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Will Stringer of Inspirr and Chisos Capital

I was intrigued when I first heard about what Will Stringer was building at Chisos Capital.

Then we met for coffee in Los Angeles and talked about it for hours.

I couldn’t stop thinking about the potential of the funding model he’s deploying.

After meeting up a few more times, I also learned about Inspirr, the platform he’s building to make startup capital more attainable for ambitious individuals from all walks of life.

As I’ve gotten to know Will over the past few months, I’m convinced that what he’s building is a game-changer and I wanted to share more about it with all of you.

Let’s get to it.

What are you building with Chisos Capital and Inspirr?

Chisos Capital and Inspirr are two implementations of the same idea - People and their ambitions are investable.

Chisos Capital is an asset manager that raises capital to invest in people, while Inspirr provides the software platform infrastructure to allow anyone to invest in others using similar terms.

Our unique insight for both companies is structuring a type of personal equity investment for people pursuing ambitious things.

The analogy is this - You can lend money to a company and you can invest in the equity of a company. You can lend money to a person, but there is no great way to “invest in the equity” of a person. That is what we are doing - Creating the opportunity to invest in a person’s upside ambitions with multiple levers to dial up or down the risk level of the investment.

How did you decide to start these companies?

Two things led me to start Chisos first, followed by Inspirr.

The first was from an investor perspective - While working on the investment team of a large family office, I worked on a number of deals that were highly structured.

Private equity deals, asset purchase deals, and general partner staking deals with custom terms designed to protect downside and capture upside.

As my interest led me towards technology and innovation I thought there needed to be a better way to fund early ideas and early ambition. The typical VC funding model that either returns 100x or 0x (slight exaggeration) just doesn’t work for most companies.

The other perspective was from the founder/entrepreneur lens.

As I went to raise a bit of capital for Chisos, I was met with a ton of resistance from investors. This resistance was absolutely valid and I was very naive in my thinking about raising. I had no real business plan and didn’t know anything about the traditional problem/solution/GTM/competition/etc pitch.

What I did know was how to structure an investment to align investor and capital seeker incentives. So that’s what I did - I crafted a structure where my early investors were essentially investing in me and my personal career success.

With my structure, if my business succeeds everyone wins. If my business fails then I pay back a fixed percentage of my earnings (over a minimum salary threshold) over time until my investors get their money back.

This was a no-brainer to my investors who knew my finance background and knew that I would likely succeed in my career even if the business didn’t work out.

What is the big vision for these in the long term?

The big vision is this: Anyone, anywhere in the world who can demonstrate even a hint of future potential can receive funding to pursue their ambitious goals.

The structure is flexible enough to adjust the risk, cost of capital, check size, etc.

It expands the criteria for funding from “I tell a good story” or “I know the right people” to “I am a multi-faceted person and I’ve shown promise through X/Y/Z activities, therefore I am much less risky to invest in, even though my grand ambitions are risky.”

What were the biggest challenges getting these off the ground?

Education and capital raising for Chisos.

What we are doing is quite unique.

While there are some tailwinds around alternative investments and investing in athletes/creators, there is still a long way to go for mainstream awareness.

From the investor perspective, our asset sits somewhere between debt and venture. It does not fit cleanly into an allocation bucket, and thus often gets put in the “too hard bucket”.

As our track record grows and we have more hard proof, the conversation gets easier, but it does take some context to understand why the risk/rewards of the asset are attractive.

As with anything new, repetition, education, and proof are the keys to success.

Investing in a napkin sketch idea on a SAFE would be a foreign concept 30 years ago.

For Chisos and Inspirr, we are in the early phases of opening up a new type of investment structure.

What are some examples of people you've funded or the types of people or companies you are looking to fund?

Right now we are looking at entrepreneurs, athletes, and creatives.

For Chisos Capital, we have a set of criteria we look for that includes some of the following:

• Future earning potential of $100k+. Does your previous income level, career, schooling, training, etc. indicate that you will likely earn at least $100k+ per year in the future?

