This Fund Invests in Founders at the Idea Stage
CEO William Stringer Says 65% of Chisos's Funded Founders Are Traditionally Underserved
Devin: What do you see as your superpower that’s enabled all this success?
Will: Yeah, I think curiosity is a little bit of one and then just maybe a slightly unhealthy desire to succeed in, quote-unquote, the game of life. I know, obviously, there’s a lot more that goes into life than building a business and being successful at building a business. But I think in my career right now, that’s really what I’m focused on, is building something unique and making it big and kind of taking it mainstream. Throughout my career, I’ve always been curious to dig into different topics.
Chisos co-founder and CEO William Stringer is disrupting startup financing convention with money for founders who have nothing more than an idea. “We like to say that we invest directly in people,” Will says. “Often, that’s day one capital.”
Chisos invests $50,000 early on. “We’re investing pre-traction, pre-revenue alongside friends and family—or instead of friends and family—using our convertible income share agreement terms,” he says.
The convertible income share agreement is itself made up of two instruments. “One is an income share agreement similar to what you would see in the education space. The other is a SAFE, equity in a person’s business,” he says. A SAFE is a simple agreement for future equity typically triggered by a future large equity investment.
Will used equity crowdfunding to raise over $513,000 on Wefunder. He’s also seeing the founders Chisos funds successfully raise via regulated investment crowdfunding.
Remarkably, Chisos backs a disproportionate number of diverse entrepreneurs. “Our current portfolio stands at about a little over 65 percent of our portfolio are investments in underrepresented founders,” Will says.
Applying to Chisos is easy. You don’t have to be a golfing buddy of one of Will’s golfing buddies. (I’m not entirely sure Will has golfing buddies.)
“We have an open online application, so anyone can go on and apply,” he says. “We have a big orange button on our website that takes you to the application process, and the first two steps are automated.”
The first step links to your Linkedin profile.
“Two is more psychographic information such as grit, hustle, ambition, leadership, coachability,” Will says. “And third is we are looking at the business at a very high level.”
The key to the Chisos model is that the entrepreneurs sign promissory notes obligating them to pay the money back from whatever income they may generate in the future.
“In a worst-case scenario, we invest our $50,000; your company fails the very next day,” Will says. “if your company fails on day two, we’re asking, what are you doing next? Can we help you go back and get a job? Can we help you start your next company? Because that income share agreement is an investment in you personally.”
The loan is structured to be flexible and affordable. “There’s a salary floor; there’s a payment cap,” he says. “You are making payments on the income share agreement when you’re earning income, but only when you’re earning income over a certain threshold. So while you’re building your business, if you’re paying yourself a very low salary or no salary, there are no payments due.”
The model is working. So far, Chisos has backed 35 founders, deploying about $1.25 million. Five of the companies have gone on to raise additional capital. The firm has also collected $150,000 in payments on the income share agreements.
Will credits his success, at least in part, to his curiosity.
How to Develop Curiosity As a Superpower
“Really digging in and being curious about the person, being curious about what problem they’re solving is, I think, what’s going to lead to our success at Chisos,” Will says, explaining the role of curiosity at Chisos.
The success Will is having at Chisos exemplifies the power of curiosity to impact success. “The interest and curiosity to kind of design something that worked for founders but also worked for investors in order to try and mobilize that capital” was a driving force behind Chisos. “That’s what we did when we built the convertible income share agreement.”
Will offers two specific suggestions to foster your curiosity:
Read. “Reading is another way to get exposure to new ideas,” Will says. “Diving in and reading books about quantum physics or quantum mechanics—I don’t pretend to understand that stuff, but as I read books about it and kind of try and learn about it, it’s just fascinating how much I don’t know—or people, in general, don’t know—and there’s so much white space to explore. To me, that’s just mentally stimulating.”
Travel. “Travel and get outside your comfort zone,” he says, cautioning that merely visiting a resort is another sort of travel. “I was able to travel a little bit when I was younger. That helped me see different cultures, see how different people operate and then realize that, oh yeah, the way I grew up is not the only way people operate. Seeing that always led me to dig deeper and understand why some cultures are different.”
Following Will’s example and advice can strengthen your curiosity, potentially making it a superpower that will enable you to do more good in the world.