2C and I can’t be in four countries. I’m going to pick one country, and when I nail that, then I’ll go more. So staying lean and focusing on revenue is a great strategy that will help you sleep better.

But the other thing is managing that burn rate. And here’s the mathematical certainty, which is if you have six months of runway and you halve your burn rate, you’re going to buy yourself another six months. If you’ve got two months of runway left and you halve your burn rate, you’re going to buy yourself another two months. So the longer you leave it, if you realize you’ve got a cash crunch coming, the harder it will be and the deeper you’ll have to cut. And if you get to two months left, well, you know, loss on people’s payouts and things like that, there’s basically no recovery.

So you want to make those hard decisions fast so you can make smaller cuts. And if you can see your products not going to be ready for 12 months, or you’re not going to be able to raise in 12 months, you know, if you reduced your burn rate by 30%, that’s going to give you another four months or maybe six months. That might be enough. If that’s not going to be enough, then you need to act sooner and act deeper as well. You know, I think the key thing that here is keeping founders up at night is realizing in your mind subconsciously, that the train’s going to run into that mountain, but being hopeful that somehow the track will get extended or whatever it is, the runway will get extended before that happens, and the reality is, it’s probably not going to happen.

You might get lucky but you don’t want to bet everything on getting lucky, and that means cutting burn rate, focus on revenue, doing whatever it takes to get some revenue, so that you are not reliant on that next fundraise. Because if it doesn’t happen, that’s going to keep you up at night.

So those are the things keeping founders up at night. It’s kept me up at night over the years, periodically for decades. Still got my hair. So hopefully, if you can get on top of those, you can sleep better at night.