# First Round
> Tactical advice for founders and startup leaders — from interview questions and tips for new managers, to how to find a co-founder and product-market fit.
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## Posts
### Inside Vanta, where reinvention is the only constant
URL: https://review.firstround.com/inside-vanta-where-reinvention-is-the-only-constant/
Last updated: 2026-08-12T16:35:23.000Z
[](https://review.firstround.com/vanta-firsthand/)
**Sarah Scharf** joined **Vanta** as the first product marketer and one of its earliest employees. In the six years since, she’s moved up, down and sideways, and along the way she’s built the brand, defined a category and written the copy for their viral billboard (”Compliance that doesn’t SOC 2 much”). Today, she becomes Vanta’s new CMO.
She almost didn’t take the job. With an offer from her dream company, Apple, in hand, she took the Vanta interview to see if she could get a counter-offer to negotiate. But she fell for the team, the ambition, and the opportunity to help build what could become the next Apple, instead of making Apple’s marketing 0.1% better.
In the latest installment of our as-told-by essay series, “Firsthand,” Scharf takes us inside Vanta’s culture of trust and learning that’s made her many lives within the company possible.
Stepping into the CMO role is her biggest reinvention yet. “While it felt like a big leap, this reinvention only exists because of all the smaller ones. Each time I'd remade myself and it worked, I'd banked a little more of the company's trust, and that trust is what bought me the next, larger reinvention,” she writes. “**Trust compounds, but only if you stay put long enough to let it**.”
[Take me to The Review](https://review.firstround.com/vanta-firsthand/)
### Firsthand: Six Years at Vanta, My Reinvention is the Only Constant
URL: https://review.firstround.com/vanta-firsthand/
Last updated: 2026-08-13T15:47:01.000Z
The sun never came out the morning I got my dream job. I'd done my final-round Apple interview at 7 a.m. and knew it had gone well. I was just beginning to come down from the adrenaline high, so it took me a few minutes to notice the sky was still completely dark.
By noon, wildfire smoke would choke out the sun and turn the Bay Area sky an otherworldly orange. I almost didn't hear my phone ring with the good news from Apple because the birds outside my window were going berserk. They couldn't tell if it was day or night.
Inside, I also felt completely mixed up. I couldn't articulate why I was about to turn down my dream job at Apple for a thirty-person compliance startup whose website only had a purple llama and a "request a demo" button.
I was about to hit seven years at Google and was itching for something new. When Apple reached out, I knew that if I could get an offer, I would take it. But those hazy pandemic days left me with time to kill, so I also took interviews with a few startups — mostly to get a competing offer for negotiation, but also because I wasn’t into baking sourdough.
One startup was Vanta, an under-the-radar seed-stage company. I knew nothing about compliance. I went into the interview process with low expectations and skeptical about my fit with an early-stage startup.
It was the Vanta *team* who won me over. Everyone was both kind and killer, especially [Christina](https://www.linkedin.com/in/ccacioppo?ref=review.firstround.com), the co-founder and CEO. Other founders I'd met that summer all named the same two examples of excellent marketing — Nike and Apple (man, I really wanted that Apple job). Christina reached for The New Yorker, for fashion brand Loewe, and for a British woodstain company whose slogan she admired so much that it later became one of our values ("does exactly what it says on the tin"). Her through line was an appreciation for heritage, craft, and — underneath it all — a sense of humor. Conversations with Christina were the most interesting I’d had in months. She had real instincts and appreciation for marketing, as opposed to viewing the function as something to outsource and model after the “textbook” examples.
So after a surprisingly rigorous interview process for such a small company, I joined as the first product marketer. I learned on my first day that the whole marketing team would report to me, which has set the tone for the past six years. My role has expanded, contracted, split, and reset more times than I can count — back to PMM, then Head of Product Marketing, then adding in Comms and Brand, serving as interim CMO, moving into VP of Revenue Marketing, and now taking on the mantle of CMO at a $4.15B company with 16,000 customers. My six years here have been the most rewarding years of my career.
I think Christina hired me despite my ignorance about compliance because she firmly believes anyone can do anything if they read 10 books about the subject. She’s a self-taught coder, she speaks six languages, and she keeps a [running list](https://docs.google.com/spreadsheets/d/1DrH-TdZ0myOkWAfyZ4u-Fpr6Us9nhb5sYSK53NMlBMM/edit?gid=0&ref=review.firstround.com#gid=0) of the nearly 1,000 books she’s read over the last two decades. Vanta itself is proof of that mindset: She’s become a sought-after expert on SOC 2, a compliance framework she first learned about through extensive customer discovery with security teams.
Any voracious reader of fiction will tell you that the characters worth rooting for are never perfect, and rarely do the most well-prepared receive the call to adventure. At Vanta, the talent culture is shaped by the belief that a person’s arc is far more important than the set point of her resume. You’re encouraged to learn how to do things you've never done before, you're given the grace to make mistakes (and the trust that you won't make the same mistake a second time), and there's always room for your role to shapeshift as the company grows. In my six years here, I've reinvented myself more times than I can count. I wanted to learn new things, and Vanta required me to.
## Why I said yes to Vanta
I’m drawn to marketing because it feels like the center of a Venn diagram of my parents’ brains. My dad was an entertainment lawyer for 41 years, an even-keeled business type, but with a zany sense of humor. My mom is a screenwriter — a storyteller who thinks in pictures. Like her, I loved writing from a young age, and her voice always rings in my head when I write, reminding me that writing falls flat when you can’t hear it *and* see it in your mind.
None of my first few jobs had quite the right balance of creative and business I wanted. I graduated from Stanford at the tail end of the Great Recession, so I chose the stable path: management consulting. It put the analytical side of my brain to use, but gave me few opportunities for creativity. I tried tech writing, which was fun, but I missed the business side. I joined a startup doing a bit of everything for a while, but the startup wound down.
One of my friends was a product marketer at Google, who told me I would love it, so she referred me to their Associate PMM program. I initially balked at the suggestion: It was primarily a new grad program, and I had *three whole years (!)* of work experience. Taking it meant stepping down to get in the door.
But at the end of my first day at Google, I thought: “This is what I want to do for the rest of my life.”
It was an early lesson that the best careers aren't ladders, they're jungle gyms — you move up, but also sideways, and sometimes down. Over six years, I was able to move all around the Google gym. My first role at Google was on Account Settings — specifically, helping people understand their privacy and security controls in words they'd actually recognize. I loved speaking with people of all backgrounds, conducting focus groups across the US and Europe, which gave me a true appreciation for the sheer scale of technology’s reach and how much impact depended on users’ trust. We launched a Privacy Checkup that explained users' choices in plain English; by 2020, [200 million people](https://blog.google/innovation-and-ai/technology/safety-security/keeping-private-information-private/?ref=review.firstround.com) were using it each year. I got promoted and moved up and across to Next Billion Users, building for mobile-first economies like India and Indonesia, then over to the Platforms team on Android and Google Play.
Eventually, I’d learned the Google way, and I could feel my learning curve flattening. When Apple called, it felt like the obvious next move: up, and onto the most admired ladder in tech. **What I hadn't figured out yet was that I'd have the most fun — and learn the most — by chasing the most interesting move, not the highest jump.**
I was connected to Vanta through my friend Dasha, who knew our first Head of People. Much like my friend Caroline who connected me to Google, it seemed she knew something about me that I didn’t. The early conversations started with curiosity (why the llama?) but got more serious simply because they kept scheduling more of them. I remember thinking, “This is a 30-person company. Why am I talking to so many people?” I was used to the rigor of big-tech interview processes: weeks-long, ten different interviewers, take-homes that consumed entire weekends. I expected startup hiring to be quick and easy in comparison. Not at Vanta. I talked to pretty much all 30 people at the company.
I was impressed with the thoughtfulness each interviewer brought to the conversation, and intrigued by the amount of time the team was willing to spend to find the right candidate for an early, but relatively junior, role. After an hour-long “final” presentation for Christina, I learned there was yet one more stage: what we call the values interview.
Christina conducted the interview, asking questions that assessed my alignment with Vanta’s values. She asked my now favorite interview question, which is aimed at assessing our value centered on “frameworks thinking.”*“Let’s say I have two projects for you: Project A and Project B. I can’t tell you any details about these projects, but I can answer questions about them. What questions would you ask me to decide which project to work on?”*
I’ve asked this question in countless Vanta interviews over the years, and I’ve found it has high signal for people who succeed at Vanta: those who are curious, methodical, and able to unstick themselves in periods of ambiguity. People who can open their laptops to any number of competing priorities on any given morning and figure out who and what to ask in order to get to “right, I’ll work on Project A.”
**Me and the Vanta'n who closed me, Emart (our VP of Sales)*
A few days after the world turned orange, Vanta made me an offer. [Eric Martin,](https://www.linkedin.com/in/ericlongmartin?ref=review.firstround.com) aka Emart, the legendary Vanta “sales guy,” did my closing call, and I expected a hard sell. Instead he told me, “Wow, I heard you got an offer from Apple. That’s amazing.” I probably showed my bewilderment on camera. But I realized this was true to the culture — everyone is genuinely rooting for the best for everyone, whether that leads them to Vanta or not.
Then he segued into all the reasons he thought Vanta would be bigger than Apple, and I could tell he believed them. By the time we hung up, I half-believed them, too. At Google I'd seen how much software quietly depends on trust. What Vanta had figured out was the business logic underneath it — that trust isn't just what keeps customers, it's what wins them, and a company that makes itself easier to trust grows faster than one that doesn't.
Personally, I also felt ready to take a leap. In the preceding two years, I’d gotten married, lost my dad, and moved across the country and back, landing in San Francisco just in time for the world to shut down with the pandemic. Joining Apple would have meant stability during a tumultuous season, but also being a cog in the machine hoping to make the overall marketing a tenth of a percent better. Vanta felt like a club of people I desperately wanted to join, where my impact would be uncapped, dependent only on me.
> I realized the opportunity to help build what could become the next Apple was more compelling to me than making Apple’s marketing 0.1% better.
## The freedom to make mistakes (but only once)
I knew Vanta would be a change from Google, but nothing could prepare me for how much. I spent almost every day of my first few months at Vanta absolutely terrified.
**The Vanta website when I joined*
I had to quickly learn just about everything: the product, the customers, the business model, the operating pace. The stakes of my learning curve were high because the opportunity ahead of us was massive. When I joined, demo requests were flooding in, but no one knew where they were coming from. We had no formal sales or marketing in place, and we weren’t even running any ads or paid search. The website looked like the landing page of a secret society.
Everyone at Vanta felt the intensity of the demand and how fast we needed to move. At Google, Fridays had been for email catchup and social 1:1s. At Vanta, every Friday at 8:30 AM, we had a ritual called “coffee and compliance” where an auditor or compliance officer would run a training session. At any time, you could be cold-called to rattle off the five Trust Services Criteria of a SOC 2 or the observation window for a SOC 2 Type I (Trick question! It’s point-in-time.)
My first order of business was to figure out how folks were finding out about Vanta, so I talked to a lot of early customers. Almost all heard about us through word of mouth. This mirrored something I observed during my interview process. Whenever I described what Vanta did to a friend, they would invariably ask, *“What’s that name again? Fanta? I need that.”*
The central marketing challenge at that time was that our customers — startups who needed to prove their security standards so they could land enterprise customers — only learned what SOC 2 was after frantically Googling it when a prospect asked if they had it. We were able to capture a lot of that existing demand by targeting search keywords like “soc 2,” but we knew education could create even more demand. Customers were problem-aware, but not solution-aware, so we invested a lot of our early marketing resources into educating the VC and accelerator ecosystem about why they needed a SOC 2.
By early 2021, we were gearing up to announce our Series A, our first institutional funding round. Most companies at the time were raising Series A at $1M ARR, but we had already blown past $10M ARR. Without a major funding round, people thought we were smaller than we were, which was holding us back from attracting great talent and winning the trust of bigger customers.
I was in charge of our fundraise announcement, which I had never done before. I had never even done any type of comms. This was a big moment for us: The business was ripping, we’d gotten a $50M check, the round was led by Sequoia, and we were going to talk about ourselves publicly for the first time.
I fucked up. I didn’t know what an embargo was — the mutual agreement between a reporter and a PR person that neither will share the news until the designated article’s go-live time. So when the reporter's article didn’t go live exactly at 6 a.m. PT as planned, I pushed all our materials anyway. The reporter was very unhappy, and called Christina directly.
I thought I’d get fired. All morning, I waited for the axe to fall, but it never did. Christina smoothed it out with the reporter. The article was great, and meetings started pouring in. The next day, I sheepishly attended a warts-and-all debrief with the team. Christina took my side in that discussion and assured me that “Now we know what an embargo is. It won’t happen again!”
It didn’t. I realized quickly that Vanta was a place where it was okay to make mistakes, so long as you diagnose why they happened and apply that learning moving forward. This was jarring to me at first, because corporate life had wired me to fear missteps. But I quickly learned that too much fear can be paralyzing and prevents you from learning.
> Christina wants you to make new mistakes. If I made the same mistake again, I would have been out.
Shortly after that, I created two sticky notes in the notes app of my phone: “3 Vanta things,” where I have three things I’m excited to be working on (if the list runs dry, I’ll know something’s wrong) and “Vanta lessons learned” where, as the title suggests, I bullet out lessons I’ve learned from Vanta, usually the hard way, by making a mistake.
There was the time I showed up for a Strategic Initiative review unprepared, and totally whiffed when questions were directed my way (lesson learned: Read the pre-read!). Or the time I was overly defensive about my team’s performance in a 1:1 with Christina which triggered a thoughtful note from her that I was coming across as not self-aware (the exact word she used was “nihilistic”) about what was and wasn’t out of my control (lesson learned: Taking feedback well is a skill. Cultivate it!).
Reading each one of those bullets still stings a bit, like thinking about the most embarrassing things you did in middle school, but the list itself is a comfort to me.
## The billboard: Vanta’s breakout, my breakout
It turns out marketing an “unsexy” product is really fun, and Vanta trusted me to take creative bets you wouldn’t expect from a B2B compliance company.
Up until our Series A announcement, my marketing work had been fairly conventional: setting up paid search, doing community education for startups. That fall, we were getting ready for SaaStr, our first-ever in-person conference, held at the San Mateo Fairground, which felt like an opportunity to take a big marketing swing. [Delaney](https://www.linkedin.com/in/delaney-hertlein/?ref=review.firstround.com), Vanta’s first marketer and my demand gen counterpart, rented a billboard right off of the Fairground exit for two weeks, and we had a week to submit our creative.
We started riffing on what we wanted to say. At the end of a group brainstorm session, we still hadn’t landed on any winners, and the perfect pun popped into my head: “Compliance that doesn’t SOC 2 much.” It felt like spot-on positioning, because Vanta was the definition of a painkiller product. We come in when a startup is about to land a massive customer that could be an inflection point for their business, but the deal gets stuck at the one-yard line because they don’t have a SOC 2\. I shared it in the Zoom chat and everyone laughed, but the consensus was that it was good but too provocative, and B2B marketing should be *respectable.*
But it stuck in my head. Later that night, I ran it by my husband. He thought it was hilarious, which gave me more confidence to fight for it. I shared it with one of our new execs, who felt like one of the first adults in the room, but she didn’t love it, because it implies that compliance inherently sucks.
I still had a gut feeling that it would be good, so I brought it to Christina directly. “It’s a little out of the box,” I remember Christina telling me, “but let me think about it.” I’d told her on a Friday, and then on Saturday morning, she Slacked me, “Okay, it’s funny. Let’s run it.”
**The first billboard*
So we went with it. [Christina posted it](https://x.com/christinacaci/status/1442952740141821954?s=20&ref=review.firstround.com), it went viral, and for the first time people knew Vanta’s name as a brand, not just the provider of SOC 2s. We had one of the smallest booths at the conference, but it was mobbed all day by people who saw the billboard on their way in.
It felt like our marketing had kicked into gear after slowly building momentum — we’d just raised this huge Series A after never doing press or marketing, and now we had a viral billboard. Not long before, the embargo mess had me convinced I was the wrong person for the job. I was sure that someone was about to notice I had no idea what I was doing. But the billboard proved otherwise. I didn’t know all the conventional diction of B2B marketing, but I had come to know our product and customers deeply. And I felt more and more confident that I could combine that with the love of storytelling I inherited from my mom to create *new* diction, with a differentiated tone.
**The Saastr crew*
The billboard paid back its rent, and then some. A CTO was driving down 101 and saw it, laughed to himself, and a few weeks later Googled Vanta and set up a demo. Weeks later he became our largest enterprise customer.
It took me a while to name the playbook we were writing. During our first rebrand, the agency ran one of those voice exercises where you pick the words that describe you — was our celebrity doppelganger Tom Hanks or David Attenborough? Was our brand voice witty or warm or bold? None of the words they picked quite fit. “Witty” made it sound like we were straining for a laugh, which was the opposite of what the billboard had done. Half offhand, I said it felt more like we did marketing *with a wink*. That one stuck. Someone later described the wink to me as the twist in a martini — something a bit unexpected that helps the substance (in our case, dense security and compliance content) go down easy.
Once we named it, we could do it on purpose. We delighted customers by sending them purple socks adorned with “SOC 1” and “SOC 2” after their audit. We hosted our inaugural user conference, VantaCon, the week before SantaCon in San Francisco. We created our own energy drink, ROC 2, for engineers who wanted to stay in flow instead of pull evidence for compliance requirements.
## My six-month reinvention cycle
Reinventing myself at Vanta has paralleled how the business has continuously reinvented *itself*. A sampling of those reinventions:
When I first joined, Vanta was the only player in our space. Then 2021 arrived — peak pandemic, peak ZIRP, peak startups — and overnight we had a few dozen VC-backed competitors all claiming to be "just like Vanta." (On the bright side, it meant all the market education I did in my first year had worked.) The humility and earnestness that had served us suddenly felt like liabilities. I had to amp up my competitive instinct and figure out how to defend a category I'd helped build, this time without Google's name behind me.
Vanta was changing in parallel, standing up a real sales team to match the growth. [Stevie Case](https://www.linkedin.com/in/steviecase?ref=review.firstround.com) joined as our CRO — with an unmatched competitive streak and a love of winning, fitting for the [first woman to go pro as a competitive gamer](https://www.vanityfair.com/style/2022/10/stevie-case-vs-the-world-gaming-industry-sexism?srsltid=AfmBOorExY5Mw8DnF8Eqm2AHJfpgUd8BDKEX98IAclb0t1d7D-M4bbFi&ref=review.firstround.com) — and taught me that the sales team is the largest marketing surface we have. Knowing we had the best product wasn't worth much if a rep couldn't say why out loud, so I became the product's most fluent power user and its loudest advocate with sales.
Going from a product to a platform was the next reinvention. I got to name my first category, Trust Management, and learn how to build equity in that term to make the case that the whole was worth more than the sum of its parts.
More recently, AI exploded onto the scene. Once again, the narrative changed, and Vanta, along with any company founded before 2025, was being called the dreaded “i” word: *incumbent*. My job was to turn that around — to make our track record and our pace of shipping read as strengths rather than baggage, at a moment when the market was rewarding a fake-it-till-you-make-it approach to AI. When serious allegations against a competitor went viral, our trusted reputation and track record became even more valuable assets.
By 2025, Vanta’s marketing was reinventing itself for a new audience, the enterprise, and I worried about whether we’d be able to keep our wink while talking to bigger buyers. When our first CMO, [Scott Holden](https://www.linkedin.com/in/scottiholden?ref=review.firstround.com), joined, our first 1:1 focused on the great many things we needed to do to mature our marketing rigor and polish to reach Vanta’s next stage of growth. I agreed with all of his plans, but made one request: “You can’t kill the llama,” I said, “that’s all I ask.”
It turns out I needn’t have worried. By this time, VantaCon had grown into one of the largest dedicated conferences for GRC professionals. One of the recurring highlights of VantaCon is getting our enterprise Customer Advisory Board, a collection of CISOs, together to get their advice. At VantaCon 2025 we pitched them three concepts for our first large-scale brand campaign, our first campaign targeting CISOs. The feedback was clear: Don’t lose the wink, and don’t lose the llama. Later that night, we took a group of them to a Warriors game, where they met the wink in the wild — Vanta-branded baskets at the security line for phones and keys, stamped "Secure the win with Vanta."
**Behind the scenes of our "Calm-pliance campaign"*
We had always marketed business software with the radical idea that our buyers were actually human. And it turned out that CISOs are human! So we hired [Mary Ellen Matthews](https://www.instagram.com/maryellenmatthewsnyc/?hl=en&ref=review.firstround.com), SNL's longtime portrait photographer, to shoot our "[Calm-pliance](https://www.linkedin.com/posts/vanta-security%5Fsnl-photographer-mary-ellen-matthews-called-activity-7463257557940404225-dZfx/?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAB-cydoB958voLwCYS3c3FAJs77ualgq02g)" campaign, which has run all around the world. And we redesigned our beloved llama, Ilma, to give her a more polished look and personality.
Just recently, we unveiled Ilma on our new permanent billboard on 101\. Once again, we debated taglines to use. After much debate, we went back to the line that started it all: "Compliance that doesn't SOC 2 much.”
Every one of those eras demanded a different focus, a different skill set, a different posture — but all of them still lived inside PMM and Brand, the part of marketing I already called home.
At the end of last year, Scott and Christina came to me with yet another new challenge: leading Revenue Marketing, the third leg of marketing I'd never touched, and the part where AI is reshaping the work fastest.
The Silicon Valley playbook is clear about what you do after half a decade, a 40X run, and a new CMO: You go find your next thing somewhere else. Plenty of CMOs I admire have "only" led PMM before getting the job — one leg of the marketing stool — and I'd already led two. I took the sideways move across the jungle gym instead, because it was the job with the most left to learn.
Very quickly I was confronted with the exact thing Christina had once asked me about in that values interview — Project A and Project B, no context, figure out which to work on. Revenue Marketing threw a dozen of those at me at once (Brand or performance? Upmarket or startups?), but Vanta had trained me for precisely that: to walk into ambiguity, figure out what to ask and of whom, and get to "right, I'll start here." I made an impact fast, and earned the trust of the business.
What I didn't plan for was how quickly the next reinvention would arrive. Recently, Scott decided to move on from Vanta, and the CMO seat opened up. By then I'd led every marketing function at Vanta — I'd started most of those teams, and had a hand in hiring most of the people on them. I knew this business, these customers, and this team in the way you only can by staying inside them for years. Christina set a 1:1 with me and asked me to take on the role. I sat for a moment in shock. Becoming CMO at Vanta, the company I already knew so well, whose marketing DNA felt like an extension of my own, had felt like my dream role since I had turned down my “dream role” at Apple six years before. But I was also extremely happy in my new Revenue Marketing capacity, driving improvements to pipegen and spending a lot of my time building in Claude Code. Before my brain had a chance to catch up, I’d already accepted the role, and with it, my biggest reinvention yet.
While it felt like a big leap, this reinvention only exists because of all the smaller ones. Each time I'd remade myself and it worked, I'd banked a little more of the company's trust, and that trust is what bought me the next, larger reinvention.
> Trust compounds, but only if you stay put long enough to let it.
## The man who stayed
My dad made the same commute to the same office for the same job for 41 years. Growing up, his career seemed to me like the opposite of reinvention. Younger lawyers at his firm called him “The Professor.” But when he died, my inbox filled with notes from people I'd never met, telling stories I'd never heard. He had helped invent new ways of financing movies — cross-border deals and first-of-their-kind structures that hadn't existed before he built them. And he had changed the course of a younger generation of lawyers' careers, quietly, over years, in a way only someone who'd stayed long enough to have that kind of context and standing ever could. He'd been reinventing himself the whole time, though I'd only ever seen the man who stayed.
What I understand now is what he already knew: You don't have to leave to reinvent yourself. You just have to keep learning, and keep doing the work differently than you did it before. Six years at Vanta, and I'm just getting started.
### What startups get wrong about enterprise | Lindsey Scrase (COO, Checkr)
URL: https://review.firstround.com/what-startups-get-wrong-about-enterprise-lindsey-scrase-coo-checkr/
Last updated: 2026-07-30T16:25:05.000Z
In the latest episode of Executive Function, Brett sits down with Lindsey Scrase, COO of Checkr. Before joining Checkr as CRO and later stepping into the COO seat, Lindsey spent nearly a decade at Google Cloud as global managing director for SMB, mid-market, and startups. In this conversation, she breaks down why moving upmarket into enterprise trips up so many startups looking to scale, how Checkr rebuilt its sales compensation model to keep pace with growth, and where AI is already reshaping her operations and go-to-market teams.
In today's episode, we discuss:
- Why operators who thrive at massive-scale companies often struggle when they join a startup
- The hard-won lessons from Checkr's early enterprise push that nearly failed
- Why Checkr’s C-suite meets every morning with no specific agenda
- The surprising challenges moving from CRO to COO
- How Checkr turned AI experiments into operating systems
**References**
- Amazon: [https://www.amazon.com](https://www.amazon.com/?ref=review.firstround.com)
- Checkr: [https://checkr.com](https://checkr.com/?ref=review.firstround.com)
- Claude: [https://claude.com](https://claude.com/?ref=review.firstround.com)
- Daniel Yanisse: [https://www.linkedin.com/in/yanisse/](https://www.linkedin.com/in/yanisse/?ref=review.firstround.com)
- DoorDash: [https://www.doordash.com](https://www.doordash.com/?ref=review.firstround.com)
- Google: [https://www.google.com](https://www.google.com/?ref=review.firstround.com)
- Lovable: [https://lovable.dev](https://lovable.dev/?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com](https://www.microsoft.com/?ref=review.firstround.com)
**Where to find Lindsey**
- LinkedIn: [https://www.linkedin.com/in/lindsey-scrase-0702442/](https://www.linkedin.com/in/lindsey-scrase-0702442/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/Lscrase](https://twitter.com/Lscrase?ref=review.firstround.com)
**Where to find Brett**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps**
00:00 Introduction
00:06 Why big-company executives often struggle in startups
02:18 What Checkr's first CRO needed to accomplish
03:33 How to take on an entrenched category leader
06:58 Why leaders underestimate how hard the jump to enterprise really is
10:23 Separating a true deal-blocker from a customer's nice-to-have request
18:30 Why Lindsey hired enterprise-scarred sales leader over a market leader's résumé
22:08 The biggest challenges of moving from CRO to COO
28:03 Why Checkr names a single decision-maker for every major decision
34:42 Why Checkr rebuilt their sales compensation model
40:39 What actually separates a team's best seller from everyone else
45:03 Inside Checkr’s daily, no-agenda, c-suite meeting
50:23 How following data can sometimes lead you in the wrong direction
57:27 Why hitting 130% of a goal isn’t always a good thing
58:57 Where AI has changed how Checkr's teams operate day to day
1:04:33 Advice for all aspiring COOs
**Brett:**
When you go and look at many people with your backgrounds, the pattern is you worked at sort of a massive at-scale business, then on a relative basis you join a startup as an executive and a lot of times it does not go well. And that person often goes back to operating at some massive scale after some stint. And it feels like after a decade of doing real at scale building, you went to something very small and have had a really prosperous sort of last four-plus years. Why do you think you've kind of been able to adapt and really do well in a very different environment where it feels like the default is it doesn't go particularly well?
**Lindsey:**
Yeah. I mean, it often doesn't go well. You're right. I think that there's a few dimensions to this for me. I think there's me as a person and then there's the experience I've had and then Checkr and what Checkr needed versus what I was bringing. I think me as a person, I have always really enjoyed going into completely new contexts and understanding first principles, but even just being an expat in a different country, immersing myself in a new experience, what are different ways of doing things and really learning from that versus taking my point of view and foisting it on where I'm going. So I've always liked that and been excited about it. At Google, I joined Google Cloud when we were a few hundred people on the go-to-market side, a few hundred million in revenue, and so not dissimilar to the size and scale that Checkr is.
People think Google had a ton of resources. Obviously we do. Unlimited funding in some ways for the startup, that was Google Cloud, but it was very hands-on, scrappy, building and scaling with very little resources and scale. And so we had no enablement pretty much seven of the 10 years I was there for any of my functions. We had very little RevOps or SalesOps or systems folks or anything like that. So it was really building and figuring out how to do that at scale. So when you take that to the Checkr context, we had a lot more built out, frankly, at Checkr when I joined than I had at the similar stage at Google. So there was that. And then I think that what Daniel was looking for... I joined as CRO. He had had several CROs before then.
**Brett:**
There's no scarier job than being the first CRO at a startup.
**Lindsey:**
It's a terrifying job. First to blame when numbers aren't hit, which is hard. Is it the person or is it the product market fit? It's very difficult.
**Brett:**
It depends on who you ask. If you ask the CRO, it's the product. If you ask the CEO, it's the CRO.
**Lindsey:**
I think that where Daniel... What he was looking for at the time when he was hiring me was someone who could be incredibly data-driven, who was very operational. We were, at that point, had been very successful with gig companies, selling verifications, background checks, and were looking to... We'd kind of dabbled in enterprise, we could summon mid-market, starting an SMB, and really wanted someone to think multi-segment, operationally data-driven, high velocity sales layering on top. And so that was something where... I knew what he was wanting to buy, I was selling. There was a really strong product market fit, so to speak, from what I was able to bring. And we really vetted that throughout the interview process. I didn't want to go somewhere where they had illusions of what I was going to do or what I was going to be and I wasn't, and there was a really strong fit there.
**Brett:**
What do you think is unique about building a business like that where there's already a category of leader and you're trying to gain market share versus a business where maybe it's a new market and you start out as the leader? Or it depends on maybe how you look at the Checkr market, but maybe when you joined, it felt like in their sub-part of the market, they were the category leader. What are your reflections on business strategy, order of operations when you're trying to go after a market with a clear leader already?
**Lindsey:**
I think it requires a lot of humility to understand where are you gapped versus an incumbent? With Google, we're going up against a Microsoft or an Amazon, and Google's a category leader in other aspects, and so I think at first there wasn't the right understanding of the investment we need to make in marketing and the investment we need to make in product go to market, like hey, we'll just do this. And at Checkr, I would say it's been similar over the years where we early lead in all of the gig economy, high-volume hiring, and then shifted to enterprise. And again, this is six plus years ago, but had some failures where thought like, "Hey, we can just do this. Enterprise is the same," and it's absolutely not, and you have to think about it in terms of focus, I would say is very important. You can't go from being a challenger in the market to capturing everything overnight, but really thinking about where is that focused vertical or verticals where you know you can win.
And so whether it's at Google Cloud, like innovative companies or high volume or high growth startups is where we really leaned in. Those will become the big companies and they were going immediately to cloud, not shifting from on-prem to cloud. So that was a big part of the strategy. At Checkr, it's where we know we are huge value add versus entrenched incumbents. So industries like staffing, gig, retail, hospitality, manufacturing, we're doing a lot of hiring and they need the benefits of our technology and accuracy and scale. So that focus is really important. And then the other thing is the whole company has to be behind it. I've kind of said this multiple times, but I can't reinforce it enough. At Checkr a few years ago, we said, "Let's go into enterprise again." We're evaluating the strategic decision because it's an investment of resources and really our R&D team's time, and we had to literally shake hands around the table that in engineering and product in legal and people, obviously all of go-to-market, we are investing across the board. This isn't just something you can pilot.
And then there needs to be that really tight learning loop is probably the other most important thing where we have our chief product officer is meeting with customers daily, our product managers are on the calls with our customers daily with us to really get that very fast cycle and loop of feedback to know. We're still building, and if you're a challenger, you have to be able to be agile and you can't just assume you have the right product. And there's a lot of needs that enterprises have. So it's a huge undertaking and one that Google Cloud has been obviously very successful at. Checkr, we're seeing a lot of success as well in our most recent few years here and a lot more to come.
**Brett:**
This topic that comes up with so many scale-up startups, which is you generally build the business on the back of venture back tech or mid-market buyers. And then at some point everyone realizes that most revenue exists in the global Fortune 10,000, and so we're having all this success for this widget sold to this mid-market customer, we're just going to take it to enterprise. You look at tons of companies that do that. It's so much more challenging to make that work. And a lot of companies have done it, but a lot of companies have almost blown themself up over dominating enterprise. Why is it actually much harder than someone... Imagine you have this great product and this go-to-market that's working to sell it to call it 200-person companies and now you're selling to 25,000 person companies?
**Lindsey:**
I think that why is it hard, I mean, there's so many things about why it's a challenge. I think that there's... Obviously, if you do the math, you're like, "Oh, yeah. The deal sizes are very large. It's like a set list of accounts we go after. No-brainer, let's go do this." They're not shifting providers all the time. So deal cycles only come up every so many years, and they're often a year-plus long sales cycle.
**Brett:**
And why though?
**Lindsey:**
The decision-making process at large companies is long. Often big decisions like this, if you're going to switch your cloud provider, if you're going to switch your email provider, switch your background, your verifications platform, this takes a lot of internal resources as well from an engineering or development timelines perspective. So it has to align with the timing of their contracts, it has to align with their strategic priorities as a company, and if this isn't something they care about, it's on the top 10 list, then you've got to figure out how to make it up there. And so even that discovery with the customer to try to find and uncover pain and paint that future vision is hard. The sales acumen is incredibly important. You're not order-taking, you're not doing one or two pitches and closing a deal, you're engaging in a very complex sales cycle where you're building trust, you're multi-threading.
Or if you're talking to the HR buyer, you've got to figure out, okay, well, who's the ultimate decider here? Is it the CHRO? Is it the CFO? Is it the CEO? You're doing reconnaissance across the company to try to really get a good understanding. So there's a lot of challenges on the go-to-market itself. And you may be faced with lack of brand awareness in enterprise, especially if you're coming from being a scale-up or startups know you only. There could be billboards all over San Francisco, but your buyers are in Dallas and Atlanta and Chicago, so it's a different audience. And then I mentioned the product roadmap. Enterprise customers, there's always going to be the last long tail of requests for any customer. They're rarely buying it off the shelf. There's going to be something unique for their instance. And I mentioned in G Suite or Google Workspace, there is things... We thought product was complete and done, but there's a list of whether they're regulatory or certifications that are needed for certain industries or just bells and whistles, but they're really important to that customer. You have to build those.
So that's all the reasons why it's very challenging. I think that what can make one successful in this is multiple things, but one, on the product development side, it's really hard to differentiate what's a deal blocker versus a nice to have or something that a customer wants versus something that they really need. And oftentimes I think where people can go wrong is anything this customer asks for or prospect asks for, I'm going to commit to building. So suddenly your product roadmap is complete snowflakes for every single customer, which is not going to work when you just spread too thin, and the flip side, or you're too arrogant and say, "Hey, we don't need to do any of this," you can't close the deals, and then it's like product and sales pointing fingers at where's the issue.
The other part I mentioned is focus and making sure that... I've seen enterprise sales leaders fail where you're running sales teams, you're doing this in a repeatable fashion, but you're not getting hands-on into what specific accounts, why, how do we run targeted plays. So for Checkr, for example, getting the outbound motion... If you're going through enterprise, you have to get outbound pipeline generated. When I came in, it was not working. I'm like, "Okay, is this a strategy issue? Is it an execution issue?" Took a year and a half to really uncover all the issues of why it wasn't working, and it was people, it was processes, it was the right strategy we were going with. And so tinker with it to find the right thing, but eventually figuring out and really getting laser targeted and who are we focusing on? What events do we need to show up at? How do we think about getting their attention? Buyers are incredibly busy. I get a hundred emails a week from people trying to sell me something. I don't read any of them.
And so you really got to get it creative and figuring out, and especially in today's world of AI slop outbound in terms of people's attention is more distracted than ever, how do you get their focus? And so when you do really well in enterprise, you're able to focus on the right target accounts, figure out the right messaging and the right... What's the pain they have and how do I address that and get ahold of them? And then running that sales cycle and being tenacious throughout what could be a year or a year-plus.
**Brett:**
So where do you think a company should start? Let's say you have a lot of success, you're at a couple hundred million dollars in a mid-market business and you want to go build an enterprise business. How do you break that apart? Just in the way that you articulate it's so multifaceted. It can be so complex. Do you think there is a way to begin that's correct for most companies or it's totally context-dependent?
**Lindsey:**
Translatable for any company. It's figuring out, do we have the right people on the bus, so to speak? So hiring enterprise-experienced sellers is very different. Thinking about enterprise marketing is completely different than traditional growth marketing and demand generation. So you need account-based marketing, you need events, strategies, et cetera. Having the right product and engineering investment to be able to do last mile needs and build for the enterprise specifically. So those are table stakes. And then the how is to start in a focused approach. You can't spray and pray.
And so often people will have a small pilot in a specific large enterprise and like, okay, we're good. We're in the enterprise. Or a startup that they got when they were, let's say... DoorDash was one of our first customers that was a startup when we started with them, they're now obviously a large enterprise, but just because you've scaled with that company doesn't make you enterprise-ready. And so focusing on for traditional enterprises, where can you win? And even being as narrow as possible. We closed a lot of car dealerships, very large Fortune 500 car dealership companies. That's one where let's just keep taking them down as an example.
**Brett:**
How did you figure that out?
**Lindsey:**
You need a really data-driven RevOps and sales team. We got very, very granular using a lot of the tools out there using AI, but just people who are really focused and inquisitive. And then we started doing very quick iterations of if we're starting to see good takedowns in a specific, we call them rich niches, but then let's spin up more and more campaigns targeting that. And you have referenceable customers, you're seeing good takedown strategy.
**Brett:**
But do you think because of that, that... Again, let's say you're mainly a mid-market business. Should you be more in explore mode at the beginning where you're more spray and prey and you're trying to find these niches or you need to find a more efficient path to start to stack the niches on top of one another?
**Lindsey:**
I would look at where are you performing well in the mid-market? Do a really deep vertical analysis, talk to customers. Know where are you acquiring customers really well, where are they thriving, your NRR is high, GRR is high, and then start there in a few areas. I wouldn't go tackle the beast head-on because it's a lot of money and you want to get the quick learning. And if you're spread too thin across too many verticals, that's just really hard. Unless you have a very completely horizontal product, but even if the buyers and it's different, yeah.
**Brett:**
When you think about getting this enterprise motion off the ground, should it be cleaved off and you have a few sellers or marketers or whatever that you're kind of creating a new business, or you actually want it very tightly coupled with the rest of the company when you're getting it off the ground?
**Lindsey:**
I mean, the way that I think things work best for anything like this, not just enterprise, is to have dedicated people trying and moving quickly and sharing information together. I don't think it needs... So I wouldn't put it totally embedded. Let's put this through the exact same process for the rest of the company, but it shouldn't be in a basement corner somewhere. When we started this, we had a small group of sellers. We had product manager. I said, "If we're going to do this, we need one dedicated product manager because there's not an enterprise. It's an entire product stack." But you need one person who is embedded with the team and is the person and leader. And that was a hugely beneficial move because he was in the customer calls, he was coordinating with all the folks in engineering and product that just helped us move and scale so much more quickly. So I think having some separation is helpful. And that could just be specific name individuals. In marketing, you're the person in product. They don't have to be completely separated.
**Brett:**
Did you find that you had to pre-commit to X number of roughly we're going to spend a third of our engineering resources on what's coming from the go-to-market and product team that's with enterprise or it was much more organic?
**Lindsey:**
It was more organic. And every quarter we're looking at that breakdown, and what we did align on is that there's going to be an unanticipated work that we're going to have to do and we all need to align that we got to figure out how to do that. Because even at the beginning of a quarter, you set a roadmap, but there's stuff that's going to come up from a new prospect where we got to figure out how to fit it in or an existing customer that we just ramped because there's a lot of unknowns at that point still.
**Brett:**
Do you think it's clear that the AEs need to understand enterprise and that being an enterprise AE is different than being an SMB AE or some version of a seller down market? Do you think the person leading revenue also needs to have enterprise experience or you can have somebody that's much more in a transactional mid-market be successful at building out enterprise?
**Lindsey:**
You always could have someone be successful. I come from SMB mid-market, so I was not the deep enterprise expert when I came to Checkr, and at that point we weren't going big in enterprise. So for me, it was really important to hire a sales leader who had done this multiple times and done it in an environment that was gritty and challenging, not where, hey, they're the market leader running an enterprise org. And that's valuable at some point, but no, hey, I need to go figure out what accounts to go after, how to take these down. And so that I think is very important. And then on the sales reps, we've got a great internal mobility program where you can grow from being an SMB commercially up into enterprise.
But what's very hard to train if they don't have it already is that outbound demand generation hunger. So if you're taking and hiring someone, even an enterprise, but who's just had leads passed to them, they're in a market-leading position or they're not having to do that, we are like, "That's a no-go for us moving forward." So everyone needs to know grown up through, you make your own pipeline, which is hard to teach that if you've not grinded it out on the phones or doing outbound without a fresh, warm book.
**Brett:**
One of the things you mentioned briefly that's always fascinating to me is basically forever in go-to-market, events tend to be very useful, and it takes in every possible flavor of taking people to VIP thing at F1 through cocktail hours, dinners, educational. And it feels very odd that still in 2026, that that's very effective and it's generally very high ROI. What's going on with events and selling products and why they tend to work very well, regardless of who the buyer is or you could go through and it just tends to work well?
**Lindsey:**
Yeah. I mean, I also... Especially post-COVID, events were dead, we stopped doing anything. And then we piloted it and saw returns, watched it closely, and over the years have invested substantially in this. I think that the crux of it is a sale, it's a leap of trust, and especially at that enterprise level, you're making a big decision. Often as a buyer, your career, this is a big strategic thing you're recommending internally, you don't want to take risk on behalf of the company, and so a lot of that comes down to the trust you're making in the individuals. Humans are humans. I don't think anytime soon in enterprise sales specifically, that's going to be replaced on the AI or on the agentic side. But it's that human-to-human contact is the biggest fundamental pillar.
And then I think also, and where we try to focus our events is giving people something that they wouldn't get otherwise. So I'm sure you get invited to events, you get invited to a lot of events. Most of them... I've got children at home. There's opportunity cost of going to an event if I could work on my own work or be with my family is very, very high. And so it's creating enough interesting, compelling events, whether that's experiences they wouldn't have otherwise, not just another basketball game. It could be that. But we've done Houston Rodeo or Devil Wears Prada Premier in New York, just something that's different or very strong thought leadership that's going to help you in your job. And so it can't just be go to the same event, it's got to be targeted and high value.
And then lastly, at a lot of these events, they're meeting their peer set, which is for any leader, I always tell my leaders, that's an important part of your job is to break from the day-to-day, to get external context, and for most of these, they're with a bunch of other folks outside, and that's hugely valuable for them. So events are not dead, and I don't think they're dying anytime soon.
**Brett:**
But if you think about going from CRO to COO in the context of Checkr, what was by far the hardest parts of that?
**Lindsey:**
The mental shift, especially in a large company like Google, even though we were Google Cloud, smaller when I joined, but you're managing your own functions and you're working to push cross-functional teams. That is your direct area of accountability. And so it was, I think, a few things. One was inserting myselves into other people's business who were not on my team. So let's look at the supply chain, which is owned by another function at that time. How can we improve that? Or our recruiting velocity, our hiring approach, is this working well? Hey, let me partner with you on that. Looking at our metrics with our CFO at the time, "Hey, I don't think we are necessarily measuring all the right metrics. Let's look at adding some other ones that better define the business." So that was an adjustment, especially no, those are my peers objectively, but I had to lean in and push them.
And then also working with Daniel, we spent a lot of time intentionally on a few things, but one is continuing to build trust, continuing to give him feedback, and he wants to be pushed as well, give feedback both ways obviously. And then figuring out the right balance of, hey, running the... I do our company business reviews and he's up back more, but making sure that he's a founder. He cares deeply, this is his baby, and making sure that he's aware of everything he wants to be aware of, even though he's not in the day-to-day. And he and I are always working through that and finding the right balance to make sure we're on the same page.
**Brett:**
What did you figure out about how you go about solving these problems that sit outside of the part of the org that you're directly responsible for? One would imagine, "Why are you involved in what I'm doing here?" Or very easy to get defensive, very easy to get, territorial. Very easy for that person to then say, "Well, let's talk about your part of the..." Or all of the interpersonal things.
**Lindsey:**
I think it starts with trust and building that trust with each other. I think one thing I've also done at the company is build out... I'm a big believer in cadences and connection, so all of the cadences with our C-staff, it's the six of us, including the CEO, but when we do offsites together and ways to connect in a deeper level so that we can have difficult conversations, same with our VP level, our director level, all of that I coordinate. So that's a big part of it where you have the license to push each other. I think the second is that I had to get out of my own way and this is my job. I debate, I push, but I like harmony. I had to tell people explicitly what I was doing, like, "Hey, this is my job as COO. I want to partner with you. We're working on this together. I don't have the right answers always."
And I get a lot of benefit when they push me like, "Hey, you're..." Our chief product officer when he came, is like, "The sales collateral's not very good." He's a very strong enterprise-focused product leader, and, "You're right, let's go improve this together." So it should go both ways. I think that from a mental framing as an executive in this role, it's that this is what is expected of me and we're not doing well if go-to-market's functioning well or operations is functioning well, but there's issues over here.
**Brett:**
This builds on what you were saying a second ago about building cadence and systems and process as you scale, and it feels like if it's not done well, you end up in corporate bureaucracy land and people spending more time filling out OKRs than they do doing the work. It feels like have this fundamental tension where you're trying to figure out how do we have as little work around the actual work that people want to do? But I think you get to... It's almost like a law of physics. You get to a certain size company and it might be 30 to 50% of the time if you audit what someone's doing, it's not doing actual work to make the product better, deliver for a customer on and on. And so what's your general philosophy on the role of process and standardization while also allowing for judgment, agility, pushing decisions to the edges of the company, the tension and those two things?
**Lindsey:**
Yeah. I mean, decision-making is one we've been actively working through right now, and that's a very hard one because that drives a lot of... The more process you have to take things up the chain, so to speak, the more people are spending on internal stuff versus getting work done. Especially in a founder-led company, the reason the company took off so well is that you've got incredibly bright founders who make a lot of decisions, and I think at Checkr, have got into a routine of a lot of decisions just naturally flowing up. If you give an executive a decision, they will make the decision. And so we've worked to try to turn that in an intentional way and just very practical things. But I think first of all, Daniel and I sat down a couple of years ago and said, "Okay, what are the decisions that you need to make? Let's just document it."
**Brett:**
So what are some examples of that?
**Lindsey:**
Deals above a certain size or any major brand campaign, not a demand gen, but any major brand decision. Any product monetization that's going in a completely... We're a consumptive model. Changing a product to SaaS is an example. Our CEO cares about swag. So it's like what we put out there, people are wearing. That's an exception he gets. That's not a big one. And we keep looking at it and saying, "Where can we push that down to the next layer, the next layer?" So there's that. I tend to think there's the whole rapid racy... I think sometimes it's just too much process, but what we've rolled out is two things. One, for every initiative or anything happening, who's the DRI, directly responsible individual, and that's just in our lexicon, because we saw a lot of swirl happening around unsure who was taking the next step to who owns something and codifying who is the decision maker, because we saw naturally everything was just flowing up and it wasn't always obvious that certain executives were deciding everything or everything was flowing up to VPs.
And so it forces us to say like, "Oh, wow. I'm the decision maker on a lot of things. Push it down." As an executive, as a leader, how I think about my time is the ROI of my time on a decision should be high. So I should be able to do distinctly better than someone below me or deeper in the organization. And if I'm deciding things down there, then I'm not getting shareholder value. And so that's one big thing we put in place in terms of mechanism to flow decisions.
**Brett:**
And so with that in your world, at this point in the company's life, what do you think the things that you should be DRI on, and maybe what are some things that other people might think you should be DRI on, but you sort of very strongly believe it should sit somewhere else in the org?
**Lindsey:**
Key DRI, how are we thinking about major product roadmap trade-offs? That's probably the thing we disagree and debate on the most as a company is there's so many massive opportunities ahead of us we could go run after and capture revenue very quickly, how do we sequence those? What do we not do? So that's at the exec level decision because it really should tie to our three-year roadmap and strategy. I think an example of something where I maybe decide on, but I push it down, is how many sales reps should we have going to next year? We're going through that decision right now. And I think that if you're aligning incentives of everyone... People are getting paid on the things that are read by the company. If their goals are really thoughtfully aligned, then a lot of those things are... People are going to make the right decision.
Big M&A, this is one where those are one-way doors that are hard. And then hiring is really important. So key, any VP level and above, if you get that wrong, that's going to obviously have a ripple effect on the whole company. I have to do it too. I'm a perfectionist. I am very data-driven and I always tell people once I have your trust, you go make the decisions. When I have a new hire, a new leader, I'm investing more time upfront like, "Here's how I would make a decision. Let's look at this one together and then after the next one, you go with it." So there's coaching involved as well.
**Brett:**
What do you consistently find in terms of actual decisions are very challenging? Even if you have high quality judgment and you have context on the organization and it's in your remit that for whatever reason, it's oftentimes very hard to get it right?
**Lindsey:**
I think hiring is one of the hardest things where, especially executive hiring, or... People just are really good interviewers at that stage in their career, and the stakes are high, and so I've made bad calls there, either maybe over-indexing on someone who's got a ton of relevant experience or betting on someone who's not at that exact level, but has the intrinsics who couldn't turn the corner in negotiations with very high stakes where there's not perfect information and there's no perfect decision.
And I think that what I've learned over the years is that you could make a really good decision and still have a bad outcome, or you could make a really poor decision and have a good outcome. And how do you become good at the process of making decisions? Which for me, as a recovering perfectionist, it's like you're going to make the best decision you have with the information you have available, and you have to make a decision. Nothing worse than that is no decision. I'm working on it then with my team as well. If I trust your process of making a decision, then hopefully you'll be right and 10 out of 10 you probably will, but there will be some misses and I might've had the same outcome.
**Brett:**
Do you find that even when you build trust with somebody who's owning something in your org, that you still need to stay close such that you can actually have a feel for the business or there's this risk that you turn into a Dilbert exec that's so separate from everything and so you have to stay close to the metal?
**Lindsey:**
Absolutely, and I think it's easier than ever now. Staying close to your team, but then the broader organization. Even in our office, Daniel and I sit together in one area and then I have a separate place, I just sit with the team in the sales floor or whatever, just to hear through osmosis what's happening, talking to people in the hallway, et cetera. But now with AI... We're heavy Slack users, we have a channel for every single customer, every single deal. We're very structured about this. I can regularly keep pulse of everything. Getting that felt sense of intuition and sentiment is what's important to me. I'm very data-driven, but an intuitive decision maker layering the data into it. And so if you're not getting that, if you don't have a process by which to glean that, then you're often operating blind.
I believe that the best way to make a decision is getting as close to the customer as possible, and often the people on the front lines have the answer. We're just sitting over here pontificating. And so to me, it's often like, let's bring the people who actually are close to this into the discussion either directly or let's make sure we're getting their input. I've seen this in both ways. I've been in an organization where people are making decisions with completely lacking context.
**Brett:**
I would think one of the things you spent some time working on in your role is incentive design. I mean, maybe in the most extreme, there's so many important things as it relates to running a go-to-market team and figuring out things like comp. What are some of the things that you figured out as it relates to incentive design or mistakes that you've had to correct or things like that as you try to figure out how to incent and align many, many, many, many people?
**Lindsey:**
I mean, the biggest experience I've had in this and learnings has been in the sales compensation and moving from a SaaS model to consumptive. So at Google, we were in G Suite, a SaaS. You book a deal, you give rep credit and you don't really have to do anything. It's incredible. And then whereas consumptive, you have to close the deal, they have to ramp, you have to predict how much they're going to spend. And so I've lived through this transition twice now. When I came into Checkr, people were comped on bookings, so it's like how much the customer's going to spend, how much do you think they're going to spend. In reality, we don't collect revenue until based on how many checks they're running. And so people were getting way overpaid for things that maybe weren't going live or the actual revenue realization was very different than expected. So incentives were completely off.
So we had to do a pretty dramatic change. And we're doing this with companies we acquire too where you're comped on revenue, and then therefore I know if you're comped on this, your pay is aligning with value to the customer, which is then aligning with revenue to Checkr. And we've had to tweak some things here and there, like what's the sort of leading thing we can give them when the deal is closed? But it's been a game changer in terms of the way customer engagement because we're doing what's right for them and we're not just overselling them on something or overbooking things, and then making sure that they're going live and that rep is very attuned to make sure that that all happens seamlessly.
That's a big one. I think it all comes down to what are we trying to achieve as a company? What is this person uniquely positioned to influence? If you give someone too much scope, then they're not getting incented on anything. If I'm comping my sales leader on total revenue for the company, that's not high leverage for me. And then just giving them the guardrails so that we don't go out of bounds. For a sales incentive comp, if you do all of those things and then you can set up to have a winning sales organization, then it's like these decisions are easy. Should we add more reps? How do we treat this one deal? It just makes everything easier than if you have the shadow approach that's not aligned with your company's success. And oftentimes for founders or for leaders, a sales leader will come in and say, "No, no, no, we need to do it this way," and no, you don't. Really think first principles.
**Brett:**
What other reflections do you have about variable comp for sales? Because I feel like you have a bunch of founders that want to think everything from first principles and a lot of them begin with there shouldn't be variable comp for reps. And in the fullness of time, I think that basically every single one of them eventually gets to the point that says, "No, we should have variable comp. There should be sales commissions." And I've always wondered why aren't more PMs on variable comp and why aren't we pick any of these functions?
**Lindsey:**
Yeah. I mean, I haven't thought deeply about the product or other functions, like engineers, but on the sales side, absolutely they should be on variable comp. And by nature, you want people who are incredibly competitive, hungry, and who are going to take this risk of 50% of their compensation is at risk. Sometimes I get asked, "Why do salespeople make so much?" I'm like, "You want to go take a quota and have your salary cut in half? Have at it."
**Brett:**
I feel like that would be interesting. I feel like a PM should be able to say, "I'd like to be eligible for 40% more comp, but I'll cut my base by half."
**Lindsey:**
I think the hard thing there, which is I think... Love any thoughts you have. But measuring the effectiveness of-
**Brett:**
Inputs and outputs.
**Lindsey:**
Yeah, it's hard. And we talk about this all the time. How do you know you have a high-functioning org? Is it the number of things they ship? Is it the quality? It's harder. I think the harder it is to have that scoreboard that you can look at objectively, the harder it is to put on a variable comp. But when you are very clear on the input that's made, the output that they're driving, and that it's a non-negotiable, very clear scorecard, it works well. There's MBO plans where you're... I've done those for certain roles where it's five categories and you're rated on them at the end. It's just a ton of overhead. It doesn't drive as much the same behavior. And sales success breeds people staying. An enterprise AE is a hot commodity. They can go other places. If they know there's going to make a lot more money or be more successful somewhere else, they'll vote with their feet, and so you want to have a good plan where there's a lot of upside.
And that's another thing we've looked at is I think you can get really stingy and be like, oh, we have accelerators. If you're making above your quota, it's going to go to accelerator mode. We've had times where there's caps on that or we're stingy on that. It's like that's not the right move. To what end? And if your unit economics are working, if you've done the math right, which you should be doing, then it all makes sense. This math works. I think the highest-performing AE should make a lot more than a lot of people in the company.
**Brett:**
It does feel like the fact that the work tends to be easier to measure makes it easier to comp in that way, which is that there's an unfortunate part of that. Because a superstar theoretically... Maybe the average PM should be comped at X, but maybe the superstar PM should make 3X or whatever. And yeah, you have career ladders and this and that, but it doesn't work the same way as sellers.
**Lindsey:**
And I think that's where things are moving more and more is differentiating, paying more for performance across all roles. And especially with leveraging AI, you can get 10X more out of a certain amazing engineer than an average one.
**Brett:**
In working across so many sellers, what's your working theory if you take in any team that you worked on and you look at the number one seller versus everyone else? Are they always doing something consistently different than... Not what is difference between the best one and the worst, but the folks that are good and the person that's like the head and shoulder star on the team.
**Lindsey:**
People have the misconception about sellers. They're like, "Oh, it's the most outgoing guy over there that's going to be the bestsellers."
**Brett:**
A lot of them are very introverted, I find. They have to turn it on and they need to re-energize.
**Lindsey:**
It's probably two ingredients for me. I mean, building trust with customers, being able to do that is a gift or it's something that's a skill that you have to really develop, but outside of that, I think it's really diligent strategic thinking and planning, and it's thinking through what are all the moves I'm going to make? How do I structure those? How do I rally all the resources? It's a team sport. And I do that in a thoughtful... Like a captain of a team. And I think reps who are good-
**Brett:**
People that are IC reps, they have to think about the world that way.
**Lindsey:**
They have to think about their world that way, and they're just exceptional at the drive, the tenacity of executing that strategy, and they're not flying by the seat of their pants. They're not doing it on their own and then be like, "Oh, I got to bring along an SE," or, "Oh, I didn't get approval for this last minute." I mean, I see a lot of that, but the great ones are exceptional project managers in a way at thinking through how to get into the customer and bring all the resources around them.
**Brett:**
Going back to the transition from CRO to COO, did you find it at all hard not to just spend time and focus on all the stuff you were already very good at? I would imagine you spent a career in various flavors of go-to-market. You're very good at it because you're still doing it, and so you're the COO, but the CRO hat keeps calling you back because you're really good at that thing.
**Lindsey:**
Yeah. No, absolutely. And that's the ongoing push that I'm looking at. Where am I spending my time working with Daniel on what are the next big strategic things we need to be thinking about? One of those, for example, is a company we have acquired recently or a year ago at this point, but integrating that across the whole company and accelerating that business. So that's a go-to-market angle, but really leaning in more directly. It's hard because I don't have a CRO, so I'm still managing all of the functions as an effective CRO, but have exceptional leaders.
**Brett:**
What else can you share about the dynamic of managing a leader that is outside of your domain? And it feels like there is a difference for you coming up as a CRO managing a VP of sales than you managing a VP of marketing or CMO, or whatnot.
**Lindsey:**
Yeah. I mean, I think that I've had this so many times throughout my career. I think the first times, I mean, I took over sales engineering at one point in Google for my world, my segment, and I had not done that. So I think that there's been a lot of times of this where I've kind of cut out that process of like, "Oh, I don't know what I'm doing. Can I add value?" And I think it's just about as you get more and more senior, your role as a leader is to help remove obstacles, help think through strategy, help think through talent on the team and structure of the team, but it's not necessarily to be a functional expert by any means. And I am very transparent in the hiring process too, of where I spike, where I'll partner with them or need them to lean in, and I ask the same of them.
And then I think it's just having that mutual trust where I think that you'll flag to me... I'll push and ask the right questions or I'll ask a lot of questions, and it's really because I'm trying to learn and pressure test, but that the trust is there, that they know that I'm going through that process with them and asking questions to make it better.
**Brett:**
So when you look across the rhythm and cadence of the way that you run your org, what are the rituals and touch points that happen weekly or daily or quarterly that are the most important things that you've put in place?
**Lindsey:**
There's the company-wide and then my team. For the company, at the C-staff level, we meet every single morning and there's no structured agenda, and when I joined, this was already in place and I'm like, "This is crazy. This is so much time." And I've become a convert. I mean, there's one time out of several that it's maybe not as high value, but it creates that trust, it creates this opportunity for us as a leadership team to know each other as people, to know what's going on in each other's personal life, to be able to align on any fire that's happening, whether it's a customer issue, an engineering incident, an employee thing, very real-time. And it really supports that first team mentality of this is your first team, it's not your function. I think it's a key part of how we operate and helps us function very well.
**Brett:**
And it's 30 minutes or an hours?
**Lindsey:**
30 minutes. 30 minutes.
**Brett:**
And there's no agenda, you just show up and talk about whatever?
**Lindsey:**
Yep. There was an unwritten rule in the beginning that's like the first half is about non-work stuff, but I'm typically the one that's like, "All right. Let's talk about this, you guys." But it is very conducive to building that trust I talked about earlier. Every two weeks we do a review with all of our top 20 leaders of the entire business, and so that is a... We're a document culture, which is we do the silent read, comment and discuss after, and that review of that document is the cadence by which we're reviewing.
**Brett:**
And the document's like a business review?
**Lindsey:**
It's a business review that covers... We have strategic goals we set at the beginning of the year, we spend a lot of time on those. So it tracks input and output metrics across all of those strategic priorities we're driving. And then it also covers some functional metrics and the revenue, the forecast of the revenue overall as a company. That is critical, and there's cascades up to that with each function. I do a revenue business review every two weeks.
**Brett:**
But on that review, what is then happening? So everybody sits down and reads it, and then what's the median used for?
**Lindsey:**
It's a kind of intake of information. So everyone's clear on what's happening across, and then we discuss, people flag, "Hey, I want to discuss this." And so there's five to 10 topics or any goal that's read or off-track, we'll discuss as well. And we'll go through, problem solve live, hey, if there's an issue. An engineering issue over here, or hey, there's a customer situation here, what do we need to do? And set a DRI in place to go address and follow up. It's a way to make sure that we're tracking with rigor. And then if certain goals are quite off-track, we will do a separate deep dive one hour where we'll go into that and we do those monthly as well.
**Brett:**
And then you were saying you have every other week is a revenue-
**Lindsey:**
We have a revenue business review just on the revenue organization. Twice a year we bring our top 80 leaders together in person, get them aligned at the beginning of the year, like here's the strategy, here are our goals. Very intentional cascading with them. And then we do a company-wide kickoff. And then mid-year as well, we meet with that set of leaders again. These are the leaders who are the director of demand gen or the director of platform engineering. They are driving the company and we're at that stage where we're not big enough to have completely federated approach. So we bring everyone together and make sure that they're aligned. That was a big change I made coming to Checkr where we didn't really think about middle layers at all. It was the whole company and then the executive team. And that's really critical to get people the information before it's spread to the whole company, whether it's an org change, whether it's a strategy shift.
**Brett:**
And so throughout the year, you disseminate through those 80 people?
**Lindsey:**
Exactly. So any beginning of the year, middle of the year, any org change we're rolling out this week, that group gets informed before the rest of the company on anything, any policy change. We have regular virtual meetings with them as well, but it's a time investment, but it's high ROI.
**Brett:**
And is it just if you get to a certain level in the career ladder, you're auto-added to that group or there's a judgment piece?
**Lindsey:**
You're auto-added, just to make it very straightforward.
**Brett:**
And then what's the difference between that group and the top 20 people?
**Lindsey:**
The top 20 is VP, and that top 20, we're meeting in person as well. Two additional times per year, just that group, usually offsite. And that's a mix of setting the strategic goals for the year. It is bringing people along on whether it's our strategy with M&A or investors. And then it's a lot of trust building as well, like how are we functioning as a leadership team. So we do this when we do it twice a year with our C-staff. So a lot of touch points intentionally built to allow us to just move more quickly in the off-season or just as everyone's executing, that alignment is really important.
**Brett:**
Do you think if you were to be a CRO again, it would be marginally helpful that you had this role or it would be a big deal in terms of your overall effectiveness?
**Lindsey:**
I'm such an operator at heart and so data-driven and the way I've operated hasn't... It would give me the bigger picture perspective, but I don't think it would fundamentally change for me personally the way I'm operating because I just have that bent naturally.
**Brett:**
On the data piece, where have you found that data has led you in the wrong direction or had massed something that you could only know qualitatively or there are these pitfalls if you get too focused on managing through a dashboard?
**Lindsey:**
There's strategic direction and product insight that you can't glean through data. I mean, with customers regularly as possible, try to hear the insights from calls. And fraud is an area that just keeps coming up more and more, but it wasn't shown in the data. People are seeing more and more... Inadvertently hiring North Koreans into their company and wondering what line of code did this person change? Having someone that's stolen an SSN and is on multiple platforms. So all of these things, we kind of knew here and there there were issues, but as I started to talk to customer A, to customer B, our chief product officer and our sales team hearing more and more, that just gleaned from connecting dots, and that has formed a really big strategic investment for us and where we want to go and product investment.
And that's the kind of thing if you're just focused on scoreboard and metrics, you're like... We may be doing this for free, or maybe this is a very low identity verification is a low ASP product, we don't need to spend a ton of focus here, but it's incredibly strategic in the bigger picture. So that's one example where you can't just be looking at data, you have to supplement that with as many customer conversations as you can. And for reps who are having those calls every day, they're not in the right role to be able to share that information up or to push for a strategic direction. It has to come from you.
**Brett:**
And would you say that the customer is where most goodness comes from in terms of supplementing context on top of data or are there other pockets?
**Lindsey:**
I think that's the ultimate goal you're trying to get. I think in terms of what's going well, what's not going well, where do we need to invest strategically for the future, there's various ways to get that, if not the customer from obviously the teams, and we've built a whole customer LLM that's got all the knowledge on all the customer support calls and all the sales calls and whatnot, but going direct to the source is, I see the highest value. And also having that empathy ongoing is really important. And that's actually a hard part about being in the COO role is that there's obviously a lot of demands for your time, but pulling you into a customer call, like I said, I want to talk to as many customers per week, et cetera, et cetera. There's hesitance like, "Oh. Well, Lindsey's going to be on the call. What's the agenda? Does the customer want to do this? Is the rep..." So it's like you have to really force yourself in because the default inclination for the team is like, "We've got this, don't bother."
**Brett:**
Do you find that figuring out what the governing metrics for the company are is relatively easy or is it tricky, you're trying to represent in some ways something just enormously complex in a set of numbers and you can't have 300 numbers generally speaking, but you also can't have one number like revenue. Any reflections on that process of trying to articulate the business in something much more numerical?
**Lindsey:**
I think that we have probably too many metrics, like most companies do. We're very data and metric-oriented. I'd say the key is starting with revenue and breaking it down into the component drivers. So when I started, we looked at revenue by acquisition channel, but it was like, okay, no, we need to break it new versus existing and upsell versus retention, new logos versus size of deal. All of that, just the math equation, the algebra is really important, and then structuring goals and owners across each of those.
**Brett:**
Yeah. It feels like if you have a consumption-based model with incredible NRR, you run the risk of actually underemphasizing net new business because you can hit these incredible annual goals, and then when you pick it apart, you don't have enough new seeds being planted to blossom into big accounts in the future.
**Lindsey:**
Yeah. No, I'm a big big proponent of this and separating out your sales force into new logo hunters and then existing account reps. I think it's very problematic for a growth company to combine those into one role, which a lot of people do, and explicit goals on new customers, new revenues that there's a discrete owner for. If you're growing well and don't understand that, I think this just is what's the driver. It's just as bad as not growing in some ways because you don't have control over it.
**Brett:**
It's like the classic thing, if you exceed plan by 20%, everybody says you're amazing. If you miss plan by 20%, everyone's very angry, but in both cases, you were unable to predict.
**Lindsey:**
I mean, I'd rather exceed plan, but if you don't know why, I will lose trust in you. You better know why you're exceeding plan. Yeah, I think that the metrics... One thing that we do at Checkr is there's obviously the financial metrics, the revenue, new revenue, margin, EBITDA, which govern our financial plan, but I mentioned earlier, we have strategic goals we set. We spend a lot of time in Q4 every year outlining those, deciding what those would be, and then we track those rigorously the following year. And so those are the things where they're outside the financial plan. It could be percentage of revenue from this new product area that we've got product market fit, we want to scale it up, for example. Or it could be strategic investment in we're building a people data graph, which is just work outside. This is not directly monetizable in the short-term, but it's strategic long-term.
So those type of things, having those set, communicated to the company, and then everyone knows when you're trying to make trade-offs, you're bias toward doing these things and not the long list of other things. So having metrics on those is also really important so you know the inputs and outputs. And then we try to simplify that down to 10 things that we've got metrics on. So those are pretty clear. And then beyond that, there's a proliferation of metrics, but having key owners of you own this and all the things cascading up to it so that you're having distinct accountability. I think more frustrating to me is there's a metric and 12 people think they own it or that means no one owns it and you're not going to see movement. So you need the metric, you need a goal, and we like to set goals that are... It's better to set a goal that's ambitious and you slightly missed than to get 130% of the goal because that means you weren't thinking big enough.
**Brett:**
But I feel like one of the downsides of setting particularly ambitious goals is there's something about this sense of as a company, we want to feel like we're winning and we set the goal and we hit the goal, and if you do the classic OKR thing where you want to get 70 or 80%, I forget what the number is, and that's great, it doesn't create a culture of feeling like we're winning. Have you noticed that or do you-
**Lindsey:**
Yeah, absolutely. We've had a lot of debates about the similar thing. My take is similar to yours. For the metrics that matter from a financial perspective or the sales team quota overall, that should be ones where we want to hit that within 5%. Strategic stretch goals and initiatives, we label them such like, "Hey, this is a stretch goal. I want you to think ambitiously." We're doing this for H2 right now. We're saying, "Okay, what are some, for lack of creative term, 10X goals? But you get the gist for H2 that we know they're impossible, but I want you to think really big and think where you have to rethink the way your team works. You have to leverage AI in new ways to hit those." But I think it's defining them as such so that you're not in this situation where you're either losing or no one's thinking big.
**Brett:**
Yeah, because I think to the point that you're making, sometimes if the goal is 5X versus 10%, you have to fundamentally rethink everything to get a 5X, then you can eke out a 10 or 20% gain and lots of small changes.
**Lindsey:**
And it's really hard for someone in seat to think about completely rethinking. And so you have to force them to.
**Brett:**
In the purview of your part of the company, what is the way that you guys have leveraged AI that has made the biggest difference? So not cool demos and all this other stuff, but in production, in the way the team is running and working, it has made a profound impact on what you all are doing.
**Lindsey:**
Maybe starting within my organization, but in operations, this is all of our supply chain polling data, customer support, candidate support disputes as part of FICRA processes. All of that's being done by humans in the past. We have an incredibly AI forward-thinking SVP of operations and his team are phenomenal. And so they've built AI... We've taken our AI resolution rate. We've got goals to get that to 90-plus percent over time where it's not only a chatbot interaction, but it's generative AI addressing the customer issues. We've taken customer satisfaction on interactions from before generative AI and post, improve three X in terms of CSAT, and we've been able to substantially scale without adding more headcount. And the cost per revenue dollar has gone down dramatically.
**Brett:**
And in a given day or a given week, how does that impact the business?
**Lindsey:**
It allows us to know where to invest our roadmap or even what customers might be showing signals of growth opportunity or distress in some way because, hey, there's these customer support tickets or this international product is picked on. That's one where, hey, we're seeing this come up on several calls for this country. There's maybe an issue there where we need to prioritize this more quickly to win more customers or prevent churn of these 10 accounts or something like that. So it's like a real-time signal so that we're not in this annual planning process and quarterly, but real-time capturing opportunities for growth or turn reduction. So that's great.
And then also the other part is just cost avoidance on the agentic side. On the sales side, we've had AI SDRs is basic that happened a while ago. We've done... Building this with a partner, but an entire orchestration layer for outbound. That was an area where it's like to do this well, reps have 20 different systems they're having to go into to do all the things. And so we built one agentic layer that they use and that when they wake up in the morning, it's already outreached to specific accounts based on signals, customized content. And so we're six months into rolling that in. It obviously takes investment to continue to improve, but that's a big bet we're making.
**Brett:**
And has that shown tremendous promise?
**Lindsey:**
It's shown promise. Yeah. Yeah, absolutely. And I mean, our outbound pipeline is a percentage of total pipeline is continuing to grow. And another area we're early in, but account-based marketing, it tends to be very manual. Can we 100X that in H2 through this and other tooling we're stitching together? On the engineering side as well, over 8% of our code is now written with generative AI, so that's another area. So there's very fundamental in-production use cases. And then as I mentioned, we've got really blue sky goals for H2\. If we get 40% there, they'll be very meaningful. To do this well, I mean, that's the hard part. We pushed AI tools to the entire company pretty early. Everyone has a Claude license, a Lovable license, and we did hack days, non-engineering hack days to drive this. And so it's like, first, everyone's just building stuff for their own productivity, which is great, but costs money and it's maybe making you marginally more efficient.
And then the push is to move people to build an app that is business impact, like hey, a Customer 360 skill in Claude or agent that will help us actually have better insight into this customer. Everyone's building the same thing. And so then it's getting the shared agents that everyone's using the same one, someone centrally manages it. And then eventually workflows and systems is where we need to move to because we don't want AI for AI's sake, but give me the signals that a customer is challenged, send that to the CSM immediately to activate this outreach sequence. That type of thing is where we need to move toward. So we're investing a lot in the knowledge layer to be able to query... Queryable company's all the rage, but we're investing substantially in it.
**Brett:**
And so have you found that a lot of the work needs to be more centralized or have you found that it's hybrid where you have this drumbeat of getting every line level employee to be playing and building and tinkering? It feels like it's been a little bit like you've kind of gone in multiple directions and now is it kind of we want to try every conceivable...
**Lindsey:**
We're moving toward more centralization, but it's important that we get everyone up to a higher level of AI fluency. And so we've defined what those levels are and are assessing people on the moving up. But we don't need every single ops agent building an app. They need to be handling tickets and we don't necessarily need every SDR to be building the next app for that. But they should know the art of what's possible, which is why there was a heavy investment upfront, and they all came up with the things that now we're figuring out how to scale. So we're going through that journey right now.
**Brett:**
If someone is a bit earlier in their career and they are thinking about where do they want to take their career and they're like, "Okay, being a COO could be really interesting based on what I'm interested in and my own set of skills, et cetera, et cetera," what's your perspective other than be excellent at the thing you're doing and continue to be excellent and grow in your role? Are there certain things that if in five years or seven years or at some point in the future they want to be a COO that they should spend time on or grow in this way, or I know it's not in your purview, but you should be doing this when it sits outside of your role in ops or go-to-market or pick any function?
**Lindsey:**
If you're not in a revenue sales track... A lot of RevOps folks I meet want to be COO. I think you got to run revenue sales teams specifically at some point. Interacting with customers is important. Unless you're an internally-only-focused COO, which can be, but interacting with customers, having that engaging and understanding what it's like to own the number, understanding the intricacies of motivating and driving and running a sales organization. I think that it's a bigger leap to go from support function to COO owning revenue if you've never done it. So I've seen people who go from that to being an AE, and then that combination is huge because you know the operational part, you've done sales or sales leadership and taking that.
If you're in the sales leader track or CRO track and you want to be a COO from there, you've got to really double-click and understand the data, the numbers, which there are a lot of more and more sales leaders now have that acumen and ability, but it has to be intentional, understanding if closest to is the RevOps team and the components there, thinking about the broader company metrics and spending time on that and understanding what is important financially to the board, to the CEO.
I think often so much times a sales leader is so narrowly focused on the quota, the number, and doesn't spend time getting that insight and learning. And that I think could be a blocker to becoming a COO at some point.
**Brett:**
What else, maybe just to wrap up, when you reflect on your own abilities and skills, do you think has served you so well and allowed you to grow into a COO other than just hard work and intelligence?
**Lindsey:**
I think it's the mix of incredibly data-driven and operational, but also really care about the humans and the people. And I know that was the combination that Daniel valued of like, "Hey, I know that I could trust that Lindsey's going to hold a lot of rigor and be as detail-oriented as I would be so I can step back and let go," but also really be intentional and think about the culture and the people and building trust. Low ego is really important to us at Checkr. You're in it for the company's success. You're not here to build an empire to do it for yourself. And so I think that's also served me well in this context because I really want to make Checkr successful. I want to make Daniel successful. I like that partnership and trust is really important.
**Brett:**
Right. Great place to end. Thank you so much.
**Lindsey:**
Yeah, thank you.
### How Gamma pulled off their AI pivot | Jon Noronha (Co-founder and CPO of Gamma)
URL: https://review.firstround.com/how-gamma-pulled-off-their-ai-pivot-jon-noronha-co-founder-and-cpo-of-gamma/
Last updated: 2026-07-24T15:49:07.000Z
In this episode of In Depth, Brett sits down with Jon Noronha, co-founder and CPO of Gamma, the AI-native presentation platform used by more than 100 million people. In this conversation, he walks through Gamma’s distinct eras of product-market fit: from a pre-AI struggle with a year of runway left, to an overnight AI-fueled explosion, to today’s unplanned scramble into enterprise sales. Jon also unpacks his hard-won lessons on horizontal versus vertical bets, monetizing AI products, and why nailing onboarding turned out to be the whole game.
In today's episode, we discuss:
- Why Gamma's all-in AI launch in March 2023 saved their startup
- How fixing a simple onboarding problem accidentally uncovered Gamma’s entire product-market fit
- Why Jon bet Gamma on a horizontal product against the advice of nearly every investor
- How Gamma's daily signups climbed from hundreds to over 100,000 with zero paid marketing
- What building three pricing tiers taught Jon about monetizing AI
**References**
- Canva: [https://www.canva.com/](https://www.canva.com/?ref=review.firstround.com)
- Corgi: [https://www.corgi.insure/](https://www.corgi.insure/?ref=review.firstround.com)
- Facebook:
- Gamma: [https://gamma.app/](https://gamma.app/?ref=review.firstround.com)
- Google: [https://www.google.com/](https://www.google.com/?ref=review.firstround.com)
- Linear: [https://linear.app/](https://linear.app/?ref=review.firstround.com)
- Loom: [https://www.loom.com/](https://www.loom.com/?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com/](https://www.microsoft.com/?ref=review.firstround.com)
- Notion: [https://www.notion.com/](https://www.notion.com/?ref=review.firstround.com)
- Optimizely: [https://www.optimizely.com/](https://www.optimizely.com/?ref=review.firstround.com)
- Salesforce: [https://www.salesforce.com/](https://www.salesforce.com/?ref=review.firstround.com)
- Slack: [https://slack.com/](https://slack.com/?ref=review.firstround.com)
- Zoom: [https://www.zoom.us/](https://www.zoom.us/?ref=review.firstround.com)
**Where to find Jon Noronha**
- LinkedIn: [https://www.linkedin.com/in/jonnoronha/](https://www.linkedin.com/in/jonnoronha/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/thatsjonsense](https://twitter.com/thatsjonsense?ref=review.firstround.com)
**Where to find Brett**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
01:47 Gamma’s three-era journey to product-market fit
03:41 Spotting the blank page problem pre-ChatGPT
05:11 How Gamma survived with only one year of runway
07:17 How onboarding fixes revealed the whole product
09:31 Choosing horizontal over investors' vertical playbook
13:41 Prototyping by hand before AI coding
15:36 How Gamma builds with future models in mind
20:06 The Kool-Aid mistake of a late PowerPoint export
24:31 Why the presentation industry hadn't evolved since 1987
33:30 How Gamma solves evals for taste, not just data
40:21 Jon's hardest lessons monetizing AI since 2023
44:16 The fast leap from prosumer to enterprise
47:01 Why product still beats distribution
52:06 The metric that proved product-market fit
57:36 Pricing advice for prosumer AI founders
59:01 The toils and realities of founder life
Brett: Maybe a way to frame part of the discussion is for Gamma, if you go back to six months before the company was started all the way through today, how would you define the distinct phases of product-market fit for the company?
Jon: Well, let's start with the none era of product-market fit. So we started the company in 2020\. This was obviously peak pandemic, and it was this period when we saw all these companies, like say Zoom and Loom and Slack, really blowing up because people were taking a new approach to work. And there was this incredible why-now moment of people realizing we're not all in the same room, we're not using the same tools, and so that was the era in which Gamma was born. The early hypothesis was not about AI. It was all about remote work driving this transformation. And so we did a lot of prototyping, a lot of beta concepts.
Brett: Did you start working on the company without a product in mind?
Jon: No. Well, we had a problem in mind, I should say, and we had a target. The target was always PowerPoint. We knew we wanted to reinvent presentations, because first of all, it had a massive TAM. That was something I took from my previous experiences. I wanted to work on something that had a huge TAM if you were successful with a product that nobody liked. And so PowerPoint checked those two boxes really well. It also felt well suited to our team's skills. It was really about front-end design, creativity, productivity. I think there was a great product to be built here. There's like a billion people that use PowerPoint and Google Slides every month, and they're not happy with it. So that was always the driving force. We thought we had a "why now." And so we dove in and we said, "All right, let's prototype, let's explore, let's see what we can do here."
We built a product that did okay, I would say. We had some traction, but if we're talking 2020 to 2022-ish, we had basically no product out, just prototypes. '22, we launched on Product Hunt. We get our first thousands of users, maybe we're in the hundreds of monthly actives. We have slightly linear growth, but I would say we're in this era of weak to middling product-market fit, definitely not red-hot. At this point, runway starts dwindling. We're starting to figure out where do we go from here? How do we drive more of this? And this is when the first green shoots of AI are starting to show up. We're seeing Stable Diffusion as a model out there. We're seeing GPT-3, not even ChatGPT yet. And we realized that Gamma's core problem is this blank-page problem. People come in wanting to make a presentation or whatever, but they're faced with an empty white screen and told, "Go start from scratch."
Brett: But why wasn't that a problem for Google Slides or PowerPoint?
Jon: Well, that's the ironic thing we realized is that in fact it is, but there was no alternative. And that actually is what drove product-market fit for us is we always tell ourselves, "We're 10X better than PowerPoint, 10X better than Google Slides." But until we actually solved that blank-page problem for people, we weren't really. That was actually the foundational problem with those products is they start you in a blank page and you cobble something together out of templates. And there just was no better way technologically to overcome this before. I think the closest was to give people good templates. This is Canva's strategy. It's also what Notion's done really well in its own separate domain. But we got to now use this ultra-powerful kryptonite tool to solve the problem, which was generative AI. And so we plugged that in to solve our onboarding challenges.
Brett: How easy was it to identify that that was the bottleneck? Was it blindingly obvious?
Jon: Once we had already launched a product and had it in market, it was blindingly obvious that our activation rate was low. The conversion rate of someone signing up for our product from a landing page and actually getting to a point of seeing value was appallingly low. It was like we're talking 5% or 10% or something. So as soon as we went to say, "Well, what would get this number to be 20%, 30%, 50%?" it was like, well, this blank page was staring us in the face is the obvious problem. And so at that point, yes, it was obvious.
So we designed a whole launch around let's overcome that blank page. It was our Hail Mary moment as a startup. We were down to maybe a year of runway. We were a team of 12, but we knew this AI thing was going to be big. Nobody knew how big, and we wanted to bet on use AI to overcome the blank-page problem. And so we did a big launch around this. We put all of our resources into it. We launched it in March 2023, and that did take off. That really did scratch an itch and got us through our first stage of product-market fit.
And the best definition I've heard of product-market fit is you stop pushing the rock up the hill and you start chasing the rock down the hill. That was absolutely what it felt like. Especially, I would say, that first year of 2023, there was such a gap between the capabilities of our product and our team and a demand of what people wanted out of it. We were just racing to keep up. We're talking servers going down every other week, at one point, for even days at a time, a support volume we couldn't keep up with. We weren't even monetizing and people were emailing us begging to pay for the product. That's as red-hot as it gets with product-market fit. And we spent the whole next couple of years just trying to keep up with that. Now, we're in an era where I think we've finally caught up with that prosumer product-market fit. We're finally able to service the demand and scale it and all of that.
But now, we've entered this new stage of product-market fit challenge, which is in the last year or so, B2B demand appeared. Suddenly, all these companies were already starting to use our product internally, and also, we saw this phenomenon of the AI mandate, where the CEO says top-down, "We need more AI. Let's drive this as a priority." They survey their employees and they say, "What are the top things you wish you could do with AI?" Well, everyone needs just a chat tool for sure. The engineers all need a tool like a Cursor or Claude Code or whatever. And it turns out the third use case that's bubbling up over and over is presentations. People are wasting all this time just formatting their PowerPoints and Google Slides. And so we hit this new source of product-market fit that we were once again woefully unprepared for. We had no sales team, no compliance, no anything. And so for the last year, we've been building up that B2B motion basically from scratch and getting it in place.
Brett: Before you solved the onboarding problem, was the product for people that got through onboarding insanely high NPS and retentive?
Jon: No, it was not.
Brett: So why did fixing onboarding fix the overall customer sat of the end-to-end product?
Jon: We thought we were solving an onboarding problem, which was overcome the blank page, but it turns out we were discovering product-market fit, because the real job to be done for the customer is also solve the blank page. And so when we solved what we thought was our problem, which was solve the blank page for our onboarding, we actually solved their problem, which was solve the blank page for me to avoid all this time making a presentation. And it turned out that was actually the thing that had product-market fit.
Brett: Can you explain more about that?
Jon: Fundamentally, if you just think about the last time you had to make a presentation and just how that immediately felt to you like, "Oh shit, big, high-stakes presentation to the boss, the client," whatever it is, your mind immediately leaps to all the work you have to do. "I have to come up with a visual design. I have to make a template. I have to structure the story and pull together all the key ideas. I have to lay out each individual slide and make sure it doesn't overflow off the page, and now, I need to fill the space so I got to find some stupid clip art and fill it up." You're suddenly looking at 10 hours of work to make anything good minimum, and every time, you're almost restarting, not to mention the fragility of your team starts to edit it and mess with it.
And so what we did was we just eliminated maybe eight or nine of those 10 hours right off the board. And when you can give that concrete time savings, the value is just so immediate, concrete, and people leapt on it.
Brett: When you were working on onboarding, did you think it could solve the entire basically how satisfying this product is?
Jon: Not originally. That's not why we prioritized it, but we have a strong dogfooding culture. We're using our own product every single day. And I remember this moment, maybe a month or so into this three-month sprint, to get this big new AI version of our product where we were all just sitting around at lunch playing with a mobile version of our product and we started just making presentations about anything we could think of, like different breeds of cats, why does Subway smell so good? All these kinds of questions. And we realized that it was fun in the same way that a social media app is fun or a game that you play is fun. It was this new kind of dopamine reward that you got from generating these things. And suddenly, I got this inkling of, whoa, this could actually be a whole product value proposition. There's this aspect of the slot machine of what am I going to get?
Brett: Did you think about building the product for a specific subset of presentation creators and were trying to work backwards from that and bound the jobs to be done? Or did you think very generically about a generalizable tool that anybody to do anything could use?
Jon: We bet early on and pretty consistently on building a horizontal product rather than a vertical one that was focused on a specific persona. And it was actually a source of constant tension in fundraising in a lot of our early debates, because I think there's a playbook out there, which is you need to pick a very narrow vertical, satisfy that customer type and then build outwards from there. We bet against that because we looked at this productivity space and all of the most inspiring companies that we saw were not verticalized in this way. They were actually quite horizontal. So your Notions, your Slacks, your Looms, it was actually difficult to pin down where their early fit had come from.
You could do it in some cases. Maybe Slack was early-stage startups or whatever it is. But these companies were fairly broad in who they targeted. And even if they had a persona, it wasn't a single narrow type; it was a broad one. So we actually settled on a broad one, which was external presenting, not like the internal company all-hands, but somebody in a role like sales or marketing or consulting who is ultimately trying to get business from somebody else.
Brett: Why?
Jon: Because there was natural virality to it. It would spread between organizations. And there was natural willingness to pay, because the presentation was ultimately tied to some kind of revenue-generating activity for that business. So we've always leaned towards that direction while still being good for other use cases, like internal presentations, but we chose not to narrow any further. And I think that served us well, at least up to this point, because we've proven that with that broad product, you can serve a huge horizontal user base.
Brett: Was that a very easy decision, or did you spend real time working through it?
Jon: For me, it actually always felt easy. It was obvious just looking at the leading tools in this space that that was the path that they had taken. A tool like PowerPoint is not a vertical solution, it's horizontal. But it was a source of constant friction, because I would say every investor asked us about it and challenged us on it, which then caused us to question ourselves over and over.
Brett: Did you think about and do you currently think about building the product as if you are building a consumer product company?
Jon: I think overall, we've leaned consumer, especially early on. Maybe just give some concrete ways in which we have looked more consumer-like. The composition of our team early on, our original team we hit product-market fit was 12 people, of which zero were in any kind of GTM role, so we had no sales or marketing. Four out of those 12 were UX designers. So that's actually a pretty insane ratio of one-third. But it's the kind of ratio you do when you're a consumer company who's betting on user experience and product-led growth being your main driver.
I think another example is that we've relied heavily on techniques like A/B testing coming from my Optimizely heritage to iterate our way towards everything from pricing to AI models to user experience, also, generally a much more consumer-skewed technique. I think one thing that informed this orientation was actually the very first exercise we did when we started the company, before anything else, before we built any product, was we did a hundred user interviews in which to ask people in different walks of life, different verticals basically, "Tell me the last time you made a presentation. What was that like?" We had them walk through what they made, how they made it, what went well and what didn't go well.
And the really extraordinary thing from doing that exercise was hearing that of those hundred people, whether they were a consultant or a teacher or a doctor or a tech employee, they all said pretty much the exact same stuff. It wasn't that the doctor had different presentation needs than the consultant by and large. There were some specifics. It was almost all the same few problems, which is actually this blank-page problem, "I don't know where to start," this feeling of judgment, "I feel like people are judging me based on how my slides look, not what I'm trying to say," and then this huge tax of formatting, "I spend all this time just moving boxes around to align them and make them look right." A lot of the quotes we heard, probably the single most common quote we heard from all of these people, no matter what their job was "I spent 90% of my time on formatting and 10% of my time on content." And so unlocking that, flipping that ratio became the skeleton key that felt totally horizontal, not vertical to one specific user type.
Brett: Talk about how you went from that to this prototyping motion.
Jon: Yeah. So we started with those user problems. We boiled it down to three top ones, which was basically formatting, structure, and content. And then we dove into prototyping. All of our early team were either designer or engineer types, so everybody was capable of building things. Keep in mind, this is pre-AI coding, so we still had to do it all the old-fashioned way, hand-rolled by hand. But we built a ton of prototypes. We would build multiple every week. We would take them back to some of those same users. We really relied heavily on trying these things ourselves. Early on, these products were all so bad you could barely even ask a customer to make a presentation in them, because presentations are naturally high stakes. People use them for real work. The product wasn't ready for real work. And so we made presentations ourselves over and over every day.
Brett: Do you think the fact that you had weak product-market fit ended up being a huge lucky break in that if the company had much stronger product-market fit, it would be harder to rebuild it when these new AI primitives were invented?
Jon: Yes. I absolutely feel that way. I think in many ways, we got extraordinarily lucky by having built so much of the non-AI primitives infrastructure that gave us something to build upon, but not being wedded to any of it and knowing we had to make a lot of changes at the moment AI came along. So we could throw out the parts that weren't serving us, but we weren't building from zero. We weren't building a pure GPT wrapper, so to speak, because we actually had years of technology we'd built up that AI could layer on top of.
And it's an interesting challenge now because as we grow, product-market fit is not guaranteed. You don't get to just keep it because you had it before. We're in this incredibly competitive space, but now, we have the challenge that we have been so successful. We have more than a hundred million users who've signed up for our product, but AI has not slowed down. If anything, it's sped up. And so we're having to now think very carefully about how we chuck out parts of our product we have today and embrace new ones while managing that larger legacy base.
Brett: How do you do that? What does that sound like?
Jon: It means constantly questioning some of our core design principles, a lot of bets that we made early on. Gamma's early success came in this period 2023 when LLMs weren't very good yet. And so a lot of what made our product great was guardrails we put around these dumb ... They weren't even agents yet, dumb prompts to protect the AI from itself. Now, what we're finding actually is that all those guardrails we put in place are holding these much more intelligent AIs back. And so we're now in a mode not of even adding functionality, but trying to throw things out, loosen the requirements, and let AI do more overall.
Brett: Knowing what you know now about the path of the company and the way that the product was reinvented, do you think everything unfolded how it needed to? Or could it have been done faster or differently?
Jon: Well, I think you can always look back with hindsight and say, "We should have skipped that route of the idea maze and gone straight to the good idea," but that's not really possible. Yeah, you don't have the time machine. But I guess your question is more like if you were just to execute again with laser-like focus, could you have gotten there more quickly and more directly? I think for sure, yes. We took some wrong turns, and those wrong turns are still embedded in the DNA of our product in many ways. A lot of the work of scaling through this next stage of growth is figuring out which of those wrong turns to undo. Also, which of those were not really wrong turns, they were just too early and seeds of something greater. So there are some aspects of our product which never hit product-market fit in that early stage, but I think still could actually.
To give a simple example, one of the early bets that Gamma took was interactivity. This idea that a presentation didn't have to be just a linear narrative where you click through slide by slide, but instead you could have live interactive elements on the screen. Early on, that turned out not to resonate with our first product-market fit because people really just wanted to interoperate with the world they're used to of make traditional PowerPoints. And so they actually caused all this pain for us of trying to figure out how to bridge this interactivity with this legacy format that was not interactive. And we're still facing that pain because we're in this crossing the chasm period where we're trying to win over people that want familiarity.
But as we grow our distribution and become a platform in our own right where people spend time, now, we can actually reintroduce those elements and then become actually part of the stickiness of why someone wants to stay in a tool like Gamma versus exporting to somewhere else. And so many of these concepts have a proper time, but I think looking back as a founder, a lot of the mistakes come from misjudging timing versus misjudging ideas.
Brett: Say more about that.
Jon: I think as a first-time founder, a lot of my naiveté came from looking at some product and saying, "I can make it better." And that might be true, but I think there's a couple false assumptions that live inside that declaration of better. The first one is that just because I think it's better doesn't mean the user think it's better. But the other one is thinking about the user in isolation versus the system in which they operate. And with productivity, you're always collaborating with peers, you have work guidelines and templates you have to follow. And so a lot of our best ideas were what if you could be free of all of that? But people are not free of all that. And so you have to meet them where they are. You have to bridge that familiarity gap, and only once you've bridged it and started to bring people into your new system can you now start to layer on what you really thought was magical about the vision.
And I think you really see this with companies that have been in this game much longer than we have at Gamma. And thinking again about these companies that inspire us like a Slack or a Notion or a Canva, early on, they all took different spins on the thing they were replacing like docs and email, and some parts of it were unfamiliar and confusing, and they had to layer in those bridges to make sense. But now that these companies have all been around for, let's say, 10 years, they're getting to really dig into those original parts of their vision and bring them to life.
Brett: If you think about the things that you would have done differently knowing everything that you know, there's a huge chunk of it which is at that time, it was just unknowable. And in that case, the way that you work through the idea maze is required or you couldn't unearth it. The other is from time to time, there are things actually that were totally knowable at that time, but because of your own frame of reference or all sorts of other things, you went in the wrong direction. And I'm curious if in that second bucket, if there are any specific things that come to mind that were important, or did it tended to be more it was unknowable, we had to go down the hallway, realize the door was closed, then go to another door?
Jon: The biggest one that comes to mind for me is the obvious and hindsight realization that we had started by trying to pioneer this new creative format that was somewhere in between presentation, document, and webpage. So it was mobile-responsive, content would adjust and reflow. And that was what created a lot of our early propulsion, which was that this format actually worked really nicely for LLMs.
I think the blind spot for us though was drinking our own Kool-Aid that people always want to operate in our new format versus the obvious realization that no, everybody is still exporting this thing to PowerPoint early on because that's where their team lives. And so we did build a PowerPoint export, but probably a year or two late. I think we should have listened to the signals earlier on of people just telling us this is what they wanted. But we were so excited about our own format and wanting to build our own proprietary frame of reference. This also I think came from perhaps trying to build for durability in moat before building for adoption, and I think you actually have to go in the opposite order. You have to first win adoption, which is kind of a grueling fight with someone who is changing their workflow and only then build some of that stickiness around it.
Brett: One of the things you're touching on, and I think it's really interesting in a consumer or prosumer form factor of software, is you have a lot of people that say the way to build products is just to build the thing that you would want, you're the customer. There's another version of it which is no, you have to get really close to customers and understand what they care about or not necessarily have them design the product, but have them articulate their problems. And then there's maybe some place in between, but there's definitely a customer-centric worldview, and then maybe there's the Jobsian worldview, which is like you have to instantiate the thing you've always wanted. And it feels like in the journey of Gamma, there's been this connection between these two because there's this dogfooding culture, there's this the whole company was started around wanting a thing that didn't exist. What else could you reflect on those two maybe worldviews?
Jon: I think that's really well put, and I feel like we've constantly been sailing between these worldviews. I don't think I would ally us with either one purely. I think you're right that we have had this Jobsian mindset of build a thing that didn't already exist, people don't quite know what they're asking for. And I think in the early stages, you see that in the way that we started from problems. Really make sure we're aligned with the customer on the problems that they're stating, but show them a solution that is not necessarily what they wanted.
But as I also alluded to, there were times where we drank our own Kool-Aid too much and we believed we had built the 10X better solution when really the customer's telling us, "Nah, I actually want this other thing instead." And so we've gone through periods of having to then re-anchor that against exactly what customers are telling us. We're really experiencing this now as we take our consumer-y product and go into B2B where in many ways, there's already product-market fit. People are using this thing undercover, they're pulling it into their companies, but at the same time, we're hitting brick walls on certain aspects of the product that need to change because businesses have very different needs than consumers. And so I would say as a leader, it's been on my mind how to cultivate both mindsets, especially when it comes to our design team, which needs to both contain this "research, stay close to the customer" mindset, but also this maverick, creative, "build a thing they haven't asked for yet" mindset.
Brett: So what's your best cut at that? Or if you are trying to indoctrinate that into the people designing products, building products, engineering products, how does it manifest itself?
Jon: The quote that I heard about this that I have always really liked is that "You diagnose with data and solve with design." And so what I take that to mean is, first of all, when it comes to quantitative data, we try to be a very data-driven organization. We really stick to metrics and analytics and A/B testing. But there's also qualitative data. We try to always stay very close to what the customer is telling us and let us all marinate in that. But they're not going to give us solutions. The way to actually solve solutions is to get out ahead of those problems and find the unlock, whether it's a UX designer making a mock-up, but even more often now, it's an engineer actually prototyping something with AI that sometimes crystallizes or unlocks three or four different problems we've heard into one new solution and then bounce back and forth and diagnose, did this actually solve the problem? Let's shove those in people's faces and let them tell us where it holds up and where it doesn't.
Brett: How did you think about the episodic nature of the product?
Jon: I would say it is the biggest structural challenge with this category. You didn't mention another structural challenge, which is that competitors are all bundled into larger suites.
Brett: And I was going to say, yeah, there's generally, I would imagine, low willingness to pay.
Jon: Yeah, yeah. And I think these two factors are why this category of presentations has been a graveyard of startups. PowerPoint came out in 1987, and in the last 39 years, basically nobody else has managed to unseat them. The companies that have come closest, if you probably say Google Slides and maybe Keynote, were not even really serious competitors. They were ports of the same product to different platforms as part of a different larger suite. And so this was always our biggest doubt and fear about entering the category and probably our, again, naiveté that we even did it at all. But I think what we felt was that these dynamics created stagnation in the category, and that stagnation was what made room for a disruptor to come with the right "why now."
We were actually wrong about the "why now." We though it was remote work in COVID. We got lucky that a better "why now" came along just in time, which was AI and really embraced that. And AI is such a sea change that I do think it is just this anti-incumbent technology across the board. I mean, that's why we have a SaaS apocalypse now, is it's questioning every software company's moat.
And so that's what's given us, let's say, the boldness to be a challenger in this category despite those challenges. I won't claim that we've solved all those problems. We are iterating through them. Although I do think probably what's been most valuable to us is to have the mindset of being okay with a broad horizontal, somewhat episodic user base because we believe we can find pockets of deep value inside of that. And it's not an either/or. It's not build the horizontal product or build the verticalized solution with depth for a different customer base. It's a bit more T-shaped. We've started with that wide horizontal base, which is still growing just given this tidal wave of change coming from AI. But we think we can build pillars of depth within that, and we're already seeing signs of that, particularly in our B2B motion, our API. And I think what's different about those is they represent repeated workflows on teams rather than episodic usage by individuals. And so the challenge our team is trying to navigate is how to keep growing that prosumer user base while also building those pillars of depth.
Brett: And so what's your best crack at that now?
Jon: I think our best crack at it where we've already seen such clear value is when you have a larger company, so not these small prosumer use cases, but companies of thousands of people or even Fortune 10s or Fortune 100s with tens of thousands of people where they have some team at their company that has a repeated presentation use case. The most obvious one you could think of is a sales team, where you've got people just pitching the product over and over and over again in a fairly repeated and templated way. You could think of it as almost following a recipe over and over again.
And where we have now rolled out a B2B offering as well as an API with connectors into common tools. So a simple example to think about is that sales team uses, let's say, Salesforce as their CRM system of record, and anytime an opportunity gets created or advances stages or has a meeting, we can automatically create a presentation based on that, building on all the content that's already happened and hand-deliver it to the sales rep to use in the next meeting. And companies love that because frankly, they don't trust their own sales reps to make good content. They had a very fragile workflow before of copy-pasting templates. If we can really streamline that workflow and turn it to a repeated one, we're seeing that there's a huge opportunity in these companies to do it.
Brett: How does that fit with the nature of this product, which is one that just has infinite roadmap? You talk to 25 different customers, certain things bubble up, but you could build infinitely because of the form factor of the product. And so when you think about either the different chapters of the company's life, how did you think about prioritizing?
Jon: Well, one thing that has both helped us and hurt us in prioritization is being an exceptionally lean company. We have generally had a pretty small team. For a while, we were at over two million ARR per employee, which actually felt like too much. It was almost comically outsized in terms of the amount of work we had to do versus the size of our team. But it forced a lot of clarity and prioritization, and I think it's often helped us do something that is hard for product builders to do, which is build less instead of build more. And particularly in this world of rapidly advancing AI models, it's actually a really healthy instinct because the less you build as product surface area, the more that the AI can actually fill in in actually the white space. The blank page was the problem we started out trying to solve. Now, it's the thing we're trying to give to these models to let them rip.
And so we are trying to engineer an organization that doesn't build a thousand laundry list features, instead builds strong reusable building blocks that AI can work on top of to provide a lot of the remaining range.
Brett: What have been some of your reflections on building a product for a use case where the current status quo is people creating very bad presentations?
Jon: Well, first of all, it's what made us bet on this category. I think there are ... I'll contrast it to maybe the world of spreadsheets. So Excel is such a dominant tool for spreadsheets, and I love Excel. I think it's a great product. I would not want to compete with Excel. Even though I do think there are all these interesting ways you could compete with Excel in the sense that code is coming along, the challenge is that it's so beloved by the people who use it that I would not have seen, personally as a founder, the daylight of where I could add that 10X value. PowerPoint felt so ripe to attack because it doesn't have the same feeling. The output undermines people's confidence and the process of making it is so taxing that it felt like there was white space here, even despite the structural challenges of the industry.
Brett: And why do you think that is? At PowerPoint, you have, I think, a bunch of smart people that are trying to do great work. I think Google Slides has talented technologists and product builders. What's the working theory as to why it is the way that it was?
Jon: I think the same structural challenges that make it hard for a startup to succeed here also give an incumbent no reason to put focus into it. If you think about who's buying the Google Suite or the Microsoft Office Suite, nobody's doing it by comparing the feature set of PowerPoint versus Google Slides. Instead, they're comparing Outlook versus Gmail, and maybe after that, Word versus Google Slides. And PowerPoint and Google Slides are afterthoughts in their product roadmap. And it shows up in their prioritization of how they allocate engineering talent, product talent, design talent. By the way, it also increasingly shows up in how they allocate GPUs, which are the new currency. The thing that I've heard secondhand is that when Google is thinking about where to put its AI resources, of course, they're going to throw those at Search, which is its flagship core product rather than something like Google Slides, which it can count on being sold for free whether it does well or not.
So this is the interesting opportunity for us. They've left this huge UX gap for us that we can go after, but there are still these structural business challenges that we have to solve to make it a successful business around that.
Brett: You could argue Google Sheets is an example of this. It's not a flagship product. It has tremendous adoption, but it feels like Google Sheets is doing a much better job of delivering on the promise than Google Slides is, and just like Excel, to your point, is much more beloved than PowerPoint. But a lot of times, the suite is not sold because of Excel. In some ways, I guess Excel has become Kleenex, and that's an interesting part of also the challenge when something just becomes a standard.
Jon: Yeah, yeah. You don't want to diverge from that standard too much. That's absolutely right. I think probably the biggest difference between the Excel workflow and the PowerPoint workflow is creativity and taste. There's less objective definition of what good looks like, and there's much more room for the user and also the brand to express themselves. That's what makes it a really fun problem for us to work on. It's also what makes it a much more challenging AI problem to tackle.
For example, if you imagine how to write evals for a product like Excel versus a product like PowerPoint, I think it's pretty easy to imagine how to write the Excel ones. Are the formulas correct? If we give it a bunch of inputs and outputs, does it give us the right number at the end? It's actually a fairly straightforward problem. If you now imagine how to do that for PowerPoint, there are these mechanical failures. Did the text get clipped at the bottom of the slide or whatever? But once you get past those, it's a way squishier problem to objectively iterate.
And these products are so horizontal. You've got millions of people using them in different ways. At the scale of PowerPoint and Google Slides, you have hundreds of millions of people using them. And so you start to actually need this difficult quality of taste and creativity. And while I think there is great engineering talent working on those products, I don't think they have treated them as a place where they put their best designers and people who have that taste. It's a hard thing to exercise inside of a big tech company like that.
Brett: So how have you solved the evals problem, or how do you think about it at a philosophical level?
Jon: Well, I won't claim that we have solved it because it's a really tricky problem for us. I think we view it as more of a data problem, and I think we are trying to view this less as an objective function of "Is this good or bad?" and more of a problem of extracting and identifying people's taste and preferences, which are not the same for everyone.
And so there's a few pieces of this. One of them is collecting the data. I think this is also a nice potential advantage we have over some of these FAANG competitors is that we have this large prosumer user base that we can actually learn from and use that to actually build a better enterprise experience as well. And it's in the cloud, so we actually have visibility into what people are making, what they're doing, how they're prompting. So we're using that extract taste and see what works. We're running A/B tests on different models to see what clicks. We're also able to combine different models from different providers in a way that some of our competitors structurally aren't. They're tied into their own house models. And so we get to directly test. Particularly in the world of image models, they all have a different feel to them and a different texture, and we get to provide all of those for different use cases and see where they shine.
So for us, it's not about the one right answer of evals, although we do have evals for a lot of common cases. It's about actually using data to identify user preferences and eventually build models that tune to those.
Brett: How do you think about short-term versus long-term opportunity? One way to think about that is that gap creates the space for the entire company. The other is that ideally you don't want to spend a tremendous amount of time solving problems that you think in 90 days or six months will be completely solved with some simple model integration.
Jon: There's this scaffolding approach where we constantly have to build out temporary supports and then take them away again. It's a very strange approach to product building, and we're even having to reorient our own mindset about how we build internally for that. The classic design mindset is make a quick prototype and throw it away. The classic engineering mindset is build durable systems that can last for 10 years. We find ourselves in this in between where we have to build systems that last for six to 12 months at a scale of a hundred million people plus using them, but we also have to know that we're going to say goodbye to them and throw them away and build something new because model progress is so fast.
Brett: So how do you actually go about doing that?
Jon: I'm not going to claim that we've solved the answer to that, but I think a lot of it comes from engineering things with the mindset of this will get thrown away later. And so it needs to scale by usage, but it doesn't need to scale by time, meaning that we don't need to plan for every future eventuality. We often have to flag things and build such that they can be turned off again later. I would say that's a core part of building, so feature flagging as just an engineering technique. But I think it gets deeper culturally, and it's a cultural lesson that we're still trying to learn. It also jives with this whole move towards AI coding where, gosh, the shame we're going to throw this all away in six months, but at the same time, we can build it four times faster. So we should be willing to actually make more temporary things that we throw out later.
Brett: What's the inverse of this? What are the things that you've decided have to be built for durability if a huge portion of what you build is going to be much more transitory?
Jon: Well, we have certain obligations to our customers. Right? We need to keep their data private and secure, especially as we move into enterprise. We also have to keep serving these presentations, which are not always a one-shot episodic thing. They're often these long-term living artifacts. And so we have to serve them basically forever unchanged. We can't just go mess with someone's content after the fact. And so the things that are about how we store, render, and present things need to be extremely durable and sticky, but the mechanics of how we generate them, how we edit them need to get thrown out even faster than we're throwing them out now.
But there's one more challenge with that, which is worth calling out, which is even as we move to AI doing more of the work, we are also in this world where users are trying to learn a complicated new tool to do a high stakes part of their job. And so we can't just add 10 new buttons every month as new features come out. We still have to actually prune and simplify the user experience and maintain people's expectations of how things will work.
Brett: And so is most of that that there's no particular way in which you've solved that other than it's a consideration and people have to use good judgment to navigate it?
Jon: Yes, but I think there's also maybe a design principle here, which goes back to our prioritization, which is err on the side of building fewer knobs and controls because all of those become things that you need to maintain and honor over time. And they may end up becoming irrelevant as AI capabilities advance. So I think we're now leaning towards this model of have fewer simpler building blocks, but then more open-ended customization on top, including even just writing custom HTML, CSS, going with the grain of what models can already do.
Brett: What are some of the things that you've had to cobble together to get the product experience right along this similar path that we're going down that you're pretty sure will be solved in the future and thus you're creating this temporary solve?
Jon: A lot of what we've had to cobble together along the way have been guardrails that get an LLM to produce consistently good visual output. So to give some simple examples of that, if you are a company with an established brand, you always want to generate in consistent fonts, colors, sizes, also even more basic considerations that matter to everyone, and AI should never write so much text that it overflows off the end of the slide and you can't read it anymore. Text probably shouldn't get too small. Early on, the guardrails we took to that were hard structural constraints of our format. For example, we didn't even let you customize the fonts on an individual block of text. We enforced them from the outside and said, "LLM, you just write text and we will style it for you." Same applies for layout where we wouldn't actually have the AI hardcode X, Y positions of elements. We would have it give more semantic ideas like a three-column layout, and we would actually render that for the AI.
Those things have served us really well for both agents and humans. Even for humans, they remove a lot of the fussing that goes into making a presentation, and that's our core value proposition is taking away the fussy formatting so you can focus on content. But frankly, we're finding now that it's actually hamstringing us. By building all these guardrails in about formatting and design, we're actually limiting what AI can do compared to just letting it loose with full creativity. And so a lot of the hard problems we're digging into now is how do we actually give the AI more of a creative ceiling and, in some cases, kick away these guardrails that were previously holding it up while still maintaining that floor and the editing experience that is simple and focused?
Brett: What has been your important learnings from a monetization standpoint?
Jon: Well, I think the biggest meta learning has been that monetizing AI products is a moving target, and there's no pricing model we could have had starting in 2023 up to now in 2026 that would've worked at every period of our growth or into the future. So we've actually had to have a monetization model that is adaptive with changing trends. So just to maybe call out a few of those key adaptations that we had to face early on. The first discovery was actually a great one, which is AI products are easier to monetize than traditional SaaS products. The willingness to pay is just much higher, and there's a natural customer understanding that these things cost money to run, and there's this natural equation people have of their own hours saved into dollars they pay for a software product. And so when we can save someone eight hours in a month and charge them $20, for many people, it's a no-brainer, and they'll happily do it.
Brett: And they're able to compute that rationally you found?
Jon: Yes. At least they're willing to give it a try. I think they're willing to say, "Yeah, 20 bucks." I mean, I think those numbers are usually far enough apart of what do I pay for eight hours of work versus $20, that many, many people are willing to just try it out.
But then there's a churn component on the other end of that, which is this AI tourism phenomenon. People are very willing to try a new AI product, but just because they've swiped their credit card the first time doesn't mean they're actually committed. And so we've had to learn how to almost filter within our revenue base and figure out who are those sticky users and how do we keep nurturing and growing them?
As you said, presentations are a naturally episodic use case, which means we can't expect on our prosumer base to have more than 100% net revenue retention. We know we're going to lose a lot of these people. We have to be okay with losing those people. It would be a mistake though to block them entirely from subscribing or, for example, limit ourselves to only annual plans and lose those monthly users. First of all, because they're still a great revenue source, even if it's not always recurring. Second of all, because within that larger base, there are some who will really stick and see the value. And third, because there's still this viral loop that we kick off from these episodic users who, by the way, do come back even if it's episodic. It still recurs on a slower rate.
And so for all those reasons, we want to keep nurturing this wide base of people who know and love Gamma and refer to their friends and use it sometimes, but we also need to look within that for the stickier user base. And sometimes, there are different personas or ICPs within these. The type of user who will be the sticky recurring user using us every day of the week is not always the same as the person who's coming episodically, but there are more of those episodic people. And so if you just look at raw numbers, you can get confused about where to focus your time.
Brett: And so how have you actually gone about this? How does that map to the way you've chosen to monetize the product?
Jon: Part of it is by monetizing our product through different tiers, and pricing naturally reveals preference. And so we have at the low end, a $10-a-month plan, which is relatively episodic. It's our entry-level floor. It's also more popular internationally in developing countries who don't have the money for very expensive AI products. It's not actually a loss leader because we do make money off of it, but we never expect it to be the sticky retentive product. But then we have just kept discovering new ways to add more tiers of value on top of that. So we have a Pro plan that's $25 a month on top of that, which is surprisingly popular even at that higher price point and naturally stickier. It's for bigger prosumers, people in more developed countries who have more money to spend.
And then we've now added an Ultra plan that's at the $100-a-month price point. So that's people who have much higher volume of usage, much higher expectations. They're willing to use the fanciest AI models to get the best output and so we can monetize them very differently. And then there's also this new axis of individual versus team where we've built up Team and Business plans where we're now spreading across the entire company, and the retention of those looks obviously much better than the individual plans.
Brett: Is the transition from a consumer, prosumer company to one selling businesses feel very incremental, or it feels just the gulf between those two things is very significant?
Jon: I wanted it to be incremental. The way I thought we would tackle this was that we would inch our way upwards from individual to SMB to mid-market to enterprise to really big enterprise. That felt like the classic way to do it and also the incremental sustainable way to learn as you go. The pace of this AI industry has just upturned all of our plans in that respect for two reasons. One of them is just competition. We can't afford to leisurely work our way up the market because things move so quickly. But then the second one is that the demand is just there. I never would've thought that people in Fortune 25 companies want a product like Gamma right now, because we started with these prosumer-y roots. Early on, maybe a year ago, they would come to us and I would just laugh and say, "There's no way we can serve a company like this. We shouldn't even have the conversation." But what amazed us was even when we tried to turn away these customers, they kept coming back to us.
Brett: The other way of arguing it is that the way a consumer uses a product is similar in that a business or a large enterprise is just a collection of individuals who are all trying to create material to talk to customers or clients or this or that. Why did it seem like it's such a gulf?
Jon: Because I'd been through a verticalized journey at my previous company, Optimizely, where we also started as an SMB product with $10, $20-a-month plans and over a period of, in Optimizely's case, several years, transitioned to an enterprise product with customers paying millions of dollars a year. And I was very involved at every stage of that journey. I saw what went well, but I also saw all the ways in which it was really hard. It's really hard to build up a sales team that can sell to enterprises. It's really hard to market to those people and retool your motion. It's really hard to build a product that works for those. It turns out even when the individual user need is the same, teams have such different needs, and there's this whole world of compliance, privacy, IT approvals and everything that you have to solve. And I saw how small our team was. I think we had maybe, I don't know, 15 or 20 engineers at the time we started feeling this demand.
And so it's not that we didn't want those kinds of customers, it was just knowing the reality of what it would take to serve them was daunting. And I know how easily you can get pulled into these deals where you start making commitments to them. Our philosophy was we didn't want to give up our prosumer product and only bet on enterprise. We wanted to layer enterprise on top of this prosumer business that was already healthy, which meant that you have to divide your focus to some degree. We have since grown the team a lot. Obviously, we've raised money. We've probably more than tripled the size of our engineering team. We've built up go-to-market. We are now serving these companies. But to answer your original question, it was not incremental. It's been a rapid sprint to actually be able to serve companies like that.
Brett: Switching gears just a little bit, I think there's so many people that talk about we're in a time that distribution matters more than product. Even in the early days when you had an inkling of this product, but it wasn't quite right, you had a lot of distribution, you had a bunch of people trying the product. What have you figured out about distribution?
Jon: I think I'll probably disagree with the premise here of I still think product matters much more than distribution. It is true though that increasingly as AI products feed on their own training data, that distribution is how you make your product better. And so I think dynamics may change where people without distribution can't get their products to be good enough. But I still think it's a mistake to conclude from that that, oh, these are all distribution problems and we just need to have a better brand and more marketing dollars and everything. All of that absolutely matters, but I think ultimately, product is the driver, and great products can still overcome a distribution gap.
Brett: But isn't the early lesson of the story that the product wasn't right, but you also had tremendous distribution, thousands and thousands and thousands and thousands of people coming to the product?
Jon: No, I think that until we had nailed the product, we actually had pretty weak distribution. We had hundreds of people coming to the product every day, and every time, we would do a big launch or a big marketing moment, that would spike to a thousand and fall right back down. The inflection point came when we truly solved virality in the product by introducing AI. And at that point, we started getting distribution for free, because people would make something great, they would share it with someone else, those people would try it out with a very low friction loop and tell their friends. And at that point, it didn't even matter how big that initial seed of distribution was. What mattered was the slope of the curve, and I think that slope is all product.
Brett: You spent most of your career building products before LLMs existed and codegen and everything that we have today, and now, you're building a company that's completely predicated on this enabling technology. How would you describe the difference in what it means to be excellent at building products today versus at every other point in your career?
Jon: I think in many ways, LLMs have heightened what it always took to build great products and widen the gap between the teams that are really good at them and not. So I think actually, the core trait that mattered before and still matters now is agility, and by agility, I specifically mean being extremely close to customers about what they actually want, shipping extremely quickly, faster than you're comfortable with, and then being willing to throw away or change your core product mechanisms based on what you learn.
The insane thing about LLMs is that agility used to mean that you would do all those things over, let's say, a six to 12-month cycle, and now, it's become possible, keyword being possible, to do them over a day to week cycle instead. Almost no company can really stomach though the sort of g-forces involved in moving at that pace, and especially larger companies. There's just too many stakeholders involved, too many legacy commitments and responsibilities that I think it's just physically impossible to move at that kind of pace. Not just impossible, but irresponsible to move at that pace.
Brett: And the bottleneck being humans.
Jon: Not only humans. I would say human decision-making is one, but also just the accumulated cruft of backwards compatibility, contracts, legal responsibilities. I think even an org run by a thousand AI agents would actually hit this friction. It's just that they're all a few months old, and so we haven't seen it yet. And so we're in this world where your ability to tighten that cycle time on all of those pieces is the key trait that will drive success. And companies with different profiles have to adapt in different ways. For us as a roughly a hundred person company, we already feel too slow. We already feel like we have to be faster. We see how a company of two or three people can just fly because they have none of this accumulated cruft. And I can only imagine what it's like to operate 100,000 person company in these conditions.
Brett: How do you figure out how fast you should actually be moving?
Jon: The answer's probably always faster at this point. I think ultimately, this goes back to diagnose with data, treat with design. So the way to know if you're not moving fast enough is when you start seeing signals in the data that you're losing even an ounce of product-market fit, so looking at activity metrics, looking at segmentation of your users and how much they're driving your product, being unflinching in listening to why people churn off your product and where they're going and what they're saying. We're trying to really sharpen all of those systems so that all of us are getting basically slapped in the face by data every day, and we can use that as the ultimate signal that says ... It's not about be fast or slow. It's be fast in this specific area. This is an area that needs drastic change, this is an area that can make gradual incremental change, this is an area that's crushing it and just keep going the way it was.
Brett: You gave the qualitative definition of your experience of product-market fit while rolling up the hill versus down the hill. If you had to turn that into quantitative metrics or numbers that actually express that qualitative feeling, what are the most important numbers that express it?
Jon: The most obvious one to me in terms of when I felt that things qualitatively changed was actually just new user signups per day. Obviously, a vanity metric, it's not the one that most drives the business, but it was the one that drove the qualitative feel of product-market fit. And just to give some concrete numbers, before we launched our sort of AI product and it was more esoteric and hard to use, we were in the hundreds of signups a day. As soon as we launched this AI product, it jumped into the low thousands. We're talking 1,000 or 2,000 a day. But the reason we knew product-market fit was happening was that the numbers started inflecting upwards. So it started inflecting to be, very quickly in a matter of a month or two, 10,000 signups a day, 20,000, 30,000.
Brett: Which is the opposite. Normally, you launch something and you get from a thousand-
Jon: Normally, you launch, it goes up, and it spikes back down.
Brett: Yeah, exactly.
Jon: So the fact that it went up, I mean, it reminded me of reading about Facebook in the early days, like a true viral coefficient. Was it work? And we were still doing no-paid marketing at this time. So the only explanation for this was word-of-mouth growth, basically, different kinds of word of mouth. But that 10,000 kept climbing upwards, 10,000, 20,000, 30,000, to the point where in our first year we crossed 100,000 signups a day. And I just tried to step back and visualize 100,000 people. That's like a stadium. I mean, it's really actually unreal when people were signing up for this product that we hadn't even really marketed and still had major weak spots at the time. This was maybe three years ago. And that number has continued to trend upward, not exponentially forever. We'd have the whole human population at some point if it had kept trending upwards, but it has settled in now well above 100,000 signups every day. And that just keeps on going. It amazes me that there's this many people out there. And of course now, we think a lot more about signup quality and different markets and different job functions and all of that, but that was the clearest sign that we had gone through some kind of phase shift.
Brett: Did you then also think a lot about retention and usages as key PMF metrics, or no, it's really-
Jon: The true definition of PMF is that you're so overwhelmed that you can't think of anything else. And that's what we were for the first year probably. We couldn't even think about are they using or retaining? We're just trying to keep all the people coming through the door.
Brett: Back to what we were talking about a second ago, what are some of the things you've had to unlearn or have been hard for you to unlearn in building products in this era versus the rest of your career?
Jon: One of the hardest things is that we, as a company, value craftsmanship as one of our core values, building things really well and really carefully and really thoughtfully. And I think also part of that is we valued a culture of ... I won't say consensus decision-making, but involving a lot of people, having a lot of opinions, and letting those all shape the final output. And a lot of that care from our team is what drove our early success.
So I wouldn't say we've tried to unlearn it, but the pace at which the market is moving and the need to change the product has made us adapt that. Our idea of what craft looks like. Craft can no longer look like going into your little studio and tinkering for several weeks before coming out with something to show for it, and craft also doesn't mean that all of us can feel the same ownership of the product through consensus. We actually have to take these blind leaps in the dark often, put something out there, see if it works. We also have to sunset things a lot more quickly. And so I think figuring out how to square high pace and urgency of innovation with craft and care has been one of the trickiest cultural adaptations to navigate along the way.
Brett: So even if it's not solved, what is the definition of craft in the context of your company today?
Jon: I think it means that we still want to be our own best user of the product. We still use our own love of the product as the ultimate north star, but we have now tried to pair that with a much higher pace and a much higher level of urgency at getting things out there and much less sentimentality of keeping the things that we have in there. So maybe you could say that it's pairing craft down to its essential, which is care without possessiveness.
Brett: When you zoom all the way out and you think about all the different things that you figured out about building an app-layer AI company today, what are the most important things that you're reasonably sure are globally correct?
Jon: A few that come to mind as really obvious ones. Multi-model orchestration, so you can't tie yourselves to a single model and just wrap that. You have to add value by orchestrating multiple pieces together. Simple example for us at Gamma is that we orchestrate both text and image models, but even in those categories, we have probably three-ish major providers of each one and use different models for different tasks, in particular, optimizing for cost, latency and reliability. Building both evals on top and also a data pipeline to actually gather real user preference signals so that you can iterate on the quality I would say is really essential. On pricing, segmenting users into different types and finding ways to serve those different categories. I don't know how obvious this one is, but going international has been huge for us. The AI app-layer opportunity is so much broader than just a narrow segment of people like, say, in the United States and the people right next to you. I think especially for a horizontal prosumer product like ours, it's just a no-brainer, and our company is 10 times bigger than it would've been if we hadn't done that.
I don't know if going horizontal versus vertical in general is a clear-cut answer. I hope what we've shown is that horizontal can work, but certainly, vertical can work, too. I do think it's important to pick, and it's very hard to waffle between those things, and you make pretty different choices if you do. For us as a horizontal company, betting on UX as a differentiator has served us really well, and nurturing a team culture and talent around that has been really good.
Brett: What about high-order bit insights? And you hit on many of these around specifically building a modern prosumer business. Are there hard-earned insights that for other people that are just about to begin a prosumer business, you can say, "Be careful of this, keep this in mind?"
Jon: Rethink pricing. Don't take legacy SaaS pricing as a given in this new world. I think you'll need to test your way to pricing yourself. And this is a live one. I don't think our lessons will even carry forward in six months because the landscape is changing so quickly. Differentiation remains really important. I think you need a really crisp story of why someone should bet on you as a brand and you as a product because of an extremely concrete way in which you're different. I think for us, if we were to boil it down into one word, it was speed. You should choose Gamma over PowerPoint because we are so much faster at getting you to the polished outcomes. Obviously, we care about other things we've tried to layer things on, but we tried to really orient ourselves around that. And then bring that into the onboarding. That's maybe the crucial one for a horizontal prosumer thing is you have to take your one value prop and show it in the first two minutes of when someone signs up. If you can't do that, you're toast.
And probably, the single biggest lesson that you could take from Gamma was focusing on onboarding actually unlocked the real product's value prop. So maybe to go back to your question of what would we do differently? I would've just focused on onboarding. For my next company, I would say just nail onboarding over and over. If you do nothing else, nail onboarding, because if you can nail the first five minutes, you've nailed the value prop of the rest of the product.
Brett: Maybe just to wrap up, something you didn't talk that much about is what was the emotional and psychological journey of the company? So maybe if you go back across your path to PMF and the different chapters, was it despair and anxiety? Was it, it was always pretty light and people were just creative and trying things? What did it feel like as a founding team through the beginning of COVID all the way up until now you're having a hundred thousand people try the product on a daily basis?
Jon: Ironically, I would say the happiest and easiest time was when we had zero product-market fit because zero PMF equals no responsibilities, complete creative freedom.
Brett: But it didn't feel anxiety-producing that we have nothing?
Jon: Eventually, it got very anxiety-producing once that runway counter started ticking down. But early on, I would say our first year or two, we'd raised enough money that we weren't immediately worried about will this hit? We knew we had some time, and so we were in an exploration period, and that was so fun. I got the best sleep of my life during, I would say, those periods of the company. Then probably, the worst period of all was the time when that clock started ticking down and I knew we didn't have PMF, and the music was going to stop. That was maximum dread, despair, anxiety that I felt.
But once we hit product-market fit, it wasn't all sunshine and roses. Now, there was a whole new set of challenges. Oh my gosh, every day, there's a new problem to be solved. There's so much to keep up with. I love this metaphor of pushing the rock up the hill and chasing the rock down the hill because I think it illustrates that neither activity is particularly fun - pushing the rock and chasing the rock. And the frustrating thing about startups is you don't get even a week at the very top to just sit and enjoy the view. You immediately go into chasing mode, and I feel like we've been in chasing mode ever since. Not to say it isn't fun. There's many wonderful parts of the experience. I wouldn't trade it. It's my dream. But don't expect to ever get a break, and if you're a founder, don't ever kid yourself of like, "Oh, there's just this one stretch, but after that, it's going to be so much easier."
Brett: Or this one exec or this.
Jon: Yeah. Yeah. If I hire this one exec, if I close this one candidate, if we get this one deal, it's all going to get easier. It never gets easy.
Brett: So then why is this of interest to you? You go from one version of pain to another version of pain, and as you said, by definition, the entirety of the company will be this.
Jon: I'm a recent new parent and I'm observing all the ways in which having a child is like having a company. And my feeling about both in these last few years is that there is so much pain and just physical exhaustion, but also so much joy and pride that you feel along the way. This feeling that you have built something that didn't exist before and the joy of getting to create something magical with your colleagues every day is so high that it is worth the pain and challenges that you endure along the way.
Brett: In reflection, did you find the lack of intensity and pressure and angst that existed in the early chapter of the company's life, was that a feature, or because you had runway, it created too much space for too much tinkering and slowness? Do you reflect on that at all?
Jon: I do reflect on it, but I don't think it's a clear-cut answer. On the one hand, I think the nature of a creative product that is so design-oriented is that you can't build it in a pressure cooker. This goes back to this larger debate going on around 996 and whether everybody needs to be working 80-hour weeks, and I think there are certain types of company that are well-served by a 996-type culture because it's just a grind where there's very concrete, legible work to do. There's way more work than people and whoever gets through it fastest wins.
But creative products that are oriented around creating that special experience that are often about restraint and doing less I don't think are very well served by this mindset. They're well served by creating space for exploring multiple different paths in parallel, dogfooding them yourself, coming to your own conviction with time. And it's been funny observing the Linear founder and the Corgi founder arguing about this on Twitter because they represent these two extremes of company really well. We, I think, are more of those design-y tool where we needed that space. At the same time, I'm also cognizant that Gamma really only succeeded because of luck. Our original idea didn't work. A world-changing trend came along just when we were at our low point. And I mean, kudos to us for jumping on that trend, but still, if the wind hadn't come at just the right time, our boat would've sank. And I do wonder if we'd had more urgency and speed, if we would've gotten more maybe shots on goal.
Brett: What is the takeaway from that, the point that you just made? Is it that there is more luck in outlier companies?
Jon: Oh, yeah. I mean, there's a huge amount of luck in outlier companies. I have no doubt about that based on my own experience and from talking to other founders as well. But it's not only luck. I mean, I think that the boat metaphor is always valuable of if the wind doesn't come, you're going to sink. But at the same time, dealing with that wind and getting your sails in the right place and zigging and zagging at the right time takes a huge amount of skill and execution. But in terms of what does it mean for company building, my synthesis of these ideas and the one I'm trying to apply at Gamma is you need to both give yourself room to be creative and try a lot of ideas, but you need to do it faster and you need to be extremely decisive and bold on, when you have one, throwing the entire company's energy at it.
Brett: Good place to end. Thank you so much for the time and the conversation.
Jon: Thank you for having me. It's great to be here.
Brett: I really appreciate it. Yeah. Thanks.
### Watch: Launching Gravitas, one of the highest-powered spacecraft ever built
URL: https://review.firstround.com/watch-launching-gravitas-one-of-the-highest-powered-spacecraft-ever-built/
Last updated: 2026-07-23T16:39:10.000Z
[](https://www.youtube.com/watch?v=7%5FcS3RPY%5Fzo&ref=review.firstround.com)
Brothers and co-founders Karan and Neel Kunjur started **K2 Space** on a contrarian bet. When the entire satellite industry was building smaller satellites, K2 built larger and more powerful satellites.
In space, everything comes down to power, and power scales with size. More size means power, which means more capability to run experiments and missions that weren’t doable on smaller buses. Neel Kunjur says it best:
> “We’re vastly underestimating our own capabilities of what we can do in space. We need to think bigger, not smaller.”
That contrarian bet became real when K2 launched Gravitas — the 20kW satellite is one of the highest-powered spacecraft ever built.
This is the story of how K2 is making the impossible, possible.
[Watch](https://youtu.be/7%5FcS3RPY%5Fzo?ref=review.firstround.com)
---
## **Recommended resources:**
We've just opened applications for our sixth cohort of PMF Method — an intensive, four-day retreat has helped over 100 founders take a straighter path to PMF.
Alumni include senior leaders from Anthropic, SpaceX, Stripe, Rippling and more. And in the last 18 months, they've raised $750M.
Are you next? Learn more and [apply here](https://www.firstround.com/pmf?ref=review.firstround.com).
### Why Plaid’s COO cold-calls new hires | Eric Sager (COO of Plaid)
URL: https://review.firstround.com/executive-function-eric-sager-coo-plaid/
Last updated: 2026-07-16T19:16:40.000Z
In the latest episode of Executive Function, Brett sits down with Eric Sager, COO of Plaid, following stints as CRO of Bluevine and Head of Sales at Square. During his seven-year tenure at Plaid, Eric has helped lead the business through a pandemic, Visa's collapsed acquisition, a fintech downturn, and the AI boom. In today’s conversation, he unpacks how he kept teams focused during turbulent times, why he refuses to run at 100% capacity, and how he re-architected the go-to-market function as Plaid scaled.
In today's episode, we discuss:
- How Plaid stayed focused after the Visa acquisition fell through and then raised at nearly 3x the price
- Why great COOs deliberately make themselves obsolete
- Why Eric treats speed, risk, and cost as a three-way trade-off, and why sometimes going slower wins
- How refusing to run at 100% capacity helped Plaid win OpenAI, Perplexity, and Replit
- Why Eric personally cold-calls brand-new employees
**References**
- Bain & Company: [https://www.bain.com](https://www.bain.com/?ref=review.firstround.com)
- Bluevine: [https://www.bluevine.com](https://www.bluevine.com/?ref=review.firstround.com)
- Chase: [https://www.chase.com](https://www.chase.com/?ref=review.firstround.com)
- Citibank: [https://www.citi.com](https://www.citi.com/?ref=review.firstround.com)
- Eyal Lifshitz: [https://www.linkedin.com/in/eyallifshitz/](https://www.linkedin.com/in/eyallifshitz/?ref=review.firstround.com)
- Françoise Brougher: [https://x.com/FrancoiseBr](https://x.com/FrancoiseBr?ref=review.firstround.com)
- Gokul Rajaram: [https://www.linkedin.com/in/gokulrajaram1/](https://www.linkedin.com/in/gokulrajaram1/?ref=review.firstround.com)
- Jack Dorsey: [https://x.com/jack](https://x.com/jack?ref=review.firstround.com)
- Michael Mankins: [https://www.linkedin.com/in/michaelcmankins](https://www.linkedin.com/in/michaelcmankins?ref=review.firstround.com)
- OpenAI: [https://openai.com](https://openai.com/?ref=review.firstround.com)
- Perplexity: [https://www.perplexity.ai](https://www.perplexity.ai/?ref=review.firstround.com)
- Plaid: [https://plaid.com](https://plaid.com/?ref=review.firstround.com)
- Replit: [https://replit.com](https://replit.com/?ref=review.firstround.com)
- Sarah Friar: [https://www.linkedin.com/in/sarah-friar/](https://www.linkedin.com/in/sarah-friar/?ref=review.firstround.com)
- Square: [https://squareup.com](https://squareup.com/?ref=review.firstround.com)
- Visa: [https://www.visa.com](https://www.visa.com/?ref=review.firstround.com)
- William Hockey: [https://www.linkedin.com/in/william-hockey-04536710](https://www.linkedin.com/in/william-hockey-04536710?ref=review.firstround.com)
- Zach Perret: [https://www.linkedin.com/in/zperret/](https://www.linkedin.com/in/zperret/?ref=review.firstround.com)
**Where to find Eric Sager**
- LinkedIn: [https://www.linkedin.com/in/eric-sager-a529516](https://www.linkedin.com/in/eric-sager-a529516?ref=review.firstround.com)
**Where to find Brett**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps**
00:00 Introduction
00:40 Leading a company through turbulent times
04:24 How to build a resilient team culture
08:33 How Plaid avoids bureaucracy, while operating at scale
10:58 The speed-quality tradeoff: Going faster isn't always better
15:32 When to move from generalists to specialized customer segments
20:14 Why Plaid has one owner for entire customer relationships
22:06 The "quarterback" model: one owner, experts on call
24:08 Why you should never run your org at 100% capacity
29:47 "Always available, never needed": the support mantra
36:49 Eric’s unusual "hit by a bus" test to measure job success
43:57 Why Eric cold calls brand-new employees
52:14 Eric's week: 25% ecosystem, 50% business, 25% team
55:15 How to spot fake mission alignment in interviews
59:04 The one thing a founder has that no hire can replicate
**Brett:** I'm curious to get your perspective on what is unique about leading a company in moments of incredible dynamic change that's very different than leading a company when that's not the case. So, you join and it feels like things are relatively ho-hum for maybe 18 months. Then you have the pandemic, then you have Visa M&A, then you have FinTech is dead, market implosion, and then you have AI. What's unique about running a decent portion of the company and the role of COO through those specific times?
**Eric:** So, I feel at least as far as my journey at Plaid is concerned, in a weird way, there's nothing unique about it because at almost a step there was something like that.
**Brett:** We should talk about the three weeks or it wasn't that.
**Eric:** There's always been things like that. I think the key is always you just have to be relentlessly focused on still moving the business itself forward. And so, I think whether it's in the context of Visa or COVID or anything else, I think one of the things we've always really been very focused on is ruthlessly focusing on making sure that we're serving our customers, we're serving the ecosystem, we're continuing to move the ball forward irregardless of what happens on something like that. And so, there's a couple of tactical ways in which I think we did that. I think one is just in terms of how we speak to the company. We're very clear that this is just one potential milestone among many. It is not the end goal, it is not the finish line. I think that's particularly important even if you see companies now going public and so forth, I think. I learned a lot there from my days at Square where that's kind of how Sarah and Jack talked about the IPL, right? It wasn't the finish line, it was just another milestone amongst many milestones. And I think if you take that attitude, it's easier to remain focused. The second is the way you think about the team. And I think we've always tried to minimize the number of folks that are truly actively working on something like that. In the case of COVID, obviously that's a little bit different. That affects everybody. But in the case of Visa, the team that was actively day-to-day working on the transaction was actually quite small. And everyone else was 100% focused on continuing to grow the business. They were certainly aware of the transaction and aware of what was happening and obviously how could you not be given some of the press at the time. But fundamentally, they were 100% focused on their day job on, again, serving our customers, serving consumers, building the platform and the ecosystem.
**Brett:** Do you think it's mainly sort of a comms kind of a thing where you're just relentlessly landing those messages? So, is it just narrative and storytelling and keeping people focused in the way that you communicate or are there other things that you have to do?
**Eric:** I mean, I think it's substantive as well, right? I mean, in this case, I don't know if I would think of it as kind of falling apart. I mean, certainly the deal didn't go through, but then subsequently we raised at a significant upround. We provided liquidity to our team, right? And so, suddenly from an employee's perspective, you're actually pretty happy about it, right? And so, I think that went a long way to show the intent for what we're trying to build. I think it's about just the culture and what you really value at the end of the day, right? And I think if you build a company around any given milestone, like an acquisition or an IPO or something like that, I think it's really hard to build a truly great company versus if you build a company and a culture focused on actually delivering for your customers, delivering for in our case, the ecosystem that we're building, I genuinely think our teams, certainly I do, believe in that, right? And we believe in that much more than we believe in any one of these kind of externalities that might happen. And I think as a result, it makes it easier to stay focused, right? So, it doesn't just start when that event happens. It's like you're constantly talking about what you're trying to do for the ecosystem as a whole and for your customers and so forth and so on. And so, it's not like it's a new thing versus I think to me, sometimes if you frame it more as a comms thing, it sounds a little bit more like it was reactive to just that moment versus no, this was always the culture that we were building, it never changed, right? And I think the really great companies, they've been able to do that. They've been able to maintain that focus, to maintain that culture over a very long period of time, irregardless of what happens. And I think that's what then builds the resiliency to handle all the ups and downs that you talked about. It's very rare that you find a company where it's really just straight up into the right.
**Brett:** So, if you pick that apart a little bit and you talk about building the foundational culture that to the point that you're making becomes that ballast through all the ups and downs of the company's life, how do you think about what it actually means to create or construct or build that? The idea of being customer-centric, all the underpinnings that drive the culture. If you pick it apart and you use the least generic culturey language, how do you actually go about doing it in your eyes?
**Eric:** So, I think the first step is always, this is obvious, but you actually have to take the time to think about it and formalize it in a way. I don't think it's something you just want to leave to chance. And I think there's a lot to be said for, again, I think the founders like Zach and others, I think he was very deliberate about the kind of culture that he wanted to build. And I've seen a lot of founders that they're not. It's just kind of an afterthought. It's kind of the result of everything else that's happening around them versus like, no, this is like I'm proactively thinking about what I want it to be and what I'm aiming for. I think once you have that, I think the second piece is you have to hire for. And so, you have to be willing to make actual trade-offs in terms of the kinds of people that you're bringing on board, particularly in leadership positions, but really across the entire organization. And then I think you have to build out a rewards infrastructure around that as well. So, it has to matter for who gets promoted, who doesn't, who gets a raise, who doesn't, who gets more equity, who doesn't. Those things have to be tied not just purely to results, but to an individual's ability to enhance and further and contribute to the culture as well.
**Brett:** What have you found have been the trickiest moments around culture or when it has been the most tested in your eyes?
**Eric:** I think the hardest is always when there's a clear kind of conflict between the culture and some short-term goal. And so, where you believe in the culture long-term, you know what's right, but in the short term, there's a shortcut that would clearly maybe lead to better metrics or a better operational outcome. That becomes very challenging. And I think that's where again, I think the really good leaders, they are able to maintain that discipline, maintain that focus on that long-term north star vis-a-vis letting themselves, like I said earlier, to get distracted and say, "No, no, look, I know I can get to this one specific milestone. It's just a little bit quicker if I just make a few compromises." I don't think that ever ends there, right? Once you go down that path and the folks around you see that, there's going to be a second time, there's going to be a third time, there's going to be a fourth time. And before you know it, those cultural principles don't really stand for much of anything anymore. It's pretty clear that the short-term has overtaken the long-term.
**Brett:** What about things like you have a star employee in some dimension, but they're an asshole or they violate your culture in some way, but they're really high performing. Do you find there are those tension points quite often or very rarely?
**Eric:** I mean, those happen, right? I think they're the key is you just have to be very open, honest, and direct. So, you just have to take that on right away. And I certainly think that's a conversation I've had with a lot of folks over the years. And I think the key there is always to make sure that you're really discerning intent, right? So, that there's a version of the world where you might be acting in what I or our culture perceives to be an asshole, but you're not actually doing it on purpose, right? And so, it's simply me coming to you and saying, "Hey, look, this is really being perceived as you being an asshole. Maybe if you tried it a little bit differently, we would get to a much better outcome together." Once you say that to people, the vast majority of people I've ever worked with, their reaction to this is say, "Hey, Eric, thank you. I really appreciate you caring about me enough to give me that feedback." And then they do their best to course correct. And it might not be instantaneous, but over a period of time they evolve in terms of how they interact with their team and the rest of the organization and that solves. And somebody that was supposed to be an asshole two years ago suddenly is just crushing it from a culture perspective.
**Brett:** Switching gears a little bit, because you've been at the company for a long time, you've seen it go from a relatively small company to a relatively large company or certainly a larger company. The natural thing that happens when you add more and more people and you grow is you end up with more bureaucratic organizations. But in almost always cases, there's some form of slowness that's introduced into a company. What are some of your observations about that and the organism that is the company as it's evolved?
**Eric:** I think there's a few things. So, one, I think generally speaking, I do think it's true that the bigger you get, the harder it gets. But at the same time, the bigger you get, the more assets you have at your disposal to fight that off in a way. And so, I think there's a few core things that I think mine and we do. I think one is making sure that even as you get bigger, you're always crystal clear on who the decision maker actually is. I think you don't want to live in a world where it's unclear, you have five, six, seven people. They all think they're the ones ultimately making the final decisions. And so, I think even on something as mundane as just going through my leadership meetings or going through any meetings, just being crystal clear at the end, what are the things we're actually going to go do? But also then crucially, who's on point to do it and trying our best to make sure that it is one person, it's not two people, it's not three people, it's not four people. That doesn't mean there shouldn't be collaboration. That doesn't mean you're not going to go to your colleagues and ask them for input. But I think we try very, very hard to make it clear who's ultimately making the call. I also think we've tried to avoid just unnecessary layers. It's funny to me sometimes now reading what people are saying in the context of AI and so forth because I think-
**Brett:** The flattening of the org and everything.
**Eric:** Yeah. We built Plaid that way from day one, right? And so, we never really hired a lot of middle managers, so to speak, right? The focus was really always on hiring as many frontline folks as we need that are either building products, developing products, working with our customers, et cetera, or we needed the right kind of senior leadership to bring the right subject matter expertise in. But even for those folks, we have an expectation that they can still do their job, right? They can still do the job of an IC, right? And so, that's just culturally where we're at. And I think again, Zach is a wonderful example of a founder who actually does that, right? He really still does IC level work every single day. And I think he expects that of his leadership team and then we expect that of the rest of the team as well.
**Brett:** Do you think about driving pace and velocity in the context of what you're responsible for and that you're kind of a governing force on that or no?
**Eric:** I do, but I think there's other dimensions to it as well, right? And so, there's a dimension of speed and velocity. There's a dimension of risk and then there's probably a dimension of cost and you're trying to optimize in that kind of three-dimensional space, so to speak. I don't think it's fair to say that, "Hey, no matter what the decision is or what you're talking about in the context of the business, that faster is always better." I think that's nonsense, right? There's plenty of examples where you don't want to do that, particularly I think in a business like ours where the details really matter, right? I think one of the examples I oftentimes give folks is in our world, if I tell you there's $101 in your bank account, but it's really $101.10, there's absolutely nothing funny about that. It's not like it's like you're buying gems in a video game or something like my kids do on their iPad. And if they get that wrong by a little bit, is it great? No. Is the world going to go on? Yes. But if you fundamentally as a consumer or as one of our customers can't rely on the data that they're using to make very important recommendations and decisions. This decides should you get a mortgage? If so, how big of a mortgage should you get? These are life-changing decisions for you and your family. We have an obligation to make that as absolutely right as we possibly can. And if that means that in certain times, in certain pockets, we move a little bit less fast, so be it, right? That's just one example. And then oftentimes, there's a cost dimension to it as well where it's just a question of how much money are you willing to spend to make it go faster? And so, sometimes that trade-off doesn't make sense.
**Brett:** Do you talk about that in the context of whatever you're working on as a team or an org? We are going to go slow here or we are going to go fast here?
**Eric:** I don't know that I would frame it as we go slow. That's not the branding that I think is going to resonate with folks.
**Brett:** Well, we need to be methodical and precise here.
**Eric:** Exactly, right? I think I would frame it more as, look, this is one area where we just absolutely cannot afford to get it wrong, right? And so, that by definition means you're going to have to make some sacrifices when it comes to speed. And so, it's just understanding for any given area across those three dimensions, where do we actually want to play? And so, we talk about it in that context, right? And so, it's a trade-off. Again, you can't have everything. There's no way that's not how the world works. And so, it's about being honest upfront about the trade-offs that you're making when it comes to this specific decision, this specific project, this specific part of the business, and then executing accordingly. That's the way I would think about it. And that can evolve over time, right? It can evolve as the technology and our capabilities evolve. It can evolve as regulation evolves. It can evolve as the competitive settings of other solutions that are out there in the market evolve. So, these things aren't static either, but it's being clear about what they are when you set out. And it's about having the discipline to go back and reevaluate and look at does that trade-off still make sense? If it does, fantastic. If it doesn't, you need to change it to get it in line with what the current market and opportunity actually demand.
**Brett:** Do you find that you often as a team think this is a time we need to be methodical and actually you rethink it and actually we should err towards speed? Or the easiest thing is figuring out that set of trade-offs. And then the hard thing is going and actioning on that.
**Eric:** For better or worse, I think Zach and I have a fantastic partnership there where he tends to be the one that's coming in and saying we should move faster. And then the German in me is a bit more methodical about it. And so, that's a good tension at the end of the day to make sure that we're actually executing on it in a sustainable way. And I think it's a part of why I think we've been so successful. I think we've had competitors that sacrificed everything at the altar of speed and it didn't work out and not at all. And so, again, it's about being smart. And so, are there moments where even I find, yeah, we should be going faster? Absolutely. At doesn't happen. But I think we have a lot of folks across the business that probably tend to be more aggressive on the speed side than I naturally am. But it ends up being a really, really good balance to make sure that we're actually getting to the sweet spot for what the situation demands.
**Brett:** Maybe you could share a little bit about how you've thought about organizing the company over the company's life. I don't know if there's certain chapters you would break it apart into. How would you articulate your higher level thinking on how to organize a company? There's so many ways. And you're also multi-product company now. You have different types of customers, two-person companies, 200,000 person companies, different sectors. What are the different incarnations of org design and what have you landed on now and maybe what are some of the things you've gotten right or wrong?
**Eric:** I'll talk about it more through the go-to-market lens. Although on the product lens, it's kind of evolved in similar ways. And so, in the early days, there was only one flavor. And so, it didn't matter. An opportunity would come in, it would get assigned to an AE, and it would get worked. But there was no notion of it, this is a startup or this is an enterprise customer or anything like that. And I think in the very early days, that's actually workable. And I think the general principle there is you want to avoid unnecessary complexity, right? And so, it's so much when you're first getting started is about finding the right kind of product market fit within the right segment within the right use case. You can still afford to find true generalists and your products are probably simpler or at least more narrow. You're unlikely to start with 15 different products at the same time. You're starting with one thing. And so, here in the case of Plaid, that was mainly off, which is just the account and writing number. It's what customers use to be able to initially connect the bank account to then fund it. That's in and of itself not that difficult to explain to somebody. And it doesn't really matter that much of whether you're talking to an enterprise customer or you're talking to-
**Brett:** The unit of value they want is very similar.
**Eric:** Yeah, it's very similar, right? And so, that's where we started. And then we very quickly realized as we got bigger and bigger, "Hey, there's actually a real difference now in terms of how big companies are buying our products from how small companies are buying them." And so, then we had T-shirt sized it, small, medium, large. We called it something else, but conceptually, that's what it was. And then there, that's at the time that I came in.
**Brett:** Was that intuitive, that shift? What were the signs that it was the time to do it and it wasn't too early and it wasn't too late if you just had to orient?
**Eric:** You really started seeing a divergence in needs from those customers, right? And so, we had gone from one product to three products. The newer products were fundamentally different in terms of how they were being sold. And yet all three T-shirt size segments, our startup segment, our mid-market segment, our enterprise segments were all rapidly grown. Then it's, I think, relatively easy to go down that path of specializing. I think that also-
**Brett:** But you're starting to hear different things from the customers.
**Eric:** Very different things.
**Brett:** And that's what the decision.
**Eric:** Yeah. And it's in all facets, right? It's like, what do you expect from the product? What do you expect from the sales team? What do you expect from the account management team? What do you expect from your support team? What do you expect from your solutions engineering or sales engineering team? It starts diverging quite a bit, which is intuitive. If you've ever tried to get any of these things implemented, how we implement even today with the largest companies in the world to how we implement with a startup is very, very, very different. And so, if we're implementing a solution, pick a company like Citibank. Or on the one hand, we're implementing a solution with a startup that just got going that has two people working for it who are really technical. It's just a totally different process. And so, we started specializing along those dimensions. And at the time, at least we were still very functionally driven and the functions were separate. So, you had a sales team, you had an account management team, you had a customer support team. And I think one of the things that very quickly became clear to me was those handoffs between sales and account management, they weren't working very well. And I think I've been blessed to have a role at Plaid where I've always generally been able to oversee all aspects of the business. So, everything from marketing to sales, to account management, to support, et cetera. And so, I think it was much easier for me to put myself then in the customer's shoes and say, "Well, if I was interacting with Plaid, how would I really want this interaction to go?" Right? And so, certainly personally, I've gone through this as a consumer of many products where I call into one person, I tell them my life story, then they eventually connect me to another person or they go away and a new person comes in and then I have to repeat my life story again. Then I have to repeat it again and again and again. And honestly, by the fourth time I'm like, "I've had enough of this. Okay. I'm done here. How can you not know this stuff by now," right? And there's a technological solution to that to at least partially, but there's also, I think, an organizational structural solution. So, one thing that we did is we then created our segments, but then we put all the functions within the segment together so that the person leading the segment owned the entire end-to-end customer relationship, right? And so, suddenly, even if it wasn't the exact same person doing it, you had somebody much closer to the customer who was accountable for making sure that the customer's experience with our sales team smoothly translated into the customer's experience with our account management team, smoothly translated into the experience with our support team and so forth and so on. And that just dramatically improved both customer satisfaction overall, their ability to implement and scale their initial product and use case, and then our ability to successfully cross-sell and upsell them into all these other solutions that we had available.
**Brett:** What are the downsides of organizing that way?
**Eric:** There's an element of you lose some fungibility. And so, you just have less generalists, you're starting to go down a more specialized path. So, it becomes either more expensive or more important for you to be able to have a well-grounded understanding of how your business is going to evolve. Otherwise, if you hire too many startup folks and then it ends up being your business actually grows much faster in enterprise, now you're mismatched. It's hard to take the startup folks and just now turn them into enterprise folks. In many cases, frankly, vice versa. So, even if it moves in the other direction, you've got a mismatch there. And so, you need to understand your business better. You need to be more though about how you get ahead of that. Because in many of these cases, our teams can get up to speed quickly, but it still takes a few months to get them up to speed. And so, if you're not careful, you can really create a dissonance there. We just don't have the capacity to meet the needs of your customer in a particular segment. Versus if you take a more generalized approach, again, it won't be as good, but it's just more fungible across. It's easier to move them from one part of the business to the other.
**Brett:** What else can you share about how the org has evolved in the last handful of years?
**Eric:** So, it was that we kind of evolved from one size fits all to size-based. And then the next step for us was just really adding verticals to that. And so, this is within enterprise, whether you're in healthcare or in automotive or whether you're in real estate or whatever, that buying is also different. And so, we added another layer of specialization to that. And so, for us, obviously, FinTech is an important segment, banking and wealth is an important segment. And so, we really actually created segments that were being run as segments where that shared expertise really started to come to bear. And that probably started three, four years ago. And now suddenly instead of having somebody who's yes, only focused on big customers, but it could be any flavor of big customer, now it's one specific flavor of big customer where they're getting the experience of being able to do that over and over and over again. And that was really, really helpful. And then the final step now has been with the proliferation of products that we've brought to market successfully, right? So, it's no longer just aggregation. It's what we're doing on credit, it's what we're doing on fraud, it's what we're doing on payments. In every single one of those cases, we've really both intelligence layer on top of the Plaid network. We have amazing customers that are already operating at scale that's seeing massive benefits. We've now built horizontal teams that then help support our vertical teams, right? And so, the key there is if you're an enterprise customer in the real estate space, you want to be treated like an enterprise customer in the real estate space. So, you want one person that can speak to you about everything to do with Plaid. But at the same time, you still need expertise when you want to help on fraud versus if you want help on payments versus if you want help on credit and so forth and so on. And so, the way we structure that is if you're on the vertical, you own it, you're kind of the quarterback, and there's an expectation that you understand every use case, call it the 80%. But where you need to, you have a team of experts that sit horizontally that bring that last mile of product.
**Brett:** When you think about some of these org decisions, what do you think you did too soon or too late? And maybe it's just you have the benefit of hindsight, but when you look back at some of these architectural decisions, are there things that if you could have a mulligan and do it over again?
**Eric:** I mean, look, I could probably use a thousand mulligans. I don't think I've ever been in a situation where you look backwards and you just nailed it. I think anybody that tells you that they haven't thought enough about the journey that they've been on, even if it's been successful. Look, I think there's definitely pockets where we should have specialized more and faster. I think there's other areas where we probably went too quick. We were really still in a zero to one phase. We didn't need a whole team of people trying to sell that product. What we really needed is a few select relationships with very specific customers to help us co-create and co-develop. And then once we knew we had that product market fit for that particular combination of vertical and use case, then you start ramping it up. And so, I've made both mistakes, frankly, in either direction. I think the key for us has been to just build the organization in a way that it's resilient enough, it's flexible enough, and it has enough spare capacity. That's the last one. Something I really believe in is like, "Hey, I really don't ever want to be right at 100% capacity. I'm willing to pay for some inefficiency so that as the market evolves, as our product evolves, et cetera, I have the capacity to adjust to it in real time much more quickly than I otherwise could." And I think that's worked wonders, right? Because really allowed us to do is more recently now, we've had hundreds of AI companies signing up and we just announced OpenAI, we announced Perplexity, we announced Replit. And so, all these things I think are possible because we saw that opportunity about developing maybe 18 months ago and we were very quickly able to marshal folks towards that across product engineering design and go-to-market. And that was only possible because we had spare capacity, right? If we had dedicated all those folks at 100% to all these other opportunities where we were already seeing huge demand from customers and growing, I don't know that we would've been able to react as quickly to what has been obviously a huge opportunity for us in addition to be able to grow what we already had.
**Brett:** Something you didn't talk as much about is how product and engineering fits into the org design. And I would assume it gets infinitely more complicated when you have many segments in terms of verticals, many company sizes, and then many products and you're trying to build a roadmap and this customer wants this and that customer wants this. What's been the high level path of product and edge as it relates to org design?
**Eric:** I mean there we have what we call product areas. And so, product area dedicated to payments, product area dedicated to fraud, product area dedicated to credit. And so, they're the ones driving that roadmap for that kind of specific area. And in part it's those solutions are aimed at even different buyers at the same customer. And so, I think the key then, like you said, is, okay, for any given customer, what do they really want across that whole spectrum to the extent that they want to buy all of those products? And generally, I think we've been able to manage that quite well where I think we've just made the decision for credit with an eye towards how do we build the best possible credit solutions for the ecosystem? We've made the decisions on fraud with an eye towards how can we build the best possible fraud solutions for the ecosystem? I think it's been very rare that customers have essentially said, look, I'm not going to buy your credit solution until you also build this specific feature on fraud. Even though from our perspective, that feature would be further down the list. It just truly very rarely happens.
**Brett:** But what about the fraud offering for a 10-person company versus a million person company?
**Eric:** That is, I think, fundamentally a decision for our fraud team. I partner with them, our teams partner with them from a sales and from a sales and marketing go-to-market perspective. But at the end of the day, that's literally the work of our product managers on fraud is to understand the overall market enough to say, "Okay, well, where do we think relative to alternatives we can build the best possible solutions?" If anything, the only other lens for us that's important is where does it help us grow the network? Because at the end of the day, we're really a network of networks, right? And so, fundamentally, there are pockets where having a new consumer sign up for Plaid benefits all of our products and solutions. Having a new account connected to the ecosystem benefits all of our products and solutions. So, there's a bit of a bias there to say, "Not just what makes me the most money, but it's first and foremost about what allows us to build the network because it's the network that then delivers a better outcome for consumers. It delivers out better outcome for our developers, delivers a better outcome for the ecosystem as a whole." And so, you think about that in a very specific use case. If it's you as a consumer wanting to get a mortgage and you want to do that in an easy way where you can easily cross shop different opportunities, it's very important for us to A, obviously have a relationship with you. But then also if you have 10 accounts that are relevant to have all 10 of those accounts ideally already connected to Plaid, so that that becomes a very seamless process versus having to go through and connecting each account one at a time. Now that's gotten a lot faster for us as well, but that's obviously more cumbersome than just like, "Hey, I already have them all connected. Let me share it." You can literally instantaneously get the offers that you're looking for. You're happy as a consumer. The developer's happy because it's a really tight match between your needs and their product. And the ecosystem as a whole is improved because it's just a much more efficient way of matching your demand with the right supply.
**Brett:** What about pre and post-sales and making that as smooth as possible? Do you have traditional account management in each one of these segments?
**Eric:** Yeah. And I think my general philosophy over years has always been both for support and I think account management, engineering, solutions engineering, sales engineering, et cetera. It's always been always available never needed is the ideal mantra, right? So, I'm a big believer in, and I think we've been really focused on building our products to such a level of quality that they could theoretically be self-serve and oftentimes are, right? And so, one of the things you see a lot of is you see even very big customers, companies implement with Plaid and scale to massive use cases without ever having to talk to anybody. That's incredible. And so, we don't hide a customer's ability to contact us or anything like that. We want to make it easy while at the same time making the product so good that that just doesn't happen as often. And then a customer can choose and they can choose to engage with us whenever they want to. And then obviously, we're monitoring the health of their integrations, the health of their product, the health of their use case. And where we think we have something to add to meaningfully make it better, then we proactively reach out there to help them. And so, if you on your own aren't quite getting to the place that we think you should be either in terms of how quickly you're moving through the process or in terms of the results that you're seeing, we'll proactively engage to help you with that.
**Brett:** What about the expand motion where you're getting people to go multi-product with you? Is that also pretty low touch, no touch?
**Eric:** Again, I think it depends on the phase and the kind of customer and the specific use case. I think generally there, the first thing for us is just awareness, right? I think we're lucky that we have a lot of really amazing customers. We're lucky that a lot of those customers are obviously incredibly satisfied. They've been with us for a very long time. They have really great NRR, et cetera. But I think there's still pockets, particularly with a lot of the intelligence solutions that we've more recently brought to market where even some of our existing customers are yet aware of them, right? And so, that's not true in core aggregation. I think if you think about in the US building a product where it depends on bank connectivity or open finance connectivity, the odds are just insanely high that you're going to consider Plaid. I mean, it's like a fireable offense. If you have to go explain to your bos that you made a purchase decision in this space and you just never considered us and it doesn't go incredibly well, good luck with that. That's not going to land well. I think our job is to make sure that when you think about payments, when you think about fraud, when you think about credit, we end up in that same place. And I think first and foremost, that just starts with awareness because once a customer has the awareness, then they obviously connect that with the experience that they currently have on Plaid, which is generally going to be very, very good. And now they're like, "Okay, well, let me learn more." And then we give them the path to either do that on their own or once again, they can engage with one of our teams. Like I said earlier, whoever owns that relationship can bring in more expertise from some of our horizontal teams where they're needed. And then we have a whole engine on the backend in terms of account managers, implementation teams, solutions engineering teams, et cetera, that will help you implement the solution and then scale it.
**Brett:** But do you ever think about so much of what you're doing from a product and engineering perspective is you want to deliver on the promise for the customer with very little human intervention. And so, if the account manager never existed, maybe they have no impact on a given customer. Do you think about disambiguating just what the steady state of a customer is going to do without this account management intervention?
**Eric:** Do I think about it? Yes. Do I think that there's enough there to throttle it or to in any way not be there when they ask for help? Absolutely not. And so, again, we run a business that at scale is an incredible business. And so, the last thing I would want to do is you as a customer had a great experience with our first product. You have an issue with a second product and somehow there's just no help to be had. I think that's crazy. I think given the product work that we've done over the years, I think we've proven time and time again that we're going from strength to strength to strength. And you're seeing, again, not just the NR, but also the number of products that our customers are using continue to take up. And so, you just think about even if you got that wrong one time, how much potential future relationship value and even just hard LTV you're giving up makes no sense whatsoever. There's almost no amount of money that I wouldn't reasonably spend to make sure that one of our customers gets to a good outcome. And even if that makes that account unprofitable, that experience will kind of resonate across the rest of the ecosystem and you'll make it back on other use cases.
**Brett:** But what are the other ways if someone were to look at how you run your org, that sort of obsession expresses itself? That sort of, I'm going to go to the ends of the earth for the customer. Many times it sounds like you're not going to be penny-wise, pound foolish. Are there other points or the way that you've oriented the org that sort of flow from that sort of way of thinking about things?
**Eric:** Well, so I think first off, it's not just the customer, it's also consumers, right? So, I think it's really important for us that consumers, even though they never pay us, that at the end of the day, consumers get a consistently better outcome. And certainly that I think has been true in a massive, massive, massive way at the ecosystem level.
**Eric:** But for the vast majority of people, the reality is this allows people to make better decisions for themselves, better decisions for their families, better decisions for their small business, and it allows them to get better products for their needs at a lower cost. That is fantastic, right? And that's the north star. And I think if you do that through this relationship with developers where you leave no stone unturned to make their experience as good as you could possibly make it, there's just so much value created in that ecosystem that there's always going to be enough leftover for us. Always has been, right? And so, I understand the question, but I think in practice, we have never really been forced into a situation where we had to choose between, well, we don't have enough money to invest to give you this amazing experience. It's there. And again, I think that's a testament to how good our products are. It's a testament to how easy it is to implement and scale them essentially already. And so, we can afford to make sure that if something isn't the way it ought to be, that we can fix that as quickly and as reliably as possible.
**Brett:** At this point in your journey with the company and the scale of the company, what is excellence in your role as COO?
**Eric:** I'd say there's a few vectors to it. I think the first one is it's actually not Plaid. It's like, is the ecosystem overall creating more value for consumers than before? I really think about that quite a bit. And so, are people writ large better off because of the tools that we brought into the world? Our payment solution making it easier and cheaper and better to buy the things that you want to buy when you want to buy them, how you want to buy them? Or our fraud solutions eliminating fraud that otherwise would harm the ecosystem, et cetera. I think that's one.
**Brett:** Do you think about measuring that in any level of precision or it's just a visceral feel or gut feel?
**Eric:** I mean, we do a lot of work to try to measure that. And I think, like I said, there's a lot of really tangible things that we can share. You look up around, okay, well, what's happened to over limit fees? What's happened to trading fees? What's happened to average APRs and so forth adjusted for obviously base level interest rates, et cetera. And you can see all those things improving. And the reality is that just even what seem to be relatively minor improvements are massive, right? I mean, if I told you, look, it's like for this type of population, it went from prime plus seven to prime plus six and a half, you just put billions of dollars back into people's pockets. And I think that's a fundamentally good thing for everybody involved, right? I think the institutions agree with that. I think policymakers and regulators agree with that. I think our customers certainly agree with that and for us, it's an important component of it. And so, I think that's the first piece. Because I think if you don't do that, then you're just trying to extract rents. You're trying to get people to do things that actually aren't in their best interest. I don't think it's mission aligned with the kind of company that we are and that we want to build. And so, that's number one. I think two then is, okay, look, are we getting our fair share of that value, right? We've put all this work in, we've built all these amazing solutions. And I think that's generally measured both in just usage. Is a network growing, but also revenue. I think the third is what kind of team am I building, right? Is it the kind of organization where if I get hit by a bus tomorrow, all kinds of bad things start happening? Or is the reality if I do get hit by a bus tomorrow, well, my kids will be sad, my wife will be sad, and hopefully Zach will be a little bit sad. The world will go on for consumers, for our customers, for Plaid because of the team and the infrastructure and the tools and everything else that we've built, right? And I think I take great pride in the idea that I feel like if I left tomorrow, I think Plaid will be just fine. And I think too often you find situations where that's actually not the case. And in some ways to me, that's the ultimate asset test of did you do a good job or not? And my own lived experience is every time I've thought I've made myself useless and obsolete, there's always been some new opportunity that even at the company that I'm at that came up where we're like, "Actually, we could use your skillset to make yourself useless and redundant in this particular role as well, and you just roll it forward." But those are probably the three things, right? There's like, "Hey, what are we doing at the ecosystem level? Are we really growing the network and the business itself? And then are you building a team and a structure and an engine that makes all of this repeatable and consistent even without you there?"
**Brett:** But do you think in that case that you're trying to build an org so that if you weren't there navigating Chase or what you're doing with OpenAI or whoever, that the company would be perfectly well off without you? Or is there these certain pockets of basically jobs to be done that sit in your remit and if you were gone, you'd actually have to go get somebody else that could do it?
**Eric:** You probably would have to get somebody else. It's also not about me. It's anybody in a role like this. You probably shouldn't be in it if you can't add some value at the point of attack. It's just the point of attack ends up evolving. I think it's more maybe that. It's like if I found myself focused on the same point of attack for too long a period of time, my conclusion would be, well, I haven't really done a good enough job to build out the capabilities that we need to be able to do that in a sustainable long-term way. I can probably do it. And there's maybe even I would say maybe 20% of my job is just the stuff I really like to do, which I still didn't do, right? So, there's still certain customers that I go sell it myself because I love doing it. I probably don't need to, right? Keeps me sharp, right? It's fun. And so, I think that's another vector where at some point, if you've done it, like you said, as long as I have, even true for I think many founders, you deserve to take 20%. Have some candidates that you like it, right? You're good at it, you like it, do that. But then that 80% really is, "Okay, hey, where can I uniquely move the ball forward?" But the spirit there is always like, that's probably not a permanent thing. That's something where you need to backfill that with the actual structure to be able to make a decision.
**Brett:** Maybe on a similar thread, you hinted on this just a little while ago. In your role of CEO, how do you think about what is the IC work that you should be doing or you do to this day even with a large org?
**Eric:** I think it really changes. So, one part is 20% of it is like, hey, I just love doing this. And as long as nobody tells me I'm at it, I'm going to keep doing it.
**Brett:** And so, for you, you hinted at it, but that's things like-
**Eric:** Some of the big partnerships, some of the big deals, or some of the small ones that are very cutting edge, some of the early AI deals and so forth. I think that's just super fun. It allows me to learn new things. It allows to move faster because I can say yes to things and no to things very rapidly in a way that-
**Brett:** And so, you'll work the deal yourself?
**Eric:** Yes, basically. Yeah. I'm in there negotiating with the right folks. But it's unique. I've been there for so long. It's like other than Zach, there's probably nobody else at Blat that can say yes or no as quickly to certain things as I can. So, that's one. I think then it's what are the things that are important, right? So, think of the importance on one axis. There's an element of is this a one-way door? So, there's some things that are important, but look, if it goes wrong and you can hit rewind and there's things where, no, you can't fix it. It's just like this is the new paradigm, right? And then the third is just more subjective, but it's like how good is the talent that we have available internally to do this? And so, in certain pockets, we have just incredible people and they have the capacity. And so, then the default would be, even if it's important, even if it's a one-way street, I would start with delegating it first.
**Brett:** What about at what altitude you're flying in the org? Do you find in certain areas you go down to the IC that's responsible, maybe multiple layers deep versus most of the time you'll fly at a certain altitude? What about that question?
**Eric:** I think I've inadvertently scared quite a few folks who are new to Plaid and I will literally call them. I will just get there.
**Brett:** And they're not excited to hear from you?
**Eric:** And they're just like... the first time it happens-
**Brett:** They're not thinking this is a great reason that you're reaching out to tell you what a great job they're doing?
**Eric:** What is happening? And you can tell they realize I'm calling them and they're just like, "Wait, wait, what? What do you mean? Is everything okay?" It's like, "No, don't worry. I just have a couple questions." And you can almost hear them slacking their manager in the background. But I think that's a feature, right? I think Zach operates it away. I think all good founders, I think at the end of the day, if you allow yourselves to just be so far away from the point of attack, I think it's really hard to be good or great. I also think it's really hard to earn the respect of your teams. I think so many of those stories that will end up making the rounds of Plaid. And it's like, "Oh, Eric came in, he actually talked to me about it. He actually helped me. He actually joined the call and we got to a better outcome." And that's not why I do it, but I think it's a feature not a bug. So, sometimes it just happens. Sometimes there's just a lot of relationships that I've had over the years where we have a customer that I've literally worked with for eight years where I have the relationship with the founder or the CEO and the CPO and so forth and so on. And so, sometimes it's just easier for us to have that conversation. And again, I have the advantage of in those moments being able to say yes and no instantaneously. And that goes a long way. But the framing all tends to come back to those three dimensions. How important is it? Is it a one-way door or not? And then do we have the talent/the capacity internally for somebody to really nail it? And then I go from there. And when times are good, I have a lot of free time on my hands, which Zach's always like, "Hey, what are you doing?" But the reality is if you've built a really kick-ass team and they're doing a great job and they're on top of it in a role like mine, you actually do have that spare capacity again. But that is, to me, it's a feature Because if something goes wrong, it's not only that we have capacity at the organizational level. I have capacity and I don't have to take from something else. I can immediately lead the charge, whether that's a unique opportunity or a unique threat.
**Brett:** At the org level, this sort of idea of not redlining at all times so that you can go after emergent things that present itself. Have you found there are downsides? I find every decision there's positives and negatives. Is Slack in the system, are there things you have to manage around or can create lack of intensity or I don't know.
**Eric:** Look, I think you could make that argument. I mean, particularly with you, if you hear the whole, what is it? Every day, everyone's working 14 hours a day, whatever it is, seven days a week. The truth is, look, if you are so on top of it that you are perfect about how you're allocating your seven days a week, 14 hours a day, then that is better than what I'm describing. It's just flat out better, right? You're able to do more. You're never making mistakes, you're always doing the right thing. The problem becomes if you ever wrong, your ability to course correct and then your ability to quickly course correct because now you're going to get stuck at, well, what am I going to take from? That's the challenge. And so, I think more realistically, most businesses operate in a world where they do make mistakes and unforeseen opportunities and threats do come their way. In those moments, that spare capacity is an absolute godsend in terms of your ability to react and to tackle that. And that's no different than sports or anything else, right? If you play basketball and every minute of the game, you're going 100% redlined to where you just got absolutely nothing left. And then suddenly at the end of the game, you have to make a play. I don't like your odds, right? Versus if I was just a little bit smarter and a few times here and there, I just walked to the sideline instead of sprinting to the sideline, et cetera, and I've just got a little bit more energy left. This has nothing to do with how you practice leading up to it. It's like how you're playing the actual game. I think I'll win.
**Brett:** What about as the business evolves? How do you build your feel for the business? You sort of hinted on this a little bit, but I assume when you first join, the company's a much smaller, single product company. Your kind of feel for the business and the customer, what's going on comes very naturally. You might be all in one room or one floor plate or whatever. As the business expands, you start to look at dashboards, you have staff meetings, you have... But it's harder, I think, to have that feel. And I think that feel matters a lot because that drives your judgment and instinct. What have you noticed in that dimension?
**Eric:** I think you cannot get yourself separated from the point of attack. It's as simple as that. So, that means talking to ICs directly, talking to... And I go spend time with everyone. We hire somebody straight out of undergrad, starts with Vlad. I will go spend time with them a month in, two months in, just understanding-Yeah, what are we doing? What are you doing? What's working for you? That is all so valuable. It's not rocket science. I don't think it's particularly clever. It's just like, "Hey, go spend time with your team, go spend time with customers, go spend time with partners. Be at the front lines." And I think the more of my time I can spend on that and the less I spend it on strategy and internal stuff, I think the more effective I think I am and the more I think effective ultimately Plaid is. But I think that takes energy, it takes passion. You have to really care about what you're doing, your customers, the use cases. I think it's hard to do if you're working on a business where you don't care about the business, if that makes sense, right? And so, I think that's sometimes I see that where folks are joining companies where they don't really care about it, they just think it's going to do well financially. And then you find those executives have a very hard time motivating themselves day in and day out to be at the front lines. But that's not why they're doing it, right? It's not the reason. And so, for me, I really believe, like I said, in the products and solutions that we're bringing in the market and the ecosystem that we're trying to build and the benefit that consumers derive from it and our customers derive from. So, I love talking to them about, "Okay, well, how are you using our credit solutions? What are you even trying to solve in the place? Where do you think that's going? What would you want to see in the future that would put you in an even better position to serve your customers, our consumers overall even better?" And I just spend a lot of time on that. And so, yeah, I don't think there's anything hugely insightful there. It's just the discipline of being able to do that day in and day out I think is the trick. And I think a lot of-
**Brett:** But you have to be close to the front lines is the big takeaway.
**Eric:** But every day, right? Because it's not static. It's not like a thing you can do once a month like undercover boss for show and then you don't do it anymore. You're going to lose touch. There's just no two ways about it. Either you have to be incredibly disciplined about it, that'll work, or you just have to be really passionate about it, right? And probably ideally both. But that's the way to be in a situation where if you looked at my calendar, you probably wouldn't find many days, if any, where I'm not directly talking to customers or directly talking to somebody on the front lines of our teams. And so, that's the trick. I mean, it's almost like I talk to my kids. If you want to get good at something, the way to get good at it isn't to spend 10 hours one day. It's to spend half an hour or one hour every single day for 10 days or 20 days to develop it. And ultimately, those longer periods of time of shorter, more intense kind of interactions is what builds skill way more efficiently and to a much greater extent than if you just try to pack it all in.
**Brett:** Maybe on a similar line on your calendar, if you go back to what you were talking about, which is your core mandate, which you sort of outlined, I think is ecosystem health, business health and the people on the field. How does that map to actually how you spend a week?
**Eric:** I'd say I probably spend 25% of the time on ecosystem health, probably 50% of the time on business health. Again, working with customers and so forth, and then 25% on team. And on the team side, I think that varies. I've just been lucky that at this point I have an amazing leadership team. I think a lot of those folks have been with me for a very long period of time as well. And so, it's not like we just hired a fantastic CMO, for example, but that's the only role that was really left on my leadership team. So, I'm hiring one person a year kind of thing.
**Brett:** If you were to go a click deeper, what are some of the rituals or the way that you run your staff meeting? What are the touchstones of a week that's not just important things like I met with this customer or I had lunch with a skip level or that type of thing?
**Eric:** I get my leadership team together every Monday. And I think we very openly talk about... Actually, the first bullet point is what have you learned from a customer in the last week? Even there because I want my team to have the same thing. Let's talk about what's new. So, I benefit from hearing their stories. They benefit from hearing each other's, but we start there. We talk about what are just important things that people need to know. And then we talk about follow-ups and then we talk about actual new topics kind of decisions that we need to make. So, you have that. And then there's a whole host of cadence around, we'll look at our pipeline, look at our forecast, do a deal review. There's a whole host of things like that that are in that second category of running the business. And then the rest of it is really spent one-on-ones developing.
**Brett:** When you think about your direct reports underneath you, is there anything differential that you look for across every single person that's very important to you that's not just what most high-functioning COOs would want in their execs?
**Eric:** I don't know how unique it is, to be honest, right? I think for me, I really care that they believe and are aligned to the mission. So, back to I want folks that are going to have the passion about what we're doing to actually want to get on the front lines themselves and be at the point of attack. And I've just found over the years in every place I've been, that if you bring somebody in and they don't actually care about what you're doing, they're there because they think you're going to go public next or whatever else. I think it is just a matter of time. They can fake it for a certain period of time, but eventually that edge wears off and they end up not, I think, being as involved in the business as they could be and should be. And that ends up translating to a lack of performance.
**Brett:** How easy is that to figure out in an interview context? Because there's so much salesmanship that's going on.
**Eric:** Some simple things are just like, what other roles are you looking at and why? What connects all of them? And I think if you get an answer to that, that's like, "Well, I'm looking at this company over here in AI, and then I'm looking at this other kind of..." It's just all over the place. And the only thing that really reasonably would ever connect them is you read somewhere an article that says that they're doing well. The odds are that whatever they tell you next about their affinity for your product and solutions isn't quite as genuine as it is. Just the odds dictate that because otherwise, why would you be looking at 10 different things? And so, there's things like that and there's a lot that you can do through references by asking the right questions. And even just referencing in my world, I oftentimes will talk to people that they sold to. So, you worked for X, you're coming to join Plaid, but I know people that you sold to. I'll go call them. I'll be like, "Hey, what was your experience? Did you ever meet them?" And the number of times where you're the CRO or CEO and they're like, "I have no idea who that person even is." And so, there's a sampling bias there. I think for better or worse, if you called a lot of our top tier customers, you called the CEOs, et cetera, the folks that are working on that, I think a reasonably high percentage of them would know who I am.
**Brett:** What do you think when you think about all the people you've hired and all the people that haven't worked out or the small subset that haven't worked out? Is there a thread that ties it together?
**Eric:** I think it's two. I think one is what we just talked about, which is they never really fully bought into the culture and they didn't have the excitement for what we're trying to do. And then the second I, and we got enthralled by the expertise. And so, it's what I said earlier, so much of what we're building, it's new. It actually hasn't existed before. But I think there's pockets where you could talk yourself into thinking that, "Hey, this person actually has done it before." And in a world where you're constantly navigating a certain uncertainty, it's always very appealing to be like, "You know what? I'd love to have somebody on my team that is better than me at looking around corners because they've kind of done it before." And that can be at any level, right? It can be very specific on how do I build an enterprise sales team? It can be broader and so forth and so on. But I think if that's the main reason you hire someone, I think that oftentimes doesn't work out because you end up overlooking all these other things that are far more important in terms of what that person's feeling is. I was a consultant myself, so I don't mean this as a disc, but I think it's like they're more suited to be a good consultant for a short period of time to help you deliver levels-
**Brett:** And a business builder.
**Eric:** ... than somebody who's actually going to help you build the business. Because again, anybody that you put into that situation for the next 18 months is going to end up sounding just like that person at the end of that 18-month period, except now they have all these other amazing qualities that make them awesome. Versus this person, it's like if they don't have the rest, that advantage that you perceive when you first made the hire erodes actually over time because it gets replicated by whoever's in the role anyway.
**Brett:** What's been your observation as the difference between a very senior exec and a founder? Not just the role, obviously, the difference between a CEO and a COO, but is it there's some moral authority that comes with being a founder that's just different? Is it there's an inherent risk appetite and a willingness to bet the business that is different? Or do you think that people over rotate on what it is to be a founder versus a CEO or COO or?
**Eric:** Well, no, I definitely think there's a difference. I think it can cut both ways, right? I mean, I think there's founders for whom it's the first thing they ever did. They get to a certain threshold, but all their net worth is locked in the company. And suddenly, I don't think they're particularly risk-taking at all versus I might be coming in as an executive. I've had a lot of exits. I'm totally free to actually take much better risk. So, I don't think it's as simple as it's always good. I think sometimes, it can be bad. The good founders, I think the one thing that they have, which is impossible to replicate, is truly fundamentally their baby. And so, in the same way that, look, I love my kids in a certain way, you love your kids in a certain way. You will never love my kids the way you love your own and I will never love your kids the way... No matter how awesome they are, no matter how much time I spend with them, no matter how well-intentioned I am, it's almost impossible to do that, right? And so, Zach, I love Plaid, love the team, love the mission, love the company. I will never love it as much as Zach does, right? I may never even love it as much as William still does, right? That's a testament to them, but it's also just born out of the situation. If our roles were reversed, if I had started a company and then Zach was working there, I don't think Zach would love it as much as I did. It just allows you to do things that just become incredibly difficult to do over and over every single day if you don't have that. And I really think that it's a crazy analogy in a way, but I really do think what would you not do for your kids? And so, that I think is the number one thing. And the good founders, that's the mentality. And so, there's nothing that they're not willing to do.
**Brett:** Yeah. Well, I'm curious if you distill it down to that, what is the so what about that? If you want to take advantage of that or just the organic nature of the company, do... Takes advantage of it. What is it all about?
**Eric:** It gives you a level of resilience that nobody you ever hire is ever going to have.
**Brett:** Through all the ups and downs and twists and turns everything.
**Eric:** Through all the ups and downs, right? I think we're lucky it went well, but I think for most companies, they've gone through so many ups and downs and such significant downs that if you actually generally ask those founders, "Hey, if you were just a hired CEO, would you still be here?" And the answer would be no. I think one thing I hear a lot from my friends that have started companies, the one advice, my wife just started another company of her own. And the one thing you kind of tell her, and it's easy to say even in that relationship where she started is, look, there's kind of two outcomes that are great if you start a company, right? One is you retain control of it and it becomes huge. The second is it fails quickly. Everything in the middle, right?
**Brett:** Which is the most likely outcome.
**Eric:** It's like a terrible outcome in a way, right? But yet most companies go through phases where it sure as hell feels like you're in the middle. It's the founders that never quit. Zach never quit. There would've been a thousand reasons to quit along the way and he never quit. He never even thought about quitting. And so, he's the only person that could have made it through all those trials and tribulations to develop the skills that he now has because he's the only person that loved the thing enough to where none of that ever made him question for even a second whether or not it's worth it. And I think people innately see that in great founders and they deeply, deeply respect it. And so, because I believe that that's how he thinks about it, I afford him a level of, I don't know what you want to call it, respect, grace, whatever on anything. Because I believe fundamentally, he would never do anything that's bad for Plaid, that he believes to be bad for bad. So, there's just everyone else, myself included, I could make the argument that in pockets, maybe we would've done something that's more selfishly oriented to what I want versus what's best for Plaid. I have zero doubt that everything he's done, he might be wrong by the way. He might be wrong. But the fact that he puts that first and foremost goes a long way. And I think all the really, really great founders, they have that in common.
**Brett:** What about just wrapping up, if you think about yourself seven and a half years ago and you think about yourself today, what's the most different? What have you figured out? I'm sure there's a lot. As we're having this conversation, it seems like you're very driven by values and very align your own values to your values at work. I guess those things probably haven't changed very much in seven and a half years. But are there a few really important things if you were to compare your previous version of yourself to today that would be most striking?
**Eric:** I think that there's one thing that comes with perspective, age, whatever you want to call it. If you had told me, not even just seven years ago, right? But if you told me when I was 15, 16, growing up in Germany, I said this earlier, that my life would turn out this way, I'd be like, it's amazing, right? It's just a fantastic outcome. But at the same time, every single day, I'm like, "Oh, I could just be a little bit better or Plaid could be better." And so, it's trying to balance those two things. That's the challenge, right? And so, I think for most people that are out there that have been really successful that have helped build these kind of businesses, I think realistically for the vast majority of them, it's like, "Hey, look, this has gone way better than you ever had any reason to believe it would go or should go." But then the best ones are still have that fire to keep going. And in a weird way, I was talking to somebody about this the other day and I was like, I don't know whether I would wish that on my kids, right? In a way, you want your kids to just be like, look, I achieved this thing and I'm now super happy.
**Brett:** Very tiring.
**Eric:** And I don't know that I will ever feel that, right? I don't think there's ever going to be a day where I'm like, "Hey, mission accomplished." Because I think there's always something that we could do, again, in the context of Plaid, but I think in the context of any role I would take on, there's always something that we can do that's better for the consumers, better for the customers, better for the company, better for the people that put their trust in me to join my team, et cetera, better, better, better, better, better. And on the one hand, I love that. I wouldn't trade it for the world. But on the other, you have to be kind of crazy I think a bit to be that relentless about it no matter what.
**Brett:** Do you think it makes you less happy on a regular basis?
**Eric:** I don't know that it makes me less... Maybe in a way, right? But then there's so many other things in my life where I made very good choices, right? I think on this one, it's like sports is the same, right? It's like who are the people that end up being really good? It's not the people that won one championship and then we're like, wow, I never-
**Brett:** There's a dissatisfaction that goes along with that. I can always-
**Eric:** You have to be like-
**Brett:** It was a great game, but I could have done this, this and this.
**Eric:** Exactly. Yeah. I think Goku I work with at Square. I think he said this somewhere like this, perpetual dissatisfaction. That's in some ways the secret and that comes with a burden and so you shouldn't.
**Brett:** But so then what is the result of that on you as a COO? Meaning you compound that over seven and a half years. And I look at you seven and a half years ago and today every day trying to get a little bit better. Where is it most substantially expressed?
**Eric:** I think the biggest area is probably in how I try to show up for my team, right? I think that's where I've grown. I don't know that I've gotten that much better at selling to customers or doing some of the tactical things of the job, but I think how I show up for my team, how I try to put them in a position to succeed.
**Brett:** Share more. What does that look like?
**Eric:** I think that's where those folks would say I've come the furthest. I mean, it's the things we talked about. It's like, "Hey, how much time are we really spending for those folks that really need it? How far ahead are we thinking in terms of putting these folks in a position to succeed?" And we have so many people at Plaid that have internally shot through the ranks that have gone from IC roles to now running hundred million dollar businesses. And so, I could literally name seven or eight people on my team that have followed that path. And it's not like every single person always works out, but they've worked out to a phenomenal percentage. And they themselves are so much of the reason for why we've had the success that we've had. So, it's picking the right people, but then also then really being committed to investing in them and then giving them that confidence to say, "Hey, I'm not going to just turn around and take you out of the game if you miss one shot. That's not how this is going to go down, right? I genuinely believe in you, right? You can absolutely do this. I'm going to put the team around you to make you shine and then let's go." And I think if you stick with that for long enough, you're just going to be right a high percentage of the time that you're going to end up with these amazing outcomes," right? And they deserve really all the credit for that. But that again, there's lots of sports analogies in there where too oftentimes you'll see coaches yank a player after the first baby and then surprise, surprise, they're not going to be very-
**Brett:** And then everyone else.
**Eric:** Right? It's just never going to work. Or the next time even they get in, they're just panicked about doing the same thing that just got them yanked up the first time. And then they go to a different team and a different coach and that coach is like, "Hey, you got this. I'll leave you in. You make a couple mistakes." And then a quarter of the season in, they're suddenly killing it. I think you see that over and over and over again. And so, I think tied to that probably also is this notion of I just have very little FOMO. Once I make a decision that somebody is the person I'm going to invest in, I'm not that worried about what the other option is or the other option is or the other option is. I'm then dedicated to seeing it through, unless they give me some really clear reason for saying, "Hey, this just isn't going to work." And then obviously Plaid as a whole comes first, but the bar for that is pretty high.
**Brett:** To wrap up at some point when you're retired or you're not at Plaid or doing something else, what is it you want the people that you worked most closely to say about you?
**Eric:** I think one, that we really try to do our very best to serve consumers and our customers. I think that's really important to me. This notion that the work we did actually in many, many, many small ways in some medium ways and maybe even fewer big ways helped move things forward to be better. And so, by that I mean there's literally going to be millions and millions of consumers that will never know my name, but their life will just be a little bit better because of the products and solutions that we brought to market because of the ecosystem that we built. And that goes a long way. I think there's a lot of things you can do in life where at the end of the day, you look back and it didn't really leave much of a dent. And so, I think that's the first one. And then the second one is that I think the people that worked with me, but particularly I think the people that worked for me feel like they got as close to their full potential as they could have gotten to, right? I think that's the second one. It's not that they loved it every minute of every day or anything like that. It's just like if they really think back and they're like, "Hey, could I have gone somewhere else and achieved more?" And in their minds, the answer is no. It's like Eric and Plaid helped me get to a place that otherwise I would've gotten to. And I feel like I've always had folks like that in my life, whether it's folks like Michael Mankins at Bain or Francois at Square or AL at Blue Mine and now Zach and others at Square. I've always really, really been lucky. I mean at Plaid, I've always really been lucky that I've been surrounded by people like that where did I enjoy every single moment? No, right? But do I believe they helped me get as close to my full potential as I could have probably gotten to? Yeah, right? And I think that would mean a lot.
**Brett:** Beautiful place to end. Thank you so much for the time.
**Eric:** Thank you. Appreciate it.
**Brett:** I really appreciate it. That was wonderful.
### How Supabase became the essential infrastructure for the AI era | Paul Copplestone (Co-founder, CEO)
URL: https://review.firstround.com/how-supabase-became-the-essential-infrastructure-for-the-ai-era-paul-copplestone-co-founder-ceo/
Last updated: 2026-07-16T19:10:37.000Z
In this episode of In Depth, Brett sits down with Paul Copplestone, co-founder and CEO of Supabase, the open-source Postgres platform now serving more than seven million developers. Before Supabase, Paul launched a Thumbtack-style marketplace in Southeast Asia and co-founded an office-management startup called Nimbus, experiences that taught him to separate fundraising from building and to find product-market fit before blitzscaling. He breaks down how a single tagline change for Supabase unlocked product-market fit, why he runs a fully distributed async team with near-zero attrition, and how he turned PLG signals into a product-led sales motion comped only on incremental uplift.
In today's episode, we discuss:
- How changing one tagline helped Supabase go to #1 in Hacker News - an early sign of product market fit
- Why Paul ran Supabase like it had only $100K in the bank despite raising real money
- How Supabase rode three distinct AI waves, from pgvector to Bolt and Lovable, to Claude Code
- Why Supabase built a sales team comped only on the incremental uplift over a control group
- What the Toyota production system's "kaizen" taught Paul about unblocking a scaling team
**References:**
- Ant Wilson: [https://www.linkedin.com/in/ant-wilson-46179937](https://www.linkedin.com/in/ant-wilson-46179937?ref=review.firstround.com)
- Bolt: [https://bolt.new/](https://bolt.new/?ref=review.firstround.com)
- Claude Code: [https://www.anthropic.com/claude-code](https://www.anthropic.com/claude-code?ref=review.firstround.com)
- Codex: [https://openai.com/codex/](https://openai.com/codex/?ref=review.firstround.com)
- Entrepreneurs First: [https://www.joinef.com/](https://www.joinef.com/?ref=review.firstround.com)
- Firebase: [https://firebase.google.com/](https://firebase.google.com/?ref=review.firstround.com)
- Lovable: [https://lovable.dev/](https://lovable.dev/?ref=review.firstround.com)
- MongoDB: [https://www.mongodb.com/](https://www.mongodb.com/?ref=review.firstround.com)
- Next.js: [https://nextjs.org/](https://nextjs.org/?ref=review.firstround.com)
- PostgreSQL: [https://www.postgresql.org/](https://www.postgresql.org/?ref=review.firstround.com)
- Supabase: [https://supabase.com/](https://supabase.com/?ref=review.firstround.com)
- Thumbtack: [https://www.thumbtack.com/](https://www.thumbtack.com/?ref=review.firstround.com)
- Y Combinator: [https://www.ycombinator.com/](https://www.ycombinator.com/?ref=review.firstround.com)
**Where to find Paul:**
- LinkedIn: [https://www.linkedin.com/in/paulcopplestone](https://www.linkedin.com/in/paulcopplestone?ref=review.firstround.com)
- Twitter/X: [https://x.com/kiwicopple](https://x.com/kiwicopple?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
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**Timestamps:**
00:00 Introduction
01:32 Why Paul's earlier startups were never destined to be huge
07:14 Unlearning the "tall poppy" mindset and going all-in on async
09:54 Reverse-engineering why Supabase was an outstanding idea
12:04 The accidental Hacker News launch and tagline lesson
13:58 Where the early roadmap came from: demand vs. technical taste
17:28 Skill vs. luck, and operating like you have $100K in the bank
21:42 What actually makes a great developer experience
23:10 Solving the "graduation problem" Firebase never could
24:58 The role of open source in Supabase's success
26:10 The three distinct AI tailwinds: From pgvector to Claude Code
35:24 Supabase’s egoless, hyper-competitive open-source culture
42:58 A tactical playbook for raising capital
48:37 Product-led sales comped on incremental uplift only
59:27 The production philosophy behind Supabase’s operations
Paul:
We though we're getting DDoSed at the time, actually, because we just saw this customer launching lots and lots of databases.
Brett:
For today's episode, I'm sitting down with Paul Copplestone, co-founder and CEO of Supabase, the open-source backend platform that millions of developers now build on. The company started as a side project, and now, it's the backend for a huge slice of the internet.
Paul:
It was obvious to me how hard it was for developers to use databases. If the problem exists, then the opportunity exists.
Brett:
But it wasn't always like this. Before Supabase, Paul built other startups that never took off in the same way.
Paul:
There's something painful about the chewing glass of trying to find product-market fit and you're trying everything, and sometimes, you just don't know what else to do.
Brett:
When AI app builders like Bolt and Lovable launched, every new app needed a backend and many chose Supabase.
Paul:
These are the tools that are using more of the CLI, MCP-type workload now happening off a base of seven, eight million developers.
Brett:
In our conversation, Paul reverse-engineers why Supabase worked. He shares why he refuses to lock in customers and how he's building towards self-driving databases run by agents.
Paul:
We want to build a generational database company.
Brett:
He also gets into the chaos of hypergrowth and how he tackled the success problems that come with scaling too fast without losing himself in the process.
Paul:
I want to look back at the end of my life and think, "Oh, not only did I build a big fucking company, but I also did it my way."
Brett:
Let's dive in.
You worked on multiple companies before you started Supabase that were seemingly less successful than this company, depending on how you measure it. What are your reflections on the value of a good idea or a few of the foundational things that clicked into place with this company that didn't click into place with other companies?
Paul:
Well, I think a successful startup takes a thousand things to go right and a lot of luck. The first ones were probably never destined to be as big. The ambition behind them was not as large, so they could have been successful in a local maxima.
Brett:
Why is that?
Paul:
Well, they're geographically constrained for starters. The first one was a marketplace in Southeast Asia. The reason why that first one didn't go well was it didn't have pure product-market fit. We're modeling against one here in the US actually called Thumbtack, which is, of course, markets are all different the way things operate. There's a different mentality to how you do things in the US versus, say, even Malaysia or Thailand.
Brett:
When you were working on it in the early days, did you have a less ambitious mindset-
Paul:
No.
Brett:
... versus where you started? All of that was ... You're just saying that it turned out to be less ambitious, not the intention.
Paul:
Yeah. I mean, the mindset's still the same. I mean, the ambitiousness, could we build that to be a hundred-billion-dollar company? No. So I think my ability to assess a market dynamic is much more honed now. In fact, I think I even worked, I would say, harder on that when I was building 90-hour weeks or something like that to make it work. So we're definitely ambitious, and I learned a lot from that one. I had a co-founder who was extremely ambitious, great salesperson, extremely good at fundraising, and all of these things were assets that I picked up from him.
Brett:
What about the second experience?
Paul:
Yeah, it's funny because the journey trickles on to Supabase. My country manager for my first startup said, "I'm building this company and it's going to be ..." He explained it and it's like an office management tool, but also owning the services. So very similar to the first one, but fixing or de-risking a lot of the things that were in the first one. And he had to moat some permission from the government to do certain things. So that was good. But I said to him, "Look, I'm a developer. I'm going to launch a DevTools company."
Brett:
That's what you were thinking about doing at the time.
Paul:
Yep. Yeah. He said to me, "Well, just give me a couple of years. Come brainstorm, build it and just build with us on the side or inside." And so that's actually where I started building. I took a lot of those learnings from all those companies that I was launching. And then I honed the tech stack and I built the second company. It's called Nimbus. I built Nimbus with the same tech stack, and that tech stack now is what is Supabase.
Brett:
Talk more about how that actually unfolded.
Paul:
I was building a chat application. As I said, many of them, actually in Southeast Asia, operate via messaging. And so essentially, what I was building was a platform, but it felt more like a chat app. We were using Postgres for most of our database workload, but then for the chat side, I was using Firebase because it's got this nice real-time functionality. It's very cool actually. But as we started scaling up, I had some scaling limits on that particular piece, and then I thought, all right, I have to figure out how to fix this. And then I was looking at our tech stack and Postgres, and I realized I could build this real-time feature on top of Postgres itself. I needed to use this framework, a language called Elixir, framework of Phoenix, and I built it and I open-sourced it, and it worked very well for our use case, and it started getting some traction on how can you use just the open source part of it.
And so I thought, okay, timing seems good. There's interest, developer interest. I know what I want to build. I want to build a database startup. I knew I wanted to do it on Postgres. And so when all of these things just lined up, I reached out to my now co-founder who I had met at Entrepreneur First, and I lived with him and I said, "This is what I'm going to build." I thought at the time, again, to de-risk things. I thought I'm going to build the most Y Combinator-friendly team and apply for YC, and that will help from a DevTool point of view. I think that's the pitch that actually convinced him. He really wanted to go to YC. And so we started and we were fortunate to get into YC very early on.
Brett:
When you came across this opportunity and you were starting what is now Supabase, was it very obvious to you and was it high conviction, or was it like, "Well, this seems interesting. I could see it going ..." What was the feeling in your own psychology at the time?
Paul:
It was obvious to me how hard it was for developers to use databases. Yeah. And I just knew if the problem exists, then the opportunity exists. What I couldn't have picked is how successful Postgres has been. We definitely rode that wave, and hopefully, we contributed a little bit to that wave as well. So in that way, we've had a lot of tailwinds and we've been pretty deliberate to try to capture as many of these tailwinds as possible. So each time, it feels like the opportunity's getting bigger and bigger. I felt like there was definitely a big business in it, but probably not or definitely at the time not at the scale that I know we can reach now.
Brett:
You were talking a little bit about this, but how were you different as a founder when you started Supabase versus when you were working on your first company?
Paul:
Well, first of all, when I started on my first startup, I don't know how familiar you are with the Kiwi mindset, the New Zealand mindset. I'm from New Zealand. And we've got this thing called tall poppy where you don't ever want to be the tallest poppy because then you get cut down. So you always make yourself smaller, or I don't know, it's a hard culture to explain. I quickly unlearned that in my first startup. I remember my co-founder, as I said, he was very good at fundraising. I learned a lot from him how to fundraise, and it's a little bit like sales. It's slightly different, but I had to learn that. So actually, that's one thing. I treat the process of fundraising and building a business as two distinct things. Now, hopefully both of them, you do phenomenally, but you could do one or the other separately quite well. I learned really the dynamics of fundraising, investors, why it's important, when to raise.
I also learned the value of not blitzscaling too early. So find product-market fit before you blitzscale. I probably learned that lesson a little bit too hard at Supabase. We're very small, and we've got to ramp up really fast for our scale. Yeah, I held that lesson too long, I think, at Supabase where we've got a lot of growth across everywhere and a lot of people are stretched. But it was good to see that internally at my first startup, like how we hired maybe too fast on too many areas that didn't matter.
What was good on that one, my co-founder was very diligent about keeping the bar extremely high. That one has always stuck. I think that one's universal, if you can keep the best people. It was at YC yesterday and someone was saying, "Should I take someone who's high agency, or should I take someone who's high performance?" And it's very clear to me it's both. You just don't compromise on any of those.
So we, at Supabase, are a fully distributed team. We have no offices. So we're in three countries in my first startup, and we had an HQ in Malaysia. And whenever I'd visit Singapore or Thailand, they'd always feel like decisions were made away from them because the gravity of the co-founders is too high. Of course, everyone went fully distributed during COVID, and then there was a big push to go back in or do hybrid. It was very clear to me. No, you don't half-ass it. You just go all in if you're going to do remote. We went completely async, and now, actually, I think it's a superpower for us.
Brett:
What about if you take a crack at reverse-engineering why Supabase was an outstanding idea that maybe you didn't even fully grok at the time, but now you have the benefit of hindsight? And so dissecting it and saying, "Okay, here's actually why it turned out to be so good." How would you articulate it?
Paul:
With the benefit of hindsight, lots of tailwinds, that's always good. Hard problem to solve is also good. We have competition, but it's not like a competitor can spin up. So for example, now, if I was building in the AI area, there's a lot of things that are getting launched fast. That means a competitor can get launched fast. Where we are is not in the build space. We're in the operate space. We operate the databases. So it's not just enough to launch something. You have to prove that you can operate it over many years and do it at scale. So there's this kind of moat that was important.
We also leaned very hard into our community and the PLG motion. So that was good, not trying to split our focus between let's go upmarket really fast. We've just kept our finger on the pulse of the community and the PLG motion, even though we get a lot of pressure all the time to move really fast across and win all types of workloads. And this was important because, as well, Postgres is so versatile that it can serve anything that enterprises wanted. You can use it for this thing, that thing, whatever. And so we're often trying to find out exactly what their ICP should be and only build increments on top. So it's like a onion getting larger rather than splitting our focus all around. So from this point, I think it was beneficial that we just had a lot of market drag, a lot of market pull anyway. And in my earlier startups, when you don't have product-market fit, you lose focus because nothing is clearly winning. So you're jumping around a lot.
Brett:
What's your definition of product-market fit?
Paul:
I don't really have a definition, but you just know it, like when things are growing a lot faster and when you're doing nothing and it continues to accelerate. That's how it feels.
Brett:
What was the very first moment that you felt that real pull? What was the product maturity at that point? What's the story if there was a day or a number of days that it felt like the ball started rolling down the hill?
Paul:
I can peg a few key dates at the start of 2020\. We got into YC, and we did this accidental launch. Someone put us on Hacker News, and usually you do a launch Hacker News. Someone put us on Hacker News, and it was the day after I changed the tagline. I changed the tagline to "Open-source Firebase alternative," and someone put it on Hacker News that next day, and immediately, it went to the top of Hacker News. It was very upvoted, lots of comments. And that was the first lesson in that product-market fit often is just like a product-positioning fit. Sometimes, you can just change some things, and that's all that matters. And there are some people in the world that want whatever you're building, even if it's a niche product. You just need to find them and tell them in the right way. So that was the first thing, a good lesson as well just on how to position things for developers.
From there, a lot of people in those threads said, "Oh, we really need Auth." This is a product that Firebase have because we now put the Firebase positioning out there. They actually wanted these other things. And of course, I only really wanted to build the database offering, but Auth made sense because I thought we could do a better product for the market by putting your Auth users in your Postgres database. Actually, something that I never really understood from other Auth providers keeping your users outside your database. So we did it and we managed to launch that before the Y Combinator demo day. And again, we just saw the slope of the chart change, and we thought, "All right, these launches are clearly things that work." So off the back of that, we said, "All right, demo day's gone. In three months time, we'll just move from Alpha to Beta, and we'll say all the things we've shipped on this one day."
Brett:
Just keep launching.
Paul:
Yeah. And we ship, ship, ship. And then on that day, we just rolled everything up into a single page and put it on Hacker News, and it went up again, and we thought, "Oh, that's great. Well, we launched, and why don't we just turn this into instead of one launch, can we do a launch every day for a week?" And then that was our first launch week, maybe I think four months later. Again, we just kept seeing these 20% bumps each time we would do these product launches. So it felt like sometimes inside those launches, there were some things that fired really well, some things that didn't. You can tell those ones that have product-market fit just have direct demand.
Brett:
Did the early roadmap come from people just saying, "I need this and I need that." Or did it come from more of a technical taste perspective, like you had an opinion on how this thing should work and what we should build and so you just manifested it in the world?
Paul:
A bit of both. Yeah. It was a hybrid. So we knew as well, again, because of our positioning, all the things that Firebase had, we didn't want to do all of them because we wanted to keep the database side. And I just thought of some ways to do it, or as well the team had some ideas that they wanted to build and they seemed to fit. And we largely think in primitives. We try to offer just pure primitives rather than products, and the primitives can be mixed and matched to allow developers to do many, many things. I think the only one that was really, really demanded from the community was functions. We went through our Edge Functions. We went through three launch weeks and people kept saying, "Oh, I hope they launch Edge Functions this launch week." And we were thinking, "No, we don't want to because we're a database." And we're telling them use Next.js or use whatever you're using. In the end, the demands were so high that we had to launch it, so yeah. And this turned out to be a great product.
Brett:
When you think about the first year building the first product, starting to launch, what felt at the time very hard and what felt somewhat easy?
Paul:
I mean, it was a grind, lots of \[inaudible 00:15:37\]. It didn't really feel that hard if I'm honest. Once we felt like we had product-market fit, I mean, it's all problems of scale, right? It's really just about navigating community and feature requests and building as fast as you can. And these things are largely exciting, and we had a lot of people joining the team. I remember this is how I know it wasn't necessarily hard.
A lot of those ex-founders were coming to us and they were burnt out. I remember one in particular who was burnt out from doing his own company for five years and we said, "Ah, just come help us. We've got so much work to do. Just spend a bit of time if you want, take a break from your own company." And he came in and instantly, he was reinvigorated because he no longer had to deal with product-market fit. It was just solving these cool technical problems for our customers, and he joined Supabase. Time and time again, I saw this from founders where they were burnt out from their own thing.
Brett:
They were burned out from it just not working, not-
Paul:
Just not working. Yeah.
Brett:
... working on it.
Paul:
There's something painful about the chewing glass of trying to find product-market fit and you're trying everything, and sometimes, you just don't know what else to do maybe because there is no way to get your vision into the hands of the right people, but we didn't have that. It was just problems of shipping as fast as we could.
Brett:
What is your reflection now on the interplay between skill and luck specifically and originally getting into product-market fit?
Paul:
Well, it depends on the time of the market. The things that I'm uniquely served to solve might not be perfect for the timing. What happens when you get product-market fit is usually ... Or even the funding, like for example, if I just went out and raised a lot of money, then the temptation is, "Okay. Well, let's hire lots of people." 10 people don't help you solve product-market fit, right? You have to iterate, you have to do it small. So we're launching a product at the moment, and there's just no engineers on it. It's just a product person engineering it, and people say, "Oh, should we staff this up?" And I said, "Well, absolutely not." They don't have the idea baked yet. And so it needs to be really a fast and tight feedback loop.
What we did well and what I would do I think if I was to start again is, yes, I'd raise the funds, that's important, but I'd still operate as if I only have 100,000 in the bank account, where you just got to iterate really fast with a small group of people to try find that thing, and then you've got to be really honest about whether you actually got fit or not. As we've said, it means many things. So whether people will use something, whether they'll pay for something, whether they'll upgrade on that thing, whether they'll want to take it into an enterprise, all of these are different stages of fit that you need to de-risk.
Brett:
What else did you learn, if anything, about the relationship between you as a founder and what you should actually work on? And this may be sort of too reductive, but it sounds like the first company was just not as perfectly fit to you as Supabase. Do you have any reflections on that?
Paul:
I think that's okay, because as the CTO, me being a techie, of course, I want to work on tech things. But there are so many opportunities outside of the tech bubble that need to be techified. Well, maybe, we're seeing that now with AI, and that can leak out into these domains, but I don't think they necessarily failed because I wasn't passionate about the space. And in fact, the second one is quite successful. Of course, not to the degree that Supabase is, but my co-founder there's done a phenomenal job of scaling it. And I helped them a lot. I really like this space. I like helping service workers. But yeah, I'm passionate about tech.
Brett:
How do you now approach building new products at Supabase and getting those into product-market fit?
Paul:
We could just push things out and people would adopt them, and we didn't have to worry about eight million developers trying something out on day one now, and also, we've got a very well-functioning business. So-
Brett:
But back then, it was a little bit more improvisational and you would have one or two engineers work on something that you thought was good, the customers thought was interesting, and just put it out in the world, and that was that?
Paul:
I think in our second launch week, one of our engineers had built Supabase Storage, somewhere where you could store ... I think it was storage. I can't remember exactly, but for storing files and videos and things like that, because you can't stick them in your database. I remember we're about to launch it for launch week, and literally, two hours before we launched it, he wasn't happy with the DX of the client libraries and he just rewrote them and launched them after that to be more like Supabase. So it was very much like that. We're just bouncing ideas off each other trying to make a perfect integrated suite, and we could test these things out, and we weren't too scared to put something new out into the world.
Brett:
And so then how does it work today running at an at-scale business when you're building something new?
Paul:
You have to be able to scale up. That's rule number one. You probably need billing on it. People will abuse things, strong security guard rails. There's all these things that you need to think about before you can really push it out. And so now, where we're moving towards is more like a pipeline. We used to have this pipeline which is Private Alpha, Public Alpha, into Beta. Now, we're thinking, well, just put it out into labs where we'll have a smaller subset and people might discover it organically, but it doesn't necessarily have to have the full marketing weight behind it. And then we get feedback from that, and then it could start moving natively into the platform.
Brett:
What do you think makes a great developer experience? If you had to talk about it in the most concrete specific way or you were teaching someone like your ideas about what it means for something to be truly incredible from a developer experience perspective, what are the underpinnings?
Paul:
I think the key metric is time to value. You want to get the developer to their aha moment as soon as possible without getting blocked. You know what a bad developer experience is just a ton of paper cuts where you're getting blocked all the time. You're trying to achieve a goal. You usually have a goal in mind. I want to build a to-do app and you just get stuck on three or four things and then you give up. So a good developer experience is take any one of those, whatever their goal is, and the ability to get them to that point as soon as possible.
Brett:
What did you do in building the product or from a product strategy perspective to solve the graduation problem? Where I think a lot of people's early critique would be, "Oh, Supabase, great to hack on the weekends and get going." But when you're doing real and production workloads at scale, you're eventually going to move away and you guys have managed to keep just incredible customers at incredible scale. Did you think a lot about that, or did you just make the product better and better? Or what was true about what you did where Firebase, obviously that was a critique for a long time, which is a great place to get started, but not a great place to scale?
Paul:
Yeah, we thought a lot about this, and it's actually, right from the start, part of our strategy. So we want to build a generational database company. We had seen many database companies come at it and say, "I'm going to build a bigger, better whatever, and then people want to use us," and they didn't really succeed. If you look back over the past 20 years, probably, the only database companies that have really managed to do well are Firebase and Mongo, and they did well because they targeted these day-zero workloads there. You would choose them before you even knew what you were going to build back when you were a developer.
So we knew if we wanted to build that bigger, better experience, we first had to win the day-zero experience, like the Mongos and the Firebases. So that's where the positioning "Open-source Firebase alternative" came from, where we just pushed that quite hard because we knew that people were choosing Firebase at the start. Well, let's give them another option. And then we smuggled Postgres, and at the start, we didn't promote too much that it was Postgres. We weren't sure if people would understand it necessarily why we were doing that, or they might even say, "I don't want Postgres. I want MySQL," at the time, was more popular.
Over time, it became clear the Postgres was winning. And so we slowly started to migrate our tagline from "Open-source Firebase alternative" to just this "Build in a weekend, scale to millions." And the positioning helped that slow positioning and we started doing a lot of our marketing as largely around Memes, a lot of Postgres memes, just talking about Postgres, promoting Postgres, doing what we could to promote it to developers and sticking up for Postgres where we could in the ecosystem and defending it for different things and leaning into its features as much as possible.
Brett:
What is the role of open source in the company's history, and how has that been such a input driver to the success of the company?
Paul:
So everything we develop is open source. We have either a MIT, Apache 2 or Postgres license, with the exception of the platform code or the billing and everything like that. But if you want a Supabase stack, you just can do docker compose up and you get the Supabase experience. We don't put any tracking on that. If you want to use it, you get it for free. We try to stack it with as many features as possible. If features aren't there, it's just because we haven't quite got around to it, and sometimes, things move faster. So there's no real strategy like, oh, we'll use it as an onboarding tool to get people on and we'll gate some features. It's really just because Ant and I have philosophically aligned with open source and I love open source. Postgres itself is open source. So we get a lot from it and we want to as well contribute back to the ecosystem as much as possible. It means that we can employ a bunch of open-source maintainers from around the world, and that's nice as well. We hope that we can employ more and more open-source maintainers, which I think is really just good for the world.
Brett:
Would love you to talk more about the incredible AI tailwind that emerged for the business. What was the story behind what it was like on the inside? Because you obviously built the company, were having a lot of success before everybody started vibe coding and DIYing, and it seems like it just created just incredibly explosive growth. And then did it cause you to rethink the roadmap and direction? Or maybe you could talk a little bit about that experience kind of reaccelerating years into building the company.
Paul:
I see it in three distinct phases. So phase one was the kind of everyone was getting into embeddings on the database side, vectors and embeddings. So we were one of the first to offer pgvector. In fact, I think we were the first. And helping to promote that, we put that out, and that saw a lot of uptick as well. End of 2024 was when the likes of Bolt and Lovable launched, and that was also an interesting ... That was the second tailwind. We thought we were getting DDoSed at the time actually because we just saw this customer launching lots and lots of databases or these two customers.
Brett:
And they chose, when they launched, to have you all as the standard, had you just want to set up a Supabase instance?
Paul:
Yeah. The experience would be you'd come in, you click a Connect to Supabase, and it would bring back your database credentials so then you could build on top of it and you just prompt your way through a backend. It's gone through several iterations, but yeah, I mean the growth was very strong immediately.
And it's always vague. I mean, in hindsight you think, "Oh, it's very clear this is the right move. We should definitely support all these platforms." But I remember at the time, even internally, people were saying, "Ah, these are just prototypes, vibe coding." Lots of slop back then, lots of slop now sometimes, but I mean, good products and bad products being built.
The thing that was clear for us was that principle that we had at the start. We want to be there when people are getting started and then make sure that they never want to leave. So even if they were getting started building things that weren't going to be huge businesses, we still needed to be in that space to learn, to understand. And as well, I mean, a lot of thinking, do we need our own front end? But we're clear that we just want to be a database company. This is all we want to do.
So that helps to hone what we should be in that wave, which was just this platform that will supply the backend for all of these AI builders. And that became the focus of 2025, and we built out this product called Supabase for Platforms. It looks like an enterprise offering where an enterprise might need a single pane of glass to see all their databases and which ones are secure and tools around them and usage and everything. So this was the thing that helped us. We knew that we could map this product that we're building for platforms. It was mapping to our enterprise roadmap anyway, but on different sequencing and a slight twist. So we just got to work building that product, and it was a huge growth lever for 2025.
And then phase three has largely from January this year, the likes of Claude Code and Codex and everything that are just ramping up really, really fast. And these are the tools that are using more of the CLI, MCP-type workload, and we're seeing huge adoption from them, in fact, acceleration, the likes of what we saw even at YC, but now happening off a base of seven, eight million developers.
Brett:
So is it just year after year, it feels like there's just so much more that you need to do than you can get done at any given point in time and it just feels quite chaotic even at this scale?
Paul:
Pretty much. Yeah. So now, of course, I mean, at these scales that you start getting to, then you've got these success problems, which is just keeping up with the growth really and strange things like in certain areas, we're going to run out of IP addresses in four months or something like that, and you've got to quickly solve all these problems; otherwise, the whole business can't launch another database. Lots of things that just crop up that you have to swat away all the time, and they take a lot of focus away from that product marketing, like launch, launch, launch, but that's just the phase that we're in. I think you see it with all the AI companies now, where you're either launching a lot or your stability is not so high. And so from our point of view, now, we're just making sure that we can scale to the next 10, 100 million developers.
Brett:
If you break apart the company's life into a few chapters, how has your time spent changed in any given week?
Paul:
Yeah. Chapter 1 was pretty clear. I was just building, and there's a lot of fun, because as well, there's nothing more fun than building for people who want what you're building. We spent a lot of time doing that iteration. When we got to around probably 50 people, we started splitting into teams, and I was maybe doing a bit of a hybrid of managing people.
Brett:
But weren't you doing a tremendous amount of recruiting then if you had 50 people or no?
Paul:
We've never really had problems recruiting. I think we've got so many reasons to work at Supabase. The brand is well-loved, it's open source, it's developer tools, we're fully distributed. So a lot of the time, we're finding people who they were either building a tool that we needed or they were contributing to our repositories, and we could see that they were doing a phenomenal job, and we just said, "Oh, do you want a job?" Or a lot of ex-founders actually were just coming to us asking to work at Supabase. So I don't think we were doing a ton of outbound, if I'm honest. But eventually, that became more of a thing, and my co-founder's very good at that, and he is very keen on keeping the culture very distinct as well. So we shared that between the two of us, and we're both developers so we know what we want in terms of the culture of the company.
Yeah. So recruiting became a big thing probably more last year. We had in the early stages, I said at the start, I had these scars from blitzscaling without product-market fit. And we had this idea that we'd only hire when we had a hair-on-fire problem for the first probably four or five years. And so we got to maybe 200 people with that mentality or 150 people with that mentality. And then we quickly had to change. Halfway through last year, we just said, "All right. There's just way more work than anyone can do, so we just need to get people in as fast as possible." And then yeah, hiring became a top priority, not just for us, but for all of the team.
Brett:
Do you think given how much technology is changing, it's productive to spend time thinking about a three-year time horizon?
Paul:
Yes, in some ways. I don't think you need to think about exactly what products to push out. We don't need to think about exactly what product to push out, but we need to think how our platform will evolve. So a good example is when we started, the company was very dashboard-first. Developers would come in, they'd launch the database from the dashboard, they'd use it. Now, with agents, they're becoming very CLI-first. And so this one's obvious to everyone, but what spills out the other side of this is, okay, what that means is that everything is very code-first, it's very Git-first.
And so what we want is on the CLI, for example, one thing that I want the whole thing to shift towards is that if you use the CLI, you get the Supabase folder and that should be a pure representation of everything that's on your platform, so in code, essentially infrastructure as code inside your folder. And that should include your database schema, declarative schemas. Everything should be there for the agent to understand. It shouldn't have to reach out to the platform. So what this means is that we just get parity across every surface area that we can - dashboard, CLI, MCP. All of them should match.
Then what spills out the other side of that? Okay, well, people want to branch on Git. So everything needs to be branchable. Whether it's buckets for images, your database needs to be branchable. You need to have testing environments that are very cheap and ephemeral for doing these branches. And then of course, there's the obvious stuff. If agents are building now, then they'll probably be operating in the future. So at the moment, maybe developers in looking at things whether the database is healthy or not, but of course, they probably don't want to be doing that. And that's actually where most developers don't want to spend any of their time is looking at whether things are healthy or not. So building out the infrastructure that will have self-driving databases on all vectors, the performance could be improved, the reliability, the security of it can all be improved by agents essentially, and then you can choose where you want to be inserted into the agentic flow.
Brett:
What is distinctive about the Supabase culture, and why have you chosen it to be that way?
Paul:
We're completely distributed and asynchronous. We chose this one largely because of it's a bit of path dependency. We started during COVID, and then out of that, we continued on this way.
Brett:
Do you think if COVID didn't happen, you would be a traditional in-office company?
Paul:
I think we would have been forced to through YC. They really want you to come to SF and be based here and build here, and that is the right approach, I think, for 99.9% of the companies. I think for us, it's worked well because we're open source. We hire a lot of database people. Those people are spread out around the world, so it's worked well. Yeah. And now, it's a bit of a superpower because our attrition is extremely low, but the leaning into the async culture has helped because everything's written, everything's recorded, everything's captured in Slack or Notion, or one of our sales meetings is ingested into our warehouses.
And this solves the Metcalfe's Law issue as we scale up. So because everything's there ready to be searchable, AI has solved this for us. Instead of our CFO coming to me and saying, "Hey, when is Multigres going to launch?" Then I can say, "Oh, you can just ask the AI the timelines," and he can do it without reaching out to a developer." And him being non-technical, he might not even understand all of the intricacies of a product and he can ask the AI, "Oh, can you explain it to me from a finance point of view? What does it mean?" And so this body of knowledge, the whole history of Supabase has now been embedded and you can search through it. And I think that's going to be a critical thing as we continue to scale up.
Brett:
What about distinctive in the sense of how you behave, who is a great fit for Supabase and who isn't? What behaviors are celebrated? What gets someone exited? How did you land on those type of distinctive things?
Paul:
First of all, of course, learned very early that not everyone are built for, async and you have to be of a certain ilk to really love it. And if you didn't love it, you just weren't going to love Supabase. So that's the trade-off. I mean, you just have to be clear about that with people, and you'll miss out on some people who just could be good, but they won't work at your company.
The other thing that is really important to us is we have quite an egoless culture, which often people think means unambitious or something like that. But actually, Supabase is hyper-competitive. It boils down to the open-source mentality, especially old-school open-source people who you're out there probably grinding in public, putting out your code for free, but you want it to be top-notch. That's a certain mindset. It's hard to explain and hard to find, but you can definitely find it in the open-source ecosystem. So we've tried to really capture that ethos inside our company as well.
Brett:
How do you figure out if somebody has that before they join?
Paul:
You can talk about, in the past, the projects they've worked on, problems, conflicts that they'd had, how they dealt with them, even knowing how they talk about things inside the interview. Is it lots of me, me, me? Is it the team and putting the team first and things that we worked on? Yeah, there's lots of little tells, I guess.
Brett:
Do you think it's relatively easy?
Paul:
Well, especially for my co-founder. He's the key bar raiser, and he can-
Brett:
Suss it out.
Paul:
He can suss it out very well. Yeah.
Brett:
Why is that so important to you?
Paul:
I could be doing this business for 30 more years, and I want to work with people like that. I don't want to work with assholes.
Brett:
There seems to be this kind of warm, kind quality about you in my conversation with you. Do you feel like that is who you are?
Paul:
I guess so. I mean, if you feel it, then yeah.
Brett:
Well, there could be a whole different side of you. I mean, the thread I'm pulling on is I find that a lot of conventionally successful and ambitious CEOs are very difficult, oftentimes cruel at times, and I'm not experiencing that in our interaction.
Paul:
Yeah.
Brett:
Maybe, you actually are that. Maybe it's some of that New Zealand sort of generous spirit. Do you think a lot about that at all in the context of your identity as a CEO? You're building one of the most spectacular infrastructure companies. There's a certain kind of kindness about you that comes through.
Paul:
Yeah. I think probably, as you point out, because I'm from New Zealand. We're generally sort of is a kind population. A lot of CEOs I know are definitely ... As you say, they can be cruel or Machiavellian or something like this. And I see that. I mean, even with the CEOs that I interact with, or in the space that we're in, there's a lot of that. I don't think we need to be like that. I'm very much a rising tide. We'll raise all ships. The database space is going to grow phenomenally for everyone. I want to look back at the end of my life and think, "Oh, not only did I build a big fucking company, but I also did it my way and ways that people will look back and say, 'Oh, that's actually respectful.'" And I have a certain affinity to, especially the ... I've actually been doing tech for a long time. The old-school open-source mentality where people are just out there building things and putting their code there and contributing and-
Brett:
Because they love it.
Paul:
Yeah, because they love it. And I love what we're building and I love the space. I love seeing what people are building. I've got no qualms with anyone operating their way, but inside the realm, the sphere that I'm operating in, I just want to operate like a good human and see other good humans succeed.
Brett:
And so do you think ultimately, the culture is just a reflection of you two and your values and who you want to work with and-
Paul:
Yeah. I think it comes down a lot to that. And of course, then you hire a couple of people who are like that as well who are-
Brett:
Self-perpetuates.
Paul:
Yeah. And self-perpetuate. We've got some values like egoless, truth-seeking, batteries included. And we did this thing at our offsite, where we got everyone to rank the five different values. I'm pretty sure they ranked them in the same order that I had ranked them personally inside the company, which is crazy because one of them is just to be undeniable, means so great that you can't be denied. And we have a few examples of those people who are just titans of industry, undeniably good and yet still, the egoless part of it was the thing at the top and that was the thing that someone got off and said, "I've never been at a company that is so successful and yet puts that on top." And so you can see that you get people around you that are of that mindset.
It's obvious to a lot of people. Of course, if you could have both an undeniable culture and an egoless culture, why would you not want that? I think it's just that many people think that these two are at odds with each other and they can't coexist, but that's the thing that I think is untrue. It got pushed a lot by our investors, and I just said, "No, no, no, this is not true. This is how it's going to be."
Brett:
You just mentioned investors. You talked at the beginning about fundraising. If you had to teach somebody how to be excellent in raising capital, what's the little course that you would run?
Paul:
Oh, little playbook.
Brett:
Other than the most obvious thing as build a spectacular business that investors are tripping over themselves.
Paul:
That's rule number one. If I was to do a tactical playbook, it's probably, first of all, you need to be in touch with a lot of investors; otherwise, you don't have any of your lead gen. So I probably start meeting a lot of investors. And you really treat it like a completely different play from startups. You switch mentality from builder to fundraiser.
Brett:
What does that mean?
Paul:
I will normally, especially talking to developers, underplay a lot of what we're doing, but with developers, that hedging is to your detriment. In fact, they'll discount anything you say anyway. So if you tell them, "We're going to be a billion-dollar company," they'll probably think, "Well, they'll only be a 500 million-dollar company." You say 10 billion, they'll probably think, "Oh, only a billion-dollar company." Whereas with a developer, I'll always underpromise and overdeliver.
Brett:
What do you think makes a great pitch? Or when you're telling your story or you're having a catch-up with someone at coffee and you want them excited about the Supabase story, what is different about that than when you're talking to customers or people that you may recruit other than maybe what you said, which is you have to be maximally ambitious because of the discount that an investor might apply in their own brain?
Paul:
Believing that you are going to be that ambitious is actually the thing that matters and then sequencing of it. So it's a bit ridiculous to be ambitious and think that you're going to get there anytime soon, but where we are today and where we want to get to is going to take 10, 30 years and being deliberate about how we're going to get there and having clarity about the steps to get there is what matters to an investor. So they need to both believe that ambitiousness is true and that I or whoever it is pitching has thought about how to get there.
Brett:
Do you enjoy raising capital?
Paul:
Yeah, not really at all actually. It's a huge distraction from what really matters. But for a database company, it's a very necessary part.
Brett:
Over the life of the company, it seems like you've been very PLG-focused kind of, at least in the early days, didn't get pulled into mega enterprise with an endless roadmap. And obviously, more recently you have companies of almost all scales building on top of Supabase. Did you think much about when you would really think about a Global 10,000 company using the product and what they needed? Was that sequenced in a specific way, or did you just wake up one day and say, "Okay, we're a big company now. We can take something like that on?"
Paul:
No, the sequencing was important. So if you think of types of companies from risk-averse enterprise, which will be not even just enterprise, like bank or something like that-
Brett:
Yeah, mega enterprise \[inaudible 00:44:15\].
Paul:
... and then like indie developer right down here and then like a bunch of getting-started use cases, so like launching their bank is up here, production workloads. We started down the bottom left, and I think the big problem is that most people try to then jump ... If they're doing PLG, they try to jump as well to the top right. Whereas we just thought of adding these layers. So we're just building out. Even today, of course, we couldn't host a bank on our platform, but I've got no doubt we'll get there one day, and it's just about making sure that we're adding those layers incrementally.
So an enterprise actually could come in and be one of those players, and as long as it's one of those workloads that fit within the sphere that we are currently operating in, then we're happy to work with them. Innovation workloads, for example, if they want to get started, even if they're a bank or maybe they've got a big open-source presence and they actually want to understand how they can use some of our open-source tooling, we'll chat to them about it so that we're building the relationship with them.
Brett:
But at any given point in time, your resource constraint, like your ambitions and the roadmap is multi-decades long and you can only ship something, so many things in X period of time. How do you think about, do I want to make what we're doing better? Am I willing to go up and move out and sort of the visual that you represented?
Paul:
Yeah. As you add more people, then the roadmap is very linear, like small and linear when we are getting started because we only had a few people, so adding products. But then you've got to add all the operational stuff plus the products and get all the certifications. So you need to build out those teams over time. We just saw enterprises coming in and they might say ... Well, not even enterprises. At the start, it was an SMB, and they'd say, "Yeah, we need this," and that type of thing to add whatever they needed might be only say three or four months on the roadmap, and so we knew that we could achieve it. And then we added and it's available then for all of the startups on our platform. Now, if an enterprise comes in, and they say something that is also going to benefit maybe a thousand customers, then we'll add it. But if they say something that's bespoke to them, then of course, we'll just end up saying no because we really want to make sure that everything we're building benefits a huge pool of customers at this stage.
Brett:
What about on the go-to-market side? Has that evolved a lot?
Paul:
Yes, yes. So we do have now as well an enterprise motion where they'll come in and it's more like a sales-led growth, but in terms of the sales team, their focus on that, it's very much like a 10% of focus, 20% of focus. The key focus for us is moving from PLG, which is just purely organic, people sign up, put down their credit card, to a product-led sales motion. I don't know how popular it is. I think it's not, especially not the way we do it.
What we have done is take a lot of signals from our PLG motion. It could be like, for example, someone is ... They're thrashing their disk on the database side or they're hitting CPU limits or something like this. So they're probably having, encountering a problem, and we pick up a lot of these things. We call them triggers, product triggers. And then when we find one of those, if they fit some category, we actually do an automated outreach to them and email saying, "Oh, hey, look, looks like you're having this problem on your database. Do you want to jump on a call with one of our team?" If they respond, then we essentially can get this report from the usage, and we can see all the products that they're using, and we can give it to one of our success team, sales team and say, "Here's all the things that they're having an issue with and just go help them." So our sales actually just looks like support, and that's important. We actually don't really want to sell to people. We want to help them to grow if they want.
Then we take the cohort of people who respond, and we rank it against all those who don't respond. So we've got that as a control group. And what we do is we measure those who don't respond, how much did their usage grow? And actually, we know quarter over quarter, it's 25%, versus those who have chatted to a success person, and that's 125%. So we can see the incremental uplift from those who are chatting to our sales team.
Brett:
Is the sales team quota-carrying?
Paul:
Yeah, on the incremental uplift only, which I think is the big difference from what was traditionally done. On a PLG motion, you could easily say, "Oh, get a salesperson," and so on, reach out to anyone and then you pay them on the revenue generated by that customer. But if that customer was going to pay you $100,000 without talking to a salesperson, then you don't really want to be saying, "Oh, the salesperson could actually just be getting in the way." So we only measure and, over time, want to continue to measure that incremental uplift, and then that's what they get comped on.
Brett:
Are they salespeople or are they truly support or technical support or sales engineering style?
Paul:
Sales engineering. Yeah, we've got a mix of both, so account managers and salespeople and customer solution architects. And the most important thing at our stage, especially going from a PLG is very much like a very technical engineer who actually can understand the product, talk to the developer. If it's from maybe a firmographic point of view or someone who is more on the business side and they want to, say, spin up thousands of databases, then it could be more of a salesperson, less technical.
Brett:
In the process of helping that customer, are they selling them new products? "Hey, have you thought about using this?" Or "We can help you with that," or-
Paul:
They can do, but that's if they understand the workload and it seems relevant, then they can. But developers, they're quite allergic to sales, and so we definitely don't want anything to be forced down anyone's throat. So really, the guiding principle is just be helpful to the customer, and that's all that matters.
Brett:
When you zoom out and you think about the trajectory of the company thus far, are there any other unconventional or non-consensus decisions you've made or ways you've organized the company that have mattered a lot to the success of the company?
Paul:
It's literally embedded in our product principles in the docs. We don't like lock-in. We try to build on protocols and open standards. So if you ever have an issue, you can, like with our Postgres, pg\_dump and take it somewhere else, it's your data. And this forces us to build a great experience and compete on that experience.
To be honest, again, I don't know if this is a strategy that works. In fact, sometimes, I see it doesn't work and you never really learn the counterfactual. I don't see many people online saying, "Oh, thank God, Supabase have this principle, and now, I'm going to do everything with them." But for me, I just know if I was to use myself as a model of the customer that I want to build for, I think that's just important from the ethos of how the platform should feel that everything feels like simple primitives, protocols and can work without lock-in. And I think developers feel lock-in very early on in their investigation of a platform and it scares them away. It scares me away from things that I feel too locked in. So, yeah.
And it's hard for us as well because, of course, when it comes to developer experience, I love to just do something that Postgres completely does not do to achieve some goals that we want from the product side, but it's hard for us to do it in the Postgres way. But if we can pull it off, then there's a certain elegance about it, like a craftsmanship that I think seeps through, and maybe that's the one that I can point to. I see online people pointing out how the elegance of the platform that is using these open protocols and primitives, but somehow makes it feel very integrated in it like a single product.
Brett:
And that's what's really guided these decisions?
Paul:
Yeah, yeah. very much so.
Brett:
What have you found to be very hard? Have there been these intense pivotal moments? It feels like so much of it has been immense amount of work, but not like soul-crushing or near-death experiences, or there's a calmness about what's happened with the company you've built. I don't know how you would articulate it, but in the rear view, have there been these intense crossroad moments, these very hard, tricky things, or has it just felt very natural and just flowed out?
Paul:
No, I think, I mean, it's hard to emphasize how painful it can be for a lot of people scaling. This is a success problem, but scaling for some people, like myself included in the early days, meant grinding for very long hours. And yeah. I mean, we've got some people in the company who, going through periods, get burnt out because there's just so much to do, because as I said, we had this hiring philosophy that didn't allow them to offload. And then you get this hero culture internally where they're the only ones that can solve it, but it's very hard to solve because the only people that can solve a hero culture is the heroes themselves. They have to hire those people and train them up and offload a bunch of stuff. So this is like a mini thing where my painful experience was giving away my Lego and all the things that I wanted to do, and they as well have to learn to do that themselves, even though they might just be an engineer and they don't think about having to do that. They don't get people telling them all the time, "This is how you escape a hero culture."
So a lot of the hard periods is just hitting these scaling dynamics, and that can lead to all sorts of issues, I mean, whether it's running out of capacity on, as I said, the IP addresses or literally just servers capacity and things like this. And these things are very hard to deal with because they're unsolvable in many ways and we have to scramble to do all sorts of things, but you want to make sure that you're doing your best for your customers, and for a customer-centric company, to not be able to do an amazing job in some areas, that's what I take painfully. Yeah.
Brett:
What about you has made the company work? You've been, to date, immensely successful as the founder and CEO of this business. And so what about you or your temperament, skills, abilities do you think is the input driver?
Paul:
I think the main thing that matters is I think in processes. So I think a lot of people think in outputs or fixed points and things like that, and I very rarely think this way. It's more ... We have a term which comes from the Toyota production system that we use a lot, which is called Kaizen. Kaizen means to incrementally improve all things from the CEO to the assembly line workers. So in the Toyota production system, they literally mean down to the cleaner will look for perfection in how they clean and doing it as a system. So I love this way of operating and thinking of things always like, well, things go up, things go down, they're just processes. How much they go up and down is what we need to matter. There are control targets on all of these things.
So I largely, for a long time, thought in Kaizen and used that a lot internally. So from the product side, just increment the product, make small improvements, ship and shout to the business itself. We've got processes. The RFC process is broken. Let's change it. Just make a small change and never trying to make anything a big-bang change. It's always just incremental.
Then from there, you can map your business into processes. So that's where we're at at this stage which are more isolated. You can look at your top of funnel and that's isolated maybe to the marketing team or the DevRel team, and you might look at your churn as a process, and that could be isolated to the product itself. And then largely, towards the tail end of this year, even now, starting to think more in systems, so going up a level again. And the system is from what end-to-end does it matter? It's no good, for example, automating some small part of the business. What actually matters is making sure that a full end-to-end part of the business can be completely automated. So that includes the system of, especially as we've grown now into multiple teams, product team, engineering team, design. How do these three teams operate as a single unit from one end of the spectrum to another, and the handoff between the teams then becomes what is the most important thing. Anyone can iterate really fast in a small ecosystem like a startup does, but as you grow, what matters most is having these improvement cycles within the entire system.
Brett:
Talk more about why you think this way of seeing the world has mattered so much for the company.
Paul:
I think because people unblock themselves a lot. If I always scope things down to being small improvement, small improvement, you always see people getting blocked on the big things. They'll try to do something really ambitious, and it's obvious why it happens. I call them like we do RFCs, requests for comments, which are like our PRDs. The design team might put something out, and I might like a hundred things inside what they've done if it's a huge thing, and I might dislike that one thing, and I just comment on that one thing that I dislike. So it's obvious where things get blocked. You want to have small changes which can easily get through the systems of blockers.
Avoiding the blockers and giving people a mentality to avoid those blockers so that they continue to ship is important, and then enabling other leaders in the company to remove those blockers if necessary is also a critical part. So defrag, we call it in Supabases. From the product side, but also from the business side, we went through a cycle of looking at all the systems that are a bit broken and like a defrag, the old defrag in computers, tightening those up.
Brett:
So I just wanted to wrap up with what is it that you want your customers to say about you and your team members when you're not around?
Paul:
Me personally?
Brett:
Yeah. What's like the North Star for you?
Paul:
For my team, I would hope that they don't say much about me. I would hope that they think we did it. That's more important to me than like, "Oh, Copple was in and he's such a good leader," or something like that. I would far rather them feel like, "Oh, we're smashing it." So that's way, way more important to me than anything that they would say.
From the customer point of view, I think the thing that I would want them to think ... I don't need them to say anything about me, but to think that I actually want to solve their problems. That's pretty much it. And just to feel that I'm in the community with them, I'm like them. That's how I feel like. I'm just a builder as well, and I'm in there just to fix some hard problems, and over time, I would hope that I'm building the platform that they want to see the world.
Brett:
Cool. Thank you so much for doing this.
Paul:
Thank you.
Brett:
I really appreciate it. This was great.
Hacker News
### Listen: Figma’s CMO thinks safe marketing is risky
URL: https://review.firstround.com/listen-figmas-cmo-thinks-safe-marketing-is-risky/
Last updated: 2026-06-07T15:03:45.000Z
[](https://www.youtube.com/watch?v=UUpIxLX6PPw&ref=review.firstround.com)
### [YouTube](https://www.youtube.com/watch?v=UUpIxLX6PPw&ref=review.firstround.com) | [Apple Podcasts](https://podcasts.apple.com/us/podcast/how-to-build-a-beloved-tech-brand-sheila-joglekar/id1535886300?i=1000771148768&ref=review.firstround.com) | [Spotify](https://open.spotify.com/episode/4sAUIitoJ7N1WXAsx3DWHN?ref=review.firstround.com)
“Ubiquity is the opposite of cool.”
That brand wisdom comes from Urban Outfitters’ CEO, and it’s a saying **Sheila Joglekar Vashee** picked up back when she worked in retail.
“Gap in the 90s was the perfect example of this. It was on every street corner, and it stopped being cool,” she says. “As you grow, the challenge becomes how to remain relevant. There's something special about being the challenger, the underdog. There are still ways to keep that spirit alive.”
She points to brands like Harley Davidson and Apple, which successfully kept their it factor even as they became huge companies. She’s now the Chief Marketing Officer of **Figma**, where she spends a lot of time thinking about what it takes to build a beloved brand for a public company with widespread usage.
In this episode of Executive Function, she walks through what excellent marketing looks like in 2026\. She shares:
- **Why AI needs more optimistic stories:** “So many new opportunities are created with platform shifts: the internet, the Industrial Revolution, mobile and social. We haven’t been optimistic enough about AI — there's room to recapture the joy of building and making that got us all here in the first place,” she says.
- **How to run marketing as a portfolio of maintenance and moonshots:** “The creative breakthrough ideas always seem crazy when you look at them individually, but as a portfolio you realize these are the risks you should be taking toward the step change outcomes,” she says. “But you need to have them as part of a portfolio, because if one of them doesn’t work, you still need to hit your numbers and run the business.”
- **Why quick-hit growth plays can stain your brand**: “Think about any spammy ad you’ve seen on TikTok,” she says. “That doesn’t improve brand perception, but it gets your attention in the moment and it might make you click. Over time, that’s detrimental to a company’s brand, even if it’s effective as a local maximum for that channel.”
[Watch now](https://www.youtube.com/watch?v=UUpIxLX6PPw&ref=review.firstround.com)
### How to build a beloved tech brand | Sheila Joglekar Vashee (CMO, Figma)
URL: https://review.firstround.com/how-to-build-a-beloved-tech-brand-sheila-joglekar-vashee-cmo-figma/
Last updated: 2026-06-04T15:06:34.000Z
In today's conversation, Brett sits down with CMO of Figma, Sheila Joglekar Vashee. Previously the second marketing hire at Dropbox, where she helped scale the company past $1 billion in revenue, she now leads marketing at Figma fresh off its IPO. In an industry that has spent a decade trying to turn marketing into something closer to hedge fund trading, Sheila argues the art was always the point — we just stopped talking about it. She unpacks how to run marketing as a portfolio of moonshots, why giving teams different goals breeds dysfunction, how to scale taste across an organization, and why old playbooks are obsolete, even as the fundamentals hold.
In today's episode, we discuss:
- How to run marketing like a portfolio of moonshots
- The value of disruptive energy for senior marketers
- Why "Ubiquity is the opposite of cool"
- How to actually scale taste across an organization
- What great marketing looks like in the AI era
**Referenced:**
- Apple: [https://www.apple.com/](https://www.apple.com/?ref=review.firstround.com)
- Dennis Woodside: [https://www.linkedin.com/in/dennis-woodside-341302/](https://www.linkedin.com/in/dennis-woodside-341302/?ref=review.firstround.com)
- Dropbox: [https://www.dropbox.com/](https://www.dropbox.com/?ref=review.firstround.com)
- Dylan Field: [https://www.linkedin.com/in/dylanfield/](https://www.linkedin.com/in/dylanfield/?ref=review.firstround.com)
- Figma: [https://www.figma.com](https://www.figma.com/?ref=review.firstround.com)
- Francoise Brougher: [https://www.linkedin.com/in/francoise-brougher-341a72/](https://www.linkedin.com/in/francoise-brougher-341a72/?ref=review.firstround.com)
- Gap: [https://www.gap.com/](https://www.gap.com/?ref=review.firstround.com)
- Google Chrome: [https://www.google.com/chrome/](https://www.google.com/chrome/?ref=review.firstround.com)
- Harley-Davidson: [https://www.harley-davidson.com/](https://www.harley-davidson.com/?ref=review.firstround.com)
- HubSpot: [https://www.hubspot.com/](https://www.hubspot.com/?ref=review.firstround.com)
- Notion: [https://www.notion.com/](https://www.notion.com/?ref=review.firstround.com)
- Opendoor: [https://www.opendoor.com/](https://www.opendoor.com/?ref=review.firstround.com)
- Pinterest: [https://www.pinterest.com/](https://www.pinterest.com/?ref=review.firstround.com)
- Square: [https://squareup.com/](https://squareup.com/?ref=review.firstround.com)
- The Web Is What You Make of It (Dear Sophie): [https://www.youtube.com/watch?v=pzOBOuyr-EU](https://www.youtube.com/watch?v=pzOBOuyr-EU&ref=review.firstround.com)
- Urban Outfitters: [https://www.urbanoutfitters.com/](https://www.urbanoutfitters.com/?ref=review.firstround.com)
- Yamini Rangan: [https://www.linkedin.com/in/yaminirangan/](https://www.linkedin.com/in/yaminirangan/?ref=review.firstround.com)
**Where to find Sheila:**
- LinkedIn: [https://www.linkedin.com/in/sheilavashee/](https://www.linkedin.com/in/sheilavashee/?ref=review.firstround.com)
- X: [https://x.com/sheilavashee](https://x.com/sheilavashee?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986644/](https://www.linkedin.com/in/brett-berson-9986644/?ref=review.firstround.com)
- X: [https://x.com/brettberson](https://x.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
00:07 What excellent marketing actually is in 2026
01:36 Why giving teams different goals creates dysfunction
02:36 The most important decision Sheila made as CMO last year
04:26 The real difference between an SVP and a CMO
06:05 Marketing is one engine - not separate pieces
07:15 The tension between brand and growth
09:25 The decisions a CMO should never be making
09:55 Running marketing like a portfolio of moonshots
12:46 "Ubiquity is the opposite of cool"
15:11 Why a few companies get a flywheel of momentum
16:44 The Silicon Valley clock and irrational perception cycles
19:25 How to actually scale taste across an org
21:09 What changes for a CMO in a post-LLM world
23:15 Why the artistic side of marketing never really left
26:05 Whether taste can ever be encoded in software
27:15 Telling an optimistic, yet realistic story about AI
30:50 You need to make people care
32:11 What surprised Sheila about being a public-company CMO
33:46 Why Figma won enterprise where Dropbox couldn't
35:25 Sheila’s favorite campaign ever
37:10 Why announcement videos full of humans, lack humanity
38:55 Playbooks are obselete, but the fundamentals are not
40:25 Why marketing in 2026 demands disruptive energy
41:54 How Sheila architects her week
48:55 Where corporate politics actually come from
53:55 "Sheila, are you going to change the world in this job?"
58:09 What's unique about the CMO and CEO relationship
**Brett:** I thought we could start what you think excellent marketing is in 2026.
**Sheila:** is that marketing sort of sits at the intersection of product, of revenue, of users and user perception, and for Figma, like community. the job of excellent marketing, which is more true now than ever, is making coherence across all those things, making all of that work together. So clarifying for what you're building, who are you building it for? Why should they care? Making sure that that translates to how is it gonna drive growth and revenue for the business, and then also circling back to users in the community and making sure that it resonates and it feels authentic, and you're building a brand that they can also feel a part of.
the only team that sits across all of those things is marketing, and it's the job of marketing to make sure that it all works together and all of those touchpoints speak to each other because they represent your brand. And I think it's harder than ever in 2026 because everything is moving at just like insane warp speed.
But the job is still the same.
**Brett:** a bunch of the things that you outlined, there's multiple input drivers to them, marketing being one of them, but it could be sales and sales effectiveness. In a lot of cases, it could be product or engineering. And so how do you think about, like, disambiguating that? When you think about either input drivers or accountability for those sort of things that are highly cross-functional.
**Sheila:** think a trap a lot of companies get into is giving those different teams different goals. And it's easy to see why you get there actually, right? Because let's look at pipeline, for example. You could argue pipeline, there are multiple contributors to that. Some of it are the leads coming in and the quality of those leads and the volume of those leads.
Some of it is the pickup rate, some of it is, the likelihood that you're able to close a deal, and that spans multiple teams. And I think it's very easy to give marketing a goal for one stage of that process and sales a goal for another stage. I think that actually creates dysfunction between the teams, and you have to goal people on the end goal knowing that there are inputs that different teams can have more influence on at each stage.
But everyone has to be focused on the same end goal, otherwise you have adverse outcomes through the process. So goal on the same end goal, but give people a different sense of their impact on the inputs.
**Brett:** the decision you made in the role of CMO last year that you think was the single most important correct decision?
**Sheila:** Last year we had a big push to continue building around the expanded definition of design. So if you look at Figma, two-thirds of people who build in Figma are non-designers. They're engineers- Yeah ... they're marketers. And we did a push to bring those people in those functions closer to Figma while still staying committed to our core, and that is really hard from a brand perspective.
But we see that working because we are expanding the definition of what design is, and we did a big push around that. And that was important for us because it's important that we build for the people who are using Figma every day, but we also have to stay committed to the community that, you know, made us, put us at the center of the product development process, which is design.
And so I feel we were able to do both by expanding the definition of who participates in the design process.
**Brett:** Damn. So wha-- how did you do that?
**Sheila:** We did that through a big campaign on the marketing side. So like for example, we launched Figma Make last year, and that was a product that brought more people into the design process. It made it more accessible for PMs and, and others to participate in the process of, building prototypes and porting them into Figma and working f- you know, in the product.
And we did a big push to bring those people together. We held events, we did campaigns. we did a lot of thought leadership and, and, had moments with people on the ground, and that was really successful in building awareness of that product, but then also bringing Figma to more audiences in a way that felt authentic.
and we plan to do more of that.
**Brett:** the difference between a VP or SVP of marketing and a CMO?
**Sheila:** When you're a CMO, you have to think about the company and the business in a bigger way. When you're a VP or SVP, th- you have to keep that in mind, but your job is to get an initiative through. launch a campaign, do a big product push, et cetera. When you're a CMO, you have to take a step back and say, "If I'm on the board, or if I'm, sitting in like the CEO Dylan's shoes, how do I think about the effectiveness of this program overall?
Is it the right place for us to be putting our people and our time, or should we be shifting to other things?" So I think you have a broader lens, and you have to push on really the relevance across a lot of different areas
**Brett:** When you think about that switch for you, is it feel incremental or it feels dramatic?
**Sheila:** You know, for me, the, the best lesson in how to operate as a CMO was spending some time in investing because I had the objective perspective of the companies that I was working with so closely and investing in, and I was able to sit at, you know, at that level as the investor or board member in some cases and ask these questions, right?
And so it gave me a better kind of empathy, I think, for, people who sit at that level and the questions they need to be asking and, and it has allowed me to bring that into my role now at Figma and push myself and our teams internally on those questions to make sure that we're taking that broader view.
It was actually a very helpful perspective to gain.
**Brett:** W-w-when you think about when, you were not in the top marketing spot and you compare and contrast those two roles, does that substantially Or if, you know, you have an SVP of marketing that works underneath you and they're thinking about at some point they're gonna be a CMO, do you think about that as, like, a significant phase shift?
**Sheila:** The other thing is, like, when you're running a part of the org but not the whole org, you don't have visibility into everything, right? So if you're the VP on the growth side or VP on the brand side, then you have less visibility into what's happening on growth and how the pieces connect together. I think when you're sitting over everything, you have to look at the whole thing as an engine, right?
Or as a funnel, and how one piece contributes to the other. And that was probably the biggest shift for me, moving from, running some of the pieces. Like, I grew up in product marketing and then brand, owning that piece, and then taking on growth later and, and understanding how everything worked together.
That was a, pretty big learning for me and a bit of an unlock actually, because they feed each other. They can sometimes be in opposition. And figuring out how to make them work in harmony is pretty cool and pretty fun.
**Brett:** most common pattern when they're in opposition?
**Sheila:** always have what works on growth sometimes feels at odds with the brand that you want to create. You see it happen all the time because what might be most effective, have the clearest hook in a specific ad that's targeting acquisition might not feel like what you-- how you wanna present yourself as a brand.
And so those two are always in tension, and you have to find the space that allows you to build both at the same time, and that is what is hard about marketing actually.
**Brett:** What's like a
good example of that?
**Sheila:** think about any spammy ad that you've seen on TikTok or other social media platforms or even, you know, some of the search ads.
You know, some, sometimes they have, like Weird, camel case and ways of capitalizing random letters to get your attention, right? That doesn't improve the brand perception, but it gets your attention in the moment and it might make you click. Over time, that's detrimental to a company's brand, but it's effective as a local maxima for that channel.
But someone has to sit across everything and say, "What's right for us long term?" That's the challenge.
And by the way, Figma team doesn't do any of that. I just want to make sure that's super clear.
**Brett:** the correct-- like, so what is the correct thing?
**Sheila:** it's a balance, and it's a little bit of the art, right? If you think about marketing, there's a science, which is looking at LCB to CAC and ROI and the marketing mix modeling and how much spend are you putting in each channel, and the art, which is what do you want to say? How do you make it break through?
How do you make it work at every level of the funnel or, the user journey? And you have to try things out, but you also have to bring a little bit of the art into it, and that, that's where like the, the real breakthrough talent, I think, shines through. What are
**Brett:** we were talking a second ago about, decision from the last year, what's your general thought on what are the decisions you should yourself be making as the CMO versus the decisions that you always want someone else in the org, and if you are making the decision, it shows that there's like an org effectiveness or health problem?
**Sheila:** So first of all, I hire people who are better than me in all of the areas that we talked about. There are people who are far better than me on the growth side at Figma. There are people who are so much better than me on the brand side, on the comms side, every team, right? So you hire people who are better my job is to look across everything and say, "Are we load balancing in the right way?" Resources, people, time. Is it effective for moving the whole business forward along those like metrics that I talked about, right? That's how I see my job. Now, there's a million of kind of smaller decisions on a particular program or a particular, you know, push in a certain area that I might get pulled into.
my ideal state is there are people who are better than me making those individual decisions, and then I can look across everything and say, "Great, this is a balanced approach to how we want to grow."
**Brett:** about it more like managing a portfolio or resource allocation and that type of stuff?
**Sheila:** Exactly.
**Brett:** with sort of that lens, what does that end up looking like quarter to quarter? Like where you put like your most, cognitive energy into this, this, these types of decisions or these trade-offs.
**Sheila:** you always have some amount of time, resources, people put on running the business stuff, right? So I would put maybe our ongoing campaigns that are growth drivers, our ongoing product launches that show momentum, just the amount of work that is like this is what we need to do to maintain the business.
And then some amount of time and energy, probably disproportionate, that goes into what are the big bets? What are the moonshots? Like, what are the things that are gonna get us, a step change outcome that we would never have when we're running the business in an incremental way, And those could be on the growth side or those could be creative.
Like, what are the creative breakthrough ideas, the things that are totally off the charts, seem crazy when you look at them individually, but as a portfolio you're like, "Yes, these are the risks we should be taking"? Those always take a disproportionate amount of time because they're, they're out there and you need to think them through.
but you need to have them as part of a portfolio, right? Because if one of them doesn't work, you still need to hit your numbers and you still need to, like run the business. And so I try to look at that as a portfolio, but you always spend more time on the moonshot big bet stuff. That's also the fun stuff in a lot of ways.
**Brett:** last few years, whether it worked or didn't
**Sheila:** I mean, any campaign idea that we have, right? So the year before, we invested a lot behind this concept of like making and believing. Make believe was the tagline, and it was like investing in kind of creativity and imagination, but also like what it takes to actually build a production level product that your customers will love because all the best products are built in Figma.
And we put a lot behind that. We had events, we had out of home, we had videos, and like it resonated with the community. In fact, we did a big community push where we took over Times Square and we put the community, like amazing things that they had built up on, you know, in Times Square and people loved it.
and we spent a lot of time building that concept and that idea. But it's possible that it wouldn't have hit. It did and we're lucky, but if it didn't, then we would have a bunch of other things that we would explore, right? And so that, those things take time to develop, but they're the things that people remember and we've got a, a whole bunch of them in the works and that we're ready to pull out and try.
**Brett:** Do you think about marketing and telling the story of the company at all as it relates to the sort of, um, maturity of the business? Like do you kind of think that, you know, when you're in the early days of Dropbox you're like A cool 20-year-old, and you wake up one day and you don't wanna feel like, you know, the '90s band that in 2026 is playing their greatest hits at some retirement community.
**Sheila:** So yes, but what changes that is actually ubiquity, not like how long the company's been around. There's a really interesting phrase in retail, and way back in my career I worked in retail. Long lifetime ago. I learned a lot there actually because brand is so important in retail because
all clothes at the end, right, like clothes are the same.
They come from the same factories a lot of time. And there's a really interesting concept, from the CEO of Urban Outfitters at the time. It was like, "Ubiquity is the opposite of cool." If something is everywhere, and like Gap, you said, we talked about the '90s. Gap in the '90s was a perfect example of that, right?
It was on every street corner, and it stopped being cool anymore. and so like I think about that a lot actually for us because ... And, and at Dropbox also because there's something special about being the challenger, the underdog that people want to, you know, they wanna be aligned with that. They, they want to be aligned with that kind of the, the people's, challenging the status quo.
as you grow, that becomes the challenge to remain relevant. I think there are a few brands who have done that successfully. I would say the, the few that I look to, like Harley Davidson, for example, still retained this kind of aura of independence and celebrating kind of the renegades, being the rebel And so I think there are ways to do it.
And to do it, you have to align really clearly with a core audience, right? So they did a great job of that. Apple back in the day did a good job with that by really clearly stating, like, who they were standing for. And s- and for Figma, it's always been design, and it's always been practice of design, which, extends beyond just visual, right?
It's like how you think, the decisions that you make. and so for us, like, that is how we stay relevant, you know, even through, you know, more kind of usage and, widespread growth.
**Brett:** What do you make of of in any given cycle, there's this subset of companies that have, like this, unique momentum around them that is often disconnected from how good the um, and often overlapping. So like the early 2010s, the best example is Dropbox.
And it just sort of was kind of consuming resources or aggregating resources around it, talent and customers and capital, and kind of created this flywheel that has like this energy or vibe around it.
And in any given cycle. there's generally less than 10 companies, and they come in and out. So like in this last cycle, Figma's definitely one of them. That's your job and the company's job. but you would say Cursor is an example of this. Again, irrespective of
**Sheila:** Sure.
**Brett:** the product
is or like you kind of bottle up all of these things and you could take five great $10 billion companies, and one kind of has it, and it's a little bit, I think, unique in technology- Yeah
the way that these hot companies end up being or getting created. And it's not just one thing, it's always many things. Have you reflected on that now that you've been across a few of these companies that kind of have it all, at least in one stretch- kind of clicking together?
**Sheila:** I think there are always, like, technology waves. There's also the Silicon Valley clock, right? And what you often see and all these companies go through is, like, this cycle around the clock. Like you're really hot, then people-- then there's the contrarian views. Then everybody, you know, is down on you, and then there's the contrarian views, and then you're really hot again.
And every company goes through that. And sometimes it's completely divorced from the fundamentals of the business Exactly. Exactly
**Brett:** of these
businesses. So what's going on?
**Sheila:** perception and, how perception shifts over time. I think it's the dynamics that are at play in the moment and what people are prioritizing.
And sometimes it's a little bit of irrationality, frankly, And especially in, in Silicon Valley and in tech, right? A lot of people will get on the bandwagon of a, of a topic, and then, yeah, there's the contrarian view, and then they... So, so we've seen it so many times, and I think that's at play here.
**Brett:** if that's kind of the general cycle that happens,
how does that factor into what you think about doing in your role as a CMO?
**Sheila:** think for, us, it has been and always will be the community and our users and what they value most. And at the end of the day, to build a lasting business that people care about, you have got to stay eyes on goal for that And there'll be all kinds of noise around you, It's just a fact. But if you can stay really true to the people who love your product and build what they want, you're gonna have a long-lasting business. And we just cannot lose sight of that... fact.
**Brett:** So what is that... How do you instantiate that day by day?
**Sheila:** the whole company is built around that starting from Dylan, who every day will respond to people on social who are asking questions or, giving feedback on what we're building. In fact, he's so fast, I have to give our whole team... We have a whole team of people who, who focus on responding to people, this whole team of people cannot get to social responses faster than Dylan sometimes because...
And, and everything is tops down from there. He cares so much about that, and so much of our company is built around understanding how our users are feeling, what they want, feedback loops, whether it's research or s- amazing support team or even folks, you know, listening to people on social or our community and, and events and our DAs.
Our whole company is built around making sure we're giving our community and our users what they want. I think it has to be that ingrained for it to be something that you don't lose sight of no matter what's happening.
**Brett:** How do you think about scaling taste across the
**Sheila:** you know, I think there are different views on this.
**Brett:** One is that, like, you really can't scale it. You need a small number of tastemakers in a company. They need to be involved and touch sort of all of this stuff before it goes out. There's others that you can kind of indoctrinate. You know, 'cause one, one might say that scaling taste is about, let's say, Dylan's a tastemaker,
then what it means is having people see the world through his
eyes.
**Sheila:** I,
I think you, you can actually, and you develop
kind of a concept of organizational taste through being open about choices and decision-making. we can always get better at that, but I think we've-- we're-- we've done a good job of that at Figma, right? So being open about the thought process and the judgment that's applied and being open about the assumptions that are made to get there actually allows more people to understand the decision-making, and I think that is how you scale organizational taste.
And I think you can.
It's hard.
So for example, when we make decisions around whether it's product, but also on marketing, we're very open about why. What was the thinking? What were the decisions? And what got us to, whatever outcome we, we got to? And that people can follow that thinking and apply it for themselves.
Now, there always has to be some level of, okay, let's look across everything and make sure that everything is at the bar that we want. that's still hard and has to be there. But the, decision-making, making that more open and shared helps more people understand how to make those decisions.
**Brett:** What do you think is different about excellence as a CMO in a post-LLM world as opposed to a pre-LLM world?
**Sheila:** There is so much potential to scale quickly at low quality. You have so many tools now available to you that allow you to move fast and get to an outcome. The job becomes what is the right outcome? What is the right choice? What's the right thing to move forward with? And so there's less onus on coming up with one single, great idea.
There's a-- you can get to more ideas faster and more of a onus on judgment and intent and decision-making. The, the job is shifting that way 'cause there are so many options now you can explore. What's the right one to make that's gonna be the most effective? That, that's where more attention kind of needs to go.
**Brett:** Do you think when you think about the next couple years and who the best CMOs in the industry are, the input drivers and like what makes someone good to five or seven years ago is very similar or there is going to be a sea change?
**Sheila:** the qualities are, the same, right? what makes someone successful regardless of their role is curiosity and openness to change and making sure that you can take advantage of the latest tools and tech-tech-technology available to you, right? So that's still true. I think there's gonna be a divide in people who leverage the latest tools available to them and people who don't, and that will move quickly over the next not even couple years, year. And
so that kind of chasm will be created without question. But the qualities that make you successful are the same, I think. And it's just, open to evolving how you think, not having one playbook that works all the time, right? It, it-- that's never been true. And so It's like the ability to adapt and having curiosity that's gonna carry people through this next wave.
**Brett:** And so you don't think there's gonna be much more science in what great marketing looks like? cause you had this interesting, the, mid-2010s was interesting, I think, in marketing because there's the rise of the more technical marker, the rise of the growth function that came out of the, the, the 2008, '9 and '10
Facebook days, and this tension between kind of creative and quantitative.
And you had this whole marketing discipline that started to look almost like hedge fund trading- at least certainly in ad scale consumer. and, and it feels like there was this identity crisis and certain people thought that it was gonna go one way or another.
It almost feels like in the last few years the artistic and creative elements in marketing have been re-elevated. Maybe that's AI and AI slop. the, way that ideas are disseminated and this-- the ability to sort of tell amazing stories with video that was very different than 10 years ago on the internet.
But there's been kind of like this interesting back and forth between quantitative and qualitative or creative and instrumented marketing. And is your sense like it's gonna tilt in one way or another, or it's gonna be a little bit status quo over the next few years?
**Sheila:** It's interesting because you're, you're right. There was a big push on growth, growth marketing, the science behind, again, resource allocation. I would argue that even in that world, brand and taste and being able to communicate an idea clearly was still critical, right? you could have any iteration of a message across a bunch of different platforms that you could automate and test and, you
know, quantify whatever.
But, a single breakthrough idea even then was far more effective, right? And so art was still really important back then. I just don't think we talked about it as
much.
**Brett:** the
**Sheila:** a difference in where the, like, kind of the platforms are shifting. So you can-- The time that you would've spent figuring out w- how do you, fragment a message across all these different platforms, now we're looking at systems And we're like "Great, how can you build a system to get more options out there that you can decide how to fragment me-" Right?
So it's just like the platforms are shifting a little bit, but the the mix is still the same. The importance of creativity and art is still there. I don't know. I think it was always important, right? I don't think we talked about it, But even back then in the 2010s, it was important. It's as important now.
I'm not sure I agree that it ever went away in terms of importance. I just think that we didn't talk about it. And I think for n- like now it's as important as it ever was because there's gonna be so much more out there, right? So now it's gonna be-- what is at a premium is attention because there's so much information out there.
So those creative ideas will still break through and be more-- and be important. But they always have been.
**Brett:** Like, o-one of the things that you're getting at is, creativity
and taste, is inherently human.
And not only that, there's a subset of humans that have those sensibilities.
and then in some ways, great marketing is a little bit like great fashion designers, that you kinda have a feel for what's gonna resonate and what's gonna tell the story and
et cetera. Is it sort of your current belief that that can't be encoded in software?
**Sheila:** there will always be a role for creativity from humans, and whether that's applied at the judgment level and the curation level or the ideation level, there will always be a role that is stand out, that is the human touch, that is going to be what separates i- great ideas from just okay ones, right?
Because everyone's using the same tools to create ideas. They've got the same platforms and the same tools, so everything's gonna look the same. So what's gonna make you stand out? The human touch, craft, passion, creativity. That has always been true and will always be true.
**Brett:** it seems like Silicon Valley hasn't done an amazing job of telling an optimistic story of AI? in the past few days that I'm sure you were very attuned to, which is Notion had a brand campaign around think together.
**Sheila:** Yeah.
**Brett:** It was like this very optimistic take of that the future of AI is about collaboration.
It's not about the one person building a billion-dollar company.
And I
feel like the role of marketing in 2026 in technology is by far the most important time in history.
**Sheila:** agree with you on that I think there's a lot of fear around AI right now. and a lot of that is coming from what happens with any time there's a big platform shift, right? Which is there's structural displacement of jobs. I think that's what's driving a lot of fear. And
what we have to remember is that so many new opportunities are created when you have those platform shifts.
You saw that with the internet. You saw, you saw that with the Industrial Revolution, you saw it with the internet, you saw it with mobile and social. And this is bigger than those, but the same thing will happen. And I think you're right. We've not been optimistic enough. There's room for that. And there's room to recapture the joy of building and making that got us all here in the first place, that got us excited to be in technology.
There's room to recapture that and remember why we're all here. And I think the tech industry in general can do a better job of that.
**Brett:** Do you think a lot of marketing comms people are worried about having a too optimistic take because they don't want to be smashed by the people that are saying, "Oh, you're taking all the jobs," and all of that, and there's some like...
**Sheila:** I think that the there is room for us to tell an optimistic but realistic story right? Because my, feeling about the early 2010s and that timeframe that we talked about was like tech was going to be the savior, right? And I think that is easy to poke holes in generally, that's never the case that one industry does that.
I think right now we're not focusing enough on the realistic story, of what's going to happen, and there is optimism in there. And just like things happen in waves, I think we'll get there, and I think people will feel more comfortable leaning into that. But it's with, more of a realistic view, I think.
And frankly, right now- People don't yet know how to talk about AI generally. If you drive down 101, everyone's just putting AI on a billboard. They're not even really explaining what you get for it And so I think we'll learn as we better understand. it's not just productivity, it's also, other things you
get.
I would push for realism, not just optimism, right? Because it has to-- people have to feel like you're being authentic.
**Brett:** Do you think that the North Star for a lot of companies is just being different? That they should find a way to just be different as it relates to what their brand is and the story they're telling?
**Sheila:** There's always been a concept of breakthrough, message breakthrough. It's not being different for the sake of being different. just making people care. you could be different as one way to do that. You could speak to the needs people have as one way to do that.
But it's just make-- build sh\*t people care about. That is the job of everyone at the end of the day. whether it's different than everything else probably will be if you can find, like, your audience that... and get really clear on their needs and serve those. But it's not about just being different. It's speaking to your audience and giving them what they need.
**Brett:** do you get someone to care that's not only just you need to understand your customer? Like, what, what is the formula to get someone to care?
**Sheila:** think this is a little bit of the art, right? So it's hard to put a for- there's not a formula like there, there is in other parts of building a business.
**Brett:** you're working with your team and you're coming up with different campaign ideas and they put something in front of you, and there's something going on in your brain where you're like, "Ugh, I can see this catching on. "I can see people actually caring about this." Like, if you think-- can you make that more legible?
Mm-hmm.
**Sheila:** think-- So there is a, an intuition that you build over time by consuming a bunch of different data points of user feedback, of market feedback, you have to consume all those data points to really understand and, and get a sense for what will be effective. And that is part of judgment. And that is part of how you siphon the good ideas from the bad ones.
Someone who's done that really well is Dylan, frankly. He just consumes so many data points across so many areas, and he's built this really good intuition, and I've learned that from him, or I'm trying to. And that is how I would explain, like, judgment and intuition.
**Brett:** what's different about being the CMO of a public company versus a, a late-stage private company?
**Sheila:** What surprised me is how little is different- actually. And the reason for that is y- you have to be tighter on process. in the sense that you've got to be able to forecast what you're gonna do for a quarter.
You've got to be really tight and clear on budget and have good mechanisms in place. And, that's not that different- Mm ... 'cause we tried to operate that way anyway. I think what is hard is that there's a lot of noise out there in the market about you, naturally. you have to stay... Going back to what we talked about earlier, you got to stay laser focused on the thing that matters, and for us, it's users and what they care about.
And trying to shut out the noise and focus on that is the thing that becomes a little bit harder.
**Brett:** W- What is sort of your reflection on, on going public in that a lot of people say, "Okay, there's a few reasons to go public." One is to access larger pools of capital and a bunch of financial things. but another one is it's an incredible marketing moment, and it allows you to elevate your brand.
What's
sort of your observations about that second value?
**Sheila:** I think that's true. The whole world is paying attention for a period of time. You get one opportunity to make a statement. For us, we made it about our community because that's what we care about. I also there is a view that for larger enterprise customers, they feel a sense of security staying with you.
You're public, you're an established company, so that's definitely true. We tried to make it the most of the opportunity to tell our story to the world.
**Brett:** Do you think there's a difference in marketing to the enterprise versus marketing to small business or prosumer? You gotta have this very interesting experience because it mirrors Dropbox to a certain degree. Yeah.
But like in looking at the companies from a distance, it feels like for a variety of reasons, Figma has been far more successful in that like Figma has one enterprise, Figma has one SMB, Figma has one prosumer, where Dropbox won prosumer and spent the last 10 years trying to
win enterprise and it never really happened.
**Sheila:** I agree. I think especially because Figma just moved on enterprise earlier. We knew that was an area that we needed to invest in. We built the team. We spent the cycles to understand what they cared about. We built the motions. We just did that earlier, so that helped.
I Dropbox was a tool for everyone, So that made it harder to be specific about what needs you were serving even as you moved into enterprise. Whereas like Figma was way more focused on the core audience. And even for prosumers, even for SMBs, it is a professional use case. And so that has allowed us to be really clear and really specific,
**Brett:** Do you think about different stories and messages that you want for SMBs versus mega enterprise? Or is it mainly there's an overarching narrative and maybe there's little tweaks here or there, but it's all kind of the same thing?
**Sheila:** the narrative and the brand is the same. Where there's variance is in specifically what they need, what their needs are. So as you're a larger organization, you care more about governance, you care more about, you know, specific admin features, et cetera. So we s- we-- the proof points are different, but what we stand for is the same, and that's nice to have that consistency.
**Brett:** who's on your like Mount Rushmore of sort of marketing campaigns of the last few years? Both maybe it's the, some of the things that you all worked on or just like when marketing is done in the most spectacular way possible, it looks like this, or I was so impressed by that.
**Sheila:** You know, my favorite marketing campaign, I'm gonna go way back in time, so this is not answering your last few years? prompt, was back in the day, the marketing around Chrome. And it was a campaign that was done I still go-- it still makes me teary-eyed to this, day. And it was a campaign-- I'm getting teary-eyed thinking about it now.
It was a campaign, it was called The Web Is What You Make of It. there's a lot of parallels to kind of the way that we're thinking about this AI wave now, actually. And it was, it was around Chrome, and it was across kinda Google products, and it was talking about users and how they interacted with those products.
There was one specific ad spot I remember, Dear Sophie, and it brought a very human lens to how you could get the most out of their web products. But it was so human, it was so visceral. It spoke to so many people, and I still look to that as an example of how you can Go back to make people care about what you're building.
I will always be a lover of that campaign.
**Brett:** it was that it tapped into, like, the human experience?
**Sheila:** The human experience with the web and how the tools available elevated, really people and their experience and their relationships. And there's so much we can learn from that with AI.
**Brett:** It's interesting when you say that because, like, the last year there's this genre of announcement video now
that's like the talking head in high
**Sheila:** Oh, it's so funny that you say
**Brett:** of
like every single one.
**Sheila:** Every single
**Brett:** And they all, for featuring humans, seem to lack humanity. And like, again, just an interesting recent reference point was the, this Notion video that they put out. And it, it dovetails with exactly what you were saying about the Chrome video, and it feels like so many of the things that take off- there's a soul to it, but there's this humanity to it. even though that seems obvious, almost all marketing in 2026 and '25 is not that.
**Sheila:** what you just described, and not specifically the Notion campaign, I think, but the announcement video is the literal opposite of
what I'm
saying, right? That's cool.
What, what is going on? I think that, like, we're still trying to figure out the humanity play here, right?
Mm-hmm. don't think we've done a good job telling that story yet. And that is what is going to, to your point earlier about optimism, that's what's gonna get people back to an optimistic place about AI. They can understand how it elevates their life. I don't think we've got quite gotten to that yet.
**Brett:** What else do you think about, like, in how marketing and storytelling is changing? it seems like a lot of your worldviews are that the future is more similar to the past, that the things that have mattered 10 or 15 years ago as it relates to telling your story and, and marketing still definitely hold true. Do you have other thoughts on you kind of see things moving in a different direction in certain areas?
And
**Sheila:** think more than ever, actually, what, like, what is evolving are the playbooks. So if you look the, you know, at the past, like, 10 to 15 years, right? The playbooks were largely similar. Like, you come in, you build acquisition funnels, you build upsell motions, you build retention plays.
it was, like, a little bit more playbooked. That is being questioned now. All of those playbooks out the window. And the way that you think about acquiring users is totally different. SEO is now like how do you have... how do you grab attention within LLM search results? The consideration phase of helping people, you know, feel comfortable with your product is now mostly third-party conversations, right?
Through social or, or other places. they don't only want to hear it from you. They want to hear it from everyone else. And so those playbooks are shifting dramatically. The core values of what it will take to be successful are the same, but the way, the how is totally different. And the people who are going to be successful are the people who can adapt.
And sometimes having too much prior experience is a bad thing because those... that stuff won't work and you have to be willing to throw it out the window and start over. But that's also what makes it fun, honestly. I'm ready to look at everything again from first principles. Been doing this job for a long time.
I want to change it and try something new. So I'm kind of excited about that.
**Brett:** sort of building on that, if you think about even your excellence in your job today versus fifteen years ago, twenty ten, twenty twelve, like, what's the compare and contrast about the role of the CMO today versus fifteen years ago?
**Sheila:** the way you described it was apt, right? Like, it was more similar to maybe not 15, maybe 10 years ago. It was more similar to a hedge fund trader and the mechanisms and the systems were kind of more clear. I think the systems are different now. There's also a little bit of a premium on disruptive energy that, maybe we wouldn't have put a premium on in the past, right?
Because the systems were so important. Actually, this is a push from Dylan that I think about all the time. I'm, I am a systems thinker. I like to come in and say, "Great. How are we... What are the processes that we're building that allow us to scale? How do we think about the 30/70," right?
Like, that's, how I think.
And Dylan had a push for me recently where he said, "But where is your disruptive energy coming from? Make sure you have enough of that on the team because that is what we need right now in the future." And I loved that push because in the past, disruptive energy is not always a good thing, right? Because you don't want things that are gonna shake this, system that you've built.
But now sometimes that disruptive energy is what is going to get you to the step change, and there's more of
a premium on that than maybe there would've been in the past, and that's a bit of a change.
**Brett:** so how do you spend your time in a given week?
Like what-- If you were to break down sort of the overall architecture of the week,
like where are you with exec team? Where are you with directs? What do you end up spending time on?
**Sheila:** I try to have regular time to check in. So we have our exec team meeting every week. We have a similar type of meeting with my leadership team, which spans both the marketing kind of comms growth worlds, but then also support and a lot of like the kind of those ops touch points.
**Brett:** How do you run that meeting?
**Sheila:** that one is more about like what are the priorities for the week?
Like what should everybody be focused on? How do we make sure our key things are successful? And then I try to also build in, like, regular check-ins and touch points on, like, key streams that matter and influence thinking. So product, what's happening on product? How do we keep up momentum? What are the key things we need to get across?
Customers, what are the main themes of feedback coming in? What should we be paying attention to? You know, do they influence maybe where we spend time? overall business, how is it tracking? How do we think about ROI? Are we on track for our numbers? Are we not? What are tweaks we need to make?
So I try to kind of balance those areas.
**Brett:** And those are like structured meetings or it's like async docs or
**Sheila:** A combination. It depends. Like, some of them are more regular meetings that we have. Some of the things like insights share outs are more async, so it kind of depends on the nature of the thing. And then I try to spend time to go deep with people too. So I try to mix in one-on-ones with people on the team, the right cross-functional folks from other teams so I can get a pulse on what's happening and make sure that I feel close to the work.
That's really important to me.
**Brett:** What are the, the weekly, monthly, quarterly, annual rituals that you think are most
important?
**Sheila:** they're built around those themes that I talked about. So you gotta have the check-ins with your kind of key leadership, but then how do you make sure that you're tracking the business and, what's happening? And the way that I do that is we have a monthly share out with the whole team. The whole marketing team and the support team does this as well.
What are the key metrics? How are you trending? That way you have a shared understanding of how the business is moving. Doesn't matter what team you're on, you need to understand what's happening, right? So that's one thing that, that happens regularly. That's a live share-out, and people can ask questions and, be briefed on really, like, what are the things we're doing that are moving
the numbers?
**Brett:** company or just marketing?
**Sheila:** we do have share-outs across the company but I do this with my team on a regular basis, right? And then our
OKRs are also based off of that. Then you have to have insights sharing at multiple levels. So we do a lot on the product side with research to understand how our particular products kind of, uh, what's the reception.
We look at things like MPS, we look at things like CSAT, but also there's a wealth of information from the support team on how are people feeling, where are their questions coming. From the social team on how is perception, what are the questions that people have or things that they're dealing with in the moment?
And we try to create forums to share that back with our team. Because again, just like metrics, I want everyone to be really immersed in how our users are feeling. We also have a lot of in-person touch points where we share out kind of those insights and whether it's course calls or, like, insights from events and things like that.
The last thing is having a regular sync on product and, you know, frankly, making sure that our own team is aware of things that are happening because you have different pockets of the team running on different things and sharing back across the rest of our team so everyone's in the know and we can stay on top of how quickly we're innovating and moving.
And so those are the three streams that everyone on the team needs to be aware of, no matter your role. And then we have monthly all-hands where we try to have a little fun. So those are share-outs, of course, on, like, key topics or, or numbers, but also we build in time for, play, for icebreakers, for games, so we can all have a little bit of fun together because at the end of the day, you gotta have fun with the people that you work with.
