“Hustling is the art of practicing capitalism without capital”

Originally published on Scrappy & Strange, the Founder Collective Newsletter — Sign up here!

David Frankel relayed this quote from Regie Gibson, which was delivered at Cue Ball Capital’s annual gathering, as a reminder that capital is a constraint — though probably not the biggest constraint facing most startups. Hustle tends to be in much shorter supply. Here are a few inspiring stories of entrepreneurs illustrating the power of hustle over capital:

• Wayfair: Instead of investing in costly ad campaigns in the company’s cash-strapped early days, Wayfair built 270 highly targeted websites, with ultra-specific names like “RacksAndStands.com” to game Google’s search algorithm, paving the way for what has become a $4B business.
• ShutterStock, a $2B stock photo service, was started by a hacker/amateur photographer who personally built the site and launched it with 100,000 images from his photo collection.
• CarGurus: Hustle doesn’t stop once you have raised venture capital. Langley Steinert raised $5M to get CarGurus started, but instead of seeking VC to hire even more engineers, he used the revenue he was generating to hire hundreds of sales reps to generate even more revenue — now the company is cruising towards an IPO.

Meet The Efficient Entrepreneur Who Replaced RadioShack

Limor Fried, founder/CEO of AdaFruit. Photo: Make: Magazine.

Limor Fried started AdaFruit out of her dorm room at MIT and has bootstrapped her ecommerce/electronics startup (now based in NYC) to $45M in revenue with 105 FTEs, and a product line which features 400+ hardware products and kits. Read this Make: Magazine profile to learn more about the company, including how they’ve acquired 20M+ YouTube views, 100K Twitter followers, and 2M monthly website visits.

Unity Raised No VC for its First Four Years, Gets $400M in One Round

Unity, makers of the game engine that powers Pokemon Go and 34% of top mobile games just raised $400M from PE giant Silver Lake. Even more interesting is the history of how the founders hustled during the company’s first four years, building out mobile-friendly 3-D rendering tech, forgoing salary, and even waiting tables to pay the bills before raising venture capital.

Should Startups Care About Profitability?

Mark Suster makes a compelling argument that profitability is overrated for companies that are well suited to venture capital. It’s a nuanced argument, but one that almost any entrepreneur would benefit from reading. Here’s an excerpt:

If the market they are targeting is very large and fast growing, then the venture-backed businesses often make it harder for the non-venture-backed businesses to compete in the long-term. If the markets aren’t large then the company who managed its costs may be able to get a modest exit at a fair price and make the team wealthy precisely because they didn’t take on venture capital. The VC-backed businesses sometimes “blow up.” As is often the case — there are no obvious or right answers.

Fred Wilson responded with a post about the beneficial effects enjoyed by his portfolio companies that have prioritized profitability. Brad Feld shared his experience from the dot-com era, “I learned that the markets reward growth until they don’t. Then they reward profitability.” Also, be sure to read Roger Ehrenberg’s thoughtful contribution to the discussion.

Weirdness from Around the Web

• Filmmaker replaces missing eyeball with a video camera. [Motherboard]
• “During a recent type-in at Albuquerque soul food restaurant Nexus Brewery, around three dozen fans took turns clicking the keys of an Italian-made 1964 Olivetti Lettera 32 Typewriter.” [MySanAntonio]
• British researchers scan 6,000 faces to create database for plastic surgeons to use for reconstructive surgery [3Ders]
• The first blue pigment created in over 200 years to be used in a crayon [Colossal]

Founder Collective in the News

Deconstructing the “Near” Perfect Deal — Our Investment in Julia Computing

By David Frankel, Partner

An excerpt:

I’m fortunate to have been involved with some amazing entrepreneurs and startups over the years, but each of those deals had some flaw when I invested. These obviously weren’t disqualifying; it’s just the reality that high-risk seed-stage venture investing is predicated on … risk. That’s why I’m both excited and somewhat concerned that I’ve recently had the opportunity to invest in a deal that is as close to the platonic ideal that I’m ever likely to see.

Want to know what makes a deal “near” perfect? Read More!

What Startups & VCs Can Learn From Indiana Jones

By Micah Rosenbloom, Partner

An excerpt:

It might be a useful exercise for founders to think of themselves as auteurs rather than entrepreneurs. Filmmakers and founders are both creative professionals, but directors have to contend with a world where capital is a fixed sum, not a seemingly endless stream.

Directors must have a vision for their product, a rough understanding of what it would cost to realize that vision, and then execute within those constraints. Contrast that to startup founders who always have the possibility of raising another round of funding.

Strict limitations for filmmakers have led to a slew of indie projects, made on shoe-string budgets by unknown creators, that go on to rival star-studded Hollywood blockbusters. For instance:

These are career-making projects that put stars, and catchphrases, on the map. All were made — at most — with a series A level of funding. What makes these low-budget films so successful? There seem to be a few common themes:

Want to know what Napoleon Dynamite can teach your startup? Read the rest here.

There’s No Shame in a $100M Startup

By Eric Paley, Partner & Joe Flaherty, C&C

We’ve expanded our list of entrepreneurs who have become VCs and found that billion dollar outcomes remain in short supply.

Portfolio Updates

OpenGov CEO Zach Bookman appeared on CNBC to discuss how tech companies can help streamline and strengthen government services [CNBC]

Omada Health raised $50M from Cigna to fight diabetes [Omada]

PillPack announced a new package design and PharmacyOS [Wired]

Sense360 released data demonstrating that meal delivery apps don’t cannibalize restaurant sales. [CNBC]

Bumpers breaks down the new changes to Apple’s podcast ecosystem [Bumpers]

Andela is one of the Wall Street Journal’s “25 Tech Companies to Watch” [WSJ]

Job of the Week

3-D Printing market leader Formlabs is looking to hire 100+ people in the next year, but first, they need to find an ace recruiter. Do you know how to seek out the best software engineers? The techniques to attract top notch talent in engineering, design, marketing, and sales? If so, Formlabs is building something amazing — be a part of it.