309: Funded!
Download MP32 months ago, I started tinkering on a new business. A few weeks ago, I created a company for it. And a few days ago, I signed a document. And yesterday, a massive wire arrived in the less than a day old bank account. PodScan is now a real company that has been funded by the Calm Company Fund with a 6 figure amount.
Arvid:Enough to allow me to press the proverbial Nitro button in the equally proverbial racing car, I guess, that this b to b SaaS business called PodScan is. Today, in celebration of this massive milestone, I will dive into why I got funded, why I even said yes to it in the first place. The risks, the fears, the hopes, my dreams, and strategies, and what all of this means for someone who's been talking about being self funded and an entrepreneur for years. This episode is sponsored by acquire.com. More on that later.
Arvid:First things first. Am I still an indie hacker? Can this still be called bootstrapping? I believe so. Yes.
Arvid:On both accounts, and I'll dive into why. The biggest problem in traditional VC funding is this power imbalance between the investor and the entrepreneur. Too often, raising 1,000,000 means inviting a voting party into your cap table that ultimately has very different interests from you. Right? A VC wants to find the unicorn.
Arvid:They want to find the big thing and make sure that that one company in a 100 makes up for all the losses that they gain from the ones that fail. But the Calm Company Fund is something entirely different. If you listen to my conversation with Tyler Tringus, who operates that fund on Boots Up Founder podcast 304, I think a couple weeks ago, you will learn that the fund is not looking for unicorns, but they instead want to be the rising tide that lifts all the boats. There's a way to fund bootstrappers without taking away their agency, and Tyler and his team are making it happen. I think Tyler talked about that there are some 80 some businesses, 80 some companies that they funded so far, and only 4 of them have failed or something like this, which is I think the exact opposite of a VC fund.
Arvid:Right? Where they fund a 100 companies and maybe 4 are profitable or growing to the point where their wins can, you know, outlast the losses of the other ones. It's it's really really interesting. And regarding the com company fund, I should know how this works because I'm actually invested and have been invested in the com company fund myself for a long while, which immediately made me a mentor among other great founders like Patrick McKenzie, Michelle Hansen, and Kevin McCarroll, so many more. It's an interesting dynamic.
Arvid:Like if you invest in the fund and only then do you get to be a mentor in the fund. So there are a lot of really really interesting SaaS founders that have made it, that have enough funds to actually contribute to a fund like this, that now are also accessible for all the entrepreneurs that are funded by the fund as mentors. It's it's a really interesting concept. And now in a weird twist of fate, I am both mentor and mentee. It's kinda cool.
Arvid:Really love it. The people around me are all successful and experienced bootstrapped SaaS founders. Like, they do what I want to do. So that is spectacular. But am I still independent?
Arvid:Maybe one of the most important questions for us indie hackers. Right? The people who wanna stay independent. We wanna build our own thing. Well, we'll dive into the specifics of the funding contract itself later.
Arvid:Let's just say that right now, nothing changed for PodScan other than me being able to actually spend a lot more money much more quickly and turning that data platform ingestion system that I have up to 11. That, by the way, was also the whole point of me even contemplating getting funded. So let me share the story behind this decision. The the offer, the signing, and everything in between. Because I think that is the part that is not always clearly expressed when people talk about funding.
Arvid:When people talk about, you know, investors or anything. Like the the whole story leading up to it and the choices that I've made, I think you might be interested in that. Tyler and I have crossed virtual paths for years now at this point. Like, we he was the first person that we actually called back in in 2019 when we had someone interested in acquiring our SaaS business, that was feedback panda at that time, and we wanted to check if that acquirer was legit, so we had to call up people. We had to do our own due diligence, and Tyler had just sold his own business, Stormapper, to that same private equity company, so we rang him up and chatted with him about his experience.