It's part of being effective, and moving fast and, building relationships. So we, build that into our rituals, so it's just something we always do.
**Brett:** has the m-marketing function had to change at all as product velocity has increased? Or is it just more cross-functional, you know, a PMM with a PM that's owning the launch of this new product and it's kind of incremental because you all have, have accelerated net new product launches
**Sheila:** have. We're, I mean, at the cadence of multiple have evolved Not necessarily the org structure, but how we're approaching some of these moments. We're trying to cluster as smaller teams and have multiple pods working on many different things at once, right? That's the only way you can move everything forward at the same time.
We're not perfect at it yet. We're still figuring out how to get there, but we're trying to find ways to give more people independence to move with the right kind of guardrails in place and right collaborators and make that clear so we can continue to move quickly. It's been an evolution over the past few months, actually.
**Brett:** like what, what's the general structure now of like the, the broader marketing org and how does that fit into,
small product launches, big launches,
sort of those type of things?
**Sheila:** the org is constructed around disciplines. So we'll have a product marketing team, we'll have a comms team, we have a social team. And the reason we're organized that way is because each team is excellent at what they do. But when we're activating around a product launch or moment, the bigger ones will have more people involved because every team needs to, like, play a role.
The smaller ones will have very small, nimble teams that just act and move with a smaller set of folks so we can get things shipped quickly. And we strategize, and that's what a lot of lead-- kind of leadership time that we spend together is about, like strategizing how are we effectively using our people and resources across these different moments.
**Brett:** you think about the role of CMO in the context of the executive team?
**Sheila:** It--
**Brett:** the discipline and bring that perspective to these cross-functional problems? Or do you think about It--
differently in some way?
**Sheila:** role, the way that I see it, is to represent a few viewpoints. Customers and what they care about, and so then having a span over our amazing support team really helps 'cause I've got a lot of input there.
**Brett:** Is that why it's structured that way for you?
**Sheila:** That's part of it, yeah, because it's kind of the end-to-end experience. I also it's representing a bit of the broader ex-external perspective, right?
So, like, w-where is perception? Where do we need to explain more maybe where our head is at? the, what's the role that we need to play in the world? On the marketing side, we've got so many feelers out on so many touchpoints on what's happening in the world, on social, with customers.
Part of my job is to represent that for people so internally we understand.
**Brett:** what are some of the things you've had to figure out in terms of being effective in that specific team? Right, like obviously one, one of the biggest differences I think about, being an, an SVP or VP is, and you were hinting at this earlier, you're generally kind of-- you're hopefully aware of the company and the business,
but your whole world is, in this case, marketing or marketing adjacent.
**Sheila:** it really is, like understanding the role that you play in the business and advocating for the right structural things for the company. So at a high level, if we're looking at like people or money, are we putting them in the right place as a company? And it's having that broader perspective on that. and I think also it helps you build empathy for other functions and where they're at and challenges, and that's something that you don't always get when you're sitting on a team and running one piece of something, right? You don't understand the broader perspective of what's happening on product or design or other teams.
that perspective is helpful also when directing your own team's time, 'cause you can figure out how to address challenges or partner with teams more effectively, and that's a really important role both ways, up and down, right? So you can make sure that you're showing up in the most effective way as you work with other leaders on the exec team, and you can make sure you're representing what's happening in the right way to your team so we can be most effective.
F-
**Brett:** Where do corporate politics come from?
**Sheila:** exist because people are trying to understand and make effective decisions. That, that's what I've seen. and when those decisions are obscure, there's a lot of jockeying to figure out how to get them made in your favor. I love the fact that there's very little politics at Figma because we're super transparent on the executive team also, and really open to making the right decisions for Figma.
I actually love it. I feel like it's the least political environment I've ever been in for that reason. But I think the less clarity And transparency there is, the more breeding ground there is for politics because people make a lot of assumptions about how to get stuff done.
**Brett:** do you think politics are more driven by the individual people who happen to be at the company or the, the culture of the company itself? Said differently, you take a given person and you- Yeah. put them in one company and you put them in could they become super political in one environment and apolitical in another environment?
**Sheila:** it's a little bit of both. It's a little bit of the individual and like, you know, what shenanigans are they gonna pull to get something done? I think organizationally, there's a level of tolerance that could exist for politics. At Figma, that's very low tolerance. and that comes from Dylan.
He has very low tolerance for politics, and I appreciate that. I think if there is more openness or tolerance, then there's more room for that to grow, and that depends on the individual, like how likely they are to lean into that. That makes me like my job less. Politics makes me hate work, and so I'm very happy not having that.
**Brett:** Do you think about this in the context of your own team and that you have to be very mindful of this, that like the default state is as the marketing org grows, it will just kind of permeate it?
**Sheila:** I, I do think about that. I, I'm very attuned to our organizational culture. It matters a lot to me. I really care about facts and truth, and that's why we have so many open sharing forums- on what's happening, what's the data, what's working and what's not working, so there's shared context on what's working.
'Cause then we all know the facts and, and it's less up to, like, any individual interpretation, So that's why those forums are so, and those rituals are so important to me because I abhor politics. I wanna know the truth.
**Brett:** when you think back on your career thus far, what are the, the sort of pivotal moments, the weeks or days or conversations that you had that have kind of led to some step function and change or evolution or you were going left and then-- like,
**Sheila:** Yeah.
**Brett:** consequential things that led you to sort of what you're doing now
**Sheila:** I have a few mentors that I have worked with, or either worked with or I've been adjacent to and they've sort of adopted me over time. and one of them was, the, COO that I worked for at Dropbox, Dennis Woodside, who's gone on to be the CEO of Freshworks. I still am very close to him. I really trust his opinion and guidance.
another one was, Yamini Rangan, who I worked with at Dropbox, who's now
at HubSpot. She's incredible. Another one was Francoise, who was the chief business officer at Square, and then went to Pinterest. And I was in a conversation with Francoise, and talking to her about my job and getting her advice and getting feedback and, and I was like, "You know, here, I'm weighing these quest-" I was getting her advice on something.
And she just paused and said, " Sheila, are you going to change the world in this job?" was kind of taken aback, and I hadn't thought about it that way. I don't, I'm not sure. I don't know." And then she was like, "Then why are you wasting your time?" And that was such a pivotal moment for me, 'cause I was kind of like, wow, the most precious thing here is, like, my time and what I'm spending it on.
And I got to s- I've got to spend it on something that feels worthy of having an impact on the world. And that just made me sort of see my own career moves differently, and what I prioritized and, where I went, because that's what we should all expect of ourselves.
**Brett:** the way through running the marketing function, how would you describe the leaps you had to make or the things that you had to figure out sort of
**Sheila:** There were some very instructive moments that I learned a lot from. So starting off at Dropbox, we talked about this, but the move to enterprise was hard. We learned a lot. We would go into customers and they'd say like, "Why are we even talking to you? You're a consumer toy," And so we learned a lot about how to change perception, what proof points really matter, how do you move the needle on that?
So that, that was one. I moved to Opendoor after that, which was completely different operations, heavy business. There was a really delicate balance between supply and demand because you had to create enough supply of homes and demand had to be there. And I learned so much about growth and how to think about really controllable levers of growth, and it's something I had very little exposure to because Dropbox, for a long time, growth had never been a problem. I did a s- a, short gig in investing where I learned a ton. I got a chance to meet really incredible founders and, learn to approach company building from a different lens and asking different questions of teams and where they're spending time. now in my role at Figma, I've learned so much about the importance of community and users and co-creating a product with them. So each stage I've learned so much that makes me a better marketer, and they've sort of built on each other. I kept adding a new thing or a new skill set that I feel really grateful for
**Brett:** Do you generally subscribe to the idea of, if you think about, growing in the marketing function, that you should work at drastically different places or that you should sort of compound knowledge? Like you- might argue that Dropbox is quite different from Figma, but there's some significant overlap relative to Opendoor.
**Sheila:** I don't-- no, I don't think it has to be drastically different places. I think it's exposure to different areas, right? So product marketing, growth, brand, you have to understand all of these things and how they work together. That could be at one company that you get that, or it could be across different companies.
For me, it just happened to be different companies, but I don't think it matters how you get that.
**Brett:** Do you think it matters if the, if the CMO came up in the world of, product marketing and brand versus came up in growth can equal-- can either be equally great in CMO or it's context dependent on the company or that type of thing?
**Sheila:** I've seen both work really well. It's a little bit context dependent on what's most urgent for that company at that moment in time. either flavor could work. I've seen really great growth leaders who have, brand and product nested under them, and it feeds the, the growth engine, but it's not the leading thing.
And I've seen phenomenal product marketing or brand leaders that start from a storytelling view and growth is one-- like, these channels are one way that you execute on that. For Figma, product is really kind of the center of the company, and that is, like, coming from Dylan. That's how he thinks.
So we've kind of built everything around that. Yeah.
**Brett:** What about on, on that point, what's unique about the CMO-CEO relationship that might be different than the CEO and
chief product officer other than their different disciplines?
**Sheila:** the CMO-CEO relationship, there has to be a lot of trust there, and that's true of product also. But there's so much volume of stuff that comes out of marketing, just so many surfaces, so many things, so many posts, so many content pieces, videos, and there's a really wide range of output.
And it's important that there's trust and alignment on what we were talking about earlier, which is organizational taste, judgment, because there's no way either one can have, you know, a view across everything. More important for the CMO, too. But I think there has to be a, a, a level of alignment and trust there on like, kind of that things are gonna be at the level of quality and output expected and still move the business in the right way.
and it's a little bit different than, you know, product or, other teams for that reason
**Brett:** What about the role of, a founder as obviously kind of the chief spokesperson of the company? Yeah. Now obviously if the, if it's a, if it's a hired CEO, they're also the
spokesperson for the company. There's something different. There's sort of like a, a moral authority. there's a linkage between what the company is and who the person is, regardless of when you look at any mature business, whether it's founder-led or CEO-led.
How do you think about that in the context of marketing, which is storytelling, and those things seem very connected?
**Sheila:** Oh, I mean, the CEO is the chief spokesperson, but also the chief person to deliver the narrative. There has to be extreme alignment on that level, it's gotta all stem from one thing. that's another area where there needs to be trust, but also, like, those two things need to be hand in hand because your message, your narrative, your story comes from, especially if it's a founder CEO, it is, it is them, right?
It
It's not just, like, a thing they say, it is who they are, that the company's built off of that, and the purpose and the why you are doing what you're doing comes from them. that is-- it's the origin of really everything you do.
**Brett:** So in this case, how is Dylan specifically involved with marketing?
we work so incredibly closely with Dylan, and we align on ideas. We will riff on messaging together. He's very thoughtful and in the details, and a lot of our good ideas come from him. this is an area where we work really closely with him, and our job is to refine that with him and then figure out how to disseminate and scale.
**Sheila:** But that is something that he is very close to.
**Brett:** Is it mostly done like ad hoc improvisational, or is like, you know, what traditional product reviews are,
the exist-- you've created a similar thing in marketing?
**Sheila:** We have created a similar thing in marketing, actually, and we keep it to kind of the core things 'cause he's busy, right? So the core things that we need his perspective on or get his take on. But we-- it's similar to product reviews in the way that we'll, share with him top messages, where are they showing up, get his feedback, make sure that they're aligned with his thinking, because he is so core to delivering that message.
**Brett:** are some of the things that he's imparted on you that's most shaped the way that you think about the function?
**Sheila:** Seeing the scale at which he can consume those data points that I was talking about, right? So he's reading all the reviews, he's reading all the summaries, all the social posts, all the feedback at such scale. It's amazing, actually. our teams can't keep up sometimes with the rapidity at which he responds to things.
And we've got to build systems to match that. But it's really valuable in building the judgment. And so, you know, I think we all try to emulate that.
**Brett:** a lot more and are kind of
**Sheila:** I try to be.
It's very
hard.
**Brett:** business. Yeah. what is it that you want the people that you work with to say about you, either when you're not in the room or after they leave the company at some point? What is it you want them to say about who you are and how you work?
**Sheila:** want them to feel like they did the best work of their life with me. That's what I want, because it's important for the company we're working on. It's also important for them. They have to feel like they were empowered to do the best work of their life, period. With respect to me, I hope they think that I'm open.
I hope they think that I'm kind. I hope that they think that I'm, taking risks and helping them take risks. But I think the most important thing to me for my team that we're doing the best work of our life together.
**Brett:** just distill that down What are you doing to enable people to do the best work of their career?
**Sheila:** It's giving them the room to take those moonshot bets that we talk about, right? it's building systems that they can feel that they're learning from and scaling. It's, for some, giving them exposure to how things work at scale at a world-class company like Figma. It's all of those things working together.
I think at the end of the day, it's also having fun. That's very important to me as a
human. And so In addition to working hard, we have to build in room to play and be human and have fun, and I hope that we can do that while doing the best work of our lives.
**Brett:** Great place then. Thank you so much.
**Sheila:** you. That was very fun.
### What it’s like to work at Applied Intuition, the quietly dominant AI company
URL: https://review.firstround.com/what-its-like-to-work-at-applied-intuition-the-quietly-dominant-ai-company/
Last updated: 2026-06-03T16:01:10.000Z
[](https://review.firstround.com/firsthand-applied-intuition/)
**Applied Intuition** is a bit of an “if you know you know” company. For years, they didn’t talk about what they did publicly. Co-founder and CEO **Qasar Younis** didn’t even have a Twitter.
**Malhar Patel** started back when the company was just called “NewCo” on LinkedIn, joining a crew of engineers working out of a rented space above a bar in Sunnyvale. They had a no-shoes policy — only because their office was a literal house, so it felt odd to keep them on.
Today, Applied Intuition is a $15B company, and as they’ve grown into a leader in physical AI, they’ve started to talk about themselves a bit more (Younis even set up an X recently).
For our second installment of “Firsthand,” our as-told-by series spotlighting the early employees at some of the most distinctive companies in tech, Patel brings us inside the halls of Applied’s Sunnyvale campus, where they’re in-office five days a week, and it's not unusual to find folks staying late for a call at 11PM with customers in Tokyo. He’s now Deputy CTO, and he’s worked across just about every function at the company throughout all its phases of scale.
In this essay, he shares what’s kept him there — and what makes the culture so uniquely “Applied,” which has somehow stayed pretty constant over the years (they still take their shoes off, even in their several-hundred-thousand-square-foot HQ).
[Take me to The Review](https://review.firstround.com/firsthand-applied-intuition/)
### Firsthand: Seven Years Inside Applied Intuition, the Quietly Dominant Physical AI Company
URL: https://review.firstround.com/firsthand-applied-intuition/
Last updated: 2026-08-12T14:47:52.000Z
*As part of our series highlighting what makes a company truly distinctive, our second installment of Firsthand features *Applied Intuition* as seen through the eyes of* [*Malhar Patel*](https://www.linkedin.com/in/malharp/?ref=review.firstround.com)*, one of the early hires who*’*s been at the company through every phase.*
*Internally, the shorthand is Applied. (Shortening to AI would have been a little cheesy.)*
Most people in tech, even the very plugged-in ones, don’t know much about [Applied Intuition](https://www.appliedintuition.com/?ref=review.firstround.com).
Yet on paper, our company and culture is very on-trend for a tech company in 2026\. We build software and AI for the physical world, from autonomous vehicles to construction trucks to fighter jets. We have over 1,000 engineers, and customers conducting 50 million simulations a year on a platform handling hundreds of petabytes of data. We’re a $15B valuation company, in-person five days a week, and our engineers embed with customers around the world — from Sweden to Japan. And yes, we still have a no-shoes policy at the office.
For a long time, we’ve had the mindset that the only people who needed to know what Applied was doing were customers and candidates. We were heads down on our work, sustained mostly by word-of-mouth. But as we’ve grown past 1,300 people to become a global leader in physical AI, that thinking has evolved.
People often ask how we’ve kept our culture so distinctly "Applied." This has largely been architected by our co-founders [Qasar Younis](https://x.com/qasar?ref=review.firstround.com) and [Peter Ludwig](https://www.linkedin.com/in/peterwludwig/?ref=review.firstround.com). Over my seven years here, I’ve seen a lot — from the days when a handful of us worked out of a rented space above a bar on Murphy Avenue in Sunnyvale to today, reporting from our several-hundred-thousand-square-foot campus just a mile down the road. Here’s what’s kept me here all these years.
## Joining: How I wound up here and how we recruit
I joined Applied at the start of 2019 as an engineer. It was my first real job out of college. I feel like I was born here.
I studied EECS at Cal (go Bears!), where I spent a lot of time building small autonomous vehicles and launching satellites (including a [miniature satellite the size of an Apple Watch screen](https://medium.com/@trbrashears%5F90628/spinorsat-a-step-along-a-50-year-journey-to-the-stars-23ee4effe6ab?ref=review.firstround.com)). Someday, I’d like to build the *Iron Man* suit.
During my senior fall, I had dinner with my friend [Rohan](https://www.linkedin.com/in/rohan-pai-a95b2b53/?ref=review.firstround.com), who was one of the first engineers at Applied. I trusted him, so I figured if Rohan liked working there, I might too. I got connected to the team the next day, interviewed, and got an offer within a week.
When I joined, there were around 15 of us. We didn’t have an org chart or clear-cut roles. We had a single product, the planning simulator, and a few customers. The website didn’t even tell you any of this. We were just focused on building the best possible product for customers.
I’ve had a lot of roles here over the years. Whatever the company needed to figure out at a specific moment in time is where I got pulled. I’ve helped start and run our infrastructure group, worked on recruiting, finance, and customer accounts, built Reinforcement Learning (RL) environments before they were cool, and led the Data, ML, and Compute org (what people now call AI infrastructure). Most recently, I was asked to step into our first-ever [Deputy CTO role](https://x.com/qasar/status/2059719497507115407?s=20&ref=review.firstround.com). Now I’m focused on making sure we have the right technical strategy and are executing on it across all of engineering, helping our CTO Peter manage what 1,000+ engineers are shipping.
Because I’ve touched so many parts of the business, I’ve done a lot of hiring. I’ve interviewed thousands of folks myself and I've seen our hiring process twist and turn as we added more people and tried to figure out which hiring habits were worth hanging onto and what needed to change.
We’ve always approached hiring as shoring up three sides of a triangle:
- **Domain specialists**. In the beginning, this meant simulation PhDs. Nowadays it’s people who are very deep in our verticals, from automotive to trucking to agriculture.
- **New talent.** We have a giant new grad class and invest heavily in growing them into leads — I’m one of many examples of this. About 70–80% of our management is internally promoted.
- **Ex-founder or CTO types.** They inject the startup energy. You have to consistently move fast and build the best product.
The trifecta is what creates productive groups. Any one of those elements in isolation tips the balance. Too many former founders and you lose structure; too much domain experience and you get cynicism about what’s possible. You need a bit of naivety, especially when you’re doing deeply technical work. Personality matters too. It’s a constant exercise in calibration.
Before we hire any candidate, we do what we call a leads chat. This is a conversation with two leads in the company close to what you’d be doing and with a strong feel for the culture. We’re trying to decide if this person will fit into a team, and whether they have the hunger to succeed.
The nuance is you need to make sure the leads doing this are calibrated. When we first started, it was a casual conversation with Qasar and Peter. They did them for the first few hundred hires and still do them today for our leads.
We also have a self-selection process by being in-person five days a week. Not everyone wants that, and that’s completely fair. But the people who do tend to be genuinely energized by the work. You can feel it when you walk in.
My other favorite hiring heuristic is what I call the car test, which is apt for a company like ours. **If you’re stuck with this person for eight hours in a car, would you be happy?**
## Working here: What’s expected of us
We have a lot of conviction in how to build this company — from the hiring process to day-to-day operations — so it’s important we help new hires adapt quickly. We do that with required reading and viewing, such as onboarding videos that walk through niche situations and how to think about them. Every new hire reads a curated list of Qasar’s writing (we can’t share any of it publicly, but you can get a taste of his unique writing style from [what he’s shared on his website](https://qy.co/writings/newqasar/?ref=review.firstround.com)).
**One of my favorite training videos is called "How Not to Be a Corporate Goon."** It sets the tone pretty clearly, underscoring why being intentional can make a real impact.
True to the “building a great product is all that matters” spirit of our founders, when you join Applied, the expectation is that you’ll ship from day one. You should merge code by the end of your first or second day.
But we won’t just let you fly blind. One of the things I did for everyone who joined my team was get them in a car their first week. You joined a company that does stuff with cars, you should experience one. Afterward I’d ask: "What should we make better?"
It’s an easy test for me to see if this is someone who can find and want to fix issues and propose solutions. They should be able to spot a few things. These car sessions create these micro teaching moments that help craft them into someone who’s going to be hyper-effective here.
Another big expectation at Applied is that we will send engineers onsite with our partners on the other side of the world constantly. We’ve been “forward-deploying” long before it became a trend.
This global spirit is a big part of our ethos. Applied has been international since early on because our customers are in the countries core to our verticals, places like Japan, Korea, Germany, Sweden. Our offices are where the customers are.
Making that work is maybe the hardest cultural problem we’ve had to solve. Our HQ is on the West Coast, which means there’s an nine-hour time difference to Munich and another seven to Tokyo.
> It’s not unusual to walk past a conference room at 11 PM with five people on a call with customers on the other side of the world.
Because of this frequent flyer culture, everyone here is good at communicating, engineers included. Our general expectation is that if I put you in front of a customer executive, you can articulate precise technical details clearly to them. Because there are a ton of people who start in Sunnyvale and rotate onsite for a few months, the old archetype of the engineer who sticks in their corner doesn’t work here.
We care deeply about technical excellence. Over 80% of our workforce are engineers, and the products we work on are genuinely hard. Good software is one thing, but making it work reliably on physical hardware in the real world is another.
A big reason why I’ve stayed here seven years is because I’ve gotten to go where the problems are. Most people leave companies because they don't feel like they can do anything about their environment. I’ve always felt like folks at Applied can, whether that’s changing function, exploring a new direction, or giving direct feedback.
When people do move on from Applied, what they do next runs the gamut. Of the early employees, many stayed for four or five years and went on to start their own companies. One person has a matcha company. One went to a circus academy.
## Fitting in: The vibe and how we work
"Culture" gets thrown around in Silicon Valley a lot, but usually it ends at drinks in the fridge and free lunches. Here, culture is the shared behavior everyone actually exhibits. When you join Applied, you absorb it pretty quickly.
My favorite company value is radical pragmatism. You can’t turn your brain off for any decision. You’re always doing whatever is most pragmatic.
A good example is how we do travel. Most people going on a business trip blindly book a flight and don’t think much more about logistics. Here, we may think too much about what the implications of the costs are, or the transit time. We are literally thinking, "Is the business going to do better or worse because of that $200 dollar difference in flight prices?" This micropragmatism is a big reason why we've barely spent any of the money we've raised.
Another key part of that is speed. It’s not "let’s catch up next week," it’s "let’s figure this out today."
> People who’ve left and joined much smaller companies will often tell me everything felt faster at Applied.
People don’t have many recurring meetings. If you need something, you go talk to someone. We use Slack religiously, especially given all the time zones. We believe being a hive mind is a big factor in our success, so we’re intentional about how people use it.
There’s a programmatic channel structure — you always know where to find the project channel, the customer channel, whatever you need. All these little touchpoints and lubricants help speed up people’s ability to find and communicate information as fast as possible. And if you end up writing an essay in Slack, it’s probably easier to just meet live or jump on a five-minute call. Our criteria for whether to have a meeting is: does a decision need to be made? If so, we’ll get on a decision-making meeting to run through open questions, with the goal of making a decision by the end of it. The other prompt for a meeting is if there’s some nuance that’s challenging to convey in writing. And we default to 15 minutes for both conditions. If it’s neither, the meeting doesn’t exist.
But it’s not all super serious. We’ve had meme channels come and go over the years. One of the old ones, the second meme channel, was my own #malhars-mansion. One of the more recent ones is #peanut-gallery, a live discussion feed during every all-hands.
We’ve maintained our no-shoes policy from the very first Applied office (a house in Mountain View) all the way to our current campus. At first, we didn’t wear shoes because we were working out of a literal house and it seemed odd to keep them on. But as we grew, we decided to keep it.
## Not letting it break: Maintaining and evolving culture at scale
If you want to build a great company, you have to be different. Our approach to scaling is sheer paranoia about being like everyone else, which is extremely hard when you’re doubling or tripling the team.
> The moment you accept sameness, you drift toward mediocrity.
So we’ve always tried to no more than double the company in any given calendar year. Because if you do, more than 50% of the company takes on a net-new culture. When I see these other cases of a 10x or 15x in one year, I just think that will probably implode because a company’s culture can’t sustain itself by adding so many people who don’t actually know it yet. It’s important to be intentional here.
One of the guards against that we implemented early on is called the culture table. It was Qasar, Peter, me and a few people from across the company. It specifically didn’t include managers. We’d meet to get a pulse on whether there were any deviations creeping in from a cultural perspective.
For example, one of the outcomes of that table is a scoring system for managers. ICs score their managers every six months by answering about 50 questions on how they’re doing. This prevents managers punching down, which certainly happens at other companies. So you want to pair the manager score with their performance metrics to see whether a team is both performing well and operating effectively. The combination is what’s important. It exposes the well-liked manager who doesn’t drive results, and the effective manager who makes everyone miserable. Those are the things we’d bring to a culture table discussion.
Looking back, we were able to stay under the radar for a long time because we recruited incredible talent through word of mouth. But that only works when you need 50 people, not 500\. We’ve gotten more pragmatic about that. We’ve also felt we couldn’t keep building frontier technology without sharing our opinions and learnings more broadly, including on AI policy, and on the future of intelligent machines.
There’s a phrase we come back to a lot: "Only the paranoid survive." It sounds intense, but for us it really just means: Don’t get comfortable. Keep questioning your assumptions.
Stay paranoid.
### Listen: Why AI makes great salespeople matter even more
URL: https://review.firstround.com/listen-why-ai-makes-great-salespeople-matter-evemore/
Last updated: 2026-05-24T14:51:22.000Z
[](https://www.youtube.com/watch?v=iHzFgVS9ngM&ref=review.firstround.com)
### [**YouTube**](https://www.youtube.com/watch?v=iHzFgVS9ngM&ref=review.firstround.com) **|** [**Apple Podcasts**](https://podcasts.apple.com/us/podcast/why-old-school-sales-work-still-wins-in-the-ai-era/id1535886300?i=1000768909425&ref=review.firstround.com) **|** [**Spotify**](https://open.spotify.com/episode/2AhOVxzvAKKM2heWz40riG?si=A5lZnpPUQkuMxoR5ARpcFA&ref=review.firstround.com)
During COVID, one of **Graham Moreno’s** sales reps found out that his champion’s son had to stop taking guitar lessons. So the rep offered to teach him over Zoom. The rep didn’t tell anyone — Moreno found out about it six months later when the customer brought it up on a call.
One of Moreno's core philosophies is that a great go-to-market system raises the floor and introduces predictability while still leaving space for exceptional people to use their judgment to delight the customer. Much of the industry has been debating whether AI could replace salespeople, but this example of the guitar lessons is the kind of real, human connection Moreno observes in elite sales orgs.
Moreno is one of a small number of elite go-to-market leaders. He was a global VP at Grafana Labs, architected the GTM motion at Windsurf through its acquisition by Cognition and now is the head of GTM at Parallel Web Systems. His opinion is counterintuitive to how most sales organizations are operating right now — the fundamentals of great selling are becoming the only real edge in the age of AI.
In this episode, you’ll learn:
1. **Why PLG isn’t enough in enterprise** — while at Windsurf, Moreno collected data on the outcomes of structured rollouts and in-person enablement, and found they were far more successful compared to when customers were given the tools and left to self-serve. They heard feedback that no other AI company was sending people to roadshows or being that hands-on with customers.
2. **How to build a sales org that raises the floor without capping the ceiling** — Moreno describes how to create just enough structure so that consistent performers thrive, while also leaving enough room that exceptional ones can teach someone’s kid guitar over Zoom.
3. **What changes when selling to AI-native companies** — a sales cycle that takes six to eight weeks in enterprise compresses down to five business days with an AI-native buyer. Moreno breaks down why, and what it demands of sellers.
4. **Why post-sales should report to a revenue leader** — Moreno says that when you split go-to-market into separate pillars, this creates organizational drift because no one person owns the full customer relationship.
[Watch now](https://www.youtube.com/watch?v=iHzFgVS9ngM&ref=review.firstround.com)
### Why old-school sales work still wins in the AI era | Graham Moreno (Head of GTM, Parallel)
URL: https://review.firstround.com/why-old-school-sales-work-still-wins-in-the-ai-era-graham-moreno-head-of-gtm-parallel/
Last updated: 2026-06-04T14:23:40.000Z
In the latest episode of Executive Function, Brett sits down with Graham Moreno, Head of GTM at Parallel Web Systems. Before Parallel, Graham scaled Windsurf's GTM organization from three sellers to seventy-five in under a year, served as President through the Cognition acquisition, and earlier built and led enterprise sales teams at Grafana Labs and MongoDB. In this conversation, he unpacks why the AI-era backlash against structured enterprise sales misreads the data, how to design a process that raises the floor for ordinary reps without capping the ceiling for stars, and why selling to AI-native customers compresses an eight-week cycle into five business days.
In today's episode, we discuss:
- Why in-person enterprise rollouts still beat product-led motions
- Building a robust sales process that still leaves room for unscripted moments
- Why the three highest-leverage early sales hires aren't sellers at all
- The case for outsized commission accelerators for star sellers — and the kind of person they attract
- Why most AI companies are skipping the in-person sales work that enterprise customers actually want
**References:**
- Ahead: [https://www.ahead.com](https://www.ahead.com/?ref=review.firstround.com)
- Amazon: [https://www.amazon.com](https://www.amazon.com/?ref=review.firstround.com)
- Anthropic: [https://www.anthropic.com](https://www.anthropic.com/?ref=review.firstround.com)
- Attio: [https://www.attio.com](https://www.attio.com/?ref=review.firstround.com)
- Augment Code: [https://www.augmentcode.com/](https://www.augmentcode.com/?ref=review.firstround.com)
- Cognition: [https://cognition.ai](https://cognition.ai/?ref=review.firstround.com)
- Cursor: [https://cursor.com](https://cursor.com/?ref=review.firstround.com)
- Dani McCabe: [https://www.linkedin.com/in/danielle-mccabe/](https://www.linkedin.com/in/danielle-mccabe/?ref=review.firstround.com)
- Datadog: [https://www.datadoghq.com](https://www.datadoghq.com/?ref=review.firstround.com)
- GitHub Copilot: [https://github.com/features/copilot](https://github.com/features/copilot?ref=review.firstround.com)
- HubSpot: [https://www.hubspot.com](https://www.hubspot.com/?ref=review.firstround.com)
- Jeremy Powers: [https://www.linkedin.com/in/jeremypowers/](https://www.linkedin.com/in/jeremypowers/?ref=review.firstround.com)
- JPMorgan: [https://www.jpmorgan.com](https://www.jpmorgan.com/?ref=review.firstround.com)
- Matt McClernan: [https://www.linkedin.com/in/mattmcclernan/](https://www.linkedin.com/in/mattmcclernan/?ref=review.firstround.com)
- MongoDB: [https://www.mongodb.com](https://www.mongodb.com/?ref=review.firstround.com)
- Nicole Rettinger: [https://www.linkedin.com/in/nicole-rettinger-23b20465/](https://www.linkedin.com/in/nicole-rettinger-23b20465/?ref=review.firstround.com)
- Notion: [https://www.notion.com](https://www.notion.com/?ref=review.firstround.com)
- OpenAI: [https://openai.com](https://openai.com/?ref=review.firstround.com)
- Parag Agrawal: [https://www.linkedin.com/in/paragagr/](https://www.linkedin.com/in/paragagr/?ref=review.firstround.com)
- Parallel: [https://parallel.ai](https://parallel.ai/?ref=review.firstround.com)
- Snowflake: [https://www.snowflake.com](https://www.snowflake.com/?ref=review.firstround.com)
- University of Chicago: [https://www.uchicago.edu](https://www.uchicago.edu/?ref=review.firstround.com)
- Windsurf: [https://windsurf.com](https://windsurf.com/?ref=review.firstround.com)
**Where to find Graham:**
- LinkedIn: [https://www.linkedin.com/in/grahammoreno/](https://www.linkedin.com/in/grahammoreno/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
00:32 Has the sales playbook changed in the AI era?
02:13 Why "showing up" beats letting the marketplace decide
06:50 Why great salespeople sell to engineers and executives in one motion
11:37 Selling to AI-native buyers who grew up on ChatGPT
13:49 Same seller, different tempo: 8 weeks vs. 8 business days
15:57 How AI-native buyers handle build vs. buy decisions
17:48 The rep who taught a champion's son guitar over Zoom
19:03 Raising the floor without capping the ceiling
22:09 Why too much process narrows the kind of seller you attract
25:46 The three pillars of GTM excellence
31:00 Building peers who are 80% aligned, not 100%
38:03 Whether AI is changing what good enablement looks like
41:35 Selling against direct and implied competitors at once
42:45 Instrumenting the funnel from stage zero to close
45:57 Why post-sales should always roll up to the revenue leader
48:19 The case for outsized commissions
52:02 The 96 hours of panic before Cognition acquired Windsurf
53:04 How far out should a GTM leader be planning?
57:53 What a normal week looks like in hypergrowth
**Brett:** Maybe a place to start that that might be particularly interesting to hear your take on is, uh, you bring, you've been bringing software to market for a while. You click, you sort of had a huge chapter, um, call it pre-chat GPT or pre LLM as we know it.
Then post sort of chat GPT in one of the leading companies that's bringing, um, cogen to market. Now you're joining another company that's at the forefront of this technology. What's like your observations in, let's start with kind of new world, old world of selling these two different forms of software,
Do you think it, it tends to be more different and you're relearning your job or Most of it's like 90%.
**Graham:** identical. I think one of the funny things about this generation of, of companies and of sales is that it feels like the playbook companies of like the cloud era, the, like Mongos, Datadog snowflakes have kind of become, there's like backlash against it. And now there's a lot of very like anti playbook sentiment.
And I think the reality is that I've found that it's very much in the middle where like windsurf cognition.
**Brett:** In the sense of, in this generation of founders and companies, we gotta reinvent everything and go back to first principles kind of.
**Graham:** Yeah. My sense is that there's just like a lot of like pride in PLG. . And I'm like, we want the product to carry the sales motion forward. And there's like less around this like very structured, measurable sales process and more about meeting companies where they are and injecting sales at the latest possible point.
And that it feels like in a lot of these companies that have been super successful, there is, uh, maybe like a negative ethos around the word sales. . And what I found on like what we bet on at Windsurf was. In AI natives, you have to sell completely differently. The amount of information out there is is much larger.
They do a lot more research before coming in. People can try products and so there it is. Have a conversation, figure out where they
**Brett:** the end customers.
**Graham**: Correct. So like the newer companies that have been founded call it like post 2020, um, where they come in with a pretty strong perspective, often having used a bunch of tools in the market and like what you're having to do is figure out what they believe relative to what they're trying to achieve and like do some education around that.
But there is probably a very different motion there than like an older school, like what made HubSpot famous, for instance. . Um, I think in the enterprise it's very similar and it moves faster, but like you still change, management dictates success in the enterprise more than technology. And so companies still want people to come out and deliver services and do trainings and spend time with the, in the, with the team.
And like when we were doing large rollouts at Windsurf, we would send people. On road shows, like two reps in particular I remember went to India, Europe all over the US to sit with different offices for different banks. And the feedback we got was, since we've been buying AI tools, there's not a single company that has actually sent teams to go and do this.
And like part of why we're going with you outside of belief in the tech is that we think that you guys actually understand how to partner with us as an enterprise because it's not just our tech is amazing, release it into your marketplace internally and it'll spread like wildfire. . There was like a willingness to sit and to do discovery on current workflows, propose new ones, align on what the actual answer was, and then go and like spend time driving it.
Because six months in, companies that did structured rollouts were a lot more successful and we ended up collecting a lot of data on this because it became part of how we sold. Then the companies that said, Hey, I've got tool A, tool B, and tool C, we're gonna throw them into a marketplace and just like let the market decide that wasn't six months out.
Super effective. There was, in a lot of cases, minimal measurable change. People had done the wrong things because instead of having trainings, they had just messed around with it and figured out their own workflows. Um, and so I think in that way, the like old generation of sales is still very much applicable.
**Graham:** Where I think people want opinions, they want clarity, and in a lot of cases there's interest and excitement about something because they have an idea of how it can be effectual in their business. But I think companies lose an opportunity to become more than just a vending machine for software when they're not willing to say, Hey, we are really strongly opinionated about the best way to do this and why.
And look, we're gonna take the time to get to know your business, but then we'll read that back to you, apply our perspective. And if that is the thing that you believe is a viable option, then we'll work with you to make it successful.
**Brett:** Why, why do enterprises wanna be sold in this way?
**Graham:** I think companies that have large scale organizations, and certainly the executives at the top of that chain understand that getting large groups of people to do anything is really hard. And that if you can provide a step-by-step guide, get in the boat with them and work on how to apply that and how to execute it, execute, and then are constantly able to, because everyone, like get they gets brought into a training, is wondering why they got pulled away from work.
So you have to have a really strong upfront value prof on, Hey, at the end of this two hour session here is what you're gonna be able to take with you and how we expect it to impact your work in week one and week four and week 12\. Like, this is the, the carrot at the end of the stick if you spend in two hours not doing your primary job.
But if you do that really effectively and you're able to come back and do. Ongoing training and enablement and you develop relationships, then like the ultimate change management across thousands or tens of thousands of people is more effective. Um, because on top of there being a systemic piece to it, there's a human piece where like if someone doesn't trust you or doesn't know you, less likely to listen.
If someone is making the effort and there's a team that shows up and is willing to work with you, and over the course of a year you see the same people a few times, you begin to develop relationships. It's why systems integrators, var as have multi-decade relationships with these companies and are so effective, like ww t ahead emphasis doing tens of billions in revenue.
A lot of that is because there's executives that have been there for the entire span of the relationship and there's like a deep amount of trust that if someone says, I'm gonna deliver this, they'll,
**Brett:** Do you, do you think that's gonna change in any way? If you're a betting man, you would say in the next few years that's that's how it's gonna be.
**Graham:** I think that at. Any large scale organization, large, those foundational principles will continue to exist. Like Parallel is the first company I've worked at that I would say is truly AI enabled. And what we do internally with Claude and Notion and att and like all of these different tools is amazing.
And like Claude Cowork is in a month, three weeks of being at this company, it changed how I work because I can now go into cloud and have all these different systems hooked up to it. . And say, help me build a slide deck. Help me build a doc. Like, Hey, I'm looking to prep for the forecast tomorrow.
Can you gimme a readout of all of this stuff? And so I think I have a much better command at the data that I have within the company. But if I were doing a large scale rollout, especially if I had a team of a few hundred or a few thousand, I still think I would default to wanting to be able to work with a vendor on how to make that successful.
And like, yes, incorporate that into our workflows, or teach me how I should change the workflows. But I don't necessarily see. I even see this in my team of like 10 people right now. How we all use clogged flow work is pretty different. . And so if you scale that across thousands of people, I think you probably end up with a lot of redundant work inefficiency.
And that absolutely would lead in, in that situation to wanting to work with a vendor on how to make sure that we're getting the most out of something versus just being better than we were,
**Brett:** What is, if you think about large enterprise and your experience with windsurf and then cognition and you think about excellence in sales., a lot of the core components are similar. Are there really important differences with this, this type of technology and bringing it to the enterprise over the last 18 months?
**Graham:** yeah. I mean, I think one of the things that at Windsurf and cognition we did really well was, the way I describe it is like great sales is like squeezing an orange or applying pressure from both sides. So on the one hand, do you want to go. Talk to engineers and like have a strong dero practice and really get in and like understand on the ground the way that people are working, thinking what they want to be doing.
Absolutely. That's really, really critical. But at the same time, these executives that are managing huge budgets have projects and increasingly have CFOs saying, oh well, like that company over there, cut head count 40% and increase productivity three x. How are you gonna do that? Like if you're not involved in the conversation with them, then you're just hoping there's enough of a flywheel at the ground, like at the ground level to pull your product up.
I think what we did really effectively was how to strong practice around going out and meeting developers where they were. And that was both like being active on Twitter, being active in meetups, having like a strong devra practice about trying to bring together a community of people that created a conversation that was ongoing around how to use the tool to the best of its abilities.
But then also we had a really strong practice on. Executive events, making sure that we were plugged into the CI C-I-O-C-T-O and being able to go and basically translate what we were hearing from their people, which in a lot of cases they weren't getting direct and giving us the opportunity as we were going back and engaging with the developers to say, Hey, we spent some time with, you know, Mr.
And Mrs. Executive, here's how they're thinking about it. And I actually think that great sales organizations understand that in a lot of cases, they are the vehicle that both developers and executives use to get a clearer insight of what's happening in other parts of the org. Because if there's six layers, if you're selling to a major bank, like CIO of JP Morgan is nine layers between an engineer and she's not necessarily hearing from engineers on a regular basis.
But if you're a vendor who can say, Hey, we just went and did a huge training at your Ohio office, like here's the feedback, here's what we're hearing. And then like able to integrate that into. How they're thinking about AI strategy. That's a huge value add for that business that goes beyond just the tech.
And I think we were super intentional early from like the very, very early stages about how we chose to do that. Because when I got into windsurf outside of hiring sellers and deployed engineers, the three things that I told our CEO that I wanted to go do was hire a Worldclass partner person, a Worldclass enablement person and a data person.
And my premise was, we're at single digit millions in revenue right now, but by the time we get to 50 a hundred in a product like this, it is more important that our enterprise customers are able to get consistent services and ideally from a place that they trust. And that is through partners. Like being able to go and build credibility and build belief in the big partners and systems integrators was something that we started doing probably $40 million in revenue before most companies, but by the time we hit 50 a hundred, we were in.
Some of these centers of excellence that we wouldn't have been in until we were at 250, otherwise. And that was a huge force multiplier for us because it meant that if a bank said, Hey, on short notice we have this event in Singapore, can you come out? We could probably send one or two people, but we could call the partner that we knew they worked with, that we also were close with and say, Hey, can you, can you flex 30 people to come help us deliver this?
Um, and I think for us, knowing early on that we were going to be more enterprise focused, that was a really high leverage way to spend time. And then from an enablement perspective, I think
sellers in some cases get a bad rap because they're not necessarily credible able to come in and provide information that their, their customer might not have without them. And so by investing a ton and creating a sales team that was well drilled, well educated, was able to speak not just to our product and to our competitors, but to the market as a whole.
And to do this in a way that was programmatic. Like we measured the outcome of enablement and we're able to look at like, Hey, how did the first four weeks of digital onboarding go? Like, how are people performing in these sessions? How does, like at bootcamp, there's different measurements that we have and we could then look and say, Hey, like this cohort that hit 75% on average became productive in the field three months before previous cohorts.
And so I think just being very intentional and programmatic early on, things that at 10 sellers like doesn't necessarily seem important, but that meant that at a hundred, we had that completely dialed in in a way that at other orgs that I've been at, we were scrambling because we realized too late that we should have done it a year before.
**Brett:** What about, what does excellence look like when you're selling to AI native customers?
**Brett:** How different is it?
**Graham:** That's, I think, the most different thing. Uh, and it's been really fun. I think AI natives a like. In a lot of cases, a good percentage of their employees started using chat GBT in like college or high school. . And so you have this group of people that are just like born to it in the same way that like our generation might feel about an iPhone.
But it means that the education curve is completely different. 'cause it's not like, hey, here are the rudimentary pieces of like what an agent is and how you get the most out of it. But it's okay. Like show me what you're doing, show me your workflow. Okay, cool. Like you are miles ahead of someone that I might be working with who picked this up when they were 45.
And now it's about like optimizing for the outcome you're looking to create. Ideally giving you like two or three pieces of information or two or three things about how to use the product or get the most out of a workflow. Having you go back, do it, provide feedback. Like I think the way that we communicate at parallel with those companies is like a lot in Slack, a lot over like text.
There's just like a lot more constant communication. And it feels more like an ongoing conversation because I think a lot of this generation is just used to async, first of all. And also just like having a pretty constant narrative going on. Because even if you're talking to chat GBT, that can be an ongoing conversation.
And so there is this much more like continuous exchange of information and then you get on a call every couple of days to like go through the most recent stuff that's happened. But we're coming into those conversations with way more context because rather than, Hey, here's an email recapping what we talked about,
Go do this and then we're gonna read it out.
You're coming into a conversation with like three days of just like constant communication. . Which is cool because I think in a lot of ways it's allowed us to get a lot more embedded in the outcome they're looking to drive and like that's really fun. Um, but I also think that it's just been a completely different, uh, challenge and set of things to think about from like a not even sales process.
The sales process is similar, but the time interval of the sales process is very different. Or like an AI native, a process that might take just naturally six to eight weeks in enterprise is like five to eight business days. . Um, because there's just so much continuous exchange of stuff that otherwise you'd have to extract over a period of time, just like naturally gets compressed.
**Brett:** What, um, what are the implications for what the sales org looks like selling into that end customer, based on sort of that observation. Is there, like, could, is there a different seller persona or way of going about the work to be successful for that customer base versus, um, you know, traditional business enterprise, mid market, whatever?
**Graham:** I think really good sellers tend to over communicate no matter what. Just like, depending on what that, what that means. And so like an enterprise, it might be you're sending like project management emails weekly to recap everything that happened to talk about expectations for next week.
And ideally you're texting some of the people that are involved. And I think if you took a great enterprise seller that does all of those things naturally, it might take an adjustment to like being in Slack all the time or being in text communication as much as we tend to be. Um, but I do think the basic like personality traits that make people good at AI native existed in enterprise, they've just never had to communicate that much.
Um, so to be fair, I really haven't experimented yet with taking like a great enterprise seller and being like, Hey, I'm gonna pull you off of the big banks and like stick you into the right, the tier one San Francisco companies. But I suspect that, uh, the adjustment could happen and I actually like from a personality profile perspective, no.
I think if anything. Companies overcomplicate hiring of sellers like you hire smart people that are good at problem solving. Uh, something I say all the time is you can't fake giving a shit. . Like people that care deeply and are very human oriented will go above and beyond to make customers happy and won't be really sincere and authentic about trying to understand like not just what the company is trying to achieve, but like, Hey, I'm talking to these three people every day.
Like, what do they care about? Like, who are they as people? Um, and I think that that personality profile is exactly what we look for in AI natives and an enterprise. I think the, like hard skills that come with it are different because the a native reps that we're hiring are for the most part, younger in their careers, often grew up with GPT and just some of the like, communication styles that they have are pretty different.
But if I look at from a behavioral perspective, what makes our a native reps really good versus our enterprise reps really good, it's almost all of the same things. Just usually across different technology stacks.
**Brett:** What about in terms of the way that an AI native company makes these decisions build verse by how they evaluate competitors, um, ROI or differentiation or like sort of those type of things?
**Graham:** Yeah, I mean the, the interesting thing is that where I have sat in ai, I feel like there's less of a build versus buy conversation. Like pretty quickly people realized that they weren't gonna build copilot or cursor or windsurf uhhuh. And so it became a what do we prefer? . And in a lot of cases, again, this is where I think there is an opportunity to like bring back some of the old school, which is that, uh, if all tech is, if you're working with one of the top three vendors in every, in any space in AI right now on a four to six week cycle, the tech is probably within 10% of equal.
So there is like a taste human preference perspective, but I think there is also this like, trust is this person, or is this company gonna show up for me and help me if I run into an issue? And I think. Where we've had a lot of success in AI native and in enterprise. Back to the showing up, like are you willing to go on site and do work with the team?
Are you willing to fly out and like do a training session? Are you asking about, uh, hackathons or like major milestones where like the engineering team gets together and like asking to participate in it? And the consistent feedback, and this was true at Wind Exon at parallel, is the way that our orgs operate, felt different to them.
But when we said, Hey, why is this really good feedback? Can you tell us why? The answer almost always was like, you guys show up a lot. Like you guys are very present, very willing to jump in and help and like ask for trades. I don't think that like fundamentals of like, Hey, if you're gonna go invest a ton of time, it's okay to say, Hey, we'll send people out.
We wanna make sure that if we do that we're gonna like get the right amount of FaceTime. We're gonna be able to meet with the right people, but we're happy tare nuo do that. Like for most, for the most part, people are very comfortable with that. But I think there's a lot of companies right now that have defaulted to zoom and defaulted to slack.
And I think that being willing to like put in the lead work and develop relationships, like one of my favorite stories is, uh, one of my, the best reps I've ever worked with, uh, during COVID found out that his, what champion at one of his company's sons had been taking guitar lessons and couldn't anymore because of COVID.
So we ended up teaching this guy's kid guitar over Zoom during COVID.
**Brett:** Because he knew how to play guitar.
**Graham:** So like, this just like came up in the course of them getting to know each other and it was like, oh, you know, my son was, he was like, hi, you know, how are you guys managing COVID? And he was like, oh, like, you know, my son was taking guitar lessons and it's kind of been a bummer 'cause he hasn't really been able to, and my rep was like, oh, like I'd play guitar.
I've like taught people, I'm happy to give him lessons. . And he also didn't tell anyone, like, no one found out about this for a long time. And then the, the champion at this account brought it up on a call with me like six months later. It was like, oh yeah, Isaac has been like teaching my son how to play guitar.
And I was like, what? Um, but it's like that. And it's like, I think the thing that people miss is yes, like sales process is important. Having the right stages, the right gates, the right operational rhythm so that everyone in go to market knows where to be at any given time is helpful. Not because that's what makes success or failure, but because if you can create that in a way that is aligned with your customers, it creates a lot of clarity for everyone involved and what they should be doing at any given time.
But the thing that actually makes special or special is the kind of person that you have then running in this process. And at no part in our process doesn't say teach someone guitar. Right.
**Brett:** So, so then if you pull at that, how does it make you think about, what do you want to standardize as you begin to scale a go-to-market organization versus kind of like, what do you wanna push to the edges, which is, hey, you're a smart, capable, passionate person. Yeah. Go use your own best judgment to help us build our business.
**Graham:** The CEO of parallel said this to me recently where he said, Hey, like I want us to have a super measurable, predictable sales process, but I want what we do to raise the floor. Like I want the floor to be really high. What I don't want that I feel like does happen in some of these very process heavy orgs is for us to cap the ceiling.
So how do you create something that creates like a bare minimum as far as people's operational expectations, how they're gonna behave every day? That means that we know we're never gonna go below 90 without creating so much structure and so much process that it doesn't give people the opportunity to go do something kind of special and unusual.
Um, and a lot of that is, I think simplicity is important. We don't want to have too many sales processes, too many sales stages. It's important to be really clear on what they are and why, and to have a really clear set of like three to five, never more, and probably not less than three things that happen in each of them.
So it's like, hey, as you're moving through the process, do we have these things to move to the next stage? Did this meeting occur where someone said, yes, I'm gonna do this with you. Do we know that that person has the power to do it? Great, move on. But by keeping it very simple, everything else is pick your own adventure.
I generally think that if we've created the right expectations in the field, someone else's judgment on why to deviate or how to do something that is like nonlinear is gonna be better than mine
**Brett:** Because they're just closest to the customer to the problem.
**Graham:** closest to the customer and, and like I hire people to be better than me, there's not a single person in any of my, in any of the orgs that I've been a part of building that I didn't think was better than me at the thing that we hired them to do.
I think that that's really important because also if you create a culture where people, because there's two ways this goes. Either leaders want to validate their existence by having input on everything and by having input on everything, you actually create a culture of people being frozen and unable to act because they feel like if they don't get your sign off or don't get your input .
There will be some penalty. Or you create a culture where everyone knows that as long as you've thought it out, I'll ask a couple of questions, but they come in knowing there's an almost 100% chance I'm gonna say yes, which actually makes them accountable for the outcome. . Like if you're in an environment where someone's gonna say no to you, you actually don't feel that accountable because you threw out a suggestion, they rewrite it, and then you just go do that.
If you're in an environment where someone is gonna be like, all right, tell me why. And as long as there's a coherent thought behind that, the default response is, yeah, do it. Let's see. And if it works three times, we'll enable the fuel on it. And if it works once and not again, then like we learned.
Um, but I think the way to create autonomy and or orgs of any scale is to hire, like, every time someone goes to hire for me, like one of my leaders, I'll say, Hey, like, do you, do you feel like you are going to be able to say yes to this person? The vast majority of the time they ask for something? 'cause if not, we should talk about that.
But if yes, then like that's a good signal that we want that person here.
**Brett:** Why does it not work as you're scaling to have such a good system and process, this is a genuine question, such good system and process that you can kind of hire relatively mediocre people and have them thrive and deliver for the business. Like why, like embedded in what you're, I'm articulating the opposite of what you're saying.
Yeah. And you obviously have a belief that that's not the optimal way to sail a Go to Market org scaling. Go to market org.
**Graham:** I actually think the optimal way to scale go to market org is probably to have a system that is, 'cause again, like the three to five things that that should exist in each of these stages should be enough to run a consistent, healthy cycle.
And so I think at scale, like if someone walked in tomorrow and said, Graham, hire a thousand people in the next year.
It's not gonna look the same with this at Hire 50\. But what you need at that point is to have that process that you've articulated be correct and opinionated enough that someone who. Does the training leans into enablement, leans into developing the muscle memory to go follow the steps. Maybe they never operate above the floor, but if the floor that you create is high enough .
And they can follow the steps, maybe that is the person who is a consistent like 95 to 110 of quota. . But what is important is that the people that are gonna come in and go teach people guitar lessons or go and like have a cooking class for a few of their prospects that they found out really love cooking, still feel empowered to do that.
And I actually don't think that those things are at odds. I think what tends to happen is orgs either are like, we only want the greatest people, and like great people, great people are unstructured. Mm. And you end up with these sales orders, it's like a bunch of artists just kind of like throwing paint at the walls.
And it's not that those can't be effective, but it's really hard to measure.
**Brett:** What? Talk about why, what the problems are with that.
**Graham:** Um, I think if you have a bunch of people that are all really good at problem solving, but all do it in silos or do it in different ways, then when you go to create predictability in the business, there's not actually really a baseline to be forecasting off of because you have person A over here who is like an amazing technical mind who can walk into a room of engineers and just like absolutely enthrall 'em and get people very bought into their technical brilliance.
You have the person over here who is great at executive level conversations and doesn't understand the tech at all, but can go and like connect deeply to the business problems and then bring the right resources to bear. And they have totally different ways that they go about validating the tech and totally different lengths of time that it takes and different deal sizes.
And if there's all of these different objects that don't look the same when you go to the VP and you're like, all right, you have a hundred of these people tell me what's gonna happen next. . That is a pretty challenging kaleidoscope of behaviors to be looking through. And I think the important thing is if you create that floor and you have this system that is clear, concise, measurable, you can hire people, not to say mediocre, but like who maybe aren't, don't flex in that unusual way, who can come in, lean into the system, follow the process, and be super successful.
What you don't want those to create a system that is so rigorous, it's only people that are looking for that level of clarity and certainty who gravitate to it. So it's like how do you create a process where we can bring people in who might not just naturally be that kind of like artistic nature, but who are diligent, hardworking, smart care, and will follow the process.
And you'll get 95 to 110% of them, and I'll take 900 of those people if the remaining a hundred. Are the people that are out there teaching guitar classes or doing cooking classes or like, whatever that might be. . And so it's like, how do you create a process that allows people of differing skill levels at a baseline to be more successful than they could have been otherwise without working in that system and create enough flexibility in the system.
But if someone is like, Hey, I wanna like flex and do this thing, that's really unusual. You can still say, hell yeah, let's go do it.
**Brett:** What you think true excellence is leading the GoTo market function.
**Graham:** I think, I think excellence at leading the go-to-market function can, you'll see I love this number, probably be broken into three things. I think it is. It's, it's easy. Yeah. Yeah. It makes you sound smarter than it. There's only two, but not so difficult that you have to keep four in your brand at the same time.
Um, I think as a leader it is how are you predictably driving revenue? And that is both like net new logos. How are you thinking about expansion programmatically? Like when my founders come and talk to me, I need to be able to tell them, Hey, from a new logo perspective, like here's how we're operating.
Here's what it looks like in AI native. Here's what it looks like in enterprise. Here are the things that are going really well. Here are sticking points related to how we're selling. Here's product feedback we're hearing. And then from an expansion perspective, are we before close? Like if, if you are not talking about how to successfully deploy the thing you're selling, basically from the moment the eval goes well, then you're completely missing the plot.
Like the plurality of revenue that exists in most organizations happens after the first deal. So how are you going in and saying, and this is another thing, like an example right now is at parallel we have so much, the market is coming towards us so intensely that the team is overwhelmed. There's like not enough people to respond to the demand that we have.
And so like that's a good example of just having to simplify it where it's like, all right, if the eval went well, have we agreed with our champion and with the economic buyer on the kickoff date? Which then applies pretty direct pressure on like how quickly we get paper done. If we agreed on what the first 30 day milestones are, first 90 day like we have to create a lot of clarity for what success looks like.
So the customer's not wondering, did I get something out of the investment? Like it's your job to take that on. And so revenue's the first piece. I'm gonna put talent development in the same bucket, but I think one of the biggest like tragedies of the generation that's coming into go to market right now is that a lot of organizations have become so focused on responding to demand.
They've really heavily moved away from development. And like for anyone, for anyone looking at getting into sales right now or go to market sales to put engineering post-sales, like finding an organization that's still puts enablement and developing of people like primary among its responsibilities, I actually think is really critical because, and I don't remember which executive gets credit for saying this, but like there's a lot of people that talk about how if you don't love yourself, it's hard to love other people.
Well, I think if you're not like actively investing in. The development and careers of the people that chose to entrust their career development to you, then you're like missing the mark as a company. And that probably says something about how you're handling your customers. . And so like I, the woman who built along, which, so Jeremy Powers and Nicole Redinger built Mongo was an enablement program, which was legendary and had every reason to be.
Nicole came built out Windsurf, um, and brought similar to like Nicole and Jeremy worked really closely together at Mongo. Nicole came in and was like, I'm bringing in Danny McCabe, who is every bit as good as me. And so we had, in my opinion, the two best enablement people operating at Windsurf, uh, for about a year and a half.
And we built an amazing enablement program. But what that meant was because there was so much pride in how we were able to develop people, and whether you're like an SDR AE leader, this is the other thing, like a lot of people get into leadership and everyone's just like, all right, you're never gonna develop again.
Congratulations on being a leader and like. That isn't how that should work. If anything, it is super critical to be intentional about saying, all right, look, who are my cohorts of leaders who are in the first two years of leadership? . Because like the lessons and development that they probably need to be hearing are different than someone who's in years three to seven.
And I think being very intentional about that both makes you more attractive to top tier talent and makes you able to take risks on people who are kind of like we were talking about, or maybe someone doesn't come in knowing the process, but if they're smart and willing to learn and have all these unbelievable other characteristics, you can bring them in and develop them.
And so like for me, revenue is the big piece people, and enablement is the second piece that I think is unbelievably critical. And then like, how are you aligning everything in the organization, both today and six months out to reduce friction for everyone internally and therefore for customers? Because if you are hiring great people, enabling them and making them better on a continuous basis, delivering revenue to the business, that is also delivering measurable value to your customers.
And. You're being intentional and programmatic about, Hey, how does what we're doing in sales connect to marketing? How does it, are we communicating with Auto Point engineering colleagues? Am I communicating with the engineering team? Like is our, is our legal team being appropriately protected by the sellers?
Do we know how to have the conversations around limitation of liability and all of this stuff? And like a huge part, I think of any, any executive of any business unit should be making sure you're spending appropriate time with your peers. Because if you get that connective tissue built appropriately, it's awesome when like legal is being appropriately protected.
Finance isn't calling me being like, how on earth did we approve this term? And they can all go focus on things that are like value added to the business and not trying to create fences around sales. So sales doesn't do idiotic things. And like better yet, if you're able to develop rapport where you know there's gonna be times that you ask for help.
And if you have done the like legwork and put in the, the sweat equity to build trust and to show people that, like you will show up proactively when something does happen and it will, where you're like, Hey, I need, I need an assist here. Like, generally that is like a, a good moment to kind of like band together and get closer.
Whereas where I've been in ORs where there's that tension, like people help, but there's a huge difference between like, yeah, I'll help and like, hell yeah. I would love to like get in the boat in a row
**Brett:** I would say the natural path, which is that functions grate against each other, or most likely blame each other. You know, marketing conventionally blame sales for not hitting a number. Sales says we're not getting the appropriate. Yeah. Leads or, or coverage from marketing or sales is blaming.
'cause they're not delivering a product that's saleable and like you have this normal sort of cadence where I think the functional leaders often blame each other as opposed to truly coming together. And you know, it sounds like you have this customer centricity with your counterparts, which is like, Hey legal, let me sit in your shoes a little bit.
Yeah. Not let me scream at you because this deal term is blowing up this $5 million enterprise deal. And you know, sort of those types of things that can happen in scale
**Graham:** Yeah, I mean if you, if you have like the particular mental illness where like running go to market teams is fun for you. Then like everyone is your customer. Like the other organizations that are like part of your company are very much your customers, your reps, and like the people that work for you who like trust you with their careers and trust you to be able to give 'em a path to success of your customers.
And obviously the people paying us money as a business for our technology or your customers. And I think, like again, you, when you said this at the beginning, there's different ways. There's not one right way to do it. . Um, and man, like Amazon has been so successful with this, like we don't want agreement, we want conflict.
Like this is part of who we are and they clearly attract personalities for whom that is like motivating and galvanizing in a way that's really good. Uh, I don't have the world's most like healthy relationship with Ger. And so like I default to wanting, I do my best work and I'm able to make mistakes in a very productive way if I'm in an environment where the people around me, assuming I don't make like a ridiculous mistake, trust that I had good intentions and they're willing to like talk to me about.
What went wrong? How do we fix it? And I go fix it. And like things are good. And I think that assumption of positive intent and that assumption of like, we're gonna figure this out together is the environment that I react really well to. So I try to create that. . And like if someone is like, I really want a lot of conflict, like they probably shouldn't come work for me.
But I think something that we did really well at Windsurf, and this was like semi accidental, is rather than creating an organization where there was like inherent conflict, and again, Amazon is an example of one that did that intentionally and was super successful. What I tried to do was find people that led different organizations, whether that was like post-sales or deployed engineering or partners who were 80% aligned on almost everything we were doing.
Like I want the foundation to be, we agree on most of how to do this, and then that 20% is debate and that's fine as long as there is this like general. Affinity and trust where like, you know that at a fundamental level, everyone in the room with you is part of solving this problem, or building this machine has your back, wants the same thing.
Is it gonna like Empire Build to try to step on your shows or play political games? And I think by having that comradery at the top level, not only were we able to solve problems, like one of the things I used to say at Windsurf, and we haven't had to do this yet, a parallel, but I would say I don't ever, like, I don't ever want a debate or a conflict between my directs to come to me, because if it does, I will intentionally make a decision that's designed to annoy both of you.
I will just like try to find the exact middle.
Um, but generally speaking, my expectation is that like we're all adults, we can put our egos aside and that, like the right answer is pretty apparent. And in two years there were only two things that got escalated to me. And in both cases it was just like silly, like the ego
**Brett:** Interpersonal.
**Graham:** just like, like people's egos got ped, but like, we like sat down and I was like, guys, if you like.
Put your egos back in your backpacks and like take a breath. Is the answer to this question actually hard? Yeah. And in both cases we sat there for a second and they were like, no, I got it. And I don't actually think in either case we anyone said out loud what the answer was because it was very obvious and they just went and did it.
Um, and I think that that is super important. So like by creating that ethos though at the top, it then meant to the point of like companies mimicking founders values, it meant that the teams saw that the leaders got along well. Mm. And so for the most part it was like just natural, like people bumping into each other.
But I think by having that like ethos of an assumption of we are all in this together, we're gonna build together. And that doesn't mean you don't call things out when someone's not. Like if someone falls below a standard, call it out, but ideally do it one-on-one. . Like if you choose to do it in a room, to me that's performative.
That's not actually being a good peer, being a good partner, being a good leader. Like that's, that's a conversation where you pull someone aside and you're like, Hey, not at all trying to blow you up or come down your street, but like, I'm observing either you doing this or like, what I'm feeling is your team is dropping the ball here and we've seen it a couple of times and here are the specific examples and here's why I feel this way.
Um, and I think it is a lot easier to move fast when you're not looking over your shoulder.
**Brett:** What do you think the downsides or tradeoffs that you're making to behave in this way and, and create an organization that behaves in this way? If.
**Graham:** I mean, man, now I, because I, you know, like the two other examples I have is I was in org, I was in an organization that was really high performing, uh, so combative. . So like a bunch of people from New York and Boston. Um, and I think the negative side was that you could get into meetings that were like just 20 minutes of people yelling at each other that had nothing to do with soften the problem.
And it just became like egos. Um, but in a lot of cases, some of the most, like ignatious difficult people that I've worked with were often a right, and b thought in different ways, and so would get frustrated and vocal because they had this like, different way of thinking about things. It was really valuable and it is probably good to like, inject in a conversation.
Um, and I don't like, you know, again, I I
**Brett:** You're saying you can lose that if there's
**Graham:** too much agreement harm it. Yeah. Yeah. And so I think you, like, ideally you try to find that person who is still able to be, uh, you know, the stick in the, the stick in the mud or whatever. Uh, but for the most part can do so in a congenial way because also, like I am someone that will try to call stuff out, but I generally try to do it in like a playful seeming way.
But I think that's a risk, like if you default too much. 'cause there's also like agreeable, fake agreeable and there's like agreeable, aligned, agreeable. . And so I think I like, generally I joke that.
**Brett:** Fake agreeable is you're agreeing for the sake of agreeing even if you don't agree or it's something else,
**Graham:** I mean, I think in the, uh, is it ruinous empathy, but like, I'm not, if I gonna say this Yes. Fucking people just like saying yes for the sake of avoiding conflict. Yeah. And like, that's not ideal. But for me, the way that you have the most productive flavor of conflict is if you have built a foundation of trust so that conflict isn't threatening.
Like ideally, if you have people that foundationally like, and trust and care about each other, that actually creates a platform, right. For productive conflict.
I think in enablement, if one of the things, and this is like crunchier than I was planning to get, but like I think one of the things that like some pieces of America is missing right now is that a lot of cultures that have really strong identities have like natural cultural touchstones.
So like whether it's like a bar mitzvah or quinceanera, there's like shared experiences that people have that like bond a group over a shared identity or a shared thing. And I think that's actually where enablement's really powerful.
Where if, and like, I'll, I'll give a Mongo example, but like at, if you have bootcamp, everyone goes through three to four weeks of like onboarding, online training, and then you get to bootcamp.
And you take it seriously. It was like you dial in, like you take a test coming in, there's winners, like it's competitive, it's fun, it's fun to make you better. But this is like an opport,
Brett: A test like that.
Graham: uh, what we would do. The Mongo one was more intense at Windsor if it was like, not quite this intense, but it was literally just like, Hey, over the last four weeks you've worked through these training modules and now we're gonna give you like a, in some cases multiple choice.
In some cases fill in the blanks. But it's like 20 questions. It was meant to take like 30 minutes, but just to make sure that you've absorbed it, that you weren't like watching TV and doing laundry and just had it on in the background. . And it's just like, we want to make sure that as a foundation for doing, for investing a week in bootcamp, that you have absorbed the information that we were hoping you would to make this valuable.
And so, like really the intent is just did you do the free work? Um, but it was a way to make sure that the reap would be valuable. And then you go through, like, there's competitions and that range from like trivia games, just like stuff that is meant to create, to force recall at the end of a long day or like, uh.
Mock discovery calls and you'd do 'em in front of the room and people would rate it. And like it was just a way to like both like build a reputation and make friends and like build this community. But across, you do once a month across 12 cohorts of people, like everyone. Years later, ATMs would be like, oh, well what bootcamp class were you in?
And it was like, oh, I was with like Matt McClennan, who's now the CEO of Augment, or Graham Siemens, who's now the CRO at XII. And like it became this thing that oriented everyone because it would be like, oh, like did you guys do this training? And they were like, oh no, we had scraped that by the time I was there, but like they'd introduced this one.
And it becomes this common cultural touchstone that also becomes a really big source of pride for people about like who they came up with and like how hard it was. And it just becomes this rallying point. And it also sets the tone early that like being excellent and being elite is A, an expectation.
Also be can be really fun Like I think right now in AI especially, there is this like glorification of misery where people are like, we work 11 hours a day, 500 days a week. And you're like, uh, okay. Um, and I didn't read the part of the book that said that you can't have fun and like at every, whether it is music or art or sports teams, like most of the greatest examples of all of those were people that appeared to be having a pretty good time doing it.
And I think that that is like an important thing.
And if you talk about like instantiating an idea in a culture, enablement is the best way to do that early. And then like the way that you make that an ongoing part of pride is great.
**Brett:** Do you think enablement's changing a lot with sort of the type of knowledge a seller can have at their finger, uh, fingertips?, do you think you run the risk of if you don't actually learn it? There's a certain feel and taste and judgment. Um, instantiated in a person when you're actually going through training, that if you're just relying on an lm, give less.
**Graham:** Depends on the kind of sales you're doing. I think if you're out there selling like a basic application, it's probably fine. Also, those are the sales jobs that are gonna get AIed. Yeah. Um, I think if you're doing like real enterprise sales though, it's really hard.
There's not like an LLM that can tell me about organizational change management and like, I, like, I just, my, a lot of my favorite customers, but also my scar tissue comes from like financial services and then insurance companies. A lot of what you're navigating in those organizations is political. .
And there's not an LLM that can tell you that now. Like, do I, do I see, not even do I think, do I see sellers that have information at their fingertips, like abdicate the responsibility to understand that. Yes. And where that kills 'em is in person.
Because on a zoom call, you can have, right. The little AI bot that's like slinging you information.
Right. Um, but those are the people that you have to like, send into a rocket and shoot into the field because they won't go willingly.
I also think this goes back to just base hiring, where if you're not hiring someone who is naturally curious and like, wants to be good 'cause they want to be good, not because you're making them then you run that risk. But I also think that that goes back to like, who you let in the door matters a lot because if you're not, uh, creating, you're not cooking with the right ingredients, no amount of knife work is gonna change that.and so I think yes, there's a huge risk that on the one hand
though, I think.
What I'm seeing with AI and like again, parallel, most AI advanced organization I've worked with and Danny McCabe showed up two weeks ago and like already is like all the way in on being able to figure out how AI can not just enable ourselves in live conversations, but also from like a practicing and enablement perspective.
Yeah, yeah. You can do a lot more. So I think the cool thing about AI in enablement is it actually allows you to have like to go significantly deeper on your own. So by the time you get in a room with other people, you can be much
**Brett:** In terms of like simulation and all that kind of stuff?
**Graham:** Simulation like the, the ability rather than like single shot calls to mimic complex situations, even if it's not in like a simulated conversation, but you're like having a conversation with a bot that is like forcing you to like string concepts together and to connect ideas.
And we're just like, the synapses that are firing are more complex and different. And like if you're trying to like build myin and like create the underlying nerve matter that allows you to build skills like complex movements is how you do that. . And like transitions are a really important part of that.
And so I think that that is a really cool part of AI enablement. But yeah, totally. If you're gonna let people hide behind a computer and just read snippets of like other conversations that sound smart. Yes. Dun. Like I would recommend you not let those people go on site. Yeah.
**Brett:** What are the other things in this bucket of enablement in your mind? If you're operating at a world class level?
**Graham:** When we were selling MongoDB, we effectively had to know the database industry.
And that was kind of it. Like I had to be able to talk about different relational databases. I had to be able to talk about the like different no SQL databases that were out there.
But I didn't really have to be able to talk about like big data systems or like anything to do with Kafka or anything to do with Kubernetes.
It was like pretty confined to that industry. And I think now if you really want to be elite, because not only are you selling against direct competitors, you're selling against implied competitors. Like you have to actually have a pretty good grasp.
Brett: interesting.
Graham: like you have to have a pretty good grasp on not just your competitors, but like the entire infrastructure layer, the app layer, right?
A bunch of stuff that like is a little bit of everything and like not, 'cause not only are people saying, okay, like why can't I do this with Claude? Or why can't I do this with GPT?
But like every company on earth that was an app company, like tried to crash into developer tools to avoid getting obliterated.
And so now like randomly people will be like, what about this company? And I'm like, did they even have something in this space? Like Google it? And I'm like, oh, they do.
You have to be able to clarify and simplify for customers why things matter. 'cause people will come in and be like, all right, we're doing this with Claw and this with GPT and like we have, you know, cognition for this cursor for this.
Yeah. We have like 15 other dev tools. Notion has started doing a bunch of stuff that is like not necessarily what was in their initial remit, how do I tie this together? And like, I think the hardest thing for sellers, A, you have to be able to speak about it intelligently because if you can't, you don't even earn the opportunity to simplify.
So like you do actually have to be able to play ball across all of these different products and be able to have a coherent narrative and a coherent opinion. But I actually think one of the things that the best sellers and the best organizations do is help to clarify things.
**Brett:** In sort of the top bucket of driving predictable revenue? What are kind of the input drivers to excellence there?
**Graham:** I mean in a, like take people out of it because I think that's like the big one, but from a process perspective, it's okay, you're gonna go do pipeline generation, uh, we call that stage zero targeting. So it's like, hey, these are the companies that we're trying to engage. And a company can only be in targeting if it has been actioned on, reached out to in the trailing five business days.
Reason that we're so strict about that is we wanna see from the time that we engage and there's two buckets. There's leads, there's like people that came inbound and there's people that we're proactively reaching out to. Yeah. We wanna see how much time does it take in each of those buckets to get to a first meeting.
And then from a first meeting, we have a set of qualification criteria. First meeting goes into use case evaluation. So if the meeting goes well, we're like, yep, there's something here. We're gonna have a larger conversation. We're gonna move into use case evaluation meeting doesn't, that doesn't go well.
If it's not the right fit right now, might push that towards self-serve, might push it towards a drip campaign, might disqualify for the time being. There's a number of reasons you could do that. Then use case evaluation, could be two conversations, it could be 20\. Just depends on the organization, depends on who you're talking to and where you have to get.
Then you have a POV initiation conversation that is, hey, this is all the stuff that we've talked about, everything we've covered. Do you agree that we're gonna go take this hill together? Yes. Great. Moving into evaluators, move into a value or move into scope. That is clearly measurable criteria that we're gonna go test against.
We all agree that if we do these tests and achieve these results that we're gonna purchase, go have a conversation with the executive. And at each of those stages, we're looking at conversion rates. So you're instrumenting the entire process. So it's like, all right, we know that in cold outreach takes us three weeks to get a first meeting.
We know that 40% of first meetings convert into use case evaluation for US qualified pipeline QP is starting at scope. So once you get to scope, we expect the close rate to be 60% or greater. So we know 50% of use case evaluation conversations move into scope. We know that 60% of deals in scope close and like you're instrumenting each stage of this pipeline.
So what should happen over a quarter or two is you are able to create a heat map of from. A warm lead or an outbound prospect through close. This is the amount of time it takes. This is our conversion rate. And then suddenly you have a map of all the things that you can go coach to that allows, shows you all the leverage you can pull, and so you develop a baseline for the company.
You look at AI native, you look at enterprise, and then you look at individual reps and you can effectively show someone like, this is the company baseline, this is the baseline for your segment, and then this is where you are relative to that. And that should make coaching conversations like pretty non-confrontational.
It's just data-driven.
By having this heat map, you're able to basically take the entire revenue cycle and demystify it so that at any given time, a, there's like maximum accountability on me. Like I can never say I have no idea why something is happening because at any given time I have a heat map that I know have to go look at.
And the same is true of post-sale because like honestly, especially, especially it feels like right now an AI companies aren't doing three years. They're not doing huge upfront commits. They're like dipping their toe in the water and then like just gradually consuming more. And so a lot of the work is done in post-sale.
**Brett:** Do you think that post sales should always roll up to the revenue leader?
**Graham:** Yes.
In general it is really important to have surprise clarity on like what the overall direction of the org is. And so like where I've seen there'd be struggles, I'm like, I, I worked at a company that, that had unbelievably good people, but we split the go-to market org into like three separate pillars.
And in theory, all of those people were equal. And the way that I used to describe it to people is it is like you took three people, spun them around for like two minutes and then tied their legs together and said, walk straight. Mm. Where everyone is just not intentional. There's not like any malice to it, but everyone is just like kind of leaning this way or leaning this way and there was just like all this tension.
And so generally speaking, I think you want to confine the greatest amount of direction, setting clarity to the smallest number of people possible, like generally speaking, not a fan of authoritarianism. I think in businesses it's actually really important where you need one person who is responsible for owning the strategy of go-to market.
And like for me that is like basically anything revenue generating or customer related ideally is under a single person. Now that person's obviously accountable to the founders and to the board and to all these other things, but like there should not be two people that the Gordon Market Organization looks at for direction because that's the only way that you can have the appropriate level of clarity and the appropriate level of ownership.
And I think post-sales is like an unbelievably critical function, but so is deployed engineering, so is sales and like you want post-sales to be a really clear mirror of the product and of the sales process back to sales and then also to engineering. And so it's super important, like we talked about with the cross-functional stuff earlier, to do the right type of enablement to make it so that people can communicate cross-functionally effectively.
. But ultimately if there's an organization that is responsible for the success of customers that have invested in us and for earning the right to expand beyond that, I don't see another way that I don't see who else I could report to. And I know there's a lot of other opinions on this, but like this specifically is something that I think all the other opinions are wrong.
**Brett:** Is your sense, it also just stops all the normal issues you have when, um, sort of a traditional sales org is throwing a, a signed op over to a success team and like accountability and ownership and like, are they jamming somebody in, into the funnel that is not gonna retain for whatever, you know, and all of those like subtle things that end up popping up.
**Graham:** I mean I'm, yes. So like, first of all, yes, I think having that go to a singular place, like creates the opportunity for clarity. I also think that this just goes back to like the people you hire, um, and like stuff happens. Yeah. Like someone is always gonna, there's gonna be a deal that blows up like that.
That's inevitable. I don't know that I've ever been somewhere that that didn't happen, but I think if you hire the right kind of person who is high ownership and like, I want reps to feel. Like a sense of like ownership and accountability to their customers. 'cause ideally you've made these people your friends, like .
If you have connected with what they care about, who they are, you like, have done the legwork to like build trust and to connect with them there. Like it shouldn't be an option to that seller . To hand off the account and be like, yeah, good luck with your life. Like I have sellers who I have pulled accounts from just because they were too busy.
Where it's like, Hey, you're covering three of the Fortune 10\. Like I need you to just go like live there. So I'm gonna pull these other accounts back from you. But who still like, actively communicate with the people that they develop relationships with and like are telling the existing account team. But I think in like a healthy org, if you've hired the right kind of person, like it shouldn't just end there.
. Um, and I think another, and this is hard, this is not like an easy thing. Getting the swim lands right for sales and for post-sales is super important. And like I am.
**Brett:** Given the way that you describe the type of sellers that you want in your org Yeah. Which is, um, smart, curious, customer first, customer obsessed.Why do you think that sales commissions make sense?
**Graham:** I think the sales commissions make sense because it's, well, it makes sense. Maybe. I think you're looking for people that are really competitive and I think you're looking for people, not in all cases, like they're, I know some amazing sellers who like, who grew up very privileged and I, but ironically everyone has this, a different flavor of the same chip.
So it's like either you grew up with not a lot or like in like varying versions of situations that like created a lot of adversity.
**Brett**: Yeah. Or you don't want to, you wanna prove that you're not a silver spoon kid or some other version of
**Graham**: or you're like the, the runt of the litter in a very like, talented family. And like I probably skew more that way. Like my parents grew up super blue collar, but like, I didn't necessarily, but I am from a family that is like really frighteningly accomplished.
And I was the athlete. I was like the one that was very obsessed with soccer while everyone else was at UChicago. Um. And so for me it's this like incredible drive to not be
**Brett**: I am smart enough.
**Graham**: Yeah. Like to do, to not be the loser of the family. Totally. Um, and I think that, that, I think that that personality profile, like if you're looking for, 'cause the other thing sales impact is so measurable on the business.
You can justify like a different sort of pay because you're able to say, Hey, like our margin is this total cost of servicing the business, like engineering infra all in is this. Yeah. And then like the rest of this we have that we can build a comp plan around. And like the reality is that if I can go write a comp plan that at the top tier, and like in AI right now, the top tier is like 30 x your OTE.
Like, you know, like I remember in the days where it was like, oh yeah, if you're doing like five XOT, that's like spectacular. And now quote is like 10 XOTE first accelerator tiers 20\. Second is 30, and at that point that person has paid themselves back. . Paid themselves and like everyone else back so many times over.
Then I'm happy to give them that, that upside. Because the reality is that, like I've done this now, I've seen it recently. When you give people healthy accelerators, not only does it attract a different kind of rep, but like as much as everyone is driven, kind, compassionate, all this stuff, every poker game anyone has ever played, it gets a little bit more intense when there's money on the table.
. And I do think that even though you're hiring these people that embody all of these traits that I think exist with or without that carrot, uh, the competitive fire that comes up when you can like go make a life changing commission check or you're trying to compete to be number one and it's not just to be number one is really fun.
And like I have that I like to. Would go do the right thing for customers no matter what would go do the right thing for employees no matter what. Like I, I know in general, leadership is for you if you get more excited when other people make money than when you do. And like the best day of my career was when, uh, cognition acquired Windsurf.
And I like saw what the 200 people who for like 96 hours I had been having a panic attack that I failed we're making. Like that was the coolest moment of my entire life. It was unbelievable. Um, and I think if you don't have that perspective and like leadership probably isn't for you, but as much as I get fired up and like we're paying our commission checks, it's also really fun to like try to run up the score.
And I think that like the natural tendency to hire people that come from competitive backgrounds and it's not just sports. I think like the sports thing gets beaten to death and there are great sellers Mm, that play sports, but I also know great sellers that were like very good at music. . And had to like compete in
**Brett**: chess are all sorts of things,
**Graham**: mean, shape music, chess, acting. . Like theater is not, I've learned, not like Right. An easy thing to necessarily get the roles that you want to go get. And just like, I think anyone that did something that was based on passion and obsession, and that was inherently repetitive for long periods of time.
So you could string it all together in a game or in a play, like that's a good profile for sales.
**Brett:** Um, last couple things in, in the way in which companies are scaling right now and the environment is changing. When you think about leading the go-to-market org far, do you think you should be thinking and working on the business six months, 18 months? Like it feels like it could be anywhere from one to three years In the previous
**Graham:**
Yeah. so I'm gonna give you the, my current state today, and then like, I think how that evolves over the next few quarters right now, like, just getting in, it's observing, watching and trying to like, figure out what we're doing today, how we're doing it, what to, and then like, you boil, like you, you know, you boil the frog, right?
You don't wanna just come in and be like, here is all the process we will ever have at the same time, because people's heads would explode. So it's like, all right, we're gonna introduce a couple of like light concepts. Hey, we're gonna send, we call them w emails, like weekly emails to our customers that are just like project management recaps.
But it just helps us all stay aligned. We're gonna set a set of expectations for like, how we interact with customers and how we interact with each other. We're gonna like start to make certain things a requirement depending on where we are in the cycle, like little things. And then you introduce sales process and sales stages.
And then like, once the team is patterned into doing that, and like for operating a forecasting rhythm, like for a lot of people at these early stage companies who've never really had to forecast before. So like explaining how to do it, like how to create ranges, like how, and, and just saying, Hey, like this is gonna be messy for the first four to six weeks.
But like the goal is that in a quarter we haven't dialed in. Um, and setting expectations like, Hey, I don't, six weeks out I need to be within 5% of the forecast and like never down. Um, but once you have that pattern, and that's probably six months in where you have sales process, sales stages. You have the right level of inspection, like the reps know what to expect, the leaders know what they are expected to be digging into.
You have the funnel instrumentation that I talked about where everyone can see where they are relative to expectations, where the company is like all of this stuff. 'cause it's really only once you have absolute clarity about how people are expected to operate today, that you can or should spend a lot of time on the future.
So like let's say it space six months to build that level of like clarity, consistency, and the right amount of capacity. 'cause the other thing is like early stage companies, everyone is on fire. So like no matter how much you put great ideas in place, it's hard to, yeah, if someone's running 30 deals, like they're not gonna follow the sales process to, they can't.
So I think it's like getting that to a healthy state. And then once you do, like you as a leader, again, have to, but also should be in a place where you trust. You're enablement leader, your sales leaders, your deployed engineering leaders, like all these different people to like operate the business most of the time.
And like at that point, your focus should probably shift to still a lot of recruiting. Think 80% of the job of most very senior, like go-to-market leaders is, is still recruiting. And that will never change. Um, but then the rest of it is, okay, how do we evolve? What does this look like? What does the org look like?
Like hey, we built, I think you do have to build capacity models 12 months out. I know some people don't like that, but like I think if you don't have a bottoms up model for how you're going to build success, especially looking at like time to hire current ramp time, like
**Brett:** where you're working backwards from what.
**Graham**: correct. And like, and that can be from a revenue perspective or we can say, Hey, we actually think in the next six months.
Given some of the stuff we have coming on the product side, we're gonna flex and we're gonna hire way more on enterprise. Yeah. Like we have whatever, we have X, y, Z things coming. So we're gonna scale enterprise in preparation for this big release hitting in 90 days. Um, but I think you have to start looking at that because like back to the idea of like alignment cross-functionally.
It's like, all right, well what, what's coming on the product side? Uh, what are the expectations of the business? What are we seeing now that we can like, extrapolate out and make a reasonable bet on? Or maybe it's, hey, like we are at a scale of revenue where we have enough inputs to know that we have very specific plays in insurance and healthcare and in banking.
So maybe we start to experiment with verticalizing. Like, you don't do that mid-year. It's a great way to piss a bunch of people off and cause a bunch of chaos. But like, you start planning for that change 90 to 180 days out. So like, all right, at the turn of the year we're gonna verticalize. And like, if we're doing that, what are all the breaking changes?
What content do we have to create? Like what. Collateral do we have to spin up like field marketing teams that are specific to these different things and like, so you're going and putting all of that scaffolding in place while at the same time running at the back half of the year. And like I do think once you've built the foundation to start of the scale of the team, if you're not spending, uh, 70% of your time, like if not more, 70 to 80% of your time, three to six months out, then like I would then I would be curious to know what you're spending your time on.
Because certainly at Windsurf, like a huge amount of my time was spent on like, looking at the capacity model relative to product stuff, relative to like the, like how does that, what does legal have to go do if we do this? What is, how does customer success change? How does the deployed engineering team change?
And like beginning to put all of that stuff in place so that when you go to make the change, it's there. Like, the worst thing that can happen is you gotta make this big structural change team gets a bunch of whiplash and gets there and like. It's basically the FY Fest version of an org change. Um,
**Brett:** So, so then how does this ladder into, call it your six or nine months in, a business is starting to scale. You're maybe in the tens of millions in revenue.
What does like a normal week look like if you're really maximally productive in the seat?
**Graham:** so actually I think for me, what I found effective, like this is a sample size of one company, so I'll probably have a different answer to this over the next few years. But it just became like, what are the things that if I spend time on are the most force, force multiplicative? So like at Windsurf, which is where I have that context, it was the partner organization.
So like we made the decision to run a hundred percent of our revenue through partners. And so I spent a ton of time with my partner leader and his, his directs in front of. The systems integrators in front of the VARs, like building those relationships because being able to get non-linear revenue throughput as well as like services and all of this different stuff, like building the relationship, building the belief, figuring out what, like a Indian systems integrator, how, how are they going to incorporate our offering and like the services attached to that, into their existing AI playbook.
Like if you're working with like a head or WWT or some of the bigger US options, like what does that look like? How are we enabling their sellers? It's like going back to enablement. If you just like develop these relationships with people, show up, putting all hands and you're like, yeah, you go sell ai, it's great.
Like it's not gonna happen. So you have to invest a ton of time and resources and enablement and training and building relationships and being super intentional about going out and getting three to five wins that you can then go take internally to my team and internally to theirs and going and publicizing that.
And like for me, I knew that if I could get, if I could spend a ton of time with our partners and they leaned in with us, so like that from a revenue perspective. Was more nonlinear than almost anything I could do with an individual seller here. Likewise, uh, enablement. So like we were hiring, you know, 10, well, like 10 people a week, so you're looking at like 40, 50 person classes of bootcamp.
And so it's like, okay, well that'd better be dialed in. Like if we're looking at what is the ramp data from the last six months and had like, and now with 50 people going through a bootcamp class, pulling ramp forward by a week is meaningful. And so like, how do we like pull apart what we've done before, like figure out where to tune the knobs, knowing that it's gonna take us six months to see if it worked and go and like do that again.
And so for me it became what is the most forced multiplicative place as I can spend my time. And I'll try to spend probably 50% of my time total in those two or three. Then as we've heard, big alignment guy, uh, I spend a lot of time in one-on-ones. I probably spend two to three full days a week, even at like max output.
On one-on-ones. And like some of that is scheduled and a lot of it too. And like my wife is a saint for putting up with this, but like my team knows that I'm available pretty much all the time. And so like the worst thing is I put blocks on my calendar for gym and the smart people have figured out that I'm available then.
And so I will just
**Brett**: While working out.
**Graham**: yeah, they're like, oh gram's at the gym. He's not on a scheduled call. So I'd get like 30 calls while I was at the gym and I'd come home and my wife would be like, how's your workout? And I'd be like, I didn't do it. I paced around outside for two hours and then gave up and came home.
Um, but I think that's important. Like again, I think if you're gonna spend your time on something that's force multiplicative for like the impact of the field is really great. That's a good use of time. Same thing with being cross-functional. Like I would spend a lot of time with peers or with like different groups that were meant to support the overall revenue infrastructure.
'cause I knew if that broke, especially as we got bigger, the like immediate impact of that across a hundred sellers is really high. Um, but also like you don't ever want to be, and not that this is preventable at a certain scale, but like, you don't for as long as possible, you don't want to be a leader who's just like out there in the clouds.
**Brett**: Yeah, you wanna stay close to work?
**Graham**: Yeah. Like you wanna be someone that like will just pick up and like call a rep that either is like doing really good work on a deal or that, you know, is like fighting the good fight on a renewal. That's tough. Like, how are you being intentional about like, oh, all right. Like I should probably go call this person and like, check in with them, see how they're doing.
Or like, call this person running this big cycle for us and see if they want me to fly out. But like, putting in the legwork, I think to create the right culture, like has hugely multiplicative benefits if like you do it correctly and you've hired the people around you who are doing the same, because you kind of have like concentric circles of people that think that way.
Like you end up having something that is like supportive and fun and dynamic and challenging and hopefully like really lucrative. Great. But even more importantly, like. Give someone a network and a set of skills that they can take with them for the rest of their career. . Um, and like never gonna be a doctor, never gonna be a lawyer.
But for me, if I can like be a part of building revenue organizations that can like materially change people's lives, like that's cool.
**Brett**: That's a good place to end. Thank you so much. This was great. I really enjoyed it. Thank you for spending the time.
**Graham**: of course.
### How to make your AI brand stand out (when everything else feels the same)
URL: https://review.firstround.com/how-to-make-your-ai-brand-stand-out-when-everything-else-feels-the-same/
Last updated: 2026-05-14T15:47:04.000Z
[](https://review.firstround.com/positioning-playbook-for-ai-products/)
In the first couple years after the ChatGPT moment, slapping “AI” on your product was good enough to get buyers to pay attention. It’s not anymore.
“AI powered” worked as a differentiator when it felt new. But that stops being a position when five other credible “AI-powered X” companies are out there. And now there are — because models are shared, infrastructure is abstracted and products that once required months of engineering can launch in days or hours. Worse, all these companies use the same gradients, sterile screenshots and LLM-smoothed copy, making it impossible for customers to tell them apart.
**Arielle Jackson** has spent over a decade working with First Round founders on positioning, brand identity and launch communications. Her advice has shifted a lot over the last two years. The new problem she sees founders faced with: AI accelerates sameness.
In her new piece on The Review, Jackson lays out what founders need to do instead:
1. Start with an opinionated point of view that actually repels some people (intentionally)
2. Create positioning that you revisit every few months as the terrain moves
3. Develop a visual and verbal identity distinctive enough that a competitor copying it would look like a parody
She walks through how Cursor had to reframe its positioning twice in under two years, why Clay’s recent out-of-home campaign is the cleanest expression she’s seen in the category and what Anthropic’s Department of War standoff actually did for Claude’s App Store ranking.
Thanks, as always, for reading and sharing!
*\-The Review Editors*
[Take me to The Review](https://review.firstround.com/positioning-playbook-for-ai-products/)
### “AI-Powered” Isn’t a Position
URL: https://review.firstround.com/positioning-playbook-for-ai-products/
Last updated: 2026-06-11T17:14:51.000Z
*A lot has changed since* [*Arielle Jackson*](https://www.linkedin.com/in/ariellerjackson/?ref=review.firstround.com) *(First Round’s Head of Brand and Product Marketing) wrote her first Review article in 2015 on* [*positioning your startup*](https://review.firstround.com/positioning-your-startup-is-vital-heres-how-to-do-it-right/)*. For over 10 years, she’s helped hundreds of First Round founders with early positioning, brand identity, launch communications and marketing hiring — and while many of the fundamentals remain, her advice the last couple years has shifted as AI changes how companies do all of these things.*
*So we brought Jackson back to unpack what positioning looks like in the age of AI, and the unique advantage it gives companies when product differentiators can evaporate overnight. You can’t just ship “AI-powered” on your website (like you could, maybe even a year ago). Positioning and brand are the result of thoughtful choices founders must reinforce and continually update. With that, we’ll pass it to Jackson.*
For decades, Silicon Valley operated on the assumption that the best product wins. But now models are shared, infrastructure is abstracted, and products that once required years of engineering work can launch in six days or six hours.
For the last couple of years, founders have been able to get away with simply using AI as their differentiator because slapping “AI” onto an existing category felt like something entirely new: "AI-powered provider credentialing," "AI communications for car dealerships," "AI agents for customs brokers.” The novelty made buyers pay attention. The problem is that "AI-powered X" stops being a position the second there are five credible "AI-powered X" companies. It's even worse when they all use the same gradients, the same sterile screenshots, and the same language that turns nobody off but nobody on either. They all claim to be the most accurate, the fastest, and most definitely enterprise-ready.
These products may not literally be identical, but because their differences aren’t legible, people perceive them as interchangeable. When that happens, people default to what feels safest, or in B2B, what's easiest to justify internally. Your product may actually be different and better, but if the difference isn't clear, it doesn't matter.
Brand can help you stand out, but it isn't a self-sustaining moat you install once and enjoy forever. It's a discipline that requires you to make distinct and coherent choices as the category normalizes and AI — whether it’s in your product, design or copy — pulls you toward sameness. Every time you abdicate a choice or play it safe, you become more interchangeable with every other AI startup in your space. And interchangeability is what kills you, especially when switching costs are near-zero.
> If bottled water can do it, so can you.
Bottled water is about as close to a pure commodity as you can get. It’s heavily regulated and functionally interchangeable. There is no meaningful technical advantage. In most cases, the product inside the bottle is indistinguishable from the one next to it. And yet, some of the most distinctive brands in the world have been built in this category.
Take **Evian** and **Liquid Death**. Neither claims their water is the “best.” Evian’s point of view is that water isn't a commodity if you trace it back to its source. They position around purity and provenance. Liquid Death stands on the belief that water can be “metal.” They position water as a substitute for soda, energy drinks, or alcohol for people who’d otherwise choose those less hydrating options.
Water is water, but your decision which bottle to buy is largely driven by brand marketing.
Visual identity, tone, packaging, partnerships — everything then amplifies those positions. Evian is calm, minimal, and heritage, making the product feel timeless and premium (“Born in the French Alps”). Liquid Death is irreverent and loud, with packaging that looks like a tallboy (“Murder Your Thirst”). The Evian logo on a Liquid Death ad would make no sense, and vice versa.
The lesson isn’t that brand magically differentiates commodities. It’s that clear choices and reinforcement work even in one of the most commoditized categories imaginable.
So if you’re working in an AI category that’s starting to resemble a commodity, where do you start? Not with a logo, a tagline, or a launch video.
## 1\. Find your opinionated POV
Start with what you believe that everyone else doesn’t. This is your timeless “why” that outlasts whatever you're shipping next quarter. A real POV attracts some people and repels others. That's the point. Most founders I work with try to skip this step and get straight to logos and launches, the more tangible side of marketing that they can readily observe in others. But POV is what gives everything downstream — your positioning, your visual identity, even your product decisions — a foundation on which to build.
**Use your point of view to filter every decision. Before you can segment by audience or platform, you need the opinionated through-line that carries your story to be crystal clear.**
A few examples:
- **Nike** believes everyone with a body is an athlete, and that anyone can choose to be a great one. Their original tagline “Just Do It” is one expression of it. Standing by Colin Kaepernick in 2018 in spite of boycotts and stock dips was another. Their recent stumble at the Boston Marathon is instructive: Nike initially put up a billboard reading "Runners welcome. Walkers tolerated." which faced immediate backlash for “pace-shaming” and was replaced within days with the more timid "Boston will always remind you, movement is what matters." The original copy was a fabulous expression for a company that spent more than forty years telling people to push themselves; the replacement is the kind of line a brand runs when it's afraid of its own POV.
- **Duolingo** believes learning a new language should feel like a game you can't put down, not homework you have to do. The owl mascot, streak guilt, their willingness to be unhinged on social all follow as expressions of addictive education.
- **Anthropic** believes that AI should be a collaborative partner to human thought, not a replacement for it. "Keep thinking" is built upon this foundation. Keeping ads out of Claude is a product decision that tracks. Their public refusal to let Claude be used for mass surveillance is another.
No matter how well you articulate your point of view, if no one can understand what your product is or who it’s for you’ll be stuck with a great opinion and an unintelligible product.
## 2\. Create clarity with positioning — and keep it current
A bland POV that makes everyone nod their heads in agreement doesn’t get you very far. And neither does saying you’re “for everyone,” because it doesn’t clarify anything when it comes to [positioning](https://review.firstround.com/positioning-your-startup-is-vital-heres-how-to-do-it-right/). Positioning forces you to make a set of coherent choices:
- Who are you for?
- Why should they care?
- How is the world broken today for them?
- What are you up against?
- What makes you different from how they already try to solve their problem?
Good positioning forces you to make tradeoffs and gives customers a clear reason to choose you.
In the past, I’d nudge founders towards thinking about their competing alternative not as another startup with minimal market share, but the status quo: manual workflows, legacy software, outsourced labor, or doing nothing at all. Rather than compare themselves to more direct competitors, I’d urge them to begin by redefining the problem and articulating a clear villain to their story that their audience would want to root against. A couple examples of companies that did this well:
- **Square** didn’t initially position against other payment processors. It positioned against remaining cash-only. The early story wasn’t about rates or features, but about access — anyone could accept credit cards. Only later did Square directly take on alternatives like PayPal or traditional POS systems. The point of view underneath was simple: commerce should be easy, and small merchants deserve powerful, beautiful tools to run and grow their businesses.
- **Gong** initially positioned against “gut feel” sales coaching rather than other tools. Its core argument was that conversations were the source of truth. Only later did Gong sharpen its secondary positioning against Chorus and others by emphasizing opinionated guidance over neutral analytics. The underlying belief: sales should be driven by data, not guesswork.
Today, founders in AI categories don’t have the luxury of time. You often have to fight the status quo and multiple direct competitors simultaneously. People will compare similar tools, and you need a simple explanation for why you win versus the old way of doing things *and* why you win when the choice is between you and another startup in your space. Positioning used to last a year or two or maybe more. In this market things change so quickly that it has to be a living thing you’re constantly revisiting every few months.
Take **Cursor** as an example. They didn’t initially position against GitHub Copilot, but against the status quo of writing code in an editor designed for humans, or one with AI added on for autocomplete. At their seed announcement (October 2023), Cursor was "AI-first" which was sufficient at the time. Their POV was that if AI is going to change how software gets written, a retrofitted editor can't match one built around AI from the start.
Cursor's positioning in October 2023 versus now.
Within months, a wave of AI editors and coding agents appeared (Windsurf, Replit Agent), and Cursor had to fight two fronts at once. Against the new pack of direct competitors, Cursor sharpened around depth of codebase understanding, agentic capabilities and a faster release cadence than anyone else. But the category shifted again when Anthropic launched Claude Code. It wasn't a better IDE — it reframed the question from "what editor do you code in?" to "what agent codes with you?" sidestepping the "AI-native editor" framing Cursor had won. Cursor has since had to reposition around agent orchestration rather than the editor itself. Their original positioning wasn't wrong; it worked in the moment, but the moment changed quickly. And that's the job — not to land on something that lasts forever (like your POV), but to make coherent choices and keep making them as the terrain moves.
## 3\. Use design to bring your unique POV + position to life
Your brand is not your logo or simply a decorative coat of paint on top of your product. It’s who people think you are. So design should be the visible expression of every choice you’ve made so far.
It takes your POV and the clarity of your position and turns it into something people can recognize through visual identity (colors, typography, imagery), language (the tone you use, the phrases you repeat, the things you refuse to say) and your product itself (the defaults you set and the features you choose not to build). It dictates how you behave. Over time, those choices reinforce each other. That reinforcement is what people experience as your brand. If you look and sound like everyone else in your category, it’s hard for customers to remember which one you are.
Here are two simple tests:
- Take your homepage hero, a recent customer email, and a social post. Put them side by side. Do they all reflect your point of view and position?
- Now remove the logo from your homepage and swap it with a competitor’s. It shouldn’t make any sense.
If you’re not happy with the results of those quick assessments, but your POV and position are solid, it’s time to refine your visual and verbal identity.
**Make your visual identity unmistakably yours.** Do you look like every other company in your space? Too many B2B companies default to the same boring enterprise palettes (blue, gray and white), too many AI startups use the same giant logo in the footer trope (h/t to Emily from Mkt1 for that one). If everyone in your space is blue, be yellow. Granola may have gotten shade for its “wretched” green spiral logo ([Heart of Te Fiti](https://disney.fandom.com/wiki/Heart%5Fof%5FTe%5FFiti?ref=review.firstround.com), anyone?), but it certainly was a [distinctive choice](https://www.granola.ai/blog/a-new-look-for-granola?ref=review.firstround.com). If you're ironically punk like Liquid Death, go ahead and lean into those goth headlines and metallic foils.
Let’s nerd out with some basic evolutionary neuroscience: us humans walk around with amazing machines in our heads that are designed to attend to novelty and ignore the familiar — evolution wired us this way to survive. Think back to our hunter-gatherer days. If we ate all the red berries and were fine, and then we encountered some purple berries, it made sense to stop and think about them a bit more than the red berries we knew weren’t poisonous. For you engineers, your brain is looking for the diff.
But if something is too novel, the brain flips from curious to suspicious. Imagine our ancestors found a sparkly silver berry! That would be weird. In visual design, I often push founders who copy other startups toward distinctiveness. And I nudge creatives who err the other way back toward "maximally different but recognizable" — the optimal distinctiveness of purple berry, not the too wacky silver one.
**Kill the jargon and have a personality.** Do you have five adjectives that describe your brand personality ("human" and “trustworthy” don’t count)? Does your copy reflect them? Do you use big words to say stuff that could be said with more clarity? If you’re expressing something complex, can you explain it like you would to a smart but bored teenager? Make it interesting. Make it a story.Don’t write the same hedged copy designed to offend no one. If everyone is loud, be quiet. Make sure these choices make sense with your positioning and point of view.
Competitors will replicate your features and technical gaps will narrow. A good brand creates a specific kind of friction: copying your choices makes them look like a parody of you. Clay is one company that does this very, very well.
### Clay: Clear POV + position + distinctive assets = friction against imitation
If you were driving up the 101 from SFO last fall, one billboard stood out from the rest. It didn’t have the generic, dark mode, scifi-inspired vibe of every other AI company ad, which looked like AI made them without a good brief. It was bright, with the childlike rainbow **Clay** logo partially chiseled out of a marble block and copy that made a clever claim. If you rode the NY subway earlier this year, you may have seen a version of this plastered there too. This campaign may be the cleanest expression of the company’s POV (go-to-market is creative work) and position: Clay makes creative tools for growth teams.
Clay's billboard campaign.
While they began as a horizontal no-code spreadsheet, Clay ultimately found its footing after [narrowing in on go-to-market teams doing outbound as their target customer](https://review.firstround.com/clays-path-to-product-market-fit/). They positioned themselves against spammy outbound and manual go-to-market workflows first and other data enrichment tools second. They took a problem (incomplete contact data) and reframed it into an entire category that felt rigid and uncreative.
The company’s claymation visuals, colorful palette, and the videos they post regularly — from [“off the cuff” ones from co-founder Varun](https://www.linkedin.com/posts/vaanand%5Fi-do-several-interviews-a-day-most-candidates-activity-7452354947792433152-PmCU?utm%5Fsource=social%5Fshare%5Fsend&utm%5Fmedium=member%5Fdesktop%5Fweb&rcm=ACoAAAizmvMBnABhGG9qci0UHoDVcjkpDlc5gOc) to documentary style customer stories — all reinforce the same idea: creative tools for modern GTM teams (they coined the “GTM engineer”). Instead of your standard founder-talking-to-the-camera launch video, they recently announced a new feature (“Functions”) which standardizes workflows with renowned pizza maestro Mark Iacono of cult Brooklyn spot Lucali likening it to the consistency of his dough:
[Define Data Once, Use Everywhere with Functions | Clay posted on the topic | LinkedInIntroducing Functions. The core Clay workflows you’ve been rebuilding manually again, and again, and again from memory can now be built once + referenced everywhere. Define your data one time. Your team runs on it forever. Edit it centrally and it’ll auto-update everywhere. Functions are like perfected recipes: a pizzaiolo uses the same amount of water, flour, salt, and yeast for every single pie, at every single table. Same idea. Learn more ⬇️ Chef’s hat tip to Mark Iacono at Lucali for the ’za. | 99 comments on LinkedInLinkedInJake Block](https://www.linkedin.com/feed/update/urn:li:activity:7450184351612514304/?ref=review.firstround.com)
As they went from $1M to $100M in ARR, Clay’s production quality improved. They now have a “studio” team. And it’s no surprise that while many people in tech want to become founders, [many people at Clay dream of becoming artists or therapists](https://review.firstround.com/firsthand-clay/).
If a competitor adopted their look and feel and their language, or even their video style tomorrow, it would seem ridiculous.
## Don’t outsource your brand to LLMs
You don’t have to avoid AI altogether — the key is using AI in a way that reinforces good decisions. It’s tempting to prompt your way through positioning and generate infinite content. But AI amplifies what you feed it, so if your POV and position are generic, it amplifies generic.
LLMs work by producing something close to the statistical average of everything ever written. The more companies route their choices through them, the more everyone converges on that average. The people getting genuinely good outputs from AI right now are the ones walking in with sharp inputs: an opinionated POV, positioning that picks a fight and a design system with distinctiveness built in. When those things aren’t sharp, AI is a marketing slop machine.
Emmett Shine is on the bleeding edge of embracing AI at his brand studio, [Little Plains](https://www.littleplains.co/?ref=review.firstround.com). For a recent project, he hired his artist mom to handpaint original watercolors, then scanned them into custom node-based workflows to generate and animate new scenes, iterating between the real source material and AI systems. As Shine put it: "A creative cycle between real materials and generative systems that stays human no matter how far it scales."
> How do you tell a story about cutting-edge science that feels like it's about love and family? We hired my mom, a professional painter, to create original watercolors.
>
> Conception is a stem cell biology company working to help families have children who might not otherwise be… [pic.twitter.com/moWNc6mATb](https://t.co/moWNc6mATb?ref=review.firstround.com)
>
> — Emmett (@emmettshine) [March 26, 2026](https://twitter.com/emmettshine/status/2037182970696458536?ref%5Fsrc=twsrc%5Etfw&ref=review.firstround.com)
And instead of only delivering human-readable brand guidelines in a traditional PDF, Little Plains also [delivers structured data for agents](https://x.com/emmettshine/status/2024113482623258907?ref=review.firstround.com): “Same positioning, voice, and values, just two formats.” When those choices are articulated for humans and AI alike, they become infrastructure to scale coherence.
To further fight against AI-democratized sameness, you have to do things that are hard to replicate via AI alone. Show up in person. Be personal in your storytelling. Make physical things.
If anyone could outsource brand to AI, it would be the frontier labs, yet Anthropic opened a [pop-up Claude Café](https://www.instagram.com/p/DPW0CJQkmAq/?ref=review.firstround.com) in the West Village with “free coffee and thinking caps while supplies last.” When online output is infinite, offline craft like this stands out.
Consider how most people choose between ChatGPT and Claude — it’s probably not by reading evals, but increasingly based on what kind of company they want to associate with (ahem, brand). Each company has made a set of choices about how it shows up. These decisions turn some people off and others on:
- **OpenAI** is aggressive and expansive. This shows up in a broad product surface area, a rapid shipping cadence, aggressive consumer distribution, and a techno-utopian tone. The key message of their Super Bowl ad, “You can just build things,” reflected this perfectly.
- **Anthropic** leans into restraint and responsibility. They emphasize safety and careful progress. Their Super Bowl ad series showed the tragic comedy of putting ads into an AI assistant (clearly poking fun at ChatGPT) — something they’ve committed not to do with Claude. Claude exists to help you think, not to sell to you.
The [“Department of War” feud](https://www.anthropic.com/news/statement-department-of-war?ref=review.firstround.com) earlier this year sharpened that contrast. In late February, Anthropic refused to remove safeguards that prevent Claude from being used for mass surveillance of Americans or fully autonomous weapons. The government designated Anthropic a "supply chain risk," a label typically reserved for foreign adversaries. Meanwhile, OpenAI [signed a major contract with the DoW](https://openai.com/index/our-agreement-with-the-department-of-war/?ref=review.firstround.com), initially claiming it included the same ethical safeguards Anthropic had fought for. Reports later indicated they'd agreed to the DoW's requirement that the AI be used for "all lawful purposes."
Models converge and the frontier keeps moving. But these decisions, especially when made on such a public stage, act as real differentiators. Claude [hit #1 in the App Store](https://www.cnbc.com/2026/02/28/anthropics-claude-apple-apps.html?ref=review.firstround.com) within days of the public fallout after sitting around #20 the month prior. They didn’t launch a new model or release a new benchmark. They made a choice that reinforced their brand.
## Brand is a transient advantage, not a moat
Most AI startups won’t build advantages that endure unchanged for decades. Differentiation will be temporary, contested, and frequently reset — what [Rita McGrath called “transient advantage](https://hbr.org/2013/06/transient-advantage?ref=review.firstround.com).” Brand is another one of these. Like other advantages, it erodes if it isn’t maintained and doesn’t evolve. Its edge comes from your choices not converging with everyone else’s.
That’s the job. You can’t install distinctiveness once and enjoy it forever. "AI-powered" was a position founders adopted in 2023 and tried to coast on. For a minute, it worked. Then other companies in every category said the same thing and soon "AI-powered" stopped meaning anything at all. There’s still hope: if water can sustain radically different brands, AI products won’t just be able to — they’ll have to.
Founders have to think about brand differently in a category that starts to resemble a commodity:
1. **Find your opinionated point of view.** This has always been important, it’s just even more so today.
2. **Create clarity with positioning — and keep it current**. Positioning forces you to make distinct decisions about who your product is for and what it does in relation to what they already know.
3. **Use design to bring your POV and position to life**. Establish a unique identity that you can own, so it would be painfully obvious if another company were to copy you.
4. **Give AI sharp inputs to scale your brand.** Bland inputs result in bland outputs. That’s part of the reason so many AI companies look and feel the same.
5. **Keep making coherent choices**. As the terrain keeps moving and the tools that were supposed to give you leverage start producing the same outputs for everyone else, you need to continually reinforce decisions about what you believe, who you’re for, how you show up and what you refuse to do.
If you've got solid inputs, AI can be the most powerful amplification tool you've ever had. If you don't, it's the fastest way to disappear into the category**.**
### Why founders should bet on first-time executives | Praveer Melwani (CFO, Figma)
URL: https://review.firstround.com/why-founders-should-bet-on-first-time-executives-praveer-melwani-cfo-figma/
Last updated: 2026-05-14T18:29:05.000Z
In this latest episode of Executive Function, Brett sits down with Praveer Melwani, CFO at Figma. Praveer joined Figma in 2017 as the company's first business operations and finance hire—when the team was around 30 people and not yet charging for the product—and stepped into the CFO seat in 2022, helping to lead the company’s IPO in 2025\. In today’s conversation, Praveer breaks down the step functions that took him from IC to CFO, why Figma started acting like a public company three years before IPO, and how AI is rewriting capital allocation and the CFO job itself.
In today's episode, we discuss:
- What separates a world-class finance leader from a traffic-cop CFO
- How Praveer went from Figma's first biz ops hire to CFO of a public company in nine years
- Why Figma started acting like a public company three years before its IPO
- What Praveer has learned working alongside Dylan Field for nine years
- Why Figma intentionally cut its 90% gross margin to invest in AI
**References:**
- Adobe: [https://www.adobe.com](https://www.adobe.com/?ref=review.firstround.com)
- Brendan Mulligan: [https://www.linkedin.com/in/brendanmulligan](https://www.linkedin.com/in/brendanmulligan?ref=review.firstround.com)
- Cloudflare: [https://www.cloudflare.com](https://www.cloudflare.com/?ref=review.firstround.com)
- Dropbox: [https://www.dropbox.com](https://www.dropbox.com/?ref=review.firstround.com)
- Dylan Field: [https://www.linkedin.com/in/dylanfield/](https://www.linkedin.com/in/dylanfield/?ref=review.firstround.com)
- Fidelity: [https://www.fidelity.com](https://www.fidelity.com/?ref=review.firstround.com)
- Figma: [https://www.figma.com](https://www.figma.com/?ref=review.firstround.com)
- GIC: [https://www.gic.com.sg](https://www.gic.com.sg/?ref=review.firstround.com)
- NerdWallet: [https://www.nerdwallet.com](https://www.nerdwallet.com/?ref=review.firstround.com)
- Shaunt Voskanian: https://www.linkedin.com/in/shauntvoskanian/
**Where to find Praveer:**
- LinkedIn: [https://www.linkedin.com/in/praveer-melwani](https://www.linkedin.com/in/praveer-melwani?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
02:13 From banking to Dropbox to Figma
04:14 The phase shift when Figma's COO left
05:36 Hiring leaders in functions you don't understand
07:18 Selling the exec team on AI consumption pricing
09:48 Using Claude Code to learn new things as CFO
11:36 Building an internal board of peer CFOs
13:52 Inside Figma's CFO job description
16:38 What separates good CFOs from world-class CFOs
18:42 Capital allocation and risk in a post-ChatGPT world
21:45 Why Praveer wants to take more bets
24:32 How AI is materially changing the CFO role
25:36 The nine-year working relationship with Dylan Field
29:12 How deeply in the details should a CFO be?
31:47 What Dropbox taught Praveer about building strong teams
33:24 Praveer’s first-principles test for hiring VPs
38:47 Why Figma acted like a public company in 2022
### From the inside: What it's like to work at Clay
URL: https://review.firstround.com/from-the-inside-what-its-like-to-work-at-clay/
Last updated: 2026-05-06T18:43:15.000Z
[](https://review.firstround.com/firsthand-clay/)
So much writing about great companies comes from founders. But some of the most revealing and thoughtful stories we’ve heard over the years have come from someone else entirely — the early employees who were in the room for everything, but rarely get asked to tell their side.
In our new essay series, “Firsthand,” we partner with early employees to tell these inside stories in their own words.
We’re launching the series with Mishti Sharma, Head of Narratives at Clay.
Sharma joined as employee number ten. The morning she signed her offer letter, it felt like she was admitting defeat. She hoped to pursue journalism and filmmaking, and instead, was joining a B2B data company to write about cold email.
Three years later, she’s still there. Her essay is about why — and what happens when a company finds uniquely talented people and builds roles around their skills, rather than shoving them into job descriptions.
[Take me to The Review](https://review.firstround.com/firsthand-clay/)
### Firsthand: How I Bet On Clay (And It Bet On Me)
URL: https://review.firstround.com/firsthand-clay/
Last updated: 2026-05-06T22:24:53.000Z
The morning I signed my Clay offer letter, I shut my laptop in defeat. When the last startup I worked at had shut down almost a year prior, I thought I’d go all-in on cultural journalism and filmmaking. Instead, I was joining a ten-person B2B data company to write about cold email. I told a friend not to be surprised if I left in a month.
Three years later, I’m still here — and the job I feared regretting became one that I love.
When I joined, Clay was a simple spreadsheet tool; now it’s a major AI company. We’ve grown from 10 to 400 employees, $1M to $100M in ARR, and $50M to $5B in valuation, while hosting weekly DJ Fridays and annual Bring Your Parents To Work Days. My work, which started as writing outbound email guides, evolved into shaping Clay’s major narrative moments: from popularizing go-to-market engineering to now building a video journalism arm.
**This is the story of how Clay and I bet on each other, through a virtuous loop that helps companies create irreplicable work:**
- **Talented people lean into their spikes:** I was always gifted at narrative work, but spent years optimizing for roles with more status and pay. When I followed my natural energy, I had more impact and fun.
- **The company shapes roles around them:** Co-founders [Kareem Amin](https://www.linkedin.com/in/kareemamin/?ref=review.firstround.com) and [Varun Anand](https://www.linkedin.com/in/vaanand/?ref=review.firstround.com) saw my strengths clearly and pushed me to double down on them. Instead of forcing people into predefined job norms, Clay shapes roles, pay, and titles around what people are actually best at.
- **Irreplicable work emerges:** Spiky talent plus structural backing creates unique work. My strengths and Clay’s willingness to amplify them manifested things that didn’t exist before, like GTM engineering. We said what we believed clearly, and the world rallied around it.
- **That draws in more spiky talent:** People see what's happening at Clay and want to be part of it. New people join Clay, trust that they can be themselves at work (often for the first time in their careers), do unique work, and the loop begins again.
Clay gives people an environment that rewards their full expression, and reaps, in return, the rewards of a singularly brilliant team. I came in skeptical of the product, audience, and role, but I found a culture that fit — and together we have co-created work that no one else could do.
## Reluctant beginnings
I’ve always had a love of learning, a knack for connecting with people, a talent for writing, and a fierce independent streak. I grew up on the outskirts of NYC, traveled the world while studying philosophy at Princeton, and dreamed of following in the footsteps of Werner Herzog, Jhumpa Lahiri, and Anthony Bourdain.
Coming from a first-generation immigrant household, however, the push was to earn well and figure out the rest later. After graduation, I took a job at an old-school investment fund and quickly grew miserable at the spreadsheet busywork and intense hierarchy.
It was while trying to escape that job that I met Varun at my college best friend’s wedding in 2019\. He’d just left Jigsaw, Google’s technology think tank, full of strong opinions about corporate bureaucracy. He was intense but kind — 6'4" with a giant bear hug and an even bigger personality — and I wasn't sure what to make of him. We kept in touch as we each went on to roles at different startups.
By the time my first startup job ended two years later, I was living in a footloose tech scene in SF. Everyone around me was going rogue and betting on themselves, and I was [considering the same](https://maildropbymishti.substack.com/p/crafting-my-lifes-work-a-progress?ref=review.firstround.com): writing full-time, starting a media studio, or founding my own company. Joining another company, unless it was an AI frontier lab, felt like the least imaginative thing I could do.
**Excerpts from my journal at the time, where I was freewriting possibilities for my life.*
On a blustery January evening in 2023, I walked into Breads Bakery in Union Square to catch up with Varun. The last time we’d talked on the phone he was considering starting a pickleball company, which he’d later shelved to join Clay. As soon as Varun heard I had time, he proposed I do some contract work.
“Sure,” I said, “send me a message,” expecting him to never follow up.
“No, let’s figure it out *now,*” he said, whipping out his phone and handing me an AirPod, which I tried not to think about too much before placing into my ear. He called[ Eric Nowoslawski](https://www.linkedin.com/in/outboundphd/?ref=review.firstround.com), an in-house expert who later left Clay and became our first agency owner to hit $1M ARR.I was at the office — a bricky studio loft in Williamsburg — the next day, 24 hours before my flight back to SF.
At the time, in early 2023, Clay had about ten employees, a minimal website, and no AI features. The product was a spreadsheet-interface tool that outbound email agencies used to access multiple databases in one place. My job was to talk to these agency owners, like Eric, and turn what I learned into guides to help our product spread.
I showed up in a silk button down; everyone else was in a sweatshirt and jeans. I met Kareem, the CEO, walking in and out of call booths in his iconic yellow sweater. He seemed more grounded and arts-oriented than most founders I knew, and I texted Varun afterward that he’d felt like a kindred spirit.
I finished my first piece in an hour at the office, and Varun was so shocked that he got me on a $10k retainer. My first playbook, [Smart B2B Prospecting: A Complete Guide](https://www.notion.so/clayrun/Smart-B2B-Sales-Prospecting-A-Complete-Guide-b8ff7620a43945d6906ac135bc70f6e1?source=copy%5Flink), was published on a Notion site and made its rounds around popular sales WhatsApp groups. (Much of the fundamental advice in the guide still applies, though AI made many of our early personalizations table stakes.)
> Not once, in the early months, did I consider actually joining Clay, let alone moving to New York. What I didn't realize was that Varun had probably already decided I would.
He was the main reason Clay hired so well and fast early on, and he still works the same way: he finds people that spike at something, gets them in a room as fast as possible, and has already intuited where they might fit by the time they sit down.
**Varun and me at the Clay office in 2026 (seven years after we first met).*
When a first meeting didn't close someone, persistence took over. For the next six months, Varun called me every week. He’d invariably ask me to join full-time, and I'd say no, again and again. By the summer, I was worn down enough to ask what Clay would actually offer. That's when things got complicated.
**I had three problems with joining Clay, and none of them were easy to talk myself out of:**
- **Content wasn’t a sexy role:** If I was going to work at another startup, I wanted it to be the most ambitious and rewarding work possible, which usually meant product or growth — and definitely *not* content. Writing was the part of myself I cared about most, and I was saving it for my personal projects. Doing it for a B2B sales tool felt like spending my best creative energy on a job that wouldn’t value it. We ended up benchmarking my compensation to an early PM role, with a six-month bump, which helped financially but didn't resolve my deeper worry: that nobody at Clay really saw me and I'd get pigeonholed into a low-impact corner.
- **Clay was tackling a “boring” topic**: At the time, Clay was a B2B data tool mostly used by cold emailers — not exactly a dinner party conversation starter. I couldn't figure out how to square what I actually cared about with what I'd be working on every day. The brand, people, and product vision weren’t publicly developed yet, leaving me with a mild concern that I was wasting my life force helping email spammers.
- **The opportunity cost was high:** It was the summer of 2023, the AI moment was accelerating, and I knew I had options, whether starting something new or joining a frontier lab. The week I was negotiating my Clay offer, the entire OpenAI leadership team had read a cold email I’d sent Greg Brockman pitching an AI media studio. Dropping that lead was risky: Clay had existed for six years before I joined and had only just started to gain traction. My honest expectation was that it would be a chill job, my equity would multiply by some modest amount, and we'd get acquired by Hubspot or Salesforce.
What opened me to the offer was spending more time with Kareem. He listened to my concerns without trying to talk me out of any of them. Where Varun may have debated me into the ground, Kareem just made me feel like we were the same kind of person. I got the sense that he, too, was a creative guy who was surprised he’d ended up working on a B2B tool, and that it definitely did not define his personality. He reframed work as a thing you do, not a thing you are.
When I told him I worried I was taking the easy way out, he said, in classic koan style, that the easy path was sometimes the hardest to choose. He made the role feel flexible and the decision feel reversible. “You can just try it out,” he said. “No hard feelings if you want to leave in a few months.”
Kareem and Varun continue to be the perfect foils. They are equally kind, deep, and competitive but present very differently: Varun pushes, runs hot, moves fast, sweats the details, and can get obsessed with a particular problem or person. Kareem is more airy, philosophical, and often gives space when you expect direction. On a fundraise announcement morning, Varun is editing commas at midnight and in the conference room at 7AM; Kareem has to be mildly bullied into reading the materials and rolls in well after press is live.
Varun’s persistence kept the door open; Kareem made it safe enough to walk through. After much deliberation, I agreed to join. I had one condition: I’d start in NYC, then return to SF. They said yes.
> So I moved forward. But not with my whole heart.
## The spirit of early Clay
**I fell for the people and the place before I fell for the work.**
Our office was a shoes-off apartment with a laundry machine, a wobbly bathroom lock, and a long wooden table where we ate lunch together. On my first day, I was handed a copy of *All About Love* by bell hooks, given a credit card, and told to go to the Apple store on Bedford Avenue to pick out a laptop.
The environment was, and remains, very casual and trusting, with a high degree of openness and extraversion. My coworkers were smart, kind people who decided their own priorities, assumed the best of each other, and used the company card freely. No one cared if I worked from home, from a park bench, or from a call booth. It was the opposite of my investment fund job.
Our team, especially on the business side, was an unusual collection of people. Varun had a way of convincing talented people to try jobs they’d never done, often by anchoring their pay to higher-status roles ([Yash](https://www.linkedin.com/in/yashtekriwal/?skipRedirect=true&ref=review.firstround.com) left product to lead education; [Matthew](https://www.linkedin.com/in/matthew-quan/?ref=review.firstround.com) left growth to run customer support). The result was a workplace where people weren’t trying to be the version of themselves their resume demanded.
A few days after I joined, we rented two cars and drove to the Mohonk Resort for a retreat. Most conversations had nothing to do with work and were rather, to my entertainment, about therapy, relationships, or music. We paddleboarded and danced; I convinced two people to wake up at 4:30AM for a sunrise hike with me the day we left. The whole thing felt like a mix between summer camp and a sleepy, happy, blurry road trip with friends.
I quickly felt comfortable enough to add to the culture and organized our first Bring Your Parents To Work Day, a ritual we’ve continued (as we’ve aged, we’ve since also added a Bring Your Kids to Work Day). Kareem’s mom called in at midnight in Cairo, [Brian](https://www.linkedin.com/in/brian-liang/?ref=review.firstround.com)’s mom took multiple buses to Brooklyn from New Jersey, and my dad told silly stories about how I secretly bought a stick shift car in New Zealand when I was 20\. We cut a thick chocolate cake and a few of us ended the night salsa dancing with [Juan’s](https://www.linkedin.com/in/jstejada/?skipRedirect=true&ref=review.firstround.com) mom. I went to bed in tears in my tiny basement sublet thinking about the space we’d shared.
Bring Your Parents to Work Day (left) has grown into Bring Your Kids to Work Day (right) complete with a petting zoo.
By the fall, we'd moved to a real office on Fifth Avenue near Union Square. Every Friday, for “DJ Friday,” [Mark](https://www.linkedin.com/in/mark-hahnenberg-15150211b/?ref=review.firstround.com), [Yash](https://www.linkedin.com/in/yashtekriwal/?skipRedirect=true&ref=review.firstround.com), [Tess](https://www.linkedin.com/in/tessbianchi/?skipRedirect=true&ref=review.firstround.com), and Kareem rotated through the decks. Mark threw poi, Yash did the worm, [Karan](https://www.linkedin.com/in/karan-warrier-1a705765/?ref=review.firstround.com) sometimes climbed the walls. Eventually we'd spill out to continue our nights for karaoke at Baby Grand or Toñitas in Williamsburg, which was our favorite (and apparently Bad Bunny’s too).
We were spending so much time together that, inevitably, the people at Clay became my best friends. I sublet a room directly across the office, where teammates would come over to eat dinner or watch *Love is Blind.* People invited each other to their birthday parties; Karan and Juan worked from my parents’ house in New Jersey. Kareem helped me process my ending relationship with Buddhist book recommendations and kati rolls in Washington Square Park. During a work trip to SF, when Varun sensed I felt bad about something he’d said earlier, he called me at 10pm and found me in person to apologize. We didn't have HR yet, but we had trust, friendship, and people who took responsibility.
At Clay, selling software didn't feel like selling out. We had a taste for creatives and didn't take ourselves too seriously. We didn’t cosplay “startup,” in contrast to SF, where I’d sometimes felt culture collapse into a re-enactment of VC Twitter.
> If most people in SF wanted to quit their jobs to become founders, most people at Clay wanted to quit their jobs to become artists or therapists. Nobody was performing ambition.
I loved that, and at some point, I realized *I wanted* to stay at Clay. I signed a lease in New York.
## When Clay started to feel real
Though I was learning a lot and enjoying myself, by early 2024, I couldn’t tell how much of a “real company” Clay would become. We had no enterprise customers, no code reviews, no PMs, and no expense policies. Getting a raise meant asking Varun or Kareem, who directly managed every engineer. Most early hires, including me, were doing jobs we'd never done before.
Several milestones changed my mind that year, all downstream of the GPT API release, which made Clay orders of magnitude more powerful. We built several AI features, most notably Claygent, which let companies automatically do bespoke web research that had previously taken hundreds of hours of manual labor. Suddenly, Clay could do a lot more than pull fixed data points into a spreadsheet.
**An early screenshot of our wall of love*.
The first sign was how loudly customers started talking about us. GTM agencies and operators kept telling their audiences online how much time Clay was saving them — even when the product was full of bugs. Several of them started asking if they could come work at Clay. That kind of customer obsession is rare for any startup, and almost unheard of for a B2B sales tool.
The second sign was that senior operators started leaving established companies to join us. Our marketing team, until then, had been two people: me and a recent college graduate who mostly worked out of backpacking hostels. In the late winter, Varun recruited [Bruno](https://www.linkedin.com/in/brunoestrella/?ref=review.firstround.com), the head of growth marketing at Webflow — convincing him to move from the North Shore of Oahu to Manhattan for the same job title at a much smaller company. When he signed, Varun celebrated at all-hands with a call recording from Bruno’s former manager who’d said a few weeks earlier, “Oh, you're trying to recruit Bruno from Webflow? Good fucking luck!”
**A FigJam sketch that evolved into a still-used sales deck slide.*
The third and biggest sign came that spring, when we signed OpenAI as one of our first enterprise customers. The logo made other buyers take us much more seriously, and a wave of them followed that summer. That July, I led our Series B announcement, which included a Bloomberg piece, an overhauled homepage, and a[ blog post](https://www.clay.com/blog/clay-raises-62m-to-turn-any-growth-idea-into-reality?ref=review.firstround.com), our first attempt at telling the story of what we'd built and why. Bruno's arrival freed me to stop thinking about SEO and emails, and I started spending time in SF with our product and our first enterprise customers, looking for the right words for what Clay actually did. On one trip, Kareem caught me sketching diagrams in Figma in a hotel lobby and told me it was the most useful work I could be doing. Several evolutions of those sketches still live in our sales decks.
By that point, it was clear Clay was going somewhere. We'd moved into a new office in Chelsea with rainbow-striped walls, forest-inspired seating, and dogs everywhere. The company that had been held together by vibes was becoming something real.
## When the job didn’t fit
Thanks to my positioning and messaging work, in mid-2024, I landed a raise and was promoted to Clay’s head of product marketing. Things went downhill from there.
Product marketing is a hard role to feel your way into because it ranges hugely in scope and style. Every advisor I talked to had a different definition of it. Without a clear playbook, I stuck to what I knew how to do, focusing on website projects, shipping case studies, and building out a system for product launches at a time when engineering timelines lived in people’s heads. It kept me busy, but it definitely wasn’t the whole job. I didn’t get close enough to sales to understand deal blockers, develop a point of view on pricing, etc. — and I didn’t hire people to fill my gaps.
As months passed, I felt something was increasingly off around Kareem, Varun, and later, Bruno, who was in his own no-man’s-land, functionally leading the marketing team but without the title. Little things would happen, like the blurb under my picture changing from “Head of Product Marketing” to “Product Marketing” in our Figma org chart, but no one was directly talking to me. (I later learned that this was a Figma error that had caused at least five other people anxiety — the perils of running your org chart in a design tool!) My anxiety snowballed to the point where I started second-guessing everyone’s interactions with me, once bursting into tears in the bathroom after a tense meeting with Kareem. I wondered whether I should quit.
Eventually, thanks to advice from [Rachel Hepworth](https://www.linkedin.com/in/rachelhepworth/?ref=review.firstround.com), Notion’s former CMO and our advisor, I asked them directly what was going on. Her point was that executives (especially new and busy ones that you’re also friends with outside of work) can be conflict avoidant about feedback, and it’s worth putting yourself out there to make it easy for them. So I scheduled three conversations, face-to-face, where I essentially said: something is wrong, and I’m feeling bad. What is it, and how can I help?
The tension broke immediately. Everyone acknowledged they had a sense that I wasn't the right person for the role. Once said out loud, it felt obvious to me, too. We were at a stage where we didn't have the luxury of time for me to teach myself a new discipline. And even if we'd had the time, many key parts of the job didn't give me energy (and, in fact, were draining). The conversations were a relief, especially because everyone owned their mistakes, and I received several heartfelt apologies for the miscommunication. I went back to the work I loved.
**My Slack DMs with Kareem after our conversation about my role.*
**The end of 2024 brought some sadness: winter was setting in, and Clay’s cast was changing.** As talented new people were joining, members of the original crew, especially early engineers, were leaving or getting fired — the casualty, in part, of having many inexperienced managers and no structured feedback loops.
I knew it was healthy that I was developing a more contained attitude towards work, wasn’t hanging out with my colleagues 24/7, and had grown more naturally distant from some of them. But I felt sad that the Clay I’d fallen for — twenty people who felt like a road trip caravan — was fading. Varun, and especially Kareem, grew busier and less accessible. Attendance at DJ Fridays slumped. I used to go on a walk with every new person who joined; I’d stopped being able to keep up months ago and couldn’t recognize many faces. Maybe every job just eventually becomes a *job*, I thought, and it was naive to expect otherwise.
On my best friend’s last day, I hired a surprise mariachi band for a sendoff and went home in the cold feeling the loneliness of a chapter closing. After the winter holidays, I tried to focus on what I could control: my relationship to the work itself.
## The year of our narrative breakout — and my return to individual work
I entered 2025 a bit exhausted. For years, I’d pushed myself to do work that optimized for compensation, perception, and security. With no energy left for that, I narrowed my focus to the narrative work I was already good at. It turned out to be the best career move I ever made.
**What came easily to me was exactly what Clay needed most from me.** A new product marketing team took over how customers understood and bought the product, running launches, the website, case studies, and sales collaboration. I focused on building out the concepts and brand narrative that shaped how the world felt about Clay — and the broader GTM function. That year, I helped define the future we believed in, with three pieces that had a huge ripple effect:
- I framed Clay as a [go-to-market IDE](https://www.clay.com/blog/series-b-expansion?ref=review.firstround.com) to announce our unicorn fundraise. This gave our internal team a mental model for how to think about the product.
- I defined the concept of [GTM Alpha](https://www.clay.com/blog/gtm-alpha?ref=review.firstround.com), or a competitive selling edge, and argued that teams find it by using unique data in unique plays. This gave our sales team an evergreen talk track.
- I wrote “[The Rise of the GTM Engineer](https://www.clay.com/blog/gtm-engineering?ref=review.firstround.com),” which staked Clay as the originator of what has become a blazingly popular career (today, thousands of GTME jobs are posted each quarter, including at companies like Webflow, Notion, and Canva).
We committed to these concepts in a way most companies don’t, and we’ve reaped the benefits. Ideas, which often started in Slack threads, became essays, frameworks, and names we repeated everywhere. They took on lives of their own, showing up in sales decks, hackathons, and conversations we had nothing to do with.
It was obvious that narrative was valuable for Clay, and I was asked to run a team around it that blended brand, socials, influencer, and editorial. Towards the end of 2025, though, I realized running a department was draining my energy and I was less interested in building a machine than telling stories myself. So I did something that surprised my colleagues but made my coaches proud: I chose to be an individual contributor again.
**Becoming an IC was easier than it would’ve been elsewhere because there were no professional, financial, or social incentives stopping me:**
- My post-Clay goals don’t involve climbing the corporate ladder, so managing larger teams wasn’t earning me any career points.
- As an early hire with a significant equity stake, as the company grew, I felt like I didn’t have to worry as much about chasing proportionally smaller raises.
- We treat managers the same as ICs. Most companies would read going from a manager to an IC as a demotion, but at Clay, it carries no social cost. We apply the “staff engineer” model across the company, where senior individual contributors are just as valued as managers.
I leaned into my gift for storytelling and stepped into what Rachel calls my freedom era.
## Past $100M ARR and beyond: from zone of genius to zone of hunger
**Today, I still lead Clay’s major messaging moments, but I spend the other half of my time learning the craft of video journalism for YouTube.** I’m profiling people learning GTM engineering and AI in Pakistan, India, and Benin, investigating how weird businesses grow, and using Clay’s data to surface stories hiding in plain sight. I’ve apprenticed myself to [Jake](https://www.linkedin.com/in/jake-block/?ref=review.firstround.com), who leads our Studio team, and [Herrine](https://www.linkedin.com/in/herrine-ro/?ref=review.firstround.com), who leads YouTube after years building popular media channels at the WSJ and Morning Brew.
My first year at Clay was about selling an early product, the middle was about coining the concepts that defined an industry, and the present is about building the brand — and media engine — we want. We have the money, data, and creative talent to tell stories that become popular on their own merit with viewers who don’t yet know or care about Clay.
**Jake teaching me how to use our Sony FX6 to further my quest to become a good cinematographer.*
**The process has been a surprising and delightful convergence of myzone of genius with what I call my *zone of hunger.***
Your zone of genius is what you're already best at — the thing people hire you for. Your zone of hunger is what you’re driven to learn next — to do the work you’d want to do even if no one was paying. Most people have their last real teacher in their early 20s and never really experience being a beginner again. But at work, I’m learning something new every day.
My current freedom might look surprising from the outside, given that Clay is bigger and more structured than ever. We’ve recently crossed $100M in ARR, expanded to two new offices in London and SF (though I now remain happily in NYC!), and should end the year with 750 employees. We have PMs, HR, engineering leaders, an expense policy, and codified values. Companies often get richer and more boring at the same time, but we try to use our new resources to amplify what made us special to begin with.
**First, our hiring philosophy continues to give talented, multifaceted people the environment to lean into their true strengths.** We’re happy to benchmark comp creatively or invent titles to make sure people fit where they spike. When former PMs, like [Jessica](https://www.linkedin.com/in/jessica-jin-36727633/?ref=review.firstround.com), trade in their title for “Schemes,” you get enterprise customers starring in [kung-fu fight scenes](https://www.linkedin.com/posts/grow-with-clay%5Fgtm-engineers-are-stepping-into-the-limelight-activity-7388561242929389568-nmET?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAA5C6dYBKRaRpJzEXdbAX7O4AZ8xS2jOJfc), learning to [roll joints](https://www.linkedin.com/posts/grow-with-clay%5Fevery-artist-has-a-medium-cannabis-connoisseurs-activity-7382461584335413248-mkqf?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAA5C6dYBKRaRpJzEXdbAX7O4AZ8xS2jOJfc) with Snoop Dogg’s teacher, and taking personal styling workshops in NYC. Our salespeople, engineers, and marketers are also farmers, musicians, and bookbinders. Everyone unapologetically brings themselves to work.
**A text exchange with a non-Clay friend surprised by our ops talent.*
**Second, we continue to avoid conventions that feel like a waste of time*.*** For example, we still don’t have a leadership team or “executive only” meetings. (Varun prefers talking to DRIs for specific initiatives directly, instead of filtered through layers of managers.) Our loose structure works because everyone takes ownership and acts for the team.
Kareem and Varun captured those orientations as our two core values this year: *negative maintenance* and *non-attached action.* Negative maintenance means that if you see something broken, you fix it rather than flagging it for someone else. Non-attached action, loosely inspired by the *Bhagavad Gita,* means you act without being tied to a certain outcome, with your goal always being what’s best for the team and customer. (We also have a growing set of[ operating principles](https://cdn.prod.website-files.com/61477f2c24a826836f969afe/683b43d227d44bc11e25935e%5FClay%E2%80%99s-Operating-Principles.pdf?ref=review.firstround.com) that describe how we actually work day to day — I regularly use “FYI culture,” where you act first and inform people after, rather than waiting for permission or consensus.)
**Third, we keep no budgets, minimal red tape, and lots of room for opportunistic bets for both work and play.** I proposed both a monthly book benefit and an employee grant program, which I've used to expense a *lot* of books and fund my first documentary. People’s ideas have led to a tea ceremony room, a makers’ lab, and a 2.6k square foot listening room in our new office at 11 Madison Avenue — a long way from a shoes-off loft in Williamsburg.
## After the leap
I came to Clay worried I was giving up on my creative dreams and settling for a content job at a boring company. Three years later, I’m having the most fun, learning, and creative freedom I’ve ever had. Kareem was right: committing to what came “easily” to me was difficult. But it ended up bringing me closer to the work I'd always wanted to do.
Looking back, I think what made all of this possible was simple: Clay created the conditions where I felt safe enough to be myself. When I finally relaxed, trusted my team, and did the work that was most mine, the output was something that no other company could have replicated.
I see this as a virtuous loop: create the conditions where someone can be fully themselves, and you get work that couldn't have existed any other way. Your company gets more self-actualized, and so does the person. And when people outside see that happening, they join in and make something bigger.
The work I do now connects directly back to what I wanted before I even joined Clay, and what I plan to do for the rest of my life. If and when I leave, I’ll walk out knowing how to tell the stories I've always wanted to tell, and with the financial support to actually do it.
Neither my nor Clay’s success was destined. Kareem could’ve chosen not to pivot Clay into the sales use case in 2021; Varun could’ve skipped the Clay webinar that led him to discover, and later lead, the company. I could have flaked on catching up with Varun, or started something else instead of joining. None of these paths are ones that someone else can simply replicate.
But if there's one thing I pull out of it: the people and companies that commit fully to what they're uniquely excellent at tend to find a way. In the words of Julia Cameron in *The Artist’s Way,* leap — and the net will appear.
*This piece took a village. Thank you to all the advisors, friends, and teammates who helped shape my journey and these words.*
### Why great product leaders should stop obsessing over the roadmap | Diya Jolly (CPO & CTO of Xero)
URL: https://review.firstround.com/why-great-product-leaders-should-stop-obsessing-over-the-roadmap-diya-jolly-cpo-cto-of-xero/
Last updated: 2026-04-30T16:56:10.000Z
In the latest episode of Executive Function, Brett is joined by Diya Jolly, Chief Product and Technology Officer at Xero. Before Xero, Diya was CPT at Okta and led YouTube's advertising monetization products at Google. In this conversation, she unpacks her three-bucket framework for delegating decisions, why the most important part of a CPO’s role is to drive team-wide ambition, and why the best executives need to spend half their time thinking, not doing.
In today's episode, we discuss:
- Why a CPO's number one job is raising their team’s ambition, not shipping features
- How to demand the best from your team without creating a fear-based culture
- Why organizational politics is actually an incentives problem
- How Diya is “militant” with her calendar to carve out dedicated thinking time
- Why you should avoid chasing titles in your career - and what to chase instead
**References:**
- Google: [https://www.google.com](https://www.google.com/?ref=review.firstround.com)
- Melio: [https://meliopayments.com](https://meliopayments.com/?ref=review.firstround.com)
- Okta: [https://www.okta.com](https://www.okta.com/?ref=review.firstround.com)
- Sukhinder Singh Cassidy: [https://www.linkedin.com/in/sukhinders/](https://www.linkedin.com/in/sukhinders/?ref=review.firstround.com)
- Xero: [https://www.xero.com](https://www.xero.com/?ref=review.firstround.com)
**Where to find Diya:**
- LinkedIn: [https://www.linkedin.com/in/diyajolly](https://www.linkedin.com/in/diyajolly?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:12 How an excellent CPO makes an impact on the business
02:01 How the CPO role shifts under founders vs hired CEOs
03:38 Influencing a founder without going deferential
07:37 How adding value to customers is always a net positive
08:45 Why roadmaps need more risk in the AI era
12:30 How to shelter innovation teams from the existing system
15:12 What's different about being a great CPO in 2026
17:34 How AI has changed the concept of an app
18:28 It’s essential for CPOs to fly at a low altitude
20:34 How misaligned incentives cause organizational politics
25:13 Being demanding without creating a fear-based culture
28:10 Why raising ambition is a CPO's number one job
31:39 The boss who taught Diya to keep raising the bar
32:43 The hardest part of being a CPO
35:28 The three buckets Diya uses to delegate
36:30 How Diya protects deep-work time on her calendar
42:45 Xero’s game-changing early bet on AI insights
44:58 How far into the future should CPOs plan for?
47:14 What it takes to be an excellent C-suite member
48:53 Why ambitious PMs should chase impact, not titles
50:28 The four bottlenecks that stall career growth
**Brett:** Let's do it. Thanks for joining.
**Diya:** Thanks for having me here.
**Brett:** Um, so maybe a place to start is just your definition of what an excellent chief product officer does and what's the impact they're having on the business.
**Diya:** Yeah, I think a lot of people think a good chief product or an excellent chief product officer actually helps ship stuff. Uh, but that's from my experience, far from the truth. The key job of a great product, uh, chief product Officer, is essentially setting the direction, not worrying about every single feature, not worrying about even big, even reasonably reasonable sized products down to every feature level, but set, uh, setting the vision and the direction for the product, but which then aligns with the vision and direction for the company.
And then building a team around it that can execute down into the details. Because if you have a chief product, most people think a chief product officer is someone that decides the roadmap, someone that decides, uh, how each, uh, feature, uh, uh, how each feature ships, how it's designed, et cetera. And I don't think you get really good products, um, based on that.
So that's one. I think the other thing for, uh, an excellent chief product officer is just like understanding your customers deeply so that you can decide what bets to make. 'cause you can't make every bet. And so if you don't truly understand your customers deeply, what ends up happening is you make bets that don't really add value.
And then the third thing I would say is resource allocation. Right? Where do you actually, let's say you made four bits, they're not all equally important and they're not all equally complex. So how do you design your org, design your resources, or allocate your resources in a way. That you can move those forward.
And people think resource allocation or organizing is a one-time thing, but it's not our, our, the world around us these days changes every quarter. So these are decisions you have to revisit almost every quarter.
**Brett:** Do you think that definition that you outlined is the same for all great companies, or do you think the chief product officer role is quite context and maybe CEO or founder dependent that you're working with?
**Diya:** So I think that the basics of being able to explain to your team, um, the direction of the product, uh, understanding your customers and resource allocation bets and resource allocation is the same. I think the process of getting to it is very different, different companies. So if you have a founder as a, as a, um, CEO, the founders had a vision for a while.
So really is you can't go off into a room and, uh, with your team and co-create a vision. That's usually hard. 'cause I've worked for a founder. Um, I was at Okta before Zero and I worked for a founder. You have to co-create the vision with the founder and to, to a very large extent, actually influence the founder because at the end of the day, they've been thinking, dreaming of this for 10 years.
What you can often get to the table is the depth of understanding of the customer. That's where you, you, you are. Um, that's where you can come from because very often a founder starts with a deep understanding and intuition of the customer, but then they're running a company at the end of the day. And so it, the it loses, it becomes old that understanding, and that's where you can help co-create the vision.
So that's one. Um, I think if you are working with more of a, I'd say an o, um, of a executive, CEO, um, you have, you still co-create the vision. But you co-create the company vision almost because product is such an important part of the company vision. And then once the company vision is co-created, you then have room to actually genuinely create the product vision.
Ex operational CEOs are not in the, why does this button on this, uh, UI look different? But, uh, founder will be in that much of detail.
**Brett:** Do you think it takes a certain type of chief product officer to be successful in a founder run company that is different than a hired CEO run company? Or not really?
**Diya:** I think definitely.
**Brett:** Talk more about what, why that is,
**Brett:** because you've obviously done both
**Diya:** uh, yes. I, I think, um, and I was at FreeWheel, which was founder, founder led as well, um, with a very strong product. I think, um, the difference is you have to be wi will, you have to be willing to give up some level of autonomy when thinking about the product
**Brett:** in a founder like
**Diya:** in a founder led company.
Um, and you have to be willing to, um, you have to know how to influence really well, and you have to be able to understand what influences the other person. Uh, because often for, for operational executives or of, uh, executive CEO, it is, um, the metrics are clear. Business growth, customer happiness. For a founder, often they're what makes them a founder.
And I try to start a company and I, and I kind of got a taste of it, which is the reason they become successful is the whole world says they're gonna fail. Nobody likes their idea about them. So their gut instinct made them, or their, whatever insight they had is what made them, made them succeed. So more often than not, they will go by their instinct.
Whereas I think, um, an executive CEO more often goes by repeat patterns of things that are known or data. And so how do you influence in either case is very different. Um, and I think, I think the, the being with a founder, C-E-O-A-C-P-O with a founder, CEO, requires probably more EQ and understanding into what the founder values in addition to just the business growth.
**Brett:** What's that dynamic of sort of like navigating that feel like particularly, 'cause I would assume to your point, one of the things that are special about founder run companies, not always different than, than externally hired CEOs, but they have this feel, and to your point, gut instinct for the business and the customer.
And so it seems, you know, you join and it, it seems in one way you can be overly deferential
**Brett:** and then in the other way, not. Push back enough, like there, there seems like a, a, a, a very specific tension that you have to navigate.
**Diya:** Look, at the end of the day, founders want the companies to succeed, right? Um, so that's one thing. So if you put the, put the best of the company before and you are recognized, and, and I think this is true for anyone. If you have a team player in any company that puts the company before themselves, then people know where you're coming from, right?
You're coming in the best interest of the company, you define the outcomes and you de debate the outcomes, right? So I think that is the way to neither become def deferential nor to become, nor to, and to not be able to have an open debate. So, um, I think always take it back to what you're trying to achieve.
That's important and that works across the board how you, how you drive to, or how you convince someone. Maybe different ways. One is more like, well this is the world we could build if we did this. And the other is these are the customers we can go target and this is the revenue we'll get, or this is the value we give the customer and they become more sticky or the lifetime value or whatever you wanna do.
So I think those are different. But at the end of the day, if you are aligned in the outcome, I wanna build a great company. I wanna build a great product for, uh, for, for, uh, uh, for, uh, my customers. And I don't care where the idea comes from. Right. The other thing everybody thinks is like PMs or CPOs are supposed to come up with the vision.
Like, honestly, like a vision is a collection of people coming together and understanding customers deeply enough and stitch and, and then yes, usually a CPO will stitch it together. But honestly, unless your jobs, there are very few people running around that like just sit in a room all day and can like, be like end to end.
This is the perfect thing to do.
**Brett:** Do you think about value to the customer or value to the business?
**Diya:** uh, look, I think I am a firm believer that if you add value to the customer, you will find a way to, to capture the value eventually. Mm-hmm. And yes, I, I almost think of it as if you cannot capture value, then you are fooling yourself that you added value to the customer. Hmm. Right. Or enough value to the customer.
So I think, I almost think of those two as interlinked. And if you go with, I am adding, if, if you focus on adding value to the customer, you will figure out a monetization model eventually. Mm-hmm. Um, or how to monetize it. So that's one framework. I, there are other frameworks that are hard, that are easier to do.
When you do, um, large, large scale planning, so like annual planning, you always wanna make sure there are rules of thumbs all over the place. I'm, I'm I, I'm a very Google pm In some ways, um, 30 to 40% on existing customers, 30 to 40% on new time, 20 to 30% on things that are really big moonshots, right? Like depending on, depending on, and so you use those interchangeably, right? You, you go by the rule of thumb, but really rule of thumb by itself does not work in all situations. So right now, for most people, you better be taking a lot of risk in your roadmap, right?
On things that will work or not work. So, um, and these rules of thumbs don't really work right now with everything that's happening with technology
**Brett:** Share. Share more about that.
**Diya:** Well, I mean, I think right now where things are at, you are. If you look at, if you look at what's happening with ai, um, we all know, yes, AI will automate things.
We all know AI will give you more insights, but what will it change in the product, in the workflows? Will, will apps become headless, right? Um, what does it mean in terms of, for us in accounting, do we take risk on the accuracy? Should we, in which cases, these are all like risks. Do, do we, like, does our workflow change now from a workflow that drove action?
Now, agents are driving actions to a workflow that does reviews and proves it took the right action. These are all unknown, right? So we did something called, uh, we built, we built, um, and this is a great, this is a great example. We built, um, automatic bank reconciliation. What this means is your transactions in an accounting system are matched to your cash in your bank. And, um, our customers are like, no, no, no, no, no, no. You can't do this. You can't do this with a machine. There's so much nuance to it. What do you mean? Yeah, I will do it.
**Brett:** and accuracy is just.
**Diya:** Trust. Yeah. And we're like, okay, but like, it seems silly not to do this. And so we're still like, we'll do it. But in the process of doing it, a we achieved, uh, 97% accuracy.
So we saved them like 22 hours. Uh, each small business, 22 hours a week or, or a month, sorry. Um, and then, um, the thing we learned and we iterated our way into was people are uncomfortable till they can, till they can see what you did. The second you can show them exactly what you did, people are happy. So, but when we went into it and we went into it relatively early, it was unclear if this was a ton of effort that was gonna be completely wasted.
So I think, but if you didn't go into it in this era, two years later. We would've been way behind, right? So I think the pace of change is so fast right now, and the customers themselves are changing the way they use and behave with products that they themselves don't know what they'll be comfortable with.
So you do have to take some leaps of faith and, and take more risk in what you're building right now if all you're doing is what customers are asking for right now. I, I think you'll get left behind.
**Brett:** Going back to sort of the start of the conversation, when you think about being effective as a chief, uh, chief product officer, what does that now look like? You know, let's say in 2026, you want to make more bets that are obviously ev positive, but are lower probability. But the payoff could be enormous or at least high variance.
Uh, there's a wide degree of uncertainty and you have to execute through it to, to sort of understand it. How do you go from that in a very high level sense to what is gonna happen at any VIN point in time? And then to the point you made at the beginning, how you think about resource allocation.
**Diya:** this, this is, uh, this is a great point. So we actually, um, are just doing this, which is la what, what we're bets over the last couple of years in, in AI now have. Not mainstream. They're in your 20% bucket, but they're not the, or the 20% moonshot bucket. It's not moonshot, but it's like innovative. And what's truly moonshot has become even more forward thinking.
So like, what could
**Brett:** what? Yeah, what's the difference between.
**Diya:** so an exact, so an example is auto bank reconciliation worked? Can we automate book close? Can we automate, um, can we automate tax emissions? Right? Um, that's the, now, now that's the thing where like, can you automate data capture? Like, can you just, can you, can, those things are becoming more common.
Like they, you, you're almost sure, like if I can automate, if, if reconciliation works, you can automate books, close books, close works. You can automate tax, right? So those don't seem like things that customers wouldn't adopt anymore. It's just a question of how to build them at Resource allocation used to be a problem. Today you can get a lot of certainty whether you're in the right direction or not, with a very small team reasonably fast. The question more is how do you, how do you make sure they're not sucked in by the system and the current ways of doing things?
**Brett:** Say more about that.
**Diya:** Um, so innovation off or different ways of thinking often happen when you have, when you have to start with nothing, because then you have to think of a new way to do it, because if you do it. If you do, generally do it in the same way, the, um, let me think of an example, uh, an easier example here. So let's say we are thinking about if we were to start an accounting software company today, or a payments company today, 'cause we're both, what would it look like if you're sitting in an existing system?
There's so many constraints as well as so much distraction that it's really hard to rethink it from scratch. So, um, a person would go, well, okay, if I'm gonna rethink an accounting system, our ledger does X, Y, and ZI need to think how I can build something to fit this. Whereas somebody that doesn't have a ledger would start from, okay, what is the experience and then what do I need to build from there?
Um, somebody doing it in the system would go, okay, I have this other thing to worry about. I have this meeting to attend. There's this team meeting to attend. Uh, and so there are multiple constraints in free space, like in, in, in the ability to think and go deep. Um, you tend to go to your existing customers, which often they may not be the, the tech, like the early adopters, right?
Um, so I think it's just generally relatively hard to innovate something from the ground up that is completely new in an existing system. So the question becomes, how do you find a team, invest in a team, create a team, and keep them sheltered so that they're not sucked in by the system?
**Brett:** Is it just doing that is the answer or there's nuance to how you do that? Well,
**Diya:** Well.
Create a startup, if you're really, so then you have to find the right people, the right teams, the right goals. It looks, in many ways, it looks very much like what you guys do, except you can only lay one bet on one team and one set of people. So the probability of success also is much lower. Mm-hmm. But the difference is you have, you do have some industry knowledge or depth of knowledge, and you do have a hypothesis before you go in.
You don't, you don't just say, I'm gonna start a team on the site that's gonna innovate. You say, I think the world is gonna evolve in this way. It's simple example, SaaS sa uh, SaaS versus, uh, license based model versus wanted to build a transaction based model. Super hard to do it in the current system.
Existing customers will revolt. Uh, billing systems won't work. Uh, sales incentives won't work. But if you put someone on the site, this is something very easy for people to understand. They have none of those constraints, right? So your hypothesis is transaction based mo eventually the world will move to a transaction based model.
It's not a, it's not an it's, you're not going and saying, oh, just figure out what to do. That's why t
**Brett:** Building sort of on the AI theme for a second, what do you think is different about being excellent as a chief product officer in 2026 versus excellent as a chief product officer in 2022?
**Diya:** I think a couple of things. I think one is, so we talked a little bit about this. No longer understanding your customers is important, but understanding your customers can mean multiple things. Understanding your customers can mean what they're asking for, uh. Understanding your customers can also mean bringing technology to bear in a way that they don't know what they need.
The second is obviously harder, and that is more important now. Okay. So it can't just be, I go have a bunch of customer conversations. These customers want x. It does require a depth of understanding of what the problem is. Um, an example there is, um, a good example there is we were being told repeatedly that we needed to, um, we needed to show the actual bank statement, um, during the reconciliation process. And they're like, you have to show it. You have to show it. And when you dug deeper, as an example, as. The issue was not that we weren't showing the bank statement, the issue was they just wanted the total. So we could have calculated our total as an example, this is not an AI example, but like this kind of thinking, like normally in the old, in the before ai, you could have gone there and been like, Hey, um, the customers asking for this.
You dig a little deeper into the works here. If you don't truly understand what they're trying to do and how you can bring this new technology to bear to make, to deliver even more value than they're asking for, it becomes hard. So that's one thing. I think the second thing is it's not so much about like, I need to give this capability anymore, right?
It is more now the way you need to think is how do I make their workflows easier, right? It's shifted from here's the capability, do they do utilization to how do I take what exists in front of me and, and collapse the workflows and make it easier so that in a lot of cases. You, you create new outcomes of time saved, um, uh, business grown, right?
'cause you can, you can actually do stuff for the business now. So I think it, it's just a different orientation.
**Brett:** Do you, from where you sit right now, does it feel like incremental change or it's trans just night and day? E Expand on that a little like, like those, I, I understand sort of those two points, but like when you pull on that, why is that so profound?
**Diya:** the concept of an app has changed.
So your ability to think about a customer's entire day in life is just like, you can no longer think my customer wants to do this in an app. You think you have to think, uh, my customer wants to get paid by their customer. What is the best way for me to get them paid? Versus I'm gonna put a button that resends an email, right?
Uh, uh, resends an email to ask their customer to pay. Uh, now it's like. Can I bring them on WhatsApp? Can I remind my customer, ask them if they're visiting? That cus like it, it's so many other, like, can I send them a text message? Um, how often should I do it? When should I remind? What's the best way to get paid?
All of these things are a lot more possible. So you, you're designing software and not with I'm helping humans conduct work, but I'm actually trying to get to an outcome.
**Brett:** Do you think you are flying at a lower altitude on average, more in the details or the same,
**Diya:** That's a good question. Uh, yes. In these areas I'm flying at a much lower altitude.
**Brett:** and what does that look like?
**Diya:** That's a very smart question. Um, I think, I think it's being, I think while you are, and here's why you're flying at a lower altitude, because you're trying to change the way people work. You're trying to change people because you, as one of, as you as the senior product and engineering leader. Are the catalyst for change right now, right? Because otherwise people will just keep doing what they do. So I think the way things look is someti you are having deeper discussions on, you are more in the initial sausage making, you are having deeper discussions on, um, what should, uh, how does the technical architecture need to change to be able to support, right? Like usually technical architectures are reasonably well understood, but now it's like, should we do this so we have more flexibility?
Should we be model agnostic? How quickly should we be able to change models? What can be probabilistic? What cannot be probabilistic? What has to be deterministic? Um, do we need a UI here? Will the UI be chat based or will it be a, will it look like it's traditional? Should chat be a sidecar? Should chat be the ui, right?
Like, so you get into this, all these levels of detail because you're fundamentally changing the app. Three years ago, we would've said. Oh, I'll give you a very basic example. Um, we want to do, we wanna, let's build for the mid-market segment, right? Like we don't just wanna be small business. You'd go and say, okay, can you guys figure out how to build for the mid-market segment?
And, uh, let's go figure out. And you'd do a bunch of customer calls and you'd be like, okay, here are the list of features we need to build. And then your team's been through the process of like building the us trusting the work, like building the workflow so they could go work autonomously and then come back here.
Every decision starts becoming very strategic and fundamental to the direction of the product, the way it evolves, and the tech stack, the way it evolves for the future. Mm-hmm. So yes, you are much more in the sausage making.
**Brett:** what's your definition of politics or a political company or executive team?
**Diya:** Whenever there are more than two people in the room, there's politics. This is at home. This is in homeless 'cause you've lived with each other and like, but this is everywhere, right? Like it's three people, which means any two can have an opinion that the other person doesn't have. And so the weight has changed on the, on that one person that's left out.
So to me, like I think I accepted long ago, whenever there are three, if you have a company of three people, there's politics. Mm-hmm. Right? Um, I think to me politics means at its core form two things. People are not rowing in the same direction. Okay. Um, which means there's friction in the system to achieving an outcome and people are carrying more burden of convincing, influencing, aligning than they have to.
And then I think that politics and then at the surface level, if you touch the why it is incentives are not aligned for some.
**Brett:** What about when you think about the, the different businesses that you've worked at and you think about the most political environments and the least political environments, what's going on? Like, what is a CEO doing that's different? What is an executive team, you know?
**Diya:** a, yeah, that's a very good. So I think one is, so, so when I talk about incentives, the incentive system has to be set well, right? But, but by the CEO and then subsequently by the executives. Um, I think two things. When a leader jumps in and solves problems across their teams, there is a lot of reason for the teams to lobby for their self-interest, right?
Which then creates a me versus them. When a leader rewards collaboration, even if the collaboration resulted in an imperfect situation, um, as much as they reward impact or enough, like impact is important, but like enough. Then I think that sets the behavior of collaboration because it is an outcome that is, again, it goes back to incentives.
If, if you are, if you're recognized for it, you will do it. Right. Um, if you reward putting the company first versus the best answer always. Okay. Um, that's a system where, where, uh, that's another thing a CEO can do, right? It's, and, and when you say reward the company first, it could be, you may have the right answer, but in executing this, you are going to actually make a hundred people demotivated, right?
So is that ultimately the right thing for the company? If you think like that and you reward that, I think that is, that that is what leads to lack of politics. And then I think, look, I think the other things are how safe do, like what culture, like do you create a culture of. How do you support your people?
How safe do you feel? Because when you feel safe, you're, you don't generally, you're not generally looking, um, you're not generally looking to, to, when you feel safe, you generally tend to act in the best interest of the environment, staying same. When you feel unsafe, unsafe, then you either want something for the environment or you wanna change the environment.
**Brett:** When you go back to the, the comment about, um, the incentive structure,
**Diya:** Yeah,
**Brett:** can you make that more tangible? Like what if incentives are important for a whole host of reasons, but one is to get people to do what's best for the company, is maybe one simple way to think about it. Talk about like the different levers.
**Diya:** yeah. So examples, um. If somebody did not, if somebody's project did not go well, but they went outta their way, project product launch did not go well, but they went outta their way to, uh, make another team better. Do you increase their comp? Does that go into their performance? Is that recognized it on all hands?
**Brett:** Do you think that is more important, less important, or the same importance, uh, versus comp?
**Diya:** I think there is a balance. You wanna work in a culture where you feel empowered to do the right thing you wanna work or empowered to move away. Actually, I should say this differently, autonomy, sense of purpose, growth and comp. They all need to be balanced. Um, I don't, I don't think most people for long periods of time can just be coin operated.
It's just really hard. Human beings are not made like this. It's just really like, imagine working in an environment that gives you a ton of money, but you do it again and again and again and again and you're doing the same job again. I just don't think it works long term. You tend have a of attrition,
**Brett:** So you talked a little bit about the importance of creating a, a safe or or, or supportive environment. What are your thoughts on, on when you're leading a function, the role of being demanding and having high expectations and like how those fit together?
**Diya:** I think you can do both,
**Brett:** Talk more about that.
**Diya:** I. I think you have to do both, right? So if you demand, you have to demand a lot to get results, especially in this day and age, right? Uh, but if you demand without giving people the support to succeed and letting them know that taking risk is okay, and failure is okay, you're gonna have a culture where nobody takes risks.
Nobody tries to grow. And, um, everybody is, um, it's a fear-based culture. There's no innovation, there's no growth. Everybody's doing the easiest things. Your roadmaps are sandbagged, your revenue numbers are sandbagged, right? Like nobody's willing to take risks. So I think what I tell my team is like, look, we can't know the future.
We can only try. You can't be wrong a hundred percent. You, you can't fail a hundred percent of the times. But I don't expect a success, a, a a a batting average of, I don't expect a batting average of a hundred, a hundred percent. I expect a batting average of depending on level 70, 80, 70%, et cetera. This is like, if you, if you go back to OKRs, right?
Your OKRs should be that your average should be 0.7 in the score of the okr. Mm-hmm. If it's always one, you haven't stretched yourselves and it should be okay to be 0.7\. So that's what I mean, right? Uh, by creating an environment that's supportive and, and allows you to stretch. Um, so that's one. I think the second thing is when a person is fitting into, let, let's say somebody gets promoted and is trying to do a new role, can you make sure that.
Not you personally, but you've created a culture where there's enough support around them. How do I do X? What does it mean to do? Y Can you give people enough time to grow into their roles? Is another example, right? If somebody takes a huge bet, can you go? So for example, um, uh, we took a bet where we said, and I, and I did this.
I'm like, I don't wanna wake up in two years and find out that the entire app is agents in a chat. So we're gonna go off and build our own app on the side. That is where you're gonna do accounting from a chat, okay? And it's all agents. And the effort failed mainly because customers are not there. Like they're not ready.
And maybe accounting will never become purely chat just because of the amount of data. Uh, but can you sell it? Can you. But the team we had there, can you like celebrate their failures, right? Can you celebrate failures You learn from? The question isn't, shouldn't be, did you fail or did you not achieve an outcome?
The question is, what is your batting average? Is it an acceptable batting average? And then when you failed, did you learn from it? And are you repeating the same thing multiple times?
**Brett:** Do you find that a portion of your job is to raise the ambitions of the org and, and, and you, somebody says, well, you know, we can ship it on,
**Diya:** That's literally my number one job.
**Brett:** expand on that.
**Diya:** Um, it's very interesting if you are, what you get, as you get more senior in the org is you start noticing things across teams and you also right for your, your wrongly have input from outside the company and have. And your job is to bring input from outside the company in terms of how, how things should function within.
And so you, you're not stuck in the doing as much, so oftentimes you have more perspective. We just went through it. My whole team is so stressed out that we've over committed for next year and I'm like, nah, I don't think so. Uh, because, uh, I saw us go from as, as a system, not as individual teams because you're there looking at their own teams.
I saw us go from a velocity of x to a velocity of y from a ch architecture change of X to an architecture change of YI am seeing the trajectory, I'm seeing which teams are of outperforming the trajectory, which means other teams can get there. And my decision's based on that. And I'm, and, and I'm seeing where the slack in the system is.
So I think you do end up getting a better sense in many ways, unfortunately, of how far you can push the teams. And so your job is to get them to rise to that level. Now, if you are always unrealistic, somebody told me you're being unrealistic, right? Like, they're like, when you talk like this, it sounds like you're unrealistic.
And I'm like, okay, lemme show you the data I'm seeing. The data I'm seeing is, here's the benchmark here, here's where we are at the be we've increased by, uh, productivity by let's say 50% in the last two years. And the world is increasing productivity by another 50%. So we should be able to do that. We'd like, we've caught up the world.
There's no reason we cannot. And oh, by the way, here's where I think the slack is. They're like, oh, that makes sense, right? So I think, I think often your job is to raise ambitions and push in a way where if you push so hard that people always fail, that is a doom loop, right? And then people are gonna start saying, yep, sure.
We'll say yes to you and it won't work. So there's this judgment call of like how far you raise the ambitions. And then what data are you ba raising those based on? Which is usually not the way people think about it. Like usually people go and say, here's the amount of work I have to do and this is how long it'll take.
And this is what it means. You look at more macro trends and, and and, and, uh, both inside the company and outside.
**Brett:** And based on that, it's, it's more quantitative where it's really, there's just a, when you're really experienced, this is getting this right. Okay.
**Diya:** It's both. It's a combo of both, right? It's not, it, knowing that X team is performing better than y team is really hard to say what is performing better?
**Brett:** Yeah, because it's complex.
**Diya:** It's complex, but knowing you're getting more output from this team versus this team, and so this team has found some secret, why can't you raise your other team to the level of this team?
That's a gut call, right? Going. Yes. I think the complexity is the same. Yes. I think. People on this site might need a little bit of change or need to learn a skill or something. Those are gut calls. There are also, obviously you can benchmark externally, benchmark internally and go, we did X last year, we did y the year after.
And like industry benchmark says, here's how productivity is increasing.
**Brett:** Who in your career has done the best job of this, of, of demanding the most of you? And like, what's the story behind it?
**Diya:** I'll say Sukhinder, has probably taught me more than anyone I've learned in the last, like, like it's taught me an exceptional amount while giving me a tremendous amount of autonomy, uh, on things that I know well.
**Brett:** What, what, what did she teach you?
**Diya:** Um, how do you raise, how do you, how do you keep raising the bar while being supportive? Right? Um, how do you mix?
Okay. Um, global, never Xero is globally so complicated. How do you globally scale this way? Right. What excellence looks like outside of product and engineering? What is excellence in marketing? What is excellence in sales? Or what's excellence in finance? Right? Because here I have someone who is actually an expert in all the domains I'm not in.
Mm-hmm. Right? Um, so, and relent, relentless relentlessness. Just how do, how are you relentless without tiring our teams up?
**Brett:** what do you find very tricky about being a chief product officer? What's really, like, you've been doing this for a while, what's really hard about it? Or maybe if you're not in the seat, you don't quite get it.
**Diya:** I think a lot of people would think it is about making a lot of decisions, and I think the more senior you get in any role, especially in the product role, it is about making a few decisions that are big and irreversible. And you need more time to think than to do. And the only way to get there is to have very, very strong lieutenants, which I've been blessed with.
I've been able to build up my team to have that so that you actually don't have to do a lot of the execution. So an ex, like I said, like I'm not gonna, I'm not gonna be able to execute my way out, or my team's not gonna be able to execute their way out of whether what a headless app looks like. That's a deep thinking.
You need time. Um, you are not gonna be able to execute your way out of what the next genus, uh, SaaS app looks like, right? You, you will do a bunch of experiments in the wrong direction. So I think that's what people, people think it means. More reviewing, more doing, and I think it actually, you, you need to be very focused about which decisions matter and what matters, and then spending time on those things.
I am. Famously, I am awful at email because I'm like, email is tactical. Right? And I, I, and like, I'm terrible at it. Um, and people, it's not because I run out of time. It's because I'm like, okay, that's today's problem. And I, and there are enough people in the sys in, in the org that will solve it. My job is not solving today's small problem.
My job is figuring out where we should go in the future. And I think that's not, that's a good functioning org and that's not understood very much. I think oftentimes when you step into the role, you go, my job is like actually making sure everything is done.
**Brett:** Is it easy for you to figure out what are the decisions that you really have to sit with and wrestle with versus those that should be pushed down?
**Diya:** Uh, so I have a mechanism. So there are two mechanisms, right? Mechanism is I will push down stuff. And then wait and see what fails. Okay. Because often if I try to do, I may hold too much, but I'll generally push down stuff and then like keep enough of an eye to see like if it, if it fails or not. Actually I'll push down stuff that has impact below a certain amount and not worry about it till somebody escalates.
Then there's stuff like this really matters for competitive next year. Like this, this set, this set of pro or this product we're launching or this. Um, so we were building tax in the uk. That really like is a big, meaty thing that can change our position. If we can do integrated attacks, uh, um, uh, closing your books to tax, I'll push it down, but I will make sure I have enough status updates to know when things are going well enough in as light touch away as humanly possible, or I've delegated it to a direct, um, that I have a lot of faith in that is delivered weekly, in which case I won't worry about it. And then there are for all other, and for, sorry for the big restart. Sorry. So I put decisions in three buckets. One is like impact on the business, but like not make or break for the business. Those are delegated down until somebody escalates decisions that have big impact on the business. But what you have to do is fairly certain, in which case I delegate it down, but have, but do keep an eye.
Whether it's by putting a trusted lieutenant that will raise, escalate that I trust to cash the issues and escalate. Or by making sure there's enough status update. And then there are decisions that are just ambiguous. What is a, again, I go back to like, what will the UI of tomorrow look like? Mm-hmm.
Right? That, that you just can't delegate. Um, so most of my time is spent in the big things that go wrong, right. And even more time is spent on the things that like, are just ambiguous. You just don't know the answer.
**Brett:** How much of a given week or month goes into those big, ambiguous,
**Diya:** Uh, 50 plus percent. 50%, right? No, 50%.
**Brett:** I feel, I feel like great executives would want to do that, and then the day to day just gets in, in the way of that, you
**Diya:** Uh, so I, I have a right. I do two things.
**Brett:** you never respond to an email. It saves you a lot of time. The more you're, if you respond very quickly, what happens? You get more email.
**Diya:** exactly. So I, like, I eyeball an email and it's truly breaking. And I, in many ways it is bad because I forget, like I, I don't get to urgent emails sometimes, but people know that they can find me on the phone if it's truly urgent, right? Um, but yes, I am notorious at being awful at email and Slack like awful.
Um. My, my trick is the following. So I actually will carve out one full day where I will not do meetings right? Every week. Every week. It doesn't matter. I will not do
**Brett:** And you really protect it.
**Diya:** I really protect it. Um, and again, like people will tell me I have more flexibility to do that than others, but, but I will try really hard.
The second thing is, it is harder in this job, but I also protected, uh, at least two hours a day. Um, usually at the end of the day, my brain, I'm, I'm a night person. So like I, most of my creative ideas happen, like unfortunately between nine and 12, uh, it's harder in this job because of the global nature. Uh, but I would do that, but that's another thing I do.
So I, I, and then it's not only about thinking yourself, then it's like you have to bring people into a room. So I, most of my ears laugh because I am militant about my calendar. Like I'm literally militant about what meetings get, get on my calendar. Um, and I'd say you don't always need 50%. Like, but right now, if you are not spending 50% of your time thinking about what your product will look like, what value it'll deliver, it's just gonna be hard to compete.
**Brett:** And so.
**Diya:** And you have to be blessed with a great team. I, I, in the last three years, I think I'm at a place where like I can close my eyes and my team can do it, ton of the heavy lifting on day to day.
**Brett:** So when you have this, step one is creating the time for it, what do you actually let, let's say on tomorrow, Friday, you have the whole day clear.
**Diya:** Yeah.
**Brett:** What are you actually doing to work on these really important, ambiguous problems that at least in your mind are, are kind of your core jobs?
**Diya:** Um, so I'll pick one, right? Um, I, I won't say I'll make progress on all of it. So at any given time, I think you can go very deep on one. So let's say, um. I take a new problem 'cause I've been talking about how the apple will change for a while. Let's say, I wanna figure out how SAS models are changing. So tomorrow, tomorrow I would go, um, close all the tabs that are open.
Uh, basically I actually switch my browser from Chrome to Safari so that I can't actually get into my work browser and literally go and see like, what are people saying about it? Um, has anybody else done it? What feedback have they gotten? Can I try a product like that? Um, if I were to write down what it would take us to move in that direction, what would I be worried about?
What would I not be worried about? Um, what are the risks? So it's really is like just exploring the world outside. It's, it's exploring the world outside, gathering information, coming in, thinking about it, building a structure from where you can have a debate, right? Teeing the debate up. Okay. Um. Maybe you could likely for something like this, you can't tee a debate up in one time.
Right. Um, you probably do this for like, let's say 2, 3, 4 weeks, and then you can tee a debate up and then it becomes, okay, if you've debated it, then you go, okay. Now that I've debated with everyone, it's big enough where like, I need to give it more structure. So then for the next 2, 3, 4 weeks after that, it'll be, I'll be giving it structure, trying to write either a document or build a prototype.
Now it's very easy to build a prototype. Mm-hmm. Um, and then it'll be okay, bring it back. Either at that point you hand it off to someone, or if it's still too big, then you take feedback once again, socialize it so that that's what you would do. And then, then when it comes to execution, you're very clear on what has to execute.
**Brett:** When you think about the last few years in this category of very big ambiguous problems that, that you have to solve, what's, what's the one that is like you really nailed? What's the story behind it?
**Diya:** So I can give you two very different examples. Um, one is an old world example, not ai. And then I'll give you an AI example. Um, an old world example is. How does a company like Xero compete in the us right? This was, um, uh, our, our, uh, uh, head of m and a, right? How do we compete in the us? Like it's very clear if we just do it organically, it'll take too long. But what is the right bet to make? Is it if we do something inorganically? Is it to acquire another bookkeeping provider here? Is it to acquire tax provider here?
Is it to acquire? Like, what, what should we do? And I think we bet on, we bet on lio, which everyone knows we've, we've acquired Lio and the, and the decision we made, which since has proved out to be, in retrospect, proved out to be an amazing decision, uh, is. For small businesses, the most important thing is their cash flow.
They don't think about accounting, they don't think about, like yes, they think about paying people as a, yeah, as a, um, as a, um, re yeah, as a requirement, but cash flow is most important. Mm-hmm. And two, if you could build a way, if you could own controlling their cash flow or making the them have better cash flow, that would, in a way that is world class, that would probably be a great way to attract attention and get entry. Invoicing. There are about a hundred, like ar there are hundreds and thousands of companies like, uh, doing ar. So it's probably not the best place to go to Bills, interestingly enough. Um, even before you incorporate a company or you invoice someone. You do, you pay legal fees, you in tech, you might pay to do a prototype somewhere else.
You may pay for supplies. Bills is actually, interestingly enough, the first thing a small business does. So a payments company that is early in the flow of a relationship with small business and then trying to find a company that had the right tech stack, right the right founders, had the right culture, right, had the right uh, product.
**Brett:** Do you find most of the time that's the case?
**Diya:** I think most of the times,
**Brett:** It it is just, is not glaringly obvious. Only in retrospect.
**Diya:** yeah, I think the big decisions are not clearly obvious and I honestly think like.
Batting averages on big decision. If, if every one of the big decisions you take turns out correct, you're doing something very wrong, like you're not taking enough risk, something's very wrong. So the batting average, again, like I say this like on big decisions, is like if you're batting average is two thirds,
**Brett:** You doing
**Diya:** probably doing a good job.
**Brett:** What was the AI example you were gonna share?
**Diya:** the air example was, um, interestingly enough, everyone around us in our category was doing was staying away from, um, they were doing, uh, AgTech uh, actions. Okay? Um, the bet we took was AgTech actions are important, but the ability to chat with your app to get financial insights is really important as well.
And insights are gonna turn, quote, unquote, gentech as well. In accounting, people were really worried that what if the thing hallucinates and you return wrong information. We made a bet early on. We call this our insights product. So financial insights where you literally can go to our chat bot jacks, our chat jacks and you can basically, um, do a whole scenario planning.
And when we were making the decision, we're like, can you do this at accuracy? What if we make mistakes? What if we misguide people? And I think in retrospect, just going and saying, we're gonna do it, we're gonna do it at accuracy. Um, and then pushing the teams to do it at accuracy and putting in the scaffolding that was needed for the accuracy.
It completely just, one is like we're ahead in the market, nobody else does it. Uh, second and we're at like 95% accuracy or something like in the answers return. And you can do pretty complicated things. Like you can go, should I add another shift? Should I buy, get a loan? Should I buy a car? Like you could do pretty, like, it's literally like talking to your advisor. Um, but it also helped us just up our AI infrastructure. What I mean by that is how do we do evals? How do, what do we use for ground truth? Right? Like it just because the problem was so hard, it just completely changed the game
**Brett:** Do you find that often? That, that if, if the, if you sort of raise the bar on what you're willing to do, it forces a lot of the enabling pieces to come into place.
**Diya:** yes. This is why, uh, as often as I'm called irrational, I'm like, no, you give human beings something to do and you motivate them to do it, it'll get done. We've done way bigger things. We've learned how to fly, right? Like, so
**Brett:** We got rockets in
**Diya:** we got rockets in space. Like, we've, like, we've done a lot, a bunch of bigger things.
**Brett:** Right. Um, what, what's something that has gone quite badly,
**Diya:** I also think, um, and this is what convinced me, that like while SaaS workflows will change, workflows will stay there. People don't know what to do when they come into an open chat. It's, it's very different. When you come into a chat with something in mind. It's very different when in your workday you open the chat and you go, this is not the core thing.
I think about like. Small businesses don't come to us thinking, oh, I wanna now interact with accounting, or right now I wanna interact with payroll. Right. Um, so they need the structure that guides them through. And then at, I don't think when it comes to finances, people will ever be comfortable without some kind of review workflow.
Um, because no matter what you will want to go, even if you look at the review workflow only once out of 10 times, you will want it to be there and be able to, you will want the audit trail to go back. And the chat only interface makes that very, very hard. And so I think, I think we put in too much time, too much effort into that.
We gotta, the good thing is we got a lot of learnings for our, for our current product and we have some really cool new ideas that I, I'm not ready to talk about yet. But I think that was a thing that we could have shortcut.
**Brett:** At a business of your scale, how far in the future are you spending most of your cognitive calories?
**Diya:** Look, the answer differs. Um, it differs from what it was, let's say, three years ago to now. Uh, now things are so uncertain that you're really thinking 24 months and that's become the future because things are moving so fast and nobody knows. Historically, you would be laying the groundwork for more than two years out in the future, right?
You would be going, okay, um, I've set these things that are gonna come to fruition in two years. What do I wanna do after that? How do I start laying the seeds? For what? Like making the decisions and laying the seeds for what needs to happen after that. I think now it's more like, how do I lay the seeds to reach a completely different situation in two years?
Or like, not even seeds, like how do I lay the, like how do I start, how do I start getting the org to execute And, oh, by the way, execute in a very different way to reach a completely different state in two years or 18 months.
**Brett:** Do you think given the environment that we're in that, that you need just many more bets? Just the total number of bets needs to go up,
or it's more just the nature of what the bets are? Right.
**Diya:** So saying many more bets is a little dangerous, right? Because they, they, they, it's very like, you could do a hundred things today, but do they amount to something? I think. It is very important to have a, I think you, you need today, if you have one hypothesis on how the world will work, very dangerous. If you have, I'd say somewhere around two to four hypothesis or where the world will be, and then your probability on that, and then, then you line up your bets accordingly, right?
So, um, will apps get more headless? Yes. So like we need to start up, will apps get more gentech, almost a certain probability. So there should be a bunch of resources on that. Will apps get, um, more head, will apps get more headless? Not saying completely headless, high possibility. Um, so you should have some bets.
There will. SaaS apps completely disappear. I, I the will, the workflows disappear. SaaS is an overloaded term, probably not, at least in our category, just because it's compliance. You need, like, you need the workflows to prove that you're doing the right thing to submit the taxes. There's an audit trail. You, you want a little bit of a bet there, but are you gonna put like more than 5% of your 10% of your battery resources there?
Probably not. But you do wanna keep up with the learning so that you can make a pivot as soon as you can.
**Brett:** Something you only hinted at that we haven't talked that much about is what does it mean to be on an executive team?
**Brett:** What does it mean if you are excellent in the capacity of being a team member on sort of the e-staff of a company? And is that any different than, you know, you have your executive team underneath you?
Is that any different than being world class as an executive that's underneath you versus this peer set that is running the company?
**Diya:** When you get to the C stuff, you are truly holding the. Business or, or the, the, the context one is you need to understand multiple domains at some level of depth, excuse me, to truly have impact.
I think especially as a CPO, it's very, very hard if you don't understand multiple domains in some ways. The second thing I think is you are problem solving. You switch between problem solving in your domain to problem solving at the company level. And a great example there is, I can talk about what AI is gonna do to the face of an app till I'm blue with my team and believe that's an existential threat. But that conversation does not make a ton of sense in depth at the C level. What makes a ton of sense at the C level is, uh, with my peers is like, okay, I need, what do we need to do to make our numbers this year? But what do we also need to do to make sure we're there in three years? What does the resource allocation look like?
Oh, by the way, what does that mean from a cost perspective? Do we need to go acquire something? Why in which category? So it, it, it, it's just different. I think you put on different hats. It's not even altitude. I think you put on different hats, um, in those functions.
**Brett:** When there's a senior PM that is a star and wants to have lunch with you or you know, then you have your direct, and then in between that you have a director or vp. For maybe a few of those different levels.
What's the advice that you tend to give if they want to eventually be a chief product officer
**Diya:** I think so for me, it's been interesting in that like I haven't said I want Title X ever. Right. The recipe that's worked for me, and this is what I tell them. I'm like, I, I don't know if you should worry about a title. I think if the title happens, great. But you should worry about what you wanna look back at when you end your career and be proud of. And to me it's been a few things, which is how do you continue to grow and what makes you continue to grow, keep seeking those experiences out. Growth by itself is not enough. How are you having impact? Because impact fuels growth. It's just, it, there's like, the more impact you have, the more chances you get for growth. Yeah. And then work with people that bet on you and will help you grow. So that's one, one formula I've used. Um, and every time I take a new job, like it literally is that formula, right?
Um, the, the second thing is I think people get too stuck in one experience. So to the extent you can, and this, this is why I say don't worry about titles, because often you need to go back to go forward, seek out. As many different experiences, whether that means you're working, you do startups, mid-size, big companies, whether you change domains.
**Brett:** Even if they're not trying to climb the ladder, but they're their expanding scope and impact. Are there bottlenecks that you see that that tend to be patterns like that, that pop up, that get people stuck?
**Diya:** Being able to demand high performance from your team, uh, often to people feels like, um, you are pushing them too hard and why will they wanna work here and why will they wanna work for you and you're a bad manager, et cetera, et cetera. Uh, and that taking its extreme performance management feels very bad and it's a very hard thing for even the best of people to learn.
I think the second thing that people really struggle with is not knowing everything. The more senior you get, um, and how you balance for that. And I think the third thing people struggle with is not doing everything. Uh, so this goes back to the. The more senior you get, the fewer things you pick as your focus.
And I think the last thing is, as a junior person, so you have the most flexibility to carve out thinking, thinking time. I think at, at the two ends, either you're very senior or you're very junior in the middle. It, it's very hard to carve out your own thinking time because you're at the behest of too many people and too many things and too many fires.
Um, so I think, but if you don't do that, you can't, you can't invest in having higher impact or your growth. Sometimes the investment is for your growth. Uh, sometimes the investments for impact. So those are the places where I see people start, start to sort.
**Brett:** In each one of those, are there, do you have a piece of advice or, or, or something that can be condensed or is it just too multifaceted?
**Diya:** No, I think, uh, for the performance stuff, like look, um. You build a gut intuition on what's possible and what performance you need. And generally, your gut intuition is right, like demanding, demanding of other people what you would demand of yourself is never a bad thing, right? Um, and then demanding more of yourself is also not a bad thing. So, so one of my big rules is like, if I won't do it, I won't ask people to do it, right?
Um, this is why I often get told, uh, you do too much and you ask too much of people. Um, uh, so I think, and I think the, the not having performance in a team is actually detrimental to the whole, uh, you won't get the right, the whole team won't get the right opportunities. You won't retain stars, you won't learn from other people than dealing with someone who is not performing well.
Because even one person can push, pull a performance of a team down by 20, 20, 30%, right? Because other people are carrying the weight. So that's one. The second one was getting okay with not knowing everything.
I think the, the, the advice I give people is, and I've had, I've had so many people struggle with this, which is like, you are, you're, you need to hire people who can do their jobs without you. You need to hire people who can step into your role in a couple of years. And by the way, you can learn from today because nobody's immune to learning, right?
Um, and, and they'll obviously learn a lot from you, but you can learn from them. That's the only way you're gonna succeed on focusing your time, on moving the ball forward in bigger things. And I think it takes a while for people to get there. Um. And it's okay not to know everything. It's okay to say, I have to go ask so and so person as long as it is not as long as you know, enough to make sure that things are not off track. Um, thinking time. I think, look, it's hard, but like, this is what I tell people. Like every company has a rhythm. Some companies start really fast on Mondays, but then Fridays are slower. Some companies start very slow and literally run into the weekend. Some companies actually like slow down in the middle of the week, find the thing that works, right?
Like find something that works and try to reinforce it to the best of your abilities. Um, and if you don't ask to, if you don't tell people that that is the situation, people are gonna tra travel over the calendar. This one's easier said than done, to be honest. Um, but you have to find a way. I, when I was, when I was.
A director, I literally would call in sick to get my thinking time once in a while because I'm like, I, I just like, there's, there's like, and I would tell my manager, I'm doing this because you'll respect the fact that I'm, I need to get stuff done and I need time to think, but like, I can't convince a hundred other people, so to them I'm sick.
**Brett:** Maybe lastly, you mentioned this at the very beginning of our conver, or maybe it was towards the middle when we're talking about politics at companies. Um, what is it that you want your reputation to be
**Diya:** a great question. So, um, multifaceted but honestly known for actually being able to build products at change industry is one and second, build businesses that help like that last for a long time. Um, is the second.
**Brett:** good place to end? Thanks so much for doing this. We really appreciate it. It was great.
### Inside Artemis' "AI vs AI" war | Shachar Hirshberg & Dan Shiebler (Co-founders, Artemis)
URL: https://review.firstround.com/inside-artemis-ai-vs-ai-war-shachar-hirshberg-dan-shiebler-co-founders-artemis/
Last updated: 2026-04-21T14:46:20.000Z
In this episode of In Depth, First Round Partner Josh Kopelman sits down with Shachar Hirshberg and Dan Shiebler, co-founders of Artemis, the AI-native security platform that just emerged from stealth with $70M in combined seed and Series A funding. Shachar and Dan unpack how they built a 30-person team in seven months, why AI-native companies are outperforming their AI-enabled counterparts, and why they plan to stay on a texting basis with every customer, even at scale.
In today's episode, we discuss:
- How to interview for AI fluency when building an AI-native startup
- Why founder-market fit is a critical early signal for startup success
- The surprising lesson Dan learned from founder-led sales
- How Dan and Shachar are instilling customer-obsession into Artemis’ culture
- How the two co-founders approach conflict and decision-making
**References:**
- Abnormal: [https://abnormal.ai](https://abnormal.ai/?ref=review.firstround.com)
- Amazon Web Services (AWS): [https://aws.amazon.com](https://aws.amazon.com/?ref=review.firstround.com)
- Anthropic: [https://www.anthropic.com](https://www.anthropic.com/?ref=review.firstround.com)
- Artemis: [https://artemissecurity.com](https://artemissecurity.com/?ref=review.firstround.com)
- CrowdStrike: [https://www.crowdstrike.com](https://www.crowdstrike.com/?ref=review.firstround.com)
- Demisto (now Cortex XSOAR): [https://www.paloaltonetworks.com/cortex/cortex-xsoar](https://www.paloaltonetworks.com/cortex/cortex-xsoar?ref=review.firstround.com)
- OpenAI: [https://openai.com](https://openai.com/?ref=review.firstround.com)
- Palo Alto Networks: [https://www.paloaltonetworks.com](https://www.paloaltonetworks.com/?ref=review.firstround.com)
- Todd Jackson: [https://www.linkedin.com/in/toddj0/](https://www.linkedin.com/in/toddj0/?ref=review.firstround.com)
**Where to find Shachar Hirshberg:**
- LinkedIn: [https://www.linkedin.com/in/shachar-hirshberg/](https://www.linkedin.com/in/shachar-hirshberg/?ref=review.firstround.com)
**Where to find Dan Shiebler:**
- LinkedIn: [https://www.linkedin.com/in/dan-shiebler-10219b42/](https://www.linkedin.com/in/dan-shiebler-10219b42/?ref=review.firstround.com)
**Where to find Josh:**
- LinkedIn: [https://www.linkedin.com/in/jkopelman/](https://www.linkedin.com/in/jkopelman/?ref=review.firstround.com)
- Twitter/X: [https://x.com/joshk](https://x.com/joshk?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
00:06 What Artemis does and why now
02:51 Shachar’s AWS and Palo Alto playbook
05:15 Dan’s founder journey: From Twitter to Abnormal
08:51 Why founder-market fit is critical for startups
11:38 Finding the right moment to take the leap and build
13:52 The hiring process that powers a startup in stealth
16:58 Building a team centered on AI capabilities
21:48 How AI implementation changes dashboard metrics
23:22 The ICP they chased and the one they ignored
26:44 The magic of closing the first customers
27:49 The surprising signals of early product-market fit
32:06 Critical lessons from founder-led sales
33:51 Why the first product should make founders uncomfortable
36:03 Hiring 30 people while still in stealth
42:08 “Should we be arguing more?”
43:37 How the AI security market is evolving
49:03 Why AI-native beats AI-enabled company structure
51:09 The most surprising moments as a first-time founder
Josh: Shahar Dan, welcome to the show and congrats on the launch. just to make sure everyone has enough context, could you start by explaining what your company Artemis does?
Shachar: Sure. first, thank you so much for having us for, for all the support throughout the way. Uh, we really appreciate that. Um, so Artis helps companies detect and stop attacks in their environment across all their stack, their cloud identity, network information, everything that could try to target their organization.
Artis detects the bad things and helps companies stop them before they can impact their organization.
Josh: So you've just come out of stealth, you've announced your seed and your series A funding along with your first several customers. Can you give us a sense of where the company is right now, team size customers, what the product looks like in production?
Shachar: first, because we grow so fast. Everything changes every week. So. in the past, so we started seven months ago and we are now about 30 people in the team, um, growing about one to two people, every week and scaling across engineering, product research, and go to market.
the product that we built was built in a nine 80 way from the get go, and I'll let that data, the technology of it, but just from the product perspective that allows customers to get a dramatically better value and ease of use compared with traditional legacy SI and legacy detection products. And what we see in practice is that. The users of the product spend about three to four hours every day, in the product because they're just able to get the outcomes they want using Artemis and most security product. It's kinda like a box that sits there and they don't really know, what is happening. so we are really happy about the engagement and obviously work with the customers to make it even more delighting.
Dan: Generally what we see is that, that we've been able to move very quickly because we've built the company in a way where we can develop everything entirely with AI native tooling, we've developed our code base and developed our internal processes so that everything is entirely leaned into what AI systems are capable of today and where we think they're going.
Continue moving in the, so there is no, traditional, Manual work required to be able to bring concept into prototype and bring prototype into the hands of customers and iterate very quickly. We're able to iterate on customer feedback extremely quickly, and also iterate from the things that we see in the data into improvements in the product itself in a way that's both secure and very fast.
Josh: Shahar, you got to know. Customer and the product very well from your time at AWS and Palo Alto, in what ways is that an advantage, and in what ways, if any, is it a disadvantage when it comes to starting a brand new company in the space?
Shachar: Yeah, that's a great question. So I've been in this space for, in technology and cybersecurity for the past 15 years, but in the broader security operations where we operate for the past decade, I kind of seen all the, I'd say two, two last three iterations of this market. And this has been particularly valuable because.
I know the customer very deeply. I worked with them on multiple products to help them achieve their goals in this area. And that builds a lot of trust and also a lot of intuition on what customers need and what they need and don't even know they need yet. But they will discover that in a few months.
And that's allows us to be on top of things in terms of the product roadmap, which as Dan mentioned, we just deliver on very quickly. I think the flip side is that you are seeing, because you've seen different products in the market, you know how things are. So you have to continue to push yourself to reimagine what is possible today when you rebuild everything in a native way.
And this is why we've been really pushing hard on ourselves, but also everyone on the team to adopt every AI native technology. Use it. All the time in every possible ways, and then bring the learnings back into the product. And really every paradigm that we think that customers need, we go and look at it from the lens of, okay, because we're starting from scratch with AI being so powerful today, how we can reimagine and make it a hundred times better compared to what you used to be.
Dan: Security operations teams are dealing with a lot of the same problems they've been dealing with for a long time. A lot of things have gotten harder and more difficult as the landscape has shifted.
Josh: Like what type of things?
Dan: both attackers have much better tooling today and can move much faster. So it raises the bar on what kinds of response are needed, and software has become much more complicated.
And that also has raised the bar on how difficult it is to secure states. the tooling landscape has changed and what people are able to do today. What's possible to build today is changing, but a lot of the underlying core problems are either the same or the extrapolations of the same problems that have been there for a long time.
Josh: So Dan, you. Were an ML engineer at Twitter before you went to Abnormal. Are there things you learned at Abnormal that you're applying here?
Dan: Yeah, absolutely. The, a large part of the goal at Abnormal is building a product that is able to understand behavior and then utilize that understanding in order to detect cyber attacks with extremely high precision. This is a very core element, both in abnormals products and in many other, cybersecurity products that are really leaning into this kind of behavioral based and AI native architecture for being able to provide value to customers.
what we're building is in somewhat of a different way, and a little bit more of, geared towards a slightly different suite of problems, but leaning into the same kinds of core underlying technology and the same kinds of, overall objectives of building something that's able to utilize an understanding of a customer's environments in order to be able to detect cyber attacks in a way that's resilience, to changes in attacker behavior, and requires as little manual work by the customer as possible in order to get that defense and get that protection.
Josh: So let's back up a little bit to when you were getting started Shahar. You knew you wanted to start a company, and you spent a lot of time sorting through ideas before you were ready to leave AWS. what did that period look like for you? How did you, approach the idea exploration phase? Are there questions you asked or things that helped you either rule out opportunities or lead you in any direction?
Shachar: One of the things that I focus on and still today is working backwards off customer problems. So when I looked at the ideation process and a large part of it was just Dan and I spending a ton of time together thinking about the future, having fun building and chip. But, a lot of it was thinking through what problems we know, talking with hundreds of security professionals to understand how what they feel today might be amplified or reduced as the word changes with the introduction of our technology and a lot of the ways that we operate is okay, how can things change if AI will be 10 times better next year and hundred times better?
we spent a lot of time working for ideation and answering such questions. I also participated in first rounds PMF method program, which I highly recommend and thank you for making this reality. do you want, by the way, to share a bit about what the program
Josh: Yeah. Why don't you share a little bit of, from your perspective about what the program was?
Shachar: and I think I even posted about it on LinkedIn, is like the four most valuable days that any founder can get.
Josh: magic to my ears and definitely my partner. Todd's ears.
Shachar: And it's, like equity free, everything. Free, actually everything free. This, that was worth PET was great as well, but, program
Josh: economics, it's just, it's just programming.
Shachar: exactly. So just thinking through company building, thinking through how to ideate and what are the first steps you need to go through in order to get from zero to one.
So that program was, incredibly valuable as well. And then. As we, let's say, converge in our thinking. We honestly came back again and again to this market of security operations because both, I have been in this market for a long time and Dan is work on detection problems for the past really 10 years.
And you wanna add on this?
Dan: I, I mean, I think ultimately at the end of the day, you need founder market fit. If you're going to start a company, you need to be working in a space where you really feel that you have a differentiated understanding of the problem. I, I think that there's, there, there's a lot of very large problems that, uh, people have, that companies have.
There's things that you see growing in the future and we saw a very, very large problem in security operations. We saw a problem that was growing, growing, and we saw an area that we had a really, really deep understanding of how this problem is shaped and what the different kinds, what sorts of solutions work, and what kinds of routes are dead ends, and had confidence that by leaning in and if we are able to get the right, people to join us and able to set the right, uh, core initial standards, we could have a really good shot at tackling this problem.
Josh: So you're talking a lot about the we. How did the two of you decide to become a, we? What was the co-founder dating process like?
Shachar: Yeah, so Dan and I, met a few years ago in New York. we got introduced via a mutual acquaintance and, it, it was actually a pretty funny story because, we basically scheduled a coffee. We're like, okay, let's, meet for 30 minutes, get to know each other. And the whole context we got was both of you guys are in security.
New York, just have fun. And then I think the first time we met, we spent like probably four and a half hours just walking around in the park talking about the future of security, talking about how things will change, what problem people can solve and all of these things. And, it just continued from there.
We spent a ton of time together ideating through problems and projects and building together and some side projects. And, it's been an amazing journey so far.
Dan: I, I really feel like one of the, one of the things that stood out to me is,the depth of Shara's commitment. and in terms of really wanting to build something great, wanting to see the path to the future and choose the right path. and I think that's, that really is something that,was exciting to me because I feel it's really crucial that, two people are on a journey like this together, have this sort of shared commitment.
I think that builds on top of our shared chemistry and the way that we compliment each other. but I think that kind of, mutual goal and mutual objective and overall drive that we, we see in each other and compliment each other with really is what was very clear from the very beginning of the partnership and was strengthened over time as we explored lots of different angles and discussed lots of different ways.
Josh: You were both at working elsewhere. When you decided to take the leap, did both of you think it was the right time or did one of you jump before the other? How did you know when it was the right time to say? Okay, we're done talking. Now we wanna start building.
Dan: We were both pretty aligned. The, there had some slight differences in terms of exactly which month, made sense, but we were, basically we picked, okay, this is like the right time period and this is the right opportunity. And, I think things ended up moving a little bit faster than we expected.
And then we ended up being very happy about that because of the, opportunities that were opening up in the market. I think that in, in retrospect, if, if we'd waited an extra six months or, or so as we were, were, originally discussing, then probably we, we may have ended up being too late, uh, given the, given the shape of the market, given the speed in which things are are developing.
we wanted to make sure that we had the confidence. I'm also glad we didn't start the company a year earlier because there's so much different things that's possible in tech today. We were able to build in such an AI native way because of the moment that we did start.
And so I think it was a combination of us being strategic and us being pretty aligned and really having the commitment, there's the right choice to do this with each other.
Shachar: And I'll add, there is never a good time. So it's always, always have like more promotions, more money, more stuff, more things can happen. but we just saw the pool from the market, just how customers really excited about the problem we're solving. We saw how it's changing and we realized that we have to go right now in order to fully capture this huge opportunity.
Josh: Let's talk a little bit about hiring in the AI era. are there any startup norms of hiring that you're rethinking
Shachar: Yeah, so first people is the most important thing in the company. Without people, we don't, we won't have a successful company. So we put, I would say over 60% of Dan's time in my time on hiring and developing the best talent in the world. And we try to make the hiring process extremely easy and fast for candidates.
Josh: what does the interview process or hiring process look like?
Dan: first. One thing I'll say is that we weight very heavily on references. we put a lot of emphasis on speaking with people who've worked with somebody in the past, and we try to, front load that in the process and move that through very quickly.
Josh: And you found that to be a good predictor?
Dan: we have, we found that to be extremely indicative that really we've, everybody, I've thinking we can plot out on an al almost perfect correlation between the strength of references and the strength of which, somebody actually delivers.
And I, I think also we don't aim to do. it was super lengthy interviews. We usually have about two hours of in-person meetings with the team in addition to meetings with me. And, Shahar, we try to do as much as possible in person, as much as possible, as, as fast as possible.
Josh: Do you give a love any work projects?
Dan: we've experimented with it, especially when, we, we did one experiment where we hired, winter interns, which ended up being a very successful experiments.
And we did utilize work projects primarily because of the sheer number of applications that we got and the, there's always a lot more. Risk that you take, bringing on somebody who doesn't have substantial work experience bringing on a student. So we wanted to, to de-risk that. And what we did with work projects, in that case is we didn't focus on, asking somebody to complete some coding task and then review the code.
We asked somebody to send us a link to a particular part of the, a website that they had built that accomplished a particular test, never looked at the code, didn't look at the implementation, didn't care if they built it with a no code tool or coding or cloud code entirely. It's just you can, you, can you build something that was really what we were trying to assess, in, in that work project.
And I think that's in general, I think that the, that one of the big questions we want to ask when we're hiring somebody is, are you capable of building something from scratch? Basically anybody we hire wanna have that capacity.
Josh: How do you assess for AI fluency, in your interviewing process, just given the paramount importance that you're.
Dan: This has changed over the course of time that we've been running this company because this has been one of the largest changes. When we, when we began this company, there were, there were some people who were extremely in, but it was a much smaller percentage of the market than today of this has been, of course, a absolutely crazy period of seven months in terms of a AI adoption of generally somebody who is a true builder and who is open-minded and who is willing and excited about utilizing the best tools and up-leveling their capabilities, whether or not they've had the opportunity to.
Really lean into AI native work. Some people work in companies that's forbid a AI utilization in their work. And if they have experience with ai, it's only in in small side projects. Other people work in companies that are extremely AI native. I, so I think that the, where somebody stands in terms of their prior experience at this point right now, given how long of a time that these tools have been around is, is not necessarily a great predictor of how much they'll lean into it and really adopt it.
We do a very good job of, inculcating people in the very, in the first few
Josh: So are there specific ways you've set up the engineering team or the code base to take advantage of this?
Dan: Yes, this is, I would say one of the largest. Priorities we have in the technical architecture that we have and also in, in the team. so the two things that I would say are, one is that AI coding tools enable engineers to be able to reach over the line and understand code that's outside of the range of things that they would normally be able to understand normally be able to work with in a really unparalleled way.
That really changes the physics of software engineering. It becomes so much easier for people who have never had experience with writing terraform code, writing frontend code, be able to make changes, see things debug code, debugging, I would say is one of the biggest areas we see the most, Opportunity where it's possible for agents to be able to do really effective understanding of where are their issues, where are their problems. And so giving every person in the team the capability to utilize these tools and have that be the first place that they go, then puts everybody in the mindset of, if I wanna solve this problem, I don't try to solve the problem manually.
I try to figure out how to change my approach to setting up these tools, to utilizing these tools to make it so that the tools have the right answer. And that then goes into how we actually set up our technical architecture. When we make architectural decisions, the first question that we ask is this an architectural decision that will increase or decrease the capability of AI tools to have the, to make the right answers?
Anybody who's worked with AI tools knows that they often are wrong,that is one of the reasons why they're difficult in some capacities to use, especially in large and complex code bases. And there's certain dis connectable decisions that you can make that make the tools more or less likely to be correct.
And we've structured our systems to make that. So every time we make any decision, we're trying to make them more likely to be correct.
Shachar: People side, we were. Work to give people the best experience. So this includes typically wrapping up the full end-to-end interview process in one day or two days max. So people come, they have a chat with me or Dan, and then they meet the other engineers for a couple of interviews. They typically stay for lunch with the team.
'cause we want people to get to know the people that they work with and see, it's are, is it the group of people that they'll have fun working with and build with? And then, as Stan mentioned, during the references early, so we can just wrap up things. And we typically give the offer between like two days from the moment we started talking with you or not. and then on the last bit on the ai, I think we, at this point in time, every person we interview, we ask them, how do you work with ai? Everyone is like, oh, I work with AI all the time. But then we go deeper. To this day, we still haven't found someone who, before joining Artemis, has worked with AI as intensely and thoughtfully, like we work in Artes.
So today everyone is basically having like, let's say four to eight cloud code instances running in parallel, building the system, working on shipping for to buy features simultaneously. And there is a lot of art and science to it. And we teach it when people join the company and we look for the people who wanna learn and be at the cutting edge of these capabilities.
Josh: What about outside of engineering? Are there workflows that you've found personally to be the most impactful?
Shachar: We try to automate everything we had as a additive company. I think a lot of the processes are helpful because, or automating these processes are helpful because we're now 30 people. We were 20 people about a month a bit ago, and we were basically six people in September. So with these rates of growth, the company changes dramatically, and we use AI to make sure everything is still streamlined and working.
Then keep track on all the business metrics and the operational metrics without having five people manually tracking it and instead just using AI to automate such things.
Dan: I would generally say monitoring is the area where I've seen the most value outside of ai. The ability to be outside of value from ai, outside of just engineering directly. really the ability to see all the different things that are going on, within the company. whether this is things like chats, tickets.
Actions being taken in different platforms. And then certainly the behavior of the code base itself, behavior of how customers are utilizing the products. All of these different areas are things where traditionally, if you try to do data analytics over the different systems within your company, it is difficult to be able to know what are the right questions to ask, what is the right way
to
Josh: do you have dashboards that, like, are there metrics that you're looking at now that you never would've looked at before,
Dan: Some are metrics and numbers, some are insights and, messaging
Josh: such as.
Dan: things like, there's a, this is the tenor of this conversation. This is the, kinds of activities that are being performed right now. There's, questions you can ask about what are the types of activities that people are taking, what are the kinds of, Work that people are doing and how people are spending their time, that there's, we're experimenting and exploring all of the different things that, to some extent will probably be incorporated into dashboards and viewability. But it, I think this is gonna be a really strong backbone of how we'll be able to scale.
Shachar: I'll add one piece there. For example, in the product analytics, we look at how customers use the product and you could do it manually and I can watch recordings and have a data analyst going through the metrics. Uh, we use agents for that, and that allows us to understand where customers struggle, where there is friction, and automatically think through how we remove that friction from the product or see how we. for example, if they have a flow and it takes them two minutes, how we can add a new feature that reduces this to three seconds and all these things, you could do it before, but it was a lot of manual effort to do it at scale. And now it's largely the insights part to Dan's point is largely automated.
Josh: Let's talk a little bit about customers. How did you decide, you had a lot of customer disc discovery calls. How did you decide what customers you wanted to go after, what customers you were deliberately going to ignore? like, let's just talk about how you landed on the ICP that you're, executing against.
Shachar: The core problem for us is to, or the core, tenet for us was working with people that have a problem because the ICP we ended up planning on is largely upper market and enterprises that have used or are using a traditional sim, which is, basically security a. We got a lot of interest from mid-market downmarket companies because as a part of the exploration process, we wanted to make sure we were hitting all the different ICPs, but it was more so something they wanted to try because it sounds really attractive, but I didn't have a problem. We didn't have a pain when you speaking with them.
It's not like when we were speaking with the qcp, which tell us, yeah, my team is chasing 10,000 alerts every day. They don't really know if we have detection coverage or not. All these things where you can really feel the customer being in pain. So the prioritization for us was targeting the segment that is hurting the most, delighting them, and then expanding to the broader, part of the market.
Dan: There's a certain point at which a, a company's scale and complexity reaches the state when the need to be able to monitor all of this data and the difficulty in doing it in a way that has low noise and really gives you the, the insights that you need in order to be protected, becomes extremely challenging.
There's, it's a, it's really an inflection point in terms of the complexity of the problem, and we, we found that our ICP really sits on, on the side of the companies that have, are past that inflection point in terms of complexity.
Josh: How tech forward are the customers that have that pain point? Are there commonalities where you can generally detect the prospects who are gonna be experiencing the most pain right now? Or is it just a lot of conversations to assess pain threshold?
Shachar: I would say the pain exists in that segment that is covered typically over like 2000 employees or 1500 employees. And then it depends on the industry and the capabilities of the security teams in order to understand how much pain they feel. And they want to, let's say, outsource by buying a solution, versus building on themselves.
And we tend to see about 50% of our customer base is highly regulated industries such as financial services and financial institutions, where they have the need, the impact can be very high, but they don't necessarily have the, let's say. Desire to build in-house. Whereas we work with technology companies and we definitely have a sizable amount of my, of our customers as technology companies, but some of them prefer to build it themselves because they have engineers that work as security people, but they're in practice software engineers.
and for this segment we do serve them, but mainly because they come to us to use our MCP server to still build themself, but use Artemis as an additional source that help them to get dramatically better results.
Josh: Every founder remembers the first customer and what it took to get there. What's the story of closing your first customer?
Shachar: we closed the first few together simultaneously, so it was about the same time. But I think the key thing for us was reaching the level of trust and reaching the level of satisfaction where they actually came to us, the first three customers and told us that they want to buy before we ask them to buy the product.
So it's,
Josh: piloting.
Shachar: yeah, they were design partners, they helped us build the product and then they said it became such a core element in my security operations and capabilities that I want to make sure I have the enterprise SLAs and that I have the reliability of a product that I bought, which is obviously, no, you can't wish for anything better than that when the customers come to you and ask to buy.
Um, but, uh, the, the road there was, uh, long and, um, Very meaningful and we really value them. They've been true partners and amazing, thought leaders in building the right products that now many more customers enjoy.
Josh: Any non-obvious or surprising product market fit early signals that, sort of let give you the confidence to let you know you're heading in the right direction.
Dan: We've seen a real inflection in utilization there. there's one pattern that we see very commonly with the customers that work so far, which is they'll connect a couple of relatively easy to connect data sources into the platform. We will deliver an initial set of insights and they will add a bunch more people from their team and add a bunch more data sources immediately.
And that's, and then
Josh: So it's really the time from that first quick connection to that second where they go to a deeper level of connectivity. And that's the unlock that says you found something for them.
Dan: Yes. it, you have to earn that trust. There's generally, when you're working with secure teams, especially at a large enterprise, they have the permission and capability to connect you to some of the data sources that are important for them, but not necessarily all of them. They may need to get internal buy-in, or they may need to be able to get permissions that someone else has or they might not necessarily have in order to access certain very important data sources.
it depends on the organization themself, but in order for them to have the confidence to spend that political capital, you need to earn that as a company that's gonna be working with them. You need to show them that this is actually something that's really valuable. It's worth it for you to go and put these, spend that political capital, get the, these connections and put everything in because we're going to provide you so much value when you do that.
And we, we earned that by. Making things as easy as possible and showing as much as we can.
Shachar: It around. So we started building in late September. Around late January was when we, or maybe early February, was when the product reached a maturity of a platform, and that's when we saw things like fully clicking and we just saw the usage metrics, like how much time people spent in the product, what are the activities they taking with it, how many models of the product they're using, just so that like skyrocketing.
So the, the real, graph of has gone, basically parabolic. They were like, okay, this is working for customers.
Josh: So you started off with founder-led sales. what did you learn about yourself and about that process? And then how do you see yourself, growing your go-to-market efforts?
Dan: one thing that I've learned is. And, it's a lesson that I suppose I'm still learning every day, is that when you want something in sales is about asking for things, that's you need to ask for things. You need to ask to book the next meeting. You need to ask to get the introduction to the team.
You need to ask to, get the initial connection. you need to ask, and you need to give people value and give people trust and learn and listen. But ultimately, you need to make the ask. And that's, that's something that I think I understood to some extent, but didn't really fully appreciate until going through this process of founder-led sales.
Shachar: I think for me, billion Dan's point was a lot about trust. when I was in aws, you the default, right? So people will buys first and if they don't like it, they'll go but. With Artemis, it's about getting to a point where you're really more of a trusted advisor to the CISO or director of security Operations or even the security analyst that you work with.
And in this point, I think I'm on texting basis with every single customer that we have. And there is also a direct correlation, like, okay, if I'm not on taxi basis with that person, with that customer, probably a deal is not gonna happen because we haven't earned the trust yet to get to the point where they put Artis in the core of their security operations.
Josh: Now, does that scale, are you, do you expect that a year from now, two years from now, five years from now, you're texting every customer? Or how do you expect to grow to your go to market efforts?
Shachar: Yeah, I think I told them half of my day now is just texting like customers or internally. but uh, we just hired our first, um, um, initial go-to market hires, both, uh, account executives, sales engineer, and go-to market engineer. And we're now building the repeatable go-to market motion. And a lot of that is distilling the intuition that we have from the hundreds of customers calls we've done so far into a sales script and let's say clear en enumeration of benefits that customers get when they work with Artes.
And we'll see, it's the start of the experiment. I'm sure we will learn a lot over the next few months on what works and what doesn't work. And I'm sure we'll see the initial conversion rates go down dramatically because people don't know, or people that just joined the company dunno, Artemis as well as we do obviously just yet.
but, we hired amazing people and have a strong conviction that we'll be able to work with them and with the customers to ensure we're able to communicate the value in a repeatable way.
Dan: just to answer your question earlier, I hope that five years from now, our customers feel comfortable texting us directly. If they have any issues, they have any problems, that they have easy access to our phone number and text us day and nights. I think that is incredibly important to have that level of the ownership over every single customer that works with Artemis.
Shachar: One of the conversations we had with one of our first customers, he, he was basically saying that, he was like, I know now you give us the personal attention because it's your founder led, but as you scale, it'll be some customer success person that handles my request. And we told him like, like, like, no, you should, if anything is wrong, you should tell us.
Like, we truly wanna know. Like, it's not a you, us, it's not a distraction for us. It's not the news for us like customers and your happiness is the single most important thing that we are focusing on. Because if that works, everything else will follow.
Josh: So you, you've been pretty heads down, focused below the radar. Are focusing on building and just now as you announce your financing, your first customers,you're beginning to pop up. What advice would you have to, for other founders, especially AI centric companies, to figure out when to launch and when to open up their story?
Shachar: for benchmark of cybersecurity companies who are actually going outta stealth very quickly. Typically, companies stay about a year to two years in stealth. we believe that what we have built is differentiated enough such that we. Want to put it out there. We want to educate the market. We want to help customers secure their environment.
SAI is allowing adversaries to also accelerate their attacks. So us it was putting ourself out there so we can defend customers, and we just saw the traction from the market. We saw that customers started reaching out to us while we're still in stealth, which is extremely rare for cybersecurity. and that is because of the good word that our first customers have been putting out there and truly appreciate them.
So for me, the, the advice I will have for other founders thinking about when to go out there would be on the readiness of the product, because you don't wanna be out there and disappoint people. You should be a bit at least uncomfortable about the product, but not like, this is just not to work like it should work and deliver on the promise you give customers, even if it's a small part of it.
and second, ideally have some customers that willing to put their logos on your website or their quotes on your website to show the public support and share the value that they got from the product. Because it's ultimately all about trust. And especially now when building software is easier than ever.
Everything is just so noisy. So you need to stand out somehow.
Dan: I think that ultimately you don't need to go out stealth to delight your first customers. You need to stealth to acquire customers and. Be able to improve your ability to hire engineers, and
Josh: hired 30 plus folks while in stealth,
Dan: yes, we have.
Shachar: But most small companies are not able to do that.
Josh: so what makes you so good at it?
Shachar: okay, so one thing is our interview process, which a lot of the top talents, they always have options, right? And we try to make their choice very easy because we try to give them the best experience of what it's like to work in Artemis and Woo very fast. So while other companies, their process will take three weeks, they already have an offer from us after a day and a half.
And then we just might make that decision as easy as possible. And then secondly, we have been able to communicate to the prospects people. Chatting with how fast the company has been growing, both in terms of commercial progress and product progress. And this is something that is very exciting for people.
And lastly, I think people connect with our mission, which is helping companies defend themselves in the era of ai and they want to do something that is truly meaningful to others. and that has been helping a lot.
Dan: We make it a real priority. We recognize the incredible importance of having a team that is extremely top-notch and able to be in place and support our customers, and we really lean into that. We're very intentional and thoughtful about the process that we put into place and the experience that we give to candidates.
Josh: Intentional about the culture. If I'm, I believe you're building an in person culture here in New
York, has that helped hurt in.
Shachar: I think it helped. it's a self-selecting process, but we actually have a few people that were remote prior and they're missing human interaction. They're like, I want to be in the office. I want to be with others and brainstorm and whiteboard and just build together, which is very fun in early stage when you, it's all just greenfield.
so I think that was net positive.
Dan: I really agree. I worked remote essentially from. The last five years, before, before co-founding Artemis, and I saw how it could be something that makes it more difficult to really form strong bonds with your coworkers. And I think there's a lot of other folks who feel the same way, especially in New York where it's not the same as in, in an area like the Bay, where I think a lot of people don't necessarily live within the city, and it's a little bit more difficult to commute in.
A lot of people in New York are, there's a very good commuting network, so it's a maybe be a little bit less of an ask, for people to come into the office. And a lot of people crave that interaction and want to have that option and have the ability to form those bonds to their coworkers.
Josh: Besides for just being in office, it seems like you've also been very deliberate in the type of culture you wanna build. What was most important to you as you really, as the two of you said, spent time trying to think about the culture that you wanted Artemis to have.
Dan: We had a, I, I remember one of our, one of the meetings that we'd had where we originally wrote out our first set of company values, uh, which, which we iterated on a, a couple of times. And, and really I, I think have, you know, landed on something that we, we really feel strongly about. And at the top of the list is customer obsession, which I think is, is a core part of our, ethos as a company. but very, also very important is ownership. I think that it's crucial to have each person really exude ownership. That, and that breaks down in a couple of different ways. But a core framework to, to think about this when thinking about a candidate and thinking about how they fit into the company as a whole is autonomy as an element of ownership, which I alluded to earlier, building things end to end of really having the desire to own things and not throw things over the wall or say, this is not my job in, in the process of building something.
And another one of our core values we really select for strongly in the interview process is intentionality. we are very intentional about the decisions that we make and how we, we structure the company and the, we expect that people who join are intentional about the decisions they make and how they do their jobs.
So that, and how, people make decisions around the trade-offs that they make, the decisions and things that they build. And I think that people appreciate, that, appreciate working in a culture that, that prioritizes those things.
Shachar: We were also thinking a lot about what will make a company successful today and what will still allow a company to remain successful five years from now. And for example, two of our values, additional values are velocity and keeping the high standards, which oftentimes contradict. But in the era of ai, when you combine it with customer obsession and ownership, it's actually possible because the time to build went down dramatically.
And we look for these people who exhibit these qualities in order to deliver the best outcomes for our customers. And. We started with, uh, five company values. We're trying to keep it, uh, up to five because we, uh, want to make sure people actually know what the company values are. And one of the things that we do to reinforce it is that every weeks in the whole Hands meeting that we have, we give shouts to people that exhibited the company values, whether it's customer ion or Velocity or any of the other ones.
And that helps to really reinforce that these are the things that we care about and we as a company prioritize and value.
Josh: How often do the two of you disagree, and how do you work through that?
Shachar: I honestly don't disagree a lot. Oftentimes I'm like, okay, should we argue more? Like, should we argue at all? I think Dan and I share very. A common set of values and way of thinking from first principles, and that really helps us to just analyze the situation, get to the right conclusion, and think through what makes most sense.
And then we find the company, each person has their own responsibilities and like final say on areas of focus. And that also helps to just like streamline because we don't
Josh: Yeah, that's what enables the velocity goal.
Dan: I, I think generally. We have a very strong shared trust. And so when there are certainly situations when we'll disagree and discuss and come to a decision. but a lot of the times when we disagree on something, it is because one of us has thought deeply about something.
The other one hasn't necessarily thought deeply about it. And then whoever has thought more deeply about it, the person who has thought less deeply about it, just refer to them in most of the case, say, okay, you know what? You're probably right. You thought more deeply about this to me. And so that, that ends up leading to, a relatively, low amount of disagreement because, and that's directly derivative of trust.
Shachar: And most decisions are really two-way doors, meaning like we, and that goes for the company. We, with the other people, we ask people, okay, the decision we're making now, is it a one-way door big architectural choice that we will really need to invest a lot of time to change? Or is it something that we build sheep measure and revert or judge course?
And that allows us, again, to do both the velocity and intentionality. Like we definitely want people to think through trade-offs when they're making a decision, but they should make a decision quickly and reflect on it Also, after, in order to make sure we made the right one. This is also how we think about many of these things.
Like most things, it's like doesn't, they're very local. They're not a global decision.
Josh: So overall, the positioning you've landed on for Artemis is AI battling ai. Where do you think we are now in terms of how AI is changing the market and risk landscape?
Shachar: So part of the reason we started the company at the time that we started was because we have seen the freight landscape change from our purview at AWS and abnormal security where we saw most customers environments in the world. And we saw how the attacks starts to accelerate in velocity and increase in sophistication as the cost to perform a sophisticated attack is when going down.
That was about a year ago. it only increased much faster than anyone expected. And there is also a very large report at Crowd is published in March 26 on how the time to perform an attack went down dramatically. And another report. It's on tropic release in November 25 that basically saw the same thing.
When we think three years out in the future. We believe that most work will be done by agents. AI will direct the intent, sorry. Humans will direct the intent, but AI will execute it. And that we go for probably most, let's say, work in the world. But specifically for cybersecurity, we believe that adversaries and attackers will use AI to attack companies and they'll be able to do it much faster than previously possible.
And that means that on the defenders side, defenders need to adapt as well. And this is why we positioned Artemis as AI Native protection platform to help companies protect their environment, detect and stop attacks within seconds, and replace the traditional workflows that are very human heavy, and assume that attacks will take hours to days to weeks.
Dan: been waging an AI versus AI war my entire career. when we were at Twitter, it was various kinds of spam bots and various kinds of comment, bots and all types of different automated systems aiming to game the various Twitter algorithms and squeeze money out of people and scam people and juice, different kinds of ad placements.
And there's all kinds of machine learning models that we built to detect these kinds of automated activities and clamp down on them. when I was at abnormal, the, really, the first waves of AI in cybersecurity really beginning to be shocking in the scale of the change came when you had the ability to automatically generate emails that seemed extremely relevant and extremely, good English and very convincing via the early stages of generative AI is, it was relatively shortly after the first chat BT launch, that it was possible for attackers anywhere in the world to be able to generate extremely topically relevant.
Phishing emails and send them out in mass. We saw humongous amounts of that at abnormal. That was a humongous problem for many, customers that we built technology to defend against and protect against. We saw it increasingly get better and had to increasingly improve the systems that we built in order to fight against it.
And now, most recently, you have agents that are really a different paradigm than either of the automated bot attacks or the, AI generated texts, social engineering kinds of attacks that are structured to be able to perform these multi-stage reasoning and very fast exploitation. And fighting against this, in my mind, is somewhat of a natural extension.
I, I've just seen these techniques getting better and better, different kinds of techniques over time. it's very clear that this is how all the various adversarial games, that we have to play in order to keep people safe and build a safe, safe internet and safe world.
Josh: One of the challenges that a lot of AI startups are facing right now is that many of the enterprise customers that they wanna sell to aren't yet ready for the next gen thing they're building. So these companies need to build in legacy features for parody while also building to the future. do you tow this line or make that balance?
Shachar: So first, a, one of the, my favorite things about cybersecurity and the reason I spend my entire career in cybersecurity is that it's a very innovative field because you have to make a change. Like attackers will go after the financial gain and will use the latest technology.
And on the defender's side, you'll have to adapt. It's not like you should, like, you have to, otherwise you'll be compromised. And that drives a lot of willingness to adopt new things and change what we're seeing from customers. From even our customer base, about 70% of our customers replaced their legacy solutions with Artemis.
'cause they say, I'm clear that at this point in time I have to make the change right now in order to be prepared for what is already the reality. And the other 30% use us to augment their legacy themes and legacy solutions. 'cause they say, I'm clear that in two years from now I'll need to be completely off this legacy stuff.
I could just wanna cut it. But it's a long journey and there thereby I'm starting today in order to still have complimentary, let's say, enhancement to my overall strategy, but not have to reef and replace and change things too dramatically.
Josh: Why is AI native so much more important than AI enabled every. Legacy player is now scrambling to integrate AI into their platform. Can you give just a high level description in your mind of why a company that was built, AI natively has a massive benefit.
Dan: I think it comes down to the core control layer that you have built into the very foundations of the system. When you have, every kind of decision that needs to flow through traditional logical systems as the, foundational rails, then layering a on top AI on top of that is bottlenecked. It's harder for different pieces of the AI to talk to each other.
It's at some point things need to be compressed into this old language, this old way of different parts of the system talking to each other. It's much harder for this, it, what that ends up looking like when you have a AI enabled capacity on, on top of older features is you have a core foundation that's relatively unchanged, then a bunch of different product features.
And each of those product features have their own a new AI piece that's added to it. And if there's ways that those new AI pieces talk to each other, they either talk to each other through the mechanisms of the legacy system or they talk to each other through layers that are, that are layered on top, uh, between each of these different components.
And neither of those are, are the same in terms of the ability to actually have good performance and, and the ability to really represent something that involves learning an organization, learning the core things that drive decision making as something that's replaces those underlying guardrails, those underlying foundations. with that kind of legacy, log logical structure with something that is inherently agentic, that really takes this kind of reasoning layer and builds it into the very core of how the system is structured and how the foundations are built and how information is represented.
Shachar: And they're also stuck with legacy organizational structures, which is much harder to change. Like at least as hard to change as changing your legacy technology stack
Josh: You're both first time founders. What's been the most surprising part of stepping into the founder role for the first time?
Dan: I remember when I'd first thought about this, I was thinking the, what's gonna be really strange to me is that phase between zero and 20\. Because the first company I worked at, I was employee number 15 or so, and, when I was at Abnormal, I was around number 200 and I joined Twitter, and Twitter was several thousand people.
And so I'd had experience in the, 20 to 80 range and experience in the hundreds range experience in the thousands range. But the, what is that zero to 20 going to look like? I wasn't totally sure at the beginning, but I was surprised by how natural it felt, how it was actually this.
This feels not that different. And from a, building perspective and relationship perspective, it's the really what has been different is the thing that I thought was going to be different, which is the level of ownership and commitment to level of, of certainty that this is the, this is the right thing for me.
I feel like I was built for this and I, I'd always felt like I was built for this and that has not been a, that has been the pleasant, I am pleasantly happy to see that it is as I expected. what was the surprise was how the zero to 20 phase was not quite as different or wild as I'd originally expected it to be.
Shachar: I was also presently surprised having the best time of my life, I'm living my dream and it's been a blast. Honestly. A lots of people are like, oh. It's really hard to be a founder and it's probably the hardest thing, especially professionally that I've done in my career. But it's also been by far the most rewarding thing that I've done.
And it's just like a lot of fun. There's like, yeah, I can't wait to sell the company. I can't wait to just like be in like an easier job. And I'm like, yeah, I really, I wouldn't trade it away. I've just been having fun and building with an amazing team, building for amazing customers. So for me, the, I guess the surprise was that while there are hard parts, nothing really seems hard, but more so like a fun challenge to crack.
Dan: And so we've done a lot of a hundred hour weeks in a row. I've, I don't think I've ever done this many, a hundred hour weeks in a row, but.
Shachar: I don't know if we had, we have done stop hundred hours.
Dan: but it is incredibly fun and incredibly wonderful, and that
Shachar: Yeah.
Dan: think both of those is very much as I expected.
Shachar: Yeah. And then maybe one, one accommodation for people at home. If it's really the thing, being a founder, building a company is what you want to do, like go do it. And there is potentially a time in the career that it's better to do it. Like both.
Josh: And what time is.
Shachar: I think it's personal trust. Both Dan and myself have waited relatively, relatively long in our careers.
Like both us were in senior leadership roles. We have both been an employee employees in startups that were acquired in massive acquisitions. We were early in this, employer, in these companies. so for me it was about. Seeing the experiences from each stage of a company and then incorporating that into Artemis.
Some people can also do it right after college and they'll still, be able to nail it. But I think it's a personal choice of like how you think about your career, but when you feel like you're ready, I would say just do it.
Josh: Are there any things that you are both personally thinking about as to how you hope or plan to level up as a founder,
Dan: I mean there's so many different areas where I personally want to improve. I want to be able to learn from, the experiences that we have, learn from each other, learn from the team. I think that there's a lot of things that's I'm doing for the first time. I've never been in a sales role before, to this capacity.
I've been in management roles, but it's different experience to manage people who have very different skillset sets, different kinds of, expectations and roles. And I think that leveling up as a leader in general, leveling up as a builder in the capacity of company building. I think are all areas where I want to continue to grow and continue to learn and continue to elevate.
Shachar: I think a lot about, being. A leader in a native company, which is really interesting because there is no playbook for it. There is no guideline on like what makes an truly a native company successful. And now we're starting to build in the next year, in 2026, we'll start building our executive team and we'll grow.
Right now the organization is still fully flat for like a very purposeful choice to allow people to just move fast and ship. And a lot of what I'm thinking over the next few years is that work is going to change how companies are built and operate is going to change. And I look forwards to growing with that broader, let's say, wave in the market.
And let's say position artes is the leading standards in how AI native companies operate successfully.
Josh: So I wanna wrap up with, my partner, Brett always likes to end the conversation by asking. Who has had the biggest impact of each of your careers and philosophy as founders?
Dan: Yeah, I would probably say my brother. he recently started a company not too long ago and, became very successful, very quickly, and, watching,his decision making process to leave a job where he was incredibly successful at, to start something. And then, the rapid success that he had, very early on, I think, and seeing the ways that he made these decisions, it really, I would say, opened my eyes to how much is possible when you see an opportunity and take advantage of it, and really set extremely high expectations.
Shachar: For me, uh, it's probably the founders of De Miso, the startup I worked for. I joined there very early and I joined specifically there because Deto was already their referred company, so I joined in the very first. I I told them that I'm Learn build a great company. And they gave me a lot of visibility and they also said, we'll give you the visibility and we'll give you the first check when you end up starting the company.
And they ended up really investing in Artese. They gave the first check, I guess you guys gave the first check.
Josh: Woo.
Shachar: it was all together. Money was in the bank the same day. But,I learned a ton there and a lot of how Artis is built this model on de Misto or especially around customer obsession, people being very strong generalist and people just owning things and delivering to customers and, they've been very meaningful and still help a lot in just thinking through how to continue to succeed and scale the company.
Josh: thank you both very much. Wish you the best of luck with the upcoming launch and continued success in building a kick ass business.
Shachar: Thank so much, Josh. Really appreciate you having us. It was a blast.
Josh: It was fun.
### You don't know Lenny Rachitsky
URL: https://review.firstround.com/you-dont-know-lenny-rachitsky/
Last updated: 2026-04-19T15:03:52.000Z
[](https://review.firstround.com/reluctantly-influential-inside-lenny-rachitskys-demandingly-chill-life/)
Many of us *feel* like we know Lenny Rachitsky because we see him everywhere. He’s on our commutes, in our ears as we do weekend chores, or with us at work as we’re trying to get better at our jobs.
The First Round Review got a rare opportunity to profile Rachitsky, spending hours with him at his home to understand the person behind the screen. What motivates him is far more interesting than what you might think.
Rachitsky was born in Ukraine to Jewish parents who applied to emigrate but were denied exit, being labeled “refuseniks.” Wanting to leave the country was itself an act of treason, and Rachitsky says his parents had a difficult time once their application was denied. He watched his parents navigate a lack of choice — as they figured out how to live in Ukraine and also when they finally did make it to the US, establishing their careers here.
Rachitsky says he always had a chip on his shoulder and wanted to show people what he could do. Starting a company was the ultimate form of autonomy, so that’s what he did (which he eventually sold to Airbnb).
Once Rachitsky became “Lenny,” he was driven by creating value for his audience. He dedicates between 5 - 100 hours to each newsletter, poring over it 50 times before it’s published. And as he adds new things to his network — a conference, other podcasts, his Product Pass — he always views these through the lens of value delivery.
Now that he’s built one of the most influential platforms in tech, what motivates him to keep doing it?
“I’m very afraid of moving into a place of just talking about things that aren’t real and just sound true, but aren’t true at all,” he says. He doesn’t want to pontificate or become a talking head, being so far removed from the day-to-day work of a PM that he loses grounding with what his audience wants.
[Take me to The Review](https://review.firstround.com/reluctantly-influential-inside-lenny-rachitskys-demandingly-chill-life/)
### Scaling DoorDash to market dominance | Christopher Payne (Former COO, DoorDash)
URL: https://review.firstround.com/scaling-doordash-to-market-dominance-christopher-payne-former-coo-doordash/
Last updated: 2026-04-29T03:33:24.000Z
In this latest episode of Executive Function, Brett sits down with Christopher Payne, who spent a decade as President and COO at DoorDash, helping scale the company from roughly 70 employees to the dominant food delivery platform in the US. Before DoorDash, Christopher held senior operating roles at Amazon and eBay, where he led a sweeping overhaul of marketplace search. In this conversation, he unpacks what it actually takes to run an atoms-based business versus a software company, shares his "plate spinning" framework for allocating executive attention across a complex org, and makes the case for top-down goal setting over the bottom-up alternative.
In today's episode, we discuss:
- How prior industry experience can be a liability when you're trying to reinvent the market
- How executives can practically focus their attention to stay close to product details
- What charisma actually looks like in executives—and why it's a staple trait to have
- The business case for setting ambitious goals top-down, not bottom-up
**References:**
- Amazon: [https://www.amazon.com/](https://www.amazon.com/?ref=review.firstround.com)
- Anthropic: [https://www.anthropic.com/](https://www.anthropic.com/?ref=review.firstround.com)
- Cheesecake Factory: [https://www.thecheesecakefactory.com/](https://www.thecheesecakefactory.com/?ref=review.firstround.com)
- Cursor: [https://cursor.com/](https://cursor.com/?ref=review.firstround.com)
- Dartmouth College: [https://home.dartmouth.edu/](https://home.dartmouth.edu/?ref=review.firstround.com)
- David Risher: [https://www.linkedin.com/in/jdavidrisher](https://www.linkedin.com/in/jdavidrisher?ref=review.firstround.com)
- DoorDash: [https://www.doordash.com/](https://www.doordash.com/?ref=review.firstround.com)
- eBay: [https://www.ebay.com/](https://www.ebay.com/?ref=review.firstround.com)
- Granola: [https://www.granola.ai/](https://www.granola.ai/?ref=review.firstround.com)
- Hulu: [https://www.hulu.com/](https://www.hulu.com/?ref=review.firstround.com)
- Jason Kilar: [https://www.linkedin.com/in/jasonkilar](https://www.linkedin.com/in/jasonkilar?ref=review.firstround.com)
- Jeff Bezos: [https://x.com/JeffBezos](https://x.com/JeffBezos?ref=review.firstround.com)
- Lyft: [https://www.lyft.com/](https://www.lyft.com/?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com/](https://www.microsoft.com/?ref=review.firstround.com)
- Tinder: [https://tinder.com/](https://tinder.com/?ref=review.firstround.com)
- Tony Xu: [https://www.linkedin.com/in/xutony](https://www.linkedin.com/in/xutony?ref=review.firstround.com)
- Travis Kalanick: [https://www.linkedin.com/in/traviskalanick](https://www.linkedin.com/in/traviskalanick?ref=review.firstround.com)
- Uber: [https://www.uber.com/](https://www.uber.com/?ref=review.firstround.com)
- University of Oregon: [https://www.uoregon.edu/](https://www.uoregon.edu/?ref=review.firstround.com)
- Wharton School: [https://www.wharton.upenn.edu/](https://www.wharton.upenn.edu/?ref=review.firstround.com)
**Where to find Christopher Payne:**
- LinkedIn: [https://www.linkedin.com/in/christopherpayne](https://www.linkedin.com/in/christopherpayne?ref=review.firstround.com)
- Twitter/X: [https://x.com/chrispa](https://x.com/chrispa?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
00:14 Why atoms businesses challenge bits executives
02:35 Hiring executives with a builder mentality
06:52 Great executives never outgrow the details
08:05 How ciabatta bread revealed a core DoorDash issue
10:48 How executives can scale their own impact
14:22 One-size-fits-all management is a myth
19:01 Enduring business lessons from Jeff Bezos
20:56 “I was fired from Tinder after six months”
25:38 Why specializing too early is a leadership trap
27:41 Are competitive cultures essential for success?
31:00 Lessons from Amazon’s hypergrowth
35:20 Why having industry experience can be a liability
38:46 Companies spend too much time on job interviews
40:19 The skills executives need for hypergrowth
43:34 Why AI will likely flatten organizations
45:20 Teaching COO 101: What it takes to be world-class
50:55 Why bottom-up goal setting kills ambition
55:29 How charismatic leaders help teams in tough times
58:23 The number-one sign of high-functioning executive teams
1:02:02 How first-time COOs can increase their chance of success
**Brett:**
So I wanted to start, what's your take on what is the difference about being an exec when you're running an Adams oriented business versus a Bits oriented business?
**Christopher:**
I was wondering when I joined DoorDash, which of my experiences were going to be most relevant to DoorDash. It turned out to be Amazon by a mile because of this reason. So at Amazon, that was my first experience working with Adams, to your point. And what are the key differences? One is you really have to understand the finances, like the unit economics. And so Amazon taught me how to look strategically with a finance lens at a business that is honestly a terrible business at first blush, and then you have to make the math work.
Same thing with DoorDash, right? If you launch into geography, you start losing money initially, but as you get more scale, you then can improve the unit economics by lowering the cost of delivery. You can get merchants to pay more because you've got more customers and then you can make the math work.
At Microsoft or other companies, the finance problem is like, I don't know, add up the money if you build the right product. So you have to still build a great product with Adams, but you have to make the math work. And it turns out that my mind works like I like those problems. I like the working on the make the math work. And so with DoorDash, we proved out Palo Alto, we could make money there, we expanded.
For a while, there was a narrative like, "Oh, we're giving away dollars for 90 cents." Absolutely not. You couldn't do that because you would even lose money very, very rapidly too fast for a company didn't have a lot of money. But what you do is you're expanding rapidly and you have to go through the life cycle. So you have to hit six months of volume to get the gross margin positive, and then you have to get to 12 months at a certain volume to get what we call contribution margin profit to flow through the bottom line. Once you figure that out and you know that it works for each of your markets, you can then expand very rapidly, which is what happened with DoorDash. So I tend to like both types of businesses, but I enjoy the complexity of solving the Adams problem.
**Brett:**
A capable executive that works in Bits can to all be successful running Adams oriented businesses?
**Christopher:**
Definitely not. Definitely not.
**Brett:**
What's the difference between someone like you that can play both games versus somebody that it's just not going to work for them?
**Christopher:**
I always look for people that like to build things. I think you need smarts, obviously, but you can't have somebody that runs businesses that isn't capable of going down to the lowest level of detail. If you've got somebody that runs businesses and then gets bored and then starts building businesses, which is kind of what I did in large companies, you can do it. You can actually go down to the business level, but not everyone's going to be successful in doing that. Tony and I talked about this a lot. Tony, the founder of DoorDash, but how do you know during the interview process? And the truth is you don't. And so you just sort of have to try.
**Brett:**
What's as good as you've gotten at that question?
**Christopher:**
Yeah. I often, I ask people these builder type questions. So it's like, "Tell me the problems with X." And so they can always do that. And then it's like, "Tell me how you built that. Go back in your mind to the moment that you were thinking about building that and tell me what you're thinking and how you built that."
I'll often ask people product questions. I take them outside of the business world. I'll say, "Tell me your most frequently used product, your AI. AI might be the thing right now. Oh, I use Granola all the time." "Okay. I make you king for a day, you get to add one feature to Granola. Tell me what that is and why." And you'd be stunned.
**Brett:**
People are running 10,000 person orgs and they make no sense with their ideas.
**Christopher:**
Totally. And you're like ... And my theory there is if you can't be empathetic about yourself and knowing you and how you use that thing, you say this is your most frequently used AI product and you can't make a feature for that, come on. And there's no chance you're going to be empathetic for a brand new customer. The Adams question, which you started with, I think that's teachable. I think you can learn.
**Brett:**
Do you think that in all cases of builder oriented exec operating at mega scale will outperform, or there's absolutely a role for the traditional large company executive?
**Christopher:**
I think you need both. I think you want the builder in a company because you want the perpetual line of S curves. One of the first things I did at DoorDash, because I had a lot of experience with this is, even DoorDash was very young, I founded the first new S curve at DoorDash, which was the platform business. So I worked at Microsoft, I worked at Amazon. So I was like, "Okay, this is going to be platform and there's going to be more volume eventually through the logistics engine of DoorDash than just the restaurant app."
But as an executive that starts these new S curves, one of the things I've learned is that it's my job to protect those S curves because what's going to happen is even in a small organization like DoorDash and really in a large organization, everybody tries to kill the new thing. They just try to kill it because it's taking resources away from the main thing.
And I always say, if you find yourself in a conversation where it's like, what's more important, the little thing or the main thing, you've lost the battle already. So what I tend to do is I reserve resources for the, I call it 10%, put it on the new S curves, protect those, don't let those in the ... And I say, "You guys can deal with the 90%, but you can't touch the 10." Where it gets tricky is if you need some functionality from the main body in order to do the-
**Brett:**
Right. It's not totally cleaved off.
**Christopher:**
It's not totally cleaved off. So you try to cleave it off and loosely coupled to the degree that you can, give it enough oxygen, don't give it the same type of goals, or get the right finance people in the room that are capable of helping you make the math work, find product market fit, and then later you can graduate it.
So if you look at DoorDash, you'll say, "Okay, it's restaurants, it's grocery, it's alcohol, it's retail, it's DoorDash Drive, our platform business." All of these now are multi-billion dollar businesses that are ... And so you have to have that. Now, to your point, it's okay when you have a large organization that supports that to have executives that run those organizations, right? They may not be good at building the next S curve. So you have to build a team that has a mixed skillset to be successful.
**Brett:**
But do you think for them to be successful, they have to be willing to get in the granular details? Maybe an interesting thing is when one part of what I heard you talk about builders, this ability goes zero to one to get a business off the ground. There's another, there's this mindset of like being in the details of having this sort of finger feel for every part in your org versus an exec sitting on a fiefdom of 10,000 people.
**Christopher:**
100%. Well, I think in general, if you lose the ability to get into the details of the business, to go back to the, I'll call it the base metal, then you've become irrelevant. I fundamentally believe that's independent. Everyone knows that Christopher would go look at the dashboard every day. And I go down to the ... You'd be stunned by the amount of information I looked at, but it's easy once you know what you're looking for, you just go through and you're looking for anomalies, you're looking for things that are going well, things that are surprises, and then you dig into them. So emails start to fly out.
I think the thing that people get wrong though about details is that you need to be able to go down to the detail, but you must be able to then generalize that and then look at the data to find out whether that detail's interesting or important or not. I'll give you an example. One of the things I like to do when we were building the grocery business is I would order groceries. It turns out grocery's a really hard problem. So we order groceries and invariably something would go wrong.
This is a ciabatta bread problem. My wife didn't get the ciabatta bread that she wanted, and she gets mad at me. And so I would then drive to the store, recreate the order as a Dasher, and then go around the store to figure out why didn't you eat the ciabatta bread. It turns out, this is the detail, right? The detail is there's two sections of bread. There's the normal bread aisle, and then there's the fancy bread aisle, or fancy bread area, and then the ciabatta rolls are in the fancy bread. And what was happening in the amp is we weren't directing them there. So that's a detail.
So now I'm curious. So now I got to go back and run the queries and go, "Hey, is there a higher defect rate in these categories?" Meats that have multiple areas, bacon. Turns out there are. Now I'm really interested, right? So now I start to, "Oh, it's 35% higher, missing and incorrect," or whatever the quality stat is you're looking at. So now I've gone from detail, I've now generalized, I know it's a problem to solve. Now, how do you solve it? And so my theory there would be that unfortunately we needed to get planogram information for every grocery on the planet and direct the Dasher to the right location that we literally had to do that or they weren't going to be able to get the ciabatta bread and everything else that goes along with it.
As an executive, you must retain the ability to go down to that level of detail. If you just stay up here at the 30,000-foot level and you become a manager or just a manager, I think you lose the ability to truly impact.
**Brett:**
Talk more about that. What is the problem with ... It would be easy to hear what you just explained would be to say you're a very senior operating executive. Someone more "junior" should get in their car, should flip over to dash remote and go do this and go tell you what happened. And so what is the problem with that?
**Christopher:**
They didn't do it. It's the way I think about it is, yes, I want them to do that. And so my theory is that I can't do everything for sure, but I want to retain the ability to do that in special places where I'm like, "I really would like this to succeed, so I'm going to go deep in this area." And my hope is that I help the team build that business, but I'm also hoping that you're training the next generation to say, "Oh, this is what's meant by being in the details. This is what's meant by solving how to solve a business problem and how to scale the business problem."
So I can't do that in every ... So one of the things I tend to do is like, let's say I'm running a complicated business like DoorDash, right? The metaphor I use is a plate spinning metaphor. Let's say, "Oh, that part of the business is going really well. I'll help them with the goal setting, help them with ... Okay, that's your plan. I'll look at the plan. Great. Okay, spun the plate."
This area over here, this is having trouble getting off the ground. We've tried this a few times. We're not getting product market fit. I'm going to prioritize that this quarter. I freed up enough of my capacity. I'm going to go deep with that team. And one of the things I like to do when I do that is I'll sit down with a team and say, "Okay, I'm going to work this with you as if I'm a team member, not the president and COO of the company. I'll put that hat on if needed, but I am going to be a team member and we're going to work this problem."
And so the ask I have of the team is that they share the sausage making process with me. What doesn't work, what doesn't ... So then I can get involved at a level that's necessary to try to help. Then I can back away from that. That plate is spun and you can go do something else. It's a strategy I've used in my career to scale myself. And so every quarter I might have two or three of those special areas that I'm going deep on with the hope that I can kind of scale myself. And to your question, I'm hoping while I'm doing that and helping that product area succeed, I'm helping train the people on how to take it forward.
**Brett:**
When you're diving into different parts of the business at that level of detail, what is the benefit when you're back up at altitude?
**Christopher:**
So you know the business, right? So it's like, let's take the DoorDash example, right? So it's like the initial challenge with DoorDash was like, how do you make these markets profitable? And so to use our working model, you got to go figure out how to make Boston work and how to make Philly work and how to make Palo Alto work.
And it turns out these things are kind of different from one another. And so you then start to say, "Okay, I need a playbook that's common and then that's the 80 and then I need some 20 because it's different." The big cities are different than the suburbs. And so now when you copter up and you're at the high level, you now are like, "Okay, now I understand here's how I'm going to roll out the United States. Here's how I'm going to go from 16 markets to 50 markets to 500 markets to a thousand markets."
You can use the playbooks that you've gleaned by working the problem. I tend to call this crawl, walk, run. That's the crawl phase, right? And then it's like, "Okay, I figured this out. Now we've made it work in one market. Now I'm going to try different flavors and make it work in three markets and then I'm going to go from there." Then you're up at the top level. Now, you know how to allocate capital, you know how to build teams, you know how much personnel you need. You then can build the machine that can go scale that thing across the country. If you just try to run to the end, you won't have the lessons that are necessary to be successful because the problem is not homogenous.
**Brett:**
How much of it is also the way in which you're able to work with your directs or their directs, that you have a better sense of sort of ground truth and discussion and debate and guiding sort of on a day-to-day basis?
**Christopher:**
Yeah. I mean, one of the things you realize running a lot of these companies over the course of time is that at the end of the day, it's all about people. You have to have the right people, the right teams. Earlier in my career, I would say that I was sort of like a one size fits all manager. I kind of was like, "Oh, here's how you manage people." And help them set goals and do the one-on-ones and everything like that.
And then as I went through time, I became much, I think better at being a manager in the sense that I realized that each person kind of needed different things. And so I was always trying to figure out, "Okay, I'm coaching this person, what does this person need to be successful?" And obviously you're asking them and you're like, "How can I help you be successful?"
I think earlier in my career, I let go a lot of people because they weren't performing. I read some book, I can't even remember what book it was now and it told me it was like, the first failure is on you. It's your fault as the manager. I was like, "That's kind of cool." And so I really took that to heart. And so I was like, "Okay, that didn't work. Okay, that's on me. I didn't give you the right goals didn't give you the right information. Let's try it a different way."
Holy cow, I was blown away by how much I could ... So that then became a philosophy of like, "Okay, I'm not going to be one size fits all here. It's my job to make this person successful." And I think that one technique that we spent time talking about the data piece of it, I'm often trying to teach that. I'm trying to teach how you go low to the data. I don't like the phrase in the weeds. I always think that's kind of stupid because if you're in the weeds, you're not getting it, right? It's like, no, I want you to be in the data and now I'm going to teach you how to copter up.
And part of it is judgment, you have to have judgment, where to look. I was in Microsoft during the early '90s and I talked about this before we started talking. And at that time, there wasn't a lot of data being used. And so it was all about persuading. I was getting big ideas, product, persuasion. And then I got to Amazon, it was all about data. It's all about running experiments, A/B tests. And I learned a lot during that period of time. I was like, "Oh my God, my instincts are dead wrong often."
And now I would say in the last 10, 15 years, I've been teaching people to not just use data, but to use their judgment to actually like, "Don't overlook the human judgment." I think it's very important in this era of AI. The metaphor I often tell people, I said, "So it's like we're running a store, a grocery store, and there's a spill of milk on aisle seven." I literally have had people who want to run A/B tests to figure out whether it's a more productive use of time to clean up the spill on aisle seven or restock the shelves on aisle four and run some long range study. Well, that's=
**Brett:**
We got to take care of the milk.
**Christopher:**
Just clean up aisle seven, just clean it up. You know we should just clean it up, so just go clean it up. So that art and science duality I think is critical. But at the end of the day, if you've got the right people underneath you, you can do anything, you can pivot, you can do whatever. If you don't, it don't matter. You can have the best strategy.
**Brett:**
And so you don't think if you're star talent, you can work sort of in any environment. The manager doesn't have to coach you in a certain way or you found that the opposite is true, that the way that you work with people really changes what they can do.
**Christopher:**
Well, first of all, I think I agree with both points. So I think there's stars that can be successful everywhere in any environment, and then there's people that need coaching. And often you'll get people that'll be like, they want to be the ... Everybody wants to get promoted, right? Everyone wants to get promoted. They want to be managers and all this stuff.
And they might be incredibly good at what they do. Sales is the example. Engineering is the example. And sure enough, you promote them and they're not good at that next function. That's a good example where you've got a rockstar that's incredible that you're going to have to help them get to that ... If that's what they want, if they don't want to still be like super coder and eventual, you should make that possible too. But if that's not the path they want, if they want to be a manager, it's like no, you're going to have to go back to school. You're going to have to study this like you did engineering and this is going to be hard and that needs to be helped and taught.
And so if you advance to a level and some people do and you don't get that coaching or mentorship or experience and people are not helpful with you, you can easily run a foul and it's too bad because you were a rockstar.
**Brett:**
Who were some of the people that did that for you? And what were those moments that they took you aside that had some real impact?
**Christopher:**
At Amazon, I would say that David Richard was my boss. He's now the head of Lyft and Bezos. We was a very small company back then. And I learned so much from them. So I was in Microsoft coming into Amazon and Microsoft's a very challenging environment, very competitive environment. And when Bill challenges you, you respond with force. You got to be behind your idea and everything.
First day I was at Amazon, Jeff challenged me on something and I was fired back and Jeff was like, "I'll just ask you a question." I was like, "Oh God, I'm in a different environment and I need to learn a different system." Jeff, he always was teaching customer, customer, customer. It was like that was the foundation. I had never been in an environment like he start literally the orientation day. There's much about this on the internet where he had an empty chair. Why does he have an empty chair? Everybody was doing orientation and it's like the empty chair is for the customer. You want to represent the customer in everything you do.
That's an example where I was like, "Oh, okay. I've been thinking of this the wrong way." I had strategy, product, business, all of the ... It's like, no, no, you put it around the customer and then you build the strategy. And once he helped me get that, and then I helped build the video business, I led that, then I helped build the electronics business, which was crazy making stuff up as we were going. I liked that. Without that guidance, mentorship, focus on how to do that, there's zero chance I could have done that.
**Brett:**
What do you think about yourself has allowed you to be so successful at sort of the top level exec jobs? If you introspect what's going on or outside of maybe what you shared thus far, what's like your working theory of yourself?
**Christopher:**
Well, first of all, it hadn't all been roses. So I think it's very important to be able to look at things that were failures and label them as such and learn from them. And so it's easy to talk about the DoorDash experience. Yay. But then there was the Tinder experience where it was a disaster. I got fired after six months and I didn't fit there. I should have known that. I ran web search for Microsoft, what became Bing. And it was a great experience on the one hand. I went from zero to a thousand engineers. I got to work on that coolest problem. It's all called AI now, but it's called machine learning back then. But did we fulfill what we wanted to do? No.
I told you before we started about my little startup that I founded right into the teeth of the Great Recession, I ended up having to basically sell the company in an acquihire. Now it was great. I enjoyed my chapter at eBay, but it wasn't the dream that I had. And I think, so to your question, I like to look at things. I was a US history student at Dartmouth, and one of the things you learn quickly by studying history is that the best people learn from their mistakes, and they're not afraid to make those mistakes and learn from those mistakes.
And so I try to do that. I try to always look back and say, "What could I have done differently? How can I own this situation?" Yes, there were externalities like a Great Recession, but what could I have done differently? And I think that's helped me. So that's one thing. And then honestly, putting myself in different chairs, like the one I talked about earlier, that has been the most important, because at some point you go from being like, "Oh, Christopher's the Microsoft technology guy to. Okay, Christopher solved that problem, he worked on that problem, now he worked on that problem." You then start to have a repertoire of, "Oh, I can solve business problems."
It doesn't really matter what the domain. It has to be tech. I mean, I like tech, but other than that, I feel like I can dig in, right? I can go to school on the problem and then I can break to bear all this experience. I'll pull from that, pull from this, and it won't be exact, it won't be right, but we'll go for it.
And then maybe lastly, I'll say, I like to iterate and learn. I call it crawl, walk, run. So if I'm tackling a problem, if I can break it down into sub-parts where I can work on a problem ... DoorDash was great for this because instead of trying to launch everything across the United States all at once, you're like, "No, I'm going to start this project in Phoenix. We'll go see if it works there." And once we get it working there, then we'll figure out how to expand it. And so I think that you can't do that with everything. If you're going to change pricing or do a subscription model, you have to do writ large, but I think that ability to compartmentalize and shrink problems down and then walk and then run, I think has been very helpful to my career.
**Brett:**
What do you think is the difference between somebody who taps out at the number two spot? They're the VP of finance and they never ... Other than maybe bad luck, they're never capable of being a great CFO. They're a great VP of ops or however they ended up in the path to COO and they just don't have the capability.
**Christopher:**
It's funny, I decided I don't want to be a CEO. I was a CEO of my little company, but the truth is I watched Tony and I was like, "Holy cow, I don't really like this job that he has. I like my job." And so one of the things for me is like, I've been taught all my life is, you should aspire to keep going all the way, tippy top.
And I realized at DoorDash, this was late that I was like, "You know what? I'm good at being the president and COO. That's what I'm good at. I want to build." So that's where I want to spend my time. I don't want to raise money from investors and all that stuff. That's hard work. That's stuff I don't like to do. Tony's brilliant to add lots of things, including that.
Part of it is like it might be okay to be the best VP of finance on the planet. Do you know what I mean? Now, if you want to go to the next level, a lot of times I think people don't take the risks to get there. I don't think they don't take the path. They don't take the risk. It's like, "What does it take to get there?" Often you might be on the controller side of finance, right? You need to figure out, "I got to go learn the strategic side of finance." Are you willing to take a step back in order to do that?
A lot of people aren't willing to do that. And very few people get the generalizable skills, the generalist skills to be successful. I always coach that early in careers. I'm like, "Don't be afraid. Don't be afraid to go over here."
**Brett:**
Yeah. What do you mean by generalist skills?
**Christopher:**
Ideally, when you end up running something, you kind of want to know a little bit about everything. I want to know about marketing, I want to know about product, I want to know about BD, I want to know about eng, and I want to be able to bring it all together in a coherent strategy and a coherent go to market.
The problem is we got specialists, specialist, specialist, special. And you can subspecialize. I was doing that on the finance side. And so that was a little bit of the exercise of like, let's get in a different seat where you're uncomfortable and let's see if you can learn that skill. That pushes you, certainly, your skills. It will then increase where you can go and up in the company. But boy, does it make you a better leader.
Because now if I've run eng and I'm now running DoorDash operations, I'm not overseeing engineering, but guess what? I know a lot about engineering. So I now know how to hopefully align myself with the engineering organization. How can I help you be successful? How can I get you the data you need? And I know all roads lead to engineering, right? That's how you scale.
**Brett:**
And technology business.
**Christopher:**
Exactly. And so if you don't know that, if you've never had any experience with it, I think it's very difficult to do that. So we live in an era of specialization, but at some point, the people that have generalist skills, I believe, become more valuable. And that is one of the things that helps you break through to get to the chairs that you're talking about.
**Brett:**
You sort of said this as a passing comment, but if you go back to sort of Microsoft in the '90s, you talked to a lot of people, it was very competitive internally, battling out of ideas. Do you think there's a lot of environments where that's actually great and that's absolutely the way that a company should be run and people should behave?
**Christopher:**
Yes and no. So on the one hand, I feel very privileged to have been at Microsoft in the 1990s. So that was like, if you want to know my origin story, that's got to be central to it, right? Brilliant people, big vision, reinventing the world. Love that. I thought that was the only way to work, because that was my only experience, circa 1998\. Then I learned that's not the only way to do it. And so I could have easily been a lifer at Microsoft and probably answered this question differently.
Now, I realize, actually, you know what, you don't have to necessarily have as much competition internally. There's other systems, perhaps friendlier systems, perhaps better systems. Although I was at Amazon, which is a tough environment as well. So a little bit of both. And the truth is, I pick from now running a company or a division of DoorDash or whatever, like I'm trying to pick the best of. I want the customer focus of Amazon. I want the marketplace nuance of eBay. I want the technology optimism of Microsoft. It's a best of. There's no one size fits all, but it doesn't have to be an ultra competitive place.
**Brett:**
How do you end up with not just a watered down culture then?
**Christopher:**
I think the key from a leadership perspective is to set aggressive objectives, like full stop. Tony and I talked a lot about this, like big, hairy, audacious goals. And I coach this a lot. I'm on three boards now and I coach a lot of founder CEOs and I'm like, "Set ambitious goals." So we were talking to one company and I said, "So it's your best AI feature. This is the best AI feature." I said, "What percentage of ... It's very new. Okay, 5% of people use it today. Okay, great, but they like it. That's great. So we're getting product market fit, right? What's the goal for the next six months or whatever?" "Oh, we're going to increase it by 20%." I'm like, "Oh no, that's not going to work, because in order for this to become mainstream, that would take the rest of our ..."
**Brett:**
Existence.
**Christopher:**
Exactly. "So no, what you need to do is set, let's 10x this. Why don't we go from five to ... Then it's 0.5 to 5 and then we'll see how to go beyond that." It was 0.5 actually. And so it's like, okay. And that sounds like hard, but the thing is the team then thinks differently about that.
My contention is they don't all have to be assholes in order to achieve that objective. They can work well together. They can be friendly with one another, but they have to be ambitious and driven and biased for action and get stuff done and aim high. But I don't think you have to be competitive and combative, which is the ... And if I'm over-reading into your question, that's what I'm ... But you have to work hard. You have to work hard, you have to work smart, but you don't have to compete. Yes, you have to be competitive, but you don't have to have a culture where it's dog eat dog, I don't believe.
**Brett:**
You said that Amazon was very hard, but hard in a different way. What way?
**Christopher:**
Well, I think part of it was the time that I was there. So it was the dotcom boom and the dotcom bust. And so on the one hand, this is why I think people should work in a hyperscale situation, you are forced to learn. So Amazon was like in '98, '99, 2000, we would go from ... I'll tell you my first week there, I was trying ... Christopher, go build the video business. So there's me and Jason Kilar who ended up running Hulu and we're like, "Okay, we're going to go figure this out." And so we went to the Video Software Dealers Association and not a soul would meet with us, literally not us all. I think Artisan met with us because they felt sorry for us, but no one else would meet with us. This is in March or April of 1998 and Jeff wants us to launch in October.
And so roll forward, October of 1998, we launch Amazon. I'm in every Mahogany boardroom for every movie studio. So I went from can't get a meeting at a dealer association to literally talking about the future of e-commerce to Warner Brothers, Columbia, Sony. And so on the cool thing about that, I had experienced that type of growth at Microsoft, but not that acutely, not that crazy. And so you're forced as a up and coming executive, you got to up your game. And it's not just like, "Hey, give me some tougher goals." It's like, it just happens. It's just like, "Oh God, build the electronics business. Go figure out how to do that." I'm like, "I don't know anything about electronics. Okay, go figure it out." There's no playbook to do it, and the pace is electric.
Jeff just said we're going to launch electronics in July of 1999 and toys at the same time. Why? They're big and they're really different. I swear to God, that was the rationale. And it was cool because it pushed us. Harrison Miller was running toys. I was running electronics. And so the environment that we were in, the goal setting that we were in, the fact that we were making up stuff as we were going, forced a level of crazy. I don't think I've worked that hard and learned that much in a period of time in my life.
Then on the other hand, the boom and the bust. The bust happens as well, which you probably didn't go through, but it was an ugly time. It was the dot-bomb and Amazon.bomb and all that stuff.
**Brett:**
What's the goodness for you personally of feeling that?
**Christopher:**
Yeah. I mean, what happens is you learn that these cycles ebb and flow. And once you have perspective on that, then you're a little bit less flustered when they happen to you. Jeff took me for a walk and said, "Christopher, they build you up just to tear you down and the best you can hope for is the comeback story." And I think that's right. I think that was wise words.
I was talking to somebody about a reporter or whatever about DoorDash and the stock had been down a bunch or something like this a few years ago. And he's like, "How do you feel?" I'm like, "I don't care." And he's like, "Oh yeah, you do. I know you do." And I'm like, "No, I don't." I was like, "Because you have to have a long-term perspective. This comes and goes."
But we went through a period of time where it was basically of late, the pandemic sort of changed that where it was like everything was pretty much up and there was a whole generation of people that hadn't gone through the downturn. So invariably haul me out, "Hey Christopher, tell people it's going to be okay. You've been through the dotcom thing."
**Brett:**
You're the one older.
**Christopher:**
Tell me about the old person.
**Brett:**
Wheel them out.
**Christopher:**
Exactly. Wheel them out. It's going to be fine. Don't worry about it. But you do get perspective that ... And in fact, have you gone through it enough, you begin to realize that the downturns are actually the time where you can gain the most share. If you keep your head about you and you've got resources, you can gain the most share.
**Brett:**
What do you think the role of experience is?
**Christopher:**
I think it's a mixture. I think that in starting a new business where you're trailblazing, I think often having experience in that particular industry is a negative. So if you're going to reinvent electronics, you probably don't necessarily want to hand it over to an existing executive from Circuit City or Best Buy. And it's not disparaging on them, it's just saying it's an advantage to be able to go say, "Okay, we're going to reinvent this thing and it's going to be different than the current thing." It's almost an advantage to not know the business.
Now, with that said, there's been many cases in my career where having gone through things, I realize the pitfalls. And so now I can apply that experience. I'll give an example. So when I joined eBay, they said, "Christopher, go fix search." That was my thing. This was 2009\. 92% of the sales went through search at that time. So I was like, "Okay, this is a pretty high leverage situation." I set the goal, right? I set the goal and I said, "Well, I want to optimize conversion. So if I get one point of conversion, I get a bunch of money basically for the company." And customers are happy, presumably, because they can find what they're looking for.
Well, we didn't have the technology to do this quite right. And so I could only optimize item level conversion, not item times price. And so I said, "Well, I'm going to go build that system in parallel so I can actually auctions with the complexity." But I knew in the back of my head, I knew in the back of my head that I could drive item growth and not drive sales growth. I knew item times price, but I said, "I'll get away with this for six months and then I'll add in the price component."
Sure enough, six months goes by, bought items is up by some nice amount and sales are basically flat. And the CFO's looking at me like I'm insane, right? So okay, now I get the system online, item times price. Oh, sales go up, but you know what? I didn't think about the trustworthiness of the marketplace.
So what happened is a bunch of the sellers that were good at manipulating the thing, but we're not necessarily the best products, we're getting to the top of the list. Okay. Item times price with a trust constraint, that's it. I went through that for like 12 to 18 months before I got that right. But what did I learn as an executive? This is your experience point. Okay, now I learned, okay, I got to be more thoughtful about goal setting. I've got to think about what can go wrong with the goal and how do I set the goal so it's not too complicated because if there's too many constraints, I won't get anything. But if I don't constrain it to some degree, I won't get the outcome that I want. That's a situation where experience helps me tremendously. So I don't think it's a one size fits all answer. I think it's the problem that you're looking at, whether you want to look at it with fresh eyes or whether experience. And the truth is they both can help.
**Brett:**
And is it mostly when you're thinking about the different backgrounds? It's just sort of a judgment call. Is it like you're putting together a jazz band and it's very sort of finger feel? Or you have a way of like, "Okay, I need somebody who's done this 20 times in this role. I'm willing to take more risk on an up and comer here. I want somebody with fresh eyes here."
**Christopher:**
I think a lot of pressure gets put on the recruitment process. I think people think they can figure out in the span of 45 minutes whether the person's going to be great at this or not. In my experience, it's-
**Brett:**
Very noisy.
**Christopher:**
It's very noisy. It's a batting average thing. I think people spend too much time thinking that they can engineer that process to be perfect. I much rather, yes, we're going to interview, yes, we're going to look for skills, but then we're going to bring them in and we're going to see whether they succeed or not. And I think where organizations fail is they often then don't, when it's not a fit, they don't move on.
**Brett:**
Everybody says that. Why is that?
**Christopher:**
It's very easy to just get complacent, unfortunately. I'll give you an example where it's like, you put somebody in charge of something and check in on week one and they'll be like, "Oh my God, this thing is so messed up. We got to do A, B and C. That sounds freaking great. That makes a lot of sense to me. Let's go get that done." Check back, right? A month later, is A, B, and C done? No. Nope, nope. And they moderate.
What happens is often they can't translate it into the doing, and so people don't fix the problem. And as I alluded to earlier, step one shouldn't be to fire the person. Step one should be, I'm not giving the person enough information or enough guidance or enough help to succeed, and you got to lean into that. And then if it doesn't work, you have to move on. Being in a company that's growing like a DoorDash or an Amazon circa that period of time forces you to get good at that because you're going to fail, right? So you're forced to fix that problem one way or the other.
**Brett:**
What do you think is the difference between an effective executive at a rapidly scaling company versus an effective executive at running an at scale business if there is a difference in your mind?
**Christopher:**
Certainly the ability to adapt and change is the tippy top in the hyper growth scenario. I think that I like to teach those. I say the thing you're doing now is guaranteed to not work six months from now, guaranteed. And the problem is a lot of human beings, myself included, they're inertia. You want inertia, right? You don't like change. You're in a situation where if you don't change, you're not going to ...
So I'll give you an example at DoorDash. So we used to launch cities by sending in college students basically into cities. It used to be a fun job, right? I'm going to go launch Miami. We'd send a team in there and they would recruit Dashers and train Dashers and sign up restaurants and do the marketing. It was a fun job. But then Tony wants to launch 3,000 cities. We can't do that.
So six months from now, I need to have a model go to market where I can launch cities and not set foot in that city at all. And we don't know how to do that. And Tony wants to keep going. He wants the current model to keep going. We can't stop. So I now need to do that while I carve out some capacity to build the new model, the new launch model. I need to figure out how to get that right, and then I need to put the pedal to the metal as it were to launch.
You need the adaptability to deal with that pace of change, and it's very difficult. It's like, "Well, this is working, right?" Well, yeah, it's working, but we don't have money. We don't have the money to do that. And this gets back to the goal setting. You're like, "I want to launch with no people and I want it to be better than the model with people." And then you got to put the right people on that to our conversation about people who've got to go figure out that. And DoorDash cracked that. We figured out how to expand economically, remotely, and that allowed us to expand across the country. Everybody calls it the suburb strategy, but it really was an expansion strategy. That's how we did it.
But to connect the dots, if you're an executive that you can be amazingly effective at running at a billion-dollar business and I pull this lever and that lever, but the pace of change there is not necessarily great. That's fine. You're good at that, but you may not be good at dealing in this type of an environment where it's like it's built in. You have to change. It turns out that's what I like. I like it.
**Brett:**
And you've always liked it?
**Christopher:**
I always like to learn and every time I've moved in my career, I've been kind of bored.
**Brett:**
That was the reason you moved.
**Christopher:**
I get bored. Often the reason I moved. And I felt like being in those environments, there's zero chance that you're going to get bored because you're just like, "I don't know how to do that." I'm forced to learn. And so that works well with my stay interested, stay engaged, stay hungry.
**Brett:**
Do you agree with the idea that a lot of these AI first companies or Cursor or Anthropic are sort of much more flat orgs, much more empowered ICs, a much higher expectation for everyone regardless of how high up you are in the org? The IC-ness of the job is much more or no, there are all thousands of people and general management is general management and that type of thing?
**Christopher:**
Well, I think in the world we're living in and about to live in, I think that the ability to get stuff done, I'm blown. I'm just absolutely blown away. I don't know about you, but I did not necessarily think we were going to get to where we are in my lifetime.
**Brett:**
It also shows the comment you were saying a second ago, which is just we don't understand exponentials. And if technology is on a curve, you check in on a year, a lot changes.
**Christopher:**
We are. Yeah, somebody was saying Claude Code's been out for like nine months, whatever. I was like, "Really? That's all?" And so I think that that's going to have huge implications for how organizations are run and your ability to manage teams of humans and AIs is going to go through the roof. I do think organizations will likely be flatter in the future. I do think that even higher up executives are going to be capable of doing things, which is just astounding.
But at the end of the day, if you're still managing humans, which you will be, I believe, for a long time to come, those are going to require a lot of the skills. I think the generalist skills of building businesses, understanding customers, I don't think those go away. In fact, I think they get more important.
**Brett:**
More the value of a generalist goes up for specialists.
**Christopher:**
Yes. Yes.
**Brett:**
If you're to go back to Dartmouth where you went to school and you said, "Hey, got to go create a course." And the title of the course is how to be a world-class COO. What's the syllabus and why? Why are those classes on there?
**Christopher:**
I think I would teach how to build, which I think is the job of a COO because I think ... And so the thing that would be on that syllabus, of course, would be we build something and we probably start with AI first in this world. We build it with agentic AI, but I would teach how to build. I would teach how do you go from zero to one? How do you set goals? How do you scale once you find product market fit? How do you build a viable business? That's what I would teach. And I think if you teach that, then you can be a successful CEO.
The trouble with the COO title is it means so many different things to different people. And each company sort of has a different definition of what it is. For me, I viewed my job as my job is to build the business, and that's what I would try to teach.
**Brett:**
Do you think most of those things you actually could teach, or you would teach them by telling them to go build something?
**Christopher:**
I do. I do. In fact, one of the things I enjoyed the most last year is I got to go to the University of Oregon where my son went and I just graduated and I got to help a group of young entrepreneurs who were building phenomenal ideas, like fantastic ambition, but not necessarily they didn't know all you can teach. And some of them still literally follow up with me weekly on here's what I'm doing.
So what are some examples of that? One person's building, it's a marketplace to help people with mental disabilities and they're building a network of, it's using video and stuff like that, and it's going fantastically well. I'm super excited about that. Another person was building a T-shirt marketplace that was basically in real time figuring out how to do that. Another person was literally writing, they were writing books using AI and trying to figure out how to go to market with ... The range was just astonishing.
One of the things I learned from this, I'm curious about ... I taught this class once where I was at Wharton and it was half undergrad and half business school students. And you didn't have to tell me who was who. You know how I could tell which one was which? The innovation level for the undergrads was like off the hook. They were so cool. The ideas were so cool, but the business school students had the polished like, "Yeah, here's the plan, here's the ..." But the ideas had been somehow watered down during that process. And so it's like, I wonder if there's a way to keep this, this ambition, but maybe then figure out how to ...
**Brett:**
It goes all the way down to growing up. Like you see the creativity and curiosity in a nine-year-old. And it's just beaten out of them year by year.
**Christopher:**
Totally. So in my fake curriculum, I would hope to keep that enthusiasm and great ideas, but maybe help them figure out.
**Brett:**
But when you were trying to help the students, what are some of the ways that you actually taught or explained how to build?
**Christopher:**
Yeah. A lot of times it would be like the one vector would be they didn't understand who the customer was. So who's the customer? Who have you talked to? What problem are you solving? That's where you start on most of these things. Some people had that kind of nailed, but they were going so slow. I was like, "Oh my God, this could take forever." So I teach them how to set goals.
One group, the marketplace I was talking about, I basically told them they had a 10x by December, I think it was. And they're like, "Well, where'd that come from?" I'm like, "I made it up." And so I'm like, "But it seems like a good goal. It seems like a reasonable goal." And then I said, "Well, okay, you kind of laughed at that goal, but let's talk about it for just a second. What would have to happen to get to 10x?" And then they start beginning to work the problem.
So, okay, you got to hire this person. You then got to get ... Okay, your bottleneck would be medical or whatever it was. And so, okay, well, how do we get a hundred of those people? And so, okay, I got to do a BD deal. Okay, great, let's go do that. Did they hit the 10x? They did not. I think they got to 8x or something like that. Again, there you're hoping where you're like, "Okay, now I've taught you you can move way faster than you thought you could." Now, what's your next six months goal and see if they've learned the lesson.
So the good news is once you've seen enough businesses, you can pretty quickly ascertain, "Oh, this person doesn't know who the customer is. This person doesn't know how to run. This person has no technology person and they don't know what they're doing on the tech side of the business. I need to tell them how to do that." So pattern recognition, this is your experience, but it matters a lot.
**Brett:**
You've talked a little bit about this. I can't imagine how much time you've spent setting goals in your career. A lot.
**Christopher:**
It has to be a lot. And debating goals and getting into arguments about goals.
**Brett:**
Yes. What else can you share on the art of goal setting other than one of the most important things, which is most people are probably not ambitious enough? And incredible things happen when you set a really ambitious goal and expect a lot of people, what else are dos and don'ts or things that people get confused about when it goes to goal setting?
**Christopher:**
Well, one of the things that I do is I tend to be very initially tops down in goal setting. A lot of companies and teams are bottoms up in goal setting, and I found that, that is not a great way to have ambition. So what happens if you say, "Well, tell me what you can do." Everyone goes off and they kind of say, "Well, what about this? Well, that'll go wrong. It'll come back, we can do this."
It's not bad and it's achievable, but the problem is they didn't necessarily think as expansively as I would think they should. So I found the following a much better process. What should that team do? I think they should do X. I make it up. This is where experience comes in to play. I know enough about the area. They moved it this rate last year. I think they can move faster. This thing came online. I'm going to push them to do X.
