- The Calm Company Fund invests in startups that prioritize profits over billion-dollar valuations.
- Founder Tyler Tringas sought to back startups that didn’t fit traditional VC models.
- His firm takes a cut of a startup’s earnings, up to a specified amount, to earn its returns.
- See more stories on Insider’s business page.
Tyler Tringas isn’t competing against other venture capitalists to buy a piece of the next unicorn.
Instead, Tringas, whom Insider named as a rising star of early-stage venture capital last year, seeks to back “calm” companies: those that focus on building profitable and enduring companies. Since 2019, he’s invested in more than 40 of them.
His firm — formerly known as Earnest Capital but now called the Calm Company Fund — has deployed two funds of about $8 million in total and plans to raise a third rolling fund of $10 million in July. Tringas, who is the fund’s sole general partner, focuses on pre-seed and seed-stage software companies.
Tringas’ own experience, of founding his own company and leading it to an acquisition without venture backing, inspired his VC firm. Startups tend not to be eligible for traditional loans, given their lack of assets, but if they’re not aiming for multibillion-dollar exits, venture capitalists generally aren’t interested either. VCs need those giant exits to produce returns for their investors, or limited partners, who will then invest in new funds and new crops of startups.
But the broad universe of private companies without venture backing presents an enormous opportunity, Tringas told Insider. A profitable, multimillion-dollar business is still a success, he said.
“The opportunity that we’re going after is vast,” he said. “It’s significantly larger than all of venture capital.”
Calm has an alternative business model: it takes a percentage of the cash a company generates after all expenses are paid excluding founders’ salaries. It only takes this percentage when founders’ salaries hit a negotiated threshold.
The firm’s investment is structured similarly to a convertible note, rather than a purchase of shares or equity. It collects a payment each quarter until it hits a set return, typically between three to five times its investment. After that point, the company can continue operating without being pressured to sell or go public in order to cash out its venture investors.
Tringas is also open to an IPO or acquisition, or startups can choose to raise traditional venture capital later on. If they do, Calm’s investment converts to an equity stake. For instance, one of the firm’s portfolio companies, Yac, has raised a $7.5 million Series A round from GGV Capital and
‘s venture fund. Two of its other portfolio companies, Makerpad and EnjoyHQ, have been acquired.
Other investors have experimented with methods of backing promising startups that aren’t quite billion-dollar businesses. For instance, Collab Capital, an Atlanta-based VC firm that focused on Black-led startups, offers a profit-sharing option for its investments. But another fund based on a similar model, Indie.vc, shut down earlier this year, in part because it had trouble convincing limited partners to invest.
Tringas told Insider he’s addressed that problem. His biggest group of investors is other entrepreneurs, he said, rather than traditional financial institutions.
Calm is also raising up to $2 million through a crowdfunding campaign on WeFunder to allow other investors, even non-accredited ones, to participate. Non-accredited investors cannot legally invest in the firm’s fund itself, but they will receive a portion of the firm’s carried interest — the percentage of returns Tringas receives from its investments.
Above all, Tringas said, he’s hoping to shatter the perception that founders that aren’t aiming for the billion-dollar mark aren’t ambitious.
“That mental model has taken too much hold in the industry,” he told Insider. “You can be ambitious in a different way.”