Arvid:And it worked out well for us, like he told us everything was fine and it worked out well for him. So we went through and we sold the business, it was great, and we kept in touch ever since. And over time, that kind of strengthened. I even co hosted a podcast with Tyler back in the day, called Tyler and Albert catch up, which was really fun because we actually caught up, because we explored creating a calm company course together and we kind of turned that into a podcast that gave us some sense of accountability. And then some stuff happened and it kinda petered out, but we were still in touch.
Arvid:And it probably is no surprise that when Tyler came knocking with an offer to potentially fund PodScan, after I've been building it in public for a few months, I, at the very least, was ready to listen. And it certainly wasn't the first offer. I'd gotten a lot of d m's from people wanting to throw money or themselves at the project and myself. And I think that's very flattering but it was not always aligned, particularly with strangers who I hadn't dealt with before that kind of felt dangerous and risky. And several offers of people that I did have or do have existing relationships with just didn't fit just yet.
Arvid:Right? There were things like, yeah a partnership I could see this but maybe not right now. But Tyler didn't come with just money. He wasn't just there to like throw money at me. He came with a plan and most importantly, a clear understanding of the potential of PodScan just like I had understood it to be.
Arvid:He got that what makes the project more valuable over time is this ever growing backlog of transcribed podcast episodes that is searchable and ready to be analyzed and data mined. Right? It's actually the costly part of operating PodScan is to build that historical backlog. I can serve thousands of users without breaking a financial sweat when it comes to handling the real time alerts that the platform also offers Because there's only a finite amount of new podcast episodes that are being released every single day. Right?
Arvid:It doesn't matter if I have to check 10,000 podcast episodes for 10 alerts or if I have to check 10,000 podcast episodes for a 1,000 alerts, it will only ever be 10,000 new podcast episodes every day. And there's kind of diminishing returns in the technical complexity of building an alerting system. It really is not that complicated. And you don't need more money to send more emails. I mean, obviously, the services that I send my emails through, they kinda scale with the amount of emails that I sent, but that is like at max a couple $100 a month.
Arvid:Right? That that is not a problem. That is easily offset by customer revenue. But slogging through the backlog, just imagine, like, even today, 10000 episodes every single day. In a month, that's, yeah, 300,000 episodes or something.
Arvid:And now do that in a year, that's like 4000000, 5000000 episodes a year depending on, you know, when people release a lot or release a little. That's it's a lot of data and this goes back to, like, 2015 when podcasts became big. So all of a sudden, we're looking at 10 years of millions of episodes a year, that is tens of millions, if not hundreds of millions of episodes over time, if I can find them all. Right? So that that is a lot of data and learning the patterns and finding trends and observing journeys, that is really really interesting in that data but it takes a lot of computational power and that scales with the money that I spend on GPU instances where my ingestion engine runs.
Arvid:Right? Both the part that transcribes from audio to text and the LLM system, the AIs that infer certain things that answer questions on each transcript that, you know, allow me to extract who the sponsors are, what the topics are, that kind of stuff that needs a lot of computation, and that cost money. And that's the offer on the table at that point. That's what Tyler offered me. Speed up the time needed to build PodScan into the most comprehensive, full text searchable database of podcasts that has ever existed.
Arvid:That's not just runway money. It's a time machine. It allows me to do in a couple months what I would have done in multiple years if I had to run this all myself all bootstrap. So of course I said yes. Particularly as Tyler explained to me how the Calm Company Fund very recently streamlined their investment process that made it even easier.
Arvid:So back in the day, over the last couple 5 years I guess, Tyler wrote about this on his blog too. What the learnings were of 5 years of running the fund. They've used something called the shared earnings agreement, like the seal, which is a kind of a legal structure that allowed the fund to participate in earnings. Right? Only after founders paid themselves in dividends or some kind of liquidity event happened, like raising around or selling the business.
Arvid:But over those 5 years Tyler found that they could have it even simpler. So fortunate as I am I'm one of the first founders to get to enjoy the new construct that they've put out which is, something that Tidal also wrote about very recently on their blog. You'll find the links to this in the show notes. It's a safe with a side letter. And the safe, that's a simple agreement for future equity.