Now, here's the thing, you got to push them to do X with Y amount of resource. Because if you say do X and X is ambitious, they'll come back and say, "Great, I can do X, but I need 4,000 people to do X. I want X with Y dollars and people." Come back and tell me what your plan is. Now, what'll happen is I will ask them to go work that problem. Instead of having knee-jerk reaction that that's impossible, I want you to go work the problem. Now sometimes they'll come back to me and say, "Christopher, I can't get to X, but I can get to 80% of X. Let me explain Y." That's great.
**Brett:**
This is one of the big tensions with ambitious goals is you feel like people feel like they're not winning.
**Christopher:**
This happened in one of the companies I coach and I said, "You should promote that person. You should promote that person and say, that's exactly ..." Because you think they did stellarly and you should take it on yourself. I said, "Oh, I set the goal 10% too high. Sorry about that, but I'm so glad we got to 90%." The best execution in the company, I'm going to reward that with promotions and dollars and whatnot and send a message to the company that it is okay to strive for these ambitious goals even if you fall short. The how you did this really matters.
I've even rewarded teams that got nowhere near the goal, but pivoted, learned, didn't make the same mistakes, but they had the energy and effort to try to get there. They'll figure out how to get the batting average up over the course of time. So the tops down philosophy I think is very important and you'll get much further faster than if you do a bottoms up.
And I talked earlier about the figure out, the nuance of make sure you're going to get what you go or you're going to get directionally what you go. So be sure that that's what you want. Where a lot of companies get it wrong is they can be, the goals can be antagonistic to one another. It's like, "I need to do X and you need to do Y and they don't intersect with one another." And so you want the top level goals to galvanize as much of the company.
Like DoorDash has got DashPass our subscription model. That's super important. So if you're running the grocery business or you're running the restaurant business, you're driving DashPass, right? How are you helping add value to either grow the number of DashPass subscribers or retaining DashPass subscribers? And that unites the teams together. So that's another element of goal setting that I think the bigger your company gets, the more you want to align the teams together, and you're always looking for pockets where you got it wrong.
**Brett:**
What do you think about the topic of charisma as it relates to executives? Do you think about trying to be charismatic?
**Christopher:**
No.
**Brett:**
It's just who you are? You have a way of really engaging someone of leaning forward.
**Christopher:**
That's what you mean by that? Yes.
**Brett:**
I think that it's developing followership. It's getting someone excited.
**Christopher:**
If that's what you mean by charisma, yes. That I view as a job of a leader. The job of a leader is to get people excited about the problem that we're solving or the customer need that we're going to meet. I think that's part and parcel of the thing. There's some dark times. You invest in a lot of companies, right? And it does not go smoothly.
**Brett:**
Most of the time it doesn't go smooth.
**Christopher:**
There were periods where DoorDash was running out of money and couldn't raise money in '17 and people were like, "Oh my God." It's that those times you've got to be like, "We're good. We're going to get there."
**Brett:**
I think there's different models of leadership. One is that we're going to sugarcoat everything. Everything's hunky-dory. The other is that no, people see through that instantly and you lose credibility. Once you lose credibility, you have nothing.
**Christopher:**
Having gone through these things, I often just point back to these things. Look, lots of people left Amazon, myself included actually, in 2001, Amazon.bomb. That was the end of Amazon. Go back and look at a stock chart, have some fun with that one. And that wasn't the end.
Now, I left for other reasons, but that is a good teachable moment. And there's been lots of those in my career. I'll give you an example. So Uber entered the ... This was back in 2017 or whatever, entered the restaurant delivery space. And some people were like, "Oh my God, Uber, they've got-"
**Brett:**
Unlimited capital.
**Christopher:**
Unlimited money.
**Brett:**
Incredible talent.
**Christopher:**
They got all the drivers, right?
**Brett:**
Ambition.
**Christopher:**
Talent, Travis is going to ... It's over. And so it's in those moments where you got to say, "Come on, this is a harder problem. This is a different problem than rideshare. We're going to be best at this." And some people are not going to believe you. Not going to believe you. I can share examples. I'd be like, many people when I was at Microsoft, we would enter a space and they'd be like, "Oh my God, Microsoft. Microsoft's in the personal finance space." Well, ask Quicken how that went for ... Oh, they won. Oh, okay. Just because you have unlimited money and great people doesn't mean you win.
**Brett:**
Why is that?
**Christopher:**
I think you got to solve the problem. And often, when you're in a company, this gets back to the new stuff as well. Often what happens is that just because the team solved this problem doesn't mean you solve this problem. It gets back to the, often you don't put the right people on the problem, you don't put enough resources on the problem.
You can imagine like Tony and I, who was showing up at The Cheesecake Factory selling The Cheesecake Factory? It was Tony and me. We were the little engine that could. We were like, "We're not in rideshare. We're in food delivery." And so they went exclusive with us. Is Travis going to the cheesecake factory? Yeah, no. Not a chance.
And so elevating that in terms of the people you put on the problem, making sure those new S curves get started, get to where you need them to go. Not every company's great at ... In fact, most companies are not great at the hit parade. And so you have a distinct advantage when it is your only business.
**Brett:**
What else can you say about the dynamic of being an executive in the context of an executive team? And when that's really high functioning, what that looks and feels like?
**Christopher:**
The number one way you can tell is ask them what team they're on. And if they don't say that team, if they say, "I'm on the eng team," or, "I'm on the marketing team, on the product team," then you've got a dysfunctional team. So you want the leadership team, whatever you call them, M team, executive team or whatever, they need to be a team, right? They need to work problems together. They need to have each other's back. They need to not be political.
I think as I've gotten older, it's become easier for me because I don't want anybody's job. I'm not trying to do this or that. Earlier in my career, I was kind of like a wrecking ball earlier in my career because I wanted to get stuff done. And I realized that was perceived as self-serving, got some good feedback from a leader at Microsoft about that.
And one part of me resisted that because I was like, "My goodness, we're not moving fast enough as an organization." But then I realized that my inability to get the executive team aligned or to help get the executive team aligned was holding me back. And so I ended up realizing that that was holding me back to your earlier point. And so I had to figure out how to work within this executive team in order to thrive in my career and to get the things done.
I think a lot of people don't make that. They don't make that leap. That's a litmus test for you. So next time ask that of somebody. "So what team are you on?" And see if you get a range of answers, but you want that executive team to feel like that's their primary team.
**Brett:**
Do you generally find it's productive when CEOs want to dive down in and around a functional lead, a VP of this or that, and they go and work on a problem low level? Or do you think it's generally the job of the CEO to work with the executive team, let the executive team express themself on the company, sort of their org underneath?
**Christopher:**
I do both, obviously. I think the default mode should be, you should work within the structure that you've built, but then you should also reserve the right to go work the problem. I've learned so much by doing that, by the way. Then you go down, you're like, "Okay, this team's working on this problem. That problem has not gone well for the last quarter or whatever." Why? I don't know. Okay, I'm going to go work on that problem.
And then you go down and the cool thing about that is you get to see the next group of leaders, get to see who's good and who's not. And then you also learn a lot about the culture that's developing down in the organization. And obviously, you solve the problem, but I try to coach that a lot to executives to maintain that ability to go to the lowest level of detail.
And Tony, he can do that all the way, all the way down. Bill Gates is like that. I mean, I used to be terrified to go into a meeting with him because you'd be like, "What's he going to ask? I have no idea what he's going to ask." It's going to be literally, you could come in and be talking about, I don't know, the architecture of the search index and the next thing you know, you're off on some search business strategy conversation. His range was astronomical and he was conversant on everything asking ... He'd find your weakness, which is very impressive.
**Brett:**
Someone, maybe a former version of yourself or a friend of yours is joining a company as the COO of scale-up company. I'm starting on Monday. What in your job is to sort of give them advice, make them increase their chances of success?
**Christopher:**
You've got to study the business, so you need to understand the business. So it's like somebody built this tool at DoorDash that was just unbelievable. This four hours arrived, it's called Dispatch, and you literally could watch an order happening at real time. And it was the greatest tool ever for this.
Literally, I would pull it, I would order, I'd pull up the tool, a restaurant has confirmed the order, right? And then it's like Dasher assigned the order, right? Dasher drives, you can see Dasher drives to the ... And so in something, we invariably go wrong, there'd be customer support interactions. And one Dasher locked the keys in his car.
And literally, I was watching this unfold. This is during my first week at DoorDash. It was invaluable in understanding what we do. That's the lowest level of detail. And then there was the aggregate detail. And I always coach people to look at data on a daily basis. Don't aggregate it to a month or a quarter or look at it on a daily basis, because you'll learn so much more about what's actually going on in the business.
So I built this report straight away that had all the cities and all the numbers and the quality and stuff like that. And what's cool is it looks like a lot of information, but you're really just like, "Oh, something interesting happened in Boston." It's like, "Oh wait, the marathon was yesterday. Oh my God, the quality just fell through the floor. We didn't handle remapping DoorDash correctly because of the route." Right?
**Brett:**
And then you have customer churn and on and on and on.
**Christopher:**
Yeah. But then you're like, "Actually, there are lots of marathons that happen. And then there's parades that happen. So how do we handle that?" And then you go on off and you figure out how to do that. So it's like an insight generator. One of the things I did, I love sorting things. So I sort, you get the worst gross profit orders from yesterday. And I would be like click. You look at that detail and you're like, "Oh my God." And then you look at the customer orders and you realize that this person's creating fraudulent orders. Email to the ... Is this what's going on here? Is there a fraud?
And then the other side is, "Okay my God, this is a great order. We should do more of this." I didn't realize that was happening. The Phoenix team did something or the Seattle team did something, let's take advantage of that and spread it across the country. So understand that. Understand the company and what it does.
I went on a journey because DoorDash was very distributed. So my first week, I was in Orange County visit in LA and then I was in Seattle. I was visiting all the teams trying to get a sense for what was actually happening. The gentleman that ran our local team left in the first three months of my arrival of the company. Kevin, if you're listening, I miss you. Now he came back.
Ironically, he did me a huge favor. So I was like, "Tony, this is the center of the company's go to market." So I basically said, "You're going to have to do these other things. I'm going to go run the local teams for a while." And so it allowed me to actually go and understand the company at a very good level. And it was kind of the heart of the go to-market. So I got to understand what we do. And he did me a huge favor. In hindsight, I was like, "Oh, that actually was great." And then I came back and did the COO job.
So if your person's coming into a startup, it's like don't be afraid to do any job that's necessary because you're in a startup. And the other advice I think I would give is you can't solve all the problems immediately. So pick something, solve it, and then solve the next thing is the other thing. You can't solve it all overnight.
**Brett:**
Oh, great place to end. Thank you so much.
**Christopher:**
Thank you. I enjoyed it.
**Brett:**
This was great. You're very good at this.
**Christopher:**
Oh, thank you.
**Brett:**
And you're very charismatic.
**Christopher:**
Oh, thanks.
**Brett:**
You really are.
**Christopher:**
Thank you. I appreciate it.
**Brett:**
You have a way to be excited and get people excited. At least that's my experience.
### What really motivates Lenny Rachitsky?
URL: https://review.firstround.com/what-really-motivates-lenny-rachitsky/
Last updated: 2026-04-15T17:12:11.000Z
[](https://review.firstround.com/reluctantly-influential-inside-lenny-rachitskys-demandingly-chill-life/)
“I have a rule: no meetings before 3pm,” Lenny Rachitsky says. The retro analog clock on the wall ticks past 9:30am. “This is an exception.”
Our writer spent hours with Rachitsky — the PM turned reluctant influencer — to see what happens when the podcast camera turns off. He learned that after you peel back Rachitsky’s layer of equanimity, what you find is someone who has something to prove.
Rachitsky started Lenny’s Newsletter to live a “chill life.” And on the surface, it seems he’s achieved that: walk into his home and the floors are heated, there are lit candles, steam rises from the mug Rachitsky sips.
But with all his success and how much he works, our writer wonders if that goal of living a chill life is still even possible.
This is the central contradiction of Rachitsky. The chill life made his insanely high quality bar possible. The quality at which he does everything made the chill life sustainable.
[Take me to The Review](https://review.firstround.com/reluctantly-influential-inside-lenny-rachitskys-demandingly-chill-life/)
### Reluctantly Influential: Inside Lenny Rachitsky’s Demandingly Chill Life
URL: https://review.firstround.com/reluctantly-influential-inside-lenny-rachitskys-demandingly-chill-life/
Last updated: 2026-04-15T15:39:22.000Z
**L**enny Rachitsky says his goal with Lenny’s Newsletter was just to live a chill life. From where I sit — as we face each other on the leather couch in his Marin County home, jazz playing, steam rising from his mug — he got what he wanted.
But I wonder if success has taken him quite far from that goal.
“I have a lot of flexibility throughout the day,” he reminds me. “I can go on walks with my family and pick up my son from school. But on the other hand, I work a lot now. I always want to work. I always want to put more time into making sure everything I do is awesome. There are just a lot of things to stay on top of.”
Lenny’s Newsletter has 1.2M subscribers. It’s the top business newsletter on Substack and is top four in publications in the US. Lenny’s Podcast has over 500K YouTube subscribers and each episode gets 100-200K downloads. The sheer volume of what’s in his orbit is impressive on its own: \~25 pieces of content per month across his newsletter, podcast, community wisdom emails and the two other podcasts now on his network, “[How I AI](https://www.lennysnewsletter.com/s/how-i-ai?ref=review.firstround.com)” and “[The Skip](https://x.com/lennysan/status/2024178501113565659?ref=review.firstround.com).” He curates and frequently updates a list of partners for [Lenny’s Product Pass](https://www.lennysnewsletter.com/p/productpass?ref=review.firstround.com) and maintains its infrastructure, has a thriving 40K-person community and has even put on a 1,200-person conference in San Francisco, Lenny and Friends Summit.
All of this didn’t just happen to him. Nothing is an accident, even if he sometimes makes it sound that way.
“I’m not trying to be this influencer or creator,” Rachitsky says. “I think the reason people enjoy my work is that I’m just a friendly guy who’s learning the same way the audience is learning. I just want to share useful information that will help you in your life.”
After spending hours with Rachitsky, I see that the person on the podcast is largely the person you get off-screen. But peel back that first layer of equanimity, and you’ll find someone with something to prove. He’s built “Lenny’s” by delivering on the promise of helping people be more successful at work. And the only way for him to keep doing that is to create a life where only what he chooses — and only what he can dedicate time to — are allowed in.
“I have a rule: no meetings before 3pm,” Rachitsky says. The retro analog clock on the wall ticks past 9:30am. “This is an exception.”
## Rachitsky set out to prove he could build his own thing. He did it twice.
Rachitsky and his wife of 10 years, Michelle Rial, have opened their home to me and a photographer so we can tell their story. It’s somewhat of a rare opportunity to see their life from the inside — where the lines between work and life blend like a charcoal drawing.
When my shoes come off, heat radiates through the concrete floors. A lit candle throws the scent of a tomato plant. Local art lines the walls, curated by Rachitsky and Rial, who is an [artist herself](https://www.michellerial.com/?ref=review.firstround.com). The house’s many windows embrace the morning sun, and dangling from one of them is a crystal to refract light. Upon closer inspection, it’s anchored to a motor, slowly rotating the crystal in a circle so rainbows roll across the floor in a tidal rhythm. Most of Rachitsky’s work gets done in a black leather Eames lounge chair that’s currently occupied by Einstein, their adopted Bichon-Maltese.
“Both of us work from home. We want it to be a beautiful place to work, wherever you’re sitting. The colors should feel harmonious, each place to sit should feel cozy,” Rial says. “Comfy, beautiful and inspiring work.”
The home brings into sharp focus the contradiction of Rachitsky. These two competing ideas — a chill life and obsessive work — aren’t actually in tension with each other. To understand why, you have to go back to Odesa.
Rachitsky was born in Ukraine to Jewish parents who applied to emigrate but were denied exit, being labeled “refuseniks,” a community of 30,000-40,000 Soviet Jews who declared their desire to leave the country. ([In a recent podcast episode](https://x.com/lennysan/status/2024544077308711215?s=20&ref=review.firstround.com), he found out he and [Boris Cherny](https://www.linkedin.com/in/bcherny/?ref=review.firstround.com), the Creator and Head of Claude Code, are from the same town.) They paid a price for it. Wanting to leave was itself an act of treason, and Rachitsky says his parents had a difficult time after their application was denied. These applications were documented, and in many cases impacted the careers of refuseniks, whether it was being fired or being denied work in their area of specialization. Many refuseniks also went to the gulags.
Rachitsky’s parents were stranded. But coming to America was always very important to his mother, so much so that she only wanted to marry someone who was ready to leave the USSR — the person who first introduced Rachitsky's parents lied to his mother, saying his father spoke English when he didn’t.
When Rachitsky was six and his sisters were three, Rachitsky’s parents were at a party when they heard about another opportunity to apply for exit (Soviet policy was beginning to crack due to pressure from the Reagan administration), so they took it. The Rachitskys landed in Los Angeles, via Italy, with the help of the US Jewish Federation. His mother was an economist in Ukraine and started a new career as a CPA in the US, even though she barely spoke English. His father was a mechanical engineer and drove taxis and limos while breaking back into mechanical engineering.
Rachitsky doesn’t talk about this like it’s some kind of formative wound, but rather, where some of his drive comes from.
“My mom has had a lot of influence on the way I am. She said working hard was the key to success, and she pushed me to work hard too. She prioritized income and making money because that drives safety, security and opportunity,” he says.
His father operates differently. “My dad is my number one fan. He checks my Substack rankings and subscribers every day. He’s always like, ‘Oh, you’re number seven today!’ I actually don’t know what he does all day besides check my stats,” Rachitsky says. “But it’s a nice balance to have.”
Growing up, Rachitsky was shy, quiet and reserved — so much so that his mom asked a doctor what to do, and the doctor suggested team sports. Rachitsky wasn’t interested. He didn’t really have a bunch of friends, didn’t go to parties. But as we’re talking about his upbringing, he says something that’s actually quite revealing: “I always felt like I could achieve things. I always had this chip on my shoulder of like, ‘I’ll show people what I can do.’”
It’s the kind of thing a kid decides after watching his parents in circumstances that didn’t afford them much choice at all.
Rachitsky’s mother was probably happy with the reliability of his early career decisions. After studying computer science at UC San Diego, he got a job as an engineer at web monitoring company Webmetrics, and spent a total of nine years there (through the company’s acquisition by NeuStar, a clearinghouse for telecom data). But maybe what she didn’t know was that he was spending a lot of time on Hacker News, thinking about what he’d do next. Rachitsky says he loved building and knew he wanted to start his own company — a manifestation of that chip on his shoulder from childhood.
> Starting your own company is a great way of showing people what you can do, versus working for someone telling you what to do. *– Lenny Rachitsky*
Friend [Alistair Croll](https://www.linkedin.com/in/alistaircroll/?ref=review.firstround.com) gave him the opportunity. Croll had recently launched [Year One Labs](https://techcrunch.com/2010/09/07/year-one-labs-brings-a-startup-incubator-to-montreal/?ref=review.firstround.com), a startup incubator in Montreal, and convinced Rachitsky to quit his job and move north in the dead of winter to pursue his startup idea. His first stop after landing at the airport was to go get a real jacket.
That idea became Localmind, which allowed users to post questions about specific locations and get real-time answers from local experts. The company [launched at South by Southwest in 2011](https://www.youtube.com/watch?v=n4t8Tc%5FoVAs&ref=review.firstround.com) and raised $600K, but Rachitsky recognizes it was a moment-in-time business built on the SoLoMo (social, local, mobile) movement. “Looking back it was a terrible business idea. Being able to ask someone a question about a place you’re going was such a magical experience at the time. It turns out people only need that once a quarter.”
When Airbnb aimed to acquire the company in an all-stock transaction, one of Localmind’s investors tried to veto the deal, believing it’d be a huge loss. The way Rachitsky tells it, he and co-founder [Beau Haugh](https://www.linkedin.com/in/bhaugh/?ref=review.firstround.com) entered a big boardroom to an extremely tense meeting with their VCs and threatened to quit Localmind and just join Airbnb. Rachitsky was so nervous that he wrote himself a notecard with a script of what to say. “There’s a lot of extrovertedness to being a founder. I learned I could do the stuff I had to. I learned I could do hard things,” he says. Rachitsky overcame his soft-spoken nature to push through the sale of Localmind to Airbnb.
For the person who wanted autonomy, being told what to do didn’t sit well. He was also right. “It ended up being like a 20x return for them. The partner came to us later and asked: ‘How can we do that again?’” he says.
Rachitsky joined Airbnb with a plan to do a quick stint, gathering as much information as possible about how to run a successful business, then start another company. Instead he stayed seven years — becoming one of its first PMs. “I learned so much and built a network. My time at Airbnb was so helpful in so many ways. It would’ve been dumb to leave early,” he says.
When the company introduced its sabbatical program, Rachitsky took it. He spent three months living his very own cliche: traveling, reading, doing a 10-day silent retreat. About 45 days in, he checked in at work and had a heart-sinking moment: “I thought, ‘This stuff is so boring and it doesn’t actually matter. What the hell am I still doing here?’” Rachitsky describes the feeling as the Kool-Aid leaving his bloodstream. He quit.
Back on the couch in Marin, I’m now interviewing Rial. She takes Rachitsky’s place and Einstein jumps between us. She tells me she was nervous when Rachitsky left Airbnb. She’d been in media and advertising — and understood from her own experience as an artist how hard it was to make a living doing creative work on the internet. Over the course of her career, she’s even had to take a couple medical leaves (upending her career in the process) for repetitive strain injuries. Stability is important to her.
Rial describes herself as the unorganized, messy one — she will leave the dishes for tomorrow, runs late and works from instinct. Rachitsky is very much the one who takes care of things right away. She calls him Mary Poppins and a “disciplined hippie.” It’s hard to stay nervous about someone like that.
“He always seems to figure it out,” she says.
When Rachitsky was considering his next move, he revived a list he’d been cultivating during his seven years at Airbnb of things he wanted to build and started prototyping — which at that time meant building a V1 of the idea, showing it to potential users and validating their thinking. One of his big ideas was a “Whole Foods of gas stations,” very clean and nice, with wifi, good food and coffee. Another was an iOS app called Ritual to help with daily chores and habits.
But he craved more structure to feel like he was both accomplishing something and being productive. So he created a sprint process and board of directors. Initially it was seven friends (including now Anthropic technical staff member [Igor Kofman](https://www.linkedin.com/in/ikofman/?ref=review.firstround.com) and multi-time founder [Greg Isenberg](https://www.linkedin.com/in/gisenberg/?ref=review.firstround.com)), but over the course of six months, it grew to 30 people. He’d email this board every two weeks outlining his three professional and personal goals, email again with a mid-sprint progress report and finally, email at the end of the two weeks with a summary.
Here’s an email he sent to the board in 2019:
*Theme for this sprint: Writing*
*I'm finding a surprisingly positive reaction to the content I've been sharing, both on Medium and on Twitter, so this week I'm going to lean into it a bit more to see where it takes me. I have no plans to do writing full-time (please slap me if I ever say I do), and I still absolutely want to start a company, but I'm finding that the value I've gotten from this investment has been super high ROI and I want to see where it goes. I'm also leveraging a life philosophy of mine, "Create value, and good things will happen." We shall see. Next week though I'm planning to get back into deep startup exploration mode.*
“I told them they didn’t have to do anything or respond. The email alone created my accountability,” says Rachitsky. At an exploratory time meant to be free of commitments, Rachitsky began making them to himself.
Plan A was starting a company. Plan B was advising companies. Plan C was joining a startup. Plan D was joining a big company. Writing full time wasn’t even in the alphabet of plans, but Rachitsky found it while exploring Plan A.
“My approach to writing was to ask myself what I’ve learned about starting companies over my career. So I started writing down some things and focused on my Airbnb experience first,” he says. “How cliche. Write about your tech experience as a Medium post.”
That became his first piece: “[What Seven Years At Airbnb Taught Me About Building a Business](https://medium.com/marker/what-seven-years-at-airbnb-taught-me-about-building-a-company-e1d035d49c56?ref=review.firstround.com).”
This was in 2019\. It landed on the front page of Medium, catching the eye of co-founder and CEO of Airbnb, [Brian Chesky](https://www.linkedin.com/in/brianchesky/?ref=review.firstround.com), who shared it with the whole company. “It ended up being so incredibly successful that I started feeling like maybe I had more things I could share with people,” Rachitsky says. His first handful of posts were: “[A Three-Step Framework For Solving Problems](https://medium.com/user-experience-design-1/how-to-solve-problems-6bf14222e424?ref=review.firstround.com),” “[What Buddhism Taught Me About Product Management](http://medium.com/swlh/what-buddhism-taught-me-about-product-management-f05c7486649c?ref=review.firstround.com)” and “[How To Get Into Product Management (And Thrive)](https://medium.com/hackernoon/how-to-get-into-product-management-78c58bd9c8cf?ref=review.firstround.com).”
Rachitsky published seven [Medium posts](https://medium.com/@lennysan?ref=review.firstround.com) between April 2019 and February 2020, what he calls a period of “tinkering and writing.” During this time, he decided to move all his content over to Substack in the company’s early days, upon recommendation from Substack investor [Andrew Chen](https://www.linkedin.com/in/andrewchen/?ref=review.firstround.com).
[Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/?ref=review.firstround.com), co-founder at Substack, says Rachitsky was skeptical at first: “We saw he was posting great essays on Medium and generating a ton of interest. We thought he could really succeed with the Substack model — you can get the emails of people who care deeply about what you’re doing and one day you might want to turn on paid subscriptions,” says McKenzie. “The response was immediate.”
> He has become the poster child for what’s possible on Substack. *\- Hamish McKenzie, co-founder at Substack*
“It shows when someone really treats their readership as the primary customer and has a direct relationship with them,” McKenzie continues.
He called this period of his life “Project: Avoid Getting a Real Job.” He spent the next 10 months writing 40 free newsletters on his Substack. He didn’t miss a week — death, taxes and a Lenny’s Newsletter in your inbox every seven days. A quiet, introverted guy, sitting alone on a laptop, putting out things on the internet, trying to show people what he could do.
Growth was [surprisingly consistent](https://www.lennysnewsletter.com/i/157838246/what-did-the-growth-curve-look-like-in-the-early-days-how-did-you-sustain-momentum-when-you-were-under-5k?ref=review.firstround.com) in the early days.
To increase readership, he tried some things that worked: guestposting on Andrew Chen’s [blog](https://andrewchen.com/grow-marketplace-supply/?ref=review.firstround.com) and right here on the First Round Review, in one of our [favorite articles about performance reviews](https://review.firstround.com/the-power-of-performance-reviews-use-this-system-to-become-a-better-manager/) back in 2019\. Others growth tactics didn’t work: like paid growth. “Running Facebook or X ads are worthless. The amount of growth that comes from word of mouth dwarfs ads. Even if it’s ROI positive, the numbers it drives are meaningless,” he says.
Then COVID hit. Rachitsky says that he thought Airbnb was dead and his life savings were going to be worthless. Maybe charging for his burgeoning Substack would actually make money. At this point, 10 months in, he felt like he had gained significant momentum, enjoyed the work enough and still had a large bank of ideas to tap into. “It’s the [Lindy effect](https://en.wikipedia.org/wiki/Lindy%5Feffect?ref=review.firstround.com),” he says. “Something can live as long as its current age. I figured I could do this for at least another 10 months.”
So he [introduced a paid subscription](https://www.lennysnewsletter.com/p/this-newsletter-is-growing-up-?ref=review.firstround.com) for $15\. “That was more than Netflix. How was I going to convince anyone to pay $15 a month for this newsletter?” he says. He added access to a [private Slack community](https://www.lennysnewsletter.com/p/community?ref=review.firstround.com). He hand-picked the first 30 members (those who were most active with his newsletter, commenting and replying to emails), made sure everyone had a profile picture and personally pinged people to answer questions he knew they had expertise on. Rachitsky was in the community heavily, creating the rhythm and etiquette for how to operate with a high signal-to-noise ratio. “For example, one of the best things I did was create a channel just to #promote-your-stuff, to contain the self-promotion that occurs within these sorts of online communities. Everywhere else, you can’t self-promote,” he says.
Rachitsky’s original goal was to make $100,000 per year from the newsletter. [After 10 months of a free newsletter and six weeks of paid](https://x.com/lennysan/status/1265072097849602048?ref=review.firstround.com), he had \~13K free subs, \~450 paid subs and \~$56K in ARR. His next goal was to make his Airbnb salary and he hit that. And it just kept going. And going, and going.
“He’s really good at gifts,” says Rial, while we’re sitting on the couch with Einstein. “He’ll do really custom gifts. He commissioned a lettering artist, who I love, to create a print of a quote my dad used to say all the time.”
“Did he tell you about the record?” she asks.
Rachitsky had pointed it out on the shelf earlier. “Michelle used to sing all these funny little made up songs about our dog, so I hired a professional musician to turn them into epic songs with full arrangements,” Rachitsky says. “And on the b-side it’s just sounds of Einstein eating and drinking.”
But she tells me what’s maybe the most revealing thing about Rachitsky: “He flosses every night. And he uses a water pick during his morning shower. It represents who he is because of the consistency it takes,” she says. “Every night is one thing. But every morning, too? Who does that?”
Everything he does gets the same level of attention.
## A never-ending obsession with quality (which creates value)
For years, Rachitsky didn’t miss a single week of newsletters. He says the hardest parts were coming up with something interesting to write about every week, not taking a single week off and putting his work out into the world not knowing if a lot of people would read it.
But it was important as he monetized. He used to always tell people that the key to success was “quality and consistency.” But he’s since changed his mind about this: “I’ve come to realize quality is actually the only thing that matters. That’s part of the reason why Substack is so good, because it lets you just write and not worry about any of the infrastructure like a website or backend.”
> Spending time on anything that is not producing awesome content is not worth your time because growth from content that people love and want to share beats anything else you do. *\- Lenny Rachitsky*
To him, quality is rooted in solving a problem for someone better than anyone else. He likes to think about this through the [JTBD framework](https://review.firstround.com/build-products-that-solve-real-problems-with-this-lightweight-jtbd-framework/). For content, he says there are four jobs: keep you informed, help you make money, entertain you or help you get better at something you care about. His job is the last one. “Quality is solving someone’s problem better than anyone else. Well, maybe everyone else. You could be second or third best if the market is big enough,” he says.
If he thought something would compromise his focus on quality — even if lucrative — it wasn’t in his line of sight. [Elena Verna](http://linkedin.com/in/elenaverna?ref=review.firstround.com), who runs growth at Lovable, tried to get Rachitsky to join Miro in 2020 while she was interim CMO. “We needed a Head of Product and I tried to get him to join, even if it was an interim position or just on contract. I told him it was the opportunity of a lifetime, that he’d make millions,” she says. “He said ‘No, thank you. I really want to focus on my newsletter and I’m not going to compromise it. I really want to see it through.’”
For Rachitsky, quality leads to value. “Value means something that can improve your work and life. Can you take the stuff I’m sharing and implement it in your actual work to be better at what you do? That’s what I always obsess over,” he says.
Value is also monetary. When I ask how much money he makes from his platform, he waits a moment before he politely declines, echoing a [sentiment put forth by founder and advisor Lulu Cheng Meservey](https://x.com/lulumeservey/status/1970891615788204466?s=20&ref=review.firstround.com): “There’s this thermostat people have of how successful somebody should be. If they want you to be more successful, they help raise you up. If you’ve become successful, they bring you down,” he says. It’s clear where he thinks he is on the thermostat.
He spends an average of 10-15 hours on each newsletter, but the range is tectonically vast. Some newsletters take 100 hours to produce — like this one in 2019, “[How to kickstart and scale a marketplace business](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace?ref=review.firstround.com),” which became an eight-part series. Putting that together took months, over dozens of interviews and hundreds of hours of work. He says he goes over a newsletter 50 times before it’s published, looking for anything that isn’t concrete or clear, re-reading them until he can’t find anything to improve any more.
A lot of Rachitsky’s early newsletters came from questions he was being asked on X, from founders or other PMs (he calls Lenny’s Newsletter an “advice column”). So when he introduced guest posts, that let him solve a key problem: expanding his ability to provide better, more thorough answers on topics he didn’t have expertise in.
Rachitsky says he loves doing them because he can help shape the best ideas from the best people. Editing a guest post takes longer than writing his own posts. Author and positioning expert [April Dunford](https://www.linkedin.com/in/aprildunford/?ref=review.firstround.com), who has [written three guest posts for Lenny’s Newsletter](https://www.lennysnewsletter.com/p/a-guide-to-advanced-b2b-positioning?ref=review.firstround.com), encapsulates the [three-month process](https://www.linkedin.com/posts/aprildunford%5Ftoday-an-exec-says-to-me-must-be-easy-activity-7437914348683157504-VITK?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAAizmvMBnABhGG9qci0UHoDVcjkpDlc5gOc): many back-and-forths on ideas, structural changes from Rachitsky’s editor, creation of graphics and proofing. “People don’t understand how much time I spend editing,” says Rachitsky. “It’s not that they write the thing and we publish it. We spend months iterating on it. My goal with each post is for it to be the best thing that person has ever written.”
[Tal Raviv](https://www.linkedin.com/in/talsraviv/?ref=review.firstround.com) is a former Wix and Patreon PM who’s working on his fourth guest post with Rachitsky. “Google Docs crashes because there are so many comments. But when you finish, it reminds me of the feeling of launching a product,” he says.
And as he continued to expand, no matter the surface, his standard remained the same.
Rachitsky has two rules. One he’s kept, another he’s broken many times.
The first is no full-time employees, hoping to avoid the drama that comes with management, which he’s done many times during his working career. He works with a handful of contractors (about 10) around the world, for the podcast, newsletter and community.
He’s broken the second rule many times. “I always said, I’ll never do a course, never do a conference, never do a podcast, never do a book. I’ve done all those except the book.”
In 2022, Rachitsky launched Lenny’s Podcast, three years after his newsletter. While he was reluctant — saying podcasts are very hard to share and grow organically — his advantage was already having a successful newsletter with baked in distribution and years of audience trust.
> Because it felt scary to me, that told me it was a thing I should do. *\- Lenny Rachitsky*
But once he said yes, he went in emphatically. Rachitsky obsessed over how to produce an extremely high-quality podcast before ever recording a single episode, gathering as much knowledge as possible by taking [courses](https://dreamstudiocourse.com/?ref=review.firstround.com) and reading books about lighting, studio setup and interviewing.
Even though the podcast is already at the top of many charts, Rachitsky’s desire to improve doesn’t wane. Rial gave him voice lessons as a gift, so he could improve his speaking presence. He practices them while learning the piano.
Initially, the goal was simple: become 100 people’s favorite podcast by hyper-focusing on what would help the audience of product people in their careers. “He gets all these CEOs and founders wanting to come on the podcast but says no to 98% of them. These are big CEOs and founders — Fortune 500 companies, multi-billion dollar companies,” says [Jordan Bornstein](https://www.linkedin.com/in/jordanbornstein/?ref=review.firstround.com), who runs Pen Name, the studio producing Lenny’s Podcast. “He feels that a lot of these people actually wouldn’t provide value for his specific audience.”
He added video to the audio-only podcast after only a couple months. Putting his face everywhere was another big leap for the shy and introverted Rachitsky. Bornstein said that if Rachitsky was going to invest time and resources into doing a podcast at all, the distribution from video would be worth it. “He was 1,000% right,” says Rachitsky. “YouTube’s distribution is unlike anything else I’ve seen. It’s the only place that drives new viewers outside of my newsletter.”
But you can’t distribute bad content. Everyone I talked to said at the core of what makes Lenny’s Podcast exceptional is his research.
“He really goes beyond just showing up and recording. He does the pre-work to make sure the audience — and the guest — gets a lot of value out of it,” says [Claire Vo](https://www.linkedin.com/in/clairevo/?ref=review.firstround.com), a founder and product leader who hosts [How I AI](https://www.youtube.com/@howiaipodcast?ref=review.firstround.com), a podcast in the “Lenny’s” network.
“Every single time I’ve recorded with him, Lenny has done such deep research on me, everything I’ve said, everything I’ve shared,” says Verna, who’s been on Lenny’s Podcast four times, more than any other guest. “He comes prepared to say, ‘Based on everything, this is where I think the questions from people are, this is where I think the direction is, this is where you need to dig in.’ He has a really strong, opinionated stance of what I need to focus on.”
Rachitsky says the podcast is much less work than the newsletter. “If I just had the podcast, what a dream. But the newsletter and the podcast work together. Having both is key.”
It starts by sending guests a series of questions that can help bubble up interesting topics. Rachitsky has never shared these publicly before, but here they are:
- What’s one thing you could share that would contribute something new to the conversation around building products, teams, companies, or how AI will change how we work?
- Is there anything you have a contrarian, potentially controversial, or very strong opinion about?
- What's the most counterintuitive lesson you've learned about building products or leading teams that goes against common startup wisdom?
- What's one thing you wish you had known before moving into your current (or most recent) role?
- Anything you haven't shared elsewhere that could be interesting to share in this forum?
- What's one pivotal moment in your career?
- Is there anything you've built that has been a massive failure?
- Are there any frameworks, methods, or processes you've found to be especially useful in your work that others may find useful?
- If this were to be the one podcast episode with you that you'd want to send everyone to who wants to understand how you think and operate, what would you want to include in that episode?
- Are there 2-3 topics you'd especially love to talk about?
- Who are 1-3 people I could ping to ask what I should ask you about?
Most guests take two hours of prep, but if there’s a lot of content for him to go through, it can take between 5-10 hours. A Manus prompt provides Rachitsky with background on the guest, like their best quotes or stories, what other questions they’re most frequently asked (so he can avoid those) and helps [anticipate responses guests will have to his questions](https://x.com/lennysan/status/2008603297679372688?s=20&ref=review.firstround.com). He watches all their past interviews and reads their posts on socials, which takes the longest time.
LLMs help write questions in different styles, which he doesn’t use, but they bubble up interesting topics: “Come up with ten questions in the style of Charlie Rose. Give me ten questions in the style of Terry Gross. Give me ten questions in the style of Sean Evans — those are always super unexpected,” Rachitsky says. Everything then goes into a draft agenda for the podcast.
> I don’t feel like I’m that smart and I don’t want to sit there and pontificate and share my insights. I’d rather hear the guest talk. *\- Lenny Rachitsky*
"He wants to win. He wants to do things right. But it's done in a way that is so kind — I've never seen anything like it,” says Bornstein.
As Rachitsky walks me over to his podcast studio, he says, “It looks ridiculously small and stupid from the outside.” It is small, but very little about Rachitsky’s space strikes me as “stupid.” It’s just the opposite — very thoughtful and considered.
The actual footprint of the studio in his home is small, taking up a corner of an extra bedroom, separated from the space by a hanging curtain that, if it were drawn, would hide the fact that Rachitsky even has a podcast at all.
There are the things you’d expect a podcaster to have: a microphone and headphones, a clock to keep track of time, an audio mixer, a lightbox, a teleprompter. But then there are the things uniquely Rachitsky, artifacts of someone still trying to improve: a plaque that says “Have fun” and “Breathe,” a note to himself that says “Improve,” with bullets for “Push back more,” “Difficult parts / stories,” and “More IC folks.” There’s also a hand-written note from [Seth Godin](https://www.linkedin.com/in/sethgodin/?ref=review.firstround.com) that says “Go Lenny Go!”
“I’ve always been such a huge fan of Seth Godin. For decades. He’s such a legend. When he came on my podcast, which was already crazy, and then sent me this note telling me how impressed he is with my work — wow, that meant so much to me,” Rachitsky says.
Rachitsky has moved the studio five times — from one house to another, through rentals and Airbnbs and even to convert the podcast room into a nursery. In every iteration, Rachitsky’s signature digital fireplace has persisted throughout. It started because of a pesky reflection: a mirror in the background of his first studio was reflecting random parts of his house or his podcast setup (you can [see it over his right shoulder](https://youtu.be/YLsxHa1dhSw?si=5x08wTS06JIPIZvy&t=211&ref=review.firstround.com) in his first video podcast and [on a few episodes after](https://youtu.be/FCxkT8ULrVg?si=kHfqPb%5FaHFY4cFa9&t=180&ref=review.firstround.com)). So he started positioning his laptop to catch the reflection and chose a fireplace to evoke the warm and cozy vibe. You can see [how he first introduced the fireplace](https://youtu.be/0FgZ1VVxEBo?si=fK%5Fv2CalVsJjnIvh&t=274&ref=review.firstround.com) and a second [iteration for how it evolved](https://youtu.be/u53fplD%5FC30?si=HA1rLlR1s5FBPvG4&t=235&ref=review.firstround.com).
No space has ever bent to his studio, mirroring his approach to work and life.
## Saying no to preserve time for the right yes
As subscribers and revenue grew, Rachitsky could’ve easily fallen into the trap of wanting to do more of what was making him successful. But he leaned in the opposite direction — being even more intentional and focused.
“A lot of people look at this creator life and are like, ‘Oh I want to do a podcast and a newsletter.’ They find something that people like but *they* don’t really love — but they do it anyway, because it’s going well, and then end up creating a job they hate,” he says. “So you have to be really careful staying in the middle of that Venn Diagram of things people value and things you actually enjoy and want to do for a long time. So I try to stay close to that, which is a lot of saying no.”
> People are horrible at saying no because we have FOMO and want to chase opportunities. His ability and comfort with saying no is a big portion of his success. *\- Elena Verna*
For example, it might’ve been a logical next step for Lenny’s Podcast to follow the trend of moving to in-person, commercial-grade production setups. But he’s made the deliberate and practical choice to keep the podcast virtual only. “It’s mostly so I don’t have to go anywhere,” says Rachitsky. “I can have some tea, go right in my studio and start filming. It’s intent on creating a chill, calm experience. I want to avoid that moment of, ‘Here we go, it’s showtime!’”
Preserving his time has become something of a survival mechanism.
“If I said yes to this thing, there are 20 other versions of that thing I’d have to say yes to,” he says. It almost sounds apologetic, like he knows he might be letting people down. “It’s mostly just the volume. Saying no kindly is work.”
So he automated some of that kindness by creating templates as email snippets for different ways to say no to the things he frequently gets asked to do, like events, partnerships and content requests — even if it seems small, these requests can add up, sapping focus. He gets about 200 requests per week and respectfully declines 99.9%. The most difficult things for Rachitsky to say no to are the events or parties that would positively impact his work, connecting him with interesting people or generating ideas.
It’s telling to look at Rachitsky’s nos in the context of his yeses. The nos feel like papercuts, small things that can compound and negatively impact focus day-to-day or week-to-week. Yeses seem like they’re viewed on a time horizon of months or years in terms of what they bring to his audience.
In 2024 he hosted the Lenny and Friends Summit — an event for senior product leaders where CPOs from OpenAI, Anthropic, Netflix and Figma discuss tactics for building and growing a product, hiring and managing and much more. Rachitsky says he heard “[how impactful the experience was](https://x.com/lennysan/status/1851004994901999989?s=20&ref=review.firstround.com)” for attendees and that it was “one of the most meaningful days of his life.” If you missed the summit in 2024, you may have another chance to attend one later this year.
“He's really intentional about where he spends his time and how he scales out the business, community and network,” says Vo.
In 2025, he [introduced](https://www.lennysnewsletter.com/p/introducing-how-i-ai?ref=review.firstround.com) “How I AI,” hosted by Vo, to Lenny’s Podcast. She says he couldn’t be its creator and actually auditioned people to host. "His community needed hands-on AI content, and he understood the highest leverage thing he could do was find someone he trusts to deliver it. He creates leverage by giving experts a platform," she says.
Later in 2025, Rachitsky [added Lenny’s Product Pass](https://www.lennysnewsletter.com/p/productpass?ref=review.firstround.com): paid annual subscribers get one year free of 20+ tools like Gamma, Manus, Lovable, Linear, Replit and more. “Oh my god, it’s the smartest thing I’ve ever done,” he says.
Perplexity first approached Rachitsky a few years ago, offering Perplexity Pro to his paid subscribers. When it launched, he says it was the biggest growth day in the history of his newsletter. “The best part about the bundle is that it’s a win-win-win. Win for subscribers, win for companies, win for me. It’s such a rare and great thing to have done,” he says.
Everything he’s added to the “Lenny’s” world suggests Rachitsky has an unspoken rule he strictly adheres to: if his audience will get value from it, can he or someone else do it at the level he demands? If the answer is yes, he’ll find a way.
“My main priority is just using this time and freedom that I have to help people be better at achieving their career or life goals,” Rachitsky says.
But do those yeses actually conflict with his goal of having a chill life? Where’s that line? The contradiction again surfaces.
Rachitsky has begun reducing the frequency of his newsletter in an effort to rebalance work and life — going from a reliable four written newsletters per month to somewhere between two and four per month. He says his audience actually appreciates it, because many of them can’t keep up with all he’s producing.
For someone as obsessed with consistently delivering on his promise to his audience, that’s a scary prospect. “I worry that I’m not giving people enough value. I never felt like I could take a week off. I kept thinking, ‘No people will cancel,’” he says. “I had to invent a PTO policy for myself: four weeks off over the course of the year to refresh.”
Later in the morning of our interview, it’s gotten a bit warmer, and I’m looking out the door we’ve opened to the back yard. A Buddha fountain gurgles and a windchime rings in the breeze. When I turn around, the photographer has asked Rachitsky to do what he’d normally do. He sits in the Eames chair, puts headphones over his ears and starts typing on the computer. When we’re done with the shot, he says the time was actually very useful to him and he was able to get a few things done.
To Rachitsky, “chill” is an extremely demanding discipline. His life requires the kind of focus most people would find exhausting, not relaxing.
This reminds me of something Rachitsky said earlier in the conversation: “It’s hard to work for yourself when your boss is a workaholic.”
Maybe he’s saying no for another reason.
It feels dubious when Rachitsky says he’s never regretted saying no to anything. But the more he talks about the importance of focus to produce high-quality work, it appears as though he doesn’t spend much time looking at his life’s rearview mirror. Even if he did regret saying no to something, the road ahead doesn’t let him dwell on it very long.
“I think it’s important now that I’ve been out of the product management work for about six years. I need to find ways to stay grounded and not turn into some talking head in the clouds pontificating on things without actual experience,” Rachitsky says. He chooses his words so carefully here that I can tell it’s something he’s sensitive about. Rachitsky has always been able to lean on this work experience — whether that’s his first-hand knowledge of a topic or pulling the best information out of a guest. And with so much changing, he’s worried about his ability to keep up.
## I’m very afraid of moving into a place of just talking about things that aren’t real and just sound true, but aren’t true at all.
**\- Lenny Rachitsky*
Specifically, this means carving out space to explore and tinker. Rachitsky tries to make sure he still has the muscle memory for building — whether it’s a [list of ways](https://www.lennysnewsletter.com/p/everyone-should-be-using-claude-code?ref=review.firstround.com) to use Claude Code or [vibe-coding a soundboard](https://x.com/lennysan/status/2008297244672528868?s=20&ref=review.firstround.com) of his toddler’s favorite words. Using Codex, [he recently vibe-coded](https://x.com/lennysan/status/2033958104967352587?s=20&ref=review.firstround.com) an [app](https://www.lennysdata.com/?ref=review.firstround.com) that has his entire newsletter archive and podcast transcripts as AI-friendly Markdown files, plus an MCP server and GitHub repo. To make sure he knows what’s going on in the PM world, Rachitsky consistently talks to PMs who are on the cutting edge, and even is part of many private WhatsApp groups and email lists with product and tech leaders. Plus, he’s basically a full-time researcher for his newsletter and podcast. Getting this type of knowledge is actually the main reason he attends any events at all, which he generally avoids.
“Everyone who’s a PM on the ground who ends up being good at creating content, their dream is to move out of the product world and into podcasting or whatever I am,” he says. “But you realize once you’re in this world, you have to tap into the experience you had working a regular job for the rest of your life. You run out of advice or insights or lessons to share. So my advice to people exploring this path is to spend more time doing the work, to build more experience, so you don’t run out.” Rachitsky realizes his PM experience was a depreciating asset. Eventually, he won’t be able to use it any more, or at least in the same way.
## No end in sight
Rachitsky ended up building exactly what he wanted. But he doesn’t know how to stop.
“I never have had any real vision or goal. I had a few financial milestones, and then I hit those, and I kind of just wanted to see where this thing will go,” he says. “The big question on my mind is just how this story ends. I don’t know. I don’t know the off-ramp for this life, I don’t know how I retire from this thing. I don’t think anyone’s really figured this out.”
It’s an honest answer from someone who set out to avoid a real job and built something much more demanding and entirely his own. He seemed to have two goals that were in tension with each other. One was the chill life — no boss, no commute, no meetings before 3pm, ultimate control over his own time. The other was to make something valuable — requiring 100-hour newsletters, months of editing posts, weeks of podcast prep and obsessive curation. But what I believe Rachitsky learned is you can’t have one without the other. The chill life made the quality possible. The quality made the chill life sustainable.
There will always be more newsletters to write, more guest posts to edit, more podcast episodes to record, more products popping up that he’ll want to include in his Product Pass, more sponsors that want to pay him, more, more, more, if he wants it, there will be more.
I think the most important person Rachitsky will have to say no to is himself. But I agree with Rial — he seems to figure it out.
### The most politically dangerous role in the C-suite | Katie Burke (COO, Harvey)
URL: https://review.firstround.com/the-most-politically-dangerous-role-in-the-c-suite-katie-burke-coo-harvey/
Last updated: 2026-04-29T03:35:47.000Z
In the latest episode of Executive Function, Brett sits down with Katie Burke, who recently became COO of Harvey after joining as Chief People Officer. Before Harvey, Katie spent 11 years in HR leadership at HubSpot, where she built one of tech's most distinctive cultures. In this conversation, she unpacks her marketing-minded approach to HR, why she hired deliberately from hospitality rather than corporate backgrounds, and why developing culture should be a strategic priority for any organization.
In today's episode, we discuss:
- Why HR leaders should think like marketers
- The 2.5-year cultural hangover after a layoff
- The protein vs. sugar rule for employee feedback
- What it means to be the executive team’s own HR business partner
- What the Chief People Officer owes the board and what they don't
**References:**
- Amazon: [https://www.amazon.com](https://www.amazon.com/?ref=review.firstround.com)
- Anique Drumright: [https://www.linkedin.com/in/anique-drumright-53978a1a/](https://www.linkedin.com/in/anique-drumright-53978a1a/?ref=review.firstround.com)
- Brian Halligan: [https://www.linkedin.com/in/brianhalligan/](https://www.linkedin.com/in/brianhalligan/?ref=review.firstround.com)
- Carmel Galvin: [https://www.linkedin.com/in/carmelgalvin/](https://www.linkedin.com/in/carmelgalvin/?ref=review.firstround.com)
- eBay: [https://www.ebay.com](https://www.ebay.com/?ref=review.firstround.com)
- Gabe Pereyra: [https://www.linkedin.com/in/gabepereyra](https://www.linkedin.com/in/gabepereyra?ref=review.firstround.com)
- Harvey: [https://www.harvey.ai](https://www.harvey.ai/?ref=review.firstround.com)
- HubSpot: [https://www.hubspot.com](https://www.hubspot.com/?ref=review.firstround.com)
- Jacqui Canney: [https://www.linkedin.com/in/jacquicanney](https://www.linkedin.com/in/jacquicanney?ref=review.firstround.com)
- Klaviyo: [https://www.klaviyo.com](https://www.klaviyo.com/?ref=review.firstround.com)
- Lorrie Norrington: [https://www.linkedin.com/in/lorrienorrington/](https://www.linkedin.com/in/lorrienorrington/?ref=review.firstround.com)
- Maggie Landers: [https://www.linkedin.com/in/maggiecohenlanders/](https://www.linkedin.com/in/maggiecohenlanders/?ref=review.firstround.com)
- Rippling: [https://www.rippling.com](https://www.rippling.com/?ref=review.firstround.com)
- ServiceNow: [https://www.servicenow.com](https://www.servicenow.com/?ref=review.firstround.com)
- Winston Weinberg: [https://www.linkedin.com/in/winston-weinberg/](https://www.linkedin.com/in/winston-weinberg/?ref=review.firstround.com)
**Where to find Katie:**
- LinkedIn: [https://www.linkedin.com/in/katie-burke-965767a/](https://www.linkedin.com/in/katie-burke-965767a/?ref=review.firstround.com)
- Twitter/X: [https://x.com/katieburkie](https://x.com/katieburkie?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
00:23 Why HR begins with thinking like a marketer
01:58 “Don't ask for a seat at the table. Build the table.”
02:29 Radical transparency after Hubspot’s IPO
05:14 How HubSpot’s people function drove strategy
07:01 The trickiest part of the Chief People Officer role
10:00 Be the Michael Jordan of your exec team
12:14 Why people leaders need to create “graceful exits”
16:49 The inevitable two-year layoff hangover
23:31 The workplace shouldn’t be Disneyland
26:05 “Our job is not to make you happy every day”
34:28 Being a Chief People Officer isn’t for the faint of heart
35:04 How “Berry-Gate” taught HubSpot to manage feedback
40:51 Chief People Officers should be demanding, by design
42:01 Why “frequent flyers” are a new-hire red flag
44:54 Unpacking the role of the VP of People
49:94 Which company decisions fall to the Chief People Officer?
49:11 The most common challenges of scaling a company
51:39 The differences between HubSpot and Harvey
53:17 How AI is changing the people function
1:04:28 Why Katie shares her own performance reviews
1:06:22 How to manage a disagreement with the CEO
Brett: We'll maybe talk about this sort of last little chapter as you kind of went from a chief people officer to a chief operating officer. But maybe to start, when you think about the work that you do as a chief people officer, what are the things that you think you do most differently?
Katie Burke: As a CPO, I think a few things. One is because I was a marketer before, you think about share of attention and that applies to recruiting, but it also applies to employees. So most, I think traditionally HR leaders think we have a captive audience, so how can we drone on and on with as much information as possible internally to put people to sleep because they have to listen? And what I would always tell my team is people have a choice with how they spend their day and spend their time. We need to make sure our internal messages are super compelling and interesting. The same is true of candidates. Most employer brands are not that exciting or differentiated. And so I think some of that is thinking about comms as a strategic differentiator. Two was we hired a lot from hospitality and that was very intentional. I believe that people coming from restaurants, hotels, you name it, do a better job at thinking about the guest experience and employee experience than someone who grew up in a more traditional corporate environment. And so what you saw was our team come up with ideas that might be ... So as a good example, during the pandemic, we were able to stand up an online Montessori school three days after the pandemic set in, because we knew that parents needed the most support and we were trying to think outside the box. Those are, I think, some of the ideas that come to fruition when you have people on your team who come from different backgrounds. And then third, I would just say, I think some of the traditional HR rhetoric is about getting a seat at the table. And I'm a big believer in don't ask for a seat at the table, build the table and set the menu. And so I think that attitude seeped through my whole team, which is like the business comes first, our customers come first. Employee programming has to ladder up to the business strategy first and foremost.
Brett: Talk more about what it means to actually build the table. What are the stories that come to mind that convey that idea?
Katie Burke: Yeah. So I think a few examples come to mind. So at HubSpot, we had five values and the acronym was HEART. And I think people think of that as a big success story. The reality is we had two iterations before of failed values launches as so many companies do, because we tried to make eight of them. We had an acronym that didn't make sense or resonate. And so once we had the five values is about how we actually lived them. And I think transparency is probably the easiest one to talk through. When we went public, there were a series of things that any normal company, especially advised by lawyers and bankers would of course retire. And what we decided to do is make everyone a designated insider and continue to share that information at that velocity. That's a total counterintuitive bet. But the feedback we got from employees was it felt like getting a mini MBA 'cause you got so much more exposure. So we had a lot more information available to people even as a public company. And I think that if you were coming from a very cautious background and you were like, "Oh, we should follow the rules and what every other company has done that," we wouldn't do that. And I think that's a type of transparency. We would also release our entire employee net promoter score survey every single comment, unless there was something that was harassing or problematic, every single comment, including comments that said things like, "Katie was terrible at that company meeting," or, "I really disagree with this program." And I think if you wanted to build a team that was just aligned behind you, you certainly wouldn't release that data. That's a good example of like, we wanted culture to be a strategic priority. That means living your values even when it's really hard.
Brett: What are the other kind of things from the outside seem very weird, but were definitely the correct thing to do, at least in that stretch?
Katie Burke: During that stretch. So I think a few things that we did. One, in the middle of the pandemic, we decided to give people choice around where they worked. So a lot of companies did the return to work, we'll return to work in May, we'll return to work in September, and you saw them keep pushing that out. What we did was we designed a menu of options, so you picked your work preference much like you pick your benefits. And so we had three options, home flex and office and people opted in every year and your stipends, your work allocation, your desks, all that kind of stuff aligned with that. That's a good example of something that no one else is doing at the time that they still benefit from to this day. So that led to a ton of recruiting velocity during a time when a lot of companies were struggling to hire fast. That was a big example of something that allowed us to go faster. I think a few other things were we would just talk regularly. We had something called failure forum and we would regularly talk about things that we got wrong, including execs. And it couldn't be things like my biggest weakness is that I worked too hard. It had to be like, this was a real flop and here's what led to it. So one of my favorite examples was a VP of product got up and talked about a customer launch that went really wrong. And it created a ton of downstream effects for our support reps that frankly just completely backlogged them for three days. And he basically got up there and said, "In addition to apologizing to our customers, I want to say to our support reps, we got this wrong and messed things up for you, which I feel even equally bad about." I think that's the kind of humility that people aspire to and it creates disproportionate loyalty to a company during an incredibly tight talent market and that stuff really matters.
Brett: Think about set any arbitrary goal, we want to get to $500 million in recurring revenue and we want this type of retention and we want this type of usage or some metric for value delivered to customers. Maybe talk a little bit more about how the people function becomes sort of a strategic input driver for that.
Katie Burke: Yeah. So I think a few ways. One is just the folks that you recruit. So people who are great at execution, who live your values, who get the how, and also who can drive the urgency. Two is, managers. I think people don't talk enough about the fact that managers are the folks who set your tone and experience, especially as it relates to those metrics. And so part of what a great people function does is like you get, let's say you do an all hands meeting every week, every month, doesn't matter what the cadence is, the people team runs. I actually think your success is not just predicated on that. It's predicated on to what degree are managers repeating that information regularly and using the same slides in their team meetings to reinforce that behavior. So I think a really good people team recognizes that you want to give people tools to actually advance those mechanisms without you in the room. And the third thing I would just say is on the leadership side of things, part of your job is just to be thinking about the current leadership team and the future leadership team. And I think succession planning is viewed as like what happens if someone gets hit by a bus. And what it should actually be doing is thinking about what's the leadership skillset we need in 10 years that we don't have now or in a year that we don't have now. And where are the gaps? What's our leadership team really good at now and what are we bad at now and how does our team, like, executive recruiting should really help solve that gap.
Brett: Maybe share more about that. Obviously if you're a C-level exec, your sort of primary team ideally should be the executive team. And it seems like at least how you're describing it, one of the unique dynamics of a chief people officer is maybe they should be much more mindful of everyone else. And even if a high functioning executive team, everybody's working on the business problems together, it's not, I'm a head of engineering, I'm a this or that. There seems like more responsibility about who's in those seats, how is that evolving?
Katie Burke: One of the trickiest parts of being a chief people officer is you are the HR business partner for the executive team. And that includes being able to flip a switch between saying, "Hey, let me help you with your org and let's do an x-ray of your organization." But also to be able to turn to you and say, "Hey, the way you showed up in that meeting, that's not the behavior we all expect of each other." And so you have to be the most trusted person in that room. You have to be able to have those conversations confidentially, but then you also have to be able to go to not just your CEO, but also your board and say, "Here's how our current team stacks up, including yourself and your own team, and here's where I think we need to be to succeed in a year's time or three years time." And I think that role is really delicate, really important, and really strategic. And I think the most important currency you have in that role is trust. So the second you have a conversation where you and I are talking and you're like, "Hey, I just have to say, I think my board presentation didn't land." And I'm like, "Yep, it didn't. And here's why and we have to have a conversation." And you find that I shared that back with our board or shared with our CEO, you're never going to come to me again. So part of your job is discretion and trust. And I think that's one of the most important functions of a CPO.
Brett: But how do you figure that out? It feels like it's, one is it could lead to just insane unproductive politicking, where you have this background shadow role like you're wearing multiple hats. Certainly you can't dramatically steal any conversation you have with another exec or you're not doing your job as really a leader and shareholder in the business.
Katie Burke: I think your first point is the worst case scenario of a CPO, the political monster who's advocating and always kind of playing chess behind the scenes. What I would always say to our team, and I would say this explicitly to everyone, is I will not share what you personally shared with me. I will share thematic feedback. So, hey, the executive team is concerned that we're not doing enough here. I'm not going to say you as an individual said this, but I am going to share thematic feedback. It is my duty to the company and to our customers. And so I think some of it is just being super clear on expectation setting. I think the second part of it though is just really taking that responsibility seriously. You cannot take a momentary opportunity to seize power at the risk of trust. And so I think the politicking is part of why that CPO role is so critically important and why the best people at that role know that they need the trust to do their job every day.
Brett: What percentage of CPOs do you think behave in that way versus a politicking way?
Katie Burke: I think the better question is what percentage of executives generally do that? And I think CPOs in particular have an additional responsibility, but I think it's low. I think that's part of why a high performing executive team is not just their resumes and CVs of people in those seats, it's how they operate together as a team. And I think the reality is there are a lot of folks who play in politics and there are a lot of folks who are out for themselves or their team. And I think what you said about being a first team, that's part of why a high functioning executive team puts that trust and also the disagreement that you have to be able to disagree. I don't trust teams where they say, "We don't agree. We're a family." I hate when people say we're a family. To me-
Brett: You're a high performance sports team type person?
Katie Burke: High performance sports team works, but I think high performing sports teams you see when you want to win. One of my favorite things to call as an example is like, Michael Jordan was a really hard person to be in practice with, really hard, notably hard. He annoyed and agitated his teammates. He was a better teammate than he was a friend by far. And I think that's part of what your job as an exec is to be a great teammate. He was incredibly loyal to his team, but he was a pain because he tried to make them better every single practice. That's what you want as an executive.
Brett: How would you describe the difference between that and an asshole person that just nobody wants to work with and is so disagreeable?
Katie Burke: I think one is, would you pass to Steve Kerr in the most important high cut? Like, are you willing to give up the ball when the stakes are highest? I think that selflessness is critically important. And then two is I think people need to believe that you want to win as a team and that's not just about you. And I think what you hear over and over again from interviews with his teammates was, "Yeah, he could be extremely difficult and confrontational. And would I necessarily want to have dinner with him every night? No, but I always knew he was going to be the hardest working person out there." Same thing with Kobe, what you see with him is his work ethic was unprecedented, and I think it makes it a whole lot easier to follow someone to battle if you feel like they're working just as hard, if not harder for you than the cause.
Brett: So what about if you think another executive just doesn't have the capability to do the job? Do you then have a conversation with the CEO or what is in the way that you see the world, like, how does one navigate that?
Katie Burke: Ideally one-to-one. So ideally the conversation would first be had where, "Hey, how do you think this is going?" And ideally, you have the self-awareness to recognize that yourself, but if you don't, give the feedback directly to say, "I think where we're falling shorter in a few different ways. Number one, your team doesn't have the trust you need. Number two, the results aren't there. Number three is as you're showing up as a leader within our executive team, I don't think we have the bar we're looking for." Those are really hard and painful conversations, but I would always rather someone hear that from me than hear it later or wonder about it after they were termed. And then to your point, if I feel like someone's underperforming, absolutely have to tell the CEO and the board what that looks like. And the idea is not every exit has to be a fiery exit. I think a lot of times people can be great leaders or great executives just not for that time period, that stage or that company. And I think part of your job as a leader is to create as many graceful exits as possible.
Brett: How does something like that not come into conflict with the idea of a transparency value?
Katie Burke: I would argue that transparency is not you having access to every bit of information. It's access to as much information that is safe for the company to share. And so in this case, I think hearing directly from your boss and from your peer that you're not meeting expectations, I think is the transparency that most executives deserve.
Brett: But if someone's fired for performance reasons, you think it is-
Katie Burke: Good example. So I think that is not your information. So I think the company has an obligation to be transparent around information. If you share why an executive was termed, there are two things that could go wrong. Number one, it could really impact their ability to get a job at another company. Number two, it creates rumors and discussion, and it also means that during the odd time when you don't share why someone's terminated, they make up a story that's way worse than whatever it was. And so what I would always say to our team is, "We are going to be incredibly and radically transparent around the things that are our information to share, and we're going to be super thoughtful and discreet about information that is not ours to share, including why we've chosen to part ways with people." And I think the reality is once you explain that to people that it's not one situation, that's how we always handle exits, I actually think people are pretty understanding of it because what I always say to people is, "Let's pretend that's you. How would you want us to treat you?" And if we said, "Actually this person wasn't cutting it," that could impact your job or your family moving forward, and that's unhelpful to our employer brand.
Brett: Do you think there's a scenario where it does make sense to tell a team that somebody was let go?
Katie Burke: Yes, I do. I've exercised caution in how we do that, but I do think there are situations where it makes sense. I also think it's totally fine to share that in context. And I think there are a few examples where sometimes we've been clear that it was for underperformance or for if someone publicly violates your code of contact, I think to say just in a brief way, "Katie did not meet the standards of expectations that we have at this organization," I think that is totally fair. You don't have to go into detail about why. You don't have to say more than that, but I think being clear with people that it was not our expectation is good.
Brett: When you think back to the different chapters of your career, when is being in alignment with values, when did you find it was the trickiest or the hardest?
Katie Burke: I mean, at HubSpot, we, like so many organizations, did a layoff in 2023\. And I think when you think about our values, one of our values is empathy. And a lot of the outrage after layoff was it doesn't feel like that meets our standard of empathy. And I think there's reasonable arguments to be said. And so I think that was one of the hardest. We also had a situation in 2021, where, like so many people, we got through 2020 and we're rounding the corner in 2021 and we were kind of feeling like, "Okay, we're going to get back to normal." And our CEO at the time, Brian Halligan, got in a near death snowmobiling accident. And thankfully he's okay, made a full recovery, but it was not clear at the time how that was all going to go. Transparency is tricky in that situation because you're dealing with medical information, you're dealing with someone's family, you're dealing with then a public company and disclosure and precedent. And so I would say that was a really hard one too. So those were the two examples that come to mind on empathy and transparency that were the hardest.
Brett: And like if you take the layoffs, how did you work through that tension?
Katie Burke: Some people know this, some people don't, but when you decide to do a layoff as a company, it's a big enough decision that your board is certainly involved, your entire executive team, and you have to be kind of all in it together 'cause it's a one-way route that you're running and you have to be super thoughtful about it. So part of what we did was we asked ourselves, how do you infuse as much empathy as possible into a situation that is incredibly difficult? That included our package, that included, for example, we tried to be extremely generous with our severance package. We got board approval to do that. And I think even now, many years later, people have said our terms for that were super thoughtful. And we've also heard from people they appreciated how we handled it. So any person who is part of the layoff who wanted to talk to a senior leader, we created office hours. So you got one-on-one time. So if you wanted to complain, if you wanted to get mad, if you wanted to yell, we created space for that. And the reason for that is I think when you're making a hard decision, you never want to be so far from people that you don't feel the impact of that decision. So I will never forget what that felt like. It was incredibly hard. It was most hard on the people who were impacted by the layoff, make no mistake about that. But I think sometimes making yourself available to actually have to feel the weight of that decision is critically important.
Brett: What did that experience teach you?
Katie Burke: Layoffs teach you a lot about hangovers. So I think a layoff has a hangover of I think two to two and a half years at a company. And I think you have to be aware and cognizant of that going in, because there's the initial shock, then there's the survivor guilt for people who are still at your organization. And then there's the ongoing lagging fear of people that another one is coming. And so I think some of what you have to keep in mind is our board members told us there's probably going to be a two-year period. And I was like, "Well, we're a pretty agile organization, pretty fast moving." There is a true cultural hangover of a layoff, and I think that's sort of an important warning for people to know is that it's not just a one-time business decision, it's a cultural decision that has implications for many years to come.
Brett: The so what is that you just have to be constantly nurturing the organization after that or keeping it in mind? Or ...
Katie Burke: I think the so what is you have to go and eyes wide open that it's a two and a half year process, not a 90-day process. And then I think the other so what is just to be mindful as you think about workforce planning, just the implications of during hyper growth, how are you thoughtful about balancing adding a ton of headcount, which frankly is mission-critical to achieving your goals with balancing where you might want to flex up or down with contractors or other help. And then finally, it's just recognizing, like, the decisions that you carry as a business leader have significant weight on people's lives and their families' lives. And I think it's always just important to have that at the back of your mind.
Brett: Maybe sort of in a sort of similar vein, it feels like a process by which resources are allocated, at least, I mean, I think still to this day, but in general, is very squishy. Do we need four people for this? Nine people for this. We could do this with three, but it would be easier with 10 or it would be ... It feels like the whole precision around how many people do you need for X or Y? It's this very messy process. And it's I think one of the reasons why in general you end up with tremendous bloat at most companies, like, the normal just gravitational pull, whether it be executives building fiefdoms and power being how many people work underneath you, or the fact is, I think we could really squeeze to get this goal with three, but it'll be a heck of a lot easier with six, so I'm going to ask for eight and then we're going to end up at six. What are some of the things that you figured out around headcount planning and what we need for any given part of the org?
Katie Burke: I think headcount planning ... I've never been in org who's like, "We have absolutely excelled at headcount planning." So I think some of it is just normalizing exactly as you said, that it's messy, complicated, and inherently human. And I say all that with the notion that now it's going to get all that much more complicated when you add agents into the mix. So if you think about it, it was already so hard when it related to just humans, now you add agents into workforce planning, it's going to get a whole lot messier. And so I think a few things that have worked is number one is just defining the work first that needs to be done. So for example, a bottoms up model where people just say, "Here's how many heads I need without defining what the work is," that always falls short because to your point, the fiefdoms exist. There isn't necessarily alignment on how many folks on EPD or go to-market are actually needed. For example, PLG is a good example of emotion where you can't just spin that team up agnostically. And then number two is really pushing on the what is the work that needs to be done, what's the level that needs to get done, and having a level of accountability between your finance people and business teams on it. And then number three is just having people really feel an understanding of like with every head we add, we are adding exactly to your point, yes, a great skill and work to be done, but you're also adding the potential for disparate ownership. So one of the things that happens is if two people are in charge of anything in a company, the chances it gets done well are pretty limited. And so part of what you have to do is drive discipline along with every time you're adding people, you have to add a little bit more discipline to the process to make sure that everyone is clear on what your goals are and that everyone is clear at the speed at which they're expected to achieve them.
Brett: Walk us through, maybe in the case of Harvey, you're doing headcount planning. What does it actually look like? Who's involved? What does the process look like?
Katie Burke: I'll give you a recent example. So we just hired a chief product officer, Anique Drumright. She joined us from Rippling. She is currently with my team starting tomorrow for two days. Part of what we're doing is new executive comes on board, you want to be thoughtful to make sure that the headcount plan that we did all of six weeks ago is still relevant for what she's thinking she needs. And obviously she's spent a ton of time with our team already just getting to know us and getting to know our customers a bit and also has gotten feedback from her direct reports. And so part of it is, if you have an annual plan, especially in the world of AI, that is going to get still very fast. I'm saying this to you now as someone five weeks in, we're already doing a re-plan. That doesn't mean starting over from scratch. It just means for the next quarter ahead, what do we need to change or adjust to make sure we're thoughtful and calibrated? Number two is you need to make sure just at the very basics that you have enough ramped recruiters to achieve those goals. So one of the mistakes people make is, for example, putting a number into Q2 headcount in EMEA when notice periods simply will not allow that to happen. And then three, I think is just aligning to business need first and foremost. So another, every once in a while you'll hear from someone like, "I, Katie, just want to hire this person." And part of what you need to push is like a level of business need without adding a ton of process. So in other words, what I've seen people do is in the age of AI, now people are like, "I have to write a full rec. I have to get 17 people's approval to get headcount open." I don't think that works either, so it's finding the balance between being agile and onerous in the planning. And then I think when you add a new leader, you have to be open to letting them give feedback on the current plan versus keeping it rigid. Otherwise, I think the gap between what you were intending to do and the people you have on board doing it just gets too wide. So at Harvey, for example, we do a financial plan for the entire year. We do a headcount plan for the year, but we do a mini re-plan on a quarterly basis based on business needs, based on GOs, all that kind of good stuff.
Brett: Maybe switching gears slightly. I think if you look back certainly to late 2010s and into the pandemic, a lot of people, organizations sort of became some version of a nanny state, that it was about employee happiness, that it was about everyone comes to work dancing down the street. And that it felt like many, obviously not all, but many of the organizations became like some version of a coddling or happiness function. And maybe on the other end of the extreme, there's sort of some dynamic, where the people function really drives performance. And at times there's maybe a tension between those things or a misunderstanding about those things. What are your reflections on that? And as a company specific, certain companies are nanny states. And that's just, if you want to be nannied, that's a great company to go to and that it's very company dependent or a lot of people just have this wholesale wrong.
Katie Burke: Our VP of talent, Maggie Landers, has a great expression, which is, "The resort has to match the brochure." And I think when it comes to the coddling versus performance culture, what you say you do versus what you do has to match. I do think so many companies went too far in the 2010s. I do think people thought our job was to make people happy every day. And I think the Disneyland approach to employee experience is gone. On the flip side, I think we've overcorrected, which is to say work should be hard, get back to work, return to office mandates, taking away perks, taking away the humanity of it. I don't want to jerk the wheel too far. So when I was talking to founders, one of the questions that I asked them as part of my interview process was, how do you think about severance packages for employees who don't work out? And one of the founders I spoke to said, "I take care of the people who work here, not people who don't." And I was like, "Right, I hear you, but people took the bet on you and don't you feel like you should at least be fair and ethical on that?" And the feedback that Winston and Gabe had was, "We should do whatever is fair and market it." And by the way, we know that those people talk to other people in the industry and so we want to make sure we're thoughtful about the flywheel we're creating for talent. And so I think when we talk about Harvey, we talk about the fact that we are incredibly intense. We don't make any apologies for that, but we're intense but reasonable. So in other words, if you have a doctor's appointment, if you're taking parental leave, we want to make sure that you feel like you can actually take it. We want to hire great humans, but also at the same time, we want to make sure we're clear that this is not a nine to four culture. And I think balancing those two, all you have to do is be clear on who you are and make sure that your interview process matches what people experience day-to-day.
Brett: But the part of what you're saying is the way that you describe that is really only correct for Harvey as an organism.
Katie Burke: Yes.
Brett: It's not globally correct.
Katie Burke: I don't think there's a globally correct way to do things. So for example, when I was at HubSpot, we spent so much time on culture and employee experience and people would often bait me to say bad things about Amazon because they viewed it as antithetical to what we did at HubSpot. I'm like, I actually think Amazon has a good culture. They're clear on who they are and you know what you're signing up for. So for example, they pit teams, internal teams against each other. They're clear about that in the interview process. So I think that is a functional culture. I have a much bigger problem with people who advertise it's all unicorns and rainbows and when you come in, it's cutthroat.
Brett: Do you think you at different points in your career created too much of like, I'm in charge of employee happiness and all of that type of stuff? Or do you think you sort of threaded the needle appropriately?
Katie Burke: I think everyone did at that time. And I think HubSpot was no different and I was certainly no different as a leader. I think what we tried to get people back to was our job is not to make you happy every day. Our job is to create an environment where you can do the best work of your career. And we said that explicitly to people. I think how that actually takes shape day-to-day is really hard to enforce and get right. And there were certainly days when we overindexed too high to the unicorns and rainbows and I think disappointed people. And I think the reality is we had to find a better balance.
Brett: What have you figured out about the tricky things related to incentives? If you go back to the idea of the Charlie Mungerism, incentives rule the world, that has to express itself in so many ways in a people function, compensation, bonuses, promotions. Do you have any sort of meta-thoughts or, like, specific things that you figured out that are particularly tricky about the way that incentives works? Particularly because in so many ways, incentives are some proxy metric, that, like, at the end of the day, you're trying to deliver something for customers, that in turn creates shareholder value in a particular way when you sort of think about it actually as a business. And then you have all the human beings and/or agents now, in pursuit of sort of that flywheel of shareholder value creation. And then you have sort of all of these things that try to approximate those. And it seems like it gets even more complicated at each chapter of sort of company growth and more people and sort of that type of thing.
Katie Burke: Charlie Munger was prescient about this as he has done so many different things. I would say a few things from having watched this up close that stick out. Number one is you have to keep your incentives as simple as possible. So a good example would be as you're thinking about executive compensation, a bonus program for your entire company. The temptation is to make it six different variables that folks can then manipulate, and the idea is then it makes it harder to manipulate. That is fundamentally untrue. I actually think simplicity is really important when it comes to comp and incentive.
Brett: Well, what normally happens to your point is it feels like, "Okay, we're going to have some simple bonus structure." And then you're like, "Wait, no, no, no. It's going to be gamed in this way. So we're going to then measure these nine things."
Katie Burke: Anytime we would do a bonus structure or anytime I do a bonus structure, what I often play out including with the board is what's the failure mode for each of these. Usually there's a top line, bottom line. There aren't many creative optics on all things bonus. And so as a result, you go, "Okay, what would failure mode look like and what trade-offs are we comfortable with given that?" So I'm a big believer in simplicity wins. Two on incentives is I have not met counterintuitively, most managers are not actually out for themselves. They think of their first team as the people below them and they view their job as to protect and lobby for the people below them. And so oftentimes what I would see is not prioritizing themselves over the customer or the company, but prioritizing their team. And so I think when you know that, part of what you have to think about is when you go into promotion calibrations, when you go into giving managers autonomy over performance ratings, giving managers autonomy around compensation and equity adjustments, that's the frame you have to keep in mind is not what they solve for themselves as individuals, but how do they view their role as lobbyists on behalf of their team and how do you potentially intermediate that? And in my experience, that should be the exec's job of that function versus the people function to be calling that out. The people function obviously plays a critical role, but to me, that's holding the exec accountable for holding their directors accountable, for example.
Brett: But how does the problem just not flow up to the ... Well, normally you have the eng manager, they have a pot of engineers. In that case, they're incentivized to get whatever they can for them. How does it just not end up with this cascading problem where then at the very top, that person has that same cognitive bias to think about the thousand engineers that sit in multiple layers beneath them?
Katie Burke: So every time before a performance cycle, what I try and do is, before we even get into the how we're going to do it, I try and go, "What are we solving for?" And so for example, I will make leaders around the table say, "We want to have a high performance culture. We want to retain the top 10% of people." And what I have found is super helpful is pulling up reviews. So oftentimes I will pull up a blinded review and I'll say, "What do you think this person got on their rating in this team?" And I will include someone from my own org, so I'm not throwing shade at anyone. And oftentimes that's a humbling moment for people to go, "Okay, last cycle, I let that go on my team. Do we want to have an environment where we do that?" Okay, maybe that's fine. If we do, if we want to be more permissive, that's okay. But if we want to be a high performance culture, we need to be honest about the culture we create in our own teams and then we set the objectives together. So I will come in with a straw man and say, "Here's what I think we should roughly do." But oftentimes I hold up a mirror from the last review cycle. I find using verbatims is super helpful, because I think if you talk in the abstract or pull from some performance management book, you're probably going to fall short. If you pull examples from real managers saying, "Here's what I heard," or better yet, from your HRIS from the last cycle, I find that is much more likely to actually change people's behavior.
Brett: What have you figured out about titles when you're at a fast-growing company. And if someone is, they're a hundred person company, their plan is to get, they're going to be 250 people this year. They kind of have now career ladder and that type of thing. What's your important advice for thinking through what happens with titles as this company starts to really grow?
Katie Burke: So I would say a few things. I think executives who say, "Titles don't matter," are delusional. They do matter to people, and so does the opportunity to grow. However, if you are someone who in the interview process is mostly focused on what your title is going to be, your behavior during your entire duration of the process ... So one of my pieces of insight is people are on their best behavior as candidates. I can't even tell you how many conversations I've had where I'm like, "He was a little difficult in the negotiation, but I'm sure once he's here, he'll be a real peach." And that has not been my experience. So I think if someone is lobbying for title, they are going to be that difficult once they're on board. However, I believe not surprisingly on titles that you should solve with a level of simplicity. So for example, at Harvey, we don't have an SVP layer yet. That's pretty intentional on our part. We have head of layers, we have VP layers, we have C level layers. We don't feel like at 650 people, we need to add that level of complexity. With that said, we also don't have a perfectly rigid career ladder. So what I often say for people interviewing is they'll say, "What's your exact ladder?" I'll say, "We're growing so fast. We have guides, we have rough leveling, but we don't have this clear, if you do this in two years, you'll be promoted. That's part of the joy of joining a fast-growing AI startup, but it also means you got to be comfortable with the ambiguity that comes along with it. And in my experience, you need to make sure you set some federal guidelines on that." So if for example, one of the things you could do at a startup is say, "Hey, you do your own thing. I'll do mine and it will get figured out later as we scale."
Brett: Just push it down to some manager or this exec can do whatever they want in that.
Katie Burke: That gets exactly as messy as you would think based on what we talked about with headcount planning. And so I'm a big believer that leveling at least rough guidelines should be a federal decision versus state.
Brett: At what point do you think that should be made much more explicit or legible versus like, "Yeah, we roughly have it, but we're going to figure out as we go"?
Katie Burke: So what we did at Harvey was we did a federal system, but then the states are responsible for figuring out how they level each individual. That to me feels fair. Doing the actual leveling at the federal level was pretty painful at our stage and size. So I would say we did it around 300 people. The reason we did it was we were about to double or triple in size. So given that, it just felt like as we're bringing in a bunch of new people, this is only going to get messier. Leveling is exactly as messy no matter what stage. So we did a leveling exercise at HubSpot at 8,000 people. We did one at Harvey at 300 people. It's always really messy because it targets people's self-identity and awareness and how they align with the title. And so I think just going in knowing that, you have to appreciate the emotional depth that goes behind a leveling decision. Then you have to pick a lane that includes trade-offs and then set the course.
Brett: All executives experience this, but certainly the chief people officer probably more so than anyone, which is basically by definition when you're operating a large company, you're going to have a subset of people that no matter what you do or what the approach is or what the philosophy is, will not like it. You could have the greatest snacks in the world and there's going to be someone that has all these different allergies and they don't like the snacks and you don't get the snacks that I ... You could come up with any possible policy. And it just feels like you're constantly dealing with a decent chunk of people that are frustrated about something. Did you just learn to be at peace with that or why does it not drive you insane?
Katie Burke: I don't think being a chief people officer is for the faint of heart because I think you have to be okay with the fact that at any given moment, roughly 20% of people are unhappy with you, the decisions you made.
Brett: With at a large organization, it's a lot of people.
Katie Burke: A lot of people. But the other thing about it is, the worst thing you could possibly do is say, "That doesn't matter, they're wrong." That's terrible, 'cause then you shut down to important critical feedback that I think really matters. And so I think the balance between listening to things that people have very valid complaints about on things that matter is critical, ignoring the things that don't really matter. So a good example, our old COO at HubSpot had an expression called protein versus sugar. And the best way to think about it is, people's substantive complaints around things that really matter that stand in the way of us winning, that are at odds with our culture, those you got to really pay attention to. The complaining about the snacks really doesn't matter. We had an episode that will forever be famous in the halls of HubSpot called Berrygate. And basically what happened was we used to provide fresh berries as a perk. And the fresh berry, the finance team created a chart where the berry consumption versus headcount was disproportionate. We had this important management team meeting to figure it out.
Brett: It was like an exponential or something?
Katie Burke: Yeah, it was exponential and the cost of berries was going ... And you can imagine how much time-
Brett: Double exponential curve.
Katie Burke: Yes. And then the price of berries is going up and what could happen and how could this all ... It's a ridiculous conversation, but nonetheless.
Brett: But it was not a joke conversation.
Katie Burke: It was not a joke conversation at all. We had a serious conversation about it. And we figured out what we considered at the time to be an elegant solution to it, which was we were going to take away the fresh berries, but we were going to open a smoothie bar. And a smoothie bar was a win-win, at least from, this is like executive leadership at its finest/worse, was a win-win because customers could come in. We named the smoothies after customers. It was health forward. It provided a non-drinking option like what could go wrong.
Brett: You leave this meeting and you guys are like, "We-"
Katie Burke: "Killed it. Honestly, like, pat on the back, round of applause. No one has better elegant solutions than us." I get back to my desk and a woman on my team who I really trust will not make eye contact with me. Nothing to see here. She's literally avoiding me at all costs. And I was like, "Tell me exactly what's going on right now." She's like, "Well, there might be a bit of an issue." And I was like, "Talk to me about what you mean." And basically there was a whole Slack channel discussion around how employees were not consulted in this decision. There were a few other things. Do I not know that the fiber content of Berries is better when you consume the berries whole than in a smoothie? Why did our CFO not hold a town hall meeting for people's input on this? I pretty rarely at HubSpot ... I always was sort of like, "What could I do better? What could I do wrong?" I wrote a note to everyone and I was like, "I think we've completely lost the plot. On stuff like this, we are not going to consult the entire company. We are going to make decisions that have winners and losers and we're going to make hard calls in the interest of scale." And in this particular case, if you have spent the last 45 minutes complaining in this Slack channel about Berrygate, you clearly don't have enough work to do and we need to have a different conversation." And what's interesting about that moment in time is it became a rallying cry for what people actually cared about. Our most loyal employees were like, "Great, I'm so glad you said something because we've had entitlement issues for a while." And so I think part of what you have to do as a chief people officer is be clear on the feedback that matters versus the feedback that doesn't. I got a lot of really tough feedback on things that made me better that I had to listen to that were really important. So a good example would be we had one engineer in Dublin that had a comment for almost everything that we did. The reality was he was right on, let's call it 75% of things that he emailed me about. And so when I got an email from him, I'd always go, "What can I be doing better or differently and take it seriously?" And so I think the temptation is just ignore all the noise and I think that's a mistake. But if you pay attention to the noise, it will ... There's a reason that the average tenure of a CPO is short. Some of it is because of maybe not the right fit for business value or stage, but some of it's because it's a really hard job. It takes a big emotional tax on people.
Brett: Do you think based on sort of all of your different experiences that if someone is complaining about things that are just berries, that you should just get rid of them, that it is highly unlikely that high performance, the most important people in the company are complaining about berries? Or no, actually there's a lot of star players that complain about berries?
Katie Burke: Barriers. There are a lot of star players who complain about berries.
Brett: What do you make of that?
Katie Burke: And I think part of what we have to figure out is the balance between the two. So for example, there were people who talked about or complained about things. A good example would be the office environment, temperature, lighting. Lighting's a really good example of something engineers are super passionate about, because they feel like if I'm going to stand in front of a screen for eight hours a day, you want to make sure you don't have glare. There could be health issues and reasons behind it. And so I think the easy temptation is to kind of just say, "Everyone who complains about what you consider to be arbitrary is ridiculous," I think that is a huge mistake. And so part of what you have to do is figure out what's the ratio of people doing great work versus complaining. So to me, I care less about the berries and more about many of the people that were complaining in that Slack channel were people who were frequent flyers. And I care more about the frequent flyers of people who I'm like, "Feels like eight out of 10 times we have an issue. There are these five people that are always around the water cooler on it. That to me is a more concerning pattern than people having fickle complaints." I think most human beings have a fickle complaint about something. And if you have a specific dietary restriction, a lighting thing, if you have one thing that you're passionate about, I think there are a ton of talented people that you can make accommodations for. I think the pattern of behavior of being a nuisance is a bigger red flag.
Brett: You said something in passing a second ago that I think a couple of people have written about maybe in great detail, which is basically this idea that whenever there is not enough work at a company, all sorts of shenanigans start to happen. And that you could argue in the late 2010s through the pandemic, it was at an extreme, where there was just not enough demanding work for people. And when environments are demanding and demand a lot, there's just no time to spend 45 minutes ranting about a banana or something. Do you think a lot about that in your role? Do you think that's generally correct that you do need to match the amount of work relative to people or there's not that much to be learned from it?
Katie Burke: I think people are at their best when things feel demanding but not completely overwhelming. And I think that balance is really hard. It's also just hard to achieve company-wide. So everyone's been in sprints, where the engineering team is working super hard or times like end of year, sales and finance are working super hard. And so a lot of running a company is energy management and getting people motivated for sprints and then also getting people motivated to take a breather when they need it. That's really hard, I think, right now in this chapter when it feels like it is growth at all costs. And so I do think that there's something to like, you should have enough demanding work for everyone to focus on. Actually allocating that work across teams and geos is really hard to do.
Brett: In the point about the frequent flyers or frequent complainers, one of the things that I've noticed is they also have a way of indoctrinating their ideas into other people and getting other people rallied around nonsense. Are you hypervigilant of those type of people and you try to exit them because you do think it could kind of spread?
Katie Burke: The people with specific opinions around certain snacks or things or temperatures or items, those people don't bother me that much because every single one of us had them. The frequent flyers are the problem, because they get people to focus their energy around those minute things that don't matter. And so to me, I pay a lot of attention to frequent flyers. I'll give you a few examples. At HubSpot, whenever anyone started a new hire training, and if on the Thursday of new hire training when things wrapped up, they sent me a note that said, "Here are my 18 observations on things that could have been better or differently. And oh, by the way, here's my list of requests moving forward." I'd always go, "This person will probably last three to six months." The difference between that and someone who writes and says, "Hey, I just want to say my new hire trainer was incredible." Or, "I feel so proud to be part of HubSpot and I think these three things just to keep in mind would be feedback for next time around. Look forward to working with you." Those are two totally different things. And the people who bias to negative in their first week typically is the leading indicator of how they're going to operate.
Brett: Are there other patterns like that that you've observed?
Katie Burke: Listening to directions. So interestingly enough, one of the biggest predictors of the highest performing sales reps was them listening to the basics from IT facilities in day one. So long before you get to selling, just actually listening to people's instructions. Not surprisingly, that had an impact on performance, but also on attrition. So that was a leading indicator that most people, like, computer set up would not be the intuitive thing that you would think would make a difference and it does. I think the ratio of complaining versus fixing is a big one at any organization. And I think we can all name someone we work with who is complaining 75% of the time and fixing 25%. And then the other thing I would just say is just how much people bring up, at my last company I did this or I was known for this. I think bringing up past experiences, learning from other companies is super valuable. No one wants to hear you regale everyone with the tails of your greatness at your other organization. So the relying on your resume versus what you're doing at your current organization is another red flag.
Brett: Do you think the manager of a team does not need to be the best in that discipline?
Katie Burke: I don't think they need to be the best, but I think this notion of professional managers who have no idea what their team do all day is also a huge miss. I don't think anyone wants to work for someone who doesn't understand anything about their craft, but I don't think you need to be better than the people you manage. I manage a ton of people who are way better at their area of function, but I need to have enough subject matter expertise that they can learn something from me, or at least that I can be dangerous in conversation with them. I think that credibility is important.
Brett: Play devil's advocate, if you're the VP of engineering, is there a case that you actually should be the most strongest technically in that organization?
Katie Burke: I think you have to be incredibly sound technically. So in other words, I think the folks who are like, "Yeah, I did engineering for a few years and then I've been a professional manager ever since." I think it's about that level of credibility and I do think that matters. And so I think you have to be the best is very different from you're extremely good and you're enough to get the principal or staff engineer to be able to talk shop with you. That's an important threshold.
Brett: Switching gears back a little bit to the craft of what it means to be an effective chief people officer, explain in your mind what is the difference between a VP of people and a chief people officer in terms of capability, not obviously you're in different roles. One, you're on the e-staff or executive team, but in your mind, if somebody's caught and they're going to really struggle, they're very good as a VP of people, but they're going to struggle. What's the gap in your mind between those two?
Katie Burke: I'll answer this generally, which is like VP versus C-level executives, where do people get caught generally? 'Cause I actually think a lot of VPs, I have unfortunately become the poster child for CPOs, and so as a result, CEOs are like, "When should I hire the CPO versus VP of people?" I actually think both of them can be important execs at a company regardless of stage. I think the answer to your question of what stands between a VP of people becoming a C-level executive or really any function, number one is self-awareness. So once you hit the VP level, there's this thing that happens where you start going, "Okay, I'm actually kind of good at this. I've hit this level of competency where I'm actually feeling comfortable." You start taking in a lot of praise and kind of filtering out constructive feedback on how you can get better. And so I think self-awareness is a big one to get from VP to C level.
Brett: Why is it not important to go from director to VP? Again, not even getting to level lengths, but like squishy sort of up the org. Why do you highlight that so much more than maybe even director to VP?
Katie Burke: So director to VP, I think it's actually relevant for the next one, which is I think your ability to recruit people who are better than you. I think that's applies to both directors and VPs. Director to VP, it's how you talk to your direct reports. So oftentimes what you find directors doing is almost acting like a camp camp counselor. "Okay, friends, here's what we're going to do," and everyone knows what it feels like to be on the other side of that conversation. That's how they treat their managers, and that's singularly unhelpful. So director to VP, it's how do you elevate your operating system so you can have a conversation that doesn't feel like you're speaking to people like a camp counselor. VP to C level, it's self-awareness, and then recruiting people are better than you.
Brett: That sort of note about director to VP in terms of managing the team, what does it sound like if they're doing it correctly and it's not a camp counselor?
Katie Burke: It's number one, trusting and empowering the people that are below you. So in other words, your meetings are more about accountability to that goal versus defacto managing their team. So most directors are just de facto managing the teams for the manager. And what you want to hear is your time is more spent going, "Hey, what are the patterns you're seeing in our team and how can I best help?" Versus, "Okay, how is this person doing? How is person one doing? How's person two doing?" Number two is that they've changed their operating system from being a manager or director. So what I often ask for is, "How is your calendar different now than it was six months ago when you were director?" And people often say, "Well, I have more one-on-ones." I'm like, "That's actually the wrong answer. What I would like to see is fewer one-on-ones and more systems that help you scale." And so that's, I think for a VP what I see or for a great director, you see them go, "I changed my operating system." I said, "No to interviewing ICs on my team. I'm now only focused on interviewing managers and on equipping my managers to make better decisions for their team." And as you move to VP, it's like, "Hey, now I have five directors reporting to me. I'm thinking about an operating system that matches the urgency we need. And so I've switched my team meetings, my skip levels, everything to reflect that"
Brett: Let's take this scenario, you're a 2,500 person company or their chief people officer. In the way that you think about operating a company, what are the types of decisions that you think you are singularly responsible for and what are the types of decisions that you are pushing off or you are sure other people should be responsible for?
Katie Burke: Yes. So I think company goals, team objectives, and then what the shape of our organization at the end of a given year looks like, I think that falls to the executive. Decisions on IC hiring, how we're going to build a certain campaign, things like that, I think should fall to your team. And ideally, you're finding a mix of those two. So people feel level ... I'm a big believer the best people in the world wants some level of autonomy. I don't think anyone's ever been like, "Wow, I can't wait to work for her. She's the best micromanager around." And so I think ideally you're clear on where you play so that people understand, "Hey, this is your decision to make." And so to me, it's the company goals, the team goals, and then here's what I want us to have achieved by the end of the year, and then everything else falls to your team.
Brett: When you're sort of building a company and you're at scale, you talked about this a little bit, but at least in the people function, what are the most common problems that aren't always apparent when you're at the sort of top of the org, but doing this for a long time, there are these hidden landmines as you go from 500 people to 1,000, the people or goes from two people to 10 people. What are the types of things that maybe go overlooked, but most people leaders will eventually run into these?
Katie Burke: One is you get so focused on your roadmap of we should be implementing this talent program or we should be rolling out ACR at this time. You get too program centric versus people-centric. And so for example, if you're rolling out this top talent program, but 17 people from your top talent radar have left during that quarter, you should stop and be able to be agile enough to actually go hold our horses, let's do something different. I think what I've noticed at that scale is oftentimes people are so like, "But we said we were going to do this." You have to make sure you have the ability to flex the plan based on what you're seeing. Number two is just being too reliant on just the numbers. So for example, attrition is a great example of something that is a lagging indicator. You often don't realize you have a huge problem in a team until six people leave. And so part of what you want to look at is your analytics for what's actually predictive. At HubSpot, we found that employee happiness, so just saying on a scale of one to 10, how likely are you to recommend HubSpot? Great measure, feels really good when it's high. It wasn't actually predictive. What was predictive was people saying, "I see myself at HubSpot in the next 12 months." That was the only predictive measure on our survey. So as a result, you got to get really religious about paying attention. And so we would do that every single quarter and you'd pay attention to behaviors by geo, by team, by level, and you'd have specific actions based on how you interact with those groups, because otherwise you're going to miss it's too late. So looking at leading indicators is another one. The third one though is your own team. So what you find on people teams is everyone is people-centric, but the same temptation to become more team versus company is still there within people organizations. So territorial approaches, for example, learning and development and HR business partners are a good example of teams that often and talent development teams, they tend to have conflict. And part of what you have to do is be an active proponent of helping squash that.
Brett: You had this very long stretch at HubSpot of, call it 11 years. It seems like a very formative time in your career, and you formed all sorts of important ideas. Have you changed your mind on any of those important ones since joining Harvey?
Katie Burke: HubSpot was absolutely formative. And I think one of the things that we did incredibly well as a team was that focus on culture as a key differentiator for the company. So for example, we had people at HubSpot who knew more about our culture and employer brand than they did necessarily about our product. And so part of what I wanted to do at Harvey was a little bit do something slightly different, which is to say, "We have a great culture and I'm very proud of the culture that we're building, but ultimately at the end of the day, we want to be the leading AI platform for lawyers, so I want our product and our brand to lead and our culture to follow." And so I think, I don't know that that's necessarily changing my mind, but it's the focus on the work and what we're building and then investing in building our brand first and foremost, I think that's probably one. And then I think secondarily, the degree to which pace matters. So I would've said at HubSpot, we have to match the going fast and going slow on certain decisions. I don't think you have that luxury. So the time compression, I would say at Harvey has been a big thing. I don't think any opinions I have with regard to how to run an organization have meaningfully changed other than the need for rapid speed, and then making sure that you lead with the brand and your customer value above the company and culture.
Brett: When you think about what's happened in AI and call it the last bit of time post ChatGPT, and maybe even most recently or the last six months, where it feels like there's been just such a step function, what do you think, if anything, has changed as it relates to the people function? Not you think in the next five years, it was X and it's going to be Y, but like right now, if you're running a people org, do you think there have been really important changes?
Katie Burke: I think you said a few important things there. One is the inflection point you mentioned. Even in December, I think what you saw from the model outputs was, oh boy, things have already changed from even six months to a year ago. Given that, I think you're seeing two things. One is for non-technical folks, the ability to use, for example, Claude and meaningfully automate or create systems that otherwise would've taken you hours is pretty staggering. And I would say anyone who's missing that as a holy cow moment is missing the point. But secondarily, I think part of what you see is if the models are improving that much, then any AI company needs to improve the operations of the company at that same pace or beating it. And so part of what I think you need to do is go, "Okay, if we were, for example, getting 20% better at Harvey, we need to get 60% better 'cause that's what the model outputs." So it's become a new threshold for quality and for pace. And I think it drives a lot of the urgency around what application layer companies are building. It certainly is driving urgency within Harvey to make sure we're keeping pace with where the industry is going.
Brett: So if you look at the people who are specifically, if I were to look at how you're running it, what's the tooling and infrastructure, what is your expectation for a director of people versus four years ago or six years ago when you were the same size at HubSpot, what's the contrast in your mind?
Katie Burke: So one thing you're looking for is as a leader, what process are you eliminating or fundamentally changing with AI? So I'll give you an example. Yesterday we launched a process where people kick off all of their job recs to open up. So for example, let's say you're opening up a rec. Writing a job description you used to sit down, you'd have a cup of coffee, draft it. We use our Vault product in Harvey to do that on a regular basis that's repeatable. If you are not thinking, how could AI solve this problem first and eliminate hours of work within your team, you're not going to be a successful leader in the people function in the next year and a half. So in other words, if you dabble regularly in one of the models occasionally for personal use, but you're not using it at work, you are already way behind and need to catch up. The best people leaders I think are leaning into eliminating or reducing processes using AI. Second thing is just thinking about what we can no longer be wed to. So a good example would be we have as part of our onboarding process tried to eliminate as much friction as possible. So in other words, what I would view as successful is can you take a 15-step process and consolidate it? Before, if you got it down to 12, that would be good efficiency. Now it's like, can you get it down to three? And where can AI play a critical role so that we're just focused on the onboarding process and creating a really human experience, so that's where you're infusing the hospitality versus the others. Finally, I would just say as you think about the headcount planning, you need to be thinking about the work units to be done and the skills needed for that and whether or not it should be people or agents. And I think that's a critical part of the conversation that people leaders should be leading, not following.
Brett: What are some of the things that you think are now possible that you had always dreamed of doing as a people leader, if there is anything?
Katie Burke: So I'll give you an example. We are currently in the middle of performance reviews and one of our team members just on her own wrote a script for completing your performance review in a matter of five minutes. And a bunch of other people tried it and they were like, "This is the process that used to be so onerous, took a lot of self-examination and it was completed in five minutes." Performance reviews are just so incredibly painful. And if you can make those much less painful, I think that's a huge win. I think next year AI will be critical in the workforce planning side of things, and that's always felt like pulling teeth, so that's a big one. And then third, I would just say the building of decks and internal comms, that's something that I used to spend, I mean, hours, if not days on. And I think the reality is that will end up being much more AI driven even in the next two months versus the next year as well.
Brett: Right now, I mean, I assume if you're doing a company-wide communication, you may be getting editing advice or things like that, but where do you think it ends up going?
Katie Burke: On internal comms, you used to sort of do ... I used to, for example, do a Loom for my team every single Friday, and it was highly viewed at HubSpot, but part of it is people's attention spans are just going way down. So I think what you'll see is in the next six months, instead, what you'll do is have a level of customization. You're getting something that is relevant to you by team, by level, and it's all automated based on AI's understanding of where you are in the organization, what you need to hear. I also think you'll see more nurturing based on what you've already consumed or not. It's going to get a whole lot smarter. So for example, right now everyone gets the same exact, "Hey, you haven't completed your performance review," even if you have. And I think part of what you'll see is people going, "Hey, last time around, it took you 35 seconds to finish your performance review. This is what we want to see from you. And here's your customized report this week on things you open and engage. Oh, by the way, here's the gong call from the most successful sales rep so that you can actually study it yourself. And oh, by the way, here's the best plugin on Claude Code, for example, that someone used that was super effective for them."
Brett: What's your current strongest held belief about the next few years in terms of the people stuff that is not going to change?
Katie Burke: I think the importance of EQ is not going to change. And so I think if you have to worry less about all the things that people have always faded about being a manager, so onerous performance reviews, onerous internal comms, onerous \[inaudible 00:56:49\] processes, if that gets easier, ideally you have more time for the things that make a great manager, which is a strong level of empathy, but also a level of actually training people to do their jobs and work. So ideally you see a return to a little bit more mentorship. Most people I know don't have a manager that spent a lot of time actually getting them ready for the next stage of their career, and so I hope that that becomes the case. Number two though is I've always said that the people team needs to set the pace. AI adoption is another area where I think people leaders need to set the pace, and so I think you'll see that as well. And then I think the other thing that won't change is the importance of emphasizing what you care about and what you don't. So as an example, I think as we see engineering is a good example of something that I think is going to change tremendously, not just in the next two years, but the next two weeks, it seems like. Given that, what do you care about? Are you hiring junior engineers? Are you not? How do you make sure the best people are focused on the most technical problems and what does your resourcing look like? I think having honest conversations about that so people are clear on what they're signing up for is going to be important.
Brett: Do you think what a great VP of people looks like and does in a year or two looks relatively similar or very different than today?
Katie Burke: I think that there's a reason that, for example, Carmel Galvin at Klaviyo, Jacqui at ServiceNow, there are multiple chief people officers who are playing like chief AI officer, AI transformation roles. I don't think that's an accident, because I think the reality is AI is a technology, but it also requires a ton of change management and human behavior. And so I think what you're seeing is the best chief people officers understand what it takes to get people past fear on the change curve. They understand what it means to put champions up to actually make sure we're rewarding the behavior. Your incentives should be aligned to using and adopting AI in meaningful ways, not just in a like, "I tried this and it didn't work," kind of thing, but actually to transform how you run your teams. And I don't think it's an accident that the forward leaning people on AI are getting rewarded for that with additional titles, responsibility. I do think that people totally misunderstand that when it comes to rolling out and adopting AI, we see this at Harvey, we sell to lawyers. Lawyers are not the people that you think of as most traditionally to lean into AI, but what we've seen is that lawyers are actually pretty eager, because they're sick of doing document review. Nobody goes to law school to say like, "I've always wanted to redline documents for a really long time." And so part of what you have to figure out is how you get them on the change curve to consider adopting AI for the tasks that they absolutely hate and dread, and how do you appeal to them? That includes change management. That's not just our platform getting better, that's going into an organization, understanding their special sauce. And I think the reality is what we see is the best people are really good at doing that and understanding what it takes to get through to an organization to champion people, people leaders will be the same.
Brett: What is the role of being demanding as a manager?
Katie Burke: I think it's a huge part of the job. I think you can be liked or you can be respected and you have to pick a lane. And the reality is I think the best players, the best teams, all the champions that we admire are much better at being admired than liked. And you have to be okay with sacrificing some level of congeniality, comfort to get people to deliver the best work of their lives. And so I think most people who work for me would say I'm incredibly demanding. They would also say that I'm incredibly loyal, caring, and kind, and I think you can be both.
Brett: Explain, most people think that those two things are at odds, and particularly when you talk about one of the things that is likely to survive what is happening in AI is human empathy. I think when a lot of people hear that, again, you go back to the coddling of someone and it almost feels antithetical to being demanding or having insanely high expectations. And it feels like part of your management philosophy is bringing those two things together.
Katie Burke: Absolutely. I think the best leaders or coaches demand more of you than you ever thought was possible. And I still think they're the first person to come around if you're having a tough day and check in on you as a human being. And so I view those not as at odds with one another, but in fact that the best leaders have to be able to hold place for both of those. And so what I always say to people is, I think if you're a people leader, you have to be a queen of awkwardness. And you have to be willing to sit in really awkward conversations and just say, "Do you think that was your best workout there?" And to sit in the awkwardness of going like, "It wasn't, and here's why. And here's why I think you can do better and I have higher expectations of you." How do we chart that course together? That is really awkward. It's so much easier to say you did an amazing job out there. And so being willing to sit in that awkwardness, and what I try and do is remind myself regularly that first of all, the best coaches I ever had growing up were people that demanded that of me. And then on the flip side, the best compliments I ever get are from people five years down the line who say, "Remember when you gave me that feedback that made me better and I think about it often." And so I think you have to remind yourself of that versus just that desire to be liked.
Brett: So what's sort of an example of what it feels like to sort of work for you and have that sense of being pushed really hard and also having the level of support that you aspire to give someone.
Katie Burke: I hope it feels like being part of the best team you've ever been a part of, and it feels equal parts challenging and really, really hard and rewarding and worth it. And so I think I hope that on any given day on my team that if people are working five days a week, that, you know, who cares how you divide it up, but that three days feel really challenging and hard and two days just feel like you're completely winning and crushing it. I think that balance is really important. So one of our values at Harvey is, job's not finished, and that's really intentional. We want people to be super clear on how they could be better and to know the difference between what's good and what's great. And part of what I do with my team is I share my performance reviews. I'll share with them, "Here's what I said I was good at and here's what I said I could do better." And I think part of it is them knowing I'm not just asking that of them, I'm expecting it of myself. And I think that then it's easier to open the door. If your CEO and COO are sharing a long list of things they can do better and you can't think of one thing you're doing wrong, I think that's a self-awareness opportunity. And so part of what I try and do is lead by example. And so I've shared my performance review with my team with elements redacted for the better part of the last eight years. And so I think one of the things people would say is, "I'm super transparent around things that I could be doing better, and then I'm also super transparent with you about things you could be doing better too."
Brett: In that theme, what's the most important thing you've improved on in the last eight years?
Katie Burke: One was I overtalked. So when I first got promoted to be CPO, I thought my job was to say something important at every meeting. That is not your job. Your job is to know when you add value and when you don't. And so I overtalked and that was really tough feedback to get early on was in your new role, it feels like you're trying to grab the mic versus add to the conversation. Your quality of value add versus words per minute is going down not up. That was tough to hear, but incredibly important. And it taught me to really sit back and only speak up when I had something valuable to add. Second thing was I had a really big failure. We were really, really, really behind on recruiting at HubSpot many, many, many years ago. And I started pointing fingers left and right. I was like, "It's this team's fault, this team's fault, it's this team's fault." And Brian had a really hard conversation with me, which is, "You are either going to be here in a year because you own this and dug your way out of it, or you're going to go down pointing fingers at other people." And so I learned a really hard lesson on just owning your own mistakes, but also at a certain point, it doesn't actually matter whose fault it is. It matters that it's within your team. So that level of ownership as an exec and just being the person who in front of the board is willing to say, "That was me," is a big one. I think the third thing is letting go of perfection. I was very much someone who is an achiever and liked doing a great job and like getting good grades. And I think part of it was also just the embracing of, like, when you're an executive, your goal is to like bat 400 at best. That's like what best-in-class people are doing. And so getting more comfortable with like, "Yeah, you're right, that meeting was a miss, could have been better." And just getting more comfortable with not always knocking it out of the park.
Brett: What does it look like when you disagree well with a CEO?
Katie Burke: I think it starts with a foundation of respect. When Winston and I are talking, even in the most heated debate, there's a level of respect there, and then it feels like you're lining up on the same side of, like, you're still on the same team even when you vehemently disagree. I also just think it's understanding that you have the same long-term goal. So for example, on the things about which Winston and I disagreed the most, we never have a disagreement around where we're going. It's always just about how we get there, and I think it's that understanding. I also just think it's having a mechanism for it. So one of the hard conversations we've had to have is, he's very comfortable with conflict and so am I, but I need more time to process my own role in it. So for example, if I'm the one at fault, I need a night to sleep on it to go, "I have to understand why this conversation bothered me so much and I need to process then discuss it." He would always rather just like, "Just yell at me and we'll figure it out." And so we've had to work through how we disagree, not just what we disagree on.
Brett: Do you ultimately think the CEO has to make the final decisions?
Katie Burke: I don't think the CEO has to make all the decisions. I think part of what you have to agree on is who gets to make the call when. So Winston is really clear on, "Hey, you're the decision maker on these five things. I'm the decision maker on these other things." And I think we're clear on that. And then when we're not clear on both what the decision should be and who the decision maker would be, those are more complex conversations, but I think there's some of the most important ones we have.
Brett: What's an example of one of those where it's really nuanced and not clear and easy?
Katie Burke: So I would say oftentimes it's about the pace at which we do something and the pace at which we can expect change and whether that's hiring or open up new markets or deciding whether or not to turn over a team. Oftentimes I'm the one saying, "We need a little bit more patience and time," and he's the one saying, "No, we don't have any time." And so I think part of it is just agreeing, like, as a good example, what we have agreed to is like on fundraising, his call, CEO's job, his call. On the board meeting, he is the person who gets to make the call 'cause they are his relationships to manage and I'm of course supporting him what that looks like. If we are making a big culture decision, we'll make it together, but he will ultimately defer to me on a lot of recommendations so long as he doesn't want to lay on the tracks on it. Part of what you have to do is agree on what those parameters are. And I think we've done a decent job for the most part. I would say 90% of things we agree on both the decision maker and how we'll get there.
Brett: What's the advice you have, somebody stepping into the chief people officer role for the first time? In a lot of cases, their experience with the board is a net new thing. Maybe every now and again, a VP of people comes in and presents something to a board, but the dynamic of a chief people officer with a board is just very different. What are things to keep in mind or pieces of advice that you would give somebody stepping into their role specifically as it relates to boards?
Katie Burke: I hit the lottery on this one. So at HubSpot, I had, I think, presented to the board one time before I became the chief people officer. So to your point, I would've fallen on my face badly. We had a board member named Lorrie Norrington. She's still there. She's a board member at some of the best companies in the world, and she basically saw that I was getting appointed into a role that was a stretch for me. And she set up that I would go to eBay and shadow their CHO at the time and shadow and meet their people team. And so the first thing I would do is, rather than trying to go in all confident and pretend you know what you're doing, ask for help. Your board is usually very willing, especially given the relationship between the chief people officer and especially the compensation committee. They have incentive for you to succeed and for you to have a personal relationship. And so I would say part of it is just ask for help and ask for exposure, ask them to meet the best chief people officer you know. That is often the way in which you get the best context on what resonates and what doesn't versus falling on your face. Number two is ask to observe before you present. So I think one of the best things I've seen people do in the board work that I've done is kind of go, "Hey, it's my first time around. I'm just going to take in the cadence here and then for next time around, I'll come in prepared." Third is just the meeting. The meeting is just a meeting. Part of what you have to do is build the relationships before and after. So for the most important decisions we made at HubSpot, the board presentations, there was never a time when the board was seeing something for the first time that I was presenting. I had preceded the conversations and big ideas. I had solicited their opinion early on on recommendations. I had asked what other portfolio companies they were working with had done as a best practice. And so part of it is realizing, it's not actually about the meeting, it's actually about your ongoing relationship with the board. And it took me a while to learn that your job is to manage that dynamic and to interact with them regularly, so the meeting is just another touchpoint.
Brett: You hinted at this a little bit, but what is different about the CPO role and its working relationship and responsibility with the board relative to a CRO or a CTO or sort of any other executive function?
Katie Burke: I mean, it's so different. At a public company, you have a few pretty critical roles. So number one, the compensation committee, nom and gov, both you have pretty deep relationships with, and oftentimes you have a core responsibility to both on recommendations. So for example, the compensation committee recommends the comp for your entire executive team, including your CEO. And you're the CPO who's in the middle of that discussion that's a little awkward to manage. And so part of what you have to do is have a really deep relationship and trusted relationship with them and with your compensation consultant who's an independent advisor to the board. Second though is you manage succession planning, which depending on the board is either a nom and gov comp, depending on what it looks like, but usually a nom and gov. You have to have really awkward conversations with them around the readiness of the leadership team for the next level of growth, for the next level of global expansion for multi-product, you name it. And so I would say if you are the CTO or CRO, you of course have an obligation to the board and your relationships matter, but as the CPO, you have kind of an awkward dual relationship where you have a duty to your investors, especially at a public company to be super thoughtful about the balance. And so I think it's really navigating and understanding the nuance there is critically important.
Brett: I guess maybe to wrap up, what is it that you want the people on your team to say about you behind your back?
Katie Burke: I think I want the people on my team to say, "There's no one who wants us to win more as a company, and there's no one who's pushed me harder to get there while still having my back."
Brett: Good place to end. Thank you so much.
Katie Burke: Of course. Thank you for having me.
### What nobody tells engineers about becoming a CEO | Jay Kreps (Co-founder and CEO, Confluent)
URL: https://review.firstround.com/what-nobody-tells-engineers-about-becoming-a-ceo-jay-kreps-co-founder-and-ceo-confluent/
Last updated: 2026-03-26T14:38:24.000Z
Jay Kreps is the co-founder and CEO of Confluent, the company built around Apache Kafka — the open-source data streaming platform he originally built while at LinkedIn. In this conversation, Jay shares his full journey: how Confluent grew from a scrappy group of engineers with no go-to-market experience into a publicly traded enterprise software company. He makes the case that the difference between what a company can do, and what it must do, is one of the most underrated building levers; illustrated through his years spent pushing Confluent towards a cloud product, in the face of widespread opposition.
In this episode, we discuss:
- Why moving from software engineer to CEO requires almost an entirely new skillset
- The product marketing pyramid Jay built to explain Kafka to the world
- How Confluent bludgeoned its way to a cloud-first business when the early product was “embarrassing”
- The critical difference between what a company can do and what it must do
- What keeps scaling companies from becoming "Chipotle”
**References:**
- Amazon Web Services: [https://aws.amazon.com/](https://aws.amazon.com/?ref=review.firstround.com)
- Apache Kafka: [https://kafka.apache.org/](https://kafka.apache.org/?ref=review.firstround.com)
- Confluent: [https://www.confluent.io/](https://www.confluent.io/?ref=review.firstround.com)
- Jun Rao: [https://www.linkedin.com/in/junrao](https://www.linkedin.com/in/junrao?ref=review.firstround.com)
- LinkedIn: [https://www.linkedin.com/](https://www.linkedin.com/?ref=review.firstround.com)
- McKinsey & Company: [https://www.mckinsey.com/](https://www.mckinsey.com/?ref=review.firstround.com)
- MySpace: [https://www.myspace.com/](https://www.myspace.com/?ref=review.firstround.com)
- Neha Narkhede: [https://www.linkedin.com/in/nehanarkhede](https://www.linkedin.com/in/nehanarkhede?ref=review.firstround.com)
- Oracle: [https://www.oracle.com/](https://www.oracle.com/?ref=review.firstround.com)
- Red Hat: [https://www.redhat.com/](https://www.redhat.com/?ref=review.firstround.com)
- Snowflake: [https://www.snowflake.com/](https://www.snowflake.com/?ref=review.firstround.com)
**Where to find Jay:**
- LinkedIn: [https://www.linkedin.com/in/jaykreps/](https://www.linkedin.com/in/jaykreps/?ref=review.firstround.com)
- Twitter/X: [https://x.com/jaykreps](https://x.com/jaykreps?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
01:18 Making the leap from engineer to CEO
03:33 The 80% rule: what a CEO actually needs to know
04:54 Scaling different business disciplines
09:31 How Confluent’s story began in LinkedIn
12:13 The growing need for scalable data tech
13:37 What the early Kafka product looked like
16:38 Kafka’s underwhelming open-source launch
18:38 The blog post that accelerated Kafka’s adoption
20:16 Why so many marketing messages fail
28:08 The decision to build Confluent
34:24 Planning to fundraise before building the product
39:19 Confluent’s early years: Tough product decisions
47:07 The underrated growth lever question for companies
55:46 Why founder optimism is an overrated trait
1:00:29 What should founders give up as they scale?
1:02:47 Why people become trapped in a failure mindset
1:08:33 The Chipotle problem: Losing excellence at scale
# Jay Kreps - Episode Transcript
Brett: For today's episode, I'm sitting down with Jay Kreps. He's the co-founder and CEO of Confluent, the data streaming platform built around Apache Kafka, the open source system he and his co-founders created while they were working as engineers at LinkedIn. In our conversation, Jay shares what it takes to go from software engineer to CEO.
Jay: I think the CEO job generally, you operate more in a kind of fog of partial understanding. Very quickly as the organization gets bigger, it's impossible to know everything about everything.
Brett: He traces Confluent's origins as an open source project and shares how they landed their first enterprise customers when the product was nowhere near done.
Jay: The software product that doesn't have nearly enough features, we've taken that out to very large enterprises that we have no business working with for more money than we feel at all comfortable with.
Brett: How a single blog post did more for Confluent's adoption than years of engineering.
Jay: If we can't express why this is exciting, it's probably not going to be that successful of an open source project.
Brett: And why they bet everything on a cloud product than investors and half the company thought was a terrible idea.
Jay: We just kind of bludgeoned our way through. None of it was pretty. Some of our biggest early customers quit on us.
Brett: Let's dive in. What's surprised most? Like you started the company as a software engineer and now, you've had the full ...
Jay: Yeah, I mean, lots of things have been surprising. Probably initially the surprising thing was just how much of a jump in the deep end. Learning curve there is for ... going from CEO, the skillsets are almost exactly opposite, even though that's ... it's not uncommon for this kind of tech company, but it's still the set of things that you need to be good at or communication. The decisions you're making are very different. Certainly for engineering decisions. They're mostly knowable and there's mostly kind of right and wrong answers. But usually, especially the early phase of a company, you're making a lot of very big critical decisions with a lot of unknowable aspects, but it'll certainly impact how the company turns out. And you know that, but you don't know what the right answer is and you won't find out until later. So I think in a lot of those areas, it's quite different. And then, I think the CEO job generally, you operate much more in a kind of fog of partial understanding. I don't know that everybody understands that. Very quickly as the organization gets bigger, it's impossible to know everything about everything. And so you have to kind of be roughly directionally right. And people see this often in executives and it bothers them of like, "Oh, they don't understand that thing." And it's true, right? But in practice, you can't understand everything about everything. You have to understand a lot about the most important things and enough about some of the other things and try and make that judgment. And the feel of doing that and how you do it, I think is probably also surprising. If you come out of it, you don't do that at all. There's no shooting from the hip.
Brett: In the first bucket, if you think about going from software engineer to founder, and then over time founder to CEO, what's your clustering of the things you have to figure out at some point?
Jay: Well, it's a lot of things. I mean, I think CEOs need to know about 80% of what their executives know about their function, I think, over time. So really kind of learn that discipline. Not enough to be good at it, but enough to know what good is and know if it's going well. And so I think there's a large learning curve because you end up having to understand a bunch of these disciplines. What does a head of marketing do and what are each of the subgroups of marketing do and how are we doing it and how does that apply in our business and what's the finance team for? And all those kind of things. I think that-
Brett: Why do you think 80%? Not 90, not 50, not 20.
Jay: Yeah. I mean, ideally it should be 100%, but it's just not practically ... If somebody's done that job for 10 years and you're kind of a dilettante who steps in every time there's a role to fill and then maybe manages it indirectly through them, 80% is kind of aspirationally the best you'll be able to do.
Brett: For all of the different disciplines as the business begins to scale, did you think about what is correct in the context of Confluent?
Jay: Yeah, I think that that's really critical. And I think each discipline ... I always think of it as having some degree of kind of carryover. So if you think about, say, a finance team, if you're kind of plugging from one SaaS company to another, how much is it basically the same thing, everywhere and how much of it is going to be unique to you? And I would say it's actually pretty high that it's the same across. So it's a very transferable discipline. And then, I think when you get into aspects of software engineering, I think it's very transferable. Engineering teams are relatively structurally similar. They'll have different concentrations and specialties, but it's not massively different. And then you get into something like product is quite different, right? I mean, there's obviously some transferable practices, but you actually need to make good decisions in that space about that thing. I think each of these organizations has different genres. So you need to know what genre of marketing team am I going to have? And that requires having some opinion about what the go to market is going to be like. And I think probably for early company, that go to market construction is probably one of the areas where this goes the most wrong, where you're effectively ... you're talking to people and you're trying to cut and paste what they've done into your organization, but without really thinking about the problem that you need to solve. And I think go-to market people are often very execution oriented. And so, I would say they're often guilty of this where it's like, "Hey, this is the playbook I have done. I will do this playbook here." But ultimately, if you think about what is go-to market doing, it's trying to help the customer find you, figure out the value, make use of the product in some way. And that particular journey is actually very unique for each company. And so you have to actually think, "Okay, what techniques are going to work well for us and which are not going to work well?" You see this a lot where aspirationally the founder would love to have a very product-led motion, but in fact, the product does not particularly lend itself to that. And they're trying to will that into existence, but it's actually not ... If you think about who's going to make a decision about using this thing and what they're going to go through, it's going to be very hard to do it that way. And so, I think that's a common example of people trying to pick the mechanics independent of the problem that's being solved. And I think that's true to some extent in every discipline, but maybe go-to market is the most common.
Brett: So did you find that you need to bring in go-to market talent that was very pioneering and sort of curiosity oriented, or did it mean that for far longer than you would ever imagine, you were intimately involved in all of these little-
Jay: I was pretty heavily involved in the go-to market for-
Brett: Was that counterintuitive to start?
Jay: The way Confluent came in about, there was an open source project that was out there and had some traction before the company came around. And since I was the CEO, as we were starting the company, it was a group of technical people. It was like, "Okay, we got to go figure out how to get customers and sell this thing." And that was kind of on day one, an important problem to go solve. And so it was kind of natural that would be the case. The common wisdom in this area, I think is exactly right, which is the founders have to figure out how to sell the thing, maybe poorly. But just kind of stumble through it. And in many ways, that early experience of selling our product was, I think, very valuable through the whole life cycle of the company, because later on, much of what will happen in that journey has whole teams that do little sub parts of it, but it was very hard for those teams to think about that bigger picture, but just having gone through that process of like, "Hey, this is how people find out about us." "This is why they decide to use us. This is what has to happen before they've got the value out of it." Then you can kind of start to construct an organization that makes that go faster than that does it at scale. And so yeah, in a sense, I thought it was natural. That's always an area you're going to ... And companies, you always want more growth, you always want to move faster on that. So it's natural that that's an area you're going to put time into.
Brett: Maybe just so we have a little bit more scaffolding, you can give us the trailer version of the Confluent story going all the way back to when you were at LinkedIn, and then we'll use that as sort of a jumping off point.
Jay: Yeah, sure. I joined LinkedIn in 2007, and I think it was a pretty small company at that time. It was probably less than a hundred people, but it had been around for a few years. And it was an interesting time for software. I joined ... The area I had studied when I was in school and that I was deeply interested in was machine learning, but it was kind of early in the use of machine learning in software companies. And I came ... so I was looking for a role which would kind of apply this, where I could kind of use these skills. And I thought LinkedIn would be a good place for it because there's very interesting data in these social networks about the world and it just seemed like there'd be a lot of applications. So that was kind of what got me excited and made me want to go there. It turned out in practice, it was pretty tricky to pull off that kind of machine learning oriented product. I worked on some of the data driven functionality they had there, around recommending people you would know or coming up with the similar profiles. But end to end, as an individual engineer, it was kind of hard to take something you knew and get the right products specified. Ultimately, it was a relatively product driven thing. And so kind of something happened and then a specification came out and then that was the thing the engineering team built. And so it was hard to kind of say, "Hey, for these kind of relevance oriented techniques, this is where the opportunity lies," at least for me as a software engineer early on. And so I was kind of frustrated by that. And then as a result, I kind of realized like, "Hey, half the problem in any of these products is actually not the machine learning stuff." It's actually just the data, getting it, being able to work with it at scale, being able to apply it, being able to do that in the context of like a real running production system. And so, I ended up spending most of my time on kind of data infrastructure and that was early ... There's been a whole rise of cloud computing and open source and whole waves of data systems that ended up making this stuff easy, but this was kind of right at the very beginning of that. So you just didn't have most of it. There was a couple of open source databases, but nothing really built to operate at scale. And there was a whole revolution happening around distributed systems and distributed computing that's kind of Google was pioneering, but it was all locked up inside Google. There was a period of time where there was a really significant need for scalable data technologies. There was no commercial offerings whatsoever that addressed that. And there was a rise of open source technology, but none of it addressed that either. So there was just nothing, but everybody needed it and that kind of made it a really key problem for any of the technology companies of the day. And I felt that that was true for all the data technology that was out there, that there was an opportunity for any of the classical databases to have a kind of scalable version of it that would be important. And so, I worked on that database for a while, but in the end, it was ... it became not that unique. There was 20 other systems that were doing it and they all had different aspects of popularity. And then my scope inside of LinkedIn had grown and there was a couple different teams that I owned, including some of the analytics areas and some of the product areas. And so I was looking for, well, what are the other problems that aren't solved? If there's 100 of these key value stores, what's unique that nobody else is thinking about? And I felt like, hey, it really is about the flow of data.
Brett: And so when you went and built the first version of the product, the customer was just LinkedIn and what was the first version of the product?
Jay: It was not radically different in terms of what it did from what the technology is. Now it was not nearly as scalable or mature, didn't have all the features, but it was kind of an early sketch of that. That was built in part as kind of a side project. And then the goal for this was to replace a lot of these ad hoc pipelines that had been built up internally, which turned out to be an extremely controversial and political project internally.
Brett: Why?
Jay: Well, it's a funny thing about how these engineering organizations work. There's somebody who owns each of these things and their team's job is epic. And so, if you come in with something that's going to replace a bunch of those, they're like, "Oh no, we don't want it." And so some of the use cases I own ... so we just rolled it out for that. Some of the use cases other people in the organization owned and we spent nine months talking about that.
Brett: And when you rolled it out for the stuff that you kind of could just rip and replace, did it click for you, this is hugely powerful?
Jay: It was originally just me who worked on this and then we added pretty quickly some other really strong engineers, two of whom became my co-founders at Confluent, Jun and Neha. And yeah, I think we got increasingly excited about it. You know you're onto a big problem when the number of use cases just keeps going up by like an order of magnitude that kind of pop out and where the problem you're solving seems really fundamental. And so kind of seeing that internally, we felt like it was a really big thing. The goal was to really unlock a lot of the use of data and I think it definitely did that internally. And that kind of led up to the open source release and trying to take it out to other companies as well.
Brett: And so what was the ... It was a very small group of software engineers working on this early version. What did it feel like? Was it like just you were earlier in your career working on cool technology, this is interesting. What was the energy of the team?
Jay: I think it was ... Yeah, it was a high energy group. It was very small. I think for most of the time we probably had three to five people. It was not some massive team. I think ... we were very passionate about the thing we were doing. I think the open source part helped that. Once it's a thing, then maybe the team believes in it more than they would just some internal technology layer. And I think it ramped up as ... The story of open sourcing, it was interesting. So we were very excited about this because we're already using it internally. We released it-
Brett: And it was not just your team's use cases, it now started to spread.
Jay: That's right. So it was broadly used internally. And so we released it as open source. We assumed it would be immediately very popular.
Brett: But how did you decide that was the right time?
Jay: Just it was far enough \[inaudible 00:15:27\] yeah, it worked, we were using it in production. Interestingly, it was kind of the opposite. So we had success with some of these other open source projects. We released this thinking it was really the best thing that we'd done and just nobody had any idea what it was.
Brett: And it was very different than the first big open source release.
Jay: Yeah. Yeah. Yeah. So when we'd done the database before, it was very easy to explain what it was. It was a database.
Brett: Yeah.
Jay: People knew about databases. So this was like, "Hey, it's a database. It has less features than your other databases, but it's more scalable." So it was just very easy to explain what is it? Where does it fit? What do you use it for? And then Kafka, this open source project, it was very difficult to explain. It was like, well ... long explanation, it's about real time data, it's for this. And it actually took a while, probably the first year it mostly sat on the shelf as an open source project, which we were quite disappointed about. We really had to think, okay-
Brett: Were you aggressively working on it internally?
Jay: Yeah. Yeah. Yeah. So internally heavily used, externally by no means particularly popular, and-
Brett: Did you feel ... You said you felt surprised, but did you feel like demotivated or did you feel like, I don't know why it's not catching long?
Jay: Yeah, somewhat ... I think we had the courage of our convictions because I think we were using this internally, and so we'd kind of seen it work. And so, we put more energy into kind of getting it adopted and eventually started to think about, okay, how could you get people very excited about this area? And so, I ended up writing a very long blog post about it that really kind of caught on. And I think-
Brett: Why?
Jay: I think I put a lot of energy into it because I was like, "Hey, ultimately, if we can't express why this is exciting, then I think it's probably not going to be that successful of an open source project." And I think the blog post was kind of unusual in its form. It was like probably ... I think it was like 25 weird pictures and it was kind of entertaining, but also computer sciencey and then also talked about some of the applications of this kind of more real time way of thinking about data. And so, I think it was enough of a new way of thinking that people were intrigued and I think that really helped the technology kind of catch on in Silicon Valley and eventually beyond.
Brett: So before you put that out and after you put it out and it started to gain momentum, the product did not change. So it was really, your theory was it's a positioning and basic product marketing-
Jay: The products of course continued to evolve.
Brett: Just get better and better.
Jay: It continued to evolve, but it was effectively the same idea. So yeah, what was it that it took us probably several years to discover was basically product marketing in an open source context was, yeah, you got to tell people why it's interesting.
Brett: So maybe building on this just a little bit, if you had another software engineer who built a really interesting product and is trying to figure out how to do product marketing or explain it to a more technical audience, what would you teach them or explain to them they should try to do?
Jay: It's interesting in this area that Confluent operates in, which is there's kind of very technical software products, it is often the case that when you see early companies that have quick success, I would say one of the defining things is often that the founders are very good at that kind of communication, to a surprising degree. And so yeah, what did I learn about doing that over the years? First of all, just that it matters a lot and it's hard. So we would think about solving some computer science problem as being very hard. If you have a software engineering background, you don't think of product marketing as being hard or maybe you think it's hard, but you don't know how to engage in a hard thing like that. You think, okay, maybe some people are good at that, some people are not good at that. But in fact, I feel like a lot of marketing, it just takes a lot of thinking. So the amount of time you're going to think about how to convey the thing is just much higher than you would expect. And the level of detail you're going to put into how you do that is just much higher than you would expect. And so that was one of the first takeaways. The second takeaway ... this is all kind of like marketing 101, but it's true is marketing messages are ultimately kind of a ... they're kind of a pyramid, I think where at the top of the pyramid there's some gestalt message. It's like, what's the title? What's the slogan of the blog post? But it's not enough to just have that. And people often think of marketing as just being that, it's some slogan that we slap on it or it's some whatever, which is actually totally wrong. You need the rest of the pyramid. So what supports it is all the evidence, right? It has to be the people using it who are doing that thing, the truth of the long form argument for what you're saying. The slogan kind of sits on top of that. And when you see things that don't work, it's usually because they're either missing the top of the pyramid. There's lots of examples, but they can't boil down what it is or it's the opposite. They have some slogan, but it is not supported in the broad set of facts that would be the rest of the pyramid. And so, I always think about these things as just kind of construct that full pyramid-
Brett: If you construct the top or the bottom first.
Jay: Bottom, I think the top has to come later because ... Well, I don't know about later, but it's a distilled version of what you think. So your first version of this will not be the pithy one line statement, right? It takes a while to really understand how to boil it down in a way that actually you're never in a short statement going to convey a very deep truth, except by reference to a larger set of things. So you have to kind of almost build the body of work before you can boil it down, but you kind of do it both together, I guess.
Brett: What's the best example of this from all the years building Confluent?
Jay: One example for us was, as we were preparing to go public, one thing you have to do is explain your company to investors.
Brett: Yeah.
Jay: And a different class of investors than venture capitalists, venture capitalists usually are a little more specialized in tech, will do a little bit more research. So come public market investors, just by nature, there's fewer public companies, right? And so they have to generally make their money across a broader set of things. And so they're going to be less specialized in your area. And especially as you're new and coming out, you got to really kind of boil it down. And so I thought that was a good exercise for us. How did that exercise go? It was like, well, what do these people understand today? What is the frame of reference that they have? How can we connect ourselves to that in a way that helps them understand the opportunity for the company, why it's a big deal, why it's a strategic technology. And so we put a lot of effort into that. What we came away with is like, okay, these people understand databases because there's been a lot of successful database companies. So if you want to explain what you do, don't do it from first principles. Just say, how are you different from a database?
Brett: It's similar, I guess.
Jay: Yeah. Yeah. And so our approach to that was ... for the IPO was very much like, okay, database is data at rest, but now all the parts of the company are connected, there's going to be an equally important problem of data in motion. And so the goal was to convey, "Hey, these two things are related. Everything that's at rest has to also be in motion." So the opportunity could be equally big. It's caused by the parts of the company all having to talk to each other in software, which probably wasn't the case, originally. And that kind of implies a large TAM, not in terms of detailed analysis, but just in terms of you're comparing to something big and it gives an anchor for what the technology is and where the company sits. We're not an operational tool or something like that. And a remarkable amount of thought went into something that is kind of small, but it's actually very important if you're going to come out to a new audience. And so, I think audience by audience, you have to almost work through that. The companies that are often the punchiest and best are very early companies where there's typically just one audience, which is like the user. And then over time, you may have a whole set of ... If you're selling for more money, you'll have a whole constituency-
Brett: Right, you're a buyer.
Jay: You'll have your internal employees, which are now a large enough group that you need to think about. You have investors. And usually as companies, as time goes by, as a result of that, many things become more watered down because you're trying to say something to a bunch of people who have very different contexts. And you notice this, that companies kind of lose the edge in communication as they get bigger. And it's almost inherent because you just have to talk to more people.
Brett: Winding the clock back, you have this Magnum Opus blog post.
Jay: Yeah.
Brett: And so then what happens after the next few months? Did it like instantly click hacker new-
Jay: Yeah. People were very excited about the blog posts. That definitely helped the kind of spread of the technology. We went and did talks as well in some of the tech companies and it really did start to catch on. People were, I would say, passionately excited about the idea. It matched problems that they had that were top of mind. And that was kind of what led to, starting to think about turning it into a company.
Brett: Was the usage of the open source product, did it look like an exponential after that or like just-
Jay: Yeah, we had no real measurement. We didn't have any kind of detailed tracking or anything like that, but certainly just in, who we would hear from and the types of companies that were adopting it, that looked like a pretty nice growth curve. It was never ... This type of technology is some work to adopt. So it was never just kind of rocket to the moon. And that's been true through the whole life of the company. It's been, the open source has kind of grown steadily, kind of aligned going up for that whole time period, but it wasn't like it went from zero to infinity overnight.
Brett: What did it feel like as you were thinking about, do we want to start a company around this?
Jay: I think actually my co-founder brought it up, but I'd had kind of a very similar idea. And so, I think to some extent we were kind of thinking in that way. And I think it came about sort of naturally in that, we were hearing from companies that were well outside of tech all of a sudden. So media companies and banks, and that kind of helped us understand that okay, what ... do they have the same problem? And it turned out, yeah, they have the same problem, but maybe bigger in some ways. And so we felt like, okay, this could be applicable broadly. And then it was just, "Hey, is there a form of company that would fit this?" Effectively, what we had was an open source project. Now, there's more of a pattern for how this works, but at that time, I think companies around open source were seen as kind of not very successful.
Brett: And a lot of people had tried it at that point.
Jay: Yeah. There'd been Red Hat and that worked and there'd been some companies around Hadoop that kind of struggled. It just was not seen as a great paradigm.
Brett: Even in the early 2010s, developer tools in general, I think were a much more skeptical category, just broadly.
Jay: Yeah. So people were not that excited about the whole space. And that obviously made it more challenging for us coming in. We kind of understood, okay, this is not exactly a hot area. And I would say even in the crowd, we were in probably enterprise generally was not necessarily the thing. We'd kind of come out of a social network and that had been the big marquee companies of the day were definitely those ... yeah, it was Google and Facebook and so on. It wasn't whatever the equivalent enterprise thing it was. And this is 2014, kind of right at the rise of a lot of the SaaS stuff, but that had not kind of broken through at that point. And so yeah, we were like, "This is a really good idea ... This is a really good technological idea that doesn't have a really easy company form and is hard."
Brett: So you thought a lot about that.
Jay: We thought a lot about it. So we were like, "Well, what are we going to do? Maybe we package this up into some kind of vertical solution or something, but that didn't really make any sense." And then eventually we were like, "Look, we should just take a product to market around this. Just do the obvious thing, build this into a product and take it out to people." In 2014, that was just where it started to be clear that the cloud was going to be a big thing. But at that point, everybody believed it was just really AWS. There was not going to be any other companies. So it was a really interesting dilemma of how you would try and construct a company because you have this cloud thing that's happening that's maybe, I don't know what, five, 7% of IT spend or something, some small percentage. It's really just Amazon. It's unclear that anybody can live in that ecosystem around it. The kind of open source on premise companies have not done that well. So that was the dilemma coming into it was like, okay, can you ... And we're a category that doesn't exist and nobody has heard of. So can you get something going in that dynamic? And if so, how? I think that was kind of the challenge. Now, being software engineers, I think we dramatically overthought this. We spent probably nine months thinking about how to do it-
Brett: Was it mainly inside with you all talking amongst yourself or were you getting out and understanding customers and understanding like what was the mix of the nine months?
Jay: Yeah, we did go meet ... Most of it was us theorizing, which was probably not that useful. Since in the end, we just did the obvious thing. We did go meet with a bunch of the users of the technology and just be like, "Hey, is this important to you? What would more of a productized version of it look like? Would you pay for that?" And that was pretty enthusiastic that people were passionate about the technology. So of course, they all tell you yes, even though maybe they will or won't be customers later on. I think that combined with the impact internally at LinkedIn carried us through. So even though it was like, okay, not the most appealing area, not a really clear product path, we felt like look, there's ... fundamentally there's something very valuable here. We should just do it. And I actually think there's something to that. When I've seen people who create companies in kind of a very top down McKinsey way of thinking of like, okay, market analysis, like In some sense, it actually works less well than just marinating in some problem where you're convinced that there's a really meaty chunk of value. And then even if you don't have the rest of it figured out, you're kind of in the right spot. And I think to some extent, I think we understood that part of it. We were like, look, this data infrastructure, even though it's very uncool, is actually really valuable to companies now. And they're going to want this. And this problem that we're solving is a really valuable problem. So somehow we will be able to get some of that value, even though prior examples didn't go that well.
Brett: What was the first version of the product? How did you conceive of it? And it happened after you raised capital or before?
Jay: It was an interesting kind of occurrence. Yeah, the idea was, okay, we're going to leave LinkedIn and go figure out the details and put together a company and probably eventually go raise money. When we went to quit, LinkedIn was like, "Oh, okay this is ... First of all, we don't really want you to leave, but if you're going to leave, we do think this is really valuable. We would be interested in investing." And we were like-
Brett: Of the balance sheet.
Jay: Yeah. Yeah. Which they had not done in the past. We were very unconfident in our ability to raise money. So we were like, "Okay, this sounds great. We should totally do that." But they were like, "Well, because we don't do any investing, we kind of need it to be a priced round where somebody else is helping set the price. It's not just us assessing our own thing. And so you should go try and find some VC who will participate as well." So we were like, "Okay, we should do this and we should do it before they change their mind because maybe this goes away if we let it sit too long." And so we went from kind of thinking of like, "Okay, we're going to quit our jobs and we're going to cultivate, figure out our product and build some early version and get some first customers to like, okay, now we're going to go fundraise right now for a company that is not incorporated and doesn't have a name." That actually was probably the right thing to do. And that initial fundraise-
Brett: Why was it the right thing to do?
Jay: First of all, I think it helps if there's interest. And for us, I think it helped that the company we were at was interested. I do think with a little bit of homework, we would have done a better job of putting that fundraise together. But in practice, I think a lot of VCs are used to some of the rough edges and they can kind of get past that if there's some traction and something happening in the world. And if there's interest, that always helps. So I think it was probably the right thing.
Brett: So then you raised the money with no product, no nothing, other than the promise of what you were going to do.
Jay: That's right. Yeah. Basically we had a popular open source thing, handed some slides of what we would do. And it went from something where LinkedIn was going to be the kind of major investor to being a smaller part of the round. And it went from kind of a seed investment to a series A, through the course of that fundraising process. But yeah, it was ultimately successful. We benchmark invested and we're really happy to have them. That was Eric Fisher who was awesome part of the company from early on.
Brett: How close was the V1 of the product to kind of what you hashed out on the slides?
Jay: Yeah, it depends on what you call V1\. What we had pitched was actually very close to what we built. It's just that I said we were going to do it in a year. And I think in practice, the first thing we launched was much less than that. And to do everything on the slide took like five years.
Brett: And so, what was the very first thing you put?
Jay: Yeah. Well, the kind of founding dilemma for us was, we had ... at LinkedIn, we had really run this software internally as kind of a service. And so the early dilemma was like, "Hey, are we going to release a software product?" That's more applicable. People can use it in the cloud, they can use it in their data centers. Cloud is still a small fraction and unproven as a business model. Or are we going to do a cloud product where we feel like, "Hey, there's more value we can deliver." And of course, anybody you talk to is like in a small, early company, do not ... The right answer is not both, is just pick something. But that was actually not clear at all either because it's, okay, we're this zero billion dollar data streaming market. Are you really going to slice it in half and be like, "Oh, we're data streaming for the people who want it in this flavor." That didn't sound right either. Pretty early on, we were convinced we had to do both. Again, the starting with software was actually just pure expediency. It's easier to get a first version out and that would satisfy more of the market. And so, we started with that and then I felt a lot of angst about the cloud offering. And at that time, as we launched, Amazon had a system that was actually built in, I believe, imitation of Kafka called Kinesis. So it was incompatible, but kind of looked roughly like it. And that was popular. And we were like, "Oh man, that's going to take the opportunity. And if it doesn't, they'll build something around the open source," which they did. So we felt a lot of angst of, okay, we've got to get this managed service done, but it's very hard because there's a very small engineering team. We've just built this software product that doesn't have nearly enough features. We've taken that out to very large enterprises that we have no business working with, successfully for more money than we feel at all comfortable with. And then, we're going to somehow pull resources away from that and build this managed service, which is a very big undertaking and try and get that working. And we did start that pretty early in the life of the company. I think, I don't know when we started working on it, maybe we were a year and a half in something like that. And then it took over a year, I think, to really get a first version of the cloud offering out there, but-
Brett: When you built and shipped the software and you started selling it, did it feel like there's a there? We have real pull, people wanted it, people wanted to pay for it. What was the feeling inside of the company?
Jay: So it was good. I actually didn't know enough ... to me, I always felt like it didn't seem big enough. We didn't have enough customers. The dollar amounts didn't seem big enough, but they were actually very good for an early enterprise company. I just had no reference to what it ought to look like. And so yeah, very quickly we were getting lots of 100K plus deals coming in, but to me it didn't feel like a lot. It would be like, "Oh, we got four deals this quarter." But it was still, it was pretty good for the company that was a few quarters into selling. So it moved pretty quickly. The angst was like, "Hey, we have this popular open source with a little bit of functionality around it, which we haven't filled out." And so are we justifying the value that we're charging or does the bottom fall out because we just don't have enough kind of meat in the sandwich, right? And so that was very much the competing tension on the product side was, "Okay, we have this one product which has traction. People want it. We're landing big customers, but there's not ... it's 10% of what it ought to be." And then in terms of the role, we wanted to increase that scope. And so, we were kind of building things to do that. And then there's this whole other delivery mechanism, which is kind of a top to bottom rewrite, which really serves a different set of customers, of people who are more cloud native, et cetera, which we also have to-
Brett: And the people that started to pay you 100 or 200 or 300K, they could care less about the cloud offering. So they were pulling a different features out of you.
Jay: The early customers ... Again, we were very market driven. So we knew that like, okay, the kind of tech company that we'd come out of, mostly they would not buy a licensed software product. They would just use the open source, right? Or they might use a cloud service. They would use cloud services from Amazon. Would they use a cloud service from Confluent? We didn't know, but we thought that was the hope there. But where the early customers were was effectively large enterprises. And that comes with its own difficulties. You definitely need real kind of field team, contractual stuff. It's a huge list of items you have to do. So there was a big kind of overhead of that, but it was working. We basically had kind of large marquee enterprises, big banks, insurance companies, retailers who were customers-
Brett: In the first 12 to 24 months?
Jay: Yeah. Yeah.
Brett: And did you start to bring in some traditional sales talent at that point or you did it all yourselves?
Jay: No. So I did the first set of early deals and then, I started to hire individual reps and we got-
Brett: That would do end-to-end sales or that would kind of begin a process and bring you-
Jay: Yeah. Basically the latter. So I was still involved in meeting all the customers or one of my co-founders would be, but they were-
Brett: And did they come out of the domain?
Jay: Yes. Yeah. So I think the early sales reps were experienced in the area we were in. I mean, not our little niche and the closest thing we could find and they had worked in very early companies and we gave them a lot of equity.
Brett: And they were IC sellers.
Jay: Yes, 100%, or ICs who had also managed maybe small teams but not-
Brett: VP sales, whatever, CRO, whatever.
Jay: Yeah. And I think that's really a worthwhile investment of, I think you can kind of amplify the founder led sales thing quite significantly with just a few people, but you need people who have been successful in early companies where they just-
Brett: Not Oracle or whatever.
Jay: Yeah. There's no product marketing, there's all these other things you just don't have for them, but you have something, you have a deck that you've kind of scrapped together, but they just have to be okay with that and be able to fill in the blanks where there isn't scaffolding for them. And I think people who've been in early companies can do that, but the average sales rep coming out of a large company is going to be kind of like WTF.
Brett: This doesn't seem right. There's actually a lot of lock-in with these products.
Jay: I think you could think of it as almost game theory, right? Selfishly for a provider, you would want as much control and leverage as ... you would want as much differentiation as leverage as possible selfishly as if you're the software provider, right? If you're the buyer of the software, you want a complete commodity, right? Neither party is going to accept that and you're kind of trying to find something that's the-
Brett: And you want as much differentiation as possible because that's how you generate pricing power and market share?
Jay: So fundamentally, if you think of what is ... Open source is maybe the purest commodity, right? And so, if you're trying to sell a product which is purely open source, effectively the price of that product should collapse to the cost of providing it, which is based kind of at scale of zero. So there's no business in selling a pure open source software. The business is going to come out of selling something which has some amount of differentiation and the more differentiation, then the more you could charge. But the customer has to accept that and want it, and they're going to weigh those factors. And so if you look at how these businesses have evolved, they have to really prove themselves and provide that value to customers and customers have to feel okay. And indeed customers can move off of any of these more open systems more, easily than they could something purely proprietor, but it's not the case that the companies have no stickiness either. In fact, if you just look at kind of revenue retention statistics, it's actually quite good. And so, if you think about it, the industry has kind of found a balance where you can build a successful company that captures some amount of value. It's not as complete capture as if you had full leverage, but it's also a better deal for the customers. I think it is the case that some of these early infrastructure offerings, that it goes too far where the lock-in is so tight that the vendor can actually extract in some sense more than the value they create. Because moving off of it is such a nightmare at that point, which becomes a very negative thing for the customer. And so yeah, I think it actually works out relatively well, but on the product side, there's finding a balance of enough value and differentiation and enough openness. That's kind of the tricky bit.
Brett: So, you had the software product that was selling well and meeting the demands of a number of enterprise customers in the first 12 to 24 months, and then you decided to build the managed service alongside it. Even though it felt tricky because you had a small team being spread.
Jay: Totally. Yeah, totally, totally. So that was probably one of the more difficult things that we had to do early on.
Brett: How did you have the confidence to do that? Particularly because you'd never done any of this before.
Jay: There's always two lenses in a company. One is what can we do? And then the other is what do we have to do? And so what can we do? That's like an opinion from the team. What do we have to do? It's kind of imposed by the world. And so you kind of look at these things and you're like, okay, can we do two products at the same time? I don't know. Maybe we can. It's going to be very hard. Most people would say, don't do that. That's a bad idea, all else being equal. But if you look at what do we have to do, we absolutely have to do this. There's no question that a huge portion of the market is going to be in the public cloud and nobody in the public cloud is going to want to consume a licensed software product. So we have to have that part of the market. For me, at least I felt, okay, it's very clear that that's like an existential thing. So we just have to do it and then, we have to find a way that it can be done. And I think that's actually a very important takeaway. I found that's often true that teams, because they spend all their time thinking about how to do something, they become very fixated on what can be done. And it's actually very important to step back and be like, "Hey, to be successful in this product area, what do we have to do?" And then, it's weird, once you know you have to do it, then you find a way to do it. And this phenomenon is seen elsewhere. I think the famous whatever, business book example is like the four-minute mile or some marathon time or any of these sports things, which once ... for a long time it's seen as unachievable. And then as soon as somebody does it and you know you have to do that to compete, then everybody does it. And so, in other words, it becomes possible once people know they have to do it. And so I think that's an important view, but it was just very clear we have to do this. It was just very difficult. We understood on the engineering side, okay, that's a very different delivery mechanism. It'll be a lot of work to build. And we'd prepared for that from early in the company. So we thought set up to do it. It was in fact much harder than we thought. There's definitely a methodology for that for any company that goes multi-product. We didn't know the methodology, so I think it was just blunt force was just continuing to focus on it until we did it. It was controversial. Internally, probably half the company thought this was like the dumbest thing ever. It was still not the case that most of the market was in the public cloud. The product wasn't really selling. It was basically harder to sell and we made less money and the economics were worse. I think even some of the investors were kind of like, "What do you guys have like the, on paper, like the best enterprise business ever, and you're putting all your energy on this other thing that kind of sucks." If there was two standalone companies, we would definitely invest in this one and we would definitely not invest in that one. We just kind of bludgeoned our way through. None of it was pretty. Some of our biggest early customers quit on us.
Brett: Because the product did not meet their needs?
Jay: In various ways, right? They either outscaled us, the limitations were too embarrassing. The challenge for this kind of infrastructure is customers often kind of start small and then, kind of, you just have to do whatever they need to do in there. So everything they could flexibly do in their environment, you have to have that capability, but kind of fully automated and you have to be excellent at scale operations. And yet, the promise of these kind of fully managed cloud infrastructure offerings, that's kind of an easy thing to do for like application money or software, but hard for these big distributed data systems. But the promise is, "Hey, it's just going to kind of run itself." So it's like a self-driving car. But the feeling if you're in a self-driving car that crashes is not so good. You're like, "Yeah, if I'm holding the wheel, sure, maybe I get into a fender bender once in a while, but at least I know what's going on." And yeah, that early cloud product was very challenging.
Brett: But to build on the metaphor, it did feel like when you were working on it and you were making the promise, ala self-driving, that everybody continued to be excited about the promise. It was that when they used the product, it was not delivering on the promise. And so you knew that if the promise was delivered on, there was a-
Jay: Yeah. I think in many of these areas that we've pushed through something hard, I do think it starts with conviction of like, okay, this has to work, therefore we have to make it work. The fact that it's not working now is not relevant to what has to happen. But nonetheless, it was a big struggle. I think inherently that a second product is always kind of irrelevant to people's main goals and all the pressure of a business is to satisfy the customers that you have, the big prospects coming in the door. That kind of main flow of business becomes this magnetic force. And so yeah, we really just had to force-feed it in each area. So I think for the engineering team ... originally it was like a small group that was working on the cloud offering and then we were like, no, okay, everybody only does the cloud thing and we will work on the software product in our spare time team by team, which is a very dangerous thing to do because that was where all the money was.
Brett: Right. It didn't work to say we're basically just going to split the company and have two companies, two go to markets, two-
Jay: Yeah, because many of the fundamental components were shared. So what would happen is, okay, the cloud team is trying to build this fully managed thing. They need the Kafka part to work for what they're doing. They go to the Kafka team and say, look at all these, this customer needs this and this customer ... and what do you want this for this-
Brett: Science project?
Jay: Yeah, totally, totally, or a small amount of money. It was just, where is the pressure? And then the same on the sales and go-to market side was just really breaking out every single goal for cloud and treating those numbers. There was just an extra zero or two at the end. That was the thing until it worked and it did. We eventually ground through that kind of painful part. Interestingly, the product was growing quickly early on. It was just very lumpy and uncomfortable and off such a small number relative to the rest of the business and it just looked like zero.
Brett: Was the rest of the business in the tens of millions? What was the scale of it?
Jay: Yeah, it was over time ... Yeah, we were probably in the tens ... The early Confluent grew very fast off the software product. And I think we got to 100 million in revenue just very quickly after-
Brett: And so the software product is like at 100 million and this is-
Jay: Yeah, well, it was different points along the way, but yeah, we started working on it probably in our second year of selling in probably by our third year of selling. It was on the scoreboard, but just looked like an embarrassing failure, but nonetheless, it was going up. It just didn't look like it was catching up. And then as we kind of rounded the corner on some of the product functionality and you decide.
Brett: For you, did it feel on the managed service that there was a crossing the chasm moment line in the sand, or was it just a little bit less shitty every single day forever basically?
Jay: Yeah, it was mostly the latter. I always feel like the crossing the chasm thing is the promise. Can you make this promise and then, the hundred things required to deliver the promise, that's the thing we were chipping away at.
Brett: But it never felt like on the act two product that there was this massive phase shift and we got to the last brick slitting or-
Jay: Absolutely. So yeah, it definitely wasn't one feature that we did, but just you would see in kind of our results an inflection where it really started.
Brett: When you reflect on what about yourself has allowed you to be successful as a founder and CEO, specifically at the ... also the first time you've done this, what about you as a human do you think were the input drivers to it, or what's your working theory of it?
Jay: I think there's probably two things that were helpful for me. There's probably 15 things, 15 ways in which I'm unsuited to the job, but the two things that I think were helpful was the first just being curious and wanting to learn about all the parts of the business and how it worked, our customers, how they work. I do think that even people who come into a CEO job in an at scale company, coming out of a different discipline, I do think the CEO role is probably more multidisciplinary. So you ultimately have to be very interested in learning about the market, learning about the customers, learning about the competitors, learning about each function in a way that's probably broader than many of the other executive roles. And even as a software engineer, I'd always just been curious about stuff and software engineers probably generally are in learning mode more than many professions, even if it's not in that broad way. And so, I think that was probably a good asset. And then I'm also just tenacious. I'm not necessarily an optimist. I think it helps if you're an optimist. I think that, as you were saying, probably some of the best founders are just these inherently optimistic people, but if you don't have that, then I think it gets you there if you're just determined where you're like, "Well, okay, then the probability is only 20%, but we're not going to give up until we've lost all hope." And that turns out not to be as inspiring a message, so you may want to dress it up a bit, but I think just willingness to kind of keep working on things well past the point where it's a bit painful, I think is important. And I think that kind of whatever, tenaciousness, pain tolerance, I think that couples ... I think that's actually probably the most important ingredient for the willingness to kind of go after the things that you have to do. So I do think, especially in early companies, but probably in all companies, there's these kind of big threats or bad news things or things that will kill the company. And the tendency is nobody wants to talk about that stuff, but I do think you have to just kind of lean into those things and get them figured out, get them addressed, whatever it is. And I do think that's, again, kind of back to the just tenacious part of it. And I have come to believe that it's not enough on its own, but just not giving up on something for an extended period of time. It actually gets you pretty far. And I found that in competitive situations, in other situations, and if you just keep working on it, you'll keep improving and other people will kind of tap out at some point. And if you don't, then eventually you will kind of get there. And maybe it didn't look pretty at first, but it'll look pretty if it eventually works. And I think that thinking goes a long way. I don't know that it's a blanket rule because of course, there is some point in time.
Brett: Are there things that you were doggedly pursuing in the context of Confluent and then you eventually did wave the white flag or whatever the expression would be?
Jay: Yeah. I mean, we mostly carried through on things that-
Brett: Would you say if that's the case, is it because you were correct or that in the process of grinding through, it kind of got you to-
Jay: Yeah, it's probably both. I guess I would caveat this. So obviously you want to be very flexible about some of the details of how you do something, right? The whole point is to change your mind on that. And then, I think on the big things, do we need a cloud service? For us, also we've wanted ... one of the more recent versions of this was we felt it was very important for the company to do the processing of data, not just the flow. And we worked on this largely unsuccessfully for a number of years, right? And so, it was just kind of products that didn't take off. In the last few years, that's really started to take off for us as part of the business. But to get there, we actually did give up on early versions of the product we'd done in that space. And so, I guess you'd have to be thoughtful about what was giving up versus not giving up. I think it was logically true that we had to have a product. I think it's logically true that Confluent has to do the processing of data to have strategic importance. So you kind of can't give up on that just because you haven't succeeded yet. It has to work. And then, how you get there, you're just going to keep trying strategy, people, whatever has to change, you're going to just keep trying until you can kind of make it move. And I think once ... in a very early company, you may not have that much runway to do that, but once you have at least something in the business working, then usually you have enough time to kind of keep working at the things that have to work. So I think just being very clear of like, "Hey, what is it that must be true for this thing to succeed or be at the next level?" And then am I really confident that we're on that trajectory? And I feel like those two things often are missed, right? People are not clear on what really must be true or they tell themselves kind of a happy story that the things that are already working are really the only thing that matter. And then are we really on that trajectory? I think that's another one where people often ... if you don't know how to fix something, then you often tell yourself it's good enough, right? But in fact, it's not. And that may be about ... the people doing it, it may be about the product approach you've taken, it may be about something else, but you kind of know, okay, this is not working the way it should. And I think when you don't know the answer of how it should be or how to fix it, I think it's very uncomfortable to say, "Okay, this is not happening." But until you say that, you can't really figure out what to do about it.
Brett: When you're off on trajectory and you look at the root causes across the sort of different trajectories of the business, is it more often X or Y or it's evenly distributed, meaning 80% of the time when you're off trajectory, it's the wrong person is in the seat, you fix the person, or is it just, it's 20% that, it's 20% the product philosophy is wrong, maybe 20% it was just a year too early and the market wasn't there for it?
Jay: I think it's actually all of those things. A disproportionate percentage is people, but I do think also sometimes in organizations, people somehow become trapped in basically a failing mindset and methodology. And so like part of the people change is actually changing ... is opening the aperture on what that part of the org is willing to try. And so yeah, I think that debugging process is one of the hardest things I think in any company. You kind of have some top level results. And you're like, "This is not what we want." And then ascribing the cause of what's not working well is actually shockingly difficult. And you see it all the time. Typically, it always comes back from sales, right? People are like, "Well, sales are not good, so what's the problem?" It's like, "Okay, sales leader is bad." And it's like, "Well, it could be." And that certainly could be, and commonly is, but it could be every other thing in the chain of value leading up to that. I think that's often one of the most maddening-
Brett: Across the years of the business, do you personally spend a lot of time on this diagnostic work?
Jay: Yeah.
Brett: Yourself?
Jay: Yeah, absolutely. Anything that's not working at a high level is inherently cross-functional. And you'll see a weird phenomenon where people in each function often don't have enough global context to totally diagnose it. They may, but it's often ... depending on their personality, some people think mostly about their function. So you'll see some people where if something is not working and they're on the product team, they inherently think it's, "We don't have enough product features." And it's like, well, it could be, but it could also just be, we have no idea how to sell the thing. But you're not thinking about that. You're thinking about the product functionality. Other people who are the opposite where they tend to just kind of blame some other part of the organization out of defensiveness, but it's-
Brett: Yeah, sales blames product is like a configuration-
Jay: Yeah, totally. So somehow I do think the CEO is in a good position. If it's important and it's cross-functional, I do think you're in a good position to kind of put the puzzle pieces together. It doesn't mean you're doing that in isolation. The way the CEO does things is just go ask everybody like, "Hey, why does this work?" And then take all the answers and be like, "Okay, try and figure out which of these makes the most sense. And if that was the case, what would we do?" But I do think often the CEO's in a good position to do that because you have to think very flexibly about changes across different parts of the org.
Brett: One of the things I wanted to go back to as we kind of start to wrap up, you shared this idea of spending a lot of time figuring out what you must do, not what you can do. Is that instantiated across the company, across the whole history of the company in some way, or is it just an idea that you hit the drum on and mention all the time and-
Jay: Yeah, probably more of the latter. We didn't turn it into a value or management principle or something like that, but I do think it's kind of a common refrain of ... especially as a company gets bigger, it's very difficult. A natural thing, if you're one team that needs to do something that touches five teams is you go to the five teams and you're like, "Hey, this is what I need from you." And everybody says, "Oh, I can do it, or I can't do it, or if I could do it, I could do it in 12 months," or whatever it is. You put all that together and you're like, "Okay, here's what's doable. We can do this project and it's going to take two years." And that's kind of the best answer that we've gotten out of all these people, so that's what it is. And I don't have any magic wand as a person in the company to change that. And so the lens that's very important for really that whole group of constituents is like, okay, how important is that thing? Is that good enough? Maybe two years is fine. If it's not fine, then the fact that that was the best we could do is not relevant. We're going to be unsuccessful if that's what we do. It's weird how these things work. Everybody who has found this with headcount, with budget, with timelines, if you kind of just go back and say, "Well, okay, what would the three-month version of it look like?" Maybe that's totally impossible, but a significant portion of the time there is something you could do in three months and what would that be? Is that a good starting point? What if we change this assumption? It kind of makes people go back to the drawing board and question assumptions, but it doesn't naturally happen in a big organization. So yeah, I don't know a way of making it happen more organically, but I think it's a good practice.
Brett: To wrap up, when you look at the totality going from open source project, software, managed service, at scale, enterprise software company, publicly traded company, what are a few of the things that you've figured out that are globally correct for people creating startups that maybe aren't talked about enough? There are many things you mentioned that are correct in the context of the vessel that is Confluent. But I'm curious, where do you have conviction that these few ideas are broadly correct and maybe underappreciated or under-explored in company building?
Jay: Yeah. It's hard to know what's underappreciated because so much ... Even compared to when we were starting 10 years ago, there's so much wisdom that's out there, that's probably appreciated by somebody. I think as a company gets bigger, one of the things I've come to believe is really important is having that ... a small company kind of works almost like a fancy restaurant, like fine dining. Anything can be kind of customized or done right to get the outcome, and it works pretty well, but at small scale. In a big company, I think you become almost like you naturally become more of a system. And so, it's a little bit like Chipotle. It's not going to be great, but it's not going to be terrible. And that's kind of the natural tendency and it's the most comfortable thing. I do think trying to replicate pockets of excellence, even if it leads to inconsistency, I think that's actually really important. And to do it, you almost need people to do things that are kind of outside of the norm of how business operates. So I found that to be very true in hiring, where people who just act like they just have to fight for their life to go hire this team by themselves as if there was no recruiting support and are just really devoting a ton of energy to it. Those people are just massively more successful. But if you're in most of the large tech companies, they actually have kind of some pipeline system that feeds you, can it. And the whole system is actually set up to disincentivize that. Because they don't want to be dependent on people, only having successful managers if they can find their own people. And so, I do think there's many things that are very like that where you have to train the team to kind of go beyond.
Brett: Is that sort of centralization versus decentralization and pushing things to the edges or that's not capturing the idea?
Jay: I think it's decentralization combined with like a sense of accountability. I think as a company gets bigger, how you can give people some unit that they own and have them feel like, "Okay, I have flexibility to go pursue these goals and I have goals." I think that that ends up being underthought as companies grow, but it's really at the right time. For a company with a hundred people, it's not an issue. The place you need that is maybe the management team. As a company gets to be a few thousand, you have to have units that are like that, that are kind of working in that way. They can kind of move quickly, make decisions on their own, have a certain amount of autonomy, et cetera, and yet it's very natural to lose that as the company grows.
Brett: And you're saying that at a hundred people unconsciously, that's just the way that it works.
Jay: 100%. Yeah.
Brett: And that as you scale-
Jay: Yeah. Yeah. I think it-
Brett: Unconsciously, you lead a centralization, standardization, process.
Jay: Yeah. Yeah, that's exactly right. Intuitively, in a small company, the people who have a lot of freedom and decision making are close enough to everything happening that you will just do the thing that makes sense. And as a company gets bigger, you often lose that. A common thing I tell people is ... which sounds ridiculous, but it actually is just very useful, I just tell them, neither I nor anybody on the management team wants you to do something stupid. So if you think you are doing something that is stupid, don't just do it, come talk to us. And you would think that's not needed. And yet it often is because people think, "Okay, we're supposed to do this thing." And so then they just go do it and yet, they actually know something that means that that's not a good idea. I find every time those things escalate, something good happens. Either the management team learned something about the problem they didn't know, or the person working on the problem learned something about the global context that they didn't know, but would need to know to get the right outcome. And in a smaller company, I feel like you have much less of that because the management is so close to what's happening everywhere.
Brett: And you even as a CEO can hold everything on your hand.
Jay: Yeah, in a larger company, you have to execute some kind of strategy. So you're telling people, "Hey, this is what we want," without understanding every implication of that. So you need really the whole company trying to optimize for the end outcome that you actually care about, not just do the thing. And I do think that requires kind of creating some units that have that type of thinking. And so that's been important for us as the company has grown up just trying to break units of product that carry a revenue target, that can think of how are we marketing our area, how are we getting customers? They can't do everything because of course they're sitting in a system that handles some of the problems for them, but it gives them a certain level of accountability. And I think it just really helps them think through end to end, what's working or not working, why are customers using this or not using this? What's holding us back in growth? And then that becomes kind of the point that can easily escalate to the larger management team to unblock things in the rest of the system.
Brett: Do you spend a significant amount of your time working on making this happen in the company or now, it just kind of happens?
Jay: Yeah, I think it took us a couple of years to ... Inherently as you grow, you're just kind of always in this uncomfortable state where you're set up for something a few years ago and now, you're doing something slightly different. And so yeah, it took us a few years to go from kind of a fully centralized thing to having effectively little product areas that acts like 45% of a company. They've got the G&A stuff all done for them, but they have a revenue target. And they have some dedicated marketing and they have a plan of how they're going to be successful and a plan of how they're going to grow and dedicated sales support and so on. And as you start to have more of that, you can make it more real that like, "Hey, you guys own this thing, figure it out. Don't wait for somebody to come to you with ..." Don't just assume you're responsible for this narrow part though. I've done the product specs and I've done the engineering and I've done the design and hopefully it all works. Really think through whether it's going to work and solve all the problems across that are required.
Brett: Good place to end. Thank you for the conversation.
Jay: Yeah, my pleasure.
Brett: That was great.
Jay: Awesome.
Brett: Really interesting. Really enjoyed it.
### How fixing 401(k) the hard way led Guideline's founder to a major exit
URL: https://review.firstround.com/how-fixing-401-k-the-hard-way-led-guidelines-founder-to-a-major-exit/
Last updated: 2026-03-24T15:47:40.000Z
*This week, Guideline founder Kevin Busque shares how a contrarian bet to fix 401(k) launched a decade of building — and an eventual acquisition by Gusto.*
## [Guideline's Path to Product-Market Fit — The Early Decisions That Powered Its Acquisition by Gusto](https://review.firstround.com/guidelines-path-to-product-market-fit/)
It’s 2014 and **Kevin Busque** is too busy to be verifying 401(k) contributions on every pay period. As co-founder and VP of Technology of **TaskRabbit**, the same-day service platform widely credited with catalyzing the gig economy along with Uber and Airbnb, he is focused on scaling the company rapidly. TaskRabbit recently launched in London, its first international market, and its headcount has grown to 70.
Compared to his days as a scrappy early-stage founder, figuring it out on the fly with a small band of early hires, things now look very different for Busque. He spends a lot of time thinking about leadership. Thinking about hiring. Thinking about HR and employee benefits. It’s the latter in particular that begins to keep him up at night, after he stumbles upon a discovery that makes him do a double take: a mere 36% of TaskRabbit employees are enrolled in the company’s 401(k) plan. It doesn’t make sense.
“I remember the number, because when I found out, I was flabbergasted,” Busque recalls.
[](https://review.firstround.com/guidelines-path-to-product-market-fit/)
He begins trying to understand why so few of his employees are making use of this company benefit, which costs TaskRabbit more than $20,000 annually. As he takes a closer look at their 401(k) providers, he starts to grasp the issues.
[Continue reading on The Review](https://review.firstround.com/guidelines-path-to-product-market-fit/)
### Guideline's Path to Product-Market Fit — The Early Decisions That Powered Its Acquisition by Gusto
URL: https://review.firstround.com/guidelines-path-to-product-market-fit/
Last updated: 2026-03-24T15:08:24.000Z
It’s 2014 and [**Kevin Busque**](https://www.linkedin.com/in/kevinbusque/?ref=review.firstround.com) is too busy to be verifying 401(k) contributions on every pay period. As co-founder and VP of Technology of **TaskRabbit**, the same-day service platform widely credited with catalyzing the gig economy along with **Uber** and **Airbnb**, he is focused on scaling the company rapidly. TaskRabbit recently launched in London, its first international market, and its headcount has grown to 70.
Compared to his days as a scrappy early-stage founder, figuring it out on the fly with a small band of early hires, things now look very different for Busque. He spends a lot of time thinking about leadership. Thinking about hiring. Thinking about HR and employee benefits. **It’s the latter in particular that begins to keep him up at night, after he stumbles upon a discovery that makes him do a double take: a mere 36% of TaskRabbit employees are enrolled in the company’s 401(k) plan.** It doesn’t make sense.
“I remember the number, because when I found out, I was flabbergasted,” Busque recalls.
He begins trying to understand why so few of his employees are making use of this company benefit, which costs TaskRabbit more than $20,000 annually. As he takes a closer look at their 401(k) providers, he starts to grasp the issues: clunky, outdated systems, a lack of integrations, confusing (and often hidden) fee structures. It’s no wonder so many TaskRabbit employees have decided it’s all too hard. His founder’s brain is itching, seeing the problem as a challenge. He becomes obsessed with solving it.
Retirement funds for SMBs: Not the sexiest market sector to tap, necessarily, but one that was begging for someone to come and shake it up.
Cut to August 2025\. **Guideline**, the billion-dollar company Busque co-founded with fellow TaskRabbit alums [**Jeremy Caballero**](https://www.linkedin.com/in/jeremycaballero/?ref=review.firstround.com) and [**Mike Nelson**](https://www.linkedin.com/in/mnelsonio/?ref=review.firstround.com) in 2015 to make 401(k) simple for SMBs enters a deal to be acquired by HR tech giant **Gusto**, Guideline’s long-time payroll partner, founded by **Tomer London**, **Joshua Reeves**, and **Edward Kim** ([whose path to PMF](https://review.firstround.com/gustos-path-to-product-market-fit/) we've also cataloged here on The Review). It’s a move that has been celebrated by both companies as the natural next step in their long-standing partnership, and a win for the thousands of small businesses they serve together. Busque describes it not as an ending for Guideline, but the beginning of a new chapter.
So, what happened in between those two points on the map — from Busque’s first inkling that 401(k) for SMBs needed fixing, to acquisition? What does that journey look like in hyper-detail? In a recent conversation, Busque opened up about how he made the decision to leave TaskRabbit and plunge into a new venture, why it was crucial for Busque and his co-founders to build their full software stack from scratch, the advice that helped them find product-market fit and more.
Let’s dive in.
## When traditional providers ignored SMBs, Busque noticed the gap — and the opportunity
When Busque first squinted at that 36% figure on his screen and realized there was a disconnect between the 401(k) offering at TaskRabbit and actual employee participation, he began to examine their benefits program and found himself surprised — and frustrated. It wasn’t just that the company was pouring money into a perk only for it to be ignored by the majority of employees. It was the inefficiencies Busque uncovered that almost drove him mad.
“At TaskRabbit, our payroll and our 401(k) weren't integrated, even though they came from the same company. That was mind blowing to me. Why am I validating contributions after every pay run?” he remembers asking himself. “This should all be handled in the data set in the product.”
Then there were the fees.
“In the 401(k) legacy ecosystem, there are middlemen that charge asset-based fees: your record keeper, your TPA (third-party administrator), your fund investment manager,” says Busque. “The pricing is incredibly opaque. Often, you don’t know who is paying the fee — the company or the participant. I started digging through them all, trying to understand what an asset-based fee really was. Essentially, it’s a lot of people who are not adding value to your 401(k) plan, but are still getting paid for it.”
Busque began to search for an alternative to TaskRabbit’s 401(k) provider.
“Fidelity didn't want to talk to TaskRabbit,” he says. “We had 70 employees and zero assets.”
> *The SMB opportunity was being ignored completely. That was the precipice: I’ve got to find something better than this. I didn't find it.*
Many founders will recognize the terrain Busque describes. You can’t find the thing, because the thing does not yet exist. It was clear to him then that SMBs were in desperate need of an accessible, affordable, modernized solution for retirement funds, especially 401(k).
“I wasn't knowledgeable about it, but I started digging into it. Previously I was a data engineer in the healthcare space. I figured I could come up with an angle to make this a better experience.”
Still, the prospect of [entering an industry in which he had no professional experience](https://review.firstround.com/to-learn-a-new-market-start-by-building-your-product/), especially a sector dominated by an old guard of long-standing legacy brands, was daunting. But Busque was buoyed by words of wisdom from his grandfather: “When you thoroughly understand something, there’s nothing to it.” If he undertook deep research, did his due diligence, Busque had faith he could build something valuable in the gap in the market he’d identified.
While still at TaskRabbit, Busque spent almost two years doing in-depth analysis of retirement fund fees and inefficiencies, as well as familiarizing himself with the IRS code and SEC and Department of Labor regulations. **He realized that if he wanted to solve for the major flaws in 401(k) offerings — especially hidden fees that siphon-off savings — he’d need to build an extremely complex product.** Also, it would have to be built from scratch.
“If I was going to be able to deliver a differentiated product, it was going to be completely vertical. I was going to own the entire software stack,” he says. “That was important for product-market fit for Guideline, because if we had to go back to the small business owner every two weeks on a payroll run and ask them to validate all this stuff, that's a ton of work that they don't have time to do. That was a key insight into developing the product.”
To verify his idea, Busque sought the opinion of [**Zachary Perret**](https://www.linkedin.com/in/zperret/?ref=review.firstround.com), co-founder and CEO at fintech company [**Plaid**](https://review.firstround.com/the-pivot-to-product-market-fit/)(spoiler: Plaid would become Guideline’s first customer).
“I went to Zach because I wanted to do something at Guideline that could either mimic Plaid’s investment philosophy, or at least take into account that philosophy, so I could do something that was additive to it,” says Busque.
Perret was enthusiastic, telling Busque, “‘I want that product.’” It reaffirmed Busque’s vision.
## The product decisions that gave Guideline its edge
Busque approached Nelson and Caballero, then TaskRabit’s Lead Product Designer and Staff Engineer respectively, and told them about the idea. Nelson and Caballero were natural confidantes. The three had been working together closely building a product focused on sourcing laborers for hourly work, in partnership with another company, which would be branded separately from TaskRabbit (it was eventually killed due to a reorg within the partner company), unexpectedly leaving the trio feeling adrift. Busque made the call to leave TaskRabbit so he could focus on his new project full-time.
“I knew I was going to do something different at some point,” he says of making the call to leave. “It was a slow build, and then it just felt the right time for me to go out there and do my next thing.”
His first priority? Fundraising.
*“I don’t believe in stealth mode,” Busque explains. “Everybody has ideas. For me, it's always about execution.”*
The co-founders began trying to raise their seed round. "I needed to raise capital to pay employees to come build this thing with me," Busque says. Because they'd be creating a product that owned the entire software stack, this wasn't something they could bootstrap. With his success at TaskRabbit, there was guaranteed interest in Busque’s next venture. There was no doubt that he would be able to get in front of the right people. The only question was whether he could convince potential investors of its value.
"We had to be able to prove this problem exists.”
Busque and his co-founders built a tool that estimated fees individuals were paying out of their 401(k) — fees they were often unaware were eating away at their earnings, which they would demo at meetings with VCs.
“You could look up someone’s 401(k)s, figure out how much they were paying and make it personal — take it to an individual and show them how much money they’d be losing over the next 20 years, often $400,000 to $600,000\. The difference between 1.6% basis points and 8 basis points is a ton of money.”
**Seeing the potential investors’ eyes widen at how fees were eroding retirement savings affirmed Busque’s belief that Guideline had strong potential for product-market fit.**
Early on in the fundraising process, Busque was pitching a product that was more all-encompassing in the benefits space than just 401(k). But this approach, one VC said, was a mistake, and they opted to pass (but they would eventually come back for the Series B and write the lead check).
**Some advice the firm gave would prove pivotal.** “They gave the feedback, ‘You're biting off too much. You need to focus on one thing,’”he says.
Busque took this seriously. And it was this decision to [narrow their focus](https://review.firstround.com/owners-path-to-product-market-fit/), along with the choice to build their stack from scratch to save costs at the participant end, that would eventually secure Guideline’s path to success. Busque had heard about others who were exploring the 401(k) for SMBs space, too. But they weren’t going as deep.
“If I want to bring you a modern 401(k) experience, I can go about it in different ways,” Busque says. “The basic one is to put a flashy front end on it and use all of the legacy institutions behind the scenes. I'll go get a census for a record keeper. I'll find a third party to administer the plan. I’ll pay a record keeper. I'll only do the front end software, then I’ll tack on an asset-based fee.”
But from his research, Busque knew this approach would rely on external vendors and middlemen, who would add on their own fees, which would contradict the very problem he was trying to solve. He was well aware the others might have been able to move faster, but their product would not be as holistic, or effective, as Guideline. He remained committed to doing it the hard way, maybe taking a little longer, but getting it right. Nelson and Caballero agreed.
“I said to Mike and Cabs: if we're gonna do this, we need to start at the bottom. It's gonna be boring. We're gonna spend a year building record keeping. But it will give us this advantage all the way through, because we don't have to charge asset-based fees like everybody else does,” he says.
> *We went up the stack from the bottom, all the way until we delivered an end product on a web experience. That was super important — it gave us the advantage we needed.*
Guideline became their own first customer. “We were eating our own dog food, which was super important — what did we want in the product?” Demand mounted while Busque and his co-founders were still in this pre-launch phase. “So many people that I was talking to were like, when are you launching? When can I have this?”
Plaid was the first to come knocking, after Busque’s conversations with Perret early on. “Zach was adamant: if you’re not going to do this now, when are you going to do it?”
Determined to ride the momentum, in December 2016 they launched Plaid’s plan before the product was fully operational. This meant it was a more manual process than they would have liked. “At that time we were outsourcing to a third party to do checks. We called it a non-integrated plan, or NIP. We still have a few of those today for the bigger plans that have a homegrown payroll, or something like that.”
But it also enabled them to build a better product. “That was really important, to get in the weeds, productize the process, and bring it back in-house and develop it in software. Luckily for us, Plaid were great about it — if there was an issue, we would work with them on solving it,” says Busque. “Keeping up with Plaid, we called it the ‘Plaid problem.’ It enabled us to go upmarket. It was important to get up and running that first year, because then we had to do 5500 filing and integrate with the IRS shortly thereafter, to keep those plans in compliance.”
More early customers followed. There was TaskRabbit (no surprise there), as well as some mom-and-pop SMBs, like cupcake shops and bakeries — the exact kind of businesses Busque had in mind when he decided to fix 401(k).
Busque’s pioneering approach extended to every aspect of the product. In what was considered radical when compared to industry incumbents, Guideline launched at 0% AUM (assets under management).
“People couldn't believe we could do something like that,”he says. “The truth is, it was very difficult. But we were in early startup mode and didn't need to make a profit. We just raised the seed.”
It’s a good example of how you can, with meticulous market research, come to understand what people most dislike about your industry incumbents, and how to exploit those weaknesses to offer a truly differentiated product. **As Busque has shown, digging deep into the research to understand the nuances of the industry you’re in pays off.**
Another example is Guideline’s approach to enrollment. Up until then, 401(k) plans typically required that participants opt-in. Busque was convinced this was part of why enrollment rate at TaskRabbit was low; there were myriad reasons that might prevent a new employee from signing up to a 401(K), such as miscommunication during onboarding, or uncertainty about the product. That’s why a core feature of the Guideline product, from the beginning, was auto-enrollment. Instead of requiring employees to opt-in to the 401(k) plan, they would instead be automatically enrolled, but given the option to (easily and quickly) opt-out.
This was a non-negotiable for Busque.
"Automatic enrollment was one of the earliest decisions we made. If you do nothing, you're going to be in the 401(k) plan. You get a target day fund and a set contribution rate. You're invested automatically.”
It seemed radical at the time. But his foresight would be proved prescient a decade later when the Secure 2.0 Act mandated auto-enrollment for new retirement plans in 2022, enshrining as policy what Guideline had championed from day one. It’s a reminder that true innovation often feels uncomfortable at first, but can lay the groundwork for lasting change.
It’s also a lesson in building for the needs of your target audience and being willing to forget the rest, even when appealing to a broader market might be tempting. Busque estimates the auto-enrollment feature led to the loss of “perhaps five or ten plans out of the first 100.” But in the end, it became a defining characteristic of the product that set Guideline apart, and, in what is perhaps the ultimate validation, was adopted by other retirement funds in the years to come.
**Busque is unwavering in his view that when it comes to making product decisions, it should always come down to relentless focus on participant outcome.**
“Stay true to who you are,” Busque says. “I had a lot of conviction that this was the right thing to do. If you didn't want to participate, you could get out of it with the click of a button. But we have so many notes from people saying, ‘Thank you for putting me in. I didn't have time to do it. I've been in it for three years and I've made 30%.’”
Busque had confidence in his product. He also knew they would not be able to rely on word-of-mouth alone. So, they made a few sales hires who began outbound. This was an area where Busque admits they “failed,” though it would result in crucial early lessons that ultimately got them on the right path.
“We brought in a few sales folks,” he recalls. “I was like, ‘you guys sell 10 plans this year. I will take you to Mexico. We didn't sell 10 plans. Nobody went to Mexico.’”
The issue was tied to what Busque mentioned about needing to *tell the story* of the problem Guideline was solving. They came up against misunderstanding among the customer base. Folks lacked a deeper understanding of just how bad fees on 401(k)s were, or seemed dubious that providing a 401(k) was even possible for an SMB owner.
With around 60% of customers signing up on their own, Busque leaned heavily into product-led growth and opted not to invest further in building out a larger sales team. “In hindsight, do I wish I’d hired a sales leader to get that other 40%? Absolutely. I regret it to this day.”
You could say it was a lucky mistake. It forced Busque to find an alternate solution to sales-led growth, resulting in a partnership that would be transformative — and also lead to Guideline's acquisition a decade later.
## How a payroll integration with Gusto helped scale Guideline to tens of thousands of SMB customers
“Where do people look to bring on new benefits?”
This is the question Busque asked himself after the “failure” of the outbound sales efforts. How could they reach the right people, at the right time, and find the customers he knew would benefit enormously from using Guideline’s product? The answer eventually came: a payroll company.
The realization led Busque to [**Gusto**](https://www.youtube.com/watch?v=hlOvUsJZs2U&ref=review.firstround.com) (previously ZenPayroll), a service that had been using software solutions to simplify payroll for SMBs since 2011\. Together, Gusto and Guideline built an integration that allowed Guideline to tap Gusto’s customer base, as well as feature a product display in the benefits tab on the Gusto website. **Busque defines this moment as the big unlock that changed everything.**
“We built this whole ecosystem with them, and they became a customer. The integration gave us operational excellence and scale. It was good for Guideline, but also for Gusto; it's a 100% margin business for them.”
Not only could they increase customer acquisition this way, but the integration meant that if a Gusto customer signed up with Guideline, Guideline could ingest the customer’s payroll data, vastly simplifying the process at the user’s end. It was a 360-degree integration which meant if the customer changed their contribution on Guideline, it would also update in Gusto, and vice-versa.
“It allowed us to get to the scale that we are,” Busque says. “92% of all of our customers are on an integrated platform. That's where we play really well. We're 400 people at Guideline, but we service almost 60,000 small businesses at this point. If you look at any other competitors like ADP, that are at our scale, they have hundreds and hundreds of people just servicing 401(k). We do it all in the system.”
## A decade of partnership becomes an acquisition
The possibility of Gusto [acquiring](https://review.firstround.com/how-to-sell-your-startup-the-complete-guide-to-running-an-manda-process-as-a-founder/) Guideline was there from the beginning.
“Since as early as 2016, Tomer and I had been having a recurring conversation about it,” Busque says. “I was open to the idea, but first I wanted to prove Guideline in the market.”
Talk turned serious in the spring of 2024\. “It was a Goldilocks moment,” as Busque puts it. Guideline was about to turn 10\. The company had been profitable for 18 months, hitting around $175 million in ARR. Guideline had reached a strong, stable point. But sustaining the kind of growth expected of a VC-backed company was only going to get harder; Busque was beginning to observe consolidation in the 401(k) services space, and that companies would increasingly build or own their 401(k) products, reducing demand and putting downward pressure on the fees that could be charged for a product like Guideline.
Gusto wasn’t the only contender; there was interest from other parties. Guideline did their due diligence, exploring these other opportunities. But given Guideline and Gusto’s long partnership and deep integration, in particular their compatible tech stacks and high number of shared customers, it was clear Gusto was the most ideal acquisition partner. “They were our first partner, our longest partner, our fastest-growing partner throughout the history of Guideline.”
Alignment did not mean it would be easy.
“The transaction itself was incredibly complicated,” Busque says. What made the acquisition so complex was that Guideline, as a regulated financial services company, was not a single, simple business that could be cleanly transferred. The company was structured as multiple licensed and regulated entities under one corporate umbrella, including a record keeper and a registered investment advisor, each governed by its own compliance requirements.
To make the deal work, Guideline essentially had to be split into two parallel businesses: one serving customers integrated with Gusto’s payroll platform, and another serving customers using other payroll providers. That meant separating books of business, restructuring licensing agreements across entities, and ensuring strict data segregation, all while maintaining continuous compliance with regulators like the SEC, IRS, and the Department of Labor.
I remember looking around, like, ‘Is there a blueprint for this? Has somebody done this before? I couldn't find it.
Because Guideline had to be divided into Gusto and non-Gusto books of business — and because each part of the company carried its own regulatory and licensing obligations — different pieces of the deal had to be worked through simultaneously. While Busque was negotiating the terms with the Gusto team, other discussions were happening at the same time about where certain customers would go, how licenses would be reassigned, and how to separate systems without disrupting active payroll runs or delaying investments. It meant juggling several interlocking conversations at once, with three, four, sometimes five parties involved.
“Daunting,” is the word Busque uses to describe this period. “I didn’t sleep for months.”
This complex unchartered territory meant that the deal could have dangerously stalled, or fallen apart. Busque says what held it all together was the strong relationships underpinning the deal.
“It took a ton of partnership on both sides to get it done,” he says. “It was important to have that decade of experience with Josh and Tomer to get through this deal. Quite honestly, I don’t know if we would have got through it, had it been a new entity.”
Busque’s long-time rapport with his outside counsel, [**Andre Gharakhanian**](https://www.linkedin.com/in/siliconlegal/?ref=review.firstround.com) at Silicon Legal Strategy, who has been his attorney since the TaskRabbit days, was also crucial.
“It’s one of the things I relied on the most. Gharakhanian could reach out to ERISA attorneys \[lawyers that specialize in the Employee Retirement Income Security Act of 1974\] and people that know the SEC and the IRS, to bring that all together in a short window. We did it without bankers involved, which was kind of amazing.”
It’s his number one piece of advice for other founders going through an acquisition.
“Be careful who you choose for the professionals around the table. Make sure you have a solid relationship with them. Get referrals, get introductions. Do your due diligence. It's really, really important to get that right.”
For Busque, the acquisition means the mission he began building Guideline with — to fix 401(k) for SMBs — can continue to scale in a way that only a decade-long partnership could make possible. He believes it sets up a better experience for a new generation of investors, with more transparency, flexibility and fewer of the frictions that defined the old system.
“Gen Z is one of the fastest growing investing categories. Those people work at small businesses, too. They don’t just want mutual funds anymore. It’s important to make sure that we have an amazing investment suite for them. We can do that as one team under Gusto.”
### Listen: Why crazy deadlines produce better products than strategy docs
URL: https://review.firstround.com/listen-why-crazy-deadlines-produce-better-products-than-strategy-docs/
Last updated: 2026-03-22T15:08:21.000Z
*Jeremy Epling joins Executive Function this week for a deep dive on what it takes to become an incredibly effective CPO.*
[](https://www.youtube.com/watch?v=Ocq5T3m5MZw&ref=review.firstround.com)
### Listen now: [YouTube](https://www.youtube.com/watch?v=Ocq5T3m5MZw&ref=review.firstround.com) | [Apple](https://podcasts.apple.com/us/podcast/the-product-wisdom-every-cpo-should-ignore-jeremy/id1535886300?i=1000756127550&ref=review.firstround.com) | [Spotify](https://open.spotify.com/episode/75231hA1cHNJc377h8MDyM?ref=review.firstround.com)
After a 16-year run at Microsoft overseeing just about every major product line, **Jeremy Epling** joined GitHub as VP of Product. For one of his first projects, then-CEO Nat Friedman assigned him to a mission impossible: Get GitHub Actions to GA in nine months. No budge on the timeline.
It seemed absurd to Epling on paper, but he says Friedman’s confidence and coaching ultimately pushed him to get it done. “I did better work than I thought I could on a faster schedule than I thought I could. It was a career-defining project for me,” he says.
Epling’s now CPO at Vanta, where he’s modeled his own leadership MO after Friedman to help his team do great work faster than they thought possible.
He shares more gems in this episode of Executive Function, which is well worth a listen for executives across the org chart — not just on the product side:
- **Find the IC influencers in your company and stay close to them.** "I always look for the influencers in my org,” he says. “A lot of companies don't celebrate ICs enough. They're usually extremely good at what they do. They can communicate it well to executives. And I think that is a skill.”
- **How to avoid the “go fetch a rock” problem in decision-making.** There was a saying at Microsoft that bad decision-making is like asking someone to go fetch a rock. “Someone's like, ‘Hey, can you go fetch a rock?’ And you're like, ‘What rock?’ So you bring one and they're like, ‘Actually, that’s not the right one.’ That's the worst,” says Epling. “So we try to define boundaries around decisions and ask, ‘What data do we all agree we need to make this decision?’”
- **Big co experience doesn’t have to be a non-starter at a startup.** Epling pulled off a career transition that’s often ill-fated in tech: Big co (like, Microsoft big) to startup exec. He says it worked for two reasons: He went zero to one on new products every few years at Microsoft, which was like working at a “series of startups.” And instead of jumping straight from Microsoft, he took a “bridge” stint at GitHub, which prepared him well for Vanta. He got to experience the full commercial loop — product to messaging to pricing to revenue, whereas product lived on its own planet at Microsoft, disconnected from the business side of things.
[Listen to the episode](https://www.youtube.com/watch?v=Ocq5T3m5MZw&ref=review.firstround.com)
Explore more Executive Function episodes:
- [**Chris Degnan**](https://www.youtube.com/watch?v=bRs1zNXIjHQ&ref=review.firstround.com)**,** former CRO at **Snowflake**
- [**Stevie Case**](https://www.youtube.com/watch?v=phPoMj%5FC%5FpE&ref=review.firstround.com)**,** CRO at **Vanta**
- [**Ryan Lucas**](https://www.youtube.com/watch?v=AB0P8U9NLfM&ref=review.firstround.com)**,** VP of Design at **Rippling**
[Take me to Executive Function](https://review.firstround.com/executive-function/)
### The product wisdom every CPO should ignore | Jeremy Epling (CPO, Vanta)
URL: https://review.firstround.com/executive-function-jeremy-epling-cpo-vanta/
Last updated: 2026-04-29T03:37:03.000Z
In the latest episode of Executive Function, Brett is joined by Jeremy Epling, CPO of security and compliance platform Vanta. Jeremy details his career journey, unpacking what it took to make the jump from tenured Microsoft executive to startup CPO. He also shares hard-won insights: how to maintain shipping velocity as headcount explodes, how to manage performance without the safety net of big-company process, and what it means to run a product org where the buck truly stops with you.
In today's episode, we discuss:
- The mindset shift that made Jeremy's transition to startup CPO work
- Why it’s essential for the CPO to stay connected to details
- The rule to ensure teams ship fast while growing quickly
- Why rigid hierarchies derail quality decision-making
- How Jeremy uses open office hours for the entire company
**References:**
- Christina Cacioppo: [https://www.linkedin.com/in/ccacioppo/](https://www.linkedin.com/in/ccacioppo/?ref=review.firstround.com)
- Dropbox: [https://www.dropbox.com](https://www.dropbox.com/?ref=review.firstround.com)
- GitHub: [https://www.github.com](https://www.github.com/?ref=review.firstround.com)
- Ironclad: [https://www.ironcladapp.com](https://www.ironcladapp.com/?ref=review.firstround.com)
- Jensen Huang: [https://www.linkedin.com/in/jenhsunhuang/](https://www.linkedin.com/in/jenhsunhuang/?ref=review.firstround.com)
- Lovable: [https://lovable.dev](https://lovable.dev/?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com](https://www.microsoft.com/?ref=review.firstround.com)
- Nat Friedman: [https://www.linkedin.com/in/natfriedman/](https://www.linkedin.com/in/natfriedman/?ref=review.firstround.com)
- NVIDIA: [https://www.nvidia.com](https://www.nvidia.com/?ref=review.firstround.com)
- Span: [https://www.span.app/](https://www.span.app/?ref=review.firstround.com)
- v0: [https://v0.dev](https://v0.dev/?ref=review.firstround.com)
- Vanta: [https://www.vanta.com](https://www.vanta.com/?ref=review.firstround.com)
**Where to find Jeremy:**
- LinkedIn: [https://www.linkedin.com/in/jeremy-epling-j40/](https://www.linkedin.com/in/jeremy-epling-j40/?ref=review.firstround.com)
- Twitter/X: [https://x.com/jeremy\_epling](https://x.com/jeremy%5Fepling?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
00:09 Why most big-tech executives fail at startups
05:38 Great product leaders stay in the details
09:21 The biggest mindset shift from VP to CPO
16:24 Revenue and product teams are always at odds
18:00 The key to a quality CPO and CRO relationship
23:21 Stop making your team fetch rocks
25:54 Who ultimately oversees the quality bar?
32:27 Why rigid hierarchies kill great companies
36:38 How to leave actionable, detailed feedback
38:55 Great CPOs should avoid comfort metrics
47:27 A glimpse into Jeremy’s working week
49:07 The case for weekly 1:1s
55:13 Why ICs are the unsung heroes of a company
58:25 Jeremy’s most formative career moments
1:07:55 The hardest skills Jeremy had to learn
1:09:31 Why great managers know when to push
Brett: All right, let's do it. Thanks for joining.
Jeremy: Yeah, thanks for having me.
Brett: Normally when you look at someone with a background like yours, basically 20 years in various roles at Microsoft, they then join not a small startup, but a scale up startup, certainly relative to Microsoft, a tiny, tiny company.
Jeremy: Yeah.
Brett: In 90 days, it's a complete disaster and the person leaves and goes back to sort of the wonderful mothership. What is it about you and what you figured out and maybe the specific things you worked on at Microsoft that you think allowed you to be effective in after such a long time, changing context so dramatically?
Jeremy: I think that for me, right out of university, I had a startup. So I guess there's a little bit of that DNA in me. Lasted for nine months, ended up getting me a bunch of job offers, but didn't really go anywhere. So this is back in the day when the bubble had just burst on that first wave of internet companies. I mean, I started at Microsoft in 2002, so it was right around then. And so I think that a big part of the learning for me was I always wanted to switch teams and I've always wanted to learn new things. I think it's just part of my DNA. And so even when I was at Microsoft, I tried to switch teams every three or four years into a brand new product area. So when I started off, I was on Windows working on security and deep technical things. I was on Internet Explorer for a while. Then I joined OneDrive and that was like a zero to one and I really enjoyed that process of zero to one. I think a big transformative thing though was going to GitHub. When Microsoft purchased GitHub, I came over right after the purchase to lead all the new product development there. And to me, Nat was just very much a founder, CEO. I mean, obviously he's exited a ton of companies, been a VC, done a bunch of amazing things. And that company was run very independently. I literally quit Microsoft. Your contract ended. It was like we used all Google tools, everything was built on AWS, everything was Zoom. When Satya sent emails the company, they didn't go to anybody that worked a GitHub. Badges didn't work back and forth. HR, benefits, levels, everything was completely different. And so I think that really helped me get a taste of what it would be like. And I think one of the things that I loved was just the tight connection across the entire business. I feel like there's a lot of great things about Microsoft, but in my experience there, you kind of feel disconnected from the go to-market motion. It kind of feels like it's on another planet. It's like you're just trying to build the best product. And then somewhere over in the ether, lots of money is made that feels pretty disconnected. And I think at GitHub, I got to see it all come together. It was like being deeply involved from our product, to the messaging, to the marketing, to the revenue, going deep with SEs, thinking about our positioning, all the pieces. And that just really excited me. And I was like, I want more of this. And then as GitHub grew, which is great, it kept growing and growing. I was like, actually the most fun part was the earlier stage.
Brett: What's some of the stuff in the context of the GitHub experience when you went from being very product centric to being much more full stack and at least owning or involved in a bunch of the commercial elements? What were some of the interesting learnings from that experience?
Jeremy: I think some of the big ones was, one, I developed a really close relationship with our head of SE, which I think was really important. I think when you're doing a technical sale like GitHub, the SE team plays a huge part. AEs are critically important for setting up the relationship or navigating the org chart, doing all those pieces, but building that tight feedback loop of understanding practically what is working and what isn't each time they're going through the sales cycle and then how they're implementing with customers and driving that feedback back into the product. I think that loop I had a little bit at Microsoft, but was not nearly as tight as it was at GitHub where I felt like I was talking to our head of SE almost every single day. And I was working on new products. You're kind of in that stage of like, you really need to figure it out. Nat, I think really pushed a culture around understanding our marketing and positioning. So I got to spend a lot more time understanding how we're telling our story, how to tell our story a lot better, how we can go through and pricing and packaging, I think was something that I spent a lot more time on than I had at Microsoft. With GitHub Actions, that was like one of the products I built while I was there. We were doing usage-based pricing. It was the first time GitHub had ever done usage-based pricing on anything. And so how do we think through that transformation? The nice thing is I could still go and talk to people in Azure that I knew and worked with of like how did they go through that transformation, but then think about what does that mean for GitHub where, hey, we're selling a product every day. People are used to just buying licenses for every developer on their team. Now we're telling them to think about compute and storage and how do they estimate that and how do you make that friendly for an open source developer? How mch should we give away for free for open source? And so I think that was a really eye-opening experience to me of just the entire impact of the product holistically through the business of the pricing and packaging side. I spent a lot of time thinking about COGS. When you're running large infrastructure like CICD for these workloads at massive scale, it's very expensive. We actually racked our own Macs in our own data centers there. So thinking about the hardware supply chain and how long that takes of like, okay, we think there's going to be a new Mac Mini coming out here. How do we need to go think about the networking setup and all those different pieces? So I think it just exposed me to a lot more breadth of the business and made me appreciate everything that goes to delivering a great product experience versus just the individual kind of features or the smaller bubble, at least in my time at Microsoft. I'm sure things have changed there that you were kind of kept in there.
Brett: So with all that as a little bit of context, when you think about the job of a chief product officer in the context of sort of a scale up startup, how do you define excellence?
Jeremy: I think for me, you have to be in the details. I know there's been a lot of talk for the last year or so around founder mode or not. I'd say I'm definitely on the side of the founder mode interpretations like you need to be in the details. So for me, I want to understand what is the experience we're delivering to customers and how it's great. And I think the more disconnected you get from those, like when you start to become more of like a professional manager, I'm just guiding the team, giving strategy and things, I think you lose a lot in making sure you're building the right thing for customers. Because if you're not in those meetings, if you're not selling the product, if you're not demoing it and using it every single day, I think that's when you kind of get this disconnect. And I think that's what I see happen at times at larger companies where they get there. You kind of end up with this kind of professional management class and then the people doing the work. And then I think that's when the product starts to get confused about what it's doing because not everyone's using it and knowing where it's going and why there's a clear direction behind it.
Brett: So that's sort of one piece. What else is in the job spec for a chief product officer?
Jeremy: I mean, I think for me, understanding, one, of being able to deliver at pace, I would say that is one of the biggest things. You need to keep up a high velocity set of new features coming out to customers, making sure that you're having a really strong win rate. I'd say win rate's like a metric that I think a lot about, especially if we lose, why are we losing? Is it pricing and packaging related? That's something product can go do work. Is it like a product efficiency? What can we go do there? I think on the side of being able to cast out the vision, I think it depends on which CEO you have. Some CEOs want to own all of that. Some of them want to delegate some of it or part of it to the chief product officer. So I think understanding where you are there of how much you're going to be doing on the vision, telling the narrative and the story. I do think even with marketing being able to tell amazing narratives, the product team needs to be able to explain, because you're the one talking to the customer, building the product and be like, "Okay, we're building it for this persona in this way," and be able to transfer that knowledge over. In my case, I also lead engineering. So for me, there's also a technical side of the job as well of understanding the architecture, how we're doing on SLAs and scale, making sure we're building for the future while trading off for short-term things that we need to go deliver, especially when you're in that scale-up phase. If you're joining at like a B or a C, I felt like a lot of my conversations with CEOs when I was trying to figure out where I wanted to be was, "Tell me how fast you can move and how you move quickly. Tell me how you will help us build into a multi-product strategy." So how do you think about adjacencies, where you can go into those adjacencies, how do you make decisions around which ones? How do you verify if the decision was good or bad because not every one's going to be the right decision. And then I think one of the things I talked about through that process was also who I am and was trying to figure out what they were looking for. So I was like, "Hey, I care a lot about product quality and building an experience that's well crafted and beautiful and usable and customers love it." And you don't necessarily have to do that to build a great company. And I was like, "But I'm going to chafe against the system if you don't also value that." So I remember having conversations with Christina and other founders around like, "Hey, what gets me excited and where do I think you get the most out of me?" Versus like, "Hey, actually you should hire someone else because I'm not going to be a good fit here."
Brett: With sort of that level of detail, when you think about the chief product officer role in the way that you define it versus a senior vice president of product or a VP of product or director, whatever in your language would be the step underneath, how do you define the gap between what is expected in those two distinct roles?
Jeremy: I think in those roles, the big thing that changes is you are more focused on the C-team as your first team. I think when I got this role as my first chief product officer role, I talked to a bunch of my friends that were founders and I was like, "Hey, what's the biggest mistake that I would likely make in this role?" And they're like, "You just focus on engineering product and design and you're not actually working with the C-team." And they were like a million percent correct in that advice. And so I think that it's very easy for me, and I even like default to this because I spent most of my time in engineering and product design. It's like my happy place. I want to go in there and work with the team and think about how to make the product better, but if we're not connecting it across the rest of the business, we're not going to have the impact we need. So I think that is the biggest step change. I'd say the other thing is just a lot of the buck stops with you, especially with the way we have it structured at Vanta where I have product design and engineering. Part of the mindset I think from Christina for that is everything that goes into product development is my responsibility. So setting the pace, setting the quality bar, being crisp on the vision and what we're doing, creating that clarity felt like when I was a VP or if you're an SVP or anything before, you always have your manager to go and bounce ideas off of or know that they're going to be setting some high level guardrails. I think for Christina, she needs to be focused on our entire business and company. And so her scope is massively large. And so with me, that 100% rests with me to set all those things on pace, tempo for execution, where we should be going, why, digging into a bunch of the customer specific issues that anyone's having, debating big strategy trade-offs around how much we're investing in our downmarket business versus our upmarket business. So I think there's just a lot of kind of weight on your shoulders probably in that role where you just have to get really comfortable with just making a lot of decisions and there's no one else to really hand them off to or you're not really doing the job, at least the way we have it set up at Vanta.
Brett: What does it look like to do an excellent job being a team member sort of at the executive level other than just having relationship, connectivity, helping out, what does it mean to do that at a 10 out of 10 level?
Jeremy: For us, I think it is us all coming in with the problems that we see in the business or the opportunities and being able to share them in safe, trusted space and to be able to work through them together as a team and then represent that out as a unit. So let's say if we were like, "Hey, I'm worried that win rates," the CRO could come in and be like, "Hey, I'm worried win rates are dropping here. What are we doing?" And she feels like we can come back. And actually I would prefer ... I mean, to be happy when Stevie and I talk about that one-on-one, but almost getting it as a group so we all are on the same page because maybe there's something marketing can help out with. Maybe finance should know because there's a thing around pricing or whatever else or some data analysis we would want them to go do. So I think being able to bring back those to the group and us spend time wrestling with what those are and the big strategy decisions. And I think the other thing you need to do as a CPO is just understand the altitude that your communication needs to be at. When I'm working within engineering, product and design, we can go super deep and everyone knows every feature of the product and get really technical and do all these things. When I'm working with our CRO or our head of people or whatever else, they are not as deep into these things. So being able to kind of re-level the conversation back to like, okay, what did they know about the product and how am I communicating with them in a way that we can move the whole business forward?
Brett: When you think about operating at the executive level and you're working on a problem that a CRO is bringing you, or a chief people officer and you have the exec team working on it, do you think you're doing your job by bringing the product and engineering hat into that specific problem or are you all just, it wouldn't matter if you were doing something entirely different at the company. It's not like I'm bringing the product to an engineering viewpoint, someone else is bringing this viewpoint, someone else is bringing that viewpoint.
Jeremy: I would say a lot of the time it feels like I'm bringing more of the product and engineering viewpoint, but there's definitely things that are just kind of objective conversations around like what are the core values that we want to have around the company and how people can work together or how do we think about remote work versus not remote work? And some of that is like each team could be different and have a different approach to that and we want to allow that or we don't, but I think that's more of like a general discussion. I think a lot of the time I'm trying to bring the product insights in a consumable way because I do think there's like a difference in the CPO role when how you think about the product versus some of the other team members is just, you're probably spending a lot more time with customers than some of the other people are. Like, we have amazing go to-market leaders at GitHub, but a lot of the times a lot of what they're doing at the executive level is building the system in the machine, but aren't probably in as or might not be in as many customer calls as I am. And so I think that, hey, let me bring this customer perspective and then let's also understand what's the general go to-market perspective and the specific things we're hearing from AEs and SEs and then try to like work through it together. I think some of the big ones for us is always like, what's that feedback loop? Competitors change sales plays, they'll maybe be dropping pricing, they'll ship a new feature. And I think the key to me would be getting that group together and being like, okay, do we see one of our key competitors making a change here, they ship something really interesting. What do we want to go do as a group? Do we need to go change the roadmap? Do we need to respond? Do we think our product is just hands down better and existing messaging works or do we need to go tweak the messaging? And if we need to go tweak the messaging, how do we get that out to the field really quickly? And I think you need everybody in the C-team to kind of be aligned because maybe there's like a pricing change we would want to go make or not. Maybe there's a different go to-market motion, maybe there's a different like marketing play that we should go do or maybe it's like, oh wow, we got out played and we should go change something in the product, or they exposed a gap or something that we never thought about and we should go ship a fast fix versus like, actually this is going to take a long time. So how are we going to try to change the buying criteria for those customers? And then it becomes like a messaging thing. So it's like, oh, it's going to take EPD a month or two to go build this if it turns out it's a gap. What are we going to go tell customers about and how do we emphasize where we're even better? I think those are the conversations to me that get the most exciting and productive. And I can bring that product lens of how we can change the roadmap, how we can't, what I'm seeing in the different customer calls, but then still learn from what the go to-market team's seeing, what the marketing team's seeing.
Brett: How do you not create a dynamic where everyone's blaming everyone else? I think it's very natural, particularly with high ambition execs. If there's an issue in win rate, the normal thing would be the CRO would blame the chief product officer, they haven't built the right thing or they didn't-
Jeremy: Yup. Yeah.
Brett: ... have the right features and functionality. Maybe other than just the culture that we're building, do you have any reflections on how do you actually create a culture where here's a problem and we're all going to work on this, not blaming it on everyone else basically?
Jeremy: I think it's really hard just to be frank. I think there's this hard dynamic between the revenue team and the product team that's fundamentally kind of at odds to some degree where the product team is always thinking further out. That's how the compensation model is based for the product team, like primarily salary, also probably heavier on equity. And then you have the revenue team that's like, especially on the downmarket focused business, it's like month to month quotas. Maybe as they get bigger, it's like quarterly quotas and things like that, selling up market, and they're extremely reactive. And I think you need both parts of the business to be successful. You need to be responding quickly to customers and you can't have EPD like navel-gazing about the future when everything's going to be better and just focus on strategy. So I think the biggest thing for me is like trying to build shared truth between those two things. So I usually come back to like the customer feedback loop I think is interesting. I think I've had this experience in the past where the product usually falls into a bad place when it feels like the product team is just like order takers from like the revenue team. You know what I mean? Where it's like, "Customers complain about these five things, go fix these five things," and it becomes very reactionary. And then you don't have much of a strategy of like where you're going. It's just like you're living-
Brett: But there's also attention because there's a lot of goodness in that too.
Jeremy: Right, and those are going to land deals. So you need to be able to do a certain amount of that. You just don't want it to go all the way there. So one of the things that we've been doing is trying to do a good job also sharing like, "Hey, the product team from all the calls we're in, here's what we're seeing from customers. Is it similar or different from what the revenue team is seeing?"
Brett: When you think about this sort of fundamental tensions that we're talking about between product and revenue, for example, how much of this solve is just a really excellent relationship between the chief product officer and chief revenue officer? And that it's two humans and if they generally enjoy and respect one another, it solves 70% or no, you can have that and there is a core, there's a physics of it all that you sort of have to manage around.
Jeremy: Yeah. I mean, I think that's the core of making it successful. And I think that's something that just Stevie and I have leaned a lot into is understanding like, "Hey, how can we quickly and easily work through things with our teams between the two of us?" I do think there's always a bit of built in tension in the system that I actually don't think is a bad thing. I'm comfortable with conflict and things and thinks like companies are more successful and more comfortable they get with conflict and don't look at escalations as bad things. I think a lot of it comes down to that relationship, like can you share what you're really concerned about? Let the other person listen and take that in and then go back, because there'll be feedback going the other way too, right? The product team could set in a couple sales calls and just be like, "Oh my gosh, we just shipped this amazing new thing and no one's talking about it. Why aren't we talking about it?" You know what I mean? And maybe that's a marketing thing or maybe it's like a sales training thing or maybe it's just that seller didn't know or we haven't gotten the pipeline going. So I think that open lines of communication is really important. And I think that's what becomes that kind of like C-team thing that we mentioned before of just being able to share like, "Hey, we're seeing this." And I think it's like coming less with solutions always works better, probably on both sides, but I can at least say on the EPD side, when someone comes to me and it's like, "Hey, we have this problem. The competitive situation has changed here. What should we go do?" I always feel like it turns me onto a more receptive side. Then I get the like, "Can you please ship these three features tomorrow?" And then I'll just be like, "What's the actual customer problem?" Maybe that is the right solution, but maybe it's not. And so I think the more everyone's interacting that way of like, "What's the problem we're dealing with? Let's go look at it and see what everyone can go do to make it better." That's the best way to make it work.
Brett: So how do you think about good conflict versus bad conflict in the context of an executive team?
Jeremy: I like just talking about things directly. So I feel like people ... If someone's like, "Hey, I don't think this is working," I would just want to go and put it out on the table and just be like, "Great, let's go talk about it." And so I think when we end up dancing around things or having too many one-off conversations just because it's exhausting for everyone, and this can be like everyone's kind of talking about it but not together one-on-one and then you feel out of the loop or you hear about it third hand or whatever else. So I think one of the things Christina does really well is like we have a lot of time for the C-suite to get together each week and we go through and just be like, "Hey, these are the top topics that we need to go through and all of us can put things on the list and it can be stuff to do with our team or not to do with our team." And I think we try to approach it all as open and respectful, but also just be like, "Hey, here's the problem. I'm not happy or I'm worried that ACVs are going down here or I'm super excited that this product is doing really well and selling really well here. I'm thinking about moving even more EPD resources to this, but that would mean I'd be sacrificing in this other area. How does go to market feel about that?" And so I think it doesn't always have to be issues that you're talking about there. It can be exciting new things, but I always try to stay in front of things of what we're doing. I think over communicating is just key. I think it's something that I still am trying to do better is communicating more at the right level so everyone knows what's going on within my team because so much of what the product is doing just kind of has downstream effects on everyone else. So if we're like, "Hey, we've done a big bet on federal this year and we've gone through and done FedRAMP 20X. We got our low authorization and have been really involved with all the changes that are happening to security from that regard with the administration and Congress and everything." And that meant trade-offs in other areas like, "Hey, that's a bet that we're making." So that was something I brought to C-Team and I was like, "Hey, here's why I want to make this bet, the intensity. Here's what it would impact in other areas. How does everyone feel about that? Can we still hit the revenue numbers? Do we agree that this growth opportunity is the same? What does that look like?" I like docs a lot, so I'd say we have a pretty heavy doc writing culture, but we try to keep them short. So I don't know, I have a bunch of catchphrases, but one of them is clarity through brevity. So I'm just like, "Just tell me exactly what we want to talk about. Can we just get some bullet points and make a decision here versus some 80-page PRD, which I just feel like is kind of pretty outdated at this point." And at that point, I'd much rather just get a v0 or Figma make prototype or just show me pictures to see the customer experience. But on the C-Team side, yeah, I think it's talking about the hard problems. So it's not like there's an elephant in the room. Trying to be really constructive around what that is and then bringing as much data as we can to it as well. I spend a bunch of time trying to understand our product revenue data, looking at how things are going on the sales side, and then also on just our product usage data so that we can pull all these different pieces together. Our finance team does an amazing job pulling together deep product revenue and then tying it with the sales pieces and bringing that in. So a lot of what I like to go do on decision making is like, what do we need? What data do we need to make this decision confidently? Because the thing I hate the most, I don't know if you've ever been in this situation, Microsoft had this term called fetch of rock, where someone's like, "Hey, can you go fetch a rock?" You're like, "What rock?" And you're like, "I don't know, but bring it." And you bring it and they're like, "Actually, it's not the right one. Well, what one do you want? I don't know. Fetch another rock." And so I think that's the worst. So I think we try to define boundaries around things and say that, "Hey, here's the decision. What data do we all agree if we had this data on ..." Like sometimes it'll be gut. Sometimes it'll be real data. We can make this decision and then we can all represent it as a group because I think disagreeing and committing is also a big part of the job. There's definitely things where I don't know if I believed it and I was wrong and times where I was right and we didn't end up doing it, but we all represented as the group decision of like, "Hey, this is where we want to go and why, and we're all in it together."
Brett: Do you think exec teams are most functional when you have all sorts of different personalities around the table or is it much more functional when everybody's wired the same way? So the whole group is like a group of disagreeable people that like to debate and argue or you want one very opinionated, disagreeable person, you want more of a peacemaker personality, you want sort of that type of thing.
Jeremy: I'm not sure. I think with us, I would say if everyone's disagreeing all the time, I think it's going to feel like really painful and grinding for everyone involved. I think when it feels like someone's just becoming devil's advocate, that becomes negative from my perspective because it's just like I'm just trying to find issues in everything and any plan you can find issues in, you know what I mean? So I think trying to cap that to like, what are the impactful things that we're really worried about? One of the things we kind of do as part of our annual planning process is we'll go through and be like, "For each exec, what are your top five questions?" For us to close on the annual plan for next year, what's the five things that the CFO needs to know? You know what I mean? And he's like, "I have these five questions about the product or about revenue or whatever else." And then we can go through and be like, "Great, let's answer these questions. Now do we all feel like we're good?" Because there's always more questions, but trying to pick on some of those pieces, I do think if you don't have some amount of challenge though, you're just not going to push yourself or the company. So I think you have to be able to ask the hard questions. And I think that's something that Vanta has in its culture that Christina definitely encourages is like, let's just ask the hard questions and have the discussion. I think you just don't want to push it into devil's advocate like, let me always just be disagreeable on everything.
Brett: What about if an exec is not performing at the quality bar? Is it just the CEO's job to manage that or is there a responsibility of every other exec? And if so, how does that work in a non-backstabby kind of ...
Jeremy: I think in that case, I feel like the more senior you get, and I think this doesn't have to be at the C-team, even below. I try to encourage my team, like if my directs ... I've got engineering product and design and if they're disagreeing or someone's not performing, they'll try to work with each other first as peers. And I think that's the best thing. If I'm like, "Hey, I need this from finance or marketing or revenue," or if they feel like, "Hey, I'm not delivering something." I think them being able to come to me and just be like, "Hey, here's what I need and I feel like I'm not getting this to go do my job or I feel like these are the gaps in the area. Here's what they are." I just feed off details as a product person. So I think generic statements aren't as good for me. And I'm like, "Hey, in this doc that we wrote, can you tell me what in the math, what in the priors that you're bringing in, what is it that is making this not resonate with you?" And it's like, "Oh, great, here actually we disagree on this point and that's why everything below it doesn't make sense because you're like, we should zig, and I'm thinking we should zag here and let's go talk about that thing." But I do think working through it one-on-one, obviously the final decision of like, "Hey, how much coaching is too much?" And you're past the point of diminishing returns with that and you need to ask that person to move on or something like that. I think that ends up being the call of the CEO, obviously, because it's the manager of it. But I think the more that group can talk to each other, and then if you kind of just see persistent gaps in an area, I think it's on the CEO to figure out, "Hey, is it the system that's causing it? Is it individual performance failures? What can I go in and do to make this thing work?" Especially if the overall business is going well. It's like to some degree, I think we've had this joke in our board meetings that the board is harsher when we're doing well because there's no real problem to talk about. You know what I mean? So it'll be pushing on all these little things that kind of matter, but not as much. But if anything isn't going well, everyone knows what's not going well and then everyone's working on it. So there's a lot of scrutiny.
Brett: Something you mentioned at the start of the conversation is that in the configuration of Vanta engineering reports to you as the chief product officer, what are the pros and cons of that org design?
Jeremy: So I think understanding where your CEO wants to spend their time and where they're good at it really changes the shape of the role. Christina's really good at product, but doesn't want to probably think about and deal with disagreements between product and engineering on things. So she wanted one person to be like, "Hey, I want the kind of one throat to choke." You know what I mean? Of everything across execution, are we executing fast? Is there a high quality service? Is it scaling? Are we building the product that people want in those different pieces? And so product engineering and design are all together. And I think it lets her then focus on a lot of the cross company problems where she can talk to me about product direction and vision and what she's excited about and she can spend more time with revenue and marketing and everything versus having to manage a deep, another technical person or another design person and wanting to be in all of those more minutia conversations and resolving conflict there.
Brett: But when you think about the benefit, one is sort of creating an organization that's well shaped around the CEO, which is obviously very important. The other piece is sort of when you zoom all the way out and you think about, well, what are the benefits organizationally or to the company broadly? When you have a chief product officer that also owns engineering, you would say you gain X, but you do have to trade off Y. What is X and Y?
Jeremy: I think what you gain is a faster decision making process. So when you want to go through and decide, "Hey, do we need to do this big technical re-architecture and that's going to trade off against some product features?" You need to go through and make those. You have one person that's just going to go make that call and it's really easy for me to quickly resolve any of those discrepancies. Like design and product are often usually under the CPO, so I think that's more familiar for people, but I think it's that faster decision making. I think the downside is there can be a perception that engineering is not as important. I don't think we have that at Vanta. I think engineering is super important and I really empower our engineering leader to go through and own that. Like our engineering offsite, they have the biggest team at the company. You know what I mean? If they didn't report to me, their team would be bigger than the sales team and everything else, and they are responsible for that discipline, the hiring, the budget, all the different pieces there. So I try to hand off that. And so I do think the way I manage it is, yes, I'm the manager, but I also kind of treat it as a peer relationship at the same time where I'm like, "Hey, the two of us are in this together of how do we go build this?" And same with the head of design, but at the same time, I'm also the manager, so I get that it'll never feel like a purely peer relationship, but I think that is one of the trade-offs. If I had a company that required super, super deep technical expertise, I think that would be the case where I would be much more skeptical of having a single person that has it all and I would want a separate technology officer versus not. And I think we have really hard technical problems to go solve at Vanta, but it's a different type of problem than if you're trying to do low level 3D graphics or quantum computing or when Figma was figuring out WebGL for the first time and how to do design software on the web, I think those were different types of problems to go solve.
Brett: Another thing you mentioned is one of the more interesting questions when you think about a chief product officer in the context of a scale-up startup, which is the relationship between product and the role of the CEO. I think the reason that it's often most interesting is most technology-oriented companies are started by founders who one of their areas of expertise or the unique part about them is their product, taste, judgment, et cetera, et cetera. That's generally why the company worked in the first place. And so you often have this very tenuous relationship between the person leading product and the CEO. And to your point that you made at the beginning, it can take all sorts of different flavors. One is that you have a chief product officer that's really just executing the vision of the CEO. You can have the CEO that just realizes there's other things that they need to spend most of their time on, and there's every sort of flavor in between. What sort of reflections do you have specifically on the dynamic of a chief product officer and a product oriented CEO working together and making that successful?
Jeremy: I think spending a lot of time to mind meld on the fundamentals of just what is their vision for what makes a great product and trying to understand decision making so that you can not end up always disagreeing or having conflict in things where you're going left and they're going right all the time. That's not going to make anybody happy in the long term. So I think I spent a bunch of time, at least when I think of early with Christina, I was like, great, let me understand the product. What do you think made it successful? What do you think will make it successful in the future? What are some of the guardrails? Where do you want to spend your time on product decisions? And which things excite you and which things bore you? Which things are you good at? What are you not? And then I kind of can mold what I want to go spend my time on and we can see how that's complimentary or not. I think with Christina, one of the things that's helpful is there are things she's super passionate about. And I don't know, I think just being accepting of product founders, I don't know if most CPOs are this way, but I'm like, come all into my shit and jump in with me. I am very much a ... We did this partnership recently with a company and Christina was super excited about it. And she wrote the initial PRD and I think did a little v0 of what she thought it would be like. And I was like, "Do you just want to run with this?" And she's like, "Yeah." And I'm like, "Great." And I was like, "I've just told my team. I was like, just work with Christina." You know what I mean? And I don't know, I don't feel disempowered or anything by that. She wants to go do it. She needs some happiness in her life thinking about ... This is something that's sparking joy for her and she has to run a big company. And there's exciting parts of being a CEO. I'm sure there's plenty of parts that aren't exciting about it. You know what I mean? And this is a spark of joy. I'm like, "Just go ahead and do that." And so I try to create no structure on my team. And this is something I learned at GitHub. I felt like working with Nat, who was a product founder, I felt like was pretty similar as well, where if someone on my team knew it better than me or anything, I'm like, "Nat, just go work with Chris on this thing or go work with Naha on this thing. Don't ask me and I don't even need to be involved." And so I think when you get in this command and control military style structure, everything has to go up and down and everything, this is what kills these big companies. And so to me, I want everyone to feel like they can work with the CEO on anything and feel comfortable working with them and that it's not a problem. And that I just know with Christine, I'm like, "Great, you're on this one, so I'm not going to go and I'm going to go spend my time on these couple other things." And so I think just being clear about what those boundaries are is to me the most important part of it.
Brett: In the way that you've seen it when a CEO wants to get involved in some new product or some product detail, do you have the same standard that you expect them to operate in owning that? Or if the CEO is going to own this and it's not the way that a diligent, engaged PM that would own this, you give them slack. Or they're expected ... If you want this, it's all you, but you better execute this well.
Jeremy: Yeah. I never give them complete ownership if in that regard, I would say I always assign a PM with it. And it's a PM that's excited because it's cool to work with the CEO and the founder on things. So usually it's not hard. They don't feel disempowered. They're like, "Oh yeah, this will be fun. I get to work with Christine on it." And then it lets her still stay at a more conceptual level. So if something big does come up like, "Oh my gosh, we're about to go do a fundraise. That's going to take a bunch of her time and she can't do the day-to-day work with IC engineers and things." So I always try to have a PM and a designer. Usually someone also that's more senior, ideally staff level for us, or if not a higher senior person so that they can just understand what a high level exec communicating something means practically and how to translate that down so Christina isn't pulled into detailed minutia decisions.
Brett: Do you think that way of operating, which is that a CEO can operate at any level and any function is just globally correct or just works in the context of some of the companies that you've worked at?
Jeremy: I mean, I'm sure it hits scale limits. I doubt Sundar or Satya can operate that way, you know what I mean? With whatever 200,000 people or whatever they have. I think those companies just become very different when they get to that scale. I think when you're still in the thousands though, you should still be doing it. And I think that's part of our philosophy. At Vanta, I think we really expect people to be in the details and that's something that I believe a lot. It's just hard for me to think about how I can coach an engineer, designer or PM to be better if I don't know what they're actually doing and how to go do that job, and I'm not in those details to some degree. I mean, I tell our designers when they come in and get hired, I'm like, "I'm going to be leaving comments in your Figma file." That should not scare you. It does not mean you're doing a bad thing, but just try to normalize the behavior of like, "Hey, we can have it." I think the thing that I've learned here, and I learned from one of our design directors, Brayden, that was really good, he came in with this mechanism that was pretty good where he actually just puts what level of feedback is in front of everything. Like this is an idea, this is a suggestion, or I expect you to take action on this. I think that's something I've learned from my team that the more I've kind of grown in the size of my team or seniority of my roles, that executive megaphone, you just don't understand how it's going off and impacting all this other stuff in your org in negative ways. So I always try to be a lot better about that and repeat things multiple times. Like I send something to a team, I'm like, "I'm expecting action on this quickly or I just want to have a brainstorming conversation. Please do not change the roadmap." And I'll literally put it in all caps. Even sometimes when I do that, they'll still be like, "Okay, we made three adjustments." And I'm like, "No." So I think that's the burden that kind of comes as your team gets larger is really pushing on them to set expectations of when you want something done versus when you don't, if you're going to allow that level of movement. You know what I mean? Where the CEO's going to come in and talk to the team about something. Or even me, I don't know how big the team is now. It's like 350 people or something like that. So the EPD organization I have is pretty large at this point. And so it can be kind of scary for someone that just started for come in and me leave a comment on their PRD and they're not sure what that means. And so we try to normalize that as much as we can.
Brett: You touched on this a little bit, but an engineer, when you think about the thing that they're producing, it's software and then ideally a valuable product that a customer then wants in exchange for money. A designer is maybe doing prototypes or mocks or finished designs and the output is design and maybe what they're responsible for depending on the organization is some version of product quality, impact, whatever. How do you define what the output of you in the chief product officer role is?
Jeremy: I mean, I think for me at the highest level, I guess there's, do customers love the product and how do you want to measure that? Some of that I think can be measured through looking at win rates and how we're doing and how many of those are like product efficiencies or not coming up. I think customer satisfaction on specific areas is really impactful to me. I'm not a big believer in NPS. I know some people like it. I don't think it's like that useful, but I think going and doing customer satisfaction surveys for core workflows of like, "Hey, did this make your life better? Did it not? What were the gaps? How was it?" Those are other important areas to be looking at there. I think the velocity of like, are we continuing just to ship new features and do we have not just a product that excites customers, but like a vision that excites customers and feels like differentiated? So I think those are some of the big outputs we look at there. I mean, I think there's per product revenue is something I look at a lot. I think the sales take, at least the way we do it and the way I've seen it in most companies is more like you have like new logo versus expansion, you have it broken out by different segments and territories and all those different pieces. I instead find that the dashboard I go to and have the finance team build for me is all based on product clients. So I'm looking, it's like, great. Okay, we did a bunch of investments in this product. Are the ACVs going up as an output metric? There's lots of input metrics of like are people using it and whatever else those output metric. It's like, is it going up? Are we selling more of it? What does the attach rate look like there? Is it selling to the right persona and segment? So in our marketing data, when we do outbounds and when customers come in, we classify them into our different personas because security teams are pretty different. A startup, you probably have no one that's actually their job is security. It's like their moonlighting as something else and it's just like the founder or the technical founder. And then you have big companies where they have CISOs and multiple layers of like hierarchy and high specialization where there's a whole team that just does internal risk that is different than the team that would be handling audits or internal audits and everything. So there's a lot of specialization. So we classify those and then we think about when we're building products like, "Hey, I'm building a product for Susie security." And for her, our persona is basically the first security hiring in a company. And it's like, how are we doing against her? Is she buying the product we want? Is she using it the way we want? And how is that growing? And then is the breadth of our product offering growing? I think Christina has an approach that probably a lot of other founders do where her first experience was at Dropbox and she was working on paper and it was like a product that they were trying to expand out to be more multi-product than they are today. And I think Dropbox has done that successfully in some ways, not in others. And I think she has brought that very fully into Vanta of we have to be multi-product and how do we get there and how do we do it really early and keep it in our DNA and always be able to build new products? So I think that lens that kind of gives me a revenue output metric that's really helpful to know, great, we launched our customer trust product two years ago. How's it doing? Okay, we added a new add-on for it. Is that selling well? Are customers adopting it? How are we doing it? And then tying back to the specialty sales team like, oh, if it's not selling well, is it the product's bad? It's like we can make it better or is it like, oh, we didn't have specialty sellers. And that was like one of the fixes we did this year where we're like, wow, when we talked to the general sellers, they just don't know how to go into these deep conversations for the new product. They're kind of scared about selling it because this thing's already making all their quota. Why try risk it on the new thing? And then we did that and then it unlocked even more growth. We still found things that the product could be better on, but I think those combinations of looking at the per product revenue, how people are using the product, are they happy? And then just do we have like a compelling, exciting vision for like upmarket customers? A lot of that can fall in product, it can fall in the CEO or it can be like somewhere between for that one.
Brett: Outside of when you're doing IC sort of PM work on a given product at any given point in time, what do you think are the actual pieces of work product that you yourself must produce that are important?
Jeremy: I think for me, I have like a couple docs that I end up owning and work with my team on. One of them is this kind of meta doc now that like Google Docs have tabs, it's kind of all in like one doc with all different tabs that we call it the product plan doc. And so it basically goes through and looks at every core product that we sell independently and it defines out like, here is the persona, here's the target segment, here's the core customer problem, the value we're trying to deliver, what our differentiators are, when those are shipping and how we're unlocking new types of customers. So whether it be like a bigger headcount tier, a new special type of customer that we're unlocking. So I try to think of this as like the raw material that EPD and the product team needs to be aligned on of like, who are we building and how are we going to go win? And then there's a time element that then informs marketing and sales, right? Where we're like, "Oh, great. We think that customers that are shaped like this, we can't win them today, but we think we're going to go win them in Q2 of next year." And then I can go through and tell the sales team and marketing and be like, "We should have a campaign about this. We should be pushing it here. We should do a moment at this thing." And then we can see maybe it works out, maybe it doesn't, you know what I mean, on that bet. And then they, when they think about revenue forecasting can then go and be like, "Okay, on Q2 or in Q3 here in this segment, I'm expecting things to improve and this is how they're going to improve and we work with finance on a model." That document's really important to me. I think the things I've learned about that document is it is really great raw material for PMM and some of the people in the field, but a lot of times it gets way too detailed and it kind of glosses over for them. I would say we're shipping so fast right now where it's like each quarter we're shipping over a hundred feature updates and feedback I'll get from the AEs is like, "Oh my gosh, we are shipping so much. I literally can't keep up. I'm not sure." And so they kind of lose the signal for all the noise. And so I think this document is the raw material that then helps enablement and PMM and everything. Us pull it in to see like, our downmarket deck should look like this or upmarket deck should look like this. Here's where we should expect inflections and win rate or when we're going to enter a new market and how well we think we're going to go do. So that's a big doc for me that I spend a lot of time on. I spend a bunch of time with the finance team on that product dashboard, just analyzing that every month around where is product revenue coming from, where's it not? Are we surprised? Is it different personas than we thought, different headcounts than we thought? I think the other thing is a couple, we have what we call the product pipeline as well. This is like in Figma where I go through and think about over the next three to four years, when are we introducing new products and where and to which customers? And so I have like little emoji when it's a new ICP or we think this is a product that can be like a hundred million dollar plus business versus one that we feel like is more of an add-on. And so that helps me get the strategy view with the C-team around like, great, this year we think we're going to start incubating two products in this segment. We think next year they can generate X revenue and then after that and we can start to plan out our hiring plan. Do we want to do M&A? Do we want to build, buy, partner, and start to have those different discussions? I think the other thing is just the high level kind of like vision click through for some of our core exciting scenarios. So this is like, okay, what are these three or four really good things that we can just show to a customer about the experience of the product where it's like, "Okay, great. Here's a cool scenario where the Vanta agent is going to do this amazing thing that's unique to us because we have all this data and it can go do it. Let's have a full click through of what that is and maintaining a couple of those big walkthroughs." That's another big thing for me. And so those are some of the ones that I would say I'm the like IC on. And then there's a lot of frequent meetings I do. So I do these things called deep dives. So once a week we have a big block of time where any of the product teams can kind of like come in and walk through different areas. And sometimes I'll ask them, I'll be like, "Great, I want to update on our auditor experience. Can someone walk me through the whole vision of what we're doing and why? And let's go through those." And so that's another good checkpoint mechanism for me where sometimes I'm asking for things. Sometimes the team comes and says, "Hey, we want to show you this. We've got this new idea about how we can think about third party risk in this new exciting way. Let's bring it in and let's walk through." In those, I try to keep very visual oriented. So it's very much like, show me the customer experience, how fast can we get to visuals or a prototype?
Brett: Maybe building on this, if somebody were to watch you work for a given week and all the meetings and IC work and when you're writing a document out, when you're joining an exec team, what would they notice? What are the big chunks throughout the week where work's happening?
Jeremy: Because I'm based on the East Coast, I get a lot of IC time in the mornings and I really try to protect that. So I would say I try to start off my day with like two to three hours of either I'm catching up on docs or Slack or I'm writing something or I'm designing something or leaving feedback or I'm just walking the store. I like to spend a lot of time just going into the product and just using it. And I kind of have a set of scenarios that I run through and I go through and I'm like, "Okay, today I'm going to focus on our risk management product or I'm going to focus on our audit product or customer trust." And I just go through and find and log bugs and think about like, "Is this feeling right? Are we headed in the right direction? Are we doing that?" I think that might kind of like surprise people. My calendar gets really time sliced. I'd say that's another thing that's hard about this role and something I'm always trying to improve, but I usually have a few customer meetings every single week, whether it's like a roadmap conversation, an escalation conversation, or someone else just wants to go meet and talk about something. So there's always like a chunk of time there. And then I do believe in one-on-ones, so I do have a decent amount of one-on-ones.
Brett: For the last 25 years, if you didn't have a one-on-one, you're a horrendous manager or a leader. And then Jensen has no one-on-ones now, no one has any one-on-ones. And the lesson is no one has any real original thinking as to like, what are we actually trying to do with any of this work? What's sort of your theory as to why that's effective for you?
Jeremy: Yeah. I mean, I just think people build products and you need a relationship with people and just having that time, even if it's like a tight 30 minutes really matters. I try to make them working one-on-ones. So usually, sometimes I just always try to want all status to be async. You know what I mean? Just DM me, let's get in a doc, let's do whatever so we can get into the meeting and solve a problem together or have this discussion about like, "Oh, should we do this or that and really wrestle with the problem?" I find them just to be really important. I would say I do one-on-ones with my directs every week and then I have monthlies with a lot of other people in the org. I also try to look for the kind of influencers in my org and I probably spend more time with them and that can be better, that can be worse. I've seen it turn out to be negative at some companies where it can feel like an in crowd or outcrowd. I think we do a really good job controlling that. And I try to be really thoughtful about it, but there are people that kind of have an outsized impact on the organization and I try to be thoughtful around like, "Okay, great. Where is their head at? What are they thinking about? What time should I go spend with them?" Our staff engineers I spend more time with than most of the other engineers on the team, just because I really think they have a massive opportunity to have this huge leadership technically across the company and beyond that. And I want to make sure we're really aligned on what we're all trying to achieve from the product perspective and how that ties into engineering. I do find one-on-ones that are helpful. I still have office hours too, where it's like anybody can just go in and book my office hours. I think it's like an hour and a half every week. And sometimes people don't book things. A lot of the times they do and we come in and just kind of talk about anything.
Brett: And it's open to the entire company or you're-
Jeremy: Yeah, it's open to anybody in the company. It's pretty much always people in my org. There are times when no one books it and I'm just like, "Just get the time back." I find it just to be helpful, especially when you want to have this culture where there's not as much hierarchy. I think just demystifying who I am and what I do. And I try to be vulnerable with my team. I try to tell them areas where like, "Hey, I'm responsible for this and I think I messed this up." You know what I mean? And here's a mistake that we make that I'm responsible for and what I learned from it. So I think having a culture like that just makes it easier for everyone to work with people at different levels when they're just like, "Oh, my leader's doing this."
Brett: How long is each one of the slots that somebody can sign up for?
Jeremy: Oh, on those, I think it's 20 minutes.
Brett: And you get all sorts of range of things that people want to talk about?
Jeremy: Yeah, yeah. I mean, I've had brand new ICs that started the company that week and are like, "Hey, I'm so excited to be here. I just wanted to meet and talk." And I'm like, "Great, let's go have that conversation." Versus someone's like, "I have this super opinionated design decision. I would love to know if you think this makes sense or not." And we're going into the pixels, you know what I mean? Very detail oriented or it could be like I had one a week or two ago where our engineer that's leading how are AI enabling our code base just had a bunch of things you wanted to go talk to me about around like, "Hey, so we've met with these different companies that are doing the same thing. Here's what I've learned. Do you have any strong opinions on these? I'm drafting out these comms with the entire team. Does this seem right? Are you aligned with it?" And I'm like, "Yeah, this sounds great." So that one was more of a working meeting. I mean, I'm sure you can go do this. I don't think that ... I just can't imagine giving some of the feedback and conversations I want to have to people in a group setting and that being the best way to get the outcome I want.
Brett: Why do you think that is and have you tried it?
Jeremy: I have done it a couple times. I think sometimes I've done it good and just times I've done it not good, you know what I mean? Where I've maybe been too harsh in a group setting. I think there's a set of people that I've worked with who they kind of get these ... There's these triggering moments when it feels like I'm being criticized in front of people where that produces them into a really negative, frustrated with their job, unhappy with you, feeling like you're attacking them. And then there's other people that are just like, "Oh, that's fine." I would say I'm very much in that latter camp where, I don't know, Christina, I tell her, it's like I was like, "You can disagree with me about anything in any meeting." You know what I mean? It doesn't bother me. Obviously, I'm going to feel bad for disagreeing all the time and then I'll be like, "Okay, I have a performance problem that I need to go improve." But I'm very comfortable with that and I've just found there's a set of people that aren't. And if I want to get the best out of them and I don't necessarily have to force them to work the way that I work. So there are people that I have longer one-on-ones with, specifically because I know it helps them do better results and I think it's worth it. I'm like, whatever, another 30 minutes a week for one of my directs. That is completely worth it if I know it's going to help them do their job a ton better. I can adapt to people and not have them all be forced to adapt to me.
Brett: Yeah. I mean, I think that companies and teams are these complex organisms. So my guess is if Jensen has been running the company for decades like this and everyone's indoctrinated or there's positive selection bias where that's fun and enjoyable for them, then it can work incredibly well. I think the dangerous thing is to assume that in that organism it's successful that you can just yank it out of there and jam it into your company and it's going to be successful.
Jeremy: Yeah, I agree. I think there's like a whole ... Yeah, when you already have the system working that way, there's a bunch of people that are opting into that system and then versus you're like, "Oh, I decide I'm going to go do this." And there's a bunch of people like, "I did not sign up for this. This feels bad." And maybe that's the right decision and you want to make it, but yeah, it's a lot different.
Brett: When you think about influence in an organization, you have what the org chart says in most companies.
Jeremy: Yeah.
Brett: You have some sort of ...
Jeremy: There's definitely the shadow org chart as well.
Brett: But on that point, you have sort of a director, VP, et cetera, et cetera, and they have influence and authority. You were mentioning this a little bit, but in any company, there's all sorts of people that aren't a director of this or VP of that who end up having an incredible outsized influence on the company. Who are those people generally? How do they end up in those positions of sort of informal authority or sort of these people that people end up going to even if they're not a chief this or a VP of that?
Jeremy: I think this is the opportunity for ICs. I think a lot of companies don't celebrate ICs enough. And for us, I want ICs to be able to get all the way to the VP level at Vanta and have that level of impact. And so I think a lot of people that end up in these roles are often like ICs. You can read the books about Apple's past with Jobs and different people that have done amazing work there and how they were able to go and influence. I think one of the things about them is they're usually extremely good at what they do. They can communicate it well to executives. And I think that is a skill. You know what I mean? They know how to, in our case, go or talk to Christina or in the GitHub case, talk to Nat in a way that Nat will understand or Christina will understand what they're saying-
Brett: Do you think those are two separate things-
Jeremy: ... and see the value of it.
Brett: ... between the two of them?
Jeremy: Oh, yeah.
Brett: Or there's a correct way to communicate to a C-level person or a CEO?
Jeremy: I think it depends on the CEO, but I do think that being great at your job and being able to talk about it to the leadership team are two different skills. The other thing that I think they do is they're usually more on the, they're thinking about where we should be going and more visionary where they're like, "What is happening in the industry are pretty tapped into that and bringing that knowledge back and trying to affect change." They will go through and be like, "Hey, this awesome thing happened in AI when computer use came out for the first time and they're like, "Wow, this could be huge." I went and spent the last week prototyping all these things. Here's what I built, here's what I learned, we should be doing more here, here's why. And they kind of set these things up on a platter and then they'll go and get a bunch of other people excited and you can usually go to them. And I think there's about a bit of social influencing here too, where it's someone that I know I can go to and be like, "Hey, I really care about this." And if they care about it too, I can be like, "Can you help us drive this message across the team?" And they're just kind of socially connected enough on the team. They'll bring it up in meetings, they'll bring it up in all hands or they'll do different things and kind of carry that message forward. So I think some of the things, and I don't think it's like someone that's like a perfect social butterfly. I think there's like your stereotypical engineers that are less that way that are still really good at this, but I think that's part of it. I think the negative, the bad part that can come of this is there kind of becomes like an in crowd and like an out crowd, but I think you can control that pretty well if you're thoughtful and don't let the system getting abused. I think it is making it so it doesn't feel like they are invited to all these certain meetings and kind of get pulled in to discussions that like no one else is. I try to make it more informal. If you're in an office setting, it's just like, hey, we have some engineers that will just always come to me if I'm in the office. I'm remote, but we'll come into Christina and talk to them and go do those things. And I think that keeping it there, but we're not also going to be inviting them to every C-team meeting, you know what I mean? And be like, "Oh, what is your thought here? And can you write this paper? And can you do all these things and we're not going to tell your manager that they're doing it?" And so I think that's when it starts to become negative where it feels like this person now has been kind of like elevated into a status that no one else has been versus someone that's just doing really good work and trying to make the company better. And whether or not they're a manager or not, I don't think matters.
Brett: When you think about being effective in your role now at Vanta as the chief product officer, and you go back to the last 20 or 25 years of product building and engineering, what are some of the stories that come to mind that were really formative, that have helped shape who you are in the role?
Jeremy: I remember I've definitely had some of those harsh feedback conversations, you know what I mean, that I thought were helpful where I shipped something, I can remember one where my team shipped a product, I knew it was kind of like a B class thing, but just wanted to get it out the door because I was kind of tired of trying to iterate with them on it. And I remember my ass kind of getting handed to me for letting that happen afterward and not forcing the bar to be higher. And I think that was a really helpful thing for me. Well, two, one, it never feels good in the moment. Two, the thing my manager did at the time that was really good was like he warned me ahead of that meeting where he's like, "Go into this, it's not going to be fun." You're going to get some really direct feedback from like ... You know what I mean, from the CEO on what this is and why it didn't meet it, but that at least got me in the right mental mindset. I think if I would've walked into that meeting and not know that was going to happen, I would've reacted less good. And so I think that really helped me understand. I think I had some early managers that really focused on the craft of design and helped me understand what does it mean to create a product experience and why it's helpful to have a product experience that people love and isn't just functional. I think you can have successful businesses without it. It's just not as exciting to me, but helped me build those skills. When I thought about my first years at Microsoft or even before I went there and had like ... I mean, I taught myself how to code in high school and build websites for people in the late '90s as my high school job. So I thought about the fact that I was for so long did engineering, product and design, I think it helped me really appreciate all three. And I think that was really formative to what I do today because I remember coming up with an idea, writing all the code, doing the design, realizing it, showing it to a customer and going all the way back through. And I think it gave me an appreciation of everything that goes into making a product end to end so that I was able to make better decisions. There's definitely product managers who I think they don't know enough about the technical side, which can be fine, but can't really appreciate the pain engineering is going through and what on call is like because they've never really done it and why we need to make this more sustainable and how hard it is to keep shipping features on a broken architecture. And so I think the fact that I've had a lot of those experiences give me a little bit more empathy and I think a little bit more insight into when it is time to be like, "Hey, we need to slow down in this area and fix the architecture, go do something here because it's going to make kind of the go slow to go fast later thing versus just having to rely on engineering." Because sometimes you can get bullshit as a PM, you know what I mean? And I have the high detector for those, so I know enough about those pieces to kind of go in. I think those were some of the big ones. I mean, I think at GitHub, the big thing that for me was really understanding what the bar was for high quality experiences. I felt like GitHub's always done that really well in the past with pull requests and all the different things, and I think it's done a good job with them. And I think Max, who led the design team when I was there, I think really opened my eyes to like, what is that bar? How do you hold that bar and how technical a design team could be as well. We really pushed hard to have designers that wanted to go in and own the front end and to go build these experiences and would really understand all the details of how to make something come to life. And I think in my experience at other companies, I hadn't seen that even be an option. I just didn't even know what was possible. And now I'm like, oh wow. Now with AI, it's hopefully going to get ... It's just getting more and more easier for people to do that without all that technical expertise. But I think those were a couple of the big moments for me.
Brett: Given you've operated at sort of various scales now and you're sort of at a scale up company, one of the things that seems to always happen is as you grow, you get slower. And as you were describing, one of the things you think a lot about in the role of chief product officer who also owns engineering is how do you sort of accelerate cadence? What have you figured out in this role about how you move quicker and not just get slower and slower in terms of every next 10 people that you add to the company?
Jeremy: Yeah, it is very hard.
Brett: Why is it so hard?
Jeremy: I think that part of the reason it's so hard for us is you have so many new people. So a couple of things that I think about is we've been hiring a lot. I think within the engineering product and design team, we've hired 50 people a quarter for over a year and we'll continue that all the way through the next 12 months. And so the team has just grown substantially. And when we look at Vanta overall, I think if you've been here three months, your 10 years already \[inaudible 01:01:11\] than 20% of the company or something like that. And so you have so many new people. So one of the big things that I've tried to go do, and I learned this lesson negatively, I felt in my last year, or maybe it was last year and a half when I was at GitHub, was we hired way too fast. And then we hired so many people at just the point at which they were all ramped up, we laid off a bunch of people. And I was like, this was beyond bad. One, I just feel bad human-wise ever laying off people. Sometimes you need to, but then you're like, we spent all this time hiring them. It's like multiplicatively worse, you know what I mean? And like ramping them up only for it all to be gone. So the thing I really focus on, and my team probably hears from me all the time, I use this term absorption capacity. So I'm like, how many people can you absorb and still deliver at the rate that you're delivering at now? And so I try to look at-
Brett: Is every team different?
Jeremy: Yeah. I mean, I think there is some. I think for ... I would say it depends on the quality of the code base. There are some parts of our product that we've built more recently and they are built well and more forward-looking and those teams can absorb people super fast. We have old curmudgeonly, nasty parts of the code base that we need to have more senior people and we need to re-architect and fix some of them. And so absorption becomes really low. So those are the areas ... That's the big thing that I focus on. I think the other thing we talk a lot about ... Luckily Christina had a bunch of this culture on lockdown before I got here. She was very much like deliver, deliver, deliver, deliver, to the point at which my team was almost scared when I came in talking about quality of like, oh my gosh, is Christina signed off on the shit you're saying? You know what I mean?
Brett: Because most people think quality and speed are-
Jeremy: They can't go together.
Brett: ... fundamental.
Jeremy: Right, right. Yeah. And I was like, "Yes, I've talked with her. We can do both. Here's how we need to think about doing both and how we're going to go do it." So there's metrics that I have is like, how many feature announcements do we do per ramped engineer? And then we have a certain amount of time we think to use ramped engineers. We use this startup called Span that helps us with developer analytics. And we also look at the ramp time for engineers. I'm spending a lot of time talking about engineering because to me it's the vast majority of the team. So it's like the most important thing to optimize. So I look at like, can they ... Like our expectations, you're going to write a PR your first week and ship something to production. And then the ramp ups are actually different for product and design. They're actually almost the opposite ... Or sorry, for product design and engineering. If you think about product and design, I want them to understand the strategy and where we're going and the overall context of the product because they make big, impactful, broad decisions. For engineers, especially more junior ones that start, I just want you sling and code as fast as possible. How do we get you ramped up so that you can start executing and building as fast as possible? And then over time, you're going to build more context. And it doesn't mean engineers shouldn't know the business. They should and they should be like experts in it and be able to give feedback on the product. But what I'm trying to optimize then is our throughput capacity for the engineering team versus the product team. I'm trying to make sure that they don't make a decision that's going to confuse 30 engineers because every decision they make has a massive blast radius. So I think that's one of the things, absorption capacity, understanding your ramped engineers, what is the productivity per ramped engineer, how you go do that, and understanding where the code base is making you slow. No developer wants to have to go get a cup of coffee when they're running the build or when they're running tests. So how do you go optimize like build, test, deploy, drive those different pieces, looking for hotspots in the code base. So we also look at percentage of delivery of every single squad. So a squad for me is an engineering manager with 8 to 10 reports, one product manager, sometimes one ... and a product designer. Not every team's exactly like that, but roughly. And I look at what percentage of their time is spent on keep the lights on activity, what amount of it is spent on deep architectural rewrite tech debt things and what is new customer facing functionality. And even if it's a platform team, you can still tie it back to the customer like, "Hey, we made the experience faster," something like that. I look at that across all the squads every single month with our head of engineering and we go through and then just ask probing questions on like, "Hey, how's this going?" We ask people to write dates and commit to them. We expect us to be able to hitting 90% of the dates, which I think is reasonable. If it drops down to 85%, I'm not worried. If it drops down to 80% or 75%, I start to get worried. I want people to take risk too, and I don't want to build a culture that sandbags everything so that they can say they hit all the dates.
Brett: Last couple of things I wanted to talk about. When you think about the trajectory from being an ICPM or engineer all the way through running product design, engineering, what learnable skills were the hardest? Now there's a lot of innate things obviously in you that you are well-built for this role, but what are the things you actually had to learn from a knowledge or skillset perspective that you found were both important and hard?
Jeremy: It's hard. Some people just aren't natural at it. I think I had some natural ability, but then a lot of it I had to just learn and practice.
Brett: And it's just reps?
Jeremy: Yeah, you just put in the reps. I remember when we announced GitHub Actions, I did the big demo and I remember being super stressed before that demo. I must have run through it at least 40 times going through the demo, saying it all, was super nervous. I think it came off really well, but you know what I mean? I had to put in the reps and it's like, we've got VantaCon this week and I've done this now enough where it's like, okay, I'm just going to need a rehearsal or two and I'll be fine. And I've read the script already. But I think those were things that you put in the reps. Those are the more performance ones. But then there's just the, "Hey, you need to be able to get the team jazzed and focused at the all hands." However often you do those, if you do them weekly or monthly or just be able to turn it on with candidates and get into that sell mode. I think that generally certain people just maybe don't have that and it's something that you've got to go and learn. And it was something that I had to go learn definitely parts of that.
Brett: So just want to wrap up. When you think about being effective in the role of chief product officer, who throughout your career has been the person that you've learned the most from? And is there a tangible thing that is expressed in the way that you sort of execute in the job?
Jeremy: I think it would probably be Nat at GitHub. And I think the thing that I learned the most from him was just what does it take to build and deliver a product quickly that people love? And I think I didn't really understand how I could do both of those. And I remember the first time when I signed up for the big mission that we had, when we came over, Microsoft bought GitHub, I'd been part of working on that acquisition. So I kind of assumed that I'd have a role when we were done with and talk to Nat and he's like, "Hey, we've got GitHub Actions." And he was like, "You have nine months to get this to GA." And there was no question of like, could I ask for more time or not? But it's like basically build it and get it to GA in nine months. How do we go and do it? And I think that working with him through that pushed me to the point where I was like, wow, I can do good work faster than I ever thought that I could and how helpful that deadlines were and him being really involved in the beginning of giving coaching of like, "Okay, here's how you need to think about this or do this or that." And then just seeing him fade away more over time gave me more confidence. But yeah, I think that project was like a career defining ... I mean, there's a bunch earlier in my career, but I would say more recently, that was like seven years ago or something, was there where it was like a big business outcome we had to drive and it was really hard and wasn't sure I could go do it. But having someone that believed in you and pushed you and was like, "Here's how you can go do it," was really helpful to me.
Brett: Is seeing him engage with you in that way, the learning there is how to play the role that Nat played for you and then you try to play that role for people on the team.
Jeremy: Exactly. Yeah. And I think that's the thing that I try to take forward is one of the things I want for anybody that comes to Vanta or works with me anywhere is to feel like that they, whenever they leave or move on, they're like, "I did best work, my best work there and I did better than I thought I could." And I think that was a thing that Nat was able to extract out of me out of that process where it's like, I did better work than I thought I could on a faster schedule than I thought I could and had more impact than I though I could. And I'm like, "How do I become that for everyone on my team?" Where I'm just like, "Okay, great. How do I inspire you, give you the clarity, give you the freedom to create your own clarity and push on dates and ask hard questions, but still make it reasonable enough where it's achievable?" I think that's what I try to bring to my teams is how to play that role for them so that they walk away and it's like, "Yeah, there's going to be hard days." You know what I mean? It's like there's going to be not fun days, there's going to be late days and everything, but I want people to walk away and just be like, "Damn, I did stuff that I never thought I could go do when I was at Vanta." And that's what I want them to walk away remembering.
Brett: Great place to end. Thanks for joining.
Jeremy: Yeah, thanks for having me. It was great.
Brett: Great.
### Building Zipline: From launch disaster to drone-delivery giant | Keller Cliffton (Co-founder, CEO)
URL: https://review.firstround.com/podcast/building-zipline-from-launch-disaster-to-drone-delivery-giant-keller-cliffton-co-founder-ceo/
Last updated: 2026-04-29T03:40:45.000Z
Keller Cliffton is the co-founder and CEO of Zipline, the world's largest commercial autonomous delivery system, which today serves 5,000 hospitals across multiple countries and saves an estimated 17,000 lives per year. In this episode, Keller breaks down his extreme hiring philosophy that has powered Zipline for over a decade. He also walks through Zipline’s full origin story: from a near-dead home robot startup to a scrappy bet on drone blood delivery in Rwanda, to 135 million autonomous miles flown.
In today's episode, we discuss:
- Why Zipline hires teenagers over PhDs
- Why the best startup employees are "heat-seeking missiles for pain"
- The 5 leadership attributes Zipline has never shared publicly
- The brutal firing advice that shaped Keller’s leadership
- How Rwanda’s health minister changed Zipline’s trajectory
**References:**
- Airbnb: [https://www.airbnb.com](https://www.airbnb.com/?ref=review.firstround.com)
- Alfred Lin: [https://www.linkedin.com/in/linalfred/](https://www.linkedin.com/in/linalfred/?ref=review.firstround.com)
- Amazon: [https://www.amazon.com](https://www.amazon.com/?ref=review.firstround.com)
- Apple: [https://www.apple.com](https://www.apple.com/?ref=review.firstround.com)
- Brian Chesky: [https://www.linkedin.com/in/brianchesky/](https://www.linkedin.com/in/brianchesky/?ref=review.firstround.com)
- Cleveland Clinic: [https://my.clevelandclinic.org](https://my.clevelandclinic.org/?ref=review.firstround.com)
- Netflix: [https://www.netflix.com](https://www.netflix.com/?ref=review.firstround.com)
- Paul Kagame: [https://www.linkedin.com/in/paulkagame/](https://www.linkedin.com/in/paulkagame/?ref=review.firstround.com)
- Reflect Orbital: [https://www.reflectorbital.com](https://www.reflectorbital.com/?ref=review.firstround.com)
- Sequoia Capital: [https://www.sequoiacapital.com](https://www.sequoiacapital.com/?ref=review.firstround.com)
- SpaceX: [https://www.spacex.com](https://www.spacex.com/?ref=review.firstround.com)
- Sphero: [https://www.sphero.com](https://www.sphero.com/?ref=review.firstround.com)
- Tesla: [https://www.tesla.com](https://www.tesla.com/?ref=review.firstround.com)
- University of Washington: [https://www.washington.edu](https://www.washington.edu/?ref=review.firstround.com)
- Walmart: [https://www.walmart.com](https://www.walmart.com/?ref=review.firstround.com)
- Zipline: [https://www.zipline.com](https://www.zipline.com/?ref=review.firstround.com)
**Where to find Keller:**
- LinkedIn: [https://www.linkedin.com/in/kellerrc/](https://www.linkedin.com/in/kellerrc/?ref=review.firstround.com)
- Twitter/X: [https://x.com/Keller](https://x.com/Keller?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Introduction
02:11 Why Zipline doesn't hire for experience
06:04 Are founders born or made?
07:37 Why Zipline hires 17-year-olds over PhDs
17:03 The employees Zipline doesn't want
18:53 The ultimate startup hire is a "heat-seeking missile"
20:36 Why blind references are a non-negotiable
23:07 Can candidates admit when they screwed up?
30:10 Zipline's secret leadership playbook
35:16 Why you should always fire quickly
36:26 The early vision for Zipline
39:48 How Zipline almost died - twice
44:55 From toy robots to drone delivery: Zipline's pivot
51:35 How Rwanda's health minister changed everything
57:10 Why Zipline's launch was a "complete disaster"
1:04:05 Scaling from 1 hospital to 5000
1:05:17 The 10x hardware cost rule every founder should know
Keller: So what are the chances this is going to work? I said it's about 1%.
Brett: For today's episode of In Depth, I'm joined by Keller Cliffton, co-founder and CEO of Zipline, the autonomous drone delivery and logistics company.
Keller: So many of the problems that humanity has to solve, they require going and getting your hands dirty in the real world. Like, so much of the stuff that's going to be critical for the future of the United States is figuring out how to build physical stuff.
Brett: In an era where so much company building is about bits, Keller is obsessed with atoms, the real world unfancy work it takes to move things from point A to point B reliably and at scale. But Zipline isn't just a drone company. It's an end-to-end logistics system. And the hard part is actually everything around the aircraft.
Keller: But it turns out the aircraft is only about 15% of the complexity of designing an autonomous logistics system.
Brett: In our conversation, Keller shares the principles that made Zipline work when it shouldn't have.
Keller: I talk to so many hardware entrepreneurs who are starting in seed stage or series A, and they always say a number. I'm always like, "It's going to cost 10 times that much money to build that product."
Brett: Things like how to build teams of heat seeking missiles for pain when the odds of success are 1%.
Keller: We want to divide the company into small special forces teams that have very clear goals and are operating with high levels of agency, but also accountability.
Brett: Why the only way to learn in the physical world is through fast iteration and feedback and how Zipline survived the 10X rule that breaks most hardware economics.
Keller: He was like, "Keller, do you know when the right time to fire someone is?" I said no, but I was kind of expecting him to say something very cliche and he ended up saying, "The first time the thought crosses your mind."
Brett: Let's dive in. When you reflect on yourself as a founder and the entrepreneurial people that you've recruited and developed, what's your thinking on nature versus nurture for input drivers to your overall success?
Keller: I think that one thing that we've learned the hard way again and again and again at Zipline is just that it's very easy in any hiring process to focus on specific experience. And the reality is whenever we do that wind up, we almost always end up regretting it because especially for a startup like in the early phases, you're always... By the time you actually recruit someone and onboard them and have them up and running, the job has changed. There's a different priority inside the company and we're like, "Oh, actually nevermind. This thing we hired you to do is no longer relevant. We actually really need you to go own this thing over here." And we just ended up realizing that it's much more powerful to hire for innate characteristics, almost always. And there's like exceptions to every rule, but in general, if we could focus on these innate characteristics that would be indicative of someone growing super fast at the company, we'd almost always win. And so the four innate characteristics that Zipline focuses on are practical problem solvers, fast learners, low ego, mission-driven. If we can find people who have those four things, these are the four things that we think are pretty hard to teach people. So I guess to the nature-nurture point, these things are probably a lot more nature than nurture. Particularly practical problem solver might sound like an obvious thing. It's totally not. I would say this is present in less than 10% of humans, but people who are like predator natural practical problem solvers, people who can simplify a problem down, realize, "Well, these are the only two things that are going to drive the solution," and then as quickly as possible build initial versions of that thing, get it working, learn by doing in the real world, and then iterate their way to something like extraordinarily good. We had no idea what it looked like at its end state. There was no good role models to use from a regulatory or business model perspective. So we were figuring everything out from scratch, and that meant that we had to be really humble and curious and just like get something into the real world extremely fast. It would be super scrappy. And we would just learn by doing.
Brett: Do you think that's globally correct across startups? When you think about your friends who are running companies, do you think that insight is correct for everyone or it tends your guess is it's more correct only in the context of Zipline?
Keller: The thing that I could speak to with confidence is that like hardware companies super, super struggle with this. I mean, Zipline, we've been building the company for the last 12 years and we've seen many different kind of like super cycles where these companies raise hundreds of millions of dollars or billions of dollars and then they quickly burn through that money and then they go bankrupt. Especially in robotics, for example, there's a real predilection to just go and sit in a bunker and build something super cool and kind of convince yourself that like the metrics you're looking at are what matters, or you're kind of building really cool hardware and you're like, "The use cases will come." And Zipline was always just way more paranoid. We were like, "We have to build the simplest possible thing in less than a year and get people to pay us for it." And then once we're in the real world iterating and operating, we will learn by doing. And if we can get customers to pay us more money for certain things, that'll be a good sign. If there are maintenance problems or reliability problems, we'll have to solve them day in and day out. Just getting as quickly as possible into that mode of like rubber meeting the road is really hard for hardware companies to do. It's much easier for these companies to continually do these like update videos on X where you show the hardware doing something really cool once. And that can be very impressive looking. And in fact, I think a lot of investors can be like, "Oh wow, this is really working." But of course, I would say the dark truth about robotics is like anybody can make a video of the robot doing a thing once. The challenge is always like, can you solve the reliability and generalizability problems so you can put the thing in the real world and have it do what it's supposed to do day in and day out in a way that's reliable and useful for customers.
Brett: You hinted this a second ago, but what's kind of your working theory on each of them and in the sense of how much the role of nature or nurture plays. It seems like your gut response is its nature sort of more nature and then sort of genetics drive it, but like so you're not a believer that like kids that are in Montessori educations or things that get people to focus on real world problem solving, not regurgitating facts matters for this in your experience. And we're talking about the first one.
Keller: I guess my opinion is probably that like I have three kids at home, three kids under four years old. So I'm certainly struck watching them that like all kids are born with this like incredible curiosity and like joy of learning and ability to just go and play and do stuff and see what happens and kind of like probe the physical world in that way and learn about stuff. I would say in general, we feel like we're working against how much of the educational system is trying to kill that in kids or teach them not to do that, teach them not to take risk, not to play, to kill the curiosity. I guess I'm just speaking for myself. My educational background, especially through middle school and high school, I felt like it was almost teaching me none of the things that would have been useful to me in my career, what I ended up doing. I learned way more working, making seven bucks an hour working in a restaurant for 40 hours a week all through high school. And I learned way more in that job that's relevant to my job today than I did in high school. When Zipline is interviewing for people, we really don't care about their grades or where they go to college or what extracurricular clubs they're a part of. We're super, super focused on what are the extracurricular things that they're doing. There's a mechanical engineer on the team who's very near and dear to my my heart. He's been at Zipline for almost a decade. And I remember interviewing him being like, "Well, what did you do?" He's coming from the University of Washington. He was like, "Oh, I built a submarine." I was like, "Oh, okay. What do you mean you built a submarine?" He's like, "Well, we figured out all the different kind of major design considerations and we had to design the seals and figure out all the different subsystems." And I was like, "So what'd you do with it?" He's like, "I got into it and I took it down to 50 feet in Washington." I was like, "You're hired." It's like literally submarines are so dangerous. I don't know that much, but I know that submarines are incredibly dangerous. And the engineering behind the pressures even at 50 feet are pretty extreme in terms of how you design stuff like that. The fact that this 20 year old totally risked his own life based on the strength of his own engineering to go down to 50 feet on Washington, you know? So we're always looking for those kinds of extracurriculars. It's like, "Did someone participate in Design/Build/Fly?" These are kind of specific, very hands-on, first robotics, solar car. There's some kind of F1 college programs. In high school, a lot of folks are applying to Zipline and they have insane garage projects that they're doing as 15 or 16 year old kids. I guess whatever that is is the thing that Zipline is typically interested in and is most predictive of success. We hire a lot of folks out of high school these days. We've hired some kids who are 15 or 16 years old.
Brett: In as full-time employees?
Keller: Well, they start as interns. I mean, different examples. I mean, I remember there was someone who joined Zipline when he was 15\. He applied to his clearly prodigy level robotics talent. His parents were helping, I think, him manage some of the implications with school. And so he started as an intern for three months. And then COVID hit and so schools were shut down and so we kind of decided, "Hey, just work with us full time." And so he actually worked full time. And then he got into Stanford early admission and calling his mom and saying, "Hey, we're going to offer him a job for $180,000 to lead a team of mechanical engineers at Zipline." And she was like, "Sounds good to me." So then he actually just ended up joining us full time, delayed matriculating to college for a year. He ended up going for a year and then dropping out to start his own company, which is now funded by Sequoia called Reflect Orbital. They build space mirrors. So in general, I would say Zipline is having more and more luck hiring earlier and earlier. We can teach people most of what they need to know \[inaudible 00:09:47\].
Brett: Explain more about your working theory of why it makes a lot of sense for you. Because most people would say hiring a 17-year-old like, "They need to bake more. They're not ready to be an employee of my company."
Keller: Yeah, we find it to be wrong. I think people, again, not all 17-year-olds, but the 17-year-olds who are really self-motivated and really excited and wanting to be part of this future, I think a lot of them also have this feeling that the future is going to play out over the next four years. And if they go to college, four years from now, too much of this will have happened. There are lots of people at Zipline, by the way, who I'm thinking of who kind of fall into this category. And then yeah, the other thing is just that I think it's a knowledge probably on their behalfs that a lot of the universities these days are not teaching them the things that they would actually need that would make them super valuable at a small scale startup. The best way to get those skills is to go do. And then the flip side is that a lot of times these are the hardest working, most maniacal, insane people at the company who just want to be part of really hardcore teams operating in hardcore ways, moving lightning fast. They're usually blown away that Zipline will give them almost like crazy levels of responsibility with regard to a new product, and that's how we've designed the entire company.
Brett: How do you find those kids?
Keller: They find us. Yeah. I mean, we just are typically getting emails. And the first thing we're always asking is just like, "What have you built? What have you built? What have you built in the garage? What cool projects have you worked on with your friends? What most inspires you?" Some of the answers are insane. The submarine or someone who joined Zipline recently when he was 16 had designed a full GPS visual inertial odometry system for a quad copier that he had 3D printed using Nvidia GPUs running on board. He did this while he was at a boarding school. It's like you're hired. You know what I mean? So anyway, I don't know. I guess the high level thing is that I think success in startups, extremely important nature and nurture, but I think the nurturing is only happening by doing. I think this attitude that kids are learning the right things in college or in grad school is largely incorrect. I think the only way to develop those skills is to go and build things. You can do that in your garage. You can do that with a small team at a startup.
Brett: To the point that you're making when you're making these hiring decisions is a vast majority of the signal, the body of work that they've produced said differently. If you took any of these 17 year olds and you could not ask them what they've done, you brought them to Zipline for an onsite, could you set up in a set of practicals or something that could give you as much signal as looking at their body of work or no it's very hard to do that?
Keller: No, I think you can. I mean, for sure, we want as much of the interview process as possible to just be applied. So with the software-
Brett: Yeah. What does that look like?
Keller: Could be anything. When we're hiring technicians, we're going to build a test jig with them for a specific piece of hardware and we're going to show them the machine shop and say like, "Go for it. Let's build this test gig together over the next day." For a software engineer, it's like pair programming with them. For a mechanical engineer, we might be going through a design review for a specific part or subsystem and asking them to design something on a whiteboard with us or think through how to do a lot of different calculations to figure out if something's going to fail in a critical way. But yeah, for sure, I think we just want as much of it to be applied as possible. Supplying's very non-traditional in terms of the way that we... We're willing to break every rule in recruiting. I think a lot of people have this sense that there's one default way you should do it. We do all kinds of things that probably maybe look kind of crazy to certain candidates, but we're happy, for example, to be like, "Hey, do you just want to come and work with us for a week or just come work with us for two weeks?" We're like, "We can get someone to start with us for a month." And it's like there's no degree to which we can't just like, "Hey, let's just work together quickly and learn by doing." People will figure out pretty quickly if this is their life's work and this is where they want to be versus not.
Brett: So what's the role of experience?
Keller: I think experience in leadership and experience in terms of how to lead small special forces teams in very hardcore ways is extremely valuable, but a lot of other kinds of experience are probably becoming a lot less valuable just because the pace of technological change is so fast. I mean, hiring someone who's like, "Oh, well, they have a PhD in simultaneous localization and mapping from CMU five years ago," that was a hot area of robotics five years ago. It's not as relevant today. There's just like new approaches. I think that there are certain things that are really hard to train from a leadership and management perspective, but when it comes to technology, I think there's no replacing just people who are at the forefront and doing the work themselves. It's the reason that when we look at leaders throughout Zipline, there are a number of different things that we hold leaders accountable for and how we judge the performance of leaders, but one of the things is still technical depth and we do not want any middle managers at the company. I think middle managers would be way too quickly. Every aspect of the company is changing so fast that the only way you can keep your priors up to date is by doing the work yourself. And so the leaders of our recruiting team are running large recruiting searches themselves. Any leader at the company is spending a significant percentage of the time.
Brett: Doing the IC work.
Keller: ... doing the actual IC work.
Brett: What's your thinking on why leadership and management and leading a team, like that experience is valuable there? The counterintuitive thing would be like, that should be easier to figure out than some incredibly hard science technical breakthrough related to power management that you could have a 17-year-old working.
Keller: Yeah, I don't know. We find it to be the opposite. It's interesting.
Brett: Work through it. What's your best guess?
Keller: I think that a lot of the really hard technical problems are more tractable and can be solved in more practical ways and take less time to learn.
Brett: Than the human problems?
Keller: Yeah, than some of the human problems, for sure. And maybe it's just Zipline's perspective, but we're in a mode where we have a lot of extraordinarily brilliant people who are early in their careers growing exponentially fast. So it's usually not like... Our growth is usually not constrained by people who are like really brilliant and able to tackle hard technical problems. A lot more of our growth is constrained by like, "Do we have people who know how to be world-class hiring managers or do we know people who can be strong enough leaders that they kind of know how to play every note on the... They can be extremely positive, but also like radically candid and tell someone when it isn't good enough and someone who knows how to fire people fast enough?" That skillset is far more rare.
Brett: Is there a thread that ties the people that you have to ask to leave together or they're "not a fit" for a myriad of reasons?
Keller: Well, definitely one of them is like really bad behaviors that they learn at big companies, which is kind of like related to what we've been talking about. I definitely think a lot of big companies are actively training people on the exact wrong behaviors for them to succeed.
Brett: And that's like generic bureaucracy, political nonsense, things that have nothing to do with accomplishing work or it's another...
Keller: I think that's a big one. I think a lack of knowledge about how it feels to operate in desperate circumstances. I think a lot of people are trained on how to not lose rather than on how to win. If you're like in a big company like Apple, and I mean, Apple has already won, so the main goal for people is to not lose. And then when it comes to like, how do you do HR for a team? The main goal is like, "Let's just not get sued." And so that leads to a number of behaviors from an HR perspective that work for a huge company at that scale. Or maybe not, but depending on your argument. For a startup, like a small startup where the goal is like, "We are default dead. The only way this works is if we can shoot this incredibly narrow gap and get to this like extraordinarily revolutionary product." And the chances of you achieving that are not that good in the best of scenarios, but it's like we have to basically... It's hard to describe, but it's basically like playing to win versus playing not to lose. I think that if you're playing to win, you're like, "All right. Well, we're going to have to take a lot of different risks across the board in order to get to a scenario where we can actually do this impossible thing." But it means that we're not making decisions about how do we reduce risk for the company in every possible way. How do we just make sure that something doesn't go terribly wrong? It's like, in fact, we will fail nine times before we can figure out how to do it the 10th time. A friend of mine sent out this email the other day talking about talent that really succeeds at startups that I think was profound. He called them heat-seeking missiles for pain. That is the perfect definition of people who really succeed at startups. These are people who are customer-obsessed that they kind of always have their antenna up and they have really good spidey senses like, "Something feels really screwed up over here." They can then instantly zero in on it and like ask enough stupid questions to figure out, "Okay. Yeah, this process is broken inside our company or this product is not working correctly." And then they can basically like pull together whatever resources are necessary and be like, "Let's work through the weekend and fix this in a maniacal way and then instantly get into the real world and start learning by doing and iterating and figuring out what parts of that hypothesis were correct and not." And then they can just do that in every part of the company again and again incrementally. That's a very, very hard thing. It's risky to do. A lot of times it's not your job. So you need someone whose attitude is, "It's not not my job," which is something we say at Zipline all the time. Someone who's willing to crack some eggs. The person who's doing that might piss off some coworkers because they're like, "Why are you all up in my business? I'm supposed to be owning this." But yeah, those heat-seeking missiles for pain are worth their weight in gold for small startups. And I think generally that's just not what we're teaching at bigger companies.
Brett: So if you're interviewing somebody or sitting down with them and you're trying to understand or they're playing to win or playing not to lose, can you do that in high accuracy or you really need to either reference them in a particular way or see them do a work trial?
Keller: I think all of the above. Yeah. I mean, speaking of references, one thing that Zipline does is just always amazes me. We still do blind references for every single person who joins the company. I think this now maybe seems like out of date or I've heard from certain people that they think, "Oh, that's not something you're supposed to do from a recruiting perspective."
Brett: Oh, I'm obsessed with it.
Keller: Sounds insane to me, but blind references are hard. It actually takes a lot of time. You got to go network your way to people who've worked with this person in the past. And they obviously can't be provided references. A provided reference is a paid reference as far as I'm concerned. They're just going to tell you what you want to hear. Whereas getting to a blind reference and actually having an honest conversation about someone, like nine out of 10 times, they're like, "This person is incredible. I didn't know they were on the market. I want to hire them myself." I'm often asking like, "If you were going to go start your own thing today, would this be one of the first five people you would hire?" If the answer is yes, we've just learned something so, so strong and positive. In terms of conviction that this person is as special as we thought, maybe 10% of the time you realize the person is leaving a trail of destruction behind them in their career. And that's a very valuable thing to know about people that can sometimes be hard. There are some people who interview incredibly well and just leave a trail of destruction behind. And there are people at Zipline... I mean, Zipline has extremely strong tenure. There are so many people who have been at the company eight, nine, 10 years have been building day in and day out with me as we've kind of learned and grown together. There are also people who totally didn't do the right thing and didn't succeed and also maybe didn't leave under very good circumstances either where we have to remove them in painful ways that are damaging to the company. And then I'll see those people get hired by a competitor or by another startup and nobody called me. So it's always like, I just know that there are lots of companies that don't do blind references. It always surprises me.
Brett: What about in terms of when you're actually interviewing them? Do you spend a lot of time basically asking them for examples of the past and that line of questioning, or no, do you do something else?
