Calm Company Fund Questions & Answers
We invest in profitable, sustainable, calm businesses. We invest early in profitable businesses that want to maximize their chances of success and build for the long-term and retain control.
Calm Companies grow sustainably in every sense of the word. They don't believe in hyper growth or nothing. They aim for profitability as soon as possible — their Plan A after raising from us is to get to break-even and grow the business through cashflows. They believe success shouldn't create detrimental social, environmental or team impact. Calm Companies build companies their own way and we love that.
You may have known us as Earnest Capital — we had a lot of fun with that name — but we decided we needed something new, a rallying cry to get behind, a name to reflect a new kind of a startup capital that aligns with the overwhelming majority of entrepreneurs who want to build sustainable profitable long-term focused businesses. You can read more about the change here.
We primarily invest on a rolling basis using a financing structure that we created called the Shared Earnings Agreement (“SEAL”) that allows us to back founders who want to build sustainable profit-focused businesses without the pressure of having to continually raise capital or sell.
Short for Shared Earnings Agreement, a SEAL is a financing structure created by us to invest into calm companies to create a win-win situation all round. It is not debt, doesn’t have a fixed repayment schedule, and doesn’t require a personal guarantee. Investors make an upfront capital investment and then are entitled to receive Shared Earnings which is a percentage of Founder Earnings (a mix of founder salaries, dividends and retained earnings). Shared Earning payments only kick in once founders are able to pay themselves at least the amount agreed before hand (we call this the Founder Earnings Threshold) — we want you to thrive not just survive! To understand more about SEALS, check this out.
Nope. But an easy mistake to make. Revenue-based debt products are repaid as a percent of top-line revenue. By using Founder Earnings plus a threshold, a SEAL is much closer to a profit-share. Investors expect a growth period after the investment before any Shared Earnings begin to be paid.
We invest between $75k – $250k and can lead rounds of $500k-$1m.
Currently, we are able to invest in the US, Canada, most of the EU, Australia and New Zealand. Probably a few other places. Apply for funding and we'll try and figure it out.
If you would like to start a US-based entity, our portfolio company FirstBase is the easiest way to launch a US LLC or C-Corp. Use the code “earnest” for $20 off.
We have a preference for C-Corps and believe they are frequently the best option for founders as well, but LLCs are not a dealbreaker for us. We've invested in a number of non-US businesses and are happy to continue doing so. There is a little bit extra diligence and legal work required but it is truly just a little and not a big deal.
If you would like to launch a US C-Corp our portfolio company FirstBase is the easiest way to do that. Use the code “earnest” for $20 off.
Our center of gravity is B2B software-as-a-service (SaaS). Recurring revenue, high margin, software businesses are our bread and butter and represent the bulk of our investments.
Some things we are particularly interested in right now are:
Read more about what we invest in.
In no particular order: a Private Slack community of 200+ founders, mentors, and investors; closed-door tactical workshops led by operational experts limited to six companies at a time; exclusive partnerships with leading brands like AWS, Webflow, Notion, and more; community-wide licenses to books, courses, tools that our founders can use ad-hoc; operating playbooks designed to used off the shelf for key needs; personal "Calm Boards" comprised of knowledgeable mentors centered around your needs and ideas of success; and a lot more stuff.
We treat you like grown-ups. Calm Company Fund is, at its core, a service business. Our job is to make world-class mentors available to you and provide you with as many helpful resources as we can...but we are not here to tell you how to run your business. We understand that everything we provide is optional — to earn the right to engage with you we are intentional about what we provide.
We're not aiming to be founder friendly. We are founder aligned. You can check out what people are saying on our Wall of Love.
The whole point of Calm Company Scouts being open to all is because we know companies that are a fit for us can come from unexpected places. We can’t be everywhere — the communities and networks that you're operating in are your USP. In short, Calm Companies can be found everywhere and anywhere.
This is an evolving answer. In an ideal world, we would be investing anywhere and everywhere. In practice, we are somewhat constrained. We definitely have a slight preference for US based corporate entities. We have expanded our scope of that to US, Canada, Australia, Singapore, UK, and most of the EU — we can work with any corporate entities in any of those regions and have made investments already in those spaces. We don't care where the founders are physically located.
We are looking for people that you trust, building brands that you personally would want to invest in. Ensuring that the product exists, that the revenue is actually associated with the product you’re scouting, and that you’re comfortable scouting that company.
Also is the company values aligned with what we're trying to do, is this the right financing for them?
Ideally, you are recommending companies that you already know.
A message like “Hey Lisa, have you thought about investment from Calm Company Fund to get the company to sustainable growth? I know you’re not feeling the VC route...Happy to chat to you about it if you want more info,” should be enough.
If you already know about us and are ready to apply for funding, please do so! We go through every single inbound application. The value add for a company that comes through a scout is
We have no expectations of how often a scout will scout a deal for us. We launched the Calm Company Scouts program at the beginning of November so we don’t have enough data yet to share how many are scouted.
Nothing. There is no obligation or minimum number of companies you must refer to us. We will check in to see if you still want to be part of the program.
The best way to write us a memo is to answer the questions here — that will be the best guide for what we are looking for.
At Calm Company Fund, we want to know some of the metrics that signal growth. We want to get an idea of the momentum of growth. A good example of this would be “MRR growth was averaging ~5% monthly from Sep 2020 – Jan 2021, but is averaging 11% monthly for the last 4 months which is around $900 in net new MRR each month”.
Yes, we definitely look at and reply to every memo sent our way. Response time is currently within a week but it will be vary depending on things like quantity of referrals and waiting on the companies themselves — sometimes, a memo comes in before the application from the company. The ideal order is the application comes in first, and then the memo arrives afterwards.
Response time is currently within a week but it can vary.
If you’re asking if you should be reviewing financial statements, P&L sheets and things like that, the answer is almost always no. The time commitment to scouting should be proportional to the upside so you spending an entire week working on a deal doesn’t make sense. We’re looking for an understanding of the basic metrics of the company, so you can ask them ‘What is your recurring revenue? What's your churn?’ If it makes sense and sounds good to you, send it over. Our job is to check it all diligently.
The ideal order is the application comes in first, and then the memo arrives afterwards. We won’t reply to the scout until we’ve reviewed the company’s application.
It’s early days and we are currently working on figuring out what the process looks like. Watch this space. Right now, in your Scout profile, you can see if we have invested or not.
Yes, we are taking more time to provide feedback to those who write memos as we hope they will, in the future, be a bigger part of Calm Company Fund. We will let you know why the company you scouted isn’t for us so that you can start to iterate to find companies that fit our thesis. But also, this opens up a two way dialogue – if you think we’re wrong, convince us as to why this is something we should be investing in.
It’s as if you've done a one-off consulting project for us where you provided one off advisory services in diligence whilst recommending this one deal — you're not an employee and you don't necessarily have an ongoing relationship with us. We will wire success fees to the account you provide us with and it’s your responsibility to do the research needed on how to declare it which will depend on the jurisdiction you live in.
We have not built something into the scout agreement yet but we are open to the discussion. Let us know in your memo that you’re also interested in investing alongside — this is also another great data point for us of your belief in a company.
If you write a memo, you have the option of a $5k check or carry in the deal. Having carry in the deal provides the same opportunity for upside, and downside, as if you had invested in the company directly
As quickly as possible, within a week after making the investment is our goal.
No. As a Calm Company Scout you represent yourself, not Calm Company Fund or any of its affiliates.
We’re looking into how we can support that. In the meantime, people are connecting already via Twitter, DMs, LinkedIn.