Real Talk: Founders & Financial Wellness

New year, same market.

​​It’s rough out there in startupland. Valuations are volatile and VCs are vexed.

If you believe all the ruckus on Twitter and Clubhouse, it may seem as though potential customers aren’t buying, VCs aren’t investing, and founders are flailing left, right, and center.

Though the above is a bit hyperbolic, it does neither founders nor funders any good to sugarcoat the proverbial state of the startup union. Put simply, what was once a shining, shimmering market full of hope and promise has sunk—literally and figuratively—much like the lost city of Atlantis.

Founders planning to set sail on their respective entrepreneurial journeys are justifiably concerned about rougher waters and darker skies. Despite many proof points such as unmet needs, customers with real problems, growing market opportunities, and terrific co-founders, many would-be founders are staying on the sidelines—hoping to wait out the market’s maelstrom before making any bold bets.

Ironically, troubled times beget tremendous opportunities. Stonks’ unsolicited, not financial advice: Don’t wait it out. Jump headlong into the depths of entrepreneurship if you have a solid plan, supportive team, and innovative product/service. Zigging while others zag often leads to outperformance.

Per a previous Stonks writeup:

Though perhaps initially counterintuitive, some of the strongest performing companies of our generation — Uber, Lyft, Airbnb, Pinterest, Snowflake, Slack, Square, Cloudera, Yammer, and many more — emerged and received funding during [the 2007-2009] downturn.

To assuage market concerns and equip founders with a financial plan, we turned to the one and only Kelsey Willock, Co-Founder and CEO at Aura Finance. Kelsey is also the Founder and Editor in Chief of Stuck in Notes magazine & Author of the weekly newsletter "Not Your Boyfriend's Investment Advice."

Kelsey began her career at Goldman Sachs where she was a member of the Prime Brokerage business as a Relationship Manager for the firm’s top hedge fund clients. In addition, she was an Ambassador for Launch With GS, Goldman Sachs’ $1 billion investment strategy grounded in our belief that diverse teams drive strong returns. Through Launch With GS, Goldman Sachs aims to increase access to capital and facilitate connections for women, Black, Latinx & other diverse entrepreneurs and investors. She actively sourced investment opportunities for Launch Lead investors and coordinated West Coast events to grow the ecosystem.

Kelsey is actively involved with WISE (Women Investing for a Sustainable Economy), Women in CSR (Corporate Social Responsibility), and an executive committee member of Wake NOW (the Wake Forest Network of Women).

Needless to say, she knows her stuff! Over to Kelsey!

I’m almost two years into my life as an entrepreneur and one of the most common questions I get asked is “how did you take the leap?” While it took planning, risk, many conversations with my significant other, bravery, and a little insanity, there is even more to the answer. And while most people I talk to tend to fixate on the question, “what gave you the courage,” many shy away from the elephant in the room – money. When I was first thinking of taking the leap, I desperately wanted to ask “how the heck did you make you work financially?”

I felt alone and insecure, as though everyone had the answer but wasn’t sharing. So I’m gonna spill the tea and share the things that helped me prepare for the journey and stick with it. Because friends talk about money—no, it’s neither rude nor taboo—and you are definitely not alone.

How I Prepared for Entrepreneurship

Before I left my corporate job, I knew I needed to have a certain amount of money in savings to be able to sustain myself for a period of time.

1. Calculate What You Need: I knew entrepreneurship was going to be hard. I wasn’t going to be an overnight success, especially knowing I wanted to go the startup and venture capital route coming from a non-tech background. I spoke with dozens of founders and learned that fundraising sometimes took years and many would forgo salaries for extended periods of time. I decided I needed 2 years worth of money in savings to feel safe taking the leap. That meant, 24 months of rent, living expenses, food travel, student loans, and everything I knew I needed + some extra for lifestyle spending. Aka, $100,000. Now, I know this number may seem like a lot, but in the spirit of transparency I want to show it because no one told me what they had, what made them feel secure, and what they felt like they needed. This number is highly personal, so I’d recommend reviewing your monthly expenses to get an estimate of how much you would need on a monthly basis.
2. Establish a Timeline: decided my timeline was 2 years. It would give me time to really see if my pursuits could come to fruition. I also compared it to an MBA. If I were to go back to school, it would have been 2 years as well. Only you can decide this number, but once you figure it out, I’d suggest multiplying it by your monthly “burn.” We as founders are so conscious of our businesses expenses, we often neglect our own. I firmly believe in order to extend your company's runway, you must extend your own. In fact, many startups fail because the founder can no longer support themselves financially. That’s why the airplane mask analogy has always been a guiding principle for me - make sure you put yours on first before the person sitting next to you (aka, your company).
3. Set Check-Ins: Companies often review their financials on a quarterly basis during their board meetings. I’d encourage you to have your own board meeting regarding your personal finances. To make things a little less intimidating, let’s call it a money date. This is a time for you to check-in with what’s going on in your wallet. Because let’s be real, we all go over budget. Every quarter, I review my spending (my burn), what’s going on with my total net worth (what’s in my bank account), and how I can make adjustments. If you’d like help walking through this process, Aura offers a Savings & Investing Optimizer tool for members. If you’re interested in becoming a member, sign up for an onboarding call to see if Aura is right for you. Spots are limited and first come, first serve and we will be closing membership soon!
4. Find Accountability: While following these steps may seem straight forward, sticking with them is always the hardest part. If you had a board meeting for your company with just you, would you have it? I’m guessing no. My partner and I talked about this plan before I took the leap and we now have a money date together quarterly. We talk about how we’re both spending, saving, and feeling financially. As I said before, friends should talk about money and so should partners. And as one of my good therapist friend’s recently shared, “Name it to tame it.” Talking out loud about money is one of the ways to take control of it rather than have it control you. Side note: This was one of the hardest steps for me. I missed quarterly check-ins from time to time, signed up for subscriptions I forgot about, overspent over the summer, and even missed my first credit card payment. I felt terrible but finding space to lean into the feelings with someone was one of the best things I did for myself to get back on track.
5. Do the Thing! The day I quit my corporate job, I couldn’t stop shaking. Even after all the preparation I had done, I still wondered “is this enough?” The reality is, there isn’t a hard and fast rule. Stepping into the unknown of entrepreneurship is terrifying enough, so giving yourself peace of mind that you’re going prepared financially with a plan.