Keller: I mean, it depends. If we're talking about an IC who's joining us out of college or even out of high school, or if we're talking about someone who are managing to lead in 100 person company, the interview is going to look really different. On leadership hiring, we spend a lot of time actually going through LinkedIn specifically with the person looking at all the people they've hired in the past. So we're like, "Oh, great. You led this team. So let's talk about who are the three best people you hired and the three worst people that you hired." And it's like, "Let's actually pull up their names and look at them on LinkedIn. And let's think through, would we have hired those same people? Would we have been as impressed by them as they would have been? Do they have the ability to admit where they screwed up?" As crazy as this sounds for a lot of startups, there are some people who are so jumpy that they never have to deal with the consequences of their own stupid decisions. This is one of the reasons I love meeting people who have like, "Oh yeah, this person started when this company was 20 people and it grew to a thousand people and then they stayed with it all the way until bankruptcy." There are plenty of startup stories like that. And when you meet someone who went through that entire journey, it's like, "Man, good on you." Talk about sticking with something \[inaudible 00:22:16\].
Brett: And it's atypical. There's a lot of 24 months here, 24 months there.
Keller: Exactly. So it's the opposite. Exactly. So they're obviously fair weather sailors and then there are people who are like, "Man, they went through multiple really hard up and down cycles at a startup." Those people are so incredibly valuable. You know that they will stick with it when things get tough, which always happens with any ambitious idea. And especially when it comes to leaders, there are certain people who have kind of gone on these leadership tracks, but they've been bouncing between roles at different companies. Two years here, two years here, two years here. And you ask them, they're like, "Oh yeah, I grew this team from 20 to 80 people, and then I took this other role at this other company." And you realize probably half the people they hired weren't good, but they didn't have to sever the consequences of that. Anybody who's had to grow a team really fast, like 4X the size of a team over a year, they spend the next year realizing all the stupidity-
Brett: Cleaning up.
Keller: Yeah, cleaning up. And so it's like very valuable to have a sense for like, not only do they hire world-class talent, which is one of the main things we're trying to evaluate, but also have they had to realize their own mistakes and then clean up their own mistakes. So having someone who's like, "Oh yeah, I tripled the size of the team this year, but then I realized all these cultural problems and a quarter of the people I hired were toxic and didn't work out and I had to figure out how to remove them from the team and fix it, turn around the culture," that's one of the things that we interview very carefully and it's very, very valuable. On the world class talent side, a lot of the things you often want to know is like, "Great. So what did those people go on to do?" Zipline was just hiring a senior operations leader a year ago and I remember talking to him, he was coming from this big team at Tesla and he had done a lot of hiring on that team. And I think it was about 100 person team when he was kind of leading a big chunk of it and he was like, "Oh yeah, I had to hire like the first mechanical engineer onto the team." I was like, "Great. So what does that mechanical engineer do now?" He's like, "Oh, the mechanical engineer got promoted five times. Now he leads the entire division and he has 5,000 people reporting to him." Done. That's the information we need to just get a sense for like, does this person know how to identify and then recruit and then retain world-class talent, people who are going to grow super fast in their own careers?
Brett: So given the way you describe the type of people you want at Zipline and the way you want them working, it feels like it would just turn into Lord at the Flies. And all these people doing all these different things, stepping on each other and it would just be one big mess. It's obviously not the case. How do you organize all these people, many of which are probably disagreeable or struggled at work well because when they see a problem, they just have to go solve a problem. Or like, given the types of people you described, you must have had to figure out how do you organize them, particularly as you have more and more people. The normal thing is we're going to put in process, we want to put in structure, we want to standardize, how have you worked through that?
Keller: You always obviously have a balance, but I mean, a couple of things we've already talked about. One is you make sure to hire people with low ego. I think that's kind of a necessary precondition for this sort of a thing to work. You want people who are ambitious, but who put the needs of the team above their own needs. And we believe very strongly, I mean, one of Zipline's cultural values, especially for leadership is this idea of servant leadership. So it's just like, there's no fancy versions of anything for anyone in the company. People always find it weird. They come in and spend time in our offices and I sit amongst the electrical engineering team. I get confused for... I mean, I had an intern sit down at the desk next to me a couple months ago and she was like, "Oh, what's your job here?" And I said, "Oh, I clean the toilets and do whatever else is required of me." And she must have thought it was weird because she must have gone and asked someone else like, "Why does he have this weird answer?" And then she came over an hour later and was kind of embarrassed, but she thought I was an intern. The way we all sit together and work together, I just think there's a very powerful feeling of servant leadership. We want leaders who constantly are willing to do shit work themselves. Nothing is beneath a leader at Zipline. We're willing to plunge the toilets, be down in our hands and needs cleaning shit up and either at the test sites or in the office, the most unfancy work we are all willing to do. And we're constantly willing to put... The needs of the team come above everything else, including the ego of the leader. It's a rare thing. It's a hard thing to find. And I think especially in the Bay Area, you have a lot more people who have learned opposite behaviors of that in order to get ahead of other kinds of companies.
Brett: What else is a part of the way that you've organized all of these people that works?
Keller: I think that you have to basically be really clear that we want to divide the company into small special forces teams that have very clear goals and are operating with high levels of agency, but also accountability. So we were definitely inspired. Netflix talks about this idea of freedom and responsibility. I think that's a really powerful concept and Zipline definitely has kind of like stolen it and adopted it.
Brett: How do you manage that where it feels like there's so many interdependencies?
Keller: Yeah.
Brett: And so it's not like here's this little startup, it's single threaded. It feels so highly integrated; hardware, software, regulatory, on and on and on.
Keller: It's not perfect. I mean, a year and a half ago, Zipline was incredibly scary position. I mean, the company was possibly running out of money. We were six months behind launching this next generation technology that was really, really important for the company's future. And we have this joke. I mean, I've heard SpaceX talks about itself in this way, which is that we specialize in turning the impossible into the merely late, but Zipline was definitely fully in that mode. We're desperately trying to get this product launched. We didn't hit the cost targets and we didn't hit the timeline. At the end of November, just a couple months ago, Zipline has now launched this next generation product and it came in exactly on target, on time, just getting better at this as we go. Both accelerating the timelines, but lining up the goals and accountability across a program so that each of these teams can operate in a highly entrepreneurial way, but you make sure that at the end of the day, everything adds up to the full product that you need.
Brett: What's the full list of leadership attributes?
Keller: Yeah. I guess we may as well talk about this publicly. I've never talked about that publicly. Actually, I ended up... It's new. We have only started thinking about it more carefully. And it's because I think I started thinking more carefully about what did I need in executives at Zipline, and I found myself having the same conversation again and again and again with different leaders trying to describe what were the different failure modes and where were we seeing excellence? And then as soon as we wrote it down for executives, we kind of realized like, "Oh wow, it's really practical. We should totally do this for everybody." The five things we look for are strong magnet for world-class talent. I mean, we've talked about it, but does someone really know what it takes at every layer to hire someone who's like top 1% in their field and then recruit them and retain them? It's not an easier trivial thing. The second thing is they know how to challenge teams to greatness. And by that, the way that we talk about that, we mean both positive and negative. Leaders that are great at challenging to greatness, they have to know how to really rally and inspire a team and people on that team will be like, "Oh man, I would follow that person to the moon." But at the same time, there's a strong degree of radical candor, direct feedback and telling someone when something isn't good enough. You just have to be able to be like, "This doesn't meet the bar. It's not good enough. I'll work with you this weekend to fix it, but we must fix it and fast." So leaders who can play every note on the piano is kind of how we think about it. You got to be able to be on the really positive optimistic side, like, "You did absolutely amazing. This is world-class work, really inspiring and rallying." But also like, "This is not nearly good enough. We have to fix it immediately." And then the third thing is just being great at performance management and removing people from the team fast if necessary. Fourth thing is technical depth, which we talked about a little bit. And then the fifth thing is entrepreneurial drive and ownership mindset.
Brett: What's your least squishy way to articulate entrepreneurial drive?
Keller: I think it's like heat-seeking missile for pain, which we kind of talked about. I think it's a deep sense of you act in every possible sense like it is your company. It obviously is for people at Zipline. I mean, we all have ownership in this thing that we're building together. But does the person behave truly like an owner of the thing that we're building together? Do they have this attitude of like, you spend every dollar as though it's coming out of your own pocket? And then do you also have this sense of maniacal urgency? Like, way better to do the thing tonight than to wait 'till tomorrow or wait until Monday. And even more than that, I think there's this sense of like it's not not your job. If something needs to be fixed, we will fix it. It doesn't matter whose title says what.
Brett: What have you found, just sort of in closing out maybe this section on talent, is malleable in people? Meaning you have somebody who is not meeting your standard of performance in any part of the business where you come up with a fictitious example. What have you found can actually be shaped versus, "No, we got to get rid of them. Not going to work. We can't develop them to greatness."
Keller: I mean, I think there's lots of small tactical stuff where it's like, this role isn't right or the scope isn't right or like the overall work setup isn't right. And one of the biggest things that we found is that there have been periods at Zipline where we've hired too many people early in their careers who were not in the office five days a week. And we've now stopped doing that because especially for people early in their careers, I mean really for everybody, I mean, Zipline is like a very, very in-person culture. We have to be, we're building hardware. There's so much complicated multidisciplinary integration that we have to do on a day-to-day basis. But yeah, I think all of that stuff can be fixed if you're just honest about it and you're addressing it every single day. Zipline has an attitude just that like, don't wait for like some performance cycle to give someone feedback. Give them the feedback that day. If we walk out of a meeting and I as a leader think something wasn't quite good enough, immediately just grab that leader and be like, "Hey, that didn't go the way I was hoping. Here's why. Can we do better tomorrow? Let's do an iteration tonight." Treat people like adults, not like children, which I think is something that tech companies actually struggle with, especially over the last three or four years. And people want direct feedback and I think giving it fast makes it way more likely that the person can actually improve. And all of those things I just described, those are different than the innate characteristics, which I think are way harder to teach. But those things can be fixed very quickly and should be able to be fixed on an hourly or daily basis. You shouldn't have to wait a month or a quarter to go through like a performance eval cycle and get the person that feedback.
Brett: Have you found that there's a specific way to let people to go, let people go when they should, meaning you talk to almost all CEOs, regardless of-
Keller: Everybody's too slow?
Brett: Right. I wish I'd took it. Do you think you've done very well there or still it's too slow and it's just there's some law of physics going on here?
Keller: Zipline has gotten better at this as we have matured as leaders and we've gotten better as a company. Something that Alfred Lynn, board member and our partner from Sequoia told me very early on, was... We're kind of having this conversation about whether I should make some difficult decision or something. And he's like, "Keller, do you know when the right time to fire someone is? " I said, "No." But I was kind of expecting him to say something very cliche and he ended up saying, "The first time the thought crosses your mind." Which when I heard that, I was like, "That is the most sociopathic thing I have ever heard. There is no chance that that is true." Every year that has passed since he told me that 10 years ago, I've realized there is more truth to that statement than I realized.
Brett: Why do you think that is?
Keller: Because you never, ever, ever end up... When you're kind of hemming and hawing, you're, "Oh, it's me, not them. It's the role. We got off to the wrong start. We didn't get the onboarding right," there are a million excuses that you'll make to not have to kind of engage with the hard truth that this is not the right person for the role. And I think the reality is for the people who are going to be at the company who are like clearly A and A+ and who are going to be at the company for the next five, 10 years, who are going to have completely exponential impact on the company's mission, the thought never crosses your mind. I think that's the intuition here. It's that spending a bunch of time debating in your mind, "Oh, is this person a C- or are they actually a C+?" It's just not that good of a use of time.
Brett: Let me shift gears a little bit. A long time ago, Elon put this secret master plan for Tesla out that he wrote up that was basically, "We're going to start with a roadster and blah, blah, blah, blah, blah. And this is how the sort of set of things we're going to do are unfold and we're going to start with something really expensive and ultimately make something that's mass produced. It's going to look like this, this and this and broad strokes." When you think about the Zipline path, how much of it did you understand at effectively time zero? Like you obviously will talk a little bit about this and you've talked a lot about the trajectory of the company in the past, but basically you started doing blood delivery in Rwanda. You can correct me, but broad strokes that. And you're on this mission to move most things around the country and/or the world at some point. How much of that at time zero was the scaffolding mapped out in your head versus the chess game was being played in real time you were figuring things out?
Keller: I would say very little. I have this flag over my desk that says, "We do this not because it is easy, but because we thought that it would be easy." Have you seen that flag? It's so true for Zipline. It's crazy. I mean, when we got started, what we were proposing to do was illegal in the United States. So I remember talking to some early investors and everybody's like, "Well, it's illegal. I'm not going to invest in something that's illegal." I think we had this high level vision for what this could be at scale, it felt like someone should build an automated logistics system for earth. And we had seen all of these robots running around inside warehouses that could pick up a shelf, move it to a human picker who would pick something off the shelf, put it into a box and ship it. But we just remember seeing all those systems thinking like, "Man, someone's going to build that for outside the warehouse." And that would be one of the most important companies on earth if you could build that kind of teleportation system that would kind of operate like the internet, but could actually move things in the physical world. And we had that idea in 2013\. It was an extremely naive idea. We had no idea what the hell we were talking about. I remember talking to Alfred, our partner from Sequoia at the time, and Alfred's like, "Okay. Keller, you know nothing about aviation, you know nothing about logistics, you know nothing about healthcare," which is where we were proposing to start, he's like, "What makes you think this is going to go well?" The simple reality is that it's hard to say. I guess we were focusing on this area that we had instincts of like, "Oh, this feels like it's going to be important five to 10 years from now." And so I think we were willing to go and do whatever weird, scrappy things we had to do to just get started quickly in order to learn by doing and sort of like build up momentum, build experience.
Brett: But so the rough shape of what the product is today was not outlined as like the end state. So before you committed to sort of a toy robot iPhone product that the company started with, and then you kind of refounded the company around this, so maybe we could talk just briefly about how you knew that wasn't going to work. hat did you have before you committed to taking a first tangible step or making a big bet? What was figured out?
Keller: I mean, what did we have? We had nothing. We were unemployed. We had nothing better to do with our time. And as you mentioned, we had raised this small seed round and then we had raised a series A on this idea of building robots for the home. But the more I looked at it, it seemed like that was not going to be a good... I mean, in 2013, the world was not ready for that. That was not going to be a good market. We were competing directly against iPhones for people's attention from an entertainment perspective. It just didn't feel like it was going to be possible.
Brett: And was that easy? Because again, your personality type and problem solving makes me feel like the first reaction is, "Okay, it's kind of working a little bit. I can fix this. I can make this work." Or was it, "No, this is going to work. Let's move on." It wasn't something you wrestled with.
Keller: I think it's a combination of things. I mean, one, we started the company when I was 23\. This was the first idea we had. We had built a couple prototypes. It was helpful that I could see there were a couple companies that were farther along on that path than we were. These are companies that people haven't heard of, but like Sphero or Anki. These companies had raised hundreds of millions of dollars. And I could look at the products that they were building and be like, "I just don't think that that's going to be that valuable." And I think we could kind of tell that they were selling a lot of the product, but they weren't being used by customers nearly enough. And so we kind of ended up, I just had this sense of like, "Man, if I'm going to spend the next 10 years of my life working on something, we should find something that is insanely valuable and inspiring. I want to work on something that's big enough that it would be worth a decade of my life." And so I think that we knew we were interested in robotics. We had a team of like five people who I thought the world of. And so I think we were still in search of like the problem that would really inspire us and we had nothing else to do with ourselves.
Brett: When you think about refounding the company in that moment and you're raising money to do that because you ran out, what was the thing that you were raising money for? What level of definition had you figured out?
Keller: I mean, not only did we not have very much figured out, but we were also totally desperate because it felt like the company was going to die. We needed a vision. The reality is when we started building this new version of the company focusing on logistics, we knew nothing about any of this. We didn't know anything about aviation. We didn't know anything about logistics. We didn't know anything about healthcare, which was kind of where we thought it would make sense to start. It helps to be unemployed and desperate, which is basically what it felt like at that time. We had seen early indications of like, we had seen these robots running around inside Amazon warehouses. For example, there was this company Kiva that was acquired by Amazon for a billion dollars and they designed these orange robots that would run around inside warehouses and they'd bring a shelf to a human picker. The human could then take something off the shelf and ship it. And we remember seeing that. I remember seeing that and thinking like, "Someone's going to build with that for outside the warehouse," which is obviously extremely simple and also naive idea. But like, what did that really mean? It seemed like that was a huge thing to go figure out over the next decade. Could you figure out how to build an automated logistics system for earth that would function more like the internet, but in terms of sending things around in the physical world? And maybe we almost had to be naive in order to even think that something like that was possible at that time, but I think it felt to me like maybe you're sitting at the bottom of a giant mountain and most of the mountain is covered in fog, but you can see the top of the mountain. I felt like it was so obvious that somebody was going to go do that. That was the holy grail. That would be one of the most important robotics companies to be built over the next decade. It felt inevitable that it was all going to be automated. We could see that people were using 4,000 pound gas combustion vehicles, driving things around in the US to deliver something that weighs like five pounds to your house. I mean, it's just the economics are broken, it's super slow, it's unsafe, it creates a ton of pollution and traffic. It just seemed inevitable that someone was going to build something better, but we had no idea. The question of, "Okay. So how do you get from the bottom of the mountain to that point?" was completely unknown to us. And we had no money and very little experience. So it was pretty important to pick something that was in our opinion and also it was illegal. Small problem when you're talking to early investors trying to convince them to fund this, like it did not look good. And so instead it was like, "Look, we're early in our careers. If we're going to invest the next decade of our lives, let's pick something." I wanted to make sure to pick something where even if it was going to be super hard and there were like a lot of unknown tactical steps on how to get there, but I was like, it was indisputable that if you could build that thing, it would be hugely important for humanity and it would save a lot of lives.
Brett: But the thing that you picked, was it like divine intervention? You woke up one morning and it just, "This seems like it makes sense"?
Keller: I think we were really interested in logistics because we knew we wanted boring and repetitive. As a roboticist in 2013, what kind of use case are you looking for? You're looking for boring and repetitive. So like what is the most boring and repetitive industry on earth? It's probably either manufacturing or logistics. In fact, we were looking at both of them, kind of interested in both of them. And it felt to me like more people were doing robotics and manufacturing and very few people were really thinking intelligently about automating logistics. And logistics is extremely boring and extremely repetitive. We just do the same thing again and again and again and again and again. Day in, day out to your house or to a business or to a hospital. And we felt like that is something that robotics ought to be really good at doing. And then the more we thought about it, it felt like there was probably a really valuable company to be built there if you could figure it out. Like that kind of company would bring logistics to billions of people who don't have good access today. It could save a lot of lives. You could build a very high margin product in a world where today it all depends on like CapEx and expensive vehicles and unionized labor. And if you could transition that to AI and autonomy, you could build a totally different kind of business that would be very successful. So yeah, again, but these are just the naive, totally clueless thoughts of like a couple 24 year olds who have like are about to be unemployed. That's the way to think about it. And so then I think as we started iterating, then it was like, "Okay, yeah, that's like a pretty cool vision, this idea of automating logistics. If you could move things around, if you could kind of like teleport them, but like it's illegal. No one is going to allow us to do this." And so then we started thinking, "Okay. So we got to convince some countries, somewhere on earth to be partners with us and give us"-
Brett: And did that just popped to mind?
Keller: Yeah, basically.
Brett: Really?
Keller: I mean, it seemed impossible to get the FAA to do this at that time.
Brett: And you knew that it had to be via the air?
Keller: Yeah. I believe-
Brett: It didn't go down like there were a bunch of the delivery robots you see today?
Keller: By far to us, the top of Everest was like, it was very obvious, this stuff does not want to be traveling on roads for a number of reasons, which we can talk about. But yeah, I think the more we were thinking about it is like very clear, "Okay. So if you're going to design this, again, yeah, aerial autonomous logistics system that could deliver things 10 times faster, half the cost, zero emission, we got to find one country that's willing to work with us from a regulatory perspective and make exemptions and exceptions to allow us to start very fast."
Brett: And at this time, was your mindset like, "Oh, if the company's about to go out of business, this seems interesting. Let's take a crack at it"? Or you were like, "No, come hell or high water, this is going to happen. We know it for a fact." What was your mindset?
Keller: No. Completely the first.
Brett: It was low. It was-
Keller: Yeah.
Brett: ... "Let's see what happened."
Keller: Oh, I remember going-
Brett: \[inaudible 00:45:30\].
Keller: We were like 15 people. I mean, the team can confirm. We had no money, so we took the team to Little Shanghai, which is this... I don't know if you're... It's in San Mateo. It's a super hole in the wall, great Chinese restaurant, but very hole in the wall. And the whole team sat at one table because that's how big we were. And I remember this is over Christmas, someone was like, "So what are the chances this is going to work?" I said, "It's about 1%." And I think people thought that was sort of grim, but I was trying to explain it. I'm like, "Yeah, guys, it's like 1% of a gazillion dollars. Yeah, this is totally worth us working on. And by the way, if this doesn't work, we're all going to be unemployed anyways. What's so hard?"
Brett: We'll have some great stories.
Keller: Yeah, we'll have some good stories to tell. So I think we definitely thought this was highly unlikely to work. And then we spent two years building early versions of the system.
Brett: Wait. But explain how you went from, "Okay, FAA's not going to fly."
Keller: Definitely not.
Brett: It's unintended. What was that to your first site?
Keller: From that, we then went and spent two years. So first of all, we moved out of our office in San Francisco. Guess who moved in?
Brett: It's a great office.
Keller: Yeah. "Hope you guys liked it."
Brett: You have these big ass fans.
Keller: "Hope you guys liked it." It was too expensive for us at the time, but-
Brett: You had these stupid big ass fans in the ceiling that we had to take out. Pretty annoying.
Keller: Oh, yeah. We didn't put those in. Yeah, those were in before.
Brett: Terrible.
Keller: So yeah, first round moved in after us, took over the lease. But we decided, got to get out of San Francisco. Like, "If we're going to go do this, we got to go be at ground zero." So we actually moved the entire company to these trailers that we basically installed in the middle of a farm in Half Moon Bay where we could do all of engineering and manufacturing and flight tests together in one place. We moved the entire company there.
Brett: But how'd you even know about any of that?
Keller: Well, we knew that if we were going to build stuff that needed to fly, we weren't going to do that from 10th and full somewhere.
Brett: Right. But I'm saying even like you don't have avionics experience or whatever, right?
Keller: Yeah. No, but I mean, it didn't seem that crazy to us.
Brett: Just figure it out.
Keller: We were pretty sure we could build something that could fly. So we moved out there. And of course it was harder. I mean, we crashed a lot for the first couple years. We had no idea what we were doing.
Brett: And you did this before you knew that a government was going to let you do this?
Keller: Yeah. We did it in parallel. We were starting to build the very first version of the thing. And then in parallel, we were flying all over the world talking to these different governments, trying to figure out who would be crazy enough to trust this team of 15 or 20 nerds to help build a new kind of autonomous logistics system for their country.
Brett: So how did you even get a government to meet with this company that's about to run out of money and knows nothing about any of these topics?
Keller: I think-
Brett: You can't just knock on a door, I guess.
Keller: Well, we just flew there and showed up. And then you walked to the Ministry of Health because we had a feeling that we should start in healthcare. Well, we just felt like, "Okay, if you're trying to get a regulator to give you permission, you better have a really good reason." And for us, the best reason was like, "This is literally going to save the lives of moms and kids. If you don't do this delivery, that person is definitely going to die."
Brett: \[inaudible 00:48:23\]?
Keller: Is there some risk involved in us flying from here to there? Yes. We can quantify and validate that risk over time together, Zipline and the regulator. But if we don't do this delivery, that person is 100% going to lose their life. That felt to us like the strongest possible argument we could have.
Brett: Did you think of any other ideas or that was it?
Keller: Not really. Yeah. We were pretty focused on this idea of healthcare logistics. We thought that would be the right place to start. You could focus in countries that had a centralized government-run healthcare system. So you could get the whole system through a single partnership with the government.
Brett: And the idea was that this was going to allow us to validate everything?
Keller: Yeah. The idea was this would be a really powerful first use case for the technology because it could save a lot of lives. It could save the government money and it would be the perfect argument to be made why this should be allowed from a regulatory perspective. And I still remember meeting the Minister of Health of Rwanda at the time saying, "Oh, we're going to build this complicated logistics system and it's going to deliver all medical products to every hospital and health facility in the country." And she said, "Keller, shut up. Just blood." And that was the best advice the plan ever got. I mean, every expert we talked to in global public healthcare told us this idea was never going to work. We were completely off. It was a waste of our time. We would never sign contracts. The unit economics would never work. It would never work reliably. We'd never figure out manufacturing, blah, blah, blah. We'd never get regulatory.
Brett: Why did that not discourage you? Did she tell you that in the first meeting that you had with her? She was like, "Okay, let's go do this," and then you had to go do it or there was a whole set of things?
Keller: No, no, it was basically that. Yeah. I mean, she was excited. And then she suggested I meet with the president. And the president of Rwanda is a really special... He's a very special leader. He's very admired, probably the most admired leader across all of Africa. Highly technocratic, highly entrepreneurial, really pushing the government to move lightning fast and innovate.
Brett: Very Singaporean type?
Keller: Very Singaporean. Singapore for sure is their role model. They are the Singapore of Africa. He was willing to make this bet on us, again, just as this crazy team of 20 people.
Brett: And do you think it's because they saw something special in you or it was such a problem that they're like, "Why not let this see if they can... They had nothing to lose and no one else was going to solve it"? Or did you manage to convince them that this was actually going to work and you were credible for this and this reason?
Keller: I think it's a couple things, which I've only now learned much later were the case. One, the morning of the day that I met with the Minister of Health in Rwanda, there was this tragedy that occurred where a mom had severe blood loss during birth and they didn't have the blood products even though they should have at the hospital. And so then the doctor got into the car with a nurse and drove to the nearest blood transfusion facility. The traffic was super, super bad, so it took them like three hours to get there. Once they got there, that facility happened to also be out of stock of the specific blood products they needed. They had to drive another two hours to another place. I think they broke down along the way. They finally got there. They had to wait in a long line to get the products. They finally got the products, drove back to the hospital, and the mom had passed away. And there had been this long email thread, apparently. I only found out about this like a year ago. A long email thread that had been circulated amongst the executives at the Ministry of Health saying, "How could this have happened? So many things had to go wrong for this to happen." And then it just happened to be the case that like on that day I walked in and was talking about this totally stupid, naive idea. And so maybe for her, it just sort of felt like this idea is probably stupid, it's probably not going to work, but maybe there's like some sense of like divine destiny or whatever that's like, "They're here for a specific reason and I could point them at this problem." So I think there's just luck. There's just luck involved. We showed up on the right day meeting her. And I think the other thing that I can't confirm, but I have now understanding a little bit more suspected is that think about it, I was showing up so clueless, like wearing tennis shoes and a hoodie to a meeting with the president of a country. I had no idea how to even address him. I had no idea how to address the Minister of Health all the proper honorifics and things like that. I mean, I'm 24 years old. I looked like such an alien. And when you think about the kinds of companies that typically work with a Minister of Health or with a president, you've got a perfect GE salesperson with like polished shoes, nice suit, probably a specific age range, not technical, selling them MRI machines or a bridge or a power plant or who knows. But those projects are often boondoggles and often don't get built and they are not like founder-led for all these reasons. And so I think that in that case, it may have helped us that we looked like... They probably didn't know quite what to make of us, but we were totally different. We were like 24 year old engineers who were building the technology ourselves and who were telling them we were going to like move to Rwanda and not stop until it was done. And so despite the fact that you probably could have easily been like, "Well, who are these 24 year old idiots and how quickly can I get them out of my office?" I think instead they may have kind of had the opposite reaction, which is like, "If all of these GE salespeople who come in here and we sign these huge contracts and then nothing ever gets delivered for five years, maybe we should try to take a bet on a engineering-driven startup with a really clear vision." There's a good advice I would say for young founders is raise money on the dream, not on the reality. And so I think that we did do, we raised money before we were into the specifics. We had like a cool demo that we could show in Half Moon Bay at our headquarters. We were out there trying to figure out like which country would let us do this for the first time. We raised a small round of financing, and that was by far the hardest round of financing the company has ever raised. I mean, we were like begging and pleading we would literally take money from anyone. In fact, we did take money from a couple sketchy characters. That's the only round we're like, literally it didn't matter what your name was like.
Brett: The wire.
Keller: Yeah. If you're ready to give us money, we will take it because we need to raise $2 million. And it's so incredibly stressful getting that round to come together and very, very, very painful. But we raised this small round of financing. We convinced Rwanda to launch with us. We had signed this contract, and then we launched. And the launch was a complete disaster.
Brett: But how long did it take from when you signed the contract to when you tried to do your first one?
Keller: Probably like three months or six months.
Brett: And you had like a prototype-y version in California.
Keller: We have the product mostly ready.
Brett: And you moved the whole company there?
Keller: We had the product mostly ready. We didn't move the whole company, but a lot of us went and just lived there. I went and lived there. Maggie, who had joined the team at that time, moved herself to Rwanda, built a lot of the initial operating software systems that we needed to do maintenance and inventory management. A lot of the basic stuff that we had no idea how to do. Ryan, my co-founder, went out and spent months on end there. And then we also built this team of extraordinary Rwandans. So we hired full-time to start leading the distribution center and leading operations.
Brett: Why was it a disaster?
Keller: Because we were clueless. We had no idea what we were doing. Everything was designed incorrectly. All of the hardwares were super unreliable. Many of the basic design assumptions we had made were incorrect.
Brett: Was that knowable before you started or was only knowable after having done the wrong thing? What did you actually do and did it feel like-
Keller: Well, I mean, certain things... No, I guess not everything. But so much stuff we hadn't even thought about. We were really focused on designing a really cool aircraft, but it turns out the aircraft is only about 15% of the complexity of designing an autonomous logistics system. We suddenly had to be really good at inventory management. We had to be really good at cold chain. We had to be really good at maintenance. We had to be really good at air traffic control. We had to be really good at vehicle to vehicle communications. And we had to be really good at weather management and weather simulation and prediction. We had to be really good at ground infrastructure, which ground infra was definitely one of the things that was most painful.
Brett: What's ground infrastructure?
Keller: Just like all of the recovery system and the launcher that we were using to get the airplane into the air and then to get the airplane out of the air. If you see early versions of the ground infrastructure that Zipline designed, you would know why it wasn't very reliable. We were literally using deep sea fishing poles that we bought from Walmart and then we paid a bouncy castle company to make these big inflatable pads for us and that's what we launched on. So when we say pretty crappy first product, it's like, this is... I mean, come on.
Brett: It's obvious.
Keller: You can't get any more scrappy than that, and that is what we deployed. And I remember when we were about to be launching in Rwanda, I was out there, we had the president coming the next day. When the president shows up, they not only had built this huge tent and they had all New York Times and BBC and Al Jazeera, all the major global media were going to be there to film the president, launching the first autonomous aircraft. And Abdul and I, Abdul's the first person we hired in Rwanda, or the launcher had completely destroyed itself. It destroyed itself every third launch, basically. The launcher had completely destroyed itself. We're on our backs in the dirt with screwdrivers in our mouths trying to take this thing apart and put it back together and fix it. And meanwhile, there are like five to 10 special forces, like military guys, like Navy SEAL looking guys who wherever the president goes, they show up 24 hours ahead. So it's like the middle of the night, we are on a video call back to the US trying to have engineers in the US explain to us how to take this thing apart and put it back together, make it work. These soldiers are watching us, "You guys are completely fucked.' They were watching us. "What are we even seeing here? This is not going to end well." Real world is infinitely complicated, and there was no way to learn it by just going and doing it. We had tested these systems pretty extensively in one very specific place on the coast of California and Half Moon Bay. We had not tested all of the other stuff like inventory management, cold chain, air traffic control software. None of that was tested. We were building that all from scratch as we went. So suffice it to say, the president showed up, launched an aircraft, the aircraft flew off into the horizon. I thought we're probably never going to see it again. Half hour later, the aircraft came back over the horizon and landed. We were trying not to act as shocked and surprised as everybody else in the audience, but we were just as shocked.
Brett: So it goes off and you're thinking, "Well..."
Keller: That's it. I mean, even in that moment, I was still very much thinking, "Zipline is probably going to fail. This is not going to work. That aircraft is going to crash. It's not going to come back." We were highly uncertain. We didn't know. Miraculously, the aircraft came back and landed and we acted like it was totally normal. We really, I think, did a good job of acting like \[inaudible 00:59:03\].
Brett: And people are blown away by this, right?
Keller: People are freaking out. I mean, it looked insane. It looked like true science fiction technology. This aircraft had just autonomously flown over the horizon, delivered something to a hospital and come back. And we acted like it's totally normal.
Brett: \[inaudible 00:59:16\] everything?
Keller: Yeah.
Brett: And what did the Navy SEAL guys... Did you look at their faces?
Keller: I don't remember the Navy SEAL guys, but I do remember the aircraft came in and landed. We built these fences around our distribution centers. And so there's this big fence all the way around. And it was literally as far as the eye could see three different layers of kits on the fence for hundreds of yards. It was thousands of little kids, two, three, four year olds, and then the next layer was like the 10-year olds and the next layer was like the 16-year olds. And I remember the president watched the aircraft land and we were kind of talking about where this could all go, and he pointed all of them on the fence. He said, "Those are all the future engineers of Rwanda." And it kind of made me think like, "Man, this guy really gets it. Like, he has this bigger plan in mind." Why is he working with us? He knows that for Rwanda to win, they have to innovate, they have to be the Singapore here and take risk and be the proof of concept for these new kinds of infrastructure and robotics technology. But anyway, suffice it to say we launched and he was blown away and we spent two hours talking with him and brainstorming about with the future and then he left and then the system promptly broke. Everything broke again for the next nine months. And we spent nine months basically pulling all-nighters, trying to fix all these different systems, trying to make them work reliably. The good thing was we'd only added one hospital.
Brett: \[inaudible 01:00:37\] problem?
Keller: We'd only added one hospital. We were only serving one hospital at that time.
Brett: So you had a distribution center and one hospital.
Keller: And one hospital.
Brett: That was what you were trying to get to be \[inaudible 01:00:43\].
Keller: That's it. That's all we had to do, was just make it work for one hospital. And
Brett: It's basically hard for the reasons that we talked about. It's just infinite complexity in the real world environment.
Keller: So much stuff.
Brett: Weather, wind, on and on and on.
Keller: Weather, maintenance, hardware reliability, supply chains, packaging, air traffic control, communications architecture, cold chain, inventory management, supply chains of making sure you get the right products to us so that we could have them to deliver.
Brett: Was there an 80/20 dynamic where there was 20% of the things that drove a disproportionate amount of the pioneering that you had to do?
Keller: For sure. Yeah, I would say so. But it's just you can't really predict what those things are going to be.
Brett: Right. So you have to just...
Keller: You just have to do them and then iterate incredibly fast.
Brett: So then once nine months later you got to...
Keller: That one hospital started working correctly.
Brett: In a reliable way?
Keller: Yeah. Then we immediately expanded over three months to the other 20 hospitals.
Brett: And that was vastly easier?
Keller: It was way easier. It was pretty easy to add the 20 hospitals. So in three months, it took us nine months to just serve that one hospital. And then once that was reliable, we expanded to 20 more hospitals. So in the first year, we actually did what we told the government we were going to do, which was deliver blood to 21 different hospitals. Easy peasy. We ended up adding 20 more hospitals. Then we expanded to 50, then 100, then 400, then 1,000.
Brett: Across multiple distribution centers.
Keller: Soon to be across multiple distribution centers and then across multiple countries. Then we got to 2,000\. Today we serve 5,000 hospitals and health facilities globally. It's become the largest commercial autonomous system on earth of any kind, ground or air. We just crossed 135 million commercial autonomous miles. And yeah, I mean, the company, today Zipline saves about 17,000 lives a year. And we're expecting to grow another 5X over the next two or three years. That's all healthcare.
Brett: \[inaudible 01:02:28\].
Keller: I'm just talking about the healthcare side. Yeah.
Brett: Yeah.
Keller: Yeah. We expanded from blood to delivering vaccines and then transfusions and infusions and cancer products, insulin, all the different programmatic drugs. So really, I talked to so many hardware entrepreneurs who are starting in seed stage or series A scale. I'm always looking at the product and thinking about manufacturing and the hardware development process. I'm always like, "Cool, how much do you think it's going to cost to build that?" And they always say a number. I'm always like, "It's going to cost 10 times that much money to build that product." And we never changed the price. We just lost a ton of money on every delivery for the first two years. And then we just drove that cost down from 10X to 6X to 4X to \[inaudible 01:03:10\].
Brett: And it's manufacturing of the actual aircraft-
Keller: That's right.
Brett: ... gets a disproportionate amount of cost?
Keller: Everything. Yeah. The bomb cost of the aircraft, the volume of flight, labor, land, ground infrastructure. It's really everything.
Brett: And it's just a game of inches of just...
Keller: Game of inches. Yeah. Every day you're just trying to make 1% basically.
Brett: \[inaudible 01:03:29\].
Keller: We're now at 1/3 of X in terms of the overall cost. So it's really cool. We went from 10X to 1/3 of X over eight years.
Brett: Walk through the path from what you were doing outside of the United States in mainly healthcare use cases to what you've been doing in the United States. How did you know it was the right time and what was the thinking behind it?
Keller: So the crazy thing is that as we were just scaling and scaling and scaling outside the US, Zipline almost mistakenly became the largest commercial autonomous system on earth. And as we were growing, a lot of big companies in the US started noticing what we were doing and started saying, "We really want that here." We started signing these big contracts with big players in the US. We work with healthcare systems like Cleveland Clinic and Memorial Hermann, Ohio Health, Michigan Health, Michigan Medicine, Texas Health Resources, many other amazing hospital systems. And then we closed a large contract with Walmart where we started delivering for Walmart directly to homes. We also work with a lot of different restaurants. And so all of it was just around enabling instant teleportation like logistics from any hospital or retailer or restaurant directly to customer home. And so we're able to launch with all these \[inaudible 01:04:38\]-
Brett: Isn't going back to reality is infinitely complicated, like delivering a burrito to somebody in Texas is different than delivering blood to a hospital? Or once you got everything working, it doesn't really matter what you're doing?
Keller: Doesn't really matter. Yeah. I mean, this kind of technology is generally kind of payload agnostic. We're just delivering from a building to a home. Same thing with UPS. I mean, UPS is delivering all kinds of... They have a huge healthcare logistics business. They deliver all kinds of different packages for all kinds of people all over the world. So similar thing here. It did mean that we had to build an entirely new kind of technology platform. Like, we had to go-
Brett: Why is that?
Keller: Well, because the problem of delivering to homes is just way different. The way we were delivering for the healthcare logistics business originally outside the US, we were flying hundreds of miles to make these deliveries to very rural areas. Focusing on the US, delivering to homes meant we needed to deliver in a highly precise, controlled, gentle way, be able to put things like with dinner plate level accuracy directly onto your doorstep. And we need to do it while being very, very quiet and very, very cost-effective. The vision for Platform 2 was to build something that could be 10 times as fast as instant delivery in the US or using a car to deliver something and half the cost and zero emission. And that's what we launched at the beginning of last year.
Brett: Why did you want to do that at that point in time? It seems like with your original platform instead of use cases, you had a lot of market to go after. Was there anything that made you decide that this is the exact right moment to make this huge bet on an entire new platform, different use cases?
Keller: I think it just felt like this is by far when you look at logistics, this is like a market that is 100 times the size. When you look at rural healthcare logistics, but then you look at home delivery. Home delivery is a market that is 100 to a thousand times as large. And so if our goal was to provide a logistics service that served every human on earth equally, we had to do this. And so the moment we thought it was possible technologically, especially when we felt this very strong customer pull from a lot of the biggest companies in the US asking us to do this, seemed really obvious to go do it.
Brett: So I wanted to wrap up. When you think about other entrepreneurs going and building companies that have similar parts to it; hardware, breakthrough technology, regulatory, these sort of very unique styles of businesses, what have you figured out now through the last 13, 14 years that you would sort of share with them that might be useful? There's a lot of things where you just had incredible luck. There's a lot of things that are probably Zipline-specific that you can't just take out and drop in another company. But what about a few of the things that you definitely figured out that might help them in some way?
Keller: I mean, there's the trope hardware is hard. I think that is totally true. If you didn't have mental problems before the hardware startup, you will definitely have mental problems after the hardware startup. Nobody could emerge from this process normal.
Brett: So you should just start with mental problems?
Keller: Yeah, you may as well, you know? Yeah. I think that really getting a lot of these products to scale and learning what you need to learn, getting a couple iterations and figuring out manufacturing and supply chain and logistics and maintenance, these kinds of things, takes a decade. So you can look at SpaceX or Tesla or Zipline or even a company like Rivian, these companies all take a decade to get to meaningful scale. And so I think A, you probably have to raise a lot of money for that company. B, you need an amazing mission because you're going to need investors to be willing and team members to be willing to stick with this problem for like an entire decade before you really see like, "Okay, this is now on like a... It's growing at exit velocity or scape velocity." I think that the flip side of that though is that a lot of the biggest companies that are going to be built over the next... Probably most of the biggest companies that are going to be built over the next 10 years are all going to be hardware companies. And I think even when you look at AI today, I think there's this like interesting just observation, which is that like, so many of the problems that humanity has to solve, it's almost like the problems that are most crying out to be solved are the very unfancy ones. They require like going and getting your hands dirty in the real world, whether it's building like power plants or whether it's building new kinds of natural gas turbines for data centers or whether it's building autonomous logistics or it's fixing manufacturing in the US and onshoring a lot of those jobs and a lot of that innovation again. It just seems like a lot of people are much more focused. They're like trying to find these things to do in the knowledge economy, but like so much of the stuff that's going to be critical for the future of the United States is figuring out how to build physical stuff again. You have this like strong feeling if you drive around, John Collison talked a lot about this idea of like when you walk around a city and you even just look at a bench, you've seen that Tweet. It's like someone made that bench and designed it and funded it and actually built it. It's like a passion project for someone. But think about like the bridges and the tunnels and the airports. These things were all built by our grandparents for us and they're now often like kind of falling apart, but we've stopped building them. I think it's like really exciting and important to think about what is it going to take for the US to get back to building those things. There are hundreds of hardware startups waiting to get built in that vein, they're going to be super important for America's future.
Brett: And do you think if somebody wants to go after those unsexy, important, real world problems and they're 18 or 19, they should just go do it or they should go do X to prepare themself to be the right person to go build the next Zipline in some other market, solve some other problem.
Keller: I think probably both are good options, but I do think it's really hard to... I mean, there's no school that you can go to prepare for this, and that you can only learn by doing. So you either learn by joining a really exciting, fast growing startup that's working on these kinds of problems, or you define your own problem and go work on it from scratch.
Brett: Good place to end.
Keller: Cool. Yeah.
Brett: Thank you so much for doing this.
Keller: Yeah. Thanks, Brett.
Brett: I really appreciate it. And thanks for going over a little bit.
Keller: Yeah, of course.
### Stop asking “What’s your biggest pain point?” in customer discovery
URL: https://review.firstround.com/stop-asking-whats-your-biggest-pain-point-in-customer-discovery/
Last updated: 2026-03-10T15:50:46.000Z
*This week, we’re back with another installment of our Paths to Product-Market Fit series with Serval, an AI startup taking a swing at a hundred-billion dollar ITSM incumbent.*
## [Serval's Path to Product-Market Fit — Win Enterprise Buyers by Treating Them Like Consumers](https://review.firstround.com/servals-path-to-product-market-fit/)
When hunting for startup ideas, **Jake Stauch** opened with the textbook discovery question: “What’s your biggest pain point?” It got him nowhere.
He’d had dozens of conversations with IT buyers, a persona he’d spent a lot of time with as a product leader at security platform **Verkada** and wanted to build for at his new startup.
“Nowadays people have mostly solved the problems they're aware of. They've already got some tool in place,” says Stauch. “I did a lot of interviews where I’d ask, ‘What keeps you up at night?’ And I just didn’t hear anything very interesting.”
So he swapped in a new question: “**If you could hire somebody today to sit next to you and do your work for you, what would you have them do**?”
“When you frame the question as, ‘Hey, if you had somebody else here to help you, what’s the work that you'd give them?’ That's a nonjudgmental way of asking for pain points because you're saying, ‘What would you push over to this new person?’” says Stauch. “That way, they can be much more free to say, ‘I don't like to do these things or I am doing a lot of this and I think somebody else could do it for me instead.’”
The answers to that question sparked the idea for **Serval**, an AI platform that automates help desk requests and other IT workflows.
Stauch had these discovery conversations in April 2024, while still at his day job at Verkada. Serval’s now a billion-dollar startup that nabbed a $75M Series B just one month after announcing its Series A, with customers like Notion, Clay and Vercel.
[](https://review.firstround.com/servals-path-to-product-market-fit/)
On The Review, Stauch shares his biggest PMF lessons two years into building, before the early decisions blur into a glossy timeline.
[Continue reading on The Review](https://review.firstround.com/servals-path-to-product-market-fit/)
### Serval's Path to Product-Market Fit — Win Enterprise Buyers by Treating Them Like Consumers
URL: https://review.firstround.com/servals-path-to-product-market-fit/
Last updated: 2026-03-10T14:27:16.000Z
“What’s your biggest pain point?” no longer deserves its status as a classic customer discovery question. You might have heard a compelling answer to this question ten years ago, but ask this to any modern enterprise software buyer, and you’ll get shrugs.
[**Jake Stauch**](https://www.linkedin.com/in/jakestauch?ref=review.firstround.com)realized how little mileage this opener had when he started talking to IT leaders to suss out startup ideas. After five years as Product Lead and eventually Director of Product at **Verkada**, he wanted to build an adjacent business: same buyer, different product area.
But he wasn’t getting anywhere in his discovery conversations — even though he’d spent years building products for this persona. “People have mostly solved the problems they're aware of. They've already got some tool in place,” he says. “I did a lot of interviews where I’d ask, ‘What keeps you up at night?’ And I just didn’t hear anything very interesting.”
After dozens of unproductive discovery interviews with customers he’d worked with at Verkada, he swapped in a new question: **"If you could hire somebody today to sit next to you and do your work for you, what would you have them do?"**
That’s when the IT leaders opened up. “We started to hear that these folks wanted someone to take over help desk requests, which are repetitive, manual tasks,” he says. “They never named ticketing as a pain point. No one said they wanted a new ITSM or workflow builder. They just wanted someone to build cool automations to offload this work.”
That insight was the seed for **Serval,** an AI platform for IT teams that, in just under two years after launching in April 2024, has reached a $1B valuation and nabbed customers like Notion, Clay and Vercel.
As partners to Stauch and the Serval team since the very beginning of that short and impressive timeline, we’ve seen how Stauch has applied what he learned from his time at Verkada to architect a remarkable business at every turn.
Here’s a peek under the hood, while Serval is still early in its breakout trajectory.
## Sharpening platform instincts at Verkada
“Founding a company is the only thing I'd done before Verkada, and it's hopefully the only thing I'll do after Verkada,” Stauch says. He dropped out of Duke to found NeuroPlus, a video game headset that helped kids with ADHD improve their focus. Despite some initial success with parents looking for alternatives to medications, he says the company never really took off.
So in 2019, he joined Verkada as a product lead, eager to feel what it’s like to be at a startup with traction. He figured he could get what he needed in a year before starting another company.
It turned out to be fertile ground for a serial founder, and a masterclass in building out a platform, which in Verkada’s case is a cloud-based physical security platform. “I joined Verkada knowing I wanted to start a company. I thought I would stay there a year — I ended up staying there for five years because it was such a great place to be,” he says. “But the itch was always there.”Long before Stauch had the idea for Serval’s platform, these are three lessons he picked up while building Verkada.
**Sell into existing budgets, but make sure your product is 10x better.** Verkada’s business showed Stauch that to sell a platform, it’s a lot easier to build a Trojan horse of new capabilities — packaged into a product that buyers already have a well-defined budget to purchase.
The existing category for Verkada is security cameras, which enterprises already have budgets for. Anchoring to that category allowed Verkada to bundle in AI capabilities and video management into a full platform.
“I launched a lot of different products at Verkada, and I got to feel the difference between launching a product into a category where people were actively spending money, versus a category where no one had ever spent money on this thing before,” says Stauch. “There's something really powerful about building a better product in a category where people buy that product and want that product. Verkada owned the entire platform, so it was really cool to be able to sell a better camera to people that were going to buy cameras. And by nature of selling cameras, you could also sell AI capabilities and video management software. But you did that by selling cameras, not necessarily selling video software or selling AI.”
But playing into an existing category, Stauch learned, means you need to clear a high quality bar. “The experience has to be 10 times better. It has to be undeniable. It can't just be a little bit better, because people build their businesses around these systems. They're not going to put up that investment and go through a change management process unless the ROI is obvious from the moment they see the new version,” says Stauch.
**Enterprise buyers are still real world consumers.** Stauch witnessed the power of the 10X better product in action with Verkada’s demos. While showing a prospect how the Verkada camera works, a sales rep would send a live link of the camera footage to the customer on the demo call. “It sounds basic, but this capability had never existed in any of these on-prem camera systems. Getting a quick text message so you can pull up the camera feed — that blows people's minds.”
Stauch learned that even in the world of enterprise software, IT leaders are just like any one of us. They want to feel wowed by the tech they’re buying.
“At Verkada I was constantly reminded that enterprise buyers are also consumers. They use these very unsophisticated, very complex systems at work all day, but then they go home and use Nest cameras and Ring cameras,” he says. “So they’d start to ask why they don't have this same capability at the office, where they go 20 years in the past to use ancient technology just because they’re at work instead of at home.”
> When buyers see something in their enterprise that starts to look like what they expect at home, that's when it starts to click for them how much better the experience can be.
**Build the hardest part first.** Verkada succeeded in building a platform by betting that competitors couldn’t catch up with the company’s ability to roll out complex hardware. Instead of tacking software onto existing cameras, Verkada manufactures and installs its own devices.
“Building hardware first is such a big barrier before you can actually get traction, but it's the better long-term solution,” he says. “**Verkada gave me this confidence to actually seek out the things that are hard for other people to do that unlock a lot of customer value.** Then once you've built them, it's so much harder for somebody to come in after you and build those same things because you decided to go hard early.” In addition to building its own hardware, Verkada also chose the hard route by adding products early to build out the platform. “Going multi-product is daunting. You've got a camera business that's going really well. So why mess everything up by going into access control, sensors, alarms and visitor management? We knew it would be hard to build every product to be best-in-class, but it was worth it,” says Stauch.
After a five-year run at Verkada, Stauch was ready to return to his founder roots.
## The customer discovery breakthrough
In April 2024, Stauch put in his notice at Verkada and teamed up with his long-time co-worker, engineering director [**Alex McLeod**](https://www.linkedin.com/in/alexmcleodio/?ref=review.firstround.com), to start exploring ideas. They knew they didn’t want to compete with Verkada, but wanted to build on their combined experience in the IT market.
The duo were determined to run the discovery process until they could identify patterns in what potential customers wanted — however long it took. “Alex and I were both founders before Verkada. We were at companies that didn't really find crazy product-market fit, so we had deep skepticism. We needed to hear a lot of good things before we thought there was any chance that this business would work out,” says Stauch.
So they started by chatting with IT buyers, who comprised much of Verkada’s customer roster. But the challenge with this crowd, as the co-founders soon found out, is that they’re a unique combination of being both well-served by the software industry and highly-capable problem-solvers.
“The IT buyer in particular really prides themselves on figuring things out. And so they don't think about a lot of this process as being problematic because they figured it out, it works and it's quite effective,” says Stauch. “And it works, because they’re at organizations where everyone has access to the internet or the software they need.”
That’s when Stauch realized that relying on the classic “What’s your biggest pain point?” discovery question wasn’t helping the co-founders uncover the insights they sought. When Stauch started leading with, “What work would you offload?” the conversation shifted from what IT leaders couldn’t solve (they couldn’t think of anything) to what they simply didn’t like doing.
“When you frame the question as, ‘Hey, if you had somebody else here to help you, what’s the work that you'd give them?’ That's a nonjudgmental way of asking for pain points because you're saying, ‘What would you push over to this new person?’” says Stauch. “That way, they can be much more free to say, ‘I don't like to do these things or I am doing a lot of this and I think somebody else could do it for me instead.’ It allows them to have more of a neutral perspective instead of saying, ‘This is problematic or this is painful.’”
That led Stauch and McLeod to focus on automations for IT tickets and help desk requests, which they found surprising — given the abundance of automation tools already at IT leaders’ disposal. “There are tons of workflow builders and cool automation tools out there. This feels like such a solved problem. Yet when you talk to IT, they aren’t really using them. Something is not solved,” says Stauch.
So they asked a follow-up question: Why aren’t you using these automation tools? “We found out there’s a lot of friction involved in building these automations. The tools work, but it takes an investment for an often unclear ROI. The core insight we took from these conversations was that automation doesn’t actually work for IT unless it’s faster to automate something forever than to do it manually once,” he says.
Once Stauch and McLeod got enough nods in response to this IT automation idea, they set out to build it.
## Building out the platform
Inspired by Verkada’s platform approach, Stauch and McLeod thought through what a platform might look like for IT automation.
“We started by tackling the thing that we were most unsure about first: Can we actually build a system that makes it faster to automate something forever than do it manually once?” says Stauch. “The way to do that, we thought, is a vibe coding platform for IT. Users have to be able to describe in natural language what they want to automate, and on the other side of that, you get an automation that works end to end.”
But the early product development process wasn’t an immediate success. Stauch and McLeod put their V1 automation builder in front of a few customers, who didn't really know what to do with it. But the pair were confident enough in building out the full platform to not be deterred by some initial customer confusion.
“It would've been very easy to start with an IT ticketing system that has a much better UX than Jira and ServiceNow. But we didn't think that was going to be the difference maker. We knew an automation builder and with a ticketing system woven in would be really, really powerful. So we pushed through the early skepticism and just kept building and iterating. Then as the platform started to emerge around it, the conversations with customers started to shift and they started to understand how the pieces fit together.”
They built out these products in quick succession:
- Ticketing system
- Workflow builder
- Access management system
Building out the full platform early required patience. It took a full year before customers began to see the value, says Stauch — when all the individual products were mature enough to make the platform cohesive. “It wasn’t until we’d really built out all the products individually that people said, ‘Oh, I see where this is going, and I see that once you add X, Y and Z, this becomes a really powerful platform.’”
Even after facing middling feedback, Stauch held onto conviction in the platform approach by reminding himself how massive the market opportunity is. “No matter how bad of a week I'd have, with a couple customer conversations in a row where they didn't really get it, I just kept coming back to the fact that these products exist in the market and they make a lot of money. People spend a lot of money on ServiceNow and IT ticketing. We thought deep in our bones that we could build a better version.”
Once the platform came together, Stauch found Serval’s answer to Verkada’s camera demo: Showing prospects the workflow builder. “In our demos, there’s this very tangibly different reaction to everything we show before the workflow builder, and then after,” he says. “Before, people are bored. They’ve seen a version of everything we’re showing them. Then comes the workflow builder. You can describe a complex IT automation, like an onboarding workflow, and all the steps: add the user to Google, take a web hook in from Rippling, message their manager on Slack. Then you hit Enter, and the workflow generates before your eyes.” From there, says Stauch, prospects start to imagine everything else they can do with the platform, like password resets or reporting workflows.
## Winning in an incumbent market
As Serval hit the market, it faced a steep hurdle: going up against ServiceNow, the hundred-billion dollar, decades-old incumbent.
In the world of startup sales, a lot of the advice can be boiled down to “pick a lane”: [Stick with a narrow ICP](https://review.firstround.com/how-vanta-clay-retool-found-icp/), sell to mid-market then gradually move upmarket. Stauch has found early sales traction in this tricky category by resisting this convention, choosing a “both” model instead: Selling to mid-market and enterprise, stirring adoption through top-down and bottoms-up motions.
Here’s how Stauch is building the GTM engine to [battle the incumbent.](https://review.firstround.com/innovators-vs-incumbents-how-to-deal-with-the-saboteurs-that-threaten-your-company/)
### Carving out two ICPs: Mid-market and enterprise
The reason Serval has been able to win both mid-market and enterprise customers, says Stauch, is that the two profiles don’t actually look all that different in this category.
“We thought we’d start in the low side of mid-market and stick around there for a long time, and gradually we’d move upmarket. But what we started to see is that the problems we’re solving in the mid-market weren’t any different from what the large enterprises faced,” he says. “These enterprises that were historically late to the party have started to feel more pressure from the board and C-suite to start implementing, or at least exploring, AI solutions.”
Stauch says product-decision making actually helped make Serval fit for the enterprise. “We built this product that is built around a flexible code-based workflow engine that can then flex into large enterprises quite easily,” he says.
### Top to bottom: Courting CISOs and IT support staff
To sell into the enterprise, Serval has made inroads with every rung on the IT org chart.
“As you sell into larger organizations, the actual folks doing the implementation can be a very large team. The chances that they’re completely excited about this new tool are close to zero,” he says. “So you need somebody with a drum beat who says, ‘We’re doing this because I believe in the vision.’ So you need the leader on board.” That hinges on a great demo. Stauch shares how Serval’s consumer-grade demo recently won him an in with a big exec. “I did a demo recently for the CISO of a Fortune 50 company. After he saw it, he asked me, ‘Where are you right now? I'm going to drive to see you. I'll be there in an hour because I wanna meet you.’”
But turning rank-and-file IT employees into champions is just as important. A way to do that, Stauch has found, is to help them look good — instead of just replacing the workflows they implemented. “One of the coolest things we’ve done that we didn’t anticipate is we turn IT into builders. They get to be creative and build cool stuff with the workflow builders. There’s some parallels with what [Clay’s done with the go-to-market engineer](https://review.firstround.com/the-gtm-inflection-points-that-powered-clay-to-a-1b-valuation/),” he says. That sparks a chain reaction: They create workflows that they can share with other folks across the org.
Stauch and the team have even been surprised by some of the workflows lower-level IT users have cooked up. “They’ll tell us, ‘Hey, we built this workflow that does X, Y and Z.’ And we say, No, that's not possible. You're probably confused about how it works. And they'll show it to us, and it works. It's so cool to see someone do something with your product that you didn't think was possible before.”
> People find ways to do cool things with a product, and that’s something we’ve leaned into to combine top-down pressure from the executives with an upswell of support from the folks that are actually implementing the tool.
## The path ahead: Balancing first principles thinking with respect for how things were
Serval is still early in its journey, but the team’s progress so far has been remarkable: Serval raised a $75M Series B just months after closing its Series A in October 2025, and has snapped up dozens of customers from the incumbent. "In just 90 days since their Series A, Serval has grown revenue by 500%, tripled headcount, and raised another round at a $1B valuation. This team is moving at a pace I’ve rarely seen in all my years at First Round Capital,” says First Round Partner Bill Trenchard, who led Serval’s seed round.
Stauch’s outlook on Serval’s future is a hybrid of the two perspectives of Verkada’s leaders: CEO [**Filip Kaliszan**](https://www.linkedin.com/in/kaliszan/?ref=review.firstround.com) and Chairman [**Hans Robertson**](https://www.linkedin.com/in/hansrobertson/?ref=review.firstround.com): Understand why the category exists, but push where you can take it.
“Hans was very interested in looking at these existing, established markets and building a better version of products for markets that already existed. Filip often looked at a lot of these problems from first principles, thinking about how a new product might look different from what's come before. I often have both of these perspectives in my head — weighing both is more valuable than adopting either one wholesale,” he says.
“Serval is a combination of these two ideas: build a better ITSM where there's a massive market and a lot of customers that buy ITSM, and build something that's never existed before, which are AI agents that build IT automations and answer help desk requests.”
> To win in an existing category, yes, you want to build something better. But you also have to ask why this category exists. The history can tell you something — it's a signal, and not always something you should just ignore so you can build something from scratch.
### Listen: Snowflake’s former CRO on scaling from $0 to $3.5B (and surviving 4 CEOs)
URL: https://review.firstround.com/listen-snowflakes-former-cro-scaling-0-35b-surviving-4-ceos/
Last updated: 2026-03-01T15:10:51.000Z
*This week on Executive Function, former Snowflake CRO Chris Degnan shares lessons from a decade scaling a single company to billions in revenue.*
[](https://www.youtube.com/watch?v=bRs1zNXIjHQ&ref=review.firstround.com)
### Listen now: [YouTube](https://www.youtube.com/watch?v=bRs1zNXIjHQ&ref=review.firstround.com) | [Apple](https://podcasts.apple.com/us/podcast/snowflakes-first-sales-hire-on-scaling-from-%240-to-%243/id1535886300?i=1000751741500&ref=review.firstround.com) | [Spotify](https://open.spotify.com/episode/1ZdNvGbAHiE4u66I0MsRFw?ref=review.firstround.com)
“I need to know how to sell the product better than anyone else. Otherwise, how will I be able to judge if we’re hiring the right salespeople? Or what a good sales call looks like? How can I trust the forecast I’m being given?”
**Chris Degnan** joined **Snowflake** as employee #13 — the first sales hire. He scaled revenue from $0 to more than $3B ARR, his tenure as CRO spanning 11 years and four CEOs. He now advises startups on building a disciplined go-to-market strategy.
On the latest episode of Executive Function, Degnan sits down with First Round partner **Brett Berson** to discuss how the CRO role changes from $10M to $1B+, what he learned working under four different CEOs (including Frank Slootman), why he stays hyper-paranoid about competition, and more.
He shares:
- **How CROs develop trust with their teams as they move further away from closing deals.** Degnan refused to become what he calls a “spreadsheet manager,” a CRO that hides behind the desk and dashboard, losing touch with the sales front lines. He says being close to the actual selling fosters trust down the ladder. “If you lose that element of, ‘I could pick up the phone and call anyone in the organization,’ and you sit in your ivory tower and think things are great, you won't be good.”
- **The reason behind his uncommonly long tenure at Snowflake.** It’s rare for the first sales hire at a startup to be in the CRO seat 11 years later. Degnan has been told that his willingness to absorb feedback from everyone, from board members to peers, is part of why he lasted so long. “You have to be super open to feedback. Listen to it and take action.”
- **Why hunger beats pedigree.** Degnan shares what he looks for when hiring a head of sales, including signs that someone is willing to grind, travel and do the uncomfortable work growth requires. “If you're doing your job right, you're not sleeping in your bed 8 to 10 nights a month. You're on the road. That’s the question I’m always asking: ‘Are you willing to do that?’”
[Listen to the episode](https://www.youtube.com/watch?v=bRs1zNXIjHQ&ref=review.firstround.com)
Explore more Executive Function episodes:
- [**Stevie Case,** CRO at **Vanta**](https://www.youtube.com/watch?v=phPoMj%5FC%5FpE&ref=review.firstround.com)
- [**Ryan Lucas,** VP of Design at **Rippling**](https://www.youtube.com/watch?v=AB0P8U9NLfM&ref=review.firstround.com)
- [**Jeanne DeWitt Grosser,** COO at **Stripe**](https://www.youtube.com/watch?v=cHp7HqUfBe0&ref=review.firstround.com)
[Take me to Executive Function](https://review.firstround.com/executive-function/)
### Snowflake’s first sales hire on scaling from $0 to $3.5B | Chris Degnan (Former CRO, Snowflake)
URL: https://review.firstround.com/executive-function-chris-degnan-cro-snowflake/
Last updated: 2026-04-29T03:38:17.000Z
Chris Degnan was the first sales hire at Snowflake and spent 11 years scaling the company from zero to $3.5 billion in revenue as its CRO, working alongside four different CEOs and learning from each one. In this episode, Chris breaks down what it actually takes to scale an enterprise sales organization, why MEDDIC is the methodology every founder should know, and what working under Frank Slootman taught him about firing fast, taking feedback and finding the fakers in your team.
In today's episode, we discuss:
- What the CRO job looks like at $10M vs. $1B+
- Why sales leaders must know how to sell the product themselves
- The MEDDIC methodology and why it's a founder's best insurance policy
- How to find the fakers, manage-uppers and passengers in your org
- What Frank Slootman got right — and wrong — about scaling Snowflake
- Why most AI companies will face a go-to-market reckoning
**References:**
- Amazon: [https://www.amazon.com/](https://www.amazon.com/?ref=review.firstround.com)
- Bob Muglia: [https://www.linkedin.com/in/bob-muglia-714ba592/](https://www.linkedin.com/in/bob-muglia-714ba592/?ref=review.firstround.com)
- Carl Eschenbach: [https://www.linkedin.com/in/carl-eschenbach-980543/](https://www.linkedin.com/in/carl-eschenbach-980543/?ref=review.firstround.com)
- Christian Kleinerman: [https://www.linkedin.com/in/christian-kleinerman-a973102/](https://www.linkedin.com/in/christian-kleinerman-a973102/?ref=review.firstround.com)
- Denise Persson: [https://www.linkedin.com/in/denisepersson/](https://www.linkedin.com/in/denisepersson/?ref=review.firstround.com)
- Dell: [https://www.dell.com/](https://www.dell.com/?ref=review.firstround.com)
- Frank Slootman: [https://www.linkedin.com/in/frankslootman/](https://www.linkedin.com/in/frankslootman/?ref=review.firstround.com)
- John McMahon: [https://www.linkedin.com/in/johnmcmahon1/](https://www.linkedin.com/in/johnmcmahon1/?ref=review.firstround.com)
- Michael Scarpelli: [https://www.linkedin.com/in/michael-scarpelli-1b289b9/](https://www.linkedin.com/in/michael-scarpelli-1b289b9/?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com/](https://www.microsoft.com/?ref=review.firstround.com)
- Oracle: [https://www.oracle.com/](https://www.oracle.com/?ref=review.firstround.com)
- Salesforce: [https://www.salesforce.com/](https://www.salesforce.com/?ref=review.firstround.com)
- Snowflake: [https://www.snowflake.com/](https://www.snowflake.com/?ref=review.firstround.com)
- Sridhar Ramaswamy: [https://www.linkedin.com/in/sridhar-ramaswamy/](https://www.linkedin.com/in/sridhar-ramaswamy/?ref=review.firstround.com)
- Stanford Graduate School of Business: [https://www.gsb.stanford.edu/](https://www.gsb.stanford.edu/?ref=review.firstround.com)
**Where to find Chris:**
- LinkedIn: [https://www.linkedin.com/in/chris-degnan/](https://www.linkedin.com/in/chris-degnan/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 What is the job of a CRO?
01:12 What excellence looks like at different revenue stages
02:59 Sales leaders need to know how to sell the product
04:52 The hardest skill leaders have to learn
08:17 You need to stay open to feedback - at all levels
14:01 Sales, segmentation, and international expansion
16:17 Why MEDDIC is the foundation for every sales org
20:32 The metrics that actually matter
22:56 A week in the life of a CRO at scale
28:32 Navigating compensation at a GTM organization
31:45 What technical CEOs get wrong about GTM
36:01 The role of hunger in great sales leaders
40:35 What makes an exceptional IC sales rep
46:41 Dysfunctional vs. high-performing executive teams
48:01 Chris' most impactful decisions at Snowflake
49:53 "When there's doubt, there's no doubt"
54:49 Learning from world-class leaders
Brett: Well, thanks for doing this. I'm excited about it.
Chris: Thanks for having me.
Brett: Want to start with the very simple question of what is the job of a CRO.
Chris: It depends. So, when I first started at Snowflake, I was not the CRO or even the VP of sales. I was the director of sales. So, as the first salesperson on the ground, your job differs greatly than when you're the chief revenue officer of a $3.5 billion organization. So, how you do the job day one is, you have to be the best salesperson on the planet. You have to know how to sell the product. And when it's a $3.5 billion public company, you're spending a lot of your time on strategy and problems. I always would say, if I'm coming into your region, it's probably not the best thing because there's a reason I'm there, and the reason is not good. A lot of times you're really thinking a lot about organizationally, how the organization is operating, what things you should do that are not just tactical, individual by individual, but like, "Hey, are there themes that need to happen? Is there sales processes that have to change?" You're thinking about a lot of things differently as the company scales.
Brett: Maybe to pick that apart a little bit, let's talk about sort of the 10 to 100 range CRO role and maybe the 100 to 500, 700, a billion, something like that. What is the difference between good and excellence maybe in those... And maybe you'd break it apart in different categories, but if we sort of chunk it down, what is excellence do you think?
Chris: As a sales leader in general, these are the things that I learned. I learned really my selling career at EMC, which is now part of Dell. I was part of the commercial sales organization, which is a very transactional mid-market sale. And what I learned there is true for any startup, is that you have to recruit great people, you have to develop those people, and then ultimately drive revenue as your third thing. If you recruit those great people and they know how to sell the product, then they'll drive revenue. And so, you think about things in that order, that becomes incredibly important. And then, as you look at your leadership team, it's incredibly important that they know how to sell the product. So, I'm very much a lead from the front sales leader. I need to know how to sell the product better than anyone else. And that was my thing. I needed to be a really good salesperson and understand the technology and then be able to articulate that back to the founders, the CEO, whomever, about some of the challenges that we're seeing in the market. So, ultimately, as the head of sales from 10 to $100 million is, it's about the people. I mean, it's always about the people. You have to find great people. You have to develop those people. You have to trust them. And then you have to continually evolve as a sales leader from being the person that does every deal to not doing every deal, enabling these people, trusting these people to actually do deals that you were doing. And that's kind of the evolution of scaling from 0 to billions of dollars in revenue.
Brett: Why do you think it's so important to have that level of product knowledge or be excellent effectively in an IC role when you're managing an organization of hundreds or a thousand sellers?
Chris: Because if you went on a sales call and you don't know what good looks like because you're not knowing how to sell the product, how are you going to be a judge of if you've built the right sales organization? So, to me, it drives me nuts if you have a sales leader... And I've had sales managers in the past that are spreadsheet managers, that sit behind their desk and they look at numbers. And that's, in some ways... towards end of my job at Snowflake, that was more the job than being the lead from the front seller. But I still took pride in being able to get on sales calls and talk about the product. And I think if you have second-line leaders in your organization who don't know how to sell the product and say, "Oh, they're hiring great salespeople," how do you know they're hiring great salespeople? How do they know what a good sales call looks like? Because if they can't sell the product, then how can I trust the forecast that they're giving to me? So, it is about this trust that you have to have in your leadership, in your sales team. And if all of a sudden you lose touch to what's happening in the organization and you'll lose touch pretty quickly, then your organization can be pretty flimsy.
Brett: Going back to sort of the scaling journey of a CRO, how would you break down your different chapters over the 11-plus years? And when you looked at version 1 of you and 2 of you and 3 of you and 4 of you as you went from 0 to 10 to 100 to 500 to a billion-plus, what was hard in what you had to do?
Chris: Before Snowflake, the largest team I had ever managed was probably 12 people, maybe 10 or 12 people. And so, all of a sudden I'm managing a very large sales team, even probably two years in, managing the largest sales team I'd ever managed. And the hardest part is, when you're a front-line leader and even a second-line leader, you know everybody in your work. And it was like at Snowflake, I knew everybody at Snowflake. I knew how they were, I knew who they were, I knew their families, all this other stuff. And then, when you're managing hundreds of people, there's a chance that you don't know people that are working for you. And when you grow like that, you're in this rocket ship. There's a lot of people that want to jump on that rocket ship. As Frank Slootman has a famous saying, it's like there's passengers and drivers. And you want the passengers to get off the bus or the rocket ship. And so it's really hard to figure out who's the truth tellers, who are telling you the truth, who are doing their job, who are working hard, and who are the fakers, the liars, the manage-uppers. So, like, there were peers of mine that were really nice to me, but not nice to people that work for me, or they were really nice to my boss, but not nice to other people in the organization or didn't know how to do their job. There's a bunch of stuff like that. So, that's the hardest part, is, if I meet you first day on the job at Snowflake and you're BDR, I'm the same person to you as I am to the CEO of the company, as I am to the board of directors. I don't change. I mean, I am who I am. And that's not always the case in an organization. And there's a lot of people that do a very good job on managing up but do a terrible job, and you have to see through that. So, you have to find those fakers, those people that are the passengers, and really vet them up.
Brett: How do you do that? What's the skill that you developed?
Chris: Number one, sometimes it's hard. If you're a third- or fourth-line manager, reaching down in and making sure that you're having one-on-ones with reps, making sure you're having one-on-ones with front-line managers, making sure you're out in the field, going and having a coffee, a breakfast, a lunch, a dinner, drinks, whatever it is that you do when you're out in the field, going to run with them, it doesn't matter. But getting them to trust you, you have to have those people that you trust. If you lose that element of, like, "I know I could pick up the phone and call anyone in the organization," or you don't do that and you just sit in your ivory tower and things are great, then you won't be good.
Brett: When you think about a world-class CRO at a scaleup company, a few hundred million in revenue, do you think they could be effective at any scaleup enterprise business if they're truly exceptional? Or there is a real fit element where the CRO has to be matched correctly with, it could be the go-to-market motion, the values of the CEO? Or is it interchangeable? You plot you into X company, it looks like these type of ACVs and you should be equally as successful.
Chris: I just had this conversation the other day with one of the founders that I'm helping, and he was talking about industry expertise versus just sales experience. And I'm going to pick the athlete over the industry expertise every single time. And so, for me, I asked that question. So I was fortunate enough to have John McMahon on our board. When John left the board, I asked him the question. Because I managed to effectively stay on my job with four different C-
Brett: Cast of CEOs.
Chris: Yeah, four different CEOs. For each time, there were moments in time that it wasn't going to work, for each one. And the thing I asked John is, "John, what feedback do you have for me?" Why was he able to keep my job? And what he said stuck with me, and I think it's important for everyone to realize this, and it's a combination of that and what Slootman says is... Slootman said to me is, "Hey, people in Silicon Valley think, because they've made a lot of money, that they're exceptional. And that's not true. There's so much luck that's involved in what we do. Yeah, you could go work your butt off selling whatever, siding, or whatever it is that you're trying to sell, or you could get lucky and sell for a company like Snowflake." And so, you have to put yourself in that perspective. And then you have to be super open to feedback. And so, if you have someone that works for you, if you have a board member, if you have your manager, a peer, if they're giving you feedback, you should not just brush that feedback off. You should listen to it and you should take it, and if you take action. So, John McMahon said to me is, "Hey, Chris, you would listen to feedback and then you would take action on that feedback, no matter what scale stuff was at." And that's really how I think ultimately I kept my job. I was really good at selling the product. Okay? Slootman saw that. But there were things that I had never done. And there was things that he thought I was making a mistake about. And so, he's like, "You need to do these things." And he said it. He would be really tough. He'd be like, "Either you do these things or I do them. But if I do them, why are you here?" And you're like, "Okay. Noted."
Brett: "Registered."
Chris: Yeah, yeah. "Yeah, I got it. I got it, Frank." So, I think that's the thing. I was super fortunate to have world-class people like Bob Muglia, like Mike Speiser, like John McMahon, Carl Eschenbach, and the list keeps going of just these world-class operators, world-class leaders that I got to work with.
Brett: What are some of the things that when Frank came in, he explained, "These gaps need to be closed," and he was correct? And were there things that he pointed you at that were incorrect?
Chris: Frank said to me, "Chris, you're a deal jockey, and that got us to where we are today, but it's not going to get us to where we need to be."
Brett: He meant that more in your superstar IC capacity or something else?
Chris: I was involved in every deal, every deal. When Frank came in, we were trending towards 500 million.
Brett: And you were that involved?
Chris: I mean, the first thing I had a... My first one-on-one with Frank... They fire Bob on a Tuesday, and then on Thursday, I have my first one-on-one with this kind of legendary, very scary guy in Frank Slootman. And I remember clearly, I walk into the one-on-one and I said, "Frank, there's two things I have for you." I said, "We have $100 million dollar deal," which is still one of Snowflake's biggest customers. "We have $100 million deal that Bob was in the middle of. I need your help on this. This is what I need you to do. And number two is, we have the best marketing department in the world. Don't screw with that." And he was like, "Well, that's refreshing because everyone else that has come in has thrown their peers under the bus." I'm like, "Well, I got nothing bad to say," which I certainly had plenty, but I wasn't going to do that then. So, I think what he meant is, "Look, I was involved in all these deals and I was grinding on all these deals that I would push people aside and say, 'I'll take this deal.'" Okay, great. But he said, "You're going to kill yourself, and it's not going to work if you're in the middle of every one of these deals. So you have to have people that you trust," which is important because I was forced to hire some people from Frank's past that I still was doing their job for them. And that was scary to me too as I went to Frank and I'd be like, "Frank, I'm doing this person's job for them. I don't see why you think they're good because they're not." Frank was very pragmatic and he said, "They're my guys in that I expect them to do their job." But he's like, and this was the difference between Frank and Bob, is, Frank's like, "Do you think the board is my friends? They're not my friends. They will fire me in a heartbeat if I'm not delivering shareholder value." So the same thing holds for your organization. There are people that I like, but if they're not doing their job, then you hold the right. You're the person that's responsible for running this organization. You have to make that decision. And so he would hold me accountable to doing that. And so he let me fire people that he forced me to hire. That's big on him. And so I think that was that... I think the thing I mentioned earlier about optimization, we should have done some of the changes he recommended in terms of I segmented the organization. I brought in a major's organization, which was covering the top 250 accounts, super important to cover them differently than a traditional 2,000-, 3,000-person organization. You can't cover them the same way. That was important. So that was helpful. But what he said to me was, "Not all new logos," we call them cap ones, "Not all new logos are the same." Turns out he was wrong. So we took our eye off the ball, new logos. So, I'd say that he was right in that it made us a ton of money because we went out to this day, the largest IPO. I'm sure someone will break it this year because there's companies that have much more revenue than we did. But we're the largest software IPO ever and enterprise software IPO ever. And there were a bunch of things that we did right at the time. We optimized. We were generating free cashflow that matters. Now it seems like back to growth, growth at all costs. We were playing in such a huge market. Snowflake's still growing at an astronomical rate. And so, that market is so huge that we should have kept the foot on the floor and kept hiring and kept going harder. And those are things that I think back to that we could have done differently.
Brett: When you think about the scaling of the sales org, explain a little bit more about as you got bigger and bigger and evolved your thinking over time, how that expressed itself in the way that you designed the org and broke the org up sort of across the journey.
Chris: We were very much an outbound organization. So everything was just cold call, cold call, or spam, spam, spam. We had no PLG. But then, all of a sudden when we became more of a name brand, there was more awareness. So there was less... I didn't need to be in front of every customer. So there could be 150-person startup, 100-person startup, and I didn't need to have a face-to-face sales organization there. So, really, at the beginning, we started trialing out at, I think, 200 employees and below, we started building out an inside sales model. And that thing worked gangbusters. It worked really well.
Brett: And the motion is somebody trials the product and then they get in touch?
Chris: Yeah. Well, combination of. Yeah. So, marketing would try to get a bunch of those people to our on-demand page, and then they would sign up for a trial account. And then there would be some outbounding, but it's more like, okay, people are more familiar with you. There's more case studies, more references, that kind of stuff. When you have a Fortune 100, Fortune 500 company, those companies buy just differently. Their evaluation processes are so long. When Frank joined... one of the largest banks in the world, he joined, and one of the first meetings I went with him on, I went out to New York, went to this meeting, I'm like, "We're never going to get these guys as a customer." Because they had been kicking the tires for two years and they kept telling us we were going to buy. Turns out that they did. Turns out they're a huge Snowflake customer, but it just took forever. And you have to treat those salespeople... they need more resources, but the upside potential, these are, like, 20, 30, $50 million a year accounts eventually, and you have to treat them differently. And that was where Frank recognized that I was not doing that. The U.S. is such a huge market. And then you start to run the same plays in the international markets as well.
Brett: What are your thoughts on process and systems as you sort of scale over time? And do you have a way to think about too much process, too little process, sort of those types of things?
Chris: I'm a firm believer of MEDDIC or MEDDPICC as a sales methodology. MEDDIC is just a sales process and it's metric, economic buyer, decision process, decision criteria, identify pain, and then it's champion and competition. That's how you... if you think about your deal, every deal that way. And so if you have a rep, a manager, a second-line manager, third-line manager who thinks about MEDDPICC and qualification that way, and if you say, "Hey, no champion, no deal," if you say, "Why do they have to do something now?" and they say, "Because they said they want to," well, that's not a real reason. Either they're just lying to you or they have no compelling reason to do a deal. So, that's your compass for a forecast. And so when I look for hiring sales leaders, I want someone who's had a MEDDIC background or been in a MEDDIC organization. But in products that are really hard to sell... So, prior to Snowflake, I was at a really crappy security software company, and it was a bad product. And so we had to be maniacal about how to sell it.
Brett: I feel like that's where you really cast your metal as a seller.
Chris: \[inaudible 00:17:19\]. That was hard.
Brett: If you can sell a piece of junk, you know what you're doing
Chris: Yeah. That was hard. Look, the reps that we had there were incredible reps. They're unique individuals, incredible. But that was really hard. And so, I took a lot of what I learned and brought that to Snowflake. But at some point when you just... all of a sudden things go, like, you're just limping along, all of a sudden it just goes like a hockey stick up and to the right, you have to be flexible. There are going to be things that you're going to say, "Okay," like, "Okay," and you're not going to... It's hard to be that maniacal about everything. But eventually, the hockey stick flattens out and truth comes and you have to then... And so that's where you make... in that hockey stick era, you make a lot of bad hires, you make a lot of mistakes. And so you have to center that on having that. So, look, I think sales methodologies matter. And I always tell this to founders, is, "I can teach someone MEDDIC." This spring, I'm ironically teaching MEDDIC at Stanford Business School, which I have no business stepping on that campus, but let alone teaching a class, but I am teaching a class on MEDDIC there, and I always tell founders, "I'm a firm believer of hiring someone that's been raised in a MEDDIC sales organization because at least they have that baseline, like what it is, how to think about things." If you don't hire them, then someone's going to have to teach them that, or no one's going to teach them that, because you don't know it.
Brett: Explain why you think it's so important and so foundational.
Chris: Kind of like what I said, there's this... At some point, if you're at this incredible company, there's this rocket ship time, and you could get to $100 million. And especially in this world of AI, there are companies that are getting to $100 million or $200 million, and they don't have to sell value. But at some point, there is a day of reckoning. I moved to California late '90s and it was the dot-com boom. People were like, "Yeah, it's never going to go away. The dot-coms are..." And people are just throwing money at these stupid companies. And eventually the reckoning came. AI, same thing. There's going to be a reckoning. There's going to be... There's a bunch of stupid companies out there or people that aren't operating in the right way. If you really dig your feet in and you actually build a really good go-to-market team grounded in this sales methodology, then you know what? You will have made some bad hires, you will have made mistakes, but you'll have made less of them. And then you will have a more fundamental focus on the right things that matter around the forecast, around are you taking feedback from customers, all those things that matter. So, that's the difference, by the way, on a lot of PLG companies. PLG companies, I don't need a great sales team. And then eventually you do. Eventually you do. And so, that's the thing, is, you may not need it today, but you'll need it eventually. And I think that's the thing that... I think I look at a lot of these, the large language model companies now. They're in that same boat. It's like-
Brett: They all have enterprise team and say, "Oh-"
Chris: Yeah. And who knows if they're good? There are a bunch of people that went at Salesforce like, "Hey, no disrespect, but you're selling water to... Salesforce is water to the sales team. That's not selling. You don't know how to sell. You don't know how to do a deal. It's order-taking." And so that's what the LLMs are doing right now. They're order-taking. At some point, if you build a world-class organization at one of those companies, they'll win in the long run.
Brett: What are your thoughts on metrics? Outside of the most obvious, ARR, net retention, what are the metrics that you obsess over? You were talking about earlier you got to a certain scale where you actually did spend a lot of time in spreadsheets. What are you looking for? What are you using to govern the business?
Chris: Working for an engineer was quite interesting. And my last legs at Snowflake was, Sridhar could build dashboards literally in front of me, and I had no business building dashboards. And so he'd be like, "Do you know that this is happening in here?" And I'm like, "No, I did not know that." So he would surprise me with a piece of data constantly. But I think the thing that really you look at is, "Okay," and we got really good at this, is, finance would give it to me, but it'd be better if I had it on my fingertips. Number one is the leading indicators. Okay, the leading indicators, how many sales calls is your sales team going on? Are they going on two? Are they going on five? How many net new business meetings are they going? That's okay. That's number one. Number two is, how much of those meetings are then turning into actual qualified pipeline? Are they converting those meetings into pipeline? Okay, look at that. You measure that. You look at the pipeline that's going there. And then how much of that pipeline is new logo pipeline? And how much of that new logo pipeline are you closing? How long does it take you to close those? Those are the things that I took my eye off, off the ball, and those are the things that matter. Because if you keep your eye on the ball on that new pipeline generation stuff, then that's the thing that keeps the company going and going and going. Because at some point, a customer who's growing really fast will flatline.
Brett: Right. And your point is that if you're just looking at top-level numbers, it masks all of the leading \[inaudible 00:22:21\]-
Chris: Masks. And it did. It did for me. I mean, I'm like, "High five," and, "Yeah. Hey, great job." But in reality, there was some bad news coming. There was some bad news, like, "Hey, we were going to miss our new logo goals." "Who cares? We're hitting our revenue goals." Well, it turns out it did matter, and it slowed our growth. And then we put our foot on that gas again or that pedal again, and that re-accelerates net retention rate, that re-accelerates growth. Those things really, really, really, really matter.
Brett: If I were to watch you when the business was part of the way through your tenure is doing 500 million or 6 or 700 million, what goes on in a week for you? How did you spend your time?
Chris: Since the beginning of time at Snowflake, I would have a Monday morning forecast at 9:00 AM, and I would expect every one of my direct reports to be on there. And they would give me a commit, meaning it's basically worst case, "Don't miss this," a most likely, and a stretch number. It's for the quarter. I'd pull up Salesforce and I'd go through and I'd pick three or four of their top biggest deals and I'd ask them questions about those deals. And they may not know the answer, but they have to get back to me within the day of what's happening in that deal. Then from there, I would go to the CEO's staff meeting, and you would report, "Here's what's happening in the forecast. Here's what the competition's saying." And you talk to the founders, you talk to the CEO, you talk to the CFO, whatever it is, you bring up issues in there. And you'd have everything from, depending on if I'm going out in the field or not, customer calls. I do one-on-ones that week with my entire direct reports. So 30-minute one-on-ones. I'd have a staff meeting, which was non-revenue generating staff meeting. So it's like, what are the top issues that are happening? You hear from your SE leader. You hear from your alliance leader. You hear from professional services leader, whatever it is that you're bringing up. It's problem solving. That's real issues. There would be skip-level meetings with different people in the organization. I'd prioritize customer meetings as often as possible, so whenever there was a customer issue. A lot of times, especially later stage, I was dealing nothing... Everything was an issue. Everything that made it to me was an issue. So I was dealing with nothing but problems. But that was it. It was basically Monday through Friday in the office dealing with... doing one-on-ones, doing forecasting, having strategy meetings about... Your strategy ops leader becomes really important. People call it RevOps, but strategy ops is incredibly important because they're the people that are supposed to be looking around the corner for you. And I'm not as operationally good. I'm more like lead from the front cell, kind of read the room-type person. I need someone who's more intellectual, thinking about, "Here are data points that are problematic." And so I would have a monthly analytics meeting and I would say, "Bring me some piece of data," whether it was pipeline reviews, and I'd bring the marketing team. It was revenue. It was new logo stuff. I would want to review a bunch of different stuff. Every seventh week of the quarter, my Monday morning forecast call would turn into a out quarter, so the next quarter forecast call.
Brett: What sort of, when you think about your line, your directs, what is important across every single one of them? What is the thing that ties them all together?
Chris: I needed to believe that people knew how to do their job. I had sales engineering people working for me. I didn't know how to be a sales engineer. I had professional services leaders working for me. I didn't know how to be a professional services leader. I didn't know anything about the professional services business. So you really need to listen to them, understand... Because different people... Or different orgs, you hire these different people. They're different personalities. They're different types of people sometimes in terms of how they think. And so you have to be open to working with these different type of people, taking feedback, understanding their challenges and helping them solve those challenges. And so, my head of professional services, there were times where he would be complaining about something and I'd have to say, "Is this a real complaint or not?" listen to him and then react to it. Or my head of sales engineering, they'd say, "I need every one of your sales reps to be able to do demos." And I'm like, "I don't think so. Why?" And that's what your jobs are. But have a good conversation around that. But ultimately, I needed these people to be well-respected by their organization. So you needed to hear, are they bad managers? All this other stuff. You needed to provide them feedback, like, "I'm hearing this about your org," and them... Kind of same thing that I learned from Slootman was like, take that feedback and act on that feedback, and that's what you're looking for in all your leaders.
Brett: Any other thoughts of how you know if someone's excellent in something like sales engineering that you are not excellent in versus I assume your SVP is sales, you could do that job, you've done that job, you know what excellence is. Anything else on managing effectively when you haven't come up in that sub-function?
Chris: The number one thing is, are they recruiting and developing their people? It goes back to that. Are they recruiting great people? Are they developing those people? Are you retaining people? Are you losing good people? These are all things that if all of a sudden you have a rash of good people leaving the organization and you know they're good, on the sales engineering side, you know they're good, if you pick up the phone and you call three of the sales reps that work with that SC and they like, "Oh, man, that was a loss," okay, then you dig in, you find out. So that's where you start to figure out, "Oh, well, let me have a conversation with this person." Like, "Why are you leaving?" Most of the time it's, "I hate my manager."
Brett: And that's sort of the number one thing you're on the lookout for?
Chris: Yeah. And sometimes it's okay. I mean, sometimes you're like, "Okay." Sometimes it's not okay. And that's the other thing in that, going back to the hockey stick example, is, if people are making a lot of money, they'll put up with a lot of crap. And I've had managers that were a little bit of a nightmare, and I put up with them and I shouldn't have. And that happens.
Brett: What do you want the people to say that have worked with you in your org about you when you're not in the room?
Chris: That I'm honest. I'm direct. I work hard. I'm very passionate about what I do. Those are the north stars. I'm not the smartest guy. I'm not going to outsmart everyone. As long as they think that I've been direct with them, I've been honest and I've worked hard, those are the things that matter to me.
Brett: You touched on this in various ways, but what have you figured out around compensation in the go-to-market org and what works, what doesn't? Are there specific landmines or patterns of things that will blow up in your face at some point?
Chris: One of the challenges that we had at Snowflake is the way that I had structured the comp plans early on was, prior to Frank and Mike Scarpelli, the CFO of Snowflake at the time, coming on board, I did one-year comp plans where it was a growth ACV and a renewal ACV. And then I had gates for most people on new logos. That was how we structured it. So, what would happen is, all of a sudden when we started to become more well-known in the industry, you'd get these big deals. And so you'd go out and get a big booking. And then that rep would say they got a $2 million, $3 million booking on a new logo. Didn't happen a lot, but it happened. And because our commission rates were not built to get these $3 million deals, you'd have a rep that might make a million bucks on that deal. In fact, we did. So the rep makes a million bucks, and then he sees this large, very, very, very large company, Fortune 50 company, land the deal, and the rep has a renewal quota going in the next year, and he's like, "They're not going to renew at that rate," because we let them roll over any unused consumption for a dollar. As long as they renewed the contract for a dollar, they could just roll it over. And so the rep quit because he's like, "I'm not going to make any money this year." And so you have to balance that of, how do you pay someone to land the right-size deal and stay with the account, incentivize them to get the account to grow. So, that's where I got rid of the renewal number and then paid them on consumption, but then paid them on growth ACV and consumption. But even then, that becomes problematic because to a public company, when you close a renewal, that means you're invoicing the customer for a large dollar amount. And what invoicing means, it means free cash flow. But if you don't incentivize renewals and just add on capacity, that becomes problematic. So, there's all sorts of different tricks that I've learned in the process.
Brett: Is sort of the takeaway that you have to be constantly nurturing the comp philosophy in every chapter of growth? There is not a globally correct way you eventually land on and then you can just leave it and let it-
Chris: Well, I think it's by segment. I mean, you could look at it by segment of accounts. If you have a, I don't know, Fortune 50 or G2K account that's spending $10 million a year, you might manage the comp plan differently. And so you would have... For some of our largest accounts, we would have custom comp plans, because we'd want to incentivize the right behavior. We knew that XYZ company was going to be potentially our largest customer. You look at that account and say, "How do we incentivize the sales rep? How do we incentivize the SE?" So you might have, I don't know, 10 to 20 customized comp plans specific to those large, massive accounts.
Brett: Now that you've been spending a lot of time with other founders and CEOs as you've been doing advising and helping folks out, what have you found when you think about the classic product and technically oriented founder that you spend time with, what do you think they don't get about go-to-market? Or what's the misconception?
Chris: I think it goes back to what we were talking about earlier, is, I can just hire someone who I have a good interview with, but they don't come from any background of any methodology. What I'm seeing now in the AI space in particular, there's these really, really smart guys or women out there that are building world-class companies, but they're young and they've never potentially even managed people, let alone run a company. They think they know. And-
Brett: Because they've had success, right?
Chris: They've had success. They're hiring the wrong profile people. It's like, I'm the old grandfather at this point. Some of these founders are close to my daughter's age. So I'm talking to these kids and I'm like, "Okay, well, this is stupid. You're not going to do this." But sometimes they do and they make the mistakes. One of these companies I advise, the guy was like... I'm like, "You shouldn't hire this person." \[inaudible 00:32:59\] "I think I'm going to get away with it. I'm going to do it." And then he calls me two months later, he's like, "Yeah, you were right." I'm like, "Yeah, I know. Because you weren't hiring for the type of customer you're selling to. You got to look at who you're selling to."
Brett: What are the normal mistakes you tend to see in terms of early go-to-market hiring as companies-
Chris: They don't know. They just think, "Oh, you were at..." like, "Hey-"
Brett: Good company, yeah.
Chris: "... you're taking a meeting with me and I can make anyone successful." A lot of the security companies that I advise, they all want to hire people from the security space. Who cares what... Like, "I want someone from the enterprise technology space who's sold enterprise tech," because, first of all, learning a technology and articulating the value to that customer, that's important. If you can do that, you can sell anything, right? You can sell anything. And so, I'm looking for people that have sold something that's hard to sell, they've successfully done it, they have a proven track record of doing that and show me that you've done that. So, I'm looking for that. And I'm looking for people that have been brought up in those types of organizations that have track records of developing their people. So, that's what you're really looking for, is those types of people.
Brett: Why do you think that's not intuitive to most of these founders?
Chris: Because most of them are engineers. Another company I'm with, they have zero understanding. They don't know what marketing does. Zero understanding. Like, "Wait, why am I spending 200 grand for this on marketing? I'm an engineer. I build a product. I give it to you, salesperson. Go sell it." Okay. But branding matters. You have to be out there. People have to know who you are, depending on the company you're at. AI is growing so fast, you don't want to miss it. And so you have to spend money to get out there. And so there's different things. They're naive. And the question is, are they naive and arrogant? Or are they naive and willing to take feedback? Those are the things that you're really looking for.
Brett: Why do you think you... Something you talked about earlier in the conversation, you've shared before, is kind of this learning, curious orientation that you have, feedback orientations. Everybody gives feedback all the time. Most people you check in, they do nothing with it in a month or two months.
Chris: Nothing. Nothing.
Brett: What about you? What's going on with you that you were oriented, particularly as you had more and more success, somebody else came in and you would actually listen and actually go to work on it?
Chris: First of all, it's a survival instinct, I think. I think it's probably trauma from my childhood. But I think you have to figure out, "How am I going to get myself out of the situation?" in terms of, "Okay, how am I going to solve the situation?" Kind of one of the more interesting sales experiences in my career, I was in Japan and I was at one of the car companies. And they had tried Snowflake. We didn't have any employees over there. We were just hiring the beginnings of the sales team.
Brett: And are you in a suit and a whole thing?
Chris: Oh, yeah, suit, whatever. And in Japan, 90% of the people don't speak English. We walk in, and the user of the product was there, and he's nice enough guy, and the Japanese are very polite people. But the procurement woman came in, and she just was frowning. You're just abundantly clear.
Brett: Sounds like a procurement person.
Chris: Right. But it was like, she was angry, angry. And there was some stuff that we screwed up on. And total... out of nowhere, I just get up, I walk around the table, I walk over to her, I bow to her, and I said to her, "I'm so sorry. I didn't mean for this to happen. I understand you're upset. I will fix this." Yes, I have a translator, but she sees me physically doing this. I walked back around and her whole demeanor changed. The sales engineering leader was with me at the time, and he said, "I don't know anyone that can do that." And I think that's the thing. It's like, you're reading the room. You have to pay attention to people. Sometimes reading the room is not great. When you are in the room and you realize that people don't like you and there's nothing you can do about it, it's not great. It's a skill that I do have. Maybe it's an insecurity as well. But I think those are the things that are super helpful, the survivor skills that I think get you through things.
Brett: What about the role of hunger and just wanting it really bad?
Chris: Desperation. Yeah.
Brett: How important is that do you think for scaleup CROs?
Chris: Yeah. It's incredibly important. I was just talking to guy that I've tried to recruit in the past, and he's at a company that's done really well. The company's getting bought. And he's made a bunch of money. I had talked to the founder of the company and he's like, "I like this guy." And I'm like, "I like this guy too. I know him." But the conversation I was having is, like, "You've made a lot of money." And it's a lot of money. And I'm like, "You've made a lot of money. Are you hungry to go do that again?" And we had that conversation, like, "How old are your kids? Are you going to coach tee-ball? Does your wife like you around seven days a week? Do you like being around seven days..." These are the things that you have to kind of figure out. Because the conversation I have with any head of sales, the thing that's hard about the head of sales job is... There's stress hitting the number, all other stuff. The hardest part is the travel. If you're doing your job right, you're out of your house, you're not sleeping in your bed 8 to 10 nights every month. 8 to 10 nights every month, you're not sleeping in your bed. You're on the road somewhere, you're out, you're eating, you're drinking, you're having breakfast with people. But if you're doing your job right, that's your job. And so the question that I always am looking for is, are you willing to do that? Are you willing to get on the road? Are you willing to get on that plane and sit... When Snowflake was private company and not... "Who knows if we're going to be successful?" I wasn't sitting in the first class. I was sitting in middle seat 30\. And so you have to be able to put that grind on and do that. And that's the hard part of being a successful sales leader.
Brett: Is that why you aren't in the role now?
Chris: I will lose my United Global Services status this year, and it's a spike-the-football moment for me. Look, my daughters are now in college. They've lost a lot of time with their dad. It's afforded us a lot of great things as a family. But my wife and my kids paid the price, for sure. Some of these LLM companies have come at me. They're incredible businesses. And it's like, you sit there for a second, you're like, "Man, this would be really fun." But then you remind yourself is... and that's what I said to one of the companies, as I said, "I'd probably kill myself doing it. I'd probably die." And because it's like, as soon as I stopped traveling and having the stress, I lost 20 pounds, not because I was just eating all of a sudden way better, drinking less. It was due to the stress. The stress and the travel was a lot.
Brett: Why do you think that's required for excellence?
Chris: You're the front line. You're in front of these customers. You have to be uber... If you are selling a product that is worth anything, there's some competition that's trying to eat your lunch. You have to be hyper-paranoid about that competitor. The worst thing is, if you do a forecast review with a sales team and like, "Who's the competition?" "No one." Bullshit. You're a bad salesperson. There's always competition. And so, that's the way that I operate, is, I was always operating of a state of like, "Who's eating my lunch?" And there's a company that I'm advising now that we just hired a head of sales there, and he's like, "I'm just so worried about the deals we're not in because this is a huge industry and a huge market." And I'm like, "Great. That's a great way to feel. Now go get in front of as many customers as you can and be super paranoid about it." So, yeah.
Brett: Yeah. "Let me know how it goes before \[inaudible 00:40:28\]."
Chris: Yeah. "Good luck with that."
Brett: Yeah. Exactly. You talked a little bit about hiring at your exec level or your direct report level. When you think about exceptional IC sales folks, what do you think is required to just be unbelievable in the role?
Chris: They have to be curious. You have to be super curious and asking... The best salespeople you'll meet are going to ask you way more questions than talk. If you get in there and they're just like... There's this misperception that everyone thinks that salespeople are super social people. A lot of great salespeople are not. They don't like big crowds. They don't like to be around a lot of people. They're really good at getting you to talk. So, number one, they ask... It's like, in interviews... My favorite interviews are the people that are asking me questions, not reverse. Pepper me with questions. And that always-
Brett: You think you could hire somebody based just on the quality of the questions they ask you?
Chris: I mean, yes. I'm looking at their LinkedIn background or whatever, but yes. The answer is yes. I mean, I remember one of Snowflake's earliest sales reps. He came from Oracle and I didn't traditionally like hiring Oracle people. But this guy got on and just boom, asking me this, this, this. He's almost like a sales engineer, but he was a sales rep and he was asking me all the right questions. And I'm like, "Man, I love this guy." And so, it's like, I walked out that being like, "I don't need to grill him on all this \[inaudible 00:41:54\]-"
Brett: And they turned out to be exceptional?
Chris: Yeah. He's still there. Yeah.
Brett: So, one is sort of curiosity. What else do you care about in an actual rep?
Chris: Curiosity. Being a self-starter. I always say a lot of times you're hiring a remote sales team. There may or may not be an office in that region. I can't tell you to get up every day and take a shower and shave and put your shoes and socks on and go on sales calls. I'm not a babysitter. I don't want to be a babysitter. I look at the metrics. The metrics are a spreadsheet that tells me whether or not you're going on sales calls. But are you actually going out and doing it? That's on you. And if you're calling me and saying, "I need help on this thing," I like you. If I don't hear from you, I'm assuming you're not doing anything. So, bring your problems to me. I'm okay with that. There was a crisis over the holidays with one of the companies I'm involved with. Loved it. It was not a great situation, but I loved being a part of it. I was super excited to be a part of it. And those are the types of things that gives me energy. And I think that's the type of sales rep I want, is like, bring me into a tough situation. I'm okay with that. I like that. I like solving those problems. So, I look for those types of people that have that willingness to be direct, that are self-starters, willingness to pick up the phone and call me, and that are intellectually curious. Those are the things that matter. And then you're looking for... We used to do assessments and I was looking for people that were really pessimistic, smart, intellectually smart, pessimistic.
Brett: Like, personality assessments?
Chris: Personality assessment and intellectual assessments. You're looking for someone who's smart and pessimistic. Why do I want pessimistic? Because I don't want someone with happy ears. If you're happy ears and you're nice and everyone's nice and you like everyone, well, guess what? There are going to be a bunch of deals that you're not going to get because people are going to lie to you. Buyers lie to you all the time. Procurement people lie to you all the time. You have to know that. You have to trust your instincts.
Brett: Do you think selling and closing top talent on your team is similar to selling software or entirely different?
Chris: For sure. Yeah. I mean, finding great talent and closing them, but you also have to be willing to walk... In top talent, it's a little bit of a dating game. You have to be able to walk away.
Brett: When you're a CRO, you're wearing different hats. One hat is you and your org. One of the other hats is a peer to the other execs. What have you found about playing that role and what it means to be an excellent peer? And/or what does a high-performing executive team look like versus doesn't look like?
Chris: I think transparency matters. I wrote a book with Denise Pearson, Make It Snow. And Denise and I worked together for seven-plus years, and we had this very direct relationship. And it wasn't like we were friends. We were friends, but we didn't get together outside of work. We didn't go to dinner ever. We didn't get coffee ever. But we were friends and we would share honest feedback with each other. So I think what I liked about Denise was, we were direct with each other. So if there was someone in her org or vice versa, in my org, that was a bad actor, we would tell each other. If there was something that was really urgent, Denise was not like, "Let's wait. I'll deal with that in six weeks." No. She'd pick up the phone and call someone right now and say, "Let's deal with this right now. Let's change..." She would make a change immediately. And so, I think that's the best way to-
Brett: If you think, that's both of your default way of behaving and you came together or you actively work to create that type of working dynamic?
Chris: I think it's a combination of. I think we had that culture together-
Brett: Because the normal dynamic is the salesperson blames the marketing person and the marketing person blames the salesperson, right?
Chris: 100%. By the way, sometimes founders like that, and that's not the right-
Brett: Why?
Chris: It's create this competitive culture. And it's like, "Hey, marketing throws up the slide that says, 'Here's all the leads that sales didn't follow up on.'" And what Denise centered on is like, "Okay, well, revenue is the number one metric for the company." She was world-class at her job. Her team was world-class at her job. So she would certainly care about like, "Hey, Chris, your team isn't following up on these leads." But she'd come to me direct. That was something that we did together. But she also... That was something that Frank Slootman encouraged. He always said, "Go direct." Like, "Don't go to dad and have dad go and deal with that stuff." So that would be like, "Yeah, I'll go directly to Denise," or, "I'll go directly to Christian Kleinerman," who's the SVP or chief product officer or whatever he is at Snowflake, or Mike Scarpelli, who was the CFO. You'd always just go direct with those people. And that's a culture... That's the way that Frank operated. Sometimes you might not like the answer that you're getting, but at least you're going direct to that person.
Brett: When you think about the... I assume there were phases along the 11-plus years where there was dysfunction in the executive team.
Chris: Yes.
Brett: Was most of it just the inverse of that? Or how would you define a non-productive exec team?
Chris: Towards the end of Bob's tenure, there were a couple execs that were empire builders. They cared more about what the size of their organization, the type of their title, that kind of stuff, than actually doing their job. And then they would be hard on their people, but not good at their job... Kind of one of those things like, "I expect you to be good at your job." Well, turns out you might have people that are good at your job, but you're not good at your job. And we had the same thing sometimes with a handful of people under Slootman as well. So, look, at the end of the day, there were execs that I worked with that were manage-uppers, very good, managed really well up to the CEO or even up to you, but then doing their job underneath was not great, or they just hired really crappy people, or they managed their team really badly, that kind of stuff. And you start to see that. And so, you would confront these people, and then they'd be overly nice to you but still bad at their job. And to me, that becomes problematic. And that's what I appreciate about Frank, is, he'd be like, "Man, I see this immediately." And he would take action. As a leader in general, if you see bad behavior, taking action on that behavior, that establishes so much credibility with your entire organization. If you let bad behavior exist for a long period of time, then you develop a really bad culture.
Brett: And maybe sort of on a similar note, when you think about the journey that you went through at Snowflake, what are the few, the two, three, four, five decisions in your orbit that you made that you think really mattered a ton, that were the input drivers? Outside of... most of it was, I think, as you said, doing the work yourself and building the team and-
Chris: I think culturally, it was, I brought the mindset of a very transactional organization, of a MEDDIC-built sales culture that was maybe not as hardcore as I needed to be at my previous job of MEDDIC, but very much bringing this sales methodology of... and going on a bunch of sales calls, very transactional. And that was the right thing for the company because we were all about... Our original investor always said, "Go and get market share before the competition gets product." So, we had product, but we didn't have market share. We're competing against Amazon, Microsoft, and Google, on top of their platform. So we had to get as many customers as possible. That was probably incredibly important. And then there were some tough human decisions, like firing some people. The worst part of being a leader is letting people go. But there were some decisions on firing people that I probably made too late, but I'm glad I did. Because when you make those types of decisions, as the company gets bigger and there's more money at stake for people, they're less willing to take risks on giving you information. But when you find this stuff out and you make the decision, falling on the sword. So there were very senior guys that worked for me that I fired and I had to go back and apologize to people, and being honest about it, saying, "I screwed up. I'm sorry."
Brett: Your current team, the team that you were with, you had to get rid of somebody and then go back to your team and say, "I-"
Chris: Not just my team, my entire sales org. I mean, I had to do a mea culpa to my entire portion of my sales org and say, "I'm sorry I screwed up on someone."
Brett: There's sort of this thing that everybody says, which is that you let go of people too late, generally speaking. Why is that, even sort of at very... you as a very, very senior leader?
Chris: I was fortunate enough to work for legendary leader in Frank Slootman. Frank has this thing where it says, "When there's doubt, there's no doubt." And I clearly remember this, when he first came on, he told me I had a problem, major problem. This is when he said, "Either you fix it or I fix it, but why do I need you?" That's where it came from. And I'm like, "Okay, I'll go fix it." And I did some research, found out, okay, went and fixed it. And then I remember coming to him and I hired another really senior person under his guidance. I mean, he interviewed the guy. Great. And then Denise, CMO, comes to me, and goes, "This guy's terrible." Three months on the job, "This guy's terrible." I'm like, "What? No, he's not terrible. Okay, Denise, I'm not going to argue with you. Let me go do some research." Week later I came back, I'm like, "Okay, yeah, he's terrible."
Brett: And the work you did is to talk to the people you trust around the person and fact-check.
Chris: Yes. Yes, fact-check. And so, then I start fact-checking and I'm like, "Oh, yeah, this is a problem." And then I bring the information to Frank and Frank's like, "Chris, what I'm going to tell you is you have too much empathy. You will not regret getting rid of this person as soon as possible, but I know it'll take you some time." And I had a one-on-one with that person an hour later and I'm like, "You know what? He's so right." And it was so awful. Because I had to, within an hour, call HR, "This is what I'm going to do," blah, blah, blah, blah, blah. I had someone else on the one-on-one, I had to kick them off the one-on-one and be like, "Dude, I'm sorry, but this isn't working." And he's three months on the job, and he was a very senior person somewhere else. And I'm like, "This is just not the place for you." He's like, "No, I can change." I'm like, "You can't change."
Brett: What was the core issue?
Chris: Very good at talking this way, very bad at execution. So, couldn't execute.
Brett: Seems like that's a real... the number one pattern is one of the things I'm taking from the conversation, that sort of flavor of behaving.
Chris: 100%. That's the favorite part of anyone that I work with. Do you have someone that actually does a good job or do you work with someone that just does a bunch of hand waving and points at people and says, "It's their fault. It's their fault. It's his fault"? No, it's your fault. Take ownership of it and then take action.
Brett: How did you over time get better at sussing this out in the interview process? If I looked at when you were hire more senior leader three years into Snowflake in the last year, and you're obviously very attuned to this because it seems like a real problem in hiring senior leaders, what were you doing?
Chris: I think that the unspoken thing that people don't always think about, you think, like, "Hey, I am hiring this person from XYZ company. Oh, my God, they've been there for 5 years, 7 years, 10 years. He must be great." Well, you really do have to go out and the number one thing you need to do is go and back-channel reference these people. And they might've been great at some point, but they may have lost that. And so you really do have to ask those questions of, like, "Tell me what it's like working with this person." Don't just be like, "I hear..." The most awkward thing for me now is I've had people that have worked for me that weren't necessarily successful at a specific job that are calling me and asking me for references now, because they want, "Hey, call Chris Degnan," right? And I have to be like, "Okay, well, this is what I'm going to say." I tell them that. And it wasn't great. I had someone call me and I had to tell her and she started crying, and it was not great. This happened quite recently. It's not great. But I'm like, "I'm an investor in this fund that is... They're going to call me. This is what I'll say. This is why I'll say this." And she called me the next day and said, "Thank you." And she still want me to be honest and say that... I'm like, "Okay, great." But yeah, it's awkward. It's awkward. But I think be honest, be honest, be honest, be honest, be honest. That's the thing, is, if you bullshit people, it's not going to be good.
Brett: But do you find when you're doing back-channel references that you know enough people that they will be honest with you? Because I feel like you're one of the... Most people you do a back-channel reference or you call somebody, and unless they're very close with you, "Oh, they're great," they're not going to be on... It seems like one of your core values is transparency and honesty. I feel like that's not the case out here with so many people.
Chris: It is not. It's not. You have to ask... That's why it's like, just like, "Hey, what was it like working with them? What were they good at? What were they bad at? Where would you develop them? This is an ex-Snowflake rep that someone wanted to put in front of a company I'm advising." I didn't know the rep. He worked in my organization. So I reach out to the guy who managed him, and he's like, "Yeah, he's a B player." And then I'm like, "Okay." So I'm talking to the head of sales about him and he's like, "Yeah, I don't want to talk to him," because of the reference I got.
Brett: Right. And you don't need to do sophisticated referencing if you have a \[inaudible 00:54:24\]-
Chris: But that's a guy that I know... That's a guy that I know and trust. Right?
Brett: ... care more about their relationship with you than they do with the individual.
Chris: Yeah. Yes. Yes. Yes.
Brett: And that makes things much easier.
Chris: Yes.
Brett: I wanted to wrap up by talking a little bit... And you hinted at this. You've worked with some extraordinary people. And I think given sort of your learning orientation, they've all really shaped who you are as a CRO. When you think about a few of the ones that have made the biggest difference for you, what have they imparted on you in the way that you approach being effective in the role?
Chris: Each CEO that I've worked for, I've learned a ton. I mean, look, I owe the majority of my career at Snowflake's success to Bob Muglia. Bob came on nine months after I was on the job, and I was suspect of him because he had managed 10,000 people at Microsoft and he's managing, I don't know, 30 people at Snowflake. So I was like, "What the hell is this guy going to do?" Turns out I was dead wrong. He was incredible, incredible for so many reasons. But I was the director of sales. And then I went to Bob and I said, "Bob, hey, people are calling me the VP of sales. Can I call myself the VP of sales?" He goes, "Sure, but I'm not going to promote you. I'm not going to give you more money. But you can call yourself the VP of sales. No problem." "Okay, great." Bob felt pressure from the board to bring in CRO over me. And he was like, "Well, why? What are we looking for that Chris is not doing? You've asked him to hire great leaders, he's hired those great leaders. You'd asked him to open up Europe, he's opened up Europe. You've asked him to hit the revenue targets, he's hit the revenue targets. I don't know what I'm looking for because he's it." And he took a risk and he promoted me to chief revenue officer. And look, the thing that Bob had the guts to do is take a risk on me. And I think that's something, a lesson for any leader is, you want to develop people. And there were so many little things that Bob did. I remember I came from EMC where very much it was like a sales-driven culture. You could bully your way through things. And just this classic example of Bob developing me was-
Brett: You mean the internal culture?
Chris: Yeah. You bully your way to get things done. And I remember Bob... So, Bob came in and he took the contract, the master license agreement that we had to sign with customers. And he made it two times as long, double the word count, double the number of pages. And I freak out on him and I'm like, "Bob, no way. You're going to make us fail. You're going to ruin us as a company." Because the hardest part for us, the contractual process was awful, still is with Snowflake. It's terrible, terrible, terrible because we take ownership of data. So you take indemnity, liability, security obligations, all this stuff. And it was awful. So, I freaked out on him. He goes, "I have one question for you." I go, "What's that?" He goes, "Did you read it?" And I'm like, "No, I did the word count. I counted the pages." And he said, "Okay, read it, redline it, send it to me, and we'll review it." And dude, it was such a great development opportunity for me because instead of me bullying my way and winning, which I didn't, he said, "I want to hear you out, but you have to be thoughtful about how you come back to me."
Brett: So, what was going on with him, though? The normal reaction is someone like you getting very angry, I would get very angry-
Chris: Because he's an incredible leader. He's like, "Okay, tell me what's wrong with it. I'm humble enough to take feedback." And that dude, that's incredible of a leader. Like, Sridhar Ramaswamy is a humble leader. You can tell him really awful things and he'll take that feedback and internalize it and then argue right back. So I think those are the things you look for in leaders, is like, "Hey, man..." So, to Bob's credit, A, I learned a lot from that experience.
Brett: You start to behave more like that?
Chris: I did, for sure. I learned. I learned a lot from that experience. A lot... By the way, it's not great to just force people to do things because you say so. Get them to understand why. The why. And that's like, Bob would explain, "This is why we have to do it this way. This is why we're doing it this way." And now we're like, "Oh, that makes sense." And so, bring people with you. You can... I mean, dude, Silicon Valley's full of super arrogant people that are successful. But man, I enjoy working for great people. And that was one of those great people. And Bob's just world-class.
Brett: Why do you think you and others, so many other talented people have followed Frank when he seems so difficult and hard? And what's going on with him that there's such followership?
Chris: Because you... This goes to... Earlier, I said, if you let bad behavior exist, you create this terrible culture. And that's the thing that you appreciate about Frank, is, once you make it through, he's relentless, so he'll never let you be that comfortable. But once you make it through, you're like, okay, you're one of those people that can survive in that environment, and you want to be around a bunch of other people that are like you. You don't want to be in a place that's a bunch of passengers, as Frank describes them. You want to be with a bunch of drivers. And that's the culture that he tried to drive. And I totally appreciate that. And organizationally, that drives this incredible culture.
Brett: Cool. Good place to end.
Chris: Yeah.
Brett: Thank you so much for the conversation.
Chris: Thank you. It's great.
Brett: I appreciate it.
Chris: Yeah, appreciate.
### Do you really need a forward deployed engineer?
URL: https://review.firstround.com/do-you-really-need-a-forward-deployed-engineer/
Last updated: 2026-02-24T16:54:22.000Z
*We spoke to founders and operators who’ve hired (and been) FDEs to find out what it takes to build the model at your company.*
## [So You Want to Hire a Forward Deployed Engineer: How to Know If You Need One and How to Get the Role Right](https://review.firstround.com/so-you-want-to-hire-a-forward-deployed-engineer/)
[](https://review.firstround.com/so-you-want-to-hire-a-forward-deployed-engineer/)
Once written off as a glorified consultant, the forward deployed engineer is now the hottest gig at AI startups.
The FDE was originally conceived by **Palantir** to wrangle value out of a non-prescriptive product. The title is descriptive: Palantir FDEs spent most of their time literally deployed with customers, and were still very much engineers, writing and debugging production code for some incredibly niche use cases, from government to supply chain to energy.
Now as AI products collide with the reality of legacy systems and thorny codebases, founders have turned to the forward deployed model to send engineers onsite to help speed the time to value for enterprise customers.
But what’s missing from the FDE hype cycle — no doubt also buoyed by Palantir’s outlier success in recent years — is that the role isn’t one-size-fits-all for every AI startup. It takes a ton of intentional design to actually get a return on investment.
“Forward deployed engineering is being framed as a panacea right now. But it’s a lot more complicated than that,” says James Honsa, who previously built and scaled **Ironclad**’s equivalent of an FDE team, called “legal engineering.” “**There are times in a company's lifecycle where it makes sense, and there are customer segments where it makes sense, but it's a pretty blunt instrument to try to use for your entire business**.”
We sat down with founders who’ve hired FDEs and former Palantir FDEs and recruiters to break down what justifies adding forward deployed headcount, and how to find the right folks for the job.
Our panel covers:
- Where FDEs add value, from uncovering obscure but meaty product opportunities to scaling scrappy CTO energy
- A diagnostic to figure out if you actually need an FDE, or just want a traditional engineer or post-sales hire who can talk to customers
- The traits all stellar FDEs have in common
- How to scope the role for success and choose which customers to deploy to
Thanks, as always, for reading and sharing!
*\-The Review Editors*
[Take me to The Review](https://review.firstround.com/so-you-want-to-hire-a-forward-deployed-engineer/)
### So You Want to Hire a Forward Deployed Engineer: How to Know If You Need One and How to Get the Role Right
URL: https://review.firstround.com/so-you-want-to-hire-a-forward-deployed-engineer/
Last updated: 2026-02-25T20:42:54.000Z
**Palantir** co-founder and CEO Alex Karp famously [made an observation](https://x.com/jawwwn%5F/status/1880379025366868180?s=20&ref=review.firstround.com) about why French restaurants are so renowned for their quality: The waiters are an extension of the kitchen staff. They understand how the kitchen operates as well as the cooks, so they can recommend a pairing or custom dish tailored to a diner’s unique taste.
That’s the culinary inspiration behind the forward deployed engineer, first devised by Palantir nearly two decades ago. The FDE embeds directly with a customer to build the “last mile” of the product to work in production. But unlike a traditional solutions consultant or sales engineer, the FDE is still very much an engineer who writes and debugs production code. Palantir FDEs would spend their days literally onsite (hence the “deployed” in the title) with all kinds of large organizations, from local government agencies to healthcare giants to supply chain operations.
Skeptics wrote off the FDE as glorified consulting for many years, convinced that a true software business shouldn’t need such a labor-intensive deployment process. But Palantir’s outlier success in recent years — it now has a market cap north of $300B — cast new spotlight on the role it pioneered.
If you browse open roles at a startup right now, chances are you’ll come across a [listing](https://www.linkedin.com/jobs/search-results/?keywords=forward%20deployed%20engineer&ref=review.firstround.com) for an FDE. Monthly job listings for the role [shot up by 800%](https://www.ft.com/content/91002071-7874-4cb7-9245-08ca0571c408?ref=review.firstround.com) from January to September of 2025.
The FDE has taken on a new meaning for AI startups setting their sights on the enterprise (even OpenAI [is building out its own fleet](https://www.theinformation.com/articles/openai-hiring-hundreds-ai-consultants-boost-enterprise-sales?ref=review.firstround.com)). Founders are turning to the FDE model to roll out highly technical AI products to red-tape-lined legacy workflows — an FDE can jump in to build around the blockers that stand in the way of adoption at these types of companies, from unruly codebases to compliance hurdles.
[**Jake Stauch**](https://www.linkedin.com/in/jakestauch?ref=review.firstround.com), co-founder and CEO of [**Serval**](https://www.serval.com/?ref=review.firstround.com)(an AI platform for IT) who’s building out an FDE team for his startup, says the model is taking hold at AI startups to help their enterprise customers get value out of agents. “Software platforms have become so powerful that their capabilities are no longer the rate-limiting step for the customer,” he says. “AI unlocked all of these long-tail capabilities, so it can theoretically do anything imaginable. But somebody has to steer the product to do it in that way.”
Given all the demand for FDEs on the startup side, we wanted to dig deeper into what actually makes this role successful. As we found out, while FDEs can be powerful when deployed intentionally, they’re hardly the answer for every company, or customer, and it takes a ton of careful design to get a return on investment in the role.
“Forward deployed engineering is being framed as a panacea right now. But it’s a lot more complicated than that,” says [**James Honsa**](https://www.linkedin.com/in/jameshonsa/?ref=review.firstround.com)**,** co-founder of the deployment agent company [**Genera**](https://www.withgenera.com/?ref=review.firstround.com)who previously built and scaled **Ironclad**’s equivalent of an FDE team, called “legal engineering.” “**There are times in a company's lifecycle where it makes sense, and there are customer segments where it makes sense, but it's a pretty blunt instrument to try to use for your entire business**.”
So we spoke to folks who’ve successfully scaled FDE teams to uncover the exact systems and strategies that worked: the business quirks that justify the steep investment, the hiring strategies that net all-star FDEs, the scope that maximizes the role's impact.
In addition to Honsa and Stauch, here’s our panel:
- [**Shilpa Balaji**](https://www.linkedin.com/in/shilpabalaji/?ref=review.firstround.com)**,** who joined Palantir as an FDE, where she went on to lead FDE recruiting, and is now building an FDE team at [**Promise**](https://www.promise-pay.com/?ref=review.firstround.com), a payment platform for government
- [**Frank Bien**](https://www.linkedin.com/in/frankbien/?ref=review.firstround.com) and [**Lloyd Tabb**](https://www.linkedin.com/in/lloydtabb?ref=review.firstround.com)**,** former CEO and co-founder of **Looker**, respectively, who together built and scaled a proto-FDE team
- [**Tiffany Siu**](https://www.firstround.com/team/operating/tiffany-siu?ref=review.firstround.com)**,** First Round’s Head of Talent and a former recruiter at Palantir
Let’s dive in.
## Where forward deployed engineers add value
The FDE nowadays can get lumped in with an implementation role — but that’s drifted from its Palantir origins, says alum Shilpa Balaji. "Deeply understanding your customer and executing for them through product implementation or configuration is important, but that’s not forward deployed engineering. The FDE model requires making room for creativity and innovation. It’s about discovering new things in a customer context and decentralizing product development,” she says.
Serval co-founder Jake Stauch agrees that FDEs are much more than implementation leads. “**The way I see an FDE is as an actual member of the software engineering team. Don’t just force them into implementation. Let them build the software, because they’re the ones talking to customers all day**,” he says. “FDEs actually make the product better and more attractive to our ICP, while still reducing friction in the implementation process.”
A [Palantir FDE](https://blog.palantir.com/dev-versus-delta-demystifying-engineering-roles-at-palantir-ad44c2a6e87?ref=review.firstround.com)’s charter might be to work alongside a manufacturing customer to reduce the number of defective products coming off of the assembly line, or to deploy software to help a government administer supplies for natural disaster relief. At Serval, for example, which is building an AI ITSM, FDEs have shipped a lot of real product inspired by time spent on the ground with enterprise customers: They’ve built over 60 third-party app integrations, a feedback system for users to rate agent performance and an SLA system within the product.
The most impactful use cases for FDEs typically fall into these buckets, across both product and business.
### Push a big deal over the line
Pulling FDEs into the [sales process](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/) can help close VIP contracts. That’s exactly what Looker did: They’d set up prospects with a free trial, along with heavy pre-sales implementation efforts using their actual data in demos.
“We thought we were deciding between product and service, but not deciding unlocked a third way: Selling as a product and forward-deploying during the free trial so it felt like a customized service,” co-founder Lloyd Tabb told us. “When selling the product, we used the demo as a chance to build a proof of concept, so we didn’t have a dummy sales pitch version — we always asked the prospect for an actual dataset to play with. Then, if we could get our prospects to use the product as much as possible in the free trial, we could comfortably ask for money later.”
Shilpa Balaji shares a similar story from her Palantir days. “We had three or four forward deployed engineers working with a customer in the energy space who just totally hand-rolled something to win the business, to fit the specific problem space, to create something of real value,” she says. “And they weren’t thinking at all about what the roadmap was, or if they had agreement from the mothership. The directive is just build the product, generate value.”
### Find obscure but meaty product opportunities by embedding with customers
The “deployed” nature of the role leads to deeper insights that are hard to come by on a 30-minute Zoom [customer discovery](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) call. Balaji says FDEs should ultimately be creative problem solvers in the field — who can think without roadmap constraints.
“Living onsite with the customer is such a core part of being an FDE. You're not just setting up a user interview. You're embedding with them. You're prototyping what you hear one day and showing them something the next day,” she says.
That extended immersion is what leads to the most interesting product use cases. “What’s really powerful about an FDE model is that they can be creative. FDEs invent something not by synthesizing it with a broader product, or reprioritizing a roadmap. They’re so scrappily tied to a customer and their problem that they don’t even think about what ‘product’ is,” says Balaji. “Some of the most successful FDE stories from my time at Palantir had nothing to do with the core product offering.”
> The value in a forward deployed engineering model is engineers are directly embedded with the customer. And when they see things that other people don't see, they should form conclusions that other people don’t form.
> — *Shilpa Balaji, former FDE recruitment lead at Palantir*
The risk here is that FDEs could crank out a ton of random features that don't improve the core product. So FDEs need a nose for problems that can ultimately serve other customers. “If your forward deploying engineering team has a really strong product sense, chances are that whatever customers ask for, they'll be solving a problem that a lot of other folks have,” says Jake Stauch.
### Scale scrappy CTO energy
Another benefit Stauch has found from building out an FDE team is that it recreates the early days of a co-founder single-handedly shipping code for customers.
At Serval, the difference between an FDE and a standard engineer is small: FDEs are expected to spend around 20% of their time with customers, and they’re focused on building product capabilities, and not infra, Stauch says.
“If your forward deployed engineers are the best engineers on your team, you’re reproducing the early co-founder energy where your CTO hears feedback directly from the customer and immediately fixes it and makes the product better. FDEs are a way to scale that,” says Stauch.
The FDE model runs much faster than the traditional feedback-to-product cycle because it removes the “middlemen.” “In any company, you have solutions engineers, customer success staff, account execs. Maybe the solutions engineer hears a good idea and they communicate it to a product manager. The product manager talks to the engineering manager, and then it gets scheduled in a sprint in the quarterly plan,” he says. “But there’s this gap between a customer saying, ‘I wish it worked this way,’ to the problem being addressed. That can take months, even at a great company. So it’s much better if an engineer hears that feedback directly, then goes back to their desk and builds it.”
> FDEs recreate what happens in the early days of a startup when it's just a couple founders asking customers, ‘What do you want? Cool, we'll build it.’ And then they’ll come back the next day and say, ‘Did this fix your problem? What else do you want?’”
— *Jake Stauch, co-founder and CEO of Serval*
### Clean out the feature garage
The tighter feedback loop that leads to increased shipping velocity allows FDEs to build lower-priority but still impactful features that might otherwise get stuck in roadmap purgatory.
Before founding Serval, Stauch was Product Lead at physical security platform **Verkada**. The sales team had a Slack channel called “Feature Garage,” where they’d dump customer feature requests that, largely, went untouched. But Stauch says that with an FDE model, engineers can action on these requests — not by building the exact features, but by addressing the deeper need.
“Forward deployed has a huge role in driving progress on non-controversial product capabilities. No one needs to have a brainstorming session or a roadmap around when to slot that in. They can just go and build it,” he says.
These seemingly small product blemishes can add up. “Overprioritizing is actually a mistake that really good product leaders make,” says Stauch. “They never touch the P2s. **But P2s stack up, and if you never have anyone look at P2s, you’ll end up with an inferior product, even though you were technically focused on all the right things. With the forward deployed model, P2s actually get looked at**.”
## Take this diagnostic before adding forward deployed headcount
While these benefits would entice any founder, FDE dreams can be misguided if a few key business ingredients are missing. “I think when folks today are looking to build out FDE teams, a lot of what they're looking for is just stronger customer signal and faster iteration. But you don’t need a whole fleet of FDEs to do those things,” points out Shilpa Balaji.
**Investing in an FDE team, especially in the earliest stages of a startup, is a costly bet — and can quickly burn a lot of cash if the math doesn’t add up.**
Frank Bien was tasked with scaling Looker’s scrappy sales motion when he stepped in as CEO. “When I joined, there were still a lot of unknowns. Should we sell for $500 a month or $5,000?” [Bien told us](https://review.firstround.com/the-inside-story-of-how-this-startup-turned-a-216-word-pitch-email-into-a-2-6-billion-acquisition/). “It was all up in the air — and there were no spreadsheets or slide decks to be found. In my mind, it was similar to Marketo’s model, meaning it wasn’t going to be just a couple hundred bucks a month. We needed to be in the neighborhood of $25,000 a year per customer.”
Validating there’d be a healthy return made Bien confident to invest in an FDE model in the early days. “After crunching the numbers, we saw that by the time we had 2,000 customers, we could be doing $100 million dollars in ARR, and on the path to going public. That was the model from 2013 on,” says Bien.
“You have to know your model backwards and forwards to make a bet like that. We knew the margins on the costs we were sinking into pre-sales support made sense,” he says. “But if we had been unsure whether it was going to take 2,000 customers or 100,000 customers to reach the $100 million run rate, that would have been an incredibly risky move — we very easily could have been lighting our VC dollars on fire.”
> If you’re confident in your model, you don’t have to worry whether you can support all the resources you’re sinking — you can do the math and find out.
— *Frank Bien, former CEO of Looker*
So before putting out a call to FDEs, make sure your business has these three features.
### 1: You’ve landed (or are going after) big fish
“Forward deployed engineering is definitionally an upmarket motion,” says James Honsa (former head of legal engineering at Ironclad). “**You should not be doing this if you believe the end shape of your product is some sort of product-led growth freemium fit**.”
That doesn’t necessarily mean you can’t also have customers with smaller annual contract values (ACVs). But the upper end of your customer base should include the likes of the Fortune 500, and that's where a forward deployed team should be spending their energy.
Honsa joined Ironclad before it reached $1M ARR as the first dedicated post-sales hire. He says the early Ironclad team understood that their best business would be with the legal departments of huge global companies — and they’d need dedicated engineering talent to win those contracts. “The very first version of Ironclad’s product worked out of the box. But the founders knew that all the juicy, high-value legal work would require very bespoke implementations. So to lock in these enterprise ACVs, we had to accept that the product couldn’t have pre-made building blocks,” he says.
### 2: You aren’t prescriptive about how you want customers to use your product
Shilpa Balaji advises founders to ask this question to evaluate their startup’s need for an FDE: **How opinionated are you about what your product should be in the future?**
If you *are* very opinionated about what your product should be, FDE might not be a good fit, because so much of their value comes from discovering new product opportunities. “If you do have a strong opinion, or want to, then what you're probably saying when you want an FDE is that you just want more customer signal, or more customer proximity to validate your hypotheses. That’s useful, but a PM could do that, or an engineer who can talk to a customer can do that,” she says.
Balaji explains that, on a product opinionated-ness spectrum, you have Apple at one end and Palantir at the other. Apple’s products are the epitome of “out-of-the-box” — everyone more or less experiences and uses an iPhone the same way. SaaS businesses tend to fall into this camp, too. Palantir, on the other hand, develops platforms that can shapeshift to meet the needs of highly variable problems and organizations.
Balaji says that Palantir’s roadmap in the early days was shockingly uncharted. “**Early on at Palantir, we rarely said, ‘This is what the product should be.’ FDEs helped us build incrementally more valuable products. Each thing we built, we had learned from a concrete use case and customer**,” she says. “So for a more SaaS-ified product offering, where the founder has a strong and unwavering vision for what that product should be in the future, that tells me they’re not the best fit for an FDE.”
> I think the learning the industry is taking away from the FDE’s newfound popularity is, ‘Oh, you should listen to your customers!’ Of course you should, but FDEs are for organic product growth.
*— Shilpa Balaji, former FDE recruitment lead at Palantir*
### 3: You don’t have a uniform ICP
We’ve catalogued here on The Review how many startups have found product-market fit by honing in on an ultra-specific [ICP](https://review.firstround.com/how-vanta-clay-retool-found-icp). But having a detailed list of customer criteria might actually make you a bad candidate for an FDE team, at least early on.
“FDEs make a ton of sense when your product can be deployed across a diverse range of use cases. Palantir is the extreme, canonical version of this, but at Ironclad, our version of this problem was that we could sell to any industry in the world from our earliest days,” says James Honsa.
Ironclad’s early customer mix had little in common. “For our first 50 customers, we had public tech companies, YC startups, global beauty brands and professional sports teams. We were implementing contract processes for all of them, but the needs for building out an influencer agreement workflow in Japanese were super different from season ticket sales contracts for an MLB team,” he says.
But the one through line of customer personas that warrant an FDE, says Shilpa Balaji, is that they all have technically demanding problems that can’t be solved with out-of-the-box products. “FDEs aren’t just sales engineers. They should be tackling really difficult problems that are very customer-specific, problems that need to be solved to achieve the outcome both you and your customer want,” she says. “At Promise, we’re building out an FDE team because our customer base — the US government — is heterogeneous. Each state administers their government programs differently, and the customer and technical landscapes vary a lot. So we need to be building and learning at the edges.”
### Don’t shove an FDE into an engineering or post-sales role
First Round’s Head of Talent, Tiffany Siu, has kicked off searches with founders who start off by saying they want an FDE — only to realize, upon digging deeper, what they actually need is either a formal software engineer or a post-sales role, like an implementations consultant or customer success manager.
“**When founders hire an FDE, they often imagine an all-in-one person who can build the product, implement it, train customers, customize it and keep everyone happy. That’s not realistic at scale, but it does capture the need for someone who can bridge engineering and customers early on**,” she says.
Siu likes to ask these questions to help founders clarify whether an FDE is the right role to hire for:
- **What triggered this opening? Who’s doing this work on your team today? What would happen if you don’t hire this person?** “I find these questions help founders frame the real-world use case of this person. Because on paper, sometimes they'll say, ‘We need this person to do this,’ but it doesn't line up with what actually triggered the hire,” says Siu.
- **What would this person’s day-to-day work look like?** Thinking about how you’d structure a potential FDE’s schedule can help sort out whether this role is truly a customer-facing engineer, or just extra hands for GTM or operations. “It can be surprisingly hard for founders to think of a hire’s schedule on a granular level. Sometimes they’ll say something vague like, ‘I want them to work with customers,’ but getting more specific about what their week would look like can be very revealing,” she says.
- **How will you measure this person’s success?** “If this person were to crush it or not crush it, what would they have done? Thinking in numbers and key metrics can help you get really clear about the role you need, like quota, user adoption and usage, for example,” she says.
She shares an example of a founder who initially thought they wanted an FDE, but eventually landed on an implementations lead: someone focused on getting the product set up and live for customers. “As we walked through what this person would be doing day to day, it became clear they didn’t want someone to build or extend the product by writing code. They needed someone who could execute repeatable deployments and work closely with sales — someone who could reliably get customers live using the existing product,” she says.
> If a founder says, ‘I want this forward deployed engineer to have closed X deals or run X number of demos,’ they probably want someone closer to sales, not an FDE.
*— Tiffany Siu, First Round’s Head of Talent*
## Hiring the right forward deployed engineer
So you’ve sorted out that an FDE does make sense for your startup. How do you find the best person for the job?
You don’t necessarily need to start by scouting someone who’s already been an FDE. “There are many different versions of forward deployed engineers today. An FDE at Palantir can look very different from an FDE at an early-stage startup. So founders shouldn’t optimize for the title alone — it’s worth taking the time to understand how the role is actually structured at that company, and asking candidates what their day-to-day work really looks like,” says Siu.
In some cases, titles and pedigree can even be an anti-signal. The most stellar FDEs our panel has worked with all had these five qualities in common.
### Look for these five traits
**They don’t bring in a playbook (and are often early in their career).** At Palantir, recent college grads made up a bulk of the FDE roster. “An FDE isn’t somebody who brings a playbook with them. They’re not doing a lot of pattern matching. They’re outcome-oriented, independent thinkers, who have a belief that any problem they confront can be figured out,” she says. “New grads bring a fresh pair of eyes to the table. People earlier in their careers just tend to be more open-minded about the problems they solve, and how to solve them.”
A lower seniority level wasn’t a fixed requirement, but generally speaking, the more specialized experience an FDE candidate had, the less likely they’d have that same level of independent thinking. “If someone came in overly dogmatic or set in their ways, I found that was actually a red flag for an FDE. So folks who spent more than 10 years at a FAANG company, for example, were in the no fly zone,” says Balaji.
**They’re gritty.** Balaji says grit is probably the hallmark quality of the best FDEs she worked with at Palantir. To put it bluntly, she says they had a “willingness to eat pain.” “Forward deployed engineering is painful. So many of the problem spaces FDEs worked in are extremely difficult, so these folks really need to believe they can do the impossible,” she says.
James Honsa agrees, saying that the best FDEs at Ironclad were “grinders.” “There's just a lot of work to do at a hypergrowth company. In deployments, a lot of this work was necessary, but not strategic, and that was a persistent challenge to manage as our customer base grew,” he says.
That run-through-walls energy is a trait shared by founders. Jake Stauch says FDEs often serve as mini-founders in the org. “FDEs have a strong product sense and an actual interest in sales. They have to like the fact that they’re working to get a deal done. These folks are often former or future founders,” he says.
**They clear a high technical bar.** “Engineer” is still an essential part of the job title. Honsa emphasizes that many of the folks who made the best FDEs at Ironclad could have also gone on to become a staff engineer at a top tech company. “The role is technical. In the early days at Ironclad, legal engineers were merging code into production and doing code review with our CTO every single week,” he says.
Siu agrees that what Palantir got right with their FDE model was never compromising on technical skills. “I think why Palantir was so successful with their FDEs in the early days is that they had to pass the same interview loops and facets as software engineers. They could be a traditional engineer if they wanted to, but they had these other skills that made FDE compelling,” she says.
**They don’t stop shipping.** “The best FDEs I worked with were compulsive builders,” says Balaji. “This type of person just can’t help but create something. They’re prolific, whether it’s building a tool, releasing some app, or contributing to an open-source project, they just have a restlessness to build.”
**They’re deeply curious about how businesses work.** “FDEs are innately curious about businesses,” says Honsa. “They’re someone who gets energy from going super deep on the legal risk of influencer marketing and how to create a high throughput process that protects our customers, for example. We firmly believed that we could upskill people who had the right drive.”
> Would you want to be in the trenches with this person? That’s the bar I hold for a really exceptional forward deployed engineer.
*— Shilpa Balaji, former FDE recruitment lead at Palantir*
### Interview for raw problem-solving ability (but don’t skip the coding test)
Shilpa Balaji says Palantir diverged from the classic big tech coding interview. Instead, Palantir oriented FDE interviews around the real technical challenges the company was trying to solve for their customers.
“There’s the Google style, which is interview, coding test, interview, coding test, repeat. But lots of our questions at Palantir were oriented around really high-level problem solving,” she says. “So the FDE hiring manager would say, ‘Here’s something that one of our customers is working on. No one has ever been able to solve this problem. How would you solve it?’”
Balaji offers an example of a problem-solving scenario Palantir would share in interviews: “We would explain insider trading to the candidate and ask them to design a solution: What data would they need, what questions would they ask the customer, what would they look for? We wanted to assess both their business reasoning and technical reasoning,” she says.
Honsa says Ironclad similarly set up interviews to screen for problem-solving skills. “Our most effective interview tactic was to ask folks to present a problem from their career and teach us how they used technology to solve it,” he says. “This was intentionally open-ended but elicited amazing responses. One of our founding legal engineers gave a presentation where he showed photos of a physical ‘deal room’ from a multi-million dollar aviation financing transaction, and how he’d printed thousands of pages and individually sticky-noted them, followed by the Excel macros he created to automate future closings.”
> We looked for forward deployed engineers who got energy from a very open-ended prompt. Because often our customers came to us with very open-ended prompts.
*— James Honsa, former Head of Legal Engineering at Ironclad*
## Scoping the role
Once you’ve embarked on hiring your first FDEs, lean on these three tactics to set up the role for impact — for both the FDEs themselves and your business.
**Reserve FDEs for your biggest customers’ hardest problems.**
Ironclad didn’t send legal engineers out to onboard every single customer. James Honsa says the team learned over time to reserve their FDEs for only VIPs. “In the early days, we justified the model for every customer. But as we matured, we actually bifurcated our post-sales team into legal engineers, who we reserved for high ACV customers,” says Honsa. “I think teams today make the mistake of thinking you’re either fully an FDE company, or you’re not. Ironclad was successful at having a wide range of menu options given the customer need, and systematizing our downmarket implementations to be more cookie-cutter.”
> One of our biggest learnings at Ironclad was figuring out how to sprinkle FDE on the right customers at the right times as we grew.
*— James Honsa, former Head of Legal Engineering at Ironclad*
Jake Stauch says the FDE’s scope has evolved similarly at Serval. “At first they deployed to all customers. Now we prioritize our largest customers. For us, those are companies with more than 1,000 employees, where it’s more likely they’ll need to build custom capabilities,” he says.
**FDEs do their best work when they’re onsite.**
Back when Shilpa Balaji was an FDE herself, she says some of her most impactful work happened during extended travel to a customer’s site. “I once spent weeks in a small German town with just two other colleagues. We’d go onsite to the customer’s factory floor. So we had to embrace not just the list of requirements that this customer put in their contract, but we had to spend time with their day-to-day experience. What you discover onsite is going to be so different from what was sold in the contract,” she says.
James Honsa says Ironclad’s FDEs also embraced the travel lifestyle. “One of my favorite moments was when a Fortune 100 General Counsel lovingly called us ‘The Backpacks’ when we arrived at their office,” he jokes.
**Embrace scope creep, but be wary of throwing human labor at a product problem.**
Leaning into the services nature of the FDE role is a key part of what makes it so impactful — so long as you’re not letting FDEs sink bottomless hours into a solution that won’t benefit future customers.
“In the early days at Ironclad, our view was that if we were experiencing scope creep, it was because the customer had more problems that we could solve,” says Honsa. “The key thing we got right was that our software economics benefited from scope creep. So we priced based on workflows early on. For our second customer, we’d meet a new attorney who said, ‘Hey, by the way, I do this master services agreement workflow. Can Ironclad help with that too?’ We’d say yes, and our sales team would figure out how to monetize it.”
The bad version of scope creep, says Honsa, is conducting the n-th round of iteration on a workflow with capped user volume. “If we found ourselves working on use cases where we were just endlessly iterating, and there was no clear path toward a software upside, we’d have to find a way to break off the work,” he says.
But Honsa says a truly gritty FDE will embrace scope creep in pursuit of the solution to a tough problem. Wrangling the scope should be their manager’s problem — stepping over contractual bounds probably won’t even occur to a great FDE.
“We had a team that was so driven by solving customer problems that they wouldn't even realize it. Sometimes I'd tell my team, ‘Oh, my God, you spent how many hours optimizing this thing?’ and I’d have to get on a call with the customer and rebalance the scope. But that was a good problem to have.”
### Listen: Most CROs are salespeople. Vanta’s CRO says that's changing
URL: https://review.firstround.com/listen-most-cros-are-salespeople-vantas-cro-says-thats-changing/
Last updated: 2026-02-22T16:04:07.000Z
*Vanta CRO Stevie Case is on Executive Function this week to unpack how revenue leadership is evolving in the AI era.*
[](https://www.youtube.com/watch?v=phPoMj%5FC%5FpE&ref=review.firstround.com)
### Listen now: [YouTube](https://www.youtube.com/watch?v=phPoMj%5FC%5FpE&ref=review.firstround.com) | [Apple](https://podcasts.apple.com/us/podcast/why-90-of-cros-will-fall-behind-in-the-next-2/id1535886300?i=1000750478852&ref=review.firstround.com) | [Spotify](https://open.spotify.com/episode/1DgcvKuZ1riy7rVDhSAb0k?ref=review.firstround.com)
“In 2028, CROs will need to be systems-first instead of human capacity-first. That's not to say we won’t have large go-to-market teams, but we’re going to have to have CROs who know both sides of that equation. **And I think less than 10% of current CROs are capable of making that transition**.”
**Stevie Case** is no ordinary revenue exec. A former pro gamer, she found her way into sales when a mentor took a chance on her, climbing her way up as a sales leader at **Twilio** before joining **Vanta** as CRO.
She sat down with First Round Partner Brett Berson to dissect how she operates as CRO today, and how she thinks her role is going to change over the next few years.
She shares:
- **What founders get wrong about early sales hire**: Founders filter for pedigree when looking for the first sales hire, when they should be looking for hunger. “A lot of times founders are hiring for someone with shiny logos on their resume. But the right profile for a first sales hire in your company is probably not that big logo person. You need what we call a Renaissance rep, somebody who’s more creative, more entrepreneurial. They're not necessarily going to have the prettiest resume.”
- **Why “Midwest assassin” is such a powerful seller persona**: "We've got this Midwestern vibe of people at Vanta who feel like they're outsiders and have this hunger," she says. To find those people, Stevie asks candidates to describe a time they had to grind to get an outcome they wanted, personal or professional, playing close attention to how they tell that story. “When people tell you the story of something they had to really work hard to achieve, you either hear somebody who is ultra-confident and tells you how everything went right, or somebody who can own the things they did wrong."
- **Why the next generation of CROs will be technical**: Stevie says CROs in 2028 won’t necessarily have a profile like hers. “You're going to see people who have enough exposure to sales, but also are technical and get systems. It could be someone with a growth, RevOps or GTM engineering background, and it won’t necessarily be somebody who came up through 10-plus years of selling.”
[Listen to the episode](https://www.youtube.com/watch?v=phPoMj%5FC%5FpE&ref=review.firstround.com)
We’ve got a lot more interviews lined up in the coming weeks. Here are some of the incredible execs you’ll be able to learn from:
- **Chris Degnan**, former CRO at **Snowflake**
- **David Singleton**, former CTO at **Stripe**
- **Katie Burke**, COO at **Harvey**
- **Sheila Joglekar Vashee**, CMO at **Figma**
[Take me to Executive Function](https://review.firstround.com/executive-function/)
### Why 90% of CROs will fall behind in the next 2 years | Stevie Case (CRO, Vanta)
URL: https://review.firstround.com/executive-function-stevie-case-cro-vanta/
Last updated: 2026-04-29T03:38:57.000Z
Stevie Case is the CRO of Vanta, the trust management platform serving everyone from founders to Fortune 100 CISOs. A former pro-video gamer who stumbled into sales through a mentor's bet, Stevie has built one of the most unconventional paths to the C-suite in tech. In this episode, she unpacks why early revenue hires fail, what separates a true CRO from a VP of Sales, and why she believes fewer than 10% of current CROs will thrive by 2028.
In today's episode, we discuss:
- Why early revenue hires fail
- What a top 1% CRO actually does
- The scaling mistake Stevie made by copying Twilio's playbook at Vanta
- Why Vanta remains 100% sales-led at every segment
- AI vs. humans in go-to-market
**References:**
- Cursor: [https://cursor.sh/](https://cursor.sh/?ref=review.firstround.com)
- Gong: [https://www.gong.io/](https://www.gong.io/?ref=review.firstround.com)
- Salesforce: [https://www.salesforce.com/](https://www.salesforce.com/?ref=review.firstround.com)
- Twilio: [https://www.twilio.com/](https://www.twilio.com/?ref=review.firstround.com)
- Vanta: [https://www.vanta.com/](https://www.vanta.com/?ref=review.firstround.com)
**Where to find Stevie:**
- LinkedIn: [https://www.linkedin.com/in/steviecase/](https://www.linkedin.com/in/steviecase/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Why early revenue hires fail
02:23 Who to hire at $5M in revenue
04:16 Coin-operated sellers vs. long-term builders
05:57 What excellence looks like in the CRO role
07:44 Metrics, confidence, and velocity
12:04 Should CROs lead sales?
14:39 From shy seller to revenue leader
16:36 Learning to scale at Twilio
17:44 "There is no CRO playbook"
19:58 Stevie's scaling mistake at Vanta
22:16 Why Vanta stays 100% sales-led
23:16 The value of planning 24-26 months ahead
29:54 When trusting intuition was the wrong call
30:49 Do humans still have a place in the future of GTM?
33:33 Stevie's leadership non-negotiables
36:36 The myth of hiring for industry expertise
40:00 What stays centralized in a 600-person company
47:09 The hidden leverage of a customer's first 30 days
53:42 Why the CRO role will face enormous changes by 2028
58:42 What leaders must do now to stay relevant
01:02:30 Unpacking the CEO-CRO dynamic
Brett: All right. Let's do it. Thank you for joining.
Stevie: Yeah, I'm excited to be here.
Brett: Why do you think that early revenue hires are some of the highest turnover people and roles in all of technology? It feels like a CEO goes out, they're hiring their first not necessarily GTM person but revenue leader and you follow up in six months and that person is no longer there. What's so thorny about the role?
Stevie: There are a couple of things that make those first hires very thorny. One is unrealistic expectations. The early sales pre-product market fit sales are truly coming from belief in a founder. Yes, there has to be excitement about the product, but there's a certain amount of trust and faith, and a founder tells a story in a way that builds trust and faith in where it's all headed. Often, that first sales hire is coming in or first leader is coming in and they're expected to replicate that same success. They don't have the authenticity of the origin story. They didn't build the product, so their ability to tell the story the same way just isn't there. So founders trying to pass that responsibility to somebody else is one of those original kind of thorny problems. The second is that a lot of founders don't love selling. I think that understandably it's uncomfortable, and so they bring somebody in to solve that problem for them. They're bringing people in too early to try to pass off figuring out product market fit. They're bringing them in to try to crack the nut on, "How do we sell this thing?" If you haven't figured that out as a founder, expecting somebody else who is not intimately involved in creating the product and the vision, try to solve that problem does not work. The third most common reason this is a problem is a lot of times founders are hiring for resume and they're looking at shiny logos. They're looking at somebody that's been at a big company and what they don't realize is the right profile for a first hire or a first sales leader in your company is probably not that big logo person. You need what we call a Renaissance rep, somebody that's much more creative. They're more entrepreneurial, and they're going to get out and be super curious and hustle. They're not necessarily going to have the prettiest resume.
Brett: What else can you share about that? So let's imagine a company's at five or 10 million in revenue. Maybe they have a couple of junior sellers that are supporting largely founder-led sales. What else can you say about who is ideal for that role and what would their background have been?
Stevie: Yeah, it really can vary. There's not necessarily a perfect recipe for who that person is, but what you want to look for is hunger and curiosity. Same kind of stuff you're going to look for in an entrepreneur or in a founder. You want somebody who is just deeply curious and can ask great questions. The counter-signals that you should be looking for when you're hiring somebody here are if you've got a sales interviewee or a leader interviewee who's asking you to give them some kind of confidence they're going to hit quota, that is a bad sign. You don't want somebody who's showing up looking for a guarantee of safety. You want somebody in that role who's going to swing for the fences. They may have no sales experience, but if they can ask great questions, I'm a big believer that everything really comes back to great discovery, they can probably figure out how to close deals for you. So you want somebody who's going to show up and be curious and hustle and build a business with you, not necessarily somebody who's got that shiny resume. The ideal combo is somebody that's been in a larger organization and seen what sales at scale looks like, somebody that's been early in an organization and knows what a startup looks like. If they've seen both, awesome, as long as they haven't had too much success. If you've had a salesperson who's had too much success, the chances they're going to want to start over in an early stage startup are actually really low because they've seen great success, they know what it looks like to make a lot of money in a sales org, and they don't typically have the passion and the hustle to do that first set of sales.
Brett: One of the interesting dynamics of a lot of great people in sales, people use it pejoratively, they are more coin-operated, and it's an interesting tension with what you're talking about because so much of an early-stage startup, if you go with the cliches, tend to be more mission-driven, but also most of the bestsellers actually do care about comp. Salespeople who are like, "Yeah, I don't really..." They don't perform either generally. So, how do you foot that with, again, this sort of revenues between five or 10 million, there's a little bit of repeatability type higher?
Stevie: I do think that there is a line after which you want those coin-operated sales folks, and I think that line is when you have very clear repeatable... You've got product market that you've got repeatable sales, then you just want somebody who's coin-operated, you know can give them a playbook, tell them what the ICP is and say, "Just go," and they will go repeat that at ad infinitum, and they will just make it happen and they'll hustle. Before you have that in that sort of like you've got some revenue, you've got some customers, but it's not quite repeatable yet, you want somebody thinking longer term who's going to help figure it out and they're going to do a different type of discovery. So yes, those people are somewhat coin-operated, but you want them to be a little bit more longer term incentivized. So ideally you're getting somebody in that seat, whether they are the salesperson or sales leader that is actually much more interested in equity. You want somebody who is going to be around to help build the company because you need them solving harder problems that are going to lead to repeatable success later.
Brett: So shifting gears just slightly, when you think about the role of a CRO in a business that's beginning to scale, so call it 30 to 50 million in revenue, what do you think excellence is? You take out a blank sheet of paper and it's like if this person is operating as a top 1% CRO of a business of that scale, this is sort of what they're doing.
Stevie: Yeah, it's tough because people don't necessarily mean the same thing when they say CRO. Some CROs are truly brought in as a head of sales. Others are brought in as these more generalist CROs that run all revenue. The end of the day, those top 1% CROs understand what the CEO and board are trying to achieve for the company and they are able to take that vision and those top level goals and translate it down into a go-to-market strategy that realizes those goals on a reasonable timeframe. That can mean a lot of things, and frankly, the role changes every few months because while those top level goals stay the same, market conditions change, the team changes, the competitive landscape changes. So you have to be able to distill those big visions and those big goals into something a team can actually operationalize, and that is really the job of a CRO and that could be everything from sales tactics and playbooks to a change to the ICP to a change to how we go to market to a systems design change. It is different every few months, but you have to be that translation layer between top level vision and goals and the real world, how we're making it happen.
Brett: What have you learned about metrics in the context of go-to-market and what are the parts that are very important but actually hard to get a precise metric, and then where are metrics so blatantly obvious that you should be running the business on?
Stevie: Yeah. I mean, everybody knows the top level metrics, right? Top-line growth, retention. There's this key set of eight to 10 metrics that everybody pays attention to and operates their business on. There is this next level of metrics under that that I think people pay attention to are important related to conversion and efficiency, and there's a whole set of metrics that matter there. The stuff that most people don't measure that I think actually very important are things like confidence, things like velocity. We often have a tendency in go-to-market to measure these point measure things. We measure time to close, for example, as a measure of speed, but there are other considerations that go into the velocity of the organization. I think you have to compound some of these different observations and metrics into a better sense of how much confidence does your team have in what they're doing. When they get on a call, are they opening that Zoom with confidence they can tell the story successfully and that they can win? When they do that, are they equipped with everything they need to generate the right amount of velocity to execute on the opportunity? Those aren't necessarily individual numbers. Those are a lot of things that you got to pull together to get a sense of how real that confidence is, how real the velocity is, but those are really the things that matter in go-to-market.
Brett: What is velocity in that context?
Stevie: In this case, velocity is going to be a measure of speed in some form. In simplistic terms, it's how long does it take to close a deal? How long does it take you to action a lead? It is also though how quickly can your team act on an opportunity once they see it. They have a great conversation with prospect. How quickly can they actually then close a deal there and get that customer not just signed but successful? So it's going to be the breakdown of how quickly can you get a contract out the door. Once you do that, how quickly can the prospect act on it? Once they sign, how quickly are you getting them into your product and getting them successful with your product and onboarded? So there's this whole customer experience that you've got to measure and there are point in time measures of speed within that, but it's more about reduction of friction than it is just going fast. You want to be able to reflect the urgency of your customer, of your prospect, not rush them, but execute on their timeline in a way that feels very natural and easy.
Brett: On the first point that you made about basically rep confidence, is that something that's a judgment call for you, or how do you know if there's sufficient or insufficient confidence at the rep level?
Stevie: It is more a judgment call to math. There's definitely math that matters here. Win rate is the most obvious place this shows up. Obviously, confidence is not the only factor there. It is a little bit of vibes and I do think it matters. I think that in the early days the way this shows up is when you bring in these early sales hires as a founder. There is this robotic thing that a lot of early sales hires do where they are articulating the story. They are saying the words, but they don't yet understand it. They don't yet believe it, and you can feel it, but you can't measure it. It'll show up in all your efficiency metrics, but it's hard to pin down that cause. The best way to get to the heart of that confidence and if it's there and the way you want it to be is just listening to live calls. I know early stage this can be uncomfortable. Recording calls and listening to those calls is really the only way to get to the heart of this and to coach people to confidence and get them to a place where they have that authenticity, they have that sense of belief in what they're selling because if they bring that, it's hard to lose.
Brett: What are your thoughts on the CRO role when most the customer experience or customer journey is housed underneath that role versus not and the trade-offs between those two?
Stevie: I think you just need to know what you're getting into. I think both models are valid. CRO as head of sales is a valid thing, but you need to be clear, and I don't think most CEOs or founders who go out to hire are clear about if they're hiring a head of sales or if they're truly hiring a CRO. I do think that that is one of the biggest misunderstandings of my current role is that I don't consider myself a sales leader. I hire sales leaders. In fact, that is a core part of my job is hiring great sales leaders. Leading sales is fundamentally not my job. My job is to achieve the top-line goals and sales is a contributor to that. So, you really need to understand deeply before you go out to hire somebody in a role like this, are you truly hiring this jack of all trades CRO who's going to help you achieve the top-line goals? And if so, that should guide the kind of profile that you're looking for. It is not just a VP sales plus plus, it is a different skill set. It is more analytical. It is more systems driven, and you need somebody who's going to be more strategic. You can't just take a VP sales and promote them into that role.
Brett: What's the reason why a founder and CEO would not want that shape of hire?
Stevie: I think that it is something that can be done much too early. You'll see this often when founders go out to hire somebody in this role and they start without a title or they start with a VP of sales hire and then they'll go out, they'll talk to candidates, they'll get really excited about somebody who they think is good and then that candidate will say, "This is great. I'm excited about your company, but I'm looking for a CRO title." A lot of candidates who haven't had the role yet are thinking about it as just a promotion. It is VP sales, but the next step. As a founder, I think you really want to peel apart their understanding of what they're asking for and does it align with the problems you are currently seeking to solve? So before you hire a CRO, I would not hire a CRO before you have great sales leadership, for example. So if you hire a CRO and then you say, "Okay. Now just go lead sales," you're going to have a mismatch in expectations. You could potentially have a mismatch in profile of who you've hired. You want to get super tight. It's much better to bring somebody in as a VP of sales and give them a path to becoming CRO over time as opposed to hiring them into that title just because they seem super great as a sales leader and they asked for the title. It just leads to mismatches and it ultimately sets everybody up for failure.
Brett: Were you someone that knew that eventually you want to be a CRO or were you trying on different things and here we are all these years later?
Stevie: I did not. 10 years ago, I did not know what a CRO was. My career has been very non-traditional. I happened into sales. It's not a career I ever thought that I would take on in the first place. That happened about 18 years ago, thanks to an incredible mentor who found me in a product role and said, "I need a junior salesperson. Think I can take you and teach you to sell?" That for me was a real inflection point. I thought, "I'll do it because it sounds uncomfortable," and I ended... I was terrible at it at first, but he was amazing and he modeled what great looked like. Back then, we were selling on the road. I was going meeting to meeting with him, so I saw he was great.
Brett: What did you see?
Stevie: I saw him sell the vision. I saw a very entrepreneurial seller and I saw him practice that over and over. One of the key lessons he taught me in that timeframe was... Because I was very shy. I was not a natural salesperson at all. I saw him be vulnerable in these human interactions and the point he made to me was, "You are going to have to push people harder than they're comfortable with. You're going to have to challenge people, ask for things they don't want to give you. The best way you can make other people comfortable is to be vulnerable and then you give them permission to be human. So if the meeting is tense and it's not going well, be vulnerable, poke fun at yourself, make yourself more accessible and then the other person will become more accessible." That lesson has stuck with me and it was like a big unlock for me in sales. I got a version of that later when I was in sales but still didn't know if CRO was an option or something I wanted to do. I was at Twilio for six years, had an incredible mentor there, George Hu, he was our COO. He had been the number two guy at Salesforce for a long time. George modeled for me what a CRO or a COO does. He taught me over the course of years that playbook.
Brett: Which is similar to what you were talking about in terms of how do you translate a goal to a strategy.
Stevie: Yes, he showed me how to build an operating model, what does it look like to hyperscale an organization when you've got product market fit and you've got this incredible opportunity. He showed me the math and analytical side of the business and how to build that strategy. I think the takeaway both from my time with Matt Golden and my time with George is the single most important thing you can do if you want to be a CRO, you want to grow in a revenue organization is be a part of a great organization when there's somebody you can learn from. I think the mistake a lot of people early in career make is, "I want to maximize my title. I want to prove I can be a VP sales," so they go to be a big fish in a little pond. Can't learn anything like that. Learning in an organization where you can grow under somebody great who can teach you how it's been done is the single best way to advance and really challenge yourself.
Brett: If a lot of the way that you have grown is through being around some extraordinary people, what about the opposite of that? What's the only stuff that you learned that you can't just do it by watching somebody that you just have to be in the seat and figure it out?
Stevie: There's a lot. I think that what has been shocking for me in a lot of ways with the CRO role is there is no playbook. I think because every business is so different. You get in a seat in a job like this and you will get lots of advice from lots of well-meaning people. You will get guidance from the board, the CEO, people outside the company and telling you where to focus or what to do, and the single thing I have learned is that every business is incredibly unique and you cannot apply somebody else's advice or playbook to your business in a meaningful way. It's really important to understand how everybody else is doing things and why. Ultimately, you need to divine the truth of your own business for yourself, trust your data and your instincts and then execute on that, because if you try to run somebody else's playbook in this job, it will always be not quite as good because you're replicating something that works somewhere else in a different business. So, there is some instinct. There's some gut feel. One of the big things that George had told me about being in a role like this, said, "The hardest thing when you get up every day is you could do anything and there's nobody to tell you what to do." So you have to develop a certain level of instinct and it does take time. I think that's why a lot of CROs don't make it that first 18 months because either they're not empowered to have that time to figure it out or they don't trust their instincts, so they try to run somebody else's playbook.
Brett: Explain this a little bit more in the sense of in the context of Vanta, it's not as if you are coming in knowing nothing about sales and customer success and on and on and you are going to start everything from a blank sheet of paper, but to your point, the inverse is also not true. You had an incredible career at Twilio. You're not taking that and just slamming it into Vanta. What does it actually look like to find what the path is when you bring those two things together, or what's an example of, "This is how we approached exit at Twilio because of Y and we had to approach it this way because of that," at Vanta?
Stevie: The underlying key with all these things is you need great data to understand your business... Okay. I'll give you an example from Vanta. I made a early mistake thinking I could take a playbook from Twilio and apply it here. I arrived at Vanta, incredible product market fit, tons of inbound interest, more interest than we could serve. One call closes, lots of excitement. The guidance I got from everyone was just hire, hire salespeople, and that resonated with me because that was the playbook at Twilio. We had all this great product market fit. It was like, "Okay. Go hire a bunch of salespeople to serve the demand. Scale that up." Well, I did that and what I learned about six to eight months later was that, well, maybe hiring might have been a solution. I hired the wrong kind of people and that was fundamentally because I did not have my data infrastructure appropriately set up. I didn't understand what kind of demand we had, so I assumed that all of our demand looked the same. It was all founders who wanted to do SOC2 compliance, like very simple entry-level stuff. Turned out it was much more complex than that. There was mid-market opportunity in there. There were more complex SMB use cases, so I hired a bunch of junior sellers thinking I could just throw them at the demand and up until the right we go and that is not what happened. Ultimately, that was a really painful lesson. The biggest takeaway for me was we did end up running that playbook later and hiring more salespeople to serve the demand, but we needed a very different kind of salesperson, a different kind of an enablement and an entirely different playbook. So the top-level assumption was not wrong, but all the details were wrong and that ultimately led to a lot of pain.
Brett: Maybe building on this, if I were to look at the way that you've assembled the whole customer experience from pre-sales to post-sales at your revenue scale today, and I took five other great businesses who are at the same revenue scale, what are the points that are most different? What are the things that you're doing in the most unique way that flows from the strategy of the business and how did you land on that?
Stevie: I would say one of the things that makes us incredibly unique is that Vanta remains 100% sales-led. That is unbelievably rare at our scale, especially for a business that is not a fully enterprise business. We do sell in the enterprise now, but we serve everyone from founders to CISOs of the Fortune 100 and we do that 100% through salespeople. Part of that has to do with the type of business we are and part of it has to do with the metrics. So we are a business that is very focused on trust, and therefore, humans talking to humans is how people generally want to buy our product because they want to know they can trust us. So trust being so fundamental makes us a little less of a PLG-friendly business. It's put humans at the center.
Brett: If someone were to watch how you spend your time in a given week, what's interesting about it?
Stevie: I think that the thing they might be surprised by is the diversity of types of problems I'm having to solve on a regular basis. I do think that part of the beauty of Vanta and part of why I love it is that our founder, Christina, is she's very in the detail. She is able to conceptualize the entire business in her head at any given time and that kind of leadership really attracts me because I like to be in the details as well. The diversity of types of problems we're solving on any given week is pretty intense. In some cases, I've got teams that operating relatively well without really any involvement from me, and in other cases, I'm extremely involved in the minutia of these teams work and defining what comes next. So I think that's one. I think the second that would surprise people is how far ahead I'm thinking. When I talk to my team, the vast majority of the time, I'm not even just talking about this year, I might be talking about this month or this quarter. On a daily basis, I'm thinking 24 to 36 months ahead, and most of my choices are predicated on what we are trying to achieve over the coming two to three years, not in the current period because everything you do in go-to-market has a long runway. One of the most common ways people go wrong in go-to-market is they think they're going to deploy a strategy immediately see if it works or not, and then-
Brett: You're talking like time-to-value.
Stevie: Yeah, it's time-to-value, but it's also just like time to get effective with something. You might deploy a team to sell a new product. Depending on the product, you could see six months where it might look like it's failing and then in month seven something starts to catch and that team learns because the heart of it, when you're trying to do something new, people have to learn a lot, so you want to give things sufficient runway so you can let them play out. That groundwork laying, I'm already thinking about next year I know what my two next big revenue drivers will be beyond the core product. In 12 months, those products probably aren't going to drive a lot of revenue. I'm building the teams now, so they will start to learn, they will build some muscle, they'll build some learnings and expertise so that base is there when we're ready to scale that I can build on top of. So it takes time. You can't just die with a team.
Brett: Why is that?
Stevie: Yes, because people are ultimately... Humans take time to learn and anytime you're doing something new, you got to see people... Especially if you're selling in the enterprise or something more complex, the typical ramp, even if you know the playbook, typical ramp for an enterprise seller can be six to 12 months. So, that's if you have it figured out. If you're putting them in a situation where it's a new product or it's not figured out yet, that ramp could be even longer than a year. So you have to seat people and let them figure it out for a period of time before you can expect something to take off, and if you don't, you're going to get early signal that you really cannot trust because there's so much human fallibility and learning tied up in the whole thing.
Brett: This blends over with a little bit about what we're talking about, but what do you think are the decisions that you singularly are responsible for and maybe what are some of the decisions that people might think you and your CRO role should make but you push down or give to someone else to make?
Stevie: I would say it's rare that I make decisions myself at this point. 98% of the decisions that are happening in my organization are either getting pushed to my leaders or they are a consensus in the C-suite among my first team about direction. The decisions that I make generally speaking are going to be... For example, if we're going to set a growth target for next year that we want to grow X percent year over year, I have to be the one to lock eyes with my first team with the C-suite and say, "Yes, I accept that target. I'm going to go make it happen." It doesn't really matter what anybody else's opinion on that is because ultimately I'm the one that's going to sign up for it and say, "Yes, my team is responsible for that. Let's go execute on it." Beyond that agreement, pretty much everything else gets pushed to somebody.
Brett: Why have you chosen to run the org that way?
Stevie: I think that decisions are best made by the people closest to the information and their unique insights guide us to better outcomes. At this point, with a 600-person organization, I am going to be more distant from the vast majority of the decisions that need to get made, and I believe I have hired extremely well. I have a very smart team and I trust them. I find that when you hire great people and you empower them, it doesn't mean that I'm expecting them to make the right decision or the perfect decision every time, but I owe them the opportunity to make those choices because that's the only way they're going to learn and grow. If they learn and grow faster, they will become better leaders more quickly.
Brett: How often do you disagree with the decision that a given leadership team member is making?
Stevie: 20 to 30% of the time.
Brett: Of those, let's say three out of 10, how often are you right and how often are they right?
Stevie: That's a great question. I'd say it's half and half.
Brett: In the situations where you are incorrect, is it normally that they understand something about the business from their vantage point that you don't?
Stevie: Yes, it's that they've got some unique insight. They are closer to it. They've seen it. They've got gut feel for what's going on in their part of the business, and those unique insights lead them to better decisions.
Brett: Have you found that your own intuition is generally off in a certain subset of areas? A lot of people say the best advice is trust your gut, trust your intuition, which I think is probably generally right. Is there a category of things like when you reflect on judgment calls that are very noisy for whatever reason?
Stevie: Yes, and I would say that those categories have shifted, but I think the area that was hardest for me was coming in as somebody with primarily a sales background. I think I came into this role believing I understand what motivates people, and I have found that I was wrong about that on a lot of occasions. My natural inclination is to motivate people and talk to my team in a way that motivates salespeople. It does not resonate with a broader base of people who might be serving customers, whether that's customer success or support or... I think that there's a bigger story and a broader set of things that motivate people in other roles and that's where I found my instincts were not nearly as good. So it's something I've had to intentionally develop and get much more thoughtful about.
Brett: Sort of on this set of themes around decision-making, what are the decisions that you still wrestle with and find very, very difficult to make or to figure out what the correct thing to do is?
Stevie: I think the hardest set of decisions at this point in time has to do with how many humans to add to the team. In a world where there are clearly AI solutions, technology solutions that on paper can do the jobs that humans are doing and there are... We don't have a lot of artificial limitations in our business. We got great gross margin. We are great from a cash position. So it's less about can we do it? But I know that the world is changing very quickly and I feel an intense responsibility when I bring humans into our business to set them up for success, and I want to bring them into roles that I can confidently tell them are going to continue to add value in our organization over the long term. So, wrestling with that idea of do we solve problems system first or human first or some combination thereof and can we really tell people with high trust that we're bringing them into a role that's going to continue to exist? Those are the hardest questions at this point. I don't think anybody has a clear answer to those things, so it really requires a lot of introspection and just thoughtfulness because it's cliché, but these are real human beings coming in to trust you with their career and their life and the weight of that is not lost on me.
Brett: What's an example of a role you were wrestling with and decided that people should be really doing this?
Stevie: SDR is a great example of this. I am so bullish on all the AI tooling. AI will continue to transform the way we go to market, but I have deeply come to believe that jobs like SDR for the foreseeable future should still be human first. The beauty of AI tooling is not to replace those humans, it is to elevate their work to allow them to do the higher value work, to be more thoughtful. There are solutions that will absolutely do big parts of the job that they do today. I believe the SDRs will continue to have tremendous value in our organization. So we've made a big bet on humans there. It's a little bit of a contrarian bet, but I'm finding it pays off because the thing that cuts through all of the AI-generated noise today is real humanity. So, human SDR is picking up a phone and having a meaningful conversation with someone actually cuts through when AI-generated email does not.
Brett: Switching gears just a little bit. When you think about your leadership team, the folks that report to you, what are the threads or attributes that regardless of if it's a customer success function or sales function are your non-negotiables maybe in the least generic sense, so not like honesty and those type of things, but the differential bits that are important for your specific team that you're building?
Stevie: There's a couple of things that for me are key with these leaders. One is just intense curiosity and it comes back to sales skills, customer skills. Without curiosity, we are getting nowhere. We have to change the business every few months, so I need people who have that growth mindset and the curiosity to drive it.
Brett: Do you think that is abundant or not abundant?
Stevie: It is not abundant. I think that there are a lot of people who come in with high confidence that they already know the right way to do things and they are not open to new ways. The curiosity has to be tied to a certain level of humility, which I do think is a bit contrarian. I think that a lot of folks in the Valley hire for confidence and ego. I'm hiring confident people and I'm hiring incredibly competitive people, but they are also people with very little ego. What defines the team I'm trying to build is a team that is intensely competitive with the outside world and inside the walls of Vanta is the most collaborative team that you could build. So it is people who absolutely live to get up and crush the competition, but then want to help their teammate hit quota or close the deal or win or whatever it is. So there's this balance of kind competition that I find differentiates who we are as a team and who my leaders are, and looking for a curiosity and growth mindset. When I interview and I find you can see when you ask these questions, I always love to ask people, "What is something that took you a very long time to accomplish in your life? Tell me about that journey and why'd you do it? What motivated you?" It does not have to be work-related. I'm looking for somebody that's passionate about achieving things, and as they tell that story, you can hear the humility. You can hear the hunger. We have a joke inside Vanta. At one point, somebody wrote a piece about Vanta and one of the subtitles on the article was Midwest Assassins, the Midwestern Assassins. We've got this Midwestern vibe of people who feel like they're outsiders to a certain extent and have this work ethic and have this hunger. When people tell you the story of something they had to really work hard to achieve, you either hear somebody who is ultra-confident and tells you how everything went right or somebody that can own the things they did wrong. In that slight part of how they tell their story, that's where you can find those people that are very hungry but can see their own failings and have the curiosity to continue to learn.
Brett: When you assemble all the more senior people that you've hired that you've had to let go, they did not work out, are there buckets of reasons of the things you got wrong?
Stevie: Yes, I learned a brutal lesson on this front and to the person. My hiring mistakes have been tied to the idea that I was hiring someone that knew something I didn't. So I made a few key hires where I was hiring someone because they came from a cybersecurity background or because they had 20-plus years running the function I was putting them on. In each of those cases, I was attributing to that candidate some magical knowledge that they were going to bring and they were going to figure everything out for me and they were going to solve all of my problems and it was always wrong. It was always wrong because what they did is exactly what you should not do. They brought a playbook and they tried to apply their known playbook to our very unique business and it didn't work. I didn't take into account how they would do with the unique people on my team. I didn't take into account how they fit into the culture. I just thought, "This person knows something I don't." I was wrong every time. Those people never worked out. The people who do work out are the ones that have that grit. It's like a personality type and it's not about some unique knowledge. They need to know basics, but when you're looking for some unique knowledge, it's just you're bound to go wrong because knowledge fades. Anybody can learn anything.
Brett: But haven't you found people with unique knowledge that also possessed what you're talking about in terms of curiosity, open-mindedness, et cetera, et cetera, and were successful or not really?
Stevie: Not really.
Brett: Why is that? You can have somebody that worked in cybersecurity and is curious and is not going to apply some generic playbook.
Stevie: I think it's because we are trying to do something different. We have built a product and a company that are trying to disrupt existing industry. So by and large, people that are going to come from that industry, they have a way of looking at the world. They have a way of thinking about things. There are people that have brought some subject matter expertise, but when they do that never ends up being the thing they bring that really has value.
Brett: But so then what's the role of experience? Why aren't all your direct reports three years of experience as a chef? Push it to the extreme. I assume if I were to look at your directs, there are people that have done variations of the thing that they're doing, so there is an experience component.
Stevie: There are in some cases. I will say my head of sales, Elliot Goldwater, he is amazing, comes from channel background, never ran direct sales in his life. He is running my entire global sales organization. He's one of the best sales leaders I've ever worked with. So, I do think I have found more success with people that don't necessarily have the experience. That said, it does play a role and I think the biggest role it plays... Kelly Bray is a great example of this running post-sales. She's got several years of experience running these post-sales teams and there she's gotten those at bat. So she's seen what worked and didn't work. She could learn from it, but she has seen enough different circumstances and she's open-minded enough that she didn't show up saying, "I have the answer and I'm going to roll that out on day two." Yeah. She showed up and she listened and she learned and there was that humility to be open to trying it in a new way.
Brett: How do you think about centralization versus decentralization in your 600-person org or where you want process and systems versus where you want it to be decentralized judgment at the edge of the org, sort of let people use their best judgment.
Stevie: I aspire to centralize the things where we've got localized product, market fit and repeatable playbooks. So my global sales org, I really don't want that decentralization. I want everybody singing from the same songbook. I want us telling the story of customer value the same way. For me, their centralization is key. That's where you get efficiency. That's where you get this consistency of experience. But there are lots of parts of the business where that's not the reality, whether that's places we're shipping new products, new geographies, a new segment we're entering. In all of those places, I aspire to almost the opposite on day one. I want them to have as much latitude and as much leeway to figure it out as possible. One of the hardest things in a big company is that if you've got this engine that's successful in a product with product market fit, it just has all this inertia and momentum, it becomes very hard to do something else. So what I've found is you have to separate those teams that are doing something new and give them the space to operate without getting sucked into the successful engine that is doing the thing you already know how to do.
Brett: What's a good example from the last year?
Stevie: So for us, the biggest one of these has been our move into serving enterprise customers because Vanta, historically when we started out selling 100% to founders automated compliance, first-time compliance use case and very short sales cycle. It was 100% inbound for a long time. So there is this engine of success and we are unbelievably good at that. When we first started trying to move up market, we had opportunity, we had pipeline, but what we did was just give those leads to our existing team and we just radically failed at it because they were so distracted by the thing that was easy that they knew how to do. So then step two was we created a separate team and said, "Okay. You're our mid-market team. You're going to start selling to a different set of customers." But we kept them as a part of the core sales team and still we found they were just so distracted by this transactional business that even though we were telling them, "You now are measured on a quarter, not a month and you have to operate differently," they just couldn't look away from the core of what was working. It wasn't until we hired a completely separate leadership team, we sectioned off our enterprise organization and we basically said, "You guys are completely separate and you're going to sit over here for a year." We actually ended up having them roll up to a GM who was in our engineering and product development team for a year. So we sat them closer to the product. We separated them from the core revenue engine of the business. It wasn't until we did that that we started to see them build momentum and success. They just had to get enough separation from the core.
Brett: When you think back to your own career up into the role of CRO, what were the few moments or actual conversations that have stuck with you that were formative in some way? You talked at the beginning one was when you were watching what it means to sell.
Stevie: That was definitely the first. I remember I stumbled through my first few years of sales and I was starting to figure out some of the mechanics. There was a point in time at which I got a sales leadership job at a startup that ended up getting acquired by Visa. In this, it's in payments and financial services. So at this time, I was in my mid-30s. I ended up having a team of sellers is a very deeply entrenched industry, team of sellers that were 15 to 20 years older than me. I remember talking with them early on and I could tell there that I was going to have to earn their trust. Over time I got in deep with them. I showed them how I could do discovery. I built credibility and I remember one of those very tenured sellers, a guy that had been selling for 30-plus years saying, "Man, I was skeptical at first, but you really know how to twist the knife." That stuck with me and in a way it was a nice compliment, but it also reassures-
Brett: Why is twisting the knife a compliment?
Stevie: It was just what he was trying to get to because I did inspect this with him. Think what he was really getting to was that ability to do deep discovery and to get to the heart of a problem or to the heart of what matters to a customer, and that for me was this eye-opening like, "Oh, that really does matter." To have somebody so much more tenured see that and encourage it, it made me just double-down on that skill in a meaningful way. Then along the way, I used that to start to get to know different types of people in a way I hadn't been able to before. I think the next big turning point for me was at Twilio where I got this opportunity to see people operate at a scale that I had never seen before. In that, George, our COO, it was funny because he never directly told me or taught me things. He would give me these haikus little riddles to go figure out and that alone his teaching approach.
Brett: What was a riddle?
Stevie: He would give me these fragments of sentences of like, "Go figure out this thing over here." At one point he told me, "There's this incredibly important meeting that happens once a month at this company, go find it and get into that meeting. That's where all the decisions get made." I later found out that I was a lowly senior director, this was like an SVP-plus, C-level meeting. It took me several months. I ended up being owed a favor by the CFO and he said, "What can I do to make it up to you?" I said, "You know what, you can invite me to this one meeting." I got myself into that meeting and it was... I learned so much in that meeting. It was a meeting where the leaders of the company and our finance team, StratFin team, talked about all of the core metrics of the business and it's where they were talking about what the strategy should be, so all the data, all the gnarly problems and what are we going to do about it? So just to hear the way they talked about the business, that exposure changed everything for me because then it was like this light bulb. It's like, "Oh, now I understand how they think about problems and how they think about what to do about them." Then I started trying to figure out how do I do that and just that one meeting was enough to unlock it.
Brett: When you think about the overall end-to-end customer journey, what part has the greatest hit in leverage, the thing that's when you invest in it, you get crazy returns and maybe most people don't?
Stevie: It is the first 30 days, and I think this is true for a lot of businesses, it is incredibly true in ours. There is this natural inclination, especially as a sales leader, to be so focused on the signature and then you're like, "Great. We've got a one-year term. We've got a whole year to make this customer successful." One of the big eye-opening moments in our business was we set out expectations. "It's a year term and over the course of the year, we are going to make you successful in accomplishing the mission." When we compressed that and said, "We are going to spend an intensive two weeks with you and we are going to get you successful in just a few days," it's like the customers all of a sudden were like, "Oh, great, that's the schedule. We're going to do that with you." When they see early value, you just build tremendous credibility and the chances that they are going to churn if you can make them successful early are just radically lower. So that first 30 days is to me the magic moment where if you can win them there, build trust and credibility, you've got them for good.
Brett: What does a perfect first sales call sound like?
Stevie: Perfect. First sales call is going to be about 60% discovery. Most salespeople that get that it's a first call and they desperately want to show the product or they want to get further, but you want to do majority discovery because the only way to run a sales cycle is to deeply understand the customer's pain and you can't do that without intense discovery. You also want to provide value because regardless of your solution, if they're going to buy or not, the thing that will guarantee a customer will spend more time with you is if you deliver some kind of value to them, and that value might be subject matter expertise. It might be access to something. Ultimately, you want them to view you as somebody who brings value. So if you can deliver 60 to 70% discovery and then spend that last 30 to 40% of the time, giving them something of value based on what you learned in discovery, you are nearly guaranteed that it gets a second call and that's got to be your goal.
Brett: So, you don't do a traditional demo and that type of thing on that first call?
Stevie: We really try to resist that. It is very tempting, especially in a space that is competitively noisy to go to that demo, and I think that that is the easy crutch because we have a great product. It's tempting to say, "Well, let me just show you." The reality if you're just going to show a customer a product is you don't understand what their pain is. Why are they even talking to you? Without that why and without implicating the pain, as we call it in sales, you don't even know what part of the product to show them. If you're going to give them we call it when you give a general demo, the harbor tour, and the harbor tour is generally a waste of everyone's time. It feels comforting. She's like, "Look, I have this beautiful product." But the reality may be there may be just one piece that is the magic piece that they care about that solves their problem and you could spend 30 seconds showing that and get more impact than the harbor tour the last 30 minutes.
Brett: How do you know if the problem with the broader company as a product problem or a go-to-market problem?
Stevie: I think that in the vast majority of cases, problems are a little bit of everybody's problem. It's rare that it's on just one side or the other. I think that you've got to get enough at bats at discovery to really peel that apart. We, of course, use Gong to record our calls. One way we get to the heart of that is if we start to pick up on a theme, we'll develop a hypothesis about is this a product problem potentially, or even if it might be a product problem, is there a way for us to work around that? So, we will test ways to address it. We'll see how that lands. Ultimately, if we find there is a real gap here we need to address, then we'll pass it over, but generally, we're trying to address things first without saying like, "Oh, this is a product problem. Let's go fix that."
Brett: Is it just how you're wired? Because I feel like in many companies you have go-to-market leadership blaming product leadership and product leadership blaming go-to-market leadership.
Stevie: That is very common. Yeah, I do think it is partly how I'm wired. I also am acutely aware of how toxic that dynamic can be and I don't think you end up achieving anybody's goals that way. One of the big inflection points for me and how to think about go-to-market was at Twilio, we had a specific QBR. This is not with product, but it was one of those typical dynamics where I came into the QBR and I had all these beautiful charts and graphs to basically show marketing is not giving us enough leads. I proved that out in triplicate, and George looked at me and said, "Okay. So, what can you do about it? What do you have control over? I don't care that marketing is not delivering. You can do something." I said, "Okay. We can outbound. Let's go." It was a great example of taking control and having that agency to control your own destiny. I would love to think that every product gap we uncover will get immediately addressed, that would be amazing, but in reality, you will get a better outcome if you as a team think about that question of what do we have control over? Is there something we could do differently to work around this issue and ensure we're going to give the feedback? We want to iterate on the product and we want to make sure our feedback is high quality, but in the meantime we're going to control the controllables and do what we can do.
Brett: What do you think is the difference between a top 1% CRO in 2026 and a top 1% CRO in 2028, if there is anything?
Stevie: I think there will be a huge difference. I think in 2028, everyone will need to be systems first instead of human capacity first. That's not to say we will not have large go-to-market teams, but I think in 2028 you're going to have to have CROs that know both sides of that equation. There's an interesting thing happening right now, and I think this is what's going to manifest in 2026, is you've got all these AI-native companies. They're growing up almost like prosumer PLG. They've got all this incredible off-the-charts growth, but what happens for the vast majority of them is they hit this point where they see an enterprise opportunity and it's very hard to capture the real enterprise opportunity without a classic go-to-market engine. Enterprise buyers are decades probably from self-service PLG acquisition of technology. They'll get there eventually. But if you even look back at how long it took enterprises to move to the cloud, there's still plenty of enterprise workloads not in the cloud, which seems completely insane, but they are slow to adopt because there's a huge amount of revenue at risk. They've got these massive multi-billion dollar established businesses. The level of risk in buying new technology is high. They expect to be sold to by humans and I do not think that will change by 2028, probably not even 2030\. So you are going to have to have CROs who both understand a systems first AI-native way of going to market and know the enterprise sale and can build a real sales team to complement. Those things cannot be separate. They won't be exclusive of each other. If you can build a system and a human team that are really tightly intertwined and feeding off each other, that's what a top 1% CRO is going to be doing in 2028.
Brett: What percentage of CROs do you think are capable of making that transition?
Stevie: Less than 10%.
Brett: So, where do you think that next generation of CROs is going to come from?
Stevie: I think they are not going to be former salespeople. I think that they are going to be a different breed. I think they're going to be more technical. I think you're going to see people who potentially have a growth background, people who have enough exposure to sales, but also are technical and get systems. So it's like growth, rev ops, GTM engineering. That is the background that I think will grow into a CRO role and it will not be somebody who came up through 10-plus years of selling.
Brett: When you talk about the systems design, make that a little bit more tangible.
Stevie: Yeah. I mean, the system itself, there's a change we're going through now on this that historically go-to-market systems are very siloed, right? You buy 20 different pieces of SaaS and they all sort of integrate lightly. You've got your data in CRM. It is a very siloed world today. That will not work going forward. One way that I'm addressing this right now is I've actually instead of historically would have go-to-market systems live inside of DevOps, I think systems now is a top-level consideration. I actually just hired a systems architect reporting directly to me who lives outside of DevOps and owns go-to-market systems architecture.
Brett: Who their background is a DevOps background-
Stevie: No, he's background is-
Brett: ... or just an engineer?
Stevie: He's got an engineering background, but he has done GTM systems so he's got some familiarity, but he's ultimately an engineer and that design is going to be central to how we move forward. He today is a unicorn. There aren't a lot of people out there like him, but I think that that is going to be one of the most important roles in the org going forward.
Brett: Why do you think it's going to happen so quickly?
Stevie: I think it's going to happen quickly because if you look at the revenue growth from these AI-native companies, it's just a totally different universe. It used to be if you got to $100 million in less than five years, that was legendary, just unbelievably rare. Now you just see AI-native companies hitting 100 million in ARR in two years or less. So I think that everyone sees the opportunity. So there's this forcing function. Everybody wants to win and it's very clear that there's a way to win that's different and that way to win is systems forward, but it can't be exclusively systems. You've got to find that unique blend. I think right now we've got this crop of AI-native companies that are doing the systems forward thing and they are now hitting that, "Oh, wow, okay, we've got to actually figure out go-to-market. How do we even do enterprise sales?" That's a whole other thing they're not familiar with. Then you've got legacy SaaS companies that are watching that and realizing they have to do something differently that looks more like PLG or looks more like a systems-forward approach. So you're going to have to get that blend from both sides to get that next wave of what really is going to win.
Brett: Maybe this is obvious, but what does that mean for people who want to thrive in the next five years and do want to be a CRO and maybe did come up under sales? Is there ways they should be positioning themselves?
Stevie: Yes, and I think it starts with educating themselves. I think that you cannot just sit and watch this stuff happen or read about it. You have to participate. We're at the point you have to download Cursor, start coding something. You have to actually personally experience it. What I see a lot of senior leaders doing is watching it and speaking to it, but not participating. I think if you don't get your hands dirty and try it yourself, you're never going to really get it. If you want to come up through that traditional path, but you want to make this move, getting your hands dirty and actually building has to be the way. It's not an option to not be a builder.
Brett: When you think about being effective in running your function, how do you think about balancing, how demanding to be and hard-charging to be with helping or supporting or whatever other term you would use?
Stevie: You can push a lot harder and be more demanding than it probably seems. I default to pushing very hard and setting unrealistic goals and swinging really big because I consider one of my core responsibilities painting the picture of what's possible, and if I'm tempering expectations or saying like, "Oh, it's okay. We didn't quite hit," that becomes the culture. So I do think it is my job to set the bar for urgency and results unrealistically high. At the same time, I do recognize that there are humans working for me and I want them to be happy in their work. I want them to feel rewarded. I want them to feel seen. So for me, it's not necessarily a balance of supporting and helping versus setting the bar high. I think people get a tremendous amount of joy and enjoyment out of achieving hard things, so I will always push very hard. I think the thing I'm forever trying to balance with is seeing the people who work for me as humans and saying that out loud and making it sure that they understand how much I appreciate them. If you can find people who thrive in that sort of type two fun, really hard achievement environment and then back that up with real human connection, that's the win.
Brett: What about partially the inverse of this? What do you think a lot of people think it is to be an excellent CRO or to be a great C-suite exec that you think is misunderstood or wrong?
Stevie: I think that the expectation is people do think that you have to be kind of a jerk. I think that they think that you have to be aloof or perfectly buttoned up and maybe this is just bias that is very much not me. I actually think you're much more successful when you are real and you are vulnerable and you are honest. That's the way to build a real team and build loyalty is just be a real person and admit the things that you don't know the reality. I know a lot of CROs and to the person, none of us know the whole job. None of us know all the answers. Even if you've had the CRO job before, every one of these is so different. We all have blind spots. The more you actually own that, the more likely you are to be successful.
Brett: What can you share about the specific relationship or your perspective on the relationship between a CRO and a founder and CEO specifically?
Stevie: It is the most important relationship. Speaking from experience working with Christina at Vanta, she really won me over in our early days together because I felt that we were both values aligned. We approached the work in a similar way. We had sort of an unconventional journey of getting to know each other. It was a short period of time, but what I love about that working relationship is that it is high transparency and it is zero ego. There's just this very fast flow of information. We are super aligned around what we're trying to accomplish and I think that that's the most important thing at the heart of that relationship is, "Just tell me what you want from me." Where this can go wrong and where the relationship can struggle is when you've got a CEO who is maybe not giving you the why behind the goals and thinks that by holding that back somehow they're going to get more out of you. The reality is the better a CRO understands what you're trying to achieve over the longterm and why the better we can align the organization around that. So just brutal transparency and honesty about where you're trying to go and I will get you there. When we are at our best, it is when we've got that open free flow of information and just total transparency about what we're trying to do.
Brett: What else can you share about one big pieces that you two it sounds like just fit together from just a default values perspective? What about the specific effort or things that you put into the working dynamic that have yielded results?
Stevie: Yeah, this has been an interesting way we have grown together. Christina is a product person. She is heavy on written communication and there's a specific way that she processes her decisions and the way she thinks about the business. She also loves to be in the detail. It's so funny because anytime we get new leaders in the door, I think they're a little bit nervous because she'll show up on calls they don't expect and they're like, "Oh, my gosh, am I doing something wrong?" It's like, "No, she just really cares about the details." I think one of those keys in the unlock for us was getting super comfortable showing her everything. This is not a natural part of most CEO-CRO relationships. I think we want to report good news and we want to report up what's working. When I got comfortable showing her the entire organization warts and all and telling her what wasn't working, that was when we really started to succeed together and that was uncomfortable for a long time. Now, it's second nature because I trust her with it. I understand she just wants to be in it. That was one. Then really just trusting that when she has told me what she wants, that I don't need to triangulate the why or that there's more to it. We have come to this very high trust relationship than when she says something, I trust it completely and that allows me the freedom to then go execute on that.
Brett: Why do you think it's your job not to pressure test it or push it or-
Stevie: I do still pressure test it, but in a different way. It's not because I don't trust it. What I do now is I make sure I deeply understand it. I think early on I was maybe nervous to ask questions when she would give me a directive or give me some kind of guidance, and that nervousness led me to attribute all sorts of explanations to what she was asking for. Now, when I pressure test it, it's not because I question it or I disagree. I want to deeply understand how she's thinking about something so I can be sure I'm delivering what she actually wants. So I question now for deep understanding versus trying to figure out is there something more to this than I think there is. So it's like a higher trust inspection so I can calibrate what I'm delivering for her.
Brett: What do you two still disagree on or just can't quite see eye to eye on?
Stevie: I think that there is always a natural disagreement between a CEO and a CRO about speed and risk. I am very naturally inclined to both go fast and take bigger risks by the nature of my role. By the nature of her role, she wants us to be methodical. She wants to make sure we have fully thought things out end to end. So whether that is what markets to enter or how we should bring a specific product to market or how we want to message versus a competitor, she's always a little more risk-averse in those conversations. I really value it. We don't always agree on this stuff and I think that that is a good thing because in the talking that out, we typically come to a better solution than if we just went with my pedal to the metal risk answer.
Brett: How do you think about being a CRO in a market that's fiercely competitive? Is there any difference in how you go about your work in a very competitive market as opposed to more of a green field or-
Stevie: It's extremely different and it has really removed any ability to be lazy in any area. In the grand scheme of things, there are times I would've told you that the intense competitive nature of our market is painful or frustrating or there have been points when it has felt so hard. It has also made us infinitely better. I think the biggest lesson for me is that you need to find the sweet spot of not being overly focused on competitors, but also learning to respect them at such a level that you can see what's not working. You can see what they are doing that is working and have enough respect for it to recalibrate and learn and get better. So you don't want to obsess because I think that that is an easy way to go super wrong when everything you're doing is about what they're doing and how you respond to it, but you need to be open to it. You need to learn from it.
Brett: So I wanted to wrap up with asking you who would you say has had the biggest impact on you and your career? Maybe because you talked about two important folks, there's another one that comes to mind, but you can highlight one of them as well.
Stevie: I mean, definitely the true answer is George at Twilio. He just opened my eyes to a different way of thinking about how to scale a business. He gave me exposure to an analytical approach to go to market that I had never seen. So it's almost like that was the infancy of my understanding of how to go systems first was learning from him. He had a really unique journey in that he started at Salesforce as an intern, and 13 years later, he was the CMO of Salesforce and then the COO, and so his journey was really inspiring. So that was the most transformative mentor I have had. That said, when I go back to my early career, I started as... I had been a pro video gamer. My first sales job was selling to video game company. I was selling payments platforms to them, an there is a woman that was the COO of a company that was one of the early mobile games companies called JAMDAT. Her name is Nanea Reeves, and she at that time was one of the only C-suite women that I had ever met, and she was a leader in an industry that was like 99% male. She was smart and unapologetically herself. What she modeled in those early days made me realize that it was possible to get into a role like that. So for me, she was truly the first person that opened my eyes to a bigger career.
Brett: Great. Thanks, Pam. Thanks for spending the time.
Stevie: Thank you.
### Listen: Why Rippling’s VP of Design thinks speed improves quality
URL: https://review.firstround.com/listen-why-ripplings-vp-of-design-thinks-speed-improves-quality/
Last updated: 2026-02-16T08:05:11.000Z
*On our second episode of Executive Function, Rippling’s VP of Design, Ryan Lucas, discusses how to build a fast, demanding, supportive place for designers to do their best work.*
[](https://www.youtube.com/watch?v=AB0P8U9NLfM&ref=review.firstround.com)
### Listen now: [YouTube](https://www.youtube.com/watch?v=AB0P8U9NLfM&ref=review.firstround.com) | [Apple](https://podcasts.apple.com/us/podcast/figma-is-not-the-source-of-truth-ryan-lucas-vp/id1535886300?i=1000749427139&ref=review.firstround.com) | [Spotify](https://open.spotify.com/episode/2ZH1cM5meIOdayS6v6p5EP?si=j2Uml7cKRbyTOI61SwfT3Q&ref=review.firstround.com)
“Figma is not the source of truth. It’s a bunch of rectangles in a vector drawing program,” says **Ryan Lucas**, VP of Design at **Rippling**. “The source of truth is the thing that customers experience.”
This exemplifies Lucas’s approach to building products, teams and cultures — utility above all else. In conversation with First Round partner Brett Berson, Lucas explores why you can’t scale taste, how his background as an industrial designer shaped his thinking and how to create a demanding yet supportive environment as a manager.
Here are a few of our favorite moments from the conversation:
- **A holistic framework for how designers should think about their jobs**: “Useful, usable and desirable are the three things we need to deliver. People often forget about the last bit. Dreyfuss said the designer’s job is not done if the product doesn’t sell — you need to know a balance sheet, be able to write copy, talk to customers. The idea behind it is you basically can’t deliver a well-formed product unless you have an understanding of all those things.”
- **Creating a demanding yet supportive environment**: “People can’t do great work unless you push them. You have to put people in a position of being somewhat uncomfortable. And I want it to be backed up by feeling like the feedback I’m giving them is really substantive. The supportive piece is that good creative work of any kind doesn’t come from fear. It’s hard to balance pushing people and keeping them out of that fight-or-flight zone.”
- **If scaling judgement is possible**: “How do you as a design leader scale quality and do it in a way that’s repeatable? You can define quality and get specific about it. But at some point, it’s still a little intangible. I think there’s a lot you can do to spread the ability to build better products across an org. But to get to the highest point on the mountain, you probably need the opinionated, tasteful, benevolent dictator.”
[Listen to the episode](https://www.youtube.com/watch?v=AB0P8U9NLfM&ref=review.firstround.com)
We’ve got a lot more interviews lined up in the coming weeks. Here are some of the incredible execs you’ll be able to learn from:
- **David Singleton**, former CTO at **Stripe**
- **Chris Degnan**, former COO at DoorDash
- **Stevie Case**, CRO at **Vanta**
- **Katie Burke**, COO at **Harvey**
- **Sheila Joglekar Vashee**, CMO at **Figma**
Whether you’re a senior IC who wants to know what it takes to get to the top, or a founder building out your C-suite, we hope you’ll walk away from these conversations with a new model for what executive excellence looks like.
[Take me to Executive Function](https://review.firstround.com/executive-function/)
### Figma is not the source of truth | Ryan Lucas (VP of Design, Rippling)
URL: https://review.firstround.com/figma-is-not-the-source-of-truth-ryan-lucas-vp-of-design-rippling/
Last updated: 2026-02-15T07:57:08.000Z
In the second Executive Function episode, Brett sits down with Ryan Lucas, VP of Design at Rippling. Before Rippling, Ryan led design at Retool and co-founded multiple startups, bringing a rare founder's perspective to design leadership. A trained industrial designer, Ryan traces the roots of modern software design back 2,000 years to make the case that products must be useful, usable, and desirable - and above all, used.
In today's episode, we discuss:
- Why design leaders who stop designing stop leading
- The four pillars every design manager must master
- How to delegate when you're a perfectionist
- Why leaders need strong opinions
- How to scale good judgment
- What Rippling's operating system teaches about speed and commitments
**References:**
- Airbnb: [https://www.airbnb.com/](https://www.airbnb.com/?ref=review.firstround.com)
- Amazon: [https://www.amazon.com/](https://www.amazon.com/?ref=review.firstround.com)
- Apple: [https://www.apple.com/](https://www.apple.com/?ref=review.firstround.com)
- Asana: [https://www.asana.com/](https://www.asana.com/?ref=review.firstround.com)
- Brian Chesky: [https://www.linkedin.com/in/brianchesky/](https://www.linkedin.com/in/brianchesky/?ref=review.firstround.com)
- CrossFit: [https://www.crossfit.com/](https://www.crossfit.com/?ref=review.firstround.com)
- Figma: [https://www.figma.com/](https://www.figma.com/?ref=review.firstround.com)
- Honeywell: [https://www.honeywell.com/](https://www.honeywell.com/?ref=review.firstround.com)
- Liz Sanders: [https://www.linkedin.com/in/sandersliz/](https://www.linkedin.com/in/sandersliz/?ref=review.firstround.com)
- Nest: [https://store.google.com/category/google\_nest](https://store.google.com/category/google%5Fnest?ref=review.firstround.com)
- Notion: [https://www.notion.so/](https://www.notion.so/?ref=review.firstround.com)
- Parker Conrad: [https://www.linkedin.com/in/parkerconrad/](https://www.linkedin.com/in/parkerconrad/?ref=review.firstround.com)
- Patrick Collison: [https://www.linkedin.com/in/patrickcollison/](https://www.linkedin.com/in/patrickcollison/?ref=review.firstround.com)
- Retool: [https://retool.com/](https://retool.com/?ref=review.firstround.com)
- Rippling: [https://www.rippling.com/](https://www.rippling.com/?ref=review.firstround.com)
- Stripe: [https://www.stripe.com/](https://www.stripe.com/?ref=review.firstround.com)
**Where to find Ryan:**
- LinkedIn: [https://www.linkedin.com/in/ryanwlucas/](https://www.linkedin.com/in/ryanwlucas/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
00:00 Intro
00:08 What design actually does at a software company
01:40 The roots of design: from industrial design to software
03:29 Useful, usable, desirable — and used
04:49 How design relates to engineering, product, and marketing
08:15 Measuring success as a design leader
12:40 The gap between director and VP-level design leadership
14:23 Why great design leaders jump up and down in altitude
19:26 The four pillars every design manager must master
21:34 Over-indexing on quality and the perfectionist trap
25:11 When lowering the quality bar actually cost the business
27:53 How to build judgment through pattern matching
31:25 How Ryan's design team differs from the rest
34:31 Why Figma is not the source of truth
36:32 How Ryan spends his week: recruiting, crits, and staff meetings
38:39 The "Do/Try/Consider" framework
42:12 The most important decisions of the past year
44:05 Should one-on-ones exist?
46:45 How to scale judgment
50:49 What to look for when hiring your first design leader
54:54 Advice for young designers who want to lead
58:24 Demanding yet supportive: A balanced management style
01:02:43 What Rippling's operating system teaches about execution
Brett: Thanks for joining. I'm excited to get into it.
Ryan: Yeah, I'm excited to be here. Thanks for having me.
Brett: So wanted to kick things off by just sort of getting your definition of what you think the job to be done of a design function is at a software company.
Ryan: I think you have to define design maybe a little bit at a software company where it's helpful too. I think people don't ask the question like, "What does engineering do?" People kind of have a sense of it, but I think you hear more often like, "What does design do?"
Brett: Or what does sales do?
Ryan: Yeah. What does sales do? They sell stuff. My definition of what engineering does is engineering uses the techniques of science and math and they build technical solutions and systems and structures to solve problems, right? That's sort of the essence of it. And I think design is not that different. The tools are maybe a little bit different, but design is very much about solving problems and it's about making things to solve problems. So maybe it's a little bit less on science and math and it's a little bit more on humanities and social sciences and arts. Psychology or cognitive science, visual arts, anthropology, ethnography. Maybe those are a little bit more of the toolkits. But even then, I think that's a little bit imperfect because if you study architecture, you have to take structures and statics. And I studied industrial design in school and you have to take material science and manufacturing processes. And those are pretty applied sciences and pretty hard sciences. So even then, I think there's a lot of overlap in how you think about engineering and design. And I think that's maybe a helpful point to anchor, like what the job to be done for the function is. I think of industrial design, which is what I studied, as sort of the base of software design, like the modern practice. I think a lot of people hear product design, which is the term that we use often for designers today. And they think of product design, that's pretty new. We used to call ourselves UI/UX designers or interactive designers. And that is true, but to me, the true practice is basically the same as industrial design. You have to think about what you're building and why and for whom. You have to have a deeply informed understanding of your users. You use that to make design decisions. And then you have all these sort of hard skills that come around that of like, how do you make things? And whether you make something physically like table or whether you make something on the computer, you're still dealing with a medium. You have to know that medium. And I think that the essence to me of industrial design is very much... There's an industrial designer named Henry Dreyfus, who's quite famous. You'd probably recognize some of his works if you saw it. He designed the Bell 500 telephone, which is kind of like the classic heavy telephone rotary dial. The Honeywell Thermostat, which if you've seen the Nest thermostat, it's actually based on that. And he wrote a book that I think it was in like 1955 or somewhere around there called Designing for People. It's an awesome book about just the practice. But one of the things he says in it is that basically products that look good and work well sell better. And I think that is the kind of essence of industrial design. And so when I think about the modern practice of software design, what do we do for a company, it's like, well, we're trying to make products that look good and work well because we think they will sell better. They will accelerate the powers of a business. Or in some cases, I think they can create the powers of a business. What that looks like pragmatically, that's maybe like the philosophical thing, like what does that look like on a day to day. I always talk about useful and usable and desirable as being like the three things that we need to deliver. And when I think about like practically what useful, usable, desirable means today when you're designing products, useful is pretty straightforward because it's just utility. It can like do a job. Like maybe a really dumb metaphor is like if you have a small tree in your backyard and you're like, "I no longer want this tree to be here," you want to cut it down, how do you do that? Well, it's like maybe you go into your garage and you're like, "I think I have an ax in here somewhere." And you fish it out and the ax is just completely dull and like rusted and the handle's falling apart. There's like no utility. The thing... You just can't cut down the [tree.It](http://tree.it/?ref=review.firstround.com) won't do it, right? Maybe you find in there that you do have an ax, but maybe it's like the wrong ax for the job. And when we talk about like design, there's obviously a lot more to tactically what it is, but I really think like well-designed products, products you say that look great and work great and hopefully sell better, those are the three things. Those are what you have to deliver. And the sell better piece is used. Like, do people use this? So useful, usable, desirable, and used. And I think people often forget about that last bit, but I think it's incredibly important to the practice of professional design, again, whether it's physical products or software products. I think Dreyfus said the designer's job is not done if the product doesn't sell, and I've always believed that.
Brett: That. How do you think that squares with the other functions that are involved in sort of delivering something to the customer? And in your definition or the way that you think design should function, is the responsible part you design or in so many things, these things like desirability, well, there's product marketing elements often to that.
Ryan: Yeah. Yeah, yeah. Totally.
Brett: Or usability. There's what's the latency of the product. That might be more of something that engineering is responsible for. So do you think how those things relate to, does it matter who is the primary owner versus supporter in a given company?
Ryan: Yeah, that's a really good question. I mean, to me, the answer is no. I think it's sort of a shared responsibility, and it may differ from company to company. It differs from team to team too, right? You're always putting together a crew, a cast of characters and trying to assemble the right skillset. And in any given time, you might have a product manager who actually was originally a designer or has great sort of aesthetic skills. You might have an engineer who's like a really good product and business thinker. These things genuinely tend to be shared between people who are making stuff. But I think the original definition of industrial design, if you go back to Dreyfus and his ilk of that time, like if you read that book, Designing for People, he basically literally says in the front, he's like, "A designer is part salesperson, part marketer, part PR person, part artist." He's like, "You need to know a balance sheet, you need to be able to sort of write copy, you need to talk to customers, do all these things." It was a very holistic view. And the idea behind it is like, you basically can't deliver a well-formed product unless you have an understanding of all of those things and you're probably by nature of doing it going to touch all those things. In modern practice, look, there's specialization, right? Everybody cannot do everything. It's impossible. When you're a smaller company, when you're a startup, much more possible. And I think you see it more. You're like, "We don't have any PMs, so our engineer and designer are doing it." As you get bigger, there's just too much work. But I think the spirit of that idea is really important to me. And this is maybe a place where I might differ from other design leaders, but I think that the EPD trio has to be a Venn diagram. It has to overlap to build great product. And again, it can differ a little bit from team to team and company to company, but the nature, you're just going to naturally step on each other's toes a little bit, I think in a good way. And that's how I think about the space between the functions, product marketing, marketing, product management, engineering, design, is like, if you have that skillset, it's immensely powerful. That's how I've always tried to practice. I'm like, I would say like a pretty decent front-end engineer. Not a great back engineer, a decent front end engineer. I ran product marketing for a bit at Retool and I've definitely done a lot of it in startups that I've run. I love core functionality of design. I love making things. I love the hard skills of talking to users and framing problems and making and building UIs. But I also love business and thinking about like, "Is this the right thing to build and who's going to use this and what's our strategy?" And I think the best makers of any product probably care about the things around them. And I think when you see people who don't, that lack of curiosity, that more specialization, I think you generally, maybe not always, but I think you generally get worse products because of it.
Brett: How do you measure success for you in the role of head of design or VP of design or leading a design function?
Ryan: Building an environment I think in design in particular where people feel like they can truly really do good work, like do the best work in their life, that takes work. It's a lot of work. The skillsets are not necessarily diffuse. You're looking for certain types of people, especially if you're looking for people who are these generalists. To be able to recruit, find people, get them in, get them up to speed, it's a big part of the job. And measuring that, of course, is like at the top line. It's like, "Are we making our hires? Are we getting the right people in?" And there's a bunch of metrics you look at when you're hiring; time to hire and onsite to offer rates and all those normal standard things. That's a big part of it. I think there's the product bit, which probably overlaps with quality a lot. When I think people think about design and we talk about useful, usable, desirable, you're very much entering into the world of, "Are we shipping a quality product," right? "Are we shipping a product that we think does these jobs well for our customers?" I think ownership of that, ownership of quality again is a shared ownership, to your point. Stability of the system or reliability of the system probably falls a little bit more into the engineering world, but something like performance is shared because perceived performance is often very much a design problem. It's not like you can say, "The API needs to be faster." It's like, "API can't be any faster, but how can we make it feel faster?" And then you start talking about interactions and perception, right? Maybe that comes a little bit more in the design world. So I think you're looking at that category of things. But I do also think, and this might be controversial, but I think the design leader needs to have ownership of building the right things to some extent. I mean, again, it's shared, I think, with the product function. But like research, for example, sits under me at Rippling and our research function is very strategic. It's very much looking around the corner. It's less evaluative and more generative. And I think that type of thinking of like, "Where are we skating to? What are we missing?", that's often lives in design and then you need to be responsible for that. And not just generating it, obviously, because generating it is one step, but if the company's not able to use it and access it and act on it and make decisions on it, then it's probably not that helpful. So that's sort of another category of things. I think there's the metrics you look at when you're thinking about these things. Like for quality, there's CSAT and there's NPS, there's customer sentiment things. I think those are useful. They're not perfect. They're lagging. They don't always tell you exactly what's going on, but they're useful to track. The qualitative bit is probably generally the more interesting stuff. And you see that in evaluative user testing or you'll see that in surveys. You can do ethnography, right, shadow customers. And that usually, I think like Nielsen said, you kind of only need to do five tests and you kind of know what's going on generally. And I think that's often the case. And so keeping attuned to that. It's very easy to get into execution and production mode of just like, "These are the things we have to go do and ship in our business right now and forget that you really need to be constantly sanity checking them against, did they solve the jobs to be done, did they solve the problems we identified, are they working. And I think a leader can be a check on that. The quality bar bit is something that I think is part of the job of the design leader in terms of thinking about success. Like, who ultimately owns the quality bar or like has the final say of, is this good enough? Probably the companies that you would look at and think are the most design-driven, they tend to have one benevolent dictator doing that, right? So it might be Brian at Airbnb or obviously Steve Jobs at Apple. And I think that can be partially the design leader's job. It depends a little bit on the org. I think defining quality is a big part of that. Does the organization know what it means? How do you know they know what it means? Can you get specific? I've done a bunch of work there, and there's I think some really interesting prior art in that space. It goes back to the '70s in software quality actually that Silicon Valley is good at forgetting stuff that we've done. And you go back and you read old papers and you're like, "Oh, we've really thought about this." And I think that's definitely true for quality. And so a lot of that stuff is just surfacing it to the org and communicating it, making sure people know it and can act on it.
Brett: How do you think about what is excellent in the context of a director versus a VP or exec that runs the function other than more span and scope and responsibility? Or like, what is required? What is the gap between someone who is effective as a director of design and someone who is effective as a VP of design?
Ryan: I've been this week debugging some places where it doesn't feel like we're always getting the right product to market and from idea to production and then like, "Is the problem that we're not specifying the design correctly?" And so we're not able to build it correctly because the specifications are wrong, which is maybe upstream and a little bit more in the designer's house. Or is the problem that we're specifying it properly, but somewhere along the way, maybe it's that engineering, like we're not sort of building the thing that's specified. And there's a bunch of ways that breaks down into individual things, like skill sets of the individual people, how fast we're moving, number of engineers to number of product designers. But looking systematically at sort of problems like that is also a big part of my job where I'm not debugging one individual problem. I'm really trying to see the patterns between them. I don't want the specifics very much. I'm like, "Give me the cases. Give me the examples," but I can start to pattern match and then go like, "Oh, I think we can solve this problem across the whole org potentially. And what are the changes or the processes that we need to put into place to do that?" And I think it's a little bit harder to do that when you're really in the weeds on a domain of a product.
Brett: Do you think the most capable designer should run the function?
Ryan: I think it's really important for design leaders to be hands-on. And this is like a very timely topic. A lot of people are talking about this, I think, in the industry right now. I think you hear this more and more. There's a generation of leaders who are maybe a little bit more focused operationally or like on organizational complexity rather than product complexity or like core design problems. I think that's bad in general. I think your design leader, I don't know if they should be the best designer, but I think they should be one of the best designers. And that's because you have to really jump up and down in altitude. I think this is true in engineering as well, but when you're in a function that builds things, like builds products, build services, you have the context which is very rapidly from thinking systematically, thinking about the goals of the business, resource trade-offs, how to get a team to do something that they don't want to do. And then you also have to be like diving deep on the quality bar and being like, "Whoa, this is not the right solution and I need to figure out how to get this back on track." And sometimes you can delegate that stuff to other leaders to do. Sometimes it doesn't make sense to do that, I think often. At Rippling, I think Parker, the CEO, is well known for this, Parker Conrad. People talk about founder mode. I think before founder mode existed, Parker was doing founder mode. He's just in the weeds constantly on everything. And he very rarely goes to me first, almost never, when he sees a design problem. He goes straight to the designer who designed the thing and he gives them feedback. I actually think that's really good because they hear directly what his opinion is. It doesn't get filtered through me and then my director and then somebody else. And I think design leaders need to do the same thing. It's like much better to hear it directly. The feedback that I give is often different than the feedback my managers and directors give. And it doesn't mean it's necessarily better or worse, but it does sort of illustrate those points when it's not reconciling. And I think if you're just not in the work like that every day, what's going to happen is at the end, you're going to see the work and you're not going to be satisfied with it as a leader and then what? It's like your team went through the whole process and they're going to get that feedback when it's too late to act on it. I also think you can build a lot of credibility with your team and with ICs when you show that you can still do the job. There's like a trust that comes with that. I like to stay sharp on stuff. I like to still stay up on the tools. It helps just me think more efficiently. I think I've bounced back and forth between leadership and founding and just doing work myself and my career. And I think it's just useful to just stay close to it. It just makes me, I think, a better thinker in all ways. So through that lens, I would say, yes, it is, I think, extremely important for a design leader to be incredibly hands-on, close to the craft, close to the practice. I don't know if they have to be the best one. I think sometimes that happens, but I think you see a lot of folks in the industry who maybe try management and then they're like, "I miss making stuff and it's a proportionally much smaller bit of my time, and I really want to go back to that." And those become your staff level, principal level ICs. And they do a lot of the same work, they just have more bandwidth to be hands on. And I think truly those can be parallel paths in a lot of ways. The other stuff that comes with running an org isn't everybody's favorite.
Brett: Do you think someone effectively running a design org can be someone who's an extraordinary designer and a mediocre general manager, or does that generally devolve and actually not work?
Ryan: I think it depends on the size of the org is what I would probably tell you. I mean, this is the most obvious example, but if I think of Jony Ive, it's like the Apple's design team, industrial design team at least, was never that big and they did a lot of work and it's a giant company, one of the largest companies in the world. I think if that's true, then you don't probably have to be the world's greatest manager. I think being very good at the hard skills of design is probably the most important thing. If you need a more scaled design org because of the nature of your business, and that often happens, then I think the answer is like, no, it's not going to work. You're going to hit the limits of all the things that come with trying to become a scale leader. Understanding what to let go, designers are all perfectionists, I think that's a very hard thing to do when you have a large fan of control. You're constantly making trade-offs that the business needs. There's decisions that there's like no good answer on. You're like, "Both of them are bad. What do we do?" I think you have to have somewhat of a skillset to operate that way. And you have to think really critically about the business. I mean, it's kind of what I mentioned earlier, just like I think being a generalist, really being able to understand the business from first principles, put yourself in the shoes of other functions, hopefully know a bit about how they work and be able to speak their language, if not perfectly well enough, it's just really important. And I think if you can't do that when an org gets to a certain size, you're just going to have a really hard time, again, working with your first team working laterally across the business. It's my experience at least.
Brett: You touched on this a little bit, but when you think about earlier roles in your career relative to what you're doing now running a function, what are the actual skills that had to be developed between those two points? Not just the things that are more encoded in your DNA standard, sensibility, whatever it might be, design sensibility, but like the practical things that you actually had to figure out.
Ryan: Well, I can tell you what I think the core things that you have to do as a design leader are, and then I can maybe tell you of those, I think the harder ones to develop and maybe where I struggled a little bit along the way. What I always tell folks when I'm talking to them about leadership or talking to my own leaders is like the four things that design manager needs to do, people management, we talked about that, right? Recruit, retain, develop, build a good environment people can do really good work, they feel like they can do really good work. If people aren't able to do that, you can find them a new home, that performance management piece. The second is execution. Sheer execution really, really matters, especially in hyper growth companies, which is where I spent a little bit more of my time. Speed is like just always a requirement in that world. The business that you were operating in six months ago is not the business you're operating in now. And that means execution is like a constantly moving target. And can you get stuff done and can you drive a group of people to get stuff done effectively? That means installing some process, hopefully not too much process. You still want to move fast. That means negotiating cross-functionally, building good, cross-functional relationships, but it's really about delivering on the commitments that your team has made to the business consistently, basically. And then those are like, I would say, like the foundation of like, probably all managers need to do that stuff regardless of your function, true in design as well. The other two are strategy and quality. And strategy probably touches on what you're asking a little bit about like, "Where are the lines between these functions? If this is true and these things are shared, how do you figure this out?" And when I think of strategy, it's very much building the right thing. And when I think of quality, it's building the thing right. And so building the right thing is like, "Are we figuring out how to put the best product into market and the right product in the market for our business?" And that's going to touch lots of stuff. It might touch pricing and packaging. It's going to touch hopefully a pretty deep understanding of users. You need to be able to connect design decisions to user needs in a really tight iterative feedback loop. And to do that, you have to have an understanding of strategically what you're trying to do. And then quality is very much like, "Okay, when we know what direction we're going in and we're aligned on that and we feel like it's the right direction for the business, how do we do it well?" And we talked a lot about some of that stuff earlier, but where managers I think often struggle with that stuff is they maybe like over index on one. And I can tell you a place in my career I think I spent too much time over indexing on one is probably the quality bit. That might be like the most common one for designers because most designers are perfectionists. They care about excellence. They care about really touching the work. You have this idea in your head, you're trying to make the idea real. If it doesn't quite match the thing in your head, you're sort of always pursuing that. And yet there are constraints in the world and there are constraints that you have to operate in. I think I spent too much time... You talked a little bit earlier about like, should the leader be the strongest designer in the org? I think you often find yourself in that position, especially as you're scaling, you might be the strongest designer in the org. And then your natural tendency when there's problems or the team is performing is like, "Well, I'll get in here. I can do it, and I can do it pretty fast, so let me go ahead and do it." It doesn't really do you as service as a scaling leader because it just does not scale at all. You will not have the time for it. You're not developing people. The leverage of hiring more people would actually be a much better use of time probably than you doing it. But when you're in a hyper growth business, that work needs to get done. So you feel that pressure of like, "Well, we need to get this done, and I could get this done." And I think that's a place a lot of leaders struggle with. It's something I certainly struggled with a lot. I found myself at stages of business I probably shouldn't be still working late nights and weekends and drive and work myself. So that's like a big one that I think was a hard lesson to learn. The way out of that is not a surprise. It's like you really have to hire your way out of it. You have to delegate your way out of it. You have to go through those uncomfortable periods of being like, "Well, this stuff is not going to happen or work's going to go out that I'm not going to be proud of." And you start to develop an intuition of, if you're juggling the balls, like which of the balls are rubber and it's like, "Ah, it's fine. It'll bounce back. And which are the ones that maybe don't?" And then you kind of delegate resources appropriately. But if you're a perfectionist, which I definitely am and a lot of designers are, that doesn't just manifest in the work. It manifests in hiring, it manifests everything. And I think you have to get through that hump and just realize a pragmatism, like a natural pragmatism. I think you see that it's okay. You go through stuff and stuff does fall apart and break and you go, "Oh, that was okay. Actually, it's fine." And what we got to, because I put my time somewhere else was like much better and you start to see the leverage. I think you just have to go through it. I don't think there's necessarily... You can tell this to people all the time, and I tell my managers this stuff pretty regularly, but I think you just have to go through the exercise of seeing things break a little bit and then realizing that maybe it wasn't the end of the world. Or in some cases, maybe it was and you're like, "Well, that was the one thing that I probably should not have let go. And now I know and I can pattern match a little bit on that." The other place I see, I think with the people stuff, you sometimes see managers who really heavily over index on people and they're like, "I want to build the right environment and find the right people. I want them to feel psychologically safe and they can do great work and they can trust me and I can shield them from all the chaos of the org." And that's usually, I think, a bad decision because one, you're not working with your lateral team. That again really is your first team usually. Two, the same way as I want Parker to go to an individual designer, it's better for your designers to see what's going on in the org, to hear it, to not be sheltered from it because they'll learn more and then those times you can't be there, they're going to be able to navigate it better on their own. And then the execution stuff I think just looks like, "Do you over-index on process too soon? Do you try to build the perfect... Do you try to design... Like design energy into designing the perfect little system of execution," right? And it's like, "Ah. A lot of that stuff kind of probably doesn't matter as you're growing." It's like, good enough is great. Is the work getting out? Are you doing it? So I think those are all the places that people can fail. For me personally, in growth, it was very much more like that delegation piece and just coming a little bit more hands off the work.
Brett: What's an example of when you knowingly let something go out the door that wasn't at your standards and it actually did matter that knowing what you know now, you shouldn't have done that.
Ryan: There's a case where we're working on our reporting product at Rippling right now. And so reporting is like a platform construct. So we have lots of different products and they do lots of different things, but a shared component across the whole platform is this idea that you might want to do a little bit of reporting. You might want to just build a report that tells you something. How many people you hired in the last six months, how much you're paying in deductions for your employees every month, all those sorts of things. Basically, manifest is like you're building charts and basic tables and stuff and you're sharing those reports. Basic analysis, pretty lightweight analysis. Ripplings, I think it has an original report builder. There were some flaws in it that I think we learned from customers over time, and there was a sort of 2.0 version put forward of like, "Great. Here's where we're going to go next with this product." And I think the initial pass on it was quite good. It was very thoughtful. It addressed, I think, a lot of the problems that we'd seen. And then I think over time the scope changed a little bit for some internal reasons that I won't get into too much, but scope started getting bigger, some features got sort of pulled in that weren't in the original scope. And then what we kind of found at the end is like, we thought we had a pretty good approach. And then by the time it kind of got put together into a product, we realized it wasn't good for a lot of reasons. The usability was a little bit tough. Some concepts were hard to understand. We were trying to serve two audiences, maybe like a slightly more advanced user, more expert user versus all more of an entry level user who doesn't do this stuff a lot. And you could see that stuff kind of getting jumbled. And that's like a very preventable thing. And I think that was a place where it seemed like it was on track, and I was like, "This seems like it is on track and they know what they're doing." And I turned my attention to other things in the org. And then when it came back to, it's sort of very obvious to see probably where it went a little bit off track. We're getting that back on track right now, but I think there's a lot of cases like that of just, there's many things like Rippling as a business has a lot of different products and there's a lot of different things going on. I definitely cannot be everywhere at once. And you have to make those assessments and those judgments and sometimes they feel a little bit snap like, "Where am I going to put my time? Do I trust this team?" And you get it wrong sometimes and then you realize the cost is a little bit of time upfront would have saved a lot of time downstream, and the amount of time it's going to take to sort of go back and get everybody on the same page and unravel that stuff and fix it can take a lot longer.
Brett: And so is it just mainly judgment? You can sort of bubble up and you quickly get to the question of like, what do you delegate fully? What do you delegate partially, when you let something go out the door where if you were to be the IC owning it wouldn't go out that way? Is it just judgment that's accumulated after doing lots and lots of reps or there's some other higher order way to think about it?
Ryan: Sometimes you see things and you think it's fine. Part of it is like skill of the people on it, whether it's the manager or the IC designer or even the engineers or the PM. Do they have domain experience? Have they seen this one before? Can you trust them that they probably know how to navigate this? If everyone's like new to the product problem or the domain... Like an example is like payroll. I'm working in payroll now. I've never worked in payroll before. So there's a lot of things that are probably very obvious people who have worked in payroll for 10 years that to me I'm like, "Oh, fascinating. I had no idea this is terrifying. You can't get payroll wrong." But you go talk to somebody who's been doing this stuff for 10 years and they're like, "Oh no, it's totally fine. Here's how you do these things." So you look at your team and you go, "Do they have that accumulated between them and the triad?" Maybe that helps you take your foot off the gas a little bit. Sometimes you just have to... You throw people in and you just go, "I think you're all pretty good or you're a good designer, you're thoughtful, you're talented, you've been on a bunch of different stuff. I think you can take it" and you just kind of see how it goes and you just check in, see how they're feeling, see how other stakeholders are feeling. Is the work progressing?" Sometimes it's not, and you can just course correct a little bit, get them back on track and it's okay. Sometimes it's not and you're like, "Oh, this might not be the right fit, right? Maybe I need to look elsewhere on the org." Because it's the Andy Grove stuff, right? It's like there's motivation, there's task-relevant maturity. The task relevant maturity piece is not small. And I think even in a design function, even people who've been product designers for a long time, like with the payroll things, sometimes you encounter problems and you're just like, "Whoof. This one is hard and I haven't seen it before." As you get more senior, the space where that's true probably gets smaller. But look, everybody is, to some extent, T-shaped and is stronger in systems thinking or visual design or an AI or whatever, right? And so you have to do that as well, the other things. Like, what's the opportunity cost or what's the counterfactual? If we get this one wrong, if I'm like, "Ah, this could be better," it's like-
Brett: Yeah, reversibly irreversible.
Ryan: It's very reversible. I also think about how these decisions stack too, right? So I often ask designers, I'm like, "Okay, I don't think this is sort of good enough here. I think it should be better in this way, in this way, in this way." But I'm okay with this going out the door. I just want to know what your next steps are going to be. And if you have a well-formed set of milestones, I'm like, "Okay, yeah, we're going to go out the door with this." And it's not great because we're worried about... I don't know, the feature's not discoverable. Like, "Okay, but does the feature work? Do we feel good that it's usable?" I'm like, "Yes, it's just that we're worried people aren't going to discover it." It's just tough for us to solve that problem right now. Then I'm like, "Great. Tell me your plan to go solve that problem. Is it because you need to unravel dependencies across teams? It might take a little bit more time." Whatever it is, if you can show me that you know where you want to get and then you have a plan to get there, I feel much more confident about being like, "Okay, this can go out the door." What often happens I think in software is you do the thing and you sort of know it's flawed and then you're like, "We're onto the next thing. We're not going to come back to it." This is very much about iteration, and iteration is like so important to building quality product. I think the idea that you can build a great product in one shot it almost never happens. If that was true, I think most products would be amazing because we'd just be like, "Yeah, it's great. You just do this." And then products are great. Most products are not great. The only way through to build good product is to just iterate a bunch, and then you want to iterate as fast as humanly possible. And if you have trust that that motion is happening in your teams, it's more comfortable to be sort of hands off. If you don't have trust as that's happening, then you start to go, "Geez, do I want to let that one go?"
Brett: If someone were to watch the way that you run your design team and the design function, in what ways is it the most different than pick a random sample of 25 other scale up design functions? What are the main points of difference and what's the story behind those points of difference?
Ryan: I've had other leaders I've worked with tell me that they don't really think of me as a designer, and I sort of take that as a compliment. And I think what they mean by that is, it seems like you have your hands on a lot of things that aren't sort of purely what I think of as the hard skills of design; designing screens, thinking about interactions, visual design, whatever. And that might be part of it, which is like I really push an org to think broadly. I just redid the sort of leveling guidelines at Rippling, and there's a very specific call out around product thinking. And in product thinking is very much like understanding our product, the complexities of our product, how it's built, understanding the market and competition, thinking strategically about our business objectives, where we should go, what we should build, for whom and why. And I think a lot of functions maybe don't... Design functions don't emphasize that as much because they're like," Yeah. Product team does that. They're good. They give us a thing. They figure out that stuff. We just figure out how we're going to do it." I don't like running an org that way. Again, it's a shared responsibility for sure, but I want designers thinking that way just because I think... I'm always asking them questions of just like, "How did you make this design decision? How do I evaluate it? How do I know it's right to do this versus this?" And it's always connected back to like, "What customer insight do you have? What are the constraints of the business? What are the engineering constraints?" And I really want people to have that rigor. That's one way. And again, I think other functions do that. I'm not alone in that, but I'm probably a little bit more invested in that in general.
Brett: You want members of the design team thinking about revenue or retention or pricing or...
Ryan: Yeah. If it's demanded by the org. At times, if you're building something zero to one, you might not be thinking about that stuff. If you are building something from 99 to 100, making a small change can have a big impact, and then you probably need to be extremely rigorous about the changes you're making. And then there's a lot of work in between. It just depends on what you're building. But yes, I do want them taking that mindset of like, "Why does the business want to do this? Why is this important? Why do we need to do it now instead of later? How does this connect to other things that we're doing?" I think that's really important. It's part of my job as a leader to be able to drive that information to the org as much as possible so they understand that. Our chief product officer does that. I also do that. I want people to understand the mechanics and have the information and make the decisions and that often doesn't happen. But yeah, I think it's really important. And the other bit I think that's maybe a little bit different, although this is really changing in the industry now, is I consider myself a technical designer. Like I said, I'm a reasonably okay front-end engineer. I think it's really important to be as close to the medium you're building in as possible. It's funny, I argue with engineers about this sometimes. Engineers are like, "Figma is the source of truth." And I'm like, "Figma is not the source of truth." They're like, "Don't you want that?" And I'm like, "I do not want that." Figma is a simulacrum. It's a bunch of rectangles in a vector drawing program. It is not the thing that gets put in front of customers. The source of truth is the thing that customers experience. If they experience something and it's wrong or broken, I do not care what is in Figma. It does not matter. I would much rather everybody orient to the thing that we are putting in front of customers than to orient to some of the tools and techniques we use upstream. That is probably a somewhat unpopular opinion, but it is changing now with all the generative AI tooling because it is much easier to get more designers to work in production environments. And previously it was very hard. You maybe hire a core who had that skillset, it was hard to build a whole team. That's changing rapidly. So if you asked two years ago, I'd be like, "Probably nobody thinks that." Now I'm like, "Well, I think it's becoming a little bit more popular."
Brett: Why was that controversial?
Ryan: Yeah. I think a lot of people would go, "That's impossible. You're asking for something that's just not possible. Nobody could do that." And I'm like, "Well, definitely people can do it." I've hired a lot of people who are exceptional at it. They're great product designers and they're very technical and they can commit code. I think you see it more in earlier stage startups than probably you do later stage. And maybe that's one of the inputs that people just haven't seen it. And I'm like, "Well, if you've been in early stage, you've probably seen it." But yeah, I think people are just, "You can't scale a function that way. You're just never going to be able to hire enough people," which I think was true. And that has not gone away, but it's just more and more accessible. And I've been really excited about what I've seen out of designers. I think you see some designers right now who are still a little bit nervous about the tools and they're not quite sure how to pick them up even though I think we're doing a lot of enablement around them. And then you see the designers who already know how to do that stuff, they're just accelerating. They're like, "This is great. It's just faster." And then there's a nice sort of middle core of people who are like, "I've always been interested and curious and tried a little bit on my own, but I couldn't quite get there, and now I can get there." And those folks are doing awesome and it's really exciting to see.
Brett: How do you spend your week?
Ryan: Right now, I spend probably about 50% of my time on recruiting, and that's because we're trying to grow our design work quite a bit. I think in any given point in time in my leadership career, I'm probably at least spending 20% of my time recruiting. The next thing is probably looking at work. So like I mentioned earlier, I go... We call them UX syncs, but we basically have crits for every pillar, and I try to go to all of them and they're each about an hour long. So at Rippling, I won't go through them all, but Rippling started in HR and payroll and benefits. That is called the sort of HCM, human capital management, which is a crazy term, but very anachronistic. HCM is sort of a pillar, right? So a set of related products, our talent suites in there. That group of designers basically orchestrates their own one-hour UX sync every week. They sign up for that. So you'll have usually a couple designers who bring in work every week. And then PMs and engineers are welcome to attend, and they sometimes do, sometimes don't. It depends on what work we're looking at.
Brett: But you show up and it's minute one. What ends up unfolding over the hour?
Ryan: Minute one is, "Who's up? What are we looking at today?" And so it's a couple things we're going to look at, X and Y. Okay, great. Designer sets context, "Here's what we're going to look at today. Let me give you some context if you're not tracking this super closely what we're doing, what problem we're trying to solve. Here's the feedback I'm looking for right now today." Place that crits often go awry as people give you feedback where you're like, "Yes, yes, I know, but we're not there yet. Or that's not super helpful at this stage or maybe we've already made that decision." So that can help hone what we're all looking at and giving feedback on. They typically walk through their design decisions. Sometimes they show prototypes or demos. Sometimes they just walk through the screens, and then people ask questions and give feedback. When they go well, you have a discussion and folks take notes and they write down the feedback that they get. Sometimes you use a framework. So one of the things when you get a lot of feedback is like, "What feedback should I take and what feedback should I discard as a designer?" It can be tough to know, especially with leadership, it's like when I give feedback is, "Does that mean I have to do this? Or was Ryan just throwing out some ideas?" Asana came up with a framework called Do, Try, Consider, that a lot of companies use that I really like. So do is basically like, "This is feedback you must do. You must make this change before you can progress, whether that's shipping or going to the next stage." Try is like, "I would like you to try this idea." It might not work. You definitely don't have to do it, but I want you to at least try it. And consider is like, "Here's five ideas. Take them or leave them. Up to you." And I think calling that out can be helpful for people, for everybody when they put feedback down. But I think especially for leaders, because sometimes better or worse, the gravity of your feedback probably stands out a bit. So you do that and you look at a couple projects and then you kind of ask about next steps. Sometimes I'll ask to see certain work. I also have a Friday standing set of time where I review work. So I ask designers to bring work that's either at like 20% or 80%. And the reason for that is I picked this up from ex-Stripe folks that I worked with at Retool. 20% is you're far enough along that like you're not at square one. You're like, "We don't even know what we're going to do yet." It's not helpful to get feedback at that stage, but you've probably made some decisions and started producing something. And so it's like, "That's the directional check. Are we headed down the right road?" It's a good time to be like, "Ooh, don't go down that road. Wrong road. Get on this one before you do anything more." And the 80% check is like, "Okay, we're almost there. We've got a thing. We can really show you what we've got. We can go through most of the experience," but there's enough time left that if I'm like, "I don't love this. Let's refactor that. Let's go about this differently." You actually have that time to go do it because if you're at 90% or 100%, it's too late. We're committed to getting us out the door and we just can't do it. So those are the checkpoints that I like to have with the team. So that's a big part of my week too. And then I have a staff meeting with my leadership team. For my staff meeting with my leaders, this is another Stripe-ism I picked up from working with some ex-Stripes. We have what we call, we did this at Retool a lot, snippets, where basically everybody writes down ahead of the meeting kind of three bullet points of things that are top of mind for them. It's not necessarily like what I'm doing this week. It's more like, what is useful for this group of people to know? What should be shared or shared context of things that are important to me? So everybody fills that out ahead of time and then everybody sort of reads it. We often, at the start of the meeting for like five minutes, silently we'll read through it. People add comments. That actually ends up building an interesting agenda of like, "Oh, I didn't realize, but you were working on that thing. I'm also working on that thing. That's interesting. Or I've seen that. Let's talk about that right now." It's a really nice format. It's very quick to do. You can write them in five minutes, you can read them in five minutes. You often find things in there that you would otherwise miss with like a more formal agenda. So I do that and I think that worked quite well. And then I ask my team to... I add things to the agenda beforehand pretty regularly and ask my team to add things to the agenda. And so I'll look at it the night before, see what we've got, kind of structure it, order it, and we'll go through the snippets and go through the agenda. I think that works pretty well. Staff meetings are always tricky. I think the best staff meeting may still be not that great of a meeting, but the problem is if you don't have them, you'll miss a lot. If you do have them, you might have some meetings that don't feel like that useful or that valuable. And I think information sharing, context, discussion points, like discussions you need to have that if you don't get together that you're not forcing them, hard discussions, decision points, those kind of things. So we keep that meeting pretty short in design with the leaders. We were doing it for an hour. I trimmed it to a half hour. That time constraint of just like, "We've got a half hour. Let's use the time efficiently," I think helps a lot.
Brett: What's the most important decision you made in the last year?
Ryan: We talked about this a little bit earlier, but the resourcing decisions of, I think we have more to build than we have team size to do it right now at Rippling is one of the reasons why we're hiring more. But to some extent, you always feel that way. I think Rippling, in particular, wants to run teams that are relatively lean. I think there's a lot of good to that. Designers get to own a lot at Rippling. They, in some cases, will own a company's worth of product themselves, which as a designer is an amazing opportunity. Some companies you go in and you're like, you get this little sliver of thing, right? Rippling, that's never true. You're like, "Congratulations, you own a series C company's products by yourself. Good luck." But it's very challenging too. And so when you're thinking about resourcing in that world of just like, "Wow. Could we get away with one designer on this thing? Is that going to accomplish the business goals? And if not, where do we draw the other resourcing from?" You get a lot of decisions where there are really no good decisions. I mean, recently we had a new product area we're working on that Parker and Matt McGinnis, the CPO, asked me to find a designer to work on. And I sort of laid out the land and I was like, "Okay, this is a challenging problem. It needs this type of designer. Here's the bank of people I think can take this on. Here is what they are all on." And I was like, "All of these things seem incredibly strategically important to the business to me. Some of them are existential, but they're all extremely important." And Matt and Parker, I think both looked at that and went, "Yep, that's a tough decision. Those are all bad options. Good luck." And I think that's the kind of thing where, again, you just have to think through. You have to make a decision, you just have to decide. And then you make the best decision with the information you have and you think through what's going to happen if it goes awry and what your next move is going to be and you just grip it and rip it to some extent.
Brett: What's your take on traditional one-on-ones?
Ryan: I like the idea that one-on-ones, the hot take of one-on-ones shouldn't exist. It's like, "Let's get rid of them." Sort of there's something attractive to that about me. And I think it's because one-on-ones don't always feel like the best use of time. They take up a lot of time, especially if you find yourself carrying a lot of reports, like your span of control gets large at times. If I try to assess one-on-ones critically, I often think about what's my experience with my manager in one-on-ones, what do I get out of them? Do I like them? And then how do I think they think about their one-on-one with me?
Brett: Which I think the original incarnation was this is a vessel for the direct report is the primary consumer of the meeting.
Ryan: Right.
Brett: Although there's some bidirectional sort of dynamic, but I think-
Ryan: I think you're right.
Brett: ... part of the original incarnation was, "This is a thing for the direct report."
Ryan: I think you're right about that. And I think that is my assessment, is like, "That's what they're good at." I don't think they're that useful as a manager for the most part because I think as a leader, I generally try to just... If there's an issue that I need to talk to a report about, I'm like, "I'm just going to find somebody on my calendar, go talk to them about it right away." Matt McGinnis, who I reported to at Rippling, is very good about that. He will feedback lightning fast at you, which I prefer. It's great. Give it to me in the moment, right? So if you have that, then you're like, "Well, okay, I have this vessel to get information I need to you and I need to get it to you. So why do we need this meeting?" Career development stuff, people talk about using them for that. It's like, yeah, that stuff doesn't happen every single week though. And it's probably better to carve out time for that that's dedicated, prepare for it a little bit. So what are you left with? Status reports, I don't think status reports are useful. You can do those async. A lot of that stuff happens in standups and things anyway where managers are around. So it's like, "Can we carve that out?" What's left? I think what's left is like, I got some hard problems and I need to jam on them and I would like you, my manager, to have some time to jam on these things with me. That's where I've seen them work. And I think if in design in particular, if it's me with an IC as opposed to a manager, the most successful use of that time in terms of like how I feel about it and what I've heard from my reports and polling them is actually just using it to go over work, to like jam on ideas, whiteboard, like actually just work together, call it like a jam session and design. That seems to be the highest impact that people really like. And they're like, "You could get rid of everything else. Just give me that. It's just protected time with someone who's going to give you hopefully good quality feedback, exchange ideas, brainstorm." With managers, it's kind of the same thing, but it's often like, "I'm having a problem with my team" or like, "I'm working on this person" or "I'm trying to make a hiring decision" or "I have a cross-functional dependency that's not going well. How should I navigate this?" That stuff and be like, "Okay, yeah, you know what? I don't know, but let's sit down and figure it out together."
Brett: How do you scale judgment?
Ryan: Rigor in thinking is something that can be taught. How do you break down a problem? Think through all the constituent parts, discover parts you might not know about, discover the known, unknowns. There's a lot of different ways to teach it. It's taught formal logic. I think designers don't tend to learn this stuff in formal education, but I think you can... Judgment as a factor of rigorous thinking, those two things can often be combined a lot. It's like you can make judgments pretty easily and in a repeatable manner if you have the right information and you thought through things. When you're trying to scale judgment, there's like tools you can give people that actually get you pretty far. And if you give those tools to people, whether they're just like frameworks on how to think or literal tools, that goes a long way. But I don't know if this is a question behind your question, but a question I get a lot is, how do you as a design leader scale quality and do it in a way that's repeatable? Because it's like, "I don't know. We've got this big company and we have quality problems everywhere. I don't know. And I look at this other company and their product's pretty good. It seems like it's pretty good." I'm like, "How did they do it? We can't figure it out." And this is like a process power thing, but I think that stuff, the only way I've seen it done truly consistently when you're talking about quality, which again, I think you can define and you can get specific about, you can be like, "Are we talking about system reliability? Are we talking about performance? What type of performance? Are we talking about usability? In usability, are we talking about learnability of the system or error rate?" You can get to that specificity that helps, but at some point it's still a little intangible. What makes you like, "I don't know. The products just seem great. I can't put my finger on it." I think benevolent dictatorship is the only answer. And I think you see that in most... I mean, I don't know, Ivan at Notion, Steve Jobs at Apple, Brian at Airbnb, these places where you're like, "Yeah, they have a design leader at the top and they clearly have a strong opinion and they kind of review all the work and they say what goes and doesn't go." And so my answer to your question in that form is like you don't. I think you don't ultimately. The real answer is I think there's a lot you can do to spread the ability to build better products across an org. But I think to get to the highest point on the mountain, you probably need the opinionated, tasteful, benevolent dictator.
Brett: There's a lot of judgment calls that you take two competent people, you take you and another designer and you give them a problem and they would make the call differently. But in the context of what you're trying to do in this case of Rippling or Retool, it seems that a lot of these calls seem subjective, but there is much more of a correct call in the context of what you're trying to do at Rippling. Is a lot of that an incredible amount of just explaining everything that's going on in the business? And that's similar to sort of an LLM, if a person doesn't have appropriate context on everything that's going on, they can't make the highest quality judgment call?
Ryan: Yes. Yes. I would agree with that statement. I think you see Matt McGinnis calls it low guy, locally, optimized, globally incoherent. You see people making what seem like the right judgments with the information they have at hand. They're like, "I'm looking here at this corner of the product, this world, this domain. We think this is what's right for customers." And if you just looked at that, you'd be like, "That's a reasonable decision. You've backed up your decision with some pretty good reasonings and pretty good inputs." But then as soon as you look up and across, you go, "Well, wait a minute, but we do that this way over here and we do it this way over here." And the reason we do it differently over here is because there's slightly different inputs. And how do you get the teams to see that stuff, right? It's like they can't be looking up and across all day long, but at the same time, it's like you do need them to be able to do some of this. You can't just only do it from altitude or sharing across.
Brett: If a friend of yours is the CEO and calls a 500-person startup that's rapidly scaling and they're hiring their first design leader or VP of design or chief design officer, what have you, executive level role, and they're saying, "Well, what should I be looking for? What's really, really important to get right?" What's sort of your answer to that?
Ryan: As a good designer, my answer is usually more questions, inquiry versus advocacy. It's like, "Well, tell me more about your business and what you're building and what do you think about design and who are-"
Brett: And they're like, "No, no, please. Just give the answer."
Ryan: ... "who are the designers?' Yeah. And they're like, "I don't have time for that, \[inaudible 00:51:20\] Just tell me what to hire. Give me the checklist." You can either find people who are maybe interested in scaling down a little bit or people who are interested in scaling up, which is to say leaders who have maybe worked for bigger orgs quite often go, "Wow, I miss the days when we were smaller, or I missed the days when I worked for a smaller company. I could be closer to the work, I could get more done faster, I could make bigger changes. I would like to sort of go back to that mode of operation." If they've done it before and then they've also done a larger scale company, that's a really nice sweet spot for a leader because you're like, "This isn't going to be unfamiliar to you, but I know you can grow. I know you're going to get us from here to multiple steps in the future." I think a lot of what happens inside of companies, typically with the first design leaders, it might be the best designer or it might be the founding designer and they scale until all of a sudden they're either like, "I don't like this anymore" or "I'm past my limits," and then you're like, "We need to do something here." And you can either try to... Leadership teams change over as you grow a company, they just do. And you have to asked the question of like, "Is this your next two-year hire? And you feel good about that?" If you brought in a leader and they got you from here to two years from now, and that was their time, would you feel like that's success? Because if so, you can take our risk on somebody who maybe has a little bit less experience. Y-intercept's not as high, slope's high, they're excited to do it, their motivation will be high, engine will be massive. They'll give you the hours that you want at this stage. The skills that you're looking for from them are obviously like some experience in management, aptitude of coming up out of the work, being able to scale themselves a little bit. They can hire. They have a network. They know the basics blocking and tackling of basic operational stuff. They're not going to be ignoring it or overwhelmed by it. They don't have to be the absolute best at it because if you're at that size, your org's probably not that big. You're making a handful of hires instead of making 50 hires, right? You can get away with more. But if you want them to keep scaling, it's just a higher risk that they won't. Sometimes they can.
Brett: And the benefit of experience is just, it's a shortcut for everything or they're more likely to be correct or...
Ryan: Bigger networks, faster to hire, seeing more stuff, seeing more reps, more pattern matchings, faster, ability to do... You've hired before, you understand you need to create a ladder, you need to create a loop. You probably have those things already. And you'll adjust it for our business, but you're not starting from scratch, right? The things that I always say with leaders is there's the leaders who can be hands-on that you sort of trust in their taste and their craftsmanship and their ability. You would not be afraid for them to jump in and do some of the work. And then there's the leaders where you're like, "It's been 10 years since they've clearly touched any work. You probably don't want to hire one of those." And there's a bunch of them in the space, bad people, they're just at a point in their career where they've been in a different world. I would definitely tell the startup founder, stay away from that. But also be careful not to over-index on the people who are going to have the same thing I told you earlier, which is they're going to not be able to extract themselves out and operate a little bit of altitude when you need it.
Brett: What about sort of the flip side of the question, which is it's a 25-year-old designer, they are a star, they work with you in an X number of years, they want your job?
Ryan: They can have it.
Brett: There's this funny thing when you talk to people who have been building functions for a long period of time where they want to amass the largest possible team. And then as they get later and later in their career, they want to have the smallest possible team.
Ryan: Yeah.
Brett: It's a funny dynamic.
Ryan: It is.
Brett: But for that person that's a few years in, you've touched on this in a few different ways, but what are the things they should be doing in the short term to sort of set themselves up to start to compound and sort of grow into your role?
Ryan: One of the things that I consistently look for in people is that they have an opinion, and it can be an opinion about anything really, but I'm like, "I want to know what you believe in strongly. I want to know what you believe in strongly and are probably wrong about. I want to know what you will go to Matt for" because that tells me a lot about what's important to them and their motivations, and it's going to connect in how they think about our product and what we're building in our business. What I see often is a sort of lack of that stuff. I'm like, "Why do you want to work here? Why do you care about this product? What opinions do you have on our product as it exists right now? Where do you think it should go? Show me some taste. Show me some opinion." That stuff is really important for a leader. I think you can get away with being an IC without having a ton of that because you're just like, "No, it's fine. Here's my world and I sort of have a set of tasks and I do a pretty good job and make a decent set of decisions in there. But you know, a lot of this stuff is just kind of handed to me." For leaders, I'm like, "This stuff's not going to be handed to you. You have to have opinions. You have to be able to go to the mat and fight for things. If you think the product should be doing something or we should be playing somewhere that we're not, who is going to make that happen if not you?" Design has this amazing ability to take ambiguous, intangible ideas and make them real. If there's one thing that designers can do that's maybe... I think this is changing now, but that other functions have a harder time doing, it's like we can make the artifacts to make ideas real, right? And whether that's prototypes or demos or narratives, slide decks presentations, blue sky thinking, dream decks, whatever, and you can see a company just rally around that stuff instantly. And an idea that's been around, people are kind of thinking about or they're arguing about, as soon as there's an artifact, people are like, "Oh, right." And everyone anchors on that. They might be like, "No, that's not it." Or they might be like, "Oh my gosh, that's amazing. How do we get there?" But it just locks everyone in to a much richer, higher bandwidth conversation. And if you can't do that, if you can't sort of see the playing field, grasp the things that are in the air, talk to others, form an opinion about what this product should be doing, strategically where it should be playing, where the opportunities are, where design can be in a lever and an accelerant for a business, you're not going to be able to produce those things in a way that's going to get the business moving. What I want to see in a 25-year-old is that you have the instinct to be able to do that. You might be able to do that fully or across the whole business, but that you see those opportunities and you come out of your lane and you make things happen. The best designers, you see them do that. You're like, "Wow, I wasn't even thinking this would be something you did, but you saw a problem and you steered the business. You moved the tiller." Man, when you see that, you're like, "Kids are all right, you're going to be okay." Most people tend to want to stay in their lane, and I think you need to see people come out of it to be a leader. And you see that quite early, but it's something I select for in leaders and I select for one of the most senior ICs. The absence of it is, to me, usually not a good signal. It's like, "I'd much rather you have very upsetting opinions that I don't agree with, but you have them."
Brett: What do you want your team to say about you? Like when they're talking to their friends about their boss or the person running the function, what's the thing you aspire for them to say about you?
Ryan: Maybe a few things. I think I want them to feel like they are doing truly great work and that I sort of put the environment in place for them to do that. I think my management style is generally demanding but supportive. I think that was Robbie Gupta, right? People can't do great work unless you push them. You have to push people. You have to put people in a position of being somewhat uncomfortable. I want to build an environment where it is true, so people are like, "Yeah, Ryan pushes us. He pushes hard on. It's not always comfortable, but I see that the work is better. The work that I've done here is so much better for it, and I want that." And I want it to be backed up too by feeling like the feedback I'm giving them is really substantive, which is to say it's informed. It's not just feedback of me being like, "Yeah, I mean, here's some graphic design fundamentals. Make that type smaller. That green doesn't look right," but it's really informed about the domain they're working on, it's high quality feedback, and they feel like I'm in it with them. And then the supportive piece is good design, good creative work of any kind. I mean, engineering design, it doesn't come from fear. You can't be in a fear state and make good work because when you're in a fear state, your limbic system activates and your prefrontal cortex shuts down and your executive function shuts down, and that's where all of your creative thinking is. And so if the stakes are really high and you're constantly pushing on people and you have them in that fight or flight or reactive mode, it's actually going to shut down good creative work. And it's a really hard balance to both push people, but keep them out of that zone, keep them in a zone where they feel like they do have the space to experiment and try and fail and their support in doing that, that's the balance I want to create in a design org. I don't know how people say that in few words, but basically I want people to feel both that like, "Wow, I really got pushed hard to do good work and I feel like I learned a lot and my work came out better from the other side of it. And I felt even though it was hard and day to day was challenging and it was often uncomfortable, I ultimately really felt supported, like the function and Ryan and my managers had my back. So even though there were bad days and overall, I really feel like I came out a better designer." That's kind of the whole thing for me.
Brett: And so how do you know if you're being demanding enough and how do you know if you're being supportive enough?
Ryan: I mean, I think about this all the time. I think my managers do too, just like sometimes you come out of meetings and you're like, "I should have leaned in a little bit more. I'm not sure I drove the feedback as hard." And then sometimes you come out of meetings and you're like, "Whoa, I really clearly overwhelm the designer here with this feedback." I think that's a case where it's a little bit easier because if you lean in hard on a designer, you give them really tough feedback, you can usually kind of read it where it's like, "Uh-oh, I overflowed their buffer a little bit." It's a little bit more than they're maybe capable of handling and acting on." You can then go, "Hey, let's schedule some more time. Let's sit down. Let's go through this together." The generative AI tooling is great because it's like now I can be like, "Ooh, I can spend 15 minutes and I can actually whip something together much faster. I don't have a lot of time, but I can now start to speak in artifacts to you, which is more helpful." But you can walk them through it. You can help them break it down. So that one's more salvageable. The inverse is less salvageable where you're like, you maybe didn't lean in as hard, the work continues, they don't make the changes that maybe you thought you communicated or you were hoping they were going to make and then you find yourself further down the road and you're like, "Whoa, this product's not ready." That's actually, I think, worse. So I tend to try to bias towards more harder feedback, which is to say overflowing the buffer a little bit versus pulling the punch. But time is a constraint on this stuff. I don't get to always go to every single crit or see all work. Sometimes even you're looking at three projects and you're like, "I got more to say, but I got to go to the next one" and you sort of lose it. So I mean, I think about this a lot. Part of the reason why I have that Friday time is just that there is a space where it's just me and I'm going to see that work. And that's where I really try to fully lean in on stuff to make sure I'm like, "Okay, this one, I don't want it to go past here until I can really push on it." I think that's it. I think a lot of companies maybe pulled back from this stuff over the years. I see companies leaning into this more now. It's like the culture's changing a little bit around it.
Brett: What is working at Parker's company sort of taught you or net new ideas that are important to the way that you think about running or scaling a business?
Ryan: I think that Rippling, the way that Rippling operates challenges a lot of people, like you see leaders come in and I think this was true for me. And the way it operates is just often very different than the way other companies operate. Some things you might think are good practice might not be in place. Specifically for me, it was like, I'm used to EPD teams being like really, really tightly integrated. There were a bunch of places where I was like, "Oh, they're a little bit siloed." It's a little bit more waterfally, and I'm like, "That seems crazy. How's anything getting done?" And then you really have to question your priors, I think, because if you look at Rippling and the amount of work that it's done, the amount of things it shipped, how successful the business has been, you're like, "Clearly this is working." And so that's been sort of my experience of just all these little places where I'm like, "This is how we should communicate with R&D org." And I'd be like, "Oh, we don't do it that way, or we communicate less frequently." Or, "I don't speak as a design leader in front of the org as much or things that I think are important." But then I go, "Actually, I think it's totally fine." There's many things like that where I've really been sort of forced to suspend my disbelief, and it's helped me understand what's unique about the opera. It's called the Rippling operating system a lot. What is Rippling operating system? What I really love is, and the thing I will take with me, is just absolute sheer, amazing speed of execution. I mean, just like the gas pedal is just meshed all the time. And normally you think that it's a little scary as a design leader, but I think it's really great. I mean, it's like the amount of stuff that gets done when you really press on people on like, "You can do more, like what's possible." It's amazing what people can get done more than they think. I think Rippling and Parker are very good at getting that out of people. It's been awesome to see. It's made me think a lot about how I do that. And that sort of overlaps with this idea of pressing on people and demanding. And I see the company's really good at that. Another thing is commitments. The company talks about commitments a lot. There's this concept of MMDDs, which just basically are a Rippling deadline. Parker wants a date next to everything. And the idea is like, it's not that that date is sacrosanct per se. It's that like in the absence of a date, there really is not a commitment, and that express commitment is what matters. And if you commit to the thing, you need to follow up on that commitment as any team member. And if you're going to miss that date, that is okay, but you better, A, have a good reason and good rational, rigorous reason, things you learned, things that changed. And then hopefully you are smart about it, which is to say when you see that coming, you renegotiate that date with a lot of room as commitments to other people because there's a lot of dependencies. It's very hard to do in practice. I think it's incredibly important. And I think the rigor around commitments to other teams is like in a business that's doing as many things as Rippling is so critical. And I really like that aspect. And I think Matt McGinnis is really smart about how he runs the team in this regard and how he asked for it and Parker as well. And that's a big thing that I will sort of take away. Man, you can get a lot of stuff done really fast into pretty good effect, and a lot of it is about how you get a lot of people working on a lot of different stuff at the same time to work in concert and orchestration. And I've taken away quite a bit on that front.
Brett: Good place to end. Thank you.
Ryan: Yeah, thank you.
Brett: I really appreciate it.
Ryan: Yeah, that's great.
### A new podcast from First Round: How the top 0.001% of scaleup execs operate
URL: https://review.firstround.com/a-new-podcast-from-first-round-how-the-top-0-001-of-scaleup-execs-operate/
Last updated: 2026-02-09T08:06:16.000Z
*Introducing our new podcast, Executive Function, where we sit down with the best scaleup execs operating today: The ones up-and-coming tech leaders wish they could have as a mentor, and founders wish they could hire.*
*Our first episode with Vercel COO Jeanne DeWitt Grosser just dropped — and stay tuned for future interviews with execs from Rippling, Harvey, Cognition & more.*
[](https://www.youtube.com/watch?v=cHp7HqUfBe0&ref=review.firstround.com)
### Listen now: [YouTube](https://www.youtube.com/watch?v=cHp7HqUfBe0&ref=review.firstround.com) | [Apple](https://podcasts.apple.com/us/podcast/executive-function-building-systems-that-can-make-decisions/id1535886300?i=1000748365996&ref=review.firstround.com) | [Spotify](https://open.spotify.com/episode/7r7nDKiRvhm44cYuuzWh8M?ref=review.firstround.com)
There's a lot of knowledge floating around the Valley about what makes a great founder, engineer or PM. Some names and faces, or heuristics and frameworks probably come to mind.
But we’ve found there's remarkably few resources available for folks stepping into the C-suite, specifically at hypergrowth companies — these people are forced to keep pace with a company that changes 5-10x in a year.
Our new podcast, **Executive Function**, aims to fill this gap. Think of these conversations like office hours with the execs driving the growth of today’s best companies, like Rippling, Harvey and Cognition.
Our first guest, **Jeanne DeWitt Grosser**, exemplifies operational excellence. She spent nearly a decade at **Stripe**, leading growth and product before stepping into the role of Chief Business Officer. She’s now the Chief Operating Officer at **Vercel**.
First Round Partner Brett Berson sat down with Jeanne to unpack why most execs fail, how she interviews exec hires and why context is the biggest rate limiter of impact. Some highlights from their conversation:
- **Why the hardest leap in leadership is going from frontline manager to manager of managers**: “Often where people get stuck is they try to scale via what has made them successful so far, and become a super IC, rather than empower the other people around them to be excellent ICs as well.”
- **Why the best execs work themselves out of a job every couple months**: “The minute you feel you have deeply mastered something is probably the point at which you should be figuring out how somebody else does that.”
- **The brutal truth John Collison shared during a performance review that still rings in her head today**: “He told me, 'When you don't think somebody's good at their job, they're dead to you.’ You can’t un-hear that.”
[Listen to the episode](https://www.youtube.com/watch?v=cHp7HqUfBe0&ref=review.firstround.com)
We’ve got a lot more interviews lined up in the coming weeks. Here are some of the incredible execs you’ll be able to learn from:
- **David Singleton**, former CTO at **Stripe**
- **Ryan Lucas**, VP of Design at **Rippling**
- **Stevie Case**, CRO at **Vanta**
- **Katie Burke**, COO at **Harvey**
- **Sheila Joglekar Vashee**, CMO at **Figma**
Whether you’re a senior IC who wants to know what it takes to get to the top, or a founder building out your C-suite, we hope you’ll walk away from these conversations with a new model for what executive excellence looks like.
[Take me to Executive Function](https://review.firstround.com/executive-function/)
### Executive Function: Building systems that can make decisions without you | Jeanne DeWitt Grosser (COO, Vercel)
URL: https://review.firstround.com/executive-function-jeanne-dewitt-grosser-coo-vercel/
Last updated: 2026-04-29T03:40:03.000Z
In the first Executive Function episode, Brett sits down with Jeanne De Witt Grosser, Chief Operating Officer at Vercel. Before Vercel, Jeanne spent nearly a decade at Stripe, where she built and scaled global revenue teams and led product partnerships. In this conversation, she unpacks what separates good executives from extraordinary ones, shares her rigorous executive hiring process, and reveals the brutally honest performance review feedback she'll never forget.
In today's episode, we discuss:
- What it takes to operate at 30,000 feet and ground level simultaneously
- The leap from frontline manager to manager of managers
- Inside Jeanne's executive interview process
- The inherent value of driver trees for metrics
- Why context is everything
**References:**
- Akamai: [https://www.akamai.com](https://www.akamai.com/?ref=review.firstround.com)
- Claire Johnson: [https://www.linkedin.com/in/claire-hughes-johnson-7058/](https://www.linkedin.com/in/claire-hughes-johnson-7058/?ref=review.firstround.com)
- Culture Amp: [https://www.cultureamp.com](https://www.cultureamp.com/?ref=review.firstround.com)
- Guillermo Rauch: [https://www.linkedin.com/in/rauchg](https://www.linkedin.com/in/rauchg?ref=review.firstround.com)
- John Collison: [https://www.linkedin.com/in/johnbcollison/](https://www.linkedin.com/in/johnbcollison/?ref=review.firstround.com)
- Next.js: [https://nextjs.org](https://nextjs.org/?ref=review.firstround.com)
- Nike: [https://www.nike.com](https://www.nike.com/?ref=review.firstround.com)
- OpenAI: [https://www.openai.com](https://www.openai.com/?ref=review.firstround.com)
- Patrick Collison: [https://www.linkedin.com/in/patrickcollison](https://www.linkedin.com/in/patrickcollison?ref=review.firstround.com)
- Stanford Graduate School of Business: [https://www.gsb.stanford.edu](https://www.gsb.stanford.edu/?ref=review.firstround.com)
- Stripe: [https://www.stripe.com](https://www.stripe.com/?ref=review.firstround.com)
- Vercel: [https://www.vercel.com](https://www.vercel.com/?ref=review.firstround.com)
**Where to find Jeanne:**
- LinkedIn: [https://www.linkedin.com/in/jeannedewitt](https://www.linkedin.com/in/jeannedewitt?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
(01:17) What separates good executives from extraordinary ones
(02:48) How leadership changes as companies scale
(04:15) What an executive is actually accountable for
(06:11) The leap most rising leaders never make
(07:52) When to dive deep vs. when to step back
(10:09) Teaching people to think like you do
(11:56) Creating a shared language across the business
(13:52) What a COO job description actually looks like
(17:20) The upside of owning the full customer experience
(19:10) Why marketing rolls up under a COO
(21:06) Being demanding and supportive at the same time
(22:33) Inside the executive interview process
(27:35) The workshop prompts that reveal everything
(30:11) The common thread in failed executive hires
(36:36) Metrics: the driver tree philosophy
(43:04 What a collaborative exec team looks like
(57:08) How Stripe got 30 people to operate as one team
(1:03:50) Working yourself out of a job
(1:10:32) The review feedback you can't unhear
Jeanne: I think a lot of executives over pattern match and do not have intellectual curiosity to figure out what's different.
Brett: If someone's effective at 25 million in ARR and their goal is not to be layered or managed out, are there things they should be doing?
Jeanne: You need to work yourself out of a job. You're comfortable doing the job you have become good at. That is no longer the job.
Brett: What do you think are the things that tend to keep star talent from ascending to sort of the top spot, in maybe any functional area or in the C-suite?
Jeanne: They try to scale via what has made them successful so far and basically just continuously become a super IC and so you now have to design a system. You have to understand what are the metrics that you need to be watching? What are forums that you need to review? Who are your key people?
Brett: Is there a performance review that was the most valuable?
Jeanne: One of the things he said to me was cross-functionally, when you don't think somebody's good at their job, they're dead to you. You can't unhear that.
Brett: Well, let's do it. Thanks so much for joining.
Jeanne: Thanks for having me.
Brett: I wanted to start by getting your perspective. When you think about being an executive at a scale-up startup, what's the difference between somebody who's very good and someone who's extraordinary?
Jeanne: Some of what I would say is, and this is something that Stripe valued, and I think a lot more companies are generally valuing this, which is you have to be able to operate simultaneously at 30,000 feet and ground level. So from a 30,000-foot perspective, you have to develop a multi-year point of view on where you ought to go and how to get there, which I will say feels harder than ever in the current moment that we're in.
Brett: Just given the amount of change.
Jeanne: Yeah, with AI. You just don't really have a sense for if I put together a two-year plan, is that reasonable? So I think that's one. And then at the same time, you are still hardcore building a company. So there are all sorts of operations that are not yet operational, and there can be a pretty big gap between that 30,000-foot view and what needs to be true to realize it. Not everybody at your company has had the experience before to know how to go and say, "Okay, well, this was Jeanne's North Star. I know how to turn that into an hour by hour, minute by minute operating reality." And so, you're in some cases building that yourself. You're, in other cases, coaching somebody who has the will, but not yet the skill, and then in other cases, being able to delegate more freely to somebody who has done it before and can bring that vision to life.
Brett: How do you think about those two big jobs to be done in various points of scaling? So if you're at a 500-person company, 1,000, 5,000, 10,000, does that change pretty dramatically or do you think it's somewhat similar?
Jeanne: I think there are parts of it that are similar. So when I was at Stripe, we were, I think, 8,000 people by the time I left. Vercel is now north of 600, and as a leader, I'm always sort of figuring out what are the three big rocks that either I'm not going to be in the weeds on, but I'm going to be reviewing and very, very close to, or the things that are so hard to figure out exactly what's the right way to approach it that I'm going to get in there almost like an IC alongside the working group. I think as a company scales, if you've done a good job of hiring, you do have more people that you can give a North Star to, give a set of metrics to, and you don't have to be in the nuts and bolts of that thing, so it's a bit more maybe of an altitude question, but it doesn't change the fact that as an effective executive, there are a set of things where you're going super deep, either personally doing the work or deeply, deeply reviewing it, and then a set of other things where you have confidence that the team's going to go execute without you being super close.
Brett: And maybe if you take a snapshot across a couple of the points in your career in the different executive seats, what is the outcome that you are responsible for? As an IC, it's very clear you're a PM, you're working on a product, or you're an engineer, you're deploying some piece of code, but do you think about it? I mean, you spent a decent chunk working on different parts of the revenue org that it's just, "I have to hit this number in this segment and that's my job," or you think about results differently than that?
Jeanne: You're thinking about things on multiple time horizons. So I am accountable to specific results within a year, but an executive is meant to be long tenured. My career has been marked by basically two nearly decade long tenures. Hopefully, Vercel will be a third for that. And so, executives have decade long stints because you are able to replicably produce results year after year after year. And so, that means the bulk of your team is going to be focused on executing for in year results, whether that's in product or go-to-market, et cetera. You have to have a set of leaders who then are also capable of thinking about, "Well, what about next year?" And then, you, as a leader, need to be thinking even past that. How is the competitive dynamic changing? How is the market around me changing? I work in sales, but how do I feel about our product roadmap relative to what I'm seeing in customer conversations? I think that's probably the other thing that you're doing as an executive is you've got a functional swim lane you own, but most effective executives are going to be looking more broadly. Do I feel like the finance org is using the right set of metrics to measure success and allocate resources? Again, do I feel like product has the correct roadmap that's constantly going to keep us competitive? And so, I think any really strong executive typically is thinking more as a general manager with depth in the particular thing that they own, but also an ability to make trade-offs that might not be in their own self-interest because it's going to set them up for success or the company up for success really in the long run.
Brett: Are there things that tend to keep star talent from ascending to the top spot in maybe any functional area or in the C-suite, CRO, et cetera? So they get up to being a star VP of sales, and they just never become one of the generational CROs, or they are in any of the other functions. They're an incredible VP of ops. They're never going to be a COO if they're coming up in that. Are there things that tend to stitch together all the people that get stuck other than bad luck or they chose the wrong company or anything like that?
Jeanne: I do think it's an ability to transition into systems thinking. So if you move from an IC into an operator into a leader, it's not about you anymore. It's about, can you get a group of people to execute the way you, as an IC, would have done a thing? I think actually, one of the biggest leaps in leadership to make is going from a frontline manager to a second-line manager. So there, you've got to learn to delegate and get comfortable with that, but you're going to seven direct reports on average. You're pretty darn hands-on. When you get to manager of managers, you can't now go and be in every deal, be in every product review, all that type of stuff. And so, you now have to design a system. You have to understand what are the metrics that you need to be watching. What are your leading indicators to know when something's off track? What are forums that you need to review? Who are your key people? How do you keep a pulse on what's actually going on through them? And so, I think often, where people get stuck is they try to scale via what has made them successful so far and basically just continuously become a super IC rather than empowering the other people around them to be excellent ICs as well.
Brett: What's the balance there between sort of empowering people and also being in the details? I think one of the things that you started to say, and I think my guess is knowing you a little bit over the years and certainly the culture of Stripe, is that there's the altitude shifting. And so, it's not just, "Here's my six leads underneath me. I'm just focused on them," there's a lot of diving into the details. And so, how do you think about that in what conditions you're sort of behaving in what way?
Jeanne: I think a big thing for a leader is pattern recognition. And so, one of the ways I get at that is by staying close to the most effective people at various layers in the organization. So in a sales org, as an example, I will spend a lot of time selling alongside some of our top sellers because I want to see, is their messaging evolved? Is my pitch starting to diverge from their pitch, and what does that mean about my own/the one that a hundred other people are doing? Are they getting a new set of objections that they're handling effectively? So that's sort of one way I'll do things. And then, the other one, I mean, it's sort of different version of an earlier answer, which is the projects that are key to driving step function change in some area typically at the outset. I'm in the room with you doing the whiteboard. When you write your first brief on it, you've got a comment on every other sentence from me on how to do something. For the first three meetings while we're getting the project out of the ground, I'm there actively participating right alongside you. And then, when I sort of feel confident like, "Okay, this thing's got exit velocity. Great," we'll go into biweekly, monthly, whatever's an appropriate review cadence because I now sort of feel confident that we have a shared mental model, which I think is another big thing you're trying to do as an executive is... One of the things I always feel I've succeeded is I'll have people work for me say, "Jeanne, I was in a meeting earlier today. We were discussing X, Y, Z, and I sat there and I thought to myself, 'What would Jeanne do?'" And if I've done a good job of helping you understand my mental model, then nine times out of 10, you should be able to ask yourself that question and come up with the answer I would've come up with had I been there alongside you.
Brett: What are examples of the types of things you're trying to teach?
Jeanne: I mean, so you can have processes that facilitate this. OKRs are an example of that, all hands, how you communicate priorities, staff meetings. We always kick off every one of my staff meetings with Jeanne's top of mind, which is meant to communicate my mental model. So maybe some other things within go-to-market, actually at the company, this has been helpful is a segmentation framework, so we can all talk about customers the same way. We talk a lot in go-to-market. I'm a big proponent of lead to revenue models. I've run operating model where you've broken down all the funnel math, so we can have a similar way of evaluating performance where things are green or not. Those are other examples. I think of like operating mechanisms that basically also give you a shared language. Another example of that actually within sales is often, you'll have like a sales methodology that you brought in, which lets you... I mean, MEDDPICC is a common discovery framework, but it's also another way to speak the same language. I think that's a challenge you can sometimes have at companies where you're sort of speaking past each other. And so, shared metrics with common definitions, that's a great way to have finance, product, sales, all speak the same language. Segmentation framework often at companies is a go-to-market thing. At Stripe, I strived really hard to have that be a company thing. At Vercel, it was a little easier to just come in, and this is going to be a company thing. And now, actually, every new hire, I deliver one of our company values is KYC, know your customer, and I deliver the KYC onboarding session where I walk through every new hire at the company, "Here's how we think about customers, how we break it down. Here's what our customer base looks like." So again, you sort of have a shared mental model across the whole company.
Brett: What do you think are the hardest areas of the business to develop shared context on a team?
Jeanne: A lot of startups is product-market fit, right? So when you aren't yet replicably selling into a segment, a vertical, however you're cutting your customers, is that because the product isn't good enough there or is it because your go-to-market isn't strong enough there? So we're going through that one now at Vercel where really beloved product by startups and developers, we've had some awesome enterprise wins, but to what degree do we actually have enterprise product-market fit? You get situations where you've got these wins. So if you work in product and engineering, that suggests in your mind, "Well, if one enterprise brought it, surely all of them can, right?" And so, this must be a go-to-market problem of like, "You're not doing a good enough job of bringing forth the value of our product and all these other enterprises," whereas a go-to-market team might say, "Well, actually, we have the following feature gaps that we need to do to make this more expansive." So we're trying to, right now, get at it both from a data-driven perspective of just objectively speaking if you use that three by two I just articulated. Where is our revenue today? Where is it growing organically? And then, within go-to-market, preparing our point of view in each of those boxes for each of our product lines, what's our view on the degree to which we're totally green? We can sell this to every company on the planet in that segment versus, "Hey, we're halfway there. There's a set that we're really strong at and then a set where you might need one or two things, and then here's where we need to build into," with the hope then that we can agree on those and either we put in certain things on the roadmap, and therefore, we'll plan to go pursue revenue in that segment or we say, "This is not the year of X product and Y segment."
Brett: If you take a step back and you look at your job of being the COO of a 600-person company, and you would take a blank sheet of paper out and sort of just start from scratch to say, "Okay, what is the job description of a COO by your definition for a company at this scale," what's on the piece of paper?
Jeanne: This is one of the tougher things about the COO role is there's not sort of a canonical definition of a COO to start. my functional job at Vercel is a soup to nuts go-to-market role, so I have marketing, all of sales, all of your technical sales functions, customer success, support partnerships. Basically, if it touches a customer, makes a dollar, it's in my remit. That's not necessarily the typical COO role. If you took Stripe under Claire, she had people but didn't have marketing at the outset, had marketing at a later point. I often think COO is sort of like the set of functions that a founder knows are incredibly important and doesn't personally want to manage at this particular moment in time. But broadly, I sort of think of my job as two things. One is go execute the functions that I run excellently, turn those into predictable engines, and then two, enable the company to run more effectively. And so, that'll be things like company planning, or even though data science doesn't roll up into me, how do we have more uniform metrics across the company? How do we do things like a segmentation framework? There's places on people that we want to dive into. Our executive team is doing a half-day offsite tomorrow, and one of the sessions I'm leading is we're currently doing planning. And so, that's a lot of the what of what's going to be the revenue target and what are we going to do to get there. Tomorrow's session is all about the how. So when you're scaling as rapidly as Vercel is, there are going to be a lot of things that are working about your culture that you actually need to be thoughtful about ensuring you carry forward and then certain things that worked really well at a certain scale that aren't going to work at the next scale that you might want to refine. So we're going to spend some time talking through our-
Brett: How do you figure that out? Is it just judgment?
Jeanne: I think like a lot of well-run companies, we use Culture Amp. So we actually do our employee engagement surveys. We just shifted now to doing them three times a year. So you have data about the places that your own executive team thinks things are and aren't working. Your employee base does, so bring that to bear. And then, I'm planning to basically also do a bit of a stop, start, continue of just like four folks in the room. What's our views on the things that are working and not? And I think that'll be elucidating on the degree to which we all agree. I imagine there are going to be some places where we do and others that we don't, and that in and itself is something that you want to surface and work through because if executives don't believe on an aspect of the how, you actually will not have cultural uniformity on a thing that might have, say, been really important to Guillermo and we did in fact need to codify.
Brett: And you're doing this with your exec team or the exec team by the company?
Jeanne: The exec team, so this would be chief product officer, CFO, head of people, et cetera.
Brett: What's the benefit based on your time at Vercel of packaging the COO role in the way that it is at Vercel as you outlined? What are the trade-offs? Clearly, there are downsides to any given org configuration. How would you kind of group those things?
