Is there something we could call "Sober Capital"?

It’s finally Friday and time for a new issue of Capitaholic, for all of us in Capitaholic Anonymous.

I’ve started gathering a few brave souls here in my hometown of Örebro, in the middle of Sweden, who share this way of thinking about entrepreneurship. Every other week we meet over breakfast and talk about life, work, building companies – and how we can navigate all of it without becoming dependent on capital. No lectures, no one trying to sell anything – just a nice, relaxed hangout.

Yesterday and today we’ve seen some AI anxiety hit the stock markets. In the US, Nasdaq dropped 2.3% yesterday and down another 1.6% today initially before bouncing back to positive territory.
I don’t think this is the beginning of a crash – but it is a clear sign of the nervousness out there around sky-high valuations in AI companies and the way they invest in each other, creating this loop of ever-rising valuations.

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A short personal update feels appropriate too. It’s easy to only write about “today’s topic” and forget the newsletter equivalent of a bit of banter.

Right now, I’m running my company on my own, without any outside investment. Things are going well, and I’m evaluating how I can further develop my services while still keeping a clear focus. I’m also exploring options to team up with another company around my core business. That could create opportunities and synergies for my company, my clients, and whichever company we join forces with. I’ll share more if that actually happens.

If it doesn’t, the question will sooner or later pop up: should I keep going entirely on my own merits, or bring in capital? You probably know how I feel about capital – or do you? I figured I’d make that clearer with today’s topic: Sober Capital! (Does it even exist?)

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I think the wind is starting to blow in Capitaholic Anonymous’ direction. There’s a shift happening in how people think about capital.

Just in the past week, two good examples popped up:

One is behind a paywall and the other is unfortunately in Swedish – but let me give you a recap of both.

Robert Ahldin argues that the VC model is broken (have you heard that one before?) and that the fund cycles are far too short to build sustainable, successful companies. The interesting part is that he draws the same conclusions I did in an earlier post (read it here), where I argue that tomorrow’s founders won’t raise from traditional VCs – because we now have all the tools we need to build something truly capital-efficient.

In a related LinkedIn post, he asks when we’ll see the first real unicorn: the one that never raised capital, but still becomes a unicorn – with a valuation based on the company’s profits, not the latest funding round.

Fredrik argues that there is a fundamental imbalance between VCs (who risk other people’s money) and founders (who risk their lives). He says both parties are needed, but that there’s a mismatch because the founder puts all her eggs in one basket, while the VC applies portfolio theory and spreads risk across many bets. This ties back to what I’ve written before about being part of someone else’s portfolio strategy – when your own strategy is very binary in terms of outcome.

Like both of these Swedes, I’m not against venture capital. I’m against the traditional model that sometimes turns into a kind of pump-and-dump or pyramid scheme, where investment rounds define the company’s value instead of the underlying business.

So in this piece I’m exploring which types of capital I’d consider more or less “Sober Capital” – i.e. capital that doesn’t automatically push you into capital addiction. The catch, of course, is that you can become addicted even to sober capital if you’re not paying attention.

There was a great initiative in the US that’s now on pause: the Calm Company Fund.

Their idea was to invest in profitable, “calm” companies that deliberately chose an exist strategy instead of an exit strategy – companies that wanted to grow slowly and sustainably over time.

To support this exist-strategy, they built a different funding model called “SEAL”, a founder-friendly structure where the investor receives a percentage of “Founder Earnings” (salary, dividends, profits) only after the business passes a certain earnings threshold. Payments continue until the investor reaches a capped return – typically a multiple of the original investment – and then they stop.

If the company later raises a priced round or exits, the SEAL converts into equity using a valuation cap. This gives founders flexibility, limited dilution, and no pressure for hyper-growth or forced exits.

Since the Calm Company Fund is now on hold (you can read why on their site), we need to look for other alternatives. I have a few suggestions, but I’m sure there are many more out there.

Before I list what I think you should look for, let me know if you’ve found an investor that matches the Capitaholic Anonymous mindset. I’m putting together a list of investors around the world who emphasise calmness, the exist-strategy, and long-term focus.

When I publish the list, it will be a living document and always available to all subscribers of this newsletter.

One common denominator that makes it easier to find common ground with an investor – if you have a Capitaholic Anonymous mindset – is to focus on those who invest their own money.

Angel investors, family offices and investment companies typically invest from their own pockets or balance sheets. That usually means faster decisions and it’s easier to align your goals with theirs.

As soon as you bring in an investor investing from a fund, you should ask a LOT of questions about the fund’s life cycle. If you take their money, you’ll very likely have to replace your exist-strategy with an exit strategy.

Angel investors can also want quick exits – but there are many more of them to choose from. Make sure you are clear with yourself about what you want and how you want to run your business – and be equally clear with potential investors. If you have different agendas at this stage, it will almost certainly end in a mess sooner or later.

In my own case, most of my investors invested their own money – and they were a blessing. They understood that building a business takes time, and they were engaged and available whenever I asked for help.

The ones investing from a fund meant more work: more reporting, more governance, more agreements to sign.

Here’s an insight for you before you raise any money: I became addicted – a Capitaholic – even to the more sober capital. It only takes one VC with a clear exit strategy and portfolio strategy to drag you into Capitaholic mode, chasing fast growth and bigger and bigger funding rounds.

One of the VCs that invested in my company was Gorilla Capital. I think they’re the antithesis of a traditional VC.

First of all, they invest earlier than most VCs, which makes their money more valuable to you as an entrepreneur. They invest before product–market fit, which makes more sense from an entrepreneurs perspective. That’s when you need the capital the most as a Capitaholic Anonymous–minded founder. After PMF, there are other non-dilutive capital sources you can use instead.

They also invest in camels instead of unicorns.

Stop right there and take a deep, calm breath.

Isn’t that the best thing you’ve heard in a while? Camels!

Apparently they thought I was a camel too. Camels are resilient and can walk across the desert (I did, but died eventually). They move slowly but endure all kinds of challenges. And they exist (unlike unicorns).

There may be constraints in their fund structure – make sure you’re comfortable aiming for an exit within their fund’s time frame. But beyond that, they share exactly the same values and vision as you and I: focus on customers and product; build real value in the company through revenue.

I’ve learned a lot from their podcasts, from their annual meetup they host for portfolio companies, and from their overall expertise I could tap into. They have a very different position and approach in the VC industry – and I salute them for that.

If you reach PMF, you get a different set of problems: scaling problems.

At that point, if you have recurring revenue, you can often take loans based on future revenue. Don’t borrow too much – but it can be a way to invest just ahead of the curve. There are plenty of players in that space. If you’re interested, you can easily find them (Google it).

I’d be very careful with traditional bank loans before PMF. That’s what really got our boat to keel. If you use loans to finance development, you’ll likely need to capitalise those development costs on the balance sheet to keep your equity positive.

Even though the Calm Company Fund never really found its own fund-PMF, I’m convinced there’s room for more players in this space.

Maybe you’re already one of them? If so, send me an email and I’ll add you to the list of Sober Capital Investors.

That’s all for this week. I’ll make you aware when I launch my list of Sober Capital Investors. I finished this post late this time. I’ve been busy the last couple of days. Maybe there will be some news around that soon enough :)

Capitaholic Anonymous

See you next friday!

/Jacob Kihlbaum