The Opportunity Cost of Being an Entrepreneur

I always heard how hard it was to be an entrepreneur. The majority of startups fail, it’s incredibly competitive to raise money, it’s costly, your skills are tested daily…The list never ends. However, one thing I hadn’t heard much about was the opportunity cost of it all. I blame the media for focusing on the ultra success stories rather than also the many real stories entrepreneurs endure.

Opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen. In my case, it was my corporate salary forgone for the price of pursuing a business.

As an example, let’s say you are making $180,000 + benefits (assuming you’d also make a 5% pay raise every year) and decide to quit in order to pursue your entrepreneurial dreams. On average a startup exit takes 8-10 years and many founders don’t pay themselves until they raise their first round of venture capital. In this instance, let’s say the founder doesn’t pay themselves for 1 year and when they start making a salary, they pay themselves $80,000 with a 5% increase each year.

After 10 years, the difference in earnings between the founder's cushy corporate job and barebones founder salary adds up to $1,381,895.51, neither including benefits nor discounted for taxes. That means, in order for the opportunity cost to be worth it, assuming you will exit with 5% ownership of your company, your company will need to be worth at least $27,637,910.22 for you to break even.

Now, I’m not saying opportunity cost is only financial. After leaving my corporate job, I gained so much more than just an opportunity to exit. I found a job I loved, am pursuing a space I deeply believe in, and wake up every day excited to solve world-changing problems. There is a huge amount of value in these qualities that is not to be ignored. I also recognize, some might actually make more as founders than they did in their corporate roles.

I simply encourage you to do the math on your own to determine your personal opportunity cost.

Whether ready to take the plunge or timid about jumping into the deep end, I leave you with three tidbits that may prove useful during your journey.

Tactical Financial Tips & Tricks for Entrepreneurs

1. Hedge your Risk - I hear from entrepreneurs all the time, “I’m making such little money, I don’t have any extra to save.” I also hear, “My company is my retirement - when I make it big, a 401k won’t even be necessary.” I see these two responses on a spectrum. One is avoidant and the other is superfluous. Regardless of where you sit on the spectrum, I’d encourage any entrepreneur to hedge their risk and still think about their future. Just as you use sunscreen to avoid skin damage for your future self, put on your retirement-block by setting aside a few hundred dollars (or even less!) per month just in case.
2. Tax Efficiencies - Not only is investing in your retirement a hedge, it’s also a way to reduce your taxable income. Many entrepreneurs might be making the least amount of money that they have in years. Such entrepreneurs can drive their tax liability even lower by contributing to an IRA.
3. Convert a Traditional IRA into a Roth - If you ever wanted to convert from a traditional to a Roth IRA, now may be a good time. In a roth, you're paying tax on your income bracket today. It might make more sense to do that now when you're in a lower tax bracket than in the future when you are in a higher tax bracket. However, be sure to consult your tax advisor on whichever decision you decide to make.

Want access to Aura?

Aura is currently at capacity but the Stonks community secured 20 spots for priority onboarding. To claim your exclusive invite, sign up for a call here. Spots are limited, so this is first come, first serve. During this session, the founders will teach you how to use the app, answer any questions you might have, and help you make the most of the world’s first financial engagement platform and community.

⭐️ STONKS BONUS: You will also unlock access to our Investing & Savings Optimizer coaching session (a $500 value).

About Aura:

Aura is a mindful money management platform that helps you put your money to work and anxiety to rest. You can think of us as your wealth manager meets money coach on a mission to heal your relationship with money, achieve your financial goals and align your investments with your values.

We're like if Noom + Headspace + Betterment had a baby. Our mission is to empower individuals to live a life of abundance while growing passive wealth.

To learn more, take our money personality quiz or visit us at Aurafinance.io.

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