Jeanne: One of the things I'm really excited about in it is it does give end-to-end ownership of the customer experience. So we are the external facing functions. You do have a singular owner of the revenue, right? So you can't have sales point its finger at marketing. Marketing points its finger at sales because I own both of them. So it's my job to make that work. How I often describe it is I feel like marketing and sales end up being this like Venn diagram of strategy, and then you have the same thing actually with sales and support often, and then everyone winds up doing each other's job. And so, I think if I'm doing my job right, that feels more like an integrated strategy and a continuum rather than somewhat overlapping set of goals. I think that's the benefit. Similarly, from a feedback into the product and engineering org, you often have support has this set of asks, sales has this set of asks, marketing might be thinking about what we want to sell in the future, they have this set, and now, EPD has to go decide of these three inputs like how do I stack rank them? Whereas if I'm doing my job effectively, I ought to say, "I've looked across all of these and here's what I think is the right strategic mix of those," I think those ought to be the benefits. From drawbacks... I mean, a COO role has a fair amount of breadth. So across my functional remit, I have places where I have depth and places where I've historically been adjacent to that. And so, I have a lot of exposure to it, but it's not like I'm a 20-year marketer. You've got to believe I'm going to hire well and then manage well for that particular function. I think that's often true with a COO is you'll spike in certain areas, and then you sort of have to believe you can cover the others.
Brett: Why did it make sense in the context of Vercel, specifically in the marketing function, the roll up under you, given that it's such a marketing and brand-centric company? The natural thing I think is you see a founder that has those type of brand and taste sensibilities, and so they would want marketing very close to them and not being disintermediated. Was it just that the entire owning the end-to-end customer experience is so much more valuable that the trade-off is worth it basically?
Jeanne: I think so. I think it's interesting. I mean, marketing is brand and then it is the tip of the sphere-
Brett: Demand gen and everything else. Yeah, exactly.
Jeanne: Demand gen like tip of the sphere of your revenue engine.
Brett: Exactly.
Jeanne: A lot of founders, Guillermo's a good example, John and Patrick were examples of this as well, are excellent brand marketers, but that does not a predictable revenue engine make on its own. And so, I think that G and I got to a point through the interview process where he had enough confidence that I was going to let him continue to be chief brand officer, and then I could go build that machine that was going to drive our B2B growth.
Brett: So do you have that explicitly carved out or no, it's just more informal?
Jeanne: No, it's more informal. The way I operate as a leader is like... I've always been somebody where it's like, "All right, if you want to talk to a direct report of mine, you don't have to go through me, just go talk to them." It's my job to have broad awareness of what needs to be true to achieve the set of results we're going for, but I don't need to be in charge of all of it. So my CMO as an example, I'm like, "You should have weekly one-on-ones with G. I want you to know what he's thinking about. I want you to know all of the things he's concerned about from a brand perspective." And then, he and I can debrief and figure out when there are places where we might need to prioritize something differently or whatever the case may be, but I don't have a need to block any of that or be an intermediary of it.
Brett: How do you think about your role in the team that is under you in being incredibly demanding and supporting?
Jeanne: I think this is one of the things that people say is like differentiating about me is the ability to sort of be in that upper right quadrant of supporting and demanding. I think on the demanding front, one, it's a standard I hold myself to. Two, I think most people that I'll hire and work with really do want to produce excellent results. The thing then that is differentiating is the ability to bring the supportive, which is I'm going to bend over backwards to help you get there. And so, I think the folks who have worked for me for a long time, you get into that dynamic where you know, I'm going to be your best sounding board. I'm somebody who you can bring problems to that you don't have to be worried about. It's fine to take things to me in draft form, and we'll work through stuff. And as long as you're being communicative, upholding commitments, we'll figure it out. But when folks are not upholding commitments, not escalating issues, letting bad outcomes happen that we haven't tried to intervene and solve is sort of when you get into more issues.
Brett: Do you find that it's hard to calibrate or manage between those or it's just very intuitive?
Jeanne: Honestly, I think it's intuitive. I'm doing a lot of executive hiring right now. So we hired a CMO in June, just hired a global head of field engineering less than a month ago, in the market for a CRO. I spend a fair amount of time with those folks while in the interview process. One of the things I actually do throughout the interview process is a fair amount of coaching them because if I'm going to hire you, we'll have that type of dynamic. So in an interview process, I'm also here to set you up for success and see if we go back and forth in that capacity, does it result in you doing well in some of these forums versus sort of let's hang you out to dry and see what you can independently produce. So by the time I hire people, I feel like we've built a pretty solid working relationship. I meet very frequently with new executives when they start. You're trying to be in constant communication. So again, we can develop that shared mental model. I'm fortunate enough that our CMO and I take the same ferry to work, so he and I have all sorts of ad hoc one-on-ones, but you're pretty quickly just trying to get to that safe space of like, we are going to talk about the business, we're going to talk about how to make the business better, and then we're going to partner in the places where that makes each of us more effective and go off and conquer where each of us knows exactly what we want to do and can just go execute.
Brett: What's the core of an interview for you when you're running an exec search for your own team?
Jeanne: So my first interview is sort of like just bidirectional, learning more about your background, going pretty deep into the things you've done, and then selling you a fair amount in a very, not selling actually, mostly telling you, "This is the reason I'm hiring your role. I have the following issues that you will need to come and resolve." I find that by putting those things out on the table in the first meeting, basically, you get a sense pretty rapidly for, does that person get motivated by solving those things or not?
Brett: So what did that sound like for the CMO search when you're communicating, "This is the job to be done"?
Jeanne: Yeah. For the CMO search, it was, we're moving up market into enterprise. So we've got some early enterprise wins, but we don't have enterprise awareness, enterprise brand recognition, so we got to go build an enterprise machine. Second was we do not have an investible model, so I need somebody who's going to come in and build a real demand gen machine where we know we can put a dollar in, we'll get this money out. So I need somebody who is into the quantitative aspects of this. Another big one was Vercel now actually has a lot of product surface area. So had been known for front-end cloud, we now do a bunch in security. At the time, AI was still a little bit more nascent. Now, it's not, but basically, it was like, we're going to have to do some major positioning work to actually figure out how do you graduate into being a much broader set of products while not losing the core of what got us here. And then, you sort of describe the realities of some of the messiness behind all of that. So that's sort of like my first call. My second call, I typically send a prompt for before where basically, it'd be like, "Okay, I teed up these areas in the first call. Now, I actually want to go and spend this entire hour talking about those four and things you have done that are similar at prior companies and then how you might think about starting to tackle it here."
Brett: And what's excellence? You leave that second meeting going through that prompt and you're like, "I desperately want to spend more time with this."
Jeanne: Typically, I have learned something. I have learned multiple things.
Brett: Novel insight.
Jeanne: Yes. Often, early, that second meeting, they already are giving me a mental model I didn't have. They're talking to me either about a thing they did where I can immediately see, "Oh, if we did that here, it would work." So I generally lead that second call if it's somebody who has a shot at being hired, very excited about, "Oh, okay. I would be able to not pay attention to these things because you are better at that than I." Same thing just happened with the field engineering leader on that second call. He was pulling up some dashboards that he had built and talking me through how they run their proof of concepts, and I was like, "We do none of that, and you just pointed out five metrics that I've never heard of." So that's sort of that second call. Then, we fan out into meeting other folks. A lot of these rules at Vercel, it's incredibly important that you get product depth, and you will be credible with our EPD organization. So we've got those meetings. We're getting into people topics, et cetera. Then, we'll regroup coming out of those. Next one then is a 90-minute workshop. So there you are doing work product. We have three prompts. Typically, they align to stuff you would be expected to do in your first 90 days. And then, they'll do a one-on-one with G. Any executive reporting to me has got to be somebody he also trusts and would go directly to. Then, we'll do stuff with the folks that are going to be their direct reports.
Brett: What's the prompt in that second category?
Jeanne: Yeah. So CRO, we're doing right now. First one is effectively, we give them, "You're going to go talk to Nike's CTO." So Nike, the reason I picked this, Nike's on Next.js. They're not on Vercel. They have Akamais their CDN and WAF. They clearly are investing in AI, so they sort of have all the things you could possibly sell to them. And this person is going to have to figure out we are not yet excellent at executive selling, so I'm curious how they'll come up with a value proposition for that executive. I'm going to be interested in the degree to which they go really research our product and can speak intelligently to why if you're self-hosting Next.js, that might not be a great call for you. So that's sort of the first one is basically like, "Do they start to geek out on our product?"
Brett: And do you only give a one-line prompt or you're giving supporting material?
Jeanne: It's like too small. It's probably six sentences total, but it's two small paragraphs. So that's the first one.
Brett: If they ask you for additional information, do you give it to them?
Jeanne: So actually, with both CRO candidates that we're about to bring on site, I did prep meetings with both of them, which is also a really interesting interview. What do they ask me? How are they thinking about breaking down these problems?
Brett: In doing so many of these problems, I found that if you could not have somebody do the problem, but you just have the pre-call where they're asking questions, that's as high signal as the project itself.
Jeanne: I totally agree. I actually think that was one of the reasons I wound up getting employed at Vercel is I had to do the homework assignment, and they set me up with one of the VPs to walk me through. I can ask whatever questions, and I think I did. That was probably my best interview. But yeah, so our second one is all about, are you going to be a tight operator? So it's digging into what's your operating cadence, what are the metrics you're looking at, how would you drive results? So just basically looking at what's their machine and then in the conversation, can they contextualize it? So will they be able to say, "Hey, I did this really well at the company I'm at currently. Here's ways in which I think that would likely pull through directly to Vercel and ways at which I might tweak." Our last one is, I think Vercel is like a 99th percentile AI company, and one of the things I'm passionate about is bringing AI to bear on everything that we're doing and go-to-market to really build a unique AI forward experience. And so, the last prompt is about that. The world's your oyster. You've got a GTM engineering function. You've got a killer data science team. You basically blank check for me to go, "AI eyes what you're going to run. Tell me what you'd do." And there, I'm trying to figure out, are they creative? Do they have good ideas, or are we mostly going to be running out last year's playbook?
Brett: Is there a thread that ties together all the failed executives that you've hired in your career or they all didn't work out for all sorts of random reasons?
Jeanne: Maybe a more interesting way, just because at Stripe, we hired so many, so if I go beyond just the ones I hired, I think it was a couple things. One was typically, they did not actually go get their hands dirty. Actually, the thing I should have started with was they had a playbook and they did not contextualize it. So I think a lot of executives over pattern match and do not have intellectual curiosity to figure out what's different. We had a lot of this at Stripe where you had AWS consumption-based business model that feels like it ought to be similar, and actually, payments has fundamentally different margin profile. It's totally different competitive space, et cetera. So I think that's first is over pattern matching and not going and getting your hands dirty to adjust. Second was did not culturally adapt. I saw this happen at Google. I saw this happen at Stripe, which was like you ended up with... We had an Oracle leader at one point in the org I was in. And so, that org started to feel like a Google-y version of Oracle. So we had pockets of that at Stripe as well. And then, typically, it was also a failure to develop your network and collaborate effectively to get buy-in from other orgs.
Brett: Do you think in the way that you outlined how you approach evaluating exec talent, it's quite good at screening all that out, or these are the pockets of error that no matter what you do, it's surprisingly hard to figure that out before somebody joins and is eight weeks in or 90 days in or whatever?
Jeanne: I've gotten better at the, can this person contextualize in particular? I think a lot of times when you're hiring an executive, you get like shiny resume syndrome. And so, now, if you go back to the three questions I just outlined, the middle one is really meant to be like all my questions during that portion of the onsite will be like, "Well, how would you tweak it given this? How would you figure out whether or not that's relevant?" I'm actually looking for folks to open by saying, "Hey, I don't know enough about your context. I'd hypothesize the following might be true, and therefore, this is transferable." So if they open that way, great signs. If not, through the discussion, can we pull out mental flexibility? I think that's one. I think it's probably harder to get. I mean, the network one I try to get at by lots of cross-functional interviewing. So like Tom O, our CPO, is on all of my executive loops because he's got to be as excited about this person as I am. So that's meant to correct for that one. I mean, the workshop is a great way to force an executive to go get their hands dirty. A lot of those people won't have written a two to three-page doc by themselves all alone for a long time. So you'll have to bring me back a year from now and see if I've done a good job with everybody.
Brett: Do you think most of the best executives were extraordinary I see in the function or it's non-correlated? So the best CRO at one point was an unbelievable seller, top 1%?
Jeanne: I tend to think there's some of that. I do think I'm better at my job having been deep in sales within the COO remit. I am better at how do I really push the sales org than how do I really push the marketing org? Because I know in sales, when I am making an ask, that is hard, but it is reasonable. Whereas in marketing, I may not have that same reasonableness. I do think that that matters. Also, somebody asked me a question along these lines at a dinner a month or so ago, I hypothesize it may matter more in the AI era because a lot of what you're trying to do is now in part functional acumen, not only to your team, but to an agent. A very tactical example of this was I launched a GTM engineering team in the first six weeks on the job at Vercel. So basically, it took three sales engineers like, "Congrats. You're now founding members of our GTM eng team where we're going to go bring agents to bear across everything in GTM." The first thing we tackled was building a lead agent, so people who contact sales. This would help qualify them more effectively. So we had one of the GTM engineers work with a top performing SDR on that team, and they did a lot with human in the loop. And basically, after about six weeks, we were ready to largely take humans out of the loop because it was now performing in line with all the human-based KPIs we were using. Then, a couple of weeks ago, so this has been running since the start of August, we now have built this thing called a playbook platform where we have all these plays that have agents running. So I was playing around in that to go make sure I'm still aware of what's going on in this playbook platform. So I click in to some of the emails that the agent is recommending we send as a first response, and I was like, "Ooh, that's actually not what I would've said." I realized it's because even though that was modeled after our best in class SDR, I have 20 more years of sales experience than that best in class SDR. And so, I know a little bit better what you should say if an executive wants to talk to you about a product than that person did. I think you're going to see that across a lot of places where actually, functional depth combined with your depth of context in your company, those two things together are kind of what makes AI work better.
Brett: What have you figured out about metrics? What is kind of persnickety or difficult about them? What are the things that seem obvious, but when you run a business on this type of number, there are these issues. Do you have wholesale like you spent so much time trying to govern businesses as they scale with numbers? Is there a handful of things that you've figured out that are kind of truths in what goes on when you pick a number?
Jeanne: Two things, I would say. Thing one is I'm a huge believer in driver trees. So literally, can you start at the top total revenue and break that down into the hundred different nodes that actually drive that outcome? Can you do that X anti so that throughout the course of the year, if revenue is green or some other color, you know exactly either what's working well that you can lean into more or what's not or you can course correct? That is like a biggie that I try to get in place anywhere.
Brett: Which you would think of as like leading metrics or drivers to some lagging metric or output?
Jeanne: Yeah. It's basically, okay, you've got total revenue. So what is that going to be? It's going to be net new revenue from new customers. It's existing revenue for existing, expansion from existing. Okay. Net new revenue, that comes from, you can break it down by segment all the way down to the bottom. So that was actually one of the first things I did my first 30 days at Vercel was in the go-to-market side, put together a lead to revenue model, which is here's exactly everything that needs to be true, how many leads we're going to need, at what rate will those convert into an opportunity? At what rate will we win them? What will be the ACV? How much time will it take by segment, by geo, massive model? And you want to do that at a company level as well so that you can be aligned across the engineering side of it, too. So that's sort of one is actually understand your drivers and which are levers. So I'll give you another example on this. When we did the lead to revenue model, the model for Vercel this year was most sensitive to our ACV. So the most credible way for me to increase revenue growth rate was that particular area. Similarly, in our PLG funnel, we also built the lead to revenue model where that one, the biggest one was actually our signup conversion rate. So that helps you figure out where to focus. So two is actually the definition of a metric. This was a challenge we had for a while at Stripe when we brought in a bunch of new executives at the same time. Sales will define revenue a certain way, typically more bookings oriented. Finance will define it differently, perhaps gap revenue, and EPD might define it another way that might actually be more usage oriented than actually the revenue dollars, or it might be revenue dollars, but some ARR variant. I've frequently found that if you don't have the exact same definition, then you can have things be green or red depending on how you're cutting the data and looking at it. And so, that was a big thing that we focused on for a while, and getting right at Stripe was a singular way to review the business across go-to-market, EPD, and finance. Go-to-market could then lead the room and run a forecast call with the way we were going to look at quota and target, but you needed to report out on it collectively with the same way to cut the data. We sort of had the same thing actually coming to Vercel. I sat down with finance to look at that one as well because we had a quarter where you had one result on bookings, but actually, sales was super green, but you'd had a churn somewhere in the business. So total revenue that the company was looking at was different. So I think that's the biggest way is we cannot debate metrics. They have to be set, definitions agreed, and then we're all out, and we all agree. If this is green, we all think it's green, and if it's not, we're all fixing it.
Brett: What was the difference between how the group decided revenue should be accounted for at Stripe and the way the group decided revenue should be accounted at Vercel, and how does that map to how you actually go about bringing clarity to a given metric?
Jeanne: Stripe always had, I think it's shifted more since I've left, but payments was one of the earlier consumption-based businesses, but it was really unusual for a long time to do a committed contract because payments actually is arguably maybe the first ever consumption-based business. And so, sales would sign deals, they weren't technically bookable, so you were sort of approximating the value of them, and that may or may not realize. That was one of the things that sort of would get us wrapped around the axle sometimes. And then, sales looks at stuff again on the basis of how we're quotaing people. And so, there, you can get some things as well where if we're grossing up on partner revenue, you can be hitting your quota from a sales perspective. It looks different from a revenue perspective. It's basically a bookings revenue mismatch in many cases. So that's one of the things at Vercel we've just decided we're going to look at things on a gap revenue basis, just make it simple. Again, I'll have more forecast call, but I'm going to translate that into gap revenue basis when we talk about it as an executive level.
Brett: When you think about company health or health inside of your part of the organization, what is the hardest thing to find numbers to govern?
Jeanne: Product marketing is one mostly in that it is less isolatable. So if you're in charge of both launching and then landing, you've got to work closely with the demand gen team. You're working with parts of sales. That's a little bit of one that maybe you can tie day of launch metrics to product marketing, but that's not why product marketing exists. Brand is another one that certainly has metrics around it, but you're looking, you can do all sorts of awareness studies, but there are certain things that are less immediately quantifiable. Within sales, you got different... How exactly do you determine just how effective your RevOps org is? Typically, there's a little feels of like, are they helping you with throughput? But how exactly would you quantify whether or not you have an A or an A plus RevOps team? I'm not totally sure the answer to that one.
Brett: How do you think about your job as a peer on the executive team? You have your own body of work that you're owning, and you're part of the org and the outputs and outcomes that come of that. And at the same time, you sort of wear this other hat, which is you're one of a handful of a number of people that are kind of governing the entire business, and you're a manager of your exec team and a teammate or peer of this other team. What are your thoughts on specifically when you wear that hat, what you're trying to do to be effective?
Jeanne: I think most folks, if you've done the kind of five dysfunctions of a team, you're supposed to think of your peer set as your primary team. And so, in that forum, I'm meant to help facilitate better outcomes for the company while bringing my functional perspective to bear. But I think that means you're going to wade outside of your functional area pretty frequently. Our chief product officer this morning, I woke up to a lot of feedback on aspects of the sales process. He's just took a couple of sales calls with us, which was great, super motivating for me. There are things where he was wanting to also check, "Hey, I'm newer to sales myself, so just tell me if this is how this works," or "This felt off to me. I think we could do better here." Similarly, I'll go give feedback obviously on a roadmap coming in while we were getting set up here. I was messaging back and forth with CFO about some of the budgeting decisions we might want to be dialing up or down in Q4, sort of given what we're thinking about for FY27 plans. So I think in general, as an executive, you need to be highly accountable to having your function do its job, but you should just be contributing more broadly to what are the set of things that you think are more likely to make the company successful. One of the ways in which I saw this actually work the best, Stripe, sort of late in my tenure there, Stripe got much, much, much more rigorous about, the budget is the budget. We've got headcount OpEx, and that will be the number that we have collectively as a company. Across the course of the year, opportunities would emerge that you would want to fund, and you had this concept of self-solving and would frequently donate headcount, take it out of my P&L, go give it to product because I actually think if they can go do this thing, I'm more likely to make money over here.
Brett: How did that work? Because I think this sort of normal dynamic would be everybody builds their fiefdom, right? A new dollar comes available, and everyone on the exec team is trying to grab that. So what was the dynamic where that was the inverse?
Jeanne: One, you had actually a leadership team at that point that had worked together for quite some time on average. And so, we had built a fair amount of trust. There was a lot of work that Will Gaybrick did, to his credit, to get all of product, go-to-market, finance in sort of the same room. We ran basically a 30-person leadership team for a while, which is a lot to have in a weekly staff meeting, to have on every single offsite that you're doing quarterly was a lot of time with 30 people. But I do think that built a level of trust. I wish I had a more framework-based answer for you, but it literally would be like, I'm in a room with Fran Ryan, John Affaki, they were two of the more senior engineering leaders, and we'd just be like, "All right, guys, this thing's not tracking. I think if I gave you two partnership heads and you put them on that engineering team, we'd actually make that thing bright green, whereas this is not going to really go from red to yellow." And it was truly just some of the better same team functioning that I've been a part of. But again, Fran and I, John and I had worked together for half a decade.
Brett: But is that part of it is just so much at the end of the day depends on the quality of the relationship between a small number of people?
Jeanne: I think it's that, and it's a pattern of people showing up with the best interest of the company in mind. So it's a trust of like, you're demonstrating that you're optimizing for company outcomes and not your own.
Brett: Do you think if you were in the CEO's seat or you have your own executive team, multiple functions, that it's easy to understand who's optimizing for what or it's tricky?
Jeanne: I think it's relatively easy. I did this when... So I changed roles at Stripe seven years in. I moved to run all of our global product partnerships, so everything with like the banks, Visa, Amex, that type of stuff. And so, I came in, and that org had had a fair amount of leadership turnover over an 18-month period and was pretty clearly in need of some org changes. To me, that was a bit of a new function for me. Product partnerships is adjacent to go-to-market. There's a lot of functional acumen I can pull through, but I didn't know anything about how you partner with a bank, et cetera, so I was learning where it wasn't like I could just go take a sales org design and stick it in this context. So basically, I went to that leadership team, everybody agreed our current org design is suboptimal, so that was good. We agree that something needs to change, and I basically said, "I would like to do this change with you all. And so, to the extent that you all are demonstrating that you are keeping your Stripe hat on, we will do this together." I want to be clear that I am the decider. And so, the minute that I think people are putting their own person hats on, then I will make the decisions going forward, and we will stop the collective decision-making here. To that group's credit, everybody did keep their Stripe hat on, and we made very tough calls. I think every single one of my direct reports had their remit changed by close to 50%, so gave half their Legos to someone, kept the other half. All of them, I think, ultimately liked the shape it landed in, but it was one where you can tell when people are doing first principled thinking, using frameworks, taking names off org charts, and just designing, "Here's what's the best outcome, and then sure, we'll put the humans back into it" versus when you have a lot of like, "Well, but this, I feel that. How would this person react," that type of stuff.
Brett: Is there anything else you did to encourage people to behave that way or once you put in the stake in the ground, it sort of took care of itself?
Jeanne: No, I mean, there was a lot of one-on-ones that would happen throughout that so I could understand where each individual was nervous and then use that as ways to go back to frameworks that would help us make decisions. So we had to make a call on, are we going to be partner aligned, functionally aligned or regionally aligned? Those are all rational ways to set up an org. You could make arguments for all of them. So we actually just decided we're going to go and make the case for every single one of those, and then we'll make the case why each of them doesn't work, and then we'll work through it. But if you sort of started by, again, sort of just how would you first principles make an argument for any of these, then that sort of got facts out on the table as much as possible. And then, you could debate how to optimize, but created a solid foundation. It was a lot of workshops, so it was a lot of getting people in the exact same room with a whiteboard and having the space to debate. I think often, we'll do offsites and you try to make something that should take three hours fit in one hour on the agenda. So we did a lot more of that because I think a lot of times, if people can talk through things out loud, then that also makes you less nervous that you haven't been heard or we haven't worked through your concern.
Brett: It would seem that a company utopia would be, you have people that all they do is wear the company hat and they do great work, and over time, the people who are best situated to ultimately be C-level of this or VP of that would be in those roles. My sense is across companies, it never really works that way.
Jeanne: No.
Brett: And there is this sense of you have to advocate for yourself. And then, there's extremes where either self-advocacy gets in front of what's right for the business, so the classic version of that is you get a marginal dollar and you just want to build your fiefdom would be one example. You quickly get into, well, what is politics and politicking? And at scale companies, you have the classic thing, which is the people in a lot of the functions are just the best at politicking as opposed to running the function, whatever. What's kind of your perspective on that? How do you toe the line between advocating for yourself and advocating for the company? Is there a tension in that?
Jeanne: I mean, one of the things, I'm a big believer in your work should speak for itself. I have definitely learned over the course of my career that there have been many times where not purposefully putting more visibility on my work meant that it was less well understood. So I certainly had experiences where my peer set was acutely aware of the work I was doing and its impact. The layer above me was less so because I was not spending a bunch of time doing internal marketing of myself. I think you have to be probably aware of that at larger companies. For me, personally, I just hate it. And so, that often becomes, to me, a time when I debate whether or not this sort of company has scaled beyond what I want it to be for me, personally. I remember actually the moment at Google where I went to business school at Stanford GSB, and they had a class there. It was called Paths to Power. It was basically a class on politics. I did not take the class. I reached a point in my Google career where I reached out to the professor and was like, "Can you send me the syllabus," because I realized I was being outpoliticked by people who were less effective than I was. And then, I never read anything on the syllabus. I decided to leave. I had a little bit of that at Stripe too, which sort of I like being at companies when it's truly intellectually pure. That was actually one of the things that really got me to Vercel was the interview process that I had with the executives who were going to be my peer set was one of the most transparent showed... There's actually a session with the head of people and the CFO that was like, "We are going to spend the next 45 minutes only talking about the warts on this company because if you join, you will be stuck with them, too. And do we want that?" I just had this sense for this was a group of people that were some of the most fundamentally apolitical people I had met, which has been true since arriving at the company. I do a working with Jeanne doc for my orgs, and one of the things in the about me session is I just believe deeply in brutal intellectual honesty. And the definition of that is basically your ability to detach your ego from an idea. So most folks have those very deeply intertwined. You have an idea. I think it's a bad idea. You feel that now, you aren't smart versus I'm very smart. I just had a bad idea. It's actually pretty rare for people to have the level of self-confidence to be able to detach an ego from an idea. I like operating in those types of environments, so I tend to seek them out.
Brett: Is there anything else you do in the part of the org that you own so that great work speaks for itself and as much as you can, all the other shenanigans are sort of kept at a minimum?
Jeanne: Yeah. I mean, I think you do this by how you highlight work, who you highlight. That's often I'm spending my time with the people that I know are doing really great work.
Brett: How do you know they're doing great work?
Jeanne: I normally end up being close to it, and you can see it. I think it's often pretty clear to most people who are the individuals that are doing three to 5X the number of humans. For me, coming into Vercel, you're trying to figure out who are the set of people that are going to give me the most insights, help me ramp, figure things out. In a lot of cases, those people will seek you out, too. I think the way I'll experience the way they interact is also just like very selfless sharing of information. There's clearly no agenda. They are similarly just trying to have a sounding board with you, "Hey, I witnessed this. I've got this insight. What do you think about this" with nothing, what's in it for me versus others. You can tell when people want to get on your calendar to give you some feedback, but they're mostly trying to position it as, "Look at me." I think if you've been in leadership for a while, you sniff that out pretty readily.
Brett: Isn't the opposite of the point true at various points in your career? You made the statement that if you're doing three to 5X the work of the average person, it's clear, but in many points in your career, if you look at a level up from you or two levels up, they weren't aware. It seems that that was you at that point in time. And so, what's going on? Is it just people intentionally sort of trying to make that obscure, or is there something else that it's actually harder to be aware of all of that as an org begins to scale?
Jeanne: I think it was people were always aware that I was a high performer. I think there had been other individuals who were very effective at putting bows on things that maybe other people knew had warts under the surface. And then, one of the potential downsides of being somebody who's pretty brutally intellectually honest is you actually expose all the things you know to not be working. If I'm in a forecast call back in Stripe days and we're struggling on a certain thing, I will talk about all the ways in which this thing is not working. "Here are the things I'm trying to do to fix it." I know the peer next to me has the exact same problem, and sometimes that person instead might be like, "Oh yeah, we got this. We're on top of it. We'll fix it." There's that version of the world of like, "I'm not going to uncover reality to you. I'm going to mostly hope you look over there while ideally I figure it out," versus "I want you to be acutely aware of the things I'm working on so you're not blindsided by it, but you are then going to know that this isn't all perfect on route to getting to hopefully what is the right outcome." Probably, there were points where I should have just put a bow on it.
Brett: You mentioned at various points at Stripe, there was kind of a formal or informal exec team that was, call it, 30 people. That seems very bad. Why did that work, or what was the good parts of that, or how did that end up being for some period of time?
Jeanne: So Stripe had LT, which was basically like John and Patrick's directs. It had OG, which was basically more or less the directs of those directs. And then, it had GPTL, which was go-to-market, whatever. It was go-to-market and product. I always like invert some of the letters, too. And so, it was basically born out of as Stripe had gone through hyperscale. We had lost some of the connectivity between GTM and EPD. And so, mostly, it was actually to bring those groups together, squash them together and be like, "We will be one team because right now, we are operating as two functions." And then, you also had finance and some other folks in there that would make everything work together more effectively. So it was more like these were the core operating groups of the company and that we needed to get to that, sort of overcome the five dysfunctions of a team to be like, "This is your team, not the go-to-market org, not the EPD org."
Brett: And so, how was the time spent? How do you have that number of people-
Jeanne: Yeah, I mean, so-
Brett: ... do anything productive?
Jeanne: ... I think anybody who is in those forums will tell you there are things that worked and things that didn't. So things that worked was at least everybody did have shared context. You were in the room. Things that didn't work was with 30 people in a room, probably 10, if that, are going to take up the majority of the air time, and the 10 who did weren't always the 10 who likely should have. I think there were times where you weren't getting to the right answer efficiently or the people who really should have been weighing in were being silent just because of how they wanted to participate, so that was a bit of a challenge. It was a lot of time, I mean, hours and upon hours every week together, so it was a real commitment. I do think we did really turn a corner as far as operating as a same team. Yeah, and I don't know that we would've gotten there without that level of forcing function. So it was an expensive investment, but I would argue it paid off in the end.
Brett: So how do you spend your time in a given week? And maybe if you think back over the last few months, what are you sure is the correct attention you're spending in a given week? And are there areas where like, "Ugh, I really feel like it should be optimal for me to do X or Y, but I haven't sort of done that yet"?
Jeanne: I don't necessarily have a framework per se of like, "I'm going to spend 10% time of this, 30% of time on this, et cetera." This is not a week by week thing, but I tend to have one to two quarter periods that are more internally focused versus externally focused. So often, I'll realize there are a set of things that are not functioning about an org, and then we'll have a period where I'm going really deep on our core operations. Do we have the right org design? Do we have the right ways to look at the business? Do we have the right set of initiatives? And then, you sort of get that foundation set, and then now, you can be much more externally facing. I'm doing a lot more sales calls, getting back squarely in the market. I find it's hard to do both of them equally at the same time. That's sort of one way for me that things tend to ebb and flow. I find one of the things that I have to keep myself honest about is carving out time for deep thought and more of long-term thinking. It's extremely easy for that to get scheduled over. Plane flights are my favorite these days.
Brett: But now with Starlink, it's going to be less effective to disconnect.
Jeanne: Yeah, yeah. Yeah, there you go. Anyway, I mean, that's sort of the number one thing I have to check myself on is my job is not to be triaging every day. It is very easy to triage every day. It tends to be that when I do things that have the most impact on the org, it has been because I have taken time out to go have deep thought. Also, there are certain themes in a quarter where I'm particularly trying to move the needle on in that more hands-on way. A great example of this right now is as Vercel becomes more of this platform, we need to be better at selling to executives, and that's a hard muscle to build if you've been selling to developers. And so, I am spending a lot of my time right now personally doing that. So we need our SDR team out prospecting to executives and getting comfortable with that. So Guillermo and I currently have a contest on who's going to be the top SDR at the company. So he's beating me actually on the founder outreach to startups. I'm probably winning in enterprise CXO outreach, but I'm personally doing that and taking a lot of the first calls so that I can figure out exactly what should we say. And then, people can listen to my Gong calls and hear, "Okay, what did you do? How would I emulate that?" So that's a top of mind thing where I'm super in the weeds right now as we sort that out and build the muscle.
Brett: When you build a new capability, if you go back to Stripe and you're operating at mega scale, order of magnitude maybe more than where you are today, do you still believe that the exec should basically be inventing on their own or just doing the thing first?
Jeanne: I do think so. At Stripe, we would update our core narrative, and I would be super in the weeds with typically some of our best sales leaders, best AEs, product marketing that was figuring it out, coming up with that deck. I'd be dry running it. I'd be the person that you would record the video for folks to listen to. I'd be the one delivering it. I think that's important in having connectivity to your org and to the market. More recent example that was at Stripe was we were trying to drive a pretty different partnership motion with some of our payment method providers. So that was another one where I was like super... At one point, I think I mocked up how you would change the UI, which I'm not a product manager, but I saw this great commercial opportunity from a partnership perspective, was trying to go pitch product that we should invest in this and went out and did that, got the buy-in as a result of that. And then, we drove an 18-month long massive initiative across changing product, huge partnership motions, et cetera.
Brett: The topic of execs, one of the things that comes up all the time is the person was great at X scale, but they couldn't scale, so they got us to 100 million and then they couldn't scale. When someone says that in your experience, what do they normally mean? Where do people struggle to uplevel or grow?
Jeanne: I think it's in two ways. So either one is they fail to scale their people leadership, so going from frontline management to second line to third line because each of those does require a different way of operating. So that's one area. And then, the other is actually typically the business changed and you didn't adapt your skillset to that. So a great example of this, it would be like companies that are scaling revenue. Typically, you start in one segment and you wind up needing to be in another. So a lot of them will start with the PLG-heavy inside sales type motion, and then that sales leader, as an example, cannot scale when you start doing big enterprise deals. I think that's where people get more stuck is I couldn't acquire the incremental functional acumen or hire under me such that somebody brings that in and shores up that weakness for me. And as a result, you become a rate limiter on the org's ability to perform.
Brett: If someone's effective at 25 million in ARR as some simple proxy metric and their goal is not to be layered or managed out and they want to get into hundreds of millions, again, in this fictitious example, are there things they should be doing or ways they should be spending time or investments they should be making in some marginal unit of time that will increase the chance that they can be in the seat for longer?
Jeanne: Look, you can say, "Go read a lot of books. Go try to learn things." I actually think the best piece of advice I ever got that stuck to me is that you need to work yourself out of a job, which is as you're scaling, you're comfortable doing the job you have become good at. But if you keep doing that job, that is no longer the job at 100 million versus 25 million. And so, I think that the minute you feel you have deeply mastered something is probably the point at which you should be figuring out how somebody else does that. So either you're teaching it to somebody below you who is going to be able to move in and take that off your plate, or you're starting to think about how do I hire for that so I now have the bandwidth to go learn the next thing.
Brett: So a way to think about that is the CRO. The dominant motion is PLG. That's kind of your jam. You came up through that. You want to get out of the PLG business in short order and start working on the other part of the business. Is that sort of what you mean?
Jeanne: Yeah, because you should if you've got expertise there. Sort of like we were talking about earlier, you ought to be able to now know where to poke pretty easily. You did that job, so if somebody else is doing it for you, you're going to have more comfort and handing that off and then being able to monitor, and then you can go invest in the new place. And then, I think you just have to have self-awareness of when you are climbing that learning curve effectively yourself versus when you need to bring in additional expertise. I mean, I'll give you an example at Stripe. My sales career path started in PLG also. The first sales team I ever ran was sold into the less than 50 employee segments, so that's real small. And over the course of subsequent roles, I kept having an opportunity to move up market, and Stripe started to move more squarely into enterprise. There are a bunch of ways in which I had been effective at picking that up, had been involved in a lot of our early deals, made the case for getting into enterprise to the board, but enterprise sales leadership is a skill that's learned over decades, period. When we got serious about we are now going to go from, we had the enterprise tiger team, so our sort of seven first figure it out reps to actually know we're now investing in enterprise and we're going to have multiple managers here was when I went out and said, "Okay, it's time for me to bring in an enterprise leader who is somebody that I will learn from while we continue to scale this organization."
Brett: When you zoom all the way out and you think about ending up sort of in this COO role, if you remove anything related to the genetic lottery and you remove anything related to good luck and you try to figure out what were the controllable inputs for you in your career, what do you distill it down to?
Jeanne: I very purposefully followed high-quality leaders. So Claire Johnson, a lot of people know, I worked for her three times. Another gentleman, Rich Rao, I worked for him twice. I worked for him before business school. I came back from business school explicitly to work for him because I felt he was somebody I could learn from. In both of those cases, those were individuals who I not only felt I could really learn from and who were invested in teaching me, but they were also clearly people who were driving exponential growth for their own careers that then if I'm adding value to them, they're pulling me along with them. So I think I was very thoughtful about who I worked for. I was somebody who always did value depth, and I think people are willing to take risks on you when you are definitely good at certain things, right? So they're like, "This job description has five major things. You clearly are quite good at three, so I feel confident you'll go figure the other two out." That was frequently the story of my career. I did a stint in APAC at Google. I knew nothing about the region. I was going to manage both SMB and mid-market. I did not know mid-market, but I had done a lot in the year prior to sort of be like, again, you'd check half of the boxes on that resume. Same thing happened at Stripe when I moved into partnerships. I actually remember having a conversation. That job, at the time I accepted it, rolled into the CFO, and I remember having a conversation with her that was explicitly, "I've looked at the job description for this. I checked half of the boxes and I don't on the other half, but I think given my Stripe experience, hopefully, you can believe I'll get there." I do think the third, we've talked about it a lot, is just being somebody who's known for trying to make an organization better. And so, a lot of people root for me because I've typically helped them be better at their job too.
Brett: Is there a formal or informal performance review that you've had in your career that was the most valuable?
Jeanne: I have had quite a few that have stuck with me. I don't know that this is the most valuable per se, but it's definitely the one where I left the review and I certainly will never forget it. So I reported to John Collison for an interim period. I had one performance review with him, and one of the things he said to me was going back to the conversations we had on being demanding and supportive. He said, "Within your own organization, you do a great job of being both demanding and supportive. Cross-functionally, when you don't think somebody's good at their job, they're dead to you." And that phrase, you can't unhear that. That's not very flattering, which of course, I went home, and I was like, "What is he talking about?" And then, I slept on it, and I was like, "I actually think that's a completely fair comment." And then, I saw myself doing that very frequently of completely writing somebody off when I did not think they were effective at their job in a function that I was not running. I don't know that I have fixed that, but I am now far more self-aware.
Brett: I still write them off, but I know that I'm doing it.
Jeanne: I really try, and I actually think being in this role of a COO, because I've got this many more functions, is you just develop a lot more empathy of like a lot of times when you think someone's not doing well, it's because you don't have visibility into how their functional sausage is made, and the fact that it's actually hard to produce the output from you on the outside in maybe looks a little bit more straightforward. So I do find, over the course of my career, I've developed meaningfully more empathy through various points of either failure or relatively harsh feedback.
Brett: What about on this theme of things you've had to figure out or actual skill development versus sort of innate parts of you? When you think about becoming a C-level executive, if you sorted everything you had to figure out over multiple decades, are there a few things that are both the most important and the hardest from an actual, "I needed to develop a competency in this standpoint"?
Jeanne: I chose to go to business school because I thought I did not have enough hard skills. I was a French major, and I went to Google and the role that I was in and support at Google was great at teaching you how to get things done, and influencing without authority was something I really learned, but I was not facile with a spreadsheet. And so, I went to business school specifically because I did not feel like I could understand P&L effectively, could use data effectively. So that was sort of my crash course in hard skills. Other ones have been more around like leadership development. Google really had pretty exceptional leadership development training during the years that I was there, which thanks to Sheryl Sandberg. There are a lot of those that were hard. I remember one. Claire made me cry at in front of 15 people, which was another one that leadership development, how you influence, how you show up, et cetera. But there were a lot of those that I think shaped me a fair amount as a leader and how you scale and get people on board.
Brett: Maybe just to wrap up on sort of a similar vein, who's the person that's influenced you most in the role of an exec and what's the most tangible thing they imparted on you?
Jeanne: I'll answer this two ways. I do think Claire had the most influence on me in how I show up as a people leader. I was always really impressed by how she got cross-functional groups of people together and aligned around a common goal. She stepped out of her swim lane so beautifully and was somebody who always, I think, was trying to facilitate honest dialogue to get good answers. So I definitely credit her with a lot of things I looked up to from like a how perspective. I think from a content perspective, because I do pride myself on being a leader who isn't just a general athlete, like I'm not in an executive role because I have leadership skills, I'm also in executive role because I really do have functional depth. And that actually, I think, was more self-initiated, and it was basically my experience going out to APAC and being like, "Oh, I now manage a bunch of sellers who have sold for a decade, and I've never carried a bag, and they have skills I don't have, and I had better go learn them real quick so that I can be credible." And that was sort of the moment where I was like, "Okay, sales is a functional skill, and depth at that is differentiating as well."
Brett: Good place to end.
Jeanne: Yeah.
Brett: Thank you so much.
Jeanne: Thank you.
Brett: I really appreciate it.
Jeanne: Yeah.
Brett: That was great.
### Mastering the skill of company-building, from Applied Intuition’s founder
URL: https://review.firstround.com/mastering-the-skill-of-company-building-from-applied-intuitions-founder/
Last updated: 2026-01-29T07:38:30.000Z
*This week, Qasar Younis shares all the personal and professional moves he made to found Applied Intuition.*
## [Applied Intuition’s Path to Product-Market Fit — The $15B Founder’s Formula for a Winning Company](https://review.firstround.com/applied-intuitions-path-to-product-market-fit/)
For Qasar Younis, the path to product-market fit dates back to childhood.
He grew up in a Detroit suburb, where the auto industry was the backdrop to his whole life: His father was an auto worker whose job security wavered as production moved to China. Younis studied engineering at the General Motors Institute. He worked part-time on the factory floor.
Younis always knew he wanted to be a founder, inspired by watching his dad reclaim his autonomy. “He started his own small business, which he still runs today. That’s been hugely informative to me. I saw him get his dignity that way. He really became a master of his own destiny,” he says.
So he designed his career to optimize his own founder training: engineering jobs at General Motors and Bosch, business school, a stint at a holding company to “learn finance,” investing at Y Combinator. He tried his hand at starting two companies, the second of which he sold to Google.
[](https://review.firstround.com/applied-intuitions-path-to-product-market-fit/)
At Google he’d meet Peter Ludwig, a PM and fellow Detroit kid who was also interested in starting a company. Their shared experiences, from growing up in Motor City to building sensors for a Google Street View car, materialized in a startup idea that only they could pursue: software for automakers developing self-driving cars, which would become Applied Intuition.
[Continue reading on The Review](https://review.firstround.com/applied-intuitions-path-to-product-market-fit/)
### Applied Intuition’s Path to Product-Market Fit — The $15B Founder’s Formula for a Winning Company
URL: https://review.firstround.com/applied-intuitions-path-to-product-market-fit/
Last updated: 2026-01-29T07:38:25.000Z
[**Qasar Younis**](https://www.linkedin.com/in/qasar?ref=review.firstround.com)believes company building is a craft — one that he’s worked hard to master since he was a kid.
Younis grew up in a working class family in a Detroit suburb shaped by the auto industry. He started working at McDonald’s at 14 and juggled multiple jobs all the way through college, studying engineering and working part-time on the factory floor at the General Motors Institute.
But when he watched his dad, an auto worker who’d struggled as jobs began to move to China, start his own business, he dreamed of one day doing the same. “He started his own small business, which he still runs today. That’s been hugely informative to me. I saw him get his dignity that way. He really became a master of his own destiny,” he says.
That set Younis on a mission to collect experiences that might one day increase the odds of building his own successful company: engineering jobs at General Motors and Bosch, business school, a stint at a holding company to “learn finance.” He founded two startups — the first, a crowdfunding app, never gained much traction. The second, a consumer-to-business messaging platform, sold to Google, where Younis went on to work as a Group PM for Google Maps. After that, he spent several years at Y Combinator as COO. “I fundamentally see myself as a founder, and as an engineer, a lot more than I see myself as an investor or an employee,” he says. “So that was always in the back of my mind: I knew I needed to get broad experience across all kinds of functions in a business, technical and non-technical.”
In 2017, Younis was ready to start a company again. He teamed up with [**Peter Ludwig**](https://www.linkedin.com/in/peterwludwig?ref=review.firstround.com)**,** a PM he’d worked with at Google and a fellow Michiganite. Their shared experiences, from growing up in Motor City to building sensors for a Google Street View car, had materialized in a startup idea: software for automakers developing self-driving cars.
Today, that company, [**Applied Intuition**](https://www.appliedintuition.com/?ref=review.firstround.com), is worth $15B, counts 18 of the top 20 global automakers as customers (including General Motors), and is leading the physical AI revolution — deploying intelligence in machines from submersibles to cars to fighter jets. In this exclusive interview, Younis lays out both the personal and business moves he’s made to build a company only he could start. Let’s dive in.
## A founder’s education: From venture capital to Andy Warhol’s autobiography
Younis inadvertently landed his job as an investor by trying to start his third company. While still at Google, he and Ludwig originally had an idea to work on a robotaxi startup together, given their shared familiarity with the auto industry and hardware experience at Google. Younis pitched a few funds, including Y Combinator.
But Paul Graham told him he wasn’t sure if it was a good idea, and offered him a job at Y Combinator instead. Younis didn’t have enough conviction in the robotaxi idea to turn down the job — so he joined Y Combinator, and Ludwig stayed on at Google.
Going into YC, Younis fully expected to start a company again. So he spent his time there obsessively studying the ingredients of a successful startup. “At YC, whenever I assessed companies, I’d always think about how I might do it instead — what’s right about this? What’s wrong about this?” he says. “A place like YC is fantastic for that, especially if you’ve been a founder before and you can start pattern matching.”
On paper, Younis believed he’d gathered all the right experiences to lead another successful company: engineering, finance, business school, product management, investing — even starting two companies. But in his view, training to become a well-rounded entrepreneur doesn’t begin and end with professional endeavors. He’s found exploring his personal curiosities to be just as important in shaping another important quality in founders: curiosity.
“I’ve always read a lot. Not airport books about quick growth hacks. I believe you can read [Roman history](https://www.amazon.com/SPQR-History-Ancient-Mary-Beard/dp/1631492225/?ref=review.firstround.com) or [Andy Warhol’s autobiography](https://www.amazon.com/Philosophy-Andy-Warhol-Back-Again/dp/0156717204?ref=review.firstround.com) and learn how to build a company,” he says. “**Knowing what good art is makes you a better founder**.” Younis doesn’t identify single things he’s read from these books that shape how he’s building Applied Intuition, but the residual knowledge sits in his brain for pattern-matching later.
If you’re curious about Younis' reading list, you can find all [his favorites here](https://qy.co/books/?ref=review.firstround.com), but his taste in books can be boiled down to this: old, and unrelated to tech and startups. “The closest thing to a business book I read would be something like [The History of the Standard Oil Company](https://www.amazon.com/History-Standard-Company-Vol-Volumes/dp/1605207616?ref=review.firstround.com), but it was written in 1905\. I tend to read books that are more than 25 years old, because the trends and short-term noise have been filtered out,” he says.
> Whether it’s great music, great art or great ideas, founders should consume media that’s well outside of their domain. If you consume low-quality content, you’re going to get low-quality ideas.
## Founding order of operations: Team, market, idea
In 2017, Younis left Y Combinator and teamed back up with Ludwig to begin exploring markets and ideas to pursue.
Looking back, Younis says this founding formula worked well for Applied Intuition: Choose a co-founder, then a market and then an idea. In that order.
### 1: Find a co-founder who’s seen your ups and downs (and vice versa).
“I really believe [finding a co-founder](https://review.firstround.com/the-founder-dating-playbook-heres-the-process-i-used-to-find-my-co-founder/) has to come first,” says Younis. “If you have an idea then find a co-founder, they’re really just a glorified employee. They weren’t there for the birthing of the idea, so the idea probably isn’t as tied to their skills.”
But don’t go founder speed-dating. “You can’t compress the co-founder search into a one- to two-month period. You need to see this person evolve over many years.”That was the case with his friendship with Ludwig, which began when they worked together at Google. Younis says their co-founder chemistry was evident from the start — even outside of work. “Peter’s and my parents live a quarter mile from each other in Michigan. So we have some obvious shared values,” he says. “If you ask someone who’s worked at Applied Intuition they’ll often say that he and I are perfectly balanced. If I just ran the company, or just he ran it, it wouldn’t work.”
> When you start a company with someone, you’re climbing up the side of a mountain and hooking yourself to that person. If they fall off that mountain, you do, too.
### 2: Choose a market that’s familiar *and* fast-growing.
Once Younis and Ludwig were ready to take the founder leap together, their next order of business was picking a market.
That starts with identifying a market in which you both have experience. “**After finding a good co-founder, market timing is everything**,” he says. “It’s the beginning, middle and end of your company. So between you and your co-founder, look at which markets overlap in the Venn diagram of your experiences.”Younis’ second requirement for a market was one that was on the cusp of a boom. “If you're an aspiring founder, you have to go to a market that’s exploding in growth. Generally speaking, if there’s already a huge competitor in the market, you’re not going to fare as well,” he says. “If you go to the dentist CRM market that already has seven players, for example, it doesn't matter if you can make a way better product. It's tough to penetrate that market.”
Younis and Ludwig narrowed their list down to a few different soon-to-be-hot markets — but realized they were neglecting their first piece of criteria. “At the time, in 2017, the growing markets were crypto, AR/VR and autonomy,” he says. “We actually built a few demos in those first two markets. But then we realized, ‘What are we doing? We don’t know shit about voice. The thing we really know is software, and autonomy is a growing market, so let’s learn about that.’”
They were confident that the timing was right to get in early before any big players emerged. “We figured, if we can survive long enough until autonomy technology will converge, then we’ll not only have momentum, but we’ll already be there when the market turns,” he says.
### 3: Zero in on a problem in that market.
After spending some time exploring the market, they noticed the striking lack of software tools available to build and test autonomous systems within vehicles. So they came up with a software idea: engineering tools for automakers working to develop their own autonomy programs.
Instead of predicting the future of the autonomy market, they chose to cast a wide net. “We wanted to build a product that could be used by anyone, because we weren’t sure where the ecosystem was headed, or which self-driving car would win,” says Younis. “Is it going to be a self-driving truck? A college shuttle? Tesla? Waymo? We didn’t know, so we figured we’d build a horizontal product to fuel the entire ecosystem, because we didn’t know when autonomy would truly take off.”
Younis and Ludwig pursued the engineering tooling for autonomy idea and went out to raise a seed round. On the other side of his stint as an investor, Younis had learned how to parse through feedback on startup ideas. While his original robotaxi idea was met with skepticism, investors had a strong appetite for Applied Intuition, which he took as a positive signal.
“If I ask an accountant at a tool and dye shop in the suburbs of Tulsa whether Applied Intuition is a good idea, that feedback isn’t important. But if you ask an investor, and they tell you no, you should think about that. A lot of founders just don’t,” says Younis. “I say *listen* to the naysayers. Founders have a really hard time being objective about their ideas. Their instincts tell them, ‘No one’s going to get your thing,’ so they just keep at it. But sometimes you actually shouldn't keep at it.”
> A founder isn’t made when they start a company. A founder is made when they get feedback about the product, the market, or themselves, and interpret it correctly.
## Building multi-product from day one
Younis and Ludwig recruited a handful of engineers and got started building the product — all together, out of a house in Mountain View.
“We only left when we got to a size where we couldn’t all work from the living room. A neighbor even asked me one day, ‘Are you guys running a company in there?’ And I just said, ‘Ah, it’s just some friends working from home.’ We got a notice on our door the next day,” Younis laughs.
Younis made a bet to build out the second product in quick succession, within a year of starting the company. The first product was a planning simulator, followed by a perception simulator, and then a data logger. “We went multi-product quickly out of a practical reason: The first product we were building covered so much space that the customers were still paying for a much richer product. We had built a mass of a product which became our second product, so we could actually charge for it as a separate product,” he says.
In hindsight, Younis says [going multi-product](https://review.firstround.com/going-multi-product-11-tactics-for-tackling-your-next-bet/) as a young company was the right call. “As a founder, you have to make a decision about whether you’re going to be a single-product company or a multi-product company. From the early days we decided to be a multi-product company,” he says. “It's really hard to find product-market fit again and again and again. It's really hard to manage dozens of products and make sure they're all the right products and the market needs them, and you're not just holding onto them because you started them four years ago. We built the muscle to take feedback and build a product around that feedback.”
## Go-to-market: Start small to perfect the product, then go big
Younis made a calculated GTM bet: start in Silicon Valley as a stepping stone to global automakers, and eventually other industries.
He knew the Boschs and General Motors of the world were worthy big fishes. Having worked at both companies, Younis knew their wallets were deep (Bosch, for reference, pulls in north of $65 billion in revenue per year, just in the automotive category). Second, he understood that one big account could contain several customers — a company like Stellantis has dozens of sub-brands with different teams working on self-driving.
But he knew there was no point going after the huge automakers while Applied Intuition was still ironing out their first suite of products. So Younis chose to start by selling to companies that looked a lot more like Applied Intuition.
“We knew these huge car companies would be hesitant to buy stuff from a young company. They’re working on five- to seven-year autonomy programs, so that doesn’t make sense,” he says. “Our early insight was to sell to Bay Area companies working in autonomy because the size of those companies were similar to ours, and we could use that as a springboard into the traditional original equipment manufacturers (OEMs), which was our endgame. That was our original wedge to get the right to sell. Because both the startup and the large automaker are working on the same problem: autonomy.”
The GTM test, in Younis’ view, was simple: Applied Intuition’s products had to be exceptional. “We’re a company that can only be judged on the quality of our products. We’re a hard tech, software-only enterprise company. So the only analysis is whether this product does what we promise it can,” he says.
One of Applied Intuition’s first customers was Voyage, a self-driving car startup that was later acquired by Cruise. Younis says working with these startups gave the team a feedback loop to build a more sophisticated product and gain deeper insights about autonomy. “Our first few customers gave us not only dollars, but the feedback we needed to build our next-generation product, which we wanted to be good enough to pitch to General Motors.”
The strategy panned out: In 2018, Applied Intuition did a formal RFP alongside 28 other companies to compete for General Motors’ autonomy tooling business. They won — which gave them the confidence to start going after other million-dollar accounts. “We won against the big companies like Nvidia and Ansys,” says Younis. “We were still a small company at the time. We just had the best product.”
After signing the first few automaker heavyweights, Applied Intuition expanded into other industries, starting with defense, and later signing construction, mining and trucking customers.
## Scaling up
A clear sign of product-market fit in retrospect, says Younis, is that Applied Intuition has always kept all its money in the bank. “We've preserved all the capital we've ever raised in the company's history, which is evidence that the company is an efficient, cash-generating entity — the products we build are wanted by the market and the market's willingness to pay us more than it costs to build the products,” he says.
Ultimately, Younis says the idea for Applied Intuition was validated by the market quite quickly — within the first several years — confirming the pattern he’d observed as an investor at Y Combinator. “The good companies were good pretty quickly and then were good for 10 years, and then they went public,” he says. “With Applied Intuition, we got traction from fairly early on in the company. We didn’t have to wonder whether it was going to work.”
As Applied Intuition went on to grow into a multi-billion dollar, thousand-person company over the following years, Younis says these are three of his own personal values that have kept the company on its breakout path.
### Be cost-conscious
Younis has kept a tight P&L sheet since the early days. “We’ve tried to keep our focus on making this a viable company. Being cost-conscious is one of our core values. And it’s worked out,” he says.
Salary is one area of particular discipline at Applied Intuition, which Younis says diverges from the staggering total compensation packages at well-funded startups nowadays. “You can look at [Levels.fyi](https://www.levels.fyi/?ref=review.firstround.com) — you often get paid more to go to a startup than to Google or Facebook, and those companies generate billions in cash flow every month,” he says. “So you wonder why all these companies raise money and are never profitable: It's because they actually have a really bad compensation strategy.”
To buck this trend, Younis stuck with the old-school model: Reduce salaries and increase equity packages to start, and both will increase as the value of the company goes up. “The vast majority of our employees are now at the 99th percentile of compensation, but not because of their first offer,” he says. “They’re there because the stock price grew. That’s the right way to do it. You get stock while it’s cheap, you contribute to the company’s success, and you get rich over time.”
### You don’t need to win by a wide margin
Younis doesn’t subscribe to the “don’t worry about your competition” philosophy. “Maybe you didn’t have to worry about the competition in 2010, when it was exotic to build a company, but now we’re in the industrial age of venture capital,” he says. “There are more startups, more dollars, more competition.”
You don’t have to win by a lot to win all the same. “In this ecosystem, if you can stay just a little ahead, and if you can keep that lead, you can become the number one player,” he says.
He takes Applied Intuition’s internal deliberation on which AI coding tool to purchase as an example. “If you just look at the universe of coding tools, we did a whole evaluation with hundreds of engineers to pick a tool to roll out internally. We ultimately chose Cursor, and I asked, ‘Is it really the best product or is it incrementally better?’ And our head of infra said, ‘Just incrementally better, but better enough for us to pick it.’ That compounds — that’s how Cursor became a juggernaut.”
> In Silicon Valley, if you can pull just a little bit ahead, and you can keep it, you can become the number one player.
### Hard work compounds
Younis’ teenage obsession with hard work has never wavered. “I’ve worked seven days a week for as long as I can remember,” he says. “Whether it’s having multiple jobs or one job where you work all the time.”
Looking back in the rearview mirror, he sees how that extra work has compounded over time, from the initial team’s Applied Intuition hacker house to the early days of his engineering career.
“Forget the seven-day work week. Just work 10 extra hours per week, and that compounds in significant ways. On an annual basis, that becomes three extra months.”
### What cold-calling from a closet taught Gusto’s founder about PMF
URL: https://review.firstround.com/gustos-path-to-product-market-fit-newsletter/
Last updated: 2026-01-21T07:17:31.000Z
*This week, Gusto co-founder and CPO Tomer London shares how relentlessly cold-calling potential customers taught him to recognize what PMF really feels like.*
## [Gusto’s Path to Product-Market Fit — How Listening to Customers Built a $9.6B Company](https://review.firstround.com/gustos-path-to-product-market-fit/)
It’s 2012 and **Tomer London** has locked himself in a closet, phone in hand, to dial the numbers of small business owners he finds on Yelp, taking rejection, after rejection, after rejection on the chin. He’s recently dropped out of an electrical engineering PhD program at Stanford to focus on the payroll startup he co-founded with Josh Reeves and Edward Kim that will eventually become **Gusto**.
“We were hustling, trying to find who would trust the three of us to run their payroll,” London says. “We had a swimming class for kids. We had a flower shop where Eddie was buying flowers, and he asked her, ‘Who do you use for payroll?’ She didn’t have a provider, so we set her up.”
[](https://review.firstround.com/gustos-path-to-product-market-fit/)
They were concurrently exploring building an API payroll product for enterprise platforms. But all that cold-calling had revealed a surprising truth: Among prospective customers, SMBs were much more enthusiastic than ENTs.
“I remember going to some of these big platforms and we were sure they were going to love it. But the response we mostly got was, ‘This could be cool, but it’s not a priority right now.’”
SMBs, meanwhile, were clamoring for a product to solve their payroll problems …
[Continue reading on The Review](https://review.firstround.com/gustos-path-to-product-market-fit/)
### Gusto’s Path to Product-Market Fit — How Listening to Customers Built a $9.6B Company
URL: https://review.firstround.com/gustos-path-to-product-market-fit/
Last updated: 2026-01-21T22:03:49.000Z
[**Tomer London**](https://www.linkedin.com/in/tomerlondon/?ref=review.firstround.com)’s father gave him just one piece of career advice: don’t start your own business.
“For forty years, my dad has owned a small clothing store in Haifa, Israel, where I grew up. From a young age, I noticed how emotionally difficult it is. I could tell within seconds of him getting home if it was a good or bad day.”
London spent years helping out at the shop after school, cleaning, answering phone calls, handling customers and organizing inventory, and despite his father’s warning to become anything but an entrepreneur, it was too late. At twelve, he decided to bring his dad’s pen-and-paper inventory system online. Armed with a 386 PC running Windows 95 and a brick-sized Visual Basic guide, he taught himself to code and built an inventory management program for the store from scratch.
“It worked really well, saved my dad a bunch of time — he ended up buying a computer for the store just to run it,” he says. “That connection with small businesses meant that once I started touching software, I wanted it to do something useful.”
A decade and a half later, London arrived at Stanford for a PhD in electrical engineering, where he met future co-founders [**Josh Reeves**](https://www.linkedin.com/in/joshuareeves/?ref=review.firstround.com) and [**Edward Kim**](https://www.linkedin.com/in/edawerd/?ref=review.firstround.com). The trio joined Y Combinator’s Winter 2012 batch, launching [**Gusto**](https://gusto.com/?ref=review.firstround.com) (then ZenPayroll) with a simple mission: to take the complexity out of building a small business, starting with payroll. What began as a narrow payroll product for California small businesses has since grown into Gusto, a platform that helps more than 400,000 small businesses manage payroll, benefits, HR, and compliance, most recently valued at $9.5 billion. Gusto’s latest milestone is its acquisition of [**Guideline**](https://review.firstround.com/podcast/inside-guidelines-mission-to-modernize-401-k-s-building-from-first-principles-finding-strategic-edges-and-rewiring-retirement-kevin-busque-co-founder-and-ceo/), which Gusto has partnered with since 2016 to provide 401(k) services to SMBs.
In this conversation, London reflects on how years of building, failing, and trying again sharpened his judgment as a founder, teaching him to seek rejection to learn faster and recognize the emotional signals of real demand. The instincts that began in his father’s shop — listening closely, solving real problems, and caring about how the work gets done — still guide how he builds today.
## Pressure-testing ideas through early customer discovery
It’s 2012 and Tomer London has locked himself in a walk-in closet, phone in hand, to dial the numbers of small business owners he finds on Yelp, taking rejection, after rejection, after rejection on the chin.
It’s been more than fifteen years since he built that inventory program for his father’s clothing store. He now calls the Bay Area home, as an electrical engineering student at Stanford. London had been studying in Israel and founded a handful of small software startups that ultimately didn’t scale. He decided to apply for a U.S. student visa, inspired by the story of the Google founders meeting at the university, as well as watching a video of [Steve Jobs’s 2005 commencement speech](https://www.youtube.com/watch?v=UF8uR6Z6KLc&ref=review.firstround.com). *Everything around you that you call life was made up by people that were no smarter than you,* is the line that stuck with him.
Not long after arriving on campus, London made the kind of connections he’d been seeking in Josh Reeves and Edward Kim. “I was really, really lucky meeting Josh and Eddie in my first few months at Stanford,” he says. United by their shared desire to solve problems with software, the three students soon began exploring how to simplify payroll, and those early brainstorming sessions would become the foundation for ZenPayroll.
Which is how he found himself in that closet.
“I’d just start calling potential customers, one by one,” he says of the early days of customer discovery. It’s a strategy he recommends to all early stage founders. “Every day you can pitch something a little bit different,” he says. “You learn from the day before.” It was the fastest way to figure out what worked; talk to people, see how they react, tweak, repeat. “Having multiple founding journeys — me, Josh, and Eddie all had previous startups — helps you avoid repeating the same mistakes,” he says. “You can move faster, validating or invalidating ideas. It builds confidence. You have very little to lose.”
London leaned on being a student, and a foreigner, to disarm skeptical business owners, from laundromats, to convenience store owners to veterinary clinics. “I’m a PhD student from Stanford and I have a few questions,” he’d begin. “Do you mind helping?” Or, “I’m not from here, can you explain to me what this means?”
“You’d be surprised how many people are excited to speak with technologists who can build things for them,” he says. “Most people outside of Silicon Valley don’t often get to speak with people that can build products they use everyday.”
For London, there’s no shortcut to proper customer discovery. “It’s hard, but it’s your job to speak with strangers,” he says. “Fear of rejection is very human, but when you speak with a customer, you need to be in the mindset of seeking it.”
> You go out there to learn, and the learning comes from rejection. You’ve got to develop a thick skin.
The art of customer discovery, London says, is patience and persistence — using every conversation, especially the rejections, to deepen understanding. “The world is full of distractions, long to-do lists, and things people care about,” he says. “It’s quite rare to get to that place where you feel excitement and energy from a potential customer. When you find it, stop everything, and double down.”
## A strong signal from SMBs tightens Gusto’s target customer
They continued building the business, acquiring early customers through more relentless cold calling. “We were hustling, trying to find who would trust the three of us to run their payroll,” London says. “We had a swimming class for kids. We had a flower shop where Eddie was buying flowers, and he asked her, ‘Who do you use for payroll?’ She didn’t have a provider, so we set her up.”
They were also concurrently exploring building an API payroll product for enterprise platforms. “I remember going to some of these big platforms and we were sure they were going love it,” he says. “We were solving a really complicated problem for them. But mostly the response was, ‘This could be cool, but it’s not a priority right now.’”
It was this early feedback that reinforced their focus on SMBs. “When we talked with a small business, it was clear they were craving something better,” says London. “The pain from payroll was across industries, and the pain was strong enough that even if we did not have a personal network with dentists, dentists loved Gusto.”
The founders had recognized the “positive tension,” that unmistakable pull from SMBs who urgently wanted what they were building. It’s another lesson London gained from those early ventures he started in Israel: how to know if you’ve truly found [product-market fit](https://review.firstround.com/the-pivot-to-product-market-fit/).
“It should feel like *pulling* a rope, not pushing a rope,” he says. “With my previous company, I remember going to one of the biggest companies in Israel, an airline, and trying to convince them, ‘Here’s how the product is going to make your life better, and your customer’s life better, and improve your metrics.’” But London didn’t feel that positive tension. “There was interest, but it was not a priority for them. It was a priority enough to keep getting us more meetings — but not enough to actually get a contract.”
He also looks for [emotional reactions](https://review.firstround.com/sentrys-path-to-product-market-fit/). “A lot of people, when you tell them about your idea or show them the product, will be polite and nice about it,” he says. “But ‘polite’ and ‘nice’ is not how you build a business. **You need a strong positive emotion — or a strong negative emotion.”**
It’s the intense reactions on either end of the spectrum that London found valuable, whether critical or positive. “When someone says your stuff is absolute shit, that’s gold. There’s something in your mental model that’s wrong; either it’s the wrong customer, or something about your service, or the way you pitched it.” And on the flip side: “When someone is emotionally reacting with engagement and excitement — ‘Where can I sign up?’ — you know you’ve hit gold. But 90% of conversations sit in the middle. There’s not a lot of data there.”
London says a founder should understand their target audience so well that when you talk to customers, you should know how they’re going to respond before they open their mouth.
> Speak with customers so much that you start predicting what they’re going to say next.
London estimates that in those early days, two out of ten SMB owners they spoke with were instantly sold. “That’s great product-market fit,” he says. “The next step was to figure out, who are those two? Who are those segments? **Then you can pick ten of those, and you’re going to get ten out of ten.**”
The company eventually applied to YC and got in, which again brought into question the market segment they’d focus on — even though they’d been committed to building a payroll product for SMBs. London debated with Reeves and Kim about which market sector they should target.
“I actually thought we should focus on startups,” he says. They could tap their YC batch mates. “We could just go to them and say, ‘Hey, do you have payroll? No? Great, do you want to use us for it? I can onboard you right now.’ But Josh pushed to go broader, to put it out there for all small businesses. That ended up being the right call.”
As they moved through YC and started raising their seed round, they encountered a new kind of skepticism. “Investors didn’t believe the story of what we were trying to build,” London says. “There’s a reason why back then there were tons of companies focusing on software for enterprise, and software for consumers; for SMBs, you can’t just put it on billboards.” The SMB audience is fragmented, made up of millions of independent buyers with needs too highly individualized to be effectively reached through broad, top-down marketing. Not only that, but each account would bring in far less revenue than an enterprise business or a fast-growing startup would. In other words, most investors saw small business go-to-market as a losing game.
But the trio remained steadfast in their commitment to SMBs and to test it, got hyper-focused about which types of SMBs they’d focus on. This was the thinking behind their decision to target a specific segment of the market within SMBs: California companies with salaried employees only. “We decided that we were not going to serve anyone else,” London explains. “Because we wanted to make sure that every person we did serve loved the product.”
They aimed for an NPS of 85 and above, knowing the power of word-of-mouth. “Small businesses often have friends who are small business owners. Our hypothesis was, ‘We’re going to build a product and service people love so much that small businesses are going to talk about it all the time.’”
## Letting customer insight drive the roadmap
In the early days, London and his co-founders found a rhythm that kept them moving quickly: a strict monthly release cycle. “The way we built the first product was around releases — we had a monthly release cycle,” London says. “We were all working together in one small room. It’s not like we’d start working and only see each other at the end of the month, but having that monthly cadence meant we were always building backwards from a clear goal.”
Each month they forced themselves to answer the question, what needs to ship by the end of this cycle? From there they worked backward, scoping and prioritizing the most impactful features. “By the end of this month, here’s what we need to ship. Now let’s figure out how to do it in the time we have. There’s no other way,” London says. “That approach forced us to be decisive about scope — what to build first, what could wait. It helped us make progress really fast.”
This disciplined cadence helped fuel the young startup’s momentum. “This was post-YC, during that first stretch of about a year,” he says. “Every single month was about defining the thing we needed to ship to reach our goals. It was really helpful.”
As they were onboarding customers, London’s upbringing as the son of a shop owner came through in his hands-on, service-first approach. “This first set of customers all had my phone number,” he says. “I personally onboarded every single employee at every one of those first, I want to say, fifty companies. It was an incredible experience to learn what works and what doesn’t. You see them use the product, see what’s confusing, write it down, then go and fix it. **You get a bunch of insights from that that can really help build a better product.”**
It would take nearly a year before the product could handle full self-service, letting customers onboard, run payroll and file taxes on their own. Until then, every interaction ran through London or one of the co-founders. It was a high-touch, time-consuming approach, but worth it.
Even once they’d launched publicly — about eight months after YC, with a TechCrunch announcement tied to their $6.1 million seed round — the mix of customers remained split between startups and small businesses. By that point, they had already begun expanding beyond California, rolling out state by state as customer satisfaction remained consistently high.
With customer satisfaction consistently high, they decided the time was right to start expanding beyond their California test market — the narrow focus that had allowed them to perfect the experience and build genuine customer love. They began by adding support for hourly and contract workers, not just salaried employees, and rolling out state by state. “The timing was 100% based on how well the payroll product was doing,” London says. “It felt quite linear. We knew what we needed to do. We needed to expand states, we had a list of features and functionality, and I knew we could do it.”
As adoption grew, in 2015 [ZenPayroll rebranded to Gusto](https://review.firstround.com/this-is-how-you-design-a-lasting-brand-an-inside-look-at-gustos-reinvention/), a name chosen because it conveyed the enthusiasm, care, and human warmth they wanted people to feel when using their product — a stark contrast to the cold, bureaucratic baggage of “payroll.” “When we thought about our mission, it was never just payroll,” London says. “Payroll was where we started, but it was clear after a while that payroll data is very, very powerful. Once you’ve done payroll onboarding, you know everything about the company: who the employees are, where they work, how much they get paid. That makes it really easy to add additional products and solve more problems.”
The first new product was benefits, followed soon after by insurance and HR tools. “Health insurance back then felt exactly like payroll felt — people hated the experience,” London says. “It felt janky. You had to call people, fax forms, do a bunch of manual work. So we thought, can we just make that a few clicks instead?”
**London** [**validated**](https://review.firstround.com/unconventional-tactics-for-validating-your-startup-idea/) **the idea the same way he had in the early days — talking directly to customers.** “I remember sitting in a room and calling twenty of Gusto’s customers that I thought could be a good fit,” he says. “I pitched them: ‘Hey, we’re going to build this. Here’s how much it’s going to cost. Can I sign you up?’ I got seventeen out of twenty.”
The overwhelmingly positive response confirmed they were on the right path. “It represented this combination of a really important pain point and a great revenue stream,” London says. “We were at a point where payroll was going well. The team was executing, we were expanding state by state. We knew we could take some of our best people, put them on a new team, and launch something from scratch.”
That was the beginning of what Gusto’s founders called the “people platform”: a suite of products that would help small businesses streamline employee services beyond payroll. “When we did our YC pitch, the last slide was about that,” London says. “It said, ‘We’re starting from payroll, the next step is benefits and HR, and from there it’s going to be a full people platform. Everything to help you start, build, and grow your business.’ That was the vision from day one.”
Then, in 2020, when the pandemic hit, compliance became a focus. “We heard a lot about it over the years,” London says, “but it really popped up in COVID. All of a sudden, a company with seven employees might have five different states to manage. There’s a lot of compliance work around managing the state entities, the registrations, all the different tax regulations — every state is different.”
The pandemic, as painful as it was for small businesses, also uncovered an opportunity for Gusto to better support them. “It completely changed our prioritization,” London says. “We brought compliance up to the top of the roadmap, and we’re spending a lot of energy on it now. I think we have a really good product there.”
For London, it was another reminder that the company’s best product decisions have always come from listening to customers — the same instinct that started in that walk-in closet a decade earlier. “That’s something I wish we’d seen earlier,” he reflects. “Compliance is absolutely part of the job people hire Gusto to do. It’s not an add-on. It’s central.”
## Looking ahead
In August 2025, Gusto announced plans to acquire [Guideline](https://www.guideline.com/?ref=review.firstround.com), bringing in-house the 401(k) service the two companies had partnered on since 2016\. It’s a milestone that marks how far Gusto’s “people platform” vision has come. But for London, it doesn’t feel like a finish line.
“When I look five years ahead, I know future me will look back at Gusto today and think, wow, they were just getting started. There’s still so much to do.” That restless, forward-looking, rarely satisfied mindset has defined London’s decade at Gusto. Even as the company scaled nationally and matured beyond its ZenPayroll roots, he struggled to see any moment as a true arrival. “That performance anxiety has been there the whole time,” he says. “It’s not doubt so much as fuel — a sense that Gusto’s success has always been a midpoint, never an endpoint.”
He can pinpoint the first time he felt the company gaining real traction — around the Series B, when Gusto hit tens of millions in annual recurring revenue. Yet he still didn’t feel it was a moment to exhale. What he remembers of that time is the emails he would sent his team. W*e’re not growing fast enough. Onboarding takes too long. We need more of this kind of customer.*
“If you’re not on your toes and trying to disrupt yourself, to innovate and move fast, you’re going to lose,” he says. “This is not the industry to sit back and hang out and think about the past.”
Still, beneath the urgency is a principle London credits to his father’s clothing shop in Haifa — a belief that real success is measured by longevity, integrity, and a customer first mentality.
“There is something around long-term orientation that I learned from my dad,” he says. “For the customer, it's not a transaction, it's a relationship. It's about building something for the long-term in a respectful way that you feel proud of the ‘how’ later, but without sacrificing performance.”
### The unconventional growth levers that made Canva a $42B company
URL: https://review.firstround.com/canvas-path-to-product-market-fit/
Last updated: 2026-01-14T07:28:47.000Z
*Cameron Adams barely knew Melanie Perkins and Cliff Obrecht before the three decided to build Canva together. In a recent conversation, Adams shared how he knew it was the right choice, how SEO and localization unlocked massive growth, and more.*
## [**Canva’s Path to Product-Market Fit: How a Two-Hour Founder Date Led To a $42B Design Platform**](https://review.firstround.com/canvas-path-to-product-market-fit-2/)
In March 2012, **Cameron Adams** returned to Sydney from San Francisco at an uncertain moment. The **Google** alum had just come back from a fundraising trip for Fluent, the email startup he’d co-founded, without securing the backing he’d hoped for. He also had a newborn at home.
“We spent two months traipsing up and down Sand Hill Road and all over the Bay Area. We thought we would come back with a novelty-sized check of $2 million. Didn’t pan out that way."
[](https://review.firstround.com/canvas-path-to-product-market-fit-2/)
He’d left his role as a user interface designer at Google to give the startup his full attention — a decision that left him taking stock of what came next.
That’s when **Lars Rasmussen**, the co-founder of Google Maps and Adams’s former boss at Google, came to him with a serendipitous suggestion, encouraging Adams to meet a young entrepreneur he’d recently been introduced to: **Melanie Perkins**. Perkins, with her partner **Cliff Obrecht**, had built an online yearbook business called Fusion Books, which was pulling in $2-3 million a year.
But they had their eyes on a much bigger prize. If students could easily create and publish their own yearbooks online with zero design skills, it stood to reason that with the right tools, *anyone* should be able to design *anything*…
[Continue reading on The Review](https://review.firstround.com/canvas-path-to-product-market-fit-2/)
### Canva’s Path to Product-Market Fit — How a Two-Hour Founder Date Led To a $42B Design Platform
URL: https://review.firstround.com/canvas-path-to-product-market-fit-2/
Last updated: 2026-01-21T00:04:44.000Z
In March 2012, [**Cameron Adams**](https://www.linkedin.com/in/themaninblue/?ref=review.firstround.com) returned to Sydney from San Francisco at an uncertain moment. The **Google** alum had just come back from a fundraising trip for Fluent, the email startup he’d co-founded, without securing the backing he’d hoped for. He also had a newborn at home.
“We spent two months traipsing up and down Sand Hill Road and all over the Bay Area. We thought we would come back with a novelty-sized check of $2 million. Didn’t pan out that way."
He’d left his role as a user interface designer at Google to give the startup his full attention, a decision that left him taking stock of what came next. That’s when [**Lars Rasmussen**](https://www.linkedin.com/in/larserasmussen/?ref=review.firstround.com), the co-founder of Google Maps and Adams’s former boss at Google, came to him with a serendipitous suggestion, encouraging Adams to meet a young entrepreneur he’d recently been introduced to: [**Melanie Perkins**](https://www.linkedin.com/in/melanieperkins/?ref=review.firstround.com). Perkins, with her partner [**Cliff Obrecht**](https://www.linkedin.com/in/cliff-obrecht-79ba9920/?ref=review.firstround.com), had built an online yearbook business called Fusion Books, which was pulling in $2-3 million a year. But they had their eyes on a much bigger prize. If students could easily design and publish their own yearbooks online with zero design skills, it stood to reason that with the right tools, *anyone* should be able to design *anything*.
Adams met with Perkins, but he was hesitant to dive into another early-stage startup, given he was still a little bruised from Fluent’s disappointing reception in Silicon Valley. He politely declined to take the conversation any further. But the idea of bringing design to everyone continued to brew in the back of his mind. After another attempt to fundraise for Fluent went nowhere, it occurred to Adams that perhaps he should revisit Obrecht and Perkins’s pitch. From there, things moved rapidly. After one in-person meeting and a couple of Skype calls, Adams was in. Just over a decade later, [**Canva**](https://www.canva.com/?ref=review.firstround.com) is valued at $42 billion, is used by more than 260 million people in 190 countries each month and has revolutionized access to graphic design.
In this conversation, Adams reflects on Canva's remarkable path from scrappy startup to one of the most valuable private tech companies globally, from that lightning-fast founding courtship, to an “anticlimactic” launch day. He shares the key decisions that helped the company find product-market fit with early evangelists who would be crucial for Canva to scale, how a late funding scare pushed them to operate profitably for eight years running, and much, much more. Let’s get into it.
## From a lightning-fast courtship to a humbling launch day
[C](http://google.com/url?q=https://www.firstround.com/ai/figma&sa=D&source=docs&ust=1765990889376076&usg=AOvVaw3nY0JXmFBbZGHmbSY1RVkm)[o-founder matching](https://www.firstround.com/ai/figma?ref=review.firstround.com) can sometimes feel like speed dating, but Adams’s quick decision to team up with Obrecht and Perkins was unusually fast by any measure. He committed to building Canva with the near-strangers after a single two-and-a-half-hour meeting, followed by a couple of follow up calls and emails. Adams partly credits this decisive action to the fact that he wholeheartedly believed in their vision, the designer in him understanding the potential. “I’ve always believed everyone is creative, they just need the right tools,” Adams says. “Being able to bring visual design to people who had never thought about tackling it before was compelling.”
But there was also something beyond logic — a gut instinct that said, *leap in*. “It was a rapid courting session,” he admits, “but when I met Mel and Cliff, we just clicked." There was also the fact that Lars Rasmussen had introduced them and vouched for him.
Adams attributes his sharp intuition to the self-knowledge he’d gained in the years leading up to meeting Obrecht and Perkins. At Google, and during the years he was trying to build Fluent, he’d learned a great deal about himself; his strengths and preferences, as well as what he needed in teammates as a balance. He recognized right away upon meeting his future Canva co-founders that the trio’s skill sets complemented one another. “Cliff was an amazing operator. He thought about hiring, revenue models and margins. Mel had a huge vision around how to bring teams together and rally the world behind this idea. We quickly wanted to get into building Canva.”
Luck and timing also played a role. **Adams sees luck not as something passive, random, or beyond his control, but active.** “You put yourself in a position of luck,” Adams says. “Luck came from reaching out to someone, working late nights on an idea and pushing it out there.”
> If you sit in your room at home and never talk to anyone, nothing is going to happen.
Within a few months the newly minted co-founders had rented an office in Sydney and were building the first version of Canva. The early product work was scrappy and fast. “It was me and Mel sitting in this cavernous, empty office, jamming on ideas, sketching both physically and on the screen, and then quickly getting those ideas into prototypes,” Adams recalls. “It was really important for us to feel the product and know it was the *right* product.”
As they embarked on a relentless prototyping run, Adams and Obrecht decided they would follow the [Double Diamond design thinking process](https://www.designcouncil.org.uk/our-resources/the-double-diamond/?ref=review.firstround.com). “You go wide, you come back in, and you go out wide again as you get user response, and then zero in on your final product,” Adams explains. This phase lasted around three months, until they felt ready to hire an engineering team to start building out the product with an eye to ship. Adams’ hybrid skills, equal parts designer and coder, made it possible to iterate fast. “We could sketch something and in a few hours use it on a computer,” Adams says, crediting this [speed](https://review.firstround.com/speed-as-a-habit/) as a crucial early building block (this was, of course, long before [AI made rapid prototyping a standard part of every designer’s toolkit](https://www.firstround.com/ai/figma?ref=review.firstround.com)). “I find it easy to think about a design idea, sketch it, and get it into code, which is a really important step when you're building a product,” he says. “It isn't until you've tried something interactive for yourself, and then put it in someone's hands, that you know how it's going to behave.” Once Adams and Perkins did bring on an engineering team, progress sped up further. “The engineers started laying down the architecture, thinking about the data we'd need to store, how we'd store images on the front end, how we'd do all the manipulation and keep it stable,” Adams says.
Six months out from launch, Canva’s ICP was still intentionally broad. “We wanted to bring design to the entire world. When you're trying to do that, you can't pigeonhole yourself.” But a few months before launch, they recognized the need to start homing in on a target persona. “If you push out a product and say, ‘This is for everyone,’ it's really hard to get people interested,” he says. So, they identified people who need to create professional-looking designs, such as small business owners, marketers, teachers, and students, but lacked design experience and/or access to expensive software like Adobe Creative Suite. Adams and his co-founders wanted to reduce the time, cost, and hassle involved in making flyers, presentations and other small design projects for this large swathe of people. Still relatively broad, but at least more narrow than “everyone.”
They began initial rounds of user testing, a mix of in-person focus groups and an online service called [usertesting.com](http://usertesting.com/?ref=review.firstround.com) that connected them remotely with people willing to try out the product and provide feedback. Adams and Perkins quickly noticed something: a lot of people opened Canva and promptly froze. “They were like, ‘I'm not a designer. I'm scared of screwing everything up.’” Canva was a product intended to make anyone feel they could be a designer, but in an ironic twist, imposter syndrome made them feel as though they shouldn’t even try.
A relatively simple solution emerged. Adams and his co-founders came up with the idea to produce a 23-second onboarding video that showed what was possible in Canva (moving images, resizing text, layering shapes), which would play before the user was dropped into a guided exercise. The exercise prompted the user to drag a monkey onto the page, put a hat on it, change the color of the hat and search for a slice of pizza. It was silly. It worked.
What Adams remembers most of this period, in the last few months before Canva launched, was this excitement in the air — as well as a fair amount of stress. “As a founder, you're not just focusing on the product. You're also thinking about the company, the team, PR and press, how you pay people, the business model. **It was frantic, trying to juggle all those things, while still placing a premium on the product and making sure that we're delivering an amazing experience**. But incredibly exciting.” Adding to the pressure was the fear a competitor would launch first, which was amplified by several investors who urged the founders to ship earlier than they were comfortable, pressure they resisted. Adams says it was important to them to strike the right balance of quality and speed. “We sweated the details, made sure it was something that we were proud of. But we knew we had a few bugs and flaws.”
In August 2013, Canva officially went live to a waiting list of more than 15,000 people. This time was a strange mix of both dramatic *and* anticlimactic, for Adams even more than the rest of the team. Two days before launch, he was hit by a car while cycling and knocked unconscious. Adams was rushed to hospital, where he received stitches on his face.
“I was back at work the next day,” he says.
Shaken and sore, but determined the team would hit the milestone they’d been working toward for months, Adams was there in the office to hit the go live button. Momentous as it was, there had been so much build up that it felt, in a way, anticlimactic. A Google Analytics dashboard mounted on the wall showed not a tidal wave of tens of thousands of users flooding the site to try the product, but instead a mere trickle.
“After about 30 seconds, one person visited the site. Two minutes later, another one. Five minutes later, three more. Then it just went quiet,” he says. “We realized there wasn't going to be a flood of users.”
It was a humbling experience, one that taught Adams not to put too much emphasis on future launches. “If you're starting at zero and adding a couple of users every day, and then a thousand a week, and then 50,000 a month, it stacks up.” The real work, he says, comes *after* launch. “Turn up every day and plug away, make the product, engage with your customers, be firm on the vision that you want to create, and keep heading towards that,” he advises.
> When you're looking at a journey of 10 or 20 years, the launch is probably the least important thing.
## Social media managers: the early evangelists who fueled Canva’s first wave of growth
Despite the “anticlimactic” launch, Canva quickly found traction. Around 500 people came to the website that first day. By the end of the week, that figure had grown to more than 5,000\. By the end of the first month, 20,000\. “It was instantly valuable,” Adams says. “From the early days, retention was pretty high. Around half of the early site visitors turned into ravenous users.”
Adams and his co-founders stayed focused on understanding exactly how early users interacted with the product — what confused them, what delighted them, and where the experience still needed smoothing out. “The first year, we built out the product and got more features in there to make it a more solid platform for customers who were turning up to have a great experience.”
With more user feedback sessions, a specific cohort of people who were connecting with Canva the most began to emerge: social media managers. At the time it was still a relatively new profession, but growing rapidly as the internet entered a new, hyper-visual era following the boom of Pinterest and Instagram. “They needed to create a lot of content, but they couldn't afford to pay a professional designer to do it,” he says. “They were time poor, running their own business, liaising with clients, and also needing to think about text, visuals and strategy. Canva was the perfect tool for them to be able to scale.”
Canva’s drag-and-drop simplicity and free templates meant it quickly became an essential tool for this underserved audience. These early adopters were loud about their enthusiasm for the product, which had a powerful word-of-mouth effect. “They were naturally online, talking to their peers, sharing tips and tricks, showing what they’d made,” says Adams. “They became our first real evangelists.”
**This created a feedback loop: the more content they made, the more others saw Canva in action, and the more signups grew. The team leaned into the momentum, refining templates, adding social-specific formats and shaping messaging around this community of fans**. “They loved being on social media, telling people about the tools they were using, introducing Canva to others, giving tips and tricks. A great first customer to land on.”
Adams says tailoring the product experience to this group of zealous early users was a pivotal moment for Canva’s growth. “Being responsive to them, building them up as your advocates, making them feel like they're part of the team so they're really willing to talk about your product to other people — it’s incredibly important,” he says. “Other growth strategies can kick in after that. But having the community that loves your product because it's a quality product is one of the key ways that we build. Word of mouth in those early years was like gold for us. Still is.”
Even so, Adams insists that Canva’s broad appeal has also been central to its success.
“Our vision encompasses so much possibility. People can use it in such different ways. That's driven me for the last 13 years,” he says. “There's so much opportunity, so many unique and interesting problems we solve for different types of users, and that enables us to constantly be innovating. I don't think we could do that if we were just focusing on one small user group.”
More than a decade since launch, Adams and his co-founders still place a high importance on fostering community. Canva maintains a presence in online groups and forums that have grown organically around the product. “We share tips about what's coming up on the roadmap, respond to requests, make sure their bugs are filed.”
> That's how we think about community: it’s more about the broader ecosystem than building specific tools that bring community together on the Canva platform.
They take a similar approach to managing user complaints and technical support requests. **“Being able to convert someone who is frustrated with your product, have a great customer service interaction and turn them into a Canva fan — that creates another person who's willing to talk about Canva.** Who will sit down at a bus stop next to someone and tell them about the product, show them their favorite design and win you another Canva user.”
## The two levers that supercharged growth: SEO and localization
Over the next couple of years Canva started to unlock new parts of its growth engine. One of these was SEO. Adams admits that before they launched, he and his co-founders had only “vague ideas” about how SEO would drive growth for Canva. But that changed when they found a growth leader in Australia who reimagined the entire funnel. “It was about the whole flow of someone typing in a search, ending up on a Canva landing page, getting them into the product, and making that a really great experience.”
The SEO project involved mapping hundreds of search terms, then building tailored landing pages for each one, a pioneering example of programmatic SEO. The user would land on a page with information about what they were looking for — wedding invitations, birthday cards, marketing content for Instagram, business presentations — and in a click they were inside Canva, seeing how they could create it for themselves. “We gave them an easy entry point into the editor, and then we made it clear once they were in the Canva editor how they would achieve the job they’d set out to do,” Adams says. “We started seeing returns within three months. It scaled up over the next couple of years to become a massive driving engine for us. It’s still a massive source of traffic.”
In Adams’s mind, another lever was equally as important: international markets. Since they were based in Australia, which has a population of less than 30 million people, Canva had no choice but to think globally if they wanted to scale. “You're never going to create a scaled online company just thinking about the Australian market.”
Three years after launch they began to execute in earnest on a global strategy that focused on localizing for key markets. “**We launched eight languages that year. The following year, we launched in a hundred languages.**” The growth was explosive. “Brazil, Mexico, Indonesia, India, massive markets, a lot of non-English speakers — it has totally reshaped what the product of Canva is, how we surface content to people, how we give them a great experience wherever they are in the world,” Adams says. “It’s intensely localized. It’s not just in their language. It also has all the right content; it speaks to their cultural norms.”
## Hard lessons: A code editor rewrite, a wobbly enterprise launch and a chaotic funding round
One of Canva’s toughest early lessons arrived when the team realized they had to rewrite the entire editor codebase. This meant that for two years they were unable to launch any new features. The only alternative would have been to do the work in parallel, and then bring the old and new versions together, which Adams believes would have pushed out the timeline too far, and created unnecessarily complex launch headaches. “It was ultimately the right call, because it set us up for real-time collaboration, truly scaled teams, hundreds of people using designs together, velocity of products, a better tech stack that enabled us to scale to hundreds of millions of people,” he says, “but it was a struggle to get through.”
On the business side, things were much more straightforward, at least at first. For the first two years, revenue came from a simple model: users could buy stock images and other content for $1 each. “Part of designing is getting access to the ingredients for a design, whether that's a photograph, a font or a video,” Adams says. “It was extremely expensive to do that. We enabled you to design and grab the content in the same tool — and do so easily and cheaply.”
The model was working; they were scaling, and seeing approximately 30% month-on-month revenue growth. But as Canva grew, Adams and his team began to notice a particular group of users that was pushing the product further than the average small business owner or social media manager. These users wanted more out of the product: more control over their brand, more consistency across designs, and a way to collaborate with the people they worked with.
There was also data showing that Canva sometimes had upwards of 5,000 users within one company. They knew it would make sense for a large company to take a more cohesive (and affordable) approach to incorporating the product into their tech stacks. So, Canva created a subscription tier specifically for enterprise. “We made some vague promises that it would be better for large teams and brand consistency. It got a little bit of traction, but it wasn't very successful.” **Adams says this was because they neglected to target the right decision makers in the enterprise organizations, those who could advocate for the product and ultimately secure contract sign-off.** “Finding the right decision-maker to champion it is a different play to the grassroots adoption we were used to. It required us to rethink what we were offering.”
As with those early users who got stage fright at the blank canvas, forcing the team to problem-solve, quickly, the team used Canva For Work’s lukewarm launch as an opportunity to learn, understand their users more deeply and improve their offering. “We’ve since learned a lot more about the enterprise space, what scaled teams need from their visual content, how they want to control their brand, and how they want to interact with teams across the organization.”
Canva Enterprise launched in May 2024\. “The reception to that has been far more successful,” Adams is happy to say. FedEx, the New York Stock Exchange, and Amazon are among their customers.
Yet another hard lesson that still makes Adams sweat a little to recall is their third funding round, in 2018\. A bullish investor valued Canva at $100M and wanted to put in tens of millions. But, at the last minute, they decided to value the company at half of what they’d discussed. The co-founders scrambled, and ultimately pulled together a totally different round of funding that did not include that investor. They learned a powerful lesson in the process. “We decided we didn’t want to be beholden to any investor. We didn’t want to be in that position again,” he says. “Since then, we've put a premium on being a profitable company, making sure we can run the company without having to put our hand out.”
They’ve since been profitable for eight years straight.
## The power of being a first mover and creating a new category
“Canva has grown from zero to 260 million people that use it every single month. It’s been a crazy, wild ride, one I didn’t sign up for in the first days,” Adams says. “We put Canva out into the world with huge hope and promise. It's been amazing to see the world respond.”
From Adams’s point of view, Canva owes much of its success — before evangelizing early users, creating a programmatic SEO flywheel or launching in international markets — to being a first mover in the category. “We essentially created this category of democratized visual design. Canva is still the foremost design platform that anyone can access anywhere in the world. The growth that we've experienced is a testament to our belief in the vision.”
Looking back on the “wild ride” of the past decade, one thing that stands out to Adams is how grateful he is that he and his-founders didn’t take no for an answer. And they were told no. *A lot*.
“I'm sure they're kicking themselves now,” he says. His advice for other founders going through the hard knocks of rejection? Get used to the fact that you see a different view of the world from other people. “Have confidence in your vision and recognize that some people aren't early adopters,” he says. Find the people who *do* share your vision, who *do* get excited about what you're building, and drill into them. You can win the rest of the world over time.
> In the early days, just focus on the positive, optimistic users who really will lean in, and don't worry about converting the naysayers.
For Adams, there was no single “aha” moment when Canva’s success became blindingly, undeniably obvious. But one early email stands out. “It was from an orphanage in South America. They wrote to thank us — they were using Canva to create newsletters that helped children find adoptive families.” That note crystallized what Canva was really about at its core. “It was someone I didn’t know, in a country I’d never been to, using Canva to make an impact in their community. That’s when I realized — this is bigger than us. This can reach anyone.”
### The best company building advice we heard in 2025
URL: https://review.firstround.com/the-best-company-building-advice-we-heard-in-2025/
Last updated: 2026-01-10T08:02:59.000Z
*Sharing our favorite snippets of startup advice we published last year.*
## [The 30 Best Pieces of Company Building Advice We Heard in 2025](https://review.firstround.com/the-30-best-pieces-of-company-building-advice-we-heard-in-2025/)
[](https://review.firstround.com/the-30-best-pieces-of-company-building-advice-we-heard-in-2025/)
Happy 2026!
We’re kicking off the new year with a tradition we’ve upheld ever since The Review was born in 2013\. Every January, we comb through all the articles we published over the past 12 months to pull out 30 pieces of standout advice.
We spoke with some incredible founders and builders in 2025, filling out an archive that covered topics from launching out of stealth to user onboarding to landing your first design partners.
As we assembled this guide, the snippets that stood out to us were the seemingly small tactics and against-the-grain approaches that led to outsized impact. They came from folks who weren’t afraid to take risks long before their strategies became consensus, or before their companies became household names.
Here’s a taste of the advice that made the list:
- **Run a reverse demo.** **Clay** co-founder **Varun Anand** architected the company’s breakout revenue growth. Just one of Anand’s clever GTM tactics: flipping the classic demo on its head by asking the customer to share *their* screen and give Clay a test drive, with his guidance.
- **“Meme-ify” your idea to build momentum inside your company.** **Mihika Kapoor** rallied folks from across **Figma** to join her in getting a new bet off the ground: Figma Slides. To do so, she turned the product idea into a meme, even creating a custom Slack emoji. “It may feel random, but a big part of what made Figma Slides go internally viral was the fact that we called it ‘Flides.’ It was ultimately this meme that people were able to take and run with. That’s because being kooky humanizes your idea,” she says.
- **In the age of AI, hire more entry-level people, not fewer.** We sat down with **Shopify**’s VP and Head of Engineering, **Farhan Thawar**, to find out how he’s brought CEO Tobi Lütke’s famous AI memo to life in his org. Bucking the trend to slash entry-level roles, Shopify has made hiring young people a key part of its AI strategy: the company brought on 1,000 interns last year. Thawar says young people are AI centaurs — they use AI in reflexive, creative ways.
We hope you’ll find something in here you can put to use to build an incredible company, whether that’s today or 10 years from now.
Thanks, as always, for reading and sharing!
*\-The Review Editors*
[Take me to The Review](https://review.firstround.com/the-30-best-pieces-of-company-building-advice-we-heard-in-2025/)
### The 30 Best Pieces of Company Building Advice We Heard in 2025
URL: https://review.firstround.com/the-30-best-pieces-of-company-building-advice-we-heard-in-2025/
Last updated: 2026-04-07T17:07:06.000Z
We’re ringing in the new year here at The Review with a longstanding tradition: sifting through the hundreds of thousands of words we published over the last 12 months to surface the very best 30 pieces of advice we shared.
Company-building today looks very different from when we started this annual tradition over a decade ago. The fundraises are bigger, the timelines are shorter, the teams are tinier and expected to do much more with less. While many of last year’s tech headlines featured record growth and eye-popping valuations, we found our curiosity drawn to the untold stories of quiet execution, scrappy experiments and contrarian bets that paved the way — starting with founders who ask, *imagine if* this could be different or better or faster?
We asked founders who had a banner year in 2025 to recount their companies’ early days, long before the first glimmers of [product-market fit](https://review.firstround.com/series/product-market-fit/), when *imagine if* was all they had. We chronicled how **EvolutionIQ**’s foundersturned an early bet on vertical AI into [a $730M acquisition](https://review.firstround.com/evolutioniq-path-to-pmf/), how **Karri Saarinen** scaled **Linear** into a billion-dollar company by [bucking the "growth at all costs" mindset](https://review.firstround.com/linears-path-to-product-market-fit/) and how **Varun Anand** tuned the gears on **Clay**’s [go-to-market engine](https://review.firstround.com/the-gtm-inflection-points-that-powered-clay-to-a-1b-valuation/) to spur its breakout growth.
We also shared many tactics to guide founders who are currently in that lonely 0-1 stretch. **Color** co-founder **Othman Laraki** opened up about how he went unreasonably deep [to learn a market](https://review.firstround.com/to-learn-a-new-market-start-by-building-your-product/) he had zero experience in. **Figma’s** firstmarketing hire, **Claire Butler**,offered up advice for [how to launch out of stealth](https://review.firstround.com/how-to-launch-your-startup-out-of-stealth/). **Sierra** GTM leader **Logan Randolph** shared a detailed guide on [landing your first design partners](https://review.firstround.com/sierra-design-partnership/).
This moment in startup time feels equally full of promise and pressure, where so much is possible but you’ve got to grab it immediately. Our mission here at The Review is the same as ever: to help make the fog of company-building a little easier to navigate. Our hope is that by spotlighting the sharpest startup builders of today, the next generation of founders can find kernels of wisdom to hang onto when so little feels certain.
With that, here are the 30 standout pieces of advice we gathered last year to help you build an incredible company in 2026.
## 1\. [Don’t take your boots off the ground](https://review.firstround.com/how-i-spent-17784-hours-in-5-years-as-a-startup-founder/)
[**Sam Corcos**](https://review.firstround.com/the-most-honest-lessons-about-the-path-to-product-market-fit/)tracked every one of the 17,784 hours he spent over five years building **Levels**, neatly plotting the time he spent on different areas of the business.
Just one of his many takeaways from his rigorous self-analysis: He took an extended hiatus from the codebase in the company’s scaling phase, and he regrets it.
In Levels’ first two years, Corcos himself often pulled tickets and shipped code, a period of software development he describes as insanely high-velocity. But as the pressure to scale came in years three and four, he felt the need to “professionalize” the engineering org and bring in PMs, designers and experienced managers. Soon, shipping ground to a halt.
“There are a lot of idioms to describe how I was feeling around this time: treading water. Pushing on a string. Screaming into the void. But looking at the data, I have no one to blame but myself. It’s easy to see from reviewing my time from these couple of years that software development was not my priority, and it should have been,” he says.
So Corcos overhauled the org and stripped its structure back down to a lean team of engineers who reported directly to him. Here’s what Corcos learned from the course correction:
- “I had lost touch with the people making and using our product. But I didn’t have the courage to do what needed to be done,” he says. “When I would make an effort to get back into the codebase and the product development cycle, or even just talk with customers again, I would hear from the leadership team that my involvement was disruptive and I should let them do their jobs. I didn’t push back strongly here, because I was too busy listening to conventional wisdom — likely because it leaves less room for criticism.”
- “I continued to place my focus in other areas of the business — which was a huge mistake. I had allowed myself to become the passenger and not the driver of my own company. It wasn't until I made the drastic change that I felt like I was running this company again,” he says.
- “We no longer hire pure ‘managers’ at Levels, and we probably never will again,” he says. “The managers we hire need to be capable of performing the tasks of those they manage. If they manage engineers, they need to be able to write excellent software. If they manage marketers, they need to be exceptional marketers themselves. Hire people who can be ‘button clickers’ instead of finding someone else to click the buttons for them.”
## 2\. [Hire more entry-level people, not fewer](https://www.firstround.com/ai/shopify?ref=review.firstround.com)
New grads entering the workforce had a lot to be anxious about in 2025, with reports that job opportunities for entry-level folks [are shrinking](https://qz.com/gen-z-careers-economy-jobs?ref=review.firstround.com) as companies invest in AI. Shopify, meanwhile, hired 1,000 interns.
CEO Tobi Lütke’s memo asked teams to see what they can get done using AI before asking for more headcount. The company has since consciously diverged from this charter, doubling down on both AI *and* entry-level talent. **The reason, says VP & Head of Engineering** [**Farhan Thawar**](https://ca.linkedin.com/in/fnthawar?ref=review.firstround.com)**, is that young people are AI centaurs: they use AI in reflexive, creative ways**.
After Thawar successfully ran a 25-person engineering internship program, Lütke asked him how big they could scale the program. “Without new infrastructure, I originally said we could support 75 interns. Then I took it back. [I updated my answer to 1,000](http://linkedin.com/posts/fnthawar%5Fmy-arms-are-too-short-to-capture-all-the-activity-7283456205795078144-c8jZ?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAAizmvMBnABhGG9qci0UHoDVcjkpDlc5gOc),” says Thawar.
He’s led many intern programs over the years at Shopify, and has long believed new grads’ fluency with the cutting edge tech adds a lot of value to the team. This era is no different. “They’re always interested in new tools and shortcuts. I want them to be lazy and use the latest tooling,” he says. “We saw this happen in mobile. I hired lots of interns back then because I knew they were mobile native.”
## 3\. [Win hearts & minds at every altitude of the org chart](https://review.firstround.com/evolutioniq-path-to-pmf/)
When **EvolutionIQ** (an AI platform for insurance claims) got scooped up by CCC Intelligent Solutions for $730M, it marked one of the first major vertical AI exits. We knew every detail of the company’s six-year trajectory was worth careful study, so we sat down with co-founders [**Mike Saltzman**](https://www.linkedin.com/in/michael-saltzman-9536812b?ref=review.firstround.com)**,** [**Tomas Vykruta**](https://www.linkedin.com/in/tvykruta?ref=review.firstround.com)and **Jonathan Lewin** to share what they got right.
While no single decision or strategy netted this impressive outcome, one tactic stood out to us: **During customer discovery, the founding team was committed to building close relationships with not just C-Suite execs who’d buy their product, but also the insurance workers who’d be using their product.**
“One of the things that I think our business has done really well — and has been important to do well — is we have been good at building and maintaining relationships across the verticality of an organization," says Saltzman. “From the frontline desk person who could be a recent or junior employee, to the manager, to the director level, to the VP, to the Chief Claims Officer and the President of the business — we built relationships with everyone in the reporting line, and we adjusted our approach depending on what they needed.”
The team created feedback loops that spanned the organization. "With the frontline examiners, we were white boarding out what we could do at the desk level,” says Saltzman. “And then once a week, we were meeting with their manager, and once a month meeting with the head of claims and saying, 'Look, this is what we're hearing, this what we think we're building, does this problem work for you as well? Do you want a solution here?' We got all the stakeholders to dive into the process.”
This strategy proved effective as EvolutionIQ landed new customers. First Round Partner Bill Trenchard, who first invested in the team in 2019, says the knowledge the founders gained from wading into the details was impressive.
“They had this ability to really explain at a deeper level what was going on inside of disability insurance, and why AI was going to be a big difference maker for them,” he says. “You only develop that skill from immersing yourself in the problem and going ‘unreasonably deep’ to understand it from every angle.”
## 4\. Embrace ego death in founder-led sales
As a long-time GTM exec, [**Meka Asonye**](https://www.firstround.com/team/investing/meka-asonye?ref=review.firstround.com)has noticed that many of the founders he’s worked with have a bit of a sales phobia. “My biggest fear when I decided to start a company was that I would have to do sales,” confesses [**Marta Bralic Kerns**](https://www.linkedin.com/in/martabralic/?ref=review.firstround.com), founder and CEO of **Pomelo Care**.
For an essay exploring the founder-led sales process, Asonye recruited an all-star bench of sales leaders and GTM-savvy founders to share their wisdom on how to overcome this fear on the path to the first few million in revenue.
One of Asonye’s best pieces of sales advice for founders is a dose of tough love: **Stop talking about yourself**. “As I’ve found in my own sales career, the best sales calls are the ones where you as the seller don’t talk much at all,” he says.
[**Mike Molinet**](https://www.linkedin.com/in/mikemolinet/?ref=review.firstround.com), co-founder of Thena and Branch, has found this to be true as well. “People care about themselves — are you solving my problem or not? They don’t care about what you do and who you are,” he says.
Founder ego death means letting go of your product assumptions — and listening to what the customer is telling you, even when it’s not what you want to hear. [**Eric Lasker**](https://www.linkedin.com/in/ealasker/?ref=review.firstround.com)**,** CRO of **Varda Space**, puts it this way: “I’m a big believer in finding your hypothesis and trying to burn it down as quickly as possible — do as much as you can to destroy any ego you have about your product and your ability to make a sale,” he says. “The goal in the early days should be to really test if you have something the market wants, almost more than your ability to sell it.”
## 5\. [Run a reverse demo to spark magic for prospects](https://review.firstround.com/the-gtm-inflection-points-that-powered-clay-to-a-1b-valuation/)
**Clay’s** revenue growth curve speaks for itself: 10X in 2022, 10X again in 2023, 6X in 2024, and the company recently [blew past $100M in ARR](https://www.clay.com/blog/100m-arr?ref=review.firstround.com).
[**Varun Anand**](https://www.linkedin.com/in/vaanand?ref=review.firstround.com)joined in 2021 and quickly earned the co-founder title by building out many of the sales systems driving Clay’s growth today.
One of the more clever GTM tactics Anand shared with us is Clay’s use of a reverse demo in sales calls. Even after Clay had narrowed in on their ICP of outbound salespeople, the team still struggled to help prospects find an “aha” moment with the product. So rather than him leading the demo on a sales call as is customary, he’d have the prospect share *their* screen.
Anand would give folks a Clay signup link, and then use Zoom’s annotation features to guide them through which buttons to click to help solve the problem at hand. “Our goal with every reverse demo was simple: Solve the customer’s stated problem within 30 minutes — and try to blow their minds in the process,” he says.
“If you’re learning how to drive a car, you don’t sit in the passenger seat while the instructor lectures you. You take the wheel while the instructor safely guides you,” says Anand. It was a fair trade: The Clay team got a ton of UX feedback, while the customer learned how to use Clay.
## 6\. [Self-serve product onboarding should be opinionated, interruptive and interactive ](https://review.firstround.com/superhuman-onboarding-playbook/)
The leaky bucket problem is an existential threat to every founder who’s closed their first handful of customers. You fought hard to win them — but the second half of the battle is keeping them and, hopefully, leaving them wanting more.
Onboarding is one of the best levers to pull for retention. [**Gaurav Vohra**](https://www.linkedin.com/in/gvohra?ref=review.firstround.com)was the architect behind **Superhuman’s** onboarding experience, which is well-known for being white-glove, highly personalized and human-led. Vohra dropped by The Review to share how he designed the email app’s onboarding in full, starting with how the Superhuman team manually onboarded new customers, and later translated that experience into software for a self-serve experience.
He drew much of his product inspiration from an unlikely source — video games. “For decades, video game creators have been perfecting the art of dropping players into new and complex worlds and then setting them up for success. They teach players to learn the controls, take action, and embark on their adventure,” he says.
He discovered that the best video game onboarding has three attributes that product and growth teams typically shy away from: **It’s opinionated, interruptive and interactive.**
Here’s what each quality looks like in practice:
- **Opinionated:** “There are many ways to use your product, but there is likely a *best* way. And you owe it to your customers to help them down that path,” says Vohra. The team modeled an opinionated onboarding after 1985’s Super Mario Bros 1-1, pulling in design elements from how the game instructs players to learn to jump.
- **Interruptive:** “Great product onboardings arrest a user's attention with something important to say,” he says. To create an attention-grabbing flow, Superhuman took a cue from another video game: The Legend of Zelda: Ocarina of Time, where a fairy helper shouts, “Hey, listen!” The result was a full-screen checklist to help a user get set up.
- **Interactive**: “A common objection to being opinionated and interruptive is that it removes agency from users. The antidote is to make these experiences interactive,” says Vohra. To do that, the team took inspiration from how early video games like Super Mario Bros teach through play (e.g., the first level gently introduces mechanics), applying a similar philosophy in Superhuman’s onboarding by having users interactively practice key shortcuts like **Z** to Undo Send.”
## 7\. [Founders, figure out growth before you delegate it to someone else](https://review.firstround.com/founder-led-growth-playbook/)
If you ran an autopsy of every failed startup, you’d often find a few common culprits — lack of product-market fit, mismanagement, co-founder breakups. [**Matt Lerner**](https://uk.linkedin.com/in/matthewlerner?ref=review.firstround.com)makes a bold claim about the leading cause of death: “Nearly always, a startup's failure has to do with the founder's approach to growth.”
A former PayPal B2B growth lead and co-founder of [**SYSTM**](https://www.systm.co/?ref=review.firstround.com), an online accelerator for startups, Lerner has seen this play out again and again with the founders he’s advised. Generally, the growth-averse founder falls into one of three buckets:
- **The overthinkers**: “Founders who debate, theorize, strategize and talk to other smart people all day long and think things through, but never execute,” Lerner says. “I don’t need to tell you how that story ends.”
- **The underthinkers**: “These founders’ philosophy is to build, build, build, and fair enough.” he says. “But if you’re just building off your sense of the market, and your product isn’t working, adding more features that your customers don’t need, founders are just adding complexity to the product, the code base and maintenance — and slowing themselves down.”
- **The hire-and-delegaters**: These are founders who come from a senior role inside a big company, or who are humble enough that they rely on hiring experts for leading all the different functions. “But those outside experts don't have the right context,” he says. “They're thinking in terms of their own function, not the entire company. The founder needs to be involved in growth at the early stage.”
“Ultimately, founders need to be the ones that figure out how their business is going to grow,” says Lerner.
> Founders can't afford to delegate growth right away, nor do the best founders have to. It's in great founders’ DNA to get stuck in something and make a mess of it until they figure out what drives their business forward.
— *Matt Lerner, co-founder of SYSTM*
## 8\. [Rent an exec to help you build a new function](https://review.firstround.com/fractional-exec-hiring-guide/)
It seemed like every seasoned operator went fractional last year. It’s a newer term for a hardly novel practice — executive talent working with a company on a part-time basis. But this surge of fractional talent hitting the market has created some confusion on the hiring side.
Long-time ops leader [**Amanda Schwartz Ramirez**](https://www.linkedin.com/in/amandamschwartz?ref=review.firstround.com)offers some clarity on what early-stage startups need to know about working with fractional leaders. One major benefit, she says, is de-risking a costly executive hire while you stand up a new function or build management muscle. “Finding the perfect executive is like trying to throw darts at a moving dartboard and hit a bullseye. A fractional leader can help you understand what you need while you're figuring out what it is you're building,” she says.
But fractional execs aren’t a panacea. “I don't think that fractional is the answer for every function, especially as you build out the core product, design and engineering engine,” she says. “The question you should be asking is: Are there any industry or functional gaps that we can close to help us move faster?”
To steer clear of diluting the core product discovery process, Schwartz Ramirez recommends asking these questions upfront before hiring a fractional exec:
- Are you clear on why this person is here, and what perspective you’re hoping they will bring that informs your PMF process?
- Are there specific bottlenecks that you’re looking for an experienced leader to clear? Specific types of functional or industry expertise you’re lacking?
- Can you establish a part-time working relationship that ensures your fractional leader gets the context they need without falling out of sync every 48 hours?
## 9\. [Take a detour from management and dust off your IC skills](https://review.firstround.com/this-90-day-plan-turns-engineering-leaders-back-into-frontline-developers/)
In 2015, [**David Loftesness**](https://www.linkedin.com/in/dloftesness?ref=review.firstround.com)graced The Review with his [90-day plan](https://review.firstround.com/this-90-day-plan-turns-engineers-into-remarkable-managers/) to transform engineers into managers. Last year, he returned with another 90-day plan for the flip side of that transition: returning to IC work.
After runs as an engineering leader at **Amazon, Twitter** and **eero,** he traded in his manager mantle and took on a role as an IC developer. He’d done this transition a couple times already in his career, moving between manager and IC engineer roles and even cycling between managing ICs and managing managers multiple times. “I just missed that feeling of shipping code,” he says, feeling a pull at this junction to get back to the ground floor of engineering.
Using his own experience of putting the IC developer hat back on, Loftesness laid out his transition plan in full, from communicating the change to settling back into a maker’s schedule. As the notion of the AI-powered “[super IC](https://maven.com/p/676334/the-super-ic-roadmap?ref=review.firstround.com)” took hold last year, we found his advice particularly timely (and broadly useful to anyone considering this transition — not just engineers).
Transitioning back to IC work doesn’t have to be permanent. Throughout his own cycles, he’s found that stepping away from management can actually *improve* your skills as a manager. “Every time I've taken a break to return to coding, I've become a better manager. Sometimes you need to step away from the trees to see the forest,” he says.
> The transition to management isn’t a one-way door. You can continue to be a leader without being a manager — they’re not the same.
— *David Loftesness, former engineering leader at Amazon, Twitter and eero*
## 10\. [Build for behavior change (and be realistic about the power of inertia)](https://review.firstround.com/a-research-toolkit-for-the-discovery-phase/)
In the scramble to ship vibe-coded products to market, [**Jeanette Mellinger**](https://www.linkedin.com/in/jeanette-mellinger?ref=review.firstround.com)thinks founders are flying past a few fundamentals. Long before you start selling, and even before you start building the product, the user research expert says founders should find **problem-solution fit.**
“Problem-solution fit means finding a deeper customer need that you’re uniquely positioned to solve, and building for it with better early signals and stronger team alignment from the start,” she says.
Mellinger shared her extensive user research toolkit with The Review to help founders add more rigor to the discovery phase. She calls out one steep psychological barrier every founder must climb over: user inertia. “Meaningful behavior change is required to get most products and processes off the ground, and it’s a lot harder than it seems,” says Mellinger. “This is where you bring in tools to get to know humans. We know a lot about what motivates us through behavior change models, or in this case, asking someone to read your email or try your product — to do anything different.”
Mellinger points to these two behavior change models as a framework for developing a solution in the discovery phase:
- [**The Fogg behavior model**](https://www.behaviormodel.org/?ref=review.firstround.com). Stanford professor Dr. BJ Fogg created this simple formula that results in behavior change: B=MAP. Behavior happens when Motivation, Ability and a Prompt collide at the same time. Does your customer want to use your product, and is it easy for them to use it — and importantly, do they have a reason or reminder to start using it? If you fail to get your desired behavior, you’re probably missing one of these three things.
- [**The Hooked behavior model**](https://www.nirandfar.com/hooked/?ref=review.firstround.com). Inertia is a powerful force, and building a product people want to use more than the thing they already use is an uphill battle. Nir Eyal, who conceived this model building on Fogg’s, says that a new product must be 9X better to escape the inertia of using the incumbent solution.
> Building something great doesn’t mean people will adopt it. There’s too much else going on.
— *Jeanette Mellinger, former Head of UXR at Uber Eats and BetterUp*
## 11\. [To learn how a market works, follow the money](https://review.firstround.com/to-learn-a-new-market-start-by-building-your-product/)
When picking a market to build in, some founders choose one they know like the back of their hand, often spurred by a personal frustration. Others stumble upon a problem ripe for solving in a market they’ve never stepped foot in.
[**Othman Laraki**](https://www.linkedin.com/in/othmanlaraki?ref=review.firstround.com)is a remarkable success story of the latter path. Before founding **Color**, a virtual cancer clinic, he had never worked in healthcare. He was a former founder and Twitter PM who’d stumbled upon the idea for cheaper genetic testing when his co-founder, **Elad Gil**, got his genome sequenced (for $4,000).
To understand the inner workings of healthcare, he started with what he knew — building a product. Only in the process of learning the market, however, did he realize that a direct-to-consumer genetic test didn’t align with buyer incentives, and Color pivoted to a platform that sells to employers.
That’s why his first order of operations to learn a new market is to untangle the flow of money and decision-making. He says the best way to do this is by setting up exploratory conversations with industry leaders you might sell to, like a claims adjuster in insurance or a procurement manager in construction, for example.
“One of the mistakes I see founders make is not talking to people enough,” says Laraki. “I meet a lot of healthcare companies where you can tell, even though they’ve been in the industry for a while, they’re still naive about the marketplace. They don’t understand their buyers in a deep way.”
“As consumers, we think about one buyer and one seller,” he says. “But in many industries, with healthcare being an extra-complicated version, the process of making a purchasing decision and acting on it can be more complex. It’s worth being flexible about which buyer you want to sell to.”
“Who influences, who decides, who sets the price, who sets the terms, how the transaction actually occurs and how you get paid — this is what you have to untangle,” he says.
## 12\. [Prove you can do the hard part first](https://review.firstround.com/mercurys-path-to-product-market-fit/)
Like Color’s Othman Laraki, [**Immad Akhund**](https://www.linkedin.com/in/iakhund?ref=review.firstround.com)**,** CEO and co-founder of **Mercury**, is a founder who’s proved that you don’t need domain experience to build an enduring business.
The idea for Mercury had been sitting in the back of his head for years. As a multi-time founder, he was continuously frustrated by the horrible business banking experience, even as other fintech products like Stripe and Square started to take off.
When he finally decided to pursue the idea, he knew he had to do the hard part first: learning the market. “Fintech was a completely new space to me,” he says. “I knew I could build a product. The hard part was figuring out the framework for compliance, risk and legal to make a bank sponsorship work.”
So Akhund set out to talk to three expert personas in the fintech space: founders, investors and lawyers. He had over 90 conversations over the course of four months. He came to understand that building the initial product while meeting compliance standards would require a long execution period. “I realized it might take years to get this product live. My mindset became, ‘This isn’t going to be easy. I’m going to do this for the long run,’” he says. “
But the challenge proved to be his sweet spot as a founder. “The more I explored it, the more it turned from impossible to doable — but hard. And ‘doable but hard’ is my favorite place to be,” he says.
> In the beginning, spend all your time doing the thing you're the least capable of doing — and the least capable of proving to the world that you can do.
— *Immad Akhund, CEO and co-founder of Mercury*
## 13\. [Know if your business is a follower or pioneer ](https://review.firstround.com/how-to-design-your-org/)
[**Alyssa Henry**](https://www.linkedin.com/in/alyssa-henry-0905692?ref=review.firstround.com), former CEO of **Square** and board member for **Intel**, **Confluent**, and **Samsara**, argues that every company leans toward one of two core identities: pioneer or fast follower. A startup will likely possess traits of both, but Henry says founders must be honest about which identity they’re leading with, because it shapes everything from product-building priorities, to brand voice, to hiring.
“**Microsoft** is an incredible fast follower, very good at seeing something happening out in the landscape and doing it better, cheaper, and faster,” she says. “Competition has to seep from a fast follower because it’s all you’re defined by. And frankly, in the absence of competition, the company struggles.” **Amazon**, when it was first founded, was a quintessential example of a pioneer. “Amazon struggled at being a fast follower because its operating mechanisms weren’t built to follow. They were built to pioneer something.”
The follower versus pioneer distinction is especially important, Henry says, when it comes to your product roadmap. When you’re not the first in the space, you need to push yourself much further to differentiate your product and exceed expectations.
“If you’re new, and if it’s viable at all, the reason it’s viable is because it’s remarkable,” Henry says. “But if you’re a follower going into an existing space, you can’t say ‘Oh, we launched this and it does all the minimal things somebody needs.’ The marketplace is going to say ‘So what? If it’s not 10x better, I don’t care.’”
## 14\. [“Meme-ify” your product idea to gain internal momentum](https://review.firstround.com/how-to-make-your-product-idea-go-viral-inside-your-company-lessons-from-figma-slides/)
When the idea for **Figma** Slides was still in its infancy, founding PM [**Mihika Kapoor**](https://www.linkedin.com/in/mihikakapoor?ref=review.firstround.com) made an offhand decision to give the project a silly name. “It may feel random, but a big part of what made Figma Slides go internally viral was the fact that we called it ‘Flides,’” she says. “It’s a totally absurd name that you could not go to market with, and yet, this was the thing that made people feel the most irrationally attached to the project.”
What started as a tongue-in-cheek nickname quickly snowballed, with colleagues across the org joining in on the fun: the animation sync became the “flanimation” sync, and the layout workstream turned into the “flayout” workstream.
As Kapoor accidentally discovered, a little playfulness that makes people feel excited and included — going viral, essentially — helps to spread awareness internally for a project. **“It was ultimately this meme that people were able to take and run with,”** she says. **“That’s because being kooky humanizes your idea.** It makes it easy for someone to bring it up in a Zoom chat, or with a Slack emoji. To this day, people are pitching me on why Flides is a better name for this project.”
For those looking to recreate Kapoor’s success and meme-ify their own project, she offers a few practical tips.
- **Come up with a code name**. “Brand can be built in so many different ways… Think about code names for your project. Think about iconography — what visuals do you want to be synonymous with your project? Use that to inspire you.”
- **Use the “double take test.”** “If someone is getting an overview of all the initiatives going on at the company, will a new hire ask to learn more about your project? If you’re telling your mom about your day at work, is she asking to learn more about what you’re working on?”
- **Make a custom Slack emoji**. “It will cause this interesting trickle-down effect. It starts with you reacting to every message with it. Pretty soon, your team will start using it, and then your company will. It’s a programmatic version of taking a project and getting it in front of the company asynchronously,” she says.
> If you haven’t already made a Slack emoji for the project you’re working on, I recommend doing it right now.
— *Mihika Kapoor, former Product Lead at Figma*
## 15\. [Tell your users how they should experience your product](https://review.firstround.com/linears-path-to-product-market-fit/)
Back when [**Karri Saarinen**](https://www.linkedin.com/in/karrisaarinen?ref=review.firstround.com)was a product designer at Airbnb, he hated the project management tools he had to use. He found them cumbersome and slow. So he built **Linear** with a very specific user in mind: himself.
He and the early Linear team took their time to design an MVP that would clear their own high bars. “We wanted the first product to get to the state where we could use it every day for our own basic workflows,” says Saarinen. “We were the first ideal customer. So we just had to build something nice for ourselves that actually worked.”
Saarinen was extremely opinionated about how this software should look and feel, taking a page from the Apple school of software design, which creates a universal experience for every Mac or iPhone user. “**I don’t think you can build the optimal tool for anything if it’s very flexible or endlessly customizable**. So from the beginning, we had a strong opinion of what a good workflow looks like and we provided standards and defaults for how to operate,” he says.
## 16\. [Give engineers “wolf time” ](https://review.firstround.com/engineering-lessons-apple-palantir-slack/)
[**Michael Lopp**](https://www.linkedin.com/in/michaellopp?ref=review.firstround.com), who has spent his career building products at **Palantir**, **Slack** and **Apple**, believes that engineers need time carved out for open-ended, curiosity-driven exploration. **He advises a specific 71/29 split: “71% of that time is very clear. Build things that you need to, get them done and get positive feedback,” he says. “The other 29% is time to do whatever the heck is inspiring you based on the 71% stuff.”** This creative window (he calls it “wolf time”) is an invitation to wander, experiment and follow threads of inspiration wherever they lead.
What happens during this time can’t be explained to a manager, and Lopp says that’s exactly the point. “It’s time for things to be created and spin out of that little poetry jam, and you can't let management and product folks into that world. They’ll know when something’s happened there, and it always does.”
From his own experience, Lopp cautions leaders not to formalize wolf time. Instead, he recommends encouraging eng teams to treat it as a space of freedom and autonomy, and make it clear that exploration is essential to long-term innovation.
## 17\. [When making AI products, move fast by separating product performance and UX](https://www.firstround.com/ai/carta?ref=review.firstround.com)
The biggest lesson **Carta’s** Director of Machine Learning, [**Jayant Tikmani**](https://www.linkedin.com/in/jayanttikmani/?ref=review.firstround.com), learned from building the company’s internal AI agents was the power of separating the model’s behavior — its instructions, context and reasoning — from the front end.
“Unlike traditional software, where performance is largely driven by deterministic logic, AI product performance also depends on model behavior, which is controlled through model choice, instructions and context design,” Tikmani says. “To enable fast iteration, decoupling this layer from the UX and workflow integration is important.”
This decoupling gave Carta’s engineering, product, and AI teams the freedom to evolve the agent’s output without needing to constantly rebuild the front or backend systems, enabling them to move quickly. Model behavior was separately tested in rough setups by domain experts, while UX was rapidly iterated upon for the best user experience. Eventually the two came together but in the prototyping phase, this split was extremely valuable for developing a product for fast impact.
## 18\. [You only need these three artifacts to launch your product](https://review.firstround.com/how-to-launch-your-startup-out-of-stealth/)
Coming out of stealth feels like the biggest moment in your startup’s history. The pressure around it can lead to decision paralysis.
[**Claire Butler**](https://www.linkedin.com/in/clairetbutler?ref=review.firstround.com) understands this fear, having joined **Figma** back when the team was still building in stealth, and helped scale the marketing function from launch all the way up to IPO.
Her launch playbook brings a sense of stoicism to the process. Her first piece of advice in regards to timing is to just set a date, almost at random — and work backwards from there. You can always move it. Setting a date charges you to actually draft up all the materials you’ll need on launch day and hone your marketing fundamentals. “The worst thing you can do is get stuck in a massive brainstorming file where you’re making tables about features and benefits,” she says. “Even well before you’re ready, creating launch materials will force you to sharpen your positioning.”
Mock up these three artifacts:
- **The website.** “Once you have your positioning statement, do your website first,” says Butler. It forces you to decide fundamentals like brand feel and tone, core positioning, most important features and a call to action.
- **The announcement post.** This is the launch note that comes directly from the founder. “Whether you ever post it or not, I’d encourage the founder to write an announcement post,” says Butler. “Do it yourself. This is something that should come straight from the founder — and explain your vision, why you built this thing and where you’re headed long-term.”
- **The social post.** This comes from your company handle (pre-launch is a good time to set that up, even if you don’t plan to post yet). “This one’s quicker, because you’re distilling everything from the website and the founder’s announcement into its simplest form,” she says.
## 19\. [Make sure your product passes the “screenshot test”](https://review.firstround.com/lessons-in-product-scaling-and-storytelling-from-figmas-cpo/)
**Figma** CPO [**Yuhki Yamashita**](https://www.linkedin.com/in/yuhki?ref=review.firstround.com)has a simple test to determine if a product is fit for launch: **Can someone understand its value in a single screenshot?**
At Figma, visuals are king, so Yamashita likes to distill a product’s story down into a clear and compelling image for launch communications. “What’s the one screenshot that’s completely self-explanatory?” he asks. “You need to show something people want. That’s a design problem. That’s a storytelling problem. That distillation is really important.”
He points out that it’s easy to lose sight of how a user will first encounter the product if you’ve been knee-deep in its development. If you find yourself having to add context to a screenshot, that’s a flag that the product has gotten too complicated. “If you’ve been involved in the evolution of the product, you can empathize with how you got there. But users don't see that evolution — they’re coming fresh at a screenshot with no context. If you have to explain what's going on, that's an indication that you haven’t made the value proposition simple enough,” he says.
## 20\. [Your first two Customer Success systems should be support tickets and onboarding](https://review.firstround.com/founders-guide-building-customer-success/)
In the early days, your first Customer Success hires will naturally be focused on handling whatever customer issue pops up next. But **Atlassian** and **LinkedIn** CS alum [**Stephanie Berner**](https://www.linkedin.com/in/stephanieberner?ref=review.firstround.com)urges founders to not let that become your operating model. If you want to scale, you must establish foundational systems that bring consistency to how you support and onboard customers. Berner says there are two key areas that are most important to focus on.
- **Support tickets**. “You need a way for customers to reach out to you,” says Berner. “Whether that’s through a Slack channel or an actual support system, you need a systematic way of collecting that customer feedback that's not just an email.” Beyond communication, she notes that as volume increases, ticket systems become a diagnostic tool — the only reliable way to categorize issues and understand what’s really happening with your product.
- **Onboarding**. “A big mistake I see companies make is that they don’t codify the multi-step process of getting a customer onboarded,” says Berner. “If you don't have that early mindset of creating a checklist, your business can end up scaling without you having a consistent way of onboarding customers, and that means there’s a weak understanding of what it takes to get a customer to value.”
While support systems can take many forms, Berner recommends keeping the first version of an onboarding manual incredibly simple — think a shared Google Sheet outlining the 10-step process. “The details of that implementation are different depending on the product, but onboarding manuals should always include a kickoff call and a requirements gathering conversation,” says Berner. “Then it's planning out each of those steps. Ask yourself: ‘What data do we need to gather, and who's going to deliver those files or build that API? Who's on point to build the communications that will go out to our users when we roll out this product?’”
## 21\. [Treat design partnerships like real contracts](https://review.firstround.com/sierra-design-partnership/)
Some founders think of design partners as casual collaborators. But [**Logan Randolph**](https://uk.linkedin.com/in/loganrandolph?ref=review.firstround.com), GTM lead at **Sierra**, says that in his experience, open-ended, casual partnerships rarely work. Instead, both sides need to be invested. The quickest way to get there? Payments and time limits.
For Sierra, this approach helped filter out companies that were merely curious about AI.
> Everyone’s excited to experiment with AI. So the financial commitment had to be significant enough that people really needed to think about it, get approval from their boss and go through the procurement process.
*— Logan Randolph, GTM lead at Sierra*
For founders figuring out their own pricing, he suggests a simple benchmark: “10–20% of your total contract value feels right. Anything less than that and it’s not that real of a commitment.”
When it comes to time limits, set clear, firm deadlines. “Whatever you do, don’t allow the ‘try this and give us feedback when you are ready’ approach,” Randolph says. Without constraints, teams deprioritize the work and momentum evaporates. Instead, set tight guardrails: “If you say, ‘We’re going to work together for three months and then the partnership period is over,’ they’ll show up the next week ready to get to work.”
While it’s going to be different for everyone, Randolph offers a useful range. “Under two months is probably too short and over six months is probably too long,” he says. The window of time should be long enough to build together and see results, but short enough to keep both sides engaged and accountable from day one. As Randolph notes, Sierra can now launch agents in a week, “but when everything was new, it took a bit longer,” making these boundaries even more critical in the early stages.
## 22\. [Don’t aim for 100% automation when making an AI product](https://www.firstround.com/ai/brex?ref=review.firstround.com)
As AI integration continues at a rapid clip at companies of all sizes and industries, clarity, nuance and practical implementation frameworks matter (which is exactly why we started [**Applied Intelligence**](https://www.firstround.com/ai?ref=review.firstround.com), our AI focused series). **Brex** CTO [**James Reggio**](https://www.linkedin.com/in/jamesreggio?ref=review.firstround.com) says being strategic, by identifying where AI is going to be most impactful in your workflow is the key, even if it means automating only a fraction of what the processes and tasks you technically could.
“When you set the goal at 100% automation as opposed to 40% automation, you end up making investments that are oftentimes going to yield zero value because they have a binary outcome.”
**By resisting the all-or-nothing framing and starting with partial but targeted automation, Brex has seen value compound quickly.** Brex’s fraud agent is a great example. Building a system that could replace analysts entirely, with 100% confidence in every recommendation, would have required enormous engineering work, with uncertain payoff. Instead, the team automated only the cases where the model demonstrated high confidence, and routed everything else to human analysts, who were supported with AI-generated findings. This hybrid approach delivered immediate operational efficiency while still improving analyst judgment and throughput.
## 23\. [Your marketing story is bigger than your product story](https://review.firstround.com/how-to-adapt-your-pitch-deck-into-your-website/)
Some of the first marketing every founder does is their pitch deck. So it’s understandable to want to squeeze as much juice out of that hard work as possible, and repurpose some of that language in customer-facing materials.
But don’t ship your pitch deck to your website, says [**Emily Kramer**](https://www.linkedin.com/in/emilykramer?ref=review.firstround.com), former marketing leader at Carta and Asana and now, a B2B startup marketing advisor and author of the MKT1 newsletter.
“Investors and customers care about different things. A fundraising pitch should cover what’s important to investors: your big vision, your team’s unique ability to solve the problem and the market potential. But effective marketing, especially in the early days, needs to speak to a much narrower audience and a much more immediate pain,” she says. “**Your pitch deck might have helped you raise a seed round, but it won’t help you close your first 10 customers — unless you know how to translate it**.”
To find the language you’ll use to talk to customers, think bigger than just your product. “In addition to writing clear positioning, choose three to four narratives you want to focus on that speak to your audience. These can be related to market trends, what your customers have in common, your founding story or a unique insight or contrarian view you have,” she says.
She calls these narratives [perceptions](https://newsletter.mkt1.co/p/episode-2-story?ref=review.firstround.com). “Your perceptions may be adapted from slides in your pitch deck, like your ‘why now’ and ‘vision’ slides, but they’re geared toward the perspective of your customers. Focus on movements and trends your customers actually care about, rather than what excites investors.”
## 24\. [Don’t write off founder-led marketing (even if it doesn’t scale)](https://review.firstround.com/owners-path-to-product-market-fit)
[**Adam Guild**](https://www.linkedin.com/in/adamharrisonguild?ref=review.firstround.com)spent much of his first year building **Owner** hustling with cold outbound, literally going door to door to restaurants around LA. He’d found a handful of early customers this way, but he eventually reached a breaking point. “I didn’t want to scale a business through outbound because it was so brutally hard. I basically had to spam people to get them to take my meeting. So I wanted to develop a model where they would instead come to me,” he says.
He knew he needed to drum up inbound business. Content seemed like a good place to start, but he had no credentials in the restaurant industry. So he started to pitch trade publications with article ideas, leaning on his experience having done outbound sales. The editor of Modern Restaurant Magazine gave him a chance — and his guest post wound up becoming the magazine’s top piece of the year.
He says the writing process doubled as a crash course in the industry. “The work I was doing to research these articles improved my ability to communicate with the restaurant community, and gave me a much deeper understanding of the broader landscape,” he says.
The founder-led marketing strategy paid off: Several strong leads came directly from Guild’s article, allowing him to successfully bootstrap the company to six figures in ARR.
## 25\. [When selling to enterprise, think emotion, not logic](https://review.firstround.com/reductos-path-to-product-market-fit/)
Technical founders often assume buyers make decisions the same way they do: rationally, based on specs and performance. **Reducto** founder [**Adit Abraham** ](https://www.linkedin.com/in/aditabraham?ref=review.firstround.com)once thought this too, until he discovered that **enterprise sales runs on storytelling, trust and executive buy-in far more than objective evaluation.**
“You’re probably someone who approaches your own buying decisions from a very rational perspective,” Abraham says. “You choose whatever you think will perform the best. But with enterprise sales, it’s much more relationship-driven in a way that surprised me as someone who didn’t come from a sales background.”
Instead of showcasing the product, running through features and metrics and assuming that’s what will convince the stakeholder at a large organization, Abraham advises founders to offer a solution to the specific pain that’s hampering productivity for that buyer and their company or industry.
“The more I’ve thought about selling from that lens, the easier everything else becomes.”
In founder-led sales especially, make your audience feel your excitement about, and belief in, the product.
> Your energy as a founder is contagious. When people see how much you care about the product, they start to care about it more, too.
*— Adit Abraham, Reducto founder*
## 26\. [Run a memorability test to pick the right name](https://review.firstround.com/how-to-pick-company-name/)
It’s tempting to rush into lists of clever words or domain checks when naming your startup. But [**Arielle Jackson**](https://www.linkedin.com/in/ariellerjackson?ref=review.firstround.com), Head of Brand and Product Marketing at **First Round**, who’s guided many a founder through the name-choosing process, says it should take time (at least a month).
“While picking a name is more art than science, having a process results in a name that’s more intentional, and usually better,” she says. Once you have a shortlist of potential names you like, one of the tactics she’s seen work is to play a memory game.
**“I like to run a simple test: talk with several people about the three names you’re considering,” she says. “The next day, go back and ask them to recall the names. See which of the three they can remember.”**
As for what’s most likely to stick, there are a few factors solid brand names often have in common.
- **Concreteness**: when a name evokes an image, like Apple or Red Bull.
- **Functional relevance**: this could be something very literal, like HotelTonight, or a word or phrase that evokes something the product is known for, like Swiffer, which captures the sound of sweeping.
- **Wordplay**: think phrases that are alliterative or just fun to say, like Firefox, Coca-Cola, or 7-Eleven, or a deliberate, playful misspelling, like Lyft.
## 27\. [Find personality–message fit to make your message resonate](https://review.firstround.com/the-other-pmf-wes-kaos-personality-message-fit-framework-for-founders/)
**Maven** co-founder and executive coach [**Wes Kao**](https://review.firstround.com/the-most-honest-lessons-about-the-path-to-product-market-fit/) urges founders to lead with their natural communication style instead of trying to emulate someone else’s. “We've all seen somebody pretending to be Steve Jobs, or trying to be Mark Benioff, and it’s not landing,” she says.
“I don't think that we, as founders or leaders, can change 180-degrees, even if we want to.”
She calls this process finding personality-*message* fit — the other PMF. It allows you to more effortlessly connect with your audience and make your message land with them. The simplest way to do this is to amplify and refine the traits that come naturally to you, and compensate for the ones that don’t.
> Personality-message fit is about what makes you *you*, instead of trying to copy someone else and having those tactics fall flat.
*— Wes Kao, Maven founder and executive coach*
Kao encourages founders to start by identifying their own default communication tendencies by taking an inventory of sorts. Do you lean toward being more exuberant or reserved when pitching? Do you tend to pull from anecdotes or data? The other side of this is being strategic and accommodating these traits. If you’re naturally less emotive, Kao’s tip is to make sure you use words that express how you’re feeling — for instance saying, rather than showing, “I’m so excited about this.”
## 28\. [Seek rejection to build founder resilience](https://review.firstround.com/preparing-for-anxiety-of-becoming-a-founder/)
“The founder journey isn't just about managing long hours and a heavy workload. It's about navigating profound identity shifts, handling persistent loneliness and learning to lead through failure.”
Psychologist and co-founder of **Coa**, the gym for mental health, [**Dr. Emily Anhalt**](https://www.linkedin.com/in/dremilyanhalt?ref=review.firstround.com)advises early-stage founders to build “emotional calluses” by asking each day for something they’re almost certain they won’t get. The point is to get used to hearing “no” and build the comfort with rejection and ambiguity needed to be a founder. **Resilience comes from learning to operate even when fear or anxiety is present, rather than waiting for those feelings to disappear.**
> Think of it as creating shock absorbers for your emotional vehicle. They don't eliminate the bumps in the road, but they make them more manageable.
*— Emily Anhalt, Coa co-founder and psychologist*
Anhalt has observed that founders often prepare extensively on the tactical front but rarely train for the emotional realities that come with the job.
“Most aspiring founders spend countless hours preparing for the logistical challenges of starting a company but very little time on the emotional resilience required to run that company,” she says. “They’re perfecting their pitch deck, not unpacking why they want to start the company in the first place. They’re building financial models instead of community. They expect stress, certainly, but they frame it as something to push through until they ‘make it.’ This mindset sets them up for a harsh wake-up call.”
## 29\. [When making a tough call, ask yourself this vital question](https://review.firstround.com/sentrys-path-to-product-market-fit/)
In the 14 years since [**David Cramer**](https://www.linkedin.com/in/dmcramer?ref=review.firstround.com) founded **Sentry**, he’s regularly had to make tough calls in order to steer the company’s trajectory. When faced with such moments, there’s one question he asks himself to be pointed back in the direction of his north star, and he recommends it to other founders.
> You have to ask yourself: does that align with my view of the world? Specifically, you need to ask if something aligns with your view of the world in the *future*, versus in the past.
*— David Cramer, Sentry co-founder*
One example of this was early on, when **Uber**, at the time one of their largest customers, pushed for a paid, on-premises version of the product. Sentry initially agreed and provided the service, but Cramer knew on-prem was a detour from the correct path for Sentry. Even though it would have been a lucrative contract to renew, he declined. “I didn’t want to sell on-prem software,” he says. “I didn’t want to be in that business.”
Another example was when Best Buy asked Sentry to complete a detailed request for comment, a pre-contract proposal outlining how Sentry would implement and integrate the product. Even knowing he’d lose a potential customer, Cramer again said no. “It did not seem like the best use of my time. I’d rather get 10 new customers instead of Best Buy.” **It turned out to be the right call. Best Buy did eventually become a Sentry customer, just not right then.**
“Saying 'no' to things you don't believe in is really important,” he says. “You have to steer those decisions, and have conviction they align with your vision.”
## 30\. [Make sure your AI product’s eval process includes its target user](https://review.firstround.com/figma-ai-eval-process/)
While building **Figma** Make, the AI tool that allows users to create and edit designs faster, Head of Product, AI [**David Kossnick**](https://www.linkedin.com/in/davidkossnick?ref=review.firstround.com) made a decision: the target audience would be in the room for eval.
The AI team invited Figma designers to provide feedback on early prototypes, knowing their opinions on functionality, features, and aesthetics would hold the most weight. There were several rounds of feedback, with designers, as well as engineers and PMs, giving their input.
As Kossnick plainly put it, “garbage in, garbage out.”
The first round was conducted via Slack, where they were asked to include their prompt, a link to what they created, and the design and functionality scores (rated 1–4). “In one day, we got hundreds of example prompts,” Kossnick says. “We quickly learned there isn’t one quality bar.”
For the next round, the team built a sprawling FigJam board and had users add their prompt, result, and scores directly to it. The endless canvas created a shared space that encouraged collaboration and creative thinking.
“We got 1,000 examples of real things people wanted to build, use cases where the product fell over, places it did great and unexpected areas for each of these,” says Kossnick. “This shaped our features and designs. **Once we felt like there was a path on quality, we could invest a ton more in the whole product experience, its form factor, longtail features and workflows.”**
When the end user helps shape the evaluation criteria from the start, you dramatically reduce the risk of shipping something that works in theory but falls flat in practice. It also speeds up alignment across the team: engineers understand what great looks like to designers, designers see what the AI can unlock, and PMs can anchor decisions in user value. All of this Kossnick and his team learned first-hand.
“It was probably the most helpful day of the entire project."
### The most honest lessons about the path to product-market fit
URL: https://review.firstround.com/the-most-honest-lessons-about-the-path-to-product-market-fit/
Last updated: 2025-12-22T08:04:13.000Z
## [What the best founders taught us about building companies in 2025](https://www.youtube.com/watch?v=RqO8Daovdmg&ref=review.firstround.com)
[](https://www.youtube.com/watch?v=RqO8Daovdmg&ref=review.firstround.com)
All companies start with a founder who asks some version of the same question: *Imagine if* this could be different?
What happens next is where the real story lives — when ideas become real. That path is hardly ever a straight line. But what’s shared among those who walk it is an obsession with building something truly great.
This year on our podcast, In Depth, we asked founders to retrace the steps they took to find product-market fit in more detail than they’ve ever shared before.
**Owner** co-founder and CEO, **Adam Guild**, takes us through how the idea for the company started after saving his mom’s struggling dog grooming business. **Braintrust** founder and CEO **Ankur Goyal** recounts first feeling PMF when he didn’t have to convince anyone to use the product. And **Jyoti Bansal**, founder and CEO of **Harness**, shares why the hardest decision he ever made was to break up with Netflix as a customer. You’ll also hear from the founders of **Gusto**, **fal**, **Meter**, **Postman**, **Reducto**, **Sentry**, **Serval** and **Stedi**.
Of course, this is only a sliver of the advice shared across dozens of episodes of In Depth this year. Here were some more of our favorites:
1. [**How Clay learned the problems its ICP needed to solve**](https://www.youtube.com/watch?v=DHNcr5kd6FE&ref=review.firstround.com): The product started as an API-connected spreadsheet that pulled information from many sources into one place — but it had too many ICPs, leading to inconsistent usage and feature bloat. After identifying agency owners (and eventually salespeople) as targets, co-founder **Varun Anand** wanted to better understand their problems. “I would join all these WhatsApp groups and basically wait for people to talk about problems related to data enrichment,” he says. “We used that as a way to get into the ecosystem and get people really solving their problems with Clay.”
2. [**Why Linear’s founders built a product for themselves, making it opinionated instead of flexible**](https://www.youtube.com/watch?v=V5gUllyF900&ref=review.firstround.com): Linear’s co-founder and CEO **Karri Saarinen** has always had a designer’s eye, but as a principal designer at Airbnb, that focused on a dissatisfaction with the company’s project management software. So he and his co-founders built an alternative. “My design philosophy has always been that you should design something for someone, and it’s really hard to design something good for everyone,” he says. “I don’t believe you can build the optimal tool for anything if it’s very flexible. So from the beginning, we wanted to be opinionated that there should be a good way of doing things.”
3. [**What the co-founder and CEO of Applied Intuition believes is the real moment a founder is born:**](https://www.youtube.com/watch?v=-IJu-GWqkWg&ref=review.firstround.com) Prior to **Applied Intuition**, **Qasar Younis** was a founder and COO at Y Combinator. He’s interacted with many founders and has identified this as the moment they truly claim the founder mantle: “A founder is not made when you decide to start a company or raise capital. A founder’s made when you get feedback about the product, the market or yourself, and interpret it correctly,” he says. “What’s really important is you have to somehow discount some people’s feedback and over-index on other people’s. This analysis interpretation is the true heart of being a founder, especially in the early days.”
Thanks, as always, for watching and sharing!
*\-The Review Editors*
[Explore more episodes of In Depth](https://www.youtube.com/playlist?list=PLXoP9lpWdJh%5FkIYQqPClBk3uypqhjWL3e&ref=review.firstround.com)
### Notion put an engineer in sales to build better AI tools
URL: https://review.firstround.com/notion-put-an-engineer-in-sales-to-build-better-ai-tools/
Last updated: 2026-01-12T19:10:00.000Z
*This week on Applied Intelligence, we learn how an AI engineer at Notion joined the sales team for a month to understand their challenges and build better tools to solve their problems.*
## [Context Before Code: How Notion Put an AI Engineer on the Sales Floor to Discover What Actually Needed Building](https://www.firstround.com/ai/notion?ref=review.firstround.com)
His first day on Notion’s sales team, AI engineer Theo Bleier made 40 cold calls. He didn’t land a single meeting — but he did discover insights that would change how Notion built internal AI sales tools.
Instead of just throwing AI at the sales team and expecting results, Bleier became a card-carrying member of the sales pod for a month. He had named accounts. He learned about objection handling. He (unsuccessfully) cold-called.
Sitting with Notion’s most successful salespeople, Bleier noticed they spent extra time doing account research before any outbound. **But he learned the result of that research wasn’t better email messaging — these reps developed a better understanding of *when* to reach out to these accounts and prioritize them accordingly**.
> “From the outside, it seems obvious we should make the sales team move faster by doing account research for them. But when Theo came in and did research, where he ended up was actually account prioritization."
> \- Pravesh Mistry, Notion’s Head of Global Sales.
This led to Bleier’s framework for a successful sales process: “Right messaging to the right person at the right company at the right time — and right time is step zero.”
As a result, Bleier created an internal tool called “Salestino bot” to automate that process. It gives reps specific product signals they use to better prioritize which accounts to reach out to, while also providing them with customized messaging to edit and use in that outreach.
[](https://www.firstround.com/ai/notion?ref=review.firstround.com)
In this exclusive interview, we learn about Bleier’s immersion process to find the right problems and exactly how he built the tools to solve them. If you’re developing internal AI tools, Bleier’s process is a clear example of how to find the real problem before writing a single line of code.
Thanks, as always, for reading and sharing,
\-The Review editors
[Take me to Applied Intelligence](https://www.firstround.com/ai/notion?ref=review.firstround.com)
### Building Meter for decades, not an exit | Anil Varanasi (Co-founder and CEO)
URL: https://review.firstround.com/podcast/building-meter-for-decades-not-an-exit-anil-varanasi-co-founder-and-ceo/
Last updated: 2026-04-29T03:42:31.000Z
Anil Varanasi is the co-founder and CEO of Meter, which provides full-stack networking infrastructure as a service for businesses. Since founding Meter with his brother Sunil in 2015, Anil has been playing a distinctly long game in one of the most entrenched markets in technology, betting on vertical integration, business model innovation, and a multi-decade time horizon. In this conversation, he unpacks Meter’s origin story, from four-plus years of heads-down R&D, and shares how his unconventional approach to planning, management, and pace keeps him excited to run the company for decades.
In today’s episode, we discuss:
- Why Anil thinks in 25-year horizons
- How operating in a monopolistic market shaped Meter’s approach
- Why Meter scrapped a year of OS work during the R&D phase
- How Meter is rethinking networking’s business model
- Surviving COVID, Apple’s M1 transition, and “a thousand bad days”
- Anil’s contrarian views on planning, OKRs, and management
- How founders can build companies they’ll want to run for decades
**Where to find Anil:**
- LinkedIn: https://www.linkedin.com/in/anilcv/
- Twitter/X: [https://x.com/acv](https://x.com/acv?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**References:**
- ADT: [https://www.adt.com](https://www.adt.com/?ref=review.firstround.com)
- Alex Honnold: [https://www.alexhonnold.com](https://www.alexhonnold.com/?ref=review.firstround.com)
- Alex Tabarrok: [https://x.com/ATabarrok](https://x.com/ATabarrok?ref=review.firstround.com)
- [alarm.com](http://alarm.com/?ref=review.firstround.com): [https://www.alarm.com](https://www.alarm.com/?ref=review.firstround.com)
- Apple: [https://www.apple.com](https://www.apple.com/?ref=review.firstround.com)
- Bloomberg: [https://www.bloomberg.com](https://www.bloomberg.com/?ref=review.firstround.com)
- Bryan Caplan: [http://www.bcaplan.com/](http://www.bcaplan.com/?ref=review.firstround.com)
- Cisco: [https://www.cisco.com](https://www.cisco.com/?ref=review.firstround.com)
- Coca-Cola: [https://www.coca-colacompany.com](https://www.coca-colacompany.com/?ref=review.firstround.com)
- George Mason University (GMU): [https://www.gmu.edu](https://www.gmu.edu/?ref=review.firstround.com)
- Intel: [https://www.intel.com](https://www.intel.com/?ref=review.firstround.com)
- Julia Galef: [https://x.com/juliagalef](https://x.com/juliagalef?ref=review.firstround.com)
- Martin Casado: [https://www.linkedin.com/in/martincasado/](https://www.linkedin.com/in/martincasado/?ref=review.firstround.com)
- Meraki: [https://meraki.cisco.com](https://meraki.cisco.com/?ref=review.firstround.com)
- Meter: [https://www.meter.com](https://www.meter.com/?ref=review.firstround.com)
- Michela Giorcelli: [https://x.com/M\_Giorcelli](https://x.com/M%5FGiorcelli?ref=review.firstround.com)
- Nicholas Bloom: [https://www.linkedin.com/in/nick-bloom-stanford/](https://www.linkedin.com/in/nick-bloom-stanford/?ref=review.firstround.com)
- Raffaella Sadun: [https://www.linkedin.com/in/raffaella-sadun-3a182225/](https://www.linkedin.com/in/raffaella-sadun-3a182225/?ref=review.firstround.com)
- Sanjit Biswas: [https://www.linkedin.com/in/sanjitbiswas/](https://www.linkedin.com/in/sanjitbiswas/?ref=review.firstround.com)
- Sunil Varanasi: [https://www.linkedin.com/in/sunil-varanasi-662a01253/](https://www.linkedin.com/in/sunil-varanasi-662a01253/?ref=review.firstround.com)
- Tyler Cowen: [https://www.linkedin.com/in/tyler-cowen-166718/](https://www.linkedin.com/in/tyler-cowen-166718/?ref=review.firstround.com)
- Twitch: [https://www.twitch.tv](https://www.twitch.tv/?ref=review.firstround.com)
**Timestamps:**
(01:27) Meter’s unusual timeframes
(04:06) “We don’t do OKRs”
(06:32) How to plan without planning
(08:31) Track your unhappy customers
(11:43) How Meter’s journey began
(15:02) Dissecting the 2010s SaaS boom
(17:06) The networking industry trap
(21:44) Meter’s first roadblock
(22:07) Why Shenzhen accelerated Meter’s progress
(26:29) The process to get a sales-ready product
(31:02) Why you should own the full stack
(32:45) The surprising thing you should innovate
(35:03) Avoiding the one-trick pony trap
(37:39) The secret to finding an excellent market
(43:48) How COVID’s constraints propelled growth
(48:25) Why founders need to know their customers
(49:34) Why Meter didn’t sell via traditional channels
(51:44) You need “seller-market fit”
(54:51) The danger of meta-work
(56:25) Decoupling management from authority
(1:02:17) When the person is the problem
(1:05:05) The inherent value of going slowly
(1:09:41) Running a company for as long as possible
Anil Varanasi: I believe in businesses that own the entire thing. For the long term, if you're trying to build something for 20, 30, 40 years, you want to own the stack.
Brett: For today's episode, I'm sitting down with Anil Varanasi, co-founder and CEO of Meter, a networking infrastructure company that integrates hardware, software, and operations. It took Anil and his brother, Sunil, almost five years to build the first version of the product. And most of the time, it was just the two of them living in Shenzhen for over a year figuring out how to design and manufacture hardware.
Anil Varanasi: We had to scrape 100% of the work a year in. You want to be able to waste anything when starting a company except time. You're okay wasting money, but we wasted time.
Brett: What stands out about Anil is his conviction. He's building Meter exactly the way he thinks it needs to be built to become a generational company.
Anil Varanasi: We've always thought about business model as part of the product because that should inform what hardware you build for us, how you build the software, how you build the SLAs, what customers can expect, how you sell, all stems from that.
Brett: This is reflected in the unique approach he's taken in all areas of the business, from sales to how the company runs internally.
Anil Varanasi: 90% of networking is actually sold through the channel, but we deliberately did not sell through the channel until we knew the product was dramatically better in every way.
Brett: Let's dive in. How do you think about time horizons when building Meter? In chatting with people that have worked at the company or know you a little bit, I think one of the sort of themes that bubbles up is there's few people that have a longer time horizon than you. But obviously in the nature of the business that you're building, you have to balance that with what you're doing basically hour by hour, given the degree of difficulty. I'm curious about the arc of the company, or, at any given point in time, how do you think about managing against time horizons?
Anil Varanasi: I think roughly, as I've gotten older and done more work, for most things, my answer is a barbell approach is the right approach. Whether you think long-term versus what do you care about day-to-day every hour versus can you be ambitious and can you be kind at the same time? All these things, I think a barbell approach is where I think I'm gravitating toward more. Even on this time horizon question, I think to do what we want to do, we know will take a really long time, and we can get into the reasons why. But every single day, if you ask the same people, I'm sort of insufferable to work with because everything should have been done for me a second ago, a minute ago, et cetera. I've found for me, particularly, and the types of people that gravitate toward working with us, that cadence of, yes, the overall thing we're trying to do might take some time, but the particular day, there's always something to drive it a little bit forward. I don't care about where Meter ends up in five. I care about where it ends up in 25\. But at the same time, the next few hours also really matter to me. I think all sorts of things of understanding exactly where all the folks that report to me, where their time is going, then getting a view from them, where the time is going for all of them. I try to keep a mental note of all those people. Where is time going? Because what happens as a company grows, and I'm sure founders realize this too, you actually don't even know what's happening in your own company a lot of times. And how do you grip that together and put that sense is what I'm trying to do a lot more. But day-to-day, there's so much I care about. And we should finish in 24 hours, a week, et cetera. But the overall, are we going to win to the standard that we want, I think that'll take a decade or two.
Brett: How would you articulate what the multi-decade view is of what you're trying to do, how it's changed, and then ultimately how does that translate into 10, five-year, year, six-month, three-month? How does it all link together?
Anil Varanasi: I don't think I have great answers there because one of the things with Meter is we actually don't even do planning much. We don't do OKRs. Hunter Walk actually wrote this great blog post in 2015 or 2016\. I've never talked to the person, but I read his blog of how OKRs are good for Google. Why are you following them? If you have a money printing machine, you should have that kind of stuff, but for everybody else, it's different. One good thing, I think, about doing hard things is they're very easy to say but very hard to do. For example, if you and I decide today to start a company, put man on Mars, you immediately get it. You can picture your Mars. You can picture a man there, but it's so hard to actually make that happen. Using that as an example for Meter, we just want to process all the packets in the world through our hardware and software. Now, that is remarkably hard to do when we say all the packets. But to boil that down, there's a bunch of software and hardware we need to build today to go deliver it to people to go do a little bit more of the networks that are out there, a little bit more, and then different types of networks. Over time, how you get to that point is being fully vertically integrated. Where you not only build the hardware, write the software, we're the ones that go deliver the hardware in the real world, but over time we can go even further down the stack where we should go make our own ASICs or our own chips. And that's another way to capture all the packets, et cetera. But going back from those 10, 20 years things down to a six-month, three-month, one-month things is precisely knowing what is the next step it takes that we believe to get there. If you read Julia Galef's book called Scout Mindset where you sort of have, as you're going in, there's this fog of war that gets clearer and clearer. I roughly think of that where you know what the destination is, but you might not know all the treacherous paths that are there in between where there might be mountains, there might be snakes, there might be wars, et cetera, that will happen. But every day, are you uncovering a little bit of that fog? We try to bring it back to where are we today, and what is the clear next step? And are we doing that as fast as possible at the highest quality as possible? And that's the plan.
Brett: Maybe talk a little bit more about that. If you don't do sort of more traditional long-range planning or annual planning or goal setting and that type of stuff, what goes in place of that? And how do you figure out what the correct next thing to do and/or how you're winning and losing? And maybe you could go back to 12 months ago. What's the next thing you decided to do as a company?
Anil Varanasi: This is the real advantage of building infrastructure and particularly networking. We're an industry that's been around for 40 years. Along with building PCs themselves, this is one of the largest markets that's been around for a long time. Initially what we're doing is, because we're building all of the stack, there's a bunch of things we need to build to first become on par. If you look at our industry, Cisco has a rack like ours where they have 10 different pieces of hardware, but majority of that was done through acquisition. They bought their switching business called Crescendo in the '90s, et cetera, et cetera. Meraki. All these different things. We decided to build that whole thing from the ground up. Power. Routing. Switching. Wireless. Security. Cellular. All those things. First, there were a bunch of things that the world expects each of these things to have. Initially, it's actually relatively easy when building an infrastructure business because you have to get to on par to what everybody else has. The question whether you're winning or not actually comes down to the fact that what's the quality at which you're doing? Is the pace getting faster than before because of the choices you made? For example, how you decide to build operating systems, how you decide to build your APIs, how you decide to build your backend, how you set up the pipelines for QA. All these things. Are they helping you get higher velocity? And then how you actually track the quality of the business is two things. One is both very subjectively on using the product yourself. I think another thing that I found very surprising, but that I'm pretty sure of, is most people in technology don't use the products they help build. And this is a big revelation for me in the last five years. No matter what, people actually don't use the thing that they build. Sunil and I try to use the entire product end-to-end every weekend. Every feature. Everything. And that gives a lot of subjective thing. And then objectively, what you actually understand is tracking two things there. One, how many customers are unhappy with the product? And that could be any reason. That could be a hardware reason, a software reason, an operations reason, a billing reason, whatever. That should be coming down as a percentage of your customers every day and every week. And then, two, when you are using the product yourself, what is the brittleness on how slow is it to add features and how slow is it to add products onto it? That also you can easily measure from velocity of things. Both of us being engineers, we roughly have a sense of how long something can take, what's the size of things, and we can feel when velocity has come down in the company, and we've had to sort of parachute that and try to fix that at different parts, but that's also something you can feel as well. And then the customer one, anytime any customer issue happens, I try to be incredibly aware of it. It could be a customer that's very small for us that might be paying us just $20,000 a year or something. But knowing exactly why that happened, I think it's the most serious way of knowing what the velocity and quality are.
Brett: How did you figure this out?
Anil Varanasi: Paying a lot of it. We went through a period in 2020\. Apple moved from using Intel silicon to their own silicon. When they did that, usually hardware had three separate radios for 2.4 gigahertz, five gigahertz, and Bluetooth. When they moved, they were using with this thing called software-defined radio which is using two radios for all three of those things. Anyway, there ended up being some issues in how they implemented it. All of our early customers were tech companies. They were all early adopters of the M1\. And I'm not joking. Every single one of our customers hated us for a period of about six to eight months. We thought it was us. We started rewriting the entire stack. Rightfully so. They're paying us for an outcome. We're not delivering that outcome. It turned out that it wasn't us because once we fixed this thing with how Apple implemented thing on Mac, next day went back to everybody loving us. But during that time is when we formulate a lot of this, which is if this is starting to happen again because of some other reason, how would we catch it next time before it became that 100% of customers are having a trouble with you?
Brett: And a lot of it is rooted into the way that you use it yourself and being just unreasonably close to customers?
Anil Varanasi: I think if you help people understand that anytime a customer is having an actual issue, you should be at least CC-ed on it for every single customer. You can actually drive a lot down. Not a day or night goes by that we try to figure out who's exactly having trouble with the product. Every day, we try to go look at it. A lot of times, there's not much we can do. There's other smarter people at Meter that are doing something, but knowing that this problem exists is really important. Maybe it's hardware choices we made three or four years ago that were the wrong choices that are stifling us from actually being able to make progress. Any number of these things. Then next time, can you make a different or better choice? But that part, knowing at any given point who are the customers that are having a bad time, I think it's something that I deeply care about.
Brett: Starting in the middle of the story, if you go all the way back, what was the first moment that the early inklings of an insight for Meter were born?
Anil Varanasi: I think this will sound very prosaic, but usually when people look at these things ex post, they somehow want to romanticize this that it was a Newtonian moment where an apple fell on their head, and they knew what to do exactly from there. But ex ante doesn't really work that way. Or certainly didn't for us. I studied networking in college, something we were really interested in. It was so cool to figure out how does the internet work, where do packets flow, things like that. And then we had kept up with a bunch of research that was happening in the industry. The last great networking company was a company called Meraki. Sanjit and John had done some great research when they were PhD students. We read that. Then Martin Casado who's a GP at A16\. As a PhD student, he did phenomenal work himself on software-defined networking. We were following those things. And then as these things were coming together, we were running another business ourselves before, and we were trying to use networking products ourselves and thought all of them were just remarkably subpar. Quality of the hardware. Quality of the software. And then the pricing model. What happened with the industry that's really interesting is in hardware businesses, you're trying to build hardware for as cheaply as possible and sell it for as much as possible because that gap is your margin. S Then the networking industry started doing something really interesting is they started saying hardware is commoditized. Everywhere. And then that also gave them license to actually commoditize the hardware. We felt even the hardware quality wasn't there. The software quality wasn't. I think Meraki had done some tremendous work. But after that, 15, 20 years, nothing was happening at all. Then we started looking into ... There's all these great research that's happening. Because YouTube was happening. Twitch was happening. FaceTime was happening. All of that was because somebody made networking much better. Then we started looking into why is that not applied to networking everywhere?
Brett: And you were doing this exploration to start a company, or you were just curious as to what was going on?
Anil Varanasi: Curious. I hadn't studied networking for four or five years. I'm running this other company. What's going on in networking? Let's go look into it. Let's see how it is. Then we started formulating ideas about, what if we did hardware this way? But then we hit this wall that said, to be able to do hardware this way, how are we going to get over the margins? Then that actually pulled us into doing a different business model where we don't even sell hardware at all. What that enables us to do is, because the hardware is for us to manage and us to make sure it's great, we maybe might choose components that are 20%, 30%, 40% more expensive than a traditional vendor might, but that is only marginal for us compared to the entire margin for them. We were just exploring, then we had some ideas on how to take some of these new things that were happening and apply it to networking today. Then that led to thinking about maybe we could do hardware differently this way, but to do that, how are we going to get over the margin thing? And that's where the business model came up too.
Brett: How did that come about?
Anil Varanasi: A lot of just discussions with me and Sunil. We would go on long walks and try to think about what happened in other industries. One of the things, the way we grew up is, weirdly enough, we grew up studying 8Ks and 10Ks around the dinner table, and that was the fun part.
Brett: Why is that?
Anil Varanasi: Our father used to run a public company. These were sort of the discussions around the house. What are the nuts and bolts about a business? And if you look at between 2000 and 2015, all the rage in Silicon Valley was SaaS. How do you get to recurring revenue businesses? How do you do SaaS businesses higher margin? But we maybe looked at it and said, where did that actually come from? Turns out it actually came from security and alarm industry. They were doing one-time sales and one-time revenue. Then there's this analyst, consultant-type person named Ron Davis in the security and alarm world. He started writing about this concept called RMR, recurring monthly revenue. And today, if you go look at [alarm.com](http://alarm.com/?ref=review.firstround.com) or ADT or anyone, more than the gap revenue, this is the number that people care about. It's not even a gap metric. But what is the RMR? And then I think software businesses ended up taking that and then pushing it that way. We were really interested in finding out is why is networking not that way? And then another thing that sort of was a thing that opened up in our mind is this is the easiest way to align incentives between us and customers, which is don't pay us unless the network works. And that's easy way to sell as well, to say, "We are responsible for the network being great. We will take on all the risks for the hardware. You don't have to, but you pay us when the network is great. If it's not, don't pay us." That's how it sort of all came together. And then I don't remember actually how it happened that we came up with as a square footage pricing model, but I think as these things happen, I think now the rest of the industry will move there in the next five, 10 years is some scribbles and notebooks of me and Sunil where we came up with this.
Brett: And you figured all those things out before you started working on the company? Did you spend a lot of time thinking about what are the differences between the opportunity in a small business or a 10,000-square-foot office versus the problems that Coca-Cola has with networking?
Anil Varanasi: Yeah, and it's actually one of our fears in networking that if we ended up going too far down that path, that we would get into the same trap everybody else did. What happened in the networking industry for the last 40 years is it's one of the only industries that has multiple $200+ billion businesses, yet no new companies come in. It's probably the most scathing review against the efficient market hypothesis. One of our hypothesis on why that happened is ... Let's say you're interested in networking. Maybe you start building firewalls. Maybe you start building switches. Maybe you start building access points. Because precisely what you're saying, which is maybe I'll just build Wi-Fi access points, sell that to small businesses, or maybe I'll build switches and sell that to data centers, whatever your entry point might be. What we understood what happened with all the companies in the last 20, 30 years that tried to compete with Cisco was that they then end up selling that. Then the best companies actually start having success. Then they never go out and build the rest of the thing. Then they always just end up being a point solution, and the only exit out of that is getting acquired by one of the big folks. We did explore what you're saying of what does this mean for a 10,000-square-foot business to a Coca-Cola or to a massive stadium or all the complex networks. And the conclusion for us was to actually ... Maybe a little bit counterintuitive. We said, precisely because of that reason, we should go build a whole thing.
Brett: But start down market?
Anil Varanasi: Yes. Start down market where they don't need complex features and complex reporting and all those things first, but do the whole thing for one customer and have a couple of customers in mind. And the way we thought of these couple of customers is we used to have this small office on Townsend Street in San Francisco. And after coding 'til about 2:00 PM, I would go do door-to-door sales. And I mean literally knock on doors and say, "What are you guys using for networking? Can I speak to the IT person?" And just keep going back and learning what are the exact features that they use. And we would just prioritize those in the beginning.
Brett: Did you find that when you thought about your first 10 or 15 customers, and you were obviously talking to dozens and dozens of customers, did the promise in the abstract instantly resonate, and they're like, "Please, God, give me this," or they're like, "It's kind of a pain in the ass. I'll try it out,"? How much pull for the promise before there was a product was there?
Anil Varanasi: I think there wasn't that much pull initially.
Brett: And did that concern you?
Anil Varanasi: For sure. And I think the reason there wasn't pull that I only understood later, I didn't understand at the time, was because new companies don't come into this industry, the buyers actually did not have a muscle to evaluate new vendors all the time. Whereas in other products, you might be seeing a new business trying to solve that problem 10 times a year. And anybody that works in IT or procurement or software or anything in a tech company, they're getting emails all the time about a particular thing that somebody's trying to solve. I only realized that about a year, year and a half, later after starting on why was this pull not happening? Because once we gave it to someone, they were incredibly happy, but there was this resistance in the beginning. And my conclusion after many months of looking at it was they're just not used to evaluating new products. And the best analogy I've come up with there is very similar to the car industry. If anybody is trying to buy a car, none of us would go to Google and say, "What are all the new car companies?" We only end up buying a car because maybe we saw it or saw a friend or a colleague or somebody mention it. I think networking is a lot similar to that. It did concern me, but it took me another year, year and a half, where discussions with Sunil to try to understand why is that most of these buyers are not evaluating new products ever for networking.
Brett: As you're doing all this work before you actually start to build anything, what was the output of it? Did you collect all of these different ideas and theses, and it turned into a memo, or you were sketching this? You were chasing down a bunch of different things, and then a bunch of the things crystallized. Business model. Full stack. Start down market. No point solutions. Et cetera. Et cetera.
Anil Varanasi: It was just a one page that we ended writing over the course of three to four months. We were trying to figure out where do we start? First, we started with software because it's easiest to start there. We started writing some rounding algorithms and figuring out how to do operating systems and some unit kernels, for those in the audience that are deep into networking. We tried all these things. Then we hit a big roadblock.
Brett: You did this without design partners or your first three ... You just started building?
Anil Varanasi: Yeah. First, we just wanted to process packets. Are we going to be able to even process packets on some generic virtual software based on virtual hardware, essentially, and do it on that? Is this actually going to work at all? Then we started hitting some pretty decent roadblocks where we realized we need hardware. And I think the old LMK quota people that care about software builder on hardware turned out to be entirely true. Then immediately we felt that bottleneck a lot being in San Francisco because we would try to design PCBs and get them manufactured, and the cycle was waiting four to six weeks. That was just incredibly painfully slow. We just said, "Where's all the hardware in the world made faster?" And everything and everyone pointed us to Shenzhen. We just decided to just go to Shenzhen and go live there, and we're like, "We'll go for a month or two. We'll figure it out." And turns out we were wrong. We ended up living there for a year, year and a half.
Brett: What was that like?
Anil Varanasi: Brutally hard but also fun at the same time. The reason it was hard is less on the products things or anything like that. It's just Sunil and I were vegetarian. Living in Shenzhen, it's probably the best diet program I've ever been in my life. I lost 15 pounds. But the people were awesome. You could design a circuit board in the morning, and some kid would run over to your office by nighttime. I know there's all this US-versus-China rhetoric, but what I've learned over time is people everywhere are just trying to live their life, and they're just friendly and nice and things. Ended up visiting a lot of factories, working with folks that would work with us. Because a lot of times in hardware, nobody works with you unless there's a minimum order quantity because it's not worth it for them. We got really lucky. Some of the folks were with us for a little while. Then we sort of graduated. Then as we were getting into real production stuff, moved it all to Taiwan where all the whole things are made. And then that was a whole process of trying to convince people in Taiwan that, yes, we're ordering 500 units, but one day we will order 50,000 units and 100,000 units and five million units. But some of those folks ended up taking a chance on us that we still work with, which is really cool. But the China experience, I don't know what we were thinking when we decided to go there. I went back and looked at some of our notes. And it was really naive. We just said, "Hey, we'll go for a month or two." And that was the thing we told our friends and our family. I went and looked at old text messages. Looking back, probably one of the best things I've done in my life where you end up learning so much of how everything in the world is made. There's probably not an object in this room that I can look at and not know how it's made. And even just putting work aside, that was just a great experience.
Brett: When you thought about building the first version of the product, was it basically, "We're going to go back to first principle, start with a blank sheet of paper, and just build the perfect stack hardware software for X shape of business,"? Or was there a lot of customer collaboration and design partnership, and you had a set of ICPs of companies that are between X and Y, and there was an iterative process between early customers or what might be considered design partners and be one of the saleable usable product?
Anil Varanasi: We had that partnership with customers on the software. But on hardware, it was mostly just compromises because you set out on a blank sheet of paper, and you say you want to build the best hardware. But cost, MOQ, supply chain, which vendors will work with you, which chips you have access to, those all start narrowing your choices down to maybe just okay hardware. And even the first piece of hardware we held were just, "This is okay." And then the hardware piece was mostly on compromise of what is the quality that's achievable today because all these other avenues are not available for us.
Brett: How much of, on that point, was the optimization function cost?
Anil Varanasi: We were fine with crappy margins, but the bigger challenge was who would even work with us? Even if we said, "We will give you money," or we said, "We don't care about making money," there's just a subset of folks that would work with us at that time. Just our size was so small. Tiny. Hardware, it was more compromise on what's possible, but software was a lot of iteration. But that's only on the management plane. The dashboards and things like that. The rest of it-
Brett: The software infrastructure?
Anil Varanasi: Yeah. Packet processing. Wireless. All of it. The job there is just get it working first, then make it fast, then make it secure. You don't need design partnership there. Can you actually process packets? Is it actually working? Is it fast, and is it secure? Because no customer actually understands that part. They do understand the management part. That we went back and forth and sort of figure out what's the right design, what's the right user interface, down to the colors, and all these things matter. And we spent a lot of time on those. But majority of it, and maybe this is the other reason why we were able to do it much faster, we didn't have to wait for that loop of we think something, ask a customer, they tell us. 80% of it was just, can you get it working?
Brett: The time you finished your research, you started to work on software. You quickly pivoted to hardware. How long did it take you to get to a sales-ready product?
Anil Varanasi: Took us four years. Four and a half years. Four years. We ended up going down this path on operating systems that we had to scrape 100% of the work a year in. It was one of the most painful times that ... Because you want to be able to waste anything when starting a company except time. You're okay wasting money. You're okay wasting so many other things, but we wasted time. We wasted a year of time going down this wrong path of how to build the operating systems and packet processing. That lost a year.
Brett: How did you screw that up?
Anil Varanasi: I think we tried to do the perfect version of, if every technology worked perfectly, we would build this mirage of a great operating system. And that was just entirely wrong.
Brett: How did you know you had to scrap it versus just keep trying?
Anil Varanasi: We went to this meetup down in Santa Clara because that's where a lot of the operating systems meetups happen. It was 20, 30 people. Everybody sort of brought what they're working on to show, "Hey, this is the operating system I'm working on," or, "This is the packet processing," whatever.
Brett: And these are companies or hobbyists or everything?
Anil Varanasi: Combination. We ended up sort of showcasing ours. Then this older gentleman came about, and he's like, "I understand what you guys are trying to do. We've been trying to do it 10 years as well or seven years." It's one of the largest companies. I won't say who but one of the largest companies in the world. And they're like, "We're going to try to open source it. All the stuff you were trying to do the last two years is not only worse. We're just going to give it away." And it was this important library on how to take packets and process. That was only about 20% of what we were going to do and what we're doing, but it changed our entire framing in what's possible. Somebody else had thought about a better way of doing it. And that changed our mind.
Brett: And you leveraged that open source or no?
Anil Varanasi: Yeah, because the awesome thing about open source, you can just read the code. And this happens with models all day today. Once you read an open-source model on how it's trained and how it's set up and what's the architecture, now you know how to do it yourself. Somebody else had taken this other approach. It really opened the ideas for us up. And we knew, I think instantly, but we probably didn't tell each other for about a week that we had to scrape it. And I think after a week, we kept talking about the same idea of maybe we should have gone down this path and this path. And we kept making the steelman case for why that was better, and we couldn't make the strawman case at all. And I think both of us probably realized this is bad, but we should scrape.
Brett: That's a year of the four and a half that was lost?
Anil Varanasi: Yeah.
Brett: Now, you're at three and a half years of at least moving in a directionally correct way.
Anil Varanasi: Glacially.
Brett: What is it like running a company where the path to that real sense of market pull and product market fit is years away, but you're also not iterating toward it? It seems like hunkering down to build the thing you knew you needed to build.
Anil Varanasi: It was a lot like that. And it was just two people until we got first customers. It was just Sunil and me.
Brett: For the four and a half years?
Anil Varanasi: Yeah.
Brett: When you think about those first handful of years of really building the foundation of the company, whether it be the way that you thought about the market and why it was the way that it was or how you landed on full stack, business model, your first few customers, when you try to sort of abstract it and bubble it all up ... We talked about a couple of the things that maybe the decisions and the dead ends that you had to sort of change direction. What are the most important things that you are convicted in were correct that are useful to other people who are doing those foundational things for the first time?
Anil Varanasi: Ratcliffe's law is underappreciated. Great markets are great. I think we can all convince ourselves this is a market that this is going to happen, or that's going to happen. But when you're talking about building something for decades, which is how we thought about where our time should go, having a really great substantial market that touches everyone, there is not a human in the world today that packets are not impacting them. Having that sort of market and believing in that market I think was one of the best things we'd ever done. Maybe I agree with the adage, or maybe I don't, that you want a small market that's growing, but I think I prefer a much larger market that's also growing. And I think we got that part right. I think what you mentioned on the full stack, I think that was the right thing to do.
Brett: But that's the right thing to do in the context of Meter. What's the bigger idea there? For other founders, what is their version of full stack-
Anil Varanasi: I think owning the entire thing. I believe in businesses that own the entire thing. For the long term. And if somebody's trying to build a business for five or 10 years, I'm finding \[inaudible 00:31:11\] fault in that. But I'm saying if you're trying to build something for 20, 30, 40 years, and you want to own the stack, what's ironic to really think about is there is not a single large company in the world today that is not vertically integrated. There's just none. But what's ironic is if you start a business today, there's some sort of great filter happening that most of them don't make it if you start vertically integrated. But if you do start a great point solution or something where you own horizontally one part of the stack, I think the chances of making it to a certain level are higher, but the chances of building a very large business I think are very slim chances. If people are interested, I think, in doing that, maybe if I had to extrapolate into what it means is, you have to be vertically integrated. I think it's also so much fun to build a vertically integrated business. You get to control so much, and your business actually tells you a lot more. You understand almost every part of it. Today, we are vertically integrated in every way except building our own chips. Everything else Meter's vertically integrated in.
Brett: But your hope is to eventually do that as well?
Anil Varanasi: We have plans underway. We think we can do some great work there. But by the time we realize that, it will take another eight years, I think, from now before this will even be fruitful at all. But I think actually owning the entire stack is probably really important. And then the last thing that's probably applicable to everyone ... If you look at businesses in the modern sense in the last 50 years, the three times businesses are usually rewarded is when they innovate on product and technology, or they innovate on how they deliver that. Somebody figured out SaaS. Before that, somebody figured out CDs. Somebody figured out USB. Whatever. The delivery mechanism is also rewarded a lot. How does that change? Apps are another ways. People figured out how to do apps. But the third one that is rewarded that's severely underrated is business model innovation. We have always thought about business model as part of the product because that should inform what hardware you build for us, how you build the software, how you build the SLAs, what customers can expect, how you sell, all stems from that. Maybe another thing, if I did have to extrapolate out, very few people I meet seriously think about business model innovation.
Brett: Why do you think that is?
Anil Varanasi: It's probably one of the hardest things to do. How are you going to charge in a new way? And it's uncharted territory. And it is scary.
Brett: You're seeing a renaissance in that a little bit in AI when people are getting away from per-seat pricing is an example of it today-
Anil Varanasi: 100%. But think about how big of a shift that is.
Brett: It's 15 years in the make.
Anil Varanasi: And if it does end up working, we're probably going to see some amazing companies built that figure that out.
Brett: Right. That then are competing against per-seat company.
Anil Varanasi: Exactly. And you can then sell against the per-seat companies, but I think that's happened so few times.
Brett: Do you think that it's underexplored, or it's just it requires a set of scarce magic that every now and again sort of comes together?
Anil Varanasi: That might be true, but maybe it's not true because none of us even talk about it.
Brett: Mainly in Silicon Valley is product and technology.
Anil Varanasi: I'm convinced that all these smart people, if they end up spending time on it, that there would be new business models. It can't be that we've achieved 100% permanence on what business models should be.
Brett: The sort of meta thing that you did is move from buying hardware to wrapping hardware and software together in a bundle and paying monthly on a per-square-foot basis.
Anil Varanasi: Including delivery. We go and do the installation and all of it too.
Brett: There's this kind of important concept of path dependence which is that it's very counterintuitive, but so many times you start with a point solution that you basically just become a slave to sort of the point solution. You just briefly talked about that, but so many times you follow up with a company seven years later, and they're still kind of a one-trick pony. What can you explain about why that exists and maybe, importantly, how that maps to where you start matters maybe more than people might think it does?
Anil Varanasi: I think this actually boils down to what you were asking at the beginning, which is what happens every day, every week too. When we all decide what we're going to do in a given day, there's a path-dependent thing we could go do, and there's likely this harder thing if we finish that day that the trajectory of our work would change. But most of the time, we end up doing the former rather than the latter. But the latter of doing something really great, the difficulty is only a little bit. If the normal thing to do is 100% difficult, but the really hard thing to do is 120% difficult, most people look at it as 120 rather than just that 20\. And every time I look at exactly what you're saying on businesses that end up being the same point solution a long time, I think you're absolutely right in the fact that if they had decided at the beginning that the scope was a little bit larger, generally my rough intuition is it's only 20% more, but it actually ends up enabling you to capture a lot more. A lot, lot more. And I don't know why that is, but I have a worry that actually, particularly in Silicon Valley, that this sort of thinking has accelerated, which is make a point solution as fast as possible to get to some revenue as fast as possible. And everybody then ends up optimizing for the local maxima because if you end up giving smart people a problem, they will go as deep as possible on it. And I think that happens over and over. Then when you meet founders, I'm sure you hear this, which is, "This market turned out to be way bigger than we thought it was. The problems are so hard." And then almost invariably, every company tells you what they're working on is the hardest problem in the world. And I just don't think that's categorically true at all. But, because you end up becoming either a slave of your own success or end up having some sort of reverse Gell-Mann amnesia of, because you know the problem deeply well, you think it's the most important problem and the most difficult problem, you sort of end up missing it. But I think that's constantly there. And networking has been littered with that. And we got very afraid of that because there were so many great companies that did just one part. But our estimation was if they spent 20% more effort, 20% more time, 20% more capital, they could have done the whole thing.
Brett: What about the first thing that you mentioned which is how critical it is to be in an excellent market? You talked a little bit about it, but what is your definition of this is a market worthy of going after, or, all things equal, a market has these properties will increase the chance you can build an important company?
Anil Varanasi: I think growth is incredibly important. You want to be in a market that is rapidly growing, not rapidly shrinking. I think that's fundamentally core. Second, personally, myself, and I don't know how much this should be rooted into other people's businesses, but personally, I appreciate markets that have purchasing power, whether in a great economy or a bad economy too, both, especially if you want to build a long-term business. And then three, I like markets that sort of affect everybody in the world. Cars. Rockets. Networking. Banking. These types of really large things that affect everybody in the world. But those would be my criteria of thinking about great markets, but it has to start with the market that's growing because that's usually a place to go sell to that excess new demand is how you get in.
Brett: So many of the markets that would satisfy that set of criteria I think tend to be monopoly or oligopoly structures where you end up having companies that are very large that, for a lot of the reasons that you mentioned earlier, are set up in a way that makes it hard for a software or software and hardware startup to penetrate it. Some of it is that they're so monopolistic that just nobody gets up to the plate. And I think this is more often than not if there is actually a reason why the structure is the way that it is. And I think most founders begin by ... Going back to what you were saying a second ago, they begin with the product's not good enough, and that's why. But they miss that there's actually power in these businesses. Is there anything else you can say about most of the biggest, most interesting markets tend to be dominated by incumbents and, by definition, make it hard for a new company, and so then what does one do?
Anil Varanasi: I think they make it hard only in the beginning is my new way of understanding these markets in the last five to 10 years, which is, in a market where incumbents like that don't exist, the initial ramp is easy to get in, but so many people get in. Then it becomes really difficult. But with markets like this with large incumbents, the initial ramp is really hard. But once you pass that chasm, there's almost nobody else there along with you. Then it becomes much easier. If we ask people in 2021 how strong is a search monopoly for Google, I think you would've got an unequivocal answer that this is the end, that it's not going to happen. Or if you asked seven or eight years ago is anybody else going to be able to challenge the primes in defense, I think the answer would've been, "No way." The primes are the primes. That's set right there. Or if you go even 20 years ago, is there going to be an American car company? The answer would've been, "No way. Here are all the structural reasons." But I think the initial part is incredibly hard, like you're saying, because you have to go build things that are on par with a much larger stack that already exists by the incumbents because maybe they built it over decades or did acquisitions. And you have to figure out how to do something new in there. And you have to figure out how you can still price it better than them. Yes, the initial challenge is much higher, but my estimation is, if you cross the first part, it's actually much smoother sailing after that because very few companies are willing to actually cross that first part.
Brett: On all the other parts of the business, do you see problem, fix problem, or you also are more deliberate? Meaning everything outside of the technical details of a product.
Anil Varanasi: I'm still see problem, fix problem on if something wrong with customers and then a sales deal as well. If there's a deal that probability drops 5% or 10%, I still try to fix it as soon as possible.
Brett: And that's generally the correct thing to do.
Anil Varanasi: I don't think so. I don't think so on enterprise sales. I think enterprise sales actually have their own ebb and flow because that company might be doing their own thing. If they're deciding to pay you $10, $20 million a year, there's other things they're considering and doing, and pushing is not always the right answer. And I've made a few mistakes there, too, where that was also in enterprise sales. I'm still not sure if it's not the right answer everywhere else. But enterprise, I don't think it's always push, push, push, push, push. I think there's some give you have to have.
Brett: How did things unfold? You're four and a half years in. You have an early version of a usable product. Then sort of what happened in the company's story?
Anil Varanasi: We ended up talking to some friends' companies and others where we would go power their networks. And it was just a few spaces at a time. A couple of them didn't even work. We would stay at their office, try to fix it. One time it was super funny because we ended up sleeping over in the office because we were fixing it the whole time. And then they sort of came over the next day, and they said, "Our snacks are gone, and you guys are wearing the same clothes. What's happening?"
Brett: And did they have Wi-Fi?
Anil Varanasi: They did.
Brett: They did. It was worth it.
Anil Varanasi: It was working. But it took us the whole night to do it. We're like, "No, no, you caught us on a laundry cycle," and this whole thing sort of thing. But it was just then a drumbeat of just who are the customers that don't need every single feature in the world, but they would benefit from having the full stack from us and just getting down to them.
Brett: And when you were doing that, did that feel easy? People started to line up? Or every marginal customer, every next customer, you were fighting for?
Anil Varanasi: In tech, it was easy once we'd acquired a few customers as it happens. But in every new market, it was just as challenging. You go from tech to warehouses to then to manufacture-
Brett: Was that your second?
Anil Varanasi: Warehouses.
Brett: How did you decide that?
Anil Varanasi: We actually did not want to do anything other than offices for a long time because even though to the point on selecting something small, office is actually one of the smallest segment of real estate, but we felt like there was an immediate fit because there were so many tech companies to be able to do it. What actually forced our hand was COVID. 100% of our customers went to zero starting March 12th. Then, for about six to nine months or however long, I think it took a bit longer, the struggle was two things. One is all of our existing customers, nobody's going into offices. And then, two, we couldn't get hardware out of Taiwan because supply chain was so bad, and we were such a small company. All the availability of production was for the larger companies, and we were sort of way down the rung to be able to do it. We always knew one thing true to be about networking and Meter is we're some sort of index on the economy. And what happened was e-commerce was growing from 12% of all of revenue in the economy to 24%. Then you had this proliferation of all these warehouse companies and manufacturing companies. But because it was COVID, they themselves couldn't get people to go work there. Spaces that previously were never automated were entirely getting automated. And if anything is automated, it has to be on the network. Then that happened to be a segment. Actually, that segment actually would propel a lot of our growth during a time when everybody ... I think even Bloomberg ended up writing a cover story on us that was something else. And then because this whole COVID thing was happening at the top of mind, I think the cover story was The Thrill of Office Wi-Fi or something like that. And I think in so many people's mind, it was like, "If offices are not," ... I didn't think they understood that it was such an index on the economy that this other segment, which we knew we would get to later, but macroeconomics pushed us toward.
Brett: What was the feeling of running the company during that period of time?
Anil Varanasi: It was only 10 people. I wouldn't say it was a company. When you have 10 people, it's a small group. We're all sitting around a table. It was hectic. Chaotic.
Brett: But did it feel like, "Well, we had a good run,"? Or was it like it was, "We'll find a way past. We'll find a way through this. We'll get on the other side,"?
Anil Varanasi: This is the one question so many people ask Sunil and me, even the people that know us really well, that we don't have a good answer for. To even get to production hardware, we had self-funded the business. We didn't raise outside capital. It never even occurred to us that we would do something else. I don't know.
Brett: Is that how your personalities have always been?
Anil Varanasi: I think so because in another life we used to make film a lot, and we would have ambitious way we would set up shots to music to who we wanted in it and et cetera. And I think we were always unreasonable that way. Somehow we were convinced that we should always do the highest-quality thing. It's one of the hardest things to explain because so many people ask us that, even the folks that know us, our friends, and other things. And people sometimes think we're not being genuine and, "Were you afraid, or were you sad or anything?" We're like, "No, that was not the thing. We're sad at the fact that we're not making progress."
Brett: But it shows that you're wired differently.
Anil Varanasi: Thank you.
Brett: There was the Free Solo film with Alex Honnold who does the-
Anil Varanasi: Right. Right. Right. Yes, the scaling.
Brett: And they did an MRI of his brain. It's just different. Being scared isn't a thing that registers in his brain. It may just be that you have a different position.
Anil Varanasi: Maybe. Because a lot of our friends, too, and some of our investors that have become very close to us ... One time, they even asked us, "You're not being genuine and telling us what you're thinking." And we're like, "We're really not worried. We know this is the thing we'll do." It was really hard to convince people of that. But it wasn't like we're saying that to people, and then Sunil and I are like, "Holy shit. This thing is going to be-
Brett: Freaking out. Exactly.
Anil Varanasi: No, we're like, "Cool." Yes, it's going to be tough. There are multiple moments, COVID, this Apple thing, supply chain, whatever. Studying businesses now the last two decades, I think, for any business, I think there's about 1,000 days of really bad time. Any business. We just happen to have all 1,000 at the beginning consecutively.
Brett: And now it's just roses.
Anil Varanasi: The thing that is true now is we would actively have to mess it up on purpose that it won't be a decently large business. What I think we still have a lot of work to do, and we have to do great work to happen, is are we going to be one of the largest businesses in the world? And I truly mean that. Are we going to be one of the largest businesses in the world? That we have a long way to go, and I suspect there'll be a lot of mistakes we'll make and et cetera. But whatever baseline you think of as a large Silicon Valley company, that we would have to actively mess up from this point.
Brett: That point around credibility and trust in a new market. How did you end up cracking that? Do you have to find a particular first few customers that are buck the trend and are on the classic early adopter or some other?
Anil Varanasi: On this, though, what I am sure of is I do think it's no matter what size of the business. Now, I've not run a business that's very large yet. I will. But I'm pretty sure that no matter the size of the business, if it's a brand-new market, the founder has to do it, or it has to be part of it to convince the first few people to take the chance because I think they're buying the person rather than the product. And they want to know who the person is that's behind it. Usually when we go to new markets, even now when we go to gigantic markets, Sunil and I try to understand as deeply as possible who that actual buyer is. Can we talk to them? It's one thing watching Fathom and Gong calls or notes and other things but another thing to be able to actually ask this person a question, ideally in person, because you can actually tell a lot more from their body language what they're going to buy or not, and 90% of communication being nonverbal and all these things. I do think every new vertical we've gone to, and maybe this is different for other businesses, I think it's just as difficult.
Brett: As you've been telling the story of the company, it's clear that the company was predicated on rethinking the end-to-end product, rethinking the business model. What about actually how you physically sell it? Is that pretty conventional, or is that done in a different way?
Anil Varanasi: I think it's conventional now. We did take a divergent approach before. 90% of networking is actually sold through the channel. And majority of Silicon Valley trade doesn't even know what the channel is. But we deliberately did not sell through the channel because how legacy companies stifled new entrants another way is when a new entrant was making progress, they would incentivize the channel to say, "We're okay losing money for a quarter or two. Sell our thing." Until we knew the product was dramatically better in every way in the hardware, in the software, et cetera, we were not going to touch the channel because also with the channel is channel folks are amazing, but what they're doing is they're selling their reputation, not the product. You want to have a product where they feel comfortable selling the reputation along with it, but we want it to be so good that any marginal incentive a legacy vendor might give that doesn't stifle our ability to do it. Originally not doing channel and doing direct sales for networking is really odd. But now that we've established that, that also enabled us to get hundreds of customers first then take those hundreds of customers' case studies, take that to the channel, learn from that, build a better product, and then make that all available to the channel. Because one of the other things that's advantageous to us is because we're the company that helps build the hardware, the software deploys it and helps maintain it, we ended up building a lot of tools that are the same tools that a channel partner might want, giving that all to them at once. Now, we sell very traditionally. Even though our business model is different, our delivery is different, our hardware is different, incentives are different, the path to selling is a very known one.
Brett: Was there anything you had to reinvent as you transition over to channel sales, given your business model is different? Was that tricky to sort out?
Anil Varanasi: People.
Brett: Just the education component?
Anil Varanasi: Yeah. I think if you take traditional great people from great Silicon Valley companies that are PLG and that type of folks, I just don't think that's a fit. I do think there's a seller market fit, too, which I also did not appreciate in the beginning. I was in this first principles thinking of you take any smart person, put them in anywhere, they'll achieve it.
Brett: Why is that not the case?
Anil Varanasi: I think in sales, you need to be able to actually iterate to a win really fast. A seller only gets really good if they're confident in a sale. And you want to get to that sale as fast as possible where they've handled things. And I think if you have to learn a market because you have to go learn networking, then you have to learn how to sell differently. Learning two things that are brand new at once, that's hard. I think if you only have to learn one thing, I think people can do it so that you can still have a 90-day ramp or 120-day ramp or whatever you want to do. But otherwise, if you have to learn two things, you might have people that don't sell anything for nine months to a year. Not that that's bad, but they will lose confidence entirely.
Brett: Did you find it difficult to train the channel to sell your product given the business model was different, or no?
Anil Varanasi: No, it was not as difficult as I thought it was going to be.
Brett: Why do you think that is?
Anil Varanasi: If we were the first people to bring any product that had recurring revenue, I think it would've been tough.
Brett: But there was enough early-
Anil Varanasi: Zoom and whatever. Call center stuff. SaaS software. You sort of had cloud move that way too. I think they had enough of an understanding of how this would work. The thing that I also underappreciated is that us, Meter, bringing recurring revenue, how much they would like that because it now actuates their business based on recurring, high-quality, predictable revenue. And because most of channel grew through networking, almost 50% of the channel is networking revenue. That has been one-time sales, and their businesses have been actuated lower. And that actually is one of the things that draws them, too, which is, "If I do this, my business is more valuable because of it."
Brett: I wanted to pivot the conversation slightly. One of the things in knowing a little bit about Meter is there's a lot of things that you do differently, whether it be how you're in office, a lot of the manufacturing stuff you talked about, full stack, starting a company with your brother. I think you have many, many, many direct reports, or at least you used to. And I'm sure there's lots of other things that you do that other people would say are weird, don't make sense, go against best practice. You talked about we have no OKRs, goals, long-term goals. Maybe you could walk through a few of those things. Maybe how you think about management as it applies to who you are as a person and Meter as a company. And maybe we could take a couple of those things and explain what is the origin. How do you figure out the way that you're going to do things in terms of organizing, managing, hiring, et cetera? Because it feels like you do more things that are different than the average scale-up company.
Anil Varanasi: I think maybe it's rooted in the fact that both Sunil and I, when we started our first company, we were super young, and you end up making a lot of mistakes. And the one mistake we ended up becoming very allergic to that we made sure we don't want to do ever again is talking about the work more than doing the work itself. As a company starts to scale, the meta work ends up being way more than the actual work. If you look at people's calendars, if you look at where people's time is going, one of the things I try to tell people when they onboard onto Meter, I do a session with them, Sunil does a session with them, as a class is that Meter's buying two things from all of us. Meter's buying our brain and our time. How do we make sure both of those are the best versions that we're giving to Meter? But if you look at most people's calendars as a company starts to scale, majority of it ends up being a coordination meta-work thing, and the amount of time they get to do real work starts dwindling and dwindling down. That's what we're allergic to the most, and that's what we're fearful the most. I'm actually still not sure if any of this meta stuff even matters.
Brett: Why is it the way that it is?
Anil Varanasi: I think in human tendency, it's the same thing why we all reach for sugar. It's the easiest way to feel good. You put a process in place. You write a doc down. You talk about how to do the work. You talk about how to set up your tracking system on Atlassian or Linear or whatever. Doing all that feels like real work. I just don't think it's real work at all. The real work is actually the work itself. And one of the things we're trying to do, and I don't know how successful we will be over the next five to seven years, is the other thing we disagree with in this vein ... Somehow people have bundled management and authority together in one. We're trying to decouple that as much as possible. We would like Meter to be a place where great people that have no interest in management for any reason still can have a lot of the power in how it happens. Most people, I think, ended up thinking that the only way for me to become important in my career is to become a manager. I think that's the other reason that happens is you take your best people, you fire them into management, and they learn that management does all this meta work. And if you give those problems to smart people, they're going to do them really well. We try to resist that as much as possible, whether it's on how we do direct reports, how we do one-on-ones, how we do OKRs, how we do planning, how we do any part of it. We try to at least be truthful as much as we can on the fact that we're just going to try to do the work rather than the meta work.
Brett: Why even have management at all?
Anil Varanasi: It's a great question. I do think we need it for coordination. If you look at management, Nicholas Bloom has great work on this at Stanford. Kayla Gorcelli, I'm probably saying her name wrong, at Berkeley. And then Raffaella Sadun at Harvard. What we know from longitudinal studies is that not only is management important. Management is actually a huge factor in what ends up driving outcomes. But again, management doesn't have to be authority. Management has to be coordination and context. Tyler Cowen has this great saying that he's been saying for a long time that is now getting popular, which is, "It is context that is scarce." I think management is really about being able to really think about what's the context that's missing from everyone, doing the meta work yourself rather than pushing that to other people, and then giving that context to other people. But we know unequivocally that management is not just important. Management actually works. We have really great RCTs and A/B tests, essentially, of same problem, same factories, half management, half without management, and outcomes being entirely different. Management is still incredibly important. It's just that you don't want to couple together, in our view, management and authority.
Brett: How do you, in the most specific way possible, define what management is at Meter?
Anil Varanasi: I think what management at Meter should be is making sure everybody understands what they have to do, what pace is expected of them, and what success looks like. That's it.
Brett: What about who should be on the team?
Anil Varanasi: I think that should be project specific.
Brett: What about should we fire someone?
Anil Varanasi: That should actually be only management partially. And I think it should be the other people that work with them too. A lot of times when you go to a team that's six or seven or 10 people, more than the manager, I think it's actually better to ask everybody else that works within that team who should be fired.
Brett: It's partially management's responsibility-
Anil Varanasi: Partially. The management responsibility is finding that out and knowing it. That's why one of the things we're trying to resist in the company as much as possible is having any people that are just people managers. And I don't mean to say just in a pejorative way. I mean the only thing they're doing is people management. We sort of have everybody that's a player coach, and I want to see how long we can push that. I suspect we'll hit some breaking point in the next year or two. But everybody does the work and helps others has context because otherwise I don't know how you know what the work really is.
Brett: What about providing high-quality feedback or coaching or that whole genre of stuff?
Anil Varanasi: I'm still back and forth on this. Because I think the thing that I don't like, that I still haven't figured out if this is right or wrong, so that's why I haven't unwound it in Meter just yet, which is a lot of times what happens is ... Let's say you and I work together. I have feedback for you. I'll say, "Cool. I have one-on-one with him three weeks from now, so I'm going to wait to tell him then. And then I'm going to tell him all the things that I have as feedback at that time." Rather than bottling it up like that, just like in any relationship, I suspect the better thing is instantly doing it.
Brett: But that's the modality of it. There's the question of when you think about jobs to be done of a manager, is giving feedback, spotting gaps, closing gaps, development \[inaudible 01:00:39\]-
Anil Varanasi: I don't think so. I think each other should do it. I think if you leave it solely on the managers, it's irresponsible to do so because if you're on a team, and let's say you're on a basketball team, and somebody doesn't have their hand in the passing lane, the coach is not going to be able to watch every single player on the field. But the player right next to him will know this person is not putting up their hand in the passing lanes. I think you should have a mature team that's able to do with each other rather than just relying on the manager. But I'm still working on how to operationalize this. I think there's so much of good in management that came in Silicon Valley. And if you look at what has America shipped to the world, management is one of the things that we have sort of shipped culturally. There's a lot of great things, for sure, but I'm just not sure if 100% of them work for a small company that wants to grow fast. I think maybe they work for a bigger company, or maybe they don't. But if you talk to CEOs of really large companies, they don't like it either. I don't know who likes the management but certainly something America has shipped to the world.
Brett: How many direct reports do you have now?
Anil Varanasi: Two dozen.
Brett: What is your working relationship? You don't have one-on-ones?
Anil Varanasi: I don't. I ebb and flow. Right now, we have this conference coming up on November 18th where we're releasing an entire new product line. I'm sort of ebb and flowing out of it right now. But I'm old school. I tend to call people a lot. I literally pick up the phone and just call them if I'm thinking about something and just talk to people. All the two dozen I talk to at least every two or three days.
Brett: If I were to listen or watch how Meter employees work together, is it mainly work focused?
Anil Varanasi: The other thing I think Sunil and I have learned in this vein, and I'm trying to articulate this sentence really well, so tell me if it makes sense, which is if you're spending your time thinking about the person instead of the problem, the person is the problem.
Brett: What about the sense of your job as a manager is to help this person have maximal impact and grow? And I think I tend to be more in your camp, to be clear, but I think conventional wisdom is much more people leave managers, not companies. And there's almost this nanny state dynamic that's been created, which it sounds is sort of the opposite of how you think about it.
Anil Varanasi: At least how I want Meter to be, whether we're there today or not is a separate question, I do think there is some benefit in a manager being a mirror to someone and saying, "These are all the things that you're not able to see that I see because I get to talk to everyone. It's my job to do so and show it." For the best people, what I've found is, as soon as they know that's the problem, they tend to fix it, and there's no need to linger on that topic much longer. I think what a manager could do well is if you're having to deliver the same thing for people consistently over and over again, that should be one of the things they go take action on. Maybe that person shouldn't be at a company, and it's not a fit. Where your job is a sort of a stenographer knowing how much of the same problem is happening over and over again.
Brett: Do you think an employee needs to ... It's important that they feel like their manager cares about them?
Anil Varanasi: Yes, but not as a friend or family or any of that stuff. I think it's a work relationship-
Brett: They're valuable to accomplishing the mission of the company?
Anil Varanasi: Not just that. That they're valued as a person because of the skills they have, how they think, how they work.
Brett: But that's a means to the end, no?
Anil Varanasi: Possibly, but I think that's the extent to which a business should care.
Brett: There's caring about me as a person, and there's caring about the value that I'm bringing to the company. But you're saying value that you bring to the company, right?
Anil Varanasi: I think so.
Brett: Not just, "Tell me about your weekend. And how's your kid doing?"?
Anil Varanasi: I do think those things matter. I think there's some sort of social contract that we're not going to be able to get past. And I do think those things are important, but I don't think I agree with those things are the most important. A lot of places, those things end up becoming the most important thing, and everything else becomes secondary. Maybe I'd switch the order of the work itself. The value. That's primary, and this is secondary. But at the same time, when a colleague has been sick or has a kid or does something, Sunil and I have done all sorts of heroics to help them. I think that's important too. Maybe I'm not articulating it properly, but I think both can be important where if you do need to do something you can help, you should do everything possible, but 99% of the time it should just be about the work.
Brett: How would you explain or teach your philosophy on fighting slowness?
Anil Varanasi: It has changed in the last couple years. I have come around on two topics on slowness. One is that it is impossible to be fast all the time, that you have to zoom out a little bit and look at the curve rather than any one intercept to know whether you're fast or slow. I think there are parts, there are times, no matter what you do, you are going to be slow. And second, I actually think slowness during some times is good, particularly for businesses like ours when we're making decisions on things like what hardware we build and how we build it that have ramifications for us for a decade. Doing that just a couple months faster, I have come around the fact that that's actually not the right thing there is.
Brett: And that goes back to see problem, solve problem?
Anil Varanasi: Yeah. And rather than ascribing fast and slow to the entire business, I now think about it discreetly on what the job to be done is and where should it be fast and where it should be slow, and that's actually different for different parts of it. For example, in sales, no matter what, I do think we should be incredibly fast on responding to a prospect. I don't care how big we are. Whatever. You hear all these tales of, as larger companies go, you can't even get somebody to tell you what the product is. That I think is pernicious. Same thing on a customer. If a customer reaches out for anything, that they're the ones paying the bills, that response should be incredibly fast. But I don't think we have to take that same philosophy and be so generic everywhere in the company. That's something I've changed my mind on, which is I think there's different pockets that are a different cadence. When we go build chips, for example, I actually think the right thing there is to go as slow as possible because taping out a new chip then building it is incredibly hard on ramifications on the mistakes you make. I've changed my mind because of that. The other reason I've changed my mind is there are extraneous factors a lot of times that you actually don't want to push purely for the sake of speed. We talked earlier about the fact that maybe the enterprise sales when you're selling really large accounts, pushing for speed, speed, speed all the time might not be the right answer. I think that's actually true sometimes in things like design and creative things as well. A lot of times, there's some magic that happens when you let it. And we're doing a lot of creative things that we'll announce, but I'm trying to be patient there where I'm not pushing for the same speed there that I might in software or I might in sales or I might somewhere else. I don't think we have to push there as much.
Brett: Do you communicate or set goal ... I know you don't set conventional goals. Set deadlines. There are deadlines.
Anil Varanasi: Yes.
Brett: Do you do any of those type of things in ways that you think massively speed the company up?
Anil Varanasi: I think a lot of times when we started doing this user conference that we're doing, that's been a great reagent to finish things on a certain day. I have now understood why Apple does it. September 7th every year, no matter what, it's a great thing. And the most important thing is not that I think people end up working hard or anything. If you have a great company, they're always working hard. What ends up actually happening is people end up not working on things that don't matter. They start cutting that because they don't have time for that. And those deadlines I think work really well.
Brett: What about if someone says, "We're redoing our website," and they're like, "It's going to take us three months,"?
Anil Varanasi: I do ask this question a lot is how is it that every problem in the world ends up being able to solve exactly 90 days for every problem? I haven't gotten a great answer. But anytime I ask that question, people then give me a much better thing.
Brett: Do you end up inspecting the timelines a lot and pushing, or no?
Anil Varanasi: No. I think with smart people, if you ask this question, you say, how is it that every problem, that could be a sales problem, that could be an engineering problem, it could be an operations problem, that could be a design problem, they can be exactly solved in 90 days, but it can't be that everything is solved in this exact thing. It happens to be on a Georgian calendar that happens to be exactly quarterly that has to correlate with how stock market does it. It can't be that that's the right formula. We don't have a universal truth everywhere else, but we do in this one thing? I just don't think I believe it.
Brett: One of the last things I wanted to ask you, I think that one of the dynamics in Silicon Valley where there's so many founders that start new businesses is you sort of watch the founder in year seven or nine and 11\. In many cases, they're not particularly happy. The company's working. They're at 100 million or 200 or 300 million. They have 800 employees, but it's almost like they're begrudgingly running this company. And it feels on the other hand that this has the chance to be a real multi-decades pursuit for you where the goal is not to be done and sell the company. The goal is to figure out how to just run the company for as long as possible. Maybe you are living in misery, but it doesn't feel that way.
Anil Varanasi: I'm not at all. I have so much fun.
Brett: And you work at an incredibly high-intensity level. What did you figure out that makes it feel more like an infinite game for you than many other people that are in the first big chapter of building a company?
Anil Varanasi: I have talked to other companies that have this hardware-software operations component. And I do think you're right. There's something there that these companies' founders tend to be a bit happier than others. Because what you end up not liking about your own business sometimes is the way you do software or something else or some ... You can always find something exciting about a business when the scope is much larger. And a friend of mine, his parents had this 50th marriage anniversary, and they were having this little party. And I went, and I asked them. I was like, "What's the secret? How do you get married and stay married for 50 years?" She sort of mentioned something that's interesting. My friend's mom is like, "Neither of us wanted out at the exact same time from the marriage." I think there's something there for a company as well. As long as you can find really exciting problems to solve ... I think this is why in Silicon Valley for so much of the software businesses it's been true than the generation prior is if you look at all these SaaS and software founders, they're much more prolific investors than a generation before them. Way more prolific. I think they're trying to find some exciting things to be part of and do. And they try to do other things and bring it and investments and things like that. But I think if you have a business that constantly has something new that you can learn, I think that keeps it very exciting. I invariably in a given week learn about an entirely new topic at Meter that I had no idea about a week prior. I think that's one. Second, Sunil and I both have this tendency to not want out of anything at the exact same time. Life is sinusoidal, no doubt, and businesses particularly are sinusoidal, but there's never been a case I think that both of us have been down. The partner you have that you're doing this with I think is one of the greatest blessings of my life to be able to do it. And I think beyond that, I actually don't know the answer. I do really just love understanding how something works, and I think I have the best job in the world. I get to build hardware. I get to build software. I get to do physical world operations, and it just really keeps a lot of fun for me. But I suspect it has to do with the fact that it's the type of business I'm in but also who I'm doing it with.
Brett: It also sounds like if you weren't doing this, and the company vanished, you would go start another company. And why would you do that-
Anil Varanasi: And with Sunil.
Brett: And why would you do that? Because that's what you have.
Anil Varanasi: Yes. And I would do it with Sunil. This is year 19 of me and him working together.
Brett: I just want to wrap up where we always do which is sort of on a very similar vein which is when you think about all the people that you spent time with and have been involved in the business or that you've gotten advice from or studied, who has taught you the most? And what's the thing that they taught you? And maybe I'd say who's had that disproportionate impact? And what is the thing that they instilled in you?
Anil Varanasi: I ended up going to college when I was much younger than other people. I think I was 16 or 16 and a half. And I ended up going to this school called George Mason out east.
Brett: Tyler Cowen's.
Anil Varanasi: Cowen, Kaplan, Tabora, Kling, and others. And I don't know if it's one particular idea, but what was really interesting about the GMU econ department as a whole and how it's developed over the last two decades since even I started there is it is possible to actually understand the world if you just take a little bit of time. The world isn't that some sort of black box. And yes, they're the econ department, but they're sort of understanding everything in the world. And seeing people like that, that they were econ professors by title, but it was everything from music to film to economics, obviously, to businesses, to technology, to everything. And if you just take a little bit of time, you can actually just understand how the world works or at least attempt to. I think that had a profound impact on me because you sort of assume that you're just living in somebody else's world, I think when you're younger. Especially by being a kid, that's how it is. You're told when to wake up. You're told what to eat. You're told when to go to school. You're told when to do homework. Et cetera. Et cetera. And that gets instilled in all of us and particularly post the Dewey Decimal type education system where you're given a task to do. But expanding that horizon a little bit and saying it is actually possible to at least attempt to understand how something works, I think I just didn't fully grok how much impact that's had until in the last decade. There's nothing that I look at and say that's hard to understand. I think you can understand it. It just depends on are you willing to put in a little bit of time into it?
Brett: Great place to end.
Anil Varanasi: Awesome.
Brett: Thank you for spending all the time.
Anil Varanasi: Thank you.
### The merger playbook: A founder’s firsthand story of the deal that beat the odds
URL: https://review.firstround.com/the-merger-playbook-crossbeams-ceo-breaks-down-every-detail-of-the-deal-that-worked-2/
Last updated: 2025-12-04T07:45:52.000Z
*This week, Bob Moore, co-founder and CEO of Crossbeam, details every aspect of merging with a fast-growing competitor.*
## [The Merger Playbook: Crossbeam’s CEO Breaks Down Every Detail of the Deal That Worked](https://review.firstround.com/the-merger-playbook/?title)
75% of mergers fail. But **Bob Moore**, co-founder and CEO of ecosystem revenue platform company **Crossbeam**, knew a deal with fast-growing competitor Reveal could materially change the trajectory of his company.
Leading up to the deal, Crossbeam was approaching $10M ARR and had 800 customers (including Snowflake, Okta and Shopify). But uncover the up-and-to-the-right metrics and you’d see a different story — the company was spending too much cash to generate each incremental dollar of revenue and that revenue was coming too slowly.
> “Our journey to $10M ARR had felt like chewing glass, and we still saw a buffet of it ahead of us,” Moore says.
In this essay, Moore goes into extreme, firsthand detail about how he and Reveal’s co-founder and CEO, Simon Bouchez, architected a merger that beat the odds. He takes us through:
- How they split the equity ownership and structured the board
- The values that dictated every aspect of the deal, with examples of how they were used in practice
- Why the messaging and narrative were so important and how they were deployed across different channels
- How they combined two teams and products, and the difficult tradeoffs they had to make in the process of doing each
Moore’s account of the merger goes beyond the vague headlines and PR talking points you normally get when it comes to M&A. If you’ve never run a real process yourself, you might be surprised at the sheer number of details to make it work. It’s a fascinating look at how two companies *actually* come together.
Thanks, as always, for reading and sharing!
*\-The Review Editors*
[Take me to The Review](https://review.firstround.com/the-merger-playbook/?button)
### The Merger Playbook: Crossbeam’s CEO Breaks Down Every Detail of the Deal That Worked
URL: https://review.firstround.com/the-merger-playbook/
Last updated: 2025-12-03T08:05:19.000Z
*Here on The Review, we’ve dedicated thousands of hours to detailing every aspect of company-building, which includes exits. We’ve covered prepping to* [*take your company public*](https://review.firstround.com/fresh-off-ipo-upstarts-ceo-shares-why-the-startup-isnt-a-typical-success-story/) *or the* [*decision to sell*](https://review.firstround.com/how-to-sell-your-startup-the-complete-guide-to-running-an-manda-process-as-a-founder/)*, but haven’t spent as much time on the process of merging with another company as a founder. They’re uniquely difficult to execute well. A majority of the time they don’t work because bringing two companies together — balance sheets, cultures, products and people — is far more difficult in practice than one company subsuming another.*
[***Bob Moore***](https://www.linkedin.com/in/robertjmoore/?ref=review.firstround.com)*, co-founder and CEO of ecosystem revenue platform company* [***Crossbeam***](https://www.crossbeam.com/?ref=review.firstround.com)*, knew the odds of a successful merger were against him. But he also knew the high rate at which startups fail in general. So when he saw the opportunity to materially change the trajectory of his company by merging with its fast-growing competitor, *Reveal*, it was a decision he didn’t take lightly.*
*From the outside, between vague headlines and PR talking points, M&A is inscrutable. And if you’ve never run a deal process yourself, you might be surprised at the sheer number of details to make it work. In this essay, Moore goes into extreme detail about every aspect of the odds-beating merger — its structure, the values they created, messaging, how they migrated thousands of customers and much more. We thought the best person to tell that story was Moore himself.*
*With that, the floor is his.*
*Disclaimer: The information in this document is provided for general informational purposes only and should not be taken as legal advice. Both parties were represented by experienced legal teams who guided the deal through complex regulatory, tax and cross-border considerations. Any legal decisions should be made in consultation with counsel.*
Everyone told me this would be a bad idea.
When I was considering [merging my company, Crossbeam, with our fast-growing competitor, Reveal](https://www.crossbeam.com/crossbeam-and-reveal-merger-announcement?ref=review.firstround.com), I understood a harrowing statistic: mergers fail [\~75% of the time](https://bcghendersoninstitute.com/the-ma-failure-trap-with-baruch-lev-and-feng-gu/?utm%5Fsource=chatgpt.com). Most of my advisors — and most of my board — disliked the idea. Some feared distraction, some were skeptical we could align on terms, and some would have preferred that we just tough it out on our own.
But two reasons led me to quickly gain conviction that it was the right move for us: The dynamics of our market and the alignment of our founders.
Companies like HubSpot, Stripe, and Anthropic use Crossbeam to identify and share overlapping accounts with their partners. They use this “second-party data” asset to enrich their own data, reveal insights about how to win deals and find signals that indicate who else they should be selling to. Some people liken it to “LinkedIn for data.”
At the time of the Reveal deal, we were approaching $10M ARR with some incredible logos in our roster and about 800 paying customers.
**This visualization of the Crossbeam network shows tens of thousands of companies (nodes) connected by hundreds of thousands of partnerships (edges) — each connection is a pipeline through which data can flow between companies under tightly controlled rules.*
Users and ARR were up-and-to-the-right, but if you dug a bit deeper, you’d find a different story.
We were spending way too much cash to generate each incremental dollar of revenue (our burn multiple was 5.9x) and revenue came too slowly — even with self-serve revenue picking up, sales reps endured an average 59-day sales cycle for below-market ACVs. We were trapped by the physics of our own business, and with interest rates rising in the post-ZIRP era, this wasn’t a tenable situation.
We hypothesized a few reasons for this, which Crossbeam’s frontline teams felt acutely:
1. We were in the midst of a slow and expensive “category creation” journey, requiring our buyers to carve out new budgets for a new product class that had to be sold to multiple stakeholders internally in order to purchase.
2. The existence of Reveal in the market was causing our network to split down the middle, leaving most customers straddled between two platforms, not able to get the full value out of either of them. (Imagine if there were two LinkedIns! Not only would you have a painful time finding a contact, which of those companies’ Sales Navigator product would you buy? Probably neither.)
3. The combination of the two points above made it impossible to mature and scale a pricing model. We just couldn’t repeatedly connect the value we created to the prices we charged.
If we were right about network effects and the power of our platform, then we should’ve been growing much faster.
> But in reality, our journey to $10M ARR had felt like chewing glass, and we still saw a buffet of it ahead of us.
These challenges ultimately limited our ability to deliver value to customers. Crossbeam and Reveal operated independently, and our overlapping efforts created confusion in the market. Instead of combining strengths to deliver a more complete solution, we were leaving customers without the full, unified experience they deserved.
In this essay, I’ll explain how we architected a once-in-a-lifetime merger to completely change the trajectory of both businesses. Here, I’m holding nothing back — from the structure of the deal, to the process for integrating the companies, to how we merged our customers, our products and more.
## Genesis of the deal (and why it almost died before it even started)
It took 18 months from conception to completion for this deal to happen. For most of that time, it looked completely dead.
I met Reveal’s CEO, [Simon Bouchez](https://www.linkedin.com/in/simonbouchez/?originalSubdomain=fr&ref=review.firstround.com), at an industry conference in 2022\. This wasn’t a normal meeting of competitors: we laughed.
Crossbeam had a silly mascot running around handing people drinks and Simon had just gotten off stage where he was introducing a made-up word (he coined the term “nearbound” as a category-creating term akin to our later “ecosystem-led growth” tagline). The absurdity of our situation wasn’t lost on either of us and we were quick to empathize.
**Crossbeam’s mascot PAM at the fateful Partnership Leaders Catalyst Conference in 2022*
As it turned out, we were both repeat founders fascinated with solving the same problem. We had kids almost the same age. We were confused about why we chose to attend a conference in Miami in August. Most importantly, we admitted to each other a hard truth: Because our companies rely on a network effect, our customers would all be a lot happier if there was only one of us out there.
The next week, we were on the phone exploring what it might look like to try and bring the companies together. As good as the idea was, the timing was awful:
- Both companies had raised capital within the last year and still had an overwhelming majority of that capital on our balance sheets. We felt internally — and knew our investors felt — like we had an obligation to duke it out and “win” the space.
- We didn’t have a good basis on how our companies could be valued against each other. We both knew the ZIRP-era valuations were not defensible, and our ARR was changing so rapidly that it became a battle of whose forecast was more aggressive.
- It was very difficult to articulate what success would look like, mostly because we didn’t have enough post-revenue operating history to compare it against.
We mutually decided to stop talking and regroup in a year if we thought it was worth another conversation.
**Slide from the post-merger 2024 full team all-hands meeting*
### One year later: the deal rises from the dead
In the following year, both Crossbeam and Reveal grew revenue at triple-digit percentages — but still missed all of our ambitious targets while burning huge amounts of money. Our burn multiple was 5.9x, and we still hadn’t made strides in winning large enterprises or more complex deals with higher ACVs. NRR (net revenue retention) was under 100% as customers hopped between platforms in the midst of the market fog, meaning our buckets were leaking into each other like a snake eating its own tail. Meanwhile, customer value was often hard to prove as the networks further fragmented and implementations stalled.
Crossbeam had strongholds in analytics, cybersecurity and ecommerce, with big logos like Snowflake, Okta and Shopify in our network. Reveal had the EMEA market and had picked up huge logos in CRM, HR tech, and customer experience like HubSpot, SmartRecruiters and Qualtrics. Meanwhile, a far greater number of companies were using *both* of our products in free tiers. We were so distracted playing small ball with each other that we couldn’t put together the bigger play of landing large, cross-functional, horizontal deals.
> The top piece of customer feedback for both companies was simple: please, please, please integrate the networks with each other. In other words, merge.
Almost a year after our last attempt, I dropped Simon a WhatsApp message: “Worth catching up?” We both knew it was time to get serious about what it’d look like to combine our companies.
Simon and I decided we had to meet face-to-face and get more time together before advancing the deal. Simon caught a flight from Paris to Philly.
In that meeting, we found the conversation kept gravitating to two sets of stakeholders: our customers and our teams. If we did this right, we could go from a “one plus one equals two” to “one plus one equals ten.” But it would require a lot of extremely hard decisions, conversations and an abundance of clarity both internally and externally.
Once we had agreed to pursue this idea seriously, one of the first things we did was create a set of “core values for the deal.” These were a set of principles we agreed to live by in the process of navigating this complex experience. If there was an argument, a stall, a blow-up or any confusion, we would look back to these values as our guiding light:
**1\. Customer experience wins**
- What it means: Every decision should make this merger feel positive and valuable for users, even if it’s harder for us.
- Why it’s important: Our customers have to feel this is great news or the narrative — and loyalty — will turn against us.
- When it’ll come up: In messaging, customer communications, migration experience and pricing or packaging choices.
**2\. One company**
- What it means: Once we merge, there’s no “Crossbeam” or “Reveal” — just one team chasing a single north star.
- Why it’s important: Scorekeeping or protecting old ways will slow us down and fracture the culture.
- When it’ll come up: In merging products, brands, leadership structures and shared tools or processes.
**3\. Frontload internal pain**
- What it means: Do the hard, uncomfortable integration work immediately instead of punting problems forward.
- Why it’s important: We need to make this our hardest year so the next five can be our best.
- When it’ll come up: In restructuring teams, merging systems and tackling tech or UX debt early.
**4\. Focus on the future**
- What it means: Tell a story about where the new company is going, not just how the old ones combined.
- Why it’s important: This moment gives us outsized attention — so we must frame a big, forward-looking vision.
- When it’ll come up: In launch announcements, motivating teams and pitching investors or press.
The values were written in intentional order, with higher values taking precedence when trade-offs emerged. For example, we wouldn’t steamroll too fast in creating “one unified company” if it came at the expense of the customer (because the customer value came first).
**As you can see from the spirit of the values, Simon and I also knew we’d have to make the first year of the merger the hardest one, so our next five could be our best years**. To do that, these values would help us eliminate the “let’s do both” compromises and project a clear vision for what a combined company could become. That means no co-CEOs. No naming the company something ridiculous like “RevealBeam.” No made-up titles to protect egos and bloat the leadership team. We would put down our egos and rip off band-aids as early as possible to avoid pain later.
## Getting it done: from term sheet to close
Simon and I had a handshake deal, and a good understanding of what it would take to finish the job. But there was one big hill to climb: investor support.
We knew that getting our respective boards to support this move would mean coming to them with the right economic model. Our boards are made up of amazing, founder-friendly investors but it’s still their job to ask hard questions and push to optimize terms in situations like this one.
### Equity ownership
This would be a stock deal, so the big question was, “How do we value each company?” To me and Simon, the data told the story: If you compared our ARR, the split was 70% Crossbeam, 30% Reveal. If you compared the size of our networks it was, miraculously, also 70/30\. And the post-moneys of our last VC rounds? You guessed it: 70/30\.
In keeping with our deal values, Simon and I felt this 70/30 split was the only answer that wouldn’t come with massive amounts of posturing and distraction. Predictably (and responsibly) each of our investors felt differently:
- Reveal’s investors felt they should fetch a premium as they were the smaller “target” and had an excellent alternative path of just continuing on without us due to their strong cash position. They wanted something more like 60/40.
- Crossbeam’s investors felt we should fetch a premium as the larger “category leader,” with more big customers and revenue scale. They wanted something more like 80/20\.
This is where founder conviction is a superpower, and great founder-friendly investors show their true colors. Simon and I agreed that, rather than fighting each other, we would both go back to our respective investors and make a hard case for the 70/30 terms.
> Bringing two companies together is an exercise in prioritizing the interests of your future combined company over your own egos and short-term interests.
A few scenario models later, we were able to get our investors convinced that a local optimization here was not a hill for anyone to die on. This would either work or not, and getting entrenched in arbitrary negotiation about a premium calculation could be a poison pill. After a week or so of meetings and analysis, the investors were all on board and the split was set at 70/30\.
There’s another truth underlying the deal: because both companies were well capitalized, by joining forces, our combined cash (with cost reductions) gave us lots of runway. Crossbeam received about $25M out of the deal, which was material, especially given we’d be burning a fair amount of cash as a combined business. Even if things didn’t work out, we and our board understood that this was also effectively a fundraising event, providing a helpful downside insurance against the integration failing somehow.
### Board structure
We were fortunate that many other potential landmines were easy — Simon joined the board along with one of Reveal’s lead investors. We kept my seat and Crossbeam’s three investors, and left an independent seat open. This created a voting power ratio that worked out to 67/33 (if you squint, that’s beautifully similar to 70/30!).
### Investor rights
The other pill that Simon and I agreed to swallow was stacking up the liquidation preference on the capital raised by the two companies. This ensured downside protection for all the investors who would suffer dilution from this deal. Everyone played nicely here and we ended up with a really clean stock structure with 1x convertible preferred investor stock. (In other words, no new punitive investor terms or special treatment for anyone in the investor classes. Like me and Simon, they all agreed to “be in together” to make this deal doable.)
### Getting to signature
Believe it or not, ALL of this was in the term sheet. Again, in the spirit of the deal values, we ripped off all these band-aids in advance so nothing could get us stuck in the closing process. It made for a protracted term sheet negotiation but a beautifully smooth and short closing process.
From the date we sent the first term sheet draft over (January 18, 2024), it was just under two months to the signing of the document (March 16, 2024).
### The journey from term sheet to closing the deal
Signing a term sheet (more formally known as a Letter of Intent) is not the same as closing a deal. The term sheet lays out an initial understanding of how a deal will be structured, but it simply kicks off an intense “due diligence” period during which definitive documents are negotiated, additional discovery is conducted and more. Countless deals die during this phase, despite the best intentions laid out in their term sheets.
Here’s what our target closing timeline looked like the day we signed the term sheet:
- Term sheet signed: March 16
- Rough financial model finalized: April 5
- Org chart finalized: April 30
- Target close and signing, and external announcement: May 15
Despite this optimistic target of a 60-day close, we closed the deal at exactly the 101-day mark on June 25th. What took so long?
Lots of the delay lived in the intricacies of merging two companies with multiple sub-entities spanning the US, UK and EU. Ensuring no punitive tax consequences, stock option value destruction or currency issues was a complex journey.
The other major topic at hand was compliance. Both our companies were quite small and had plenty of other competitors to deal with in our broader market, but it was still critically important we not run afoul of any laws or even best practices particularly regarding competition. The big thing here was the concept of “gun jumping,” which is the act of operating as a combined company prematurely. It’s a little bit of a logic trap: Obviously we wouldn’t be able to execute a merger without deep knowledge of each other’s businesses, but we couldn’t share operational “secrets” like customer lists or jointly make decisions about the company's future operations until we were all one company.
Our solution was to create distinct subteams in the closing period between term sheet and the deal being done:
- “Clean Teams”: Special teammates on each side privy to more detailed information for the exclusive purpose of due diligence. They were not allowed to use information to assist the Deal Teams in their work. This included:
- Crossbeam: General Counsel, Head of Finance and CISO
- Reveal: Chief of Staff, CFO and VP of Human Resources
- “Deal Teams”: Operating executives inside each company who were “read in” on the merger and conducting information gathering to ensure a successful transaction and post-merger integration, but not privy to secrets from the other company and not engaging in any joint operational activities. This included:
- Crossbeam: CEO, CTO, CMO, VP of Product, VP of Sales and VP of People
- Reveal: CEO, COO, CTO and CPO
While the deal teams were “read in” at a high level, no competitive or sensitive information was shared and the two companies operated at arm’s length until the deal was closed. This is a really tough and delicate balance but important to avoid operating as one company until the deal is finalized.
One fun note: Like all good deals, this one needed a codename just to provide some cover in case any documents or other materials leaked. I chose “Project Waterboy” — a term inspired by the fact that my name is Bob (or Bobby) and Simon’s last name is Bouchez (or Boucher) — Bobby Boucher is Adam Sandler’s character in *The Waterboy*.
## Coming together: day zero
On closing day, each company held their own “just us” all-hands meeting where the founders explained the deal, talked about the decision and motivation and then invited the other founder in to meet the company.
Then, the next morning (afternoon French time), we held our first combined all-hands meeting as a united company. **This was possibly the most important hour of this entire experience, and we covered a lot of very important topics to set us off on the right foot**.
### Messaging and narrative: “merger” versus “acquisition”
So much of this deal’s success can be chalked up to “not letting egos drive.” While structurally this was an acquisition of Reveal by Crossbeam, Simon and I would only refer to it as a merger.
This decision came down to the very first core value of the deal: customer experience wins. Reveal had over 10,000 companies on its platform that would be migrating over to Crossbeam (more on that later), and the message we wanted to send was one of thoughtful and equitable treatment of every customer regardless of where they had started out.
Here’s an excerpt from the announcement we sent to customers:
*“We are thrilled to announce the merger of Crossbeam and Reveal into a single entity. Everyone will be able to partner with everyone. Finally.*
*The combined company will hold a north star vision of creating a best-of-both-worlds customer experience that includes a single unified data network. This will allow us to drive an innovative roadmap of products for all go-to-market teams that goes above and beyond today’s commoditized world of intent signals and workflows.”*
*In the coming months, our users can expect a thoughtful and decisive combination of our platforms, messaging, and teams. We will combine our greatest superpowers to create something even more valuable than the sum of its parts. With the most powerful account mapping data network ever created, we help more companies win, unlock new kinds of insights, and enable the go-to-market playbooks of the future.”*
Moreover, there was an important message to send to both teams: We are one company (another value) and we are equally responsible for the success of our combined company.
> We would make decisions based on the best outcomes for our customers and our business, and there was no place in our go-forward plan for a power hierarchy between the businesses that came before.
This was another case where I got pressure from some advisors and even our own executives to please reconsider. To them, the “optics” of us “winning” and “sending a message to the market” by acquiring Reveal were just too tempting to pass up. But, to me and Simon, that glory would fade fast and leave the wrong operational setup in its wake.
Here’s a slide from our day zero standup meeting of the newly combined company:
### Leadership and reporting lines
Simon and I split duties along the lines of skillset and background. I’d become CEO, and because I had an engineering background (and experience as a VC and in finance), would have product, eng, marketing, finance and ops rolling to me. Simon would become COO, and had experience with more of the customer-facing aspects of the business — so sales, customer success and partnerships reported to him.
Showing that Simon and I were extremely aligned was an important part of this. In the all-hands announcing the merger, we made the new org chart transparent to everyone and also placed ourselves side-by-side as co-founders.
**Slide from 2023 full team all-hands meeting*
**I want to point out one very intentional element of this new reporting structure: Simon and I ended up managing some of each other’s most senior executives, and this set an important tone around how the teams would have to immediately integrate into one cohesive unit**.
Most notably, Crossbeam’s CRO, who’d previously reported to me, would now be reporting to Simon; Reveal’s COO, who’d previously reported to Simon, would now be reporting to me.
### Difficult team changes
At the same time as the merger, we had to right-size the combined team (across all levels of seniority and functions). In the end, we netted out at about 120 people, down from what would have been 200 if we’d not merged and continued with our pre-existing hiring plans as independent companies.
For teammates who’d be impacted, Simon and I personally worked with them ahead of the company all-hands, with the rest of the team finding out during that all-hands. This allowed us to exit people in a way where they could retain some agency in the process, get their flowers and end this chapter in a way that connected to the successful milestone of the merger.
### Defining success
We spent a lot of time in that first all-hands meeting on the deal story, the journey to the finish line, our hopes and dreams from a long-term vision standpoint. But we felt it was also essential that we define the team’s concrete measurable goals for what success would look like one year from that day.
If we did our jobs well, these would all be true in a year:
1. Our company would have crossed $20M ARR (representing a material acceleration of our growth rate)
2. Burn would drop to less than $1M / month (and thus combined with #1, our burn multiple would drop by over 80% from \~6x to \~1x)
3. We would be one team with one (awesome) culture as shown in team retention and satisfaction scores
4. We would have one product, one network, and one customer base
5. The company would be spending 100% of its time on forward-looking innovation and growth, rather than artifacts or unfinished business from the merger
Now we just had to execute.
## After the honeymoon: the real work
Most of the work we’d done up to this point was figuring out the deal and messaging it to our teams — but now, it was time to tackle the material aspects of bringing two companies together, most notably our products and customer bases.
### Merging products
As codified in our core values, this was the highest-priority part of the merger. Our one-year goal was having “one unified product,” and within a month of closing, our technical teams had run a complex analysis of various options around how to achieve it.
The way we saw it, we had three options. Here were the two we explored, but decided against:
- **Merging the two codebases to allow a seamless interoperability of the networks.** This might make everyone in the room feel good, but was not the best thing to serve our customers. The backends were written in different languages, there was a ton of redundant code and we used different infrastructures (Crossbeam was on AWS, Reveal was on GCP). While it may have sounded warm-and-fuzzy to our teams and customers at first, we’d create a duct-taped system and years of baggage that would impede future innovation. We needed a clean break. (Pain up front, remember? Someone was going to have to throw away five years of their hard work and that was just a fact.)
- **Creating a totally new product**. We could do this, and we’d probably build a platform that was incrementally better, but we were going to spend years doing it. We’d also have to migrate all 30,000 companies across both platforms to the “new thing” instead of Reveal’s 10,000 one way or Crossbeam’s 20,000 the other way. Overall, this option felt like a short-sighted pipe dream.
**We decided to have one platform absorb everything about the other (including its customers), and we ended up bringing everything over to Crossbeam.**
Why Crossbeam? It had more customers (including far more large, entrenched enterprises) and a more complex set of advanced configuration functionality that would’ve been harder to map over to Reveal. Specifically, these were features that allowed customers to configure data sharing rules, user access rights and other typically enterprise-grade functionality — all stuff that would’ve been hard to spin up in a new environment and move customers to. Moving everything to Crossbeam could happen faster with less customer disruption.
It’s also worth noting that Reveal’s frontend was objectively better than Crossbeam’s. As a result, even though the combined network would live on Crossbeam’s backend, we did invest in several projects to make the Crossbeam frontend adopt the best parts of Reveal’s frontend experience as part of this year-one project.
### “Crossboarding” Reveal customers
**We outlawed the word “migration.” No one wants to migrate anything, ever; it sounds like painful work that just gets you right back where you started.**
Instead, we adopted the term “crossboarding” for the process of moving Reveal customers over to the Crossbeam network. It delivered the message that we would be there doing just as much heavy lifting as our customers.
Crossboarding was a hybrid approach that combined technological work (i.e. automatically creating accounts and re-establishing partnerships) with a white glove customer service experience (i.e. trainings, live walkthroughs of reauthorizing system access). Methodically, each customer from Reveal was able to rebuild their partner graphs, reconfigure and validate data shares and navigate technical migration steps.
This required operating at massive scale (as tens of thousands of companies and users were impacted), each on their own systematic roadmap.
**Customer Success team internal slides, August 2024: The crossboarding journey each Reveal customer would experience.*
**Customer Success team internal slides, August 2024: Our initial “waterfall” of customers to track through migration.*
**In the end, we crossboarded all paying customers of Reveal over to Crossbeam prior to the retirement of Reveal at the one-year anniversary of our deal. We also had a nearly 100% rate of crossboarding for active free tier users of Reveal.**
Was there any churn? Of course. But interestingly, the annual churn rate of crossboarded Reveal customers was nearly identical to the pre-existing underlying churn rate prior to the merger (roughly 14% annually, or an 86% gross revenue retention rate). In other words, it doesn’t appear that the deal or the crossboarding process created any detrimental churn that wasn’t already coming our way.
### Pricing and packaging
Customer migration also included getting every paying Reveal customer on a new contract that was based on “Crossbeam paper” — our master services agreement (MSA) that governs all our paid contracts.
Yes, we could have found a way to alter the Reveal MSA and create as "familiar" a renewal experience as possible for Reveal customers, but that would have violated our core values for the deal and created a lot of confusion long-term, violating our one-year goal of having all teams focused on a single, united go-to-market playbook. So we opted to make every renewal a little harder the first time so we get all customers on one clean set of books and terms. Especially for Reveal’s enterprise customers who were not using Crossbeam at all — Qualtrics, for example — this amounted to effectively restarting procurement again from scratch, an effort more akin to a new sale than a renewal.
With the Crossbeam MSA came Crossbeam pricing. Because both companies had relatively immature monetization strategies, there weren’t many large, pre-existing, multi-year contracts to untangle. We’d both been operating on freemium-heavy models and our customers had different definitions of value, forcing us to reconsider how much customers paid and why.
> This was a moment to rebuild our pricing strategy on first principles. The result was collapsing the two revenue systems into one pricing framework tied directly to customer outcomes, not legacy metrics.
All new deals and renewals would be sold as Crossbeam licenses, and we’d honor the pricing of current contracts. But instead of the legacy SaaS tiers and flat licenses we were using, customers would now pay for the number of user seats they needed and what data they’d need access to — a much clearer model that more directly showed the value of the platform.
Within one year of our merger, NRR had jumped from roughly 90% to 105% and climbing. Our hole in the bucket had sealed.
### Rebalancing the C-suite
Four months after the merger, Simon and I came to a hard realization: the majority of our C-suite was hired in a different era with different market dynamics, different challenges and different opportunities.
For example, most of our pre-merger marketing efforts were about category creation and standing out against a noisy competitor, but today we had a singular market story and it was time to shift energy to more pure lead generation efforts. We had also hired product and technical leadership that was more appropriate for a company many times our size (based on the high-flying ZIRP era expectations). These just weren’t befitting our new streamlined structure.
We came to the hard decision to let most of our C-suite go, including our CTO, CMO and CPO.
> It became clear the new org was top-heavy. Yet our best player-coaches were thriving and hungry for more.
In thinning out the top layer of the company, we did no backfilling and instead placed more responsibility on the existing team's highest performers. These folks were given leadership positions in roles across the company, like content marketing, operations and engineering management.
We also made sure that our co-founders and remaining C-Suiters took a more hands-on approach. I was back in our daily product planning meetings, and Simon was in the pipeline reviews with our sellers. It felt really, really good — and was more befitting our size.
## Reflecting back on the deal
The merger that everyone said wouldn’t work ended up beating the odds. At the one-year mark, we hit every single one of our goals:
1. **Clear $20M ARR** — we beat ARR forecasts by 120% at one year and flew toward the $25M mark while adding ARR at a faster pace than ever before in company history.
2. **Burn less than $1M / month** — our burn multiple plummeted from 5.9x to 1.1x in a single year and our ARR/FTE had more than doubled.
3. **One team, one (awesome) culture** — we’d fully integrated teams and driven employee NPS up 20 points from +8 to +28.
4. **One product, one network, one customer base** — Reveal’s product had been sunset and all customers were migrated not just to the Crossbeam platform but also to “Crossbeam paper” as every renewal in our first year was redone on the Crossbeam MSA.
5. **Company focused on PDE and GTM innovation** — with customers migrated and Reveal sunset, 0% of our roadmap and sales energy was focused on the past. We started shipping faster than ever, and company-defining features like our Deal Navigator and AI products hit the market just a few weeks after the one-year mark.
Simon and I knew that the first year would be our hardest, and I’m extremely proud of the work our teams did and the faith customers had in us.
**Slide from 2025 team offsite*.
I can talk all day about setting egos aside or great strategic vision, but the reality is that Simon and I both knew: This deal solved the biggest problems in our companies, gave us a sense of new momentum and possibility, energized our teams and radically accelerated the hard changes we knew were necessary but feared may kill our companies.
I’ve been a founder [since 2008 across three separate venture-backed companies](https://review.firstround.com/this-founder-built-startups-in-2008-2016-and-2018-heres-what-hes-learned-about-resiliency/), seen booms and busts, expansions and contractions, fire sales and windfalls. These experiences have taught me that many successful situations are a result of being lucky *and* good. I believe we were both, and am extremely grateful to have found a partner in Simon who had the courage to do what was right for our companies and customers. We have a lot more work to do — and now, a stronger foundation on which to do it.
### Listen: How this two-time billion-dollar founder wins in the enterprise
URL: https://review.firstround.com/listen-how-this-two-time-billion-dollar-founder-wins-in-the-enterprise/
Last updated: 2025-11-26T08:03:33.000Z
GTM lessons from Jyoti Bansal
_This post is for subscribers only._
### How Harness runs 16 “startups within a startup” at scale | Jyoti Bansal (Co-founder and CEO)
URL: https://review.firstround.com/podcast/how-harness-runs-16-startups-within-a-startup-at-scale-jyoti-bansal-co-founder-and-ceo/
Last updated: 2026-04-29T03:43:21.000Z
Jyoti Bansal is the co-founder and CEO of Harness, the software delivery platform used by thousands of engineering teams. He previously founded AppDynamics, which he led from inception to a multibillion-dollar acquisition by Cisco. In this episode, Jyoti unpacks what it really takes to move from mid-market to enterprise, why he thinks in terms of “product-market-sales fit,” and how he structures Harness as a collection of “startups within a startup” to launch multiple “best-of-breed” products.
In today’s episode, we discuss:
- Why companies get stuck in the mid-market and struggle to move up into enterprise
- Why Jyoti deliberately lost Netflix as their customer
- The difference between product-market-sales fit, and product-market-fit
- How to build a scalable, capacity-driven go-to-market machine (instead of chasing deals)
- Diagnosing whether you have a product problem or a distribution problem
- How to hire and evaluate your first head of sales and top sales leaders
- Why Jyoti sold AppDynamics three days before IPO
- The “binary differentiator” rule for launching new products into crowded markets
- Why Harness runs 16 product lines under one roof
**Where to find Jyoti:**
- LinkedIn: [https://www.linkedin.com/in/jyotibansal/](https://www.linkedin.com/in/jyotibansal/?ref=review.firstround.com)
- Twitter/X: [https://x.com/jyotibansalsf](https://x.com/jyotibansalsf?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**References:**
- Amazon: [https://www.amazon.com/](https://www.amazon.com/?ref=review.firstround.com)
- AppDynamics: [https://www.appdynamics.com/](https://www.appdynamics.com/?ref=review.firstround.com)
- Barclays: [https://home.barclays/](https://home.barclays/?ref=review.firstround.com)
- BIG Labs: [https://www.biglabs.com/](https://www.biglabs.com/?ref=review.firstround.com)
- Carlos Delatorre: [https://www.linkedin.com/in/cadelatorre/](https://www.linkedin.com/in/cadelatorre/?ref=review.firstround.com)
- Charles Schwab: [https://www.schwab.com/](https://www.schwab.com/?ref=review.firstround.com)
- Cisco: [https://www.cisco.com/](https://www.cisco.com/?ref=review.firstround.com)
- Citi: [https://www.citi.com/](https://www.citi.com/?ref=review.firstround.com)
- Cloudability: [https://www.apptio.com/products/cloudability/](https://www.apptio.com/products/cloudability/?ref=review.firstround.com)
- Datadog: [https://www.datadoghq.com/](https://www.datadoghq.com/?ref=review.firstround.com)
- Dynatrace: [https://www.dynatrace.com/](https://www.dynatrace.com/?ref=review.firstround.com)
- Harness: [https://www.harness.io/](https://www.harness.io/?ref=review.firstround.com)
- Jeff Bezos: [https://x.com/JeffBezos](https://x.com/JeffBezos?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com/](https://www.microsoft.com/?ref=review.firstround.com)
- Nasdaq: [https://www.nasdaq.com/](https://www.nasdaq.com/?ref=review.firstround.com)
- Netflix: [https://www.netflix.com/](https://www.netflix.com/?ref=review.firstround.com)
- New Relic: [https://newrelic.com/](https://newrelic.com/?ref=review.firstround.com)
- Salesforce: [https://www.salesforce.com/](https://www.salesforce.com/?ref=review.firstround.com)
- Splunk: [https://www.splunk.com/](https://www.splunk.com/?ref=review.firstround.com)
- Traceable: [https://www.traceable.ai/](https://www.traceable.ai/?ref=review.firstround.com)
- Unusual Ventures: [https://www.unusual.vc/](https://www.unusual.vc/?ref=review.firstround.com)
- VMware: [https://www.vmware.com/](https://www.vmware.com/?ref=review.firstround.com)
**Timestamps:**
(01:48) Why do companies get stuck in the mid-market?
(05:09) Designing a product for enterprise and mid-market
(07:19) Why Jyoti lost Netflix as a customer - on purpose
(10:18) Becoming a scalable GTM organization
(12:32) The real signs of product-market fit
(14:04) Have you delivered the value?
(15:46) How to hire your first sales team
(19:59) The four signs of excellent sales leaders
(23:16) How to interview a sales leader
(27:51) Where Jyoti developed his commercial taste
(29:37) Why early founders need to learn sales
(32:02) How AppDynamics began
(36:36) Why Jyoti sold three days pre-IPO
(41:55) What does a healthy board look like?
(44:23) How Jyoti perceives competition
(46:18) Why you need a binary differentiator
(49:53) How to launch multiple products
(52:00) “We need to be best of breed”
(57:38) Why PMs are like mini-entrepreneurs
(1:00:20) The startup within a startup
(1:02:45) A culture of continuous improvement
Jyoti: Early on when you think of go-to-market, people talk about product-market fit. Sometimes they say you should think of product-market sales fit. But if you have not figured out how to sell it, you may have to redesign the product.
Brett: For today's episode, I'm sitting down with Jyoti Bansal, founder and CEO of Harness. In one of the rare examples of a second-time founder who's built not one, but two enduring enterprise software companies.
Jyoti: If someone asked me, as a second-time founder what you learn, I said, the main thing is to not go in the assumptions at what worked the first time will always work the second time.
Brett: After selling AppDynamics to Cisco for 3.7 billion, Jyoti could have done anything. Instead, he dove back into the startup trenches this time building a platform to automate software delivery for engineering teams. What stands out most about Jyoti is how systematically he approaches company building, from building a go-to-market motion all the way through scaling up the sales team.
Jyoti: When I was doing AppDynamics, until the first 10 million of revenue I didn't care about go-to-market. As we built the best product go-to-market will happen. And then I realized to scale, really, we need to be equally excellent and go-to-market as we are excellent in product.
Brett: In our conversation, we talk about why starting with enterprise customers has been an advantage, and how to diagnose whether your challenges stem from product or go-to-market issues.
Jyoti: If someone comes to me and say, "This product is not selling and go-to-market is not doing a good job," the first question I ask them, "How many happy successful customers do you have?" We don't really have any happy successful customers.
Brett: He also shares how he thinks about founder-led sales, what it really means to take go-to-market seriously from day zero, and what separates an exceptional sales leader from an average one. Let's dive in. When you look broadly at the software ecosystem, there's a lot of companies that start mid-market and struggle to crack enterprise. Do you think it's normally that the problem is just different in enterprise, that it's surprisingly hard to get go-to-market right in terms of transitioning from mid-market to enterprise. Do you have a theory as to why a lot of companies tend to get stuck in the mid-market?
Jyoti: It's almost like over time you build certain muscles at a company. The go-to-market muscle in mid-market is around... PLG is very important to it. You have to have the high velocity. It's mostly inside sales. The heavy-duty enterprise sales folks will be too expensive for it. Now you've built your culture and muscles around it, for now you want to change to something else or build something in parallel that's just organizationally hard. That's the one part that I see, you build all the machine around, it's mostly marketing-heavy, mostly PLG, you have cheaper, younger inside salespeople. Enterprise will be more sales-led. You have partners and channels and expensive enterprise salespeople, longer sales cycles. There's a shift in how the financial planning will happen in your company. And with the CFO will be onboard with the salespeople, what you celebrated before, how the product managers work with go-to-market. Those are just a company's DNA get created over time. The second is the product. The products that are designed for mid-market and products that are designed for enterprise have certain differences. In enterprise, you need to hide... You want lots of capabilities and lots of flexibility. Lots of capabilities and lots of flexibility could become a complex user experience in mid-market. What's your strength in enterprise could become your weakness in there. Versus, also applies like in mid-market you designed a simple product with less capabilities, but now it doesn't work and do the things in enterprise. It's possible to do both. It's possible to do both, but you have to design the products in the right kind of way where you remove the things that are not needed in market, you price in a certain way. But it's just hard. For enterprise-focused companies to go mid-market is also hard.
Brett: You very rarely see a company that begins by dominating enterprise be able to go down market.
Jyoti: Yes, yes. It's very, very hard. But that's why at Harness one of the lessons I learned was I wanted to do both. I wanted to set a charter for let's design for both. There's no reason why we can't design our product where it works in enterprise, it has all the capabilities, it has all the flexibility, but it also has the ability to simplify and work in the mid-market. For two reasons. One reason is I didn't want the mid-market companies to come in enterprise at some point in future and compete with us there. Second is, I do think that designing the simplicity of the experience helps an enterprise as well. Because if you want do your... Even enterprises you would still do some PLG. You still want people to get going. Even someone who's already bought your product, for them to adopt, you still want the simplicity and the virality that comes from it. There is an advantage of, as an enterprise-focused company also to not completely let go of, okay, we are so heavyweight and so complicated. But that becomes our issue. You want to get almost the accountability that comes from by selling into commercial. We call it commercial space with the mid-market space. We are at 80/20 right now. I would actually like it to become 70/30\. We don't need it, but we just think it actually creates the right discipline on how the product should be designed.
Brett: How did it translate to you think about the first year of the company and building Harness, with this idea of primary/secondary you wanted to be able to play in both? What did it actually look like tangibly in terms of how you approach building the business?
Jyoti: Well, the large enterprise you won't nail for some time. The product won't be ready. So you really start with mid-market anyways. At Harness, I knew that I wanted to sell in enterprise quite a lot, and you start having those dialogues, you start having dialogues with the large banks, your City Banks and Barclays and all kind of companies. But you're still mostly selling into the mid-market who are more fast-moving, they don't need so many capabilities, they can move fast, all of that. But by working with them, you're getting the product to be ready with it has to work an enterprise. And some point you start nailing your first enterprise customer, and then you nail your second. And that's what happened in practice with us.
Brett: What was your first enterprise customer?
Jyoti: I think one of the banks, Charles Schwab.
Brett: And how long into the company's life did you land them?
Jyoti: They were early, that were two years in the company life. But that was, they were one and then you get more, then it takes more. And now it's like we nail enterprise customers every week. But early in the company life, I won't say we only sell into enterprise only. We would starve otherwise, so we build the product. We don't need to build the... Again, it's about this is the path we are on. But on the path we don't need to wait for the full path. You find customers wherever you find, really, and most of them will create the pipeline in enterprise will also create a pipeline in mid-market. The mid-market pipeline will close faster. The enterprise pipeline will close much, much, much longer. But you start closing one and two, and then you start learning from them and the product starts get to mature and then you build all of it.
Brett: Were you particularly opinionated about your first three or five or 10 customers when building Harness? Or broadly speaking, anyone in mid-market that needed a solution that you had was fine to get going?
Jyoti: I don't believe I'm being opinionated too much on it. It's like, you want the right use cases though. You have to be opinionated on you are building the product that would be broadly needed, not by what this one customer wants or this two customer wants. Something like that, right? That's what for sure, but not who the customer is. Our first customer was online retail company. Second was a speech translation. And some of those companies become bigger over time as well. They grow from there. In AppDynamics, our customer number three was Netflix, and Netflix was just transitioning. And it sounds like an old time ago, very long time ago now. They were just starting to transition from DVD company to a streaming company. They were, in terms of the tech footprint, was not big. And they were our customer number three. And then they suddenly like, okay, we are going to, boom, completely in the cloud and become the online streaming company. And when we started working with them, they were like 300 servers, that's a total thing, and they became 3,000 servers running in the cloud in a couple of years.
Brett: Did that help you mature the product rapidly-
Jyoti: Definitely.
Brett: ... because you didn't want to lose them?
Jyoti: Definitely, yes. It helped us mature the product very rapidly. Some point of time, and that was hardest decision and I probably ever made, we decided to lose them. They were so much bigger than our customer number. They were customer number one in terms of their size, and our customer number two to 20, the mind were not their size. And we are producing a lot of revenue and the business was growing. And so much our effort was going into scaling and making it work for them, that at some point we had the conversation and dialogue with them that we have to let you go. It was probably the only time I had to let go a customer like that, but that was the right business decision for the company.
Brett: How did you figure that out?
Jyoti: Just the engineering time. I couldn't get anything else done in the engineering roadmap. At that time we had 200 customers, and they all have the requirements and things, and feature requests and things that they want. And then we had Netflix's number one customer. They have a lot of requirements and things that we have to do. At some point it became it was only for them in our case at that time. And that's where it was clear I cannot serve the other customers, it's just very hard choice to make that we just cannot serve other customers supporting that one customer. Which was such a great customer to have, and to lose them after three years was a painful choice to make.
Brett: What does it look like to take go-to-market seriously from day zero? Oftentimes, before you really have a product built and all that type of stuff.
Jyoti: In the very early on when you think of go-to-market, you think of people talk about product market fit. Sometimes I say you should think of product market sales fit. Which is, if you design a product which is what problem you're solving, what is your solution? That's a product market fit. But if you have not figured out how to sell it, it will eventually you may have to redesign the product. If you're going to sell it to enterprise or mid-market, you're going to sell it through PLG or you're going to sell it through sales led. How you design the product is very dependent on how you're going to sell it. If you don't think about it like the product is solving the problems, your go-to-market is going to PLG, and you didn't really design for that experience, that's not going to work. You're going to sell into large enterprise and you didn't design it properly. To me, figuring out what the go-to-market would be is very, very key. You have to trade through that also. The product market fit iteration also need to figure out the go-to-market fit iteration. You just have to deliberate about it. At Harness we were more deliberate about it, like, okay, this is what we want to build out. We knew what we need to build out, otherwise it won't be sellable. We can build a product that works, but it won't be sellable because it's not ready for our sales force to scale through that. Talk about, how do you become a more scalable go-to-market organization? When you convert that into your product and you have some sales that can scale, you can go from 10 units of sellers to 50 units of sellers to 500 units of sellers, there's a scalable machine that you have to build out. The more you put in, the more will come out because you have a repeatable, predictable, and go-to-market sales machine.
Brett: Say more about how you go about doing that.
Jyoti: Well, so much goes into that. A lot of it is the fine-tuning the kind of sellers you will have. Fine-tuning, what does the demand generation funnel look like? What comes on the top? What converts at every stage? So you know if I get 5,000 leads of this kind, they will convert into this many demos for our sellers, and these demos will convert to this many opportunities of this kind, and this many will go to this kind of close rate. Now, at some point you can predict based on how many leads what you're going to close in six months because this is your sales cycle, you can start planning your business in terms of how many new sellers you'll hire, how long it takes them to ramp, how many you iterate, what's the sales capacity that comes from it, what's the demand generation capacity that comes from it. Then you know, okay, we want to go from 5,200, you know what you need. Otherwise, if you are... We are going to go to 5,200, you have this many sellers today, and we are going to close business in these accounts and deals. That doesn't work. To me it's like, a scale sales organization is when you're not talking about deals, you're talking about capacity. The deals will happen when you have the right capacity. When you say, okay, I have 20 million a quarter of ramped sales capacity, so I know I'm going to close 90% business of that, roughly 18 million. Without even thinking of what deals you have for 18 million. Then you have your predictable system. Of course, at the end of the day you have some deals you have to close, but you can get to a point where you don't need to think about what deal whatnot.
Brett: And call it the one to five or five to 25 scale revenue chapter of the company. How do you think about diagnosing if there's a fundamental product problem, or if there's a go-to market kind of distribution problem in the business if it's not growing in the way that you want?
Jyoti: I think a lot of it comes down to the product market fit definition again. My definition of product market fit is always not that we have sold the product, but did we deliver the value to the customer after we sold it. For most enterprise software products, over time the rule of thumb that I've learned is that if you have delivered value to 25 customers, you have a very strong product market fit. Not just that you've sold 25 customers. When you sold, you said this is the problem we'll solve and this is the ROI you're going to get, this is the benefit you're going to get. And three months later, six months later they bought your product and they have got that ROI, and you've successfully implemented and ensure it. If you don't have successful, happy customers, it's most likely a product problem. It's not a go-to-market problem. If someone comes to me and say, "This product is not selling and go-to-market is not doing a good job," the first question I ask them, "Okay, how many happy successful customers do you have?" And it's like, "We don't really have any happy successful customers," or we have three or four or five, product is not ready yet for go-to market to really really scale on it. That's where I look at many times that is the founder-led sales job is to deliver not just the first 25 customers but also the first 25 success stories, or the successful outcomes that come out of it. A lot of the product maturity happens in that process, not in the selling processes. The delivering the value into those. Once you have those, most products should be able to scale. If you have those happy successful customers and go-to market, it's not scaling after that, then you have to feel like, okay, did something change since you found that product market fit, the competitive dynamic to everything? Part of the most likely it's a go-to-market problem otherwise.
Brett: The definition of a happy successful customer, is that generally easy? It's visceral, you talk to the customer, "This is exactly what I needed."? Or there's some, with more precision it looks like X or Y?
Jyoti: To me, just comes down to one thing, is the value delivered? And the value delivered perception in there... It's like if you ask a customer, "Are you happy?" Sometimes they might be happy but they haven't gotten any value out of it. It all really comes down to, have you gotten the value you thought you will get when you bought us? In Harness, we run a very structured sales process where we will create a assessment before we sell. Which is, this is the value you're going to get. If you buy Harness and using Harness for continuous delivery, your deployments. We do an assessment of right now you're deploying once in two weeks, you can become once a day. Your engineers spend this much time per deployment, like six hours per deployment, that can come down to 30 minutes per deployment. Your failure rate is this much today, a 20% deployment failure rate, we can bring it down to 4%. You define outcomes in the sales process. And then after once you sell it we work with the customer on, have you achieved those outcomes? And have you not achieved those outcomes, you haven't delivered the value that we promised. Even if you're not that structured around it, I really think the happy successful customer definition is very simple as, have they achieved the value outcome they thought when they bought it? And if they have, then most customers are happy if that happens.
Brett: In the case of Harness, when you think about building out the early go-to-market team, is your philosophy you will hire a senior go-to-market leader, they build a team? You hire more junior people, you begin to scale and then you put a senior leader on top of them? What's the order of operations? Do you have a point of view on it?
Jyoti: I tell every early founder, if you don't have experience managing salespeople, try not to learn as on the job for the first time there. If you can, you have the money and ability to recruit a senior person, do that. Because you're de-risking, you're learning and a lot of things that will come in. Normally, I look at how the most senior you can attract and you can afford. If you have constraint on cash early on, which a lot of startups are and you don't want to, then it's a different thing. But if you have the cash and you can attract someone, I would look for a director, VP sales, someone who knows how to hire the right people, the reps, how to run a sales process, all of that. If you have experience managing salespeople, it's okay to hire a few reps and then bring the manager. I'll tell from my own experience. AppDynamics, when I was looking to hire my first sales rep, I still remember I was someone who was like, okay, you should hire some sales reps, you don't need a VP of sales. And I started interviewing those reps, I couldn't even figure out how to interview them. It's like, what do I ask to really... Because they-
Brett: And you're an engineer.
Jyoti: I'm an engineer. I couldn't really figure out, okay, is this person the right person or not? What to ask in the interview. And that's when, okay, I'm going to probably... I should hire a VP of sales who knows what to do, and I can learn from the VP of sales to do. And so that's what I did. I was able to attract a VP of sales at the time, and then the VP of sales brought in now, started to build it out and all that. At Harness, actually I did decide that I know now at AppDynamics I worked with salespeople all the time. I know enterprise software sales and all that. I had enough skills that... And I could attract head of sales where he's in Harness, but I actually wanted to have a couple of reps just work with me initially. I felt like I need to be close, very close to the customers in that. I was still in the transition from founder-led sales very early on. At Harness, to me it was very clear that I need to be... The second time founder, I was a bit paranoid about that. I don't want to be too far removed. At AppDynamics, right before I was leading a org of a thousand people, it was my last job there as a CEO. And now you come in and just completely on the ground at five people, and that's a shift. And then you may get into, okay, I need these layers of people to do things. And I was very paranoid about not doing that, that I need to go on the ground and not bring layers. Actually, Harness, I initially didn't hire. Until the first million I didn't hire head of sales. And I said, okay, I'll just hire a few reps. I know how to manage them, I know how to interview them, I know what to do there.
Brett: One of the big points I think you're trying to make is that the way the product is delivered and the way the product is built is one and the same and they have to go together. And so, when you're selling it and you're close to the customer, and you're building the product, you have a very tight feedback loop between those-
Jyoti: And you can compare it very fast and kind of... Yeah.
Brett: When you do think about hiring your first head of sales, do you think there's some special things you're looking for in your first head of sales that's different than an excellent at scale sales leader? Or a great head of sales can go from one to 50 million or 50 to 500, or that type of thing?
Jyoti: Most of the times it would be a little bit different skills. Someone who would go from one to 50 and someone who go from 50 to 500 might have most likely different skills. Sometimes you may find someone who can do all of it, and that happens too. If you're hiring your first head of sales, I would look for someone who hasn't been too far removed from a first line or a second line manager. If they come in from a place where it's like a 300 million sales org, there are six layers between them and the sales rep, and they have been like the last time they had it was eight years ago before they were close to the customers. It's an adjustment, and you're taking a risk with it. I normally would recommend people don't hire that senior of a person trying to bring... It's hard for them to adjust down as well. Normally, a first time head of sales I normally look at what are we forecasting as a business side. Let's say half a million in revenue and you're looking at your first head of sales. Or a million in revenue looking for head of sales. And you're projecting that for a million in revenue in the next three years I want to get to 25 million. At 25 million revenue you normally would probably need a team of maybe 15 sellers. I would normally look for someone who has experience within that managing teams of 15, 20 sellers, and delivering outcomes of it is a good person. Because at least you have the next three years. And now you're taking a bet on, can they scale from that? And if the scale is great. If they can't scale from it, then it's, okay, you bring someone maybe on top of them or something.
Brett: Do you have any reflections on when you think about the top three sales leaders that have ever worked in your org, what's different about them than all the average sales leaders? Of which I think there's by definition a lot.
Jyoti: No, I had the fortune of working with really, really, really world-class sales leaders, and including now in Harness. I'll tell you that the number one thing that they do extremely well is recruiting. And it sounds like you're talking about sales, why is recruiting the number one thing? And all I've found is eventually the sales scaling comes down to ability to attract the right people. And people who are very good in recruiting or want to put the time and energy in recruiting the right people, they scale very well. The second part after that, which is tied to recruiting, is the enablement. If you bring people in, can you understand what it takes to enable people well? The value of that, the ramping the people. If you don't enable them well, good people are not going to make money. And if they're not going to make money, they will leave. And now you don't have the sales capacity that you need. Then the third is a disciplined sales process. The sales process is not very loose and how you generate pipeline. How do you evaluate every part of where you are in the deal? How do you look for what is the right pain? There are many frameworks around a structured sales process, but you want someone who believes in it and who can run that in a disciplined way. Otherwise, the predictability of the business goes away. A sales rep comes to you and we are doing this POC and the things are going very well. Suddenly, oh, we lost a deal. Why did we lost a deal? Because there was another person who was pitching for competitor we didn't know about. That is a bad sales process. In a structured sales process you will try to find that early on. You'll try to build the right champions in the account so you don't have surprises. A great sales leader will do that well. The fourth is really people who have the mindset of finding a way to achieve success. In sales, the world of sales, the excuses can build up very fast. Many times those are valid reasons. The best sales leaders in my mind always take extreme ownership. Extreme ownership and pride in their ability to achieve the numbers. At any level, if I interview a salesperson and they're not very clear... If I ask them normally, okay, how did you perform on your targets in the last 10 years? And they don't know it easily. Best people will have in their resumes even. 2020, I achieved 110% of my quota, '21 I achieved 109% of my quota, '23 I did this, whatever. Right? The reason I like that is not just because they achieved more, but because they are anchored as a measure of success around that. Do they take pride in it and do they consider that you want to achieve your goals and targets is the thing you take pride in? People who don't, you ask them, okay, how did you do, and they all start speaking in abstract terms. I know I want a salesperson and say, "I achieved 100% of my target, or 70% of my target for these reasons." But someone who doesn't even know their target or talk about that is normally a bad sign. What I've seen is you recruit very well and you are almost obsessed with the talent that you can recruit. You enable them well. Enable could be at the rep level, enable could be at the manager level, at the leader level, all those. You know run a tight discipline sales process. And you take extreme ownership of the number, and you drive that ownership of the number across the org, those are the best ones.
Brett: You mentioned this in the last thing that you just said. When you're interviewing a sales leader, if I were to sit down and watch you spend time with the person, what are you doing? What are you asking? What are you probing on?
Jyoti: It depends on different stages of the company, but I really interview along those lines. Okay, we have to hire five reps or 10 reps, or 20 reps, whatever it is. And managers and leaders and all. How would you do that? And what's your prior track record of hiring and attracting the right people? There's leaders who make the hiring recruiting easy and proven that they have done it well, and they are this magnet for good sales talent, that's \[inaudible 00:23:51\]-
Brett: Is that a big part of it is that they're the kind of person that people just follow?
Jyoti: That's a very big part of it. Follow for multiple reasons, like they're a good leader, they are fair in the how to do it, good people want to learn from them. All kind of reasons. But, yeah, that's one big part. The second is, I like to see do they understand a disciplined sales process or not? Have they done it in the past? Many times they've worked in organizations where there is a disciplined sales process, so you know if they're spent five years in this company, they likely know the disciplined sales process well. But then, I really would interview around that. Which a lot of it comes down to, tell me about the deals you lost, tell me about the deals you won.
Brett: And you want to hear the sales process come through.
Jyoti: You want to hear the sales process and how they even talk about it. When they talk about this is a deal we lost, what is the terminology they even used to talk about that. Or this is the deal we won, how they talk about it. And the third thing I talk about, tell me about when you didn't meet your numbers, and why? Or when you beat your number significantly, why? And do they understand it? And people who don't even care about their numbers, to me that's a problem. But when they care about their numbers then how they architect towards that number. I was in this job last year and we did 70% of our number. Do they understand the mechanics of why did this did 70% number? It's okay that you did 70% of the number, but at least what happened and you understand what the full dynamic of it. You did 130% of your number, and what happened and why not? And do they think about architecting the sales machine towards the number? Those are the things I would normally interview for.
Brett: Do you care if they've sold similar things to similar customers, or no?
Jyoti: To some extent, but not... It depends on the definition of similar. In most enterprise software, this is my learning, is you can put into three buckets in terms of sales experience. One is business applications, CRM and all that. And there are very good sales people who are very well-trained to do that. They worked at Salesforce or someone for a long time. The second will be the enterprise infrastructure folks. Enterprise infrastructure, you're selling to IT and technical people. And the third would be hardware oriented things, like firewalls and all that. And I do care about that you have... When I'm selling an enterprise infrastructure I've seen, yes, people coming from business applications can succeed, but there's a risk there. People coming from hardware selling can succeed, but there's a risk there. These three buckets are broad enough. I don't need to be an infrastructure software that someone has sold a CI/CD product, doesn't matter to me. If they have sold anything infrastructure software, that's good enough. They know how to sell to IT and how to sell to infrastructure people, and technical people and developers and all that. That's normally I would look at. I do look at SMB versus enterprise for sure. The people who are only experienced in enterprise selling, and you want to sell to SMB, they will struggle. And same with the people who only sell SMB, they will struggle. That you definitely want. If you want your business enterprise selling, you need someone who has experience in enterprise selling.
Brett: Have you noticed any patterns in hiring go-to market people from the third-best company in the category versus the first? Do you like the people that worked at the premium company in the category? Do you like people who had success selling the third-best product? Do you care about that in any way?
Jyoti: It's a good question. I remember when I was hiring one of our sales leader in AppDynamics, became our CRO, and very successful many companies after. In the interview process was telling me we had product number five in the market and we're doing well. I normally don't look at completely like that, but yes, there is something to it. Normally, what happens is the number one company is number one not just because they have great product, but because they also have a very strong sales culture and DNA. Most of the time you do want someone who has spent... So they know what good sales culture and good sales discipline means. I'm not biased against number one company because of that. If someone is on number three company and they've done well because the product was not very good and they've sold it, there is value to it. I would rather take someone who's coming from a highly disciplined sales culture, because then we don't have to teach them that. Because they already know, they've spent three years, five years, seven years in that highly disciplined sales culture.
Brett: One of the thing in talking to you that's very clear is you either always had or you've developed a lot of commercial taste. And as someone who's a classically trained software engineer, I think it's an attribute that tends to be under expressed. Do you think you honed it and developed it? Both the nose for value, like spending time with a customer and understanding is there an opportunity here, all the sales and go to market stuff, do you think you just developed that sensibility or you always sort of had that as something that was a part of you?
Jyoti: Before I became software engineer, or before I went to school to study computer science, I grew up in a small town in India and my dad had what you'll call a mom and pop shop of selling irrigation machinery to farmers. And in that small town we didn't have too much proper job, so everyone almost had some small business that they will do around my family. I was going on my dad's shop since I was six or seven years old on weekend and after school to help him on the shop. Anytime I sell... I learned business before I learned engineering, but that was just some exposure to the basics of the business. I studied computer science, became software engineer. Then when you start as an entrepreneur you have to hone it, you have to put your energy into it. Many times software engineers come to me, it's like, "Hey, you became from engineer to entrepreneur. What skills you had to learn?" Tell them is you really need three skills. There's a technical skills, don't underestimate and forget that, because that is your strength. There is the people skills, because you cannot build anything of size without being alone. And third is the business skills. Technical skills are your core, so you have to make sure you don't lose your core power, but you have to put deliberate energy in the other two skills, which is the people and the business. Yes, I had to put energy into refining and learning and refining and learning. And you do that over time, because that is really the only way. Many times I tell early founders is learn sales. They ask me, "What do I learn?" It's like, learn sales. And you learn sales by selling it. Sell yourself, sell the product. Don't be like, oh, I'm not good in front of customers, and I need to hire a salesperson to do it. There's no way you'll be able to manage and make that sales org work if you don't learn how to sell yourself. Yes, you need sellers to grow, but you got to learn how to sell yourself too. And understand the get the empathy towards what it takes, what do customers really want? Otherwise, you'll be building things that no one really cares.
Brett: When you started to develop the sales muscle, did you enjoy learning sales, or did you like doing product and you were forced to do sales and you did it because you had to do it?
Jyoti: In some ways, when I started AppDynamics, this was April of 2008\. And I raised my first... That time the 5 million round used to be called a Series A round, right? For sure.
Brett: Series A is 5 million.
Jyoti: Pre-seed. Is the pre-seed, right? I did my series a 5 million in April, and in September the Lehman Brothers crash happened and everything was falling apart. There was no more funding for the next couple of years really. That almost forces you to succeed.
Brett: You got to have revenue.
Jyoti: It creates this very tight focus. For me, it's like we were a small team, like 10 people. And we were like, we got to build a product. But everything, do we survive this next two years is about do we get revenue? You become much more revenue oriented. And that was very, very key, just because that was the only way to come out of it. And it was no easy path. Other than revenue, there was no next round I could raise without it. I think maybe that was it, you force yourself to do it. You find revenue, find your way to learn how to get to revenue. It's very simple. I tell everyone is the only lifeblood of any company is revenue. If revenue is there, most things will kind of you'll figure out.
Brett: And if not? And if not, they won't.
Jyoti: You can build the best product, everything have the best, everything is... The revenue is not there... Ultimately, you need the revenues. I always liked that. I actually had one exec early on in AppDynamics who somehow thought that was a bad thing. He will complain like, "You are a very sales oriented founder. You are not being able to spend enough time on engineering. You should do more." Yes, I know how to build products and I want to, but the sales orient is a good thing, it's not a bad thing. I got to sell and make sure we get revenue, otherwise I'll be building things that doesn't really sell. And if you don't have revenue, nothing is going to work.
Brett: What was the founding story of AppDynamics? How did it actually get started?
Jyoti: I was working as a senior engineer architect. And another startup which had a first generation of application monitoring product, a company called Wily Technology, which was acquired by Computer Associates. I had exposure to the application monitoring-
Brett: You were there before they were acquired, and then after-
Jyoti: Before they were acquired. Before they were acquired. And I was there for a year after they were acquired. That was the first generation of application monitoring. And the reason, actually, I joined a startup because I always... As a developer, I'm struggling with troubleshooting these complex issues that are happening, and this company is doing something interesting there, so let me join them. And I like the problem space. This is when the cloud was just starting to come out, and people are building more and more distributed systems, microservices. That how you troubleshoot what goes wrong and fix things in these requires a very different way of doing things. And it requires a notion of a distributed application tracing and ability to trace between a lot of different things. I knew the problem is emerging, and a little bit of the industry knowledge because I was working in a company that was in the previous generation of that kind of solution. I was passionate about that problem. It was clear to me we need to next set of products and companies have to build to solve this. As a founder, what happens is many times you start getting into the strong conviction and you can't sleep. You are like, someone has to solve this problem. And then you start, okay, why don't I solve it? If someone has to solve this problem, you completely are convinced and you start looking at, how do I solve it? And that's when I, okay, let me start building this thing and start pitching to VCs and investors to get some capital. And I still remember I was still in the job when I was pitching, because it was a large company. And this one investor was... He asked me, "Do you really believe in this?" I said, "Yeah, of course I do." He's like, "Why are you still in your job then?" And I came home and I was like, oh, that's a good question. Next day I resign. It's like, okay, let's go and do this. And if I can't get started, I can always go back in an engineering job. Why not? I started pitching to investors, at that time it was just... For me, it's like we didn't have many investors in San Francisco at that time. I live here, I had to go to Sand Hill Road to do the track too, to pitch to them. Mostly, during the days I would go and trying to find investment, and during the night I will go and code.
Brett: How long did it take you to raise the first round?
Jyoti: About three months. And I got a lot of rejections. I got about 30 rejection. Especially, at that time it was a bit harder on you're a first time founder, you're just an engineer, you're technical, you don't have any business background. Some people will say you find a business co-founder, otherwise we can't really fund it. Actually, my first term sheet I got, it came with a condition that a business co-founder has to join as CEO. And they had a good guy who they wanted to come in, but I was not sure, I don't want to do a shotgun marriage like that. Even with a great guy, I don't want to. This market is too small or all kind of things. Now, observability people will think, oh, you have companies worth lots... Datadog and New Relic and Dynatrace and AppDynamics and Splunk, and a lot of successful companies, but back then we were \[inaudible 00:34:57\] observability. This was before with things we called monitoring. This is such a small market, it's a niche market. No big company could be built. All of this.
Brett: And why did you have such conviction? It just seemed obvious to you?
Jyoti: It seemed obvious to me. To me, the world running on software, everything you do is software. And I knew as a software engineer it's very hard to troubleshoot when something goes wrong. And the impact of something going wrong is very, very high. Things slow down on an application web app or a mobile app, people lose hundreds of millions of revenue. It has to be fixed, and there were no good products. And I knew there were no good products because I worked in one of the products who were the previous generation product. The conviction to me is the conviction on the problem. How can you operate a world on software if you can't fix or troubleshoot when things go wrong? Which, things go wrong all the time. I knew the current solution set, so that was there, but I also had conviction on my approach of solving it. I knew that, or at least in my mind, I was pretty convinced-
Brett: Technical insight of the-
Jyoti: Technical insight that I can do a distributed brace would be the solution for it. And maybe my insight would've been turned wrong, then maybe we didn't succeed. But that was also the conviction. And the insight was right, and it all worked out.
