What’s up, Founders! Today we have some fun topics to cover:

• Secondaries — how to take cash off the table

• Who is still investing today?

• How to earn more without EARNING more 😉 

• Tax avoidance startup idea

Let’s get into it!

💰️ Let’s talk about Secondaries

AKA: Cashing out SOME of your chips.

I have a lot of conversations with founders and the subject of Secondaries is among the most commonly recurring. Founders don’t pay themselves a lot, and they often live in very expensive lifestyle places. The idea of bringing home a million or two when you’re several years from a potential exit is often irresistible. But how does it actually work?? Let’s learn!

Over the years, I’ve read many great write-ups on secondaries.

Unfortunately, they never really seem to apply to MY real-world scenario. What if my startup isn’t doing $150m in revenue? What if I didn’t just raise a $100m Series D??

This Secondaries Primer, written by Riz Virk is the most complete write-up I’ve ever come across on this subject. In this 17-minute read, you’ll learn about how:

• Secondary sales offer liquidity to shareholders in companies staying private longer.

• Buyers can be existing or new investors, specialized funds, or private individuals.

• The increasing rarity of IPOs has made secondary sales more prevalent in Silicon Valley.

But don’t be disheartened by all the talk of “Pre-IPO” companies in the article. Nowadays, secondary sales are happening as early as the Series A (and in some cases, even priced Seed rounds!).

💸 But who is still investing today?

I’ve heard from 4 or 5 founders THIS WEEK that nobody is writing checks.

This is simply not true. VCs are like asset managers, pocketing a 2% annual fee from LPs, plus 20% from profits – that's if they make any. The twist? They get their 2% regardless of performance, fueling the incentive to manage bigger funds for heftier fees. They get there by deploying their existing funds, rinsing, and repeating. They’ll keep writing checks as long as there are LPs lined up to do the whole thing over again.

Despite the belief that VCs thrive on big returns, many actually rely on these fees, even when they underperform. 95% of VC funds don’t make money but MAYBE an investment in YOUR company can help them be among the cream of the crop.

If I was raising VC today, I’d take a big shortcut and go through Thunder and use their AI-curated list of investors who are actively deploying capital.

💳️ Start earning more today without earning more!

I sadly learned this too late in life. Amex rewards are NON-TAXABLE

Understanding this simple fact can help you earn SO much more, without actually bringing in any additional taxable income.

Let’s say you spend $1m on Meta/Google ads each year:

Amex will give you 7 cards to spread that $1m out so that you can take advantage of their 4x points per $150k spent per card, per year. So EVERY year, you can go enjoy TWO $25k vacations, all expenses paid with Amex points.

$1m with 4x points = 4 million Amex Points. That’s roughly $41k or like $50k if you transfer points and take advantage of transfer offers from airlines and hotel chains.

🤯 

Read more about how/why these rewards are non-taxable here.

Key Takeaways:

• Whether credit card rewards are taxable as income depends on how the rewards are received.

• If earned through the use of the card, like a cash-back bonus, the rewards are viewed by the IRS as a rebate and not taxable income.

• Rewards provided as an incentive just for opening an account (without you spending any money) COULD be considered taxable income.

Tips and Tricks

• Wishing you could use your Credit Card for more purchases like Rent, Car Lease, Tuition, etc where cards aren’t accepted? Companies like Plastiq can help with that!

• Don’t spend your points via your credit card’s reward portal! Transfer them to a specific merchant (Airline, Hotel, etc) and you’ll get a lot more bang for your…points. Many merchants have a 25-30% rewards points BONUS for transferring points from your Amex/Visa More details here.

💡 Startup idea of the week

Let’s help people find more fulfillment in life, while also avoiding taxes

Keeping in mind that Tax AVOIDANCE is perfectly legal, what if there was a way to marry this age-old practice with the general act of having more fun in life?!?

I’m talking about passion-based businesses. Oh, you like to travel? GREAT, you now have a fully functional travel blogging business and all your travel is tax deductible, as long as you take a few pictures and have ChatGPT write up some nice words about where you went.

Oh, you enjoy eating at fancy expensive restaurants? GREAT, you now own a food blogging business!

I’m imagining a business similar to BetterLegal or Stripe Atlas whose sole purpose is to help people set up a totally legit passion-based business so they can chase their passions without actually paying for them…

Tax avoidance is FUN!!

Do you want to build this with me? Let me know!

THE END

Thank you as always for reading this. I don’t have any sponsors or directives or agenda so you’re always going to get whatever topics inspired me that week. This one was fun!

I love you all.

Sincerely,

John Hancock

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