Arvid:That's just what it says. If there ever is an event that touches or converts equity, which either I'm raising around, I'm getting more money, which I don't think I need, but who knows. Right? That's the idea, future equity. It's a it's a guarantee for the fund to be part of these things.
Arvid:Or if I sell the company, that moment, Confund gets their respective ratio of shares in the business. Until then, all shares are fully owned by me. If there is an event, a part of those shares belongs to them. And if I never sell, they never own any part of the business. That is wonderful for an indie hacker because that's really ultimately what would be the perfect thing to happen.
Arvid:And that's where the site letter comes in. Right? In that, the shared earnings component is clarified. And after a certain time, I have some time, I'm not gonna go deeply into the specifics because that's different for every company that gets funded, but after a while any dividend that I pull out of the business goes in a small part to the fund. I think somewhere around like 10% or or less.
Arvid:That's kind of what it is. And here's where the founder alignment is clearly visible. Not only does this only happen when I choose to take money out of the business as a dividend, it also includes a substantial 6 figure salary a year that I can pay myself before I even have to pay the fund on this. It is obvious to me that the confluence wants founders to run a calm and revenue centric business, that can sustain their lifestyle. It's the ultimate lifestyle business fund in the best sense of the word.
Arvid:It's not a unicorn hunt. It's kind of to stay with the weird animal metaphors, I think it's a grazing ground for regular workhorses. Like people who just put in the work and then stuff happens. That's what the fund wants. Everybody every business in the fund should succeed because it's revenue centric, it's profitable.
Arvid:It is just a business that works. It's not a moonshot. We're not trying to disrupt anything here. I'm just building a cool data platform for people who wanna work with podcasts. Right?
Arvid:That is the the realistic and calm approach to building a business that I wanna do and that's where the confound comes in. And Tyler's offer, I guess came in just 2 or two and a half weeks ago. And I think at that point, PodScan was still very much just a personal project that I was building in public. But if you sign a safe, you sign a real document, right? You need a real company with real shares, a real name, a real bank account, and I didn't have that.
Arvid:So it was time to act at that point. And this isn't the first time that I had to create a new legal entity for a project. I have another SaaS called permanent link, which was started as a, I think, a Wyoming LLC because I didn't wanna shoulder the liability of hosting links to other people's content. So I created a company in the states through a service, get to them in a second, and I had a choice between Delaware and Wyoming. And for smaller companies that, you know, don't think they're ever gonna have funding, I think Wyoming was the comp the the the location of choice and an LLC because it also didn't need to be much more complicated.
Arvid:But PodScan is a little bit different and also not different at the same time. Because I just I needed a company that would very easily allow me to, like, give liability to the entity and to create a structure that works well with funding. It would look serious and legitimate to my customers and just make it easier to work with all the wonderful SaaS solutions that I would need along the way. Maybe for payroll, maybe for analytics, you know, all these kind of things. It's easy easier, I guess, to have a company that is in a good location, that has a a good address, and that is just, you know, adequately formed.
Arvid:So opening a Delaware c corp was the best path for me here. Delaware just makes it super easy and fast to open a business. It's recognized for being the place where businesses are funded or founded and funded I guess. And even for Canadian residents like me or like German citizens that are Canadian residents, they still can set up a company in the States through this. And the c corp would make executing the safe easier when that time comes structurally with the shares and the the system around it.
Arvid:And then finally having a US company just serves as a big trust signal both to potential customers to have an address in New York, that's kinda nice. Right? And also to other SaaS companies, SaaS services that I would use along the way. If you tell them, I'm gonna need payroll, and they ask you, well, what kind of company do you have? And you say, well, it's a debt or c corp.
Arvid:They said, sure. That's like 80% of the companies that we have running anyway. Right? So it makes a lot of sense to go with the default here. And there are quite a few services out there that facilitate funding such a company.