Brett: Earlier in your life did you say, I want to go start my own business at some point? Or that wasn't even-
Jyoti: No, no, that was my goal. A lot of times... I graduated from as an engineering school, on the top engineering schools in India. A lot of people would come in and do the US after to do a master's or PhD. And I was like, I don't want to do that because I want to actually start a company and build businesses. That's always something I wanted. That's why I was like, let's me go and work in startups so I would learn it. I had to also wait for my green card before I could start a company. I was like, let me work in startups while I do that, which was kind of what I wanted.
Brett: One of the many interesting stories about the company is you're about to go public, and then you ended up selling the company. What's your reflection on that whole set of decisions? And was that easy at the time, was it agonizing?
Jyoti: It was agonizing, for sure. We sold the company for $3.7 billion. It seems like a big number. Even these days, 3.7 billion doesn't seem like a big number.
Brett: It's still a big number. It's a big number.
Jyoti: But back then it was bigger-
Brett: Bigger than now.
Jyoti: Bigger than now. Many people think, oh, that would be such an easy decision to make. But it was not. We were on the IPO path, we were on the road show, we were about to ring the bell on Nasdaq on Thursday. We had our first 20 employees or so who are in New York for the ringing the bell and everything. And this conversation started three days before the IPO Cisco came in and said, "We'll pay you more than you the price you will list." And we said, "No, we'll go IPO." We said no. They came in with another price, which is like, "We'll pay you more than one and a half times of what you will trade at."We said no, and then say, "We'll pay you two and a half times of what you will trade at." At that point now it's like, okay, do we take it or not? Do we take the risk of what the execution that will come out of it? What's the right thing for the shareholders? Yeah, it was like a two or three days of nonstop debates and board meetings. And of what is the right thing to do? And we said yes. When we rolled it out on Wednesday to our employees who are in the New York already, it's like, yeah, we come back, "We are not going IPO." Everyone was so sad. We made a deal with Cisco that, okay, if we close this deal, can we still go and ring the bell? And they made it happen. The Cisco stock is a big ticker on Nasdaq. So with all the same people, we all went back a few months later and did it. In hindsight, when you look at it, we had one of the... I would say the strongest visibility product at that time. We also had one of the best sales organizations also. We're growing very, very fast. We're growing 65% or so at that time. And of course the revenue sizes those days at IPO were smaller, we are at 150, 160 million or so revenue at the time. Would we have built much more bigger platform? I look at the other companies in that space, they have done better. Yes, so we there. But the other part of the variable was also I would say not the best investor board dynamic, and that creates execution uncertainty on what will happen in the future, what we'll do. That was a factor in there as well. When I also learned the lessons from the first company to second company, to me that's very important as well. You got to make the right aligned set of investors and board. At Harness, you have this vision for building it for a platform for the long-term. But if I have investors who don't want to do that for the long-term, who want to do in something different vision for what the company should be, then you're misaligned and that creates a big execution, uncertainty and risk. Unfortunately, we had those issues in AppDynamics, and that was a factor in deciding to sell.
Brett: That note about alignment with your investors, is that much easier for you to understand the second and third time because you know all the investors? Or do you think you could actually start the whole thing over and build your first company, and there's conversations you could have before you accepted a term sheet where you could have figured out are we aligned or not?
Jyoti: Yeah, that's a great question. I don't think so, but I didn't know how to ask the questions at the time. I really had no idea what to ask when I was doing my earlier rounds of financing, so it was a little bit harder. But a lot of it comes down to what you want to build out in the... And it's not that I had full clarity. You get your investment and get the business going, you don't have too much choices and control. Sometimes you want to get the business working. And later on if it turns out it creates misalignment or sometimes the board dynamic is not the best, that does create issues. I'm very fortunate that... And I probably spend one to 2% of my time managing the board. And Harness, on maybe not even that. In AppDynamics, I had a broken board dynamic that I had to spend 25% of my time managing the board and shielding our team from the challenges that come with it. Because otherwise what happens is if someone wants to do certain thing and someone wants to do certain thing, and someone want to do a thing, and the business is flip-flopping from one to another, from a strategy that can break the company. I had to spend a lot of time to make sure that doesn't happen. At Harness, I deliberately have picked the people and build the board and the dynamic of it that I don't have to spend time. And I'm very fortunate that I was able to pull that off.
Brett: If a founder friend of yours is raising their first round, they've never done it before, is there any advice you would give them in terms of how to figure out if this investor or set of investors is going to be aligned with you?
Jyoti: Yes. One is, are they investing in because they believe in the vision and they believe in the founder, or are they investing for FOMO? Because half of the investors are just, oh, this is a hot deal, I need to chase it. And they don't really fundamentally believe in the problem, or you. That's one thing I say.
Brett: How do you figure that out?
Jyoti: You know in the process how much... Someone who's want to invest, how much conviction they have, do they have a point of view of why they want to invest in? Not just because you're suddenly a hot deal and that's why they want to invest. That definitely is one. But I also look at, do the reference checks and all on how they would behave in hard situations. What's their belief in the role of the founder and a board member? It's where the boundaries are. That's what I ask if a founder friend comes to me. Look at that and look at the track records. There is the talk to other former entrepreneurs they have invested in. It's important, because you're going to be working with them for a long time.
Brett: It's easier to get a divorce than it is to get someone off your board. What, in your mind, does a healthy, productive, useful board look like?
Jyoti: I think a healthy productive board would be the board that will challenge you, ask the right questions in the decisions that the executive team, the management team is looking to make, but then let you run with it. Not that they are trying to think that they need to make the decisions. And I always look at if the board believes that the executive team is not capable of making the right decisions, they should change the executive team instead of trying to make the decisions. That's the one healthy dynamic of it. Second is the board should provide the right degree of governance and oversight from people are doing the right things. Just that's to me is the board's job. Nothing wrong ever happens in the company. Nothing wrong is happening and you provide the right degree of governance and create some degree of accountability around that. The third is to bring in perspectives from a broader lens. Sometimes when you are executing, you are executing in the lens of what you are doing. That's what you believe in day-to-day, everything you see. But there's a broader lens of what might be happening in the industry that something a board can bring in the perspectives. But to me, the healthy board dynamic always is the board members will challenge you. You have a debate, dialogue, discussion. But there is a trust that they know, okay, I asked my questions, I challenged, and I see the arguments on why do something, why not do something. But I trust the judgment of the executive team on why they... Because they have the expertise, because they live in it every day to day. Most of the time board members don't have the domain expertise or the industry expertise or the expertise. They think they might, that's a \[inaudible 00:43:34\] problem.
Brett: They really have nothing.
Jyoti: They think they might. And these are very smart folks, but they're not living and breathing that particular problem every day. The expertise level that the management team will have will be much more than the board. But the board's job is to challenge them and ask them, have they thought through things or not, but you have to trust them to do that, do the job. That's very important. The other thing is, of course, for a lot of early companies you need help on things like recruiting and sometimes sales intros and all. People are willing to-
Brett: Do the work.
Jyoti: ... to do the work and help you. That's important because that makes a difference.
Brett: How has your thinking on competition changed in the last 15 plus years at building companies? Is it something you obsess over? Is it something you focus on? If you do pay close attention to competitors, how does it practically express itself in the way that you want to run a business?
Jyoti: I am more in the camp of, I don't really pay as much attention to competitors, but I don't obsess about competitors. You don't want to be blind about competitors. You want to know what competitors are doing and what things are happening, et cetera. But chasing competitors and being too obsessed by chasing them, you can just go into one direction to another, do this and that and not really... The lens of revenue and customer value delivery works much simpler because you could be very focused with that on we need to drive this much revenue. And how do we drive the revenue is by delivering value to customers. And how do we prove that? Can we constantly increase the value that we are creating by more use cases, by some use case, by do doing it better than we used to do before? That's what driving... And we are listening to customers very closely. We have a very tight feedback loop from our customers. If you have that, you know what you're building because you know that will create more value for your customers, and new customers and existing customers, and you are building for that. That, to me, is the primary north star. You don't want to be blind about what competitors are doing. You want to watch that, but not obsess by that. That's how we normally operate at Harness. We look at competitors, but ultimately, are we building the right things that our customers want? Will pay for it? Are they getting value from it? And would that allow us to sell more over time?
Brett: Building on this slightly, when you think about delivering new products to the market, if there are seven other companies that are doing something similar, does that inform anything? Or it really is, let's just solve the problem in the best way for the customer and do a world-class job selling the product and...
Jyoti: Well, you have to think about if there are seven other companies that are solving the problem. You just say, let's solve the problem in the best way possible. And if your best way possible is no different than other seven companies, or maybe even inferior than the seven companies, then it's not good enough. If there's a market that I'm building a product with seven other companies, the approach I take is we have to look at, okay, what are those seven companies doing? That's when you do want to have a competitive analysis very strongly. Out of those, what are the core capabilities that are table stakes to compete with those seven? And those are the core capabilities you have to have compete with them. And then, what are the defen... I call them binary differentiator capabilities on top of that. The rule that I like to follow is we are not launching a new product until we have, these are the table stake parity capabilities, and these are the binary differentiator. That we have at least one strong binary differentiator. Maybe it's two, but at least one.
Brett: What's a good example of it?
Jyoti: Let's say CIE. A lot of competitors in space, continuous integration, you have all kind of companies in the space for a long time. Product number two that we built out at Harness, so if you're building CIE, what would that mean? You start with, okay, what are the things that all the other CIE companies would have? A modern CIE company will have a declarative pipeline, it will have this, all the kind of things. This is the list of table stake parity features. But what is our unique binary differentiator that we built? In our case, we looked at what is the biggest pain with all these companies? Which just really comes down to the developers think the builds are too slow. And that they submit a code and it takes too long, it takes them 30 minutes to wait or 40 minutes to wait for the build to... And then we look at, okay, why are the builds so slow? And the builds are so slow because you're running a lot of tests. We created a technology about, how do you reduce the number of tests you need to run based on what you changed? Let's say you changed 50 lines of code, and you sum it up a PR for a CI system. And you most likely these days you'll have a suite of 3,000 tests that will all be executed. We created a AI model. This was, by the way, before LLM. When we launched our CI in 2020, called test intelligence, which where we'll learn based on what you changed, what tests really need to be run. Out of the 3,000 tests, we probably can cut it down by 80% to just 300 tests or 400 tests, 500 tests based on what you changed. We can significantly increase your productivity around it, you don't need to wait for builds. When we launched it, we had a very binary differentiated test intelligence that will do everything that your current CI does, but our builds will likely be 4X faster. And we will prove it. We have 4X faster because we cut down all this unnecessary testing with our test intelligence. But that was the binary differentiator. When we launched our product on our cloud cost management, which is another module in Harness we built. Cloud cost management was about FinOps. Like in any products in the FinOps space, for quite some time like Cloud Health, VMware Require and Cloudability, and all those kind of companies. But the problem in FinOps still a lot of cloud-based. When we build the product, okay, what are all these FinOps products do? The FinOps product are reporting, you're collecting data, and you're slicing and dicing the data and reporting and dashboarding on the data. That's mostly say the current state of the FinOps products. And we looked at our binary differentiator that we wanted to bring is, what do you do with the data by automating actions? Can you just bring automation actions to the developers so that normally otherwise in FinOps a report... Someone will look at the bill and a report, a FinOps person and then chase the engineers and developers say, "Hey, go fix this." Our approach was, instead of them chasing the developers, can we just give it an automated response the developers can do so it doesn't even happen? We launched with that market. It's the current status dashboards and visibility, which you have to do to replace as a parity thing, but you have to build the binary differentiators which are about the, how do you automate that? Almost everything that we do, that is the rule we follow on that. You need to parity as well. Because you don't have parity, you're not going to be able to replace something. Maybe it's not 100% parity, because maybe people have the existing seven incumbents, they have 50 features that only 20 matter, 30 don't really matter right away. You just focus on the 20 that really matter to get the right parity. But you have to have a binary differentiator, one or two binary differentiators.
Brett: What else may on this theme of launching multiple products? When you're getting a team together or if you were to explain your philosophy around, what are the things that we need to do to make the next product successful, similar to what you were talking about around a binary differentiator, are there other things that are part of your philosophy on when we are doing the next thing, this set of conditions has to be met or other similar things?
Jyoti: One thing I didn't talk about, which I'm surprised that I didn't so far yet, is this how we operate at Harness is what I call the startups within a startup concept. And this is a concept I actually started to implement at AppDynamics. We were doing it at AppD, and AppD was growing so fast because of that. We are building more and more products in there. At Harness, we have made it to a V2 of that startups within startup concept. What that means is when you build a new product, it operates as its own independent, semi-independent startup. There's some owner who's almost a startup CEO, a product manager who's leading that. And with the same kind of hunger and if you start a company outside, a seed-stage startup, you have 5, 6, 7 people and you have to go and build something and win. We almost like to create the similar kind of structure, the environment, how they do it. With a good degree of freedom around it also. You have a shared infrastructure, shared side of our platform. A lot of the enterprise code and all you will get for free because it's all part of the platform. After that, if you are the startup CEO, you do your founder selling, you find the product market fit, you do founder selling, find the first 20, 25 successful things.
Brett: Yourself, you don't get to use your sales team.
Jyoti: You work with sales, but you are responsible on sales. You lean on sales. You say you have a salesperson in an account, like a Citibank. You will say, "Hey, Citibank will be a great potential customer for this thing. Can you introduce me to the customer and then you will do the selling?" Not, our salesperson doesn't know how to sell this new thing there, but the product manager does. It's really the founder selling in the beginning to get that going. And we only start teaching the salespeople to actively sell something once we reach that bar. Normally, it's like in the 20, 25 customer kind of bar, that's when now the sales can run and take over the founder.
Brett: And it's the same thing, it's 25 customers and you've met the product \[inaudible 00:52:00\] .
Jyoti: Yes. Some things could be slightly lesser, some could be more, but the bar definition depends on. But it's roughly in the range that we have sold the product, people are getting value. Very large accounts that maybe you don't need 25, you need smaller numbers. We operate in that startup within startup concept. When we start a new startup, the definition that I set for everyone is we have to be best of breed in that area. We don't have to be best of breed on day one, but that is what we keep building. What does best of breed mean? To me it's very simple. Someone says, "What are the top three products in this thing? We should be one of the obvious names in there." Then we are \[inaudible 00:52:32\]-
Brett: For this job to be done.
Jyoti: Whatever that is. Like a CD, if someone says what are the top three products in CD? And people don't think of us. In our segment, say we're selling an enterprise segment in there, we probably are not there yet. Or, what are the top three products for feature flags? But that's we keep building for that we are just perceived by our target segments as among the best products in that. And we have those kind of binary differentiators. We have the right kind of capabilities, the right bar on the value that we are delivering to the customers after. We are focused on not unnecessary features, but the features that will deliver, then deliver an outcome. And that's the goal we set. Let's keep building towards if we don't stop until we get there. The thing about the seed model, at Harness we even built a internal funding model that's aligns to it. A startup starts at a seed stage where you normally have like five, six people, a product manager and a five, six people who are the product manager is the startup CEO, and you are five six people. It's not too different than a seed company outside. Once you hit a million in revenue, you hit a Aeries A stage, then you have a bigger team, you have more customers. We fund it like that. Once you hit 5 million in revenue, 5 million in AR, then you have the next Series B startup. You hit 20 million in revenue, that's a Series C startup. You have Series D startup is 50 million in revenue. And we have 16 startups inside Harness now, and they're all of these different stages. The advantage is the seed stage startups can fail fast. Our investment as a company is not that high. We can pivot very similar to what happens in the startup ecosystem. We can start with five people and start experimenting on something. And if we can't find a million in revenue or a path to a million in revenue, we know either we need to pivot to something else, which we do pivot, or we need to stop it. Let's stop doing it. But we can do that at a lower cost to the company.
Brett: Will they stay in this startup concept basically forever, or at some point it gets reorganized into the rest of the company?
Jyoti: They stay in the startup concept forever. It's all one shared platform. For our customers, if you buy five modules from five of our startups, you're still buying one. You won't even know if five things, is one product you're buying, right? But we create a model that we don't bundle things. Each of these modules are sold on their own to create accountability. They will never be best to breed in them if we don't have accountability to the customer. The minute we bundle it, then you can have three great modules for best of breed and two very inferior ones. And you'll start getting in this false sense of these things are selling and these things are... We look at, they're not even selling because they're just bundled part of something. By not bundling, it creates accountability to the customer. Our customer, we says we have these 16 modules, you can start with 1, 2, 3, 4, 5, 6, whatever you want. And we'll earn our business by proving that we are best of breed on this module number three or four or five. And you don't think we are, don't buy it, by the things that you think we are. But that creates this accountability to the customer, now they are only buying what they think is good because they are likely replacing some existing thing or something. And we're competing with those existing things in there. And same applies on renewal also, if they don't use that because they didn't get value, they won't renew. It creates a lot of internal accountability now. Now the startup team, they need to know and earn their business by being... Because let's say someone is using our CI/CD and they are very happy with it. Now they want to look at our feature flags. We don't bundle it part of CI/CD. We are like, we have to compete against the best of breed products on feature flags out there. And if we can't win, we know we don't have the best of breed product. Now it creates accountability to the customer and create accountability internally to us, to our teams that what they're building towards it. Of course there's a lot of synergy that comes with the shared platform. The shared platform, you get a lot of advantages.
Brett: And does the customer get advantages?
Jyoti: Customer gets massive advantage because it's one integrated experience. But we'll still look at that should not be the only thing. If someone is buying customer is just buying because you're inferior product for something, but it's part of one integrated platform, in the end I feel we are not going to win.
Brett: That's very interesting. \[inaudible 00:56:18\] It's the opposite of the Microsoft strategy.
Jyoti: I feel like in developer tool space you want to build good products for each of those, otherwise people won't use them. People will just build their homegrown things and all that.
Brett: When they buy the fifth product, you don't discount, you don't do... It's all has to stand on its own.
Jyoti: There are so much discounts. If the more you buy from us, there'll be some discounts. Yes, there are some part of it, but we still have to prove that we are, compared to the alternatives that are out there that are best to breed could be in that, that we can beat them. There could be some price thing, but that's not the primary reason people pick something, right?
Brett: Ultimately, you see customers land with all sorts of different products, and start here and then go to this one and-
Jyoti: Yes. There are certain, we call them the most common landing zones. Where people will start with, there are three or four that most people land with, and then the people will grow from there. But the advantage of that is now we have these startups running and they're scaling, and all the compounding effect of startups within startup is very, very powerful. Because now it's like I have these startups who are kind of go from a million revenue in first year to three, 4 million in second year, to eight to 10 in third year. To maybe 20, 25 in fourth year, or something like that, right? And every year we are launching three. You start layering the waterfall of that. We are growing well now. Actually, our business growth has accelerated, which at a certain size the growth starts coming down. Part of is that compounding that comes from that multiple startups that are happening.
Brett: When you think about the PM that you are putting in one of these new startups, is there something different about them than a good PM at Harness that makes them good to do that specific thing?
Jyoti: Extreme ownership, entrepreneur mindset. it's very important, I call it the entrepreneur mindset. It's because you are a startup founder inside it. Yes, we create the platform, the sales platform, the shared platform, all kind of things. But the entrepreneur mindset, which is like you have a startup founder, you find your way. And you are a startup founder, you can't just say, "I do my product, I couldn't figure out sales or I couldn't figure out marketing." You couldn't figure it out, your company startup dies. It's similar mindset that we try today. About actually half of our startup founders are former founders. Which actually helps, because now they have seen... But you don't have to be former founder, but a former founder always helps because they have gone through it and they've seen it and they've worked on it. We also acquire small companies. Because many times what happens, actually all the time, everything's said with AI to build a world-class best of breed product in each of these, it takes time. It takes about two years. By the time you say, "Okay, let's build this thing," and you matured it enough that you can sell to our enterprise customer base, it's normally a two year process. Maybe sometimes 18 months if we're building completely on our own, which is what we would normally do. But we also look at, we bring a small team? You hired a tech in acquisition or something, to cut down the two years down to a year or to six months because we have expertise and iteration. But whenever we acquire a small company, we rewrite the code completely in six months too on our platform. All the old code goes away on our platform, that's one shared experience and everything, but it's the expertise that you get. That you get expertise and you get that sometimes those one or two people who could be the startup founder for that particular area for you. That's how we accelerate and cut down that two year cycle, or many times to six months, a year. And we have done a few of those.
Brett: Do you have a unique compensation model for the people that are doing that, or they're just normally compensated?
Jyoti: I don't believe in overly complicated compensation models. Because the problem is overly complicated compensation models, they could drive bad behavior easily. If you don't like to do that. Then you start getting bad behavior, internal competition in the wrong ways, and all that. It's like, everyone's interest has to be aligned towards the Harness interest in the end. And-
Brett: Creating shareholder value and then everybody-
Jyoti: Creating shareholder value. But at the same time, they are heavily motivated to make their startups and their products successful.
Brett: I guess as we start to wrap up, if I were to watch you over the course of a month or two months running the company and talking to your team, are there things you're constantly explaining to them that they would roll their eyes that you're saying it again, but is a big part of your philosophy on building companies that we haven't talked about or explored yet? The most important ideas, this is how we build products, this is how we sell products. Is there anything we didn't explore?
Jyoti: Internally, people hear from me a lot about the startup within startup. We have this scaled autonomy, but you run it on your own, but you have still in a scale aligned framework. Which is important for... We don't want to slow down, you want to be... I always talk about the concept of continuous improvement as a company. Because when startups start to grow, people are like, this not perfect, this not perfect, this not perfect. And I always look at... I repeat one thing all the time, it's not about, are we perfect on something? It's all about, are we improving on something? And if you're constantly improving, that's the mindset. Because we don't need to... If the day we are perfect on everything, we'll be too slow. We cannot be stagnant. Whatever the problem is, we have to keep improving on that. And we find next set of problems and keep improving on it. That's something I talk a lot about, the value of customer value delivery. We talked about it. Everyone at my team will hear the concept of value delivery a lot. That's a core part of what we do in the company.
Brett: What did you mean by scaled autonomy?
Jyoti: By scale autonomy, I mean people run on their own without being micromanaged and too many gates and all that. It's almost like it's a balance. When you're a startup, you don't need any structure. You will grow faster by not having structure, by having a lot of people can just run on their own. But a certain time, if you don't have structure, that will slow you down. What is the balance? What structure you need and what autonomy you need? I started to call this concept, how do we internally create a blueprint for this? Startup within startup is an example of how we do product innovation and scale. How we are building a broad platform, and we are doing product innovation at scale with a lot of autonomy that people have. It's a similar thing we apply on the sales side as well. There's a framework in our CRO, Carlos, would run where there's a very structured sales framework, sales discipline, sales process. But how do you get every sales manager, first line, second line, third line, all of them to operate as it's your business and that you're responsible for your business in maybe New York or London, or whatever you are running? And how do you take it, that pride in you are the business owner and you have the autonomy to the right degree to manage your business? It's a concept of how do you give people more, but you still have the framework of structure so that they can still keep operating as startups?
Brett: And the important thing is that the general physics of companies is as they scale, you reduce autonomy.
Jyoti: Everything starts falling apart. People are like, "Oh, you don't have a...," and then you become a bureaucracy.
Brett: This has to be approved by this person, this person.
Jyoti: Yeah, yeah. Then it's like, how do you create the high degree of autonomy, but you have the right structures and checks and balances?
Brett: On the point around continual improvement, other than you talking a lot about it, how do you indoctrinate that? Or are there rituals or are there things that you get people to behave in that way?
Jyoti: Talking is very important. Sometimes people underestimate how important it's just to talk about something. But then it starts becoming part of the mindset of how people would think about it. But a lot of it is like if something goes wrong, no blame games. How do we bring the spread of continuous improvement? Of what do we learn from it and improve for future? And that's a big part of the culture that we built out. Things go wrong all the time. We're very intellectually honest post-mortem, learn from it and find the continuous improvement way of how we improve it. And we must still have something, again, go wrong on something, but we still get better. And people who are not doing that, they're stuck on something, maybe they are not the right people or they are not the right cultural fit for us. That's the part of it. But also, transparency around things. Having the notion of continuous improvement, people are a bit more transparent. They don't need to feel that they need to hide things that are not working. Because they can come in and say, "These are things working well, these are things not, and these are things we need to improve on." And they'll put this in the bucket of continuous improvement that we need. And this is what you show the improvement a quarter later or a month later, or something like this, is how we got there. You just have to get it on different layers that part of the company culture.
Brett: Wanted to wrap up where we always do, which is the question of, who has had an outsized influence on the way that you think about these topics of building companies and scaling companies? Is there someone that comes to mind that has imparted something particularly useful? What did they teach you or what's a part of your life philosophy in building companies?
Jyoti: I would say the company I admire a lot and the person would be Amazon and how Bezos build Amazon. A lot of the stuff that I'm doing in the enterprise software world, the startups within startup and how we are innovating and how we are scaling, and how we are going towards newer markets, and have the sense of ownership responsibility by a different autonomous level. I take a lot of inspirations from how Amazon was built. How Amazon went from selling books to selling everything. That probably has the most outsized influence in when I look at it as a role model of a company that could be built and how I would like to build it.
Brett: Cool. Great place to end. Thank you so much for spending all this time.
Jyoti: Okay. Yeah.
Brett: I really enjoyed it.
Jyoti: Yeah, great conversation. Really enjoyed it as well.
### The process I've used to name dozens of companies
URL: https://review.firstround.com/the-process-ive-used-to-name-dozens-of-companies/
Last updated: 2025-12-04T16:54:23.000Z
A note from the essay's author
_This post is for subscribers only._
### What’s in a Name? A Lot, Actually. Here’s How to Pick the Right One For Your Company
URL: https://review.firstround.com/how-to-pick-company-name/
Last updated: 2025-11-18T17:04:13.000Z
[*Arielle Jackson*](https://www.linkedin.com/in/ariellerjackson/?ref=review.firstround.com) *is Head of Brand and Product Marketing at First Round — for over 10 years, she’s helped hundreds of First Round founders on early positioning, brand identity, launch communications and marketing hiring. She started her career at Google, helping grow Gmail in its early days. At Square, she was one of the first marketers who led the launch of new hardware products. She then joined a seed-stage startup called Cover before it was snapped up by (then) Twitter.*
*Across all the companies she’s helped, naming is one of the trickiest challenges to solve. It’s hard to find a name, hard to know if you’ve found the right one and hard to know if it’s working. A lot of it is a gut feeling.*
*Naming exists in this art-meets-science gray area that many founders struggle with. On the surface, it might seem easy, but it’s an exercise in iteration, patience and taste. Search for resources out there and you’re more likely to land on a “name generator” than something that actually helps you come up with a name that feels like it truly fits YOUR company.*
*So we tapped Jackson to bring some color to the process. In this essay, she demystifies how to select a name — sharing the process she’s used to do it dozens of times. We figured the best person to walk you through it would be Jackson herself. The floor is now hers.*
A bad name won’t kill a good company — but sometimes, it feels like it could.
I get why so many founders agonize over picking the right name. You want it to be memorable. You want it to have meaning for your company. You don’t want it to get roasted or outgrow it or regret the decision.
Some of this pressure comes from the fact that an excellent name can only help you, spreading word of mouth and making it easier to build your brand. Yet in many cases, great names don’t start great. Think about Disney, which was simply the founder’s last name: OK name, remarkable brand. In a spreadsheet cell in plain old 10-pt Arial font, would it stand out amongst other options? Probably not. And now, billions of dollars in marketing spend and 100 years later, it’s iconic, synonymous with magic and wonder.
This example should actually take some of the pressure *off* picking your name; you can’t foresee a decade or a century of brand equity. Think of your name as an ambassador for your brand, not the entire thing. Give yourself the space to [“imagine if](http://firstround.com/?ref=review.firstround.com),” which is what we do around here at First Round Capital.
Naming is one of the most common challenges founders bring to me, usually after they’ve toiled over it themselves, sometimes for months. You can only walk around the block so many times before you get yourself dizzy.
I’ve helped with dozens of names over the course of my career, from companies to products, and I know the struggle founders go through when picking a name that fits their company. So here, I’m hoping to help more founders DIY naming by providing a framework that brings clarity to the naming process: what matters, what doesn’t, some of the legal necessities founders don’t think about and much more.
## Incorporating your company: pick something you know will change
There’s a difference between the name you incorporate under and the one you use externally. When you’re first getting started, don’t put too much pressure on your incorporation name because it’s likely going to change. I’d say even plan for it to change.
If you need to act fast, just incorporate using a placeholder name.
Before First Round, I worked at a company called “Apps & Zerts, Inc.” (yes, inspired by [this scene](https://www.youtube.com/watch?v=3mQoI%5Fa%5FtoU&ref=review.firstround.com) from *Parks and Recreation*). The founders knowingly incorporated under a ridiculous name they would never use publicly. Eventually, once they had confidence in the product they were building and its positioning, we landed on the name “Cover,” filed for a trademark and launched that way. I’ve worked with many founders who have incorporated using placeholder names: the street the co-founders grew up on, a child’s birthday, etc.
**My advice is to pick something so outlandish that it could never see the light of day.** This frees you up from the agony of selecting the right name (which you can do later), and the more unusable it is, the less you’ll get attached and end up launching with it simply because it’s become comfortable.
> You don’t want to get tied to a name because you had to file your incorporation docs on a tight deadline.
A few years ago, I worked with [Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/?ref=review.firstround.com), co-founder and CEO of [Maven](https://maven.com/?ref=review.firstround.com) (and previously, co-founder of Udemy) to name the cohort-based learning company. He recommends the patient approach: “We operated for nearly eight months without a name.”
## How to pick your *actual* name
The best time to do this is before launch. No matter how small your company is, once your name is out in the world, changing it only gets harder, not easier — you’re giving up some brand equity (especially if you’ve had the name for a while), there are more places to change the name and more communication required about the change. Do you call it X, or do you still call it Twitter?
I’ve found a few inflection points to be good moments for naming:
- You’ve incorporated using a placeholder name and now you know what you are building.
- You’ve pivoted, and your name no longer makes sense.
- You’ve realized you can’t use your current name for legal or other reasons.
- You’ve outgrown your name. This can happen when the core of what your company does expands beyond its original focus — like Grammarly [adopting the name Superhuman](https://www.grammarly.com/blog/company/introducing-new-superhuman/?ref=review.firstround.com) after acquiring email platform Superhuman and AI products like Coda.
**Expect naming to take at least a month. This isn’t a single brainstorm or ChatGPT prompt.**
Creative work is often framed as divine inspiration (and sometimes it is!) but talk to any great painter, writer or musician and they’ll tell you how much unseen labor goes into what often looks effortless. While picking a name is more art than science, having a process results in a name that’s more intentional (and usually better).
### Step one: positioning
[I’ve gone in depth about positioning on The Review](https://review.firstround.com/positioning-your-startup-is-vital-heres-how-to-do-it-right/#how-to-position-your-business). I recommend starting there, because being able to explain your product in plain English — who it’s for, what it is and what makes it different and desirable — is a great jumping off point for naming it. Here’s a quick breakdown:
- **What is positioning, exactly?** It’s the space you occupy in the minds of people in your target audience, relative to what they already know.
- **The inputs to good positioning:** To position your product in the mind of your user requires a bunch of upfront research, from prioritizing audiences to understanding their problems and what they’re doing to solve them. Based on that, you can make a set of choices to avoid being everything to everyone, in favor of being something great for someone.
- **The positioning statement**: Functionally, you end up with an internal statement that looks something like this:
- **For** (target customer)
- **Who** (statement of need or opportunity),
- (Product name) **is a** (product category)
- **That** (key benefit).
- **Unlike** (competing alternative) (Product name) (primary differentiator).
- Here's Maven's first positioning statement, which we used as an input for naming back when they were still using the temporary placeholder “Didactic:”
- **For** experts (former or current operators) with audiences (5k+ followers online / 500 offline)
- **Who** want to share their knowledge while making money,
- Didactic **is the** first cohort-based course platform
- **That** makes it easy to deliver a premium student experience at scale.
- **Unlike** small workshops or impersonal mass online classes, Didactic integrates both live and asynchronous components to fully engage your students while eliminating the burden of managing the course yourself.
### Step two: complete a naming brief
Once positioning is in a good place, it’s time to set the target on the name itself. It can be tempting to jump right into brainstorming, but without a brief, it feels a bit like throwing darts in a dark room, hoping to hit something.
A simple naming brief ensures the most basic parameters are clear, while also forcing participants to articulate their personal likes and dislikes. Answer the following questions:
**1\. What are you naming?**
The company? The product? Both?
**2\. What are the names of related / competitor products?**
Make sure you don’t sound like everyone else by compiling an extensive list to identify common themes or types of names.
**3\. Who’s the target audience?**
Describe who we’re naming for. Paint a picture of who you’re trying to acquire for the next 18 months as well as who might ever use you.
**4\. What concept do you want to communicate?**
List your brand attributes / personality. How do you want to be perceived? What’s the single most important idea for the name to convey? What should the tone be?
**5\. Do you have a preference for descriptive, suggestive or fanciful names?**
- Descriptive names are fairly explicit about what your business does. Think Internet Explorer, Whole Foods, Toys ‘R Us.
- Suggestive names evoke what your business or product is without being explicit, often via metaphor. Safari suggests exploration. Amazon is a huge river and suggests a wide selection.
- Fanciful names have nothing directly to do with your company’s offering. Examples include FireFox, Adobe, Apple.
- Many people think made-up words can only be fanciful, but they can really be any of the above. PayPal and YouTube are pretty descriptive. Swiffer or Pinterest are suggestive. Oreo or Kodak are fanciful.
**6\. Pick five company names you really like (which don’t have to be in your specific space). What do you like about them?**
Nike, Apple and Tesla often come up during this step. But try your best to separate the name from the company (and what the names have come to mean over decades — see note about Disney above).
**7\. Now the inverse. Pick five company names you really dislike. What do you dislike about them?**
This is obviously subjective, but many founders say they don’t like Hugging Face (too silly), Xilinx (too difficult to produce) or Fast (too generic).
**8\. Are there any length considerations you need to be aware of?**
If you’re a hardware company, etching your name onto a small piece of plastic or metal, space might be paramount. It’s not time for a name like Harley Davidson or The Browser Company, but one like Oura or Ember.
**9\. What are the legal considerations?**
Some founders are adamant about owning the trademark to their names, but others don’t care as long as they’re not violating someone else’s trademark.
**10\. Does the exact domain name need to be available?**
Consider alternate top-level domains (TLDs) besides .com, and if you’re willing to amend your name with a prefix or suffix to make it work for the domain (we’ll get into this more later).
**11\. What is your rough budget for domain acquisition?**
This is where I usually have to come in with a reality check. If you want a real English word on a .com, it’s going to cost you.
**12\. Any additional details, requirements or inspiration we should be aware of?**
What existing ideas or concepts do you have already? What should we avoid? Is there anything else we need to keep in mind? For example, I’ve worked with founders who have their operations split between the U.S. and China and needed the name to be easy to pronounce by a native Mandarin speaker.
### Step three: have a namestorm
The best brainstorms combine structure and creativity. Without *some* structure, it’s easy for creative ideas to be untethered and unhelpful. Establish the box before thinking outside it.
Too often, founders brainstorm alone or just with their co-founder, which vastly narrows the pool of good ideas. While that can be a good starting point, you’ll definitely want to bring in other employees or even friends and family. If you happen to have a linguist friend or a writer or someone who speaks five languages, this is the time to call in a favor and get them to participate.
**You’re probably thinking AI can be great at coming up with names. In my experience thus far, the overt name suggestions haven’t been good (they’re either obvious and pattern-based or unusable) but the brainstorming has been amazing**. Instead of spending hours reading Wikipedia and searching, I have a conversation with an LLM:
- Bad prompts look like this: “Come up with a name for my startup that makes engines,” or “Provide 10 names for a company that does therapeutic services for children in a preschool setting.”
- Good prompts are more focused on identifying the specifics you need without the hours of legwork: “What are 25 lesser-known engine parts? I’m looking for real, technical components that aren’t as widely known as ‘turbine’ or ‘compressor’ but are important to the function, efficiency, or durability of gas turbine engines.” Or “Give me 10 kid-friendly English verbs that mean ‘to propel’ and 10 nouns that suggest forward motion, like a slingshot or swing.”
I’ve covered some of the brainstorm process in this [positioning](https://review.firstround.com/positioning-your-startup-is-vital-heres-how-to-do-it-right/#how-to-name-your-company) article, but let’s get into some more detail.
**1\. Take your positioning statement and break it into nouns and verbs**.
This is a great warmup exercise to get the creative gears greased. For every meaningful word you isolate, create a full list of synonyms, antonyms, free associations, words in other languages, etc. You can use AI to help with this, and just capture as many as you can.
Full disclosure, it’s unlikely you’ll find your name this way, but it happens. When I was working with Maven’s co-founders on their name, we first found “maven” (from the Yiddish word “meyvn” which means “one who understands”) when doing this for “expert” — one of the words straight from their positioning statement.
**2\. After the warm up brainstorm based on your positioning statement, do a second brainstorm on \~8-10 relevant themes**.
Here are some of the themes we played with when naming Maven:
- Groups of people or animals (herd, flock)
- To gather or gatherings (squad, audience)
- Patterns in fabric, math or woodworking (joinery, fractal)
- Last names of famous educators (Montessori, Nye)
- Ancient Greek words and mythology related to gathering or learning (agora, Socratic)
- Special or premium access (red carpet, box seats)
One theme I like to include is “just say it:” explain what the heck the company does in as few words as possible (think PayPal or even First Round).
**3\. Read — a lot**
The Review team recently sat down with [**Jeanette Mellinger**](https://www.linkedin.com/in/jeanette-mellinger/?ref=review.firstround.com), former Head of UX Research at Uber Eats and BetterUp and now, advisor and consultant to early-stage startups on all things research. Her [research framework](https://review.firstround.com/a-research-toolkit-for-the-discovery-phase/#incubate-fight-the-urge-to-build-hurriedly-to-allow-richer-ideas-to-surface) includes an “incubate” phase for a reason: “Look at how our brains work. Great ideas don’t happen on schedule. True insight takes time, and pops up in unexpected ways.”
While you’re researching terms related to your chosen themes, there are many other ways to spark ideas — like reading historical accounts of the industry or browsing everything from baby name websites like [Nameberry](https://nameberry.com/?ref=review.firstround.com) to [Urban Dictionary](https://www.urbandictionary.com/?ref=review.firstround.com) (I’ve found name contenders on both!).
It also helps to read fiction or nonfiction that has nothing to do with the topic at hand. Highlight or write down names and phrases that are interesting and could be food for thought. I get kind of obsessed with words when I’m in this phase of naming and pay attention to everything from street signs to song lyrics.
Sometimes inspiration comes from somewhere unexpected. For example, wifi system [eero](https://eero.com/?ref=review.firstround.com) was originally called “Portal,” but while working with naming firm [A Hundred Monkeys](https://www.ahundredmonkeys.com/?ref=review.firstround.com), someone mentioned that they were from St. Louis, which led to discussing the city’s famous Gateway Arch by Finnish-American architect turned industrial designer Eero Saarinen. That moment led to a new name reflecting the company’s focus on design.
I consider this to be a different and equally useful path from the AI research you’re doing; it’s more serendipitous than the pattern-based AI suggestions.
**4\. Gather every idea in a spreadsheet and make a shortlist**.
At this point, you should have hundreds of ideas at minimum. Maybe even thousands. Scour the earth. To expand your list, play with the following types of names:
- **Real words**: like Apple, Gain and Square that have been repurposed outside of their definitions
- **Phrases**: like Man Repeller, Good Inside and Human Interest
- **Affixes**: tacking something onto an existing word, like Blogger or Contently
- **Compounds**: two words fused together, like Salesforce or Facebook
- **Blends**: part of one word combined with part of another, like Pinterest (pin + interests) or Microsoft (microcomputer + software)
- **Fragments**: a piece of an existing word, like Cisco from a clipped version of San Francisco or Vanta from advantage
- **Misspellings**: like Google, Lyft and Okta
- **Other languages**: like Reebok (from "rhebok,” Afrikaans for a South African antelope) or Asana (Sanskrit for a sitting meditation pose)
- **Onomatopoeia**: words that imitate the sound they represent, like Zoom and Twitter
- **Coined words**: fully invented words like Kodak, Etsy, or Vercel. Beware: the failure case here is sounding like a little-known Pokemon creature (think Zygarde or Giratina) or a drug (think Ozempic, Abrysvo or Camzyos — there are a lot of strange coined pharmaceutical names due to intense trademark and regulatory pressure)
- **Names of people or places**: like Tesla, eero and Duane Reade (the first location was on Broadway between Duane and Reade Streets)
- **Eponyms**: named after the founder like Disney, Adidas and Ford
- **Acronyms**: like IBM (International Business Machines), GEICO (Government Employees Insurance Company) or Fiat (Fabbrica Italiana Automobili Torino). Some of these you may have not known are acronyms!
- **Alphanumeric**: like 7-Eleven, from their original hours of operation, or 23andMe from the 23 pairs of chromosomes
Then, go through and highlight the ones that are interesting and worth pursuing. Some practical criteria to consider:
- **Trademark**. Is the name OK to use? Meaning, it’s not violating someone else’s trademark (bonus if you can proactively trademark it yourself).
- **Domain availability.** Is there a path to a viable domain?
- **Distinctiveness**. Is it unique and memorable?
- **Timelessness.** Is it cool now and will it still be cool in 10 or 100 years? You don’t want to be dated based on the name you pick when it’s no longer trendy anymore (think the “drop the e” trend of Tumblr or Flickr or Grindr from the 2000s — Twitter was originally part of that group but they later added the “e”). You want a name that will age well because it's built on deeper linguistic, semantic, and/or emotional foundations.
- **Reflective of key messaging**. It’s nice if your name can do some marketing work for you. Is it at all suggestive of what the product does or a feeling you’re trying to convey?
- **Sound and ease of pronunciation**. Is it easy to spell? Is it easy to understand over the phone? This is more important than people think. Say the name out loud. Is Zapier “zay-pee-er” or “zap-ee-er”? Think about how it would be used in a sentence and say that out loud too. Does it feel natural in your mouth as you say it? Is it fun to say?
- **Appearance**. Literally how pleasing or logical it looks to the eye. Names with harmonious letter heights, shapes and symmetry give designers a field day when creating wordmarks. Think Coca-Cola with those twin “C”s and “a”s.
- **Length**. A two-syllable word can be preferable because it’s not too long but more distinctive than a monosyllabic one.
Using those criteria and any additional ones you added to your brief, make a shortlist of 10-25 contenders. I find it helpful to put these into a new tab of the spreadsheet, where each name is a row and the criteria are columns — then, for every name, assign each consideration a stoplight color.
**5\. Narrow it down to a top three**
From your initial shortlist, get to your top three. I usually have each founder independently send me their top three, and then we get together to discuss what emerges.
Often, practical considerations like trademarks and domains will help you declare a winner. If not, here are some other signs to help you whittle down.
Good signs:
- **It’s polarizing**. If some people love it and some hate it, that’s actually a good sign. The names that everyone thinks are fine but no one loves are the boring, safe choices. You’re looking for names that get a reaction. It means people are feeling something.
- **It grows on you.** You initially felt lukewarm or negative to a name, but you can’t stop thinking about it, or you warm up to it. Nike is a classic example, which at the time was called Blue Ribbon Sports. As detailed in co-founder Phil Knight’s memoir [*Shoe Dog*](https://en.wikipedia.org/wiki/Shoe%5FDog?ref=review.firstround.com), when an early employee suggested the name Nike (after the Greek goddess of victory), Knight thought it was “not terrible” but didn’t love it. After it was picked from an “unspeakably bad” list that included Falcon and Dimension Six, Knight later admitted, “it grew on me.”
- **It’s a “two-layer” name.** This is my personal favorite: a name that works instantly on the surface for someone who doesn’t know much about the company, but works even better on a deeper level for the initiated. For example, most people think Google is a made up word that’s fun to say. But math nerds know it comes from the mathematical term “googol,” a one followed by 100 zeros. Or Moderna, which just sounds like a modern biotech until you know it’s a blend of “modified” + “RNA.” If you’re in the inner circle, these names feel like they’re winking at you.
Bad signs:
- There are tons of companies with the same name or it sounds like a competitor.
- It’s obvious and boring.
- It can easily be made fun of. "Pilaster" came up recently in a brainstorm. Say it out loud a few times. The jokes would write themselves.
- It locks you into something that’ll feel too restrictive later. When ZenPayroll started to add products outside of just payroll, the name got too small — [so they rebranded to Gusto](https://review.firstround.com/this-is-how-you-design-a-lasting-brand-an-inside-look-at-gustos-reinvention/).
## Getting feedback on your contenders
Naming is obviously a qualitative exercise. To me, good naming lives at the intersection of instinct and discipline. When things click, it feels obvious, like the company named itself. But many founders, by nature, like to test and get feedback and measure as quantitatively as possible — so often, they’ll look to their internal teams or friends and family or customers or generally, “the internet” as a backboard off which to rebound ideas.
Research around naming is tricky, particularly quantitative or survey-based research.
> If you ask a bunch of people to help pick a name, you’re likely to end up with a least common denominator name: one that pleases everyone but means nothing.
However, this type of research can be helpful to surface negative connotations you weren’t previously aware of. An example here is Vicks, the over-the-counter medication. In Germany, they’re “Wick” because in German “V” can sound like “F,” so it sounds like “Ficks” to German speakers — which is a vulgar term (that many of you are probably looking up right now).
It can also make you aware of other meanings or associations you may want to play up as you’re developing the brand. If a name doesn’t communicate anything, that’s also good to know — and it’s probably not a good name.
On the qualitative front, I’ve found it helpful to gather feedback from both initiated and uninitiated users:
**Talk to current users.**
Tell them you’re exploring a few new names, and ask what each name communicates. You want to uncover each option’s strongest qualities and find those negative associations that become dealbreakers.
Then ask which name they think fits best and why. Beware that this question often results in a descriptive name. I’ve found that in general, people are fairly literal and tend to prefer things that are familiar, so for a browser, that means they’d choose Internet Explorer over Chrome, Safari, or Firefox. Follow up with why they picked that name to get a deeper explanation of their choices.
**Talk to uninitiated users — people in your target audience who don’t know anything about the product yet.**
Two options here:
1. Same as above, but first using your positioning statement as the foundation, write a very short blurb about what the product does and have people read it with an “X” as the name. Then show the 2-3 names you’re deciding between.
2. Show each name by itself and ask folks what the name brings to mind and what they think a product with this name might do.
**Run a small memorability test.**
Memorability is an important aspect of a good name, but it’s also difficult because the human brain is a weird thing.
Conflicting elements can make a name memorable. One is concreteness, when a name evokes something tangible and easy for people to picture, like Apple or Red Bull. That mental image helps people remember the name, even if it has nothing to do with the product itself. These names often take something simple and familiar and place it in a completely new context — think Shell for gas or Caterpillar for tractors.
However, names can also gain memorability through functional relevance — when they directly reflect the product promise. HotelTonight is overtly descriptive, while Swiffer succeeds more subtly: it sounds like swiftly sweeping, embedding the product’s benefit in its phonetics. Another path to memorability is wordplay, which can make a name catchy or fun to say. That might be through alliteration (Firefox, Coca-Cola), rhyme (7-Eleven), creative misspelling (Lyft), or even palindromic symmetry (Sonos). And just to make things extra confusing: being short and sassy with a name can make it memorable (like Sony), but so can being long (like American Express or Harley Davidson).
> I like to run a simple test: talk with several people about the three names you’re considering. The next day, go back and ask them to recall the names. See which of the three they can remember.
## Trademarks and legal clearance
Congrats, you have your top choice name. Before moving forward — using it publicly, doing visual identity work, spending a five-figure sum on a domain — you’ll want to make sure the name is usable. Don’t fall in love with something you can’t have.
I highly recommend having a trademark attorney involved at this point. There are essentially two questions to address (everyone needs to answer the first one):
1. Might you be violating anyone else’s trademark? If so, you could receive a cease and desist and be forced to change your name.
2. Can you trademark the name yourself? If you can, I suggest doing this — it’s relatively low cost ($5k) and proactively prevents others from using your name.
**Just because another company uses the same name doesn’t mean you can’t use it**. Think Delta (airlines, dental insurance and faucets), or Dove (soap, chocolate). These can coexist because they’re in unrelated industries with very different goods and services — so there’s no likelihood for user confusion, which is something both you and the trademark office want to avoid. Contrast that with trying to use the name Dove to make a different kind of chocolate, or even a different kind of candy. That could be a problem. You want to be as distinct as possible from others offering similar goods and services.
Trademarks are categorized into classes by the USPTO, based on the type of goods or services they cover. For example, Class 9 is for “Electrical and scientific apparatus” which includes downloadable software and mobile apps, but not SaaS. That falls under Class 42, “Computer and scientific services.”
A company can hold trademarks in multiple classes if its products or services span different categories. For instance, [Anduril has registrations in several classes](https://tsdr.uspto.gov/?ref=review.firstround.com#caseNumber=88806653&caseSearchType=US%5FAPPLICATION&caseType=DEFAULT&searchType=statusSearch) — including both 9 and 42 but also Class 7 (machinery), Class 12 (vehicles), Class 23 (yarns and threads), and more. Within each class, you must specify a “description of goods and services,” which precisely defines what your trademark protects within that category.
Some common steps for clearing use and protecting your name are:
1. **Start with a basic search**. You can do this initial screen, sometimes called a “knockout search,” either yourself or with an attorney [here at the USPTO](https://tmsearch.uspto.gov/search/search-information?ref=review.firstround.com) to quickly rule out obvious conflicts.
2. **Do a comprehensive search**. This goes beyond registered trademarks and includes common law uses — businesses using a name without having registered it. A trademark attorney or specialized search firm can run this type of report. It takes longer because it includes unregistered but legally relevant uses like domain names, social handles and state business registrations.
3. **Understand the risks and your tolerance**. Usually, names come back from your legal advisor as low, medium or high risk. Get on the phone with your lawyer to discuss the results and strategize. Don’t email — it’s much better to talk about these things over the phone because lawyers will be more likely to give you brass tacks they might not be comfortable writing.
4. **Decide whether to file**. If you do, you’ll need to determine the relevant trademark class(es) and draft an accurate description of your goods and services. Again, a lawyer can help and actually do this filing for you. You can file for aword mark(text only), adesign mark (logo), or both. In the meantime, you can likely start using your name.
5. **Wait**. For months. You (or, ideally, your trademark attorney) will eventually receive either an approval for publication or an “Office Action” from the USPTO, which is a notice requiring a response. For example, if your name is initially found to be confusingly similar to another, your attorney can help you amend your application or submit arguments to overcome the refusal.
### If you’ve incorporated as a different name
Keep in mind that if your company was incorporated under a different name than the one you plan to use publicly, you’ll need to make that official. To do this, your lawyer can either amend or restate your incorporation documents to reflect the new name, or file a “doing business as” (DBA) which legally allows you to operate under a trade name that’s different from your registered corporate entity.
Think of a DBA as your company’s official nickname — the name you go by in public even though your legal paperwork uses another. We did a DBA at Apps & Zerts. Maven updated their corporate entity. There are pros and cons with either path. I leave it to the lawyers to decide.
This advice comes directly from one:
*“Changing the name on the corporate side is straightforward – it just requires Board and stockholder consents, and an amendment to the certificate of incorporation that gets filed in Delaware.*
*You also need to update the IRS – they can be painfully slow in confirming the name change, and sometimes that can create some administrative burdens with third parties such as payroll providers, banks, insurance companies and importers, who frustratingly sometimes insist on something more than the Delaware corporate filing. The fastest way to cut through that is by filing the tax returns with the new name reflected.*
*Using a d/b/a has its own set of hassles – technically you’re often supposed to register that in local counties/cities wherever you do business, which can be a real pain to keep track of as I believe there are periodic filings in some places every year or every 2-3 years.”*
## Domains
Get the name right, then solve for the domain.
> It’s harder than ever to get a good .com domain — but it also matters less than ever. User behavior has shifted away from direct URL entry and toward search bars with predictive text, social media and apps.
Plus, folks are far more comfortable with a variety of domain extensions beyond .com.
You can get creative with the domain you select by using:
- **Prefixes** — variants with a word in front of the name like [onepeloton.com](http://onepeloton.com/?ref=review.firstround.com) or [tryfigma.com](http://tryfigma.com/?ref=review.firstround.com) (they moved to [figma.com](http://figma.com/?ref=review.firstround.com) later).
- **Suffixes** — variants with a word in the back of the name like [awaytravel.com](http://awaytravel.com/?ref=review.firstround.com) or [squareup.com](http://squareup.com/?ref=review.firstround.com) (they have a redirect in place from [square.com](http://square.com/?ref=review.firstround.com) but even today that’s still technically owned by Square Enix, the Japanese gaming company).
- **Alternative top level domains (TLDs)** — .ai is an obvious one for today’s founders, but there are others like .aero or .university you might consider depending on your company. An .ai domain might cost you five figures. The same domain at .com might be seven or more.
In Maven’s case, they wanted [maven.com](http://maven.com/?ref=review.firstround.com), which was owned but no longer being used by a big corporation. Eventually, they worked out a part-cash, part-stock deal to acquire the domain. Biyani [wrote](https://x.com/gaganbiyani/status/1375137698483036163?s=20&ref=review.firstround.com) about their path to Maven a few years ago.
If you can’t outright purchase your domain, a domain broker can help you negotiate if the domain you want is owned by someone else. They can also help structure lease-to-own options, where you rent a domain for a set period of time with the option or obligation to purchase it at the end of that term. This spreads out the upfront cost and reduces some of the risk with going all-in on a domain.
Stop to ask yourself: Does the .com really matter to you? One founder I worked with spent $39 by amending the name, while another spent a seven-figure sum on the straight .com because they thought:
- The .com communicated more trust to their small business customers, which was important given their industry.
- Buying the .com name felt inevitable as the company hopefully became successful.
- If they spent \~$1M a month on search ads, the .com domain would have a large overall impact on conversion rate and eventually positive ROI.
Some founders just don’t have cash for the straight .com or think it’s prudent when they’ve only raised a few million dollars. It’s quite common to start with a variant and kick .com down the road. Or if you’re a mobile app, and most of your user acquisition comes from app stores, it matters much less. All of this really depends on the context of your business and some personal preference.
## Naming your product vs. naming your company
When it comes to naming products, most founders overcomplicate it. My advice: Don’t get too creative. If you only have one product, keep the company and the product name the same. When you branch out into multiple offerings, then it makes sense to ask customers to remember more than one name. As a fledging company it’s hard enough to get them to remember one.
If you’ve built equity in your company name, resist the urge to give your product an entirely different name. It’s a lesson some of the frontier AI labs seem to have missed.
> I’d bet the average users of ChatGPT have no idea it comes from OpenAI, or that Claude comes from Anthropic. And I don’t think that was intentional.
When you are launching a new product and need to disambiguate it from the company name and/or your first product, a simple framework usually works: \[Company Name\] + \[Descriptive Word\]. This lets the new product borrow the parent brand’s equity and build on it.
It works best when the company name itself isn’t also descriptive. Google Maps is a good example. By the time it launched, Google already stood for search, speed and simplicity in “organizing the world’s information.” There was no need to get cute or abstract — these were maps, done the Google way.
Of course, there are times when separating the product name from the company name makes sense. Google kept its name attached to its products (Google Maps, Google Drive, Google Calendar) until it introduced Android. They didn’t acquire Android and rebrand it to Google OS or Google Phone; they kept the distinct name that felt open, neutral and futuristic. This new mobile platform was supported by Google, but not defined by it. Square took a similar approach with names like Square Reader, Square Register and Square Invoices. Then it launched Cash App, a consumer product aimed at a completely different audience that might never touch its merchant tools.
Some car brands use model numbers to lean on the parent brand (BMW’s X5, Audi’s A3). Others use distinct product names (Toyota’s Prius, Tacoma and more) to create a new set of expectations and associations for each. For now, just remember: descriptive product names reinforce who’s behind the products; distinct product names provide room to build something new.
## If you’re still struggling with naming
When you first started with naming, you might’ve thought, “How hard could this really be?” Sure, you could pick a name out of a hat — but choosing the right name that works for your company requires a much more thoughtful process.
If you don’t want to go through it, you can outsource to a specialized naming firm, or in some cases, your branding agency can take over. But keep in mind, it’ll cost you: full service naming usually starts around $25k but can go all the way up to six figures.
Really, my hope is that this essay might make it possible for more founders to DIY naming. There are other DIY resources that can help too, like [a fun deck of cards for name generation](https://nopicnicpress.com/shop/go-name-yourself?ref=review.firstround.com) (put out by a naming studio I’ve mentioned working with called A Hundred Monkeys). Or if you’re more of an auditory learner, [listen to naming expert David Placek of Lexicon Branding on Lenny’s Podcast](https://www.lennysnewsletter.com/p/naming-expert-david-placek?ref=review.firstround.com). Don’t forget about your marketing friends or your VC firm that might have an in-house marketer — they can act as your thought partner.
### The other PMF: how personality-message fit helps founders communicate better
URL: https://review.firstround.com/the-other-pmf-how-personality-message-fit-helps-founders-communicate-better/
Last updated: 2025-12-04T16:55:42.000Z
The 30-second prep habit, learning to read a room, and more
_This post is for subscribers only._
### The Other PMF: Wes Kao’s Framework for Founders Who Want to Communicate — and Lead — Better
URL: https://review.firstround.com/the-other-pmf-wes-kaos-personality-message-fit-framework-for-founders/
Last updated: 2025-11-13T08:02:49.000Z
There was a time when [**Wes Kao**](https://www.linkedin.com/in/weskao/?ref=review.firstround.com) thought that to be a leader, she would have to change. Leaders, she believed, had to look and act a certain way — serious. Buttoned-up. Formal.
When she co-founded [**Maven**](https://www.linkedin.com/company/maven-hq/?ref=review.firstround.com), an online cohort-based course platform, Kao was thrust into an executive role, and she quickly began unlearning her preconceptions. The company culture that emerged organically at the startup helped her reflect more deeply on how a leader should speak or behave. “We weren’t serious or corporate for the sake of it,” she says. “It allowed us to be ourselves, and care about the quality of the ideas that we were sharing.” This suited Kao. “I think I’m a pretty professional person,” she says, “but I don’t think I’m the most *formal* person.”
Back then, Kao was still figuring out her leadership style. She would often notice, in meetings or at events, that one of her co-founders would make a comment that Kao felt she could never get away with.
“He would say certain things and people would love it. If I said something similar, I just knew it wouldn’t land the same way, and vice-versa.”
This observation planted a seed that would bloom into Kao’s own unique communication framework: *personality-message* fit. **If you shape your message to suit the tone, style and quirks of the way you naturally communicate, Kao argues, rather than adopting an approach that feels forced, connection with your audience will come effortlessly.** This might be in a hard [conversation with your co-founder](https://review.firstround.com/five-practices-to-strengthen-your-co-founder-relationship/), on a call with a prickly customer, or when pitching a room of potential investors.
“I don't think that we, as founders or leaders, can change 180-degrees, even if we want to,” Kao says. “We've all seen somebody pretending to be Steve Jobs, or trying to be Mark Benioff, and it’s not landing. It's better to know, ‘this is how I am, this is the constraint, and these are the levers I have to pull for people to better understand me.’”
It’s about more than simply being authentic. “That word gets thrown around a lot,” Kao says. “I don’t know if I believe there’s one true way to be ‘authentic.’ We can be different versions of ourselves in different settings, in different contexts, with different people.” Charisma, too, is a concept so broad and abstract it’s hard to translate into actionable steps. What Kao is talking about is more strategic. “You see founders of all types, styles, and idiosyncrasies being successful,” she says. **“It’s more about what makes you *you*, instead of trying to copy someone else and having those tactics fall flat.** There's a lot of things you can do to evolve, grow and get better in the way that you communicate.”
In this conversation, the executive coach and entrepreneur, who in addition to Maven co-founded the altMBA with bestselling author and marketing trailblazer Seth Godin, shares how founders can develop personality-message fit, first by finding their own voice, and then by learning how to make it land with others.
## Part 1: Personality
Self-reflection is the “personality” side of finding personality-message fit. Before thinking about an audience, you need to understand yourself: how you show up, what feels authentic, and where you naturally shine.
### Do an internal audit
When it comes to personality, disposition, and temperament, Kao says “it’s important to understand what your baseline is.” Ask yourself how it feels most natural to you to present in different settings, from pitching in a boardroom to mingling at an event, or speaking to a large group versus in conversation with a few people. Does it feel natural to joke, or be more reserved? To lead with data, or begin with a story? To hold attention with practiced pauses, or exuberant energy? “How do you react to things?” Kao asks. “Where does your head naturally go? Then, if you want to make adjustments, you can — but you have to know your baseline.”
Armed with that information, you can adjust the delivery of your message accordingly. Kao gives the example of an executive coaching client who is relatively inexpressive; she could barely tell when he was happy or upset. Kao’s advice to her client was not to learn to emote more, or force himself to make more animated facial expressions, which would only feel contrived. “If you want people to know how you feel,” she says, “you need to amp up other levers. Instead of trying to be high-emoting, or relying on your facial expressions or tone of voice to do the heavy lifting, you can turn up the enthusiasm with the choice of the words you use.”
By deliberately choosing language that signals energy (phrases like “I’m very excited” or “this has me feeling fired up”) Kao’s client was able to show conviction without faking it. Kao says it’s about finding subtle ways to make your intent clear, even when your delivery is naturally understated.
**The second part of conducting an internal audit is to assess which kinds of professional communication feel natural and effortless to you, and which feel more like pushing a boulder uphill.**
“It’s helpful to take stock of the parts of your role that light you up, and the parts you have to summon internal fortitude to get through,” Kao says. For example, do you shine when chatting with investors or customers at a casual event, but clam up speaking in front of the entire company at a town hall, or vice-versa?
> Pay attention to what gives you energy versus what feels like it’s depleting energy, or something that you dread, and to your excitement level — that’s the clue.
Conducting an audit will also help you identify if there has been a drift over time, where your day-to-day responsibilities have become increasingly centered around the kind of tasks at which you *don’t* excel.
“Your role might have been aligned with your strengths when you started, but it might now be only a small fraction of what you like doing. It's easy to get pulled in a bunch of different directions. You might look up one day and realize you're working on a bunch of stuff you don't enjoy and you're not very good at.”
**The audit doesn’t have to be overly structured. Kao recommends occasional reflection, whether through journaling or quick self-checks after big projects, to course-correct before burnout sets in.** “I'm a big proponent of stream-of-consciousness writing. I do a lot of reflection that way. The other aspect is noticing strong feelings either way; I see strong feelings as clues our bodies are trying to tell us.”
### Practice the 30-second prep habit
In Kao’s experience, most communication issues can usually be traced back to the same root: a lack of preparation. “It’s the biggest bottleneck to clear communication. We often jump from one meeting into the next, and answer Slack messages in between. I think people just don't put enough thought into their communication.”
And while you would undoubtedly prepare for a high-stakes meeting, you might not prepare for a quick Slack huddle or a walk-and-talk. **But Kao says smaller moments of communication also require preparation to be fruitful.** “When you’re speaking in real time, your brain is doing a bunch of different processes at once: processing, thinking, connecting it to past context, formulating a response, and then saying it out loud, all in milliseconds. If you aren’t clear about what you’re trying to say, it’s going to be confusing.”
Drawing on the data you have from your internal audit, Kao recommends spending as little as 30 seconds asking yourself a few clarifying questions before a conversation. “A couple of moments can make a big difference. It allows you to speak up on a call, or in a meeting, in a way that gets your main point across much better.”
Kao suggests jotting down notes, or simply reflecting. “Instead of sharing whatever comes to mind, start with your ideal outcome, and work back from there.” Questions to ask:
- What is my ideal outcome?
- Who is the recipient?
- What does this person need to know, and what do they value?
- What’s my main point?
- What’s my secondary point?
- Who are other potential stakeholders involved?
- What are the levers that I have I could potentially pull?
- What are any sensitivities that I need to be mindful of in this situation?
Working backward from your desired outcome is key. Kao shares an example of a coaching client, the head of finance at a Series A company, who was going about persuading the founder/CEO the wrong way.
“He wanted to convince them to adopt a more standard way of measuring CAC. My client *said* they wanted to be heard. But in reality, the ideal outcome was that the CEO would agree to calculate CAC in a certain way.” Kao helped the head of finance to work backward from there to determine how they should communicate the ask.
“What is most likely to appeal to this person, based on what you know about their worldview? You’re not going to get very far in my experience, trying to force them into entering your world. It's much better,” Kao argues, “to frame your recommendation under an existing umbrella of what they already care about and how they think the business should be run.”
## Part 2: Message
Finding your personality-message fit requires more than self-reflection. You’ll also need to conduct research in the field — to try different approaches, adapt them to your audience, and see what actually lands. “You can’t pontificate in your own mind endlessly and then come to a breakthrough. You can’t know what’s resonating until you go out and try. You have to get reps,” says Kao.
### Learn to read the room
Some people seem born with the ability to sense a shift in energy, or spot confusion before anyone speaks up. “They're naturally better at this,” Kao says. “Better at noticing the reactions of others and asking themselves, ‘Was that the reaction I was hoping for? If I approach it this way, am I going to get the reaction I'm looking for more?’ But it’s a skill you *can* get better at.” Kao advises approaching reading the room as a muscle you can build, not a talent that either you have or you don’t.
“I take an experimental, iterative approach, and it's very much first principles based. I’ll try a bunch of different things along the way to see, does that feel natural for me or does that feel off?”
**The people who seem naturally good at reading the room, Kao says, are just the ones who’ve practiced noticing.** “From far away it can look like magic, but if you come closer and dissect what’s happening, it can be broken down into component parts.”
Kao advises starting by sharpening your observation skills in professional settings, from presenting a deck to networking at an industry event. “Notice the reactions of others. Ask yourself, did I get the reaction I was hoping for? If not, what could I do differently next time?”
She encourages making small tweaks in low-stakes settings — for example, your tone, framing, or order of ideas — and to watch what changes. Think of it as A/B testing. “There’s no silver bullet,” she says. “Try things, and be honest about the reaction you’re getting. That’s how you get closer to the reaction you *want*.”
It’s important to take note of more than what’s said out loud. Kao distinguishes between explicit feedback (what people tell you) and implicit feedback (what they *show* you). “Most people over-index on explicit feedback,” she says. “If you take a step back and notice more, you’d probably see that this thing was bothering that person long before they spoke up about it.”
Make a habit of scanning the expressions and body language of your audience mid-meeting, and adjust your strategy in real-time. “If you can tell that it’s not really working, that’s a sign to switch things up.”
### Go deeper on feedback decoding
If you receive feedback on your [communication style](https://review.firstround.com/the-science-of-speaking-is-the-art-of-being-heard/) in a more formal capacity, such as from your co-founder or an investor, Kao warns against rushing to make changes without first probing for specifics, especially if the feedback is vague. “Three months later when you check in with that person, you might find that what you thought they meant was not what they meant at all.”
Don’t accept vague feedback at face value. **Ask follow-up questions until you can define what the other person means.** Kao gives an example of the common piece of feedback founders get to be more strategic. “You might ask, ‘when I did this thing, would you say that that was strategic, or did it not feel as strategic? What are some examples from my peers that you feel are strategic?’”
Kao warns that not everyone is skilled at providing specific feedback, so it might take a few attempts to glean the information you need. “They might not be able to share more specifics if you just ask them point blank. You may need to ask indirectly. Draw that information out of them.”
Once you’ve gathered examples, read between the lines. “You might notice a pattern; maybe a peer always starts with context, or they’re great at stack ranking what matters most,” she says.
**This approach does two things at once: it forces specificity from your manager, and it gives you a clear map for how to adjust.** “It’s much easier for most leaders to react to something in front of them than to define what they mean from scratch.”
The result of feedback on your communication style should be that you have clear, actionable steps to take to make changes. “It’s your job to unpack it, clarify it, and get to that next level of specificity so you can fix the right things,” Kao says.
“You might normally start talking in a chronological way about what happened starting from the past three months up until now,” Kao says as an example. “That is going to be confusing for someone who is hearing about this for the first time.” How you could shift your approach based on feedback is to frame the topic up front, and tell your audience directly what you need from them.
“You could say, ‘we’re here to talk about the new feature we're launching. What I'm looking for is your feedback about whether this is clear, and if so, we're going to launch next week.’ Saying something like that versus jumping straight into the deep end means the audience will understand more clearly what you’re trying to say.”
### Own your spike
Everyone has strengths and blind spots. For founders, those spikes are magnified, since they tend to show up in the culture and direction of the company itself. **Kao says spiky traits are valuable, not something to be sanded down to be inoffensive.**
“Most founders have a pretty strong point of view about the way things should be,” she says. “You *want* founders who have a strong point of view, who are obsessed about whatever they're obsessed about. I don’t mean stirring the pot with controversial statements just for the sake of it. I mean having a unique stance based on your lived experience that you can back up with evidence, stories, and logic.”
Kao encourages founders to share their spiky opinions with pride, with the intention of teaching people something new. “If you’re just saying stuff people already know, that’s not very useful,” she says. “The content that resonates is the kind that helps people think differently, that challenges a viewpoint in a productive way and gives clarity to a problem they’re dealing with.”
It’s a principle Kao applies to her own personality-message fit. “Almost all of my content starts with considering: what’s my spiky point of view here?” she says. “The stuff that performs best is usually rooted in something that triggered a reaction in me — either I strongly agree, or I strongly disagree.”
She encourages founders to use that same instinct as a guide.
> If something triggers you, if you find yourself thinking ‘this is annoying’ or ‘this is fascinating,’ that’s where your best material lives. That’s where you have conviction.
**Spiky opinions don’t just get attention; they build credibility.** They tell people what you stand for and help attract those for whom your message is more likely to strongly resonate. “It’s not about being loud for the sake of it,” Kao says. “It’s about being specific, grounded, and true to what you actually believe.”
But pay attention if something about the way you [communicate](https://review.firstround.com/power-up-your-team-with-nonviolent-communication-principles/), whether it’s style or content, seems to be consistently bothering people. “It’s useful to be self-aware of the ways that you might be impacting the people that you work with,” Kao says. “If you’re consistently getting feedback that a part of your behavior isn’t productive, it’s up to you to decide if you want to continue that and live with the consequences, or change it. By the time anyone's speaking up, it’s probably been bothering them longer than you knew.”
### How to build a company you’ll run forever | Zack Kanter (Founder and CEO of Stedi)
URL: https://review.firstround.com/podcast/how-to-build-a-company-youll-run-forever-zack-kanter-founder-and-ceo-of-stedi/
Last updated: 2026-02-03T17:34:59.000Z
Zack Kanter is the founder and CEO of Stedi, an API-first healthcare clearinghouse. After bootstrapping a wildly profitable auto-parts business, he sold it to tackle "the most complicated problem" he'd ever encountered: business-to-business transaction exchange. He spent years building EDI infrastructure, threw away the entire codebase eight times, and found extraordinary traction in healthcare. Stedi recently raised a $70M Series B co-led by Stripe and Addition. In this conversation, Brett and Zack discuss why venture capital means "going pro," why execution is never actually a moat, and how "eating glass" became Stedi's competitive advantage.
**In today’s episode, we discuss:**
- How 16-year-old Zack turned $2,500 into a wholesale empire
- Why bootstrapping means being "constrained by capital" and how VC removes that ceiling
- Why Zack rebuilt their EDI product eight times before launch
- The snake swallowing a deer: what extreme product-market fit really looks like
- What software companies can learn from discount retail and Toyota
- Why Stedi’s new hires are told "everything’s your fault now"
- And much more
**Where to find Zack:**
- LinkedIn: https://www.linkedin.com/in/zkanter
- Twitter/X: https://x.com/zackkanter
**Where to find Brett:**
- LinkedIn: https://www.linkedin.com/in/brett-berson-9986094/
- Twitter/X: https://twitter.com/brettberson
**Where to find First Round Capital:**
- Website: https://firstround.com/
- First Round Review: https://review.firstround.com/
- Twitter/X: https://twitter.com/firstround
- YouTube: https://www.youtube.com/@FirstRoundCapital
- This podcast on all platforms: https://review.firstround.com/podcast
**References:**
- Aetna: https://www.aetna.com/
- Amazon: https://www.amazon.com/
- AWS: https://aws.amazon.com/
- Blue Cross Blue Shield: https://www.bcbs.com/
- Change Healthcare: https://www.changehealthcare.com/
- Cigna: https://www.cigna.com/
- Clay: https://www.clay.com/
- Costco: https://www.costco.com/
- Ford Motor Company: https://www.ford.com/
- GM: https://www.gm.com/
- HIPAA overview (HHS): https://www.hhs.gov/hipaa/index.html
- Jeff Bezos: https://x.com/JeffBezos
- Kanban / TPS (Toyota): https://global.toyota/en/company/vision-and-philosophy/production-system
- Microsoft Teams: https://www.microsoft.com/microsoft-teams
- NetSuite: https://www.netsuite.com/
- O’Reilly Auto Parts: https://www.oreillyauto.com/
- Peter Thiel: https://x.com/peterthiel
- Porter’s five forces: https://www.isc.hbs.edu/strategy/pages/the-five-forces.aspx
- "Reality has a surprising amount of detail": https://johnsalvatier.org/blog/2017/reality-has-a-surprising-amount-of-detail
- Slack: https://slack.com/
- Stedi: https://www.stedi.com/
- Summit Racing: https://www.summitracing.com/
- Target: https://www.target.com/
- Walmart: https://www.walmart.com/
- Zapier: https://zapier.com/
**Timestamps:**
(01:24) Zack’s first business
(08:54) Why the first customer is tricky
(10:12) The downside of bootstrapping
(11:42) Why venture capital is like “going pro”
(14:20) The confusion between ownership vs. control
(16:08) Building a company you don’t want to leave
(20:46) Do things better than other people
(24:49) Stedi’s early years
(31:43) Physical vs. digital product-market fit
(34:41) How Stedi scaled decision-making
(40:08) Stedi’s journey to product-market fit
(45:22) Finding founder-approach fit
(50:42) “All software is a cascade of miracles”
(52:52) The surprising lessons from discount retail
(57:50) How the Toyota production system influences software
(1:01:31) What it means to be a high-agency person
(1:03:09) The core trait Zack looks for when hiring
(1:02:57) Maintaining conviction in unconventional practice
(1:14:19) When should you start to hire managers?
(1:17:42) “Reality has a surprising amount of detail”
Zack: We've decided we're going to eat glass. That is what sets us apart. We'll go to the ends of the earth to do things the right way, even when it's not economical and it doesn't make sense.
Brett: For today's episode, I'm sitting down with Zach Kanter, founder and CEO of Steady, the only programmable healthcare clearinghouse. Before Steady, Zach ran an auto parts company and that experience heavily influenced his approach to systems efficiency and quality.
Zack: It took four-and-a-half years for us to launch anything publicly. We threw away everything that we had built every line of code, maybe eight times.
Everybody's had somebody say to them at some point, quality, price and speed. You have to pick two. That is like the most losing mindset.
Brett: Along the way, he's developed a philosophy about business that's both pragmatic and contrarian.
Zack: When you have bootstrapped a businesses, you're saying, I'm going to be constrained by capital. Being able to remove the fundamental constraint of capital as the limiting factor of a business is like the equivalent of going pro. All of a sudden you have a million dollars in your bank account, you're immediately faced with a question of, "How good am I?"
Brett: In our conversation, we dig into how manufacturing principles translates to software.
Zack: In software, you kind of have it on easy mode because the margins.
Brett:
What it really means to build a high-performance team, and how Zach thinks about creating enduring advantages in a changing market.
Zack: On everybody's first day at Steady, I say, "Welcome to Steady. Everything's your fault now."
Brett: Let's dive in. So what's the story of starting your first business?
Zack: Well, I was getting my first car, which was a 1995 Caprice. I don't know if you know what a Caprice looks like, is the old yellow cabs and police cars, the kind of big boat-y ones, and it's the cousin vehicle, so it's a Chevy Caprice is a cousin vehicle to the Impala SS, and the '94 to '96 Impala SS is kind of the last of the great four-door rear-wheel drive V8 American muscle sedans. So I was getting my first car. My first car was the $3,900 or something like that. And so it was in need of repair, in need of a number of things. And as I got the car, I started going on this car forum, the [ImpalaSSforum.com](http://impalassforum.com/?ref=review.firstround.com), and I was basically looking for parts that I might want to put on my car. I didn't really know a whole lot about how to work on a car, but I was interested in learning and reading about this stuff. So I got kind of obsessed with it eventually was a satellite trade show of this show called the SEMA Show, which is the big show every year where all of the automotive kind of after-market business gets done every year. They had a satellite show in New Jersey about 45 minutes from where I grew up. I was 16 I guess at the time. And so I made up a fake business card so that I could go to this trade show and I basically went around from booth to booth and I asked every single person, Hey, do you have any parts for this car? And it was kind of an obscure car and not really a hot car like a Camaro or a Mustang or Chevelle or something like that. And finally, 20, 30 booths into the show, was not a huge show. I met a guy who knew a guy who had developed ball joints, heavy duty ball joints for the car. And now I didn't really know what a ball joint did or what it was, but I was pretty excited that he had something for my car. And so I reached out to this guy after the show. Interesting thing about the car industry, there's the kind of need-based repairs, which is somewhere as a $200 billion market. So your tire blows out or you need a new muffler or something. And then there's the want-based purchases, which are the upgrades. And I was more interested in the want-based purchase and I think it's a 40 billion market or at least that's what it was when I was in the industry. So I met this guy and called him afterwards and I talked to him and he said, I talked to him for 45 minutes about these heavy duty ball joints that he had made. Okay, it sounds like a great product. I'd like to order a set. And the guy goes, "What do you mean you want to order a set?" I said, "I want to order a set for my car." He says, "This is a wholesale business. You have to buy $2,500 worth of stuff." So I kind of did the math. I figured out that $2,500 worth of stuff was 25 sets of things. It was enough to do 25 cars. So I signed up for a credit card and I bought $2,500 worth of stuff and I basically packaged it into a kit, each one of these different pieces, 12 different components or so, and I packaged it into a kit and listed those for sale on the Impala SS forum and the kind of group purchases section, and I sold out of the kits. And so I got mine and I sold 24 other kits and that started to become a real business.
Brett: So to contextualize the journey of building the auto-parts business, tell us about the few chapters over those 13, 14 years and then curious to get your perspective on a few things.
Zack: In the beginning I was selling direct to customer, so I had a website, took PayPal and I would sell on these online car forums. I started selling these kind of auto parts for this one specific car, these few different years of Impala SS and Caprice. And I sold small, it was nice fun money, but it was not real business. And I skipped my senior year of high school and I went to college and when I got to college, I met a guy who was also interested in cars and he said, "You know what you should do is you should develop ball joints for snowplows because the snowplow, the additional wear that comes from having a snowplow on the front of the truck actually wears at the ball joints very quickly." So I asked him what he was using for a snowplow and he was using a Chevy S-10 two-wheel drive truck. And so I said, "I'll make a note to go look at that and see if I could maybe have those made," or something like that. And so I went and I did the research and it turned out that the exact same ball joint that was used on the Impala SS was used on the Chevy S-10\. And it's because when GM or Ford or whoever goes and makes a new vehicle, they make something, like I said, obviously in hindsight they don't go and make every part from scratch. What they do is they look and see, "What do we have that's a similar weight, that has similar angles and whatever all the other requirements are," and they take that off the shelf and they use it. So that was an eyeopening thing for me. I never thought, "Hey, what else does this vehicle fit?" There's an interesting kind of nuance to auto parts in that one part can fit many vehicles and obviously one vehicle has many different parts, so it's a many to many database relationship that's not the easiest thing to model. Because that is difficult to model and it's very different from how you might sell a glass or a fork or a watch, which is like it might vary based off of having four prongs on the fork or five prongs or being up dessert fork or whatever, kind of different fork, auto parts both have those different types of dimensions, but they also have this different fitment criteria to it. And because of the complicated fitment criteria, the e-commerce penetration rates in auto parts are very, very low. So I don't know the latest numbers, but when I was in the auto parts industry a number of years ago, the penetration rates in automotive were second only to grocery, so it was like a 4% e-commerce penetration rate for auto parts at 2% e-commerce penetration rate for groceries. So I found out that it fit these other vehicles and I started listing more parts on my website.
Brett: You were contract manufacturing them or no, still looking, just being a middleman.
Zack: It was still, I probably had modifications done to it. There was a number of different changes. There were plastic bearings. I switched them to metal bearings, which were better. I made them greasable and I changed the coatings and a bunch of different things like that. Maybe six months after I did that, I got a call from this guy one day and he said, the guy in Indiana, he said, "I'm making a production run of control arms and I want to buy, I hear you make the best ball joints in the world and I want to buy." And I said, "Okay, how many do you want to order?" And he said, "I want to order 500 sets." And 500 was I was floored. This was more money-
Brett: And this out of your dorm room?
Zack: Out of my dorm room, yeah, absolutely. He said, "How much would it be?" And I think I sold them for 20 bucks at the time. So I said it would be $13\. And he said, "How about $12?" I said, "Sure." And so he placed the order and that was what it was 500 control arms, probably 500 sets. So it was like a $20,000 order or something like that, which was just an instant $10,000 profit or something. It was more money than I had ever transacted at one time. And that kind of woke me up to the power of wholesale. I continued on this supplying these individual small manufacturers for a while. This is much longer story, but I eventually got into one of the major auto parts retailers company called Summit Racing Equipment. I learned that the hardest thing to do is to get your first customer in any one of these segments. Okay, consumer, it's not that hard to get your first customer. There's enough people out there in terms of wholesale, everybody wants to know who are you supplying now? And so you have this problem of, okay, you meet your first customer and they-
Brett: Cold-start problem.
Zack: ... \[inaudible 00:09:47\] cold-start problem, exactly right. And so starting with these kind of private label jobs or working with these niche players who had a big name but relatively small volume and were willing to be progressive was very helpful. And then one of the ways that I ended up getting into the first retailer was I went to them and I asked which of our competitors catalogs you in? And I said, "I'm not in any of them right now," but I said, "Do you have a copy of your catalog?" And I flipped through their catalog and I circled all the different products that they were offering that had my parts in it and that was one of the several kind of chips that fell into place of convincing them to carry the product line. And then once you get that, within three months I had their biggest competitor. Within a month after that I had Amazon and within probably a year after that I had O'Reilly Auto parts and the kind of dominoes just fall from there.
Brett: Through all the ups and downs over that 12, 13 years of building the company, what ended up causing you to want to sell the company?
Zack: I had bootstrapped that business, self-funded the business, which means basically funded out of revenue, funded out of debt. I hear a lot of founders talk about the venture capital backed founders saying, "Oh, next time I'm going to bootstrap or You should bootstrap your business, you shouldn't raise venture capital." There are a lot of downsides to bootstrapping and the fundamental thing that I think about when I think about bootstrapping is that when you have bootstrapped a business, you're making a statement of saying, not in every case, but in the vast majority of cases you're saying, "I'm going to be constrained by capital." Now, there are examples of business that just generates so much capital that they're not. Bootstrap business just generates so much capital, they're not constrained, but by and large bootstrap businesses are constrained by capital. So I would have this cycle where I would have millions of dollars of new products that I wanted to make, but I would have $20,000 of free capital that I could deploy. So you go and you design $20,000 worth of stuff. You place the order, it takes three months to get a sample, you get the sample, you approve it takes four months for the production and shipping and everything, and then it takes you some months to earn your money back on that, get your initial cash back out, and then you go and you take your $40,000 that you have now and you deploy that and you kind of do the cycle over and over again. And I did that enough times. You get to the point of saying, "What am I doing here? I think that I can do a lot more than I'm doing. I think that I have a huge bench of ideas that could be deployed," and it's kind of a question of how do you want to spend your time? Do you want to spend your time owning everything %100 but being able to work to 2% of your capacity or do you want to be unconstrained by that and figure out what you're really capable of? And so fundamentally venture capital is this idea of which I think is the most wonderful thing in the world. You raise an initial round of funding, we raised $1 million dollars in our first round of funding and all of a sudden you're faced with, you have $1 million dollars in your bank account, you're immediately faced with the question of how good am I, which is if you don't have engineers, it's like how good are we? I'm not good enough at recruiting. You're hiring engineers, but it's not clear enough what they should build. You're not good enough at product. The product is there and you have engineers, but you're not good enough at selling it initially. That's a hundred percent your problem. Now you get to this place, you hire four or five, six people and you realize, "Well, I can't hire too many more people or else we're going to have too short of a runway," and now you're not good enough at fundraising. Of course, another way of framing that as you're not good enough is it's within your locus of control. So as a high agency person being able to remove the fundamental constraint of capital as the limiting factor of a business, to me it's like the equivalent of going pro. I think that there's vastly more cases in which venture capital makes sense for a high-achieving person than for bootstrapping.
Brett: Why do you think this idea of bootstrapping being the way to go, at least in some corners of the internet, it's almost turned into sort of this ideology?
Zack: Well, look, to some extent the grass is always greener. I think there's also a lack of granularity of how you think about it, which is basically what are the things that you don't like about raising venture capital? People say, well, we were pressured to grow really fast. What does that mean? Does that mean that you were going to be fired as the CEO if you didn't do something? That's an issue of board control. Was it just uncomfortable that people were pushing you to move fast? It's like, grow up. You're going to be pressured for all sorts of things from employees, from investors, from customers, from peers to do things. And I think you have to have a backbone and decide what are you going to do? What are you going to stand for? What are your principles versus your preferences? And kind of own those things. There's an element of ownership, which is people say, "Oh, it'd be nice to own a hundred percent of the thing." And I think, look, that's a math equation. You can't be obsessed with owning a hundred percent of the thing. Would you rather own a hundred percent of a 10 million business or 10% of a billion dollar business? Of course, I think unless you really have some obsession with ownership. But I think most of these things are confusion about ownership versus control.
Brett: And why do you think people get confused in that way? Is it just the way the brain tends to work?
Zack: When I was starting Steady, I had a lot of friends who had started companies and I noticed something interesting, which is that founders wanted to often leave the company that they had started. So you see people romanticize about bootstrapping, but you also see people romanticizing about starting over from scratch again. The question is like, what are you hoping to do differently? And basically when it came down to it and you probe these questions of what they were looking for is basically they disliked the business that they ended up building. And to me that's kind of a crazy situation to get yourself into because it's your fault. You've built this business, you made all the decisions and everything. Yes, okay, maybe you had a board who's forcing you to do something you didn't like to do, but that was your decision to give up board control. Now you can get yourself into difficult situations where you have to give up board control, but again, it kind of all compiles back down to this is your fault. Just don't put yourself into those circumstances and you're not going to end up having those problems. And so I love the Charlie Bunger quote where he says, "All I want to know is where I'm going to die, so I know not to go there." I thought about that from the early days of saying, "Okay, what are the things that, as I was thinking about this question of do I want to pick a new business that I think has faster returns to cash or do I want to do a venture capital backed business?" I basically said, "Well, what are the things that I might end up regretting? What are the reasons why I would want to leave this company?" And as long as I decide not to do those things from day one, I'm going to end up building a company that I love. In other words, just don't build a company that you want to leave and you're going to want to stay there for a very long time.
Brett: What are the things that you listed out? And I should say do you think you could have listed them out if you didn't first build the auto-parts business?
Zack: I do think so, yes, because I think it wasn't really learnings. Look, I didn't learn that much about venture capital from the auto-parts business except for the fact that I've learned that I didn't want to bootstrap. And I think that having gone through that taught me, "Okay, how do I want to spend my life is I want to spend my life working on hard problems with smart people and I want to look in the mirror every day and be faced with the question of how good am I?" I think that that is the ultimate dream of a founder is to figure out what my limits are. The decisions basically that I made upfront were, well, one thing I liked about bootstrapping is that I didn't have a boss and to me I kind of went through this agonizing question of do I want to raise venture capital because is that going to mean having a boss and you can just invert that like everything else and say, "Well, how would I have venture capital investors where it didn't feel like having a boss When I could have talked to other founders about the circumstances that they had found themselves in most common things were that they promised things that they couldn't deliver on, got themselves into bad circumstances and didn't explain those things adequately or upfront to investors. They gave up control early, brought on investors that they didn't like. And so I worked backwards from this list and I said, start with I'm only going to tell investors good news after it happens and bad news either hopefully before it happens or as soon as it happens worst case. And talk about that first one a little bit. That I guess is something that I learned from the auto-parts business. My largest customer for the auto-parts business, which was like a customer that when I landed it, it kind of put the business into a different stratosphere. It took me five years to land that customer, and the other four times that I almost landed it, it was like on the one yard line and then, poof, something happened. You said something they didn't like and they would disappear for a year and you won't answer emails for a year. A year later they finally answer your emails and I kind of realized that of B2B deals that seem 99% likely to close, 50% of them fall through. And so I've Angel-invested in 50 or 60 companies, and so I get a lot of investor update emails and through angel investing I've realized I definitely don't want to be an investor, but you get these emails and they're like, "Oh, we're in a POC with this Fortune 500 company and we have this much in pipeline, and we're this," and I'm like, "Man, why are you telling me this? Just tell me about the things that happened before." I don't need to know about the things that might happen or end up not happening. And I think there's just almost pure downside in listing these things out to investors.
Brett: Was there anything else you listed out that were sort of non-negotiables in trying to create a company that you can run forever?
Zack: Well, yeah, I mean the run forever piece is interesting. I kind of realized with the auto-parts business and I had started a lot of other side projects while doing that, I was bored with it, that the returns that you get from working on one thing are like when you split your attention, you don't get 50 50 and so you say like, "Oh, we're going to do this and this. I'm going to focus on this and this," is never going to really work very well. With the auto-parts business. Having done all these things, I decided that I wanted to sell that business and start working on the most complicated problem I had ever come across, which is this problem of business to business transaction exchange, which I had come across through the auto-parts business and knew that I didn't want to retire. I never wanted to work for anybody else. I didn't particularly like starting and selling businesses. I like compounding and I think it comes in many ways, it's compounding of relationships and friendships and whatever it is. It's like yes, the beginning of something can be exciting and the end if something could be relieving, but by and large, the muck in the middle is where the value is built. I didn't want to retire, forget if I that part already, but if you kind of put these things together, which is I don't want to retire. I don't want to be an investor, I don't want to start and sell companies, I don't want to work for anybody else, you can default. You realize that what you want to do is run one business for a very long time. But when we build this business, it's gonna be, not a one of end business, but an end of one business.
Brett: Is there any other hidden knowledge that you picked up through running the auto-parts business, the types of things that are important, ideas that would've been hard for you to figure out had you not had that chapter?
Zack: There's this tremendous alpha that can be found from doing things better than other people. There's this great, I'm not a sports fan, I'm in particular not a basketball fan, but there's this great converse ad from around when we grew up that had Larry Bird in it, and it's a picture of him diving for this ball that's going out of bounds and he says, "It makes me sick when I see a guy just watching the ball go out bounds." That extends to everything, the things that I did to build the auto-parts business. There was no breakthrough in manufacturing technology or distribution technology or anything. I basically said these parts are being sold very poorly on the internet and there are some basic things that can be done in order to make the products better. What were those basic things? You look to what the customers are saying, customers saying, "The original parts that were made on my vehicle had a metal to metal bearing service and I want it to be metal to metal, and the ones that are sold today are plastic." They complained about the parts rusting and they complained that the boots on the parts would tear. These are all solvable problems. This is not something you have to go learn how to land a rocket in order to fix. And then the pictures that you would see online for these products were scanned in from the old books that were in parts stores. And so these are multi-billion dollar market cap companies that their photos were, the e-commerce sites were scanned in copies of books. It was grainy, it was black and white. And so my basic hypothesis with the auto-parts business after I was through that initial phase of it was that by having a high quality product was better on these few clear dimensions. And by having excellent photography of each one of the products and clear explanations and then following that up with excellent customer support, that I could take some percentage in the market without doing any advertising. And that turned out to be true. The business was immensely profitable. It was like it had software margins that people told me were not possible to do in that business. I met, actually tried to raise money for the auto-parts business in maybe 2014 or 2015, and I talked to some guys who did a mini family office, private equity VC-type thing, and they asked me to put together projections, which I had never done for the business, and I projected the business would make such and such profit at such levels, and they actually kind of laughed me out of the room. They actually laughed when I presented it to them. They said, "You just don't get it." They don't. And I said, "What don't I get?" They said, "Well, when you get to a certain size, you're going to need to do more things. You need to hire more people. You're going to do all this stuff." I was like, "But I've built software for that. That's what the software is for." They said, "Yeah, it's in theory that's true, but when you get there, it doesn't actually work." I went out when I sold the business, I went back and I looked at those projections that I had sent them and the actual EBITDA margin that I achieved, the actual real profit, not just a fake EBITDA margin, was two and a half times what I had shown to them at that time. So it was wildly pessimistic. When I later read about the Toyota production system, you think that some sort of a major breakthroughs and they're developing these cutting edge things and robots and all that. And really what the founder of the Toyota production system said and what people said about him is he took basic ideas and he carried them through to an extreme degree. And basically that's the philosophy that I brought forward to Steady, which was like there is, yes, other people have attempted to solve business to business transaction communication before, but I can look at it and I can see there's hundreds of things of obvious pieces that they're not doing. And my hypothesis again is that if you fix those things, that emergent property of fixing all those basic pieces is going to lead to something that has a much better outcome.
Brett: Switching gears slightly and going back to talking about the journey of building Steady, the company sort of had this interesting path where it took something like five years to get to your first million in revenue and then you sort of went one to 10 in a surprisingly short amount of time. Maybe you can kind of contextualize the journey and sort of explain some of the higher order bit insights of that seven or eight year journey you've been on.
Zack: Now, being a healthcare clearinghouse, as we fundamentally sit in between providers, which could be your individual doctor or dentist's office, if they've got an independent practice, it could be a large health system, it could be an ambulatory surgery center or anything in between. It was a pretty broad spectrum of what these customers might be and they need to submit transactions to payers, insurance companies, they're called payers in the industry, Aetna, Cigna, Blue Cross Blue Shield, whoever it might be. And then they need to process claims and the transactions that come back in response to that, like claim acknowledgements and claim status, electronic remittance advice, which is record of the payment that was sent, those transactions all get processed by these clearinghouses, but that's not where we started. Where we started was a layer underneath that, which is with this archaic file transfer protocol set of standards called EDI, Electronic Data Interchange, and EDI was what I had encountered in the auto-parts business when I started selling to these various retailers, I sold to O'Reilly Auto Parts and Amazon, and when the volume got such that it wasn't reasonable to automate manually into the transactions anymore, I reached out to the different retailers and said, "can you send me your API spec so I can automate the transactions?" It's probably in 2011 or 2012, and they all wrote back and they said, "What's an API?" Things have gotten a little bit better since then, but broadly, I found out at that point that the way that these businesses integrated was using this technology called EDI, which was developed in the sixties for railroad communication, popularized in the eighties by Walmart. And then when Amazon came onto the scene in the '90s, they said, "Okay, what's the fastest way for us to onboard all of Walmart suppliers, Procter and Gamble and Rubbermaid and whoever else might be, Nike." And the fastest way for them to do that was to adopt the same standard of the Walmart use. And so you fast-forward to today and the whole world of retail logistics, transportation, supply chain manufacturing anything revolving around physical products works off of EDI. And so the way that EDI works is it's a file that Amazon or Walmart will send you for a purchase order and then you send back a purchase order acknowledgement and a ship notice and an invoice and these various transactions that flow back and forth. When I found out about EDI, I was very excited. I had read the 4-hour Workweek not too long before this and I said, "Okay, I need to automate everything." And so when you look at this list of EDI transactions, it turns out that it's not just purchase orders and ship notices and invoices as inventory feeds, I can automate my warehouse shipping orders, I can automate the load tender, which is where you tell the warehouse, the warehouse tells the truck to come pick the product up. You can file your tax returns via EDI, get your bank statements via EDI. So I said, "In six months I'm going to have this whole thing humming." A bunch of different, I was running on NetSuite at the time, implemented NetSuite early and there were a lot of EDI platforms that were out there that were pre-integrated with NetSuite and pre-integrated with these various trading partners, the Amazons and O'Reillys of the world. And I signed up, interviewed three of them, spoke with three of them was my first piece of software I had really bought outside of NetSuite that required an implementation and I reached out to three of them and I chose one of them and they walked me. This was great onboarding kickoff call. They assigned somebody to my account, seemed like a really great process and they said, this is going to take 30 days, this is going to take 30 more days and this is going to take 30 days and in 90 days the whole thing's are going to be done. 60 days goes by after that kickoff call and I reached out to them and I said, "Hey, it's been 60 days and just wanted to check in how we should be thinking about scheduling that last call." And they wrote back to me and they said, probably took them 10 days to get back to me. And they said, "Oh, we reached out to your trading partner and they never got back to us, so we haven't started yet." And that was where I first experienced this level of ball dropping in the software world. And you find out is that these, when they said they were pre-integrated, what they meant was we have done an integration once before. It doesn't mean that this is not like a plugin, this is not like a Zapier integration. I went through three of these. One was worse than the last and the last one was an 18-month implementation and everything could possibly go wrong, went wrong. And to kind of go back to our earlier discussion, there's just so many of the things that they were doing, I was like, I'm pretty sure these are very fixable. This is not rocket science. So I ultimately had my own EDI system built and then that automated the auto-parts business for the next five years. And in building that business, I realized, or in building that automation platform, I realized there's a big opportunity for this market. It's really, really hard to build an EDI platform and that's what I'm committed to do and we're going to win this by going through the muck for longer than anybody else. And we got exactly what we wanted. We did indeed go through the muck for a very long time. It took four-and-a-half years for us to launch anything publicly. And what you don't see during that time was that we threw away everything that we had built completely every line of code maybe eight times and you just get to a place and you say, "Okay, this is not the way," and you have to start from scratch again. And I think that you gain more of an appreciation for how the other EDI businesses ended up where they are because they got to one of those paths and they said, "All right, this is going to gets us kind of part of the way there and we'll fix it later." And they stayed there and ended up on this kind of dead evolutionary branch.
Brett: What are your reflections on this idea of building products for yourself? Because I think part of the reason that even though you thought the degree of difficulty of the build was going to be very high, you had built a version of this for yourself and maybe to a certain degree, you thought that your preferences were representative of the larger market and it felt like as you spent more and more time with trading partners as you were building and delivering product and building and delivering product, before you had any real launch, anything like that, that in some ways your preferences didn't externalize or weren't fully repeatable to an end market, that there were too many people that wanted to do all sorts of things in all sorts of different ways that made the degree of difficulty maybe even higher. I don't know if you have sort of thoughts or reflections on that.
Zack: I love the term product market fit. I think that the coining of product market fit is a technology in and of itself. When I was in the physical product world, product market fit is pretty obvious. Now, product market fit in physical products is not easy, also is also hard to find product market fit. Plenty of people don't find product market fit there, but there are some things that are much easier about it. And when you look at companies that are 150 years old, you look it up, Design House that makes clothing is 200 years old and every season they're shipping new designs and new stuff. You see people who are making TVs and they're making new TVs and you see people who are making all these different items. Furniture makers, it doesn't matter if the company's two years old or 50 years old, they're shipping new products. And then you come into the software world and the most common thing in the software world is that people talk about things. They know what the features are that people want and you can't ship it, you just can't. But why is that? That's kind of the trillion-dollar question, but companies get stuck in the mud, and so what you generally see is that companies are able to ship for some short period of time, two years, three years, and then the system ossifies and then they go and they're stuck with that system going forward, and that's basically what they're going to sell. The question is have you built enough in that cement setting phase to build a multi-billion dollar business or do you get stuck. Counter examples to that, of course, rippling would be one great counter example to that as this compound product that's shipping lots and lots of features over a long period of time. Anyways, when you get into software, the reason why product market fit is so complicated is because you're no longer dealing with a 3D substance, you are dealing with an infinitely dimensioned substance. And it's not just like the way the product looks, it's the way the product responds interactively. It's the way that the email notifications work and a text message notification, the notification settings, and it has to do with who the buyer is within the organization. And it has to do with all these kind of intangibles that are very, very hard to reason about. And basic reason for all this is that everything's happening below the line of representation. Mostly vast majority of what's happening in the software's below the line of representation, when you look at Uber and you're working on doing something on the Uber app, the vast majority of what's happening is not visible to you behind the scenes. So solving this problem of how do we make something that users want is really hard. And that to me, the easiest way of solving that problem is to scope it down, which is to say, if this is an infinitely dimensioned substance, at least let's make it small. At least let's make these building blocks individual small pieces. And that's why the idea of a minimum viable product is so powerful. It's why the idea of let's get something in front of users so that we can start testing the product infinitely dimensioned product and also infinitely dimensioned market where there aren't homogenous buyers and everything. You're trying to get the fit of these things together.
Brett: How did it instantiate itself in this path that Steady took?
Zack: So what we did was we first tried building a user interface and probably we got six months into that of saying We're going to build a user interface just for retail and logistics, and then we'll kind of expand out from there. What we saw was like, okay, you look at a purchase order from Walmart and then you look at one from Amazon and you try and combine the properties that are common and you build what's called a canonical model. You do that a number of times and we start to make these decisions, and I'm pretty comfortable making the decisions on a purchase order and a purchase order acknowledgement on the ship notice I was less confident about that because it's a more complicated thing, and then you start to have to deal with people like, "Well, I really need to do my warehouse shipping orders." You're like, "Oh, I've worked with those sometimes before." And you start thinking about, okay, there's 321 of these and I'm looking at some of these and they have to do with student loans or student transcripts and I have no clue about any of that. How are we going to be able to scale the quality of decision making that's required in order to not make a whole bunch of bad decisions here? And basically came to the conclusion pretty quickly, this is not possible. And this is one of the paths where people die. Josh Wolf talked about this idea of at some point he said something like, there's a myth that the best entrepreneurs are risk-takers when in reality the best entrepreneurs are risk killers and they're trimming away failure paths. And the thing is, when you trim away a failure path through odds of success go up. And so we found that within six months we were like, okay, trim that off. That one's a failure path. What we ultimately landed on was, okay, we need to strip this all the way back. We need to build support for all 321 transactions. That's all 30 plus releases, and we're going to do this by shipping Lego blocks. We're going to ship an API, a developer focused API that turns EDI this format into JSON a developer friendly format and vice versa, we're going to launch an API for mapping one JSON format to another and we're going to launch another one for spinning up SFTP. And eight of these APIs relaunched throughout 2022 could be stitched together in order to build anything. It's kind of like discovering the building blocks for DNA, you figure out what the building blocks are, you can create a great many different organisms or instances of organisms using that combinatorial structure. So we did that and what we found was that indeed, to your point, there were customers who could do that, and this is not really unexpected, but there weren't tens of thousands of them. There were small development teams who were super competent led by a CTO, you know, who was hands-on coding of four or five engineers. They could build it, but it would cost them tens of thousands of dollars of development time and months of work. And then sometimes they would pay us $4 and 18 cents in a month. So obviously it's a bad trade for them because they want to spend more dollars and less development time. Bad trade for us, because we want to earn revenue. And so we started working on the next layer on top of that, which was A, looked at all the common things that customers had to build over and over again, and we built the SaaS platform that actually wasn't too dissimilar looking from the original thing that we had started to build and through away and that SaaS platform under the hood use these eight individual APIs to stitch things together in a higher order structure. And it gave the ability to configure things in a user interface, still API driven, but you could configure things in user interface, you could retry things, it kept track of your all transactions and all those pieces, but it still took weeks or months of implementation time for people to get up and running. Maybe this time it was less about code, it was more about configuration, but we had customers who were using this for retail logistics. We also had customers who were using this for healthcare. And what we found in the back half of 2023, we launched this in March of 2023, was that nine of the top 10 biggest deals that we signed were in healthcare. And we started looking more deeply into healthcare space and found that there's a lot of things to like healthcare is 18% of GDP is obviously a very big market, but also the HIPAA Act of '96, which everybody knows is a privacy framework. You might have had to sign HIPAA paperwork at your doctor's office or gone through a HIPAA audit. Also mandated transaction standards. So we talked about this problem of Amazon and Walmart using purchase orders that were incompatible with each other, using kind of different versions of the standard. That concept doesn't exist in healthcare. So everybody is mandated by regulations surrounding the HIPAA Act to use the exact same schema. So yes, the schema is 650 pages long for a claim and you have to translate that from a PDF into something, but it outlines a superset of what is allowed, which cuts off a big part of the problem. And the second part of the problem is the connectivity piece. So no matter how big you get as an EDI company, you have to integrate every single one of your vendors one by one with Walmart or Tractor Supply or Target. There isn't this such thing as you connect once and the transactions just start flowing. In healthcare, the existence of clearing houses means that they're pre-connected to thousands of different insurance companies. And so you connect once and boom, the transactions are flowing instantly. Those two things combined were the big breakthrough.
Brett: And so if you started at the end, the product would have the same limitations as so many of the other products in the category.
Zack: Yeah, although I think a little better, you have the benefits of cloud computing and things like that and more modern software languages and libraries and stuff, but by and large I think it would've ended up in the same spot.
Brett: So how do you define product market fit? What is the Zach Kanter definition?
Zack: We thought we had product market fit in 2023\. Things were going really well. We were growing and we were landing, customers we're getting great feedback and all this stuff. And then we launched the backstory of this is Change Healthcare, which was the largest clearing house for claims. They got hit by cyber attack and they were down for 60 days and even today they're not fully back up. There's the dental portion of their business is not back up. There's a bunch of things that are not fully up and it's the equivalent of it's like, it's like AWS went down for 60 days and everything comes to a stop and it was just a disaster for everybody. And of course in the days after we launched that, what we built was a set of drop-in replacements for their APIs so that people could migrate directly from them to us. And it was like the classic things you see, read about in articles or you see in movies of like, we launched this thing and immediately it spreads like wildfire. It was like you don't have the chance to go viral in the B2B world very often like people go viral in the consumer world. In this case it was viral, it was like through our investors' portfolios we were onboarding all the customers and then through our people who weren't investors in us were calling us and saying, "Hey, I heard you helped out this company. Can you help out our other companies?" Three weeks into this, I had not left my keyboard for a long. It's this thing, you wake up at 4 35 in the morning, you work till midnight, you get some sleep, you come right back to it. And my wife said, "You have to go outside, we have to go on a walk, you have to go outside." And I went on this walk for 15 minutes and in that time period I took three calls from CEOs and CTS who were desperate to get back up and running, people who were behind hundreds of millions of dollars on claim submissions, going to run out of money if you don't get them back online. And so more extreme version of product market fit that didn't continue forever because last for maybe three months and then Change Healthcare came back online from that point for the next few months after that, a snake swallowing a deer where like, yes, a snake can digest a deer if a snake is big enough, but this is not going to be a particularly fun digestion process. We had to digest all these customers that we had landed and then we had to build a repeatable go-to-market motion that was not dependent on your competitors getting hit by massive cyber attacks.
Brett: If that exogenous sort of change brought into tight focus, what extreme product market fit actually looks like, the Delta between that and what you had before? Is it urgency in the buying process? Is it the amount of people lining up for the thing that you've built? Is it the repeatability across all of them? Is it a little bit of everything? How would you compare and contrast?
Zack: A combination of things like speed to close.
Brett: Urgency?
Zack: Yeah, urgency is when people are buying the product despite all the things that it doesn't do and the deals are closing anyways, the deals are closing anyways and everybody's so happy. And I originally started Steady because I said it would've said at the beginning, it was like nobody's writing love letters to their EDI platform. And today I say the same thing, nobody's writing love letters to their clearing house. Everybody really has a hard time with the other clearing houses. And the most common thing that we hear is that by the time we have a deal signed with somebody, the other clearing houses often haven't returned their email, like their initial email. And so that's what product market fit feels like is I would hesitate to compare it to that time after the Change Healthcare hack because it's so extreme, but what it feels like now is just you have so much to do, there's just so much obvious stuff to do. The features are getting pulled out. We could sit down and come up with a list of 2000 features that our customers have asked us for and all of them are valuable and you just kind of have to ship them as quickly as you can. But customers are the product anyways.
Brett: One of the things that you've touched on sort of in a reverse way is that stylistically there's two dominant ways that you can go about building a software company. One is that you down scope product surface area and down scope the use case and down scope, the end customer ship something as quickly as possible and then layer cake the company for the next decade. The other is one where to get to sort of the minimum usable or sellable product, it might take a year or two or four or five. And there's different reasons why. Sometimes the long build shaped products, there's a real set of technologies that you have to assemble. That's probably like the Figma case. It was clear what the thing had to do, but that you needed to assemble a lot of technology to get something like that to work in the browser. Another is just that the core product surface area is so large. Like, Workday couldn't be built in two weeks. You ship it on a weekend type thing and there's obviously consequences of starting in either position. We can obviously come up with examples of either position that led to meaningful companies and come up with either position of the company that never ultimately shipped after five years or the wedge product that was basically a bridge to nowhere. But I'm curious because you've spent a lot of time thinking about this. Stylistically you've been a slow build style company.
Zack: I think you kind of need a fit between what sort of problem you want to solve as a founder that people talk about founder market fit, but I think kind of also founder approach fit. And you get into business and you start reading about Warren Buffett and Charlie Munger and they talk about moats and they say like, "Oh, a moat is a business that's so great that a ham sandwich can run it, because eventually a ham sandwich will win it." And you kind of look at the businesses they cite as having these, Coca-Cola and these different businesses that have these moats and your conclusion is, by these guys' definition, there's basically no great businesses. They own half of them and there's basically no great businesses. And you see all these companies getting built around you at the time. I remember Slack being built at the time and you're like, "Well, Slack doesn't really have any of these characteristics that these guys are talking about. I don't think ham sandwich could have run Slack at the time." And so you kind of draw the conclusion that moats must not be that important. Very common thing people say in software in venture, "Oh, the only moat is execution," which is just definitely not a moat. And then you get into, so you go through and you think like, "Okay, execution's the Moat and I'm going to kind go through just move as quickly as possible." And then you see these companies that initially seem promising either just stall out in terms of growth or get obliterated that don't have moats, and now it kind of put Slack into that category, although they had a really wonderful exit story. But you look at Slack, and I remember when Slack came out, I knew a guy who was an investor in Microsoft, which at the time this guy didn't know anything about tech and he was a huge investor in Microsoft. And I was like, "Man, you have no idea what you're talking about." He is like, "Teams is going to kill Slack." And I'm like, there's no self-respecting tech company on earth that is going to use Teams instead of Slack. What you don't appreciate is that it's not about steady or first round or Uber or whoever it is using Slack or not using Slack. It's about the marginal Fortune 500 company. Whether they're going to decide to use Slack or whether they're going to get Teams for free or bundled in. And if they make those decisions to get it for a lower cost, it puts downward pricing pressure on Slack. And so the price that everybody pays Slack goes down. The reality is that most people don't care about the product only being 80% as good. For most people, that doesn't matter. They're not willing to pay a lot and more for that incremental piece. So as you start to see these businesses not really achieve this sort of dream that they were set out to achieve, and it seemed like Slack was on this meteoric rise and is going to be the fabric of everything that we do things in, and started looking for explanations as to why this is not happening. And that led me to, you read about Michael Porter, Porter's Five Forces, which is something you would read about in business school and it's fascinating. He basically boils it down five forces and all this stuff. But what it compiles down to is very useful, which is that if something doesn't lead to lower costs, sustained lower costs over time, or the sustained ability to charge higher prices over time and ideally both, it is not a mode. And so when you look at execution's a moat. Okay, is execution going to lead to sustained higher price or lower costs over time? No, it's not. And of course everybody else is trying to execute very quickly too.
Brett: The biggest downside of taking on one of these big builds is that the company ends up never shipping or they end up shipping the wrong thing. Right? Part of the point you're making is if you have something that is a very rapid, basically timed to first product shipped, you can get in front of customers. When you get something in front of customers that gives you data, you take that data and you iterate and iterate and iterate. If you look at the long build, you have sort of these two dominant problems of building the wrong thing or just never shipping the thing. Do you have any thoughts on how do you avoid those things other than a founder and CEO with very good judgment or who has well modeled the problem in their head?
Zack: It's tough because I think that for every actual instance of this is a long build that you have to build all this stuff, there are probably hundreds or thousands of people who think that they have a long build that could be done incrementally.
Brett: And that if you have a long build that can be done incrementally, you should go do that.
Zack: Absolutely, yes. If there is the option to ship things incrementally, it is, I think virtually always better and that's how we ship things now. We we don't ship big bang features. In fact, we de-scope features to the point of where we think it will be barely usable by one customer and we get it there because what we're optimizing for something a little bit different, which is that we will never have one individual product that we can go with one couple of features that we're going to be able to build a billion dollar fee stream on. We have to build many, many, many products across a broad surface area. So what we're optimizing for feature velocity over time, and in order to do that, I think incrementalism is the only way to go. It's very hard to ship big bang, big release features in succession like that without incrementally releasing them to customers.
Brett: What is it about breaking things down and getting it in front of customers and listing to feedback? Why is that so valuable in building software?
Zack: All software is a cascade of miracles. When you look at something, I think you go in Vibecode for a weekend and you're like, "Oh my God, why doesn't my company ship more?" Because I just shipped. Look at all the stuff I shipped into the weekend. And then you keep running with that project. You realize like, "Oh God, I didn't think about how am I going to do the database migrations and how am I going to do this? And oh, and I shipped this regression, I don't have any testing in place and oh no, I'm not using the SDK, I just use this portion of the API spec." And you gain this new appreciation for like, "Oh, it's actually really, really hard to build and maintain a complex code base." And so a complex code base, a complex piece of software is basically any piece of software that you use today is pretty complex, is a set of miracles and any feature then has a set of miracles. And so when I'm reviewing our tickets or our design docs or whatever, I'm going through and I'm just looking for miracles and I just want to cross, I want to get us down to one or two miracles and I use a broad definition of a miracle. I think as a miracle when a feature ships and works for a customer and solve some basic problem and doesn't back people into a corner and all the studs have all these downsides. And that's why I think overall this idea of how can we scope things down, how do we get to ship things by Demo Day? How do we get things in front of customers is either basically just eliminating miracles. But going back to this product market fit analogy of you have a many, many dimension product, you have many, many dimension customer configuration in market. Basically what you're saying when you're saying I'm going to go build something small and talk to a customer is you're reducing the number of fit surfaces. So you're coming down, maybe you have 12 fit surfaces here and 14 fit surfaces here versus 300 fit surfaces here and 3000 fit surfaces here.
Brett: What are the most important ideas that you've taken from other places or other industries or other books that are a lot of the input drivers to the way that you have built the company?
Zack: I think that there's more to learn from the category of discount retailing than there is in software than there is to almost any other category. And you look at companies like Aldi and Trader Joe's or kind of some of the newer ones, but then you have the Sol Price business and you have Costco and you have Walmart and software. You kind of have it on easy mode because of the margins. And I think we've learned the hard way over the last 15 years that anytime there's a new venture backed business that looks like there's a software like Growth Metrics but not software like margins, things end up poorly. And so they say product market fit is the antidote to stupidity. I think that product market fit is the antidote to stupidity, provided that as product market fit with high gross margins and I think product market fit with low gross margins is a tough business, but if you can learn the lessons from people who've played on hard mode, I think that you're going to have a leg up in the software industry and discount retail, they're working off of not just retail, which is low margins, discount retail, which are working off razor-thin margin. These people have built enormously valuable businesses. Sol Price built such a valuable business and then went and taught the Costco founder and I forget if he taught Bezos, but maybe the Bezos went to the Costco founder, but there's this whole network of all these businesses that were built based off of these ideas and what does it look like? It looks like lowering the cost, so figuring out how do we sell things for cheaper? How do we reduce the selection that we have? How do we simplify the process of buying from our company as opposed to making things more complex? How do you figure out what the right packaging is and what the right units that people want to buy in? How do you drive your cost down? I think all of these are themes that come from the world that was like this was honed in the trenches of discount retailing that are applicable.
Brett: So take a couple of those and explain how they express itself specifically in how you're building steady.
Zack: When we were in logistics and retail, people would riot over paying for these things called transportation status messages. And this was like when you see an 18 wheeler going down the highway every 15 minutes it has to emit a status message telling you where the truck is and all these things and that happens whether the truck is moving or not. And people didn't want to pay a hundredth or a thousandth of a cent for those things and that's because they were making a really small amount of money per load. They were not making very much money. The gross margins are tight and that amps up all the pressure on the business and you come into healthcare and people say, "Well, the transactions are commoditized that clearinghouse is the process." And you look at eligibility checks or claims are commoditized, but when you compare the price of a claim or an eligibility check to a text message or to a transportation status message or to an S3 read or write or storage or something like that, orders of magnitude more expensive. I love the Jeff Bezos quote of there's at some point someone wanted to raise the price of something in Amazon and he said, "Look, there's two types of companies. There's company's always working to charge more and there's companies who are trying to charge less, and we will be the second. We'll be the company's working to try to charge less." And we're doing that. We're pulling costs out of the transaction.
Brett: That's the your-margin's-my-opportunity.
Zack: Your margin's my opportunity. And I think that it's not a matter of saying, "Hey, we can operate on a lower margin than you can, but maybe even we can operate on a higher margin than the competitors because they're based off legacy tech stacks and legacy support models and things like that. And we can do that at a lower transaction cost. And so I think it's a basic question is are you going to be a business that's going to pull cost out or are you going to charge more? And I think those things can be both. I think that we hope over time to be a company that charges less for transactions that should be commoditized and charges more for the optional value add functionality that people can have on top of that.
Brett: Yeah, AWS is a good story and that costs every quarter basically forever have been driven down and gross margins are very strong in that product.
Zack: That's right. And people don't churn. Saying people don't churn from AWS because of costs. They look at this and say, "Okay, my costs are probably not going to go up here. They're probably going to trend down over time."
Brett: What about the, you mentioned this in passing, but the Toyota production system, it seems irrelevant to building a software business, but I think you'd disagree.
Zack: Fundamental tenets of the Toyota production system, everybody works off Kanban boards today. It's like Kanban board is an invention of the Toyota production system that is the Kanban board is based off of the Kanban bins where there's a bin moves throughout the production line as parts are needed and it goes and fetches the previous part. I think that the biggest lesson, well there's two big lessons from the Toyota production system that I took is a lot of lessons, but there's two wins that stick out. One is that people often think about Toyota reduction system as something that was done to reduce costs and when you read these guys talk, they hate talk about cost reduction. Now I've just been talking about cost reduction for the last 15 minutes, but they hated talk about cost reduction. They said the things that you do to reduce costs, the cost savings almost never materialize. And you read about this like, "Oh, we're going to do this to save this money and blah blah," and then everybody's margins are all kind of always the same. It's never really materializes. There's another variation on that that they say when you buy a machine in order to save cost but the volumes don't materialize, it wipes out the potential savings many times over. And so an example of that is you're using an on-demand service from AWS for queuing and you're using this menu. You're like, well, we did a million messages for the last three months. We're going to set up a server instead and we're going to in that server for the same cost can process 5 million messages or whatever, and then you set that server up and you are running RabbitMQ or whatever you can in order to save money and then the traffic on that goes down from a million to a hundred thousand because it turned out that someone figured out how to batch them, but now nobody's looking at that server and so you're running the server and the costs never go down. And so the cost savings often don't, first of all, when you buy a machine to do something, when there's this whole trend about people going on-prem off of AWS over the last couple of years, which was like, okay, you buy all these GPUs and you don't need them, you buy all these servers, you don't need them. It becomes fantastically expensive versus the cost savings that you would've had. So what they say instead is don't focus on reducing cost. Always focus on improving quality because the quality gains usually materialize if you say like, "Okay, we're going to reduce the defect rate or it's a very measurable thing," but what you find is that by improving the quality, the costs usually go down and I think that everybody's had somebody say to them at some point say, "Well, I want this done, I want this done, I want this done." They say, okay, well quality price and speed, you have to pick two. And I think that that is the most losing mindset in business and engineering in design and whatever the thing is. And that the trade-offs between those three are usually an illusion that usually the thing that can be achieved at the lowest cost and the fastest and the highest degree of quality. I think that the best people will find the way of delivering all of those things together and it becomes a virtuous cycle. If you go and you cut corners of quality in order to ship your code faster at a lower cost, then your code is something like you have to live with that forever. You have to go back and fix that later. And so I think that generally you have to find crafts people. You have to set reasonable scope is generally the thing to adjust and say we're going to scope things down in order to move it faster and you can kind of get the best of all the worlds as a company, we've decided we're going to eat glass. That is what sets us apart. I won't call it a moat because the eating glass is not a moat, but we'll go to the ends of the earth to do things the right way even when it's not economical and it doesn't make sense. It's kind a matter of principle, a matter of taste if for no other reason than the accumulation of not doing things the right way is the sort of thing that would make me hate the company. And if you want to build a company that you want to stay at for a long time, just don't do the things that you want to hate.
Brett: Where does your source of agency come from and what are your reflections on what it means to be a high agency person? Because I think you seek it out as a top level criteria when you're adding people to your company.
Zack: On everybody's first day Steady. I say, "Welcome to steady, everything's your fault now." And then I say, "It's not as bad as it sounds. Actually everything's your fault now also. Everything's your fault and your manager's fault and everything kind of compiles down to being my fault." But to me it's a great thing about having a company. I think being an adult is the greatest thing in the world and to be in total control basically of your life. I guess maybe a lot of people feel like I have to be responsible for things and I largely feel that I get to be responsible for things. There's a book that we've both read called The Courage to Be Disliked, which I think is a terrible title because that doesn't really, it's not really the message of the book, message of the book is that people are getting exactly what they want all the time. If you're not getting the things that you think you want, you probably don't really understand what it is that you want. And so you talk to founders, you're like, "Oh, it's the investor. They're being so difficult," or whatever, or, "My employees, they want this policy or they don't want this policy." It's like, you must want to be miserable in your business. By revealed preferences, that is what you want because you could just broadly just fix these things. And does that mean you're going to have a bad relationship with some investors? Yes. Does it mean you're going to have a bad relationship with some employees or have to part ways? Absolutely. It's just hard to imagine, I think, being a different way as opposed to, I guess just going through life and thinking that things are happening to you.
Brett: Is it something you actively seek out when you're adding people to study?
Zack: It would be very noticed in screening. We just don't have that. Maybe because of the type of people that apply, I don't know, but we don't have that problem. But there's all these things you learn about interviewing and I think a lot of the common wisdom about interviewing is probably a lot of it is correct in terms of it's a bad sign of someone's complaining about their previous employer. What we think about during interviews is what I look for during interviews. I want to get a sense that the person is held back by the environment that they're in, that this person could be achieving more, if not for the team that they're on or the organization that they're in. The idea of this is like a caged animal who needs to be unleashed is something that we look for. I think there's a fine line between that and somebody saying like, "I'm held back by my team and my company sucks," and-
Brett: "If only this and this and this, then I could have done this, this, and this."
Zack: You just find the generally high agency people just find ways to make things work and yeah, it certainly something that we look for. Somebody's like highly resourceful.
Brett: In the years that you've been building Steady, have you changed your mind about specific things you're looking for in people, the traits that tend to tie the people together that you want to hire, not a specialist in this area or sort of that type of thing?
Zack: Some of these things are trite because everybody says the same thing in the beginning. You look for people who have a lot of experience and then you realize you hire someone with 20 years of experience and they don't have 20 years of experience, they have one year of experience repeated 20 times. By contrast, you hire somebody who's two years out of college who doesn't know anything about anything and you can have them performing well in a job. The thing that we've ramped up over time in terms of what we're looking for is desire to work by and large. We've gotten a lot more comfortable screening for that. I think during the process of people who are work enthusiasts, people, what does that mean? You're working a lot of hours. Does that mean that we're holding Sunday morning engineering meetings? Definitely not. Definitely not. But I think that we went through this phase of the zero interest rate of 2020, 2021, whereas you couldn't bring those things up otherwise people wouldn't work at the company. I think people have realized a couple things which is, "Hey, it's nice to be if you enjoy those things, if you want to be part of a winning team, it's nice to be part of a company where people also are enthusiastic about putting in hard work and putting in more hours." I think this stuff can get performative with all the 996 stuff on Twitter, which I think is more about broadcasting than actually doing work, but that's been something that we've looked more for and I think that the desire to work also kind of tends to be correlated with other things and I think that that has become one of the traits that we look for the most.
Brett: In the context of an interview process, what are you looking for to give you confidence that somebody's a work enthusiast?
Zack: I find that if you lay it out, people are pretty happy to select into one of the categories that you lay out. Generally, people are not going to tell you that hey, they're in that category if they're not. And I very much believe this about hiring I think is true about friendships, relationships, investors and everything. People are very loudly and obviously going to broadcast to you who they are and what they believe in and what they want and what they want to do and how they're going to act. And it's up to you to listen to it. And the reasons why someone doesn't end up working out as an investor, as an employee, as a whatever are almost always the reasons that you thought they weren't going to work out. And this is one of our, we have four or so questions that we answer internally after an interview panel and one of them is on what dimension do you think this person might be a superstar? And another one is if the person doesn't work out, what is the reason that you think why? And you find that just almost every time when somebody doesn't work out, it's the reason why people put down in the thing.
Brett: The way the world actually plays out is not you ask somebody, are you a work enthusiast or where would you put yourself? And they're directly lying to your face to get the job. Actually in general there's very little lying. It's that you're lying to yourself basically or unwilling to sort of listen to the actual data that's sitting in front of you.
Zack: Absolutely, and what does that look like is you meet someone and they're the perfect person for the role and everything's great and they've got the right knowledge and they've got this and they're at the prime point of their career and everything and they're enthusiastic and you're like, "How do you think about work-life balance?" They say, "It's the most important thing to me, but I believe in work smarter, not harder. And of course when crunch time comes, I'm willing to put in the time and if something's needed after hours, I'm willing to do it." And you're like, "oh, that's a pretty good answer and this person will fit right in." And then you realize later you're like, oh man, they told me right up front that the number one thing that they were optimizing for was work-life balance. And that's fine.
Brett: That's the beauty of a free market system that we have here. Over the years, there's lots of things that you've chosen to do your own way at Steady that maybe is not perfectly aligned with best practice, be it the way you think about having managers or zillions of other topics. I think you build a very merit oriented company for a very long period of time, that sort of genre of topic. Do you have a way that you go about making these decisions? In what way are we going to have a conventional sales team, conventional pricing and packaging versus we're going to reinvent it and do it the steady way? Is it just a very organic, "This just makes sense, we're going to do it this way. This doesn't make sense." When you zoom out and you think about all the choices that you've made about who works at the company and how you work, how you organize, how you build products, pricing impact on and on and on, how you support customers, is all of that just your Intuitive taste and judgment and this makes sense to you where if you reason about it and maybe a more mechanical way?
Zack: We landed one big customer pretty early on, coincidentally in the auto parts space, and we basically took over their EDI department and we used through that four-and-a-half year period of where we were figuring out what to build and how to build it, we were not building without a customer, we were building with one customer just not building for the public market. So we took over this customers EDI department and figured out how do we build something for them? And we went to really extreme degrees there and invested many, many, many millions of dollars in building that. In terms of estimating the complexity of did I think it was going to take that long? It'd be that hard. I'd spent $50,000 of my own money with the auto-parts business building that EDI system, that homegrown system, and I said, in order to make this generic and work for everything, it's going to cost at least 10 times as much. I said I was going to raise a million dollars just to be safe to have a two x margin of safety and now we've raised $92 million and still lots of stuff left to build. So I was off by a couple orders of magnitude with this Automotive customer we've taken over the EDI business. We just did an unreasonable amount of work in order to make things work and everybody told us at that point, "Well this level of support is not really going to scale," and so it's not going to work for 10 customers. And then over the years we got 10 customers and we kept offering this level support, hyper-responsive and everything and then we got to a hundred customers. People say, "It's not going to work when you have more customers. You can't do this with hundreds and hundreds of customers." And then we have hundreds and hundreds of customers now and we do it and we don't have a different support program, any internal designation for support between customers who pay us seven figures per year and customers who pay us $500 a month. This is the exact same support. It's like an example of something that people said just wouldn't work, and that's something I learned with the auto-parts business. You know what I did is I said, "When people have a warranty claim, I'm just going to replace the part for free," and I'm just going to send them, basically no questions asked and people said it's not going to work in the beginning. "People are going to learn about it and take advantage of it." I was like, "Okay, well I'll figure that out as it goes." And just you find that most of the things that people warn you about don't come to pass and most of these edge cases don't come to pass. I think it's a little bit different in consumer with fraud and stuff like that, but B2B, generally don't need to worry about those things. Overall it's just been picking the philosophy, the things that just make sense where I'm like, I think that we wrote a blog post about this, David and James on our team wrote a blog post called Do Support That Doesn't Scale, a play on Paul Graham's Do Things That Don't Scale blog post and talked about this kind of philosophies of support. I think a lot of things have fell into that category of it's just reasoning through from first principles and doing things in a way that we thought made sense and being open to if it doesn't work, we can always go back and do it the other way. It's like, it's very easy to regress back to the mean of what everybody else is doing.
Brett: What are some of the other things that you've done your own way at Steady, or maybe the most important things that you've chosen to do your own way that if you just followed best practice it would be severely suboptimal for the company?
Zack: We've biased to really heavily towards hiring individual contributors. I think that there's pros and cons to that. I used to think what are managers for and is that really necessary? And you could build borderline the holacracy model and that would work and I've come much more around to the idea of you just need a system that's consistent and you asked about sales hiring and when it was time to go build a sales team, which I pushed off for a very long time. I wanted the product to be working and selling itself before we hired a sales team and I went out and I surveyed eight or nine of the smartest people I knew about enterprise sales. One person says, "You should hire someone who's in your industry who understands your domain, is the best on lock." You talk to the next person and they say "You should hire based off of last year's W2 and that's basically what matters." Maybe he didn't say that. Somebody else might have said that. You come through and you come away from this. My conclusion of this was at the end of this is when things are working it kind of, not that it doesn't matter what you do, but there's lots of different ways to be successful. The important thing is that the decisions that you're making are consistent and that they're well implemented. So some of this stuff is like, I'm not sure how much it matters as much as it matters, picking a system that works together and I think that our system all kind of works together really well.
Brett: How do you get other people to have high quality judgment in the way that you do. Maybe where so many of these decisions are situational and not just this is a correct way, this is an incorrect way. There's a correct way and incorrect way to do something in the context of Steady, but I would assume at the 96th employee, it's so much harder to get that unconscious alignment that maybe you have with five or seven people when you're getting the company going. Where ultimately as you get to 100, 500, 1,000, the whole point of culture is that we have a consistent way that we basically problem solve and accomplish work together. Have you done anything to try to explicitly get the 96th person to have the same way of reasoning through problems as you do?
Zack: We have hired managers, now engineering managers and I talked about this idea of we were hyper-focused on hiring individual contributors and for a long time that people were, our team leads, which functioned as engineering managers spent 90% of their time coding and we got to a place of, the ultimate reason why we needed to hire engineering managers is because we had to double the size of our engineering team who's just in the space that we're in. You talked about first mover advantage like OpenAI has. We have what Peter Thiel talked about as last mover advantage, very clear what the features are, very clear what needs to be built and we just had to double the number of engineers or more and you can't just double the number of engineers and not add additional nodes. It's like you're going to get to a place where there's too much product context to which engineering context, the on-call rotations get complicated. So we hired engineering managers and I got into a discussion with one of the engineering managers and I asked, we do a Demo Day every Thursday and we were talking about something about planning meeting and I said, "Well, why do you think that we do demos? And why do you think we do Demo Day?" He said, "Well, I think we do Demo Day for accountability." And it was funny, that wouldn't have been in my top 10 reasons. I don't do Demo Day to see is this person working? You have other ways of telling if somebody's working, we do Demo Day because it's a way that everybody can get a shared understanding of how the product works and what's changing. And also because it encourages people to ship in incremental units that are viewable on a week by week basis. It's not the purpose of seeing if work is getting done. And so it's a hard problem of how do people know what's important? I need to do more writing in order to clarify somebody saying, I think as you identified, having a close cohort of people that you trust with really high quality judgment and we have people who have been there four or five years. We have a mechanism that we use extensively, which is called the decision record. And a decision record is a very much written culture, we write things, write important things down, and decision record follows a template and it says scope, context, so scope of what team it applies to context of the background of it, decision, which is the actual meat of the net of what's being decided action items and notable comments which was harvesting the comments that happened on the side of the Google Doc and anything that is done of consequence at studies basically driven by a decision record. And so we make decision records for SLA's, make decision records for SLAs who make decision records for hiring certain roles who make all sorts of different decision records. And so in terms of scaling judgment, I think part of it is scaling judgment in terms of more people with judgment, but then also scaling your own judgment. The other thing I do is I look at take at least a cursory look at all the pull requests that are made throughout the organization every day.
Brett: You've shared a lot of wonderful things with me over many years to read and one of my favorites was this short essay. I think the title is Reality is a Surprising Amount of Detail. I think it's something that you've thought a lot about as you've been building study and sort of earlier parts of your career. What's sort of the big idea in that and something that'll get somebody to go want to read it.
Zack: Reality Has a Surprising Amount of Details is an essay by a guy named, if I remember, John Salvatier and it's really wonderful. The basic premise of it is this. You've walked up and down staircases many times, then you could probably maybe draw what a staircase looks like, but if somebody gave you the tools and sent you to Home Depot and said, go build a staircase, you're going to find that it is a lot harder than you think. And it's not just building code. There's angles so that it's comfortable and how big does it have to be for your feet and how do you make it stable and all these different pieces. And another classic example is you ask people to draw a bicycle. Most people have ridden a bicycle. Most people with the bicycle pictures that people draw are hilarious. I mean this is contraptions that would never work in a million years. It's this idea that basically almost everything is a lot more complicated than you think. When you say something like, to go back to the example of the voicemail. If you were to write out a standard operating procedure for updating the voicemail, it's going to be like 25 steps long. And now yes, can you do that? Write the SOP for it? Yes. But now you want to keep it up to date and you're using a voiceover IP phone system or using Zoom or whatever. Now you have to keep that up to date and then you're putting it in Slab and then you decide, "Oh, we're going to switch to Notion." And then the links break and everything is just, there's fractal complexity throughout everything that you do. And it kind of comes back to this concept of the Cascade of Miracles problem, is these ideas, which Boyd talks about this patchwork of strategies, ideas are all closely related. You have this idea that you don't want to do too many things because they're cascade of miracles because multiplicative probability that lessens your chance of success. And similarly, reality has a surprising amount of detail. You have to be very careful what are the things that we're signing up to do because every single one of these things has a lot of detail in it. And I think that's why this incremental approach of what can I get done for Demo Day is like, it causes you scope and scope and scope and scope until you get to something that's manageable.
Brett: Is there anything else that you think you figured out in the process of building this company that is generally useful to other people at the early stages of building a company? You talked about a bunch of these ideas in various ways. Part of the point that you make that I think is certainly correct is that so many of the right things to do are right in the context of the machine you're building. And so the most important thing is to actually have a point of view on the machine that you're building, not just generically correct things, but are there other things that are broadly useful that you figured out in the process of building the company thus far?
Zack: Look, I think there's a difference between dogmatic and principled. I think that when you think about basic way, I describe principles versus preferences, is a principle is something that you're doing no matter what, that you are dogmatic about it. And the preference is something that you want to do, provided that the circumstances are, if the trade-offs are reasonable. Think about you find, you think that you are principled, the principled person for honesty and integrity and then you step into the back of an Uber and there's a suitcase of cash with $50 million in it. You're about to find out very quickly, is this a principle that you have or is this a preference that you have? And what most people define, think that are their principles are actually their preferences. Now. For example, I have a principle for doing things the right way, like these dependency updates and security and things like that, that we really care about doing things the right way. And when I say no matter what, I mean no matter what. There's other things that are preferences had a preference for not building sales function in order to sell something that wasn't working yet. And once that the trade-off became clear enough, I built a sales team. The sales team has been amazing, but we also did it at the right time. I think it's the right thing at the right time.
Brett: I want to wrap up with the topic that we always do, which is who's the person that have the biggest impact on you, the way that you think or in this case build the company? And what is the specific thing that was in part a person you could know or personally or know through a book that you read.
Zack: I think it's probably Jeff Bezos who I don't know. But he, maybe five years ago I wrote an essay called What is Amazon and a 25-page essay that explained my understanding of Amazon, having sold to Amazon as a retail seller and as a marketplace seller, and then used AWS and various different pieces, advertised on Amazon. And what I think I either talked about it in that piece or in a podcast or something about it was that what Bezos came up with, with the Amazon culture of the six-page memo and the two-pager and doc reads and the Amazon principles and the various pieces that make their culture, the service oriented architecture and everything. And when I looked at Amazon this, I think this was when Bezos was still CEO, I said, "The thing that I admire most about Bezos is that if Bezos were no longer CEO of Amazon, I think the business would suffer. But I don't think that the business..." If Elon were no longer the CEO of SpaceX, I think that would be a huge problem. Amazon is in really tough spaces, tough, fiercely competitive spaces, but they have a business organism-
Brett: Ideology.
Zack: ... ideology that has transcended just him or any one person. And I think that that's an unbelievable achievement. I'm very happy with our way of doing things and I feel like we have a special way of doing things. And I think that our customers recognize that there's a special product being built in a special way that it's being built in a special way, that they're being serviced as customers. And the next challenge among the other things is figuring out how do you distill this down into something that can be understandable and teachable and learnable. And that is when you think about everything's my fault, it's definitely a failure of mine to not have recorded all of those things so far. And it's challenging and that's something that I'm looking forward to, is figuring out how do you institutionalize that knowledge.
Brett: Good place to end. Thanks for joining.
Zack: This was great. Thanks for having me.
### How a high school dropout built one of the world’s most-used developer tools
URL: https://review.firstround.com/how-a-high-school-dropout-built-one-of-the-worlds-most-used-developer-tools/
Last updated: 2025-12-04T16:55:59.000Z
From bootstrapping to a $3B company
_This post is for subscribers only._
### Sentry's Path to Product-Market Fit — A High School Dropout Turned an Open-Source Project into a $3B Company
URL: https://review.firstround.com/sentrys-path-to-product-market-fit/
Last updated: 2026-01-12T18:43:08.000Z
Founders often know from a young age they want to start a company. [**David Cramer**](https://www.linkedin.com/in/dmcramer/?ref=review.firstround.com) created a product so successful that it *pulled* *him into* being a founder.
The Lincoln, Nebraska native grew up working class, dropped out of high school in ninth grade and worked at Burger King. He taught himself to code on borrowed computers, spending a lot of his free time playing early internet games, in awe of their seemingly endless creative possibilities. That interest led him to the world of open source, and ultimately resulted in a project that would become [**Sentry**](https://sentry.io/?ref=review.firstround.com): an error and performance monitoring software platform now valued at over $3B, used by more than 140,000 customers and millions of engineers around the world.
Unpack the Cinderella story and what you’ll find is a founder who has remained true to himself and his beliefs, guiding the company in his image. He champions focus, saying “no” to anything that doesn’t align with the company’s vision (even if the opportunities are lucrative). He’s ultra-competitive, wanting “nobody else to exist” and adjusting the company’s tactics to squash competition. Even the company’s marketing reflects his spirit — believing the founder is the brand, and that **marketing’s only job is to make people know you exist and what you stand for.**
In this exclusive conversation, Cramer shares how his working class upbringing instilled traits that would lead him to succeed. He also discusses the pivotal decisions in Sentry’s journey to [product-market fit](https://review.firstround.com/20-lessons-from-20-different-paths-to-product-market-fit-advice-for-founders-from-founders/), why he decided to fundraise when the company was successfully bootstrapped, the call to [replace himself as CEO](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups/) in 2020 and much, much more. It’s a fascinating and candid look at a founder who’s unwavering in his conviction and has truly done it his own way. Let’s dive in.
## The scrappy beginnings that forged Sentry’s relentless founder
Cramer dropped out of school his freshman year, feeling he didn’t fit into the classroom structure and wasn’t getting much out of it. “I was that rebellious kid,” he says. “I didn’t like school. My parents were pretty loose so they let me do it. I went to work at Burger King for a couple of years, got promoted to manager — I fired my cousin.”
When he wasn’t cleaning out the deep fryer or terminating the employment of blood relatives, Cramer was indulging his obsession with burgeoning computer technology; from a young age he’d been fascinated by the internet, but didn’t have a computer at home. “I have vivid memories of going to school an hour early just to surf the internet, or going over to my friend's house all the time to use the computer.” These were the early days of being online: [GeoCities](https://en.wikipedia.org/wiki/GeoCities?ref=review.firstround.com), [Hamster Dance](https://en.wikipedia.org/wiki/Hampster%5FDance?ref=review.firstround.com), the wild west of creation. Cramer was captivated by the limitless possibility.
“That led me into games: data mining games, building databases out of them, basic programming. A lot of my early career was just me hacking stuff together,” he says. “I’d take World of Warcraft game files, reverse engineer them to pull out all the items in the game and build a database out of those so people could search them on the internet.”
Cramer credits the open source community as a catalyst for almost everything that followed; he was publishing his work freely, building tools for others to use and collaborating in public.
> Access is a big deal when you come from the middle of nowhere. Sentry was born out of these opportunities. But even outside of Sentry, every job I’ve gotten was because they used my code already.
The first door to open was a full-time job as a programmer. He went from managing the Burger King in Nebraska to working for a startup called **Curse** in Germany, which was big in the World of Warcraft scene, making gaming content and virtual currency.
“Startups are a more accessible version of technology companies,” he says. “I was a high school dropout, nobody was going to recruit me from an Ivy League school. And so I always worked in these smaller companies and grew and developed my skills with them.”
While still working for Curse, Cramer relocated from Germany to San Francisco for a year, before eventually leaving that role and returning to the Midwest to plot his next move. As much as he felt at home in Nebraska, surrounded by family and friends, he soon realized his hometown couldn’t compete with the gravitational pull of Silicon Valley. “I recognized the personal value to me of being surrounded by peers,” he says. “And no matter what anybody says, there’s no other place like San Francisco that has that.”
### An open source project becomes the seed of Sentry
It was 2008, and Cramer’s call to make the move back west proved to be the right one. Returning to San Francisco, Cramer joined a startup called **Disqus**, a (since acquired) audience engagement platform, immersed once again in a tight-knit developer community. “It was the defining moment of my career,” he says.
Over the next three years, he ran large parts of the Disqus infrastructure, wrote significant portions of the product's code and began speaking at developer conferences, building both his reputation and confidence. He also started learning Python. "I was big in the community. Instagram, Eventbrite and Mozilla were all Python Django companies. I think the code was public for all these things. There was a Django community channel, where we'd help and ask questions of each other."
Here, the seed of Sentry was planted.
“Somebody asked how I would log errors to the database. I thought that seemed pretty easy. I whipped up an example, pushed it on Google code, and didn’t think much about it — I just like tinkering,” he says. “I don't know if the value prop actually existed at the time, because the idea of putting logs in a dashboard in that way didn't make sense. But what did make sense was that I could take errors and get these really rich reports of data. The amount of information it gave me was phenomenal.”
Initially, Cramer wasn’t thinking about monetizing what he’d built. “I was like, why would I? I’m just building stuff I want my peers to use.” But there’s a bigger lesson here than just the returns that often come from generosity and being community-minded. Cramer gained deep insights from having people use his product so early, realizing people valued the depth of its error data more than he anticipated. **It also showed** [**hard proof of consumer demand**](https://review.firstround.com/unconventional-tactics-for-validating-your-startup-idea/)**, and it put Sentry on the fast-track to product-market fit.** “I was always motivated by people using my stuff,” he says. “I was happy to spend my nights and weekends fixing things, getting feedback. I still live off of that stuff, it really feeds me.”
“That, to me, is definitionally how you get to product-market fit.”
### The conversation with a Heroku peer that changed everything
For the first few years, Sentry existed only as open source — but had gained significant traction. It was running inside thousands of companies, including Silicon Valley heavyweights like Uber and Airbnb. But turning it into a business still wasn’t part of the plan.
“I never thought about it until one day I was talking to a PM at Heroku, who told me I should launch a paid add-on of Sentry, because they were trying to expand the add-on store,” he remembers. “I didn’t quite understand what it meant, but I thought I’d make a little beer money. That was the joke at the time, because Sentry already had a lot of adoption at that point.”
Over Christmas break, while still working at Disqus, Cramer decided to experiment. “I built a cloud service, added Stripe on it, and launched it.”
The results were immediate. Sentry had a paying customer on day one, ten within a few days. “It was all organic. We only charged seven bucks. But there was clearly value being delivered. The demand was there.”
That [early enthusiasm was the proof point](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/), which mirrors how Cramer defines true product-market fit.
> My version of product market fit is when a customer viscerally reacts in a positive way. The counter version of that is, ‘oh, that seems useful.’ But no emotion. No excitement. Something's wrong there. It's not clicking.
Still, at that time, Cramer still saw Sentry less as a business than a self-sustaining side project. “The money was used to pay for servers or sponsor conferences. We didn’t have income out of it for about three years.” But it was becoming harder to ignore the signal its growing customer base was sending. **“We had great product-market fit from the get go. We still had a lot of work to do to unlock everything, but it was there.”**
## Weaponizing open source
Sentry’s user base was growing fast, but there was a catch. Those thousands of Silicon Valley companies already running the open source version? They had internal engineering teams capable of self-hosting copies of Sentry’s open source code, so they weren’t going to pay for a cloud-hosted service.
It soon became apparent to Cramer that the right move was not to chase existing users and convert huge companies, but rather to target the next generation of startups. Engineers who had used Sentry at Uber, Airbnb or elsewhere would take it with them to their next company — and this time, those younger startups would choose the convenience of the hosted cloud version. “None of the companies using the early open-source version ever converted to cloud,” Cramer says. **“We went after the long-tail funnel of what would happen over 10 years. That worked phenomenally for us.”**
Some of the large companies did ask for a paid, on-premises offering, but Cramer refused. “Uber actually did pay for a year for a support contract — it was a lot of money. We chose to not renew it. I didn’t want to sell on-prem software. I didn’t want to be in that business.”
Instead, Sentry doubled down on the strategy that had already been working for them: giving the product away for free. Despite having a paid, cloud-hosted version of Sentry, letting companies self-host for free meant the product could spread organically across the developer ecosystem. **By refusing to wall off the product, Cramer used openness as a weapon. “That’s what open source does — it commoditizes the market,” he says.**
He recalls one telling example, when a payments company switched from a now-defunct competitor to Sentry’s free, self-hosted version. “They didn’t pay us a dime, but it took away 10 or 20 percent of that competitor’s revenue,” he says. “Less than a year later, they paid us half a million dollars a year. **Not only does that competitor not exist anymore, but we don’t really have competitors, we removed the market. We got this customer with zero marketing or sales dollars spent.”**
For Cramer, the story illustrates what he calls his “ultra aggressive” approach to competition. “I’ve been capable of building Sentry because I’m very competitive. I want nobody else to exist,” he admits. “For a long time, we had a bunch of competitors that looked exactly like us. None of them exist anymore. That’s not a coincidence. That wasn’t us just focusing inward and ignoring them. It was me, every day, being like, ‘we have to be better in every single way, in every single territory they’re in.’”
That instinct for relentless improvement has defined Sentry’s strategy. When one rival began gaining traction in the PHP Laravel open-source community (a popular web framework used by millions of developers to build modern applications) Cramer refused to concede ground.
“We can’t have that. We have the better product, the better engineering. Overnight, we went from barely existing there to being the clear leader. We even hosted the first official party at the conference so everyone knew who we were,” he says.
This aggression has never mellowed, and he advises early stage founders to be just as assertive over their turf. “If a startup enters our space today, the executive team is immediately focused on them,” says Cramer. “You can’t let anyone wedge into your market. That’s how you lose the thing that made you successful in the first place.”
**Even when competing with giants like Datadog, his posture remains the same: don’t replicate — innovate.**
> Our strategy is to do what they can’t, not to feature match. You don’t compete by building the same product. You compete by building the one they can’t.
One example of this was when Cramer noticed that while legacy monitoring tools were still obsessed with back-end servers, the real action was moving to the browser. JavaScript was powering a new generation of dynamic web applications, and this came with a new set of visibility problems. “We recognized the JavaScript shift,” he says. “Everybody else ignored it. That was the point zero of the entire company: we have to solve JavaScript first, because we recognized that was the growth of the industry.”
While other companies chased enterprise clients and traditional back-end monitoring, Sentry went after the developers struggling with JavaScript errors happening live in users’ browsers. The market might have *looked* smaller, but it was rapidly expanding. By meeting that emerging need early, Sentry didn’t just find a niche, it defined one. “We only exist because people ignored the space. We might still have grown, but we are dominant in that market. We are first to market in everything there. We are *still* first to market in everything there.”
## From bootstrapped to backed: the decision to raise capital
In early 2013, Cramer made the decision to leave Disqus. Within months he’d joined Dropbox as an engineer, continuing to run a steadily growing Sentry as a side hustle. Two years later, in early 2015, Sentry had what most founders would consider a dream setup: thousands of paying customers, $600K in annual revenue, and profitability. But Cramer wasn’t content. “We were so much bigger than our competitors, but we were barely in the black,” he says. “We wanted to hire people. We wanted to grow. We wanted to win. We wanted to be the best — and to be the best, we needed more money.” In the years since he’d first built Sentry as an open-source tool and later turned it into a paid cloud service, Cramer had [begun to imagine something larger](https://review.firstround.com/the-pivot-to-product-market-fit/): transforming a useful developer tool into a serious player in Silicon Valley. **To do that, he knew, would require more than hard work and luck. It would require capital.**
> Why fundraise when you’ve got a successful bootstrapped business? The answer was, to do something you can’t do otherwise.
It was around this time that Cramer began to feel the friction between Sentry, and all the ways he envisioned being able to grow and evolve it, and his responsibilities at Dropbox. “I was doing two full-time jobs at once. I was on call for both. It was a nightmare. I realized it was unsustainable.”
Cramer left Dropbox and focused on fundraising for Sentry, but didn’t know much about it. Early attempts to raise a seed round went nowhere. In hindsight he can see that he didn’t really know what he was doing; he was cold-calling, and had no experience in [how to pitch VCs](https://review.firstround.com/heres-what-you-can-really-expect-when-pitching-your-seed-stage-startup-at-a-vc-partner-meeting/), or navigate the VC world generally. “Those people were not going to give me money,” he says. “All of them basically ghosted me.” It wasn’t until a former Dropbox colleague, Dan Levine, reached out that things began to shift. “He knew who I was, and it turns out that’s the game: bet on people you already know.” Within months, Sentry raised a $1.5 million seed round. Their Series A followed the next year, bringing in $9 million.
**The cash infusion changed everything, not just financially, but psychologically.** “After one year of venture funding, it was clear we were the market leader. Before that, nobody had any idea who we were,” he says. “A venture partner pushes the company to do more. You have to think bigger.”
Still, he insists he wouldn’t change the fact that Sentry started out bootstrapped. The discipline of being forced to make money early taught him an important lesson. “When you're bootstrapped, you don't give things away — it's too expensive. When Sentry went from open source to a real company, there was no free plan. I don't know that if I had venture capital and I was building a product, I would make that same decision.” A pitch deck that lays out the plan for how you’ll eventually monetize is great, he says, but theory doesn’t always play out the way you plan. “Being bootstrapped forces you to validate with the customer.”
And for Cramer, that validation is non-negotiable for finding true product-market fit.
**“If there's one thing anybody takes away from this, I’d say it’s to monetize right away, to recognize if it's gonna work or not.”**
## Staying narrow to scale: how “blind focus” drove Sentry’s success
For Cramer, a kind of tunnel vision he describes as “unwavering blind focus” has always come naturally, and he credits it with much of Sentry’s success.
> Saying 'no' to things you don't believe in is really important. You have to steer those decisions, and have conviction they align with your vision.
In a decade of building Sentry, that conviction has often meant saying ‘no’ when saying ‘yes’ might have been easier, and more lucrative. At various points, Cramer faced pressure to expand the company’s scope, with pressure often coming from potential customers negotiating large contracts. **But instead of chasing near-term wins, he stayed fixated on long-term alignment.**
One example: Best Buy asked Sentry to complete an RFC (request for comment), a detailed technical proposal outlining how Sentry would implement and integrate the product at Best Buy. To some, it would seem like a request worth agreeing to, given it would lead to a promising path toward landing a major customer. But Cramer saw it differently: “It did not seem like the best use of my time,” he remembers. “I’d rather get 10 new customers instead of Best Buy. I said no.”
A similar story played out with an insurance company that was requesting specific anti-virus protections before signing. “We weren’t going to do that,” he says. “They did not become a customer *at the time*. But both of them are now.”
It’s a value that’s come to define Cramer: resisting the temptation to chase validation or revenue at the expense of focus. “I care about the banker that is gonna use the cloud, not the banker that refuses to use the cloud,” he says. He advises early stage founders to think on longer time horizons. “Early stage especially, it's easy to fall into the trap of needing validation. Needing to make some money.
> You have to ask yourself: does that align with my view of the world? Specifically, you need to ask if something aligns with your view of the world in the future, versus in the past.
That discipline to stay narrow has proven to be one of Cramer’s greatest strengths. It’s also a source of tension, the constant balancing act between conviction and flexibility. “You need an extreme degree of confidence that looks like ego. At the same time you need humility.”
He admits it’s a contradictory balance, but one founders can learn to walk over time.
“You need to find middle ground; you need to be empathetic towards what matters. But you’ve also got to not question what you’re doing a lot of the time. That’s hard.”
By 2020, that balance led Cramer to a decision many founders struggle with: stepping aside as CEO. [Milin Desai](https://review.firstround.com/podcast/lessons-from-sentry/), former GM at VMware took on the role. “I am very confident in everything I say, but then, I gave up board control. I hired a CEO to take my job. I don't need the arrogance of the whole thing. I'm also very honest about what does and doesn't work for me.”
The same discipline that helped him ignore distractions also helped him recognize when his own role needed to change. “You’ve gotta have the humility to be able to say, ‘that opinion I held was wrong.’ For some people that's tough. But the people that have succeeded at Sentry are the ones who have been willing to challenge their opinions. Because the counter version is you just end up with decision paralysis.”
## Bug reports and billboards: Cramer’s unorthodox playbook for sales and marketing
For Cramer, marketing has never been about selling features or function. It’s been about [building a brand that people remember](https://review.firstround.com/how-to-build-an-iconic-brand-without-breaking-the-bank/), even before they realize they need your product.
Sentry’s billboard campaigns are perhaps the most obvious example of this; quirky, eccentric, out-there imagery that turn heads with their strangeness, all the while communicating nothing specific about Sentry’s value offering. It’s just a *vibe*. Attention. Eyeballs. This illustrates perfectly Cramer’s philosophy, borne of his early experiences, back when existing Sentry customers using the open-source version couldn’t be convinced to convert to the cloud product.
> Marketing’s job isn’t to fill a funnel. It’s to make sure people know we exist, recognize our brand, and understand what we stand for when the right moment comes.
Also central to his marketing philosophy is that the founder of a startup is central to its brand. “The founder *is* the brand,” he says. “Half of our weird campaigns come from me. If you’re a founder and you’re not out there representing your company every day, you’re doing it wrong.”
Cramer’s unconventional instincts extend to [sales](https://review.firstround.com/0-5m-first-sales-hire/), too. He learned early that enterprise deals aren’t really about the product, but about trust. “Especially with large companies, they’re not really buying your software,” he says. “They’re buying a partnership. It’s not about selling features. It’s about showing that I know this space better than anyone else, that our company are the experts, and that we’re the best partnership they could ever have.”
This philosophy drove Sentry’s sales strategy in the early days. “I was basically being what I wish every product manager was,” he says. “I was writing the code, but I was also following up with every single customer.” When a bug report came in, he’d fix it himself, then personally email the user whose name was tied to the error. “If that happened to you, you’d be amazed,” he says. “That was just good user experience.”
Cramer’s instinct to be hands-on hasn’t faded with scale. Even today, he occasionally steps into deals himself. Once, when a major AI company struggled with setup, Cramer showed up at their office in person to help fix it. “That’s [founder-led sales](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/),” he says. “It’s not just talking to customers. It’s doing whatever it takes to make them successful with what you’ve built.”
### When founders should quit as head of product — and hire the first PM
URL: https://review.firstround.com/when-founders-should-quit-as-head-of-product-and-hire-the-first-pm/
Last updated: 2025-12-04T16:56:20.000Z
4 heuristics for deciding when it’s time
_This post is for subscribers only._
### When Should You Stop Clinging to Product and Hire Your First PM? Advice From a Founder and CPO
URL: https://review.firstround.com/when-to-hire-your-first-pm/
Last updated: 2025-10-31T08:03:17.000Z
[*Giving away your LEGOS*](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups/) *has become a core tenet of scaling startups. But in practice, the act of transferring ownership is often far more painful for most founders — especially if they have a favorite child in one area of the business. Product is, understandably, one of the hardest LEGOs to hand to someone else. Maybe a founder was CPO at a previous company. Maybe they think roadmap planning is where they can add the most value. Or maybe they just have a desire to hang on to control over something that's so core to the company’s success.*
*That’s one reason hiring your first PM can be difficult. Another is timing. At what scale do you actually need a PM? And how’s AI changing all this?*
*Over the years, we’ve collected a ton of valuable advice about* [*how to hire a PM*](https://review.firstround.com/our-6-must-reads-if-youre-hiring-a-product-manager/)*, but less on when it makes sense to do so, especially for founders who are at the pivotal moment where they’re considering bringing on their first product manager.*
*So we wanted to give early-stage founders a few heuristics for this decision from someone who’s gone through the process firsthand.* [***Saumil Mehta***](https://www.linkedin.com/in/saumilmehta1/?ref=review.firstround.com) *is Global President at *Ticketmaster*, but before that, he spent nearly a decade in product leadership positions at *Square*, which acquired the company he founded (where, for a long time, he acted as both CEO and PM).*
*He acknowledges there’s no one-size-fits-all answer but instead, thinks about when to hire a PM based on the signals you’re receiving from the business and the product, and where your time as a founder will have the most impact.*
*With that, here’s Mehta.*
---
As an early-stage startup founder, I had two titles: CEO and, unofficially, IC PM.
Things were going great. My company, LocBox, just raised our Series A and brought on a handful of engineers. We had a sales and account management team. Our customer roster of local businesses was quickly multiplying.
But my colleagues kept nudging me to hire our first PM. Turns out I was a bottleneck for engineering and design.
I was torn. I’d spent my whole career in product up until starting my company. I felt overprotective of every single product decision. I was tight with each engineer and designer.
But the financial realities of a cash-burning startup also loomed large. Should our next incremental dollar of spend go toward a full-time engineer, designer, account executive — or do we *really* need a PM?
> While mulling over the decision to hire the first PM, an old startup adage kept ringing through my ears: “If you’re not building, and you’re not selling, why the hell are you even here?”
This was 15 years ago, but today’s founders still wrestle with this same question. And the decision has only gotten more complicated as AI upends roles and org charts even at the smallest startups.
While there’s no one-size-fits-all answer, I developed a litmus test to help make the decision. After selling my startup to **Square**, I spent nearly ten years there as a General Manager and later Chief Product Officer. Now I tell every founder to use the same system I used to make the decision for my startup.
Here’s my rule of thumb: **Hire your first PM once the marginal hour you spend on product work is worth less than the same hour you might spend on go-to-market or company building.**
This recognizes that while founders should keep the reins of the product *strategy*, there comes a point when the product work in a company gets highly *tactical* and competes with other equally valuable work. Should you still be planning bi-weekly sprints or synthesizing go-to-market feedback and turning it into digestible artifacts that an engineer or designer can co-create? Owning every tactical PM activity is fine for the founder who can delegate away GTM or other company-building work. But time is finite and opportunity cost is real. Eventually, the equation flips.
A founder of a seed-stage AI startup told me, “The adage that [founder-led sales](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/) is the fastest way to product-market fit is almost always true.”This sentiment is echoed by another founder of a Series A payments infrastructure startup: “We knew we wanted to build an industry-leading payments infrastructure for government benefits. But my own focus had to be on GTM and growing into a sales role, so I had to hire a great first PM to allow me the space to do that.”
The exact moment this happens is different for every company. I’ve worked with companies that hired their first PM months after raising their first round, while other founders stuck it out as IC PMs well into the growth stage.
Use these four simple heuristics to help you decide if you’re ready to bring on your first PM.
## 1\. The rate (and frequency) of inputs for decision-making
At its core, the PM role is about making good decisions in highly uncertain circumstances. This requires signal-gathering and synthesis across multiple input sources.
On day zero of any startup, there are only two sources of input — the founders’ own hypotheses about the market, and prospective customers’ opinions about their pain points. Product-market fit is a successful marriage of the two. Unsurprisingly, at this stage, hiring a full-time PM is actually counterproductive, as it’s the founders’ job to navigate the idea maze and find PMF.
Once you clinch nascent PMF, you start building more features and upping your GTM focus. In the first three to six months, you may bring on the first few engineers, designers and business hires. Within six to nine months, you may have landed [design partners](https://review.firstround.com/sierra-design-partnership/) to test the product and give feedback. You’ve likely gained some traction and are seeing signals across product usage and website traffic, and you’re analyzing and optimizing different channels.
So within 12-18 months, what was once just the founders themselves grows into a fast-moving startup with inputs coming from engineers, designers, prospective and current customers and analytics sources.
Even if the overall product strategy is set in stone, this step change of input volume demands rapid, tactical product decision-making. You’re confronted with decisions you never had to make before. Should you build Feature X or Feature Y first? Should you overhaul the roadmap to make your highest-paying customer happy, or build out requests from ten smaller customers? Where do you draw the line for good enough on Feature Z? Are you shipping at the right efficient frontier of quality and velocity?
I remember tackling many of these questions as the founder-PM at LocBox. We started seeing some worrisome churn patterns and wondered if the problem was our sales process, [our ICP](https://review.firstround.com/how-vanta-clay-retool-found-icp/), our account management — or simply the product’s failure to get onboarded customers to use multiple features (thus reducing churn). Our product engagement analysis wasn’t strong enough because our instrumentation was subpar, which was something we deprioritized in favor of all the other product work we had to do.
And while we had shipped some features, I wondered if we shipped the *right* ones. Customers were clamoring for more features that were table stakes offerings from competitors. Over time, these would all get built — but for a given two-sprint window, a full-time PM (which we didn’t have at the time) would have been able to do this much faster.
I struggled to operate at the level of detail required during the exact few days the team was sprint planning. I couldn’t get into “maker mode” when we needed it most, overwhelmed by other time-sensitive tasks important to the business. At the exact same time, I was helping close a key hire, helping sales improve their prospecting data and looking for a new office space in San Francisco.
Put simply, the number of inputs and time-sensitive tasks were creating demands on my time that working more hours simply couldn’t compensate for.
**But it’s not *just* the divergent sources of input. It’s also the *rate* at which input arrives.**
With most consumer apps, for example, new data and feedback arrives hourly. Funnels change weekly in response to product work. New bugs and edge cases crop up weekly. Even with mid-market SaaS customers, the product may be used differently by each customer depending on their internal workflows or the number or type of seats involved.
With AI startups, there’s a new foundational model or technology development just about every week. I recently met a PM at a high-growth AI startup who ships vibe-coded apps with a UI and development layer on top of multiple foundational models. Every model update can wind up invalidating parts of the startup’s business logic because the new model may have solved deficiencies in the prior model.
Someone has to do the legwork to keep up with the breakneck rate at which new inputs arrive.
## 2\. Customer-facing surface area
Many years ago, I was having a conversation with my then-boss at Square, [Alyssa Henry](https://review.firstround.com/how-to-design-your-org/), about two very different areas of Square: our payments platform that actually processes payments across the customer base and our CRM tools for small businesses that help them understand their buyers, market to them, set up loyalty programs or sell gift cards.
As you’d expect, payments was far more important to Square’s brand identity, not to mention its financial success as a newly public company. But she made a comment at the time that stuck with me: “Payments is an inch wide but a mile deep. These CRM tools are a mile wide but an inch deep. Act accordingly*.”*
This encapsulates the second heuristic: **The need to hire the first IC PM is directly correlated with the amount of customer-facing surface area in a product.**
In this case, “surface area” is an imperfect term to describe the unique number and the general complexity of the screens a customer *could* interact with. Got a simple web-only product with just a few screens that drive most of the customer interaction, with a ton of complexity and magic hidden behind the scenes (like the first incarnation of ChatGPT)? You can get away with far fewer PMs in general and, by extension, delay the hiring of the first one as long as possible. In June 2025, OpenAI [only had \~30 PMs](https://www.linkedin.com/posts/petergyang%5Fopenai-has-30-pms-for-2000-staff-we-activity-7340022894569103360-GsN1/?ref=review.firstround.com), even though the company had thousands of employees at that point. Conversely, if you have a product that, even in its MVP form, supports iOS, Android, web and has a ton of integrations to push and pull data — even if the level of technical complexity is far lower than an LLM — it’s plausible that you might need to bring on your first PM a lot earlier.
Why does customer-facing surface area make a difference? Because surface area is a shared space with many stakeholders with divergent opinions.
Customer-facing surface area is shared by prospects who are newly evaluating the product, current customers who are using the product or connecting the product to external data sources, salespeople who are demoing parts of the product, marketers who want to iterate on product copy, designers who sweat information architecture and interaction patterns, frontend engineers who render the designs and server engineers who work with the frontend engineers to manage business logic and data that renders on the screen. Even the sheer number of screens creates increased odds of edge cases, bugs and customer-facing product failures.
Not only are there more stakeholders, but each stakeholder has strongly held opinions about *how* the user experience should work based upon personal preferences (take, for example, an engineer who staunchly prefers dark mode). As a designer once told me, “Because everyone can see the design, everyone thinks they can be a designer.”
Given the number of stakeholders and their divergent opinions — there’s a need for signal-gathering and synthesis. PMs are uniquely suited to do that.
Now compare that with a product with very little surface area, like ChatGPT in November 2022, with just a handful of screens and no mobile app. The vast majority of tactical decisions in a product like this are, or certainly *can be*, made by engineers. And even if a PM gets involved in a platform or research team that operates deep below the surface, they have far fewer stakeholders to manage since sales, marketing, design and prospective or current customers have no real opinion about topics deep in the guts of the product.
Every startup’s surface area is different. But the following questions may help founders evaluate their own surface area and its complexity:
- **Do you need multi-platform support at full feature parity** (i.e. iOS, Android, desktop web, mobile web)?
- **How many multi-step workflows do you plan to have?** Multi-step workflows may be stateful, require conditional validation, have branching logic, demonstrate progressive disclosure — each of which is a source of complexity.
- **How much of the app requires data input from customers?** Surfaces that require file uploads, connecting to external data sources, real-time data validation or cleanup inherently have higher complexity than surfaces that are simply for reading text or data.
- **How many third-party integrations and plugins do you need to build to drive customer value?** While AI startups are using Model Context Protocol (MCP) for integration purposes, all startups need to consider the number of third-party APIs since that creates dependency on other companies (e.g. breaking changes).
- **How many “roles” do you have to support in the next few months?** For example, if the product surface area has to vary by the roles of owner vs. manager vs. employee, that creates higher complexity.
- **How many screens in the app or site are “information dense”?** These are screens with many fields, information tables, multiple charts, lists of settings and so on.
- **How much of the app or website is accessible via a nested information hierarchy?** A very simple app has little hierarchy — one-level navigation with one screen per nav item, for example. An app with complex surface area may have nested menus and complex hierarchy (e.g. dashboard → business management → reports → sales reports).
- **Do you have or intend to implement an AI chatbot UI paradigm that executes tasks on behalf of the user?** AI chatbots that are agentic require significant work tied to evals and model changes and create new complexity.
- **Do you plan to be in multiple countries in the next few months?**
Evaluating where the product is today or intends to be in the next few months through these questions should give founders a full picture of their surface area complexity. If the product has a lot of surface area, it may be time to consider hiring the first PM very soon.
For example, one founder of a Series A AI company building agents to resolve IT requests realized that surface area was *the* key factor in his decision to hire at PM: “We’re covering a lot of surface area and third party integrations, especially given our enterprise customers, likely more so than most AI startups at our stage,” he says. “So we did what felt like the counterintuitive thing and hired a PM much earlier than we expected to.”
## 3\. The impact of AI
There’s a lot of hyperventilating about how AI will eliminate the PM role. While AI will surely impact where PMs spend their time — as is true for every type of knowledge work — **I believe that the productivity boom from AI will, on balance, result in startups hiring the first PM *sooner* than they would have in a pre-AI world.**
There are two key reasons. The first is that engineering and design productivity have changed.
The average startup feature ships much faster than five years ago, which creates a flywheel where there are more features to ship. That means there are more decisions to make, more input sources to navigate at a higher rate and more [taste-making](https://review.firstround.com/stripe-square-linear-product-taste/) required. Once again, PMs are uniquely suited to do all of this.
As Stanford ML professor Andrew Ng [put it eloquently](https://x.com/AndrewYNg/status/1879939058211971420?utm%5Fsource=chatgpt.com), “Software is often written by teams that comprise Product Managers (PMs), who decide what to build (such as what features to implement for what users) and Software Developers, who write the code to build the product. Economics shows that when two goods are complements — such as cars (with internal-combustion engines) and gasoline — falling prices in one leads to higher demand for the other. As coding becomes more efficient, teams will need more product management work (as well as design work) as a fraction of the total workforce.”
This was echoed by [Brandon Levey](https://www.linkedin.com/in/brandonlevey/?ref=review.firstround.com), founder and CEO at AI code compliance tool Ichi. He’s a second-time founder and also spent several years as a General Manager and Head of Platform Product at Square, resulting in an intuitive sense of engineering and PM dynamics in the pre-AI world. Historically, companies would, on average, hire one PM for every eight to ten engineers. But AI is now upending this ratio.
“Our engineers are now probably [twice as productive](https://www.firstround.com/ai/linktree?ref=review.firstround.com) as I’d have expected a few years ago because of AI. Our designer is now also able to double as a frontend engineer. So I’m thinking about reducing the ratio between eng and PM and adding one more PM,” says Levey.
Of course, PMs aren’t immune to AI’s impact and are expected to be more productive because of it. A lot of the rote work in the PM role — documentation, program management, status updates — will be automated away. At scale, companies may hire *fewer* PMs than they would have without AI. But the earliest stage startups, which are all AI-first in their development practices, will likely have to hire their first PM *sooner* than previous benchmarks in response to higher eng and design productivity.
In the past, a founder could reasonably wait until after they hired the first six to eight engineers. But now, if the engineers are much more productive, it may be time to hire the first PM after the first four or five engineers.
The second reason startups will hire PMs sooner is that the non-deterministic nature of LLM responses changes the actual nature of software development. This, in turn, creates new PM-like work that simply didn’t exist before. *“*There’s a lot more chaos in the system compared to general software being built. This added level of chaos can actually have an impact on product planning, customer research, small iterations and more, which are all important,” says Levey.
If your startup’s engineering and design is far more productive, and even more so if your startup is AI-native, your PM hiring ratios are likely lower than before.
## 4\. The opportunity cost of your time
All startups are in a race against the clock. In this race, founder time and attention is the most valuable fuel to propel the company forward. The final heuristic relies directly on a detailed opportunity cost analysis of the founder-PM’s time.
Here is a simple but concrete analysis for the founder to consider.
1. **Log the time you spend on tactical product work.** For two or three weeks, keep a rough daily log of tactical product work (or use a calendar tool to do so) of: in-feature decisions, biweekly sprint planning, daily or weekly product analytics and more. At the end, compute the average time spent per week. If needed, add a rough context-switching multiplier to also account for the time spent switching into and out of tactical product work.
2. **Track which activities you couldn’t get to.** Over that same time period, write down the list of missed or incomplete tasks outside of the product that you could have taken on if you had more time available. This includes things like obtaining new design partners, selling to prospective customers or hiring. As part of this, also consider any high-priority tasks that are currently delegated to others (e.g. post-sales enablement) that might get stronger output if the founder did them. Compute a rough weekly average.
3. **Define the opportunity cost.** Reflect on the opportunity costs of your current time prioritization. Share this analysis with close advisors or co-founders to get their input. Finally, consider these impacts:
- Which prospect deals were slowed or lost?
- Which hiring process moved more slowly or didn’t start?
- What marketing or PR opportunities did we miss out on?
- Are there any clarifications to strategic direction that we didn’t consider?
- Is there a budget or financial forecasting decision that we stalled on?
This simple three-step process will bring into sharp focus where a founder’s time is going and how the company may benefit if that time were put somewhere else. In some cases, you might run this analysis and determine it’s *not* time to hire a PM just yet. Or you might realize you need one yesterday. In either case, a structured opportunity cost analysis of your time can help you make a more intentional decision.
### The trap of weak product-market fit — lessons from Mercury’s founder
URL: https://review.firstround.com/the-trap-of-weak-product-market-fit-lessons-from-mercurys-founder/
Last updated: 2025-12-04T16:57:03.000Z
Inside the fintech unicorn’s path to product-market fit
_This post is for subscribers only._
### Mercury’s Path to Product-Market Fit — Do the Hard Part First
URL: https://review.firstround.com/mercurys-path-to-product-market-fit/
Last updated: 2025-10-29T16:03:06.000Z
Four days after **Mercury** launched publicly in 2019, someone opened up an account and — without contacting anyone on the team — deposited $1 million.
“That blew my mind,” says co-founder and CEO [**Immad Akhund**](https://www.linkedin.com/in/iakhund?ref=review.firstround.com). “This was before we even had a sales team. I assumed some folks would self-serve, but I never thought someone with $1 million would just move money into Mercury all on their own.”
Akhund first got the idea for Mercury years earlier while he was working on his startup, Heyzap. He couldn’t believe how much of a slog traditional banking was for entrepreneurs — unclear fees, rigid onboarding, stuck in branches and nowhere to be found online — even as other fintechs like Square and Stripe started to take off. He put the idea on the back burner while he scaled and later sold his company.
In 2017, when he began looking for his next venture, he was surprised no one else had fixed the startup banking problem by then. So he decided to pursue the idea himself.
While Akhund would later view that blind $1M transfer as a clear signal of product-market fit, at the time, he wasn’t convinced. As a serial founder for the better part of two decades, he’d developed some healthy skepticism around [early signs of traction](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/). His first startups never found product-market fit. He eventually did get there with Heyzap — but only after grinding through several pivots. He figured this immediate flash of demand wouldn’t last.
“I thought there’d be a [trough of disillusionment](https://www.gartner.com/en/research/methodologies/gartner-hype-cycle?ref=review.firstround.com) after a couple months,” he says. “But it never came. We launched and we just kept on growing.”
Now valued at $3.5B, Mercury serves more than 200,000 companies, and recently nabbed a [$300M Series C](https://mercury.com/blog/series-c-announcement?ref=review.firstround.com).
In this exclusive interview, Akhund reflects on what he’s learned about company building from his fourth go-around. He shares the lessons he wishes he could have told his twenty-something founder self — from launching slowly to scaling culture. Let’s dive in.
## Picking an idea — and sticking with it
After a stint as a part-time Partner at Y Combinator in 2017, Akhund set out to build his fourth company. This time, he knew one decision outweighed everything else: picking a great idea and sticking with it.
“There’s this sense in Silicon Valley that the idea doesn’t matter, and if the entrepreneur is good enough, they can just iterate around and eventually land on the right one,” he says. “But I think people undervalue how much the idea matters.”
Akhund had learned the hard way that a founder’s talent can actually obscure the strength of an idea. He’d taken the iterate-around approach with his company Heyzap, which started as a mobile ad network and pivoted a few times before evolving into a developer tool for app publishers. While he says it did eventually find product-market fit, it took lots of trial and error.
“When you’re a stubborn, high-grade founder, you don't know when to give up. We’d have an idea and say, ‘Let's sell the hell out of it.’ We spent two years working on every idea we had. We made incremental progress, but in hindsight, we clearly did not have product-market fit for a long time,” he says.
> If you're a strong founder, you can sell anything. You can get weak product-market fit out of almost any idea, and that's a problem.
The idea for Mercury had been lingering in the back of Akhund’s mind for years. He was reminded of it every time he had to go to the physical bank. “I’d go to send a wire and it wasn’t enabled in my account. So I’d have to spend three hours at a bank branch getting it enabled. It was insane,” he says.
He just didn’t think *he’d* be the one to tackle this problem. Without any experience in the financial industry and its regulatory hurdles, it felt too far out of his area of expertise. He figured it was so badly needed that someone else would.
By 2017, the problem remained untouched, even with fintech tailwinds starting to pick up. It was a massive market practically up for grabs. Given Akhund’s own frustration with banking as a founder, he figured if someone had to fix it, why not him?
Then he remembered an encounter at Y Combinator’s Demo Day back in 2013 that gave him some initial conviction that it was at least possible. “I met a founder named [Kai Stinchcombe](https://www.linkedin.com/in/kaistinchcombe/?ref=review.firstround.com) whose company, True Link, makes debit cards for seniors, because seniors get taken advantage of so often, and their kids want to be able to set controls,” he says. “At the time, they were just a two-person Y Combinator company. And I thought, ‘Wow, they got a deal with a bank partner. If they can do that, maybe I could do this bank thing at some point if no one else does.’”
## Exploring a hard problem
But first, Akhund had to do the hard part: figuring out how to build it.
His first order of business was [learning the market](https://review.firstround.com/to-learn-a-new-market-start-by-building-your-product/). “Fintech was a completely new space to me,” he says. “Everyone knew I could build a product. I knew I could build a product. The hard part was figuring out the framework for compliance, risk and legal to make a bank sponsorship work.”
So Akhund set out to talk to three expert fintech personas who could provide different perspectives on the industry and its challenges: founders, lawyers and investors. “I had 90 of these conversations,” says Akhund. “Some of the most useful people were four intro chains down. I’d talk to someone, and then they'd introduce me to someone, and they'd introduce me to someone else. It was a fun process.”
Here’s what he learned from each persona over a four-month sprint:
- **Entrepreneurs:** “I talked to every single fintech entrepreneur I could find. I wanted to find out how they built their companies. Many were failed entrepreneurs, and some were successful. So if they failed, I wanted to learn why. These founders weren’t building new banks for businesses, they were building consumer credit cards or other fintech products, but the companies had similar shapes,” he says. “You can get nitty-gritty with entrepreneurs — there are no dumb questions. They’re super helpful people.”
- **Lawyers:** Akhund says lawyers helped him decode the regulatory landscape. “Lawyers were the most surprisingly useful set of people I talked to,” says Akhund. “Most lawyers will do a 30-minute call with you for free, and there are a lot of financial services lawyers out there.”
- **Investors:** Akhund turned to fintech investors to figure out what was fundable. “Investors tend to be really good connectors as well, so they connected me to other entrepreneurs and lawyers,” he says.
Asking fintech experts what worked and what failed helped Akhund make an important early decision: he’d build Mercury with a sponsor bank model, instead of pursuing a bank charter. The bank charter route requires getting approval from the government to fully operate a bank — which, he learned, is hard to do. Using a sponsor bank works more like a partnership. “Some fintechs at the time had gone with the sponsor bank model, and some tried to get a charter. I learned that most of the companies that went with the charter model either failed to get a charter or, if they did get it, the company later failed,” he says.
After these conversations, he understood that building the initial product and securing a sponsor bank would require a long execution period. “I realized it might take years to get this product live. My mindset became, ‘This isn’t going to be easy. I’m going to do this for the long run.’”
But he found the challenge ahead energizing. “The more I explored it, the more it turned from impossible to doable — but hard. And ‘doable but hard’ is my favorite place to be,” he says.
> In the beginning, spend all your time doing the thing you're the least capable of doing — and the least capable of proving to the world that you can do.
## Building (and rebuilding) the early product
Akhund had one simple but ambitious requirement for the MVP: Mercury could be a company’s only account.
He understood that for any fintech product, most important product decisions needed to be locked in from the start. “When you launch something, it’s very hard to course-correct. There are lots of features in Mercury today that we built pre-launch. Trying to change things now is much harder with 200,000 users,” he says.
These were his product non-negotiables to make that true for just about any founder:
- **Fully digital.** No brick-and-mortar operations.
- **Support checks, wires and ACH.** The nuts and bolts of a standard business account.
- **Allow multiple account owners.** Businesses are usually run by a few people, so Akhund had to build infrastructure to make sure more than one person could manage the account.
- **Be accessible to immigrant founders.** He insisted on making sure immigrant founders like himself could use this product. “But this was really challenging to do,” he says. “We had to get the bank sponsor to be fully on board with infrastructure to support immigrants who didn't have a social security number or US IDs.”
Akhund was prepared to take his time to meet this high bar. “I knew that if we launched without one of these things, people wouldn’t adopt it,” he says.
But he wasn’t thinking about grand expansion plans at this stage — despite investors’ prodding. “I saw no point in building anything beyond this basic framework. I wasn’t thinking about a debit card, a credit card, or fancy analytics before we had these core features,” he says. “I remember VCs told me, ‘Why are you launching a new bank? Why don’t you just use Plaid to provide some analytics around people’s finances?’ And I said, ‘That’s not the point. That’s just a feature of the main thing — a new bank.’”
Akhund and his early team, [**Jason Zhang**](https://www.linkedin.com/in/jason-zhang-5645a860?ref=review.firstround.com) and [**Max Tagher**](https://www.linkedin.com/in/maximilian-tagher-641ba147?ref=review.firstround.com), whom he’d worked with at Heyzap, wanted to line up a bank sponsor that could co-build the product. But the first bank they partnered with didn’t hold up their end of the deal. The bank was supposed to build extra features for the team, and every month, they’d tell them it was coming, but never delivered.
The Mercury team had already built a launch-ready product, but ultimately chose to scrap their original bank sponsor and find a new one, which took another six months. They decided to redo all of the design and front end for [onboarding](https://review.firstround.com/superhuman-onboarding-playbook/) and sending money. But Akhund says that double work ultimately only strengthened the product’s design. “We were perfectionists. We just wanted to make the core experiences really, really good,” he says.
Only around six months before launching did Akhund consult some potential customers. “I didn’t talk to many customers. It just seemed so obvious to me,” he says.
He showed the MVP to around 100 founders — and only two responded enthusiastically. The rest gave a generic (but dreaded), “Sounds interesting.” But this didn’t deter him. “I figured that for this type of idea, people just couldn’t imagine what a better banking experience could be,” he says.
## A long awaited launch
Once the product was ready for its official debut after a year and a half of building, Akhund and the team [launched](https://review.firstround.com/how-to-launch-your-startup-out-of-stealth/) in April 2019\. Mercury picked up 1,500 signups upon going live — and continued to grow by 40% each month during its first year.
“We had a group of about 60 people blast out our launch news, including our investors. That worked really well, because those people’s credibility gave us built in trust,” says Akhund. “[Elad Gil](https://review.firstround.com/future-founders-heres-how-to-spot-and-build-in-nonobvious-markets/) was one of our investors, and he was supportive of the launch. I think the initial spark came from this group.”
Akhund says Mercury’s [long gestation period](https://review.firstround.com/airtables-path-to-product-market-fit-lessons-for-building-horizontal-products/) before launching was necessary, which ended up being a real shift from his earlier founder days of shipping-then-pivoting. “I used to have the mindset that I should just launch things in three months and iterate. And maybe that approach worked better back in 2010 when there was so much new space to explore with social media and mobile,” he says. “But now, I think it’s better to spend more time building a deeper, better product. We had a well-developed feature set by launch, and it also looked great. And to make things look great, you have to spend twice as much time.”
Early users loved it. “Most people expect onboarding to be really painful. But because we’d spent so much time building and rebuilding the onboarding experience, people had a great first impression of Mercury,” says Akhund.
### Signs of product-market fit
In hindsight, Akhund says these were the first three signs of real market pull after launching:
- **Mercury didn’t need a sales motion to land the first customers.** When that early user signed up and deposited $1M without contacting anyone on the team, Akhund was shocked. But it validated his hypothesis that the sheer existence of a better banking\* experience was enough to stir up demand, even for large accounts.
- **Users were patient while the early team worked out kinks.** “We thought international wires worked when we launched, but it turned out they didn’t,” says Akhund. “It took us four extra weeks after going live to fix them. But people were surprisingly patient with us, because everyone was sold on this new product.”
- **The founders were playing catch up with support requests.** “We had no [customer support](https://review.firstround.com/founders-guide-building-customer-success/) for a while after we launched, and my co-founder and I were completely overloaded just talking to customers and answering their questions. Until around two months after launch, it was just three of us handling the front end.”
At the time, though, Akhund remained skeptical about this post-launch growth. Then a year later, the pandemic struck — and he waited for the other shoe to drop.
“COVID seemed like a disaster at first. We lost 60% of our revenue. Obviously, no one was starting new businesses in March 2020,” he says.
But despite a few initial shock waves, growth continued. April came, and usage doubled. “During April and May 2020, we had this insane growth spurt because ecommerce blew up. Bank branches were shut down, so people needed a digital experience,” he says.
This pandemic boom finally gave Akhund confidence that Mercury had found product-market fit. “I remember thinking, if we can survive COVID, we can probably hang around for a while. It took me a solid year after launching to really believe we’d found product-market fit,” he says.
With the caveat that this doesn’t totally apply to startups [selling into enterprise](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/), Akhund now defines true product-market fit as this: “You wake up in the morning with more users, and you don't know where they came from,” he says. “Sure, you still have to figure out distribution in the long term. But at least initially, the market should be so big and the demand for what you're building so strong that people will just come to you, and you don't have to try that hard.”
> When I finally found product-market fit for Mercury, I thought, “Why did I waste so much time trying to sell something that no one really wanted at my previous companies, when I could have just learned quickly and moved on?”
## Scaling — for the first time
That first year post-launch brought a steady growth rate, so Akhund set out to hire ahead of the company’s needs, expanding the team by roughly 40% year after year.
Today, Mercury has reached a size Akhund had never achieved with his previous startups — a Series C, 1,000-person company. The scaling years that followed product-market fit were uncharted territory for him.
In the process, here’s what he’s learned about becoming more discerning about the advice you receive, operationalizing company culture and navigating a thorny crisis.
### Leadership lesson: You can’t copy-paste advice
Akhund’s first piece of grown-up startup advice is perhaps the most meta: “You can't take other people's lessons and make them your own,” he says. “This took me a while to truly learn, but it’s quite an important lesson for me.”
Resisting the MVP dogma and taking a long time to launch was just one example of this. “I think founders run into trouble when they try to copy-paste some Silicon Valley philosophy as a prescription for how they’ll run the business. It just never works,” he says. “The lessons work in that particular way for that particular situation. You have to adapt it to your customer segment, your personality, all these things.”
As Mercury has brought on alums from other great companies, Akhund says he always questions the playbooks that worked for them in the past. “There’s plenty of osmosis in Silicon Valley. We have a bunch of people from Stripe and Block and Google who bring their good ideas. Obviously, you shouldn’t reinvent everything, but I think it’s good to individually assess every idea instead of just saying, ‘If it worked for them, it’ll work for us,’” he says.
### Culture lesson: Hire for the traits that matter to you
Culture is one domain of company-building Akhund says you really can’t copy-paste, even if you tried.
"I never understood culture at my first two companies," he says. “People would tell me to ‘do culture.’ And I didn’t know what culture meant. Is it whether you have beer in the fridge?”
Here’s how Akhund describes culture now: **The personality of the founders is reflected in the personality of the company**.
“At Mercury, we look for people who are humble, helpful, curious, customer-centric and product-minded. Because that’s my personality and my co-founders’ personality,” he says. “But some of those traits run counter to the traits that other companies might look for.”
Akhund says unconsciously hiring disparate personality types at his previous companies led to culture clashes.
Step one to hire for the founders’ personality at scale, says Akhund, is to articulate the qualities you’re looking for. Step two is designing an interview process to filter for those traits.
Mercury has developed an unconventional hiring practice to identify one trait in particular: curiosity. During interviews, candidates may give a 45-minute presentation on any non-work related topic of their choice. Akhund has found this to be a very strong signal — even though it’s totally unrelated to the primary subject matter of the interview. “I can usually tell within 10 minutes that this person is super passionate about kayaking or gardening, or whatever it may be,” he says. “The topics are often mundane, everyday things, but curious people just have this weird level of detailed attention to random things.”
### Crisis lesson: Be a leveling function
In March 2023, after a few years of healthy growth for Mercury, Silicon Valley Bank collapsed — and wreaked havoc on the startup ecosystem. Anxious customers came to Akhund asking if their money was safe with Mercury.
He says the whole episode taught him the importance of keeping an even keel, both to the public and for the Mercury team. “As an entrepreneur in general, things can be either amazing or awful,” he says. “You have to find a path to re-level, and you have to project that out to the whole company.”
Feeling uncertain is totally expected — you just have to find your way to having a plan. “During that time, even if I didn’t have a plan, I had a plan to make a plan. So I’d say, ‘We don’t know what’s happening, but here are the five things we’ll do to figure it out,’” he says. “But at the time I was definitely thinking, ‘Oh my God, the world is falling apart.’ You just have to wake up and be optimistic for your company.”
But he also understood that the action needed to match the words. So he galvanized the whole company to build a product called Mercury Vault, which offers access to expanded FDIC insurance\* on deposits through its partner banks’ sweep networks — in that same weekend.
They built the project over a rollercoaster of a weekend, and Akhund had a lot of fun in the process. “We started working on it that Saturday, and we shipped it on Monday,” he says. “Suddenly, our whole 300-person company is working on the same thing.”
> The CEO is a leveling function. When things are amazing, you have to resist getting stuck in a state of euphoria and keep executing. And when things are awful, you have to be optimistic.
*\*Mercury is a fintech company, not an FDIC-insured bank. Checking and savings accounts are provided through our bank partners* [*Choice Financial Group*](https://rnt.com/files/ddm/bank-list/pbl-rtncu.pdf?ref=review.firstround.com)*,* [*Column N.A.*](https://column.com/legal/sweep-program-network-banks?ref=review.firstround.com)*, and* [*Evolve Bank & Trust*](https://www.getevolved.com/mercury-sweep/?ref=review.firstround.com)*; Members FDIC. Deposit insurance covers the failure of an insured bank. Checking and savings account deposits may be held by sweep network banks. Certain conditions must be satisfied for pass-through insurance to apply. Learn more* [*here*](https://mercury.com/blog/inside-mercury/how-mercury-works-with-partner-banks?ref=review.firstround.com)*.*
### Economic moat
URL: https://review.firstround.com/glossary/economic-moat/
Last updated: 2025-10-27T17:18:26.000Z
The term was popularized by Warren Buffett, who often described investing in companies with a wide economic moat as buying businesses that can defend their castle for decades. In practice, a moat is the set of structural advantages — cost, brand, technology or network — that make it hard for others to compete on equal footing. Buffett's value investing philosophy centers on finding companies whose moats ensure consistent financial performance and predictable free cash flow.
## Why economic moats matter for startups
Economic moats separate businesses that scale sustainably from those that burn cash chasing growth without defensibility. For early-stage companies, building a competitive advantage early determines long-term viability and sustainability.
**Protects unit economics:** Strong moats allow companies to maintain healthy profit margins as they scale, avoiding the trap of competing solely on lower prices.
**Attracts investment:** Investors look for competitive advantages because they signal a company's ability to generate consistent returns. A clear defensive position makes fundraising easier and valuation higher.
**Enables strategic focus:** When you understand your competitive advantage, you can allocate resources to strengthen it rather than spreading efforts across unfocused initiatives.
**Creates expansion optionality:** Companies with established defensive barriers can expand into adjacent markets more effectively because their core business model and ecosystem advantage transfers.
Without a moat, startups become vulnerable to new entrants with deeper pockets or faster execution. The key is identifying what makes your business defensible before competitors recognize the opportunity.
## The role of moats in business model design
Your company's business model determines how its competitive advantage forms and strengthens over time. The most successful founders design defensibility into their model from day one rather than treating it as an afterthought.
**Product differentiation:** Unique features, superior design or proprietary data can create a competitive edge that compounds as the company scales.
**Ecosystem integration:** Products that connect seamlessly with partners or third-party tools build natural switching costs and customer lock-in.
**Recurring revenue:** Subscription or usage-based pricing models generate predictable cash flow that funds reinvestment in the competitive advantage.
**Customer experience:** Exceptional service and reliability create emotional loyalty — an often-overlooked form of intangible asset.
Companies like Apple and Microsoft exemplify this approach. Their products are not just tools but gateways into ecosystems that reinforce brand strength and user dependency. **A well-structured business model doesn't just capture value; it protects it.**
## Types of economic moats
Identifying a competitive advantage begins with understanding its source. Your defensible position typically comes from one of five areas. Each one creates a different kind of barrier for competitors to overcome.
### Network effects
This advantage exists when a product or service becomes more valuable the more people use it. Social media platforms, marketplaces and payment networks are classic examples. Each new user adds value for all other users, making it difficult for a new network to compete. Microsoft's operating system and Apple's ecosystem both demonstrate how network effects can create enduring lock-in.
Design your product to become more valuable with each new user. Build in sharing and collaboration features that require multiple users. Start by identifying the smallest viable network that creates value, then expand from there.
### Intangible assets
These can be qualitative advantages, like brand recognition, or hard assets like patents or regulatory licenses. A strong brand like Nike or Coca-Cola enables premium pricing and creates deep customer loyalty. Patents and intellectual property can give a company a legal monopoly, which is critical for many pharmaceutical companies and [deep tech startups](https://review.firstround.com/building-a-deep-tech-company-most-startup-advice-doesnt-apply-read-this-instead/).
A vibrant community can also become a powerful brand advantage, [as Notion's growth has shown](https://review.firstround.com/how-notion-does-marketing-a-deep-dive-into-its-community-influencers-growth-playbooks/). When you build a passionate user base that advocates for your product, you create switching costs that go beyond features or pricing.
### Cost advantage
A company with a significant cost advantage can produce goods or services at a lower cost than its rivals. This allows it to either undercut competitors on price or achieve higher margins. Sources include proprietary technology, efficient processes or economies of scale. Think of Walmart's supply chain or Amazon's low-cost logistics infrastructure, which give them durable defensive positions and pricing flexibility.
### High switching costs
These are the costs or inconveniences a customer would face when changing from one provider to another. Switching costs can be financial, like termination fees, or procedural, like the time and effort needed to migrate data and retrain a team on new software. Enterprise SaaS companies often build their businesses around high switching costs and workflow dependency. Once embedded, customers are effectively locked in.
You can increase switching costs by becoming deeply integrated into customer workflows, accumulating proprietary customer data, requiring significant training or setup time, and creating dependencies across multiple user roles within an organization.
### Efficient scale
This competitive advantage exists in markets that can only profitably support a limited number of companies. For example, [Fal's generative media infrastructure](https://review.firstround.com/podcast/the-pivot-that-paid-off-how-fal-found-explosive-growth-in-generative-media-gorkem-yurtseven-co-founder-and-ceo/) demonstrates this with GPU capacity spanning 28 global data centers serving 600+ AI models — an infrastructure investment that is economically impractical for many competitors to replicate. Similarly, [K2 Space's approach to building mega-class satellites](https://www.firstround.com/companies/k2space?ref=review.firstround.com) requires 80% vertical integration and a 180,000 square foot production facility. The capital intensity of building ton-scale spacecraft (versus traditional kilograms) creates a natural barrier where only a few players can economically operate.
Economic moats aren't static. They require continuous investment and strategic focus to maintain and expand. Companies like Apple and Microsoft have [built powerful defensive advantages](https://review.firstround.com/how-to-make-craft-your-moat/) through ecosystem integration and brand strength that extend far beyond product features. Regularly assess competitive threats and evolve your strategy. What makes you defensible today might not work tomorrow.
## How to identify an economic moat
You can spot a competitive advantage through a mix of qualitative observation and financial analysis. Start by asking yourself a few direct questions about your business.
- **Do your margins consistently beat the industry average?** This points to pricing power or a cost advantage.
- **Is your return on invested capital (ROIC) strong and stable?** This shows you're efficiently generating cash flow above your cost of capital.
- **Would it be a genuine pain for your customers to leave you?** This is the heart of switching costs.
- **Does your product get more valuable as your customer base grows?** This is the clearest sign of a network effect.
A competitive advantage's durability is what matters most. A wide economic moat implies a structural advantage that should last for 20 years or more. A narrow moat suggests an advantage that might only last for 10 years.
## Measuring a company's economic moat
Investors and operators can validate a company's competitive advantage by studying its financial statements over time. The goal is to see whether the business consistently earns returns above its cost of capital — a hallmark of a durable advantage.
Key indicators include:
- **Return on invested capital (ROIC):** A company with a wide economic moat typically posts ROIC well above its cost of capital for many years. This shows that competitors can't easily erode its profits.
- **Free cash flow:** Strong, predictable free cash flow signals that the company can reinvest in its competitive advantage — funding R&D, marketing or acquisitions that reinforce its position.
- **Profit margins:** Expanding or stable margins suggest pricing power and operational efficiency.
- **Revenue stability:** Consistent growth through market cycles points to customer loyalty and a resilient business model.
Analysts at investment research companies use these metrics to assign competitive advantage ratings. Companies expected to sustain excess returns for at least 20 years are grouped in the 'wide economic moat' category. Seeing these signals helps investors identify businesses that compound capital efficiently over time.
## Moats and modern investing strategies
The concept of the economic moat has evolved from Buffett's letters to a full analytical framework used by institutional investors. Funds like the VanEck Morningstar Wide Moat ETF track companies with proven competitive advantages and strong financial performance. These portfolios often outperform benchmarks because they focus on durability rather than short-term momentum.
For individual investors, competitive advantage analysis complements traditional value investing. Instead of chasing growth stories, it emphasizes differentiation — showing why a company's products, brand or cost structure can't be easily replicated. Reviewing a company's financial statements for consistent free cash flow and high ROIC helps confirm that its defensive position is real, not narrative-driven.
For founders, understanding how investors evaluate competitive advantages can shape fundraising strategy. **Demonstrating a clear path to defensibility through intellectual property, network effects or low-cost operations signals that your business can sustain returns** long after the initial growth phase. [This approach to building sustainable competitive advantages](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/) has helped many startups secure better funding terms and higher valuations.
## When moats weaken or disappear
Economic moats aren't permanent. Market changes, technological disruption and strategic missteps can erode competitive advantages. Here are the most common threats to watch:
- **Technology disruption:** New technologies can make existing advantages irrelevant. Cloud computing weakened many traditional IT service competitive advantages.
- **Regulatory changes:** Changes in laws or regulations can eliminate protected positions or create new competitive dynamics.
- **Scale shifts:** Markets can evolve to support more competitors, reducing the value of efficient scale advantages.
- **Network fragmentation:** Large networks can split into smaller ones, reducing network effect advantages.
- **Substitution:** New solutions can eliminate the need for existing products entirely, bypassing competitive advantages altogether.
Monitor these threats and adapt your strategy before the advantages erode completely. **Companies that recognize weakening defensive positions early can pivot to build new ones.** The key is maintaining awareness of your competitive environment and staying close to customer needs as they evolve.
## Economic moats in practice
Understanding your competitive advantage influences every aspect of business strategy, from product development to fundraising to competitive positioning.
- **Product roadmap:** Prioritize features that strengthen your core advantage rather than chasing every customer request.
- **Hiring strategy:** Build teams with expertise that reinforces your defensive position, whether that's technical talent, operational excellence or customer relationship skills.
- **Partnership decisions:** Evaluate partnerships based on whether they strengthen or weaken your competitive position.
- **Expansion strategy:** Enter adjacent markets where your competitive advantage provides benefits rather than starting from scratch.
For investors, competitive advantage analysis helps identify companies with sustainable defensive positions worth long-term investment. For operators, it provides a framework for strategic decision-making and resource allocation.
Economic moats bridge the gap between short-term growth and long-term value creation. By building defensible advantages early and continuously strengthening them, companies create the foundation for sustained success in competitive markets.
## The limits of economic moats
Economic moats aren't invincible. A disruptive technology can make a powerful patent obsolete overnight. A sudden shift in consumer behavior can weaken even the most iconic brand.
**Don't over-rely on a single source for your competitive advantage.** A company protected only by patents is vulnerable once they expire. It's also important to recognize that competitive advantages can be subjective. Past performance is a useful guide but never a guarantee of future defensibility. The competitive environment is always changing.
The bottom line? **Your company's economic moat is only as strong as your ability to adapt, reinvest and defend your advantage.** The best founders and investors treat competitive advantages as living systems—measured, maintained and widened over time.
Read more from First Round:
- [How to Make Craft Your Moat](https://review.firstround.com/how-to-make-craft-your-moat/)
- [Building a Deep Tech Company? Most Startup Advice Doesn't Apply — Read This Instead](https://review.firstround.com/building-a-deep-tech-company-most-startup-advice-doesnt-apply-read-this-instead/)
- [How Notion Does Marketing: A Deep-Dive Into its Community, Influencers & Growth Playbooks](https://review.firstround.com/how-notion-does-marketing-a-deep-dive-into-its-community-influencers-growth-playbooks/)
- [Linear's Path to Product-Market Fit — Quality and Craft > Speed and Scale](https://review.firstround.com/linears-path-to-product-market-fit/)
- [How Superhuman Built an Engine to Find Product Market Fit](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/)
### Operating Leverage
URL: https://review.firstround.com/glossary/operating-leverage/
Last updated: 2025-10-27T17:17:49.000Z
Companies with high operating leverage have cost structures dominated by fixed costs like rent, salaries and equipment. Once they cover these fixed expenses, additional sales contribute directly to profit. Software companies exemplify this: after building a product, serving more customers costs little since distribution is often built into the product.
Companies with low operating leverage have cost structures tied to sales volume. Consulting firms represent this model: higher revenue requires more billable hours, driving up variable costs like consultant salaries.
For founders and executives, operating leverage serves as a lens into profitability, scalability and risk exposure. It connects cost structure decisions to financial performance and informs everything from pricing strategy to hiring plans.
## Why operating leverage matters for your business
Understanding your degree of operating leverage shapes critical decisions around growth, pricing and risk management.
**High operating leverage amplifies both upside and downside.** When sales increase, companies with high fixed costs see dramatic improvements in profit margins because additional revenue flows directly to the bottom line after covering fixed expenses. A software company might see 40% operating margin expansion from 20% sales growth.
However, this same cost structure creates greater risk during downturns. Fixed costs continue regardless of sales volume, so declining revenue hits profitability hard. Airlines illustrate this challenge: they maintain expensive fleets and staff even when passenger demand drops.
**Operating leverage impacts valuation and cash flow.** Investors often prefer companies with high operating leverage because of scalability potential. Once these businesses reach their break-even point, growth becomes highly profitable. But investors also demand higher returns to compensate for the increased risk.
**Track your contribution margin ratio, monitor fixed costs as a percentage of revenue and model how changes in production volume affect your bottom line.**
## How to calculate operating leverage
The degree of operating leverage (DOL) formula measures the sensitivity between sales and operating income:
**DOL = % change in operating income ÷ % change in sales**
This operating leverage formula shows how much operating income changes relative to sales changes. If Company A's operating income increases 20% when sales grow 10%, the DOL is 2x, meaning each percentage point of sales growth translates into two percentage points of operating income growth.
You can also calculate DOL using contribution margin:
**DOL = contribution margin ÷ operating income**
Or using the unit-based formula:
**DOL = (unit sales × contribution margin per unit) ÷ \[(unit sales × contribution margin per unit) - fixed costs\]**
### Step-by-step calculation process
**Calculate operating leverage a spreadsheet using these steps:**
1. **Identify your cost structure.** List fixed costs (rent, salaries, equipment) and variable cost per unit (materials, shipping, commissions). Pull these from your financial statement.
2. **Determine unit price and unit sales.** Your unit price minus variable cost per unit equals contribution margin per unit.
3. **Calculate total contribution margin.** Multiply the number of units sold by contribution margin per unit.
4. **Find operating income.** Subtract total fixed costs from total contribution margin.
5. **Apply the DOL formula.** Divide contribution margin by operating income for the current period.
**Spreadsheet setup:** Create columns for different sales volumes, calculate contribution margin and operating income for each scenario, then compute percentage changes to find your DOL.
**Higher fixed costs relative to variable costs create higher operating leverage and greater profit sensitivity to sales changes.**
## Operating leverage across different industries
Operating leverage varies dramatically by industry, reflecting different business models and cost structures.
### High operating leverage industries
- **Software companies:** Upfront development costs, minimal variable costs per user
- **Airlines:** Aircraft, crew and route infrastructure represent massive fixed investments
- **Manufacturing:** Equipment, facilities and production lines require substantial upfront capital
### Low operating leverage industries
- **Consulting firms:** Revenue tied directly to billable hours and consultant compensation
- **Retail:** Inventory and staffing scale with sales volume
- **Professional services:** Labor costs vary with client work
**Compare companies within the same industry.** A consulting firm with DOL of 1.2x might have high operating leverage relative to competitors, while a software company with the same ratio would be considered low-leverage.
These industry differences stem from upfront investment requirements and cost of goods sold structures. High-leverage industries typically require significant upfront capital but offer near-zero marginal costs for additional customers.
## Operating leverage and break-even analysis
Operating leverage directly affects your break-even point and profit trajectory. Companies with higher fixed costs need more revenue to break even, but they also benefit more dramatically once they exceed that threshold.
### Break-even point calculation
Break-even sales volume = Fixed costs ÷ contribution margin per unit
A company with $500,000 in fixed costs and $20 contribution margin per unit needs to sell 25,000 units to break even. After that point, each additional unit contributes $20 directly to operating income.
**Operating leverage impacts break-even sensitivity.** Higher fixed costs push your break-even point higher, requiring more sales volume to cover total costs. But they also create steeper profit curves once you exceed break-even.
**Track these metrics monthly:** Monitor your contribution margin trends, fixed cost ratios and distance from break-even. Set alerts when unit sales drop below critical thresholds.
This relationship guides strategic decisions about cost structure. Do you invest in automation (increasing fixed costs but reducing variable costs)? Do you outsource production (reducing fixed costs but increasing variable costs)? Operating leverage analysis helps evaluate these trade-offs.
## Operating leverage in strategy and financial analysis
Operating leverage is more than a calculation — it's a strategic lens that informs critical business decisions. Founders, managers and investors use this metric to evaluate a company's potential for growth and its exposure to risk.
### For founders and management
Understanding your degree of operating leverage helps guide strategic choices. When you know how a change in sales impacts your bottom line, you can make more informed decisions about your company's cost structure.
- **Pricing strategy:** Operating leverage is directly tied to contribution margin. Adjusting your unit price or managing your variable cost per unit can significantly alter your DOL. A higher contribution margin increases your leverage and your potential profitability on each sale. This is a key part of building a [pricing framework](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/) that supports your growth goals.
- [**Scaling operations**](https://review.firstround.com/podcast/operations-vs-algorithms-advice-for-scaling-startups-from-opendoor-cto-ian-wong/)**:** Decisions about capital investment often hinge on operating leverage. Should you invest in automation technology (higher fixed costs) or hire more staff (higher variable costs)? The answer depends on your sales forecasts and risk tolerance.
- **Financial modeling:** DOL is a core input for forecasting. By modeling how changes in sales volume affect net income, you can stress-test your business plan, set realistic targets and better manage cash flow.
### For investors
Investors analyze a company's operating leverage to gauge both its potential for high returns and its level of risk.
- **Valuation:** A company with high operating leverage in a growing market might command a higher valuation due to its potential for rapid earnings growth. The percentage change in the company's sales can lead to a much larger percentage change in profits.
- **Risk assessment:** Investors also recognize that a high degree of operating leverage means greater risk. If a company operates in a cyclical industry or faces uncertain demand, its high fixed costs could become a significant liability. Financial leverage can compound this risk.
**Your financial model should show how you'll achieve operating leverage over the long term.**
## Managing operating leverage risk
While high operating leverage can amplify profits, it also creates risk that requires active management.
**Watch for these warning signs:**
- Declining unit sales or customer acquisition challenges
- Rising variable costs that squeeze contribution margins
- Cash flow problems during seasonal downturns
- Competitive pressure on pricing
**Risk management strategies you can implement:**
- **Maintain adequate cash reserves** to cover fixed costs during slow periods
- **Diversify revenue streams** to reduce dependence on any single source
- **Build flexible cost structures** where possible, mixing fixed and variable elements
- **Monitor early warning indicators** like declining contribution margins or increasing customer acquisition costs
### Operational adjustments
Some companies successfully manage high operating leverage by creating variable elements within their cost structure. This might involve performance-based compensation, outsourcing non-core functions or using flexible staffing models.
**Run quarterly stress tests,** modeling 20% revenue increases and decreases to understand your profit sensitivity. Companies with high operating leverage show more volatile operating income, while low operating leverage companies have steadier but potentially lower growth in profit margins.
**Create monthly dashboards** tracking unit sales, contribution margin per unit, total fixed costs and operating leverage ratios. Set thresholds that trigger cost reduction plans when metrics deteriorate.
## Optimizing your operating leverage
The goal isn't necessarily to maximize or minimize operating leverage, but to optimize it for your business strategy and market conditions.
**Strategies for optimization:**
- **Automate processes** to convert variable labor costs into fixed technology investments
- **Focus on high-margin products** where operating leverage creates the most benefit
- **Scale efficiently** by adding revenue without proportional cost increases
- **Monitor contribution margins** to ensure pricing covers variable costs and contributes to fixed cost coverage
**Timing considerations:** Early-stage companies often accept low operating leverage to maintain flexibility. As they reach product-market fit and predictable revenue, they can invest in fixed cost infrastructure to improve scalability.
**Pricing strategy integration:** Operating leverage analysis informs pricing decisions. Companies with high fixed costs need pricing that covers variable costs and contributes meaningfully to fixed cost coverage. Unit price optimization becomes critical.
### Operating leverage in practice
**For SaaS companies:** Track monthly recurring revenue growth against customer success costs. High operating leverage means adding customers drives profit growth faster than costs increase.
**For manufacturing:** Monitor production volume against fixed facility costs. Operating leverage shows how capacity utilization affects profitability.
**For consulting firms:** Evaluate the balance between full-time staff (fixed costs) and contract workers (variable costs) based on demand predictability.
**Use this monthly checklist:**
- Calculate DOL using current period data
- Compare actual operating income to forecasted amounts
- Review contribution margin trends by product line
- Assess cash flow coverage of fixed costs
- Model scenarios for next quarter's expected sales volume
The most successful companies actively manage their operating leverage as they grow, adjusting cost structures to match their stage, market conditions and growth objectives.
**Operating leverage provides a framework for understanding how cost structure affects profitability and risk.** Whether you're evaluating investment opportunities, planning cost structures or modeling growth scenarios, operating leverage analysis connects operational decisions to financial outcomes. Companies that master this relationship gain a significant advantage in [scaling efficiently](https://review.firstround.com/four-categories-you-need-to-nail-for-healthy-startup-growth-and-top-tips-for-how-to-do-it/) while managing downside risk.
### OKRs
URL: https://review.firstround.com/glossary/okrs-meaning/
Last updated: 2025-11-03T21:34:14.000Z
Companies like Intel, Google and LinkedIn use the OKR framework to create clarity, focus and accountability. When used correctly, it’s a system that connects your [company strategy](https://review.firstround.com/set-non-goals-and-build-a-product-strategy-stack-lessons-for-product-leaders/) to the daily work of your team.
## OKR meaning and core concept
An OKR consists of an objective — where you’re going — and a handful of key results — how you’ll know you’re getting there.
The formula: I will \[objective\] as measured by \[key results\].
**Effective OKRs convert strategy into measurable, team-level action.** OKRs are transparent, time-bound and measurable. Set them quarterly. **Aim to stretch beyond business as usual while keeping execution concrete.** Start with three to five objectives, each with three to five key results.
## The OKR framework: how it works
- **Objectives** are qualitative, ambitious and action-oriented. They clarify what you want to achieve.
- **Key results** are quantitative milestones. They measure how you’re making progress against those objectives.
- **Initiatives** are the projects and tasks you’ll do to influence the key results.
A typical cycle: set quarterly goals, run weekly check-ins, review outcomes at quarter’s end, then reset. Use types to clarify intent:
- **Committed OKRs**: must-hit goals (e.g., launch dates, revenue targets).
- **Aspirational OKRs**: stretch goals where \~70% counts as success.
- **Learning OKRs**: used for discovery when the goal is insight.
## The history behind OKRs
The concept traces to Peter Drucker’s Management by Objectives (MBO). Andy Grove at Intel refined it into the modern OKR system — more collaborative, quarterly, and decoupled from compensation. Venture capitalist John Doerr introduced OKRs to Google in 1999, popularizing the approach across Silicon Valley and beyond.
## Why OKRs matter for startups
**OKRs are the connective tissue between vision, strategy and daily work.** They align distributed teams, force prioritization, and make progress transparent. For founders managing rapid growth, OKRs help maintain focus and cross-functional alignment.
## How to write OKRs
1. **Define the objective.** Ask: What is the most important thing to achieve this quarter? Keep it qualitative, memorable and free of jargon. Example: “Launch a self-serve onboarding experience that boosts activation.”
1. **Identify 3–5 key results.** Describe outcomes, not tasks. For example: “Increase activation rate from 45% to 60%,” not “Redesign onboarding.” Each key result needs a metric, target and timeframe.
1. **Review and iterate.** Hold weekly or biweekly check-ins to track progress and unblock work. At quarter’s end, score key results to inform the next cycle.
## OKR examples across company levels
- **Company-Level**
- Objective: Build the most trusted AI platform for small businesses.
- KR1: Increase NPS from 35 to 60 among SMB customers.
- KR2: Reduce churn from 10% to 6%.
- KR3: Launch a new compliance dashboard to 100% of enterprise accounts.
- **Team-Level (Engineering)**
- Objective: Strengthen developer velocity and satisfaction.
- KR1: Reduce average deployment time by 40%.
- KR2: Move 100% of core services to new CI/CD pipelines.
- KR3: Achieve 90% developer satisfaction on the internal tooling survey.
- **Individual**
- Objective: Improve leadership feedback skills.
- KR1: Conduct four structured feedback sessions per direct report this quarter.
- KR2: Raise peer feedback score by 20% in the next company survey.
- KR3: Complete one advanced management training course.
## Best Practices and Common Pitfalls
**Do this:**
- **Share OKRs publicly.** Transparency is the point.
- **Tie key results to outcomes.** Focus on behavior and impact, not just output.
- **Run a steady cadence.** 15-minute weekly check-ins; quarterly retros with scoring.
- **Align cross-functionally.** Review draft OKRs together to expose dependencies.
**Avoid this:**
- **Using OKRs for performance management.** Using OKRs as a motivator or evaluation tool for individuals is counterproductive.
- **Setting too many objectives.** Focus beats volume.
- **Confusing KPIs with OKRs.** KPIs are health metrics; OKRs drive change.
- **Writing vague key results.** If it’s not measurable, it’s not a key result.
## OKRs vs. other goal frameworks
- **OKRs vs KPIs:** KPIs track ongoing health (e.g., MRR, uptime). OKRs push a specific change.
- **OKRs vs SMART Goals:** Key results should be SMART, but OKRs encourage stretch.
- **OKRs vs MBOs:** OKRs mix top-down and bottom-up, and are decoupled from pay.
## Implementing OKRs across teams
Roll out with a hybrid, top-down and bottom-up approach. Leadership sets a few company-level goals. Teams then create aligned OKRs for how they can help achieve those goals. **Start with leadership modeling good OKRs.** Train teams with examples and a shared template. Expect a few quarters to calibrate ambition vs. achievability.
**Make progress visible.** Use a single source of truth — OKR software or a shared sheet. Run weekly team check-ins, monthly cross-team updates and quarterly scoring.
**Pilot first.** Trial in one department to refine the process before scaling.
## Measuring and grading OKRs
- **Binary (Grove):** Yes/No.
- **Google’s scale:** 0.0 to 1.0; \~0.7 often signals success for stretch goals.
- **Traffic light:** Red/Yellow/Green as a quick signal.
Scoring is for learning, not judgment. Average key result scores to get the objective score and use the insights to set better goals next quarter.
## A Quick Reference Framework
| Component | Description | Example |
| ---------- | ----------------------------------- | ------------------------------------------ |
| Objective | Ambitious, qualitative goal | “Delight customers with faster onboarding” |
| Key Result | Measurable indicator of progress | “Reduce setup time from 10 minutes to 3” |
| Type | Committed, Aspirational, Learning | Aspirational |
| Review | Weekly check-ins; quarterly grading | 0.7 indicates success |
**Read more from First Round:**
- [How to Make OKRs Actually Work at Your Startup](https://review.firstround.com/how-to-make-okrs-actually-work-at-your-startup/)
- [Four Categories You Need to Nail for Healthy Startup Growth — and Top Tips for How to Do It](https://review.firstround.com/four-categories-you-need-to-nail-for-healthy-startup-growth-and-top-tips-for-how-to-do-it/)
- [Looking to Scale Your Sales? Seven Bullets to Dodge](https://review.firstround.com/looking-to-scale-your-sales-seven-bullets-to-dodge/)
- [The Management Framework that Propelled LinkedIn to a $20 Billion Company](https://review.firstround.com/the-management-framework-that-propelled-linkedin-to-a-20-billion-company/)
### Burn Rate
URL: https://review.firstround.com/glossary/burn-rate/
Last updated: 2025-10-27T17:16:21.000Z
Typically measured monthly and expressed in dollars per month, burn rate helps founders understand how fast they're consuming cash and how many months of runway remain. In practice, it answers three critical questions: How much cash is being spent each month? How long can the company sustain operations at this pace? What changes are needed to reach profitability or extend the runway?
Investors use burn rate to gauge a company's discipline and efficiency plus the likelihood of hitting key milestones before the next round. It reflects strategy and cost structure as well as how spending aligns with growth goals.
A healthy burn rate balances growth with sustainability. Too high and the company risks running out of cash before hitting milestones. Too low and it may signal underinvestment in growth.
## Types of burn rate
There are two main types of burn rate: gross burn and net burn. Both are essential for understanding a company's cash flow.
### 1\. Gross burn rate
Gross burn rate is the total amount of cash a company spends each month. It includes all operating expenses such as salaries and rent, marketing and software costs. Gross burn shows how much money is leaving the business before considering revenue.
**Example:**
- A SaaS startup spends $40,000 on salaries, $10,000 on marketing and $5,000 on office space each month.
- Gross burn rate = $55,000 per month.
### 2\. Net burnrate
Net burn rate measures how much cash a company actually loses each month after accounting for revenue. It reflects the net outflow of cash and provides a more accurate picture of sustainability.
**Example:**
- If the same startup earns $25,000 in monthly revenue, its net burn rate is: $55,000 − $25,000 = $30,000 per month.
## 3\. Gross Burn vs. Net Burn
| Metric | Definition | Formula | Use Case |
| ---------- | ------------------------- | -------------------------- | ----------------------------------------- |
| Gross Burn | Total monthly expenses | Sum of all operating costs | Shows total spending and cost structure |
| Net Burn | Cash outflow minus inflow | Gross burn − Revenue | Shows actual cash loss and sustainability |
## How to calculate burn rate: formula, steps & example
### Burn rate formula:
Burn rate = (Starting cash balance − Ending cash balance) ÷ Number of months
This formula calculates the average monthly cash consumption over a given period.
### Steps to calculate burn rate:
1. Identify your time frame: Choose a consistent period, such as one month or one quarter.
2. Determine starting and ending cash balances: Use your company's financial statements or bank records.
3. Subtract ending cash from starting cash: This gives you total cash burned during the period.
4. Divide by the number of months: The result is your average monthly burn rate.
5. Adjust for revenue if calculating net burn: Subtract monthly revenue from total expenses to find net burn.
### Burn rate example**:**
- If a company starts the quarter with $900,000 in cash and ends with $600,000 after three months:
- Burn rate = ($900,000 − $600,000) ÷ 3 = $100,000 per month.
This means the company is burning $100,000 monthly. If it maintains that pace, it has six months of runway left.
## Why burn rate matters for startups
Burn rate is one of the most important metrics for early-stage startups because it connects spending to survival. Burn rate directly determines [**cash runway**](https://review.firstround.com/glossary/cash-runway/), the number of months a company can operate before running out of cash. It also influences valuation, investor confidence and the ability to hit milestones.
### 1\. Financial health
A manageable burn rate signals an effective business. A high burn rate without matching growth can indicate poor financial health or misaligned priorities.
### 2\. Fundraising strategy & valuation
Investors evaluate burn rate to assess how efficiently a company uses capital. A startup with a clear understanding of its burn rate and runway demonstrates operational maturity. Founders who can explain how they'll extend runway or reach profitability build trust with investors. A company that manages its burn rate effectively often earns higher valuations.
3\. Strategic planning
Burn rate informs hiring, marketing and product development decisions. Knowing how much cash is left helps founders decide whether to accelerate growth or conserve resources. For structured decision-making frameworks, see [**the tactical guide to making better decisions**](https://review.firstround.com/the-tactical-guide-to-making-better-decisions-when-starting-and-scaling-companies/).
### 4\. Milestone tracking
Burn rate can impact how startups track toward their milestones. Founders must ensure that key goals, such as product launches or revenue targets, are achievable within the available runway.
## What is a good burn rate?
There's no universal "good" burn rate. The right number depends on stage, industry and funding environment.
Still, some general benchmarks apply:
- Early-stage startups: Aim for 12–18 months of runway
- Growth-stage startups: Often target 18–24 months
- Tight fundraising markets: Extend runway to 24–36 months
A good burn rate allows enough time to scale before needing additional funding. It should align with your company's growth plan, not just your bank balance.
As Sam Shank of HotelTonight shared, reducing burn can be a turning point. His team went [**from burning millions to turning profitable in seven months**](https://review.firstround.com/from-burning-millions-to-turning-profitable-in-seven-months-how-hoteltonight-did-it/) by cutting costs, focusing on core metrics and aligning spending with outcomes.
## High burn rate: risks and implications
A high burn rate can signal aggressive growth, but it also increases risk. If revenue or funding doesn't keep pace, the company may run out of cash.
Common causes of a high burn rate:
- Overhiring before product-market fit
- Excessive marketing spend without clear ROI
- Costly office space or infrastructure
- Long sales cycles that delay revenue
- Poor forecasting or a lack of financial discipline
Consequences:
- Shortened runway and funding pressure
- Lower valuation in future rounds
- Forced layoffs or restructuring
- Loss of investor confidence
As Tasso Roumeliotis of Location Labs put it, "[Your power as a founder is a function of whether you need money or not](https://review.firstround.com/this-founder-turned-a-slow-burn-rate-into-a-big-exit/#:~:text=Your%20power%20as%20a%20founder,to%20ship%20out%20product%3F')." Keeping burn low gives founders leverage and optionality.
## Low burn rate: benefits and tradeoffs
A low burn rate extends the runway and reduces dependence on external funding. It signals efficiency and discipline, but it can also slow growth if spending is too constrained.
Benefits:
- Longer runway and more flexibility
- Easier fundraising conversations
- Greater control over valuation
- Stronger negotiating position with investors
Tradeoffs:
- Slower product development
- Limited marketing reach
- Risk of missing growth opportunities
The key is balance. Roumeliotis showed that [**a slow burn strategy can still lead to a major exit**](https://review.firstround.com/this-founder-turned-a-slow-burn-rate-into-a-big-exit/) when paired with focus and capital efficiency.
## Burn rate analysis
Analyzing burn rate isn't just about tracking expenses. It's about understanding how spending drives outcomes.
Key steps for burn rate analysis:
- Break down expenses: Separate fixed costs, such as rent and salaries, from variable costs like marketing and contractors.
- Track monthly trends: Compare burn rate month over month to spot spikes or inefficiencies.
- Align spending with milestones: Ensure that major expenses tie to measurable progress, such as product launches or customer acquisition goals.
- Model scenarios: Use financial forecasting to test how changes in revenue or spending affect the runway.
- Monitor cash flow in real time: Tools and dashboards can help founders stay updated on cash position and forecasted runway.
## How to reduce burn rate
When burn rate exceeds expectations, founders have two levers: increase revenue or reduce expenses. The most effective strategies combine both.
### 1\. Optimize operating expenses
- Reevaluate office space and shift to hybrid or remote models
- Negotiate vendor contracts and software subscriptions
- Delay non-critical hires or freeze headcount temporarily
- Reassess marketing spend for ROI
### 2\. Improve cash flow
- Accelerate collections and shorten payment cycles
- Offer annual prepayment discounts to boost cash inflows
- Delay large capital expenditures until revenue stabilizes
### 3\. Increase revenue
- Introduce new pricing tiers or upsells
- Expand into adjacent customer segments
- Strengthen retention to reduce churn
### 4\. Secure additional funding
- Plan fundraising well before cash runs low
- Use clear burn rate and runway data to demonstrate financial control
- Align investor expectations with your growth and profitability plan
### 5\. Build a culture of efficiency
- Encourage teams to treat capital as their own
- Reward creative cost-saving ideas
- Maintain transparency around financial metrics
## Burn rate in SaaS and early-stage startups
SaaS startups often face unique burn dynamics. Recurring revenue creates predictability, but customer acquisition costs can be high early on. Founders must balance growth with sustainability.
SaaS-specific considerations:
- Track burn multiple, which measures how efficiently cash burn converts into new recurring revenue
- Formula: Burn multiple = Net burn ÷ Net new ARR
- A lower burn multiple indicates efficient growth
- Monitor gross margin to ensure revenue covers variable costs
- Use cohort analysis to understand retention and expansion trends
- Align spending with customer acquisition payback periods
Early-stage startups should focus on validating product-market fit before scaling spending. Once revenue stabilizes, they can safely increase burn to accelerate growth.
## Burn rate and profitability
Burn rate is a leading indicator of how close a company is to profitability. When net burn approaches zero, the company reaches cash flow break-even, the point where inflows equal outflows.
Tracking burn rate alongside other metrics like ARPU, LTV and CAC helps founders understand whether growth is sustainable. A company with a high burn rate but improving unit economics may still be on a healthy trajectory.
Profitability isn't always the immediate goal, but understanding burn ensures that growth is intentional, not reckless.
Read more from First Round:
- [**This founder turned a slow burn rate into a big exit**](https://review.firstround.com/this-founder-turned-a-slow-burn-rate-into-a-big-exit/)
- [**From burning millions to turning profitable in seven months — how HotelTonight did it**](https://review.firstround.com/from-burning-millions-to-turning-profitable-in-seven-months-how-hoteltonight-did-it/)
- [**Cash runway**](https://review.firstround.com/glossary/cash-runway/)
- [**The tactical guide to making better decisions when starting and scaling companies**](https://review.firstround.com/the-tactical-guide-to-making-better-decisions-when-starting-and-scaling-companies/)
### Go hard early: How lessons from Verkada shaped Serval's AI agents for IT teams | Jake Stauch (Founder and CEO)
URL: https://review.firstround.com/podcast/go-hard-early-how-lessons-from-verkada-shaped-servals-ai-agents-for-it-teams-jake-stauch-founder-and-ceo/
Last updated: 2026-04-29T03:44:34.000Z
Jake is the founder and CEO of Serval, an AI-driven IT automation and service management platform that just raised $47M in Series A funding this week. Before founding Serval, Jake spent over five years at Verkada, where he led multiple products from 0-1 and helped scale the company across hardware and software. His years at Verkada taught him that winning in enterprise means delivering consumer-quality experiences to business buyers — a lesson that shapes how Serval turns complex IT automation into something that feels magical.
In this episode, Jake and Brett dive into the lessons from Verkada that inspired Serval's founding, what it takes to disrupt entrenched enterprise categories, and practical tips for getting deeply embedded with customers and hiring high-quality candidates.
**In today’s episode, we discuss:**
- Why building “in existing categories” can be more powerful than creating new ones
- The lessons from Verkada that shaped Serval's platform strategy
- The customer interview question that unlocked the IT buyer’s hidden pain points
- How Serval's automation builder uses AI to generate code-based workflows
- Redefining engineering and PM roles with forward-deployed engineers
- Keeping the hiring bar high in an AI-native startup
- Why there’s a “land grab” moment right now in enterprise AI
- And much more...
**Where to find Jake:**
- LinkedIn: [https://www.linkedin.com/in/jakestauch/](https://www.linkedin.com/in/jakestauch/?ref=review.firstround.com)
- Twitter/X: [https://x.com/jakeserval](https://x.com/jakeserval?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**References:**
- Alex McLeod: [https://www.linkedin.com/in/alexmcleodio/](https://www.linkedin.com/in/alexmcleodio/?ref=review.firstround.com)
- Clay: [https://www.clay.com](https://www.clay.com/?ref=review.firstround.com)
- Cloudflare: [https://www.cloudflare.com](https://www.cloudflare.com/?ref=review.firstround.com)
- Cursor: [https://cursor.sh](https://cursor.sh/?ref=review.firstround.com)
- Filip Kaliszan: [https://www.linkedin.com/in/kaliszan/](https://www.linkedin.com/in/kaliszan/?ref=review.firstround.com)
- Hans Robertson: [https://www.linkedin.com/in/hansrobertson](https://www.linkedin.com/in/hansrobertson?ref=review.firstround.com)
- Linear: [https://linear.app](https://linear.app/?ref=review.firstround.com)
- Okta: [https://www.okta.com](https://www.okta.com/?ref=review.firstround.com)
- Rippling: [https://www.rippling.com](https://www.rippling.com/?ref=review.firstround.com)
- Serval: [https://www.serval.com/](https://www.serval.com/?ref=review.firstround.com)
- ServiceNow: [https://www.servicenow.com](https://www.servicenow.com/?ref=review.firstround.com)
- Verkada: [https://www.verkada.com](https://www.verkada.com/?ref=review.firstround.com)
- Workday: [https://www.workday.com](https://www.workday.com/?ref=review.firstround.com)
**Timestamps:**
(02:25) Lessons from holding different product roles
(07:29) Turning “hard mode” into a moat
(10:49) The early days of Serval
(12:59) Scratching the founder itch
(14:57) Unconventional interview techniques
(17:47) Solving core interview challenges
(21:10) Planning the early product roadmap
(23:03) The surprising power of patience
(26:12) Serval’s impressive technical advantage
(27:35) Disrupting legacy incumbents
(31:13) Building for mid-market and enterprise
(33:35) Serval’s enduring roadmap
(36:08) How to sell to an existing market
(39:16) The evolving role software plays
(43:55) Building for AI that didn’t exist yet
(49:49) Serval’s forward-deployed engineers
(58:31) The hybrid PM-GM
(1:00:27) “You can over-prioritize”
(1:02:48) The unexpected value of panic buttons
(1:04:50) What Serval looks for in new talent
(1:07:01) The ultimate hiring litmus test
(1:13:59) Building out Serval’s go-to-market function
(1:16:31) The evolving IT market in 2025
Brett: Well thanks for joining.
Jake: Thank you for having me. So the last big chapter of your career happened at Verkada, which is a company that some people know about, other people don't know about, but it's a really fascinating, interesting company sort of at the intersection of hardware and software and then they had end customers that were government enterprise, mid-market, et cetera. And you had a bunch of different product roles in the five or six years you were there. I'd be interested in hearing more about what are the big ideas that you took out of executing and building in that environment that are kind of a way that you think about company building as you sort of went out and started your own thing?
Guest: One of the big ones is going after an existing market and an existing category of spend. I launched a lot of different products at Verkada and I got to feel the difference between launching a product into a category where people were actively spending money on versus a category where no one had ever spent money on this thing before. And you can do both and there's certainly examples of successful products and in both worlds, but there's something really powerful about going in and just building a better product in a category where people buy that product and want that product. And Verkada owned the entire platform and so it was really cool to be able to sell a better camera to people that were going to buy cameras. And then you could also by nature of selling cameras also sell them these really cool AI capabilities, this really cool video management software platform. But you did that by selling cameras, not necessarily selling video software or selling AI. You sold the actual entire platform. And I definitely took that concept with me to Serval of what platform can we sell that there's existing spend, there's an existing category that we can go after but we can actually package something new and differentiated within that but they'll still buy the platform and they'll buy it because you're offering this new cool capability.
Brett: Is there anything you you have to get right that's unique to building an existing category other than building an excellent product?
Guest: I think the product has to be so much better than the alternative and you have to really understand why it's better and what's stopped another company from building it before. A lot of times these categories, obviously other people have tried to go after the big leaders whether it's ERP, HRAS, CRM, ITSM in our case. And so you have to understand what's been missing and is there actually an opportunity to go after it. In some cases it's not gonna be enough to just build a nicer cleaner UI and a faster experience. You have to fundamentally look at what's been missing. And so in my opinion the experience just has to be 10 times better. It has to be undeniable. It can't just be a little bit better because people build their businesses around these systems. They're not gonna just transition and put up all of that investment and that change management process unless the ROI is obvious from the moment they see the new version.
Brett: What's the best Verkada story that sort of brings that idea to life?
Guest: I think one of the most powerful parts of the Verkada camera demo is when the sales rep sends a live link of the camera footage to a customer on the demo call. And so they can show the demo, they can show the camera feed and they send a link through the UI to the customer. The customer can pull up the text message on their phone and then start streaming to the camera. That sounds pretty basic, pretty straightforward. But this capability had never existed in any of these on-prem security systems, on-prem camera systems. There's just no way to do anything like that. So if you wanted to see a quick link into something that's going on in your facility, you couldn't do that. You'd have to do some kind of remote access into some on-prem NVR server to see what was happening. And having a sales rep just send you a quick text message and you can pull up the camera feed, that blew people's minds. That is an example of taking something that is straightforward that people understand, cameras, and adding a capability that no one had ever seen before that was so much better than anything they'd seen. And that kind of encapsulates all the benefits of the platform. Having a cloud-based system, having a modern user experience, it put it all together into like one moment where you got the text message and it started to click like, oh these are all the things I can do. Not that that use case is that valuable. People don't really need to send out text messages with links to camera footage, but it really showcases what a modern platform is capable of and in a very distinct moment.
Brett: To your point, it it's slightly counterintuitive because it's not a killer use case that somebody's using 30 times a day.
Guest: What I was constantly reminded of when I was at Verkada is that these enterprise buyers are also consumers in the sense that they use these very sophisticated, very complex systems that work all day, but then they go home and they use nest cameras and ring cameras and modern technologies and they have that contrast and they see it. And so when they see something in their enterprise that starts to look like what they expect at home, that's when it starts to click for them how much better the experience can be. And so we were basically delivering a consumer quality experience to these enterprise buyers. And so something as simple as sending a text message via that video feed and pulling up their phone, it started to feel like a consumer experience of you get a notification from your ring camera and you pull it up and you can see what's going on. And it started to make them connect the dots of why don't I have this same capability? Once I go into the office, I go 20 years in the past and I'm dealing with ancient technology just because I'm at work instead of at home.
Brett: What else did you learn about building more platform style products? I feel like every founder wants to build a platform or every founder wants to build a system of record. Very very rarely does that come along. And you're obviously working on a system of record style product in Serval, but I'm curious if you had any other reflections on building a platform, building multiple products, multiple use cases, sort of those types of things.
Guest: I think there's a few lessons. One is finding the things that are hard and just deciding to do them. When Verkada started it would've been much easier to just build software that sat on top of existing cameras. Building cameras that have to be installed, one, manufactured, two installed, that's so much harder and it's such a big barrier before you can actually get traction but it's the better long-term solution. And so just biting off that really hard thing is I think so important when you're building a platform 'cause there's a lot of stuff that you stare down the barrel of building out a full ticketing system, building out a system that can be deployed on-prem, building out all these roles and permissions and all these enterprise integrations and it just seems so hard and daunting. And I think Verkada gave me this confidence of just do the hard things, actually seek out the hard things that are harder for other people to do that unlock a lot of customer value and then once you've built them it's so much harder for somebody to come in after you and build those same things 'cause you decided to like go hard early.
Brett: What are the other examples other than the not sitting on top of existing camera systems?
Guest: I think the other thing is going multi-product early, relatively early. That's another thing that's very daunting. You've got a camera business that's going really well and then why mess anything up by going into access control, going into sensors, going into alarms, going to visitor management and kind of spreading yourself thin. That's kind of the outside in look. It's like are you sure you want to build all those products? There's a recognition that you had to to build a platform. That you really wanted to go multi-product into sell the complete solution. And if you're selling something that you think is gonna unlock a lot of value for the customer, like just biting off all that surface area is another thing that's related to the first point but is slightly different and just deciding to like hey, we're gonna do it and it's gonna be hard to build cameras and a best in class access control system and a best in class alarm system and like put all those together. There are things I learned to do differently as well. Verkada is interesting in its go to market and that a lot of small employee count customers actually had very large real estate footprints and were fairly large accounts despite being fairly small companies. I think that's a little bit different in my market it's more traditional where kind of spend increases with headcount and so we have to go up market if we're gonna unlock large account sizes and large deals. And so there's a lot more that we had to build for the enterprise than Verkada did early. Verkada waited several years to support things like Skim and SSO and SOC 2 and various compliance frameworks. We did all of those things from day one because we knew that that was gonna be a blocker to sell into the large accounts that unlocked the bigger ACVs. We also decided to build a lot of things in the platform that Verkada only added much later when it was required for them to go up market. We knew from the beginning that we really didn't have a business unless we could go up market very quickly. And so that a lot of things around user management and permissions, a lot of things around being able to deploy on-prem and have flexible deployment options. All of that are things we bid off very early because we knew where we'd end up and we saw the pains of being at Verkada when you're trying to go a market and a lot of that capability hasn't been built out yet.
Brett: Maybe sort of that's a good pivot point. What's the first kernel of Serval? Where did it come from?
Guest: The very first kernel of Serval was talking to customers at Verkada that wanted some way to automatically resolve device issues. And so we'd talk to customers that would have devices go offline. Sometimes Verkada devices like a camera that goes offline but sometimes just regular network devices, their wifi goes down or a switch goes down. And there's a lot of frustration with the process of resolving something so basic as a camera being offline. Somebody has to report that it's offline. Somebody then has to investigate what's going on. They maybe have to assign that ticket to somebody else. And at the end of that process, that back and forth, that assignment, you're gonna reboot the camera, you're gonna reboot the switch, you're gonna install new firmware or you're gonna call a technician. There's a defined set of things that you're gonna do that are very simple that are gonna resolve that problem. But every single time something happens you have to go through this long journey. And so the first idea was what if we could just sit on top of that ticketing system, notice when there are device issues that are propping up and then automatically resolve them, whether that's a reboot as a service, is an idea I came up with, like we just proactively reboot cameras if we detect issues. Maybe that is scheduling a technician, maybe it's just, you know, sending a report of what might be going on or automatically updating the firmware. And so the initial concept was hey we can build a platform within Verkada outside of Verkada. We can build a platform that diagnoses device issues and resolves those automatically. We took that to a lot of customers. I did customer discovery and nobody cared. It turns out that was a very Verkada customer focused problem and that was very top of mind when you're talking to customers doing a big device deployment. But after those devices are deployed and you got through the early troubleshooting, it didn't become a long-term problem. But when we talked to customers about that, they said, "Yeah that's something, but here's my other problem. I've got a lot more tickets than just device tickets. I've got access requests, I've got password resets, I've got people just asking me the same question that they could just look up in the knowledge base, solve that for me." And that became the evolution of Serval.
Brett: So like how did you end up chasing that down after you started to sort of see that opportunity? And how much of it was you had decided you wanna start your own company again and what should you do versus it wasn't on your radar to start another company and this insight sort of pulled you into it?
Guest: No, absolutely wanted to start another company. I mean I joined Verkada knowing I wanted start a company. I thought I was gonna stay there a year. I stayed there five years because it was such a great place to be. But the itch was always there. It's something I had to do. Is the only thing I'd done before Verkada, it's hopefully the only thing I'll do after Verkada. And so I was always looking at what could be the next thing. Now I didn't wanna just build a product that Verkada was gonna go build and just go back and compete with Verkada. I think it was hard to compete with a platform that's so robust and powerful. So I was looking for things that were adjacencies. And one of the areas that was interesting is like what else could you sell to IT that's like outside of the scope of Verkada? And there's a lot of different ideas that I chased down. At one point I was very interested in, hey it's really interesting that when we sell a big camera project, a lot of times customers are buying cameras from Verkada and switches from Meraki, and then these uninterruptible power supplies from Schneider Electric. So two Silicon Valley tech companies and then one 150 year old French company is part of the bill of materials for all these massive projects. It's like maybe you could build a better power supply for these switches. Another idea that you start, you know, interviewing customers and you know, trying to get them to say, you almost hope that they say this is a huge pain point for them. No one cared. One, very hard to get people to even talk about it on the phone. And two, they don't know what they buy, they don't know what the pain points they have, they're totally uninterested. The other idea that we chased down a lot was this idea of okay, there's something around people frustrated by these tickets, initially offline devices but more broadly, let's chase that down. We just did a lot of customer interviews. Alex and I, my co-founder and I were, were both founders before Verkada. We are at companies that didn't really find crazy product market fit. So we just had this deep skepticism and I think a lot of strictness and we needed to hear a lot of things, a lot of good things before we thought there was any chance that this business would work out. And so we interviewed a lot of customers trying to figure out, you know, is this real? And I think one of the things that was a really interesting insight from this process of interviewing to back up you hope when you get on these interviews is somebody's gonna be like, "I have this pain point, I wish somebody would solve it and I will spend this much money for somebody to solve it." And then it's like oh we could solve that.
Brett: Which is part of the issue with customer interviews I think. You end up managing for the outcome that you actually wanted. Yeah, exactly.
Guest: Because you want somebody to say that and especially today it's very rare that you're gonna hear something that sounds like that. People have mostly solved the problems that they're very aware of and they've got some tool in place. And so one of the questions after doing a lot of interviews and people would say, you know, "I'd say what keeps you up at night? What's your biggest pain point?" And you just wouldn't get anything really interesting. One of the questions I started asking that I thought was really interesting is, "If you could hire somebody today to just sit next to you and do work for you, what would you have them do?" And it's another way of getting at what are you spending time on that you really wanna offload to somebody else? And that's when we started getting really interesting answers around, "I want someone to just play around and like build me a bunch of automations. I want somebody to take on all these help desk requests. I wanna offload all these manual, repetitive tasks that I have." I thought that was really interesting because they never identified ticketing as a pain point. Nobody said they wanted a new ITSM. No one said they wanted a new workflow builder or a new access management platform. They just said they wanted somebody to go and like handle a bunch of these requests for them and somebody to go and build cool automations for them.
Brett: Why do you think that reframing of the question yielded such an interesting new set of insights that was not apparent before?
Guest: The IT buyer in particular really prides themselves on figuring things out and being a problem solver. And so they don't think about a lot of this process as being problematic because they figured it out, it works and it's quite effective. And obviously it works because they're at organizations that are quite successful and no one doesn't have access to the internet or the software they need. So a lot of it feels like a solved problem because IT has taken on all this work and solved it and there's a lot of pride that comes from that and they wouldn't identify that as broken or painful because it's their job, they did it and they did it successfully. But then when you frame it as, "Hey, if you had somebody else to help you, what is the work that you'd give them?" That's like a nonjudgmental way of saying like what are the pain points because you're saying what would you push over to this new person? And then they can be much more free as like, "I don't like to do these things or I am doing a lot of this and I think somebody else could do it for me instead." And it just allows them to have more of a neutral perspective instead of saying like, "This is problematic or this is painful." It's like, no "There's a lot of work in this category that I can shift."
Brett: How else did you spend time with customers maybe chasing down any of these different ideas? Are there other questions that you asked or other things that you found either helped you rule opportunities out or you know, go deeper into what ended up becoming Serval?
Guest: One of the challenges we had with a lot of these interviews is that we couldn't get somebody to say that X, Y and Z was a big pain point. We got some information around things that, you know, they would use labor to, they would add extra headcount to go do a thing, that was really interesting. So then we started really digging down this automation concept of it seems like they want help to do a bunch of stuff and they want help building automations, they wanna automate more things, which sounds super obvious and not super helpful. But one of the areas that we thought was really interesting was why isn't this already solved? Because it looks from the outside in like there are a lot of great automation tools out there
Brett: And one of the most competitive categories in enterprise software.
Guest: Exactly. Yes there are tons of workflow builders, there are all these kind of cool automation tools. This feels like such a solved problem and yet when you talk to IT, they weren't really using these. And so something is not solved. And that allowed us to double click and say "Okay well why aren't you automating this? Why aren't you using Okta workflows or Zapier or these other tools? Walk me through this process." And a lot of it ends up being that there's just friction in building these automations. Not that those tools don't work, they do, but it takes an investment for often an unclear ROI. And so you have to invest all this upfront thing is simple as resetting a password which often has all kinds of rules associated with it in the enterprise of don't let these people reset passwords, don't reset more than two passwords in four hours, whatever. And so building out something as simple as a password reset workflow ends up taking days, sometimes weeks to get all the logic into place. And so the core insight that we took from those conversations was, automation doesn't actually work for this IT use case unless it's faster to automate something forever than to do it manually once. You have to take away the trade off. So it's actually just easier for you to automate every single password reset for everyone for always than to go into Google Workspace and reset a single person's password because then there's no trade off, right? You're just gonna build the automation 'cause that's better than doing it manually. But if you force the trade off, then it's like, I don't know, but you're busy, you've got all these requests coming in, why are you gonna like go into some blank page workflow builder and figure out how to construct this workflow? Which again might work that's gonna take you a lot of time. And meanwhile the help desk requests are piling up. You've got some new office to open, you've gotta cut down some spend on some bill, you've got a lot of things on your plate. Automation doesn't fit into that. So barring you hiring somebody to go build some automations for you, what are you gonna do? You're just gonna do things manually 'cause you know it's gonna take a certain amount of time and you know you'll be able to do it. And so if you can flip that, if you can say it's faster to build the automation, then all of a sudden you're just gonna automate everything because it's easier to do that.
Brett: Now you hinted on this a little bit, you know, very early on you decided you were gonna build everything.
Guest: You know I think a lot of founders when they were poking at this general space, they would say, "Okay, we're gonna build some automation point solution, it's gonna integrate into whatever you're using." And then over many years we're gonna chew our way backwards to sort of own the entire system of record product. Whether it be they're using an Atlassian product or a ServiceNow product or whatever they're using.
Brett: And maybe other than kind of the general idea of the value of doing the hard things first, what else kind of informed actually what you were gonna build in what order?
Guest: I think what we wanted to do here... So we had this strategy which was to build the platform obviously and that strategy was one, because we want to go after existing spend, but also we felt long-term you could build a much better product experience if you actually own the platform. It's not a novel insight, I think everyone could look at it and take that away and then we decide, hey we're gonna invest everything and go do it. I think we tackled the thing that we are most unsure about first, which is could you actually do what I mentioned? Could you actually build a system that made it faster to automate something forever than do it manually once? And this is a code generation platform. It's basically vibe coding for IT automation or vibe coding on rails really for IT automation because we really constrain the use case here. And can you describe a natural language what you're trying to automate and can, on the other side of that, you get an automation that works end to end. And the early experiments, the answer was maybe. It worked in some cases it didn't work in a lot of cases and we had enough hope, we saw enough signal that we said, "You know what? I think that this is gonna work." And we decided to just double down and then build a platform around it. It would've been very easy to start with an IT ticketing system and you can make it much better UX than Jira and ServiceNow and you could try to sell that. We didn't think that was really gonna be the difference maker. We said if we can build an automation builder and then build a ticketing system around that, then that would be really, really powerful. So we started with the automation builder, we showed it to customers, they didn't really know what to do with it but they thought it was really cool. But we kind of pushed through the early skepticism and just kept building and iterating and then as the platform started to emerge around it, the conversations with customers started to shift and they started to understand how the pieces together.
Brett: So talk more about how it shifted, like what was changing in the product or the way you were educating the customer that went from this is cool to in production, driving actual value for the company?
Guest: I think this is one of the hardest parts about this business is that it took us a year to build something that was actually valuable. And so you really wanna get this in customer's hands as quickly as possible and then just iterate with them and build on top of a core value proposition. So much of the core value is actually combining these tools together. No one wants a mediocre ticketing system and a mediocre workflow builder and a mediocre access management system all kind of stitched together. And they don't even want to B+ version of any of those by themselves. So how do you build something compelling? You really just have to focus and build. The tenor of the conversation just started to change when all of those products reach a certain level of maturity where people saw there was enough there that they could project out in their imagination, "Oh I see where this is going and I see how this is gonna be awesome." I think when you're in an immature state on the product across those three categories, it's hard to have the vision to see how this is gonna get so cool and so much better that it's ever gonna work because you just see all the gaps. You see, well you've got a ticketing system but it doesn't do all these things my ticketing system does. And you've got a workflow builder but it doesn't do any of the things that my workflow builder does. And you've got an access management system and it's the worst access management system on the market. What are you doing? But then I don't know what the percentage is, but there's a certain percentage where there's just enough surface area that even though people still see the gaps, they're able to imagine those gaps being filled much easier and saying, "Oh I see where this is going and I see that once you add X, Y and Z, this becomes a really powerful platform." You need to get them to round up in their head of what the products will look like.
Brett: So how as the founder did you have the conviction to kind of keep plotting along month after month? You know, you ideally want to give this thing to a customer and they're like, "I need this thing, I like this thing, I'm using this thing. It's really valuable for me. I'm telling my friends about this thing." Was there anything that kind of kept you just grinding on it?
Guest: I think that the thing that helped us maintain conviction even in times where we just weren't getting the feedback we wanted was that there's a market here. People spend a lot of money on ServiceNow, IT ticketing, they spend a lot of money on Jira Service Management and Freshservice. People buy these tools and we thought deepen our bones that we could build a better version. And I think a lot of that conviction probably came from my time at Verkada knowing that if you could build just a better version of a product that already exists, that you could have a lot of success in the market. And maybe that was naive and that was over optimistic but that was where the conviction came from is no matter how bad of a week I'd have, I'd have a couple customer conversations in a row where they didn't really get it and they didn't really see what we were doing. I just kept coming back to the fact that these products exist in the market and they make a lot of money. People do buy these things and I am certain that we can make a better one. And this new technology that we're incorporating into the IT ticketing to actually automate these requests is unlike anything these customers have seen and it's going to work and we just have to keep building and finish the dream. But we could have been wrong. I could have gotten to the end of that and I was still wrong and so it may have been lucky that we just kept going and we ended up being right. But it was scary and some weeks were pretty rough.
Brett: What at Serval is the Verkada SMS part of the demo? Do you have that yet?
Guest: It's the workflow builder. Yep.
Guest: The demo can be kind of broken up into everything that comes before showing the workflow builder and then everything that comes after. Because before you show the workflow builder, people are bored and everything you show them they think they've seen before, they've seen some version of it. So it's not impressive. You show them this workflow builder where you describe a very complex IT automation that could be an offboarding workflow and onboarding workflow and you describe all these steps, we're gonna add them to Google, we're gonna take a web hook in from Rippling, we're gonna send this manager a Slack message, we're gonna add them to all these applications. And then you just hit Enter and the workflow just generates before your eyes and it actually gets written out in codes so you can see exactly what it's doing. It's not some kind of LLM black box of oh the LLM's gonna go and figure this stuff out. It's writing the actual code. And then you just hit Publish and then you run it for them. You show that it actually runs, it does all the steps it says it's going to do and people's minds are blown because they can abstract from that all the things they could do. Whether it's password resets or it's reporting workflows, compliance workflows, all the things that come through the help desk. They know that everything that they've always wanted to automate is now just one prompt away and it's showing them live how that works, that starts to click of all the things they could do with it.
Brett: Would you think about next generation companies going after these large existing markets that generally have some sort of oligopoly structure? Is part of the takeaway at least thus far in the journey and when you've thought about other companies, the general idea of people have this old clunky software and we're just gonna build a modern better version of it. Like it just that doesn't actually work. You need a true insight. In this case it was actually quite technical in nature to crack one of these existing markets.
Guest: Yeah, I think that's exactly right. I mean I think so much of this legacy enterprise software, it's powerful and it's sticky because of its configurability and if you're gonna disrupt them you have to disrupt them in a way that actually attacks that configurability head on. And so the way we've done that is not say, "Hey we've got a simpler, more opinionated version of ServiceNow," but actually a more powerful version of ServiceNow because now you can write underlying code that does anything. You're not even limited by ServiceNow's domain specific language or the way they've constructed workflows. So it's even more configurable and more flexible than the previous generation. I think a lot of the startups that have tackled these enterprise softwares have done at the other approach of let's make a simpler version, let's make it more opinionated and more constrained. And I think what large enterprises want to do is not adapt their process to your software but adapt your software to their business process. And these large enterprise software platforms like Workday and Salesforce and ServiceNow, they're very good at that. They can be adapted to whatever the internal business process is. We wanna do the same thing but actually make it even easier and more flexible and configurable.
Brett: How did you think about defining the size and scale of what an early customer was gonna be? I think sort of conventional wisdom is narrow and tight in the ICP to make it as tiny as possible monopolize that ICP and then kind of slowly chew out from there. Relatively early on you started farther up market and increasingly have been straddling, a company might have 200 employees, they might have 5,000\. But I think it's is fairly atypical. There's like Workday getting started and your mega enterprise from day zero but this sort of straddling mid-market and enterprise is fairly atypical.
Guest: Yeah, we anticipated starting mid-market and in the low side of mid-market and sticking around there for a very long time. So that was my plan as the conventional wisdom, narrow the ICP, VC backed tech companies with 500 employees, that would be where we lived for a long time. And then we'd gradually bit by bit go up market. What we started to see is that the problems we're solving in the mid-market were not any different than the problems that large enterprises faced. And a lot of the tools weren't even that different from the tools that large enterprises faced. As AI became more and more dominant as a topic of conversation in the boardroom, there also started to be more of a internal momentum at these large organizations of we should look at this stuff. And I think those two factors ended up being really important that what we built was actually quite flexible for the enterprise. Partly because it's all code-based, partly because of some decisions we made early on around the architecture to eventually move up market. So we didn't have to push ourselves that much on the product side to go there. But then also these enterprises which historically are very late to the party, they're feeling a little bit more momentum around internally and pressure from the board and the C-suite to start implementing or at least exploring AI solutions that those kind of two factors met. We had a product that was ready for the enterprise and then we had enterprises that were actually ready for early stage products in a way that hasn't been true in a long time.
Brett: How did it not lead to a dynamic where just the roadmap is not able to, it's just too substantial to be executed on?
Guest: They're just so similar mid-market and enterprise, they're shockingly similar especially because of the way we've built the product. So because the way we think about integrations and workflows is all code-based, we make a really good and flexible code-based platform for building all these workflows, extending the capabilities of the platform. The only difference is what endpoints we're hitting in these applications and certainly Workday is more complicated than Rippling but that is still fundamentally the same kind of challenge, is making IT automation work in Rippling versus making automation work at Workday. It's not that different of a challenge. I think it we taken a different approach and we maybe had a set of like prebuilt actions of things you could do in Rippling, things you could do in these different platforms and those were set and hard coded and they were part of this opinionated platform then it'd be very hard for us to switch gears and go to market because then you're starting from scratch and you're basically doubling your service area. So supporting Microsoft ends up being much, much harder than supporting the current stack of products 'cause you have to rebuild every single thing that you're doing. For us it's a symbol as giving our system context on the Microsoft API and now we support everything Microsoft. And that architecture decision allows us to just, you know, serve those customers instantly and with very few hours of development versus if we built it in a more nature, which I think historically that's what SMB and mid-market focused tech companies did is they built a very opinionated, narrow focused product. We built this product that is built around a flexible code-based workflow engine that can then flex into large enterprises quite easily.
Brett: Is there any specific set of insights that have allowed you to have such a high rate of product execution?
Guest: Other than we hired very, very good people and Alex is very good.
Brett: Like it seems outlier, the amount of product that you've shipped on a monthly basis is a relatively small team there.
Guest: There's no substitution for just great talent. I think we have an incredibly talented engineering organization. I think relentless focus, everyone knows what they're working on and why. We embed our engineers really tightly with customers so that every customer in addition to having a forward deployed owner also has a member of the regular engineering team as an assigned person. So every engineer on the team has a deep appreciation, understanding of what we're building, who it's for, why we're building it. And we've had a very focused roadmap. Our roadmap hasn't really changed in a year and a half. When we first pitched first round, those slides are basically our roadmap today. You know, priorities shifted but the same core things that we're trying to build are true then as they were true now. So I think a lot of delays on software teams is because of thrash because you change direction and you try different things and you pivot around. I think we had a lot of conviction on what we were trying to build here and we've been able to just like hammer it out because we never had to reverse, we never had to backtrack and we just get to move forward. So I think when you combine talented engineers that understand the customers and problems really well so they don't need to be micromanaged and they don't get confused and a very consistent roadmap with a lot of vision of what we're trying to build, you're able to move much, much faster than if you're kind of making it up as you go.
Brett: What about the opportunity allowed you to have such a relatively fixed roadmap?
Guest: I have to attribute some of it to luck. I think we expected... When we pitched first round we said, "Hey I think all of this is gonna change in the next two months because this is our like theory of the case. And so I think a lot of it was we guessed right about a lot of things but if I want to give us more credit, Alex and I built hundreds of new products together at Verkada. We talked to IT and security teams all day long for five years figuring out what new products to build and then we shipped hundreds of different SKUs while we were there. So I think we also had a really good intuition of how to build, what was gonna work, what was not gonna work. And so when we were doing all these customer interviews, I think we were pretty dialed in into what we were hearing them say and what we needed to build and what the market looked like. And so maybe it was experience that helped us be right but I think a lot of the success just happens to be that we were right the first time and we didn't have to kind of regroup the company and in fact one of the engineers that joined our team said that they were most impressed because our vision every time they talked to us along the journey had been consistent and we knew exactly what we were doing and we just did exactly what we said we were gonna do in terms of product development, in terms of like customer traction, we just did exactly what we said we were gonna do.
Brett: Is there anything else that you've about selling a next gen product into an existing category that you haven't talked about? You know, you landed on this aha moment, which is the way in which you build, the way in which you go about building automations, generates codes, you can do whatever you want with that code once generated, but when you're engaging a prospect and they've been using X thing for nine years, there's 7,000 people, is there a specific way that you have to go about that sale that is unique to bringing a product into an existing market?
Guest: There has to be top down alignment. That's what we found is that there has to be alignment from senior leaders that this has to be done because as you get into larger organizations, the actual folks doing the implementation, it can be a very large team. And the chances that all of them are gonna be completely aligned and excited about this new tool are close to zero. And so you need somebody with a drum beat that says, "No, we're doing this because I believe in the vision here and I believe what we're trying to accomplish and I'm gonna keep pushing the team to do it." Selling them ends up being the hardest thing as you have to get them on board. It's not really a bottoms up approach where you can get 50 different IT support leaders excited about it and they tell their CIO and that's what comes down to the demo. I mean you have to build a product that when somebody sees it starts to click and they start to envision all the things that they could do with it. That's what does it for us is if we can get the demo with that senior leader, it just clicks. I did a demo recently to the CISO of a Fortune 50 company and he saw the demo, he's like, "Where are you right now? I'm gonna drive to see you, it's an hour away. I'll be there in an hour 'cause I wanna meet you." Because he saw the demo and it was just so powerful that they wanted to go deeper and explore further. I think the second piece is finding those champions at the lower level that are really excited and that look really good because of our tool. I think one of the coolest things we've done that was not expected, that we did not anticipate, is we turn IT into builders. They get to be creative and they get to build really cool stuff with a workflow builder. And I think very much there's some parallels to what Clay's done with the go-to-market engineer. Where we've turned these IT professionals into these makers, these builders that get to create amazing workflows and they wanna share them with us, they wanna share them with other people, they wanna show the org what they were able to do.
Brett: That's cool.
Guest: And they actually surprise us. They will tell us, "Hey, we built this workflow that does X, Y and Z." And we say, "No that's, it's not really possible. Like you're probably confused about how it works." And then they'll show it to us and say, "No, it works.: You know, we ping somebody for their Okta one-time password and then they enter it into Slack and then they get this alert that goes into their Slack message. And it's so cool to see if somebody do something with your product that you didn't think was actually possible and now it's happened probably half a dozen times, it's not even surprising anymore. People just find ways to do cool things with the product and I think that's gonna be something we want to increasingly lean into because that's how you can kind of combine the top down pressure from the executives, which is you know, essential at these large enterprises. But also make sure that you've got this upswell of support from the folks that are actually implementing the tool where they look good, they don't look like, you know, you're just replacing the stuff that they decided to implement and they're big fans of and they're very comfortable with, but you're actually giving them the opportunity to be superstars and build things for the rest of the organization that make them really appreciate it.
Brett: Shifting the conversation a little bit, when you think about what's happening in enabling technology and AI, what's your sense of like what is the role of software today in humans today? Because as you were talking about kind of creative builders at companies, you kind of quickly go to, well why can't software just do everything? Why can't software come up with all the automations and then ship all the automation or test and then ship automations and like. But there's still, and it might be a context piece, a judgment piece, and intelligence piece, a creativity piece, but like there's a critical role in all of this, which in this case is the IT professional.
Guest: I think the gap here that humans are solving is translating the business rules and requirements into the underlying product. What's really interesting about all of these AI products today, they can basically do anything. You're not really limited on the capabilities of these products. You're actually more limited on somebody saying what they should do. And at least today they're not at the point where they're able to understand the business without some kind of human input telling them, "Hey, how I wanna adapt this product to meet the rules and policies and processes of this organization." And so IT can come in and they know these policies, they know these processes, they know all the business rules and what we're trying to achieve and they can construct the workflows and the piece of the product to go and execute that in a way that was very hard to do before. They're still essential in that translation layer though we are trying to make that translation layer even easier for them. I think today one of the things we're working on on the product side is how do we make it easier for you to translate that business logic, describe what you're trying to accomplish and translate that to the primitives of the product without you even having to be an expert in the product. You don't have to know the intricacies of how our system works and the nuances of how different components fit together. You just describe what it is you want the product to do and how you want it to be configured and how you want it to work. And the system figures out all that underlying logic. But I still think you need somebody there that says what's important to the organization and there's shocking diversity from company to company, not even mid-market enterprise, but even within mid-market companies within enterprises on how they want password resets to work, on how they want people to get access to applications. All of that ends up being very, very unique from company to company. And so you need people to describe what those policies are, even if the system is able to translate them very effectively.
Brett: Maybe sort of on a similar point, what's gotten easier in the 18 months that you've been building the company from an enabling technology perspective?
Guest: Code generation works super well now. So when we take these prompts to code, there used to be so many gotchas where the code wouldn't actually work. Whether the API is not well supported or it makes a couple mistakes here and there and now it's hard to break the system, it's hard to just put anything into that prompt and not have code that spit out that runs and does exactly what you want it to do. If I had the product in front of me, it would be hard for me to come up with an idea that wouldn't work in the system, which is really, really cool. And that was certainly not where we were at a year and a half ago where if you weren't on a kind of a predefined list of things we knew very, very well, it wouldn't work. So we used to, for example, have to feed it a bunch of contexts of here are all the possible workflows somebody might wanna build and here's the code, here's what it looks like. You might wanna use this code as like a reference point and then as long as what you're trying to do was somewhat similar to the workflows that we provided as context, it would work fairly reliably. But as soon as you went off the rails and you wanna do something crazy creative, it would just fall over and it would just get stuck. And that doesn't happen anymore. Now you can be as creative as you want, touch as many applications as you want. Internet search capabilities built into the models have been really, really powerful. So that say you get stuck on some obscure API and that isn't well documented, the system will go and find forums and information on how that API might be constructed and how to build the workflow that you're looking for. And so it can solve its own problems very easily and that's all gotten just so much better. I also think the end user interaction experience, AI has gotten much better at following instructions. And so we've been able to tune that interaction so it doesn't feel like you're talking with the chat bot. The way we want Serval to feel to the end user is it's somebody that solves your problem or gets outta the way and it's not somebody that's trying to talk to you or have a conversation 'cause I think everyone has had that experience with the chatbot where it's not being helpful, it's just talking a lot. And we want the experience of you wanna pass a reset, you've got a password reset, you want access this application, you've got it. You spilled coffee on your laptop, I can't help, I'm tagging in John, he's gonna help you with that. And we want that interaction to feel like Serval's always helpful and never in the way. That was hard to tune in the early days. It was hard to get it to follow those instructions and now that's gotten much easier.
Brett: Did you think about the rate of improvement with the underlying models in conjunction with how you were thinking about building the product and it was a huge bet?" Or is it just icing on the cake as this stuff gets better and better?
Guest: It was absolutely a huge bet. When we started, especially the stuff we are doing today was not possible and it was not clear that it was going to be possible. We were betting on what we were trying to do is just outside of the capability of these models. It doesn't take a crazy leap of faith to believe that they'll get there one day, but it was not clear that they would be good enough to work. And so we had to bet that what we were trying to do, the models would one day unlock. And I think that's paid off. I don't know if I would make the same bet today on those same increases in model capabilities. I'm really happy with where the models are at today because they don't have to get any better for us to build a massive business. How they work today is actually good enough for our use case. Obviously it'd be great if they get better, but they don't need to get better for our product to work really, really well.
Brett: Do you worry there's a future state where they actually get too good that it's strategically disadvantageous to the business, that there's a Goldilocks?
Guest: Yes.
Brett: Level of power that you want?
Guest: Yes, I think about this a lot. People ask me what are the competitors that I'm most worried about. And the competitor I'm most worried about is the one that doesn't exist yet. The one that comes along a couple years from now and maybe these tools have unlocked so many crazy capabilities that they're able to move very quickly and build so much of what we built so much faster and get to a level of parody in it in a very short amount of time. And so yeah, I do think that there's a world where the models get so good that it starts to erode some of these advantages. I think that's why even today I'm pushing the team to think about what are the hard things we can be investing in now? What's our next bet? So we made this big bet with code-based workflows and code generation is a source of truth for workflow automation. It was a great bet, it paid off. That's working really well. What is the next big bet we should be making? We're investing in the next generation of models and we're hoping that a lot of these tools get better and that it unlocks some crazy amount of value to customers. I think things like translating business needs into automations automatically without human interaction, that's a huge area of interest for us. I think looking at things that are not neatly automated via API is a really interesting category. Things that still require a lot of click ops and logging into tools and making changes manually. Obviously the universe of things that you might wanna automate is much bigger than the things that have very neat clean APIs. And so that's another area that we're very interested in. But we're always looking at what are the hard things we can be doing now that make it very, very hard for somebody coming in after us, even with great models and great AI capabilities that we didn't have to ever reproduce the full scope of what's possible. So going broad, going deep, continuing to bite the hard things off. I think the benefit we have is that we're in a moment where all these AI tools are coming to all these different layers of the organization and IT is witnessing sales have amazing AI tools, and design having amazing AI tools, and engineering of course having amazing AI tools and they're just sitting watching, often implementing those tools for the org and paying for them but not having their own tools. And that's creating a contrast that as these IT leaders look at it, they start to realize, oh we could be much better and we could also benefit from these same kind of tools. And I think Serval has a unique position there of being the tool that they can adopt that gives them the same kind of superpowers that Cursor and Cloud Code give to engineers and these other incredible tools give to sales and design teams and other parts of the organization.
Brett: One of the things that I really like about startups is that you generally end up innovating in product and/or distribution or both. And in a lot of ways the company itself and the structure of what it means to build a company gets innovated on. That you take five great companies and maybe 50 or 70% of the companies look somewhat similar, but 30% in the actual way that the company is organized and accomplishes work et cetera, is actually quite different. And like a lot of interesting stuff comes out of that 30%. And I'm interested in the context of you building Serval as your second company, the last big chapter, Verkada doing things in a very specific way. How could you share or articulate like what the 30% of the stuff that you've chosen to really push and innovate on in the company itself?
Guest: I'm really interested in this evolving role of the forward deployed engineer. I don't think we're unique and being very excited about that role. Where we are unique is we really consider these individuals to be full-time software engineers, people that are building product, but are building product with deep integration with the company, with the customers that they're serving.
Brett: So why has it become like a topic du jour of forward deploy engineering now? When it was kind of a fringe thing for a while, at least in the early days of Palantir, it was looked down upon as glorified consulting and now it's sort of like the topic de jour. Like maybe start with like why you think that is and then how it applies to what you all are doing.
Guest: Yeah, I think the software platforms became so powerful that the capabilities of the platform were no longer the rate limiting step of the value the company could get and the customer could get out of it. It's not what features the product had, it was actually how the product was configured, was a rate limiting step. And AI really unlocked all of these long tail capabilities so it could theoretically do everything imaginable that you want it to do, but somebody has to tell and configure the product to do it in that way. I think that's what's happening. Where if you really wanna unlock the value, you need somebody that's kind of steering it and directing it versus in a more traditional model, maybe you get some of that value with consultants that are doing implementation. I think in many ways what the forward deployed engineer role has actually replaced are the implementation consultants for large organizations, large companies like Workday and ServiceNow and Salesforce that are customizing that software to meet these organization's needs. Now the forward deployed engineers coming in and doing that for AI products for, you know, startups instead of large enterprise software companies. So I think that's what's happening is trying to unlock this value of these AI agents. The way I see it is yes, do that but also treat these as actual members of the software engineering team and let them not just do implementation but actually build software because they're the ones talking to customers all day long. And what I wanted to really break from tradition here is, in a company like Verkada, really any company traditionally you've got solutions engineers, you've got customer success staff, sales AE, they talk to customers, maybe the SE hears a good idea, they communicate that to a product manager. Product manager talks to the engineering manager about that. Maybe it gets scheduled in a sprint one day or added to some quarterly plan but there's this gap from a customer saying, I want this thing or I wish it worked this way or this is broken to that being fixed or added. That can be months even for a great company that can be months as it goes through that full cycle. And it would just be so much better if an engineer heard that feedback and then just went back to their desk and built it. And AI tools have made the development cycle so fast that a lot of the things they're asking for can actually be built in that timeframe. And so we wanted to kind of weaponize that new capability and say I want engineers talking to customers every day and then just going and building the things they're asking for and it's basically trying to recreate what happens in the early days of a startup when it's just a couple founders talking to customers, "What do you want? Cool, we'll build it." Talk to them the next day, "Is this fix your problem? What else do you want?" Can you scale that energy and that really tight feedback loop as the company gets larger and larger? That's what we're trying to do. We're trying to build out a forward deployed engineering organization that is embedded with customers and is building for them day in and day out in the same way that founders would be building with a customer.
Brett: Will they build a one-off feature that's only relevant to the one customer?
Guest: No, so their job is to build things that are valuable for a lot of customers. Now we have ways to customize the product for customers. That's the workflow engine, right? So they will also help customers write code in the workflow engine if they want, but they're more focused on what is missing from the product or would make the product even more powerful. You know, one example is our workflow builder can actually work on Serval itself because Serval has an API, you can build workflows in Serval that do things in the Serval product, which makes it incredibly powerful. You basically get to write your own features for the Serval product. But not everything in the Serval API and not everything in the Serval platform is exposed via the Serval API. So one thing you can do as a forward deployed engineer and say, "Oh it would be really cool if we had this feature. I could build this feature of the workflow but I need to add all these API capabilities so lemme just go and do that." Or you could say, "Hey, I think it would be really cool if we had a deeper integration with this software tool and if we had more context on that API and how it worked because there's all these nuances, I'm gonna go and build that integration in the Serval platform. And the ability to just talk to customers and ship for them on this like really tight feedback loop I think is really miraculous. And I'm wondering how big that forward deployed role can be and can it ultimately replace what has historically been solutions engineer can replace a lot of what's been customer success. Because if you think about what someone in customer success is often doing, a customer is complaining about something that's broken or something they don't understand and the only people that can really fix that are engineers. So why have them tell that to somebody that's not an engineer who's just gonna go around and have to give that to somebody. I think that there's something there where you can actually have everyone talk to an engineer and tighten that feedback loop and we're gonna see how far that we can get with kind of forward deployed.
Brett: In this model, what is the difference between a forward deploy engineer and an engineer?
Guest: There is very little difference other than we expect the forward deployed engineer to be spending 20% or more of their time talking to customers. And so it's a lot of a deeper embedding and we wouldn't necessarily expect that for a software engineer. A forward deploy engineer is also probably gonna be building mostly product capabilities, not necessarily working on infra or the platform or other initiatives that might be outside of the scope of the current product. So do you think over time you end up having a traditional infrastructure or internal platform team and instead of having normal engineers that are working on features just it's that same type of engineer but they're just spending all their day with customers. I think the need for a lot of product managers is probably gonna go down if you hire really product oriented for deployed software engineers then they're gonna be increasingly making decisions on what makes sense to build for the maximum number of customers and what's gonna unlock a lot of value. I think you're gonna need a lot less or maybe no solutions engineers, I think you're gonna need a lot less and maybe very limited set of customer success dedicated folks. So I'm very bullish on this concept and it really comes from this idea that if all of the feedback from customers ends up going to the engineering team anyway, why do we have all these middlemen?
Brett: How do you keep this from not just turning into a mess, just like a free for all of stuff getting shipped in all sorts of random ways.
Guest: I don't think it's that different of a problem that you face even if you have people in the middle because you're basically, you're replacing this middleman that's trying to allegedly collect all this information and then streamline it, you know, directly to the folks that matter and do it in some kind of curated way. You're kind of getting rid of a little bit of the curation and kind of going direct to the source. It really comes down to the people that are receiving that information. Are they high caliber enough? Both from a product sense and from an engineering capability to know what to build and know how to build it in a way that's really robust and is not just you know, kind of producing slop. So it comes down to caliber. I don't think this scales if you just kind of throw random people into the mess and say like, "Oh just like build stuff and ship product." But if you actually have your forward deployed engineers be the best engineers on the team, I think it's basically again reproducing this early co-founder energy where it's a CTO that's hearing the feedback directly from the customer and going and just fixing the product or making it better. And everyone knows that is great. Everyone knows that when a CTO talks to a customer and goes and builds product features that's awesome. If you can scale that, you can scale the awesomeness. There is a question though how much that scales. It probably is hard to hire 100 people with that kind of caliber of talent. How can you find ways and systems to make that scale as much as possible is something we'll have to figure it out. We certainly haven't solved it yet but I think there's something interesting there that I'm really interested in seeing how far we can go with it.
Brett: Are you finding the customers it's just immensely delighting?
Guest: Exactly, the fact that a customer can ask for something and just get it same day. We have a call at 10:00 AM and that feature they ask for is shipped at 4:00 PM, that's so powerful. People love, we know that people love great customer support even if the customer support is just very quickly telling you they're gonna fix the problem and they're listening to you and they're... People appreciate that even if the problem's not fixed. Now if you take that to the next step of not only are we fast at listening to you but we're actually also solving the problem. I think you build some customer loyalty that is really harder to reproduce and then as a side effect or the principle effect, the product's also getting much better and you're covering so much service area because the chances are that whatever they ask for, if your forward deploying engineering team is really good in product oriented, they're solving a problem that a lot of other folks have.
Brett: What is the role of a PM at Serval at some point in the future? Or is the goal to never hire traditional product management?
Guest: The goal is to delay the hiring of product management for a very long time. I think the role of PM is gonna be similar to what it was at Verkada, which is more of a general manager of a business unit. I think there will be a time when we have a big enough product portfolio that there are areas of the product that are massive and distinct in some ways and it is valuable to have a single directly responsible individual that kind of owns that category, maybe owns the revenue line of that business unit, has come some kind of ownership over the P&L. And so thinking of PM as more of a general manager in charge of a broader function or a product area, I think that's how we'd wanna structure PMs. I mean Verkada was 1,000 people and had two PMs. And I think we can do the same and keep that team very, very lean and really focus on PMs that actually own a business unit.
Brett: What's your theory of like what's going on in your brain or other like business builder GM style product people that give you that sort of taste and sensibility to kind of get that multivariate problem solved?
Guest: The best people that have done this develop this deep customer empathy and this understanding of it is almost irrelevant what they say they want. They're kind of ambivalent about all the features, suggestions, all the feature requests. At Verkada, we had a Slack channel called Feature Garage and that's basically how it was treated as sales reps would jump a bunch of feature there and no one would ever look at it. And I think the really good product leaders, they hear all that but they actually just understand what the customer's trying to do. They don't hear any of the feature requests, they just hear the understanding of oh they've got this problem and we wanna solve that. And I think it's very much what we were trying to do in the early days of Serval, is not pay attention to the fact that they wanted, you know, this feature, this feature. Certainly no one asked for a new ITSM and no one asked for a new workflow build or any of this. It was just they had this problem they were trying to solve so they wanted somebody to come and build a bunch of automations for them and make a lot of these tickets go away. Just building that empathy and then saying, "Okay, what would that look like?" I agree there's not many people that have that. I think in our model, the way I think about it is a lot of the stuff when you get to a level of product maturity that we have, so much of the things that are asked for are non-controversial and I think forward deployed has a huge role in driving forward progress on all these non-controversial product capabilities. You should be able to sort a column on a list of tickets, right? No one needs to have a conversation or a brainstorming session or a roadmap around like when we're gonna slot that in. You can just go and you can build that. I guess the only question there would be prioritization, but I think your point is you want to be shipping so quickly that just do it in afternoon kind of a thing. And I think it actually ties into this prioritization conversation because I think you can overprioritize and it's also a mistake that actually the really good product leaders do is because they're so focused on prioritization, they never touch the P2s. P2s stack up and you can get a lot of them that just completely erode the product experience. And if you're never having anybody that looks at the P2s, you're gonna end up with such an inferior product even though you were technically focused on all the right things but nobody addressed the fact that you can't sort of call them and you can't export this report and you can't do this. And so that's another side benefit of having this forward deployed is that the P2s actually get looked at and the P2s matter.
Brett: So other than what you were explaining a second ago, which is you just need to ship a lot of software, is there anything else that helps someone develop?
