No matter how much others might use this term, I am not a CFO. I love finance, money, and data, and I use all of those inputs in my work. I’ve thought many times about returning to more of a pure finance role, but I love strategy and the messiness of people, growth, and management too much. So, you’re stuck with me here in the sticky puddle of small business creation.  

I spend a good amount of time researching personal finance, stocks, private equity, fintech, real estate, private credit, crypto – basically, anything people do to manage and compound money. Recently, I’ve dabbled in angel investing, which has brought me back into the world of venture capital. 

Despite eight years and a lot of social change, I’ve noticed that “heat” is still a big deal in the VC world. Heat is shorthand for how many quality investors are showing interest in your company. It’s the investing equivalent of having a bar of premium media mentions on your website. 

The basic problem of heat is, when you’re a first-time entrepreneur who didn’t go to Stanford or aren’t a nepo baby, who’s going first? How do you build heat when you’re starting from the Arctic with no trees?

Heat isn’t an objective measure, it’s a clue. Sometimes it’s just noise. These kinds of heuristics maintain the status quo, which means opportunity is available for the taking. In fact, a partner from an established firm cited the industry’s overreliance on heat as the reason she was starting her own firm.  

Heat isn’t great for small businesses. Our growth strategy is to identify an area where we can excel, where we have an unfair advantage, and find the audience that understands and loves what we do so much that they pay without a lot of regard to price. Being a little weird and challenging to scale is a feature, not a bug. You can scale to millions of dollars in sales, but probably not the $100 million-plus that characterizes a venture-worthy investment. And that might not be what you want anyway. For these reasons and so many more, you really cannot follow the VC playbook in a self-funded company. 

Yet, here we are, chasing heat. We buy other people’s “how I did it” programs and follow them to the letter. We use generic marketing funnels. We try to support algorithm-friendly content on multiple social media channels. We launch seven lines of business. We buy the shiny technology tool that everyone else seems to have. 

When we chase heat, we’re picking up a playbook that isn’t our own. And that brings a whole bunch of avoidable risks and expenses to our companies, not to mention the joy it steals from us. 

How are you chasing heat? Are you making decisions that make your business more generic and less you? Are you listening to “shoulds”? Are you scrambling for “scale” because that’s what you’re supposed to do? 

This summer, let’s agree to stop chasing heat unless we’re by a pool or on a beach. You deserve to own a business that you enjoy and works for you. 

May AMA Replay

Thanks to the folks who joined me live to ask real-time questions! We spent some time discussing using contractors in general, and reviewed the specifics of California’s extra-special contractor rules. Watch the AMA replay here.

Our next AMA is on Thursday, June 13 at 10 AM PT. (Add a reminder with the Zoom link to your calendar.) Submit questions at any time by replying to the newsletter or using this form. 

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Media Kit 

Diagnosing “money dysmorphia.” An unintended consequence of getting your financial inputs from TikTok is that you might develop “money dysmorphia,” where you have no idea what is “normal” or achievable for a person of your age and means. 43% of Gen Z says they have a flawed perception of their finances. One of the impacts of money dysmorphia is a “live for today” attitude toward debt and buy now, pay later services. Another is susceptibility to impulse purchase of high-ticket and trend items. According to Pew Research, about a third of those under 30 cite Tik Tok as their main source of news. 

State of the Creator Economy. YouTube is now nearly 10% of all viewing consumption. But, last year, more creators stepped back from making short-form video to write newsletters, emails, and blogs. If you’re part of the creative economy, check out ConvertKit’s 2024 State of the Creator Economy report for more trends and monetization paths. Incidentally, the podcast How I Built This just completed a series with video creators, food bloggers, and social media influencers. The kiddo and I enjoyed this one with JPL scientist Mark Rober about filling a pool with Jell-O.

Peak sports. Last week, I found myself in a sports bar with a living plant wall watching two NWSL games, an NBA game, an NHL game, an MLB game, and college softball. Congrats to bars for figuring out how to be less gross and put Rokus on their TVs. Last night, the first game of the Indiana Fever’s Caitlin Clark era had 2.12 million viewers. Not bad considering it went head-to-head with the NBA Eastern Conference semifinals and a Stanley Cup elimination game. You can get every WNBA game on League Pass for $35.