Arvid:I went with Firstbase. Io because a, that worked for me last time. Permanent link is has been built or funded or founded through this. And because they're also a calm company, and also in the fund. I remember them being super fast the first time I used them and they were quite quick this time around too.
Arvid:Within an hour of me signing up and paying for all the services that you need to pay for, all my documents were dispatched to the authorities. I even had a call with a notary in Florida. It was on a Sunday. Right? It was Sunday afternoon.
Arvid:I I needed to set up the mailbox forwarding to the New York address because, you know, they they kinda have to open and scan the e the the mail and send stuff to you and you have this this address that they send it to. So you need to set up something with the USPS. And funny enough, that was the only point in time that I needed to talk to any person along this path. That was just a notary that would officially check my passport or whatever to make sure the USPS is, engaging with a real person. And that was it.
Arvid:For anything else, like opening the bank account or just really registering the company, didn't need to talk to anybody. Which for a German is substantially confusing. If you wanna open a company in Germany, you have to jump through so many hoops. It is crazy. Like we have this construct called a GmbH or GmbH, which is a limited liability company.
Arvid:That's really what it is. But there are so many steps along the way to even be able to to open one of these. Like, you have to put in €12,000 or something just to have in capital in the company that you're not allowed to touch for some reason for the liability restriction to kick in. And you have to go through a notary. You have to be physically present in the notary to found the company.
Arvid:And it costs you 100 if not 1,000 of of euros to do this. And even if you choose the slightly smaller version where you only have to put like €1 in capital in there, the notary steps are just the same. And if you don't have enough capital to pay your bills within the first couple weeks or something, you're you've are in kind of in technically in bankruptcy, the moment the fees for the the notary are supposed to come off of the bank account that may not even exist yet. It's super complicated. Here, through Firstbase.
Arvid:Io, and this is not affiliated, I just used them because I've used them before. It was just click a couple things, select how many shares you want, and say where you want it to be funded, and then pay this bill and you're done. It was extremely simple. And within 24 hours of that, like, took me an hour to get it done. Within 24 hours, the arrival of those documents at the authorities in Delaware was recognized.
Arvid:Then the Easter week happens and I guess, people there didn't work as much. I think within a day or so, it was actually done and dispatched back via mail. And then on Easter Monday, the registration documents arrived in New York via mail. They were immediately scanned, allowed me to open a bank account with Mercury, and that's all I needed. My Mercury is a partner, right?
Arvid:The Mercury Bank, generally a good bank to to bank with when it comes to startup banking. It's really, really useful. Mercury is great. They have an app, they have virtual credit cards, they have virtual debit cards, they have regular cards and all that kind of stuff. And it's very interoperable.
Arvid:They have played integrations, you can make get money from other places and stuff. It's really simple and I've I've used them before for permanently as well. And that's all I needed, to receive my funds. So I had signed all the documents, I had everything in place, and mere hours after my new bank account was opened, the wire from Kong Capital hit the account. And seconds after that, I got an email that I was preapproved for a credit card for some reason, which okay.
Arvid:It's not surprising. And that would be mailed to me as well, but it was already virtually available. So within minutes or an hour, I guess, I had the financial power of the full investment available, and I started ramping up my GPU resources. And every day, I add a few more, making sure that my data back end scales with the compute power that I have access to, and the backlog is starting to churn much faster. And that's the technical side.
Arvid:I think it's super interesting and I might talk about this in greater detail over the next couple weeks because that in itself is an interesting challenge. The business side, I'll talk about that, and the legal side, all of this is kind of concluded at this point, but let's maybe dive a little bit into the emotional roller coaster of all of this. Because I can tell you one thing. I thought raising money would feel a little different. I mean it clearly is a cause to celebrate and it is massive validation of my entrepreneurial efforts.
Arvid:But just like when we sold our last SaaS business back in 2019, the moment of the money hitting the account is both transformational and hilariously uneventful at the same time. And I think it's likely because in this case in particular, funding is fuel. It's not reward. Right? It's not that I sold a business and now I get to, like, reap the rewards of that.