Guest: You have to spend time with them. You should be visiting them in person. And you have to spend time with them, not just in a work context but hopefully outside of that. At Verkada got the chance to visit customers. We took a customer to the club in Vegas and we got to know customers got to go on site with them. It has to be being embedded. I always think of this as like you have to be embedded with a customer and it's not, oh I'm gonna schedule a customer interview and I'm gonna have an engineer talk to a customer for 30 minutes because we're doing a customer interview and they've got a list of questions they're gonna answer. It's more you have to be in a Slack channel with a customer. You have to have a weekly call with a customer. The customer should be texting you when they run into problems. Like you really just have to embed yourself in the lives of these customers for you to understand them at that level. And there's no substitute for it. And you don't have to do that for every single customer all the time. But you should have kind of a bank of customers that you have deep, deep relationships with that are fairly representative that you can just lean on and feel like you just know them. So when you're making a product decision, you're not thinking in some analytical way about whether or not like this unlocks X dollars of revenue. You're saying, "Oh you know what? Scott's gonna love this." We can do that, remember like, Dana hates this stuff and you just like have to have these people live in your head because that's what drives really great product decisions when they're actually in your head and you understand what they're gonna like and not like and you understand what they need. What are some of the examples when you think about the products you've worked on of, you could not have landed on that thing if you did not embed and go deep in that way with customers. Yeah, one of the most striking examples from Verkada was panic buttons. We didn't know if they were even necessary. You know, it was a category that was kind of controversial whether or not they even needed to build those. And I went on site to a customer that was a payday loan customer. I actually spent time talking to their cashiers that spent all day behind a layer of bulletproof glass. Every single one of them had been held up at gunpoint at some point while working at this company. I asked them about, you know, their day and what we could do to make their day better. And I was thinking about this from their perspective of what new products could I build? And the thing they said to me was, the ATM is in the lobby on the other side of the bulletproof class. Is there anything I could do to move the ATM to be closer to the door so they don't have to spend so much time in the unsafe part outside the bulletproof class? 'Cause they're worried that something's gonna happen to them when they walk out the door and they have to empty the ATM. That was their biggest fear was being in the lobby and having to cross this hallway. And that lived in their head as the most important thing that they wanted from us. And then we're having this conversation of whether or not you can carry around the panic button or if it should be mounted to the desk. It's like of course you have to carry around the panic button. Of course you have to carry around the panic button and it needs to work in the parking lot. And it's just non-negotiable because they're terrified of just walking into the, you know, walking into the lobby. And so as an example of like if you're just looking at it, you're probably gonna do some market report and be like, actually most holdup buttons are not mobile panic buttons and you know, like this is the market size of this and blah blah blah, but you just talk to that customer, "You're like no it has to be."
Brett: As the role of product is potentially changing, certainly the role of engineering is changing, at least in the sense of like what an engineer is doing day to day. Has it made you think about the type of people you wanna hire in your next 20 or 40 and then ultimately hundreds of people? Or do you think if you were building a different version of this company five years ago, it's kind of the same types of people?
Guest: No, I think we've definitely decided to bias more on really smart generalists that hopefully are technical or quantitative in some way. Because I think all these technologies are gonna change very quickly. The way of doing things are gonna change very quickly and you just want the people that are gonna be able to grow and adapt the fastest. We are biased a lot less towards experience even from where I was at a couple years ago, which I didn't really value experience more than anything else but it just become much more a factor of how smart is this person? How adaptable do we think they're gonna be? How high agency and self-motivated are they? How ambitious are they? And more of these intangibles than have they done the job. Because the job's gonna change, I don't know what the job's gonna look like, how we build software's gonna change, how we market's gonna change, how we sell is gonna change. So you're really looking for a different kind of person that you feel like is gonna succeed in this abstract future world that we don't really have a lot of predictability around. And so it's certainly changed. I think I'm also biased towards, you know, shockingly I think there's higher order returns to being technical and being able to code than there were. I think there was this moment where maybe we thought everything would be no code and I think this era of these models being very good at code generation has actually made it much more valuable to have some familiarity with building software and being able to code. And that's also been very interesting in that now an IT professional for example with some degree of programming experience is incredibly valuable to the organization because of all the things that they can build for the company. Whereas five years ago they were maybe marginally more valuable than their peer because they weren't a full software engineer, they were just like kind of dabbled in stuff. They're marginally more valuable than their peer. Now they're incredibly more valuable 'cause they can use Serval on other tools to build really, really cool products and services. And so I think about it the same way in our team. I think that people with technical abilities, quantitative abilities that are really smart just have enormous returns on their productivity with all the new technologies that are becoming available.
Brett: For anybody that's gonna join the company, do you have certain things you do during the interview process to sort of get at these type of things like high agency or just raw intelligence or those types of things?
Guest: I love a storytelling interview where I ask people to tell me their story, starting with where they went to school, why, what they did there, internships, why they went and took their first job, their next job. And then I just double click into things that I find interesting, projects, you know, big life decisions. I really like interrogating the life decisions. I think that tells you a lot about the agency of is somebody just kind of drifting and they're kind of like, "Oh this this thing came up so I did this" Or did they have a plan or you know, what are they motivated by and how do they evaluate different opportunities and different alternatives? And so that is a really fun open-ended way for me to get at what they're trying to do. So I basically do that interview with everybody that we bring in as I just give them to tell me some segment of their life story. If they're more senior than then, you know, it probably doesn't go all the way back to high school. But I just wanna understand the big life decisions they made and like really double click into the stuff they've done. And I think you learn a lot about general intelligence that way and a lot about agency that way. I think that's the best thing that we do. The other thing that I do that I think is very different is when we're looking at candidates that we're bringing in, I like to make people tell me on the interview panel, who are they better than at the company because I think often happens...
Brett: At your company.
Guest: Yeah. What often happens in this company's scale is you bring in people that are good enough that are maybe you know better than some of the people at the company. They pass the bar, they pass the screen and they get a thumbs up and they join, but they're actually at the 40th percentile or the 25th percentile of the people in the company. Or sometimes early stage you bring in somebody who is definitively the worst person in the company but they're good. And I think if you just make a habit of that, all of a sudden you just bring the talent bar of your company down so quickly without you even realizing it because they passed the bar, they were good enough, they're better than some of the folks here. And so we make it a point to say, "Is this person actually raising the overall talent bar of this company?"
Brett: Oh, on your interview, you're not asking the candidate who am I better than?
Guest: No.
Brett: because I thought that would be very interesting.
Brett: I was like, how truthful would they be.
Brett: And then we bring them in a head to head. Like you just do a battle for your job.
Guest: Exactly.
Brett: Like, hey, this person thinks they're better. Like let's do a quick test. No, we do it in like kind of the debrief with a interview panel just to make sure that we're never bringing in somebody that we feel like it's just good enough and just like kind of pass the bar but would probably be like the bottom rung on the ladder on the team. We wanna say no, that they're really good. They're like better than all those folks. They're like amazing. And we want people that are excited to bring in people that are better than them. Like hopefully every person I bring in is better at the job that they're doing than I would be. And hopefully everyone that's on those interview panels is excited to bring people in that's gonna elevate that group, that team.
Brett: Is that how you avoid the dynamic of just desperation hiring? I mean you're starting to grow really quickly.
Brett: There's such a temptation to bring in somebody because...
Brett: I don't think it can be emphasized enough.
Guest: It's so hard especially, and it's easy to say no to bad candidates, horrendous candidates but solid. Yeah, but the good candidates that pass, there's nothing wrong with them. They're good and they pass the interview and we really like them but they're not great and they're not really gonna make the company definitively better. You just have to say no at this stage especially you have to say no. And the other thing that we think about is do they make it more likely that we'll get the next great candidate? If they make it less likely you'll get the next great candidate then you're getting yourself in this vicious cycle where you're making your workplace a less and less attractive place to work for the best talent. And so that is how you stay disciplined about it. And I've never regretted it. I've never regretted waiting because there's always somebody better and every time you're on the fence and you're like, "I don't know if they actually raised the bar," just wait 'cause there is somebody better from a talent perspective. It feels at least from a distance in the last call it, three or four months that the amount of people that are joining the company, even at a relatively early stage has ticked up dramatically.
Brett: It feels like there's this talent vortex that's starting to get formed. Is there anything else you've done that's sort of gotten you to sort of that setup?
Guest: I think we evaluate every candidate on their ability to recruit the next candidate and we consider that very highly. And that could be them actually being somebody that goes out and makes phone calls and recruits or also just being somebody who's so good that we know when they join they're gonna bring other people with them or other people are gonna be more likely to join 'cause they see that.
Brett: So how do you figure that out?
Guest: Some of it is what does their network look like? And you know, you can talk to them about like who your network is. We can do back channeling, we can do reference tracks, we can see like do they have deep network of people that respect them? A lot of it is like personality. I mean are they people you wanna spend all day with? Are the people, you know, we're all in person in the office every day in San Francisco and so is this somebody that when we bring a candidate on for lunch, they're gonna be more likely to join because they had lunch with this candidate? That factors a lot into our decision, which is a lot of like energy and enthusiasm of the person.
Brett: Energy, enthusiasm, just being friendly and a nice person.
Guest: Some of it is like profile of like does their LinkedIn look like, oh yeah, I'm really excited to work with that person. They've worked at great companies, they've accomplished a lot, like I can't wait to work with this person. And so we look at candidates through that lens. Like every single person that joins we think about if this person joins or is it more or less likely that we're gonna get the next person that we really want. And there are some candidates that that has been a tiebreaker on, hey I think this person might be good but I'm just not sure that if they were here, the next person that comes in, do we want them to have lunch with that candidate one-on-one and we think that's gonna like make the candidate really excited about joining. And I don't know that every company really thinks about every hire in that way of like having a positive or negative impact on the next hire. And I think that's why you get kind of a flywheel, is you start to stack people that are just awesome to spend time with, that are really, really talented, that have a great background, that are really engaged with their community and their network. And as those people start to join, they talk to their friends and you bring candidates in and you're more likely to close them. You're more likely to attract good talent.
Brett: So are you finding you have an outlier referral rate into the company?
Guest: Yeah, we actually formalized referrals because we felt bad on how many referrals there were and no one was getting like really rewarded for it other than like bringing great people in is its own reward in many ways.
Brett: Right, well it's gonna create a lot of shareholder value for themselves.
Guest: Yeah, exactly. But yeah, there's some folks on the team that have done quite well financially that are probably making more money from referrals than they are from their salary.
Brett: I always thought referrals should be done in equity and not salary.
Guest: Yeah, I mean we could explore that. It's been great to really weaponize that and I think every person that's joined, we're starting to formalize that more and say like, hey, you know, people bring in people. And we're also getting to the point where because the company's doing really well and we've raised great funding, it's easier to outreach to your friends in your network. You're not joining like, hey there's four guys in a garage and I think you should be the fifth. It's more, hey there's something really special happening here and there's all these external signals that this is in fact a rocket ship. So as that becomes more and more true, it becomes easier to bring somebody in knowing that you're not making crazy, crazy recommendations to them to take a risk that maybe might not be it.
Brett: Now the other interesting thing on the talent side, at least in the past six months is now you're starting, even as a very early stage company, to aggressively build out the go-to-market function. What can you sort of say about how you think about staging that?
Guest: Yeah, we've been a little contrarian there in that a lot of times this, the go-to-market function just kind of evolves gradually. It's founder-led sales for a really long time and then you kind of bring in people onesie twosies, you bring in an AE and then you bring in maybe somebody that does a little bit of growth and you just kind of like develop this team. We kind of broaden in a fully baked team and we continue to scale that team very rapidly. I think one is just the rapid adoption of our product and the customer love we're seeing gives us a lot of confidence that this is working and we just need to grow to hit it to the size of the market. We know we're not TAM Limited, people buy this stuff and they're buying our stuff so it's really just a matter of time. And three, now that we're getting out there, the demos are starting to really stack up to the point where it's actually pulling us along and there's no time on the calendars left and we need the support. And so all those things kind of happened fairly close together, but we definitely made the bet before we had the market traction that this is working, we know it's working, we know the market's massive, we're gonna go and build this out knowing that we've got a limited amount of time to I think really seize the market because there's gonna be a early stage competitor ServiceNow, somebody is going to build an next generation ITSM and we've got a short amount of time I think to position ourselves as we're the ones to do it.
Brett: Do you think just given the rate of competition and startup creation, et cetera, et cetera, that that sort of land grab dynamic today in 2025 is much more substantial than three years, five years, seven years ago?
Guest: Absolutely, the land grab is happening and I think because there's so much of that top down pressure from boardrooms execs to implement AI solutions, a lot of large organizations are gonna make their bets now on startups that are fairly early stage. And yes, it's gonna take a long time for implementation and the sale to go through, but you could get boxed out of a lot of these accounts if you're not moving quickly. And so it has created an environment where you wanna get in front of as many customers as possible, even if you know the product might not be there or you know that it's gonna be a very long sales cycle, you gotta get in now and it is a moment in time that you have to take advantage of.
Brett: Are there other structural things like that that are informing the way that you're executing the business, that things are changing in this way or that way in 2025 and that means we need to build this company in a very specific way?
Guest: I think the biggest one is that there are category leaders that are emerging and that emergence is starting to feel sticky and that you're starting to see, oh this is the company that is the next ERP company and this is the company that's building the new .
Brett: The sort of X dynamic.
Guest: Exactly, and people are claiming the mantle of this is the next version of X and that dynamic is really exciting but it's also scary because you wanna make sure that you're that and you don't wanna be the number two player. You don't wanna be the number three player. And that's really driving us to move very, very fast, building out the go-to-market, building out the product, going up market much faster, raising funding much faster. Like everything is aligned around this idea that we have a window, we have a moment and we need to go after it now and we don't know how long it's gonna be there. You know, the companies that kind of took over in the cloud transformation, they got a foothold and they just became so dominant and the number two players were so small relative to the number one players. And I think the same thing is gonna happen in AI and in this case a lot of times it might be the incumbent that still wins, but there are gonna be AI native competitors creating a massive, massive value in these categories. And I don't know that it's gonna be a diverse, you know, evenly split market. I think there's definitely gonna be a one player that dominates.
Brett: It's interesting 'cause we could just be at the very head end of this secular change, but the thing that's felt a little bit counterintuitive is how much startup opportunity there has been in this technology transformation in the past two years. That it feels like in every one of these categories, while it's still very early, there is a really exciting next gen startup that has a chance to really go after this category. What's kind of your working theory building software, delivering it to customers around why there is an opportunity for new startups as opposed to pick any system of record company, you slam an LLM on the side and now they owned AI plus X or AI plus Y.
Guest: My biggest theory here, if you look at these enterprise software companies that dominated in this previous era, it was because of the configuration flexibility and it was very hard pre-LLM to deliver that same kind of configurability, flexibility, customization while delivering on product simplicity.
Brett: Which is where startups generally begin.
Guest: I think that's exactly right. So startups that come in these new markets, they do it with simplicity like what Linear does to Jira, right? A simpler, better user experience. And I think for these large enterprise players like Workday and ServiceNow and Salesforce, their value proposition is so much around the customizability and not the simplicity. And so if a startup's gonna compete with that purely on simplicity, they're gonna miss on the configurability, but AI gives them a chance to compete both on simplicity and user experience and also configurability because you're using AI to set these configurations or maybe achieve value propositions that these other platforms just can't touch. And while it's theoretically possible for these large platforms to add these AI capabilities and they are, they have this classic innovators dilemma that it makes it hard to steer the big ship to add these capabilities while still protecting their existing product and revenue and not making drastic changes that are not backwards compatible. And so they're just naturally going to be slower at adapting the full capabilities of this new wave of tech and startups are there to take advantage of it and can so much faster reproduce these capabilities that have taken decades for other companies to build out. We built ticketing in months and that used to take years. You can multiply that across all the different capabilities that we're trying to go after in all these platforms and that's what's happening.
Brett: So I wanna wrap up where we always do, which is with the question, when you think about who has taught you the most and shaped you the most as a founder and product person, who sort of comes to mind and what did they teach you that is not a family member?
Guest: I benefited a lot from this dynamic at Verkada where you have these two leaders, the CEO, Filip, the chairman, Hans, and they had a often a unique differing perspective on product. Hans was very interested in looking at these existing established markets and building a better version of products for markets that already existed. Filip often looked at a lot of these problems from first principles on what would be built if we were building it today and how might it look different from what's come before. I think both perspectives are really, really valuable and often I have both in my head. And from that experience working at Verkada for so long, I'm able to kind of have both voices and say, okay, how do we go after a category and know that there's a market there and build something better, but also question why that category exists, how it came to be, does it still make sense anymore? It's kind of like weighing those two is more valuable than adopting either one wholesale. I think a lot of companies struggle to create new categories from scratch and they kind of ignore the fact that we should maybe look at why there's a category called ITSM and maybe look at that spend because there might be something that the history is telling us there. And then other companies say, "Oh we should forget about ITSM, we should just like build something new that doesn't think about ticketing at all," are also throwing away a lot of the value that's come before. And so I think looking at both options of yes you wanna build something better, but you also want to think about like why this category exists and that maybe there's some truth to the history and the history is telling you something and its signal and not something you should just ignore and build something from scratch.
Brett: So you're sort of, you're touching on this a little bit, but if you think about where Serval is today, how are those two ideas and the tension between them best expressed?
Guest: Yeah, exactly. So Serval is a combination of these two ideas, one of which is build a better version of something that's existed before, which is build a better version of ITSM where there's a massive market and a lot of customers that buy ITSM. And also build something that's never existed before, which are AI agents that build IT automations and answer help desk requests. And we are combining both of those, the first principles, what would you build today for IT if you could build anything and the historical look at TAM and where there's an existing opportunity of ITSM and merging both of those, building an ITSM with a layer of AI on top of it that that both replaces your system record and automates these help desk requests and helps IT build these really powerful automations.
Brett: Nice, great place to end. Thank you so much for joining.
Guest: Thank you Brett.
### The compensation rules to follow (and break), according to experts
URL: https://review.firstround.com/the-compensation-rules-to-follow-and-break-according-to-experts/
Last updated: 2025-12-04T16:57:24.000Z
Compensation leaders from Clay, Google and Instacart share the rules early-stage founders can break — and the few they should actually follow.
_This post is for subscribers only._
### What Early Stage Founders Should Know About Comp: The Rules To Break (And A Few You Should Actually Follow)
URL: https://review.firstround.com/what-early-stage-founders-should-know-about-comp-the-rules-to-break-and-a-few-you-should-actually-follow/
Last updated: 2025-10-23T22:12:01.000Z
It seems that, simultaneously, there are many rules and very few rules about employee compensation. Benchmarks, structures, things you can and can’t ask — most of which early-stage founders are left to navigate themselves, coming up with a package for their first hires they feel makes the most sense.
The goal is simple: Bring on the best talent you possibly can. Getting there is far more opaque.
How should you structure the equity and cash in your offer? Should different roles get different comp strategies? Do you need a comp strategy at all, as such an early stage company? These are all questions that founders ask themselves before sliding an offer sheet across the table.
At The Review, we believe the best lessons come from those who have done it themselves — and lived to share the learnings. So we’ve compiled valuable insights from industry leaders who’ve built and scaled compensation strategies at some of the world’s top companies. We’ve broken their advice down into the supposed “rules” you can feel free to ignore, and the ones that actually do make sense to follow.
Our expert roster includes:
- [**Kaitlyn Knopp**](https://www.linkedin.com/in/kaitlynknopp/?ref=review.firstround.com), **Pequity** (formerly **Instacart** and **Google**)
- [**Varun Anand**](https://www.linkedin.com/in/vaanand/?ref=review.firstround.com), **Clay**
- [**Qasar Younis**](https://www.linkedin.com/in/qasar/?ref=review.firstround.com), **Applied Intuition**
- [**Colleen McCreary**](https://www.linkedin.com/in/colleenmccrearychiefpplofficer/?ref=review.firstround.com), **Confluent** (formerly **Credit Karma**)
- [**Tyler Hogge**](https://www.linkedin.com/in/thogge/?ref=review.firstround.com), **Pelion** (formerly **Divvy** and **Wealthfront**)
- [**Stephanie Berner**](https://www.linkedin.com/in/stephanieberner/?ref=review.firstround.com), **Smartsheet** (formerly **Atlassian**)
- [**Udi Nir**](https://www.linkedin.com/in/udinir/?ref=review.firstround.com) (formerly **Instacart and eBay**)
- [**Molly Graham**](https://www.linkedin.com/in/mograham/?ref=review.firstround.com)**, Glue Club** (former **Facebook** and **Quip**)
## Rules to break
When it comes to comp, there’s a lot of advice to sift through — and not all of it is suitable for early stage. What works for a company with hundreds or even thousands of employees won’t translate to a team of ten. Here's some common wisdom as an early stage founder you can consider ignoring.
### Over-giving equity to land top candidates
It’s one of the oldest startup compensation strategies: promote your company’s upside and use [equity](https://review.firstround.com/the-right-way-to-grant-equity-to-your-employees/) to woo the best talent. In negotiations, candidates will expect it as part of any package, and will usually expect it to be higher the earlier the company is — especially if you’re trying to convince them to leave the stability of their current role and take a bet on you and your company. But according to [**Kaitlyn Knopp**](https://www.linkedin.com/in/kaitlynknopp/?ref=review.firstround.com), who has built [compensation](https://review.firstround.com/podcast/how-to-handle-comp-challenges-at-every-startup-stage-kaitlyn-knopps-advice-from-pequity-instacart-cruise-google/) programs at companies including **Instacart**, **Cruise**, and **Google**, and is now the co-founder of HR automation platform **Pequity**, founders shouldn’t assume they have to sell the farm.
“I see a lot of early founders who, because they're desperate for talent, come to the negotiation table and lay out a ton of equity — because oftentimes they can't afford a lot of cash,” Knopp says. “But a good thing to remember is that this phase will be short-lived. Yes, you do need that talent, but you are offering a lot just by giving someone any equity in the company.”
**Knopp suggests, as a rule of thumb, that your first ten hires shouldn’t exceed 10% of the total equity pool.** Thougheven that, she notes, can be aggressive. “That’s assuming you’re giving 1% to each person. To give perspective, a very late growth stage company might give 1% to their newly hired CEO. So that is a lot of equity to offer to someone early.”
Knopp cautions against assuming those early shares will dilute over time that they’ll hardly matter. “Those decisions come back to haunt you. I've had to work with different organizations that have fully distributed their entire equity stock option pool at a very small employee count. They have to pull equity off investors and founders. It's not a fun process to go through.”
Her advice: Outline your comp philosophy (more on that below) and stick to it. “You have more leverage than you think you do.”
Educating candidates on equity can help them understand its value, both now and in two, five or ten years. That’s according to [**Molly Graham**](https://www.linkedin.com/in/mograham/?ref=review.firstround.com), who helped structure [comp](https://review.firstround.com/a-counterintuitive-system-for-startup-compensation/) at **Facebook** and **Quip.**
“No matter how smart the people who walk in the door, many won’t understand how to value their equity,” she says. “At Facebook we put together a guide to understanding your equity when we made offers. It was simple to do and made people feel more comfortable with the offers we were making.”
### Paying at the top of the market (just because you can)
While it's more common for early-stage founders to over-index on the equity side of things, cash compensation has also increased in an attempt to land talent. [**Qasar Younis**](https://www.linkedin.com/in/qasar/?ref=review.firstround.com), co-founder and CEO of **Applied Intuition**, says he’s seen new hires receive eye-watering starter salaries that become, as a company grows, “not sustainable.”
“Historically, the right way to incentivize in startups was low cash, high equity, and get rich through the growth of the stock,” he says. “Because of large fundraises, which really come from lots of funds existing — which has a downstream impact — founders have a lot more cash on hand. They overpay.”
Younis believes this can lead to compensation strategies that simply don’t make economic sense. “You can look at [Levels.fyi](https://www.levels.fyi/?ref=review.firstround.com) — you often get paid more to go to a startup than to Google or Facebook, and those companies generate billions in cash flow every month,” he says.
> Discipline around salaries for early hires isn’t about austerity, Younis argues, but integrity. When founders raise massive rounds and, in turn, inflate compensation, they sever the link between value creation and reward.
“The incentives are not there to build a functioning business. That's the reality,” he says. “We’ve tried to keep that focus: make this a viable company. Being cost-conscious is one of our core values. And it’s worked out.”
[Younis’s approach at Applied Intuition](https://review.firstround.com/podcast/inside-the-ex-yc-partners-15b-self-driving-car-company-qasar-younis/) has been to manage the balance between stewardship and reward. It's about establishing the right early comp so that you have room to reward results. And hopefully the equity is what ends up catapulting total comp. “The vast majority of our employees are now at the 99th percentile of compensation, but they’re not there because of their first offer,” he says. “They’re there because the stock price grew. That’s the right way to do it. You get stock while it’s cheap, you contribute to the company’s success, and you get rich over time.”
### Waiting for review season to talk about pay
**Clay** co-founder [**Varun Anand**](https://www.linkedin.com/in/vaanand/?ref=review.firstround.com) believes updating comp at review cycles is arbitrary. "Why do you have to wait for a performance review?" he asks. "It benefits the company to save some money on the time that person is higher performing than what you're paying them."
But at Clay, they've taken a far more [fluid approach](https://review.firstround.com/podcast/inside-clays-unconventional-path-to-1-25b/) — recognizing impact in real time and rewarding that with off-cycle comp increases.
“We are very proactive in giving people more compensation if they are truly high performers,” Anand says. “Sometimes people have just been here for a few months when we adjust comp. It’s because we noticed they’re defying the expectations we had when they joined. We’re not trying to wait for some formal performance review to make that happen. We do it immediately.”
Anand’s philosophy on separating performance reviews and compensation is informed by his own past experiences as a frustrated employee. “I’ve been at companies where I felt like a top performer, felt I was warranted more compensation, but the process of getting it was painful. You ask for it, they tell you to wait for the performance review and it leads to embitterment.”
Anand believes it’s the wrong strategy for getting the best out of your people. “Being proactive helps you in the long-term by building a really strong relationship with this person, and long-term loyalty,” he says. “Feedback is a gift to you to help you improve. Compensation is fluid because as things change, as you perform, we should reward you and you should get more.”
To ensure comp remains fair and equitable across the board, at Clay they ground every adjustment in data, combining benchmarking data with measurable results showing how a top performer has exceeded expectations. Another approach is to establish a program for founder grants, where on a regular basis stock is awarded to top performers.
“We don't have a formal structured program like that,” Anand says, “but I think that in every case we can justify comp decisions, because we’re rewarding those who are exceeding the expectations of where they were before, warranting more.”
At Clay, they also conduct a general overview of who the top performers are across the org regularly, so they can notice and reward people in the moment.
> We’ve built a company that is people-oriented, so they’ll stick with us for the long term. We’re trying to build an enduring business, and how we treat people is a huge part of that.
### Treating big tech as the blueprint
The comp structure you design needs to reflect the stage, scale, and constraints of your startup — which means you won’t be able to simply replicate what someone else is doing.
“Most places don't publish their comp formulas or rationale because it is so bespoke,” says Knopp. “I could decide to only ever pay people $100K in cash and everything else in equity. That could be a valid comp program, and it would show up in salary surveys. But that doesn’t mean *you* should be doing that.”
Adopting Google or Facebook’s pay formulas, equity bands, or bonus schemes without context means you’ll risk over-engineering a system that doesn’t fit your stage, misallocating equity or cash, and creating inequities you’ll later have to unwind. When it comes to comp, you need to build something customized and organic to your company, which means digging into research.
“Read as many resources as possible,” Knopp advises. “Read up on psychology, in particular psychology and reward behavior and how you can incentivize people. Having your own framework is far more powerful than seeing that Google does, for example, total direct comp minus this percentile of salary, plus this bonus cash, then blindly copy-pasting that formula onto your org.”
## Rules to follow
Strip away the above-mentioned generalizations myths and what’s left are the rules that hold up under pressure. These practical principles will help you to make compensation fair, defensible, and scalable from day one.
### Define your comp philosophy early
While it might feel like you don't need a comp philosophy at 10 or 15 employees, Knopp believes it saves headache very shortly down the line. "Companies suddenly find themselves navigating a maze of tough, emotional conversations that could've been avoided."
Here are a few questions to ask yourself when determining your own philosophy:
- What are the company values, and how can these be reflected in comp?
- What will be the balance of equity versus cash?
- Where will we sit on the transparency spectrum?
- What percentile will we aim for our employees to hit?
- How will top performers be rewarded?
- Is the philosophy fair, simple, and defensible?
- Is it scalable?
Introducing salary tiers, too, will make for a smoother ride as you grow.
> People want to get promoted and move up way quicker than you're usually ready for.
“A framework gives you wiggle room. You can say, ‘Okay, we will move you from the first level to the second. Here's some comp attached to it.’ It's consistent, defensible, and explainable.”
What does it look like in practice? You’ll need to define three to four levels that reflect experience and scope of contribution, aligned with company values. Knopp suggests the following:
- **Level 1: Junior / entry-level. 0-3 years experience.** Early in their career/new to the function. Requires more guidance and mentorship.
- **Level 2: Mid-level / experienced individual contributor.** 4-7 years experience. Solid practitioner who can execute independently. Doesn’t require constant direction.
- **Level 3: Senior / expert. 8-12 years experience.** Seasoned professional who brings strategic depth and can mentor others. May begin to define processes or best practices for their function.
- **Level 4: Principal / leadership.** 10-15+ years experience. Deep expert or early functional leader, may be one of the first managers in the org. Owns a discipline or domain outright. May receive performance-based equity or leadership bonuses.
Once you have defined tiers, use market data to cross-check your salaries are right-sized (resources like [Radford](https://www.aon.com/en/capabilities/human-capital-analytics/radford-mclagan-compensation-database?ref=review.firstround.com) and [Mercer’s](https://www.imercer.com/compensation-planning-solutions?phone=googlebrand&gad%5Fsource=1&gad%5Fcampaignid=2024626931&gbraid=0AAAAADn5ukgibClOebvB5NK6I3qTCLi8E&gclid=CjwKCAjwup3HBhAAEiwA7euZutg6bcZnWmvrZwAjcsRwN7wO8WlJD8OC9ojTOjR6K5G%5FdL4hu4Q0NBoCKIkQAvD%5FBwE&ref=review.firstround.com) make it easy to benchmark roles). Decide whether you’ll target the 50th percentile of the market — the market median — or a different point on the spectrum that fits your philosophy.
Deciding exactly where you sit can be difficult. [**Udi Nir**](https://www.linkedin.com/in/udinir/?ref=review.firstround.com) is an engineering alum of **eBay** and **Instacart**, and while at Instacart, he co-led a taskforce into [compensation strategy](https://review.firstround.com/how-instacart-uses-data-to-craft-a-bespoke-comp-strategy/).
> Put yourself in a strong position to win a candidate, but don’t expect to have the best offer every time. The highest comp doesn’t always win. We’ve seen that paying fairly, crafting an exciting role and conveying a compelling mission seals the deal.
A clearly defined comp philosophy might take some work now, but your future self, who’ll need to be able to justify the comp packages of more and more employees, will thank you. Knopp is sure of it.
“It helps you frame the conversation for why one person gets more equity than another, for example. You can defend a lot of these decisions, especially as you continue to grow.”
### Try out candidates on a contract-to-hire
There’s a myth that the best talent won’t consider [contract-to-hire](https://review.firstround.com/fractional-exec-hiring-guide/) — but Knopp is quick to dismiss it. In fact, she says there’s no better way to assess long-term compatibility between candidate and company.
> Pre-pandemic, people assumed the best talent wouldn’t consider contract work, but that’s no longer true. We’ve had senior engineers and designers take on 10-hour-a-week contracts — and deliver 10x value.
With a contract and NDA in place, Knopp says contract-to-hire is a powerful way to find the right people with the skills and experience you need to drive growth in the near-term while assessing long-term fit.
“You can test each other out for X number of days or months. Then at the end of it, you can talk about if this should be a full-time relationship,” Knopp says, adding the benefits are two-fold.
“One, you get help immediately when you're a small startup. Two, it gives the potential full-time employee a chance to build relationships, and to picture for themselves the value. Explaining your philosophy, mission, vision, values, is not the same as being in the day-to-day with the team, seeing the interactions, seeing how customers are reacting, seeing the problems that you face.”
Such an arrangement also has practical benefits, especially for startups constrained by cash.
“All of our first hires, who are now full-time employees, began as contractors,” Knopp says. “We bootstrapped the first year, so we could not afford to pay engineers full salaries. So we issued equity and made them contractors. It worked out.”
Knopp also dismisses the idea that just because someone is on contract means they’re not fully invested in the product, the company, or the vision.
“I know there's the question, ‘Are they fully committed? Will they give you their all?’ We haven't run into the issue,” she says. “I've seen it be a valid option for senior people who are already at companies who just want to do 10 hours a week. And you can still get a lot of value from the 10X-er working 10 hours a week for you.”
### Be transparent and educate (or otherwise be prepared to answer questions constantly)
It’s up to you how you’ll approach comp transparency at your startup. But [**Colleen McCreary**](https://www.linkedin.com/in/colleenmccrearychiefpplofficer/?ref=review.firstround.com), Chief People Officer at **Confluent**, and formerly **Credit Karma**, says [opacity comes with a cost](https://review.firstround.com/opening-up-about-comp-isnt-easy-heres-how-to-get-more-transparent/).
When she started at Credit Karma, she was tasked with overhauling the company’s [approach to comp](https://review.firstround.com/podcast/people-leaders-arent-the-ceo-of-culture-theyre-product-managers-credit-karmas-colleen-mccreary/). “No one understood how they were paid, how additional equity grants were made, or how they were going to get promoted,” McCreary says. “It was this black box — somebody makes a decision, then money just shows up in your account, and you’re left to decide whether you want to stay.”
McCreary worked to remove the shroud of mystery that hung over compensation. “I got up at an all-hands meeting and walked through every piece of it,” she says. “How we pay, what Radford is, what percentile we target, which companies are in our comp set, how often we review — everything.”
McCreary also built a communication loop that reinforced clarity at every touchpoint on the employee journey: orientation sessions for new hires, a Slack channel dedicated entirely to compensation and equity questions, and internal resource pages that made information easy to find. This approach is not only beneficial for employees, who are more empowered on the topic, but for founders and other leaders, who can spend their time and resources on other things instead of haggling over salaries.
> If you don't consistently provide clarity and context, all you're going to end up doing is talking about compensation all of the time.
Graham agrees.
“Ask anyone who has managed a team of over 10 people — everyone finds out eventually, and the problem is that feelings about compensation are relative, not absolute,” she says. “You might be living really well. You might be in the wealthiest 1%, but if there’s someone sitting next to you who makes twice as much, you’re going to feel insulted. It’s just a fact. So take that into account when you’re creating your plan. You need to be able to explain (and defend) everything through a logical set of guidelines.”
### Calibrate according to function (one size does *not* fit all)
What motivates someone in sales to excel won’t necessarily move a product manager — or a customer success leader, or an engineer. You’ll want to consider how different roles are incentivized based on their goals when laying out your comp strategy. Let’s take a look at some examples.
**For sales**, there’s a formula that Graham recommends. “We implemented this sales compensation plan that [Jason Lemkin](https://www.saastr.com/a-framework-and-some-ideas-for-your-first-sales-comp-plan/?ref=review.firstround.com) shared for setting initial sales compensation numbers.” To break it down:
- **Set a competitive base, but make it pays for itself.** Offer sales hires a strong base salary, with the expectation that they’ll generate enough revenue to cover their own costs (including salary and benefits) before earning any commissions or bonuses.
- **Double the incentive once targets are met.** If most of your reps (approximately 80% or more) are consistently hitting their goals, you can afford to offer a more generous commission — around 20-22%, compared to the standard 10-11%.
- **Reward cash-in-hand deals more heavily.** To keep cash flow top of mind for reps, pay higher commissions on deals that deliver cash upfront and slightly less for those that don’t. This nudges them to prioritize bringing in cash faster while still driving revenue.
- **Pay commissions only when cash is received, not at contract signature:** While reps might grumble about it, they’ll respect the logic. It reinforces discipline across the team.
If sales compensation is about driving the motivation to close deals, then **customer success comp is about turning that deal into a happy, long-term customer.** [**Stephanie Berner**](https://www.linkedin.com/in/stephanieberner/?ref=review.firstround.com), **Atlassian's** former SVP of Customer Success, and now Chief Customer Officer at **Smartsheet** says most [CS teams ](https://review.firstround.com/founders-guide-building-customer-success/)operate best on a base-plus-bonus model rather than pure commission. The key is ensuring incentives mirror the team’s true responsibilities — and evolve with scale.
“I’ve seen the most impact with bonus structures that include commercial KPIs like renewal percentage, expansion, or adoption metrics,” she says. “I’m a fan of that approach instead of explicit renewals quotas, unless you have a dedicated renewals team.”
In short, comp should clarify what the company expects from customer success. Are CSMs accountable for closing renewal transactions? Or for ensuring product adoption and long-term customer health? The outcomes to which you tie KPIs and comp are where your team is going to put the majority of their focus, so choose wisely.
“The thing companies get tripped up by is when you put a significant amount of comp against renewals or expansion quota,” Berner says. “If you want your teams focused on only getting renewals across the line, that is where they’ll focus. Instead, if it’s important that your CS team is paying attention to product adoption, use cases, or integration with other workflows in their business, then you need to incentivize that behavior.”
**Product teams**, by contrast, have historically existed outside the world of variable comp. But former **Divvy** and **Wealthfront** product lead [**Tyler Hogge**](https://www.linkedin.com/in/thogge/?ref=review.firstround.com), now a partner at **Pelion**, challenges that orthodoxy, introducing a model that borrows (selectively) from the sales playbook to drive greater alignment across revenue and product.
“It starts with identifying a business outcome for each product a PM is working on, and articulating the metric most closely aligned to that outcome,” he explains. “You then build an incentive structure that rewards PMs for hitting it. My two cents is that while a cash component could work, it should lean heavily towards equity. Great PMs are builders— builders want a chance to have equity in what they build.”
By tying incentives to measurable business outcomes (for example, if ARR increases following feature adoption, or there’s an improvement in retention following a product release) Divvy pushed its PMs to operate with more urgency and clarity.
“Absent incentives, I’ve found that PMs often don’t move with enough urgency or engage in the often awkward conversations about scoping that need to happen with key stakeholders, ”says Hogge. “Focusing on outcomes with aligned incentives keeps the scope from getting bloated, so they don’t make long-term investments on projects and features that are nice-to-haves, but don’t ultimately tie back to a larger goal in a meaningful way.”
Compensation should reinforce the specific value a function contributes to the wider org. Consider the deeper motivations of employees according to their specific role and team.
- **Sales** thrives on immediacy and ownership, so comp should fuel performance and discipline in equal measure.
- **Customer success** depends on relationships and retention, so comp should reward long-term value, not short-term wins.
- **Product** lives at the intersection of vision and execution, so comp should spark urgency and shared accountability for outcomes.
### The pivot that paid off: How fal found explosive growth in generative media | Gorkem Yurtseven (Co-founder and CTO)
URL: https://review.firstround.com/podcast/the-pivot-that-paid-off-how-fal-found-explosive-growth-in-generative-media-gorkem-yurtseven-co-founder-and-ceo/
Last updated: 2026-04-29T03:45:44.000Z
Gorkem Yurtseven is the co-founder and CTO of fal, the generative media platform powering the next wave of image, video, and audio applications. In less than two years, fal has scaled from $2M to over $100M in ARR, serving over 2 million developers and more than 300 enterprises, including Adobe, Canva, and Shopify. In this conversation, Gorkem shares the inside story of fal's pivot into explosive growth, the technical and cultural philosophies driving its success, and his predictions for the future of AI-generated media.
**In today's episode, we discuss:**
- How fal pivoted from data infrastructure to generative inference
- fal’s explosive year and how they scaled
- Why "generative media" is a greenfield new market
- fal's unique hiring philosophy and lean <50-person team
- Building a brand that resonates with developers
- What the world looks like in 2027 when AI-generated video becomes mainstream
- And much more…
**Where to find Gorkem:**
- [LinkedIn](https://www.linkedin.com/in/gorkemy/?ref=review.firstround.com)
- [X / Twitter](https://x.com/gorkemyurt?ref=review.firstround.com)
**Where to find Todd:**
- [LinkedIn](https://www.linkedin.com/in/toddj0/?ref=review.firstround.com)
- [X / Twitter](https://x.com/tjack?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**References:**
- Adobe: https://www.adobe.com/
- Amazon: https://www.amazon.com/
- Anthropic: https://www.anthropic.com/
- Base10: https://base10.vc/
- Black Forest Labs: https://blackforestlabs.ai/
- Burkay Gur: https://www.linkedin.com/in/burkaygur/
- Canva: https://www.canva.com/
- Clay: https://www.clay.com/
- Coinbase: https://www.coinbase.com/
- Cursor: https://www.cursor.com/
- DALL-E: https://openai.com/dall-e-2
- Databricks: https://www.databricks.com/
- Dylan Patel: https://www.linkedin.com/in/dylanpatelsa/
- fal: https://fal.ai/
- Google DeepMind: https://deepmind.google/
- LLaMA: https://ai.meta.com/llama/
- OpenAI: https://openai.com/
- Oracle: https://www.oracle.com/
- Perplexity: https://www.perplexity.ai/
- Shopify: https://www.shopify.com/
- Snowflake: https://www.snowflake.com/
- Sora: https://openai.com/sora
- Stable Diffusion XL (SDXL): https://stability.ai/stable-diffusion
- Stability AI: https://stability.ai/
- Together AI: https://www.together.ai/
All images and videos generated using models run on fal.ai
**Timestamps:**
(01:43) The generative media industry
(02:29) From $2M to $100M ARR: fal's explosive year
(04:06) How Gorkem met co-founder Burkay Gur
(05:38) The hardest decision that saved the company
(09:52) Spotting the opportunity in generative media
(13:28) Turning Todd into George Clooney
(15:29) The early adopters of the first fal product
(17:54) The transition from toy to tool
(19:27) Why 2025 is the year of AI-generated video
(21:44) Staying nimble as a 45-person company
(24:42) Predicting AI-generated film in 2027
(27:24) Why generative media is a greenfield market
(30:33) fal’s greatest optimization wins
(34:42) Why fal has 500 Slack channels
(36:02) Competing in a fast-moving, fragmented market
(42:06) How to build a world-class team
(47:24) Learning sales as a technical founder
(50:55) How fal built a brand without a marketer
(53:21) The story behind "GPU Rich / GPU Poor"
(54:22) Inside fal’s rule-breaking playbook
(56:09) The hardest part of scaling fal
Gorkem Yurtseven: We even had paying customers. We did both products for a while at the same time, we tried to convince each other like the pivot is not as drastic as it actually is.
Todd Jackson: Hey everyone, it's Todd Jackson. I'm a partner at First Round for today's episode. I'm excited to sit down with Gorkem Yurtseven. He's the founder and CTO of Fal, a generative media platform for building with AI image, video and audio models. I invested in Fal's seed round in 2022, but back then Gorkem and his co-founder, Burkay, were building a completely different product for data teams.
Gorkem Yurtseven: We were doubling down on this data infrastructure. We thought at the time, compute was gonna be big.
Todd Jackson: But when Stable Diffusion emerged, they made the tough call to pivot, walking away from paying customers.
Gorkem Yurtseven: We tried to explain this to people because it was so new. No one got it. We actually had a hard time raising our Series A.
Todd Jackson:
They made these models run so fast that when they showed me a demo turning my face into George Clooney, it literally looked like a video. Since then, they've grown from 2 million in ARR to over a hundred million.
In just one year, serving 2 million developers and raising three funding rounds in 18 months.
Gorkem Yurtseven: Investors criticized us that this revenue may not be durable. So we took enterprise sales very, very seriously.
Todd Jackson: In our conversation, we dig into their pivot story, how they stay ahead in this fast moving market and what's next for AI video.
Gorkem Yurtseven: Traditional marketing doesn't work for developers. People think it's cringe. We just jumped onto the meme and created these two hats. He ran out of the GPU poor hats like way before the GPU rich ones.
Todd Jackson: Let's dive in. Gorkem, welcome to the show.
Gorkem Yurtseven: Thank you so much. Thanks for having me, Todd.
Todd Jackson: We're going to dig into a bunch of different topics today, but just to make sure everyone has enough context, could you start by explaining at a high level what Fal does?
Gorkem Yurtseven: Fal is a generative media platform for developers. We host image, video, and audio models as easy-to-use APIs using our inference engine behind the scenes and other developers working at other big companies or solo developers build products on top of these easy-to-use APIs.
Todd Jackson: I think that you guys really pioneered this category of a generative media platform and it's just been an incredible year. I know over 100 million in ARR now, over 600 models, two million developers, 300 plus enterprises, and a series A and a B and a C all in the last 18 months. It's been a crazy year. Can you share a little bit about what the business was like this time last year, one year ago versus today?
Gorkem Yurtseven: We thought we were growing fast, but we were only at two million ARR maybe in August and we had a slow summer. I think that in general, the space, the image model space had a slow summer and it was right after Stable Diffusion XL was released in April I believe, and then for the whole summer it was very, very slow and there was basically no new model releases, everything was getting cheaper and cheaper. Our usage was growing a lot, but because everything was older, people were able to run them more efficiently including us, so our revenue was hovering around two million. And then first the Flux Model family was released. That was really good for open source and for us, and then many other models right away were released. We had a really good launch with Flux models and then video models that's really big for our business. I think around October was the first video model that was commercially available in the API. Since then, we've been growing that.
Todd Jackson: The growth has just been crazy since then. Okay, well let's go rewind the clock a little bit because one of the most interesting parts to me of your path to product market fit that I think not everyone knows about is that you and Burkay started off with a completely different idea. So I'd like to go all the way back to the beginning and just sort of tease out some of the lessons from the pivot that you guys did. Can you just tell the story of how you met Burkay and how you decided to work together?
Gorkem Yurtseven: I met Burkay when I moved to San Francisco over 10 years ago. We are both from Turkey and we went to high school there and came to the U.S. to study in college and then we both moved to San Francisco right after college and we were working at big Silicon Valley companies completely independent from each other. So we met socially by just being in the city, being Turkish together through common friends and we actually never worked together until fall. He was working at Coinbase at the time, I was at Amazon. This was during COVID times. We went to Palm Springs together and everything was in a lockdown in San Francisco and we rented the house there, stayed there for a couple months just socially. We both had our own jobs and then we started discussing some ideas and that's when the first seeds of Fal was planted and then it was maybe seven, eight months after Burkay quit his job and then shortly after I followed doing the same and we kind of went around the idea maze, tried to do something in the machine learning space. We knew building for the future, building for developers was always the right track, but we had to do some exploration around what ideas that might catch on and we had to get a team of, I think at the time, five people to try some things, open source, tried to work with some of the enterprise companies that we had connections with and we were doubling down on this data infrastructure area because we thought at the time, compute was going to be big. We were following footsteps of Databricks and Snowflake. They were able to monetize compute in the cloud very well. Turns out our bet was correct. In a way we are still doing the same thing. We are doing compute in the cloud, but the workload we were targeting was specifically for data transformation in big companies where there's a lot of data so that people can transform this data to use it either for AI in the past and maybe analytics. It was first DALL·E 2 and then Stable Diffusion and then ChatGPT and then Llama 4 and all of these things released within months of each other, the whole AI world kind of came backwards in a sense that you don't need data anymore to actually train these models. The models are already trained for you. And all of a sudden like okay, you can do a lot more with a ready-made model for you. So that was the spark for us to go for the pivot. If there's a ready-made model that changes everything, this whole data preparation stage can be skipped and only the biggest of the companies are going to do that. Everyone else, they'll just use something off the shelf and that attracted us towards inference.
Todd Jackson: The thing I think is really interesting because I first round invested in 2022 on the original idea, the product for data scientists. And one of the things I think is so interesting is that that idea in my memory was kind of working. It's interesting to pivot to something else when the product, the initial product that you have is actually kind of working and you had customers. Was that a hard thing to do to walk away from something that was working to something else that you thought might be better?
Gorkem Yurtseven: We had customers, we even had paying customers. We did both products for a while at the same time. It's very hard when you are not screaming exactly what you're doing to your customers, to the potential customers, to people you work with, it's really hard to sell because they look at your website, they see something else. So it is really hard to do both of them at the same time. Probably did it for two months or three months, maybe two months we saw the revenue growth for AI inference was growing much faster than data transformation. So we decided, all right, maybe it's time to say bye to our old customers and double down on inference.
Todd Jackson: I mean is that a psychologically hard thing to do when you have users, you have customers, you have investors who invested in that original-
Gorkem Yurtseven: Yes, everyone knows us for something, right? There's the social aspect to it as well. Yes, it was very challenging.
Todd Jackson: What was the moment where you just sort of said, hey... and did you both kind of agree at the same time, like, we got to just do the new thing?
Gorkem Yurtseven: We always tried to convince each other, okay, maybe this is not a huge difference. Maybe this is not a big pivot we are doing. We're still doing compute in the cloud. It's just a completely new workload, so maybe it's not that bad. We tried to convince each other, the pivot is not as drastic as it actually is. So we lost some time actually in that phase where, okay, maybe this is not a pivot. Maybe we are just changing direction a little bit.
Todd Jackson: So if you could go back to that moment before the pivot and kind of knowing what you know now, what would you tell yourselves or what advice would you give to other founder who-
Gorkem Yurtseven: So one thing actually you told us resonated a lot with us. You said, "okay, which of the idea you think you're going to reach one million \[inaudible 00:09:08\] first? And then which of the ideas you think you're going to reach 10 million \[inaudible 00:09:12\] first?" We remember this very well.
Todd Jackson: The data science idea was faster to a million, but the generative idea was faster to 10?
Gorkem Yurtseven: Generative was faster to 10.
Todd Jackson: Yeah.
Gorkem Yurtseven: Yeah. And so it was like, okay. It's interesting. But then we actually reached one million with inference and 10 very quickly with inference as well. So our predictions were wrong, but the framework you told us actually helped us a lot in that decision-making process.
Todd Jackson: The other thing I was thinking about is when you first saw this idea, where did you see the opportunity? What was the problem that was going unsolved? Because at the time there were other inference providers. There was Together AI, there is Together AI, there's Base 10, there's a bunch of them. They were focused on language models and text. What gave you the conviction that there was a big enough other marketing media?
Gorkem Yurtseven: There is obvious value we saw in inference because all of a sudden you don't need a lot of data yourself to train a model. You can just use something off the shelf and this all of a sudden increases the number of AI product users by we thought maybe it's a 100X, 1000X, maybe it's a lot more than that. Maybe everyone becomes an AI user because it's so easy to create an AI product. That value was obvious and we thought, okay, this changes everything. Then within that idea we had to, okay, why stick with image inference and not do LLM inference? So I think that wasn't easy as well. Image came first, right? Stable Diffusion came before Llama 2\. All the inference providers before some of them were doing other things as well, like Base Stand was also doing more traditional machine learning. So a lot of people saw the opportunity around the same time than us. Maybe they were able to pivot quicker than us. But either way, our first 10 customers or something like that were trying to build products on Stable Diffusion. So we had all of our customers doing that, but also within the Stable Diffusion world, we had to make some decisions as well, like are we going to just provide GPUs for people for them to just deploy any workflow they want or are we going to build easy to use APIs for them and they're just hitting an API endpoint? This was a big discussion within the company and we ended up building an API endpoint, which we called it like an inference endpoint rather than doing GPU infrastructure. So first we got over that hurdle and went with APIs and optimizing the inference process. And then we were so good at that we decided to stick with optimizing image inference because LLM inference was way different at the time. There were different technical, we thought the buyer is very different, the market is shaping up to be different. Obviously everything was happening so fast.
Todd Jackson: You thought it was a very different customer set.
Gorkem Yurtseven: Different customer.
Todd Jackson: But also a different set of optimizations that you had to do \[inaudible 00:12:07\].
Gorkem Yurtseven: Optimizations. Correct, correct, correct. And around that time we were actually okay, maybe it's a good time to start raising our series A. And we tried to explain this to people because it was so new no one got it. Everyone thought an inference platform is an inference platform. Doesn't matter what kind of model it is. There are other people who are more qualified or more prepared to do this than us. And we were trying to explain them how our focus on, at the time there were no video models, our focus on image models is going to actually make a difference and people thought the market was smaller as well. So all these things on top of each other, we actually had a hard time raising our series A. It wasn't that easy. And the fatigue was because all these big inference providers had raised maybe a month before or around the same time we were raising and all the investors, they were pitched the same thing over and over again and it sounds the same and that's something we underestimated how disadvantage of a situation it is to raise at the same time with seemingly all your competitors because they all say the same story. Investors hear it over and over again and there's some fatigue of hearing the same thing.
Todd Jackson: But you guys definitely had a lot of conviction that the actual stack that you needed to build, the problems that you needed to solve were very specific to what you were doing. Because I remember in 2023 when you came to our office, the first time I had seen this new idea and I think it was on Stable Diffusion STXL or something where it was on your laptop where you had this, through the webcam, this video of me turning me into George Clooney waving my hand. It was a video but it was actually like frame images-
Gorkem Yurtseven: Frame by frame.
Todd Jackson: ... images that you were generating. And it just blew my mind how fast it was. What were some of the things you were doing behind the scenes to make that possible?
Gorkem Yurtseven: That demo is when we announced this new iteration of the company to the rest of the world. Still we didn't make any money from that demo. It makes a really impressive technical demo for people to see how fast we can run inference, but we couldn't find any use case for that very fast image to image inference. Still to this day it is very impressive, but we couldn't find any commercial value with it. There was commercial value in image inference just in general, but that was very good for marketing but not so good for actually monetizing.
Todd Jackson: How did you get it to be so fast?
Gorkem Yurtseven: At the time we had a two-person inference team that Batuhan, our VP of engineering, he has a compiler's background, he loves optimizing things at a systems level and then we had another engineer who was really into writing Triton kernels. So we looked at the program, what are the parts we can optimize, how can we run the program more \[inaudible 00:14:56\] and Batuhan, me, the other engineer we have, Burkay, we all came together and obsessed over it over a couple of weeks and we were able to, at the time it was STXL and STXL distillations. That was a distilled model. There was one model that we were able to optimize and that was it. That's what people used to build products. So that was it.
Todd Jackson: And I remember a bunch of stuff on Twitter, some of the demos that you said kind of went very viral, but then let's get to the first actual product. When you started releasing and had developers using it, what was the first version of the product that you were giving to developers and what were the shortcomings of it? Because anytime you launch a brand new product, usually it could be very good at some things or probably not good at a bunch of other things.
Gorkem Yurtseven: Yeah.
Todd Jackson: What was the first version like?
Gorkem Yurtseven: I mentioned this before, instead of focusing on GPU orchestration and letting people deploy whatever they want, we decide to build APIs. Every single code that's deployed is owned by us and we control the whole process and that becomes okay, if the API can do what you're trying to do, yes you can do it. If not, you're restricted by what the API can do. So there were other competitors, they were allowing any workflow, any code to be deployed. So that was a big shortcoming. But we knew what people want to do. Everyone wants to do the same thing over and over again and therefore we thought there is value in actually optimizing the most common workflow and then people will realize that this is actually what they need. And it ended up being like that.
Todd Jackson: So let's talk about some of the earliest customers and their use cases. How did you get your first 10 customers and how were they using it?
Gorkem Yurtseven: I think almost all of them were horizontal design or image generation products. When a technology is so new, I think it's hard for products to be specialized. So a lot of them were general either consumer AI applications or web-based image generation apps.
Todd Jackson: And I remember them, some of the early ones being like I thought of them as a little bit like indie dev kind of hobbyist stuff. Sometimes when you see a new technology, it's a little bit like a toy. And some of your early customers were these kind of indie devs. Did you have concerns about that or did you think this is just how it's going to start?
Gorkem Yurtseven: I think one of the biggest signs of how this is going to be around is the amount of money they spent, right? Everyone was spending serious money on the platform, tens of thousands of dollars a day all of a sudden. And maybe this is temporary, but as long as it's going, it's definitely not a toy. People are spending serious money making serious products used by real people and to this day it's growing as we speak.
Todd Jackson: Did you have a sense at that time that eventually, look, enterprises are going to want this?
Gorkem Yurtseven: I think so because every piece of technology was like, it was just too magical to be ignored. The models just had to be a little more capable and we could see how every month, every three, four months, the models were getting more capable and people were moving into video. A lot of money was poured into training video models, so we knew things were going to get more serious. The timing, none of us expected it to be as quick.
Todd Jackson: I remember Flux, it was sometime in 2024, just being a very big moment for the company. And you guys had day zero support for Flux. The Flux moment in 2024 was kind of like the nano banana moment I feel like we're \[inaudible 00:18:35\] video, but how did you get day zero support for Flux?
Gorkem Yurtseven: The Flux team worked at Stability before, so we had a relationship with them already through their times at Stability. Of all the demos we did attracted their attention and we were able to become friends and colleague working partners during their time at Stability. So they were pretty under the radar. No one was expecting the Flux model, but we knew they were doing training and we really respected the team and we knew that they were going to do something awesome. We got in contact with them throughout during the summer and we planned a big release together and it worked great for us.
Todd Jackson: Okay, so video has been a huge part of your focus over the last 12 months, and I remember last summer you guys were telling me 2025 is going to be the year of AI generated video. It feels obvious now, but a year ago at least to me it was not that obvious. What were the signals you were seeing that were giving you that conviction?
Gorkem Yurtseven: So first of all, researchers always want to be in the cutting edge and all of a sudden, I would say a couple months after Flux, we realized we looked around, all the researchers that were good at the diffusion space, they started working on the video problem. All of a sudden, everyone left.
Todd Jackson: Pre Sora or Sora had already happened?
Gorkem Yurtseven: Flux happened in August, Sora was February before that. And I couldn't run it. Maybe some people did, but it was just a demo. After Sora, serious money was put into training video models. Yeah, exactly. And researchers left the image field and started working on video, which is interesting. I don't know if there's a term that describes the situation because not all problems were solved for image by any means. There was so much to do there, but the price for video was much shinier and there was a lot of VC money being put into it. All the researchers left doing image research and then focused on video.
Todd Jackson: So you guys saw those signals happening and you started to prepare the company, right? What were some of the new challenges that you had to solve for video?
Gorkem Yurtseven: Models were a lot bigger, which was to our advantage. The same reason why a bigger model like Flux compared to Stable Diffusion XL was to our advantage. Same way, a bigger model that requires more compute power, requires multiple of the fastest GPUs to run in the cloud. So the optimizations we make matter a lot more. If something takes one second, if you can shave off 20% of it, maybe not enough people care about it, but if something takes a minute and you can shave off a similar percentage, all of a sudden that's a lot more meaningful.
Todd Jackson: So now you guys find yourself kind of just at the center of this really interesting fast moving market. It feels like every week there's something new that happens. And so my question is how do you organize yourselves internally to be responsive to that? You guys are 40 people now?
Gorkem Yurtseven: 45 maybe.
Todd Jackson: How do you operationalize a 45 person company to be this responsive when the market is changing every week?
Gorkem Yurtseven: Among many things, positioning ourselves as a generative media company helped us hire the people who are the most interested in this, right? We have applied ML team, it's around 15 people right now, and all they do every day is either deploy these models, optimize them, play with them, and they're obsessed with it. It's as if this is their hobby and if they didn't work at Fal, they will be doing this anyways. So they're extremely on top of the market. And now with Fal's position in the market, we also get some early information from the research labs. Everyone tries to talk to us and release their models on file on day zero, so we get some additional access to information as well. These two things combined, we have some advantages over others in the market. But unexpected things happen as well and we have to react to it really fast and we are able to build that muscle very well in the team. Like something drops, immediately we drop everything and try to release that model if you don't know about it beforehand.
Todd Jackson: How do you know if a new model is worth to do that?
Gorkem Yurtseven: Exactly. The first phase is, okay, how can we evaluate this as fast as possible? Is the demo video that this model is released with, is that accurate? Can we actually compare this to other similar models? Is it actually worth it?
Todd Jackson: But if you get a sense, this thing is state of the art-
Gorkem Yurtseven: This thing's good, then we drop whatever and try. Usually on Slack, we open a huddle, eight, nine people get in there, someone shares their screen and we try to get it out as fast as possible. Some of it, we actually did it publicly too. That was interesting.
Todd Jackson: Oh, what did you do publicly?
Gorkem Yurtseven: When a model first drops, I think Batuhan did this couple times, or I'm doing a screen share, I'm speed running, deploying this model on file and people watched it. You definitely do this internally, like Batuhan would share his screen and others will watch the speed run to deploy the model to be ready.
Todd Jackson: Are there other things that sort of go along with that? Do you have huge demand spikes when a new model drops?
Gorkem Yurtseven: Yes, there is and we try to allocating GPUs to a model and doing that as elastically as possible. It's a problem that we have to think about all the time and we spend a lot of time managing our GPU capacity, how to do it the most efficient way. Sometimes we have to get GPUs really quickly. Sometimes we are able to plan it. But yeah, this is an ongoing problem that we have to solve.
Todd Jackson: One of my favorite things about working with you guys is that every time we meet, I feel like I get a crash course on the current state of the market and just a lot of opinions and insights on where the market is headed. So for example, I remember talking to you guys and you're like, "yeah, Netflix is starting to use gen AI. We're not far away from two and a half hour feature films being completely generated." Give us a picture. What does the world look like in 2027 to you?
Gorkem Yurtseven: I would say six months ago I wasn't sure if studios were going to actually use this or is it going to be so fast that all of a sudden you have independent movies on YouTube and studios completely missed the strand, right? Sometimes technology happens in light speed and you're stuck in innovators dilemma and other startups, upstarts, whatever companies leapfrog you in a way that you don't get to even compete with them. I thought maybe something like that was going to happen to studios because they're already having trouble with some of the labor situation they're having already. The film movie industry is having trouble in terms of the revenues they're making. There is very successful couple movies a year, but the long tales of movies, they've been having trouble. So I wasn't sure if studios were going to be able to actually use this technology. And it looked like they were completely avoiding it for a whole year. But something changed this summer and we are getting a ton of interest from basically all the studios in LA or elsewhere. Everyone is really interested to at least do something about it because now they understand this is good enough and they can actually save money by utilizing this technology. The creative people inside the studios I think they've spent enough time with this tool that, okay, now they see this as something that enhances their creativity rather than just replacing them. So they bought into it as well. So this summer I would say that was the biggest difference.
Todd Jackson: Are there other industries, genres, games, other things you think will be really, again, two years from now?
Gorkem Yurtseven: Yeah, gaming industry is a little more sensitive. People really care about things being hand-drawn or the creativity aspect is really important. But yeah, I think it's very suitable for gaming industry as well.
Todd Jackson: In thinking about the market, one of the things that we've talked about before is that image generation, video generation in many ways is a net new market. It's a new opportunity, it's a greenfield opportunity. Why is that an interesting idea for you?
Gorkem Yurtseven: Yeah, so this is one of the reasons why we decided to actually brand the company around generative media. We believe this is net new. Anything we are creating is not taking market share from a giant company. We are not a database company taking database revenue from Oracle or we are not in the traditional LLM market. The biggest use case seemed to be search, any LLM inference is taking market share from Google search and this is really important for Google. They would give it away for free if they had to. So they're protecting it really, really close to themselves and that's why I don't think it's a startup's game to play in that race, but for image generation video, it's completely net new. So we believe it's very suitable for a startup. And one of the other things is it was a small market in the beginning but very fast-growing. That also makes it really, really suitable for a startup as well. And even if like Google, OpenAI, even if they're active, they have their own models, but because there isn't a clear target in front of them, they're not as nimble as a startup. So it's really hard for them to go towards that target because that target doesn't exist. They have to reinvent it every single month as we do. So that puts us and the market in a very unique position for a startup like us to stay very nimble, change direction very fast, get close to maybe advertising, maybe studios, maybe more on the design side, maybe e-commerce and retail and build the whole team around this rather than just having a single target and going towards it.
Todd Jackson: In some ways I think these market conditions ended up working out so well for you in that it was an overlooked market at the beginning or people thought it was too small, which is great as a startup because it means that you enter and there isn't a lot of other competition. And then even as it's grown there's no clear giant that you are threatening and who's going to come after you. Did you predict all of it, did you know this was the case?
Gorkem Yurtseven: Maybe we got a little bit lucky. And in the whole AI market, it looks like it's very hard to differentiate with models. If you have a good model, you maybe have a three-month lead, maybe four months. People catch up for two reasons. Number one, if you had a unique research insight, that leaks and other people do it. Number two, once people see something's possible, it's way easier for them to actually go try to do it because now they know it's possible, someone else did it and other people go do the same thing or try to reach to the same idea. And number three, these models have APIs, people distill it. If you have a strong model, you can create similar models for way cheaper. So it looks like it's going to be really hard for someone to differentiate with the quality of the model. And we believe this is going to lead to even more fragmentation. So a company like Fal where you get to access many different models at the same time is going to be positioned very well in the market going forward, the better it is for us. Yeah.
Todd Jackson: I think a lot of people don't fully understand what you guys do at Fal and why it's so hard. Part of that is you've done so much work on GPU infrastructure, on model cold starts, you rarely talk about this stuff publicly I think, correctly because you put the focus on the models, you put the focus on what creative things people are doing with them. Just for a second, because I think the amount of systems work and all the creative engineering that you guys have put into the platform is wild. So you don't have to give away your secret sauce, but what are some of the biggest optimization wins that you've had that people don't know about?
Gorkem Yurtseven: Yeah. So one thing people don't appreciate, it's a different problem to host a single model and optimize it and just serve that versus hosting 600 different models at the same time, all various different architectures, various different problems and all of them have different traffic patterns. It's a much, much harder problem than hosting a single model. Any research lab either hosts their marquee model and maybe a couple other. So the number of models they have to host is less than 10\. And for us it's around 600, which is complicates things a lot. And we had to build very, very serious systems to support this. And one of the things that we have to pay attention to is how we utilize these GPUs. We can't just say, all right, we are going to equally deploy these models to all the GPUs and hope that the traffic patterns are equal. Everything has to be elastically scaling up and down. And to be able to do that whenever any new request comes in, we should be able to auto-scale up and down really fast. And that is only possible with couple things. First, cold starts is important, starting a new model as fast as possible when it's a completely new start.
Todd Jackson: And we're talking about seconds or milliseconds?
Gorkem Yurtseven: Seconds when everything is fresh. But then we have to be really smart about how we cache these models. That's part of the strategy. We are running in I think 28 different data centers. So when a request comes in, we have to make sure the request goes into a node that has this model cached locally or at least close enough so it can load into memory as fast as possible. And we do cache these models in memory sometimes too, even if it's not being used at the time, it stays cached while it's serving another model. Cold starts, the caching strategy. And if the model is latency sensitive, for example audio models, it matters a lot if the model is in a data center that's close to you because you care about milliseconds, then routing the request to the closest GPU cluster is important as well. When a node serves a request, how long it's going to stay alive and when it's going to shut down, that's an important parameter as well. So we have to optimize all these things to serve these models as efficiently as possible. We need to be so good that if you were to just host this one model on your own, you need to host 600 of them but still be better as if you are doing one.
Todd Jackson: If you could wave a magic wand and solve one technical problem kind of in generative media right now, what would that be and why?
Gorkem Yurtseven: One really important problem with model optimization, you want to be able to run the models in many GPUs because let's say given that things scale linearly, instead of it taking one minute on one GPU, you want to run it on two GPUs and let it take 30 seconds. But in reality, every time you add another GPU, the gains are not linear, it's a little bit worse. You got to be able to do it as linear as possible. So if the optimizations work linearly, I think it would solve a lot of the problems you are facing. You could be able to connect many GPUs and do really, really fast inference. This is an active research and active engineering problem and we are getting close to make it linear, but the more GPUs you add to the end, it gets worse. So in the beginning it's close to linear and then it gets worse and worse.
Todd Jackson: Another thing I've noticed is that you're very obsessed with developer experience and developer support. And I remember one of the founders that I work with was having an issue recently with Fal and I connected you guys on email and your response to him was instant. It was faster than the time you replied to my emails. Is there something that you guys do to make that customer obsession with the developer \[inaudible 00:34:31\] scale?
Gorkem Yurtseven: From the beginning, Burkay and I, we really cared about building for developers. We believe that's the best way to multiply our input to the world. We build for smart people who then build very smart products and then the impact is multiplied. If you look at some of the newest software products like public companies, they're all one way or the other developer platforms or infrastructure platforms, which is a subset of developer platforms. So we wanted to build a company for developers. We knew that was the biggest force multiplier we can get on our work. Once you decide to do that, you got to do your marketing towards developers, you got to make sure everyone gets the right amount of support, you got to care about things that developers care about and you can only do this if you obsess over the developer experience. And I think we're doing an amazing job at Fal at that. We have, I don't know, 500 different Slack channels with all the engineers from companies we work with and the response rate of those Slack channels, you measure that daily and we obsess over that.
Todd Jackson: The market is changing rapidly. We've talked about this. You guys are growing and so naturally there's competition. And I think you both have been incredible chess players and sort of navigate these changes. Well how do you think about competition in the space and future chapters of Fal and how you navigate that competition?
Gorkem Yurtseven: One thing that helped us a lot was okay, we had a technical advantage, a technical mode, how can we turn into a business advantage and a marketing advantage? Calling ourselves generative media platform and owning that term was really helpful. As biggest of the biggest enterprises were adapting this technology because when you are screaming what you do well people believe you, right? No one else is actually calling themselves generative media inference platform. To this day, no one is defining their company as that. And I think that positioning was a big advantage. And now we can go out there, talk about generative media and talk about the industry itself, but indirectly we are just talking about ourselves. Being in that position is really, really valuable and I think that differentiates us from our competition. We are almost defining the industry while we are basically just talking about our own company. So that is a unique position. And we always say this, being the market leader, there's a premium to that and yeah, we are seeing that premium because whenever a big company wants to get into this, we want to be the first phone call that they're making.
Todd Jackson: So speaking of big companies, enterprises, you've got Adobe as a customer, Canva, Shopify, what have been the biggest lessons in building for individual developers who you still serve and enterprises at the same time?
Gorkem Yurtseven: Our head of operations jokes about this. We became a legal tech company. With all these different AI models, the enterprise companies have a lot more concerns about, all right, how are these models trained? What happens with the inputs and outputs? Things like that versus our initial set of customers, they just want to go to production as fast as possible. So we had to build that muscle and being able to accommodate the requests coming from the enterprises about the legal side of things and making sure they're comfortable with using this in production.
Todd Jackson: And so do you feel like you're able to scale and serve both of these kind of different parts of the market equally well?
Gorkem Yurtseven: 100%. Yeah. I'm not scared of any security review anything. We've been through the hardest ones so we could do anything else.
Todd Jackson: And you guys are just scaling so quickly, it's one of the fastest early revenue growth rates I think in startup history. You said two million last summer and now-
Gorkem Yurtseven: Yeah, now it's over 100.
Todd Jackson: And I know that model launches also make things a little lumpy. It seems like a hard to forecast business. Is there anything you've had to learn about managing this explosive growth and forecasting for what you need?
Gorkem Yurtseven: Not forecasting, but you mentioned model launches. It's just an incredible situation because every single model launch that happens in the platform is an opportunity for us to do more marketing, hopefully with the research lab who was launching the model and then go out there, talk about this model, talk to more customers. An opportunity for us to talk to a customer we were trying to sign or get them to use the platform. Now it's another opportunity for a touch point for us. Look, there's a new model and this is happening. I would say it used to be once a week, now three, four times a week. So many model releases are happening, it's out of control. And all of them is an opportunity for us to get another big customer or get some more eyeballs on X or on Reddit. It's just an incredible tool for us to be on top of all these model releases and be the first platform to support them.
Todd Jackson: Do you think about revenue quality and revenue durability, like the revenue from one customer is different than the revenue from another customer?
Gorkem Yurtseven: In the beginning, mostly investors criticized us that this revenue may not be durable, the quality is not high enough. So we took enterprise sales very, very seriously. We built a sales team early on, maybe earlier than some of our competitors and we tried to get as much of this revenue in form of yearly commitments rather than pay as you go. To this day I think we are doing an incredible job at that. And that protects the revenue in a bit, but also proves that these are serious companies doing serious business and willing to commit for 12 months or millions of dollars in some cases. So this was our reaction to that criticism.
Todd Jackson: What are the top handful of metrics, maybe the top two or three metrics that you watch internally the most obsessively?
Gorkem Yurtseven: Revenue is number one. Anything else we've tried to do kind of became useless. Number of requests was something that we cared about. All of a sudden when video models were part of the one video model request is a lot more valuable than image models. So that doesn't matter anymore. The number of team accounts, if you sign up as a team and you have many members in your team, that means you are probably going to start spending more. So that's one thing we pay attention closely. Other than that, revenue has been the metric to follow. I know as a PM you don't like that.
Todd Jackson: I think it's incredible that as founders and especially as technical as you guys are, that revenue has always been your north star. As an investor I think you'd like to hear that.
Gorkem Yurtseven: PMs always want to find other metrics that are not correlated to revenue to track. Maybe it's like revenue in the future, but not revenue right now. It's been hard for us to find what that is, but maybe people do that when there isn't enough revenue so they're looking for other things to track. But in our case, there is enough revenue and that's what we've been tracking.
Todd Jackson: Okay. So let's talk about the team. You guys have built an insanely talented technical team. Have you been able to tap into talent that other people overlook or how did you find some of your key hires?
Gorkem Yurtseven: I think one of the advantages of working at a big Silicon Valley company for five plus years is you get to meet a lot of other very talented engineers. You could do that at a startup too, but you don't meet enough people there. And in a big company like Amazon or Coinbase, we met a ton of talented engineers and we were able to bring the most talented ones into Fal. It was their first startup job, maybe, right? They trusted us to work at in this environment and that's how we were able to bring them into Fal. So that worked great for us. And then yes, we are both Turkish and our early engineering team had some Turkish members as well. We were able to attract incredible talent from back home. That's because people trust us more and it's just a very good company for them to work at. That's been really useful for us.
Todd Jackson: How global is the engineering team?
Gorkem Yurtseven: I would say more in person in the six months people are willing to move here. We've been trying to get both our American engineers who live in other cities to move to San Francisco, but also some of the overseas engineers to move to San Francisco as well. The center of gravity has definitely moved to San Francisco, but we still have 15 people maybe remote.
Todd Jackson: What are you looking for either in the ML engineers that you hire, the systems engineers? Is there a specific thing that you evaluate?
Gorkem Yurtseven: It's either obsession with optimization, so if they worked at database company before or if they did any low-level systems engineering, that is a big plus. Even if they haven't worked with a GPU before, we believe they can learn very fast. Or obsession with the space. In the beginning this was harder to do because the space was so new there wasn't enough time for them to get obsessed with. But now we can five minute conversation immediately understand if they love video models, image models, they know what's going on and if you can feel that obsession, it's extremely useful for us. And those are the two things we are looking for when we are hiring ML engineers.
Todd Jackson: Is there anything unique or different that you guys do through interviews or the way that you hire folks?
Gorkem Yurtseven: This is an evolving process. In the beginning we were able to get to know people, spend more time with them somehow with the amount of time we spend in the ecosystem. So we were able to know someone for a longer period of time with the work they do out in the open and we had more things to look at before deciding if they should join or not. And now we have a recruiter, we have a bigger pipeline. So some of the people, I'm meeting them for the first time at the interview. So that process has been evolving. What are the things we can do differently than Meta or Google that we can identify the unique things that these people can be valuable to a company like Fal rather than any big software organization.
Todd Jackson: How do you recruit an amazing ML engineer who's also talking to the various large labs? That's got to be hard, right? Is it just obsession with the category?
Gorkem Yurtseven: So this question used to be how do you convince someone who has also an offer at Google or Facebook? I think we are past that. Like you said, we need to look at some overlooked career paths, find people non-traditional backgrounds, maybe younger, earlier in their career that might help open AI and anthropic there. Young companies too, they can't be interviewing everyone. So there's enough talent in the world if you know where to look.
Todd Jackson: And speaking of just talent and how concentrated the talent is at Fal, you guys have kept the team lean. I think you were at 25 people when you crossed 50 million and now you're at 45 crossing 100 million. And how many folks do you have on sales now, go to market?
Gorkem Yurtseven: We have around six, maybe 10 if you include CSM and all that.
Todd Jackson: Okay. But still, how many companies do you know at 100 million revenue with 10 people on the go to market side?
Gorkem Yurtseven: I think AI kind of changed a lot of things in how software companies did sales because before the market was more stagnant, you had to actually go convince people to use your product and they were choosing between five different options and the sales process was really, really long. But with AI you have so much demand coming from the market, you have to qualify. Your problems are very different. Your problem is you have to qualify who to spend time with, you have to qualify who's going to have the most spend among these companies for you to actually go talk to them. So the go-to market motion is very fast-paced, in a way transactional. So it's very different than the traditional SaaS sales cycles. And yeah, we have to hire for that type of AE profile, which has been an interesting challenge for us as well
Todd Jackson: As technical founders has been your biggest lessons in this area of teaching yourself sales. I know you did a bunch, most of the early sales.
Gorkem Yurtseven: I think the biggest lesson was starting early to get people into commitments because immediately that's a measure to understand how serious the person in front of you is as well. If they're willing to invest in your relationship and do they trust you? Do they think you can do a good job and make them successful? Getting people to commit as early as possible and giving them that option, I was a huge skeptic. I was like, no one's going to commit to this.
Todd Jackson: You didn't do sales?
Gorkem Yurtseven: No, I didn't do sales. No. Burkay didn't either.
Todd Jackson: So how do you sell the product, especially to a large enterprise, how do you sell the product?
Gorkem Yurtseven: First we want them to try it out. We make sure that's as easy as possible. You log in, put in a credit card and you can just use the product. A lot of our contracted revenue even comes from inbound. People already tried the product and they have some sort of spend and now we are reaching out to them, all right, you're on track to spend $10,000 this month. If we give you 10% discount, 7% discount, would you be willing to do a yearly or two yearly commitments?
Todd Jackson: Your annual enterprise customer started as there's a couple engineers doing pay as you go basically.
Gorkem Yurtseven: We have some signals on Salesforce. If someone's, let's say, I think it's $300 a day or something like that, if they spend more than that, it creates an opportunity on Salesforce. One of the AEs take that opportunity. There's an email associated with it, they reach out, they try to get on the phone and convert that to a yearly contract. There are very few high profile like Neon Burkay would reach out to someone who we know they have a lot of generative media spend. There's a couple of those, but majority happened inbound first and then we converted to a yearly contract.
Todd Jackson: Outside all of the work that goes into product, are there any examples of how you guys are using AI internally?
Gorkem Yurtseven: Yeah, our product team uses Cursor or equivalent tools a lot. I see the monthly bill and it keeps increasing. Yeah, I think it's better suited for product engineering type work as opposed to some of the low level optimizations we are doing on the ML side. Yeah, I would say our product engineering team and our API team allows a Cursor and similar products. On the sales side. I believe we are using Clay to enrich some of the leads we have and figuring out who to reach out, emails, stuff like that. I think that's pretty much it.
Todd Jackson: So shifting gears a little bit, but staying on team. You guys have some awesome open roles now for marketing, but I think that you guys have done a pretty incredible job marketing the product and the company without having sort of formal marketing people. You've got this amazing swag, know the GPU rich, GPU poor hats, the website is awesome. You've sponsored the padel courts in San Francisco, nano banana hackathons, generated video awards and your first developer conference coming up. So how have you thought about brand building and having taste as founders and where does that inspiration come from?
Gorkem Yurtseven: Yeah, shout out to Adam Hall who worked on our initial branding, which to this day we use it and we had a couple other iterations to even expand on it. He did a great job and we just trusted him. We didn't have any designer in-house or a marketer, so we just asked him to go crazy with it and he came up with this amazing brand that we have today and we love it so much that we want to show it everywhere. So it's been great. In terms of developer marketing, I think that's a unique taste. Traditional marketing doesn't work for developers. People think it's cringe. People don't want everything to be very obvious on their face. They want this subtle tasteful marketing that is only towards developers. I believe indirectly we are doing it very well. We all have really active X profiles. We hired a couple people just because they had an active X and they ended up being really active members of the community as well. So that helps a lot. Yeah, we try to do hackathons, we try to go to conferences, but at some scale this needs to be more organized. Therefore, we are looking for couple, not a lot of positions to help us put more organization into this. Everything has been founder led more spontaneous. We just decided to do something one day and one of us goes and executes it, but you need to do this little more organized and we want to make sure we're not missing important conferences. You don't have a hackathon and another event on the same day. We want to make sure we are spreading this enough.
Todd Jackson: Did a lot of it just come from the way that you and Burkay like to be marketed to yourselves? A lot of it is fairly intuitive?
Gorkem Yurtseven: I think so. In a way, we didn't hire a marketer early on. This is a really important position. You're presenting the Fal brand, you're presenting the company. You wanted this person to be as good as it can be to represent us basically. So we wanted to do this on our own in the beginning to know how to do it, where we fall short, maybe fail a couple of times and exactly understand where we need help so we can hire. And I believe now is the time.
Todd Jackson: How'd you come up with the GPU rich GPU poor hats?
Gorkem Yurtseven: That's one of the earliest things we did. At the time, Dylan from Semi-Analysis blog wrote an article about how everyone is GPU poor except Google. I think that was the main point of the old article. And we had a conference coming up maybe in two weeks, three weeks. We didn't have that much time. And this became a meme on Twitter. We just jumped onto the meme and created these two hats. One of them very basic GPU poor, just white on black plain font. And then this GPU rich looks like a country club, green on white. And we just showed up to this conference with these two types of hats. We thought, oh, people would like the GPU rich all of a sudden and we made equal number of them and we ran out of the GPU poor hats way before the GPU rich ones. Everyone thought GPU poor was hilarious.
Todd Jackson: Is there anything about your culture or how you guys operate that would sort of seem, I don't know, kind of weird to outsiders, but is very essential to how Fal runs?
Gorkem Yurtseven: Yeah, we don't have engineering managers. We have around 32, 34 engineers. We do have leads, obviously, we have leaders in the team, but we don't have this engineering manager role. Everyone is always contributing writing code. There's no one whose job is just to manage people.
Todd Jackson: That reminds me of early Google actually. I think there was some engineering VPs there and each of them had 40 or 50 direct reports, something like that.
Gorkem Yurtseven: At Amazon we had engineering managers. Their job was to maybe set goals but also have one-on-ones with everyone and that was it. And we don't have that.
Todd Jackson: When's that going to break?
Gorkem Yurtseven: We'll see, I don't know. One thing I like to do is we also have very few one-on-ones. Instead of one-on-ones, we try to do smaller groups of discussions like one-on-three or whatever, one on four. And we try to bring people from within the team, but maybe someone who joined recently, someone who's been there for a while and someone who's remote, someone who's in office, different types of people together so that it's a discussion. If they want to complain about something, they can complain. But usually those meetings are a lot more constructive than the old one-on-one style where you're almost forcing someone to complain about, okay, this is your time to start complaining about it. And when you give that that time, people complain, that's what they do. So we believe this group style is a lot more constructive.
Todd Jackson: Well, some questions to wrap up. What is the hardest part about building Fal that you didn't anticipate when you started?
Gorkem Yurtseven: I would say this is the hardest part of, I would say any growing company, not specific to Fal, is hiring executives, trusting people who are very experienced to come in and take over pieces of the company that have been there for a while and trusting them to actually do a good job. When you ask the question, where did you make mistakes, this is usually what people say and we are trying to be extra careful with it not to make mistakes. And we are taking as much time as possible. Yeah, that's been the hardest. We built a sales team before we hired the head of sales. I think this is number one question like series A or series B companies ask themselves what comes first. Decided to hire, I think six AEs first, everyone reported to either me or Burkay, and then we hired the head of sales. I think that was the right thing to do, but maybe it was the wrong thing to do when we look six months from now and the whole team is fighting with each other, I don't know. Hopefully that doesn't happen, but I'm now much more confident about evaluating this new head of sales we hired and the AEs, what success looks like. I saw it. I experienced it. It was painful to get there, but now I'm much more confident in my ability to actually evaluate the situation than if I had hired the head of sales before and they hired the whole sales team.
Todd Jackson: What's been the biggest surprise about being a founder versus being a technical leader?
Gorkem Yurtseven: It's just a wide range of things you have to do any given day. You might be negotiating marketing material on a padel court, also getting on recruiting calls with ML engineers, but also giving investor updates and all of these might be happening back-to-back meetings and you're responsible for all these different things.
Todd Jackson: What are the things that you're thinking about personally right now, and maybe Burkay too, if you know, about leveling up as an incredible founder over the next year or two?
Gorkem Yurtseven: One difference from having a five-person team and 45 person team is actually the amount of good information you get from everyone in the team and the amount of market intelligence, the amount of insights that we get to discuss in our office or in our stand-ups, and now I get to go represent those ideas to other people. That is insane amount of leverage I think you don't necessarily get if you are an engineering manager in a small part of a big company or if you are founder of a smaller company. I think that's been the biggest difference and it's been huge leverage for my personal development because I get access to all this very smart engineers in my team, and I get to represent their ideas.
Todd Jackson: Gorkem, thanks for being here.
Gorkem Yurtseven: Yeah, of course.
Todd Jackson: It was great.
### Pivot (meaning in business)
URL: https://review.firstround.com/glossary/pivot-meaning-business/
Last updated: 2025-10-17T20:57:21.000Z
For entrepreneurs, [a pivot is your survival tool](https://review.firstround.com/the-pivot-to-product-market-fit/) when your original plan isn't working. While iteration makes small adjustments to optimize a working strategy, pivoting redefines the strategy itself. **The ability to execute a well-timed pivot can turn a failing business into one that lasts.**
## **Why pivot strategy matters**
Pivoting in business means making a strategic change when you realize your current path isn't leading to sustainable growth or product-market fit. You're not abandoning your vision — you're adapting it based on real market feedback.
**A successful pivot preserves what’s working while correcting things that aren’t.** Most pivots build on existing assets like your team's expertise, technology or customer insights. The key is changing direction deliberately, not reactively.
In the lean startup methodology, pivoting is a core principle. You test hypotheses quickly, gather data and change course when evidence points to a better path. This approach minimizes waste while maximizing learning.
## **When you should pivot (and when to hold steady)**
Deciding to make strategic changes is one of the hardest calls you'll make as a founder. **Root this decision on data, not frustration.**
Market trends can signal pivot opportunities. Shifts in consumer behavior, new technologies or economic conditions may open doors your original business plan didn't anticipate. Think about the AI boom — how many companies pivoted to embrace that technology?
### **Clear signals it's time to pivot:**
- **Stagnant key performance indicators.** Your user growth, engagement and retention are flat (or declining) despite your best efforts.
- **Consistent negative customer feedback.** Customers tell you your product doesn't solve their most pressing needs.
- **Broken unit economics.** Your customer acquisition costs are too high or revenue streams aren't sustainable.
- **Major market shifts.** New competitors, technology or economic conditions make your original vision unworkable.
### **When not to pivot:**
- Your data is too insufficient, early or inconclusive.
- The problem is execution, not your core strategy.
- You have momentum but it's slower than expected.
**Pivoting without strong evidence wastes capital, time and morale.**
## **The 6 most common pivot strategies**
Most successful pivots build on what you've already learned. Here are the types you'll encounter:
- **Customer segment pivot.** Keep your product, find a new target audience or customer base with different needs.
- **Problem pivot.** Solve a different customer problem with your existing product.
- **Product feature pivot.** Build your entire product around the one feature customers love most.
- **Revenue model pivot.** Change how you make money (subscriptions, freemium, etc.).
- **Technology pivot.** Apply your existing technology in a new industry.
- **Channel pivot.** Find new distribution or customer acquisition channels.
**The best pivots are rooted in clear customer signals and data, focusing on long-term success over quick fixes.**
## **Business pivot examples that changed everything**
Some of today's most successful companies exist because of well-executed pivots:
**Slack** started as a gaming company called Tiny Speck. When their game failed, they pivoted to the internal communication tool they'd built for their team.
**Twitter** emerged from Odeo, a podcasting platform. As Apple dominated podcasting, the team shifted to microblogging.
**PayPal** began focusing on PalmPilot money transfers. They noticed eBay users adopting it for payments and pivoted to become the default online payment system.
During the pandemic, countless small businesses executed rapid pivots. Fitness studios moved classes online, restaurants built delivery operations, healthcare providers scaled telehealth. These strategic shifts were direct responses to changing market conditions. For some, like [Owner](https://review.firstround.com/owners-path-to-product-market-fit/), the pandemic even drove pivots that clinched market fit.
## **Pivot pricing and business plan considerations**
When pivoting, your pricing strategy often needs to change too. A new customer base may have different price sensitivity, or your pivot might require a completely different revenue model. Test pricing early in your pivot to avoid customer acquisition problems later.
Your original business plan becomes a starting point, not a rulebook. Document what assumptions changed and why. This helps communicate the pivot logic to investors and team members. A well-documented pivot shows strategic thinking, not random course changes.
Update your business plan to reflect new customer acquisition costs, lifetime value projections and competitive landscape. Your financial models need to match your new direction.
## **The pivot framework: how to plan your strategic shift**
Before committing to a pivot, use this framework to evaluate your readiness:
**P**roof: Do you have clear evidence your current model is broken?
**I**nsight: Have you identified a new opportunity based on customer feedback
**V**iability: Is your new direction sustainable and scalable?
**O**rganization: Are your team and investors aligned on the change?
**T**iming: Do you have enough runway to execute the pivot?
**All five elements must be strong before you pivot.** Missing any one can lead to a failed transition.
## **How to execute a pivot without losing momentum**
**Start by preserving what's working.** Identify which of your technology, team expertise or customer relationships might transfer to the direction you’re pivoting.
**Communicate the change clearly to stakeholders.** Frame your pivot as strategic evolution, not admission of failure. Show how customer feedback and data led to this decision.
**Move decisively once you've committed.** Half-pivots confuse customers and waste resources. Make the change comprehensive enough that it feels intentional.
**Track new metrics immediately.** Your old KPIs may not apply. Define success metrics for your new direction and monitor them closely.
## **Why pivoting is a startup superpower**
For startups, the ability to pivot quickly is a competitive advantage. Early-stage companies can test hypotheses and change course faster than established businesses.
**Pivoting isn't about abandoning your vision — it's about finding the best path to achieve it.** Some of the most celebrated companies only succeeded after admitting their first idea wasn't their best.
The entrepreneurial mindset embraces strategic changes as learning opportunities. **A well-executed pivot is one of the most powerful tools you have to build a successful business.**
**Read more from First Round:**
- [The Pivot to Product Market Fit](https://review.firstround.com/the-pivot-to-product-market-fit/)
- [Owner's Path to Product Market Fit](https://review.firstround.com/owners-path-to-product-market-fit/)
- [Pivot Survival Tactics from Kabam's 3 Near-Death Triumphs](https://review.firstround.com/pivot-survival-tactics-from-kabams-3-near-death-triumphs/)
### Run Rate
URL: https://review.firstround.com/glossary/run-rate/
Last updated: 2025-10-17T20:56:45.000Z
A run rate calculation offers a snapshot of a business's potential financial performance. Founders and investors use this metric to benchmark revenue growth, guide valuation conversations and get a simple read on a company's trajectory.
## **Why run rate matters**
Run rate is a foundational metric for any entrepreneurship journey focused on growth. Without complex models, it provides a common language for assessing financial health.
Run rate is especially useful for an early-stage company that doesn't have a full year of financial history. When you don't have years of data, annualizing your most recent quarter's results can paint a compelling picture of your company's revenue potential.
For founders, it's one of the simplest tools for financial forecasting. It helps set internal goals and informs discussions about cash flow and spending. For investors, a strong revenue run rate can signal a healthy growth rate, making it a key part of early valuation discussions.
**Run rate is useful, but only if you understand its context and limitations.**
## **How to calculate run rate**
The run rate formula is straightforward. You take the revenue from a specific period of time and project it out over a full year. The most common timeframes are monthly and quarterly.
**Run rate = (revenue in a given period ÷ number of months in period) × 12**
Examples:
- **Quarterly revenue**: A company generates $250,000 in its first quarter. The annual run rate is $250,000 × 4 = $1,000,000.
- **Monthly revenue**: A SaaS company has $100,000 in monthly recurring revenue (MRR). The annual run rate is $100,000 × 12 = $1,200,000.
These calculations give you a quick estimate of future financial performance, assuming the conditions of that single period persist for the entire year. **But be sure to always define the period of time clearly when calculating run rate.**
## **When run rate works (and when it fails)**
Run rate is most reliable when a business has predictable, stable revenue. As your income fluctuates, the metric becomes less a forecast and more a guess.
**Run rate works well for**:
- Early-stage startups with a short operating history that need a simple way to project future revenue.
- Subscription-based SaaS companies with consistent MRR and a low churn rate.
- Businesses with steady growth that aren't subject to major seasonal fluctuations.
**Run rate can be misleading for**:
- Companies with high seasonality. A retailer calculating its run rate based on a strong holiday quarter will get an inflated view of its full-year performance. The same applies to businesses in travel or real estate.
- Businesses driven by large, one-time sales. If a single huge contract lands in one month, extrapolating that figure will create an unrealistic annual forecast.
- Startups with volatile growth or a high churn rate. If your customer base is unstable, a run rate based on one good month can mask underlying problems with retention.
## **Run rate vs. annual recurring revenue (ARR)**
For a subscription business, the distinction between run rate and annual recurring revenue (ARR) is critical. While both metrics aim to project yearly revenue, they measure different things. [ARR](https://review.firstround.com/glossary/arr/) is built from recurring revenue contracts, excluding one-time fees and professional services. Run rate, on the other hand, is a simple extrapolation that can include both recurring and non-recurring income.
A SaaS company might use its MRR to calculate a revenue run rate. This provides a quick proxy for ARR and is useful for internal tracking. The real danger is including one-time setup fees or consulting projects in your run rate calculations. Doing so inflates the number and gives a false signal about the health of your subscription business.
**For SaaS companies, ARR is the benchmark for financial health. Run rate is a quick directional check.**
## **Advanced run rate analysis**
**Cohort-based run rate** tracks run rate for different customer segments or acquisition periods. This reveals whether newer customers generate higher revenue than older cohorts, signaling improvements in your customer acquisition or pricing strategy.
**Adjusted run rate** factors in known variables that will impact future performance. If you're planning a price increase in Q2, adjust your run rate calculation to reflect the expected impact on revenue.
**Run rate by revenue stream** breaks down your calculation by product line, geography or customer segment. This granular view helps you identify which parts of your business are driving growth and which may be slowing down.
**Track run rate monthly, but always pair it with churn rate and customer acquisition metrics.**
## **Limitations and pitfalls to avoid**
The simplicity of the run rate formula is also its biggest weakness. Relying on it without considering other key performance indicators can lead to poor decisions.
- It can overstate future revenue. A new [product launch](https://review.firstround.com/how-product-strategy-fails-in-the-real-world-what-to-avoid-when-building-highly-technical-products/) might cause a temporary spike in sales. Annualizing that period creates a projection that ignores the likely drop-off once the initial excitement fades.
- It hides the impact of churn. A company could have a strong MRR figure for one month, but if its churn rate is high, that revenue isn't stable.
- It ignores seasonal fluctuations. A business that does [most of its sales](https://review.firstround.com/the-company-changing-magic-of-sales-operations-done-right/) in one quarter will get a wildly inaccurate forecast by annualizing its performance from that period.
- It creates false confidence. A great run rate figure can make founders feel like long-term success is guaranteed. This can lead to over-hiring or overspending based on a projection that may not materialize.
**Run rate is a directional metric, not a guarantee of future financial performance.**
## **How to make your run rate calculations more accurate**
You can make your run rate metric to be more useful by adding layers of context. Instead of using it in isolation, pair it with other data to create a more nuanced view of your company's revenue.
1. **Adjust for** [**churn**](https://review.firstround.com/glossary/churn-rate/): When calculating a run rate for your subscription business, factor in your average churn rate. This will give you a more realistic picture of your net revenue growth over time.
2. **Exclude one-time revenue**: Strip out non-recurring sales, setup fees or project work from your run rate calculations. This ensures you're forecasting based on repeatable income streams.
3. **Account for seasonality**: If your business has predictable seasonal highs and lows, use year-over-year quarterly revenue data (if you have it) for comparison instead of simply annualizing the most recent quarter.
4. **Use multiple timeframes**: Calculate run rate using both monthly and quarterly data. If the two numbers are wildly different, it's a sign that your revenue is volatile and a simple run rate may be unreliable.
5. **Pair it with other metrics**: A run rate figure is more powerful when viewed alongside metrics like cash flow, customer acquisition cost and lifetime value. [A disciplined pricing strategy](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/) has a much bigger impact on long-term success than a temporary spike in sales.
## **Run rate as a communication tool**
Run rate is a starting point for financial conversations, both internal and external. For early-stage startups, it's a simple way to communicate traction and potential. But for it to be truly useful, it must be grounded in the reality of your business model, accounting for churn, one-time deals and seasonality. For companies looking to scale, [dodging common missteps](https://review.firstround.com/looking-to-scale-your-sales-seven-bullets-to-dodge/) requires looking beyond simple extrapolations and digging into the drivers of sustainable growth.
**Use run rate to set expectations, but always explain the assumptions behind your calculation.**
**Read more from First Round:**
- [How Superhuman Built an Engine to Find Product Market Fit](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/)
- [Don't Let Growth Hurt Your Margins: A 4-Step Pricing Framework](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/)
- [The Founder's Guide to Building a V1 of Customer Success](https://review.firstround.com/founders-guide-building-customer-success/)
- [Looking to Scale Your Sales? Seven Bullets to Dodge](https://review.firstround.com/looking-to-scale-your-sales-seven-bullets-to-dodge/)
### Lifetime Value
URL: https://review.firstround.com/glossary/lifetime-value/
Last updated: 2025-10-17T20:55:59.000Z
For founders, LTV is a critical guide for making informed decisions. It helps you understand profitability, justify customer acquisition costs (CAC) and focus resources on your most valuable customer segments. Instead of just tracking one-time sales, LTV forecasts the entire revenue potential of a customer relationship, from their first purchase to their last. It's a key performance indicator for building a business geared for long-term success.
## **Why lifetime value matters**
LTV is more than a forecasting tool. It reveals which customers are driving profitability and where you should invest your energy and capital. A clear understanding of your LTV helps you answer fundamental business questions.
- **Guides customer acquisition spending**: LTV tells you how much you can afford to spend to acquire a potential customer. The LTV to CAC ratio is a classic metric for measuring the sustainability of a business model. A healthy ratio, often cited as 3:1, means you're generating three times the revenue from a customer as you spend to get them.
- **Sharpens marketing focus**: By running a customer lifetime value calculation for different customer segments, you can identify your most profitable personas. This allows you to target social media campaigns, content and ad spend on acquiring more high-value users, rather than treating your entire customer base as a monolith. Similarly, comparing lifetime value across acquisition channels allows management to lean into high ROI activities and evaluate activities in lower ROI channels.
- **Informs product strategy**: High LTV often signals [strong product-market fit](https://review.firstround.com/how-to-measure-product-market-fit/) with a specific group. This data can guide your roadmap, helping you prioritize new products or features that serve your best customers and encourage them to spend more over time.
- **Drives retention efforts**: Knowing a segment's potential lifetime value highlights the importance of customer retention. It justifies investments in the customer journey, from onboarding and customer support to loyalty programs designed to reduce churn and improve customer satisfaction.
- **Unlocks expansion revenue strategies:** LTV helps you identify the highest value customers who you can monetize further with targeted upsell and cross-sell strategies.
**LTV connects acquisition, product, and retention strategies to the goal of profitable growth.**
## **How to calculate lifetime value**
The customer lifetime value formula you use depends on your business model. The calculations range from simple estimates for an ecommerce brand to more complex predictive models for a SaaS company.
A basic way to calculate customer lifetime value is often used for businesses with non-recurring purchases, like a coffee shop or online store:
**LTV = average purchase value × average purchase frequency × average customer lifespan**
**Example: Coffee shop** If a customer spends an average of $7 per visit, comes twice a week and remains a loyal customer for two years:
$7 (APV) × 104 (annual frequency) × 2 years (lifespan) = **$1,456 LTV**
For subscription businesses, a different formula is more common because it directly incorporates the churn rate:
**LTV = average revenue per account (ARPA) ÷ customer churn rate**
A SaaS company with an ARPA of $50 per month and a monthly churn rate of 2% would have an LTV of $2,500 ($50 ÷ 0.02). For a truer picture of profitability, many companies calculate customer lifetime value using gross margin instead of just revenue.
**Always tailor the LTV calculation to your business model, timeframe and data quality.**
## **How to increase LTV**
Improving LTV is about strengthening the customer relationship so they stay longer, buy more frequently or purchase higher-value items. You can pull three main levers to make this happen.
1. **Increase customer lifespan.** The most direct way to boost LTV is by reducing churn. A powerful [onboarding experience](https://review.firstround.com/superhuman-onboarding-playbook/) ensures new customers see value immediately. Proactive customer support and listening to customer feedback also build loyalty, encouraging users to stick around longer.
2. **Increase average purchase value.** Encourage customers to spend more with each transaction. Common tactics include upselling to premium tiers, cross-selling complementary products and creating bundles that offer more value than a single purchase.
3. **Increase purchase frequency.** Get your current customers to buy from you more often. A well-designed loyalty program can reward repeat business, while targeted campaigns can bring customers back for seasonal promotions or new arrivals.
**Every lever you pull to improve retention rates, purchase frequency, or average purchase value can compound into higher LTV.**
## **Common LTV pitfalls and how to avoid them**
While powerful, LTV can be a misleading metric if not used carefully. Founders often fall into a few common traps that distort decision-making.
- **Relying on a single LTV**: Calculating one LTV for your entire customer base hides valuable insights. Segment your LTV by acquisition channel, persona, or pricing tier to get an actionable picture of your business.
- **Forgetting about margins**: A high revenue LTV doesn't mean much if the costs to serve that customer are also high. Always factor in your gross margin to understand the true profitability of a customer.
- **Using faulty assumptions**: Your LTV calculation is only as good as the data you feed it. Early-stage companies may struggle with this, as they have limited historical data to predict customer lifespan or purchase frequency. Use a lean startup approach to test and refine your assumptions as you gather more data.
**LTV is directional, not definitive. Always pair it with other metrics like churn, customer retention, and CAC.**
## **Practical uses of LTV**
LTV drives decisions across multiple functions:
- **Revenue forecasting**: Multiply LTV by projected customer acquisition numbers to predict future revenue.
- **Customer acquisition planning**: Set realistic CAC budgets based on LTV to maintain healthy unit economics.
- **Loyalty program design**: [Structure rewards and incentives](https://review.firstround.com/how-to-do-retail-right-from-the-inventor-of-the-apple-store/) to maximize customer lifespan and purchase frequency.
- **Pricing strategy**: Test pricing models by evaluating their impact on overall customer lifetime value.
- **Feature development**: Prioritize improvements that increase retention and lifetime value.
- **Customer support allocation**: Provide higher-touch support to customer segments with the greatest LTV potential.
Dashboards that track CLTV alongside churn rate, CAC, and retention rates give you a real-time view of customer satisfaction and profitability.
**Treat LTV as an operative guidepost, not just a reporting metric.**
**Read more from First Round:**
- [Net Revenue Retention (NRR): Definition and Strategies](https://review.firstround.com/glossary/net-revenue-retention-nrr-definition/)
- [The Founder's Guide to Building a V1 of Customer Success](https://review.firstround.com/founders-guide-building-customer-success/)
- [A Counterintuitive Approach to Growth: Add Friction](https://review.firstround.com/a-counterintuitive-approach-to-growth-add-friction/)
### Gross Margin
URL: https://review.firstround.com/glossary/gross-margin/
Last updated: 2025-10-17T20:54:41.000Z
For business owners and investors, gross margin is one of the clearest signals of operational efficiency. A company with a higher gross margin keeps more money from each sale to cover administrative expenses, invest in new products and generate net profit.
By tracking gross margin alongside other [key performance indicators](https://review.firstround.com/betterment-tested-three-performance-management-systems-so-you-dont-have-to/), founders avoid the trap of [growth at all costs](https://review.firstround.com/growth-at-all-costs-is-perilous-this-is-how-to-scale-sales-sustainably/) and build a business model that supports long-term success.
**Gross margin connects revenue, direct costs and the bottom line into one simple measure of a company's financial health.**
## **What gross margin measures (and how to calculate it)**
Gross margin lives on the income statement. It's calculated by taking total revenue (or net sales) and subtracting the direct costs associated with making and selling a product. These direct costs are known as the cost of goods sold (COGS) or cost of sales. COGS can be a significant factor in the cost equation for some companies (eg, CPG companies) and less so for others (eg, SaaS).
COGS includes expenses tied directly to the production process:
- **Raw materials**: The basic components used to create a product.
- **Direct labor costs**: Wages for workers involved in production.
- **Manufacturing overhead**: Rent, utilities and equipment depreciation
What isn't included are indirect operating expenses like salaries, administrative expenses or R&D. Gross margin isolates the profitability of the core product itself before any other business costs are factored in.
Gross profit is the dollar amount left after subtracting COGS. Gross margin is that same number expressed as a percentage of revenue.
Gross margin expresses gross profit as a percentage of revenue:
**Gross margin = (net sales – COGS) / net sales × 100**
**Example**: If sales revenue is $200,000 and direct costs are $100,000, gross profit is $100,000\. In this instance, the gross margin is 50%.
**Gross profit is a dollar figure. Gross margin is a percentage of revenue. Both matter: one shows absolute dollars available, the other shows efficiency relative to sales.**
## **Why gross margin matters for financial health**
Gross margin is more than a number. It reflects pricing power, cost control and the strength of your business model.
- **For manufacturing companies**, gross margin highlights how well you manage raw materials and labor costs. A falling margin may point to inefficiencies in the production process.
- **For SaaS and service businesses**, gross margin shows whether recurring revenue can support growth without ballooning costs of production.
- **For startups**, gross margin is a guardrail. It prevents over-investment in sales or marketing when the unit economics don't support it.
**Gross margin is a mirror: it reflects whether your operations are efficient enough to support growth.**
## **What is a good gross margin?**
There is no universal standard for a good gross margin. It varies significantly based on the industry average and business model.
- **SaaS and software companies often have very high gross margins**, frequently between 70% and 90%. Their COGS are low since delivering software involves minimal variable costs per customer.
- **Retail and manufacturing companies** typically have lower gross margins, from 20% to 50%. Their COGS are high due to significant spending on raw materials, physical inventory and direct labor costs.
The best approach is to compare your gross margin percentage against an industry benchmark. **Analyzing your numbers in context helps you and potential investors understand if your company's profitability is competitive.**
## **Using gross margin for strategic decisions**
Smart founders use gross margin as a diagnostic tool. When understood in context and mapped over time, your gross margin can become a useful KPI for developing:
- **Pricing strategy**: If competitors have higher gross margins, you may be underpricing or overspending on inputs. If your margins are far above industry benchmarks, you may have room to lower prices to expand your customer base.
- **Product portfolio**: Compare gross margin per unit across SKUs. Double down on high-margin products and reconsider low-margin ones.
- **Cost management**: A declining margin signals the need to renegotiate supplier terms, automate parts of the production process or cut variable costs.
- **Growth planning**: Higher margins provide more resources to invest in new direction initiatives, like new products or market expansion.
**Gross margin is the fastest way to see if your pricing and cost structure are working together.**
## **How to improve your gross margin percentage**
Improving your company's gross margin percentage requires both cost discipline and pricing strategy.
1. **Audit variable costs**: Identify your top five cost drivers in COGS and renegotiate terms where possible.
2. **Streamline production**: Automate repetitive tasks, reduce waste and train teams to improve efficiency.
3. **Revisit pricing**: Test higher prices with new customers, create premium tiers or bundle products to increase average transaction value.
4. **Focus on retention**: For subscription businesses, reducing churn increases the lifetime value of each customer and improves gross margin over time.
5. **Shift product mix**: Promote high-margin products more aggressively and phase out low-margin offerings.
**Small efficiency gains compound into a stronger gross margin and healthier bottom line.**
## **Gross margin analysis by business type**
Different business models require different approaches to gross margin optimization:
**E-commerce businesses** should focus on inventory management and supplier relationships. Bulk purchasing agreements can reduce raw material costs. Dropshipping models typically have lower gross margins but require less upfront investment.
**Service businesses** often have higher gross margins since their primary cost is labor. The key is optimizing billable hours and reducing non-productive time. Productizing services through templates or frameworks can improve margins.
**SaaS companies** should track gross margin per customer segment. Enterprise customers often have higher margins due to annual contracts and lower support costs per dollar of revenue. Self-serve plans may have better unit economics despite lower absolute revenue per customer.
**Track gross margin monthly by product line to spot trends before they impact your bottom line.**
## **Gross margin in financial forecasting**
You can use gross margin analysis to make smarter decisions about pricing, cost management and growth:
- **Cut variable costs**: Negotiate better terms on raw materials or automate parts of the production process
- **Revisit pricing strategy**: If margins fall below the industry average, test higher prices or new product tiers
- **Prioritize high-margin products**: Focus sales and marketing on goods or services with higher gross margins
- **Track per-unit margins**: For companies with multiple SKUs, calculate gross margin per unit to see which products drive profitability
Startups that rely on rigid annual planning often miss these signals. A more flexible approach, like the rolling planning system described in ["Annual Planning is Killing Your Growth,"](https://review.firstround.com/annual-planning-is-killing-your-growth-try-this-instead/) helps leaders adjust when margins shift.
**Track gross margin by SKU monthly and flag any product that drops more than three percentage points.**
## **Gross margin is your foundation for growth**
**Gross margin is one of the clearest metrics for understanding if each dollar of revenue is contributing to sustainable growth.**
A higher gross margin provides the financial flexibility to invest in research, marketing and talent. By tracking gross margin against industry benchmarks and using it to inform your pricing and cost management strategies, you ensure your business is not just growing but growing profitably.
**Read more from First Round:**
- [Growth at All Costs is Perilous — This is How to Scale Sales Sustainably](https://review.firstround.com/growth-at-all-costs-is-perilous-this-is-how-to-scale-sales-sustainably/)
- [Betterment Tested Three Performance Management Systems So You Don't Have To](https://review.firstround.com/betterment-tested-three-performance-management-systems-so-you-dont-have-to/)
- [Answers to Your Tough Questions About Growth — Learned While Scaling Eventbrite's $5B Growth Engine](https://review.firstround.com/answers-to-your-tough-questions-about-growth-learned-while-scaling-eventbrites-5b-growth-engine/)
### Bootstrapping
URL: https://review.firstround.com/glossary/what-is-bootstrapping-business/
Last updated: 2025-10-17T20:53:38.000Z
For founders in the startup world, bootstrapping represents a fundamentally different approach to building new businesses. Rather than pitching investors and giving up equity, bootstrapped entrepreneurs rely on their own financial resources and sweat equity to get their business idea off the ground.
This often means longer hours, slower initial growth and higher personal financial risk. But it also means complete control over the company — from business operations, to marketing to the company's growth trajectory.
**Bootstrapping doesn't mean staying small forever.** While it tends to favor cash flow discipline over rapid scaling, many successful bootstrapped companies have grown from self-funding into major players, proving this approach can support long-term success when executed strategically.
## **The Bootstrapping Journey**
Most bootstrapped startups progress through distinct stages:
**Personal investment stage**: Founders operate on personal loans, credit cards or savings while validating their business plan. Many bootstrapped entrepreneurs work full-time jobs while building their product nights and weekends. The focus is on testing the business idea, proving the concept works and getting in front of potential customers.
**Building momentum**: As the startup generates its first cash flow-positive months, founders reinvest everything back into business growth. This might mean hiring the first employee, outsourcing non-core work or expanding into new markets. The customer base becomes the primary driver instead of outside funding.
**Growing with profits**: Successful bootstrapped companies reach a point where recurring revenue funds operations and product development. Some explore crowdfunding or strategic partnerships while still avoiding venture capitalists. Others, like [Zapier](https://review.firstround.com/how-zapier-pulled-off-its-one-and-done-approach-to-fundraising/), eventually pursued a one-and-done institutional round that accelerated growth without losing full control.
**Transition decisions**: Even committed bootstrappers sometimes choose outside funding later. The difference is making that call from a position of strength rather than financial risk or desperation.
**Bootstrapping is a series of tradeoffs; each stage requires sharper discipline than the last.**
## Advantages of Bootstrapping for Entrepreneurs
- **Bootstrapping gives entrepreneurs full ownership and the freedom to build their business on their own terms.** Rather than chasing investor capital, bootstrappers can focus on what matters most: serving customers, refining their product and building a sustainable operation from day one.
- **Control over vision and operations.** When you bootstrap, you retain complete control of your business and its trajectory. There's no investor board dictating strategic direction or pressuring you to hit growth targets that don't align with your vision. You own your decisions—and your success.
- **Customer-driven growth.** Bootstrapped startups tend to hit product-market fit faster because survival depends on real-world customer adoption, not the next funding round. You're forced to listen closely to your market and iterate quickly based on actual demand, not projected valuations.
- **Operational discipline.** Running lean becomes second nature when you bootstrap. You'll outsource strategically, automate aggressively and cut costs without hesitation. Limited resources sharpen your cash flow discipline and force you to test new ideas quickly—skills that serve you whether you stay bootstrapped or scale with outside capital later.
- **Avoiding overvaluation risk.** Bootstrapping companies sidestep the inflated valuations that can burden young businesses with unsustainable growth expectations. You grow at the pace your revenue supports, building on fundamentals rather than hype.
- **Sustainable valuations.** Growth backed by earned revenue creates valuations rooted in reality, not investor-driven projections. This protects you from the pressure to scale prematurely and positions your company as a stable, attractive opportunity for acquirers or later-stage investors.
- **Focus on customers, not investors.** Instead of spending months in pitch meetings and due diligence, you can dedicate your attention to product development and building a loyal customer base. Your primary accountability is to the people paying for your product—not a cap table.
- **Flexible funding options later.** Whether you choose to continue as a bootstrapped startup, explore crowdfunding or ultimately attract angel investors, you control the timing and terms. You're not locked into a predetermined growth path dictated by someone else's timeline.
- **Proven fundamentals.** Profitable fundamentals make your company attractive across the board—to acquirers looking for stable businesses, to employees seeking sustainable employers and to later-stage investors who value capital efficiency and disciplined operations.
This approach connects closely with [the call for intellectual honesty](https://review.firstround.com/the-uncomfortable-truth-a-3x-founders-guide-to-intellectual-honesty/) in company building. You need to be clear-eyed about whether your business model truly fits bootstrapping or if outside capital is required to compete effectively in your market.
## **Disadvantages of Bootstrapping**
- **Higher personal financial risk**: Funding a startup through self-funding, personal savings or personal loans means the risk rests fully on the business owners.
- **Slower scaling**: Limited resources mean you can't always recruit top talent or expand as aggressively as large venture-backed competitors.
- **Recruiting challenges**: Without social media or press buzz tied to a big fundraiser, it's harder to attract talent compared to well-funded peers.There’s also less stability and certainty with a bootstrapped business.
- **Competitive disadvantages**: Competitors flush with venture capital can outspend, undercut pricing and expand faster.
The choice between bootstrapping and outside funding requires intellectual honesty. You have to ask whether your business plan and market truly match the constraints.
**Bootstrapping isn't always the right fit. Be brutally honest about your model.**
## **When Bootstrapping Works (And When It Doesn't)**
**Best fit**: Software development, SaaS and service businesses with high margins and fast payback cycles.
**Riskier fit**: Capital-intensive industries like hardware, biotech or regulated markets where upfront cash and long sales cycles demand outside funding.
**Middle path**: Many founders bootstrap first (sometimes for years) to validate traction, then raise venture capital to accelerate scaling.
**Bootstrapping thrives when**:
- Margins are high, and customers pay quickly
- Business growth is supported by cash flow, not debt
- Market timing is right, and the business has the KPIs to back it up
## **Bootstrapping Strategies That Work**
Founders who succeed with bootstrapping often share a few common tactics:
1. **Start with services, then build products**: Many founders [begin by offering consulting](https://review.firstround.com/dbt-labs-path-to-product-market-fit/) or contract work to generate cash, then reinvest profits into building scalable products.
2. **Keep expenses brutally low**: Work from home, delay hiring and automate wherever possible. Zapier famously skipped office space altogether, saving millions each year.
3. **Charge early and often**: Don't wait for a "perfect" product. Get customers to pay for value as soon as possible.
4. **Focus on profitable niches**: Instead of chasing massive markets right away, target smaller segments where you can win and expand from there.
5. **Leverage distribution hacks**: Partnerships, integrations and word-of-mouth can replace expensive marketing campaigns.
**Bootstrapping forces you to validate your business model early. If customers won't pay, you find out fast.**
## **Bootstrapping Mindset Beyond Funding**
**Even if you raise money, adopting a bootstrapped mindset can be powerful.**
The discipline of spending carefully, focusing on customer revenue and avoiding unnecessary overhead are habits that strengthen any company. This mindset applies whether you're self-funding or have raised millions.
**Cash flow discipline**: Treat every dollar as if it's your last. This forces you to prioritize features and expenses that directly impact customer value.
**Customer validation first**: Before building anything expensive, prove customers will pay for it. This applies to new features, market expansion and hiring decisions.
**Scrappy execution**: Find creative, low-cost ways to solve problems. This builds resilience and often leads to more innovative solutions than throwing money at challenges.
As [Vinny Lingham wrote about recursive product strategy](https://review.firstround.com/the-recursive-product-strategy-that-musk-used-to-build-an-empire/), the key is to back into each step with discipline and clarity about your long-term vision.
## **Real-World Bootstrapping Examples**
[Zapier](https://review.firstround.com/how-zapier-pulled-off-its-one-and-done-approach-to-fundraising/) began as a full-time side hustle while the founders kept day jobs. They used personal investment, sweat equity and early customer base traction to build momentum before ever raising institutional money. Their remote-first model shows how self-funding shapes a company's growth and operations.
Many small businesses, from consulting firms to SaaS companies, start by bootstrapping using reinvested revenue to fund expansion. Solo entrepreneurs often test service businesses this way, proving traction before exploring other funding options.
Even nonprofits rely on a version of bootstrapping, proving their model with grants, donations and earned income before seeking major donors or institutional support.
**Read more from First Round:**
- [How Zapier Pulled Off Its One-and-Done Approach to Fundraising](https://review.firstround.com/how-zapier-pulled-off-its-one-and-done-approach-to-fundraising/)
- [The Recursive Product Strategy That Musk Used To Build An Empire](https://review.firstround.com/the-recursive-product-strategy-that-musk-used-to-build-an-empire/)
- [The Uncomfortable Truth: A 3X Founder's Guide to Intellectual Honesty](https://review.firstround.com/the-uncomfortable-truth-a-3x-founders-guide-to-intellectual-honesty/)
- [Owner's Path to Product-Market Fit](https://review.firstround.com/owners-path-to-product-market-fit/)
### How to avoid a co-founder breakup before Series B
URL: https://review.firstround.com/how-to-avoid-a-co-founder-breakup-before-series-b/
Last updated: 2025-12-04T16:57:39.000Z
Rituals to strengthen the most important relationship in your startup
_This post is for subscribers only._
### Renew Your Co-Founder Vows — and Other Tactics for Strengthening the Most Important Relationship in Your Startup
URL: https://review.firstround.com/five-practices-to-strengthen-your-co-founder-relationship/
Last updated: 2025-10-15T07:45:55.000Z
[**Rachel Lockett**](https://www.linkedin.com/in/rhlockett?ref=review.firstround.com) once helped pull a pair of exasperated co-founders back from the brink of a breakup. At first, it was the perfect match. Two co-founders, two complementary skill sets: The operational whiz and the visionary salesperson. They worked together in complete harmony. They assumed it would always be that way.
Then the company grew. They got busy. They were steering separate teams. One moved across the country and had children. They were no longer spending any time together. Both felt alone and unsupported. One founder even started to consider breaking up and selling the company early, while the other wanted to barrel ahead and keep scaling. Once-unconditional trust between the pair had fractured.
Lockett has noticed that as startups grow, there’s a familiar pattern with co-founders: After the honeymoon phase ends, they start to take their relationship for granted.
You may have heard the stat that [65% of startups fail](https://www.entrepreneur.com/leadership/harvard-business-school-professor-says-65-of-startups-fail/370367?ref=review.firstround.com) because of co-founder breakups. So there’s a lot of pressure to find “the one.” Maybe you spent months [dating around](https://review.firstround.com/the-founder-dating-playbook-heres-the-process-i-used-to-find-my-co-founder/) to search for someone who checks all your boxes. Or maybe you met your future co-founder years ago at your first job or in your freshman dorm, and your chemistry was so great you felt destined to start a company together.
Choosing the right co-founder is only part of what makes a successful pairing — you also have to consciously maintain that relationship.
“A lot of people get married and put the relationship on autopilot. The same is true with co-founders, and that doesn't work,” says Lockett. “You don’t run a business that way. You're actively managing it every single day. You have to do the same for your co-founder relationship.”
Lockett got her start in tech as a product manager at an edtech startup, and later pivoted into people strategy, where she witnessed two powerful co-founder duos in action: Evan Sharp and Ben Silbermann at **Pinterest** and the Collison brothers at **Stripe**. “I saw that when there was alignment between the co-founders at the top, it really reverberated throughout the whole business,” she says.
Such partnerships might seem like magic from the outside, but Lockett knows that behind the scenes, they take a lot of dedication. Now an executive coach, she’s something of a co-founder therapist (she also happens to be the child of two psychologists). She’s helped dozens of co-founders find their spark again — and others split on good terms.
Ultimately, resilient co-founder relationships that can survive the extreme ups and downs of startup leadership aren’t simply the result of a perfect pairing. They’re built by deciding how you want to work and grow together from the outset, and by carving out room along the way for resets and reconnection.
So what does the maintenance that prevents co-founder drama and break-ups actually look like in practice? In this exclusive interview, Lockett shares a framework for how to establish the right relationship conditions from the start, the most common (and often sneaky) causes of friction and five rituals to build into your weekly, monthly and quarterly relationship rhythms.
Let’s dive in.
## The diamond of co-founder dynamics
“Whenever I have an intake call with two co-founders to ask what they want out of coaching, their goals typically boil down to figuring out the misalignment in one of three buckets: shared vision and strategy, personal growth and the relationship itself,” says Lockett.
She has a framework for thinking about these three areas that’s shaped like a diamond: The company’s long-term plan at the top, each founder’s leadership evolution in the middle and the health of the relationship at the bottom.
Here’s how she defines each.
### Vision and strategy
The first priority is alignment on where the company is headed: your one-, five-, even ten-year plan. You likely discussed this when you first dated — but naturally, things change as the business grows up. “You can't do great work together unless you’re aligned on where you're going,” says Lockett.
Pivots are typical, and Lockett finds that founders start to diverge on shared vision after a startup clinches [product-market fit](https://review.firstround.com/series/product-market-fit/). “I asked two co-founders after they raised a Series A to write down their purpose for the next year, and they came up with really different answers,” she says. “One person thought building for scale operationally was the top business priority. The other wanted to innovate and launch two new business lines to acquire as many new customers as possible.”
That misalignment can stall progress, so Lockett recommends revisiting vision and strategy annually and top line goals regularly — ideally quarterly.
### Each founder’s individual growth
Building a company is a constant exercise in [giving away your Legos](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups/). And that often stirs up thorny feelings when founders have to give up the work they loved doing in the early days. “In my experience working with founders, that pace of growth requires deep and honest self-reflection about how to align your strengths with the needs of the business,” says Lockett.
Key milestones like a fundraise or bringing on senior leaders are natural points to reassess whether a co-founder’s title still tracks with what they’re doing — or would rather be doing. “I've worked with so many CEOs who find themselves lost because they raised money, and they had to hire someone to do something they were great at in the beginning. And then they feel stuck and depleted by operational, managerial work,” she says.
How you feel about your work as a founder has a huge impact on your co-founder. “You have to be aware of the delta between the skills you have and what the company needs, and work on it constantly, whether that’s through a mentor, advisor or coach, or hiring the right internal talent,” she says.
### The relationship
This is the nuts and bolts of how you communicate. Trust, healthy conflict, commitment and accountability form the foundation of strong co-founder relationships.
And when things do go awry with the relationship itself, founders either shrug it off as a symptom of the hard work of company-building, or feel it’s too taboo to discuss with other teammates or board members.
“Most founders will admit to challenges with vision or growth, or even their co-founder’s skillset, but rarely call out the relationship itself,” says Lockett. “They’ll blame it on lack of product-market fit, when in reality the partnership is what’s keeping them up at night — and what’s slowing them and the business down.”
> To scale your business, you have to attend to the vision and strategy, your individual growth and your relationship with each other. If any one of them is neglected, the diamond cracks.
## Common scenarios for breakdowns
Lockett often observes this telltale sign that founders are headed toward a breakdown: They can’t give — or receive — hard feedback.
Here’s how that reared its head in one CTO-CEO pair she coached. “The CTO confided in me that he planned to go to the board and kick out the CEO because he was no longer a fit for his role. The CTO felt that the CEO wasn’t running the company effectively,” she says. “These two people were good friends from college, and the CTO had tried many ways to confront the CEO and tell him he wasn’t right for the job. But he felt if he pushed too much, the CEO would overthrow him.”
Founders often don’t recognize dysfunction until things get confrontational. “People think if they don’t argue, they have a healthy relationship. That just means there’s a lot going unsaid and resentment is building,” she says. “You need healthy conflict to make good decisions.”
Lockett says so many of the co-founder breakdowns she sees are preventable. You just have to diagnose the root cause and communicate through it. She walks through three common reasons behind co-founder friction as the “Three Rs,” pulled from a book called [*The Power of 2*](https://www.amazon.com/Power-Make-Most-Your-Partnerships/dp/159562029X?ref=review.firstround.com): Role, rules and relationship.
### Role
Role evolutions are a sneaky cause of co-founder fights. “Founders feel shame when they have to step back from roles they once owned — it’s like the A+ student who thinks they have to be good at everything,” says Lockett.
She recalls coaching a previous co-founder couple: the CEO wanted to sell, and the Head of Product pushed for an IPO. But the true vision divergence was deeper than that. “Once I dug into that, I learned that the CEO actually hated his role, because he was completely depleted by managing the board and leadership team. He really missed being technical. Meanwhile, the Head of Product loved his role. They both thought there was endless potential for this business, but they had very different day-to-day experiences, and both had very different needs for rewards in the short versus long term,” she says.
If you don’t proactively recognize — and vocalize — your misalignment with your role, the burden falls on your co-founder. “When you're not honest about how you’re growing, it’s on your co-founder to be the person to tell you, ‘Hey, you want the CTO title, but you're not skilled at or really bad at hiring, and we need to double the size of our engineering team in the next six months,’” she says.
So how can founders know when role friction is the source of their woes? It’s not always obvious. Lockett likes to use this test: Does the work energize you more than 50% of the time? If not, you’re not living within your strengths, and that’s probably not good for your co-founder (or the business).
> The strongest co-founders I work with don’t fight to keep the same job — they fight to do what’s best for the company and each other.
### Rules
Your rules as a founding team are your compensation, equity split and expectations of personal commitment. Writing your rules down is an important part of making sure things feel fair.
Rules clashes often pop up when the rewards structure doesn’t track with the input of each founder. “When people are starting a company, they're often still working on something else,” Lockett says. “I worked with the CEO of a healthcare startup, and her co-founder was a doctor who was helping her raise money. But he was also still practicing. He was great for credibility, but he wasn’t executing on the work she needed him to do. And their equity was split. She felt that was completely unfair and undermined her ability to work with him. So they had to realign on expectations and rejigger the reward structure.”
She shares another example of a pair of female founders deep in the trenches of finding product-market fit who had different definitions of “grinding.” “One founder spent 10 years as the CEO of a high-growth tech company and sat on multiple boards. She was committed to the mission, but she also wanted to work at a different pace than her counterpart,” she says. “Her co-founder’s expectation was that early-stage founder mentality inherently meant working on nights and weekends. They struggled to find a balance.”
Lockett says it’s crucial to revisit all your agreements as the company evolves. Fairness isn’t defined once in the beginning — it’s a moving target that requires periodic recalibration.
### Relationships
Other times, the source of co-founder conflict is the erosion of trust due to lack of communication and empathy — the bedrock of the relationship itself.
“Interpersonal dynamics are like a dance,” says Lockett. “It feels awkward when you’re stepping on each other’s feet and you don’t know why.”
Lockett likes how Dr. Sue Johnson’s book [*Hold Me Tight*](https://www.amazon.com/Hold-Me-Tight-Conversations-Lifetime/dp/031611300X?ref=review.firstround.com) describes close relationships — romantic or professional. “The same patterns that appear in couples show up in co-founders, executive teams and other high-trust partnerships: when people feel emotionally unsafe, they protect themselves instead of collaborating,” she says.
Johnson’s book explains that partners fall into “negative conversation loops” based on underlying fears and needs that go unsaid. One partner will often hold onto a fixed story about the other, and they’ll talk past each other, no matter the topic.
Lockett shares how that negative conversation loop showed up in one co-founder pair. “I was working with the CEO and his co-founder, the COO. They had just hired a Head of Product, and the COO started to feel threatened. He hated how the CEO now deferred to someone else. He felt underappreciated, especially with some of his equity going to this new hire,” she says. “Every conversation between the two of them became tense. The COO questioned the CEO’s decision-making in front of the new Head of Product and other colleagues in a way he had never done before. The CEO would then waste energy defending his decision or avoiding the COO completely. All of a sudden it didn’t feel like they were on the same team.”
Lockett explains that the key to making up in a situation like this one is to first identify the pattern — or recognize the “demon dialogue,” as Johnson calls it. In this case, the co-founders were trapped in a loop of criticism and defense. “The CEO and COO had to acknowledge the loop they were stuck in with openness and curiosity. They can do that by sharing that something feels off and revealing their observations and feelings around it,” says Lockett. “Then once they’ve identified the negative conversation loop as the enemy, and not one another, they can get better at calling out that loop when they find themselves stuck in it again.”
## Five practices to strengthen your relationship from the outset
You’ve got your diamond. You know how it cracks. What can you do early on to make sure that doesn’t happen?
Lockett recommends adding these five practices to your to-do list at the start of your relationship and making a habit out of revisiting them regularly.
### 1\. Write (and renew) your co-founder vows
Lockett urges co-founders to draft an operating agreement — how you vow to show up for each other “in sickness and in health.”
“It’s not a legal document,” she says. “It’s a living pact on how you lead as a team.” She calls it a designed alliance: co-founders write down their North Star for the company, for themselves personally, and for the co-founder partnership. They then compare where they align and differ.
Your vows should cover:
- Your best-case scenario for the company
- How you want to be with one another (the culture you want to create)
- How you make decisions
- How you want to handle feedback and conflict
- How you’ll check-in and revisit how things are going
Lockett also recommends asking some more playful questions to help you create an identity around your partnership. A favorite of hers: What’s your co-founder relationship mascot?
You can also each take the Enneagram test to surface strengths, blind spots and clashes. Think of it like your co-founder love language. “It’s a huge relief for partners to be able to talk about where their types clash in a way that isn’t triggering. You can cultivate empathy for why your partner behaves the way they do,” she says.
Revisit this pact regularly. “Ask each quarter: What did we say we wanted? Are we living up to it or not?” she says.
### 2\. Get outside support early on
Like in any close relationship, you need someone you can vent to — who isn’t just the other person in the relationship. Whether it’s a leadership coach or trusted board member, find a third-party sounding board.
Lockett says peers can be an especially powerful (and less expensive) group to lean on. That might be your founder friends or a CEO or CTO network, folks who can open up about how they’re navigating similar partnerships.
Therapy can help too. “Building a business is emotionally complex and challenging. And, look — both of my parents are therapists. I’m in full support of therapy. But it depends on the kinds of things you want to work on,” she says. “Therapy is helpful when you want to be your best self in the present and overcome something from the past. So that includes things like patterns of behavior you learn from childhood that are impacting your partnership.”
Whatever you choose, line up your support early. “Don’t wait for a crisis. The best time to get support is when things are going well — so they keep getting better,” she says.
> In marriages, most people wait until they’re about to get divorced to go to couples therapy. But the healthiest relationships invest in their partnership — and seek outside support — early on.
### 3\. Master healthy conflict using nonviolent communication
You and your co-founder are going to fight. And that doesn’t have to be a bad thing. “Conflict isn’t the problem. Avoiding conflict is,” says Lockett.
She likes to share the [Nonviolent Communication](https://www.cnvc.org/?ref=review.firstround.com) (NVC) framework, initially developed by Marshall Rosenberg, with founders to give them some structure around sharing their feelings — without getting combative.
When you feel you need to confront your co-founder, try breaking down your response into these four parts:
- **Observation**. “When I saw you change the roadmap without looping me in…”
- **Feeling**. “…I felt frustrated and invisible.”
- **Need**. “Because I need transparency when we’re making major shifts.”
- **Request**. “Would you be willing to check in with me before changing shared plans like that?”
### 4\. Carve out time for co-founder dates
Couples need quality time together outside the hubbub of their daily lives. Co-founders are no different.
“If you’re married and skip date nights or family check-ins, things unravel. It’s the same with co-founders — without intentional time together, everything drifts,” she says.
These dates should take three forms:
**Put weekly 1:1s on the calendar.**
Use your weekly check-ins to make space for what you’re thinking and feeling outside of the business day-to-day. Ask these questions:
- How are we doing as a team?
- What’s been unsaid that needs to be addressed?
- What do you need from me this week?
If weekly meetings aren’t feasible, settle on a rhythm that feels realistic — and respect that hold on your calendar. Ideally, these 1:1s should be about 45 minutes and they can be virtual.
**Set aside time for quarterly in-person meetups.**
Regardless of location, every few months, it’s essential to spend uninterrupted time together outside of work for at least two hours. Think of this like your vacation together.
Lockett recommends dinner or time outside of the office, such as a hike. “The goal is to create an environment that feels less like a business meeting and means you’re more open and connected,” she says.
**Commit to an annual strategy session.**
Finally, an annual offsite to revisit the company’s overall direction, how you’re each feeling about it, and how you’re navigating your roles is incredibly helpful. Ideally, this should be 3-4 hours in person.
🗓️
Use Lockett’s [co-founder check-in guide](https://docs.google.com/document/d/1PG-TpGA8kRxT0ry4%5FuFPxkBmr5ssaXJBC8WsCCZ8Z40/edit?tab=t.0&ref=review.firstround.com) for your weekly, quarterly and annual get-togethers.
### 5\. Normalize role evolution
Your check-ins are a good time to discuss how you and your co-founder are feeling about how your roles are changing.
You should ask and answer honestly:
- Are we each in the seat that’s best for the company now?
- What are we each growing toward?
- What support do we need to evolve into what the business needs next?
> Founders who evolve consciously stay on the same team, even if they switch roles.
Startups live or die based on the relationships of their leaders. “But don’t let that scare you. The work to maintain them starts with these small habits. Just like in a marriage, shared commitment to the vision, individual growth and a healthy relationship is all it takes. Everything else is learned behavior,” she says. “I recommend starting with one hour each week to invest in your co-founder relationship — it compounds over time.”
### Inside Warp’s coding by prompt mandate (and how the CEO follows it too)
URL: https://review.firstround.com/inside-warps-coding-by-prompt-mandate-and-how-the-ceo-follows-it-too/
Last updated: 2025-12-04T17:38:13.000Z
Every coding task starts with a prompt — even the CEO’s
_This post is for subscribers only._
### Freemium
URL: https://review.firstround.com/glossary/freemium/
Last updated: 2025-10-08T03:24:33.000Z
Freemium has become a standard type of business model in internet-based companies, especially SaaS and consumer apps.
It should be treated as an acquisition model, not a revenue model. The free tier is the funnel that pulls in potential users, while the premium version is where monetization happens through subscription levels, premium credits or advanced services.
## **History and Evolution of Freemium**
The phrase “freemium” was coined by Jarid Lukin in 2006, but the practice predates the label. Early internet-based businesses like Hotmail and Skype leaned on free access to spread virally, then layered in premium credits or additional bells and whistles.
As SaaS matured, companies like Dropbox, Evernote, and LinkedIn popularized the freemium business model as a deliberate growth strategy. Spotify brought it to music aficionados, offering free streaming with ads, skips, and limitations, while reserving features like offline listening for paying subscribers.
Zoom is a clear example of the freemium model in action. Individuals can use Zoom for free with unlimited 1:1 calls, but group meetings are capped at 40 minutes. That time limit is the nudge that drives many teams to upgrade to paid plans, which unlock longer meetings, cloud recording, admin controls, and advanced security features. The free tier lowers adoption friction, while the paid tiers monetize power users who rely on Zoom for daily collaboration.
Today, freemium is a core tactic in product-led growth. It works especially well for digital distribution platforms and companies where marginal consumption costs are near zero and scale drives value.
## **Freemium vs. Free Trials**
Many people confuse this form of business model with free trials, but the mechanics and psychology differ.
### **Key Differences**
- **Duration of free use**
- Freemium: free forever, but with limited basic features to users.
- Free trial: full product access, but only for a set time (often 7–30 days).
- **User evaluation**
- Freemium lets users explore value at their own pace, building habits over weeks or months.
- Free trials force a decision quickly, which can be effective for products that show ROI immediately.
- **Customer appeal**
- Freemium shines in products with network effects or viral loops (Spotify, Dropbox, Facebook).
- Free trials fit better for complex B2B tools where deep exploration is needed to prove value.
Choosing between the two depends on your product’s strengths:
- Choose **freemium** if your product gains value from scale, referrals, or habit-building.
- Choose **free trials** if your product requires immediate immersion to demonstrate ROI.
As Jonah Berger, a Wharton professor, explains,[ freemium lowers uncertainty](https://review.firstround.com/pull-dont-push-how-catalysts-overcome-barriers-and-drive-product-adoption/) by letting customers experience value first and delaying costs until later.
## **Benefits of the Freemium Model**
Freemium can be a powerful business model that reduces barriers to entry while creating multiple opportunities for monetization.
- **Lowered customer acquisition costs**: Eliminates upfront payment friction and pulls in large pools of initial users.
- **Habit-building**: Users self-educate and may stick around longer, increasing the odds of conversion.
- **Viral marketing potential**: A free tier fuels word-of-mouth and network effects. Dropbox’s referral program turned free users into acquisition channels.
- **Upsell opportunities**: Once trust is built, companies can cross-sell, upsell, or monetize through ads, premium credits, or enterprise subscription levels.
- **Feedback loop**: Free users provide valuable signals for product improvement.
## **Challenges of the Freemium Model**
The freemium model also has its drawbacks and disadvantages:
- **Scalability issues**: Free users consume infrastructure and support without contributing money.
- **Value balancing**: The free tier must deliver a strong hook but still leave enough behind the paywall to drive upgrade.
- **Conversion dependency**: Monetization often relies on 2–5% of users upgrading. Without clear differentiation, conversion rates stall.
- **Misaligned incentives**: Treating freemium as a revenue model instead of an acquisition funnel can distort strategy.
Alex Rampell, CEO of TrialPay, warns that “one price means you’re leaving a lot of money on the table.” Freemium works best when paired with[ tiered subscriptions](https://review.firstround.com/dont-leave-money-on-the-table-with-this-crash-course-in-pricing/) that let customers self-select based on willingness to pay.
## **Successful Freemium Examples**
- **Dropbox**: Free storage with referral bonuses. Paid tiers unlock more space and collaboration capabilities.
- **Spotify**: Free with ads and skips limited. Premium removes ads and unlocks offline listening. According to Spotify Investor Relations, conversion to premium is driven by the better listening experience.
- **LinkedIn**: Free networking and profiles. Premium adds advanced services like search, InMail, and analytics.
- **Evernote**: Free note-taking across devices. Premium adds offline access, integrations, and collaboration.
- **Canva:** Freebasic features. Paid users unlock full control over their design in the application.
Each example shows the same principle: the free tier solves a real problem, while the premium version unlocks advanced features for power users.
## **Strategies for Freemium Success**
- **Set effective product limitations**: Free must feel valuable, but gaps should be obvious. Spotify’s ads and skip limits are a constant nudge toward premium.
- **Design for habit**: The longer users engage, the more likely they’ll pay. Build daily or weekly touchpoints.
- **Treat freemium as a funnel**: Onboarding should highlight upgrade triggers, not just free value.
- **Balance free and paid features**: Don’t give away too much. Reserve premium triggers like integrations, analytics, or advanced collaboration.
- **Expand revenue beyond upgrades**: Layer in ads, enterprise tiers, or cross-sells. Apple’s[ accessory strategy](https://review.firstround.com/our-6-must-reads-on-pricing-a-product/) is a reminder that adjacent products can drive margin.
- **Iterate constantly**: Pricing and tier design aren’t static. Test feature bundles, subscription levels, and incentives.
## **The Psychology of Freemium**
- **Reciprocity**: Free value creates goodwill, making users more open to paying later.
- **FOMO**: Seeing what’s locked behind the paywall creates urgency.
- **Endowment effect**: Once users build habits in the free version, they value their investment of time and are more likely to upgrade.
Berger frames this as lowering the “cost-benefit timing gap.” Freemium lets customers enjoy benefits now and delay payments until they’re convinced.
## **Does Freemium Work?**
It depends on the industry. The freemium business model is highly effective in SaaS, consumer apps, and digital platforms where marginal consumption costs are low and scale drives value. It’s less effective in industries requiring high-touch service to users, like consulting or healthcare, where free tiers can’t deliver meaningful value.
The crux of success is execution. The challenge is balancing generosity with sustainability.
The model works best when:
- The free product has a strong hook.
- There’s a clear, compelling upgrade path.
- The firm can sustain free users operationally.
Freemium success depends on how well you convert free users into paying customers. Done right, it can advance adoption, build awareness, and create a marketplace where listings, boosters, and customizations become natural upsells.
Success requires more than generosity. A strong freemium play means aligning free and paid tiers, tracking conversion rates, and continually optimizing how features are distributed.
### Gross Merchandise Value (GMV)
URL: https://review.firstround.com/glossary/gross-merchandise-value-gmv/
Last updated: 2025-10-08T03:23:02.000Z
For startups, the GMV metric is often one of the first performance indicators used to show traction. It reflects the scale of sales transactions, not profitability.
Expressed as a formula, GMV looks like this:
GMV = Sales price of goods × number of goods sold
So, if an eCommerce store sells 200 units at a sales price of $50 each, its GMV is $10,000\. That’s the total value of sales transactions before accounting for shipping costs, marketing costs or transaction fees.
## **GMV vs. Revenue**
GMV is related to revenue, but there’s a distinct difference: GMV is the total value of products sold. Revenue is what the company actually keeps after deducting fees and expenses.
- **GMV**: The gross transaction value of all sales.
- **Revenue**: GMV minus deductions like returns, shipping fees, marketing costs and transaction fees.
Take eBay as an example: its GMV reflects the total value of merchandise sold by users. But eBay’s net revenue comes from the fees it charges on those sales.
Shopify is similar: it processes billions in GMV for merchants, but its revenue comes from subscription fees and payment processing.
**The difference is that GMV shows scale and revenue shows profitability. Together, they give you a good idea of your**[ **product-market fit**](https://review.firstround.com/goats-path-to-product-market-fit/)**.**
## **Why Your GMV Metric Matters**
Even with its limitations, GMV is a useful[ growth metric](https://review.firstround.com/answers-to-your-tough-questions-about-growth-learned-while-scaling-eventbrites-5b-growth-engine/) for startups and marketplaces.
- **Early traction signal**: A rising annual GMV shows growth over time and helps demonstrate demand before profitability is reached.
- **Market share proxy**: For marketplaces, GMV reflects the size and activity of the ecosystem.
- **Comparisons across periods**: Tracking GMV by month, quarter or year highlights growth trends.
Investors and finance teams often ask for GMV as a top-line performance indicator. But they will always want to see it paired with other KPIs like net revenue, gross margin, customer acquisition cost and customer lifetime value.
## **The Pitfalls of Overemphasizing GMV**
Treating GMV as equivalent to revenue is a common mistake. It can inflate success and hide weak unit economics.
- **Discount-driven GMV**: Offering deep discounts or free shipping may boost GMV but simultaneously erode profitability.
- **Returns and refunds**: High return rates reduce the actual value retained.
- **Marketing spend**: Aggressive inbound marketing campaigns can drive GMV growth but lead to unsustainable customer acquisition costs.
**GMV without context is a vanity metric.** Pair it with profitability measures to avoid misleading yourself or investors.
## **How to Increase Gross Merchandise Value**
Growing GMV isn’t achieved just by selling more merchandise. Increasing GMV means raising the total value of each sales transaction and encouraging repeat purchases.
- **Raise average order value**
- Use cross-selling and recommendation carousels to suggest complementary products.
- Create product bundles that encourage bulk buying.
- Shopify apps like Infinite Options let you offer personalized products, which can lift order values.
- **Improve conversion**
- Optimize the user experience with better search ranking, faster checkout and clear merchandising strategy.
- Test product bundles and volume discounts to encourage larger carts.
- **Build loyalty and retention**
- Launch a loyalty and rewards program to drive recurring revenue.
- Personalize the shopping experience with targeted offers and recommendation engines.
- **Refine marketing**
- Focus inbound marketing campaigns on high-intent buyers.
- Track KPIs like conversion rate and customer engagement to measure impact.
**Tactics like free shipping, bundles and loyalty programs can lift GMV, but always weigh the trade-offs in margin and inventory costs.**
## **GMV in Different Business Models**
The GMV acronym applies differently depending on the business model.
- **Marketplaces**: For platforms like eBay, GMV is the core growth metric. Their revenue comes from transaction fees, not the merchandise itself.
- **Direct eCommerce**: For eCommerce brands that manufacture and sell their own products, GMV is gross sales before returns. Inventory costs and shipping fees are critical to profitability.
- **Drop ship eCommerce**: GMV reflects the total sales price, but profit is the margin between that price and what manufacturers charge.
- **Channel-led hardware sales**: GMV tracks the total value of products sold through retailers or distributors before channel discounts.
- **SaaS metrics**: GMV is less common, but SaaS companies track equivalents like monthly recurring revenue (MRR), annual recurring revenue (ARR) and total contract value. These are recurring revenue measures that function like GMV for subscription businesses.
## **Using Annual GMV as a Benchmark**
Annual GMV is one of the clearest ways to show growth over time. Comparing year-over-year GMV highlights whether sales expansion is accelerating or slowing.
For example, a marketplace might report $50 million in annual GMV in year one and $120 million in year two. That growth metric signals strong adoption, but investors will still ask: what portion of that GMV translates into net revenue and profitability?
**Always report GMV alongside revenue, gross margin and retention metrics.**
**When presenting GMV, transparency matters. Always show it in context with complementary metrics, such as:**
- **GMV**: Total value of products sold.
- **Net revenue**: After fees, returns, and discounts.
- **Gross margin**: After inventory and shipping costs.
- **CAC and LTV**: To measure acquisition and retention efficiency.
- **Cohort analysis:** Segmented GMV by product line, geography, or customer type.
**Read more from First Round:**
- [Don’t Let Growth Hurt Your Margins: A 4-Step Pricing Framework](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/)
- [Superhuman’s Onboarding Playbook](https://review.firstround.com/superhuman-onboarding-playbook/)
- [Looking to Scale Your Sales? Seven Bullets to Dodge](https://review.firstround.com/looking-to-scale-your-sales-seven-bullets-to-dodge/)
### Key Performance Indicators (KPIs)
URL: https://review.firstround.com/glossary/key-performance-indicators-kpis/
Last updated: 2025-10-08T03:21:54.000Z
## **KPIs vs. Metrics**
Not every performance metric qualifies as a KPI. Metrics are any measurement you can track, from web traffic to video views. KPIs are the *vital few* that tie directly to strategic objectives.
- **KPIs**: Answer critical business questions. Example: Customer churn rate to measure retention.
- **Metrics**: Provide context but may not drive decisions. Example: Average attendance to a webinar.
A common pitfall is tracking what’s easy to measure instead of what matters. Copying another company’s sales or marketing KPI dashboards leads to reporting on vanity metrics — your KPIs will be different based on the needs of your business. Strong operators start with their strategic objectives, define key performance questions and then select KPIs that answer them.
## **Why KPIs Matter**
KPIs are more than numbers on a dashboard:
- **Guide decisions**: A falling conversion rate on call-to-action content signals a need to adjust a digital marketing campaign.
- **Enable accountability**: Clear KPIs like gross profit margin or average response time give teams ownership of outcomes.
- **Support forecasting:** Financial KPIs such as net profit, revenue growth rate, or return on equity (ROE) feed into models for revenue-to-goal and return on investment.
- **Drive improvement**: Regular KPI reports highlight trends in customer satisfaction scores, employee satisfaction surveys or operational efficiency, helping leaders test changes and measure impact.
[Great managers go deep](https://review.firstround.com/what-i-learned-about-management-and-culture-from-growing-ubers-asia-business-from-zero-to-billions/) on the KPIs that matter most — whether tied to top-line growth, cost reduction or customer experience.
## **Types of KPIs**
### **Strategic KPIs**
High-level indicators tied to long-term goals. Examples: revenue growth, client retention rate, net promoter score. Executives use these to judge overall health.
### **Operational KPIs**
Day-to-day measures that ensure operations run efficiently and resources are used well.
Examples include:
- **Cycle time:** How long it takes to complete a core process from start to finish.
- **Customer support response time:** Average time to first reply on tickets or calls.
- **Utilization rate:** Percentage of employee, equipment, or system capacity in active use.
- **On-time delivery rate:** Share of projects, features, or shipments completed by the promised date.
- **Error rate or defect frequency:** Percentage of process outputs requiring rework or correction.
### **Functional KPIs**
Department-specific.
- **Sales KPIs**: Sales conversion rate, annual contract value, quota attainment.
- **Marketing KPIs**: Cost per lead, PPC advertising ROI, content downloads, social media sentiment analysis.
- **Support KPIs**: Customer support tickets resolved, average response time.
### **Leading vs. Lagging Indicators**
- **Leading KPIs** predict outcomes. Example: trial-to-paid conversion rate as a signal of future revenue.
- **Lagging indicators** confirm results. Example: quarterly net profit or customer churn rate.
Best practice is to combine both. A SaaS team might track product usage frequency (leading) alongside churn rate (lagging) to anticipate retention issues.
### **Input, Output and Process KPIs**
- **Input KPIs**: Resources invested, like cost per graduate in education or institutional debt per student.
- **Process KPIs**: Efficiency measures such as critical path length in project management or average daily attendance in schools.
- **Output KPIs**: Results delivered, like subscription length or customer lifetime value.
[Not every KPI needs to be numerical.](https://review.firstround.com/why-linear-puts-craft-above-all-metrics/) For Linear, quality and craft were the most important KPIs — a qualitative measure that shaped every decision, even when investors pushed for faster growth
## **Building Effective KPIs**
### **SMART Framework**
Effective KPIs are specific, measurable, achievable, relevant and time-bound. For example, “Increase customer retention rate by 5% in the next quarter,” is clearer than “Improve customer loyalty.”
### **Defining Measurement**
Every KPI should have:
- A formula (e.g., Customer Retention Rate = \[(Customers at end of period – New customers) ÷ Customers at start of period\] × 100).
- A time window (monthly, quarterly).
- A clear owner (sales department, support teams, marketing).
- A consistent denominator (avoid shifting definitions of “active customer”).
## **Tracking and Reporting KPIs**
### **Dashboards and Tools**
Modern KPI dashboards integrate data from Google Analytics , HubSpot Marketing and project management platforms. Tools like Power BI Desktop or the Power BI service allow teams to build live dashboards, visualize performance data and share PBIX files across departments.
Dashboards should include:
- **Trend axis**: Show direction over time.
- **Target field**: Compare actuals to goals.
- **Annotations**: Flag major events like a new B2B marketing campaign launch.
### **AI in KPI Management**
Artificial intelligence is increasingly used for anomaly detection, forecasting and surfacing early signals. AI data can highlight leading KPIs, automate root-cause analysis and even suggest benchmark groups for comparison. KPIs and artificial intelligence together help operators move from static reports to proactive strategy management.
### **KPI Reports**
A strong KPI report includes:
- KPI name, definition and formula.
- Target and distance to goal.
- Callout value (e.g., “Churn rate rose 2% this quarter”).
- Benchmark groups for context.
- Actionable commentary: what changed, why and what to do next.
## **Industry Examples**
- **Finance**: Net profit margin, return on investment, cost per discharge in healthcare systems.
- **Marketing**: Conversion rates, video view counts, web traffic by source.
- **Sales**: Revenue to goal, average contract value, sales cycle length.
- **Operations**: Average response time, total cycle time, operational efficiency.
- **People**: Employee satisfaction, client retention rate, average subscription length.
## **Best Practices**
- **Align with strategy**: Start with the strategic plan, then derive KPIs.
- **Limit the set**: Too many KPIs dilute focus.
- **Standardize definitions**: Keep formulas consistent across KPI dashboards.
- **Review regularly**: Hold governance meetings to retire irrelevant KPIs and add new ones.
- **Balance quantitative and qualitative indicators**: Pair hard numbers like gross profit margin with softer measures like employee satisfaction surveys.
Not every decision can be solved by experimenting your way out of it. [Some require judgment](https://review.firstround.com/how-to-take-bigger--bolder-product-bets-lessons-from-slacks-chief-product-officer/), context, and the right KPIs to frame the stakes.
KPIs are decision-support tools that connect strategy to execution, spotlight where to act and measure whether actions are working. Whether you’re tracking customer acquisitions, churn rate, or operational efficiency, the goal is the same: focus on the few performance indicators that truly move your business forward.
**Read more from First Round:**
- [Why Linear Puts Craft Above All Metrics](https://review.firstround.com/why-linear-puts-craft-above-all-metrics/)
- [What I Learned About Management and Culture From Growing Uber’s Asia Business From Zero to Billions](https://review.firstround.com/what-i-learned-about-management-and-culture-from-growing-ubers-asia-business-from-zero-to-billions/)
- [How to Take Bigger, Bolder Product Bets: Lessons From Slack Chief Product Officer](https://review.firstround.com/how-to-take-bigger--bolder-product-bets-lessons-from-slacks-chief-product-officer/)
### Churn Rate
URL: https://review.firstround.com/glossary/churn-rate/
Last updated: 2025-10-08T03:18:44.000Z
Founders often underestimate how unforgiving churn can be. Even modest attrition compounds quickly, eroding monthly recurring revenue (MRR) and forcing teams to spend heavily on acquisition just to stay flat.
As Brian Rothenberg, former VP of Growth at Eventbrite, put it: “Growth isn’t just about acquisition. Retention and [churn management](https://review.firstround.com/answers-to-your-tough-questions-about-growth-learned-while-scaling-eventbrites-5b-growth-engine/) are equally critical to avoid a leaky bucket problem.”
## **What is Churn Rate? Defining Customer Attrition**
Churn rate is typically expressed as a percentage of customers or revenue lost over a subscription period. It can be measured monthly, quarterly, or annually, depending on your business model.
- **Customer churn** looks at the number of accounts lost.
- **Revenue churn** measures the recurring revenue lost from those accounts.
Both matter because customer value varies. Imagine two scenarios: you lose ten small accounts paying $50 each ($500 in lost MRR), versus one enterprise account paying $5,000\. Customer churn suggests the first hit is worse, but revenue churn shows the real financial damage.
Expansion revenue complicates the picture further. If upsells, cross‑sells, or usage‑based growth outweigh losses, you can achieve negative net revenue churn, one of the strongest signals of product‑market fit and sustainable growth.
**Formula:**
- Customer churn rate = (Customers lost ÷ Customers at start of period) × 100
- Revenue churn rate = (MRR lost ÷ MRR at start of period) × 100
Example: A SaaS company starts the month with 500 customers and $100,000 in MRR. By the end, it has 480 customers and $96,000 in MRR. That’s a 4% customer churn rate and a 4% revenue churn rate.
## **Why Churn Rate is Your Business’s Pulse**
Churn is a direct reflection of how customers perceive your product’s value; lower churn implies stronger product stickiness, which is an important signal for business health.
- **Revenue and profitability:** High churn erodes MRR and makes forecasting unreliable. Even a strong acquisition can’t offset persistent attrition.
- **CAC efficiency:** Customer Acquisition Cost (CAC) is wasted if customers churn before covering it.
- **Customer Lifetime Value (CLTV):** CLTV drops when customers leave prematurely, reducing upsell and expansion opportunities.
- **Investor confidence:** Investors will press on churn as[ a sign of scalability](https://review.firstround.com/the-fundraising-wisdom-that-helped-our-founders-raise-18b-in-follow-on-capital/).
The math is stark. A company with 5% monthly churn retains about 54% of its customers after a year. At 10% monthly churn, retention drops to 28%. The second company must acquire nearly twice as many new customers just to stay the same size.
## **The Anatomy of Churn: Voluntary vs. Involuntary**
Not all churn is created equal, and the causes behind it often determine how you fix it.
**Voluntary churn** happens when customers consciously cancel. Common drivers include weak product‑market fit, better competitor solutions, or the perception that the product’s value doesn’t justify its price. Frustrations like confusing onboarding, slow support responses, or recurring bugs compound over time and push customers to leave.
**Involuntary churn** occurs when customers leave unintentionally, usually from payment failures: expired credit cards, insufficient funds, or billing errors. This type is often easier to prevent with better systems like card updaters, renewal reminders, or dunning management.
Early warning signals cut across both types: exit surveys, falling NPS, and declining usage patterns (fewer logins, diminishing use of key features) often predict churn before it happens. External forces like market shifts, new free alternatives, or aggressive competitor pricing can accelerate attrition.
As Rothenberg cautions, *“Resources shouldn’t be dedicated to growth if your product isn’t on a clear path to sustainable user engagement and value creation.*” High churn is usually the signal to pause acquisition and fix the product experience first.
## **Advanced Churn Analytics: Beyond Basic Numbers**
Basic churn numbers tell you what happened. Advanced analytics help you understand why.
**Cohort analysis** groups customers who started using the product at the same time to reveal patterns. Do most customers churn after three months? Do certain acquisition channels underperform? Does adoption of a specific feature correlate with retention?
**Predictive analytics** assigns churn risk scores based on behavior. Early warning signs like fewer logins, reduced feature use or negative support interactions can trigger proactive outreach.
**Connecting churn to CLTV:**CLTV = (Average revenue per customer × Gross margin %) ÷ Churn rate
A company with $100 average monthly revenue per customer and 5% monthly churn has an LTV of $2,000\. Reduce churn to 3%, and LTV jumps to $3,333, a 67% increase. This shift changes unit economics and allows higher CAC while staying profitable.
## **Strategies to Slash Your Churn Rate**
The most effective retention strategies start with [onboarding](https://review.firstround.com/superhuman-onboarding-playbook/). Customers who don’t reach value quickly are far more likely to cancel. A guided onboarding flow, proactive customer service and early success milestones can dramatically reduce early churn.
Involuntary churn deserves its own playbook. Credit card updaters, optimized retry logic and clear renewal invoices can prevent accidental cancellations. For many subscription businesses, these fixes alone can recover meaningful revenue.
Beyond that, invest in [customer success](https://review.firstround.com/founders-guide-building-customer-success/). Dedicated account managers, regular check-ins and expansion strategies turn retention into a growth engine. Segmenting churn analysis by cohort or customer type helps you identify which groups need the most attention.
Pricing and subscription models also play a role. Annual plans reduce decision points, usage-based billing scales with customer success and downgrade options give customers flexibility instead of forcing cancellation.
As Rothenberg emphasized, “Always align your organization with the few key metrics everyone should rally around.” Churn should be one of those metrics.
## **Understanding and Achieving Negative Churn**
Negative churn occurs when expansion revenue from existing customers, through upsells, cross‑sells, seat‑based pricing, or usage‑based billing, outweighs the losses from cancellations.
In this scenario, retention itself becomes a growth engine: recurring revenue compounds even without new customer acquisition, and existing accounts generate more over time than is lost to churn.
## **Churn Management: A Company-Wide Imperative**
Reducing churn isn’t just the job of customer success.
- **Product teams** must build features that drive engagement.
- **Engineering** must ensure reliability and performance.
- **Marketing and sales** must attract the right-fit customers.
- **Finance** must align pricing with customer ROI.
Investors will ask tough questions about churn because it reflects the true health of the business. Founders should make churn visible in dashboards, align incentives around retention, and personally reach out to departing customers to understand why they left. For more on how investors evaluate churn and other key growth signals during fundraising, see [The Fundraising Wisdom That Helped Our Founders Raise Billions in Follow‑On Capital](https://review.firstround.com/the-fundraising-wisdom-that-helped-our-founders-raise-18b-in-follow-on-capital/).
### Beta Testing
URL: https://review.firstround.com/glossary/beta-testing/
Last updated: 2025-10-08T03:16:42.000Z
At its core, beta testing lets a select group of users evaluate your product’s performance, usability and stability software. The goal is to simulate real-world usage across different devices, operating systems and environments that can’t be fully replicated through internal testing.
- **Alpha testing vs. beta testing**: Alpha testing is internal, focused on catching obvious bugs. Beta testing is external, focused on user experience, usability issues and market readiness.
- **Relation to UAT**: Beta testing is often considered a subset of user acceptance testing (UAT), since it validates whether the product meets user expectations before commercial release.
- **Why it matters**: No amount of internal QA or regression testing can fully predict how software behaves in the wild. Beta testing provides that missing signal.
**A beta test is the closest simulation of a real** [**launch**](https://review.firstround.com/the-beta-program-behind-this-startups-winning-launch/) **without the full risk of going live.**
## **Why Would You Require Beta Testing?**
Skipping a beta test is tempting for teams under [pressure to ship](https://review.firstround.com/the-right-way-to-ship-software/), but it’s one of the riskiest shortcuts. Here’s why it matters:
- **Catch what alpha missed**: Internal QA, regression testing and manual load testing can’t replicate the diversity of real-world usage. Beta testers surface bugs tied to specific devices, operating systems, or user-triggered events.
- **Protect user experience**: A poor first impression can tank adoption. Beta testers help verify usability before public reviews hit the Play Store or App Store.
- **Validate performance**: Field tests and in-home usage testing reveal how the product performs under real-world conditions, including network variability and device constraints.
- **Gather user feedback**: Beta programs create structured channels for feedback submission, whether through a survey,, private feedback to developers or public reviews.
- **Build loyalty**: Involving users early through a beta tester program signals transparency and creates advocates who feel invested in the product.
**Running a beta test reduces the risk of failure by combining quality assurance with customer validation.**
## **Key Characteristics of Beta Testing**
While implementation will look different for every team, each beta test has a few defining traits that separate it from earlier QA stages:
- Conducted by external users, not the internal development team.
- Focused on reliability, security and usability issues rather than feature completeness.
- Uses black-box testing techniques, where testers don’t see the code.
- Performed in natural environments — on different devices, operating systems and networks.
- Feedback loops are built in, often through tools like the Feedback Assistant app, survey engines or structured test reports.
The diversity of environments is both the strength and the challenge of beta testing. It surfaces real-world issues but makes test execution and bug tracking more complex.
## **Types of Beta Tests**
Not all beta tests look the same. Teams choose the format based on goals, resources and risk tolerance:
- **Traditional beta**: Distributed to a target audience to collect broad data on usability and performance.
- **Public beta:** Open to anyone, often through app stores or programs like the Apple Beta Software Program or the PlayStation 5 System Software Beta Program, which give early adopters a chance to try new features before general release and provide feedback that shapes the final product.
- **Closed beta**: Limited to a curated group of testers, often recruited through targeting criteria like device type, geography or employment info.
- **Focused beta**: Aimed at testing specific features or workflows, such as a new payments flow in a fintech & payments app.
- **Technical beta**: Run internally by employees or specialized testers to validate technical performance.
- **Post-release beta testing**: Continuous testing after launch, often using feature flags, canary releases, progressive rollouts or dark launches to limit exposure while gathering feedback.
**The right beta testing type depends on whether you need scale, depth or speed of feedback.**
## **The Pros and Cons of Beta Testing**
| Advantages of Beta Testing | Disadvantages of Beta Testing |
| ----------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- |
| Reduces product failure risk by validating usability and performance before launch. | Hard to track bugs consistently across varied environments. |
| Enables testing in production with real users, not just lab simulations. | Duplicate bug reports can overwhelm the internal development team. |
| Improves quality through direct user feedback and customer validation. | Developers lack full control over test conditions in the production environment. |
| More cost-effective than large-scale lab-based usability testing. | Time-consuming, since test execution depends on external users. |
| Builds good will and creates early advocates through beta programs. | Results depend heavily on tester quality — poor testers mean poor insights. |
## **Criteria for Beta Testing**
Before launching a beta program, teams should confirm:
- Alpha testing is complete and signed off.
- A stable beta version is available for external use.
- The production environment is ready to support outside beta testers.
- Tools for capturing real-time bugs, usability issues and feedback are in place.
- Test planning and test execution processes are documented, with clear expectations for test reports.
Skipping these steps leads to chaos: testers get frustrated, feedback is inconsistent and the development team struggles to act on results.
## **Practical Uses of Beta Testing**
Beta testing isn’t just a safeguard against failure — teams also use it as a tool to:
- **Validate compatibility:** Ensure the product runs across devices, operating systems, networks, and configurations.
- **Test new features in the wild:** Run targeted betas (like a new payment flow) to gauge adoption before full release.
- **Measure real-world performance:** Capture speed, stability, and scalability under natural conditions.
- **Gain customer insights:** Treat beta as structured user research to learn about expectations and pain points.
- **Strengthen community ties:** Involving users early builds trust, transparency, and a group of vocal early adopters.
**A good beta test is as much about user research as it is about software testing.**
It’s the bridge between internal QA and commercial release. It combines software engineering rigor with user research, ensuring that a product is not only functional but also usable, reliable and [market-ready](https://review.firstround.com/productboards-path-to-product-market-fit/).
**Read more from First Round:**
- [How Superhuman Built an Engine to Find Product Market Fit](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/)
- [Linear’s Path to Product-Market Fit — Quality and Craft > Speed and Scale](https://review.firstround.com/linears-path-to-product-market-fit/)
- [Build Products That Solve Real Problems With This Lightweight JTBD Framework](https://review.firstround.com/build-products-that-solve-real-problems-with-this-lightweight-jtbd-framework/)
### Founders, you’re missing this key step on the path to product-market fit
URL: https://review.firstround.com/founders-youre-missing-this-key-step-on-the-path-to-product-market-fit/
Last updated: 2025-12-04T16:58:28.000Z
A research toolkit for the discovery phase
_This post is for subscribers only._
### Go Deep to Build Fast: A Research Thinking Toolkit to Speed Up the Discovery Phase
URL: https://review.firstround.com/a-research-toolkit-for-the-discovery-phase/
Last updated: 2025-11-25T14:25:37.000Z
There’s a mirage deceiving founders in the AI era: Mistaking speed for traction.
The allure of vibe-coding an MVP in a few minutes offers a tempting shortcut past the hard work of figuring out *why* you’re building something and *how* to build it best. The problem, the solution, the team — these are the core company-building jobs you can’t outsource. But many founders figure they can adjust them on the fly in favor of racing to market. Just as it’s easier than ever to ship a product in record time, it’s easier than ever to build a product no one wants and a company no one wants to join.
[**Jeanette Mellinger**](https://www.linkedin.com/in/jeanette-mellinger?ref=review.firstround.com) argues today’s founders are zooming past a step in their scramble for [product-market fit](https://review.firstround.com/series/product-market-fit/): finding **problem-solution fit,** which includes the often-invisible yet critical component of founder fit. “Problem-solution fit means finding a deeper customer need that you’re uniquely positioned to solve, and building for it with better early signals and stronger team alignment from the start,” she says.
How? By taking a page from the UX research playbook.
Mellinger, a former Head of UX Research at **Uber Eats** and **BetterUp,** works with student founders as a Harvard Business School Executive Fellow and advises early-stage startups on all things research. She’s seen how a lack of diligence upfront leads to backtracking and double work, painful pivots and, ultimately, failure. So she wants to help founders add more rigor to their early ideation to build stronger foundations faster.
**But you don’t have to sacrifice speed for depth**. Think of it this way: Thoughtful upfront research helps train your intuition — so you can move faster and with more intention as you scale. “It’s even easier to speed in the wrong direction really fast with AI,” she says. “I want to help founders build *velocity,* which is speed in the right direction.”
Mellinger previously shared her detailed [customer discovery framework](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) with us, and now, she’s back with a research toolkit for finding stronger problem-solution fit, adapting her UX research and behavioral psych expertise for the founding journey.
“After working with dozens of founders and early-stage teams to uplevel their customer discovery skills, I’ve found that there’s still more work to do *beyond* solely focusing on the customer as they explore ideas,” she says. “The same tools that can help us get to know our customers can also help us do the essential but often unspoken work of self-discovery, which is just as crucial for building companies that last.”
In this exclusive interview, Mellinger starts by making the case for why finding problem-solution fit should predate selling — and even product building. She then breaks down the three phases of discovery, along with a comprehensive list of research methods and questions for three critical audiences: your customers, your team and yourself.
💡
You can explore Mellinger’s problem-solution fit framework in more depth — and take an assessment to find out which research methods might be most impactful to you and your team — [on Notion](https://glib-grey-e49.notion.site/Intro-Problem-Solution-Fit-2-0-27a73d03916980bab4d4d46266ae05d1?ref=review.firstround.com):
Whether you’re embarking on a blue-sky brainstorm, already in build mode or contemplating a pivot, she has the structure to help you pick your direction. Let’s dive in.
## Why you need stronger problem-solution fit before you hit the market
Imagine a [Bobo doll](https://www.psychologicalscience.org/publications/observer/obsonline/bandura-and-bobo.html?ref=review.firstround.com) — the life-sized roly-poly toy with a round, heavy bottom. You can knock Bobo from any angle, and it will waver, but it won’t fall down. It stays balanced thanks to its weighted base.
“The components that make up problem-solution fit are your base as a team and company,” she says. “You take a week or a month to figure out your vision, your values and how you work. And when you’re lost, you come back to the foundation that you as a team or as a founder put together, so you can apply these principles to the latest thing you’re building.”
Mellinger is a fan of [IDEO’s way of describing a good business](https://www.ideou.com/pages/design-thinking?ref=review.firstround.com): it’s desirable, it serves a human well, it’s economically viable and it’s something that you can technically deliver.
“When I joined Uber, I was part of the ‘Uber Everything’ group, which is what eventually turned into Uber Eats. The question we had to answer was, ‘What else could Uber do?’ And as I talked to people who’d been there for a long time, they’d say, ‘Oh, when we experimented with new businesses, they didn’t work. I see now they failed because they’d only gotten two of those three things,’” says Mellinger. “Usually the two that people focus on are the business case and technical feasibility.”
In recent years, startups have received the memo that the desirability component is make-or-break. But Mellinger has noticed that founders don’t always understand what building something people want actually entails. “Addressing sharp pain points is only one dimension. You can build something that’s ‘desirable’ but not really needed. Or if people can’t figure out how to use it, or the inertia of behavior change is too strong, then the product won’t go anywhere,” she points out.
> Problem-solution fit is the intersection of who you are as a founder, a burning problem you’re well-suited to solve and a solution that tackles the problem well.
Finding this intersection isn’t a linear process. “Problem, solution and fit are all different steps, but you can't think about them in isolation from one another. You need to think about each one at every stage," says Mellinger. “And the silent first step is the founder. Before thinking about the problem, you've got to start with the founder.”
Here’s how Mellinger breaks down the goal of each overlapping circle:
- **Founder:** Understand how to assemble a connected, resilient team that knows what they’re uniquely suited to build and the conditions they need to do it.
- **Problem**: Deeply understand your target customers’ core needs, behaviors and workflows.
- **Solution**: Build a solution that’s differentiated, usable and easily integrated.
- **Fit:** This is the [first level of product-market fit](https://www.firstround.com/levels?ref=review.firstround.com#level-1). "At the problem-solution fit stage, you should look for signs that the product you've built actually solves the problem your customer has,” says Mellinger. Refer to her [customer discovery tools](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) to help you assess fit.
> Founders are constantly being told to change directions. You could run after your tail forever if you don’t have a center to come back to.
## The three phases of deep research
Going through each of the steps to find problem-solution fit requires different levels of research. Mellinger says this will involve constant altitude shifting and changes of pace, inward reflection and in-depth conversations, blending methods from UX research, design and behavioral psych — techniques that aren’t often deployed in a startup setting, but that she’s found to be incredibly productive for founders.
Here’s a breakdown of her (handily alliterative) three phases of research.
### Incubate: Fight the urge to build hurriedly to allow richer ideas to surface
There’s a reason the best ideas often arrive when you’re going for a walk, washing the dishes or taking a shower. “Incubation leans on what we know about where good ideas come from, along with UX research methods of observation and lighter secondary research. Look at how our brains work: Great ideas don’t happen on schedule. True insight takes time, and pops up in unexpected ways,” says Mellinger.
But that doesn’t mean bringing your discovery to a complete standstill. “Incubation is a conscious activity,” she says. “It just takes time and other associations to connect ideas in new ways.” A [meta-analysis](https://pubmed.ncbi.nlm.nih.gov/19210055/?ref=review.firstround.com) (a technique that draws conclusions from multiple studies) found that taking breaks — or incubating — can significantly improve creative performance. [Another study](https://www.nature.com/articles/s41467-021-25477-8?ref=review.firstround.com) that looked into the phenomenon of “hot streaks” across artistic and scientific careers found that the highest-impact work often follows seemingly unproductive periods.
So don’t even think about building anything in this phase. “When you move without ever stopping, it’s less likely that truly original ideas will emerge,” she says. “And there are some really lightweight ways to get to know a space and let these richer insights develop.” (More on those exact methods for incubation below.)
### Immerse: Uncover more differentiated ideas and insights faster with focused sprints
This is where you’ll spend time exploring and codifying the most intriguing ideas from the incubation phase. “Immersion is about going deeper, not necessarily slower,” says Mellinger. “And it’s the perfect complement to incubation. In an ideal world, you toggle between both. Immersion helps you explore and codify quickly, but then also plants seeds for future ideas, kicking up even more incubation you can leverage later.”
Focus and depth will be more impactful than volume here. “I love the power of a really well-designed sprint. A focused week in the market with your customers can get you there faster than hundreds of disparate conversations with other customers,” she says.
> ‘I’ve spoken with hundreds of customers’ sounds sexier than, ‘I’ve had deep immersion with five.’ But you can get more out of an in-context immersion with five in a week or two than wandering conversations over months with dozens of customers.
### Integrate: Build for behavior change (and be realistic about the power of inertia)
Integration means acting on the ideas you explored during immersion and incubation to plan how you'll build a solution that isn’t just differentiated, but easy to incorporate into a user’s life. Sounds simple enough from a product perspective. But getting humans to change their behavior is anything but.
**Building a product is ultimately a human psychology problem.** “Meaningful behavior change is required to get most products and processes off the ground, and it’s a lot harder than it seems,” says Mellinger.
The trick with this step is being realistic about — and deeply understanding — the hurdles you must overcome to get your customers to use your solution. “This is where you bring in tools to get to know humans. We know a lot about what motivates us through behavior change models, or in this case, asking someone to read your email or try your product — to do anything different.”
Behavioral research is a well to draw from here. Mellinger points to two behavior changes models to build on that work especially well in the product space:
- [**The Fogg behavior model**](https://behaviormodel.org/?ref=review.firstround.com)**.** Stanford professor Dr. BJ Fogg created this simple formula that results in behavior change: B=MAP. Behavior happens when Motivation, Ability and a Prompt collide at the same time. Does your customer *want* to use your product, and is it *easy* for them to use it — and importantly, do they have a *reason* or reminder to start using it? If you fail to get your desired behavior, you’re probably missing one of these three things.
- [**The Hooked behavior model**](https://www.nirandfar.com/hooked/?ref=review.firstround.com)**.** Inertia is a powerful force, and building a product people want to use more than the thing they already use is an uphill battle. Nir Eyal, who conceived this model building on Fogg’s, says that a new product must be *9X better* to escape the inertia of using the incumbent solution.
The integration phase is also a good time to [study your incumbents](https://review.firstround.com/innovators-vs-incumbents-how-to-deal-with-the-saboteurs-that-threaten-your-company/). Inertia might explain why customers might be lukewarm about trying a new solution.
Building for behavior change has only gotten more challenging when practically every buyer and consumer is inundated with options. “You can come up with a great idea, but if you don’t honor the basics of behavior change, the product might not take off — because it wasn’t super easy to incorporate into their already-full lives,” says Mellinger.
> Building something great doesn’t mean people will adopt it. There’s too much else going on.
And your research won’t be exclusively focused on your customers. You need to know and build around your *own* behavior. “You can apply the same skills for building a more behavior-centric product to make your work more motivating for you and your team,” she says. “For example, if you want to build a values-centered company, you can be smart about how you weave those values into both the product and your team’s incentives.”
Jeanette Mellinger, former Head of UXR at Uber Eats and BetterUp
## Apply these methods to find problem-solution fit
So which methods can get you there? And how much time should you spend on this research?
“I'm not telling folks to take a year [before you launch](https://review.firstround.com/how-to-launch-your-startup-out-of-stealth/),” Mellinger says. “Doing research in a product context is a balance of the stakes, your resources and what you need to achieve. You can do so much in a focused week, month or quarter, depending on the clarity you want or the gaps you have to fill.”
She breaks down each component of finding a fit for the founding team, problem and solution. She applies the research phases of incubation, immersion and integration to each of these elements, providing the questions you should be asking yourself to kick off each phase of the journey, and the assets you and your team should aim to produce together.
Your three phases of research will look different at each step, alternating introspection with interviews, observation with sprints. Moving through a mix of structured exercises will help you dial up your confidence in choosing the right problem, solution and team. And you don’t have to use every single method listed here — take your pick based on where you want to go deeper.
Not sure where to start? Take Mellinger’s [assessment to benchmark your startup’s problem-solution fit](https://www.notion.so/Intro-Problem-Solution-Fit-2-0-27a73d03916980bab4d4d46266ae05d1?ref=review.firstround.com#27a73d03916980959965d13ffe5947cc) and figure out which research methods might be most impactful for you and your team.
### Founder
**The goal: Assemble a team that’s aligned, connected and resilient, and knows how and what it builds best.**
You won’t ship your founding team, but you can still draw on Mellinger’s research methods to uncover the right problem this specific group should solve and the exact ways they’re best suited to do that. “If you don’t have a solid team, it’s harder to execute on your brilliant ideas well,” she says. “And it’s a missed opportunity if you don’t incorporate what you do uniquely and exceptionally well into your problem choice and solution.”
To kickstart incubation, and to get a sense of how well you know yourself as a leader or team, start by asking yourself one or more baseline questions.
**Baseline questions to answer:**
(Take \~5 minutes to 1 hour)
- Why do you want to work on this?
- Would you be willing to work on this with this founding team for more than 10 years? Why or why not?
- What can you not help but do or think about — even when your time is constrained?
- How do you build or lead best? What helps you be most effective? Stay focused? Sane? Keep going?
Mellinger says that the second question is a powerful one to ask yourself — and potentially incalculably time-saving if the answer is no. “I asked this to a friend who's trying to start a company. She chewed on it for a little bit and was like, ‘Absolutely not. I definitely don’t want to think about this topic that long.’ That alone got her to save who knows how much time down the road,” she says.
**Incubate: Build awareness around your strengths and behavior as a founder by exploring your four “zones”**
(Take \~1 hour to 1 month)
Take one day to one month of observations to map out the activities that you excel at and give you energy with the four zones framework.
“This exercise is derived from a book called [*The Big Leap*](https://www.amazon.com/Big-Leap-Conquer-Hidden-Level/dp/0061735361?ref=review.firstround.com)*,*” says Mellinger. “There are four zones you can exist in, at work and in life: Genius, excellence, competence and incompetence. You want to think of these four zones as aspirational zones — meaning you might not yet be a genius, but you should aim to be a genius.”
And counterintuitively, this model recommends you remain squarely in your incompetence zone. “The stuff that you are naturally bad at and know that you dislike, you might as well stay incompetent,” she says. “I think you can get bitten by the things you’re good at, but aren’t energized by, so I like that there are different dimensions to these zones.”
[Fill out this worksheet](https://glib-grey-e49.notion.site/The-4-Zones-Worksheet-27f73d039169804cb88af513cd18fef7?pvs=143&ref=review.firstround.com) to discover yours. “What’s fun about this exercise is that you can either think about past jobs or your personal life today, or you can use it as an observational tool for a month,” says Mellinger.
Then go through your observations to pull out the values you lead with. Think about which problems you're best positioned to solve — the things you've noticed you already spend tons of time thinking about — and which customers and solutions make sense for you to immerse yourself with. “So for example, if you notice that you work best when you have a stable routine, maybe don't go after a customer base that involves extensive, frequent travel,” says Mellinger.
**Immerse: Lead a one-day to one-week offsite with your team.**
(Take \~1 day to 1 week)
Get together with your team — whether that’s just you and a co-founder or a handful of others to define your team core, aim and path.
Work together to fill out [this reflection worksheet](https://glib-grey-e49.notion.site/A-Re-Centered-Season-Worksheet-27f73d0391698073804ceae1dc70be9c?ref=review.firstround.com) developed by Mellinger. “At the inception of your company, you and your teammates can take anywhere from one to three hours to go through and answer these questions. The idea is to codify who you are, what you want and how you’ll get there,” she says.
Mellinger also recommends adding in some incubation time after this immersion step. “It can be productive to answer some of these and maybe walk away for a day, or even a week, and then come back,” she says.
This can also be a moment to explore your fit with one another, as a team. You and your founding team can each fill out your zone or foundational reflection worksheets individually, then map how your zones overlap and where they might diverge. Discuss the benefits of these differences, and what else you might need to work around.
**Integrate: Make your Fogg behavior change profile.**
(Take \~1 hour to 1 day)
Drawing on the [Fogg behavior model](https://www.behaviormodel.org/?ref=review.firstround.com), you’ll build one for your team to clarify how you most effectively achieve your goals.
AI can help here. Mellinger recommends taking your answers to the zones and reflection worksheets and asking an AI tool to develop a Fogg behavior model for you and your team so you can start thinking about your behavior change goals.
**The founder deliverable: A team foundation one-pager.**
Once you’ve used these methods to explore your goals as a founding team, you can translate your learnings into the core building blocks that make up your team foundation.
To do this, reflect on what you learned individually and as a group. If you get stuck, you can even use AI as a lightweight thought partner to draft or reframe statements. For example, copy your notes into a chat tool and ask: *“*Can you synthesize this into a one-sentence mission*?”* or *“*Give me 3 alternative mission statements based on this input*.”*
These exercises help you distill seemingly complex reflections into **building blocks** that feel concrete and actionable:
**Core**:Who you are
- **Values**: What drives you and your team
- **Tools**: What each of you offer and how you work best (strengths, fuel, differentiators, motivators, working styles)
**Aim**: What you want
- **Vision and mission**: The world you want to create and why
- **Goals**: Short- and long-term aims
**Path**: How you’ll get there
- **Roadmap & execution system**: How you’ll align and follow through
You can then weave these building blocks into your team assets and practices, which you can use during such key activities like co-founder matching, fundraising, hiring and onboarding:
- **Company charter:** Codifies your team’s purpose and commitments
- **Founder alignment snapshot**: Clarifies where co-founders are aligned or diverging
- **Team working style profile**: Your “[user manual](https://review.firstround.com/the-indispensable-document-for-the-modern-manager/)” that captures how you best collaborate
- **Individual career maps**: Aligns personal growth with company growth
- **Values-aligned hiring process**: Ensures you bring in people who strengthen the culture you’re building
### Problem
**The goal: Build your customer foundation to unearth the deeper problem you want to solve and the customer behavior you have to design for.**
Get clear about how you’ll structure your time with potential customers and synthesize what you’ve learned.
**Baseline questions to answer:**
- What’s your customer’s stated problem versus underlying need?
- How do they solve the problem today, if at all? What’s their workaround, and how much effort do they put into it?
- What unique insight do you have about your customers?
**Incubate: Internalize customer problems and behavior through community observations.**
(Take \~1 day to 1 month)
“It's your job to figure out where your customer spends time in person and online, and go there,” says Mellinger.
Spend time poring over the places your ICP hangs out, whether that’s in person or online. Subscribe to newsletters, lurk in online forums like Reddit and Discord and sign up for conferences where your customers will show up en masse. Listen to their favorite podcasts. Read their go-to publications. Take notes on patterns that start to emerge.
Mellinger shares an example of how incubation took shape for Uber Eats. “We’d order a ton of delivery, and even watched other people in our family or friend group do so. I’d order for a dinner party, and then I’d order for myself, and take note of how the experience is different,” she says.
**Immerse: Spend time in customers’ worlds for one week or more.**
(Take \~1 week, plus prep time)
Go physically where your customers are. Conduct an in-market research sprint to go deep on customer needs with in-depth interviews, ideally in the places where these folks spend time focused on the problem you seek to solve, so you can observe their behavior and pick up on details they might not think to mention.
Mellinger’s [customer discovery article](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) has robust guidance on how to get the most out of these interviews and keep bias at bay.
At Uber Eats, Mellinger says in-market sprints meant traveling onsite to launch a new product or learn about a new customer base, which included research in India, Colombia, Saudi Arabia, the UK, China and the US.
She recommends going to the physical location first, and then rounding out your immersion from your computer. “Use in-market sprints when you’re doing upfront problem and behavior discovery, and need to understand your customer’s worlds, workflows and broader goals,” she says. “After that, you can do more research sprints remotely, as you’ll already have an internalized sense of the context. Though it’s always helpful to have a balance of in-context and remote research sprints, to balance speed of answers with depth of understanding.”
**Integrate: Build a behavior change profile for your customer.**
(Take \~1 hour to 1 day)
Build your [customer’s behavior change profile](https://docs.google.com/presentation/d/1YuliWXCO77sN9TXg78kQQ6AQymT8Ua2qcRFSYTxCuyg/edit?slide=id.g37077a62efc%5F0%5F86&ref=review.firstround.com#slide=id.g37077a62efc%5F0%5F86) so you have a gameplan for how your product will leap over the hurdle of behavior change: What motivates them to try your product? To keep using it? What must be easy in order for them to do so? What will prompt them to start? To come back?
This process isn’t all that different from building a behavior change model for *yourself* — and can actually help you build empathy for the hurdles your customers must jump over to change their behavior*.*
Once again, Mellinger recommends leaning on AI tools to help translate the customer insights generated during the incubate and immerse phases into this profile.
You can also include questions during immersion, and conduct observations specifically tailored to answer these behavior-centric questions, including understanding customers’ process for attempting to solve the problem today, what prompted them to try this approach and how it’s changed over time.
**The problem deliverable: A customer foundation.**
As you close your first customer sprints, the goal isn’t just to collect insights but to distill them into a usable foundation. This means translating scattered interviews and observations into a clear picture of who your customers are, what they want, and how they try to get there today. These building blocks help ensure you’re not building in a vacuum but anchoring every product and strategy choice in the lived reality of your customers.
**Core:** Who they are
- **Target customer type** (your ICP definition): Who you’re focused on serving
- **Core needs**: What they consistently struggle with or aspire to
- **Behaviors**: Motivation, abilities, prompts
**Aim**: What they want
- **Ideal state**: The future they’re hoping to reach
- **Goals**: What success looks like for them
- **Problems**: What’s blocking them from progress
**Path:** How they get there
- **Customer journey**: Their steps with or without your product
- **Competitors and workarounds**: Who and what they rely on now
- **Opportunities**: Gaps and leverage points you can serve
You can then translate these building blocks into these sample deliverables that can be used to plan and improve your customer development, product ideation and refinement, team onboarding and fundraising narrative:
- **In-depth** [**ICP profile**](https://review.firstround.com/how-vanta-clay-retool-found-icp/): A living document of your ideal customer’s needs, problems and behaviors
- **Journey map x needs**: A clear view of where customers get stuck and how they try to solve it today
- **Founder–problem fit overview**: Evidence that you’re personally well-positioned to tackle this problem
### Solution
**The goal: To build a product your customers are happy to change their behavior to use.**
**Baseline questions to answer:**
- How does your solution fit customers’ needs?
- How does it fit into their lives or existing workflows?
- What makes your product more than 9X better than customers’ existing options?
- What unique experience or expertise is built into your product?
**Incubate: Internalize product needs and best practices.**
(Take \~1 day to 1 month)
Get to know incumbent solutions by doing a product trial. “Both in the physical and online worlds, try immersing yourself in a product area,” says Mellinger. “So actually use a product end to end yourself, over time, or watch other people use it in the wild.”
Beyond actually trying out an incumbent product, she also recommends scouring through product reviews to understand how customers talk and think about themselves.
Next, look for [analogous inspiration](https://www.designkit.org/methods/analogous-inspiration.html?ref=review.firstround.com) from unrelated domains. This is where you completely exit the industry you’ve been doing research in and study how other products tackle experiences you want to create.
“Let's say that you want to create a product that’s gamified, even if you’re in the healthcare space. So you download Duolingo and learn Spanish for a little while just to get a feel for how the product gamifies the experience,” says Mellinger. “Or maybe you really want the experience of your product to be delightful and over-the top. Maybe that means you go to your favorite restaurant, or Disneyland, and see what you can learn from them.”
**Immerse: Ideate and test a differentiated, usable product with a series of design sprints.**
(Take \~1 day to 1 month)
Once you codify customer needs and behaviors, you can use these sprints to first brainstorm then evaluate your initial concepts – from high-level approach, to specific product features. But before you build too much, you need a signal that you’re on the right path.
To do so, conduct one to three design sprints, ideally back to back, to test your value prop and initial concepts. Mellinger recommends [*The Sprint Book*](https://www.thesprintbook.com/?ref=review.firstround.com)for sprint templates and planning guidance on their structured 5-day process to rapidly move from problem to tested prototype.
Revisit your founder and team zones to brainstorm opportunities for overlap of founder and problem with your solution. “Before you're even testing something, think about how the solution you're building is unique to you and your team,” she says.
**Integrate: Design your end-to-end product experience optimizing for behavior change.**
(Take \~1 day to 1 week)
Uplevel your customers’ end-to-end product experience by building in behavior-centric levers at each key step, drawing from the Fogg and Hooked models.
Start by drawing out a journey map of your customer’s experience — follow their entire journey with the problem space, and then eventually zoom in to the interaction with your product. “The format doesn’t matter. Spreadsheets are just as good as sketches,” says Mellinger. “The goal is to externalize your thinking and capture the most important experiences for the following moments: awareness, consideration, purchase, first use, ongoing use, discontinued use and reuse.”
She lays out how the customer journey might shape up for Uber Eats. “The general journey is how customers make decisions about getting food,” she says. “Then you can zoom in on what it looks like to get food delivery. And from there, you map out the experience with your product, starting with initial product awareness into actually using it.”
Once this is mapped, overlay a behavior model on the most essential moments.
> It’s your job to make sure you know your customers’ journeys inside and out.
**The solution deliverable: A product foundation.**
Once you’ve defined the problem and customer clearly, the next step is shaping your product response. A product foundation takes early ideas and translates them into principles, vision, and opportunities that will later guide what you build, when you build it and how you test along the way.
**Core**: Evergreen product components
- **Design principles**: Rules of thumb that anchor product choices in customer needs and behaviors
**Aim**: What the product can become
- **Product vision**: The future state your product is building toward
- **Goals &** [**metrics**](https://review.firstround.com/starting-an-analytics-org-from-scratch-lessons-from-a-decade-at-doordash/): What success looks like (Sample metrics might include usability, engagement, adoption, business outcomes)
**Path**: How you’ll get there
- **Journey maps**: How customers interact with your product across all touchpoints
- **Opportunities** **now, next and later**: How to define your focus on a timeline
- **Experiments and concepts**: Ways to test your solution quickly
Once you’ve started exploring how you’ll build for behavior change, draft your product plans into the following assets, which, just like the founder and problem deliverables, you can revisit during fundraising, customer development, product ideation and review and onboarding:
- **Design principles**: Guardrails for product teams to stay true to customer needs
- **Product requirements document (PRD) components:** The practical blueprint for turning vision into specs
- **MVP opportunity map:** Helps you prioritize what to test first
- **Product roadmaps**: Creates alignment around timing and focus
- **Early value props and concepts**: Lightweight prototypes and narratives that let you test resonance
If you’re at the very beginning of your founding journey and just starting to explore ideas, Mellinger recommends starting with these five methods:
## Revisit this framework as you sell and scale
“Fit” isn’t a definitive endpoint. You’ll flip back and forth between incubation, immersion and integration as you explore different problems and solutions (and even teams).
This work isn’t the first and last time you’ll put on your UX researcher hat as a founder, either. Mellinger says this toolkit will serve you again and again at future inflection points, from [launching new products](https://review.firstround.com/going-multi-product-11-tactics-for-tackling-your-next-bet/) to recalibrating the team as you grow to running a diagnostic on an underperforming feature.
The goal of this research framework is to help you think better as a founder, no matter where you are in your journey. “You’re learning how to generate deeper ideas, how to work on something lightly in the background, and recognize when it's time to set everything aside and go really deep on something. That will be valuable at every stage of a company,” she says.
If you take one thing from Mellinger’s problem-solution fit framework, it’s this: Take some time upfront to build a Bobo doll that can’t get knocked down. “My hope is that the output of this work is a foundation — a set of tools and eventual learnings — that you come back to all the time,” she says.
### Technical Debt
URL: https://review.firstround.com/glossary/technical-debt/
Last updated: 2025-09-30T03:16:15.000Z
Debt isn’t always bad. In its early days, a startup might deliberately hardcode a feature to capture new customers because that’s its priority at the time, knowing it will later require refactoring. The danger is ignoring the balance. Just as credit card debt can spiral, [unmanaged tech debt compounds](https://review.firstround.com/podcast/treat-operational-debt-like-tech-debt-leah-sutton-on-elastics-distributed-work-playbook/) — slowing releases, inflating the backlog and undermining software quality.
## **Different types of technical debt**
In software engineering, it’s a broad term that covers multiple categories of deferred work:
- **Code debt**: Fragile or redundant sections of the codebase, often created by skipping tests or duplicating logic.
- **Design debt**: Architectural decisions that limit scalability and flexibility. An early shortcut in system design can later block major functionality.
- **Process debt**: Weak methodologies or poorly structured sprints that cause wasted effort and slow development cycles.
- **Documentation debt**: Missing or outdated documentation, forcing team members to rediscover decisions.
It’s important to distinguish debt from bad code. Bad code is negligence; debt is often an intentional, calculated decision to prioritize speed. For example, implementing a workaround to validate demand is debt, while ignoring code reviews and introducing avoidable vulnerabilities is poor engineering practice.
## **Causes of technical debt**
Technical debt emerges from choices and pressures inside the development process:
- **Shortcuts during rapid development:** For example, the development team has one week to deliver a prototype for a client. Instead of building reusable modules, engineers hardcode logic. The functionality works, the client signs off, but future development cycles now carry hidden debt.
- **Time to market pressure:** Product managers and stakeholders often push for new features to secure customers or meet internal milestones. In these cases, teams accept debt knowingly, choosing speed (and near-term goals) over sustainability. The future costs — slower progress and mounting bug fixes — are deferred.
- **Legacy code and outdated frameworks:** There are also situations in which teams inherit legacy code built on frameworks that no longer scale. The original software may have been solid, but aging tech becomes technical debt that software development must address.
- **Lack of automation:** Without automated testing or reliable CI/CD, every release risks regression. Even small changes create new rework and inflate the amount of technical debt.
- **Shifting business needs:** Startups pivot. An app originally built for consumers may suddenly need [enterprise-grade functionality](https://review.firstround.com/podcast/building-a-highly-technical-enterprise-product-essential-advice-for-product-leaders-nate-stewart-of-cockroach-labs/). That shift renders old designs obsolete, creating design debt overnight.
- **Documentation gaps:** Documentation debt accumulates quietly. As teams grow, it’s important documentation is part of that process. When processes, guides and decision-making context remain in the heads of teammates as institutional knowledge, this makes the ramp for new hires slower. The system works, but knowledge transfer breaks down.
In all cases, the key question is whether debt is intentional and tracked or reckless and invisible.
## **Characteristics of technical debt**
Martin Fowler’s technical debt quadrant helps teams assess the character of their technical debt. Not all technical debt is created equal:
1. **Reckless and deliberate**: Shipping bad code with no concern for consequences, like disabling authentication to demo a feature.
2. **Prudent and deliberate**: Making a conscious short-term trade-off, like releasing a minimal functionality to test demand.
3. **Reckless and inadvertent**: Creating problems due to lack of skill or oversight, like junior engineers introducing unscalable patterns without review.
4. **Prudent and inadvertent**: Doing the best with limited knowledge, like adopting a framework that later becomes unsupported.
This quadrant adds context to the debt. Prudent debt can accelerate learning and improve time to market. Reckless debt damages trust, creates security vulnerabilities and forces costly rewrites. Engineering leaders should push teams to be explicit: what type of debt are we taking on, and why?
## **The impact of technical debt**
Technical debt behaves like financial debt because the “interest” shows up in every planning meeting. Estimates creep upward, sprints slip because engineers are untangling old code and projects stall as teams fight regressions:
- **Code quality and functionality**: Quick fixes create fragility, slowing new features.
- **Maintainability and scalability**: Makes it harder to adapt to change; cycles are wasted untangling dependencies.
- **User experience**: Customers feel the cost in performance issues and broken flows.
- **Security and vulnerabilities**: Outdated libraries and missing patches create risk.
Ultimately, unmanaged debt creates drag across software projects: What should have been a two-week feature becomes a six-week grind because you’re paying for every shortcut that came before.
## **Managing technical debt**
When teams encounter technical debt, they have a choice: either let technical debt accumulate invisibly until it cripples velocity, or treat it as a visible, budgeted part of the development process. Here’s how to [manage technical debt](https://review.firstround.com/shims-jigs-and-other-woodworking-concepts-to-conquer-technical-debt/) as a line item and avoid a blind buildup:
**Treat refactoring as routine, not rescue**Instead of waiting for a crisis that forces a full rewrite, strong engineering orgs build refactoring into their normal sprint cadence. A common rule of thumb is to dedicate 10–20% of each cycle to addressing debt. That might mean simplifying a complex function, paying down design debt or deleting an obsolete service.
**Use automation as a safety net**Technical debt compounds fastest when quality controls are missing. Automated testing and CI/CD pipelines don’t eliminate debt, but they stop it from growing unnoticed. Each time an engineer pushes code, the system flags regressions immediately.
**Keep debt in a backlog, not background noise**[High-performing teams](https://review.firstround.com/making-engineering-team-communication-clearer-faster-better/) log debt alongside new features in their backlog. They don’t rely on tribal knowledge to remember fragile modules. Debt tickets get estimated, prioritized and scheduled.
**Align the roadmap with stakeholders**One of the hardest parts of managing technical debt isn’t technical at all — it’s social. Non-technical stakeholders want to know why “engineering keeps slowing down.” Translating the costs into clear trade-offs is crucial: “If we spend two weeks on this cleanup now, we’ll ship faster for the next six months.”
**Measure the amount of debt**Debt is notoriously hard to quantify, but the best development teams pick proxies they can track. Useful metrics include:
- Percentage of time spent on bug fixes versus feature work.
- Average time-to-release for new features.
- Growth of the backlog related to fragile modules.
- Velocity lost to rework or firefighting.
No metric is perfect, but together they paint a picture of how much “interest” the team is paying.
## **Reducing and preventing future debt**
It’s just about impossible to fully eliminate debt, but effective teams prevent it from spiraling:
- **Incremental repayment:** Pay off debt steadily. Replacing 100 lines each week is more sustainable than a risky full rewrite.
- **Iterative delivery:** Deliver features quickly, but pair speed with maintainability goals. This balances short-term wins with long-term stability.
- **Automation and monitoring:** Use tools for static analysis, performance tracking and automated testing to flag debt early.
- **Education:** Teach programmers, product managers and team members to recognize debt. Debt-awareness shifts culture from firefighting to prevention.
- **Optimize workflows:** Adopt proven frameworks and agile methodologies. Minimize process debt by clarifying ownership, improving documentation and reducing reliance on workarounds.
Ultimately, debt management is about embedding sustainability into the development process.
## **Why technical debt matters**
Technical debt isn’t a synonym for failure; it’s a lens for making trade-offs explicit. Just as businesses use financial leverage to grow faster than they could with cash alone, engineering teams can “leverage” technical debt to move quickly when speed is critical.
The key is balance. A team that never takes on debt risks moving too slowly to compete. A team that ignores it drowns in bad code, endless rework and mounting future costs. The job of a product manager or CTO is to make debt visible, align it with business needs and track repayment through the roadmap.
Technical debt is inevitable. The difference between thriving and collapsing teams is whether they treat it as hidden baggage or manage it as part of the software engineering lifecycle.
### Cash Runway
URL: https://review.firstround.com/glossary/cash-runway/
Last updated: 2025-09-30T03:15:55.000Z
For startup founders and business owners, cash runway is one of the most important financial metrics. Investors and CFOs look at months of runway to judge whether the business can hit milestones or needs to raise funding. Too little runway weakens negotiating power, while more runway gives founders flexibility to grow revenue and refine their strategy. At its core, cash runway is about knowing your numbers — understanding cash burn rate, tracking cash flow, and applying the cash runway formula to calculate how much time is left before the company’s cash is exhausted.
## **Calculate cash runway**
The cash runway formula is straightforward:
**Cash runway = Current cash balance ÷ monthly cash burn rate**
- **Cash balance:** The total amount of cash available in bank accounts and liquid assets, sometimes called cash on hand.
- **Monthly cash burn rate:** The net burn rate that accounts for both inflows and outflows. Outflows include payroll, rent, insurance, vendor payments and other recurring costs. Inflows include sales, contracts and receivables that improve cash position.
**Example 1:** If a startup’s current cash balance is $600,000 and its monthly cash burn rate is $100,000, cash runway is six months.
**Example 2:** Suppose the same company begins generating $40,000 per month in recurring revenue. Its monthly cash burn rate drops to $60,000, which extends the number of months of cash runway to 10.
This simple runway calculation is a useful rule of thumb, but it does not capture seasonality, growth-related outflows, or delayed inflows. Many startup founders build more detailed Excel financial models to test scenarios and update assumptions in real time.
## **SaaS and startup-specific considerations**
SaaS startups face unique challenges with cash runway. Because revenue is tied to subscriptions and payment terms, a delay in accounts receivable can distort the company’s cash position.
Recurring revenue creates predictability, but overspending on sales and marketing initiatives can quickly erode runway. Many SaaS founders track burn multiple, which measures how efficiently cash burn translates into new recurring revenue. [Pricing](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/) experiments also play a role. Offering discounts may boost customer acquisition but lower cash inflows, making profitability harder to achieve.
Seasonality matters too. SaaS companies often see spikes in customer upgrades at fiscal year-end, while cash inflows may lag behind. Without adjusting forecasts, founders may misjudge the true amount of time their cash reserves will last.
## **What makes a good cash runway?**
There is no single cash runway definition of “good.” Still, investors and CFOs often use standard benchmarks. A common rule of thumb is 12 - 18 months of cash runway, with many recommending 24 - 36 months in tighter fundraising markets.
Industry also plays a role. Biotech startups may need longer runways because clinical trials extend timelines. By contrast, consumer software startups with faster revenue cycles may operate with less.
A good cash runway balances enough cash to weather volatility with flexibility to invest in growth. For an early-stage startup, this means aligning the number of months of cash runway with planned milestones such as product launches or acquiring your first paying customers. For growth-stage companies, it means extending runway long enough to reach profitability targets.
## **Extending your cash runway**
To add more cash to the balance sheet, startups can:
1. **Optimize cash flow**: Accelerate accounts receivable collections, negotiate payment terms with vendors, and monitor outflows carefully.
2. **Cutting costs**: Reduce operating expenses like office space, contractors, or underperforming initiatives, while maintaining investments critical to growth.
3. **Drive profitability**: Improve pricing strategies, lower acquisition costs, and reduce overspending.
4. **Secure additional funding**: Consider fundraising or raising additional capital before the cash position becomes critical.
Excel models and dashboards allow founders to model scenarios and test the impact of changes in revenue or cash expenses. Real-time financial models also help the CFO report to investors and avoid sudden liquidity surprises. Managing cash runway effectively is not only about having enough cash but about ensuring stability while still funding initiatives that position the company for long-term profitability.
## **Cash runway as a survival tool**
Cash runway goes beyond a simple formula. For startup founders and business owners, it’s a survival metric that underpins financial health and strategic decision-making. Tracking cash flow, updating financial models, and maintaining visibility into the company’s cash balance allows founders to anticipate challenges and avoid overspending.
A company with a good cash runway also has optionality — the ability to invest in new initiatives, experiment with pricing or pursue expansion when opportunities arise.
Managing cash runway can bring up emotions for early stage operators. Read more about that in our [founder’s framework for emotional fitness](https://review.firstround.com/hit-the-emotional-gym-the-founders-framework-for-emotional-fitness/) and [managing emotions at work](https://review.firstround.com/6-small-steps-for-handling-the-emotional-ups-and-downs-at-work/) article.
### ARPU
URL: https://review.firstround.com/glossary/arpu/
Last updated: 2025-09-30T03:15:27.000Z
In practice, ARPU serves as a benchmark for evaluating pricing models, tracking revenue growth, and comparing performance against competitors. For operators, it’s a lens on profitability: raising ARPU over time is often more sustainable than simply chasing more users.
## **How ARPU works**
A “user” depends on industry:
| Industry | Who Counts as a “User” | Revenue Sources |
| ------------ | --------------------------- | ------------------------------------ |
| SaaS | Paying subscribers/accounts | Subscription tiers, add-ons, MRR |
| Ecommerce | Active shoppers | Transactions, cross-selling, upsells |
| Social Media | Active users (often free) | Ads, upgrades, premium features |
Across industries, ARPU ties pricing strategies, monetization and customer behavior into one clear business strategy benchmark.
## **How to calculate ARPU**
The ARPU calculation is straightforward:
ARPU = Total revenue ÷ Number of users
This can be measured over any time frame (monthly, quarterly or annually). For example:
- **SaaS company:** A startup generates $100,000 MRR from 5,000 paying customers.
- ARPU = 100,000 ÷ 5,000 = $20 per month.
By tracking ARPU consistently, teams can calculate ARPU, compare scenarios with an ARPU calculator and monitor total revenue generated against user growth.
## **Why ARPU matters**
ARPU is one of the clearest metrics for understanding profitability and efficiency:
- [**Revenue growth**](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/) **and profitability**: Rising ARPU means the user base is becoming more valuable.
- **Benchmarking performance**: Compare ARPU against competitors in the same sector.
- **Churn and retention**: Falling ARPU may signal poor customer retention or higher churn rate.
- **Forecasting**: ARPU informs customer lifetime value (LTV), customer acquisition cost (CAC) and broader financial forecasting.
In short, ARPU shows what each user contributes right now while CAC reflects acquisition costs and LTV projects future value.
## **Factors that influence ARPU**
Four main levers affect ARPU in any given period:
1. **Pricing models**: Tiered subscriptions, freemium upgrades or usage-based billing.
2. **Monetization tactics**: Upselling, cross-selling, bundles, add-ons or premium features.
3. [**Retention vs. churn**](https://review.firstround.com/superhuman-onboarding-playbook/): High retention boosts ARPU while churn erodes it.
4. **Industry benchmarks**: SaaS companies track MRR while telecom or social media businesses measure ARPU differently.
## **How to increase ARPU**
Founders and operators can optimize ARPU through three main approaches:
- **Pricing levers**: Adjust pricing plans, subscription models or usage-based tiers.
- **Monetization levers**: Add upsells, cross-sells or feature upgrades.
- **Retention levers**: Strengthen onboarding, engagement and support to reduce churn.
The goal is not just a high ARPU but a consistently growing high-value customer base.
## **What is a good ARPU?**
There’s no universal benchmark. A “good ARPU” is one that:
- Improves steadily over time
- Covers CAC and supports profitability
- Aligns with LTV and retention goals
In other words, good ARPU is measured relative to your own economics not just industry averages.
## **ARPU in financial forecasting**
ARPU is a core input for financial models:
- **Revenue forecasting**: Multiplying ARPU by the total number of users quickly estimates total revenue generated in a given period.
- **Connection to LTV and CAC**: High ARPU relative to CAC strengthens margins and efficiency.
- **Investor evaluation**: Steady ARPU growth signals strong monetization and retention.
- **Scenario testing**: Adjusting ARPU assumptions helps stress-test pricing models, customer segments or expansion plans.
## **Why ARPU matters for every business**
From SaaS to ecommerce to telecom to social media, ARPU connects pricing, monetization and retention into one essential measure. By focusing on the right pricing model, upselling and cross-selling tactics and retention strategies, businesses can consistently increase ARPU, drive revenue growth and build long-term profitability.
When paired with churn rate, CAC and LTV, ARPU becomes one of the most reliable signals of sustainable scalable growth.
### Break-Even Point
URL: https://review.firstround.com/glossary/break-even-point/
Last updated: 2025-09-30T03:14:55.000Z
In business, the break-even point marks the minimum sales volume required to avoid losses and sustain operations. For startups, small businesses, and entrepreneurs, calculating BEP provides an early and critical benchmark. Long-term growth and profitability depend on first understanding whether the business, as currently structured, can sustain itself.
BEP is not a side metric. It sits at the center of financial analysis, forecasting, and business plans.
## **Why the Break-Even Point Matters**
The BEP is one of the most important metrics for business owners and entrepreneurs because it reveals whether a company can [support itself](https://review.firstround.com/grit-or-quit-tactical-advice-for-founders-facing-tough-company-building-decisions/). If a startup can’t reach BEP, it’s burning cash without a path to profitability. Sometimes, this is ok — like if a company has received outside funding. But eventually, a business is going to have to turn a profit.
For a new product or product line, a clear break-even analysis shows how many units need to be sold or how much sales revenue is required to justify the investment. For a small business, it sets realistic sales goals and keeps growth plans grounded in numbers instead of assumptions.
BEP also ties directly into cash flow and forecasting. A founder who knows the sales volume required to cover total costs can better anticipate when they’ll need additional funding or when the business might sustain itself. It’s equally critical for designing a [pricing strategy](https://review.firstround.com/dont-let-growth-hurt-your-margins-a-4-step-pricing-framework-to-build-products-with-scalable-unit-economics/). If the sales price per unit doesn’t cover both variable costs and a share of fixed expenses, the math won’t work.
## **Components of Break-Even Analysis**
A break-even analysis looks at the specific cost and revenue that determines when a business covers its expenses. The main components include:
- **Fixed costs (fixed expenses):** Costs that stay the same regardless of sales volume, such as rent, salaries, insurance, and depreciation.
- **Variable costs (variable cost per unit):** Costs that change with production and sales, including raw materials, direct labor, packaging, and shipping.
- **Sales price (or sales price per unit):** The amount customers pay for a product or service. Establishing the right pricing strategy determines whether the business can cover its total expenses and earn a margin.
- **Contribution margin:** The sale price minus the variable cost per unit. This is the money available to cover total fixed costs and, after break-even, generate net profit. In a CPG business, this is straightforward — the cost of producing and selling one unit. In SaaS, contribution margin looks different: variable costs include cloud infrastructure, customer support, and onboarding. The principle is the same, but the inputs reflect the business model.
- **Contribution margin ratio:** The contribution margin expressed as a percentage of the sales price. This helps compare product lines or analyze how pricing changes affect profitability. Example: If a product sells for $25 and the variable cost per unit is $10, the contribution margin is $15\. Divide that by $25, and you get a 60% contribution margin ratio.
Together, these components reflect a company’s cost structure. Understanding the balance of total fixed costs versus total variable costs makes break-even point calculation possible.
## **Break-Even Point Formula**
The break-even point can be calculated in two main ways: by the number of units sold or by sales dollars required. Both methods rely on the same underlying relationship between fixed costs, variable costs, and sales price.
- **Contribution margin per unit = Sales price per unit − variable cost per unit**
- **Break-even point (units) = Total fixed costs ÷ contribution margin per unit**
This formula shows how many units a company must sell to cover its total fixed costs.
- **Contribution margin ratio = Contribution margin per unit ÷ Sales price per unit**
- **Break-even point (sales dollars) = Total fixed costs ÷ contribution margin ratio**
The sales dollars approach is useful for understanding overall revenue targets, while the units approach helps founders set precise sales volume goals. In financial analysis or investor decks, BEP is often used to highlight the baseline sales volume required for profitability.
## **How to Calculate Break-Even Point (Step-by-Step)**
A break-even point calculation is straightforward once you know your costs and pricing. Here’s how to run it step by step:
**1\. Identify fixed costs.**Start with all fixed expenses: rent, insurance, salaries, and other overhead that don’t change with sales volume. Example: $50,000.
**2\. Determine variable cost per unit.**Add up the raw materials, direct labor, and shipping costs tied to producing one unit. Example: $10 per unit.
**3\. Set the sales price per unit.**Decide what you’ll charge customers. Example: $25 per unit.
**4\. Compute the contribution margin.**Contribution margin = Sales price per unit − variable cost per unit.In this case: $25 − $10 = $15 contribution margin per unit.
**5\. Apply the break-even point formula.**Break-even point (units) = Total fixed costs ÷ contribution margin per unit.$50,000 ÷ $15 = \~3,334 units.
In this scenario, a startup introducing a new product must sell about 3,334 units to reach break-even. Every additional unit sold contributes directly to net profit, making BEP a powerful tool in forecasting. It helps entrepreneurs decide whether required sales targets are realistic before committing resources.
## **Applying Break-Even Analysis in Business Decisions**
Founders and business owners use the break-even point (BEP) as a tool for guiding real-world choices about products, pricing, and growth.
- **Launching a new product:** Shows whether the required sales volume is achievable.
- **Adjusting pricing strategies:** Small changes in price per unit can shift BEP significantly.
- **Assessing production volume:** Clarifies whether existing capacity can handle projected sales.
- **Market expansion:** Helps forecast the sales revenue required for viability.
- **Business plan:** A strong plan almost always includes a BEP analysis. Investors and lenders expect to see it.
- **Industry differences:**
- SaaS — BEP tied to monthly recurring revenue (MRR), churn, and retention.
- Manufacturing — balancing production, raw materials, and fixed equipment costs.
- Retail/ecommerce — whether pricing and customer acquisition costs align with projected sales.
Without a clear picture of costs and revenues, scaling [can lead to missteps](https://review.firstround.com/looking-to-scale-your-sales-seven-bullets-to-dodge/). BEP grounds decisions in data rather than assumptions.
## **Beyond the Break-Even Point**
Reaching the break-even point is the threshold where each additional sale begins to generate net profit. Once total revenue covers total costs, founders can start thinking about scaling with more confidence.
The units sold beyond BEP fuel profitability giving a business flexibility to reinvest in marketing strategies, product improvements, or expansion. For example, once a startup[ clears its BEP on a new product](https://review.firstround.com/vantas-path-to-product-market-fit/), every additional unit contributes directly to growth capital rather than just covering fixed expenses.
For founders, BEP is best seen as a milestone in an ongoing cycle of financial analysis and forecasting. The goal is to sustain growth beyond that point by managing cost structures, expanding healthy revenue streams, and avoiding the trap of cutting costs so deeply that future growth potential suffers.
### Growth Hacking
URL: https://review.firstround.com/glossary/growth-hacking/
Last updated: 2025-09-30T03:14:10.000Z
The term growth hacking was coined by Sean Ellis in 2010 when he was advising a wave of early startups. His frustration was simple: most marketers were trained for brand campaigns, long planning cycles and budgets that young companies didn’t have. What startup founders needed instead was someone who could obsess over new users, test every channel at their disposal and drive measurable results fast.
Unlike traditional marketing, which is optimized for awareness and brand equity, growth hacking is optimized to drive measurable results at speed and scale. It is often characterized by data-driven experimentation, unconventional (even scrappy) tactics and cross-functional execution.
## **The growth hacker mindset**
The growth hacker mindset starts with one principle: [everything is measured](https://review.firstround.com/hypergrowth-and-the-law-of-startup-physics/). A growth hacker doesn’t plan campaigns by gut feel; instead, they ask: What’s the metric that matters most right now?
- **Acquisition metrics**: How many new customers visit our homepage today? Which landing pages convert?
- **Activation metrics**: Did new signups complete onboarding?
- **Retention metrics**: How many active users return weekly?
- **Revenue metrics**: How much are customers paying and at what pricing tiers?
- **Referral metrics**: Do customers invite others, creating a viral loop?
To answer these questions, growth hackers run constant [A/B testing](https://review.firstround.com/the-tenets-of-a-b-testing-from-duolingos-master-growth-hacker/), deploy automation and obsess over feedback loops. Their approach is closer to a product development team than a marketing department. Growth hackers sit alongside engineers to ship experiments, often rewriting copy, adjusting UX flows or tweaking pricing on the fly.
By contrast, a marketing team might define brand campaigns for the quarter. A growth team ships dozens of tests weekly, each tied to a measurable outcome. The mindset is iterative: experiment, measure, iterate and scale.
## **A framework: The AARRR funnel**
The best way to structure growth hacking is through the **AARRR funnel**, also called the pirate metrics framework:
1. **Acquisition – Getting traffic and signups.** You’ll want to measure this through channels like SEO, social media, LinkedIn, paid ads and influencer campaigns.
2. **Activation – Delivering a strong first experience.** You can track this by measuring the % of users completing onboarding or engaging with the core product.
3. **Retention – Bringing users back.** You can do this via tactics like lifecycle email marketing, [push notifications](https://review.firstround.com/what-you-must-know-to-build-savvy-push-notifications/) and improving user experience.
4. **Revenue – Monetization.** You can optimize this by [experimenting](https://review.firstround.com/the-secret-to-running-effective-growth-sprints-follow-this-process-to-learn-faster/) with trial-to-paid conversion, pricing tests and upsells.
5. **Referral – Creating loops where existing customers help bring in new ones.** You’ll see this through mechanisms like Dropbox’s referral engine, Airbnb’s Craigslist growth hack or Slack’s team invitations.
Mapping growth hacking techniques to each stage helps startups prioritize where to focus. An early SaaS product struggling to keep users should target retention before scaling acquisition. An ecommerce brand with strong repeat purchase rates might focus on customer acquisition via content marketing and [SEO](https://review.firstround.com/the-seo-tips-that-helped-tally-20-million-visits-a-month/).
## **Step-by-step growth hacking process**
Growth hacking isn’t random — it follows a [disciplined](https://review.firstround.com/the-imperative-practice-of-relaxing-constraints/), step-by-step cycle:
- **Identify growth opportunities:** Audit the customer journey. Where do users drop off? Where does the funnel leak? Example: a high signup rate but poor retention signals an onboarding issue.
- **Generate hypotheses:** Develop specific ideas to close gaps. For example: if onboarding is weak, test shortening the signup form, adding tooltips to guide users or inserting a tutorial video that highlights the “aha moment.”
- **Run experiments:** Use A/B testing to compare variations of copy, design, layout, calls-to-action or workflows. For instance, launch new landing pages, update homepage CTAs or test different email marketing cadences.
- **Track metrics:** Measure conversion rate, daily active users and customer acquisition costs. Growth teams often build dashboards in Mixpanel or Amplitude.
- **Iterate quickly:** Kill what doesn’t work. Double down where you see traction. Each cycle produces learnings that compound over time.
The key is to stay scalable and cost-effective. Growth hacking works because experiments are lightweight, repeatable and designed to scale once validated.
## **Case studies and examples of growth hacking**
Some of the most [famous examples of growth hacking](https://review.firstround.com/this-woman-has-landed-millions-of-mobile-downloads-heres-how-she-does-it/) show how creative tactics can unlock massive growth:
- **Airbnb and Craigslist:** In the early days, Airbnb engineers wrote a script that allowed hosts to cross-post listings directly to Craigslist. Every post on Craigslist included a link back to Airbnb, funneling new users. This clever distribution engine let early Airbnb tap into an existing customer base at almost no cost.
- **Dropbox’s referral loop:** Dropbox offered 500MB of free storage to both referrer and referee. This viral loop turned customers into advocates. The math was powerful: if every user invited just two others, growth compounded exponentially. This tactic helped Dropbox scale from 100,000 to four million users in just 15 months.
- **Slack onboarding:** Slack’s growth didn’t come from ads — it came from onboarding design. New teams quickly saw value because channels were pre-populated, notifications were tuned and invites were seamless. Slack’s model proved that user experience is often the most important growth engine.
- **TikTok algorithm:** TikTok didn’t rely on friend graphs. Instead, it showed viral content immediately to new signups, creating instant engagement. Its algorithm acted as a built-in influencer engine, helping the platform build an enormous global user base.
## **Digital channels and growth hacking tools**
Modern growth hacking blends digital marketing channels with specialized growth hacking tools.
- **Search engine optimization (SEO)**: Consistently one of the most efficient growth strategies. Optimized content marketing drives steady inbound traffic.
- **Social media:** Vital channels for both B2C virality and B2B customer acquisition. Many startups scale early through clever social media tactics — for example, TikTok challenges, Instagram reels or LinkedIn thought-leadership posts.
- **Influencer campaigns**: From micro-influencers on TikTok to thought leaders on LinkedIn, influencer partnerships can drive brand credibility.
- **Email marketing automation**: Still a core channel for retention. Tools like HubSpot and Customer.io allow targeted campaigns at scale.
- **Templates and automation tools**: Prebuilt templates and no-code tools let small teams run complex campaigns quickly.
- **Analytics and A/B testing tools**: Platforms like Optimizely, Amplitude and Google Optimize power the growth hacking process by making metrics visible and testable.
Growth hackers build a tool stack not to replace strategy, but to reduce guesswork and speed up iteration.
## **Challenges, trade-offs and the future of growth hacking**
Despite its appeal, growth hacking carries risks:
- **Over-optimization:** A homepage cluttered with pop-ups may spike conversion rate short term but lead to longer-term churn.
- **Vanity metrics:** Chasing signups without activation creates false confidence.
- **Neglecting retention:** Many startups celebrate acquisition but ignore churn, masking product-market fit problems.
- **Unsustainable hacks:** What works at 1,000 users may collapse at 100,000.
That’s why the discipline is shifting. Growth hacking tactics are evolving into a broader growth marketing methodology. [Sustainable growth](https://review.firstround.com/what-i-learned-as-pandoras-first-data-scientist/) requires balancing customer acquisition with retention, aligning pricing with value and embedding growth into product development itself.
The most successful entrepreneurs and growth leaders no longer treat growth hacking as a set of tricks. They treat it as an organizational culture — one that prioritizes experimentation, sustainable growth and a reliable, step-by-step process for turning insights into results.
### How Brex is building an AI-first operations org
URL: https://review.firstround.com/how-brex-is-building-an-ai-first-operations-org/
Last updated: 2025-12-04T17:34:06.000Z
Changing roles, workflows and skills around AI
_This post is for subscribers only._
### Why Sierra built a design partnership program on “hard mode”
URL: https://review.firstround.com/why-sierra-built-a-design-partnership-program-on-hard-mode/
Last updated: 2025-12-04T17:34:30.000Z
Sierra’s first GTM hire, breaks down every step of their playbook.
_This post is for subscribers only._
### The Hard Way Pays Off: Inside Sierra’s Design Partner Strategy
URL: https://review.firstround.com/sierra-design-partnership/
Last updated: 2025-09-26T16:02:50.000Z
When [Bret Taylor](https://www.linkedin.com/in/brettaylor/?ref=review.firstround.com) — co-creator of Google Maps, Chairman of OpenAI and former co-CEO of Salesforce — asks you to join his new startup, the answer is yes. And that’s how [Logan Randolph](https://www.linkedin.com/in/loganrandolph/?ref=review.firstround.com) ended up as [Sierra’s](https://sierra.ai/?ref=review.firstround.com) first go-to-market hire in 2023\. “The advice I’ve always followed is: find the smartest people who take you seriously, and do whatever they ask,” says Randolph.
Sierra helps businesses build better, more human customer experiences with AI. Two years later, and 18 months since launch, the startup is used by hundreds of brands, including some of the largest enterprises in the world. Almost 50% of the companies using Sierra have annual revenue of over $1B, and 20% have annual revenue of $10B+. How did they attract such large enterprises so quickly? In short, first principles thinking combined with a design partner program to hone their product-market fit.
Inspired by the launch of ChatGPT in November 2022, Sierra’s founders, Taylor and [Clay Bavor](https://www.linkedin.com/in/claybavor/?ref=review.firstround.com) (a product leader at Google for 18 years), made an early bet on AI agents.
"They had this theory that agents were to AI, what apps were to mobile and websites to the Internet. And just like websites and apps before them, agents would transform the customer experience,” says Randolph. “What wasn’t clear were the specifics.”
To validate their theses, Taylor and Bavor tasked Randolph with building a design partner program. Not the glorified beta testing most enterprise startups use, but real partners who were excited to build alongside Sierra. Over two years in, Randolph says he learned three important lessons about building a design partner program:
1. **Target recognizable brands from day one** — companies with real businesses who can pressure-test every facet of your product.
2. **Bring your partners in early so you can build the product together** — not at the end when everything’s almost done.
3. **Ensure both sides have skin in the game** — with agreements that look like paid enterprise sales contracts not early-stage pilots.
> Completely orient your company around your partners’ success — ultimately their success creates your success.
In this interview, he takes us back to the beginning, unpacking the playbook Sierra used to identify design partners, and go from prototype to product-market fit. Let’s dive in.
## Finding the right partners: Define your criteria
Sierra didn't yet have an ideal customer profile — that's some of what the design partner program would eventually validate, so they cast a wide net. With the goal of landing four, the team came up with a list of 40 potential partners (some friends, some strangers). Here’s the criteria for how they selected these companies:
### Criteria #1: Horizontal appeal
Many successful startups have gotten early traction selling to other tech companies. And it likely would’ve been easy for this founding team — with decades of connections as founders and executives across tech giants — to follow that same playbook.
“But we believed AI would transform the customer experience across every industry, and we wanted to validate that theory. So we went to people in healthcare, CPG, media, retail and tech without knowing yet which ones it would actually resonate with,” says Randolph.
### Criteria #2: Large scale
Sierra’s early story is another reminder of how quickly AI adoption has accelerated. “We started with the pitch: You should use AI for customer service — which was actually non-obvious a few years ago,” says Randolph. “We wanted design partners that had to consider the risks associated with AI seriously, as we learned a lot from mitigating these risks together.”
There was also a direct correlation between how big the company was and the scale of the problem. “If you have two CX managers and you ramp up to four during the holidays, that’s not a huge deal. But if you have a call center of 5,000 employees and have to ramp to 7,000, that’s really tough to manage,” he says.
### Criteria #3: Real problems
No matter the size of the company, Sierra wanted to avoid AI tourism. “In some conversations it became clear that prospective partners were interested in ‘playing with AI’ and building internal prototypes,” said Randolph. “We wanted customers who wanted to solve a real problem that meaningfully impacted their business.”
A fun experiment often starts with “wouldn’t it be cool,” and in the design partner stage, that was almost always a red light.
A real problem sounds like, “Every holiday season our agents have to work 24/7\. It’s stressful for them and a bad experience for our customers. How can we use AI to scale our support, especially at the busiest times?”
### Criteria #4: Not too many friendlies
Sierra had an advantage in that their founders had huge networks. But finding design partners who weren’t warm intros was important to validating Sierra’s thesis.
"It’s one thing to have close friends tell you it’s a great idea. But the views of strangers are not clouded by your existing relationship. So they hold you to a different standard," Randolph says.
## Approaching partners: Beware the frictionless gap
"A lot of startups will say to prospective partners, 'We just need a few hours of your time each month.’ But you need mutual investment and risk,” says Randolph.
"So we told partners upfront: ‘We'll give you dedicated engineers, direct access to our founders, and our cell phone numbers. But in return, we need real investment from you — payment, access to your systems, and weekly meetings to get candid feedback,’" he says.
To get to locked-in, mutually invested design partners, Randolph led a four-step process:
- Step 1: Customer discovery + deck (30 minutes). “This was the initial meeting to judge mutual interest,” he says “To do this effectively, we shared context and asked a lot of questions, but we really weren’t giving the hard sell.”
- Step 2: Live demo (30 minutes). “We actually showed prospective partners our product to illustrate what we wanted to do together.”
- Step 3: Deep dives as needed (security/technical diligence). “Step three had more variance,” Randolph says. “At this point we followed the customer, addressing their questions and concerns. And at times going back to steps one and two to get buy-in from new stakeholders.”
- Step 4: Verbal commitment to the paid design partner program.
Step 1 is often overlooked by startups, eager to get someone (anyone) to take a chance on them. “At this point, we’re not even selling people on being a design partner,” says Randolph. **But this process of real** [**discovery**](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) **to understand what potential partners would like from an AI agent is so important. Without it, you risk becoming a consulting firm, crafting bespoke products with wildly different directions for each partner.**
So use this discovery call (and the demo and deep dive that follow) to get extremely granular on what success looks like for the partner. “Once we had the same goal — for example an AI agent with high resolution and CSAT rates — it was pretty clear what was in service of it, and what wasn’t,” he says.
If it’s within that scope, anything is fair game. “Need to have an NPS pop-up immediately after every conversation? Great, we’ll build that feature. Need to have a credit card feature so you can pay in the agent conversation? Great, we’ll build that. Need to have the ability to look at every conversation that’s happening? Great, we’ll build that feature,” says Randolph
“This is why we have so much gratitude for our design partners,” he says. “Every feature that differentiates our product from the market was an ask from one of our design partners.”
> Partner’s goals need to be similar enough that you’re OK helping them achieve goals in unique ways. We didn’t take on design partners who we didn’t want to follow.
At the end of the four-step process, Sierra ended up with six design partners (against their goal of four), all of whom were also paying customers. Among them are:
- [Weight Watchers](https://sierra.ai/customers/weightwatchers?ref=review.firstround.com)
- [SiriusXM](https://sierra.ai/customers/siriusxm?ref=review.firstround.com)
- [Sonos](https://sierra.ai/customers/sonos?ref=review.firstround.com)
- [OluKai](https://sierra.ai/customers/olukai?ref=review.firstround.com)
- [Minted](https://sierra.ai/customers/minted?ref=review.firstround.com)
## Structuring the partnership: Mutually assured construction
When you’re [undergoing a design partnership](https://review.firstround.com/gongs-path-to-product-market-fit/), with frequent touchpoints and heaps of feedback, you’re asking for a large commitment from your partners.
Randolph leaned into this model, with a clear end date and payment upfront. “**Both the timeboxed partnership window and the payment were commitments for the partner. They had skin in the game**,” he says.
Randolph suggests investing in a structured contractual approach for the POC. Even if it takes more time initially it will allow your partners to move to long-term customers more easily.
Here’s why he endorses this approach.
### Payments
Putting up hurdles for early customers to jump through sounds like the opposite of Silicon Valley’s “move fast” ethos — but in Sierra’s case, it helped them disqualify companies they felt were AI tourists. “Everyone’s excited to experiment with AI. So the financial commitment had to be significant enough that people really needed to think about it, get approval from their boss and go through the procurement process,” says Randolph.
For pricing out your own design partnership, Randolph recommends a simple calculus. “10-20% of your total contract value feels right. Anything less than that and it’s not that real of a commitment,” he says.
### Time limits
“Whatever you do, don’t allow the ‘try this and give us feedback when you are ready’ approach because they will say ‘Ok cool, we’re excited to work together, and we’ll get you resources next month,’” Randolph says.
Instead, he suggests setting tight guardrails: “If you say, ‘We’re going to work together for three months and then the partnership period is over,’ they’ll show up the next week ready to get to work.”
While each product and partner has unique needs, Randolph offers a helpful ballpark. “Under two months is probably too short and over six months is probably too long,” he says. “It needs to be long enough to build together, see results and close a deal — and short enough that there’s urgency on both sides to get going and stay engaged.”
“Today we’ve launched agents in a week,” Randolph says. “But when everything was new, it took a bit longer.”
## Running the program: Build trust through rapid iteration
The contract is signed, but the partnership is just beginning. It’s important to be as intentional about the kickoff process as the selection and contract. This is a critical inflection point to clarify areas of ownership and decide what’s most important to build.
### Kickoff meeting
Randolph recommends starting with a service engineering discovery session, a 60-90-minute meeting with the whole team. He had four main goals coming out of each kick-off meeting:
- **Agree on the three or four main problems to solve**. One company wanted an AI agent to do returns, exchanges and package tracking. For another, it was having the agent solve connectivity issues.
- **Define swimlanes.** “We needed clear accountability for who owns the customer experience and who owns the technical integrations,” he says.
- **Commit to a real launch during the partnership, not a prototype**. Randolph suggests getting a commitment upfront from the customer that this isn't just something for them to tinker with.
- **Create ongoing touchpoints to avoid “out of sight, out of mind.”** Randolph made sure to establish a standing meeting and a Slack or Teams channel to open a constant line of communication with the partner.
For Sierra, “more than half of the company was in every meeting,” says Randolph. On the partner side, after some trial and error, it was clear three folks needed to be in the room:
- The executive sponsor
- Someone on the technical side who could grant Sierra access to the APIs and connection points
- Someone on the business side who deeply understands the customer
> We wanted to avoid starting to work with a partner and a month later they say, ‘Oh, we need to pull in this person.’ The kickoff was a forcing function to get everyone in the room and articulate who’s owning what.
After each kickoff, Randolph would send a recap email double-confirming that they’re all on the same page, as well as a short questionnaire: “With the questionnaire, I’m looking for anything that could sneak up on us later,” says Randolph.
### Weekly iteration and communication
“We would try to get the first version of the agent built within two weeks. Even if it was bad, it was something,” said Randolph. These minimum viable agents were quite simple — for example, if the company wanted the agent to do exchanges, the MVP might just answer questions about exchanges from the help center.
And from there, progress was rapid. “Week over week, we were adding more fidelity. We began to operationalize and use our software development kit to build agents that did specific tasks for the partner, like completing a return, an exchange, or a warranty,” says Randolph. “And then, instead of using fake APIs, we’d use APIs that were connected to a sandbox, and then use production APIs that weren't launched.”
During the weekly 30-minute standups with design partners, Sierra put this progress front and center. “Every week we would explain what we did, we would solicit feedback and then we would take the feedback,” he says.
It was also an accountability check-in. “We would put up slides that spelled out clearly: Here’s everything we did, here’s the feedback you gave, here’s everything that we asked you for and you didn’t do yet. It was managing the relationship in a non-patronizing way.”
### Prioritizing what to build
When it comes to design partners, choppy waters can throw your boat off course. How do you resolve the needs of multiple VIP customers when they don’t always align? It sounds like an enormously complex problem. But Randolph keeps it simple: “Anchor everything on the core problem. If the design partner’s request goes towards that core problem, then we’ll do it. If it’s not, then we won’t,” he says.
To build trust — even for some low-priority or hyper-specific requests — the answer was often yes. “We’d rather over-rotate on building things that are too specific as opposed to quickly disqualifying customer asks,” Randolph says. “Customers are usually right and while their asks may look different, they’re often aimed at solving the same underlying issue.”
But if you do find that you’re continuously butting up against requests that seem far afield, it probably traces all the way back to the selection process. “We had one early customer who kept changing what they wanted. Ultimately, this was a symptom of us picking a partner who didn’t feel the pain as acutely as other people. They fell into the bucket of ‘it’s cool to use AI agents, so let’s find a problem that would allow us to build one,’” he says.
And while the Sierra folks were eager to hop onto just about any problem, there were a few larger requests that were out of scope for the partnership window. “Our product started with just chat, but we kept hearing that people wanted voice, which wasn’t feasible at the start. But eventually, as the product matured, it was,” says Randolph.
“SiriusXM was one design partner who really pushed us on voice, and they eventually became our design partner for the voice product as well,” he says. “We were able to launch our voice agent into production before anyone else in the market, and we owe this head start to our partners at SiriusXM.”
> Listening to really opinionated outlier requests has made our product better.
**More than half of Sierra’s product offering today is directly attributed to design partner requests**. “Part of the product is the agent itself, which interacts with customers. The second part is what we call the Agent Studio. You want to be able to read the conversations, look for trends on customer complaints and give feedback on what’s a good versus a bad answer so you can continue to improve the agent,” says Randolph.
But back in the design partnership days, the Agent Studio didn’t exist. And the feedback process left a lot to be desired. “We had links to conversations that were exported in a CSV. The design partner could then write up feedback and put it back in a CSV,” he says.
“SiriusXM really held our feet to the fire on this in terms of being able to give more specific feedback and see comprehensively what’s happening in each conversation, so we built Agent Studio,” says Randolph.
### Rally internally around a milestone
Behind the scenes at Sierra, they were ruthlessly obsessed with one particular milestone: “We would pick a launch date when the agent would be deployed,” Randolph says. To get there, the team working on design partnerships had internal weekly syncs where they’d continually ask three questions:
- What do we need?
- What do they need?
- Are we on track with the launch date?
“The whole company was obsessed with these launch dates. Every single person could tell you that X customer was launching on May 1\. It was the internal milestone that drove us,” he says.
**Eventually, 100% of design partners would convert to customers — which Randolph credits to the team's maniacal focus**. "If we hadn't gotten so specific, more customers would've driven toward a prototype. But because we were planning to launch agents, they held us to a higher standard," he says.
## Wrapping up: The path less trodden
Running an impactful design partner program is extremely difficult — teams are on call at every moment, desperately trying to keep up with partner requests, a treadmill that never seems to stop. But it’s also a period of intense closeness to customers that has a certain magic at the earliest stages. “It was a shared experience that built customer empathy across Sierra. After engineers left their dedicated design partner post, they would look back and think fondly of that time working so closely with them,” says Randolph.
And the proof in Sierra’s approach goes much deeper than a 100% partner-to-customer conversion. “Champions at our customers have gotten promoted because we solved a problem for them that was so core to their business. We’ve had multiple design partners mention us on their earnings calls. They’re still among our most trusted collaborators and critical to the success and authenticity of Sierra,” says Randolph.
So if you’re going to do a design partnership, do it the right way, not the easy way. Your product will be all the better for it. “A true design partner program is not about early selling, it’s about building with your customers for the long term,” he says.
### Net Revenue Retention (NRR)
URL: https://review.firstround.com/glossary/net-revenue-retention-nrr-definition/
Last updated: 2025-09-18T14:30:48.000Z
Unlike topline sales or new customer growth, NRR reflects your company’s ability to grow revenue from the base you already have.
An NRR greater than 100% means your upgrades, upsells and cross-sells outweigh churn, cancellations and downgrades, which signals durable revenue growth. An NRR less than 100% indicates a contraction in revenue generating activity across your customer base.
NRR is considered one of the most important metrics in B2B SaaS and subscription-based B2C because it captures expansion revenue over time, not just customer retention.
You’ll also hear NRR referred to as net dollar retention or simply net revenue retention rate.
## **NRR vs Gross Revenue Retention (GRR)**
It’s easy to confuse **NRR** with **Gross Revenue Retention (GRR)**:
- **GRR** shows the subscription revenue you retain after churn, downgrades and cancellations *without* factoring in expansion revenue.
- **NRR** includes expansion revenues to give a more complete view of your net retention formula.
Because GRR ignores expansion, it can never exceed 100%. NRR, by design, can climb well above that threshold.
| Metric | Why use it | Typical ceiling |
| ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------- |
| GRR | To diagnose retention issues, spot churn patterns and evaluate whether customers are consistently finding value. It isolates the impact of cancellations and downgrades. | Max 100% |
| NRR | To understand overall revenue durability and growth from your existing base, including expansion revenue. It shows whether upsells, cross-sells and upgrades are offsetting churn. | Can exceed 100% |
In use, each metric has distinct benefits:
- GRR is helpful for spotting retention issues and delivering a consistent, positive experience across your customer base, whereas
- NRR is helpful for evaluate upselling effectiveness, product-market fit and the combined impact of your sales, success and product teams.
## **How to calculate NRR**
The **NRR formula** is straightforward:
**NRR = (Starting MRR + Expansion Revenue – Downgrades – Churn – Cancellations) ÷ Starting MRR**
Where:
- **Starting MRR** \= recurring revenue from the same group of customers at the start of a specific period
- **Expansion revenue** \= upgrades, upsells and cross-sells in the same period
- **Contractions** \= downgrades, churn and cancellations in the same period
Example:
- Starting MRR: $100,000
- Expansion revenue: $20,000
- Downgrades + churn: $10,000
- Ending MRR: $110,000
NRR = $110,000 ÷ $100,000 = **110%**
| Factor | Effect on NRR | Example |
| --------------------- | ------------- | ----------------------------------- |
| Upgrades / Upsells | Increase NRR | A customer moves to a higher tier |
| Cross-sells | Increase NRR | Customer adds another product line |
| Downgrades | Decrease NRR | Customer switches to a cheaper plan |
| Churn / Cancellations | Decrease NRR | Customer leaves entirely |
A higher NRR shows that your retention and expansion strategies are working and your existing customers are finding your product suite more valuable over time.
## **Why NRR matters for SaaS companies**
For **SaaS companies**, NRR is a **key metric** of financial health, profitability and growth potential. New customer acquisition is expensive; expansion revenue is more efficient. It also indicates customers are getting value from your product or product suite.
A **good net revenue retention rate** tells investors your business model is sustainable: even without constant acquisition, your base revenue expands. Operators use it to shape **pricing**, product roadmaps and [customer success orgs](https://review.firstround.com/founders-guide-building-customer-success/).
## **What is a good NRR rating?**
Benchmarks vary across segment, company stage and industry. Early companies may struggle to hit even 80% as they find product-market fit. At scale, the best **SaaS companies** consistently post **higher NRR** above 100%. For example, in B2B SaaS:
- **100% NRR** \= baseline (customers renew, no expansion)
- **Above 100%** \= expansion offsets churn; a hallmark of strong SaaS businesses
- **120%+** \= often seen in category leaders like Snowflake or Zoom
To illustrate, here are some general benchmarks for B2B and B2C SaaS companies:
| Segment | Median NRR | Top Quartile NRR | Best-in-Class NRR |
| ---------- | ---------- | ---------------- | ----------------- |
| B2B SaaS | 106% | \>120% | 115-125% |
| B2C SaaS | 65% | 70-80% | \~80% |
| ARR <$1M | 98% | \~105% | \>105% |
| ARR $100M+ | 115% | 120%+ | 125%+ |
*Sources for above data* [*here*](https://www.wudpecker.io/blog/retention-benchmarks-for-b2b-saas-in-2025?ref=review.firstround.com) *and* [*here*](https://chartmogul.com/reports/saas-retention-report/saas-retention-report-2023.pdf?ref=review.firstround.com)*.*
## **Strategies to improve NRR**
Improving NRR is less about chasing logos and more about **maximizing lifetime value** from your **customer base**:
- **Reduce churn** — Strong [onboarding](https://review.firstround.com/superhuman-onboarding-playbook/), proactive customer success and support loops to stop preventable losses.
- **Drive expansion revenue** — Build upgrades, upsells and cross-sells into your roadmap.
- **Optimize pricing strategy** — Annual subscriptions and tiered models encourage long-term contracts and create room for expansion.
- **Invest in customer retention** — Align product and success teams around solving real problems, not just acquisition.
Founders like [Rick Song at Persona](https://review.firstround.com/podcast/from-reluctant-founder-to-2b-valuation-the-story-of-persona-rick-song-co-founder-and-ceo/) built billion-dollar valuations by leaning on NRR, not pure acquisition.
And in markets like AI, leaders such as [May Habib of Writer](https://review.firstround.com/podcast/scaling-and-selling-ai-products-for-enterprise-may-habib-co-founder-and-ceo-of-writer/#:~:text=Prior%20to%20Writer%2C%20May%20co,their%20brand%20style%20and%20voice.) show how enterprise expansion can fuel NRR.
## **NRR in practice**
At its best, NRR is a **real-world operating guide**, not just a spreadsheet figure. It ties directly into **financial health**, valuation and planning while showing strength in an important part of your business.
Like any metric, NRR could be misleading if used incorrectly. For example, NRR with strong expansion can mask a “leaky bucket” situation for new customers.
When used correctly, NRR becomes a key indicator for a healthy growing business, showing whether your revenue streams expand naturally as your customers grow.
Read more from First Round on building [durable revenue models](https://review.firstround.com/podcast/how-to-measure-product-market-fit-with-the-rev-model-artem-kroupenev/) and [retention-driven growth](https://review.firstround.com/heres-what-a-real-growth-strategy-looks-like-road-tested-by-facebook-and-remind/).
Sources:
1\. [https://www.wudpecker.io/blog/retention-benchmarks-for-b2b-saas-in-2025](https://www.wudpecker.io/blog/retention-benchmarks-for-b2b-saas-in-2025?ref=review.firstround.com)
2\. [https://chartmogul.com/reports/saas-retention-report/saas-retention-report-2023.pdf](https://chartmogul.com/reports/saas-retention-report/saas-retention-report-2023.pdf?ref=review.firstround.com)
### K-factor
URL: https://review.firstround.com/glossary/k-factor-virality/
Last updated: 2025-09-18T14:01:44.000Z
K-factor tells you whether your product is spreading on its own via referrals and word of mouth, or relying on other growth levers.
If your K-factor value is greater than one, every user creates more users, leading to compounding growth. If it’s less than one, you’ll need marketing campaigns or other acquisition tactics to sustain momentum.
## **How to calculate K-factor**
The k-factor formula is simple:
**K = (average number of invites sent by each user) × (conversion rate of invitees)**
For example, let’s say one user sends five referral invites. If 20% convert, the k-factor equation gives you 1.0\. At that point, each user refers an additional user.
Even small lifts in conversion rate can lead to a higher K-factor and more efficient user acquisition.
## **Why K-factor matters**
K-factor answers the question: is your growth compounding, or costing you?
When it’s above one, the product is experiencing viral growth. Acquisition costs are lower, unit economics improve, and loops begin to fuel themselves.
This is how social networks like LinkedIn scaled quickly: word-of-mouth and network invites brought in active users far more cheaply than other channels, like ads.
But virality can be misleading. A good virality score doesn’t guarantee sustainability. You could acquire a bunch of users, inflate numbers, then many of them churn.
As [one founder](https://review.firstround.com/the-uncomfortable-truth-a-3x-founders-guide-to-intellectual-honesty/) noted, it’s easy to spin a K-factor, making it look good in a pitch but unsustainable in practice. This is where intellectual honesty matters, the discipline to separate signal from noise and acknowledge when viral growth is masking deeper retention or product issues.
## **What drives virality**
Virality doesn’t happen by accident. It comes from deliberate design choices:
- **Referral programs:** Referral programs are purpose built to encourage virality. PayPal’s cash-for-referrals is one well-known case where a simple incentive turned existing users into active promoters.
- **Word-of-mouth:** Organic sharing on social media, social networking sites, and apps like TikTok amplifies reach.
- **Frictionless user experience:** Clear referral flows, fast onboarding, and easy share prompts lift the virality rate.
- **Content sharing:** A playlist, infographic, or other piece of content can trigger the viral loop just as effectively as a structured program.
These drivers are the foundation of [product virality](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups/). The key difference between products that grow organically and those that stall is whether sharing feels natural and rewarding.
## **How to optimize K-factor**
Improving K-factor means designing for virality. Teams can:
- Refine messaging, landing pages, and referral incentives to increase the conversion rate of invitees.
- Surface invitations early in onboarding, when excitement is highest.
- Experiment with pricing models like freemium tiers or discounts tied to referrals.
- Track viral effects in real time, using data and testing to tune loops instead of relying on guesswork.
## **Pitfalls of K-factor**
A high K-factor alone won’t sustain a company. If retention is weak, viral loops become leaky buckets, which is why many teams balance virality with deliberate [customer acquisition playbooks](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups/).
Paid campaigns can also distort the number, making it look healthier than it is. If ads bring in a large wave of new users, some of them may invite others simply because of the spike in activity, which makes K-factor look stronger than it would be under organic conditions.
## **Viral examples in marketing**
Dropbox is the classic story: a simple referral program offering extra storage turned users into evangelists.
TikTok took a different route, using content sharing and playback loops to keep internet users generating viral content. Each piece of content pulled in new invitees.
LinkedIn’s early growth hinged on referrals, too. Professionals are inviting colleagues to build their networks. Each new user added credibility, making it easier for the next one to join.
When [Facebook](https://review.firstround.com/heres-what-a-real-growth-strategy-looks-like-road-tested-by-facebook-and-remind/) first spread across campuses, growth didn’t come from ads. Each new student who joined invited classmates and friends, creating a loop that fueled exponential growth.
Education platform Remind by focusing on one central user: the teacher. When a teacher adopted Remind to communicate with their class, they naturally invited students and parents to join, creating a built-in referral effect that spread from classroom to classroom.
These examples of virality all highlight the same principle: K-factor isn’t about luck. It’s about designing systems where existing users naturally bring in new users.
### ARR
URL: https://review.firstround.com/glossary/arr/
Last updated: 2025-09-18T14:00:59.000Z
For SaaS companies and other subscription-based businesses, ARR is a key metric because it reflects the durability of their subscription model. Unlike one-time fees or short-term deals, ARR shows the revenue streams you can count on if customers renew, expand and stick around for year-long contracts — providing a better long-term outlook on company performance.
It’s important to distinguish between ARR and Monthly Recurring Revenue (MRR).
- **ARR** \= annual recurring revenue, the macro view of a subscription company’s financial health.
- **MRR** \= monthly recurring revenue, the micro view of how revenue fluctuates month-to-month.
Both are key SaaS metrics, but ARR is often the benchmark investors use to evaluate growth potential, financial health and valuation.
## **Why ARR matters**
ARR serves as the foundation for understanding whether a subscription business is sustainable. For SaaS companies, ARR connects directly to:
- **Financial health:** ARR is one of the best measures of a company’s growth. Consistently increasing ARR shows whether revenue streams are stable enough to support future growth (like hiring, launching new products and more).
- **Retention and churn:** Similarly, it can be a signal for other downstream parts of the business. When ARR stagnates, customer churn might be high. When ARR compounds, renewals and expansions are likely strong.
- **Valuation:** Investors use ARR to judge growth potential and profitability. Strong ARR signals durable revenue, which boosts confidence in long-term sustainability.
- **Milestones:** [Hitting ARR benchmarks](https://review.firstround.com/introducing-0-5m/), like the first $1M or $5M, often marks important inflection points in a company’s journey.
## **How to calculate ARR**
The ARR formula looks simple on paper:
**ARR = (Annual subscription price × Number of customers)**
But in practice, ARR calculation has to account for changes over time. One-time fees, onboarding charges and non-recurring add-ons should never be included in ARR. It’s all about recurring subscription revenue.
Here are the main factors to include:
| Factor | What it means | Effect on ARR |
| --------------------- | ------------------------------------------------------------ | ---------------- |
| Upgrades / Upsells | Customers move to higher tiers or purchase recurring add-ons | Increases ARR |
| Downgrades | Customers switch to cheaper subscription tiers | Decreases ARR |
| Renewals | Customers continue their yearly subscriptions | Keeps ARR steady |
| Cancellations / Churn | Customers cancel and stop paying | Decreases ARR |
## **How SaaS companies use ARR**
ARR is one of the most important SaaS metrics because it turns subscription revenue into a **predictable revenue** baseline. Operators use ARR to:
- **Forecast future revenue:** ARR growth rate helps model cash flow, growth potential and long-term sustainability.
- **Benchmark performance:** Founders can compare ARR against industry standards or internal targets.
- **Guide strategy:** ARR highlights whether pricing, retention, or expansion revenue is driving growth. It can also show which areas of go-to-market need attention. Customer churn could signal inadequate product stickiness, or smaller-than-expected contracts can indicate a need for a stronger upsell motion.
- **Fundraise with confidence:** A strong ARR metric shows investors that the company is scaling on durable revenue.
As [Vanta’s path to product-market fit](https://review.firstround.com/vantas-path-to-product-market-fit) shows, aligning product, retention and go-to-market efforts around ARR can be the difference between early traction and long-term success.
## **Strategies to grow ARR**
Growing ARR means improving both **new customer acquisition** and **revenue from existing customers**. In the early days of a venture, founder-led sales often set the foundation for the first few million of ARR. Key strategies to expand ARR over time include:
- **Improve retention:** Strong renewals reduce churn and increase customer lifetime value. There can be many reasons for this, but it shows that customers are continuing to get value from your product.
- **Drive expansion revenue:** Upsells, upgrades, add-ons and cross-selling expand account value over time. You can gate features on your product or add different subscription tiers.
- **Balance new and existing customers:** New logos fuel ARR, but the compounding effect comes from keeping the base and expanding it. Case studies can be a big driver here, and you can even incentivize existing customers with specific deals to work with you on producing one.
- **Optimize** [**pricing strategy**](https://review.firstround.com/pricing-lessons-from-working-with-30-seed-and-series-a-b2b-startups/)**:** Well-designed tiers and annual subscriptions improve profitability and long-term adoption. Whether it’s sales-led or self-serve, you need to be thoughtful about how you’re pricing the product — and be willing to change it over time.
## **Pitfalls and misconceptions**
Despite its clarity, ARR is often inaccurately reported. Common mistakes include:
- **Mistaking ARR for cash flow:** ARR is a projection, not money in the bank. Billing cycles payment terms and cancellations affect actual cash flow.
- **Inflating ARR by ignoring churn:** Excluding downgrades, cancellations, or customer churn leads to misleading numbers.
- **Chasing short-term spikes:** Even if a one-off deal is large and looks good on paper, it doesn’t create sustainable revenue streams.
## **ARR vs MRR**
- **ARR** \= annual recurring revenue, the macro view of a subscription company’s financial health.
- **MRR** \= monthly recurring revenue, the micro view of how revenue fluctuates month-to-month.
Used together, ARR and MRR provide both the long-term trajectory and the short-term health of a subscription model.
Read more from First Round on ways to build sustainable ARR, such as [paths to product-market fit](https://review.firstround.com/series/product-market-fit/) and [founder-led sales](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/).
### Scalability
URL: https://review.firstround.com/glossary/scalability-meaning-business/
Last updated: 2025-09-18T13:59:47.000Z
Growth isn’t just about adding more users or increasing sales, you need to design systems and business models that support this growth and can handle the pressure when it hits.
## What is scalability?
Scalability is having the capacity to expand without breaking.
- **Business scalability** — A business model that supports growth while handling increased demands. Scalability in business means the ability to acquire more customers or expand product offerings without driving up costs or degrading quality. When a company scales effectively, customer acquisition costs remain steady and unit economics hold and profitability improves as a result.
- **Technical scalability** — A system’s ability to support larger workloads without slowing down. Distributed systems, efficient use of nodes and CPUs and workflows that adapt under strain keep performance steady.
For [first-time founders](https://review.firstround.com/navigating-new-waters-10-tips-for-first-time-founder-success/), the ability to anticipate scale bottlenecks before they hit — and build in ways to navigate them — is critical.
## Why scalability matters for startups
Scalability enables growth, and growth is essential for survival. If your engineering systems can’t handle throughput or your [sales framework](https://review.firstround.com/the-three-frameworks-you-need-to-kick-start-sales/) can’t process 10x more leads when a big PR story hits, growth will expose those cracks.
SaaS and e-commerce companies like Amazon show that margins improve with volume, but only if pricing strategies, cloud computing and automation are designed for scale.
Go-to-market efforts follow the same rules. A sales system that can’t scale hampers the ability to grow a business, no matter how happy early customers are.
## Technical foundations of a scalable system
Scalable system design involves architecture choices and constant testing.
- **Distributed systems** reduce single points of failure and allow redundancy.
- **Scaling up vs. scaling out**: Vertical scaling (adding CPU/memory) works for short-term spikes, but horizontal scaling (adding nodes) usually wins at large scale.
- **Core functions**: Load balancing, caching, queues, sharding and partitioning all improve the system’s ability to adapt.
- **Infrastructure providers**: AWS and other cloud computing platforms offer elasticity without massive data center costs.
The right mix of algorithms and workflows — from load balancing and caching to sharding and queue management — determines whether systems keep response times steady at high volume or collapse under stress.
## Automation and optimization
Manual fixes don’t scale. Automation is what unlocks growth for large-scale operations.
On the technical side, scalability comes down to how well your systems absorb growth without slowing down. Caching, NoSQL databases and microservices optimize workloads, while queues smooth spikes in traffic to reduce latency. Keep an eye on metrics such as lagging response time, sharp spikes in number of users and system dependencies — if you notice abnormalities and can’t handle them, these can be canaries in the coal mine that your systems aren’t built for scale.
Cloud elasticity means you can expand or shrink resources as needed, achieving both high performance and cost savings. Without these tools, scalability becomes reactive instead of proactive.
## Business scalability beyond engineering
Scaling a business isn’t just about handling more customers. It’s about creating products and systems that result in **profitable growth**.
SaaS companies are classic examples: once the software is built, serving new customers adds little incremental cost. Even adding new products can be easier because infrastructure is already built. Profitability scales with adoption, creating a compounding effect.
Sustainable workflows, [pricing discipline](https://review.firstround.com/its-price-before-product-period/) and automation separate companies that achieve scalable advantage from those chasing first-mover advantage.
## Common bottlenecks in scaling
Every growing company faces constraints. The challenge is spotting them before they stall progress.
- **Technical**: CPU hitting its limit, database sharding needs, or latency dragging down the user experience.
- **Organizational**: Hiring slows, dependencies multiply and workflows that worked for five people break when you have fifty.
- **Business**: Pricing models that attracted early customers may break down at scale like discounts that erode margins or freemium tiers that overwhelm support. Unit economics that looked healthy with hundreds of users can turn negative when marketing, support and infrastructure costs rise with tens of thousands.
Bottlenecks are unavoidable, but they don’t have to be catastrophic. Redundant systems provide backups when one part fails, and regular stress testing exposes weaknesses before they turn into outages. Together, they keep bottlenecks from stalling growth and give teams time to fix problems without derailing the business.
Reddit’s product leaders Alex Le and Kavin Stewart call the jump from product-market fit to growth “[startup puberty](https://review.firstround.com/to-build-great-products-build-this-strong-scalable-system-first/)”. The shift often catches founders off guard — processes that worked for a 10-person team collapse when you’re suddenly onboarding thousands of users. Their answer was to reorganize product and engineering into modular teams, each owning a theme like growth, community or monetization. The result was a structure that scaled smoothly without bottlenecks or founders micromanaging every task.
## Playbook for scaling a startup company
This oversimplifies things of course, but Founders can use a simple framework to build scalability from day one:
1. **Design scalable systems early**: Build for distributed systems, automation and avoiding redundancy.
2. **Build scalable teams and workflows**: Eliminate single points of failure and document processes.
3. **Optimize pricing and business models**: Ensure profitability improves with scale.
4. **Continuous stress test**: Measure throughput and load balancing before failure forces a fix.
## The future of scalability
Cloud-native infrastructure has made scaling easier, even for early-stage startups with lean teams. AWS and other cloud platforms offer elasticity that once required a massive upfront investment. SaaS businesses now design with automation and workflows at the core, making large-scale growth less fragile.
AI and machine learning is already redefining scalability, predicting bottlenecks and optimizing workloads in real time. Scalability is no longer just a technical challenge. It’s a founder philosophy, connecting system design with business processes, products and leading to profitability.
### Stealth Mode
URL: https://review.firstround.com/glossary/stealth-mode/
Last updated: 2025-10-02T03:46:11.000Z
The strategy is designed to protect intellectual property, limit outside scrutiny and preserve a competitive advantage until launch. Unlike most startups that seek early attention, a stealth company deliberately hides all aspects of its work.
### **Common characteristics include:**
- **Codenames and temporary names** for internal projects or even the company itself, instead of permanent branding.
- **Strict non-disclosure agreements (NDAs)** required for employees, advisors and early partners.
- **Minimal or placeholder websites**, often showing only vague “coming soon” messaging.
- **Little to no social media presence** and limited press mentions.
- **Team members with vague LinkedIn profiles**, sometimes omitting the company name entirely.
- **Patent filings** that hint at in-progress technology, without tying back to a public brand.
- **Private fundraising and networking** with investors or potential customers, usually under confidentiality agreements.
Operating the meaning of stealth mode is not secrecy for secrecy’s sake. It’s a strategy.
## **Why do startups remain in stealth mode?**
Startups choose stealth mode to create space for focused building and to protect their edge before launch. Common reasons include:
- **Protecting intellectual property** — Sensitive inventions, algorithms, or biotech discoveries often require more development time (and patent filings). Staying quiet reduces the risk of competitors filing first.
- **Preserving a competitive advantage** — Operating under the radar makes it harder for rivals to copy features or shift their roadmap in response.
- **Product readiness and iteration** — Founders can refine an MVP, test pricing and messaging, or explore design changes without the pressure of public scrutiny. Many stealth teams work with a small set of early customers or partners under confidentiality to gather targeted feedback.
- **Controlling market timing and narrative** — Stealth allows founders to decide when to reveal their product and craft the story so launch day creates maximum impact.
- **Fundraising and hiring strategy** — Some investors are drawn to exclusivity, and a stealth pitch can spark urgency. The same applies to recruiting early teammates who want to feel part of something differentiated. For founders, these choices are best grounded in [a clear business model](https://review.firstround.com/to-go-lean-master-the-business-model-canvas/), not just secrecy.
- **Reduced noise and distraction** — By avoiding the spotlight, founders can keep the team focused on execution instead of chasing perception or fighting early criticism.
- **Anticipation and buzz** — When managed well, secrecy builds curiosity. A reveal after months or years in stealth can generate outsized attention.
## **Risks of staying in stealth mode**
Stealth carries trade-offs for **founders**:
- **Validation delays**: Without open testing, it’s harder to confirm **market fit** with real users.
- **Fundraising friction**: Some investors will want to validate a product with real data (users, revenue, etc.).
- **Hiring challenges**: Without a public brand, founders are mostly forced to recruit from smaller, personal networks. Even strong hiring strategies are shaped by [timing and external conditions](https://review.firstround.com/how-talent-teams-can-better-weather-boom-and-bust-cycles/).
- **Awareness gap**: By staying in stealth, founders delay all the awareness-building they would otherwise accrue over months or years. When they finally emerge, they’re starting from a standstill. The launch needs to be big and memorable enough to make up for that lost time.
- **Risk of misalignment**: Too much internal iteration without outside feedback can lead to wasting months or even years building the wrong product.
## **When stealth mode makes sense**
Operating in stealth is most useful when:
- Founders operate in industries where patents and research secrecy really matter, like in biotech or deep tech.
- The team already understands the customer problem and does not need broad early validation.
- The startup is building something they believe is truly disruptive and want to keep even the idea of the product out of the hands of competitors, like OpenAI’s early work on GPT-3, which was developed under wraps before its public release signaled a major leap in AI capabilities.
- Founders have strong networks for fundraising and recruiting co-founders, meaning progress won’t stall without publicity. For example, maybe they’re second-time founders and have these networks from their previous companies.
One example is a cybersecurity startup that deliberately operated under the temporary name Stellarite while refining its product. By protecting IP and pitching investors selectively, the team followed a careful[ path to product-market fit](https://review.firstround.com/material-securitys-path-to-product-market-fit/) before scaling more broadly.
By contrast, startups that depend heavily on community engagement, open feedback, or viral growth often struggle in stealth.
## **Funding and hiring in stealth mode**
- **Fundraising**: It’s more limited, but could also stir excitement. Startups in stealth often approach investors in smaller groups through their trusted networks. Pitches are often selective to investors who founders have a relationship with and trust the founder to execute on the vision they pitch — not necessarily needing the product in-hand to make an investment.
- **Hiring**: Recruitment often comes from co-founders’ personal circles or past experiences. Without a public-facing brand, job postings are rare, and confidentiality is emphasized. It really requires the ability to sell the company and its vision, which could limit the talent pool.
This reliance on trust makes stealth viable mainly for experienced teams with existing networks.
## **Transitioning out of stealth**
Eventually, a stealth mode startup must emerge. The transition typically happens once:
- An **MVP** has been tested and validated.
- Key **intellectual property** protections are secured.
- A clear **go-to-market** strategy is defined.
Exiting stealth involves more than releasing a **new product**. Founders must create a compelling narrative, build brand recognition and quickly capture attention to make up for time spent in secrecy.
[Figma stayed in stealth](https://review.firstround.com/how-to-launch-your-startup-out-of-stealth/) for nearly three years, but as Claire Butler recalls, the team chose to launch without its flagship multiplayer feature to build momentum and morale. The lesson: launching out of stealth is less about perfection and more about timing, positioning and rallying a community.
When Figma finally launched, this groundwork meant they weren’t starting from zero — their launch tapped into a ready-made audience eager to spread the word.
## **Examples of stealth mode startups**
| Company | Stealth Tactics | Why They Did It |
| ----------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- |
| Palantir | Operated in near-total secrecy with minimal press and vague descriptions of its software | To build sensitive government and enterprise data platforms without drawing early scrutiny or exposing national security use cases. |
| Stripe | Launched quietly with a closed beta and invite-only access | To refine its payments infrastructure with developers before entering a crowded fintech market dominated by incumbents. |
| SpaceX | Developed rocket technology discreetly with limited public details | To protect aerospace IP and avoid competitive or regulatory interference during early launches. |
| Material Security | Built under the temporary name Stellarite | To protect cybersecurity IP and pitch investors selectively before revealing the full product vision. |
| Dropbox | Focused on closed testing and a waitlist model rather than early publicity | To validate its cloud storage product with early adopters and ensure seamless usability before scaling broadly. |
### Saying yes to everything: How customer obsession built Samsara | Kiren Sekar (CPO)
URL: https://review.firstround.com/podcast/saying-yes-to-everything-how-customer-obsession-built-samsara-kiren-sekar-cpo/
Last updated: 2026-02-03T17:35:05.000Z
Kiren Sekar is the CPO of Samsara, a company that brings real-time visibility, analytics, and AI to physical operations. Before Samsara, Kiren was an early leader at Meraki, which was acquired by Cisco for $1.2B.
In this episode, he walks us through Samsara’s origin story: from hardware hacking in a basement to scaling a cross-industry IoT platform. He shares how early customer feedback loops led to the company’s first product, why starting with the mid-market was a deliberate choice, and how Samsara kept a startup mindset even as it scaled.
In this episode, we discuss:
- Lessons from Meraki’s acquisition by Cisco
- How Kiren hires for intrinsic motivation
- Why Samsara was built for operations industries
- The early hardware prototype and the Cowgirl Creamery insight
- Building broad vs. niche from day one
- The shift from founder-selling to a scalable sales motion
- Organizing product teams around revenue vs. experience
- How Samsara uses LLMs and AI today
- What Kiren learned from longtime co-founder Sanjit Biswas
**Where to find Kiren:**
- LinkedIn: [https://www.linkedin.com/in/kirensekar/](https://www.linkedin.com/in/kirensekar/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**References:**
- Cisco: [https://www.cisco.com/](https://www.cisco.com/?ref=review.firstround.com)
- Clay: [https://www.clay.com/](https://www.clay.com/?ref=review.firstround.com)
- Cowgirl Creamery: [https://cowgirlcreamery.com/](https://cowgirlcreamery.com/?ref=review.firstround.com)
- IBM: [https://www.ibm.com/](https://www.ibm.com/?ref=review.firstround.com)
- Meraki: [https://meraki.cisco.com/](https://meraki.cisco.com/?ref=review.firstround.com)
- Microsoft: [https://www.microsoft.com/](https://www.microsoft.com/?ref=review.firstround.com)
- Salesforce: [https://www.salesforce.com/](https://www.salesforce.com/?ref=review.firstround.com)
- Samsara: [https://www.samsara.com/](https://www.samsara.com/?ref=review.firstround.com)
- Sanjit Biswas: [https://www.linkedin.com/in/sanjitbiswas/](https://www.linkedin.com/in/sanjitbiswas/?ref=review.firstround.com)
- Uber: [https://www.uber.com/](https://www.uber.com/?ref=review.firstround.com)
**Timestamps:**
(01:27) Meraki’s growth and acquisition by Cisco
(03:25) The "evaporating" exit strategy from Meraki
(04:42) Identifying the IoT market gaps
(07:38) The early keys to success at Samsara
(09:39) What does quality mean to Kiren?
(10:54) Building a customer-centric roadmap
(17:34) Early customer research and the failed fridge monitoring idea
(20:57) How a cheese producer helped create Samsara’s first prototype
(28:06) Balancing depth and breadth in customer profiles
(33:45) Developing customer trust to build feedback loops
(40:27) How “ease of use” became a growth secret
(44:23) Pricing strategies and market positioning
(51:51) How Meraki influenced Samsara’s GTM strategy
(57:19) Helping customers navigate change management
(1:00:48) How Samsara’s team evolved during rapid growth
(1:04:03) What AI means for an IoT giant
Brett: Well, thank you so much for joining.
Kiren: Great to be here. Thank you for having me.
Brett: Yeah. I thought we could kick it off and you could sort of share a little bit of context, in terms of what was going on like 12 months before you all started. Samsara.
Kiren: Yeah. well, so it's actually easiest to, to fast forward a little bit even, before, rewind a little before that and then work our way up. So I started working with our co-founder, Sanjit and John at Meraki, which was a IT networking company, back in 2009\. the two of them had stepped, founded the company out of grad school at MIT.
It was 35 employees, couple million dollars in sales when I joined. fast forward to, late 2012 and, we'd scaled the business to about a hundred million in revenue. Cisco acquired the company for a little over $1.2 billion, and then. Really the next phase was how do we make sure that this product and this team that we really care about is, thriving within Cisco.
And, as you know, a lot of acquisitions, they fail. Like we wanted this one to work.
Brett: So just, just for a sense of pride or there was some other reason.
Kiren: Yeah, a sense of pride, a sense of you, you care about the customers, you care about the product that you work hard to build, you care about the team that you built, and think that it can do a lot of good in the world. there was no financial, incentives or anything tied to it. It was really just you want things to succeed.
and so that first year was about how do we actually get this business established within Cisco, prevent the, you know, prevent it from getting squashed. and that was often what happens when, you know, large companies acquire small companies. And we got to the point where. The product Was selling really well within Cisco.
Brett: Was their sales team selling it in? Yeah. Or, or was more like kept
Kiren: No.
and it was actually what we said. The way this works is you take their tens of thousands of, of, of sales reps and hundreds of thousands of channel partners and get them excited about this product. And, you know, we had to overcome, I think a lot of assumptions about, oh, this is for SMBs, it's not for enterprise, et cetera.
But, you know, we found those evangelists, we got it working, we got, we showed them customers getting excited and it showed them how it was good for their business and, showed them that the, the team was a really strong team as well. And so when that got to the point that there was real momentum, you know, I think for, for myself and, and for, for Sanjit and John, we wanted to be building a company.
so we kinda made the deliberate as kind of like a probably year long, process of. Handing over the business to next generation of leaders. Some of them are still there, many of them stayed for, you know, five, eight years. and, kind of transitioned that was in year two.
So we would call it the process of evaporating, right? So how do we make us leaving a non-event so that the, the business can keep growing? And then, you know, towards the end of that, I started thinking about what, what I wanted to do next. And I ended up talking to lots of different startups and VCs and founders, and talked to early stage companies, late stage companies, companies that were just being formed.
And, you know, for me personally, I realized that there was really a couple of things that, that I was optimizing for. One was I realized how lucky I had been with the people I got to work with at Meraki. And I realized that that caliber of team was actually not, not common. And then also I saw that, you know, we had built something that.
Was really having impact at scale. And I said, you know, whatever I do next, I want there to be the potential for be, for there to be even more impacted and even larger scale. and that kind of filtered out a lot of things that maybe were interesting products or point solutions, but you couldn't see them getting big.
and then in parallel started talking to Sanjit and John about what they wanted to do next. And, we all somehow started talking about, iot, the internet of things and, and what was becoming possible from a, a technology perspective. And we can talk more about some of those details. But then we also started talking about markets and, you know, at, at Meraki, we were building primarily it was a wireless networking products.
And it, it evolved over time into broad set of networking suite. but we were selling wifi systems to everyone. Everyone was pulling, putting in wifi networks often for the first time. And you know, what we saw was that. What people were connecting to their networks and what they were doing with their networks was so wildly different.
You go to a, a bank or a hospital or a carpeted office space or a tech company and they've got great software and great tools and at the time, you know, they're starting to really rely on mobile and tablets and data and cloud. And then we'd look at our customers in construction or food and beverage production or the logistics networks and these kind of physical operations, companies.
And we saw a lot of mainframes, a lot of pen and paper, a lot of, green screens that you type on for 10 minutes to make a small change. and we started kind of connecting the dots that these are really big important industries. They didn't have access to data, they didn't have access to software, but there was this combination of technologies that we thought could really change that we said, Hey, this is something that could actually make a.
An impact at a, a, a global level over multiple decades. And, and he decided this was what we wanted to, to spend the, the next chapter of our life on.
**Brett: When you reflecting on that on the opportunity set, was it in an attempt to find an opportunity to start a startup, or was it just. You were having lunch and you had noticed when you were talking to this customer, wow, that's pretty different than a Silicon Valley company,**
Kiren: I, think it was a little, from column A, a little from column B. we were definitely thinking about what we wanted to work on and build next, but I think that there was also a process of just kind of playing and tinkering and looking at what was possible. And, you know, I remember, you know, John, our CTO, hacking together prototypes of Bluetooth sensors and saying, Hey, like, do you realize how cheap this is?
Like you could start putting these little chips on everything and you know, that process of pretty organic technology or explore exploration. Also thinking about the markets is kind of what I think gave birth to what we ended up building.
**Brett: What were the other things that you were taking from the Meraki experience? One of the things that you mentioned was that, you know, seeing real world impacting customers, so that was a sorting criteria. Were there other things in those first handful of months that that drove sort of the, here's the customer, here's where we're gonna start, here's the culture, here are the people, sort of those type of things.**
Kiren: Yeah. You know, there was, at Meraki, we were doing it all for the first time and we were doing it by intuition and, and trial and error. And when we started Samsara, there was the opportunity to look backwards and say, okay, what were the things that were really keys to the success of the company that also aligned with just how we organically enjoyed working.
And, and we wanted to recreate those, those elements. and we knew that there were a lot of things that are, are very contextual, like about the time, the, the business, the the customer. But there's certain things that felt a bit more, fundamental. And I think there's a couple of things.
that we got to be deliberate about bringing over.
One was really being customer centric and starting with what does the customer need to be successful and how do we work backwards from that? And yeah, it sounds kind of obvious, like who doesn't wanna be customer centric? But if you look at, there are a lot of really successful companies and they have different true Norths, right?
If you think about Apple at its heydays, a design first company or. Google and its incredibly high growth period, I would say was like a technology first company. You know, we have banks that are profit for, right? There are different kind of true north. I think for us it was, it was the customer.
**Brett: And was that the same as Meraki?**
Kiren: Yeah. Yeah.
That's something that I think we did organically at Meraki and we said, okay, that's something we wanna replicate. I'd say another was really being long-term oriented, like Meraki?
ended up being acquired. We never planned on on selling the company. We always kind of made decisions assuming we were gonna live with them forever.
And I think that actually worked really well. it's that, that long-term orientation, but then combining it with how do you optimize for speed and iterate. So I think that idea of long-term orientation, knowing you're gonna live with decisions for a very, very long period of time, but also saying how do you work towards that, that long-term vision.
With a very high pace and kind of constantly tacking and correct and, and correcting us as as we went. and then I think the th third is we really focused on quality of team and kind of consistency of, of culture. Again, we did that very organically, but said, Hey, that that worked and, and that is timeless.
And that, that was definitely a priority from, from day one at Samsara as well.
**Brett: What does quality mean for you when you think about in the context of talent or people.**
Kiren: I think people who are intrinsically motivated, and people who are doing something because they believe in it and they wanna make it successful as opposed to purely chasing some external reward, which everyone needs those too.
But people.
who are fundamentally, want to be building something and, and you see them actually doing that in their spare time when no one's looking.
**Brett: Talk more about that, like in the context of an interview, how do you figure out if somebody's intrinsically or extrinsically motivated?**
Kiren: It's great to learn about what people do outside of work, right? And, you know, are on the product or engineering side, are they trying new things and do they have, you know, novel opinions about them? Are they. Building side projects. And you know, I think at some point everyone realized, Hey, to interview, well I, I need side projects.
But then can you go deep and can you ask them more and more questions? And is it clear they didn't just do it to have something on their resume? but they wanted to create something and they get excited when they talk about it, right? And they, they can talk about what they learned and what they would wanna do differently next time.
And you know, I think just the ability to kind of keep peeling back layers and how deep someone goes is a great way to understand. were they intrinsically motivated?
or were they trying to kind of complete an assignment?
**Brett: On the first point about customer centricity, what, when do you feel the most trade-offs with that? or when is it hardest to be customer centric? 'cause it is one of those things that's a little bit like apple pie.**
Kiren: Yeah, I mean, it, it, it only counts when it costs you something, right? I think, you know, a a a lot of the best examples are when it feels like there's a, a trade off. We can solve a problem quickly or we can do it right. We can make the, the customer experience good, or we can hit our gross margin targets. You know what, whatever it may be, having people say, okay, let me see if I can find a clever way to.
Simplify the problem or optimize the solution and actually bridge the gap, and find a way to do both. Right? That's the, the biggest challenge. 'cause ultimately if you build something that customers love, but the economics are terrible, you're not gonna have a business. If you've got great internet economics and, the product doesn't work, you're not gonna have a business when you can actually find a way to, to thread the needle.
that's kind of where the, the magic happens. I think also, you know, finding ways to, to say yes and win, you know, especially I think once there is, once there is some momentum, there's a lot of people who say you need to say no to as many things as possible. And focus, and not saying you should never focus, but also you should say, well, for a customer, how could I sit, say yes to as much as possible?
and sometimes that feels unnatural, right? You're kind of exposing yourself to risk, right? Might. you might fall short and you know, a lot of people don't want to do that for internal audiences, for customers, but by kind of stretching yourself to say, how can we actually solve as much of your problem as, as humanly possible?
I think again, that is what kind of creates those, that outsized impact, right?
**Brett: Are you often willing to deviate from your roadmap to do so, or you're constantly. Trying to balance your own roadmap with any given customer and all the little things that they're asking for.**
Kiren: I think that we, we try to have a long-term vision that it changes over time, but it's, it's a little bit, it is, it's, it's more stable, right? And it's rooted in data and experience and customer feedback. That specifics of how we build that vision over time ends up being very fluid and very dynamic. Based on that feedback from customers and, and what we're hearing on, on the street.
and so I'd say the, the roadmap details can be very dynamic and very loosely held as we get more and more, signal from customers. But that vision is something that we kind of keep mo wa moving towards unless, unless or until something, you know, very fundamental changes like a new technology, like ai, for.
example, or a major shift in the market.
