The founder type investors hate

A powerful growth tactic: Payment processing

“Convincing someone to pay you money is hard.”

According to Dan Layfield, former head of the Growth team at Codecademy, the easiest way to make more money as a business is to find the people already trying to pay you and make it easier for them.‍

For 99% of subscription companies, the place to start is getting better at payment processing.‍ Payments are a bottomless rabbit hole to go down, but this is the normal trajectory of tactics and tooling:

Step 1: Collecting Money — ‍To collect anything, you need to have a payment processor set up, like Stripe. It’s a solid product with a lot of out-of-the-box functionality that is either free or very low cost. Set it up, configure your plans, and start charging.

Step 2: A Second Processing Gateway — ‍Your second gateway should cover users in the part of the world where your first gateway is terrible at charging cards.‍ For most US-based companies, starting with Stripe, PayPal is typically the next payment gateway added.

Step 3: Subscription Management Platforms — With pricing packages in two locations, settings in two locations, and customer data in two locations, getting a centralized view of your revenue will be harder. Use subscription management platforms like Recurly, Chargbee, and Paddle.

Step 4: Adding Additional Gateways & A/B Testing Impact — ‍Now that you have multiple gateways set up, you can try to find out which countries it makes sense to install a 3rd, 4th, or 5th gateway and A/B test the impact.

Step 5: The Fancy Stuff — Start to get creative with any way to prevent transactions from failing, like partnerships with credit card providers to ensure they know the new card number you’ll be issued after your last card expires.

👉️ Want to learn more? Read: The Most Powerful & Least Understood Growth Tactic: Payment Processing

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The one type of founder investors hate funding

Aaron Dinin, who teaches entrepreneurship at Duke, once invited a VC to speak to his class. When a student asked, “What’s a red flag for you that’ll definitely cause you to pass on a company?” The answer was surpassing — they would never invest in a second-time founder.

“It’s every second-time founder I’ve ever invested in,” the VC replied. “They assume they already have product-market-fit. They assume they can reach customers. They assume the press will want to cover them. They assume they can get good talent. The list goes on and on.” He shook his head and laughed before adding, “It’s like the old saying: ‘A smooth sea never made a skilled sailor.’ Second-time founders have the same problem. They didn’t learn how to become good entrepreneurs because they got lucky on their first journey.”

The lesson here? It’s the importance of the struggle. 

As Dinin reflected to his class,

“Some entrepreneurs do get lucky, but that’s not necessarily a good thing. There’s immense value in facing challenges, and the best entrepreneurs are the ones who’ve experienced adversity. Remember that the next time you’re struggling to build your startup. Struggle, adversity, and failure aren’t bad things. They’re critical steps on your journey to becoming incredible entrepreneurs. Investors know this, and that’s why they only want to invest in entrepreneurs who’ve failed. If you haven’t failed, you haven’t learned enough to be investible.”

👉️ Read more in this fascinating insight here: One Type of Founder Investors Hate Funding

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