Arvid:I need to make the best of this money because it's there to build something even bigger. And that kind of immediately switched me into action mode. Where can I best apply this money? How should I budget? That kind of stuff.
Arvid:But I kinda wanna step back from these. Now this is an operational thing. I don't wanna talk about that either. I wanna reflect on what this means for me as a founder, as a as a person, right? As somebody building stuff.
Arvid:And I hinted at this in my very first question. Am I still a bootstrapper? Am I an indie hacker? Or am I a venture funded entrepreneur now? Am I still allowed to wear a t shirt?
Arvid:Should I get a Patagonia vest? I don't know. The strange thing is that nothing has changed, yet everything is just a little bit different. All I truly know is that I'm extremely protective of my own agency to do the things that I wanna do the way I think they should be done. And in some way, that funding added a little bit of pressure there because even though no part of the contract will punish me for potentially failing, the meta contract between the fund and Tyler and me pretty much forces me to give this my best.
Arvid:Right? It creates some sort of expectation within me, not wanting to disappoint my friends, my peers, or my heroes. But it certainly releases a lot of pressure around this shaky phase of any b to b SaaS business. The post revenue pre profitability stage. You make some money, but not enough to cover the bills.
Arvid:Now, I can operate for a good few years really without having to shuffle my personal finances too much. PodScan is pretty particular here I think because the scalable ingestion expense to build the historical backlog, that is something that not everybody has. With my other businesses like permanent link, which is just an application that routes HTTP requests from one place to another has a tiny database and that's it. Or podline.fm, which is just, you know, ingested an audio signal, like somebody sends an audio file or records an audio file, it gets transcribed, but that's not like at scale. It's just whenever somebody sends a file, I probably would not accept funding there, would not have accepted funding for any of these.
Arvid:There's just no need for that or no even potential use case there for a 6 figure financial injection. Doesn't make sense I wouldn't know where to put it. But as I'm now with PodScan nearing almost 2,000,000 hour long podcast episodes being ingested, I understand how dealing with massive amounts of data is a costly thing and that's not necessarily a common problem among India hackers. Special requirements, special solutions. And I guess special dedication too.
Arvid:Because with the funding comes one requirement. And that was something that I wanted to clarify with Tyler before I signed. I needed to talk to him about that. The fund invests not only in the specific idea that you go to them with, their money goes to a founder, a business, an agent of entrepreneurial effort. And that means that any substantially similar side project or any new related business idea that crops up in the 1st year or so has to belong to PodScan.
Arvid:That is part of the agreement. It's still mine, but it has to be under the umbrella of the company that funded the original idea. If I build a podcasting side project that uses the PodScan API, it's a PodScan owned business. Right? That's not some other business that has nothing to do with PodScan.
Arvid:Of course it does. And if I build a SaaS that serves the same customers that's the same deal. The rationale here is that the fund provides fuel for a founder who is still exploring where they're actually going to be going. Right? Where they're going to be driving that race car.
Arvid:And since we never exactly know where that is, I think it's only fair to let the fund participate even when we pivot early on. What that means for me is that I'll be focusing my efforts over the next couple years primarily on PodScan or whatever it might run or turn into. I don't know. Of course, I'm still gonna run the podcast and the blog and the newsletter and all the media stuff I do. These are existing projects and they are excluded from this clause in the first place, but I'll probably chill it on new side projects.
Arvid:I might finish my book that I'm writing, which is funny because it's about building in public, which is literally the the idea of this. Right? PodScan is built in public and I'm I wanted initially even before I came up with the PodScan idea, write a book about how to successfully build something in public. It turns out that Pod scan is the example that I might actually use in the book. So it it kinda happens in tandem, like a little bit of this, a little bit of that.
Arvid:So that is still very much on my mind, but other things, probably not as much because PodScan, besides all the funding, is already extremely promising. It would be such a waste not to give it my full attention. I found validation for this business idea through several channels. It has paying customers. There are excited investors, mentors, and all of that.