• Are your personal finances in order? High leverage, low credit, bankruptcy, etc. can indicate a poor starting position for trying to achieve something ambitious. (We know there are exceptions to everything)

• Use of proceeds - What are you going to do with the investment capital? Do we think the money will accelerate your ambitious goals or give you enough runway to iterate?

These criteria are specific to our current fund and cost of capital. There’s no reason these criteria could not change if our capital source or cost of capital changed.

For example, we’ve had conversations with philanthropic capital sources that liked the idea of using our model to fund smaller investments with more flexible underwriting standards (no income minimum needed/ no credit score minimum/ etc.).

Examples of people we’ve funded:

• Pre-seed tech entrepreneur needing capital to finish an MVP

• Indie bootstrapper needing a small bit of growth capital

• Amateur golfer needing capital to travel and compete in tournaments

• Emerging fund manager needing additional runway to fund operations until they reach a first close

• Seed stage founder raising a small bridge to extend runway and improve metrics

• Minor League baseball player needing capital to attend pitching camp and hire a personal trainer

How did you decide on the check size?

For our investments through Chisos Capital, the check size is a function of the person’s statistical future earning potential.

A good rule of thumb is that we will invest an amount equal to 20-30% of future earning potential.

For example, if you were earning $100k previously, and will likely earn that amount or more if you went back into the workforce, then our models would dictate a $20-30k max investment amount.

We have about 20 factors that shift the percentage around, but the 20-30% rule of thumb is generally accurate.

From the investor perspective, how do you think about portfolio construction?

Portfolio construction, for us, means limiting concentrations in any one geography or industry, which is fairly simple to do with our model of small checks into higher quantities of deals.

We try to keep 70%+ of the portfolio invested in founders building capital-efficient and scalable technology companies.

The remaining 30% can look at CPG, hardtech, or more outlier bets.

Because we are truly taking a bet on the founder, we feel comfortable funding fairly unique ideas or unique situations.

What are the types of deals you set up and the different levers you can pull regarding the terms?

Chisos has one main deal type: the Convertible Income Share Agreement (CISA).

The CISA combines an Income Share Agreement (ISA) with a SAFE.

The transaction is a tri-party agreement where the founder is signing the ISA as an individual and signing the SAFE as the founder of their company. We open-sourced the term sheet here.

Outside of the Chisos funds we’ve experimented with a few different structures including ISAs with multiple defined income streams:

• In-Sport Income, defined as league or tournament winnings/salary + sponsorship income

• Other Income defined as regular w-2 income derived from a job

• Creator Income, defined as revenue generated over a certain threshold from certain platforms (YouTube, Twitch, Substack, X, etc.)

We also have a structure that enables investors to gain exposure to the future companies of a founder. That is, investors invest in a founder and get equity in their current company plus a small percentage of equity in any other companies they start within the next 5 years.

All of these types of deals depend on the type of career a person is pursuing, what the upside looks like, and what the alternatives are for funding that dream.

What's the timeline for investing?

At Chisos, we can review and fund in less than a week, but we typically take closer to a month for the full deal cycle because of our limited capital.

We are fortunate to have some incredible deal flow but are cursed with the constraint of capital available to invest.

What are the legal docs you've built up for this over time?

This has been an iterative process.

We will work with legal to craft new clauses or structures as we see opportunities arise.

We started with the core CISA and have used that as the base around which to add/subtract.

We also crafted a PersonalHoldCo (PHC) structure whereby the individual pledges all of their creative royalties or equity into the PHC and investors own a portion of the PHC.

What drives you personally to build Chisos and Inspirr?

Personally, I think this idea just makes too much sense.

When I first raised my own capital on the CISA from my network, I saw how much different the conversation went (vs. raising equity only based on an unproven idea).

So much of the startup/entrepreneurship world is enamored with VC funding that the other options are often looked at unfavorably.

I also just want to have exposure to the career potential of ambitious people.

I meet people all the time that are super motivated or super talented and I just want exposure to whatever they create. It may not be clear what direction their career will go, but you just know they will do something big.

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Thanks for reading!

Best,

Justin

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