Arvid:And I personally have connected with the most amazing founders and operators in the podcasting world just through building this in public. I even established early technical partnerships, and I opened communication channels with founders in the same field who eager to build lasting marketing partnerships and do collaborations and that stuff. It's really cool. Stuff is happening, and I'm in it to win it. I think that's the cool phrase here.
Arvid:In the end, this business can and likely will be quite massive. And today marks an important day for sure, but now it's on me to make it happen. And I would love to know how you feel right now after me sharing this news. News. Are you excited?
Arvid:Are you confused? Are you amped up? Are you kinda wondering what's gonna happen? Please let me know on Twitter. It's really important for me to understand what's how you feel about this.
Arvid:I really wanna know this or send me an email at arvid@podscan.fm, that's also fine. If you know somebody who could benefit from PodScan as a tool and a potential user of the tool, social listening, media monitoring in the podcast world, send them to podscan. Fm as well. Every user, every customer, every helpful founder checking it out is a person that I truly, truly value and wanna talk to. So, yeah, happy times.
Arvid:That's it for today. I wanna briefly thank my sponsor acquire.com. And I guess this is a great opportunity to do what what Tim Ferriss calls fear setting. Right? Let's let's look at this.
Arvid:I just talked about how amazing pot skin is, but let's imagine a time where maybe it's not that amazing. It is a time where I imagine it to be profitable. It's making, let's let's say somewhere around 60, 70 k MRR, making good money, and it's generating this monthly recurring revenue consistently. It's quite the dream for many people. The problem is I hit a skill ceiling.
Arvid:Let's imagine that moment. I hit a ceiling where I don't know where to go. And I kinda feel like, I don't wanna learn yet another thing, and I don't feel like hiring, I don't feel like, you know, doing something with other people. I just I'm done with this. Let's imagine that moment.
Arvid:Well, what would I do? Would I just keep running it? Kinda bored of it? Would I keep, like, doing stuff just, you know, to keep it running, but I wouldn't really invest much of my thoughts or my time into it? I don't know.
Arvid:I probably would spend less and less time on it, and I would not really care. And I think a lot of founders are in that situation with their businesses. They are at a point where for some reason, there's a limit. There's a skill ceiling. There is a time ceiling.
Arvid:There's an attention ceiling. There's some kind of ceiling that they just cannot break through. And they don't wanna make a bigger operation out of it, but they don't want it to completely deplete itself either. So in a moment like this, the choice often turns into a non choice where people don't do anything at all. And it's it's unfortunate because that inaction and stagnation ultimately leads to the business becoming less and less valuable, and in the end, completely worthless.
Arvid:So if I ever find myself here, or if you find yourself here, here, maybe more importantly, or you think your story is headed down this particular road, just consider that there's a third option, and that option is selling the business unsurprisingly, because this is a business that works. It may not work for you, but it will definitely work for somebody else. Somebody else has this capacity, and they're looking for a place to employ it. So go to acquire.com and just look at it. Check out the platform, see what they can do for you to make your business as sellable as possible, and then sell it.
Arvid:Or at least, right now, look at it and see what you would need to do to make your business sellable, then make it sellable, list your thing for free, you can list your business for free. They've helped 100 of founders already, and they will help you set up your business for that next step. Go to try. Acquire.com/arvid, and see for yourself if this is the right option for you. Thank you for listening to the Bootstrap founder today.
Arvid:You can find me on Twitter at abitkahl, arvidkahl, and you'll find my books on my Twitter core stat too. If you wanna support me and this show, please subscribe to my YouTube channel. It just hit 7,000, subscribers there, which is amazing. Get the podcast and your player of choice and leave a rating and a review by going to rate this podcast.com/founder which makes a massive difference if you show up there because then the podcast will show up in other people's feeds. Any of this will help the show.
Arvid:The thing that's gonna help me most is you talking up PodScan to the people who you think might use it. Thank you so much for listening. Have a wonderful day, and bye bye.
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