**Brett: You know, I'm sure when you're building the company and you're spending time at Coca-Cola, pick any. Large enterprise, they're like, we really need this, or this is a problem we have. Yeah. you know, and sometimes it comes in the form of, of forward deploy engineers or sales engineering or, you know, there's, if you went to the extreme of customer centricity, you could quickly just become a consulting shop for Pepsi or pick whatever company. You could also go in the other direction, which is like, we have a vision for what we're doing. And, and you know, the more classic jobsian thing,**
Kiren: I think we have always focused on prioritizing the, the products and the capabilities that are gonna be, you know, cross-cutting and, and broadly appealing. and we try to make truly one-off work very, very rare. I think there's something that that happened both at, at Meraki and Samsara that was really helpful in the early days, which was we started off primarily focusing on mid-market customers and, you know, the only way that we were gonna be successful was by solving repeatable problems.
And we found that actually this was kind of a sweet spot for us in, in the early days, the, the very large enterprises, to your point, they would have a lot of. Maybe customer specific requirements. Some of them were not even customer specific, it was just a high hurdle to get a product to market in terms of reporting and scalability and security and, and customization and all those things.
On the flip side, there were, you know, SMBs where they might be able to deploy products very fast, but they didn't have the kind of depth of feedback that you get when someone is a professional user of a product, right? Who's kind of using that product all day, every day. And so these mid-market customers with maybe a few hundred, to a few thousand at the higher end employees, they were able to give us really high quality, deep feedback.
'cause you were selling to professional buyers and professional users of the product. they didn't expect 50 custom things because, you know, they weren't getting that from other vendors. but we could actually be engaged with a, a large number of customers, really find those common threads. And when we start hearing things from, you know, 50, 70, 80% of the customers, you go build it and turn it around quickly.
And then you get very tactical feedback around, Hey, I love this, but you know, these three things. I have to go visit three different pages. I do this 50 times a day, make this easier. Or, I love this and it's solving this problem, but I have this other problem that looks very, very similar. If you could make these changes, you could solve a bigger problem for me.
And, you know, having that kind of, customer feedback, but getting it across a large sample of customers, I think really helped us build these, these foundations that were broadly applicable. And then over time we kind of filled in the, the, the gaps to really be able to move up market. And today, you know, most of our business is, is enterprise.
We still have a large mid market base as well. Starting with mid-market worked really well for us both in, at, in Meraki and, and Samsara for, for those reasons.
**Brett: I guess to the point you were making it also, it's much easier to go mid-market and kind of chew your way up to enterprise than it is to start way down market and then sort of try to make the hop to enterprise.**
Kiren: Yeah,
I think that, that we found that mid-market customers use the products and buy the products like a simple enterprise user, whereas in some cases, the s and b customers, they're actually closer to a consumer.
and it was a more of a fundamental difference, whereas the, the bridge from mid-market to enterprise, we could do very incrementally and they start getting larger and larger and more complex and more complex.
And then the next thing you know, you're kind of working with the, the largest of the, the large enterprises.
**Brett: so let's go back to the beginning. One of the things you were explaining is your, your co-founding team was noticing some things and was partially thinking about starting a company, partially reflecting on what was happening in Meraki, different things connected to wifi networks, and then new technology, sort of what you could do with Bluetooth at very low cost.**
What happened from you all sort of chatting and saying, huh, that's interesting to, like the first thing you thought about building or, or actually shipping to someone.
Kiren: So it was a little bit unusual. We started with a very high level and honestly kind of, vague, Hey, this, there's these big set of operations industries that are underserved by technology. There's something interesting here and then also saying, Hey, there's this, this new technology stack where we could take, sensors and connect them to the internet.
connect data from those sensors into the cloud and build applications on top of them, and do that in a way that was, easy to use and cost effective. And we did some, you know, we did some research looking at who was building iot companies at the time, and it was names like, you know, GE and, and these IBM and these, these large, large conglomerates.
And then there were some startups building kind of developer platforms for iot. And no one had built a product where it was plug and play and easy to use. So you had these, these companies who would go to a, you know, a, a very, very, very large customer and say, we're gonna bring in sensors from one company and connectivity from a another, and then stand up a cloud and then build custom software.
And it would be, you know, a $50 million project that meant that it was, it was very, very limited. Then there was these developer platforms where they said, here's a way you can build iot products, but the end customer was non-technical. Right? And so they weren't really able to, to engage with them. So we said, there seems like there's an opening here to build something that gives customers visibility and data, and it does it in a way that is easy to use, where kind of an everyday operations company could, could, could get it up and running in an afternoon.
Right. And that was, that was kind of the, the, the, the level of specificity as you know, there, as you can, as you can imagine, there was a lot of gaps to fill in. So we actually started by building a prototype very quickly.
**Brett: And at this point did you say, we all wanna start a company together, we're gonna start prototyping and exploring, or it wasn't even that**
Kiren: No, at this point, I think there, there was kind of the playing with stuff in, in san's basement. Once we started kind of building prototypes and getting them customer's hands at that point, we, we, we'd started the company and said, we're, we're gonna do this. we had a small initial team and, the first, product that we built that, again, really kind of a way to get working product into customer's hands and start that feedback loop.
It was, it was very simple, but it showed the vision of what we were doing and allowed us to get real feedback. And so what it was practically was, was a, a little box and it had a cellular radio in it, so you can kind of think about it like a cell phone without a screen, and it connected to power and then it could connect to different inputs.
And so we said, how do we get, how do we start by just getting data from the physical world into software, into the customer's hands?
**Brett: Yeah. And at this point, had you spent time talking to customers or you weren't at that**
**point yet?**
Kiren: We were, talking to customers, but we got this, this prototype done like eight weeks, for, you know, the hardware piece, the software piece, kind of getting it all working end to end.
And then we just started going to prospective customers and saying, Hey, we've built this technology, we have this vision. Can we try it out? Will we give, will we give you, will you give us feedback?
**Brett: And were these like friendly relationships that you had from Meraki or like where did these mid market customers that would let you plug this stuff in come from?**
Kiren: Yeah, exactly. So we had some friendly customers from Meraki that happened to be in these operations industries. and then we did a little bit of lightweight PR around starting the company. And, you know, this was a, a, a set of industries that had really not been focused on by Silicon Valley. And, you know, there's a small fraction of the, the folks in these industries who are early adopters and were reading, you know, the tech blogs and, you know, some of them knew Meraki, from setting up networks, et cetera.
And they actually were inbounding to us saying, Hey, we're excited about what you're doing, keep us posted. And so, you know, we set, I remember we set a goal of saying, how do we get this prototype installed in a hundred real customers environments? And how do we do that quickly? How do we do it across a set of, industries and environments?
So we're kind of getting, seeing the broad market and you know, I remember that we thought that temperature sensing was the thing that was gonna, was gonna work. That was gonna be the first product we said. Think about all the industrial refrigerators. If one of these things fails, they've got pharmaceuticals.
They might have, you know, lobster and caviar in them. Like of course you'd wanna be able to monitor those. And, you know, some of the early customers, they were trying this out. They weren't paying us any money. They were just curious and wanted to help us out. They thought it was cool. And I remember them saying like, Hey, this is really cool.
I can, I can see it from my phone, it can text me when the temperature changes, but you guys know, these things don't really fail, right? Like, this is not a real problem. but then, you know, one of them, it was, a cowgirl creamery a cheese producer in Northern California. Said, you know, where we lose product all the time is, is in trucks, in, in, in transit.
is there a way we could put one of these on a truck? And so we found a way to, you know, connect it to a, a vehicle and get power from?
the vehicle. And, that kind of led the way to our first successful product, which is saying, how do we track a vehicle? And then how do you track its, its cargo, it's, and, and starting with kind of refrigerated, refrigerated transportation and, and then along the way finding all these other problems that, that customers had, had no idea where these things were.
they had no idea if they had engine faults, et cetera. All of these kind of became clear by actually getting product in the customer's hands and, hearing about what their real problems were and then trying to solve them quickly.
**Brett: So before you had the eight week prototype, you didn't do more classic sitting down with end buyers or customers doing needs finding. How big of a problem is this? Where's the urgency? You more sort of had a sense that there's some opportunity in this noom form factor of technology. Let's go build this prototype and let's learn by bringing it to the customer.**
Kiren: Exactly. Exactly.
And you know, as I was talking about earlier, the, the vision that I think we had a lot of conviction in was when you bring data and visibility to an environment where there previously was no data and visibility, it is just useful, right? We've seen that everywhere. You know, retail, financial services, healthcare, pick your, pick your industry.
And so that, we felt pretty, pretty clear about what it looked like. And is it, you know, temperature or trucks or warehouses or. you know, factory equipment. That was the piece that we had to, to find out by getting product in customer's hands. And I think that had we done traditional market research, I don't think we would've ended up at the, the same place, or certainly not as quickly, but actually showing customers what was possible, showing them a totally different user experience, help them provide the feedback of, Hey, I get it, and this is where it can be most useful.
**Brett: before you had the cowgirl creamery insight? What, what were you seeing in customers? Was it a bunch of, oh, this is kind of cool. that's interesting, but it's not solving a massive problem. Like what, how would you describe the before and after and what you were seeing and hearing fro customers?**
Kiren: actually, it was not as linear as we tried refrigeration and then we tried refrigeration in trucks. I mentioned we were, you know, doing the refrigeration piece. part of our v vision was also that. We're not trying to find a single data point for a single industry. We're actually trying to build a platform.
and, you know, thinking about, you know, what did a company like Salesforce do for, for sales teams and for, for customer data in the early two thousands, how do you have kind of that equivalent for, the world of operations? So while we were kind of running this, this loop with, refrigeration, we were also talking to water utilities.
We were saying, Hey, I get, you know, leaks and it's hard to figure out where these leaks are. Or, you know, when I ain't ringing, when I need to run pumps at certain times of day, the energy is incredibly expensive. Is there ways that I can, I can smooth that out. we talked to, you know, we actually thought that that vehicles could be interesting and we talked to, transportation fleets about, you know, how do they track their trucks and what does that look like? So we were kind of running these experiments in parallel and then kind of seeing where the biggest engagement was, was occurring, where were customers saying like, Hey, this is something that's really impactful.
Like, I need you to build this. And that kind of created, created signal. it also helped us make sure that, you know, as we started building product, we were building something that could be broadly appealing and we weren't building something for a very, very niche audience. so then when we actually, you know, finally launched our, our product, we actually again had a, a, a few different use cases that, that we were selling into, refrigerated trucks being one of them.
But then we kind of kept running this, this feedback loop of kind of having a broad aperture getting signal. Doubling down where there was customer engagement. and, you know, I think that really helped make sure that we were building towards that vision of a broad platform for a broad set of industries and not hyper focusing on something that maybe ended up being, limiting over the long run.
and actually it's interesting, in our space, most of the technology providers, again, weren't Silicon Valley companies. They weren't even big tech companies like the, the Microsofts of the world. They were a lot of these, point solutions that were building technology for a very specific problem in a very specific industry.
But they were never able to get enough scale to really invest in r and d and kind of build the kinds of things that you or, and I would consider a, a modern technology platform. And we said, Hey, actually having that breadth is gonna be something that is, is really important. So something. From early on, we made sure we kind of balanced, you know, getting feedback from large sets of customers in large markets while also solving the problems in front of us where, where customers?
were saying there there's a need.
**Brett: So what happened after you came across this insight from Cowgirl Creamery? Did you then decide to narrow in that use case Ke keeping in mind that the goal is, is always to build a broad platform, but that you wanted to nail that use case, drive repeatability around customers, and then land and expand.**
**What ended up happening, you kind of got a prototype working, they were seeing a lot of value, and then what happened?**
Kiren: It was, it was a balance. On one hand we were saying we're getting signal here that, refrigerated, transportation is a problem, so let's go make this work well. But in parallel, while we're doing that, we're having our product on. Trucks. What are the other problems that people are having with trucks? They don't know where they're, either, you know, they have no way to track them or, you know, they have a, a GPS tracker that reports location every 15 minutes. We know from getting an Uber that you can track a vehicle in real time, we know how useful that is. So you're not waiting out in the rain for your car.
We should build that into the product, and that's something that probably customers other than cowgirl creamer are gonna be interested in as well. and then in the process of doing that, saying, Hey, what else happens with these vehicles? Hey, we're looking at 'em. And a bunch of them have their check engine light on and the driver's driving with it anyway.
That doesn't seem good. Let's figure out how, a way to connect into the diagnostics port and understand if there are fault codes. And, and so it was that, that process of continually pulling the string and seeing. What more can we do? And then who would this be useful for? and so as we were solving problems for cowgirl, we were also talking to lots of other fleets and operations businesses, trying things, and then kind of doubling down on, on what was working.
**Brett: What you're sort of hitting on this, but what were the handful of things in that year after the cow cowgirl creamery insight that ended up being a part of the early sort of saleable product?**
Kiren: one of the things that we did that was really helpful was we started pitching and, trying to sell the product to a pretty diverse set of industries early on.
And, you know, we were pretty intentional about kind of looking at the, the pie chart of, of industries we were engaged with. And, you know, again, I think we kind of did this intuitively at Meraki at the time, everyone was, was trying to deploy wifi networks. Some of our competitors were saying, Hey, we are gonna be the wifi provider for healthcare.
And we're saying like, now we wanna build products for everyone. and we ended up with a very diverse set of customers. We were, I'd say intentional about doing that at, at Samsara as well. And so, you know, we would, I remember we had, you know, transportation Tuesdays where every Tuesday we were focused on talking to, to customers in, in, in transportation verticals.
you know, we would otherwise be talking to food and beverage or construction firms, these, these different industries that had fleets and we thought could benefit from what we were doing. And then, you know, we were really kind of running the feedback loop of, okay, you're excited about this. What do you need in order to, to deploy it and pay for it?
By just running that feedback loop across a wide set of customers. We went from a million in a RR to to 17 and and then 70 the year after that. Along the way. What was fascinating was we were getting more and more feature requests that were related to, to tracking, trucks and primarily kind of around location and fuel and, and compliance.
and, you know, ended up taking us many years to build out all the features to be able to really sell to the whole market. But in parallel, we, started getting customers asking us, Hey, is there a dash cam that works with, with your, with, with your system?
they were asking us, Hey, like, who do you recommend? And we said, well, hey, if, if we built one would, would you wanna try it out? And a lot of them were saying yes. And this is an example I think of, how we were very conscious about trying to balance that, that depth and breadth. and it seemed like a, a really useful thing, right? To be able to have video
And again, there was that technology lens of, there's a couple of companies doing this. they're pretty clunky. They were built on the kind of two G and 3G networks. They were where you got. Very low res video. they're hard to use. But we saw that actually the, the technology that was being really being driven by mobile phone adoption was making video really high quality, really inexpensive, and you could actually start streaming it over the air.
So we prototyped a, a dash camera that was kind of integrated in the system. And then we started, giving it first to some of our existing customers and then letting some of the customers who had were asking us about it, gonna try it out. And they're saying, wow, this is exciting. And so, you know, we could have easily said, no, we're not gonna do that.
we've got this big list of of telematics fleet tracking products to, to go build. But there was a combination of, you start hearing the same question from more and more customers and then seeing that actually there was a potential technology inflection where you could build something that was. Truly different from, from the rest of what was on the market.
and so it was actually in that, that second year that we built our, our, our dash camera, and it's since evolved into this product that basically helps customers, really understand their, their risk and, and dramatically reduce it. and it's actually now our, our number one product?
by, by revenue and growth.
But it came by running that, that feedback loop and kind of being willing to find a way to say yes and figure out a way to, to get something done When we were hearing signal from customers and saw a way that we could, we thought we could do something differently than it had been done before.
**Brett: When you're actually spending time with customers to un unearth something like, Hey, there might be an opportunity in dash cams, is it just you have a very close collaborative relationship with your customers and you're hanging out at their office, and what else is on your mind? What are you thinking about?**
**Like, how are you actually getting this information from the customers?**
Kiren: Generally focusing early on, on building relationships with customers and you quickly figure out who are the early adopters, who are excited about what you're doing, want to be part of it, and it actually, you know, makes them more engaged and more loyal when they get to, provide feedback.
And, you know, as long as you actually act on it and, and, and, and do something with it, it, it creates this, this virtuous cycle. Part of it is just being willing to, you know, get on a plane and, most of our customers are not in, you know, San Francisco or New York or Boston, so we're going all over the place and it's, you know, indirect flight with a layover and then a three hour drive.
We had a, a customer advisory, group from, from very early on. We'd invite them to, to San Francisco, to our office and spend two days with them sharing our roadmap, getting our feedback, getting their feedback, sharing ideas, kind of doing allergy tests of, Hey, show of hands, how many of you would find this useful?
Like, here are three ideas. How do you rank them? Right? Getting that feedback with people who are already using the product, who actually have. kind of a vested interest in the company's success. And then there, there's trust. We did that very early on and, we, we still do it today. That has been very, very powerful.
**Brett: Maybe we could go back to something you said a second ago. I think a lot of the conventional advice is you wanna start by my, by monopolizing a very narrow ICP, and then once you've dominated that, you move on to the other.**
**Once we do that, then we're gonna go and try to launch our financial services vertical, and then we're gonna launch, et cetera, et cetera. And it seems like one of the things that, that you all did was you wanted to be very broad from day one, and you didn't want to sort of take that strategy.**
Kiren: Going broad and, you know, finding those 80 20 solutions that actually work across verticals. I think it worked really well for us, both at Samsara and, and Meraki. I think part of it was actually, you know, working backwards from saying, Hey, how do we make this a meaningful business at scale? Right? We wanted to do something that could be a, a large self-sufficient company that could build lots of things and get them in front of lots of people.
working backwards from that, like you can kind of translate that into, into revenue goals, right? And could say, well, if we want our revenue to look like this and, you know. 10 years and five years and two years in one quarter knowing that the long term, there's a high error bar, but like, this is a vision of what, what success could look like.
You start working backwards and then you think about the, the size of the market and you say, well, if I sold this fleet tracking product to every cheese company, you know, how quickly am I gonna gonna run out of market? and then in parallel thinking through, well, if you hyper optimize there, there's a risk that actually you build something that is, is so narrow that it ends up not really providing leverage in other, other industries.
Whereas if you take the other approach and say, I wanna actually, engage with a broad market, you start end up finding these, these cross pollination opportunities where you're getting feedback from one industry, something that other industries aren't even asking for. But then you build it in the platform and all of a sudden everyone starts using it.
I'll give you a couple of examples. we were working with a, school bus fleet early on and said, we need to track our buses. We have no visibility. What's going on? We don't know if they're properly maintained, if they're late, if they're on time. but it's not just about us. We actually wanna be able to share location with, the kid's parents.
And yeah, we, we saw what you can do. It's real time. Like, like Uber, we wanna give that experience to parents so they know, you know, when to meet their, their kid at the bus stop. And we said, okay, good idea. So we built a simple, location sharing, system where you could share the real time location of a, of a school bus with someone who isn't a user of our platform.
They get a live tracking link, kind of like you would get with, with an Uber or Lyft. We started showing that to other industries and all of a sudden they're saying. Oh, I can tell you all the different ways that I would use that. I'm a construction company and I pull a dump truck up to a site, and now that truck is sitting around for half an hour waiting for a crew to come move that pile of debris and get into the truck.
People are sitting around, everything's getting gummed up. If they could have a tracking link, then they could have everything ready right when that truck arrives. you think about all the different examples like that, we would not have prioritized that feature if we weren't talking to lots of different customers.
but by finding areas where certain industries were giving us feedback and kind of applying the judgment of this could be broadly applicable, ended up being just an amazing source of kind of, product ideas that, that benefited everyone. Our mobile apps was another one. we started building mobile apps for, for drivers and. early on, it was customers who had very specific compliance requirements. Hey, they need to complete these forms. These forms are getting, mandated to move from paper to electronic format. you know, can you, can you build a, a, an app for drivers to do that? We started thinking about, well, if you put a smartphone in the driver's hands, what are all the other things you could do with it?
Right? All of the other paperwork they're doing, you could, you could digitize, you could start attaching photos to things. They can be, messaging with their dispatcher or they can, you know, they can get training and coaching. How do we just focused on.
feedback from one industry? We would've ended up with a compliance app.
Now we've got this, you know, really broad set of, of, of tools for frontline workers. And so I think that, you know, by starting with, okay, we have the ambition of we want to build something that's gonna have really broad impact. Engaging with the broad market, we're able to kind of pick and choose what are the, what are the things that we are gonna build that are gonna have the most impact.
and ultimately, if you don't meet the needs of an industry, they're not gonna buy your product, Right.
So it's not like we could go so broad but not actually connect the dots all the way to making the useful product. and, you know, revenue is a, a way to keep yourself honest there, but I think being able to say, okay, we're, we're trying to maximize revenue growth, but we want to be doing it in a way that is pulling all the best ideas from all these different types of customers.
Ended up being really powerful.
**Brett: What else? What else about. The setup allowed you to grow so quickly in a market that I don't think was a traditionally good buyer of software, right?**
Kiren: Ease of use and time to value. And that's still something that we really focus on on today.
we really wanted the product to be something that, you know, in 15 or 20 minutes you could get it set up and, and see the value. If you're trying to deploy it across a large organization, of course that's gonna take time and change management and we've gotta physically stick, you know, boxes into, vehicles, construction equipment, et cetera.
But if you've got a, a small branch or division, can you do a, a, a, a free trial and you set it up in an afternoon and see why it's useful. that was part of our sales motion from day one and actually dictated how the product had to work.
**Brett: Hmm. So that, did you, how did you come up with that?**
Kiren: you know, that was actually a big part of Meraki as well. Most of the networking industry at the time it was, it was pretty complex. And if you wanted to deploy an enterprise grade network, you needed network architects and design. And there was a lot of configuration and customization and it was a pretty big expensive project.
we said we're gonna make a network that's simple, that's plug and play, that's still usable by a business that has security and management, but you can actually get it up and running in an afternoon. And that was really what created the, the core product fit, market fit at Meraki. 'cause it turned out that it was not just the, you know, big slow moving it groups who were deploying networks, it was everyone and people didn't have time for a multi-week or month project.
So we saw that work and saw that it was a really key part of, of rapid adoption and all of us experienced it as consumers as well. Right. You know, and I don't have tolerance to try something in our personal lives if it's gonna take weeks to set up. So that was kind of, again, one of those things that we sort of felt fundamentally we should build things that you can get up and running quickly and, and see the value quickly.
we also focused on how do you actually make it economically valuable to customers very quickly. operations industries traditionally have not spent a lot of money on, on software and technology, but they have massive budgets, right? Our customers, they spend tens, sometimes hundreds of millions of dollars a year on just fuel, right?
we're really trying to, say, Hey, if you take a little bit of that, put it into technology, you're gonna see big savings. But they have thin margins, big budgets, thin margins. You're not gonna spend money on a product if it is not economically valuable, quickly. that was actually a really great forcing function. Like I remember in in our lives building products for IT organizations. There were some customers who would buy something 'cause they thought it was neat and the IT department had discretionary budgets.
They're technologists, they thought that something was cool. And it's actually really dangerous because as a startup you think, oh, I'm building something that is getting traction. But not very many people make decisions like that. But you can kind of fool yourself into think they can get a product market fit and then all of a sudden you can't, you can't scale and customers aren't renewing in operations.
Customers don't part with their money if there isn't a very clear ROI. So it actually helped us. Very early on, hone in on those use cases that customers really, really cared about, that provided real value. So, hey, I tried this and in the first week, we had a, a truck, someone left the door open, we will have, would've lost $15,000 worth of cheese 'cause of your system.
I didn't, or, you know, we were able to cut our accident rate in, in half and we're able to take a chunk of that?
savings and, put it into a driver rewards program. And we've lowered our, our turnover rate, those types of economic impacts. Actually making them clear and fast was really important I think in, in, in getting product market fit.
And then in ultimately growing from there.
**Brett: When you thought about pricing your product, was it simply an ROI model based?**
Kiren: Yeah, we would always kind of start with what is the customer's next best alternative. And in some cases there was nothing on the market. In a lot of cases there was a competitive product. I think most of our products, we weren't necessarily the first, we just had a different approach. And so even if we had a, a very different approach and it was more modern, easy to use, et cetera, the customer does have a, an alternative which is, Hey, I could buy this, legacy app.
Maybe it doesn't do everything that, that yours does. And so we think about how do we operate in, in that market context and, you know, what is our ability to price versus the the next best alternative? And, you know, early on it was actually like, how do we make this an easy decision for customers, right?
Which means if there's existing more opportunity, if there's existing vendors in a space, maybe there's the really expensive one. There's a really cheap one. Aim to be in the middle, right? And if we can actually deliver a better product than the most expensive product, but at a better price, that's a lot less convincing.
You have to do. As we've grown over time and started building more things that maybe didn't have a direct analogy, you know, we've gotta do a bit more discovery and it gets a bit more nuanced. But we thought about are the unit economics sustainable and is it a no-brainer for the customer? And if the answer is yes, go sell it and grow.
I'd say, you know, even now we're not focused on extracting every dollar possible. We're focused on actually, how do we have customers say like, that was the best technology investment I ever made. And that means leaving some value on the table. But the market is so big that we end up doing better by, you know, optimizing for, for growth and making an easy decision for customers while also making sure that we've got healthy unit economics around along the way.
**Brett: Is part of it that there's, that there is a surprising amount of anchoring in the customer's eyes. Like I, I assume if you looked at a, a, a, a few of your early products. They were vastly better in every dimension, which ultimately meant that there would be more cost savings than the best available alternative.**
**and so one would imagine that you should charge more o other than wanting to make it, I guess a no brainer buy, do peop do end buyers. Just think about it, you know? Yeah, your dash cam is vastly better. It's gonna save us all this money, but this is what it costs for a dash cam and it's hard cognitively to get off of the anchoring of existing products in the category.**
Kiren: There's a little bit of anchoring. There's also, I think, skepticism of customers who have been burned in the past. and you know, I think as we have developed more. Reference customers and built a brand and, and, and reputation, you know, that allows us to have more, pricing flexibility. But, you know, ultimately we're still very much just focused on, you know, what is gonna drive the most growth.
and finding that, that right balance.
**Brett: What about, is there anything you figured out in, in pricing a platform where I assume many of your customers buy many of your products and it's all integrated and that's one of the special parts of the business. Is there anything about how you price that or it's like, you know, the average dash cam is this, so that's generally what we're gonna charge you for that part of the, for that product.**
Kiren: not always something that you can quantify and say, I'm gonna get a higher ROI by having these things connected. But they say, Hey, if I've got a single set of users, all of the data, ties together. all of the APIs and integrations work together. actually the products can, can talk to each other and, make each other better.
That provides a ton of differentiation. so we don't charge for the platform itself. Exactly. It's really, Hey, the reason you would like to buy these five products from Samsara as opposed to one product from Samsara and four from, you know, four other companies, is, hey, each of these products kind of stands on its own as, as, as best in class.
But then you put them all together and it's, it's way better for the customer and the end user.
**Brett: In talking to different folks on your team, over the years, I heard some people talk about the way that you goal around revenue, at least product managers that seemed very customer focused, but also many of them I think had, or at least in the past, had a revenue number that they were trying to hit for their line of business.**
Kiren: We've tried kind of different goal structures over over time, but I think one of the things that
we kind of figured out early on is that especially for newer products, revenue is the best metric for product market fit.
Brett: customer value.
Kiren: Exactly. it's a proxy for, for customer value.
and impact.
And if we've got high revenue growth with solid unit economics, that means that things are working. And I think that that has really helped product managers, especially product managers who are working on new products and new apps, say, Hey, I know that you know, good looks like this, great looks like that.
And this is what off track looks like. and actually it becomes, I think, really fun to be able to have a, a number that you can hit and, and beat and get over, and then everyone kind of, everyone appreciates that, but it also translates really well. I think, you know, there's a lot of areas where that metric worked really well in the early days, but, you know, when we look at our more mature products, there's a lot of different factors that go into a customer, deciding whether or not to buy one.
And actually you could have revenue look healthy, but the customer experience is degrading and that's gonna catch up with you. And in a few, quarters or a years, you're gonna see that in, in, in revenue. On the flip side, you can be building things that are truly delighting users and you can't directly attribute them to revenue growth because that might be tied to did marketing generate enough leads and we have enough sales capacity, et cetera.
But you can know with high conviction if you're seeing usage increase, if you're seeing engagement, that's gonna translate to revenue over the long run. So I think that it's a really valuable tool, but you gotta use it in the right, right, products in the right scale.
**Brett: What are the things that you thought would generalize from Meraki and did not?**
Kiren: Yeah. Meraki, we sold through channel partners and, it turned out that that was the way that people like to buy networking. You wanna buy your networking equipment from the same person who's selling you your. In your laptops. And those reseller, partners were a great way to go to market. We tried that at, at Samsara and, a lot of actually specific partners that would been very successful with at Meraki didn't work.
and we found that actually these customers wanted to primarily buy directly from us and have a relationship directly with us. So that's something we, we tried. It wasn't working very quickly, moved on. So I think the things that really translated were around, you know, culture and values and, and what I was talking about in terms of being customer centric, being long term oriented, having this, iterative approach to building and then certain things around the user experience.
**Brett: As someone who, who did a lot of marketing as a non classically trained marketer at Meraki, how did some of the marketing ideas apply? And, and I'm, I'm interested in the fact that I assumed there was this element of category creation and you had the chance to sort of build something new at that time.**
**Did you think much about how are we gonna educate, how we're gonna create a movement about the, around this sort of, those types of things?**
Kiren: I think the, the aspect that really carried over was the idea of showing the product and then letting customers try the product themselves and optimizing everything around that. and. Both at Meraki and, and, and Samsara. And, and really to this day, we start with a demo, right? And that can be over, zoom, it can be in person, but we start with, we're gonna show you a live working system.
It's not a it know, a sandbox, it's not Figma. We're gonna show you live, a live system. when we do our customer conferences, we're only demoing live products. And there were some, you know, people came in from big companies and they said, well, what are you doing? Like, it, it, it could, it could go down. It might not work.
You should be using, mockups. We're like, no, we, we show the real thing. and then making it easy for customers to get it, get their hands on it and try themselves. That is the piece that, that really carried over and I think is a core element of, of how we go to market.
**Brett: What is the reason for that?**
Kiren: I think there's definitely some, counter positioning against, a product where you can't demo it because it's gonna be a a nine month deployment. I think some of it is actually just, it reflects the, the pride in, in, in what you've built. And, you know, I see a lot of, startups today that lead with demos and it's awesome.
And, you know, we have our, venture program at, at Samsara where we fund a number of startups who're building in the operation space. I get to see a lot of the, the founders pitch and the vast majority of them are leading with demo. And you can see the pride they have in the product that they've built.
And some companies I think lose that as they scale. But there's a handful that, that hang onto it. I think it really. Maintains that connection with the people who are building the product and how it's being introduced to customers.
**Brett: Is there anything else you all have done that you sort of pioneer on the go to market side?**
Kiren: You know, I think, in, in the early days, one thing that we did that was really helpful was we focused on building a scalable sales motion. And, you know, we never did the pure founder selling, like we always had?
a, a sales team, and it started off very small. We said, you know, the way to to, to make this successful is to build something that we can sell through a sales team that we can scale.
**Brett: So you didn't do the normal thing. We get to 5 million with founder led sales, then we hire our first sale AE or sales leader. That's not how it works.**
Kiren: That's not how it worked. In fact, we hired our first, a DR or SDR before we had a product to sell, and their job was to book demos. so myself and, and one of our product managers could basically do live demos of what we were building and get people to say, Hey, I will try this out once it's ready. and, and you know, that allowed us to say, Hey, go call a hundred water utilities and see if, this pitch is resonating.
Right? Go call a hundred food and beverage distributors and see if this pitch is resonating right. And you can see at the very top of the funnel where there's resonance. So when we got to the point where we thought, Hey, we have a product that we can try to sell, we started with a, small inside sales team and then a couple of field sales reps and said, okay, we are going to build a small, but end-to-end sales machine here.
Something that if it's working, we can scale it. And so that means we start with generating leads, we then turn those leads into demos that our, our sales reps are doing and turn that into a free trial and then turn that into, a contract and, and then a, a deployment. that process requires you to actually, get a bunch of fundamentals, right, that you might be able to work around if you're founder selling.
So, for example, the product needs to be really easy to demo 'cause you need. The sales team, not just the people who are setting the roadmap and working with the engineers every day to be able to just, you know, click, log into a dashboard and, and, and show the the newest features. you need to figure out what are the pain points that are causing people to pick up the phone in the first place and take a meeting and then take that meeting and translate it to, you know, a to a, a trial and eventually, a purchase order.
And you're getting that data, you know, really kind of at, at scale. you're, you're making sure that you have a value proposition and, a pitch that multiple people can deliver, right? Not just the person who has the, you know, the, the, the founder zeal, right? And then when it's working end to end, what's amazing about it is you can say, great.
Now let's go double this house the sale team. Now let's just go double it again. and so I think doing that early on. Helped us get a lot of those fundamentals right. similarly, you know, on the, the post-sales side, we actually said early on we're gonna start with that customer success because that is a very easy way to paper over things that make a product hard to use.
we eventually added customer success because it turned out that there were a lot of things that we really needed to help customers with in terms of change management that were not, you know, technology centric, but by saying, well, we're gonna have a, a support rep who can take tickets, but then we need to actually, not work around them, but get them resolved in the product itself.
**Brett: something you just hit on, what did you figure out about change management?**
Kiren: we figured out, you know, especially as we started going up market. That it was a real concern for customers. And if you think about these, these customers, they might say, okay, this product looks great. I've gotta go figure out, first of all, how do I go, you know, install devices in, you know, maybe 5,000 vehicles or assets that are all over, the place and they're always in use.
And if they're not in use, I'm not making money off of them. This new system's really easy to use, but I have, you know, hundreds or thousands of frontline workers who I need to train on it. actually being able to make change management?
part of our pitch was super helpful, right? Especially in, in the enterprise, being able to say, we have the technology, but we will also help you be successful with it.
And, you know, you can get this done end to end in. X months, right? that means training thousands of people, you know, getting thousands of assets connected. Here's someone you can talk to who's gone through this, who looks like you. and actually making that kind of peace of mind, part of our value proposition, I think was something that emerged over time.
You know, especially as we really started to go up market. And I think, you know, that also really helped establish that that relationship where we're not just trying to solve the customer something and move on, we're actually trying to partner with them for, for many, many years to come, which then turns into product feedback, which allows us to build more products and then sell them to these customers as well as new products.
**Brett: What are some of the tactics that have been interesting that have really worked, like, I think it's, it's, it's such an interesting point where, you know, you have drivers of these trucks that have been doing this a certain way for a long time. You have so many stakeholders that have been doing their jobs in a specific way for a long period of time, and once you bring data and analytics and real time feedback, someone then has to go do something with that to sort of have a positive impact on the business.**
Kiren: Yeah. You know, some of it was actually taking what we heard back from customers and then saying, how do we get this out to everyone? So for example, when we started with our, our safety cameras, you had some drivers who had been driving a truck for 40 years and they say, this is Big brother, I don't want this in me, in my face.
And we actually had customers say, oh, you know, what we did was we started by first putting it in the, you know, the, the VP of Safety's own car so they can see that we're doing it ourselves. Then we start with putting it on the five safest driver's, cars, the absolute best ones. And invariably there is an accident or a near miss where that camera shows that they did the right thing and, and they're not at fault.
And then you take that video and then you share it with everyone, and then you go roll it out. And then as you're rolling it out, you also roll out a safe driver bonus program where we say, we're gonna save all this money with this technology. We're gonna take a portion of it and give it as, bonuses for, for drivers who have, high safety scores. That's something that, you know, we started hearing these anecdotes for customers and kind of turning them into, into a playbook. and now it's something that we have like, you know, really, well packaged up that's easy for us to, to onboard customers to. but that kind of keeps evolving as we. Get new ideas from customers as we build new products.
and we almost think of that as like, it's not a technology product, but it, it is like a product in that way of we're hearing about what works. We're finding ways to make it scalable and then baking it in.
**Brett: What are the things that you've had to change your mind about as the company has gone sort of in each chapter of growth?**
Kiren: how we use. Revenue to, to, to, motivate and align product managers is something that's changed a lot. Early on, revenue was a really, really good indicator of, of product market fit, and it was something that, you know, we could kind of rally everyone behind. We got to a point where actually we had really strong product market fit across multiple products. The customer experience was actually starting to, to degrade in some ways. We had some rough edges to the product, which kind of makes sense. when you think about how fast we grew, but it wasn't hurting revenue growth. And we actually had to say, okay, no, we need folks to just really focus on customer experience and, obsess over that.
And we got to a point where we said, actually. Our customer experience is, is great. We talk to customers, they're really, really happy. We're still focused on how do we kind of get from 99.9 to 99.99%, and they're saying, we'd love you to go build these new products and solve new problems for us. We need to reorient folks back towards saying, okay, what are these new things that we can, we can build?
And, you know, how are we either, you know, driving adoption or, or, or driving revenue growth? So, you know, the, the thing that we need to focus on, I think has, has changed over time, and I'm sure it'll continue to change. It's also different in, you know, different parts of the business, different products, different geographies.
so that something, that thing requires us to, to hit refresh. I think, you know, an area that, that we sort of had to go through a bit of a, a, a journey on is, how we think about. Organizing and communicating our, our roadmap. And when the company was very small, it could be very dynamic. And everyone's, you know, literally in the same building, having, having lunch together, kind of typical sort of startup, feel and the superpower of startups is you can be super dynamic and everyone stays in sync.
I think we went through a period where we had grown from, you know, a few hundred people to a few thousand people. We're seeing a lot of strain from that. So we put in a lot of, process to have much more predictable, well-defined, roadmaps. And it solved some problems, but it actually meant that we were slowing down, right?
We weren't able to iterate as quickly. We weren't able to ship as quickly and said, actually a lot of what we were doing in those early days of how do you get something to a demo, a demoable form quickly? How do you get in front of customers? How do you run that feedback? That's what we need to be doing now.
We need to figure out how to make that work across, you know, a multi-thousand person company, but we need to be doing that and not, you know, acting like IBM. Right. and so that's an area that I think, has been really exciting, you know, over the last, you know, you know, period of time kind of figuring out how do we pull in those elements from, from really operating as a startup with customer scale and, you know, scale of, of engineers and product managers and designers.
And actually what we've been able to ship has just exploded. Right. Which has been really, really fun.
**Brett: What's just, what's happening with, with LLMs and, and more broadly with ai. Does it feel like the early days of Samsara when you had all these, converging technologies. at least on the hardware side, dropping costs. You could do all sorts of incredible things with Bluetooth, et cetera. Does it feel like that or it feels more profound or different or?**
Kiren: A hundred percent. I, I think, you know, when I think about Samara's product, even today, you know, with, with, more and more AI built into the product, the data that we're collecting from our customers, operations, it is like an iceberg. We're helping customers action on just the very tip. And, you know, they've had really amazing results with that, but there's so much data in the system that is still untapped and LLMs and all of the advancements in AI are just radically changing.
How we could make that, that data useful for customers in a way that doesn't require them putting more staff and personnel behind, understanding the data and acting on it. And, you know, it's, it's really, radically changed our ability to make data useful. and, you know, rewind five years, we, ago we started building AI and, and products for, for the first time really started with a safety product.
we had these dash cameras and, they would capture accidents and near misses. These were detected by someone, slamming on the brakes. So a high GForce event. He would upload video and you'd look at these and, and so many of them were drivers on their phone, distracted, right? So we started building AI to basically detect distraction and, and mobile usage and, you know, give their driver a.
A reminder to put their phone down, make it such that you could, you know, run a, a program where you rewarded drivers for not using their phones while driving. And that had a massive difference in, in accident rates. We kind of stacked on different, features on top of that, like drowsiness or, tailgating or rolling stop signs, all these different kind of safety behaviors. Each of those were pretty slow and expensive to, to, to build because we had to basically build new AI models from each of them. Were kind of training them on top of all this dash camera data. now we can use LLMs as a starting point and we can start to do things that just would've been impossible before, right?
So for example, now if you slam on the brakes and it's because, someone cut you off, or?
a pedestrian ran into the road. An ambulance, crossed in front of you even though you had a green light. The AI can actually watch that video and say, Hey, rather than lower your safety score for, for slamming on the brakes, I'm gonna increase your safety score for, for driving defensively.
That's something that if you have a big enough team and you have someone reviewing every video clip, you could do manually, but most customers don't. Right? So whether it's, you know, that you can apply ideas like that to maintenance, to fuel consumption, to training, to doing safety inspections at a job site, like all of these different areas and all of the data's there, but now we can actually just make it meaningful in ways that that was really not possible before.
**Brett: who has influenced you the most as a company builder that's not a family member, and what's the thing that they imparted on you that's like a big part of your worldview of, of company building more broadly?**
Kiren: Well, the, the practical answer is that, you know, Sanjit is, is someone who I've now known for, gosh, over 25 years, he's been my boss for the last 15 plus. and, you know, just by, by virtue of, of working together for so long, he's had a incredible impact. you know, we started doing computer science classes together as, as undergrads.
and then, you know, going from, from that to, to building Meraki and, and, and, and now samsara and. I think, you know, a lot of it has been the process of, of building together, you know, a lot of his, superpowers. I won't say they've rub rubbed off of me, but there's something that I can, I can try to try to emulate.
but, you know, definitely a, a huge impact there.
**Brett: What are, what are the superpowers?**
Kiren: Oh, there, there's a, there, there's a long list. but I think, you know, probably the, the, the biggest are his ability to be very strategic and be thinking about markets and technology trends and multi-year cycles and, and then kind of get into the details of, you know, this model could run on this chip set and could enable this feature which would be useful to this customer.
And that ability to kind of span, span those different altitudes. And then this is kind of nuclear powered, creativity and, and sense for what's possible and kind of never, never being complacent and always looking to say how, how can we do more? so that's the one that I've, you know, got to, to just, be building with and, and, learn by doing.
Brett: Great. Thanks for spending all the time with us. This was awesome.
Kiren: Thank you. It was a lot of fun.
### Idea validation tactics they won’t teach you in business school
URL: https://review.firstround.com/idea-validation-tactics-they-wont-teach-you-in-business-school/
Last updated: 2025-12-04T17:34:44.000Z
How founders from Linear, Mercury and other startups found conviction before the build
_This post is for subscribers only._
### Is Your Startup Idea Any Good? Borrow These Validation Tactics from the Founders of Linear, Mercury and More
URL: https://review.firstround.com/unconventional-tactics-for-validating-your-startup-idea/
Last updated: 2025-10-16T00:05:15.000Z
When repeat founder [**Bob Moore**](https://www.linkedin.com/in/robertjmoore?ref=review.firstround.com)was mulling over ideas for his third startup, he didn’t simply talk to potential customers to suss out demand for a few of his favorite ideas. He turned to fellow founders.
“With founders, I wasn’t asking, ‘Would you buy this?’ But instead, ‘Would you start this company? And what are the things that you think you might bump into?’” he says. Turns out most of the founders he spoke to chose the same idea. It was through this “founder discovery” that he singled out the one that would eventually become his current company, **Crossbeam.**
Moore’s unconventional method of validation got us thinking about how founders find conviction for their startup ideas — and how deeply personal that process can be. And while AI tools have certainly lowered the technical hurdles and shortened the timeline to build and validate prototypes, the stakes of problem selection remain high as ever. This is something you could spend upward of 10 years of your life working on. No pressure.
There’s no shortage of prescriptive advice floating around on how you should approach this process: Talk to [X amount of customers](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/), listen for a repeated pain point, get to work building a solution that addresses it. But the process is rarely ever that straightforward. *Who* should you talk to? Which questions should you ask? How can you parse out [glimmers of potential](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/) from non-committal answers?
So we’ve revisited our interviews with founders from companies like **Linear** and **Mercury** to surface the strategies they used to find conviction in their ideas long beforewriting a single line of code. Some did talk to potential customers, but used unconventional tactics to get a deeper read on the market. Others, like Moore, turned to entirely different audiences — like industry experts and fellow founders — to get meaningful feedback to shape their ideas.
If the sheer variety of methods we’ve included here is any indication, there’s no singular scientific way to validate your startup idea. Take your pick of what fits with your problem and market — or maybe even try a mix to get an even stronger signal.
## Get more mileage out of your customer interviews
[Customer discovery](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) is a well-trodden — and some would say essential — path for startup idea validation. But the mere act of talking to anyone you might sell to doesn’t guarantee you’ll walk away learning something. Here’s how you can find the right folks to chat with, design intentional interviews and make sure no one’s blowing smoke.
### Run minimum viable tests
[**Gagan Biyani**](https://www.linkedin.com/in/gaganbiyani?ref=review.firstround.com)**,** repeat founder and now CEO of **Maven**, has developed an alternative to the MVP designed for the sole purpose of validating an idea before you build. It’s called the [Minimum Viable Test](https://review.firstround.com/the-minimum-viable-testing-process-for-evaluating-startup-ideas/).
“I’ve been early at four startups: Udemy, Lyft, Sprig and Maven. Three of them achieved over $1M in run-rate in their first six months of going live. I don’t think this is an accident. I generally think this early success could’ve been predicted before a single line of code was written,” says Biyani.
He attributes this track record to his now-codified MVT method.
“An MVT is a test of an essential hypothesis — something you must be right about, or else the company won’t stand a chance,” he says.
First, define the “atomic unit” of your idea. Then test it. “For Google, the atomic unit is a search query. For Amazon, it’s ordering a book online. For Coinbase, it’s an easier way to buy and sell crypto,” says Biyani.
He lays out these four steps to test the atomic unit, along with examples of how he used this framework for Maven:
- **Pick a clear and specific atomic unit**. The more niche the better in this case. You are looking for the smallest possible item that you could distill your product down to. This unit is important because consumers rarely ever buy the value proposition of a company, they buy a specific item that you are selling. “For Maven, the atomic unit is a cohort-based course. How can we test whether cohort-based courses work as quickly as possible?” he says.
- **Define your risky assumption and test just one at a time**. You will almost always get 2-3 risky assumptions tested in one go, but there should always be a primary. If there isn’t, you won’t get conclusive results. For Maven, the riskiest assumption was that folks may not be willing to pay 10x more for a cohort-based course than for an asynchronous course.
- **Devise a test for that specific assumption**. If your riskiest hypothesis is execution risk: test out execution by actually trying to deliver the goods or services in as hack-y a way as possible. “For Maven, the primary risk is a profit question: on a per-seat basis, cohort-based courses are more expensive to produce than video-based ones,” says Biyani. “So my first MVT was to figure out the revenue-profit ratio of a course: Will consumers be satisfied with buying a cohort-based course for a significantly higher price point than video-based courses?”
- **When devising a test, don't build out everything**. Focus only on the hypothesis. Biyani wound up running just one course to test the risky assumptions for Maven. “I picked a specific area that I knew well and then tried to run a course on that subject. I found a partner who already had a big adjacent business (Sam Parr at TheHustle) and asked him if he would co-teach a course with me. This allowed me to test a course without having to build a marketing machine from scratch,” he says. “It was a hyper-narrow test that achieved the exact result I was looking for: The course had a 9/10 rating from its students and made over $150,000 in revenue in its first cohort.”
“The goal of this framework is not to prevent failure. That’s impossible. The goal is to increase your chances of success,” says Biyani.
> For each MVT you run, you should ask yourself again: Now that I’ve proven or disproven that risk, what are other risks I should be considering and testing against?
### Test your sales chops with a product that doesn’t exist
Like Biyani, **Material Security**’s [**Ryan Noon**](https://www.linkedin.com/in/ryannoon?ref=review.firstround.com)and [**Abhishek Agrawal**](https://www.linkedin.com/in/abhishek--agrawal?ref=review.firstround.com) took the [test-the-idea-without-a-product approach](https://review.firstround.com/material-securitys-path-to-product-market-fit/). When they teamed up to start a company together without a problem in mind, they took a running list of startup ideas and narrowed it down to four.
But to choose the winner, they took “lean” to another level — and decided to head straight to selling. “We knew all four ideas were good,” says Noon. “They were all good markets, and we all felt like we could start a company around any of them. But we knew one idea would be way easier to sell than the others, and the only way to find out was to try.”
To do that, they devised a sales test they called “marketing vignettes.” No demo, no landing page, no mockup. Just pitch decks built to look like pared-down sales landing pages, with descriptions of different features.
“It was mostly us asserting each bullet point and seeing if there was pushback, which got us honest feedback very quickly,” says Agrawal.
These vignettes were highly effective for two reasons:
- **They gauged interest without overwhelming**. “There was just enough UI to convey a concept without letting you get bogged down in it with a customer,” Agrawal says.
- **They allowed the founders to experiment with messaging**. “A big part of finding product-market fit early on is testing messaging,” he says. “When you make slides, it lets you skip product marketing because you're just thinking about bullet points that list features. But when you make marketing vignettes, you have to name your features and also convey in a couple sentences what the benefits are. It forces you to exercise muscles around positioning and marketing.”
Over the next few months, the founders spent every day pitching each of the four ideas to different prospects. Eventually, a clear winner emerged. Here’s how they knew:
- **There was a clear sales champion within enterprise organizations.** “Just the act of having to go through LinkedIn and identify people to try to sell our product to was a huge qualifier because it was like, ‘We got 20 meetings on this one. And only two on the other.’ That tells you something,” says Agrawal.
- **After the pitch, prospects had questions.** Instead of, “Sounds cool,” the founders heard reactions like, “I want to show this to the rest of my team,” “When will this be ready?”“How much does it cost?” and “How long does it take to integrate?”
### Go undercover at your day job
If your coworkers fall into your [ICP](https://review.firstround.com/how-vanta-clay-retool-found-icp/), the validation phase is a great time to conduct some research at the office — before you’ve officially donned the founder hat. This is especially useful if you’re thinking about an idea born out of personal experience, which is often the case for developer and infrastructure tools.
That’s exactly what [**Karri Saarinen**](https://www.linkedin.com/in/karrisaarinen?ref=review.firstround.com) did when ruminating on the idea for **Linear.** He and hisco-founders, **Jori Lallo** and **Tuomas Artman**, hated the project management software they used for their jobs as product builders at fast-growing startups — Saarinen was a principal designer at Uber at the time. The founders suspected other engineers and product managers felt similarly, so they wanted to test this idea before quitting to work on the idea full-time.
“We were always the type of people that we wanted to build something for,” Saarinen says of himself, Lallo and Artman. “We weren’t in management positions — we were in high IC positions because we all loved building things. And it didn’t feel like the incumbent tool was helping ICs actually do the work, which is weird, because the productivity of any company comes from ICs like engineers and designers.”
Over the course of about a year, they ran admittedly light user research with their coworkers — they wanted to keep things casual. They were:
- ICs (not managers)
- Product builders (software developers, product managers and designers)
- Working at fast-growing startups (Airbnb, Uber and Coinbase)
Their approach to these conversations was informal. “It was pretty random and unstructured,” says Saarinen. They started by asking coworkers, along with other friends in the tech world, including some founders, these questions about their companies’ software dev project management tool of choice:
- What do you think is bad about this tool?
- How would you want to improve it?
- What would make you more productive?
Just about everyone had complaints, but Saarinen noticed that most folks assumed this wasn’t a problem that could be solved. “What was interesting was that a lot of people had lots to say and clearly saw a problem. But no one said, ‘I wish you could solve this.’ They hadn’t even thought about it. The incumbent in this market is like the floors in the building — you don’t think about the floors, you just walk on them.”
One of the biggest grievances that surfaced during these conversations was how slow the performance of tools were. “So that made us think, what if we can solve the speed issue? What if we can build a tool that’s never slow?” he says. So the founding team was determined to design a tool with deep functionality from the outset — that was also incredibly fast.
Saarinen now credits much of their early conviction in Linear to this pre-work they did before quitting to [work on Linear full-time](https://review.firstround.com/linears-path-to-product-market-fit/).
### Don’t pitch your friends
[**Ryan Glasgow**](https://www.linkedin.com/in/ryanglasgow?ref=review.firstround.com)did almost the exact opposite from the Linear co-founders. The **Sprig** co-founder and CEO thinks the best way to validate an idea is to completely remove social pressure from the equation. When he was validating the idea for the surveying and product research tool, he built some lightweight mockups — and pitched them to strangers.
“**One of the key learnings I had early is to never involve people who you personally know in the customer development process**. Folks reach out to their own audience for customer development, but I think it’s often misleading,” he says. “Instead, I started to cold email founders and PMs at Y Combinator companies. I had no relationship with them, and I wanted to see if they would respond to my emails, because if I'm truly solving a pain that they're experiencing, then they will spend time. And I was able to get several of them to respond and take meetings with me.”
Glasgow notes that this is particularly important for [B2B endeavors](https://review.firstround.com/8-product-hurdles-every-founder-must-clear-this-pm-turned-founder-shares-his-playbooks/). “Time is more valuable than money if you're selling to someone here, because it's the company's money, but it's their individual time. And they're often very busy with a lot of different priorities,” he says.
He shares an example of some early potential customers who were willing to sink in that time as design partners. He found a PM at Hotwire who spent over an hour each week over three months co-creating and providing feedback. Then there was the Intuit PM on the QuickBooks team who gave him tons of feedback on the mock-ups. “So I started to validate that people I don’t know in this product management segment at high-growth and at-scale companies were willing to spend time and provide feedback, because it resonated. It solved a problem that they were experiencing in their lives because the existing solutions for them were, in fact, broken,” he says.
> In the very beginning, I really wanted to test and validate whether this was worth working on by seeing if people who I didn't know were willing to spend time with me to help co-create and develop this product.
## Consult experts who can add scaffolding to your idea
Potential customers aren’t the only input to consider when evaluating whether or not to proceed to the build. When you’ve had dozens (if not hundreds) of customer conversations, it gets easy to fall into the trap of thinking too literally about what folks say they want.
No matter how jazzed your potential customers are by your idea, other what ifs remain: Is it feasible? Will there be too much competition? Will you enjoy building it?
Here’s how these founders tested their ideas with industry experts, investors and fellow founders.
### Use industry insiders as a sounding board
[**Immad Akhund**](https://www.linkedin.com/in/iakhund?ref=review.firstround.com)had been sitting on the idea for **Mercury** for several years while working on his previous startup and later during his stint as a YC partner.
“The online bank idea had been in my head for years. I was like, ‘Okay, let me just explore this,’ and the more I explored it, the more it turned from impossible to doable but hard. Doable but hard is like, 'I'm in.’”
A [seasoned founder](https://review.firstround.com/podcast/lessons-from-mercury/), Akhund eschewed the customer route to dive deep into the fintech industry. What he was really after was testing whether he could do what he considered the “hard part” — clearing the compliance and regulatory hurdles in this industry. He felt deep conviction that this was a sorely needed solution, but the lingering question was whether it was feasible. “Everyone knew I could build a product. I knew I could build a product. The hard bit was proving that I could get a bank sponsorship and figure out the framework for compliance and risk and legal and all these things,” he says.
“When you first explore an idea, you feel really stupid,” says Akhund. “Fintech is full of acronyms. People are like, ‘Oh, you need to worry about KYC.’ I'm like, ‘What is KYC?’”
To explore the idea — and test its feasibility — he sought out three types of fintech insiders:
- **Founders**: Entrepreneurs in the fintech space had navigated many of these same regulatory barriers that Akhund needed to clear. “Many founders I talked to were failed entrepreneurs, some were successful. So I wanted to see, if they failed at the idea, what failed? Where were the failure cases, and how long did it take to build it?” says Akhund. “Generally speaking with entrepreneurs, there are no bad questions or dumb questions. They're all like, ‘Hey, I was just like you. I was trying to figure this out.’ They’re super helpful people.”
- **Investors**: Investors have pattern recognition — they’ve seen what does and doesn’t work for fintech founders. “With investors, I was trying to figure out what was fundable. Investors tend to be really good connectors as well, so they connected me to other entrepreneurs,” says Akhund.
- **Lawyers**: Akhund turned to lawyers to get a deeper understanding of the legal complications he’d have to face. “Lawyers were probably the surprisingly most useful set of people,” he says. “Most lawyers will do a 30-minute call with you for free, and there are a lot of financial services lawyers out there. I wrote a list once and did 90 conversations like this. Often, some of the most useful ones were four intro chains down. I talked to someone, they'd introduce me to someone, they'd introduce me.”
> At the start of a company, spend all your time doing the thing you’re least capable of doing and the least capable of proving to the world that you can do.
### Talk to skeptics
**WorkOS** founder and CEO [**Michael Grinich**](https://www.linkedin.com/in/grinich?ref=review.firstround.com) went hunting for a startup idea nobody wanted to solve. So when he was met with several naysayers early on, he was thrilled.
He was inspired by YC co-founder Paul Graham, who wrote, “The best startup ideas seem at first like bad ideas … if a good idea were obviously good, someone else would already have done it.”
So Grinich suspected the greater the skepticism, the thornier the problem — and the more valuable the solution. “I wanted to find an area that, to everyone else, looked like a bad idea, but based on personal experience, I knew some secret as to why it was actually a good idea,” he says. “That’s the only effective place to look for startup ideas because otherwise you just don't have any special insight.”
The first company he co-founded, an email tool called Nylas, had struggled to crack the enterprise market. When he moved on from the company, he went on a so-called “entrepreneur version of *Eat, Pray, Love*,” to mull over his next venture, and kept a running list of any and all random or obscure ideas that crossed his mind.
Grinich eventually reviewed his list with more scrutiny, circling the ones that met this criteria: It was in a huge market, he had some experience in it, the timing was right, and crucially, it was an idea that looked bad to some people but good to him. “If you have something that looks like a good idea to enough people, you risk getting into a situation where, within six months, there's a ton of companies just like yours,” he says. “You don't want to be in that situation. You want to be the only product in the category when you launch, and around six months ahead of the competition. So look for the solution that looks like a bad idea to enough people initially.”
He landed on an idea that met that criteria: A [developer tool to make enterprise-ready apps](https://review.firstround.com/workos-path-to-product-market-fit/). He paused to spend some time building out his thinking around it.
He spent the next year and a half validating his idea by interviewing three key audiences, which included folks who had dealt with selling to enterprise, as well as a potential ICP of IT admins:
- **Founders of software companies currently trying to cross over to enterprise**. This included CTOs of companies he thought would eventually need enterprise features. His goal with this audience was to see how they were thinking about their enterprise roadmap. He asked questions like: 1) How would you feel about using an external service for this? 2) Would you trust it? 3) What would it take for you to depend on us? 4) Where are you in your lifecycle, and when would you be ready to adopt a solution?
- **Companies that had successfully cracked the enterprise market**. “These people essentially told me what the roadmap was because I hadn’t actually built enterprise stuff before.” He spoke to the enterprise product team at Dropbox (where he previously worked), Asana and Slack. Some of these people ended up becoming WorkOS' angel investors. For this group, he asked questions like: 1) How did you do it? 2) What was important? 3) What ended up not being important?
- **IT admins**. This audience was more challenging to get in front of, but Grinich discovered that many VCs have CIO networks, and that by simply reaching out to them and sharing that he was an entrepreneur building something for IT, they were willing to talk to him (as long as they didn’t feel like he was trying to sell them anything). “Very few people build cool software for IT people, so they're usually pretty excited to chat,” he says. This was a particularly important group because IT admins are the end user of WorkOS. Because he wasn’t familiar with this audience, Grinich’s goal was to build empathy by asking: 1) What are your concerns with enterprise software? 2) What do you care about with these products? 3) How do you think about security and compliance? 4) What's a showstopper feature versus just a nice-to-have?
From those early conversations, Grinich learned that software company founders were actually really turned off by the idea of enterprise. “Founders were like, ‘I don't want to do enterprise stuff. This sounds like it sucks. I want to stay away from this as much as possible.’”
That’s when knew he was onto something: No one thought this was a tool worth building.
But, he found that the problem he’d landed on was a real pain point for IT admins. “The people on the IT side were the most frustrated because they were the ones constantly having to say no to adopting new products and services that weren't enterprise-ready. They're the ones that are the final gatekeeper,” he says.
### See if other founders have FOMO
After selling his first two companies, **Bob Moore** knew he wanted to take a bigger swing for his third venture. So he pulled out the running list of ideas he’d scribbled down over the past decade of entrepreneurship and circled the strongest 10\. Then, he put them in front of other founders.
“Founders are special. They need to develop an extremely high level of empathy and understanding for the needs of people across multiple personas, and also understand a baseline grasp on how markets evolve over time and what makes for something that's more durable and versatile,” says Moore.
He knew fellow founders could expand his thinking around each idea in ways no one else could. “Rather than narrowing these ideas down into the scope of how a persona would use it, I was able to broaden my horizons of what they could become,” says Moore. “I wasn't interested in having my next thing be anything other than an IPO-scale business — I wasn’t optimizing for a ‘build it for a few years and sell’ situation. I thought I had one more startup in me and I wanted to see how far I could take it.”
He made sure to set up a guard to [fend off bias](https://review.firstround.com/the-uncomfortable-truth-a-3x-founders-guide-to-intellectual-honesty/) and empty responses. Founders tend to be default optimistic, able to see the potential in any idea. So without revealing which way he was leaning, he told each founder to choose which of the ideas they liked the best.
“I’d say, ‘Hey, I've got three business ideas. I like them all equally. I want to pitch you on them and see where it goes.’ I did around 20 or 30 of these calls with founders and I distributed the 10 ideas across all of them,” says Moore.
The idea for what would become **Crossbeam** quickly bubbled to the top. Moore knew it was a winner when founders started recommending who else he should talk to — essentially pointing him toward potential customers. The idea had a built-in viral loop.
### Starting an education giant in a “bad market” | ClassDojo’s story | Sam Chaudhary (Co-founder and CEO)
URL: https://review.firstround.com/podcast/starting-an-edtech-giant-in-a-bad-market-classdojos-story-sam-chaudhary-co-founder-and-ceo/
Last updated: 2026-02-03T17:46:41.000Z
Sam Chaudhary is the co-founder and CEO of ClassDojo, a multi-product education platform used in 95% of U.S. schools and over 180 countries globally to connect teachers, students, and families. In this episode, Sam shares the full arc of building ClassDojo, from early skepticism about education and a failed group-making tool, to creating a communication platform loved by millions.
In this episode, we discuss:
- Why ClassDojo was built for consumers (teachers, students and parents) instead of schools
- How ClassDojo grew entirely by word-of-mouth
- Sam’s unusual approach to building multiple new businesses
- The founder mindset required to build an industry leader
- Why relentless resourcefulness is an underrated skill
- And much more…
**References:**
- Accel: [https://www.accel.com/](https://www.accel.com/?ref=review.firstround.com)
- Airbnb: [https://www.airbnb.com/](https://www.airbnb.com/?ref=review.firstround.com)
- Bill Gates: [https://www.linkedin.com/in/williamhgates/](https://www.linkedin.com/in/williamhgates/?ref=review.firstround.com)
- Brendan Kereiakes: [https://www.linkedin.com/in/product/](https://www.linkedin.com/in/product/?ref=review.firstround.com)
- ClassDojo: [https://www.classdojo.com/](https://www.classdojo.com/?ref=review.firstround.com)
- Dominick Bellizzi: [https://www.linkedin.com/in/dominickbellizzi/](https://www.linkedin.com/in/dominickbellizzi/?ref=review.firstround.com)
- Geoff Ralston: [https://www.linkedin.com/in/geoffralston/](https://www.linkedin.com/in/geoffralston/?ref=review.firstround.com)
- Gonzalo Aguilar Málaga: [https://www.linkedin.com/in/gonzalodecheck/](https://www.linkedin.com/in/gonzalodecheck/?ref=review.firstround.com)
- Hamilton Helmer: [https://www.linkedin.com/in/hamilton-helmer-42983/](https://www.linkedin.com/in/hamilton-helmer-42983/?ref=review.firstround.com)
- Imagine K12: [https://www.imaginek12.com//](https://www.imaginek12.com//?ref=review.firstround.com)
- Khan Academy: [https://www.khanacademy.org/](https://www.khanacademy.org/?ref=review.firstround.com)
- Liam Don: [https://www.linkedin.com/in/liamdon/](https://www.linkedin.com/in/liamdon/?ref=review.firstround.com)
- McKinsey: [https://www.mckinsey.com/](https://www.mckinsey.com/?ref=review.firstround.com)
- Paul Graham: [https://x.com/paulg](https://x.com/paulg?ref=review.firstround.com)
- Plaid: [https://plaid.com/](https://plaid.com/?ref=review.firstround.com)
- Reid Hoffman: [https://www.linkedin.com/in/reidhoffman/](https://www.linkedin.com/in/reidhoffman/?ref=review.firstround.com)
- Roblox: [https://www.roblox.com/](https://www.roblox.com/?ref=review.firstround.com)
- Sal Khan: [https://www.linkedin.com/in/khanacademy/](https://www.linkedin.com/in/khanacademy/?ref=review.firstround.com)
- Superhuman: [https://superhuman.com/](https://superhuman.com/?ref=review.firstround.com)
- Tim Brady: [https://www.linkedin.com/in/tim-brady-7a632510/](https://www.linkedin.com/in/tim-brady-7a632510/?ref=review.firstround.com)
- Y Combinator: [https://www.ycombinator.com/](https://www.ycombinator.com/?ref=review.firstround.com)
**Where to find Sam:**
- LinkedIn: [https://www.linkedin.com/in/samchaudhary/](https://www.linkedin.com/in/samchaudhary/?ref=review.firstround.com)
- Twitter/X: [https://x.com/samchaudhary](https://x.com/samchaudhary?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Timestamps:**
(00:50) Why education is a “bad market”
(02:15) Building for families, not schools
(03:29) Why enterprise education is broken
(05:39) Early challenges and insights
(08:31) Sam’s unusual background
(10:28) Meeting co-founder Liam at a hackathon
(12:09) Getting into Imagine K12 with a group-making tool
(18:34) The conversation with Reid Hoffman that changed everything
(20:38) Building a network to reach more families
(26:53) Scaling by building a community
(32:04) Designing for delight and word-of-mouth growth
(38:54) Launching the first monetization feature after 7 years
(41:35) How to pick markets and when to go broad
(44:50) The explosive expansion into the tutoring industry
(53:57) Creating safe online spaces for kids
(56:47) Harnessing AI in education
(58:38) Lessons from ClassDojo’s playbook
Brett: I thought we could start at the end. And I'm really curious for your perspective on why you think the company has been successful in a category that most people have been very negative on for a very long time, which is, you talk to most founders that have built in education and they never want to build an education again. And you talk to most investors that have looked at education companies that have invested in education companies and most of them would label it as a bad market to start a company in. And so you all have done something really special and I think it tends to be the case that most companies are exceptions to the rule. But I'm curious, when you pick apart why the company has worked in as much detail as possible, what comes to mind for you?
Sam: Well, look, I'll say first we're still very much a work in progress, so we're still in the thick of it, but honestly, we were as taken by surprise as anyone when we moved to the US. So we're both British, moved to the US to start the company, had this enormously ambitious idea that it would be really great if we could give every kid on the planet an education they love and we think that's a big engine for progress in the world. It's great for people in their individual lives, but it also helps the world move forward. And then we got here and we had this very intense learning process. It was a rude awakening because we'd meet all these ed tech entrepreneurs, we'd meet founders who'd built stuff in the space investors and we heard this continued negativity. The truth is they're right, if you look at the results in the space, it's not been a very exciting space. Most education companies basically just remain small businesses. They never reach billions of people. They never reach tens of billions in revenue. They never reach hundreds of billions in market cap. It was puzzling for us because there's a kind of weird paradox here. Every family on the planet wants a better education for their kid. No matter the income level, no matter the country you go to, just every single family you ever meet is, "I want my kid to have more and do more and be more than I was or than I had." And yet these companies don't seem to make it. So you have to ask yourself why. And we did, and one of our diagnoses was that most companies here, and this is going to sound a little facetious, but we had the beginner's mindset and we were in the US for, we had 90 days on our visit visa and we had to quickly come up with a point of view. And one of our points of view is we were like, "Hold on. Most companies here are actually serving schools. They're selling software to schools. Nothing wrong with that, but that's the supply side of the market. The people that we're trying to serve are actually kids and their families. So who's building for kids and the families, who's building for the consumer?" The analogy I think we used was if you're building Airbnb and you want to transform hospitality, you don't start by selling software to hotels. That might make hotels a little bit better, a little bit more efficient, whatever, but it doesn't massively transform the experience for the end user, for hosts and for guests. And so we just took that analogy. We're like, well, ed tech has been the business of selling software to schools. What if someone served the customer like the consumer? And so we were saying we were going to build a consumer company in a historically enterprise space. There was another company saying that, which is Duolingo. We didn't know them well at the time, but there were not many that took that approach. And so I think that single choice changed a lot about our prospects. And we didn't know how important that choice was at the time because when you look at the other side of this, the enterprise side of this, selling to schools, it's a bit like selling to in the US, like 130,000 pretty bureaucratic, very small businesses with not much budget who are trying to do a heroic job but really don't. It's not a great market and yet everyone is after the same budget trying to eke out another few dollars from the school, another few dollars from the public tax budget.
Brett: And it's a challenging end market because even though it's extraordinary amounts of spend, they're unwilling to spend on software, procurement, what structurally is going on because certainly total spend is enormous?
Sam: Yeah, I mean I think the number that's quoted usually is like 3% ish of GDP, but 70% of that is on salaries and benefits and people. And then there's a good chunk that goes into facilities and buildings. And so by the time you get to what could you spend on basically discretionary stuff, technology, other things in the classroom, it's way smaller. Then there's some artifacts of this being a public budget, it's not like you can just sign it forever. It has to come for renewal, you have to reconsider it. The procurement process is famously difficult, but I think the core issue is none of those things actually, the core issue for me is that the alignment of incentives is all wrong. So for me and it may be just the way Liam and I are wired, we want our incentives to be tied to the person that we're trying to invite, the person we're ultimately trying to serve. Now all of us in everyone in education is ultimately trying to serve kids and families. And so our view is like, well, you don't want a divorce in your incentives between you wake up one day and you're like, "Well, we have to build a roadmap that so-and-so school or so-and-so district wants," even if that's not the best thing for a kid and their family, we want our incentives to be tied to doing what's exactly right for kids and families. And so I think that was actually the more important point was you want the freedom and agency to really obsessively serve your customer and that was going to be the orientation we took.
Brett: And so you hinted at this a little bit, but when you were thinking about the opportunity, did you spend a lot of time obsessing over is this a good market? Can we build a big business? How much of that was a part of the Zero to One phase?
Sam: Yeah, we knew the school side wasn't a good market. From all we'd seen, we'd keep meeting these entrepreneurs who just had a really rough time over, I don't know, 25 years of building a company and it not really going anywhere and maybe being sold to a private equity firm or something. And so we knew that wasn't the thing. And then this actually, we had a conversation many years later, which put this into much more eloquent words for me, but we just had this belief and this conviction that families really care about their kids. And the next step is if you care about your kids, it's probably a thing you're going to spend money on. It's probably a cause you're going to spend money on. And you can look at all the market research on TAM and whatever, but there's a much more interesting view on this. I spoke with someone at Spotify, one of the C-level at Spotify, and he was talking about when Spotify started. And this actually goes into the investing side on market risk. Even if everything goes well here, how big is this market really? And most people hate that. Because they're like, "Oh god, if the market's too small then it's not a good opportunity." But I think there's actually another side to that which is it's actually the most exciting form of risk where there's one or two assumptions that if you are wrong about or if you're right about as an entrepreneur, you suddenly unlock an enormous market that no one knew was there. And so there's famous examples of this, but the Spotify one is interesting. He was like, "If you tried to proxy the market for music online when Spotify launched, you'd look at how many CDs are sold and you'd be like, it's 100 million CDs, call it 10 bucks a CD. So it's like a billion dollar market. It's way too small to build a huge company in." But then if you take the other stance where you reason a bit from first principles, you might realize that well hold on, every society on the planet has had some form of music, has evolved it or adopted it. Music is in the top five interests of basically everybody in the world at some point in their lives. And so it could be that what everyone is pointing to is a lack of a market is actually just a product and packaging problem. I think we had something like that with Dojo where no one had demonstrated that you could build a very large consumer business and education. But I think we just took this conviction that well we actually think parents care about their kids and we think they'll spend on things for their kids. Now we did early on in the company like three, six months in, we did our first monetization test. It was very small scale, it was very trivial. We can talk a bit about it. We knew at that point that parents would pay. We didn't know how much, we didn't know how big it would be, but we knew that parents would open their wallet and pay for something that would be good for their kids. So I think that was the extent of it. There was some reasoning and maybe there's some conviction based on almost this first principle's reasoning that it's an evolutionary imperative to care for your kids and therefore we think we can serve you in that need.
Brett: Let's go farther back. What was going on with you a couple of years before you started the company? And what was the entry point into, actually I think you were at McKinsey for a period of time?
Sam: That was a weird left turn for me. So I won't go into ancient history, but I grew up in a couple of weird places. I grew up in the countryside in Wales, went to a very loving, very small school, then we moved to the Middle East to Abu Dhabi in my teens went to a 3000 kid international school. This school is amazing though. They insisted on kids teaching as well as learning. So I actually taught all the way through my teens for probably about a quarter to a third of my time at school, which I had no idea how formative that would be for me. I went to college, I was an economist, a heavy dose of math in it. I thought I was going to do a PhD in one of those things. The month before I started, one of my professors asked me to go and help a friend of his with his school. And so I went to the school and helped them teach economics and maths better and turned around some of the ways they were teaching it. And then from there McKinsey came and did the recruiting spiel about how they were building an education group that was advising governments on improving public education systems, which sounded amazing. And so as I went there, I think when I got there I realized, hold on, this is all advising this isn't doing a thing. And so it was a great training ground, but there's no way I was going to stay. So I left. And there were some friends of mine in London who were starting a company. There was a small group of us in London, we all met at university and McKinsey and so on. But we'd all been reading Hacker News and this was a fringe thing at the time. This wasn't like a mainstream whatever, no one knew it \[inaudible 00:11:21\]
Brett: Most of tech was a fringe thing at the time.
Sam: Yeah, I mean Airbnb had launched I think in 2008 where the iPhone had come out in 2007\. Facebook was still private in 2011\. So anyway, so we were reading Hacker News and PG's essays were just so formative for this whole group. One of the things he said was just find the smartest group of people that you can work with. And so I found this group at a startup in London. I was working with them and while I was there, I went to a hack weekend, I met Liam, my co-founder. So it's not the way you're supposed to meet your co-founder, you're supposed to know each other when you're friends, whatever. But we together in London a week later. He's incredibly gifted. He was an amazing engineer. He was doing a PhD in computer science. He'd built one of the world's biggest kids games. We got talking about working together. My plan had been, "Look, I'm going to leave the startup and go and work on an education thing and I'm going to apply to YC as a solo founder."
Brett: But you decided you were going to start a company?
Sam: I was like, I'm going to do something in education. And I couldn't find a thing to do. I'd actually emailed Sal Khan at Khan Academy and someone there had written back and said, "Hey, this is great. You should come and join us. We're a tiny team. Just get a visa and come." And I'm like, that's a big step. So that didn't seem like a path, but I'm like, well, I care about this education thing. And it feels to me, I think there's two fundamental problems in the world that need to get solved. And I've thought this for a long time. This is stuff I was interested in when I was a kid. One is just the energy problem of we just need to provide enough energy to fund all of our activity. And that's like a survival problem. And then I think the thriving problem is once you know you're going to be around, how do you make things as good as they can be? And the answer to that I think is a very simple process, which is it's just people. Just people discover their talents and capacities and apply them in some way in the world and make something off them. And if you do that over space and time, you make the world a better place for everybody. So that problem is I think the problem that I want to spend my life on and make a dent in. So it was very clear I was going to do something in this. I don't know exactly what do I go and teach? Do I start a school? Do I... But then I think on Hacker News, someone had posted, Geoff Ralston who then became president of YC, was starting this parallel incubator called Imagine K12, which was going to have the same structure as YC, a bunch of the same speakers. It was just going to be for education companies. I was like, "Oh my God, this is amazing. I have to go to this." Liam meanwhile had been emailing with Paul Graham totally separately and they were trading riddles back and forth. Liam had some idea that he was running by Paul. Paul wrote back with, "What is the equivalent of the Altair BASIC for this idea?" And Liam was pondering. Anyway, we had this whole flirtation around Hacker News and YC. And then Liam and I got talking about working together and we agreed to work together, which is a crazy decision because we'd known each other for a few weeks, but this was when you know you know. I didn't know that he would be my best friend, the best co-founder I asked for. My roommate for the next seven or eight years.
Brett: What about things like values alignment and do you have a shared vision and all the things you end up needing to have?
Sam: That actually came a little bit later. After we got into Imagine K12 we got out in the Bay Area, I forget who it was, but someone was like, "There's only one reason that startups fail." It was a talk at this incubator thing, and I was like, "Obviously product market fit. They never find it more. I know the answer." And he was like, "No." He was like, "The only reason that startups fail is because the founders stopped trying." He's like, "If the founders are trying, you can basically figure out every problem." And I was like, "Okay, why do the founders stop trying? These are tough people." And this person's point was that it's usually because you just don't share a vision of where you want to go. And so Liam and I, I was very paranoid about this. I think a lot of founders are very paranoid, but I was very paranoid about us breaking up and yeah, there's not working out for that reason. So we actually came back home that day and both independently on a piece of paper wrote down what we wanted to do or how far we wanted to go. This guy had framed it around, one founder wants to build a very large business, the other one wants to do a lifestyle thing. We basically showed each other this little bit of paper and it said roughly the same thing, which was we've left family and friends and relationships at the time to come out to the Bay Area. We're here for 90 days. We had 90 days to prove something that would then allow us to stay for longer so that the pressure was on. He was like, "Look, I just want to build the greatest thing we can imagine building in education." And I wrote something similar. And so it felt like at a very deep level there was an alignment. And I think we got to know each other more and feel out the shape of each other. We then lived together for eight years. So you learn a lot.
Brett: And do you think the two of you fit the we're very different and compatible or we're very similar?
Sam: I think we have almost exactly the same values and we express them in quite different ways. The good thing about that is there's never been a power struggle for, "Oh, I want to do product in the company." Or, "I want to do this, that or the other." It's always been quite complimentary. So we tried, actually I was very democratic with this stuff. I remember in our Series A we had an org chart that seemed important to put in the deck. We turned up and we had co-CEO on there for me and him. And one of the investors, "What is this nonsense? I need someone to fire."
Brett: I love this.
Sam: And I was volunteered, but it was never an instinct of like, "Oh, I must have this." It was more like, "Oh, we're building this thing together." To this day we have different roles in the company, but we've kept a lot of the mechanics and logistics about, we're both on the board, we've had disagreements, but it's always been just so amicable and easy to resolve. We've been candid with each other when we don't like something, but it's never been a bitter seething kind of thing. So I think there's something around intellectual curiosity. I think there's something around humility and low ego and willingness to learn and having a high rate of learning. I think that's definitely in there. I mean, look at some level, I think there's just a willingness to work really hard. PG had that thing about relentless resourcefulness. I think both of us have both of those traits. There's definitely relentlessness and a drive, but also a resourcefulness. We'll figure it out. Like a stance that come what may we'll figure it out. I think outside of that, we probably have different temperaments and it's probably a good thing because there are times where I'm up and he's down and I'm down, he's up and we can balance each other out and all that.
Brett: So what did you apply to Imagine K12 with? What was the actual thing that was in the application?
Sam: One of Liam's best friends, I think his housemate was a teacher and we talked about one of his big problems and one of his big problems was making groups in the classroom. And so we'd made a little prototype of this group making app. And so with this group making app, but we had a whole scheme for how this group making app was going to be used by teachers. Then it was going to become a platform, not to just make groups, but then to all the teaching and learning happening in the classroom and yada, yada, yada. Now for lots of reasons, this was a bad idea, but it was like we got in with it.
Brett: You applied with that idea and then you show up. And so then what happens?
Sam: We show up and I mean you know the YC motto, Imagine K12 adopted it too. Just make something people want. And so far we'd spoken to this teacher friend of Liam's and he really wanted this and we were serving this great customer and then we got to the Bay Area-
Brett: And that was the extent of...
Sam: I mean look, also, if I'm being honest, I think it was the first cohort they're running of Imagine K12\. They were like, "Yeah, these guys have some experience in education. This one's taught." Liam was doing a PhD in computer science focused on technologies that help kids learn. They're like, "These are guys great. You're a technical founder, non-technical, perfect." At the same time, Imagine K12 was putting on these dinners where we were learning about ed tech and the industry and we're getting more and more depressed about how terrible it is. And so these two things were happening in parallel. So very quickly we were like, this group thing is not a real thing. This is not going to be a big idea.
Brett: Because of what you were hearing from teachers?
Sam: It was very lukewarm. I mean, you know when someone's into the thing and when someone's like, "Oh, that's great." And we were getting that response, we're like, "Okay, it's probably not the thing," but we didn't know what the thing was. So we've used this mental model actually a lot in the company since we called it the barbell approach where you have clarity on both ends. Clarity on one end was like, "Look, in the end, I think it's very important that everyone in the world gets to discover, develop their greatest talents and capacities. That's a thing, that's how the world should work, and I think there's a great business to be built there." On the other end, you're like, "What's the first step?" And all the steps in the middle, it's okay for those not to be completely well-defined on day one, you have to be able to learn your way into them. But we were struggling to find this end of the barbell. We're like, "What is this end?" And then we had this very, again, very formative conversation with Reid Hoffman who came as a speaker to one these things. Now we'd got to the point where we were saying, "Look, we think we're going to be a consumer company. We think kids and families are the right people for us to serve." We were like, "Look, this isn't working." Literally the tenor of the discussions we were having from the ed tech people was they're like, "Oh, it's so hard." We had someone come in and he was like, "Look, I'm going to tell you the secret to unlocking sales." And we were like, what's the secret? He was like, "You have to charter a boat and then take all this particular boat in Chesapeake Bay and take all these superintendents offshore and for a day and sign all these." I'm like, "This is not what I came here to do." So I think we had a lot of conviction that we're going to build for consumers, for kids and families, and that's going to be the audience. So then we had this conversation with Reid Hoffman. He came as a speaker and we were talking excitedly about this. "We're going to be different to all these others we're going to build for consumers." And he was like, "That's great. Consumer companies are great. Obviously I've been involved in a lot of them." He's like, "The single most important thing for you to figure out is how you're going to grow." He was like, "It's the hardest thing about consumer companies is how do you grow without spending more and more money?" And then Reed being Mr. network, he was like, the best thing, the most enduring thing at the heart of every business or great consumer business on the internet is some kind of network. And so basically, we didn't know it at the time, but that was basically the thesis of the company being formed right there. The question being put to us was what network reaches kids and families in perpetuity and at scale? And the implication was if we could build a network, then we would have a lot of time to build great businesses that people would pay for, discover what people would pay for. If we could never build a network, then nothing else we did would really matter. We really took this, I mean, I was a big nerd for basically all of Reid's writing. He'd published the LinkedIn Series A or Series B deck or something, and the whole thesis was network first, networks are valuable, build a network and then you'll build businesses on it. And we basically took that. We were like, "Okay, well we have to build a network that reaches families and kids, and that's the binary risk. That's the thing we have to do first." And we're both pretty obsessive people. So that became the only thing we did for the next six or seven years in the company. So then the question was what's the network? And that's when the penny dropped. We're like, "Well, hold on, teachers," I've been a teacher, so it's familiar. We're like, "Hold on. Teachers are in this very interesting position where every teacher first, they actually do the education. Second, they're in front of lots of kids and parents all the time." And so the thought was, well, if we could serve teachers, maybe we'd be able to serve kids and families as well. Maybe they'd take us to kids and families too. And so that then started this obsessive period of talking to teachers and really trying to understand their needs beyond Liam's first friend. That mostly came Liam did a bit of it, but mostly came to me. I was like, okay, well, I think in those first 75 to 90 days, probably 75 days, we had hundreds, hundreds and hundreds of teacher conversations to try and understand what their real problems and real needs were.
Brett: So what did the conversations sound like with all the teachers?
Sam: A lot of it was just open fact-finding. I had this question I like to ask, not the most fun question, but it really got to stuff, which was, "What's the worst part of your day? What makes you cry about your work?" And so we'd have these funny conversations where they'd be excited. I'd say we were doing everything we could to get in front of teachers because we knew nobody in America. It's hard to overstate this. We were staying in a Motel 6 for a few the first week or two because we had nowhere else to stay. Then we found this single room place in Palo Alto that, I was in one corner and Liam was in the other, and it was very humble beginnings. We knew nobody in America, we'd never lived here before. We had the Imagine K12 people had funded us. We had a little crossover with the YC folks, but that's it. And so we were just on our own in our little room. And so I just started cold calling, cold emailing, asking friends, friends of friends. We went to the local schools like Gunn High School in Palo Alto and others, and just soliciting teachers basically to talk to us. I ended up teaching summer school for a few days actually at Gunn High School in exchange for the teachers talking to us, whatever we could do. But the conversations really went to, "What is the worst pain?" That whole painkiller over vitamin thing? We're just like, okay, we took that very seriously. We're like, "What is the worst pain? What's the worst part of your day?" And we just kept getting deeper and deeper. So initially there was all kinds of good sounding stuff would come up. They'd be like, "It's marking homework, it just so annoying you marking homework." And we'd be like, "Oh, okay." But also you decide how much homework you want to set, roughly speaking, so what's really going on here? And they're like, yeah, "It's not actually the mocking homework. It's actually I get home and I'm just exhausted." And we're like, "That makes sense. Everyone, it's a long day. It's 10 hours a day, but there's other people work 10 hours a day as well. Why are you so exhausted?" And they're like, well, "It's actually, it's not that I'm exhausted. It's like I just had this one kid or one family or whatever. I'm having a real problem with them." And it basically boiled down to a human issue. They're like classroom management because some kid was causing them issues and disrupting the class. Or it was a family that was upset with them and they were having a flame war with them over email or something. And we were like, "Oh, that's an interesting thing. That's an actual human issue." That's the thing that you worry about because it's a human being on the other side of it, the rest of this is kind of workflow and whatever, transactional in a way. But these things have emotions attached to them. You could see it in their eyes, you could even feel it. And then you'd go even deeper and I could empathize with this because I'd taught, they'd say things like, "I didn't get into teaching to do this." And so there was this vision that they had of themselves that just wasn't coming to light. That's when you get that tingly sense of, "Oh, there's something here." And so that's where our first product idea came from, where we realized one of the big problems for teachers is it's called classroom management. So you've got 30 kids in a class and how do you keep it a positive and good learning environment? And that the main technology they had was basically punishment. It was like wait for things to go off the rails and then give kids detentions or raise your voice or yell. Or all these kinds of things that you just wouldn't do if you were designing a great environment. And so then we thought a bit about what a better way would be. And our first product was just a really simple way for teachers to give kids positive feedback. So it almost it felt like a game. It felt like a little toy, but as a teacher, you could sign up on a website at the time, you'd sign up, you'd put your class list in, you would add the values that you want to recognize in your class, like helping each other, kindness, curiosity, whatever it is. And then during class you could say, "Brett, that was a great example of asking a great question. Here's a plus one for a great question. You get this little sticker." Now, one of the things that was very important was we were in person for a lot of these. We did a bunch of phone calls too, but we were in person for a lot of this because a lot of this was happening in the classroom. So we'd go and see how teachers were using this early product in the classroom. And so you end up getting these little sprinklings of delight, which you totally wouldn't have done if you just stayed behind a computer screen to look at it. So one thing we did was when a little sticker would appear in a kid's profile, we had a little, "Bing," sound like a very pleasant kind of nice sound. Liam spent some time on it.
Brett: At the time you weren't concerned that this isn't a business. This is a little game?
Sam: There's a couple of things. One, we knew we wanted to get to parents, so we knew that. But the precondition to that was the YC mantra is, "Make something people want." The steps were in our minds, make something that teachers want. Step two was like question mark. Then step three is like money, but step two is get it somehow to kids and to parents. And then step three were like one day we'll build things that we think families want.
Brett: But the starting point for everything is we need to build a network? And the network needs teachers, parents and students?
Sam: That was our theory.
Brett: And then you were actively, as you were talking to teachers, as you were talking about, you were actively trying to figure out what is the unit of value in this network?
Sam: Yeah. Well, we didn't have a network to start with. We had a tool. The thing I just described as a tool, you could say there is a little bit of communication inside the classroom, teachers with kids or whatever, but it wasn't like what you think of as a network. What happened next was, so I should say this product exploded in popularity.
Brett: And you just took it to the people that you had spoken to?
Sam: Took it to the people that we've spoken to. And Mike, a third of them used it and they were blown away. We can ascribe some to a nice product, and we did a good job of that. I think the other part of it was we picked a customer that was massively underserved because no one cared about teachers because they don't have that much money, so why would you ever build products for them because they can't pay you anything. But what we realized was, well, hold on, there's a huge amount of pain here and actually they're a trusted figure and if we could serve them, then you get access to a whole lot more. And so it was looking whether people weren't looking. Maybe there's a parallel to the business model side of it as well. So it's not obvious, but we were assessing over serving teachers, that exploded. I think so one of our investors, we actually went to college together, Rahul from Superhuman, who was like, there's only one real growth channel, and that's word of mouth, and that comes from making a remarkable product. They're literally remarkable. People want to remark on it. And this was that product. Teachers would tell their friends about it and it was like became this crazy wildfire. So every batch of the YC companies, whatever, there's always at least one company that has that kind of ice hockey stick. So we were the one that started through away our idea when we turned up and everyone was like, "They're toast. They're never going to make it." And then we turned up a demo day and we had this crazy looking hockey stick chart. We'd gone from zero to, I think it was like 10,000 teachers using it out of the gate.
Brett: Before you ship the product, did you think this is really going to catch on and people are going to be obsessed? Or it's, "Oh, see what happens with this thing?"
Sam: We had a strong sense that there was a real pain here. I don't think we expected the spread. It really took us by surprise. I think we hadn't realized just how underserved teachers were. There's lots of amazing characteristics. We realized teachers don't get into it for the money or the fame. They get into it largely because they care about the mission. And when they find something that helps them on their mission, they want to tell other people about it. And so they tell other teachers about it. There's lots of other things we can talk about and the specific to teachers, but we learned a lot of that as we got into it. I talk about the resourcefulness thing. There's something to looking at a situation with different lenses. And you look at teachers and say, "Oh, it's a very bad business or revenue channel." Or you can look them and say, "Hey, it's a user with real pains that influences a lot of other people."
Brett: What was your feeling about that? Were you elated?
Sam: I mean, elated, amazed, pinching ourselves, all of which was unexpected. But I remember on demo day, the big, everyone was very riled up because Paul Graham was going to be there and the rumor was he was going to invest in the company. And Paul comes over to our booth thing after the presentations, there was some metric I'd showed about how quickly the feed points giving was growing. And he goes to Liam and is like, "Hey, Liam, can you just show me that metric over two weeks or something?" And Liam's like, "Oh God. Paul Graham's asked me to show him a metric." He dives into terminal to try and pull up the right stuff. And Liam's like, "Oh, it's going to take a minute." And I had thought it would be great to have a box donuts there because that would be a draw for people. And Paul's like, "That's fine. I'll just have a donut and wait." So the pressure is on. Anyway he ended up investing.
Brett: What did he think of the donut?
Sam: That's excellent. Really went for high quality donuts. Yeah, this is at a time. So you at a time when I had \[inaudible 00:31:36\]
Brett: \[inaudible 00:31:36\] the business that your angle on fundraising was let's have some donuts in here?
Sam: No, I was like, look, it was a goal oriented thing. I'm like, you're not sitting at the demo day hoping to fundraise. You're sitting there to get people to come to you. And I'm like, well, let's draw some more attention. If the hockey stick doesn't do it, the donuts will.
Brett: So then, okay, so you had this app and the app allowed teachers to give virtual rewards?
Sam: Stickers. There was no reward in a way. It was just stickers as feedback. So then a few months later, we were looking, we basically got enough interest in the company because if we were to go, this thing's growing, we don't really know where it goes, but we closed a seed round. We're then looking at some of the cohorts and we started to see that there was a set of users that were incredibly sticky. They'd come back every day. And we clicked a bit further into it and it wasn't obvious what they were doing in the product, but we called them and spoke to them. And basically it turns out they were taking all the rewards as a snapshot and turning into a PDF and sending it home to parents. They're communicating with parents. And this was evidently a very, we didn't know if correlation causation or whatever, but it fit a pattern of like, oh, well actually communication's a very sticky thing. You've probably been in WhatsApp groups with your friends, very hard to drop out of them. And so that then turned us onto, oh, actually what we're really building as a communication app. And a few things snapped into place. We're like, "Okay, that's a way to expand from teachers to parents and kids and really start to build a network." Two, we discovered just how high retention and high engagement that is as well. And so I think finding those golden cohorts was really important. That was almost like a second part of market fit moment for us. And so Dojo then expanded. We built parent accounts, kid accounts. The median experience of a parent is, "I don't know what's happening at school. I maybe go to a parent-teacher conference once every six months and sometimes I get a piece of paper home in a backpack, and yet this is the person I care most about in the world." And so to go from that to this seemingly, there's a very trivial thing. It was like "Brett asked a good question today," but knowing that then starts the conversation at home of, "What was that question you asked? What did you talk about?" And that's an amazing moment for the parent and the kid. But I think that then teachers were like, "Well, we're sharing these positive moments from the classroom instead of bad news and your kid got detention where you're now showing positive news." And so that was a great lift for everyone. And then it became very natural, "Well actually we want to talk about that. We want to send messages." Teachers are like, now Dojo was open in the classroom. They're like, "Now we want to take pictures of what's happening in the classroom, little snapshots of moments in the classroom." A video of this, the kid doing a poem or whatever, just real cute kind of stuff, these younger kids. And so Dojo basically from there expanded into, I think what the first product we ever built was this communication app. And it was very useful for kids and teachers and parents because it kept the whole community connected. It also served this goal of growing the Dojo network, which we can talk about.
Brett: Yeah, share a little bit more about what was the first version, I guess, of the second product built on the back of the stickers product?
Sam: Yeah, it was just a simple extension. We built parent accounts, so you now had a channel to the parent and the kid was in there as well. You can message the kid as a teacher, obviously, but the kid and parent accounts were attached and you can message back and forth. And then the next version added a camera. And we were like, "You can now take pictures in the classroom." And then we added video. And so it progressed from just sharing stickers to basically communicating about really nice moments in the classroom.
Brett: And so what were the numbers of the business at that point, roughly? What were you seeing? How fast was it growing? How many people were using it?
Sam: Oh my gosh, it's really hard to say, but I mean look, I think at the seed round, I think I know we had maybe some maybe 10,000 teachers ish using it. I think from there, this Series A, we basically just showed continued teacher growth and the beginnings of some parent growth. There's about 2.8 million teachers in the country, so I think we got to maybe one in 20 or something like that in the US. One interesting thing was we'd also started to see international growth completely organically. So we were actually at the end of 2012 I think we were in 40 or 50 countries with at least a few users.
Brett: And so did you think a lot about how do we get this thing to grow faster?
Sam: We did. Yeah, we did. Initially, like I said, it was just we're just building a great product and people love it and they tell their friends about it. I think it was, I forget now, it was one of those summers that summer, or the summer after we basically got a bit more involved in trying to learn about how this thing was growing. And a few things happened. One, we realized, I actually went on a user research visit to a middle school in the city, and I was sitting in with this science teacher, her name is Jenna, and we were like, "Wow, she's a great teacher. She's using Dojo." We were just there to learn about what's working and not working. Go back to the office. I think a week or two later I get an email from Jenna and she was like, "Hey, I'm going to take a break over the summer from teaching, obviously. Can I come and do an internship at Dojo?" And we were like, we don't really know what she would do here. And we were four or five people or something, but we're like, "Yeah, sure, come by, maybe do some support." I was doing all our support. I was probably like, "Please do all support tickets here." But a month into her internship, she comes back with this secret project she's been doing. And the secret project was her view of how we were growing through schools. And basically what she was able to show was that in all the schools that we were growing in, we had found one really passionate teacher. And it turns out we found out later on that most schools follow this kind of bell curve of distribution. Where you have really passionate, excited teachers and a bunch of module users, a bunch of laggards, but she was like, "These passionate teachers, these are people like me. These are people who really want to be on the cutting edge and do cool stuff and find the best things." And she's like, "I think these people are our champions and we should help them." And so she basically became our first community leader. She never went back to the classroom. And so she built this community where we'd get the power user from every school. And they would all meet each other and they'd be like, "Oh my God, there's people like me in the world." And that was another big inflection point.
Brett: And you did that in person or was...
Sam: We had a few in-person meetups because we did it regionally first, but then it became a Facebook group. They all had really deep relationships with Jenna. They knew the whole team. And so that, again, there's really no substitute for that. You can't really fake the care. They would text and they'd get a text back. You can't fake that. So I think that was one very important thing.
Brett: What are the other sort of things that helped inflect growth?
Sam: We started to realize in the US we had this around the world now, but we had this land and expand dynamic where we had to get to our first team basically using Dojo in a school, our first classroom. And then there was a path to expanding to the classroom. Now we have a weird stat in the business, which is hard to believe, but it's true, which is that to this day, we still haven't paid a dollar for user acquisition. So 100% of our growth has been some combination of word of mouth, virality, some community stuff, like basically zero marginal cost programs. But I'll give you an example. We would find what was working and then amplify that. So we found teachers were sitting in school doing professional development sessions. Now this is the thing teachers have to do. They have some hours they have to cover. And they were like, "I'll do a professional development session on Dojo. This is great. This is the latest thing I found this year." And we sat in on a few of these we're like, "We could just give you a really good PowerPoint presentation and we could probably put a QR code at the end of it or a link that you could flash up on the screen and everyone would join." Turns out that worked magnificently. It was such, in retrospect, we don't get that unless you go right down to the detail. The second thing we realized was that as silly as it sounds, there was no interaction effect between classrooms. So you could just use it next door to each other and not even know. So we built this concept of a school, you would join a school and now you could all see each other if you're in the same school. So you became the contact book for the school. And that was obviously a very sticky feature, which you've seen in WhatsApp and Discord and a bunch of others. So there's at least a couple of things. There's a couple of things that are working in the world and product, because we're product people. I think thinking about how you create network effect products was important to us. And so we started to see, and if you look now, Dojo is used in nine out of 10 schools in the country and maybe two or three times as many as that internationally. A lot of it's still been this land and expand dynamic.
Brett: What gave you the confidence to just grow this thing for many years without thinking about the actual business?
Sam: One, we'd done that monetization test early on, maybe a year in. We were pretty nervous about it. We didn't really have a product to sell parents. We were like, "Well, we haven't built anything." So I think we created an avatar set because kids had these little monsters we're like, oh, you can just customize your monster, give them a hat, whatever. This is very cheap to do. And we just popped in the parent account. And you don't even remember what the conversion rate was. It was abysmal. But we're like, "Oh my God, people are paying us money." This is first dollars in the company. This is incredible. So we're like, there's going to be something. We don't know what it is. It's probably not this, but there's going to be something here one day. I think it was more just a confidence building thing for ourselves. The real answer might just be we had burned our boats at that point. We turned up in the US we had this very specific thesis. We'd raise money on that thesis. We still thought we were right. The theory still made sense. We were still making progress. Every year we turned up with more teachers and more families now more kids now as well, it used to be just teachers and expand these other groups. So yeah, we were like six or seven years in, six. It was 2018, 2019 when we were like, "Oh my God, we think we've got the beginnings of a network." And then we kept seeing adjacent behavior or emergent behavior. I think that's a really important sign actually in consumer products. I think there's a lot of, probably not as important in the enterprise world, but in the consumer side of things, we are very careful not to overbuild and really tightly specify how you must use this product. We actually kept it open to see what would emerge. And so we saw a bunch of emergence. One was the international growth. Nothing we did, we didn't translate the app. Eventually we built some software, which allowed our users to translate it, but we started to see, hey, people love this. They tell that teacher they met on holiday about it and they start using it in their international school in the Netherlands. And then there are three other international school teachers, "What's that thing with the monster?" And they tell. And so we started to see these spread patterns around the world. I was like, "Oh, that's really cool." Now it's in 160 countries or whatever. But that was one. I think the second was we started to see other groupings of kids using the app. So beyond the classroom, sports clubs and afterschool clubs and daycare. And we're like, "Oh, so this isn't just classrooms. It turns out kids are many groups that could be enormous too." Once we hit a certain level of scale in the US, know something like one in four, one in five families in America use Dojo now every week. We start to get a ton of inbound from the institutions, from schools, from districts, from states, in some cases from some federal governments. And so I think there's these moments where maybe it's more of a feel thing where you feel like you've, who said this? You feel like you've got into a pool and then you get to the edge and you realize it's actually a lake, and then you get to the edge and you realize it's actually an ocean. And then we just kept feeling the sense of expanding possibilities in the communication app that we were building. And so I think that just felt like we were onto a thing. So keep going.
Brett: What's the story behind launching the first business?
Sam: We got to 2019 and basically it was more just a feel thing. We were like, "Look, we think we've got the beginnings of a network here." Think it was us and Roblox was bigger, but we were like there's, we're one of the two biggest networks on the planet for younger kids.
Brett: And this is millions of users at this point?
Sam: Yeah. Millions for sure. I think there's 25 million families in the United States with kids under 13.
Brett: And I assume the product was also highly retentive, which was super important?
Sam: Yes, super high. That was maybe one of the other things that gave us confidence was that we had incredibly high retention and incredibly high engagement. To this day it started high and it's got even higher as we've grown, but it's an incredibly sticky product. People love using it. The other thing was, it was all voluntary usage. We haven't twisted anyone's arm. It's not your school district is going to check out on you. It's just like, "I chose it." And so I think when you see those signs, they're so rare. Every time we show them to a consumer investor, the B2B investor just didn't get it. They're like, "What is this thing?" The consumer investors are like, "Oh my god, is that real? Is that weekly to monthly ratio real or is that retention curve real?" And we could just show, you see companies with consumer apps usually have 5 to 15% retention to 30 days later or something. And we were at 6 x that six months later, it was wild.
Brett: Was most of that six years just incrementally making the core product better? What was going on for those six years other than working to grow the business in all the ways you discussed?
Sam: Honestly, it's hard to convey how hard those years were. We got to seven years in and we were 30 people and we had done the Series C at 30 people with $0 in revenue. And we had the exact same thesis. I actually wrote a strategy document a year or two into the company which tried to articulate this so that we could just give it to investors. Everyone still reads that document today. It read like, "Our mission is to give every kid on earth and education they love. We think this is fundamental to progress. It's this single biggest enabler of progress on the planet. And the question is how? Step one is we're going to serve teachers. Step two is we're going to expand from teachers to this whole community of teachers and kids and families. Step three is we're going to build products and services for families that help their kids learn and grow in all the ways they want. And that's where we're going to build some great businesses." Roughly speaking, there's a lot more depth to it. But yeah, so it was incredibly hard because you have this gun pointed at your head basically, and the bank balance is going one way. And you have this really high conviction, maybe high conviction founders with a thesis that no one has ever proven before. Again, let's not align it too much. I'm just thinking about the moment in time where we were in our mid 20s, we'd moved to America. We had basically no attachments. We were living together every day and working together every day. Again, we burned the boats. We're like, "This is thing. We're going to make this work."
Brett: So how in 2019 did you decide now is the time that we're going to start a business?
Sam: I think we had just finished the Series C and we're like, man, we can't do another round with it.
Brett: We got away with it. It's been six years.
Sam: We're like, okay, it's been great. We now have, now it was the big news is we had millions of parents on Dojo and that had never happened before. We could show millions, not like a few hundred thousand, and we're like, "Wow, okay, we've got a large audience here." And so we were like, okay. We're feeling pretty encouraged about the progress on the network side. That was never the end state of the business. That was always a precondition to the next thing, which was starting to build businesses that serve kids and families in all the ways that help kids learn and grow. And so we started with honestly what felt achievable. It's a product that we still have, it's called Plus. It was at the time it was called Beyond School. We had this observation that families don't actually know how to spend money to make their kids' education better. I'm like, well, what if with confidence you could say, "This is the best $100 I can spend." We started a small team, which was working on the paid product and it was called Plus or Beyond School at the time. Then really quickly rebranded to Plus. And we basically put in a few features that parents had asked for a long time that we haven't got around to building, and that just exploded. One of them was, there's a feed of photos in the Dojo app, photos and videos. So instead of scrolling down this feed of photos and videos to see all your kids' pictures from last year or earlier in the year, we'll just make some nice digital albums for you. We call them Memories. And so you can check out these Memories and it turns out total nice to have. You don't have to buy that, but a lot of people really want that and it's a good feeling thing. And so that was one feature. Another one was the stickers that teachers were giving, you could give those at home as well, and some parents wanted that. So relatively small extensions to the core engagement loops in the product, but they were built around the core engagement loops that we'd been building for years. And so we built this and it just started to grow.
Brett: But how does that map to this is the best $100 you can spend?
Sam: It's not yet. But it's going that way. So it started with, look, the value there was let's keep you better connected to the classroom.
Brett: It started with premium features?
Sam: For some premium features, yeah, for sure. But the idea was that you want to start to add and more and more value to this over the lifetime of a customer. You want to have so much value in this that it's crazy for you not to buy this, but we have to start somewhere. Right now we can't start with deliver the whole vision. So we launched this and that just started to grow and grow and grow and grow.
Brett: And you're talking about millions in revenue very shortly?
Sam: Yeah, year one was single digit millions. It was 2020, but that just scaled very quickly. A growing percentage of our base was like, "Actually, I want this."
Brett: And it was priced $100 a year?
Sam: Yeah. I mean, monthly and annual packages varied or whatever, and the annual was a little cheaper. The monthly would equate it to about $100 year, but that was the first business. And again, it's hard to describe how in a company that's never made a dollar to then build your first business and for it to start to work, it was just a game changer. Because it gave everyone conviction that, "Oh, we can build a thing that monetizes." And with that, we started to just fund the business out of our own revenue for the most part, the team was still quite small. It meant we could extend our horizons a little bit and plan on different horizons. So when we were early days, it was just build the core products. The only thing we then got to this, we didn't know to call it this at the time, but basically a capital allocation framework. We're like, "How much money and time do we put into our core and what adjacent bets do we take?" And then what are venture bets that may or may not ever work out but are worth investing in on a very long-term horizon.
Brett: For those three years, it was basically premium features?
Sam: 2021, '22 was just premium features.
Brett: And most of it was driven by just what you were hearing from parents?
Sam: Just with families. Yeah. Now I think there's a lot of people talk about just listen to your customers and build a customer. I actually think it's incomplete advice. So for us, I got very lucky. I ran to this guy Gib Biddle, and he had this very clear framework, which we basically just totally stole in the company, which is the job is at the intersection of delighting customers in hard to copy margin and hones in ways. And hard to copy is an interesting one because that's one we thought so much about given the history of the company. There's a book called The Seven Powers, Hamilton Helmers, the author, and I got in touch with him and he was at Stanford and I was like, "Hey, could you come and talk to the company about this?" And it was preposterous. We're like 35 people or something, but he came and talked to us about it. It's really become foundational in the company. I think the intersection of those few things, how do we delight people in ways that create moats for the business and that create good businesses started to become a bit of the mantra. The second business we got into was what we call Tutor. We realized from families that a lot of families really want more attention for their kids than just what happens at school. And they substitute it by, "I'll try and help," but a lot of parents don't actually know how to help. And turns out it's not an easy thing to get great help for your kid. It's a bit trying to find a good doctor. You have to trust them. And then we looked at companies in this space and it turns out they're not very good companies, but you look at the businesses and a lot of them really struggle because they're paying a lot to acquire demand and supply. They usually have high churn because they're studying for an SAT. It's a high takes moment. Then you leave. And all that turns up at high prices or the business gets margin compressed. We realized, well, hold on. Dojo is we've got this huge community of teachers and families. We can just connect people. And because kids are younger, there's no natural churn moment. It's not like you're studying for an SAT when you're eight or something. And so we built the first version of this service. We actually found two founders. There's another weird thing about the company. We have a lot of founders in the company. I think it's like 50 or 60% of the company is former founders or founding team members, first marketer somewhere, the first engineer somewhere by design. But we found these two awesome guys, Gonzalo and Benjamin, they were YC founders. They built one the largest tutoring marketplaces in South America. And I was helping them raise their Series A. And they were like, "Look, we're going to spend all this on user acquisition." And I was like, "Well, why don't you just build this on Dojo?" And they were like, "Actually, that could make a lot of sense." So they joined Dojo, rebuilt the product on Dojo and it's just exploded. It's like millions of tutoring sessions happening on Dojo. It's way lower price than anywhere else you'll find.
Brett: And it instantly worked?
Sam: It didn't instantly work. We had to go through a few revs of it.
Brett: What were the revs?
Sam: Yeah, so the first rev was initially we built kind of the, before Benjamin and Gonzalo turned up, we tried to do it ourselves and we basically built it like a product rather than a marketplace. So the product we built was we'll find some teachers. And basically we tried to be the provider rather than setting up a marketplace where supply and demand could meet each other, which was more like what we had done before. We'd always built the product for you. And so we built that and we just knew a month or two after launching the first version of that, we were like, "This is just not going to scale. It's not going to work." Or, we're trying to be a school and you're going to get into all kinds of school issues. And so we got out of that quite quickly. But then we met Benjamin. I'd been talking to Benjamin and Gonzalo and said they joined and then it started to work.
Brett: And so what was the form factor of that product?
Sam: We actually didn't have a catalog or anything. You would just sign up initially. Initially it was just email marketing. We'd email our user base and say, "Hey, we've got this tutoring thing, you can get some tutoring for K-5 reading and math if you want more help in it." And then we would match you with one of three tutors. You could pick one of the three. And then you'd basically just have almost like a subscription to this tutor or you'd subscribe to this tutor and you'd see them every week or twice a week, whatever virtually. I think we'll do it in person eventually too, but virtually. And that just exploded in popularity. You'd have kids absolutely love it. Teachers would find out about it and then they would tell parents to do it because they're like, "I can't help Johnny as much. Can you just do this?" And it's 30 bucks a session. It's affordable for a lot more people than what tutoring had been. But the thing that really blew me away was something like two out of three families paying for that had never paid for a tutor before in their lives. So this wasn't-
Brett: Classic for the market.
Sam: This wasn't like, let's take the 1% and migrate them over. This was like there's a whole set of latent demand. Again, so one of the market risk thing, people are like, "Well, it's only immigrant parents or top 1% parents that pay for tutoring." It's like it turns out parents actually care for their kids, but there's a lot of friction in expressing that care.
Brett: Exactly. And the business model was a rake. You were just taking a percentage?
Sam: We're just taking a percent. Yeah.
Brett: You standardized the fee or you let tutors do whatever they want?
Sam: \[inaudible 00:54:38\] standardized to start with. We may still allow tutors to set price at some point, but it's like you just want to minimize the variables to start.
Brett: And were tutors existing teachers on the network?
Sam: Yeah. They're all \[inaudible 00:54:47\]
Brett: So you didn't go and recruit?
Sam: They're all still existing teachers, which is pretty amazing. There's a few joining off network now and that tutors are bringing demand from off-network as well, but that started to be our second growth engine in the company. Lots of exciting adjacencies around the subjects and grade levels and geographies and formats and lots of stuff you can get into, but the core of that is just looking like an amazing business too.
Brett: And then have you worked on the next business that you're going to launch?
Sam: Yeah. I mean different levels of maturity. So these are going from most to least mature. The next one was a crazy one, but this is a real, I think it's the kind of thing startups should be doing. So in 2021 we were talking with a bunch of parents. One of the big concerns we were hearing was, "Hey, screen time, my kids are spending all this time." It wasn't even just the quantity, it was like, "What are they doing? My kids are online. It seems bad. I don't know what they're up to." There's lots of fear, uncertainty and doubt. And the truth is you're right as a parent to be worried if your kids are under 13 and on the internet because there aren't great places for them to be on the internet. It was never really built for younger kids. So you usually get either quite boring single player apps and then to make them more exciting, you have to have all these engagement mechanics, which aren't great for kids, or you get multiplayer apps, but they're full of strangers. That's what happens on a few of the bigger gaming platforms or whatever. And now your kids amongst a bunch of strangers and we know all the downsides and weird effects of that. So what we realized was we were like, "Well, hold on." And this was actually my co-founder, Liam. He'd helped build one of the world's biggest games for kids back in the day called RuneScape. What we realized was, well, we've built this large community, but the community also has real relationships baked into it. You have kids and their parents and the teachers and their friends. We're like, because we know who you are, we could make a place where kids can be with only their friends, no random strangers, no weirdos, and that everyone would feel way better about that. Parents would feel better because it's a closed community with just my kids' friends, it's like a playground basically, where I know everyone in it, kids would feel better because now you can actually have fun rather than having a bunch of creepy strangers around. And so we start to build this place called Dojo Islands, which I could show you, but it's a virtual world where every class gets an island, they get to build this island together, so it's very Mindcrafty, you build this virtual world together. And then you start to discover games and activities spread across this island made by the kids. And so it was such a crazy, when we talked about it with the board, they're like, "You're a games company now?" And to me as well, I was like, "Oh my god, Liam is excited about this idea. I don't really know that much about it." But the more we picked it out, the more we realized, hold on, this just makes so much sense. If you could make a place basically the best place on the internet for kids where you knew your kids were going to be safe, you knew they were going to be doing wholesome stuff that was helping them learn and grow, you'd want that place. And so that's what we started to build and we launched it quietly in 2023 and it's just exploded. It's also now millions of kids.
Brett: And the primary experience is you're doing these things with your classmates?
Sam: With people you already know.
Brett: So it's not necessarily just your close friends in the school?
Sam: Yeah. Now you can peel off into smaller groups or whatever, but the superset is just people you already know.
Brett: And what's the fifth business?
Sam: Our CTO Dom turns out he homeschools his kids and we were talking about AI and the impact of it or whatever, and he taught them to read, there's a couple of great books you can work through to get through the science of reading like phonics. And he was like, "I think there could be a really killer product here." And he just went off on his own for a few weeks and he was like, "I think we could build an AI reading tutor here." And we were talking about it and we were like, look, I think everybody in the world wants the AI tutor for their kids, but you look at the way people are building it or the way it's going, it's not clear which one's going to work out. And we realized, well, we've got all of this information on how kids learn. That can be really helpful here.
Brett: What data did you have on the way that kids learn?
Sam: To start with it was like what's happening in the classroom, what your kids are doing. So it's a bit more contextual information, what kids are up to rather than specific information about your learning. People add their work and things to Dojo so there's a few things, but more than that we have deep engagement. Dojo is open on the phone or in homes and classrooms many days, many weeks. So there's lots of opportunities for engagement. And so I saw Dom and he was like, "Look, I think we should have a crack at building this." And he started to build it and so we launched it quietly last quarter. It's called Sparks. So it's an AI in the end it's going to be the AI tutor for your kid. It's starting in reading because that's basically a huge use case. We speak with families and hear from them all the time. That's one of the biggest needs they have. And it's got two parts. It's got a tutor, a little guy called Sparky who has this conversation with your kid and learns more about their preferences and where they're struggling and all the rest of it. And then a series of games and activities that lead kids through the science reading. We can take a kid from not knowing how to read to early literacy in three or four months in about 15 minutes a day with no humans involved. That's never been possible before. It's super cool.
Brett: Is there anything else that comes to mind in terms of things that you figured out in how to launch multiple products or multiple businesses?
Sam: One of the instincts was just the talent in the company. I had this mandate that we want at least half the company to be founders or former founders or former founding team members. And you can look at these businesses and all of them have a founder type at the core. You look at my exec team, it's all got former founders or close to founder. Our head of product was the first product person at Khan Academy or one of the early ones. Dom, the CTO is multi-time founders, X and a couple of businesses, a bunch of others. Our CFO was like the first finance person at Plaid. So you've got these people that are used to that muscle is intuitive to them. So who knows, we're still a relatively small company. It's 230 ish people.
Brett: So that's one of the biggest parts is to have sort of founder DNA that we're directly point on getting the new business off the ground?
Sam: Yeah, I think you want to find DNA for it. And then I think also almost like the orientation. For Dojo, like it's a really ambitious company. We want to give every kid an education they love. We're not saying we want to teach every kid to read, which is one part of an education or one part of a childhood. So it's quite a broad mandate. And then you have to be smart about which verticals you get into, which categories you unlock and so on. But I think everyone has the understanding that, oh, we're not like a one product company. It's a multi-product, multi-revenue line company. We have to be thoughtful, we have to get good at allocating capital and resources and time and energy. But those are also skills that we built in those first six or seven years because we couldn't do superfluous stuff. We had to be really just laser focused on what's the critical path to making this network work. And so I think some of that DNA transfers into these other things as well. You get into Zero to One, what's the critical path? There's not so much posturing. Actually maybe this is actually an important thing. There's this great book, it's called Leadership and Self Deception. One of the unexpected benefits of the gun to the head time of not having your revenue and going to network was that you had to be incredibly candid with yourself and with one another because it was just like time was running out so you couldn't fluff around and be like, "Well, it's I guess not that bad or whatever." If something wasn't going to work, you had to say it early and say it loudly and we had to talk about it and find a way forward. And so I think it built a culture. We have a value in the company we call candor over harmony. It's not that we don't like harmony. It's like if we have to pick as a trade-off, we'll pick candor. And so I think creating a culture of candor has really helped because with early stage ideas, it's very easy to not say anything to be like, "Well, I'll just keep eking out 2% wins over here." But someone's like, "Look, we're missing the boat on this, that or the other. We need to get into that." Another great example actually is one of our product leaders, his name's Brendan. He did this total side project, which I didn't even know about. He was like, "Look, clearly every teacher in the world is going to have a teacher's assistant. And we're in classrooms with teachers. We have a lot of trust with teachers. We should get into that and help." And so he just went to teachers did the same process I described. He was like, "What's the worst problem?" Everyone knows that story by the way. He would ask similar questions, "What's the worst problem? What's going on?" Then he arrived at, there's a whole set of more than half of the teacher's work week is taken up in admin work. I think it's like 55 hours is the average work week that teachers work and 48% of it or something is teaching. And he was like, "We should just abstract away all this stuff." But that just emerged in the company. I think building a culture where people are like, they know that we do Zero to One stuff, they know that there should be candid when they think we're missing an opportunity and then they have the muscle to do it, I think maybe some of the ingredients.
Brett: When you think back to the path into originally getting the company into product market fit and these kinds of different chapters or businesses, what are some of the meta things that you've figured out that are useful for other founders to consider and maybe some of the things that are less obvious or less discussed and the types of things that generalize? I'm sure there's tens of thousands of things that you figured out, but really it's useful in the context of this business, but the more generalizable things?
Sam: At every one of these businesses we've talked about, we had a thesis like an end, "This is what we think this could be." And we weren't always sure of all the middle steps, but we had a thesis for what this could be, this is why we could win, et cetera, et cetera. And in some of those we had to change our minds on some of the assumptions, but it was never like, let's just throw some spaghetti against the wall and see what happens. I think we had this lens of delight people hard to copy margin halting ways. Let's have a little bit of structure around picking the direction in a way. And so I think people maybe just don't talk about that. It's just make something people want. But you were asking me earlier about how much did you assess the market, that was maybe our version of it. It was like have a point of view and then update that point of view over time as you learn more. I remember even on our first funding deck, we had a series of hypotheses that need to be true for this business to work out. Things like parents will pay for a product and stuff like that. So I don't know if that's not obvious, but I feel like just that makes some people walk alone maybe misses that and I think it's necessary, even not sufficient. Dojo has this breadth of products, but I think at every point in the company there's always a choice, do you go deep or do you go broad? And it's basically almost always been right for us to go deep. And that's all we did for the first six or seven years until we found some kernel of delight.
Brett: Why do you think that is correct?
Sam: Again, it's just my one person's experience, but I hate to think what would've happened if we tried to build 50 million features in the first six or seven years. Dojo was a communication app, it stayed of communication app and it got better and smoother and more delightful and more useful and all the rest of it. But I think the third thing it is the thing about being around other founders. I spent a lot of time internally focused in the company and I think in retrospect some of the best step change kind of thing thinking I got was just from being around founders who are a step or two ahead of me.
Brett: Maybe there's a couple other things that you can share. The founder density at the company and where that came from?
Sam: Culturally, I think we're extremely atypical in a lot of different ways. I can talk about that including the founder density thing. But so I think early days everyone's like, "You've got to write values. You've a mission and strategy and values." And so I turned to one of our engineering leaders who's still in the company today. I was like, "Hey, we've got to figure out values. Can you help me write them?" And he was like, "Let me take this. I'm going to talk to the engineers." The company was mostly engineers. He said, "I'm going to talk to the engineers and I'll come back with something." And they came back with, honestly this amazing, everyone that reads them is just captivated by them. They wrote values with these three characteristics. One was they wrote them all as trade-offs, so there's no integrity or whatever. It's like candor over harmony, continuous improvement over continuous production, failure recovery over failure avoidance, this kind of stuff. And so these are actual decision-making heuristics.
Brett: Which is a good test of a value.
Sam: A really good test, especially when both sides are good things. Break things isn't actually, if you choose two \[inaudible 01:06:59\]
Brett: If integrity is one and lying is the other, I mean that's not interesting.
Sam: Totally. If you pick two good things and then you have to force a trade-off, which way do you generally choose is an interesting thing.
Brett: Because ultimately I think you're using it to figure out who comes to the company, who leads the company and how to behave as a group.
Sam: 100%. So I think that was one very important thing. They also wrote these as descriptive rather than prescriptive. So it was like, what are we actually doing today rather than aspirationally what would we like to do? The idea was once we write these down, if we don't like them, we don't like who we are, once it's on a piece of paper, we should change what we're doing and then write the new thing. And then the third thing was these were actually built to re-evaluate over time rather than just be etched on the wall in stone. So it's like, let's update these. We've dropped some of them, we've cut some of them, that kind of stuff. I thought that was a very cool thing. The way it turned into reality in the company was we took these values and we basically built all of our human systems on these values. Now look, there's a pre-product market fit and a post-product market fit. This is I think is post-product market fit, but it's enabled us to continue to innovate rather than just heroically do it once. And so I think it's somewhat important, but there's this great book by Patrick Lencioni called The Advantage, and he talks about the four jobs. He's like create high performing leadership team, create clarity over-communicate clarity, and then reflect that clarity in your human systems basically. Something like that I'm butchering in, but the human systems, how you hire, how you fire, how you compensate, and how you reward and recognize people. We basically built all those systems around these values. So what does a high candor hiring process look like or a continuous improvement feedback process look like, et cetera, et cetera. And that's led to this very clear, I think, cultural resonance through the company. And so people self-select very quickly. You can turn up, read our values though. I'm like, "This is actually how we are and you can opt in or opt out." The downstream effect of that though is that we spend very little time having very fundamental philosophical battles. There's just a base level. There's lots of diversity of thinking and experiences and things around that core, but there's a shared core for sure. I think we've just been uncompromising on that, which seems good. One of the things that emerged from that was what kinds of things you encourage and tolerate in the company. And I think one of the pernicious things that companies get into is they start to tolerate errors of inaction. They're like, "Well, I didn't do anything, so I can't be wrong." And they start to punish errors of initiative and boldness. So you really want to change that, I think. And that led us, I think to the founder thing where I think we've always feared just getting a bunch of people that are phoning it in and just doing a job. Nothing wrong with that, but it's not how I want the company to run, and I want this to be just a real team that's charging together. And so we basically just had the mandate. We're like, "Look, more than half the company is going to be founders." I think it was more than two-thirds at some point, but it's like more than half is going to be founders or founding team members. This isn't like, oh, I've only ever done a startup. These are people that have done a startup. Maybe they've scaled a thing, they've led a big thing, but they know that that curve. And I think it's just a totally different level of empathy too. If you've only presided over a kingdom, building the kingdom is a different thing, and I think that's important.
Brett: And you haven't had it lead to just chaos with these people that want to be the founder or want to be in charge? I guess maybe that's that you want people that have had more than a experience?
Sam: Yeah, I think there's a level of maturity also that comes. We've definitely had some chaos for sure, but there's a level of maturity you start to look for. You're like, okay, I know what it means to be a founder. I know what it means to be part of a team and drive together.
Brett: Who has had the biggest influence on you that is not a family member? What is the thing they imparted on you?
Sam: Well, I mean the tee up there is can I be my co-founder? Yeah. I mean, honestly, I think Liam's had an enormous impact on me. You can't work and live with someone for eight years and they don't rub off on you, but it's maybe not in the way you think. It actually goes back to something you told me earlier. We finished the incubator and we were like, "It's great. We've got this hockey stick." I talked to Tim, our now board member. I was like, "Tim, what do you think the hardest part about building this company is going to be? It seems like we've cracked the product market fit thing," whatever. And he was like, he told us a story about how Bill Gates wrote an article about Yahoo saying how cool it was, and he was just like, he woke up, blood drained from his face. He was like, "Oh my God, we're going to get taken out by Microsoft basically." He was like, "You're going to have crazy highs and crazy lows. And finding equanimity, managing yourself through those ups and downs is going to be one of the hardest things. And you don't know it yet because you've not had them, but it is one of the hardest parts of it." He was so spot on. And Liam has been just an incredible example for me because I think he's been such a, he is a model for me of equanimity and a model of optimism. I think I'm a pretty optimistic guy, but Liam is both calm and optimistic. And so when I'm having the worst of times, we'll go for a walk, we'll talk about it and I'll be like, "Oh man, actually there's a way through this." And so I count my blessings because it'd be very hard to do this alone.
Brett: How did you learn that behavior? You can't just tell yourself be calm.
Sam: Well, I mean lots of work. This whole team keeps us trained on the tracks, but there's like exact coaches and therapy and all the rest of it. But I really do think some of this is just role modeling. Being around someone like that where we could have a crazy terrible day and Liam doesn't go to pieces. He's like, "Okay, let's talk about it, think about it, feel all the feelings about it, and then let's move through it and get on with it." And I think that's been a great example for me.
Brett: Good place, then.
Sam: Yeah, man.
Brett: Thanks so much for doing it.
Sam: Cheers.
Brett: I really appreciate it.Brett: I thought we could start at the end. And I'm really curious for your perspective on why you think the company has been successful in a category that most people have been very negative on for a very long time, which is, you talk to most founders that have built in education and they never want to build an education again. And you talk to most investors that have looked at education companies that have invested in education companies and most of them would label it as a bad market to start a company in. And so you all have done something really special and I think it tends to be the case that most companies are exceptions to the rule. But I'm curious, when you pick apart why the company has worked in as much detail as possible, what comes to mind for you?
Sam: Well, look, I'll say first we're still very much a work in progress, so we're still in the thick of it, but honestly, we were as taken by surprise as anyone when we moved to the US. So we're both British, moved to the US to start the company, had this enormously ambitious idea that it would be really great if we could give every kid on the planet an education they love and we think that's a big engine for progress in the world. It's great for people in their individual lives, but it also helps the world move forward. And then we got here and we had this very intense learning process. It was a rude awakening because we'd meet all these ed tech entrepreneurs, we'd meet founders who'd built stuff in the space investors and we heard this continued negativity. The truth is they're right, if you look at the results in the space, it's not been a very exciting space. Most education companies basically just remain small businesses. They never reach billions of people. They never reach tens of billions in revenue. They never reach hundreds of billions in market cap. It was puzzling for us because there's a kind of weird paradox here. Every family on the planet wants a better education for their kid. No matter the income level, no matter the country you go to, just every single family you ever meet is, "I want my kid to have more and do more and be more than I was or than I had." And yet these companies don't seem to make it. So you have to ask yourself why. And we did, and one of our diagnoses was that most companies here, and this is going to sound a little facetious, but we had the beginner's mindset and we were in the US for, we had 90 days on our visit visa and we had to quickly come up with a point of view. And one of our points of view is we were like, "Hold on. Most companies here are actually serving schools. They're selling software to schools. Nothing wrong with that, but that's the supply side of the market. The people that we're trying to serve are actually kids and their families. So who's building for kids and the families, who's building for the consumer?" The analogy I think we used was if you're building Airbnb and you want to transform hospitality, you don't start by selling software to hotels. That might make hotels a little bit better, a little bit more efficient, whatever, but it doesn't massively transform the experience for the end user, for hosts and for guests. And so we just took that analogy. We're like, well, ed tech has been the business of selling software to schools. What if someone served the customer like the consumer? And so we were saying we were going to build a consumer company in a historically enterprise space. There was another company saying that, which is Duolingo. We didn't know them well at the time, but there were not many that took that approach. And so I think that single choice changed a lot about our prospects. And we didn't know how important that choice was at the time because when you look at the other side of this, the enterprise side of this, selling to schools, it's a bit like selling to in the US, like 130,000 pretty bureaucratic, very small businesses with not much budget who are trying to do a heroic job but really don't. It's not a great market and yet everyone is after the same budget trying to eke out another few dollars from the school, another few dollars from the public tax budget.
Brett: And it's a challenging end market because even though it's extraordinary amounts of spend, they're unwilling to spend on software, procurement, what structurally is going on because certainly total spend is enormous?
Sam: Yeah, I mean I think the number that's quoted usually is like 3% ish of GDP, but 70% of that is on salaries and benefits and people. And then there's a good chunk that goes into facilities and buildings. And so by the time you get to what could you spend on basically discretionary stuff, technology, other things in the classroom, it's way smaller. Then there's some artifacts of this being a public budget, it's not like you can just sign it forever. It has to come for renewal, you have to reconsider it. The procurement process is famously difficult, but I think the core issue is none of those things actually, the core issue for me is that the alignment of incentives is all wrong. So for me and it may be just the way Liam and I are wired, we want our incentives to be tied to the person that we're trying to invite, the person we're ultimately trying to serve. Now all of us in everyone in education is ultimately trying to serve kids and families. And so our view is like, well, you don't want a divorce in your incentives between you wake up one day and you're like, "Well, we have to build a roadmap that so-and-so school or so-and-so district wants," even if that's not the best thing for a kid and their family, we want our incentives to be tied to doing what's exactly right for kids and families. And so I think that was actually the more important point was you want the freedom and agency to really obsessively serve your customer and that was going to be the orientation we took.
Brett: And so you hinted at this a little bit, but when you were thinking about the opportunity, did you spend a lot of time obsessing over is this a good market? Can we build a big business? How much of that was a part of the Zero to One phase?
Sam: Yeah, we knew the school side wasn't a good market. From all we'd seen, we'd keep meeting these entrepreneurs who just had a really rough time over, I don't know, 25 years of building a company and it not really going anywhere and maybe being sold to a private equity firm or something. And so we knew that wasn't the thing. And then this actually, we had a conversation many years later, which put this into much more eloquent words for me, but we just had this belief and this conviction that families really care about their kids. And the next step is if you care about your kids, it's probably a thing you're going to spend money on. It's probably a cause you're going to spend money on. And you can look at all the market research on TAM and whatever, but there's a much more interesting view on this. I spoke with someone at Spotify, one of the C-level at Spotify, and he was talking about when Spotify started. And this actually goes into the investing side on market risk. Even if everything goes well here, how big is this market really? And most people hate that. Because they're like, "Oh god, if the market's too small then it's not a good opportunity." But I think there's actually another side to that which is it's actually the most exciting form of risk where there's one or two assumptions that if you are wrong about or if you're right about as an entrepreneur, you suddenly unlock an enormous market that no one knew was there. And so there's famous examples of this, but the Spotify one is interesting. He was like, "If you tried to proxy the market for music online when Spotify launched, you'd look at how many CDs are sold and you'd be like, it's 100 million CDs, call it 10 bucks a CD. So it's like a billion dollar market. It's way too small to build a huge company in." But then if you take the other stance where you reason a bit from first principles, you might realize that well hold on, every society on the planet has had some form of music, has evolved it or adopted it. Music is in the top five interests of basically everybody in the world at some point in their lives. And so it could be that what everyone is pointing to is a lack of a market is actually just a product and packaging problem. I think we had something like that with Dojo where no one had demonstrated that you could build a very large consumer business and education. But I think we just took this conviction that well we actually think parents care about their kids and we think they'll spend on things for their kids. Now we did early on in the company like three, six months in, we did our first monetization test. It was very small scale, it was very trivial. We can talk a bit about it. We knew at that point that parents would pay. We didn't know how much, we didn't know how big it would be, but we knew that parents would open their wallet and pay for something that would be good for their kids. So I think that was the extent of it. There was some reasoning and maybe there's some conviction based on almost this first principle's reasoning that it's an evolutionary imperative to care for your kids and therefore we think we can serve you in that need.
Brett: Let's go farther back. What was going on with you a couple of years before you started the company? And what was the entry point into, actually I think you were at McKinsey for a period of time?
Sam: That was a weird left turn for me. So I won't go into ancient history, but I grew up in a couple of weird places. I grew up in the countryside in Wales, went to a very loving, very small school, then we moved to the Middle East to Abu Dhabi in my teens went to a 3000 kid international school. This school is amazing though. They insisted on kids teaching as well as learning. So I actually taught all the way through my teens for probably about a quarter to a third of my time at school, which I had no idea how formative that would be for me. I went to college, I was an economist, a heavy dose of math in it. I thought I was going to do a PhD in one of those things. The month before I started, one of my professors asked me to go and help a friend of his with his school. And so I went to the school and helped them teach economics and maths better and turned around some of the ways they were teaching it. And then from there McKinsey came and did the recruiting spiel about how they were building an education group that was advising governments on improving public education systems, which sounded amazing. And so as I went there, I think when I got there I realized, hold on, this is all advising this isn't doing a thing. And so it was a great training ground, but there's no way I was going to stay. So I left. And there were some friends of mine in London who were starting a company. There was a small group of us in London, we all met at university and McKinsey and so on. But we'd all been reading Hacker News and this was a fringe thing at the time. This wasn't like a mainstream whatever, no one knew it \[inaudible 00:11:21\]
Brett: Most of tech was a fringe thing at the time.
Sam: Yeah, I mean Airbnb had launched I think in 2008 where the iPhone had come out in 2007\. Facebook was still private in 2011\. So anyway, so we were reading Hacker News and PG's essays were just so formative for this whole group. One of the things he said was just find the smartest group of people that you can work with. And so I found this group at a startup in London. I was working with them and while I was there, I went to a hack weekend, I met Liam, my co-founder. So it's not the way you're supposed to meet your co-founder, you're supposed to know each other when you're friends, whatever. But we together in London a week later. He's incredibly gifted. He was an amazing engineer. He was doing a PhD in computer science. He'd built one of the world's biggest kids games. We got talking about working together. My plan had been, "Look, I'm going to leave the startup and go and work on an education thing and I'm going to apply to YC as a solo founder."
Brett: But you decided you were going to start a company?
Sam: I was like, I'm going to do something in education. And I couldn't find a thing to do. I'd actually emailed Sal Khan at Khan Academy and someone there had written back and said, "Hey, this is great. You should come and join us. We're a tiny team. Just get a visa and come." And I'm like, that's a big step. So that didn't seem like a path, but I'm like, well, I care about this education thing. And it feels to me, I think there's two fundamental problems in the world that need to get solved. And I've thought this for a long time. This is stuff I was interested in when I was a kid. One is just the energy problem of we just need to provide enough energy to fund all of our activity. And that's like a survival problem. And then I think the thriving problem is once you know you're going to be around, how do you make things as good as they can be? And the answer to that I think is a very simple process, which is it's just people. Just people discover their talents and capacities and apply them in some way in the world and make something off them. And if you do that over space and time, you make the world a better place for everybody. So that problem is I think the problem that I want to spend my life on and make a dent in. So it was very clear I was going to do something in this. I don't know exactly what do I go and teach? Do I start a school? Do I... But then I think on Hacker News, someone had posted, Geoff Ralston who then became president of YC, was starting this parallel incubator called Imagine K12, which was going to have the same structure as YC, a bunch of the same speakers. It was just going to be for education companies. I was like, "Oh my God, this is amazing. I have to go to this." Liam meanwhile had been emailing with Paul Graham totally separately and they were trading riddles back and forth. Liam had some idea that he was running by Paul. Paul wrote back with, "What is the equivalent of the Altair BASIC for this idea?" And Liam was pondering. Anyway, we had this whole flirtation around Hacker News and YC. And then Liam and I got talking about working together and we agreed to work together, which is a crazy decision because we'd known each other for a few weeks, but this was when you know you know. I didn't know that he would be my best friend, the best co-founder I asked for. My roommate for the next seven or eight years.
Brett: What about things like values alignment and do you have a shared vision and all the things you end up needing to have?
Sam: That actually came a little bit later. After we got into Imagine K12 we got out in the Bay Area, I forget who it was, but someone was like, "There's only one reason that startups fail." It was a talk at this incubator thing, and I was like, "Obviously product market fit. They never find it more. I know the answer." And he was like, "No." He was like, "The only reason that startups fail is because the founders stopped trying." He's like, "If the founders are trying, you can basically figure out every problem." And I was like, "Okay, why do the founders stop trying? These are tough people." And this person's point was that it's usually because you just don't share a vision of where you want to go. And so Liam and I, I was very paranoid about this. I think a lot of founders are very paranoid, but I was very paranoid about us breaking up and yeah, there's not working out for that reason. So we actually came back home that day and both independently on a piece of paper wrote down what we wanted to do or how far we wanted to go. This guy had framed it around, one founder wants to build a very large business, the other one wants to do a lifestyle thing. We basically showed each other this little bit of paper and it said roughly the same thing, which was we've left family and friends and relationships at the time to come out to the Bay Area. We're here for 90 days. We had 90 days to prove something that would then allow us to stay for longer so that the pressure was on. He was like, "Look, I just want to build the greatest thing we can imagine building in education." And I wrote something similar. And so it felt like at a very deep level there was an alignment. And I think we got to know each other more and feel out the shape of each other. We then lived together for eight years. So you learn a lot.
Brett: And do you think the two of you fit the we're very different and compatible or we're very similar?
Sam: I think we have almost exactly the same values and we express them in quite different ways. The good thing about that is there's never been a power struggle for, "Oh, I want to do product in the company." Or, "I want to do this, that or the other." It's always been quite complimentary. So we tried, actually I was very democratic with this stuff. I remember in our Series A we had an org chart that seemed important to put in the deck. We turned up and we had co-CEO on there for me and him. And one of the investors, "What is this nonsense? I need someone to fire."
Brett: I love this.
Sam: And I was volunteered, but it was never an instinct of like, "Oh, I must have this." It was more like, "Oh, we're building this thing together." To this day we have different roles in the company, but we've kept a lot of the mechanics and logistics about, we're both on the board, we've had disagreements, but it's always been just so amicable and easy to resolve. We've been candid with each other when we don't like something, but it's never been a bitter seething kind of thing. So I think there's something around intellectual curiosity. I think there's something around humility and low ego and willingness to learn and having a high rate of learning. I think that's definitely in there. I mean, look at some level, I think there's just a willingness to work really hard. PG had that thing about relentless resourcefulness. I think both of us have both of those traits. There's definitely relentlessness and a drive, but also a resourcefulness. We'll figure it out. Like a stance that come what may we'll figure it out. I think outside of that, we probably have different temperaments and it's probably a good thing because there are times where I'm up and he's down and I'm down, he's up and we can balance each other out and all that.
Brett: So what did you apply to Imagine K12 with? What was the actual thing that was in the application?
Sam: One of Liam's best friends, I think his housemate was a teacher and we talked about one of his big problems and one of his big problems was making groups in the classroom. And so we'd made a little prototype of this group making app. And so with this group making app, but we had a whole scheme for how this group making app was going to be used by teachers. Then it was going to become a platform, not to just make groups, but then to all the teaching and learning happening in the classroom and yada, yada, yada. Now for lots of reasons, this was a bad idea, but it was like we got in with it.
Brett: You applied with that idea and then you show up. And so then what happens?
Sam: We show up and I mean you know the YC motto, Imagine K12 adopted it too. Just make something people want. And so far we'd spoken to this teacher friend of Liam's and he really wanted this and we were serving this great customer and then we got to the Bay Area-
Brett: And that was the extent of...
Sam: I mean look, also, if I'm being honest, I think it was the first cohort they're running of Imagine K12\. They were like, "Yeah, these guys have some experience in education. This one's taught." Liam was doing a PhD in computer science focused on technologies that help kids learn. They're like, "These are guys great. You're a technical founder, non-technical, perfect." At the same time, Imagine K12 was putting on these dinners where we were learning about ed tech and the industry and we're getting more and more depressed about how terrible it is. And so these two things were happening in parallel. So very quickly we were like, this group thing is not a real thing. This is not going to be a big idea.
Brett: Because of what you were hearing from teachers?
Sam: It was very lukewarm. I mean, you know when someone's into the thing and when someone's like, "Oh, that's great." And we were getting that response, we're like, "Okay, it's probably not the thing," but we didn't know what the thing was. So we've used this mental model actually a lot in the company since we called it the barbell approach where you have clarity on both ends. Clarity on one end was like, "Look, in the end, I think it's very important that everyone in the world gets to discover, develop their greatest talents and capacities. That's a thing, that's how the world should work, and I think there's a great business to be built there." On the other end, you're like, "What's the first step?" And all the steps in the middle, it's okay for those not to be completely well-defined on day one, you have to be able to learn your way into them. But we were struggling to find this end of the barbell. We're like, "What is this end?" And then we had this very, again, very formative conversation with Reid Hoffman who came as a speaker to one these things. Now we'd got to the point where we were saying, "Look, we think we're going to be a consumer company. We think kids and families are the right people for us to serve." We were like, "Look, this isn't working." Literally the tenor of the discussions we were having from the ed tech people was they're like, "Oh, it's so hard." We had someone come in and he was like, "Look, I'm going to tell you the secret to unlocking sales." And we were like, what's the secret? He was like, "You have to charter a boat and then take all this particular boat in Chesapeake Bay and take all these superintendents offshore and for a day and sign all these." I'm like, "This is not what I came here to do." So I think we had a lot of conviction that we're going to build for consumers, for kids and families, and that's going to be the audience. So then we had this conversation with Reid Hoffman. He came as a speaker and we were talking excitedly about this. "We're going to be different to all these others we're going to build for consumers." And he was like, "That's great. Consumer companies are great. Obviously I've been involved in a lot of them." He's like, "The single most important thing for you to figure out is how you're going to grow." He was like, "It's the hardest thing about consumer companies is how do you grow without spending more and more money?" And then Reed being Mr. network, he was like, the best thing, the most enduring thing at the heart of every business or great consumer business on the internet is some kind of network. And so basically, we didn't know it at the time, but that was basically the thesis of the company being formed right there. The question being put to us was what network reaches kids and families in perpetuity and at scale? And the implication was if we could build a network, then we would have a lot of time to build great businesses that people would pay for, discover what people would pay for. If we could never build a network, then nothing else we did would really matter. We really took this, I mean, I was a big nerd for basically all of Reid's writing. He'd published the LinkedIn Series A or Series B deck or something, and the whole thesis was network first, networks are valuable, build a network and then you'll build businesses on it. And we basically took that. We were like, "Okay, well we have to build a network that reaches families and kids, and that's the binary risk. That's the thing we have to do first." And we're both pretty obsessive people. So that became the only thing we did for the next six or seven years in the company. So then the question was what's the network? And that's when the penny dropped. We're like, "Well, hold on, teachers," I've been a teacher, so it's familiar. We're like, "Hold on. Teachers are in this very interesting position where every teacher first, they actually do the education. Second, they're in front of lots of kids and parents all the time." And so the thought was, well, if we could serve teachers, maybe we'd be able to serve kids and families as well. Maybe they'd take us to kids and families too. And so that then started this obsessive period of talking to teachers and really trying to understand their needs beyond Liam's first friend. That mostly came Liam did a bit of it, but mostly came to me. I was like, okay, well, I think in those first 75 to 90 days, probably 75 days, we had hundreds, hundreds and hundreds of teacher conversations to try and understand what their real problems and real needs were.
Brett: So what did the conversations sound like with all the teachers?
Sam: A lot of it was just open fact-finding. I had this question I like to ask, not the most fun question, but it really got to stuff, which was, "What's the worst part of your day? What makes you cry about your work?" And so we'd have these funny conversations where they'd be excited. I'd say we were doing everything we could to get in front of teachers because we knew nobody in America. It's hard to overstate this. We were staying in a Motel 6 for a few the first week or two because we had nowhere else to stay. Then we found this single room place in Palo Alto that, I was in one corner and Liam was in the other, and it was very humble beginnings. We knew nobody in America, we'd never lived here before. We had the Imagine K12 people had funded us. We had a little crossover with the YC folks, but that's it. And so we were just on our own in our little room. And so I just started cold calling, cold emailing, asking friends, friends of friends. We went to the local schools like Gunn High School in Palo Alto and others, and just soliciting teachers basically to talk to us. I ended up teaching summer school for a few days actually at Gunn High School in exchange for the teachers talking to us, whatever we could do. But the conversations really went to, "What is the worst pain?" That whole painkiller over vitamin thing? We're just like, okay, we took that very seriously. We're like, "What is the worst pain? What's the worst part of your day?" And we just kept getting deeper and deeper. So initially there was all kinds of good sounding stuff would come up. They'd be like, "It's marking homework, it just so annoying you marking homework." And we'd be like, "Oh, okay." But also you decide how much homework you want to set, roughly speaking, so what's really going on here? And they're like, yeah, "It's not actually the mocking homework. It's actually I get home and I'm just exhausted." And we're like, "That makes sense. Everyone, it's a long day. It's 10 hours a day, but there's other people work 10 hours a day as well. Why are you so exhausted?" And they're like, well, "It's actually, it's not that I'm exhausted. It's like I just had this one kid or one family or whatever. I'm having a real problem with them." And it basically boiled down to a human issue. They're like classroom management because some kid was causing them issues and disrupting the class. Or it was a family that was upset with them and they were having a flame war with them over email or something. And we were like, "Oh, that's an interesting thing. That's an actual human issue." That's the thing that you worry about because it's a human being on the other side of it, the rest of this is kind of workflow and whatever, transactional in a way. But these things have emotions attached to them. You could see it in their eyes, you could even feel it. And then you'd go even deeper and I could empathize with this because I'd taught, they'd say things like, "I didn't get into teaching to do this." And so there was this vision that they had of themselves that just wasn't coming to light. That's when you get that tingly sense of, "Oh, there's something here." And so that's where our first product idea came from, where we realized one of the big problems for teachers is it's called classroom management. So you've got 30 kids in a class and how do you keep it a positive and good learning environment? And that the main technology they had was basically punishment. It was like wait for things to go off the rails and then give kids detentions or raise your voice or yell. Or all these kinds of things that you just wouldn't do if you were designing a great environment. And so then we thought a bit about what a better way would be. And our first product was just a really simple way for teachers to give kids positive feedback. So it almost it felt like a game. It felt like a little toy, but as a teacher, you could sign up on a website at the time, you'd sign up, you'd put your class list in, you would add the values that you want to recognize in your class, like helping each other, kindness, curiosity, whatever it is. And then during class you could say, "Brett, that was a great example of asking a great question. Here's a plus one for a great question. You get this little sticker." Now, one of the things that was very important was we were in person for a lot of these. We did a bunch of phone calls too, but we were in person for a lot of this because a lot of this was happening in the classroom. So we'd go and see how teachers were using this early product in the classroom. And so you end up getting these little sprinklings of delight, which you totally wouldn't have done if you just stayed behind a computer screen to look at it. So one thing we did was when a little sticker would appear in a kid's profile, we had a little, "Bing," sound like a very pleasant kind of nice sound. Liam spent some time on it.
Brett: At the time you weren't concerned that this isn't a business. This is a little game?
Sam: There's a couple of things. One, we knew we wanted to get to parents, so we knew that. But the precondition to that was the YC mantra is, "Make something people want." The steps were in our minds, make something that teachers want. Step two was like question mark. Then step three is like money, but step two is get it somehow to kids and to parents. And then step three were like one day we'll build things that we think families want.
Brett: But the starting point for everything is we need to build a network? And the network needs teachers, parents and students?
Sam: That was our theory.
Brett: And then you were actively, as you were talking to teachers, as you were talking about, you were actively trying to figure out what is the unit of value in this network?
Sam: Yeah. Well, we didn't have a network to start with. We had a tool. The thing I just described as a tool, you could say there is a little bit of communication inside the classroom, teachers with kids or whatever, but it wasn't like what you think of as a network. What happened next was, so I should say this product exploded in popularity.
Brett: And you just took it to the people that you had spoken to?
Sam: Took it to the people that we've spoken to. And Mike, a third of them used it and they were blown away. We can ascribe some to a nice product, and we did a good job of that. I think the other part of it was we picked a customer that was massively underserved because no one cared about teachers because they don't have that much money, so why would you ever build products for them because they can't pay you anything. But what we realized was, well, hold on, there's a huge amount of pain here and actually they're a trusted figure and if we could serve them, then you get access to a whole lot more. And so it was looking whether people weren't looking. Maybe there's a parallel to the business model side of it as well. So it's not obvious, but we were assessing over serving teachers, that exploded. I think so one of our investors, we actually went to college together, Rahul from Superhuman, who was like, there's only one real growth channel, and that's word of mouth, and that comes from making a remarkable product. They're literally remarkable. People want to remark on it. And this was that product. Teachers would tell their friends about it and it was like became this crazy wildfire. So every batch of the YC companies, whatever, there's always at least one company that has that kind of ice hockey stick. So we were the one that started through away our idea when we turned up and everyone was like, "They're toast. They're never going to make it." And then we turned up a demo day and we had this crazy looking hockey stick chart. We'd gone from zero to, I think it was like 10,000 teachers using it out of the gate.
Brett: Before you ship the product, did you think this is really going to catch on and people are going to be obsessed? Or it's, "Oh, see what happens with this thing?"
Sam: We had a strong sense that there was a real pain here. I don't think we expected the spread. It really took us by surprise. I think we hadn't realized just how underserved teachers were. There's lots of amazing characteristics. We realized teachers don't get into it for the money or the fame. They get into it largely because they care about the mission. And when they find something that helps them on their mission, they want to tell other people about it. And so they tell other teachers about it. There's lots of other things we can talk about and the specific to teachers, but we learned a lot of that as we got into it. I talk about the resourcefulness thing. There's something to looking at a situation with different lenses. And you look at teachers and say, "Oh, it's a very bad business or revenue channel." Or you can look them and say, "Hey, it's a user with real pains that influences a lot of other people."
Brett: What was your feeling about that? Were you elated?
Sam: I mean, elated, amazed, pinching ourselves, all of which was unexpected. But I remember on demo day, the big, everyone was very riled up because Paul Graham was going to be there and the rumor was he was going to invest in the company. And Paul comes over to our booth thing after the presentations, there was some metric I'd showed about how quickly the feed points giving was growing. And he goes to Liam and is like, "Hey, Liam, can you just show me that metric over two weeks or something?" And Liam's like, "Oh God. Paul Graham's asked me to show him a metric." He dives into terminal to try and pull up the right stuff. And Liam's like, "Oh, it's going to take a minute." And I had thought it would be great to have a box donuts there because that would be a draw for people. And Paul's like, "That's fine. I'll just have a donut and wait." So the pressure is on. Anyway he ended up investing.
Brett: What did he think of the donut?
Sam: That's excellent. Really went for high quality donuts. Yeah, this is at a time. So you at a time when I had \[inaudible 00:31:36\]
Brett: \[inaudible 00:31:36\] the business that your angle on fundraising was let's have some donuts in here?
Sam: No, I was like, look, it was a goal oriented thing. I'm like, you're not sitting at the demo day hoping to fundraise. You're sitting there to get people to come to you. And I'm like, well, let's draw some more attention. If the hockey stick doesn't do it, the donuts will.
Brett: So then, okay, so you had this app and the app allowed teachers to give virtual rewards?
Sam: Stickers. There was no reward in a way. It was just stickers as feedback. So then a few months later, we were looking, we basically got enough interest in the company because if we were to go, this thing's growing, we don't really know where it goes, but we closed a seed round. We're then looking at some of the cohorts and we started to see that there was a set of users that were incredibly sticky. They'd come back every day. And we clicked a bit further into it and it wasn't obvious what they were doing in the product, but we called them and spoke to them. And basically it turns out they were taking all the rewards as a snapshot and turning into a PDF and sending it home to parents. They're communicating with parents. And this was evidently a very, we didn't know if correlation causation or whatever, but it fit a pattern of like, oh, well actually communication's a very sticky thing. You've probably been in WhatsApp groups with your friends, very hard to drop out of them. And so that then turned us onto, oh, actually what we're really building as a communication app. And a few things snapped into place. We're like, "Okay, that's a way to expand from teachers to parents and kids and really start to build a network." Two, we discovered just how high retention and high engagement that is as well. And so I think finding those golden cohorts was really important. That was almost like a second part of market fit moment for us. And so Dojo then expanded. We built parent accounts, kid accounts. The median experience of a parent is, "I don't know what's happening at school. I maybe go to a parent-teacher conference once every six months and sometimes I get a piece of paper home in a backpack, and yet this is the person I care most about in the world." And so to go from that to this seemingly, there's a very trivial thing. It was like "Brett asked a good question today," but knowing that then starts the conversation at home of, "What was that question you asked? What did you talk about?" And that's an amazing moment for the parent and the kid. But I think that then teachers were like, "Well, we're sharing these positive moments from the classroom instead of bad news and your kid got detention where you're now showing positive news." And so that was a great lift for everyone. And then it became very natural, "Well actually we want to talk about that. We want to send messages." Teachers are like, now Dojo was open in the classroom. They're like, "Now we want to take pictures of what's happening in the classroom, little snapshots of moments in the classroom." A video of this, the kid doing a poem or whatever, just real cute kind of stuff, these younger kids. And so Dojo basically from there expanded into, I think what the first product we ever built was this communication app. And it was very useful for kids and teachers and parents because it kept the whole community connected. It also served this goal of growing the Dojo network, which we can talk about.
Brett: Yeah, share a little bit more about what was the first version, I guess, of the second product built on the back of the stickers product?
Sam: Yeah, it was just a simple extension. We built parent accounts, so you now had a channel to the parent and the kid was in there as well. You can message the kid as a teacher, obviously, but the kid and parent accounts were attached and you can message back and forth. And then the next version added a camera. And we were like, "You can now take pictures in the classroom." And then we added video. And so it progressed from just sharing stickers to basically communicating about really nice moments in the classroom.
Brett: And so what were the numbers of the business at that point, roughly? What were you seeing? How fast was it growing? How many people were using it?
Sam: Oh my gosh, it's really hard to say, but I mean look, I think at the seed round, I think I know we had maybe some maybe 10,000 teachers ish using it. I think from there, this Series A, we basically just showed continued teacher growth and the beginnings of some parent growth. There's about 2.8 million teachers in the country, so I think we got to maybe one in 20 or something like that in the US. One interesting thing was we'd also started to see international growth completely organically. So we were actually at the end of 2012 I think we were in 40 or 50 countries with at least a few users.
Brett: And so did you think a lot about how do we get this thing to grow faster?
Sam: We did. Yeah, we did. Initially, like I said, it was just we're just building a great product and people love it and they tell their friends about it. I think it was, I forget now, it was one of those summers that summer, or the summer after we basically got a bit more involved in trying to learn about how this thing was growing. And a few things happened. One, we realized, I actually went on a user research visit to a middle school in the city, and I was sitting in with this science teacher, her name is Jenna, and we were like, "Wow, she's a great teacher. She's using Dojo." We were just there to learn about what's working and not working. Go back to the office. I think a week or two later I get an email from Jenna and she was like, "Hey, I'm going to take a break over the summer from teaching, obviously. Can I come and do an internship at Dojo?" And we were like, we don't really know what she would do here. And we were four or five people or something, but we're like, "Yeah, sure, come by, maybe do some support." I was doing all our support. I was probably like, "Please do all support tickets here." But a month into her internship, she comes back with this secret project she's been doing. And the secret project was her view of how we were growing through schools. And basically what she was able to show was that in all the schools that we were growing in, we had found one really passionate teacher. And it turns out we found out later on that most schools follow this kind of bell curve of distribution. Where you have really passionate, excited teachers and a bunch of module users, a bunch of laggards, but she was like, "These passionate teachers, these are people like me. These are people who really want to be on the cutting edge and do cool stuff and find the best things." And she's like, "I think these people are our champions and we should help them." And so she basically became our first community leader. She never went back to the classroom. And so she built this community where we'd get the power user from every school. And they would all meet each other and they'd be like, "Oh my God, there's people like me in the world." And that was another big inflection point.
Brett: And you did that in person or was...
Sam: We had a few in-person meetups because we did it regionally first, but then it became a Facebook group. They all had really deep relationships with Jenna. They knew the whole team. And so that, again, there's really no substitute for that. You can't really fake the care. They would text and they'd get a text back. You can't fake that. So I think that was one very important thing.
Brett: What are the other sort of things that helped inflect growth?
Sam: We started to realize in the US we had this around the world now, but we had this land and expand dynamic where we had to get to our first team basically using Dojo in a school, our first classroom. And then there was a path to expanding to the classroom. Now we have a weird stat in the business, which is hard to believe, but it's true, which is that to this day, we still haven't paid a dollar for user acquisition. So 100% of our growth has been some combination of word of mouth, virality, some community stuff, like basically zero marginal cost programs. But I'll give you an example. We would find what was working and then amplify that. So we found teachers were sitting in school doing professional development sessions. Now this is the thing teachers have to do. They have some hours they have to cover. And they were like, "I'll do a professional development session on Dojo. This is great. This is the latest thing I found this year." And we sat in on a few of these we're like, "We could just give you a really good PowerPoint presentation and we could probably put a QR code at the end of it or a link that you could flash up on the screen and everyone would join." Turns out that worked magnificently. It was such, in retrospect, we don't get that unless you go right down to the detail. The second thing we realized was that as silly as it sounds, there was no interaction effect between classrooms. So you could just use it next door to each other and not even know. So we built this concept of a school, you would join a school and now you could all see each other if you're in the same school. So you became the contact book for the school. And that was obviously a very sticky feature, which you've seen in WhatsApp and Discord and a bunch of others. So there's at least a couple of things. There's a couple of things that are working in the world and product, because we're product people. I think thinking about how you create network effect products was important to us. And so we started to see, and if you look now, Dojo is used in nine out of 10 schools in the country and maybe two or three times as many as that internationally. A lot of it's still been this land and expand dynamic.
Brett: What gave you the confidence to just grow this thing for many years without thinking about the actual business?
Sam: One, we'd done that monetization test early on, maybe a year in. We were pretty nervous about it. We didn't really have a product to sell parents. We were like, "Well, we haven't built anything." So I think we created an avatar set because kids had these little monsters we're like, oh, you can just customize your monster, give them a hat, whatever. This is very cheap to do. And we just popped in the parent account. And you don't even remember what the conversion rate was. It was abysmal. But we're like, "Oh my God, people are paying us money." This is first dollars in the company. This is incredible. So we're like, there's going to be something. We don't know what it is. It's probably not this, but there's going to be something here one day. I think it was more just a confidence building thing for ourselves. The real answer might just be we had burned our boats at that point. We turned up in the US we had this very specific thesis. We'd raise money on that thesis. We still thought we were right. The theory still made sense. We were still making progress. Every year we turned up with more teachers and more families now more kids now as well, it used to be just teachers and expand these other groups. So yeah, we were like six or seven years in, six. It was 2018, 2019 when we were like, "Oh my God, we think we've got the beginnings of a network." And then we kept seeing adjacent behavior or emergent behavior. I think that's a really important sign actually in consumer products. I think there's a lot of, probably not as important in the enterprise world, but in the consumer side of things, we are very careful not to overbuild and really tightly specify how you must use this product. We actually kept it open to see what would emerge. And so we saw a bunch of emergence. One was the international growth. Nothing we did, we didn't translate the app. Eventually we built some software, which allowed our users to translate it, but we started to see, hey, people love this. They tell that teacher they met on holiday about it and they start using it in their international school in the Netherlands. And then there are three other international school teachers, "What's that thing with the monster?" And they tell. And so we started to see these spread patterns around the world. I was like, "Oh, that's really cool." Now it's in 160 countries or whatever. But that was one. I think the second was we started to see other groupings of kids using the app. So beyond the classroom, sports clubs and afterschool clubs and daycare. And we're like, "Oh, so this isn't just classrooms. It turns out kids are many groups that could be enormous too." Once we hit a certain level of scale in the US, know something like one in four, one in five families in America use Dojo now every week. We start to get a ton of inbound from the institutions, from schools, from districts, from states, in some cases from some federal governments. And so I think there's these moments where maybe it's more of a feel thing where you feel like you've, who said this? You feel like you've got into a pool and then you get to the edge and you realize it's actually a lake, and then you get to the edge and you realize it's actually an ocean. And then we just kept feeling the sense of expanding possibilities in the communication app that we were building. And so I think that just felt like we were onto a thing. So keep going.
Brett: What's the story behind launching the first business?
Sam: We got to 2019 and basically it was more just a feel thing. We were like, "Look, we think we've got the beginnings of a network here." Think it was us and Roblox was bigger, but we were like there's, we're one of the two biggest networks on the planet for younger kids.
Brett: And this is millions of users at this point?
Sam: Yeah. Millions for sure. I think there's 25 million families in the United States with kids under 13.
Brett: And I assume the product was also highly retentive, which was super important?
Sam: Yes, super high. That was maybe one of the other things that gave us confidence was that we had incredibly high retention and incredibly high engagement. To this day it started high and it's got even higher as we've grown, but it's an incredibly sticky product. People love using it. The other thing was, it was all voluntary usage. We haven't twisted anyone's arm. It's not your school district is going to check out on you. It's just like, "I chose it." And so I think when you see those signs, they're so rare. Every time we show them to a consumer investor, the B2B investor just didn't get it. They're like, "What is this thing?" The consumer investors are like, "Oh my god, is that real? Is that weekly to monthly ratio real or is that retention curve real?" And we could just show, you see companies with consumer apps usually have 5 to 15% retention to 30 days later or something. And we were at 6 x that six months later, it was wild.
Brett: Was most of that six years just incrementally making the core product better? What was going on for those six years other than working to grow the business in all the ways you discussed?
Sam: Honestly, it's hard to convey how hard those years were. We got to seven years in and we were 30 people and we had done the Series C at 30 people with $0 in revenue. And we had the exact same thesis. I actually wrote a strategy document a year or two into the company which tried to articulate this so that we could just give it to investors. Everyone still reads that document today. It read like, "Our mission is to give every kid on earth and education they love. We think this is fundamental to progress. It's this single biggest enabler of progress on the planet. And the question is how? Step one is we're going to serve teachers. Step two is we're going to expand from teachers to this whole community of teachers and kids and families. Step three is we're going to build products and services for families that help their kids learn and grow in all the ways they want. And that's where we're going to build some great businesses." Roughly speaking, there's a lot more depth to it. But yeah, so it was incredibly hard because you have this gun pointed at your head basically, and the bank balance is going one way. And you have this really high conviction, maybe high conviction founders with a thesis that no one has ever proven before. Again, let's not align it too much. I'm just thinking about the moment in time where we were in our mid 20s, we'd moved to America. We had basically no attachments. We were living together every day and working together every day. Again, we burned the boats. We're like, "This is thing. We're going to make this work."
Brett: So how in 2019 did you decide now is the time that we're going to start a business?
Sam: I think we had just finished the Series C and we're like, man, we can't do another round with it.
Brett: We got away with it. It's been six years.
Sam: We're like, okay, it's been great. We now have, now it was the big news is we had millions of parents on Dojo and that had never happened before. We could show millions, not like a few hundred thousand, and we're like, "Wow, okay, we've got a large audience here." And so we were like, okay. We're feeling pretty encouraged about the progress on the network side. That was never the end state of the business. That was always a precondition to the next thing, which was starting to build businesses that serve kids and families in all the ways that help kids learn and grow. And so we started with honestly what felt achievable. It's a product that we still have, it's called Plus. It was at the time it was called Beyond School. We had this observation that families don't actually know how to spend money to make their kids' education better. I'm like, well, what if with confidence you could say, "This is the best $100 I can spend." We started a small team, which was working on the paid product and it was called Plus or Beyond School at the time. Then really quickly rebranded to Plus. And we basically put in a few features that parents had asked for a long time that we haven't got around to building, and that just exploded. One of them was, there's a feed of photos in the Dojo app, photos and videos. So instead of scrolling down this feed of photos and videos to see all your kids' pictures from last year or earlier in the year, we'll just make some nice digital albums for you. We call them Memories. And so you can check out these Memories and it turns out total nice to have. You don't have to buy that, but a lot of people really want that and it's a good feeling thing. And so that was one feature. Another one was the stickers that teachers were giving, you could give those at home as well, and some parents wanted that. So relatively small extensions to the core engagement loops in the product, but they were built around the core engagement loops that we'd been building for years. And so we built this and it just started to grow.
Brett: But how does that map to this is the best $100 you can spend?
Sam: It's not yet. But it's going that way. So it started with, look, the value there was let's keep you better connected to the classroom.
Brett: It started with premium features?
Sam: For some premium features, yeah, for sure. But the idea was that you want to start to add and more and more value to this over the lifetime of a customer. You want to have so much value in this that it's crazy for you not to buy this, but we have to start somewhere. Right now we can't start with deliver the whole vision. So we launched this and that just started to grow and grow and grow and grow.
Brett: And you're talking about millions in revenue very shortly?
Sam: Yeah, year one was single digit millions. It was 2020, but that just scaled very quickly. A growing percentage of our base was like, "Actually, I want this."
Brett: And it was priced $100 a year?
Sam: Yeah. I mean, monthly and annual packages varied or whatever, and the annual was a little cheaper. The monthly would equate it to about $100 year, but that was the first business. And again, it's hard to describe how in a company that's never made a dollar to then build your first business and for it to start to work, it was just a game changer. Because it gave everyone conviction that, "Oh, we can build a thing that monetizes." And with that, we started to just fund the business out of our own revenue for the most part, the team was still quite small. It meant we could extend our horizons a little bit and plan on different horizons. So when we were early days, it was just build the core products. The only thing we then got to this, we didn't know to call it this at the time, but basically a capital allocation framework. We're like, "How much money and time do we put into our core and what adjacent bets do we take?" And then what are venture bets that may or may not ever work out but are worth investing in on a very long-term horizon.
Brett: For those three years, it was basically premium features?
Sam: 2021, '22 was just premium features.
Brett: And most of it was driven by just what you were hearing from parents?
Sam: Just with families. Yeah. Now I think there's a lot of people talk about just listen to your customers and build a customer. I actually think it's incomplete advice. So for us, I got very lucky. I ran to this guy Gib Biddle, and he had this very clear framework, which we basically just totally stole in the company, which is the job is at the intersection of delighting customers in hard to copy margin and hones in ways. And hard to copy is an interesting one because that's one we thought so much about given the history of the company. There's a book called The Seven Powers, Hamilton Helmers, the author, and I got in touch with him and he was at Stanford and I was like, "Hey, could you come and talk to the company about this?" And it was preposterous. We're like 35 people or something, but he came and talked to us about it. It's really become foundational in the company. I think the intersection of those few things, how do we delight people in ways that create moats for the business and that create good businesses started to become a bit of the mantra. The second business we got into was what we call Tutor. We realized from families that a lot of families really want more attention for their kids than just what happens at school. And they substitute it by, "I'll try and help," but a lot of parents don't actually know how to help. And turns out it's not an easy thing to get great help for your kid. It's a bit trying to find a good doctor. You have to trust them. And then we looked at companies in this space and it turns out they're not very good companies, but you look at the businesses and a lot of them really struggle because they're paying a lot to acquire demand and supply. They usually have high churn because they're studying for an SAT. It's a high takes moment. Then you leave. And all that turns up at high prices or the business gets margin compressed. We realized, well, hold on. Dojo is we've got this huge community of teachers and families. We can just connect people. And because kids are younger, there's no natural churn moment. It's not like you're studying for an SAT when you're eight or something. And so we built the first version of this service. We actually found two founders. There's another weird thing about the company. We have a lot of founders in the company. I think it's like 50 or 60% of the company is former founders or founding team members, first marketer somewhere, the first engineer somewhere by design. But we found these two awesome guys, Gonzalo and Benjamin, they were YC founders. They built one the largest tutoring marketplaces in South America. And I was helping them raise their Series A. And they were like, "Look, we're going to spend all this on user acquisition." And I was like, "Well, why don't you just build this on Dojo?" And they were like, "Actually, that could make a lot of sense." So they joined Dojo, rebuilt the product on Dojo and it's just exploded. It's like millions of tutoring sessions happening on Dojo. It's way lower price than anywhere else you'll find.
Brett: And it instantly worked?
Sam: It didn't instantly work. We had to go through a few revs of it.
Brett: What were the revs?
Sam: Yeah, so the first rev was initially we built kind of the, before Benjamin and Gonzalo turned up, we tried to do it ourselves and we basically built it like a product rather than a marketplace. So the product we built was we'll find some teachers. And basically we tried to be the provider rather than setting up a marketplace where supply and demand could meet each other, which was more like what we had done before. We'd always built the product for you. And so we built that and we just knew a month or two after launching the first version of that, we were like, "This is just not going to scale. It's not going to work." Or, we're trying to be a school and you're going to get into all kinds of school issues. And so we got out of that quite quickly. But then we met Benjamin. I'd been talking to Benjamin and Gonzalo and said they joined and then it started to work.
Brett: And so what was the form factor of that product?
Sam: We actually didn't have a catalog or anything. You would just sign up initially. Initially it was just email marketing. We'd email our user base and say, "Hey, we've got this tutoring thing, you can get some tutoring for K-5 reading and math if you want more help in it." And then we would match you with one of three tutors. You could pick one of the three. And then you'd basically just have almost like a subscription to this tutor or you'd subscribe to this tutor and you'd see them every week or twice a week, whatever virtually. I think we'll do it in person eventually too, but virtually. And that just exploded in popularity. You'd have kids absolutely love it. Teachers would find out about it and then they would tell parents to do it because they're like, "I can't help Johnny as much. Can you just do this?" And it's 30 bucks a session. It's affordable for a lot more people than what tutoring had been. But the thing that really blew me away was something like two out of three families paying for that had never paid for a tutor before in their lives. So this wasn't-
Brett: Classic for the market.
Sam: This wasn't like, let's take the 1% and migrate them over. This was like there's a whole set of latent demand. Again, so one of the market risk thing, people are like, "Well, it's only immigrant parents or top 1% parents that pay for tutoring." It's like it turns out parents actually care for their kids, but there's a lot of friction in expressing that care.
Brett: Exactly. And the business model was a rake. You were just taking a percentage?
Sam: We're just taking a percent. Yeah.
Brett: You standardized the fee or you let tutors do whatever they want?
Sam: \[inaudible 00:54:38\] standardized to start with. We may still allow tutors to set price at some point, but it's like you just want to minimize the variables to start.
Brett: And were tutors existing teachers on the network?
Sam: Yeah. They're all \[inaudible 00:54:47\]
Brett: So you didn't go and recruit?
Sam: They're all still existing teachers, which is pretty amazing. There's a few joining off network now and that tutors are bringing demand from off-network as well, but that started to be our second growth engine in the company. Lots of exciting adjacencies around the subjects and grade levels and geographies and formats and lots of stuff you can get into, but the core of that is just looking like an amazing business too.
Brett: And then have you worked on the next business that you're going to launch?
Sam: Yeah. I mean different levels of maturity. So these are going from most to least mature. The next one was a crazy one, but this is a real, I think it's the kind of thing startups should be doing. So in 2021 we were talking with a bunch of parents. One of the big concerns we were hearing was, "Hey, screen time, my kids are spending all this time." It wasn't even just the quantity, it was like, "What are they doing? My kids are online. It seems bad. I don't know what they're up to." There's lots of fear, uncertainty and doubt. And the truth is you're right as a parent to be worried if your kids are under 13 and on the internet because there aren't great places for them to be on the internet. It was never really built for younger kids. So you usually get either quite boring single player apps and then to make them more exciting, you have to have all these engagement mechanics, which aren't great for kids, or you get multiplayer apps, but they're full of strangers. That's what happens on a few of the bigger gaming platforms or whatever. And now your kids amongst a bunch of strangers and we know all the downsides and weird effects of that. So what we realized was we were like, "Well, hold on." And this was actually my co-founder, Liam. He'd helped build one of the world's biggest games for kids back in the day called RuneScape. What we realized was, well, we've built this large community, but the community also has real relationships baked into it. You have kids and their parents and the teachers and their friends. We're like, because we know who you are, we could make a place where kids can be with only their friends, no random strangers, no weirdos, and that everyone would feel way better about that. Parents would feel better because it's a closed community with just my kids' friends, it's like a playground basically, where I know everyone in it, kids would feel better because now you can actually have fun rather than having a bunch of creepy strangers around. And so we start to build this place called Dojo Islands, which I could show you, but it's a virtual world where every class gets an island, they get to build this island together, so it's very Mindcrafty, you build this virtual world together. And then you start to discover games and activities spread across this island made by the kids. And so it was such a crazy, when we talked about it with the board, they're like, "You're a games company now?" And to me as well, I was like, "Oh my god, Liam is excited about this idea. I don't really know that much about it." But the more we picked it out, the more we realized, hold on, this just makes so much sense. If you could make a place basically the best place on the internet for kids where you knew your kids were going to be safe, you knew they were going to be doing wholesome stuff that was helping them learn and grow, you'd want that place. And so that's what we started to build and we launched it quietly in 2023 and it's just exploded. It's also now millions of kids.
Brett: And the primary experience is you're doing these things with your classmates?
Sam: With people you already know.
Brett: So it's not necessarily just your close friends in the school?
Sam: Yeah. Now you can peel off into smaller groups or whatever, but the superset is just people you already know.
Brett: And what's the fifth business?
Sam: Our CTO Dom turns out he homeschools his kids and we were talking about AI and the impact of it or whatever, and he taught them to read, there's a couple of great books you can work through to get through the science of reading like phonics. And he was like, "I think there could be a really killer product here." And he just went off on his own for a few weeks and he was like, "I think we could build an AI reading tutor here." And we were talking about it and we were like, look, I think everybody in the world wants the AI tutor for their kids, but you look at the way people are building it or the way it's going, it's not clear which one's going to work out. And we realized, well, we've got all of this information on how kids learn. That can be really helpful here.
Brett: What data did you have on the way that kids learn?
Sam: To start with it was like what's happening in the classroom, what your kids are doing. So it's a bit more contextual information, what kids are up to rather than specific information about your learning. People add their work and things to Dojo so there's a few things, but more than that we have deep engagement. Dojo is open on the phone or in homes and classrooms many days, many weeks. So there's lots of opportunities for engagement. And so I saw Dom and he was like, "Look, I think we should have a crack at building this." And he started to build it and so we launched it quietly last quarter. It's called Sparks. So it's an AI in the end it's going to be the AI tutor for your kid. It's starting in reading because that's basically a huge use case. We speak with families and hear from them all the time. That's one of the biggest needs they have. And it's got two parts. It's got a tutor, a little guy called Sparky who has this conversation with your kid and learns more about their preferences and where they're struggling and all the rest of it. And then a series of games and activities that lead kids through the science reading. We can take a kid from not knowing how to read to early literacy in three or four months in about 15 minutes a day with no humans involved. That's never been possible before. It's super cool.
Brett: Is there anything else that comes to mind in terms of things that you figured out in how to launch multiple products or multiple businesses?
Sam: One of the instincts was just the talent in the company. I had this mandate that we want at least half the company to be founders or former founders or former founding team members. And you can look at these businesses and all of them have a founder type at the core. You look at my exec team, it's all got former founders or close to founder. Our head of product was the first product person at Khan Academy or one of the early ones. Dom, the CTO is multi-time founders, X and a couple of businesses, a bunch of others. Our CFO was like the first finance person at Plaid. So you've got these people that are used to that muscle is intuitive to them. So who knows, we're still a relatively small company. It's 230 ish people.
Brett: So that's one of the biggest parts is to have sort of founder DNA that we're directly point on getting the new business off the ground?
Sam: Yeah, I think you want to find DNA for it. And then I think also almost like the orientation. For Dojo, like it's a really ambitious company. We want to give every kid an education they love. We're not saying we want to teach every kid to read, which is one part of an education or one part of a childhood. So it's quite a broad mandate. And then you have to be smart about which verticals you get into, which categories you unlock and so on. But I think everyone has the understanding that, oh, we're not like a one product company. It's a multi-product, multi-revenue line company. We have to be thoughtful, we have to get good at allocating capital and resources and time and energy. But those are also skills that we built in those first six or seven years because we couldn't do superfluous stuff. We had to be really just laser focused on what's the critical path to making this network work. And so I think some of that DNA transfers into these other things as well. You get into Zero to One, what's the critical path? There's not so much posturing. Actually maybe this is actually an important thing. There's this great book, it's called Leadership and Self Deception. One of the unexpected benefits of the gun to the head time of not having your revenue and going to network was that you had to be incredibly candid with yourself and with one another because it was just like time was running out so you couldn't fluff around and be like, "Well, it's I guess not that bad or whatever." If something wasn't going to work, you had to say it early and say it loudly and we had to talk about it and find a way forward. And so I think it built a culture. We have a value in the company we call candor over harmony. It's not that we don't like harmony. It's like if we have to pick as a trade-off, we'll pick candor. And so I think creating a culture of candor has really helped because with early stage ideas, it's very easy to not say anything to be like, "Well, I'll just keep eking out 2% wins over here." But someone's like, "Look, we're missing the boat on this, that or the other. We need to get into that." Another great example actually is one of our product leaders, his name's Brendan. He did this total side project, which I didn't even know about. He was like, "Look, clearly every teacher in the world is going to have a teacher's assistant. And we're in classrooms with teachers. We have a lot of trust with teachers. We should get into that and help." And so he just went to teachers did the same process I described. He was like, "What's the worst problem?" Everyone knows that story by the way. He would ask similar questions, "What's the worst problem? What's going on?" Then he arrived at, there's a whole set of more than half of the teacher's work week is taken up in admin work. I think it's like 55 hours is the average work week that teachers work and 48% of it or something is teaching. And he was like, "We should just abstract away all this stuff." But that just emerged in the company. I think building a culture where people are like, they know that we do Zero to One stuff, they know that there should be candid when they think we're missing an opportunity and then they have the muscle to do it, I think maybe some of the ingredients.
Brett: When you think back to the path into originally getting the company into product market fit and these kinds of different chapters or businesses, what are some of the meta things that you've figured out that are useful for other founders to consider and maybe some of the things that are less obvious or less discussed and the types of things that generalize? I'm sure there's tens of thousands of things that you figured out, but really it's useful in the context of this business, but the more generalizable things?
Sam: At every one of these businesses we've talked about, we had a thesis like an end, "This is what we think this could be." And we weren't always sure of all the middle steps, but we had a thesis for what this could be, this is why we could win, et cetera, et cetera. And in some of those we had to change our minds on some of the assumptions, but it was never like, let's just throw some spaghetti against the wall and see what happens. I think we had this lens of delight people hard to copy margin halting ways. Let's have a little bit of structure around picking the direction in a way. And so I think people maybe just don't talk about that. It's just make something people want. But you were asking me earlier about how much did you assess the market, that was maybe our version of it. It was like have a point of view and then update that point of view over time as you learn more. I remember even on our first funding deck, we had a series of hypotheses that need to be true for this business to work out. Things like parents will pay for a product and stuff like that. So I don't know if that's not obvious, but I feel like just that makes some people walk alone maybe misses that and I think it's necessary, even not sufficient. Dojo has this breadth of products, but I think at every point in the company there's always a choice, do you go deep or do you go broad? And it's basically almost always been right for us to go deep. And that's all we did for the first six or seven years until we found some kernel of delight.
Brett: Why do you think that is correct?
Sam: Again, it's just my one person's experience, but I hate to think what would've happened if we tried to build 50 million features in the first six or seven years. Dojo was a communication app, it stayed of communication app and it got better and smoother and more delightful and more useful and all the rest of it. But I think the third thing it is the thing about being around other founders. I spent a lot of time internally focused in the company and I think in retrospect some of the best step change kind of thing thinking I got was just from being around founders who are a step or two ahead of me.
Brett: Maybe there's a couple other things that you can share. The founder density at the company and where that came from?
Sam: Culturally, I think we're extremely atypical in a lot of different ways. I can talk about that including the founder density thing. But so I think early days everyone's like, "You've got to write values. You've a mission and strategy and values." And so I turned to one of our engineering leaders who's still in the company today. I was like, "Hey, we've got to figure out values. Can you help me write them?" And he was like, "Let me take this. I'm going to talk to the engineers." The company was mostly engineers. He said, "I'm going to talk to the engineers and I'll come back with something." And they came back with, honestly this amazing, everyone that reads them is just captivated by them. They wrote values with these three characteristics. One was they wrote them all as trade-offs, so there's no integrity or whatever. It's like candor over harmony, continuous improvement over continuous production, failure recovery over failure avoidance, this kind of stuff. And so these are actual decision-making heuristics.
Brett: Which is a good test of a value.
Sam: A really good test, especially when both sides are good things. Break things isn't actually, if you choose two \[inaudible 01:06:59\]
Brett: If integrity is one and lying is the other, I mean that's not interesting.
Sam: Totally. If you pick two good things and then you have to force a trade-off, which way do you generally choose is an interesting thing.
Brett: Because ultimately I think you're using it to figure out who comes to the company, who leads the company and how to behave as a group.
Sam: 100%. So I think that was one very important thing. They also wrote these as descriptive rather than prescriptive. So it was like, what are we actually doing today rather than aspirationally what would we like to do? The idea was once we write these down, if we don't like them, we don't like who we are, once it's on a piece of paper, we should change what we're doing and then write the new thing. And then the third thing was these were actually built to re-evaluate over time rather than just be etched on the wall in stone. So it's like, let's update these. We've dropped some of them, we've cut some of them, that kind of stuff. I thought that was a very cool thing. The way it turned into reality in the company was we took these values and we basically built all of our human systems on these values. Now look, there's a pre-product market fit and a post-product market fit. This is I think is post-product market fit, but it's enabled us to continue to innovate rather than just heroically do it once. And so I think it's somewhat important, but there's this great book by Patrick Lencioni called The Advantage, and he talks about the four jobs. He's like create high performing leadership team, create clarity over-communicate clarity, and then reflect that clarity in your human systems basically. Something like that I'm butchering in, but the human systems, how you hire, how you fire, how you compensate, and how you reward and recognize people. We basically built all those systems around these values. So what does a high candor hiring process look like or a continuous improvement feedback process look like, et cetera, et cetera. And that's led to this very clear, I think, cultural resonance through the company. And so people self-select very quickly. You can turn up, read our values though. I'm like, "This is actually how we are and you can opt in or opt out." The downstream effect of that though is that we spend very little time having very fundamental philosophical battles. There's just a base level. There's lots of diversity of thinking and experiences and things around that core, but there's a shared core for sure. I think we've just been uncompromising on that, which seems good. One of the things that emerged from that was what kinds of things you encourage and tolerate in the company. And I think one of the pernicious things that companies get into is they start to tolerate errors of inaction. They're like, "Well, I didn't do anything, so I can't be wrong." And they start to punish errors of initiative and boldness. So you really want to change that, I think. And that led us, I think to the founder thing where I think we've always feared just getting a bunch of people that are phoning it in and just doing a job. Nothing wrong with that, but it's not how I want the company to run, and I want this to be just a real team that's charging together. And so we basically just had the mandate. We're like, "Look, more than half the company is going to be founders." I think it was more than two-thirds at some point, but it's like more than half is going to be founders or founding team members. This isn't like, oh, I've only ever done a startup. These are people that have done a startup. Maybe they've scaled a thing, they've led a big thing, but they know that that curve. And I think it's just a totally different level of empathy too. If you've only presided over a kingdom, building the kingdom is a different thing, and I think that's important.
Brett: And you haven't had it lead to just chaos with these people that want to be the founder or want to be in charge? I guess maybe that's that you want people that have had more than a experience?
Sam: Yeah, I think there's a level of maturity also that comes. We've definitely had some chaos for sure, but there's a level of maturity you start to look for. You're like, okay, I know what it means to be a founder. I know what it means to be part of a team and drive together.
Brett: Who has had the biggest influence on you that is not a family member? What is the thing they imparted on you?
Sam: Well, I mean the tee up there is can I be my co-founder? Yeah. I mean, honestly, I think Liam's had an enormous impact on me. You can't work and live with someone for eight years and they don't rub off on you, but it's maybe not in the way you think. It actually goes back to something you told me earlier. We finished the incubator and we were like, "It's great. We've got this hockey stick." I talked to Tim, our now board member. I was like, "Tim, what do you think the hardest part about building this company is going to be? It seems like we've cracked the product market fit thing," whatever. And he was like, he told us a story about how Bill Gates wrote an article about Yahoo saying how cool it was, and he was just like, he woke up, blood drained from his face. He was like, "Oh my God, we're going to get taken out by Microsoft basically." He was like, "You're going to have crazy highs and crazy lows. And finding equanimity, managing yourself through those ups and downs is going to be one of the hardest things. And you don't know it yet because you've not had them, but it is one of the hardest parts of it." He was so spot on. And Liam has been just an incredible example for me because I think he's been such a, he is a model for me of equanimity and a model of optimism. I think I'm a pretty optimistic guy, but Liam is both calm and optimistic. And so when I'm having the worst of times, we'll go for a walk, we'll talk about it and I'll be like, "Oh man, actually there's a way through this." And so I count my blessings because it'd be very hard to do this alone.
Brett: How did you learn that behavior? You can't just tell yourself be calm.
Sam: Well, I mean lots of work. This whole team keeps us trained on the tracks, but there's like exact coaches and therapy and all the rest of it. But I really do think some of this is just role modeling. Being around someone like that where we could have a crazy terrible day and Liam doesn't go to pieces. He's like, "Okay, let's talk about it, think about it, feel all the feelings about it, and then let's move through it and get on with it." And I think that's been a great example for me.
Brett: Good place, then.
Sam: Yeah, man.
Brett: Thanks so much for doing it.
Sam: Cheers.
Brett: I really appreciate it.
### What your startup does (and doesn’t) need to come out of stealth
URL: https://review.firstround.com/what-your-startup-does-and-doesnt-need-to-come-out-of-stealth/
Last updated: 2025-12-04T17:01:12.000Z
A launch plan from Figma’s first marketer
_This post is for subscribers only._
### How to Launch Your Startup Out of Stealth, from Figma's First Marketer
URL: https://review.firstround.com/how-to-launch-your-startup-out-of-stealth/
Last updated: 2025-09-03T07:22:13.000Z
Bringing your startup out of stealth can feel a bit like becoming a parent. The platitude that “you’ll never be totally ready” rings true here — you could keep tinkering with your MVP in perpetuity.
But *not* launching is equally as scary. You’re not getting feedback from users. Your growth is glacial. Your single-digit team’s motivation is waning.
And the spotlight has only gotten harder to claim. Gone are the days when securing a TechCrunch exclusive was all you needed to make your debut in the startup world. It seems like there's a buzzy new AI startup sucking up all the oxygen every week. How do you break through the noise?
[**Claire Butler**](https://www.linkedin.com/in/clairetbutler?ref=review.firstround.com) knows this mixture of dread and anticipation well. She worked alongside the [early **Figma** team](https://review.firstround.com/collections/insights-from-building-figma/), including co-founders [**Dylan Field**](https://www.linkedin.com/in/dylanfield?ref=review.firstround.com)and **Evan Wallace**, to bring the design product out of its three-year stealth mode (and [steward its massive community growth](https://review.firstround.com/the-5-phases-of-figmas-community-led-growth-from-stealth-to-enterprise/)). After that initial debut, she went on to launch countless new products within Figma, and now as an advisor, she’s helped a number of early-stage startups step out of the shadows.
Let’s assume at this point you’ve got a shippable product, ample funding and a handful of first customers — and you’re just starting to sort out when, how and where you should emerge from stealth. Butler’s wrangled with all the questions keeping your team up at night: **Do you really need press? Which features do you absolutely need to launch with?** **When should you do it?**
Here, she lays out all the fundamentals you’ll need to nail down before launch. But heed this reminder as you craft your strategy: “The prep work can be more impactful than the launch itself,” she says. Obviously, you want your launch to win the attention of potential customers, investors and random people on LinkedIn, and her plan of action will help increase those odds. But most of the homework she assigns below is a forcing function for the crucial positioning and product decisions you need to make right now — even if your kinda-cringe tweet draft never sees the light of day.
> Do the prep work to launch now so you can back into the decisions you need to make about your product and vision.
## The when: Just set a date (even if it feels uncomfortably soon)
There are two states of launch readiness.
On one side, **you can only really launch once.** Sure, you can [launch a second product](https://review.firstround.com/going-multi-product-11-tactics-for-tackling-your-next-bet/) or announce a fundraise later, but this is your first shot at getting your name out there. So it's tempting to wait until your product and positioning feel “perfect” — which can lead you down an endless spiral of refinement.
And on the other side, **you want momentum.** You feel antsy about getting your product out into the market ASAP. You crave [traction](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/) and feedback from real customers, and you want to keep potential competitors from nipping at your heels.
**You also feel swayed by your answer to “why now?” — your reason for launching.** Are you launching a beta? Unveiling the product to users for the first time? Need some tangible proof points to start wooing prospective hires? These needs often run counter to your desire to stay in incognito mode.
**Ultimately what will decide which way you teeter-totter, says Butler, is feature completeness**. That means wrestling with what technically must be shipped and ready to use, and what you can say is coming down the road when you launch. “This is where you go back to your positioning statement and think to yourself, ‘What do I need to have done to launch, and what can I say is coming?’” says Butler. “That’s a decision you as a founder will have to grapple with. It’s a hard one.”
But reaching a critical mass of features is more important than absolute feature completeness for launch.Figma’s a great example of that. “We launched without multiplayer, which sounds crazy, because Figma is a collaborative online tool,” says Butler. “But it was going to take another year to finish building it.”
The multiplayer question was a contentious one for the early Figma crew — Butler remembers heated debates with her Figmates about whether it was a non-negotiable for launch. She says that this unease around your readiness should be expected.
“There’s going to be discomfort,” she says. “But someone told me once, ‘**If you’re not slightly embarrassed about your feature set when you launch, you’ve waited too long**.’”
As the Figma team discovered, idling in stealth can take a toll on morale. “The team was bored,” she says. “When I first joined, the office was always really quiet. They had been building for two years, just working and working. We needed momentum.”
Launching without multiplayer gave the team accountability to keep working toward that goal. “It pushed us to just get it out there without our key feature, saying multiplayer was coming and committing to that, knowing it wasn’t done.”
So how do you hop off the endless teeter-totter? Butler recommends choosing a date almost arbitrarily. “Even if you don’t know if it’ll work or not, you can always change it later,” says Butler. “You need to put a stake in the ground and have a specific date you’re working toward.”
Don’t worry about factoring seasonality into your timing calculus. “The time of year doesn’t matter,” she says. “Figma first launched in December, which is supposedly not a great time. We did other big launches days before the Fourth of July. There are pros and cons to any time of year.”
Butler also acknowledges that the world has changed since Figma launched nearly 10 years ago — and AI companies in particular no longer have the luxury of staying in a multi-year stealth mode. All the more reason to just put a date on the calendar and start working backward from there.
> There’s no way you’re going to launch and think it’s perfect. You’re not going to feel totally ready no matter what.
## The how: Create these three artifacts to force key decisions
With a date on the horizon, now is the time to start the prep work. Let’s assume you’ve already written up a positioning statement (read [Arielle Jackson’s advice](https://review.firstround.com/positioning-your-startup-is-vital-heres-how-to-do-it-right) if you’re still fine-tuning) and have a rough ICP (refer to First Round Partner [Meka Asonye’s playbook](https://review.firstround.com/how-vanta-clay-retool-found-icp/) if you don’t). Butler says loose ideas of how you might translate that messaging into a launch won’t cut it here — **actually mock up everything you’ll need to launch**.
“The worst thing you can do is get stuck in a massive brainstorming file where you’re making tables about features and benefits,” she says. “Even well before you’re ready, creating launch materials will force you to sharpen your positioning.”
How long should you spend on this prep work? As much time as you have until your go-live date, she says. “Building your product is the time-gating factor. Creating these artifacts will fill the space you give it.”
Here’s what you’ll need to mock up:
### The website
[Your website](https://review.firstround.com/how-to-adapt-your-pitch-deck-into-your-website/) is the manifestation of your current product marketing. Start here. “Once you have your positioning statement, do your website first,” says Butler. It forces you to decide these fundamentals:
- Brand feel and tone
- Core positioning
- Most important features
- Call to action
There’s no need to find a fancy brand agency to put together a slick website this early on, says Butler. “It can be really simple. You only need a homepage. And the second priority is the ‘about’ and ‘careers’ pages,” she says.
Even if you haven’t spent much time on, say, your brand feel and tone, making your website is a great way to stumble into what you do and don’t like. “Your website will nudge these decisions in a concrete way, instead of living in the swirl of existential uncertainty of early-stage marketing,” says Butler.
Your call-to-action button, meanwhile, will prompt discussions about how customers will be able to use your product upon launch. “Are you going to have a waitlist, or can folks sign up to use your product now? Or talk to sales? This small copy will force much larger decisions,” she says.
### The announcement post
Crafting your “Hello, world!” note is almost like writing an angry letter. You don’t have to send it, but the act of doing it is valuable.
“Whether you ever post it or not, I’d encourage the founder to write an announcement post,” says Butler. “Do it yourself. This is something that should come straight from the founder — and explain your vision, why you built this thing and where you’re headed long-term.”
The exercise of compiling this founder manifesto of sorts is what’s most productive here, and not necessarily how polished and stirring you can make the writing itself. “Writing all of this down in narrative format will help you organize your thoughts around how your story fits into the zeitgeist and everything else that’s happening — aside from just the product and what it does.”
> Writing is a great forcing function to get your head around how you talk about your company.
The announcement post forces you to articulate:
- Your corporate narrative
- Your “why now” and future vision
- How other news fits in, like your funding, hiring and story arc
Even if you ultimately don’t post this on launch day, don’t skip this artifact. “You might still pull from this later, whether that’s for your Series A pitch deck, getting ready to talk to the press or talking to other founders,” says Butler.
### The social post
Finally, mock up the social post. “This one’s quicker, because you’re distilling everything from the website and the founder’s announcement into its simplest form,” she says.
It forces you to sharpen:
- Your highest-level message
- Which assets you need: video, image, tagline, etc.
- Whether your message actually lands
“The social post is a gut check. Do you sound fluffy? Are you embarrassed to post this as yourself? It’s a good way to make sure you’re not stuck in the marketing language of ‘optimizing workflow inefficiencies,’” says Butler. “It’ll make you much more confident that your message is authentic to you.”
Is a launch video worth the investment? “It depends on the nature of the product,” she says. “You have to figure out the best way to communicate the launch of this product as succinctly and powerfully as possible. I’d say most of the time, a video is the best way to do that, even if it’s as simple as a product demo. It can also be used above the fold on your website.”
For a more low-fi asset, try Figma CPO **Yuhki Yamashita**’s [screenshot test](https://review.firstround.com/lessons-in-product-scaling-and-storytelling-from-figmas-cpo/): Can what you’re communicating be launched in a single screenshot (or screen recording) of the product, where someone coming at the post cold could understand what you’re launching? This is also a good test for whether your product can stand on its own without tons of explanation.
Claire Butler, Figma's founding marketer
## The where: Choose your distribution channels
You’ve got your website, announcement post and social post all queued up. Where should you broadcast them?
There’s a general launch channel playbook that will serve most tech founders. “But yours might be different depending on your ICP,” says Butler. “**Remember that there are two audiences of your launch: Your target customers and the tech ecosystem, which sometimes live on different channels. And you need to share your news with both**.”
So choose your platforms accordingly. Butler recommends not wasting your time trying to lure users into a brand-new channel. “No matter who your ICP is, find out where they currently hang out. If there’s a Reddit everyone’s in, join it. If it’s Roblox or Discord, go for it,” she says. “In the early days, you have to go to them. It’s really hard to get people into a new space in the beginning. So find ways to engage with that community where they already are.”
This is also when you should launch your brand handle on all channels you plan to engage with. “It’ll have no followers at first, so the social posts and amplification should come from the founder and early team. But you should set up the handles with the launch to get it started,” she says.
Make sure your personal accounts are set up on the channels you plan to launch on as well — and if you’re not, start one now. “In the early days, the founder is the brand. Your brand account will have zero followers, but you as a founder hopefully have some. People are much more likely to interact with you, the person, than this nebulous brand they’d never heard of until now,” she says. “Look at Dylan on [Twitter](https://x.com/zoink?ref=review.firstround.com). He’s prolific. And he was when Figma launched.”
Here’s Butler’s briefing on each of the classic launch channels:
Should you still launch on X/Twitter? You can’t ignore it, says Butler. “You have to be there, even if you don’t want to be,” she says. “I haven’t seen anywhere else online where more tech folks hang out than Twitter. So you’ll have your post from your brand account, and then you can quote-tweet or cross-share it from the founder’s personal account to share more context and your personal story.”
The same goes for LinkedIn. “Even if that’s not where your ICP is, you still have to use it. You probably have a ton of connections and you’ll get momentum there. It’s an expanding circle — the people who know you or know someone who knows you will be the first people to learn about your product. So work with what you have to start getting in front of people further away from you,” she says.
Butler also recommends emailing all of your current users — and throwing in everyone else you know onto that list, even your old roommate. “Even if they’re not your ICP, this starts to build concentric circles outside of your community,” she says.
Hacker News and Product Hunt aren’t as impactful for reach as they used to be, but they’re still a good surface area for exposure in the tech world, especially if you’re building a product for developers.
Butler’s final piece of advice for launch channels is to stop sweating over the PR exclusive. “You’re probably not going to get press,” she says. “It’s okay. It’s not as important as it used to be. It’s only viable if you’re combining your launch with a big funding announcement.”
So in her view, working with a PR agency isn’t a must at this stage. “You just need a long-form narrative piece to share around, but that can come from you. Sure, if you can land a TechCrunch, Verge or Fast Company article, that’s great for credibility, but it’s not necessary,” she says. If you’ve already secured some funding, you can work with your investor’s comms team on this.
Or try going direct. “Better yet, just send those pitches yourself as a founder. When Figma launched out of stealth, Dylan talked directly to [Josh Constine](https://www.linkedin.com/in/joshconstine?ref=review.firstround.com). It was more authentic that way,” she says.
### Prep your amplification strategy
“You can’t just put your launch posts out there and hope for the best,” says Butler. “You have to pre-seed it. To this day, that’s how we treat launches at Figma. Nothing is left to chance — we plan every detail with so many people ahead of time.”
Put together this list of folks to reach out to to help amplify your news:
- Your friends
- Industry influencers
- Beta users
- Your network
- Everyone you know
- Your mom
A few weeks ahead of the launch:
- Tell them when it’s happening
- Detail exactly what you need from them to help
On launch day:
- Share links
- Ask for reposts, upvotes, likes
- Amplify those who amplify you
“This way, you’re not going to launch to crickets. You know you’re at least launching to momentum from people you have a connection with,” she says. “You’re planning the distribution within your own circle. From there, the strength of your product and message will help you expand from that.”
## Launch day is a starting line, not the finish line
With your materials and plan of action squared away well before launch, the day itself will feel more like admin (accompanied by plenty of jitters, of course). Just make sure you don’t save all your engagement with your burgeoning community for the day of.
“Keep monitoring and engaging with conversations about the product,” says Butler. “I’d also recommend bookmarking social posts about your company to start building a list of people to keep up with in the industry.”
There’s no need to get too scientific about quantifying your launch’s success. “So much of what matters here are vibes and momentum. Metrics are hard to track because you don’t have any benchmarks yet to compare them to,” she says. Still, there are numbers to lean on to loosely gauge momentum, like social impressions and engagements, web traffic and product sign-ups.
And what if the launch day fanfare doesn’t quite live up to your expectations? Remember that the work you did to prepare matters more in the long run than your performance on game day. A flashy launch isn’t a signal of [product-market fit](https://www.firstround.com/levels?ref=review.firstround.com).
“You’re out there now. Just keep going,” says Butler. “A launch is a starting line. Even if you don’t bust out of the gate, you can catch up later. What you build and how customers react to it is ultimately more important.”
### Scale smarter, not bigger: Inside Linktree’s internal AI adoption playbook
URL: https://review.firstround.com/scale-smarter-not-bigger-inside-linktrees-internal-ai-adoption-playbook-2/
Last updated: 2025-12-04T17:01:00.000Z
How Linktree kept headcount steady at 190 while boosting shipping velocity and AI adoption
_This post is for subscribers only._
### From Chrome extension to $5B platform | Postman’s journey | Abhinav Asthana (Co-founder & CEO)
URL: https://review.firstround.com/podcast/from-chrome-extension-to-5b-platform-postmans-journey-abhinav-asthana-co-founder-ceo/
Last updated: 2026-02-03T17:35:13.000Z
Abhinav Asthana is the co-founder and CEO of Postman, the world's leading API collaboration platform used by millions of developers and thousands of companies. What began as a personal itch, a simple Chrome extension Abhinav built to make his own API work easier, became a global phenomenon within weeks.
In this episode, we discuss:
- Making the leap from India to Silicon Valley
- The moment Abhinav realized Postman could win
- His principles behind building for developers and non-developers alike
- The early monetization experiments that led to their SaaS model
- The value of progressive complexity in product design
- How community building became a powerful growth lever
- And much more…
References:
- Abhijit Kane: https://www.linkedin.com/in/abhijitkane/
- Adobe: https://www.adobe.com/
- Ankit Sobti: https://www.linkedin.com/in/ankit-sobti/
- Figma: https://www.figma.com/
- Kong Inc.: https://konghq.com/
- National University of Singapore: https://nus.edu.sg/
- Postman: https://www.postman.com/
- Ram Gupta: : https://www.linkedin.com/in/ram-gupta-39b9711/
- Slack: https://slack.com/
- Stripe: https://stripe.com/
- Stewart Butterfield: https://www.linkedin.com/in/butterfield/
- Yahoo: http://yahoo.com/
Where to find Abhinav:
- LinkedIn: https://www.linkedin.com/in/abhinavasthana/
- Twitter/X: https://x.com/a85
Where to find Brett:
- LinkedIn: https://www.linkedin.com/in/brett-berson-9986094/
- Twitter/X: https://twitter.com/brettberson
Where to find First Round Capital:
- Website: https://firstround.com/
- First Round Review: https://review.firstround.com/
- Twitter/X: https://twitter.com/firstround
- YouTube: https://www.youtube.com/@FirstRoundCapital
- This podcast on all platforms: https://review.firstround.com/podcast
Timestamps:
(01:18) Why early computer access changed everything
(03:39) The first taste of the entrepreneurial bug
(09:58) Building BITS360 in college
(11:14) Curating entrepreneurial taste
(15:49) The ventures that didn’t make it
(20:53) The problems that preceded Postman
(29:56) How Postman’s team was formed
(34:01) Why clear roles prevent chaos
(34:50) Scrappy startup life in the early days
(36:26) Postman’s path to monetization
(39:59) Building a truly collaborative platform
(43:00) Navigating market and customer needs
(46:02) Cracking the go-to-market code
(49:39) Bridging the developer-enterprise divide
(54:43) The open-source dilemma
Abhinav: Thanks for having me here.
Brett: Let's start, I want to start by talking about what your childhood was like and when you got into programming and software engineering.
Abhinav: So I got my first computer, I think in maybe '97 when I was in fifth grade. My dad was a computer geek who actually trained as a civil engineer, but got his hands on a computer mainframe when they arrived in India, and he always wanted to buy a computer. So there's a long history of how we eventually got the computer. It was not as easy as just ordering online and having it be shipped, you had to wait a few months. But the computer did arrive and I got hooked onto it almost instantly. Compared to, I think, what access for things or tools or learning opportunities I had outside of this, this was way more fascinating. Of course though, I did start with getting hooked onto gaming first, the fast feedback loop that games give you was-
Brett: Do you remember the first game?
Abhinav: I think probably there was a game called Dave or Aladdin at that time that I played, I graduated to Doom soon after. So those are the few games I remember, but I played a lot, a lot of shareware games.
Brett: So what did your dad do, was he a civil engineer or he was just trained as a civil engineer.
Abhinav: He is a civil engineer, and he actually transitioned a lot of his work to working with computers. I think he mastered Microsoft Excel to such an extent that eventually he could just press a button and he would get all his work done and that was a hack for him. Everybody around his office was like, "How do you get this done?" We had people who would come to our house to check on calculators. At that time, they were so unsure of what the computer did. But he was like, "I can just get everything done faster in my line of work." And he eventually also taught me programming. We started with C, very, very old school, more bare metal basic stuff, pointers and functions and stuff. But soon after that, he was much more interested in the way computers helped his work versus the core programming aspects of it.
Brett: Was it odd at all to be in this rural part of India, and then you go and use a computer and you're tapped into the world in some way?
Abhinav: It's like, yeah, it was a teleportation device.
Brett: That's what it felt like?
Abhinav: Yeah, just get transported into places. In some ways, you're in this internet world at that time, there were forums and there were online websites and you're browsing all this and you're connecting with people in very different ways.
Brett: What's the way in which growing up in that way shaped the person you are today, the way you think about entrepreneurship, those type of things?
Abhinav: Within a couple of years, I think both my parents saw that I was spending too much time gaming and not using it in productive ways, and they basically said, "If you want to use a computer, you need to go do something useful with it," and I think that was probably the only constraint I had. So I really started exploring why these things exist. So I started thinking about how to build games themselves, and very soon, the intersection of the internet really changed my experience a lot, because while I started with games, I tried building desktop software. So back then, Visual Basic was the original no-code software, so I learned that and you could drag-drop forms and buttons and other things, and it was empowering that you could build things that you are using before, and that has been a big influence for me, really feeling behind the screen and seeing how these things are put together. So while I saw that with games and desktop software, I think the internet really unlocked, you could connect with so many more people, you could have so much more scale, you could do things that are just fascinating for people far, far away instantly. From Visual Basic, I graduated to, I think, building on PHP and MySQL. Purists might say it's not a graduation, you have become more of a script kiddie, but I disagree. But with PHP, a web server that was hosted somewhere in the US, you're just building software for the world, and I think that allowed so much freedom for the mind to explore that I think there was no going back. I think one thing that has stayed with me is that once you conceptualize something and you see it being used by people, then the timescale of that is short and so rewarding that you just can't work for anyone else. You get this extreme dopamine hit of some sort, which in some ways is actually helping the world be a better place. It's the best of both worlds. In the middle, from thinking about something to building it, there's a lot of pain. You fail a lot, and I failed so many times. I tried to build products and they would just not work. I picked up consulting on the site. So I had a friend of mine back then and we got together and we were offering website consulting services, the best-in-class, and we would just copy projects, whoever was a designer in Vogue at that time, the web designers, if they were using Flash and ActionScript, so we'd go build a Flash website. Half the times, we'd clone it and then come up with something useful and that would really keep going. So I think this mix, this cocktail of pursuing your own curiosity, your creativity, being able to actually be independent and make money, I think both of these things came together to give me the confidence that you could be on your own. When I graduated from college, I never went for a job. I was offered many jobs through my career, so to say, but I always went back to those memories where it was so empowering, so rewarding, to just go build to make someone else's life better.
Brett: What's the earliest dopamine hit that you can remember, meaning you conceived of something or had a client and saw them use that widget?
Abhinav: I think the first or maybe the second project I did, I got maybe an $80 check for that, and it was very hard to actually cash that check because there were no banks around to actually deposit it. So I think I'd made a website for my client, and along with that, I'd built a booking service. I forgot for what purpose, maybe it was some freight tracking or something. And he sent me this $80 check for a job well done. And I think my dad said, "Deposit the money in your account. When you grow up, you'll have it." I think I just framed the check. And I met that client later, like 15 years later, he pinged me.
Brett: Really?
Abhinav: He said, "Great job with Postman."
Brett: So what were your college years like?
Abhinav: I went to college from 2006 to 2010\. For a year in between, I focused much more on competitive exams in India, that's how you get through. I landed in a pretty good college and I basically got back to this. There was a computer club, there were demands for a web designer, there was a demand for a web programmer, and I raised my hand and got quite good at it, but I still had this itch for building a product.
Brett: Instead of just doing consulting projects?
Abhinav: Yeah. So that was always paying the bills, so to speak, and that helped for paying for a MacBook or an iPhone. So I used to, like a nerd, you would buy the stuff, and my dad said, "I'm not going to pay for that stuff, you've got to earn it." So that was fun. But building a product is very different than building a project with a product, you have to conceptualize what people would need. And at that time, within our first year, what I saw as a pain point was a lot of people really did not know enough about going through the college prep process. Later, I felt like everybody feels the same pain when they go to college, but at least at that time, I knew that communities could connect online and get questions answered, and none of that was really there for aspirants or their parents, who were very involved in this activity. So we built a community called BITS360 for my college, and along with that, we built a panoramic virtual tour, similar to what we thought was Google Street View for college campuses, and we went around taking panoramic pictures, we stitched them together and we created an immersive experience, which became very viral in that community. We launched this in our first year in college, and in the second year, everybody who was applying for that college was going through that website. It became this unofficial guide to go in and we wanted to showcase the college in a good light. We then went to all its branches and that became, I'd say, the first successful but non-monetized product. That became our first startup later, which was called TeliportMe, and we had a mobile version of that. It came after trying a lot of things in the middle that did not work. So these two threads, which was trying to build these products, I did some consulting on the side, started designing websites for other clients, and I had a bunch of friends who were also eager, I found my community there, and some academics in the middle.
Brett: How did that develop your entrepreneurial taste?
Abhinav: A big part of this for me was really the importance of good design. Most things that I saw were just not built \[inaudible 00:10:18\] whether they were on the outside or they were on the inside, and when you build an integrated product and you know all the layers it involves, I knew I just didn't want to build a business, I wanted to build things that feel good, that look good, that work well, because you just can't stand it. Oftentimes, even if people would tell me that something looks great, I would still critique it and I would just never be happy. So people would say, "Great job, we loved hiring you," or, "We enjoyed the product," I knew there were so many things I could improve that I would always be a bit upset about it. So I think that was a big part of how I started thinking about entrepreneurship, whether it was building the product or building the company later on. It also gave me the resilience to actually keep progressing. I think a lot of people I saw who would just give up or would be so disappointed that they would not build the V2, the V3, but for me, doing this continuously, failing many times, but succeeding a few times, gave, I believe, me the resilience to just keep going. So I think that was a big mechanism for me. And I think finally knowing that I could always make money as a fallback just gave me the confidence. I don't need to go raise money, actually, I don't need to go back to my parents, I'll just go build some stuff and make money. So I felt, at that point, invincible. You just don't need to rely on anything, you just have to build good stuff.
Brett: Where did your taste come from? I think the thing that you noted about generally always dissatisfied, saw the product that you built could be better in all these ways, where did that come from, do you think?
Abhinav: From a very early stage, I started noticing what are the things I enjoy using and what are the things I dislike using, and a big part of me, actually, coming to Silicon Valley, I think I could trace it back to that. So if I go back to my childhood, I was in two camps, I'm building on open source or I'm using all the stuff that Microsoft did, and I could see the pros and cons of both of those, and they were still development tools. I think really, the sense for design I got from two places, one was really when I got the first iPhone or the first MacBook.
Brett: This was 2008 and '09?
Abhinav: Yeah. So around 2008, yeah, probably, I got my first MacBook.
Brett: Midway through college?
Abhinav: And I could see the difference between how something that is very extensible and flexible does not really feel very integrated and you have to really know the customer experience. And I read a lot about Apple, I read a lot about Steve Jobs, I went deep into it. I read a lot about data ramps, I read a lot about hardware engineering, industrial engineering. And this whole philosophy of less is more and subtraction is important, I think, made a big influence on me, where just everything that I saw being built in India or around me, even all the new products that came out were only about just adding more. I would react to it like, how can you make something better by removing? And I think Apple was the example for that, at least the most popular product back then. I think the other side of this was also because I was building websites, and then eventually I had to market our own products. I got a lot into creative design and trying to design those things too. So I built posters, I built websites, I built marketing material, and I became a big fan of seeing how good design is done. So a lot on the graphic design side. So I think I had these contrasting sides. On the creative side, one is your really neatly ordered integrated products that just work well, which are supposed to help users or consumers accomplish a task. And then, the other side of it is just create a freedom that graphic design offers in some formats, and I loved both of those things.
Brett: So connect the dots between this campus tour product that you built, I guess it was in the 2007 time, and the start of the first company.
Abhinav: The campus tool product did very, very well, and through that, I connected with another entrepreneur who wanted to build much more of a comprehensive platform. At that time, it was a Quora for students, so it was called Exam Crunch, and that was actually the first product we built. It never even took off. We were able to do two things. I built the entire front-end, I built the back-end, we connected it to the Facebook API. We actually won the third prize for the Facebook API competition, which was hosted as a brand new thing, so we were able to connect it to social feeds. And the whole idea was there are millions and millions of students in India, when you have a population of a billion, there are lots of people who are exploring this stuff and they're applying for things in all sorts of different places. So I was the CTO of this 2% company, and my co-founder's view was we're going to offer this as a platform.
Brett: And the product was a Q&Q product?
Abhinav: Correct, yeah.
Brett: Around student topics or around college, where I should go to college and that type of thing?
Abhinav: Both of those things. It was a mix of Stack Overflow and Quora, if you could put them together. So we had a ratings system and a category system, so that's what the product did. And I could trace it back to the first thing I had created because I was familiar with that problem. But that one did not work, there was no traction, and I don't know why, but it just bombed pretty much in the first week and I was disappointed. And then, we had to pivot and we were like, okay, what can we go to next? And we started doing these virtual tours, we started building them as a service. So we built it for a national University of Singapore, we built it for real estate companies, and we thought, okay, this is something that we want to have, they want to explore things visually. Virtual tours are a good place for that. You go into a website and all the technology was built on Flash. As an application, as a product, it had limited reach, you're just building a new product for whoever customer you have. So when Android and the mobile phone world took off, the idea pivoted to building this for smartphones. So we shrunk that technology for GPU processing. If you can imagine, we were working with CUDA back then. We tried out CUDA in 2011, it was just coming out. We bought a GPU, stuck it into a computer, and we were like, okay, how can we actually get this going?
Brett: And the idea was to put virtual tours on the phone?
Abhinav: Yeah. So you would click your pictures on the phone, but they would be stitched on the cloud, and the cloud was basically in our apartment, because that is where you could have GPUs. So that actually worked well, there was a lot of demand for new apps, and we built an Android app, we built an iOS app, and we eventually got featured on the Google Play Store.
Brett: And it allowed you to both create and consume them?
Abhinav: You could basically share it with fellow travelers, and we focused on that idea that if you're traveling, you want to capture an image of that, share it with fellow travelers, and you can teleport them to that location. That is why it was called TeliportMe. Not a good name, but it was not my call. And it worked pretty well, we had, I think, about six, seven million users.
Brett: When you started working on that company, did you have grand ambitions to build a huge company, or were you just tinkering around and having fun? What was the energy?
Abhinav: It was just have to build something that you can put your name on and be proud of it. I was the technical coder, I was the one in the back-end. I did not want to be front-facing. I really enjoyed putting this stuff together. So I was just in this building mode for a while, and as long as people said great things about it, I was happy.
Brett: When the first product was a total dud, did that impact you a lot? Were you sad about it or didn't really care and just onto the next thing?
Abhinav: Yeah, I was just enjoying coding. I was like, keep giving me stuff. We actually built many products, we don't have... It would fill up like five seasons of your show if I told you about all the failed products I built. We built a lot. But as long as I did not have to ask anyone for money, it was great.
Brett: So what ended up happening with that company?
Abhinav: So I left the company in 2013, and it was amicable, because in 2012, as I was building all these things and had this whole experience of building apps and websites through my... Ever since I got my hands on the computer, I realized in the middle that I was working with APIs all the time, I was working with external APIs, I was working with APIs at Yahoo, which I interned at for a while. The response for Postman was different than everything else I had seen. I was not even working on that on a regular basis, it was a side project.
Brett: Yeah. What was the story of the first line of code for it?
Abhinav: Yeah. I was struggling with trying to basically make a back-end for three different interfaces at the startup, and every time going back from your code editor to writing an API client and trying to figure out where stuff worked or did not work made me like, there should be a better solution out there. So initially, I searched for API clients that could have existed. I thought that people have been building this for the last four decades, I'm pretty sure not the first person to have experienced the pain. But everything really looked bad visually, and I was like, I'm not satisfied with what I'm seeing, so I just decided to build my own.
Brett: And what was the form factor of the product, and what made you want to let anybody in the world use it?
Abhinav: Yeah. So I wanted the fastest path to making it work, and at that time, the fastest path was having a Chrome extension. I did not want to build a big bulky app, I didn't have time for it. I wanted a runtime that was universally available, which is your browser. And Chrome had just introduced Chrome extensions, through which you could access APIs in the browser and actually have your own interface. So I picked that as the vehicle for that, and I could put all the skills I had, HTML, web design, to use there into building a dev tool, and I just built it and I put it out there on the Chrome Web Store and people started using it.
Brett: Without any marketing or telling people about it?
Abhinav: Yeah, no.
Brett: They were just searching for it?
Abhinav: Yeah, a lot of people were searching for it. My second feature request that came through GitHub, and the project was open source in the beginning, was actually somebody who was at Google and he was like, "I'm using this a lot, and can we add this thing or that thing?" And soon, I started seeing hints of this that, hey, this is not just someone like me who's using it, these are very experienced developers who are struggling with APIs or building with APIs all day long, and these are the ones who want more capabilities, and it just spread from there.
Brett: And it started, the product was focused on people consuming APIs?
Abhinav: Probably both. I think production and consumption of APIs, depending on what type of developer you are, is what matters. So if you're a back-end developer or a full-stack developer, you're doing both. If you're a front-end developer, by definition, you're only consuming APIs. We saw all of them.
Brett: Explain what that early version of the product allowed you to do.
Abhinav: So the first version of the product really allowed you to explore APIs, whether it is for debugging, testing, and then, eventually, it let you document an API. If you're familiar with something like Notion or Google Docs, it has an abstraction for just a literal doc there, but that's not good enough when you're dealing with technical abstractions like APIs. APIs have a very specific language, and if one character is off, it doesn't work anymore. So the product allowed you to really have APIs, API endpoints, as a first-class citizen inside the product. And what an API is basically how you connect your smartphone to your web server, so you have different applications talking to each other. So it's a pretty universal thing, and it is, in some ways, even invisible, to a certain extent, and that's what made it harder for people to use them. Most developers don't really know how deep certain things are. So the first version of the product really allowed and simplified a lot of those interactions for developers who were working with APIs, and over time, the complexity grew to basically use any API. So it could be configured to call your enterprise web service or it could be used to call your smartphone app's API, there were lots of different technical details in it. But the end outcome always was that if you want to get access to an API, you just do this within a few clicks. That's what the product let you do.
Brett: When you first built it, it was entirely focused on yourself, you didn't think about, oh, maybe other people want this, it was just solving your own problem?
Abhinav: Yeah, pretty much so. I think I was so deep into it that I didn't even think, I didn't even have to think. My loop was I would write code for the product I was building, then I would go to Postman and find out it doesn't work, so I'd have to go write up Postman and I would go fix that problem and then go back to my application again, and that's how it was for a while, until a point where the things that other people were using it for was not an experience I had. So if you were at Google, if you were at a healthcare company or you were at a Fortune 500, I had no idea what SOAP looked like, for example, or later, GraphQL looked like. So those things, I had to learn through user feedback a lot. And I was very maniacal, and still am very maniacal, about every piece of user feedback, so if a developer got stuck at any point, I basically went and fixed the product.
Brett: What was the feeling like when people started to reach out to you because you didn't launch it as a company, was it surprising?
Abhinav: It would be false to say that I wasn't pleased. It was something that was always I wanted and not having to push, but people coming and saying, "Hey, I love this thing." If people say, "I'm not using Postman," I actually would be depressed for the day. So every time people would come up and say, "Oh, I'm using Postman," it was amazing. And I also was nervously excited, like, what can I do and improve? So in initial days, I think that continued for a while. I was active in communities, like Stack Overflow or other forums, where I would talk about the product or I would just be helpful to people and I would slide in, "Hey, I'm building this thing if you want to use it," and the response was always positive. The biggest surprise for me was when Google reached out to feature Postman on the Chrome Web Store. They were building a version two of their web store, and Postman was one of the top 20 apps to be recommended, and that was a surprise. I was totally hallucinating at this point if I'm getting a call from somebody who's actually there. So after that, it felt a lot more real.
Brett: When did you decide that it could be a full-time thing and you were going to go actually leave the startup that you were at and go try to turn this into a company? And did it start, I'm going to turn this into a big company, or it was just, people seem to like this, let me go work on it full-time?
Abhinav: I had this intuition that I need to go see this all the way, because it was very exciting to see that there are so many people who are super smart and they're coming to this product. I've always knew that developers hold an extremely high bar for anything they use, and for me, actually, when people started saying that, "Outside of my core repository, outside of my ID, Postman is the one thing that I just cannot let go of," that was a big light bulb moment. And I started digging deep into, at that point, what do APIs mean for organizations, what do APIs mean for developers. And this was the day, by the way, I think Stripe was probably founded 2011, and to me, I think that was just the tip of the iceberg, so to say, what people thought of as APIs and how they actually are. I have been at Yahoo, I saw the internals of a big company at that point, and they had thousands of teams, hundreds of products, all had to talk through each other with services, and there was nothing really there. You were left on your own as a developer. I had that memory, then I saw that, okay, what is a product experience that people are relating to? And I had this intuition that this is going to be big as a company, and I think every year since then, I've always thought this could be a bigger company than what I thought it could be last year.
Brett: And so, what were the first few decisions or things that you did when you said, "I'm going to go work on this full-time"?
Abhinav: The first few things were I had to figure out how to make money without actually going and raising money. I think the idea of which YCs, Paul Graham alludes to, is be ramen profitable was very appealing. I read a lot of Paul Graham \[inaudible 00:28:37\] then, even though we didn't ever apply for YC. But I was like, okay, once you get to that state, you can start thinking a bit bigger, and I found a lot of ways to do that. Once I got to that point, finding the right co-founders, and I ended up working with Ankit, who I had worked with at Yahoo, and Abhijit, who I had worked with at my first startup. And knowing from my first experience, I knew that you have to have people outside of your skill set, people you can trust, absolutely, and they are in this for the right reasons, which is what you want to build as a product in the company, and not for anything else. And fortunately, I had Ankit, and then I found Abhijit.
Brett: Was the process like to get the two of them on board, and did you talk to lots of people? And you also had a product that was successful, so it was interesting, it's not like it's a blank sheet of paper, let's start a company, kind of a dynamic.
Abhinav: It was different, I think, how I was recruited to be a co-founder. I met Ankit a bunch of times, and because we are close, we had lived with each other in each other's apartments while hanging out, he was in Bombay, I was in Bangalore, so we spent a lot of time really discussing this topic. And Ankit had a much better job than mine, he had a high-paying job, he had a much better career, he went to Yahoo, he went to Adobe, and then he went and worked at another successful company, so I had to really figure out how to pull him out of it, and having the traction helped. But we also had to divide responsibilities around what does this mean, it's not just answering feature requests and really just keep coding., That's not how you build a company. And we thought of this idea of API collaboration being the core business problem to solve for. So while there are a lot of developer-specific problems, but a core business problem is how do teams and how do companies build APIs together and how do they make sure that they're in sync with each other and they're being built the right way. So that was the problem we started attacking, and once that idea became clear, we recruited Abhijit to first join us as an engineer. But he was so good and he was so company-first that we were like, we have to make him a co-founder. That's how we came together. And then, we were scouted out by our first VC and we formally started the company later.
Brett: How did you convince the two of them?
Abhinav: With Abhijit, it was easier. I think we had worked together, we called him, and one thing I knew about him was if he's sure about something, he'll just do it. So for both of us, plus, of course, it was Ankit and I, maybe he felt safer. With Abhijit it, was like, we called him, we said, "Do you want to be joining this thing? Do you want to be a co-founder?" He said, "Yes." So he just started, not a lot of work there.
Brett: That's great.
Abhinav: But with Ankit, he had to leave something and he had to take a big bet ,and we spent a lot of time actually working together, I think, building that trust. And I think eventually, he got very, very excited, very convinced. And it also helped that I think he got a little bit of that founder bug, having that freedom, being able to do something that you cannot do in a corporate environment, all of that was very freeing for him. But I think we also spent a lot of time really orienting ourselves towards who we want to be serving, what we want to be as a company, and I think that alignment helped early on, and I think we all got very excited about working with each other.
Brett: And so, what were the types of conversations that you would have in those very early days, the two or three of you?
Abhinav: I think a lot of that was focused in the early days on building, because we had something going. It's not like we are sitting here and being like, "Yeah, let's figure out what we're going to do next month." We have people really asking for stuff and we are finding out what is the fastest way to production for them, so that was just exhilarating. You don't have to think, you just have go build, so a lot of our work was centered on that. I think a big chunk of other work was really on roles and responsibilities and how do we want the company culture to be, and that started from our culture, how do we like to work? We like to trust each other, we have extreme curiosity, so a big chunk of our time was also talking about some of this stuff. And because I had had many experiences of working with other people, I had some sense to bring up some of those uncomfortable things early on. For example, who's going to be the CEO? In this case, I was very clear that this is a vision that I want to bring to life and I've been on the other side, to bring a vision to life, we need to decide that I'm the CEO. Correspondingly, that Ankit has to be the CTO in those phases to really take the product off the ground. And I think that conversation helped us each have clarity of responsibilities. I saw that a lot of founding teams don't do this, and then it becomes very crazy later. So I think having those uncomfortable conversations in the beginning, I was like, I'm going to be very scrappy, we need to be very scrappy. We're not going to raise a lot of money, we're not going to have a shiny office, we are hackers and we're going to build. So we rented an apartment in Bangalore, and Ankit and I lived together, we moved in.
Brett: It's funny how many founding stories start that way of just living together.
Abhinav: Yeah. He left his job, came over to Bangalore, we rented an apartment and we had three rooms. The first room was the office, and then I had one room and he had one room. We bought a dog together.
Brett: Why? You just wanted company?
Abhinav: We just wanted company. So it was a longer story, but we just thought it would be nice to have a dog around. Cooper, he's with us in the US, the dog is with us.
Brett: All these years later?
Abhinav: Yeah. There were things you could do that you can't do here, and we were scrappy and we were making some money on the side, so you just start having fun together.
Brett: So how did you get ramen profitable before you raised money?
Abhinav: Yeah. So I tried a lot of things, I tried donations, I tried, if you can believe it, some forms of advertising or sponsorship. I was getting paid $500 a month by three companies, one of them... Then because I had built an app, I was familiar with the in-app purchase model, and that was what I built, $10 lifetime in-app purchase, extremely bad pricing decision, and it just started selling. You just go to the product, hit a limit, and you start buying. And soon, I started making thousands of dollars a month.
Brett: And that's ultimately what became the path to monetization?
Abhinav: We made that free. We went to collaboration and a recurring SaaS model when we monetized eventually in late 2016, '17, so monetization happened for Postman way later. And the problem that we observed was people start coming to us with this issue of license management and sharing of these APIs with each other, and we thought it's an in-app purchase, so it's bought by user, but they were buying it in bulk. So there was something happening in the team dynamic that we needed to study. Actually, around that time, that was our key hypothesis, that to turn this into a recurring revenue machine, we need to really build a product for teams who are building applications powered by APIs, or consuming or building a lot of APIs together, and we found hundreds of companies willing to be part of that beta program. And we ran that beta program for about six months or so. I tested for that by putting the highest price point I could think of with the lowest possible amount of features, and I would say, how many will still sign up for this thing? And actually, that was the best pricing test we ever did, and within our first month, we had about 50, 60 customers just start right away. Stripe was a big part of it, we had to incorporate in the US, get Stripe billing in place. And there's a story we tell at our company, Abhijit, who was demoing our Stripe integration, we hold a weekly demo day, and he was like, "Yeah, so this is how this thing works." And the sale comes through, we were like, "Great, great job, Abhijit, we got our demo," but actually, it was a real customer. And everybody was like, "Holy shit, we're in business now." So it changed very dramatically for us once we got our first few customers.
Brett: You went from a Chrome extension, you had the founding team, you raised a little bit of money, where did you go from there?
Abhinav: The company formally started in late 2014, actually effectively early 2015, we officially incorporated in 2014\. We had a million-dollar inbound seed round or so, which we rolled into a $7 million total round in a series A. We had about five, six people by the end of 2016\. I might be wrong, might be 10 people or so. But my intent was to actually come to the US, because I just wanted to be next to our customers. So I was traveling, I was meeting customers, people who were excited, enthusiastic.
Brett: And this was still the Chrome extension product?
Abhinav: This was still a Chrome extension.
Brett: Wow.
Abhinav: You could go quite far. Eventually, we transitioned to the new Chrome \[inaudible 00:38:07\] platform, which was also deprecated. So both of these things are deprecated. I can talk a lot about API deprecations, how they hurt. Eventually, we built our own platform based on Electron and we distribute our own apps, we built a web version, all of that came later. But we never really allowed complexity until we really had to do something and it made a real impact on customers. So yeah, we just started making recurring revenue, which grew 200% first few years, then 100% for the subsequent years. And eventually, in 2017, I moved here and started really thinking about go-to-market from a broader lens after I moved here.
Brett: When you think about the early days of product building, was it mainly just pulled out of you by your customers, "We're trying to do this, we're trying to do that"? How did you decide what to build in what order in 2014 and 2015 and 2016?
Abhinav: There is a balance between customer feedback that you get, which is often reactive to a problem they're facing, and there's something just beyond the horizon that even they can't see and sometimes you can't see. So we would always start with a mix of these things and I would have a hypothesis that this is how the world is operating. So a key insight we built was that if you're building an API, it is going to be used by someone else, which is an obvious thing. But actually, most people did not think it was obvious, because there's so much in the code-centric world, because you're always writing your code, you're always building your binary. But we had this insight, looking at sharing graphs of the data inside Postman, that if you're building an API and it's supposed to be used, it's always used by someone else, because why would you otherwise build an API? And that became a key insight to drive a lot of the decisions around what we're going to build in the product next. So we built a collaborative workspaces product, we built public workspaces later, we build partner workspaces. And these problems are similar to, I would say, a Slack or a Figma, but very distinct, because we are treating with a much harder abstraction to understand. It's not documents or messages or design files, it's something that even sometimes developers don't understand or their business counterparts don't understand. So for a while, actually, we had to actually educate the customer on the fact what they're building and how that is important and what the next phase looks like. I spoke to a lot of CTOs in 2018, and oftentimes, when you'd ask them about microservices or service-oriented architecture, they would get it, but when you'd talk to them about APIs, they were like, "What are you talking about?" And that is like 2018 and APIs have been around for a while. In 2021, it changes quite dramatically. When I talked to people, they were like, "Yeah, we had API first." Of course, you're building APIs, but that education was done over the years by us and of course by some of the people in the industry. So having that balance of where the world will go and then orienting the product to both satisfy the community and the customers has always been this balance through the years. And now we have enterprise customers, so we have to balance some of the things that they want with what developers want. So developers want AI and MCP and other things, and enterprises want control and governance and all these other things. But even if we have both of these ends, I still have wanted to push the boundary a little bit, being a bit uncomfortable. Earlier this year, we launched an Asian platform as well, because we were like, okay, if APIs are going to be composed together, they can also be composed on Postman. And it's totally brand new, it's a muscle that we have to build. So always kept pushing a bit, and that oriented a lot of our roadmap.
Brett: Did you have a tension in 2015 and 2016 in terms of who we're actually building for? Is it a developer at a 10-person company? Is it a developer at Google? Is it a mid-market company? Is it not a developer? Was there any tension, or it was always intuitive who you were building for?
Abhinav: We had this inherent tension which started early on and I'd say continues to this day, that I think the question that you asked earlier, whether it's about people building APIs or consuming APIs was much deeper than what we thought. We saw that a lot of the early users of Postman, not a majority, but a significant fraction, were non-developers. These were product managers, technical writers, developer relations, solution engineers, customer-facing folks in go-to-market teams, who are some of the most enthusiastic supporters of the product, and they were like, "Postman has changed my life," and to this day, we see them, because to them, outside of Postman, there was nothing else, they were left out of this world. And of course, the core developer population has always been and continues to be our core base. The tension came from what is the level of simplicity we can have in the product without alienating developers. If you go full-steam into a developer product, you can remove all the UI and just have a terminal, and personally, that was something I did not like. I felt like a lot of the development job or the software engineering job is constructing systems together versus knowing the rules of the game. And a product decision that we took was that the product has to be useful for non-developers as well, so complexity is revealed through progressive disclosure versus something you have to read a manual or learn over the next five years on how to be good at Postman. We want you to be good at Postman in the first five minutes, and that was a very important decision that we had to really stress on.
Brett: And that was a decision made very early?
Abhinav: Very early, yeah. We were like, okay, if you are sharing an API with each other, anyone, it's a student, it's a hobbyist, they should be able to click a button and just use the API, and that helped a lot with growth later on. And we could have gone totally in that direction, where it is a Photoshop, where it is a... At one point, I built 3D models as well on 3ds Max so you could go there. So we did not want that complexity. So that balance, we had to navigate. And I think the later challenge came in designing for a developer who really does not have any restriction when it comes to when they're in a startup or they're building their own freelance project versus an enterprise developer who has to obey regulations, who has to conform to governance rules, and the balance between how much of preference you give to that freedom and how much control you give to the IT admin became a big point of friction.
Brett: What was go-to-market like in the early days? For years, was it just people finding it? When did you go from it's out in the world, people are sharing it with other people, people are taking it from one company to another, to we are going to put effort into go-to-market or distribution?
Abhinav: A big part of the challenge for us was always telling the story of what we are doing and why we are doing it, so I think first, I started with that challenge. Distribution was really not... It continues to grow even now, there are millions of users who come in without us paying anything on advertising even now, and I think that came from really just continuing to focus on the best-in-class product. So we first started with building community in San Francisco, not too far from here, we got into a co-working space and we held our first meetup, and I was super scared, like, who's going to show up? A company that started in India, nobody knows about it. And in the first meetup, we had like 50 people just show up, and it was like, okay, we have to go and do community here, and much more in the natural sense versus in the artificial sense of, okay, we are here to sell your products, we are here to sell you products. I had to build a deck, I had to talk about something, so I showed up and told people what we were building, and I was like, it's going to fall flat, nobody gets our messaging, nobody will get it. And then, one guy started with, "I have come to this meetup with these five things I want to ask you about why they're not in the product and how are you going to solve for it?" And I was terrified. I was like, I'm going to answer in front of 50 people, who I don't know before, first meetup ever. And what happened, which was very magical, was someone else answered in the audience that we have solved two or three of these things, we can talk after the meetup. So I started seeing these connections that people are forming and we were just facilitating, we don't always have to be part of the conversation or having to inject ourselves into it. If you have given the right building blocks to developers and they can figure it out, then they will teach each other. So a lot of that stuff happened at the meetup, and we continued that process after that.
Brett: What was hard about messaging the product or communicating what you were trying to do?
Abhinav: We were talking to multiple communities, these are your developers, these are your buyers, your investors and prospective employees, and when you're building a new thing, it is not clear which words to use. So we started with an API client, but it's much more than an API client, so what is it became a big part of the challenge. Is it an IDE for APIs? But if it's an IDE for APIs, then why are you not writing code in there? Is it a collaboration platform? If it's a collaboration platform, should I have docs and notes and things like that? And is it even a platform in that sense? I think during one year, we call it an API development environment. So those were common challenges we faced. Eventually, we settled on API collaboration platform as an overarching theme, with the desktop app being the client and the development environment, and as the platform expanded in time, we could actually call it a platform when there were multiple use cases of that. But in the initial stages, just calling it and articulating use cases was very hard.
Brett: What could you do with the product without paying, and then what was the dividing line to need a license?
Abhinav: So we put the dividing line as collaborating beyond three users as the time at which a team has actively decided to standardize on Postman. In the free product, you're just using it individually. So the single player product is free, the multiplayer product is paid, and it scales from there.
Brett: Was that an intuitive decision?
Abhinav: From our early experiments, we felt quite strongly about it and it was validated quite quickly. I think what we did not anticipate enough and has been proven out in subsequent years is that this is going to scale up through the entire organization, and it's not just a team product, it's actually a multi-team or a platform product. In most organizations, at the scale when they have more than 500 developers, they have a platform team who are building APIs for each other, there are multiple products, there are multiple business units, there are acquisitions, there are many things that happen in the technical architecture of a company for which we also have to design for. So the product was very flexible and very simple, which allowed for these patterns to emerge, but deliberate design for it was harder.
Brett: What else about the setup allowed the product to be used by so many different types of companies and scales of businesses?
Abhinav: I think knowing that being able to take in that feedback from developers from all these different places would allow for penetration in all these companies, just having that conviction and just keep going at it. We just never stopped, and we still continue to this day. We have launched MCP support over the last couple of months, I think we want to do A2A as well. But just knowing that those early signs, whether it's GraphQL or gRPC, having people in the company who understand technology to such an extent and being able to build for the developer, and knowing that eventually these things translate into the enterprise, how that usage translates into enterprise gave us a lot of conviction. Beyond that, we also expanded a lot on the platform side. We added tools for documentation, automation, API monitoring, we have tools for service observability, we added tools for governance. There were lots of these fragmented tools that companies were cobbling up together, and now Postman is a single solution for all of them. And then, when customers started coming up and saying that, "Okay, I'm trying to use this other tool, I'm paying you as a platform, why can't you just do it?" It became a very simple answer. So we now marry the developer side of it, which is shared adoption, and knowing that we can't miss the boat on that. But also, talking to customers and knowing that, okay, this is where we have a gap, being able to pull it together just allows for the best of both worlds.
Brett: How did you think about whether you wanted it to be an open source company or not? Because it started as an open source product.
Abhinav: I was excited about it, but what I learned was that for something that has a commitment to end user experience, you cannot do it with open source. Open source is great for really vetting the right technical constructs, and parts of the product are open source, like our runtime is open source, where you can say, okay, the throughput of thing X is 20 milliseconds or 40 milliseconds, but where a button should be is my opinion, so we can't waste time on that. And soon, we found out that really people are not interested in contributing to it, and if they were contributing to it, we just have to say no. So if we had open source, you would have a product with 30 buttons, 70 toggles with 500 configuration options, and that just becomes a product not worth using. So we went to a different model, we went to the more free cloud-hosted model, with taking the components that could be open source, we kept them open source, and developers actually reacted well to it.
Brett: How do you think the company is different because it was started in India?
Abhinav: I think the climate in the Valley and Bangalore actually changed quite dramatically over the last 10 years. I would have said, if we were talking about this in 2014, that, oh yeah, Indian companies are scrappy, raise less money. Indian companies raise a lot of money, there is money now faster sometimes, and some of them have global ambition. I think the big thing for me was that I wanted to build a category-leading global product, wherever we were from, so I think that ambition was baked in. That was less common at that point. I think there are more startups now, but not to the scale at which I think you have ambition in the Valley, and that was very appealing to me. Money can be both an accelerant and sometimes it can harm as well, and I think when you raise a lot of money, which companies can do in both places, but I saw that in India, there's a lot of short-term thinking that sometimes can come in, pay packages ballooned, average salaries probably have grown 5x, 6x, and that's the state of the market. But I think in building companies for the long-term and really treating stock as a core currency was something that was new and I think it's probably changing. So for us, really embracing the ethos by being in the Valley, by being here, hiring the best people that we can have here and really getting the best talent from the companies that are better than us really changed our culture a lot. I think the parts that I do love is we... Amazon is a good example there to borrow from. You have to embrace constraints from wherever you are. We did not let constraints ever get in our way to making progress. You can always make progress, you don't need too much to make an impact on developers and you can keep going. So during the times when I think everyone was raising, I'd say, a lot of money, we were still quite prudent about how much we actually need and whether this is a bet or this is just we are splurging, and I think that ethos came from being a little bit in India, and that has allowed us to invest in AI and other things now.
Brett: What caused you to decide to start to raise much larger amounts of capital in the last five years? Was there some specific pivot point in your thinking?
Abhinav: When it became clear that this is going to be what I believe is a multi-billion dollar business with just our first product, it was like, okay, how much is available, what's the timing here? I heard Stewart Butterfield from Slack say it at a conference, that if the money is available on good terms, you just take it, and the money was available and on good terms, so I took it and it allowed us to invest. But also, we had to say no at times when we didn't want to take it because it would've been a bit too much. So I think that was the reasoning behind it, it allowed us to invest in more products, get higher quality talent, and those are the reasons. And eventually, I see how does it serve customers, and I think we've kept that going.
Brett: What do you make of the fact that before you started this company, you worked on a bunch of different products that you were trying to turn into a great company and none of them worked in this way, and then you created this thing yourself and you accidentally created... Have you thought about what there is to be learned by that, from that dynamic, if anything?
Abhinav: So what I think I learned from that was you really have to have both of these states of belief and disbelief at the same time, which is this big paradox always in your head. I have extreme belief in this one thing that is going to be working very, very well, but I also have this conscience or judgment about really the true value of that thing. Sometimes you build a product and you just become very excited, like, oh my God, I have worked so hard, I have raised so much money, I have done so much, blood, sweat, tears, and it just doesn't matter, market doesn't care anymore. Oftentimes, I would get too transfixed by that. And in this thing, what I felt was, yeah, this is a thing that really the market wants. And I think that is a very hard thing to keep in mind at all times and take the right calls through it. And I felt like every time I failed, I'd go back at it, I was like, yes, the hypothesis was correct, but I also just went a bit too far in believing we could do it. Like, yeah, a social street view for the world captured through phones is a great idea. At this point, we were talking about the metaverse a while ago, and I was joking we were 13 years too early in the metaverse, and the idea is going to come back. Apple's trying out augmented reality as well. But you just can't build it if the customers are not ready. And I think what happens is that when you're building a product, you get so sucked into wanting it to be successful that you just lose that [judgment.So](http://judgment.so/?ref=review.firstround.com) I felt like that is something to take away. And things even that when they worked moderately, I knew they worked moderately, and at some point they're done, something is just done and you move on. I think with a bigger company, with a successful company, you have to find a space which just always keeps on growing. And I felt like with Postman, with software development, it's an always growing space, software is never done, there are new techniques, there is new technology, and we just happen to be in this place and we have to continue earning that place over time.
Brett: When you think about a star employee that decided they want to start up their own company and they come to you and want your perspective or advice, how does this translate to the type of stuff that you impart on other people that are thinking about starting a company?
Abhinav: So we have had people in the company who've been here like eight, nine, 10 years, and if anyone who is really a star employee, make sure they don't leave.
Brett: You tell them what a bad idea it is, you're going to have a miserable life.
Abhinav: I say, "Are you sure?" That probably says a lot. But we make sure that they see the value of the stock that they're going to accrue in Postman.
Brett: Let's say a non-employee comes to you.
Abhinav: Yeah. I think I try to dig into the reasons of why they're doing it, and is it really, do they just want to build a company and have their freedom? If you think that's the way, then yeah, it's free. But it's not, you're accountable to your employees, your investors, your customers, and it's not a part-time job, it's a full-time job, so you have to do it every day. So I encourage them to think that way. My serious piece of advice is always make sure, you're doing this for the next 10 years, you have the right co-founders and you hire the right team. And my partly half-serious advice is to always never spare money for the lawyer or the accountant, don't skimp on that, skimp on the office if you need to.
Brett: It's amazing what cheap lawyering will do to your company.
Abhinav: Yes. You find out-
Brett: Lawyer debt is more expensive than tech debt.
Abhinav: Correct. So many people we've hired, like, yeah, what is the problem with that company? Oh, we signed contracts we shouldn't have signed.
Brett: You talked a lot about the underpinnings of the company's successes, building something great for developers, building a great developer experience, which is often ignored, what does that actually mean?
Abhinav: There's this idea of being in a state of flow when you're engaged in deep work, and unfortunately, most of the software that we have created over the last 20 years is anything but that. We have collaborative software that I would say it actually distracts you positively. I have notifications off on my phone, but everything is trying to notify you about something else that is more important than the thing you're doing. Email, that is always telling you someone else is more important than the thing you're doing. And I could get started about consumer software for another two hours. So what building software for developers is to me, how do they engage in the state of flow and deep work, which is really in line with what they're trying to accomplish, and that means you have to eliminate friction from tiny areas that you would not even see unless you're doing the task. You have to bring in the right context at the right time. If you show them a piece of data, it has to be the right piece of data. So this balance of really adding things that are keeping them in the state of flow, but removing things that are non-essential, is what I mean by that. And keeping a developer in the state of flow is critical, and that's why designing for Postman is very hard, especially when we're building for collaboration, because we can't jam 10 notifications in that, people hate it, they start yelling. We put a screen in saying that, "Hey, do you want to read a tutorial?" We get hate mail on our support channel, because it distracts people from deep work that they're doing. So that's how I saw it.
Brett: And that's how you've always thought about it in terms of the design paradigm of the product?
Abhinav: Yeah. I would say I myself could do a better job of sticking to it, it's very hard. It's always appealing to say that, "Hey, this cohort of users could help with a little bit more nudging or things," and sometimes I've given in into that, but I always have to remove it.
Brett: So I wanted to wrap up where we always do with the question, who's been the most influential person in your life or in building the company that's not a family member, and what is it that they have imparted on you?
Abhinav: I think Charlie Munger said, "You should make friends with eminent dead." So I like that phrase a lot, I read a lot. On this side of the eminent dead, I would say I think Daniel Kahneman was a big influence on this. I read this book called Mindstorms by Seymour Papert, I think, which is a lot about the development of a child's brain when they're learning the logo language and how they explore worlds. So I think both of them I would cite as influences, things that I go back to and check my own thinking against. With respect to people who influenced me while I was building the company, I think at each stage, I had a bunch of advisors who were either CEOs or previous operators and I kept them close, and at different stages there have been different people that I would go to and say, "I find myself in a situation and I should seek your advice." I think one of our board members, Ram Gupta, he's an independent board member, we started in 2015, I think was a big influence and just having a voice.
Brett: Are there specific conversations that come to mind or things they imparted on you?
Abhinav: At many times, there is a 51/49 divide, where I'm not sure whether we go this way or that way, and I think having someone who has the courage to just tell you the truth was useful. At some point, I got the advice I should just focus much more on hiring, and I was like, that's great advice, you can't really shoulder the burden of building a company on your own and somebody needs to go tell you that. So whenever we're debugging a problem, we need people who can have that independent voice and tell you how it is, so he was one of those folks.
Brett: Good place to end. Thank you so much for doing this with us.
Abhinav: Thanks for having me, yeah, it was a deep conversation.
### How to use your industry outsider status to your advantage
URL: https://review.firstround.com/how-to-use-your-industry-outsider-status-to-your-advantage/
Last updated: 2025-12-04T17:00:50.000Z
Product-building lessons from a Twitter PM turned healthcare founder
_This post is for subscribers only._
### To Learn a New Market, Start by Building Your Product — Tactics From a Twitter PM Turned Healthcare Founder
URL: https://review.firstround.com/to-learn-a-new-market-start-by-building-your-product/
Last updated: 2025-10-26T07:40:54.000Z
[Othman Laraki](https://www.linkedin.com/in/othmanlaraki/?ref=review.firstround.com) and [Elad Gil](https://www.linkedin.com/in/eladgil/?ref=review.firstround.com) got the idea for [**Color**](https://www.color.com/?ref=review.firstround.com) — a virtual clinic that supports people at every step of their cancer journey — based on a single technical insight.
Both former Google product managers, they’d started a company called Mixer Labs together. After getting acquired by Twitter, Laraki and Gil took on VP roles in product and strategy, respectively. The two were hanging out on Twitter’s rooftop when Gil pulled out a hard drive of his fully-sequenced genome. That sparked a discussion about an [image circulating online at the time](https://www.genome.gov/sites/default/files/inline-images/2022%5FSequencing%5Fcost%5Fper%5FMb.jpg?ref=review.firstround.com), showing that the cost of genetic testing was sinking faster than Moore’s Law. Laraki and Gil figured they must be able to engineer a genetic test far cheaper than the $4,000 Gil had just paid.
The idea hit close to home for Laraki. His grandmother had died from breast cancer. His mother is a two-time breast cancer survivor. And he’d done some genetic testing himself — learning he carried the same BRCA2 gene mutation that put his mother at risk.
“Using genetic data to generate insights is a very software-driven process. That resonated with me as a software engineer,” says Laraki. With that insight, he and Gil left Twitter to start building a solution to make cancer screening more affordable and accessible.
**But they didn’t know a thing about the market. So Laraki grounded this learning process in something he *did* know — building a product.**
This kicked off a years-long, iterative process of constantly revisiting his assumptions. Eventually, he realized a direct-to-consumer testing service wouldn’t work, and Color expanded into a virtual cancer clinic, selling instead to employers and health plans. Color has since landed partnerships with healthcare brands like the National Institutes of Health and the American Cancer Society — and earned a billion-dollar valuation along the way.
We’re moving past the [market identification](https://review.firstround.com/future-founders-heres-how-to-spot-and-build-in-nonobvious-markets/) and [validation](https://review.firstround.com/the-minimum-viable-testing-process-for-evaluating-startup-ideas/) phases, past the Statista research and TAM data to talk about what it actually means to build a product in a market you’re unfamiliar with — which, maybe counterintuitively, is how Laraki learned the healthcare industry.
Here’s his advice for founders who are early in their journey.
## Watch for these failure modes of building as an outsider
Building in a new industry demands balancing both first principles thinking and acknowledgment that you’re probably not the first person to tackle this problem. “When you enter a new space, it's important to be willing to question the status quo, but also have a lot of humility,” says Laraki.
He wishes he took his own advice back at the start of his journey, when he was a software entrepreneur wading into the foreign waters of insurance giants and research labs. Beware these failure modes so you can prime your mindset for the learning ahead:
**Clinging to initial assumptions.** Don’t let your early wins — like [fundraising](https://review.firstround.com/heres-what-you-can-really-expect-when-pitching-your-seed-stage-startup-at-a-vc-partner-meeting/) or recruiting a stellar early hire — give you false confidence about your assumptions in this new industry. Hold them loosely as you learn the nuances of how this space operates. “If you’re able to raise funding and hire an early team, that means you’re somewhat convincing,” says Laraki. “Your team and investors will demand a plausible plan for how you’re going to pull off something great.”
> Many "good" plans fail. You need to be willing and able to assess and adjust.
Color went through a number of these adjustments, which was only possible because Laraki didn’t whiteknuckle what he believed to be correct. “It took many years and pivots to hone in on what worked. At every step, some people might feel that change is a failure, but in my experience, that’s often the wrong reflex,” he says.
The company’s first product was an affordable, direct-to-consumer genetic test. But growth was inhibited by several factors: CAC was too high, LTV was too low and the incentive structure was fractured. Customers wanted the best testing option, but it wasn’t integrated into clinical workflows or reimbursed by insurance.
The team pivoted to selling medical-grade tests to physicians. Doctors loved the product, but billing through insurance introduced a new kind of friction. “Even though we were cheaper, we were still spending hundreds of dollars just to collect,” says Laraki. “It cost us more than any margin we could make, so we needed to figure out a more efficient way to be able to access users and customers.”
That prompted another shift to offering the tests as a benefit through employer health plans — an idea Laraki had when a Stripe founder used the test and asked to roll it out to his employees. While the enterprise business model was effective, it was still too narrow. “Big companies don’t want to be in the business of buying individual tests. At that level, if you’re someone managing a population, you’re thinking more holistically,” he says. “You’re considering cancer and behavioral health and women’s health. We were plateauing early.”
**Thinking you’re the smartest person in the room.** “Oftentimes, myself included, people assume the reason something hasn't been solved is that everyone before them has been stupid, and they’re the first smart person to show up,” says Laraki.
So be humble throughout this process. You should assume that the field you’re entering is filled with incredibly smart, diligent people. “You're going to be naive at the beginning, and that naivete is excused if you show up with humility. It's very heavily punished if you show up with arrogance,” says Laraki. “I realized over time that when I saw people behaving in ways that I thought made no sense, it was actually because I just didn’t understand their incentive structure.”
**Falling for false positives**. With the early ammunition of fundraising, it’s easy to lean on a warm network for product leads. But Laraki says to be careful not to mistake influence for traction. Startups can score customers this way without doing the legwork of cracking the [go-to-market](https://review.firstround.com/zero-to-5m/) code in their industry.
“Are people really buying the product because it wins on the incentive side, or did you win out of influence?” says Laraki. “I see a lot of companies get a few early wins that came from either luck of influence and assume they have product-market fit. That happened to us, too. We got some early wins because of influence and realized it wouldn’t generalize or scale up.”
> Don’t mistake false positives for product-market fit.
Laraki has seen this happen when a startup gets a great name VC or some other bonafide — like having the ex-FDA Commissioner on your board — and influences some early wins. “That can cloud whether you really have product-market fit,” he says.
## Start by untangling the flow of money and decision-making
Charlie Munger famously said, “Show me the incentive and I'll show you the outcome.” Most technical folks underestimate the “why” behind the status quo, assuming incompetence is at play — and not deeply rational decisions made under constraints.
Laraki thought more like an anthropologist than a technologist by learning the decisions and sequence to complete a transaction in the healthcare industry.He says the best way to do this is by setting up exploratory conversations with industry leaders you might sell to, like a claims adjuster in insurance or a procurement manager in construction, for example.
“One of the mistakes I see founders make is not talking to people enough,” says Laraki. “I meet a lot of healthcare companies where you can tell, even though they’ve been in the industry for a while, they’re still naive about the marketplace. They don’t understand their buyers in a deep way.”
Finding these people is a numbers game. On a daily basis, Laraki recommends poring over news stories, LinkedIn posts, research papers — any industry chatter you can find. And when you notice people doing interesting work that’s relevant to your problem, reach out to them thoughtfully and try to have a conversation.
One of your main goals in these conversations is to map out how a transaction would move through all the “pots of money and incentives,” as Laraki puts it. For example, he looked at:
- Suppliers
- Manufacturers
- Distributors
- Buyers
An enterprise market is like a mosaic — from afar it looks like one cohesive image, but step closer, and you’ll see a constellation of smaller pictures. Laraki says that most founders get caught up on the buyer and assume there’s just one. “As consumers, we think about one buyer and one seller,” he says. “But in many industries, with healthcare being an extra-complicated version, the process of making a purchasing decision and acting on it can be more complex. It’s worth being flexible about which buyer you want to sell to.”
The most impactful learning will come from going into excruciating detail of how a purchase actually happens. “**Who influences, who decides, who sets the price, who sets the terms, how the transaction actually occurs and how you get paid — this is what you have to untangle**,” he says.
By unpacking these factors, Laraki learned that the reality of the healthcare industry was far more complex than what most people see on the surface. “The thing that makes healthcare difficult is that the beneficiary of your services are regular consumer humans. The economic buyer is either the health plan or a self-insured plan by big employers or the government. And then there’s the clinician,” he says. “Selling into healthcare requires all those incentives to connect. Everyone likes to say incentives are aligned with patients, but the reality is that’s not the case.”
Laraki shares an example: “We were very naive about how insurance works. You and I could both have a Blue Shield card, but you could be on an individual plan and I could be on a self-insured plan with a big company. And in reality, it’s actually the big company that’s the insurer and Blue Shield is just the administrator,” he says. “That introduces a very different dynamic around what you want to pay for and what’s worthwhile.”
There’s also the added complexity of regulation in healthcare. But again, through the process of speaking with experts to learn how the market worked, he was able to unpack where the real challenges were. “Usually people attribute the challenge of healthcare to regulation. But I think that’s completely wrong. Yes, regulation adds some overhead and cost — we’ve dealt with the FDA, HIPAA, CLIA — but those are all manageable,” he says. “What makes healthcare really difficult are the two big dynamics of the splintered buyer problem and that it’s a non-liquid market.”
All of these learnings will help you map out how a purchase happens in your industry. Once you have it, figure out if incentives align with all the different players involved in that transaction flow.
“What do you offer that’s different, and how does that difference influence the incentives of all participants?” says Laraki. “If some participants are disadvantaged by your product, you should figure out what can overcome that. Is the value you offer so big that other participants will pressure the blockers?”
The last step here is thinking through how granularly your buyer interacts with the market. “Sometimes you build amazing technology, but the buyer sees it as a feature within the solutions they purchase,” says Laraki.
> Make sure you’re not trying to sell a steering wheel to someone who wants to buy a car.
- How understanding buyer motivations helped shape Color’s product:
Laraki realized his core assumption around building a testing solution wouldn’t be a viable product. In healthcare, the buyer is splintered across multiple entities: consumers, insurers and health plans, employers and clinicians. “We basically tried every buyer until we found the one that worked. We thought the challenge was regulatory. But what makes healthcare hard is that the people who pay, benefit and prescribe are all different entities — and often, their incentives run counter to each other.”
This led him to pivot the product from a genetic test to a virtual cancer clinic. Cancer, he learned, was a top cost driver for key buyers. A genetic test was merely a feature. Big insurers and employers would only pay for a solution that could slash costs associated with cancer.
## Assemble a roster of experts — on your advisory board and your team — to help shape your product
It’s never too early to find creative ways to recruit experts, either as advisors, partners or teammates. A quality over quantity approach led Laraki to reach out to unsexy experts. “We found that ‘celebrity’ experts weren’t the best or most missionary. The most famous people get solicited constantly, so they might have less time for you,” he says. “For us, it was people deeply committed to science who ended up being very open about moving the field forward,” he says.
Go one or two steps down the management tree to identify the people actually executing the ground-level work. Laraki says Color still does this routinely. “We have a brainstorming discussion focused on the question of, ‘Who are the top brains in the world who can help our thinking and help us make a better product?’ We make a list and start reaching out to them.”
> Find advisors who are doing the work — not the ones who spend most of their time talking about it.
To increase the success rate of cold outreach, Laraki found it helpful to lean into the company’s mission and his own personal connection with the problem he was solving.
“We cold emailed [Mary Claire King](https://medgen.uw.edu/people/mary-claire-king?ref=review.firstround.com), who established the link between cancer and genetics. She's an incredible scientist, but she had never worked with businesses — she was almost anti-business,” he says. “We approached her by saying, ‘Hey, here’s our story. We want to challenge the model, but we won’t cut corners because we have personal connections to this work and are deeply technical and rigorous.’ And after putting us through the ringer to confirm we knew what we were talking about, she became a very close scientific collaborator.”
Of course, incentives are a necessary part of these arrangements, whether that’s cash, equity or an ongoing role. “A simple hourly rate helped keep things straightforward, especially for people outside of tech. Many don’t know how to reason about equity, so an hourly cash model is often easiest,” he says. But you can also get creative here, depending on your industry. “Many folks just wanted to help us and didn’t accept compensation. So if you’re working with scientists, another way to compensate them is to sponsor or partner on research they find valuable.”
Once you establish a working relationship, getting your product in the hands of these experts can teach you a lot about what your industry’s buyers care most about — and the product attributes that matter most to them. “**The best way to draw boundaries around an MVP is with your buyers so they can provide a sense of what they would be comfortable with as a baseline. This is what we did with genetic counselors and scientific experts**,” says Laraki.
- What Laraki learned by getting the product in the hands of experts:
In healthcare, a product with scientific rigor is a non-negotiable to win credibility. It took Color two years to launch. “The rigor you establish at the beginning will last for the entire life of the company, for better or worse.”
Sharing early versions of the product with experts helped validate Color was indexing on the right things. “The main validation was scientific and clinical rigor. We were hearing from practitioners that we were building a high-quality product that’s also 1/20th of the price of what everyone assumes it should cost.”
Laraki didn’t just think about assembling industry experts as advisors. He also wanted experts inside the company at the two most important sides of the product-building process: engineers and scientists. Their common denominator was that they were mission-oriented and had a get-shit-done attitude. “You’ll never have perfect information and you’ll need to adjust often, so you need people who default to action vs. paralysis in the face of uncertainty.”
Laraki recruited some of the best engineers he worked with while at Twitter and Google. The other was looking to academia for people who were deep in the science world and understood the core of what they were trying to do.
He was surprised to discover that several engineers he worked with at Google and Twitter had a passion and sometimes even an early-career background in healthcare. For some, joining Color represented the opportunity to return to their early passion armed with a strong engineering skillset. “To this day, it’s still a big differentiator for us,” he says.
But while the early team had a deep scientific bent, it lacked experience from the business side of the industry. In cases where you need to deeply iterate on the go-to-market motion, Laraki cautions against hiring “senior” people who will rigidly rely on just one playbook to win. Experience needs to be matched with openness, creativity and resilience.
Investing in experts across the board prompted another evolution of the product into a huge opportunity. At the onset of COVID, Color was a large-scale testing and vaccine distribution infrastructure for public health systems, cities and states. They had the logistics, software and lab infrastructure and could repurpose it fast.
“Everyone was ignoring the delivery part. When the rubber hits the road, vaccines or tests sitting in a warehouse don’t get deployed to large distributed populations,” Laraki says. This transformed Color into a vertically integrated healthcare company with 50-state medical licensure and operational expertise in public health delivery, shaping the product into what it is today: comprehensive virtual cancer care solution sold to large employers, unions and health plans, in partnership with the American Cancer Society.
Othman Laraki, CEO and co-founder of Color
## If there are real COGS in your business, run this unit economics exercise
Laraki’s and Gil’s initial insight came from the dwindling cost of genetic testing. But it required one important step to actually see if it was a viable business — crunching the numbers in a unit economics test spreadsheet.
“We looked at the cost of building a genetic test at the beginning and unpacked it in great detail. We made a list of all of the pieces that went into the cost to do a genetic test,” he says. “The core thesis was that we could build a high-quality test and put it on the market at a consumer price point.”
Laraki says it’s critical to embrace a first principles mindset here. “**Don’t put placeholders in a spreadsheet with big error bars. Go through the painstaking process of figuring out each step that’s needed to deliver your product and figure out how much it’ll cost,”** he says.
Since a lower price was Color’s differentiator at first, Laraki says the goal was to charge a few hundred dollars. “This was back when the Vitamix was very popular, and they were $300\. We thought, ‘We need to be cheaper than a Vitamix. So our initial price point was $250,” he says.
Starting backwards from that price point, the team looked for wiggle room in the unit economics, which helped him learn about all the components that go into the cost of a genetic test. He discovered there were a handful of items in the cost of goods sold (COGS) that dominated the cost structure. So instead of accepting the standard market price, he negotiated each component intensely.
Here’s how he found that flexibility:
- **Ask for a discount.** “It turns out that you can get a discount most of the time. It’s amazing how few people ever even ask,” he says.
- **Bake in alternatives.** The simple presence of a fallback changes the dynamics.
- **Understand the seller’s incentives.** For example, do they have end-of-quarter incentives? Prefer pre-payments? Or large purchase orders?
- **Unbundle supply**. Sometimes, supplies include a safety buffer, but that’s not always necessary. This echoes the [Google DRAM](https://research.google/pubs/dram-errors-in-the-wild-a-large-scale-field-study/?ref=review.firstround.com) story. The tail end of reliability sometimes costs more than robustly managing errors, exceptions and failures.
Newcomers often misunderstand the dynamics that drive pricing outside of the tech world, says Laraki. “Entrepreneurs think that pricing bottoms-up comes from lower costs, where their advantage is using technology to drive down the cost of services and price based on that. But in practice, pricing is more often driven by market power and incentives of middlemen who control market access and distribution.”
- The impact of Color’s pricing decision:
When Laraki ran the unit economics exercise, he learned he was able to charge $250 for the initial genetic test. But what he didn’t know was that the companies that’d been successful doing this set the price high for a reason other than COGS: “They’re like, ‘No, we’re not going to drop the price. We need to capture the margins, because market access through sales and insurance billing is what’s most expensive,’” he says. “And so if we wanted to stay a testing company, the only viable strategy would have been to sell at a high price.”
However, that initial $250 line he drew in the sand ended up setting the price in today’s market. “It all started with that choice we made and forced the market down across the board,” he says. “But for us, the real question was whether we could make it actually work.”
## Study the incumbents to find your wedge (and strategy)
You’ve already identified your product differentiators when it comes to tracing a transaction. Now it’s time to see how those stack against existing players in the market by talking to more industry players about the products they currently use.
Color’s initial wedge was pricing. Incumbents were charging north of $4,000 for genetic testing, and Laraki’s and Gil’s original thesis was that they could unlock a bigger market by charging dramatically less.
But new technology alone isn’t a viable business model. You’ll have to unpack why your approach hasn’t worked in the past for existing incumbents. Laraki says he made the mistake of assuming standard supply-and-demand laws applied to the buyers they were originally after: insurers and doctors.
- How studying incumbents led Color to pivot the product:
There are a lot of complex dynamics in healthcare that shaped how Color would go to market. “We initially made the mistake that buyers — doctors and insurers — were on a simple supply and demand curve. If you reduce the cost of X by 90%, they would buy a lot more, or at a minimum avoid higher-priced options. But it turned out that insurers couldn’t single-source from one company. They could increase purchasing by relaxing criteria, like what you need to qualify for a genetic test. But if they did that for us, they’d have to do it for everyone else too, because individual doctors might want tests from specific labs,” he says. “Access restrictions are determined by the median or high price of a service, so being a low-cost leader doesn’t make your product easier to buy. It just gives you less margin to put to work to access the market. Access only improves if everyone drops their prices and insurers can then assume a lower cost for a given service."
This meant that even if Color offered a low price, insurers still wanted to keep restrictions on whole categories to contain costs. “We realized we were in a catch-22, where insurers introduced tons of friction to stop expensive tests from being used too frequently. Because of that expectation and friction, test vendors needed to spend a lot of money just to get paid. That, in turn, caused the cost of sales and collections to be a far bigger driver of high prices than the underlying cost of testing,” he says.
The Color team soon realized their foundational assumption was wrong, which was that if testing increased by >10x in volume, cost would be reduced by 90%. “Once we knew that was the case, we made a pretty fundamental decision. Rather than stay in the testing business, we wanted to be in the solutions business. This led us to explore the buyers who are the real purchasers of solutions, which turned out to be major employers and unions. We wanted to sell holistic services, so we set out to find out who bought those.”
You’ll also need to unpack how incumbents control stakes in the market. Healthcare, for example, is a non-liquid market. “With consumer products, if a more competitive product shows up, that product can win in the market and gain traction. But in a market like healthcare, it’s the polar opposite. The mechanism of accessing the market is held by insurance companies extracting margins out of services,” says Laraki. “If you show up with a better mousetrap, you don’t have an open liquid market to compete in. You still have to break in and figure out how to force your way.”
This is where you’ll want to get creative. Say the buyer in the default marketplace (insurers in Color’s case) doesn’t offer the right purchasing model for you to compete in, so you might need to go upstream or downstream to figure out if there’s a market segment (like employers for Color) and rebundling model (like vertically integrated services) that crack open a wedge of opportunity.
Laraki thinks there are plenty of places for today’s founders to find these wedges in legacy market dynamics. “This is a very relevant pattern to think about in the AI era,” he says. “I see lots of companies going after the existing customers of old mousetraps with a better AI-driven mousetrap. Some of these will work. But I think some of the most interesting opportunities will come from companies that redraw the service boundaries in ways that we thought were impossible or impractical up until now.”
### How Canva leveraged unconventional growth levers to grow to $42B | Cameron Adams (Co-founder & CPO)
URL: https://review.firstround.com/podcast/how-canva-leveraged-unconventional-growth-levers-to-grow-to-42b-cameron-adams-co-founder-cpo/
Last updated: 2026-02-03T17:47:28.000Z
Cameron Adams is the co-founder and Chief Product Officer at Canva, the design platform valued at $42B as of July 2025, used by over 230 million people every month.
Before starting Canva, Cameron was a designer and engineer at Google and co-founded Fluent, an email startup. In this episode, Cameron walks through Canva’s earliest days — from the remarkably fast courtship with co-founders Melanie Perkins and Cliff Obrecht, to the counterintuitive product decisions that helped Canva instantly resonate with users who thought they would never design anything.
**In this episode, we cover:**
- How Canva turned social media managers into early evangelists
- Balancing a huge vision with scrappy execution
- Hard lessons from their near-silent launch day
- The two growth levers that changed everything
- And much more…
**References:**
- Adobe: [https://www.adobe.com/home](https://www.adobe.com/home?ref=review.firstround.com)
- Atlassian: [https://www.atlassian.com/](https://www.atlassian.com/?ref=review.firstround.com)
- Campaign Monitor: [https://www.campaignmonitor.com/](https://www.campaignmonitor.com/?ref=review.firstround.com)
- Canva: [https://www.canva.com/](https://www.canva.com/?ref=review.firstround.com)
- Cliff Obrecht: [https://www.linkedin.com/in/cliff-obrecht-79ba9920/](https://www.linkedin.com/in/cliff-obrecht-79ba9920/?ref=review.firstround.com)
- Dave Greiner: [https://www.linkedin.com/in/davegreiner/](https://www.linkedin.com/in/davegreiner/?ref=review.firstround.com)
- Lars Rasmussen: [https://www.linkedin.com/in/larserasmussen/](https://www.linkedin.com/in/larserasmussen/?ref=review.firstround.com)
- Melanie Perkins: [https://www.linkedin.com/in/melanieperkins/](https://www.linkedin.com/in/melanieperkins/?ref=review.firstround.com)
- Mike Cannon-Brookes: [https://www.linkedin.com/in/mcannonbrookes/](https://www.linkedin.com/in/mcannonbrookes/?ref=review.firstround.com)
- New York Stock Exchange: [https://www.nyse.com/](https://www.nyse.com/?ref=review.firstround.com)
- Pinterest: [https://pinterest.com/](https://pinterest.com/?ref=review.firstround.com)
- Scott Farquhar: [https://www.linkedin.com/in/scottfarquhar/](https://www.linkedin.com/in/scottfarquhar/?ref=review.firstround.com)
**Where to find Cameron:**
- LinkedIn: [https://www.linkedin.com/in/themaninblue/](https://www.linkedin.com/in/themaninblue/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- X/Twitter: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
(01:24) The birth of Canva
(04:32) Meeting Canva’s co-founders
(11:22) Building the first iteration of Canva
(15:26) The discovery that changed prototyping
(20:48) Why onboarding was the unlock for retention
(27:36) The anticlimactic launch day
(32:43) How word-of-mouth spurred early retention
(36:33) Targeting different user personas
(41:02) Building a community on social media
(43:38) Two impactful growth levers
(47:14) Why Canva should have gone mobile sooner
(48:12) What underpins Canva’s dominance today
(53:37) Rebuilding for enterprise
(58:38) Lessons from Canva’s tough times
Cameron:
This investor came back to us and said, you know what? We think we overvalued you. How about we put in the same amount of money for half the value? They've realized that it was a mistake and certainly a costly one for them.
Brett:
For today's episode, I'm thrilled to be joined by Cameron Adams, the co-founder of Canva. Before Canva, Cameron had started his own design agency, joined Google, and then founded an email startup with a few other Google alums.
Cameron:
There's this whole chain of events that led to Canva actually becoming Canva. But I also think that you put yourself in a position of luck. If you just sit in your room at home and never talk to anyone, nothing is gonna happen.
Brett:
As the last startup was floundering, a chance meeting with Canva founder, Mel Perkins, would set a whole new trajectory in motion. Cameron would end up spending remarkably little time with Mel and Cliff before deciding to join them in building Canva.
Cameron:
Two hours in person, two separate Skype chats, and that was it.
Brett:
But he had a gut feeling that would prove to be quite spot on.
Cameron:
We had like 30% month on month growth on revenue. But we also started to notice there were a particular cohort of Canva users that wanted a bit more out of the product.
Brett: Let's dive in. Thank you so much for joining.
Cameron: It is an absolute pleasure, Brett. Great to be here.
Brett: What were you up to a year before you got involved with Canva?
Cameron: Well, a year before Canva was founded, I had just left Google. We had just had a baby. My wife had also started her own business. So there was a lot going on. I started a startup called Fluent, which was focused on email, with a couple of my ex-Google colleagues. So we were just starting out building that and creating the product. We went through this whole journey of building the product, it being in stealth, it got leaked, it got a lot of press. We were originally going to bootstrap, but we thought since people were knocking down our door to give us cash that we might go talk to them. So we decided to go to Silicon Valley from Sydney, Australia. Thought we would quickly come back with a novelty-sized check of $2 million to help us run the rest of the startup. Didn't pan out that way. We spent about two months traipsing up and down Sand Hill Road and all over the Bay Area. Didn't manage to land funding, but got a lot of acqui-hire offers through that process. And came back to Australia and started thinking, well, what do we want to do now? And that's when I got an introduction to my Canva co-founders, Mel and Cliff, and it was actually through my old boss at Google called Lars Rasmussen. He had bumped into Melanie at a startup event over in Perth in Australia. And they'd gotten talking, he was really impressed with her, and they were looking for someone to help them actually build out the vision and get the product going. So through an early introduction, it was a bit of a delicate dance because I was still in startup mode, trying to get Fluent going, but the vision for Canva was just too compelling and it kept coming back into my mind, and I eventually reached back out to Mel and Cliff and said, "What are you up to?" And we decided to partner together.
Brett: And what was the original thing that they explained that they were up to?
Cameron: They had been working on a school yearbook business. They'd been running that for about three or four years. It was built in Adobe Flash, if anyone remembers what that was. And they had built out a decent business. I think it did 2 or $3 million in revenue. They'd really started to corner the yearbook business in Australia. But they had this bigger vision. It wasn't just yearbooks. They wanted to bring design to everyone. And it really fascinated me because I'm a graphic designer by background. I also have a computer science degree. That's how I ended up building digital products. And I'd always been really interested in creative tools, helping people unlock their innate creativity, which a lot of us don't realize we have. And I'd built a lot of tools over the previous 15 years that did that. Canva was a really pointed expression of that. Being able to bring visual design to people who had never even thought about tackling it before was really compelling, and that's what Mel wanted to do. So we started exploring what that meant and burrowing into some of the vision decks she'd put together, thinking about what product we wanted to create. And that's really where Canva started to flourish.
Brett: What did you see in the two of them that made you want to start a company together?
Cameron: To be honest, we didn't have a huge number of meetings before we decided to go all in together. But when I first met them, we just really clicked. And I think I was at this moment where I'd been at Google for four years. Prior to that, I ran my own design agency. After I left Google, I started Fluent and worked together with a couple of engineers. And then throughout my career, I'd always had side hustles and startups that I'd wanted to get off the ground. And through that, I really learned a lot about myself, what skills I had, what skills I didn't have, what I liked doing, what I didn't like doing, and what a great team looked like that I could fit into, what my teammates needed to have, what skills they needed to have, what passions they needed to have. And when I first met Mel and Cliff, it just felt like a glove. We just fit together really well. Our skills were complementary but also separate, which meant we could focus on specific areas but also come together really well to collaborate. One of the key things that I'd identified through Fluent was that I had no business skills whatsoever. Hopefully I've developed more of those in the last 15 years. But through Fluent, people constantly asked us about business models, creating the company, stuff outside the product, and we were very product-focused thinkers. So when I met Mel and Cliff and saw that they had built this amazing yearbook business. Cliff was an amazing operator. He thought about hiring and revenue models and margins. Mel was thinking about huge vision and how to bring teams together and rally the world behind this idea. We just fit together so well. And I think all of us felt it and we quickly wanted to get into building Canva together, both the product, the company, the team, the community, everything. And I think it's been fortunate that over the last 13 years, that has played out really well and we're still a really great triad together.
Brett: How much time did you spend together before you committed to starting the company?
Cameron: I think we officially spent two hours in person, two separate Skype chats, and that was it. A few emails. We didn't have any working sessions. We had lots of discussions about philosophy of the product that we wanted to build. Mel did a deep dive into the product that I was building, the email product, and really loved it. So she reassured herself that I could make great products through that. But as I said, it was a very rapid courting session, and I think it was that instinct and that gut that we felt, that resonance when we first met, that we really leaned into. Plus we also had great advisors. So Lars introduced me to them. I think that played a role in reassuring them that they knew Lars and through that chain they could respect his opinion on me being a great partner.
Brett: Do you think you all just got lucky or do you think there's something else to be learned from it? And the reason I'm curious about it is I think so much of the conventional wisdom is don't rush into starting a company with someone. Ideally, you start it with somebody that you went to college with that you've known for eight years or a colleague that you've worked together for six years. And what you did is in many ways the opposite of that, in terms of at least the amount of time that you spent.
Cameron: I mean, I don't have all the data on what makes a successful company. I just have what I've experienced and perceived. And as you said, it's kind of worked out for us. I do think that luck is a huge element of it. Like had Mel and Cliff and I ever met, had Lars... Had I applied for Google... Well, actually I didn't apply for Google. Had someone recommended me to Google and I'd gone into the office, had Lars not liked me. There's this whole chain of events that led to Canva actually becoming Canva. And when you think about all those moments of chance, the sliding doors in there, it's immense. It's a huge chain of probability and luck. But I also think that you put yourself in a position of luck. So many of those moments were me reaching out to someone, me doing a piece of work, working late nights on an idea and pushing it out there so that other people could see it and respond to it. So you do make your own luck in that you need to present yourself with the most number of opportunities. If you just sit in your room at home and never talk to anyone and never push anything out, nothing is going to happen. So my philosophy is that the more you push out there in terms of what you are creating and who you are connecting with, the more chances you have to strike that bit of luck, to find the right people, to find the right idea, to connect with the world in the right way. So I think in that respect, you do make your own luck, but it is also a large part of the world bringing something good to you.
Brett: When you all committed to building this company, did you think there was a real chance of building one of the most valuable software businesses of the last 20 years? Or was it more like you think there's an opportunity for this, there's nobody that's built this, we're going to go build it and sort of see what happens?
Cameron: You might get a different answer between me and Mel and Cliff on that. I'm sure Mel will say that she wholeheartedly believed that this is one of the biggest opportunities in the world. And I honestly believed that as well. But I also had a risk factor baked in. It's like it's a great bet to take to put this product out into the world, but I don't know how people are going to receive it. So I definitely put it out into the world with huge hope and promise, and it's been amazing to see the world respond to that and really gravitate towards what we enable for them through the product, and has enabled Canva to grow incredibly over the last 13 years, 12 since we launched, going from zero to 230 million people that now use Canva every single month. It's a bit of a crazy, wild ride. One that I don't think I signed up for in the first days. It was just like, "Create something great and cross your fingers." But the growth that we've experienced since then I think is a testament to our belief in the vision. So putting something great out there, we knew that it had promise and that it had the potential for pretty much everyone in the world to use, but you can't know it's going to succeed from day one. So putting it out there and responding to people's enthusiasm for it and growing the product, increasing the features and expanding the surface area that Canva covers has really been our journey for the past decade.
Brett: Once you committed to working together on it, where did you start? What was the early version of the product? How did you think about breaking the long-term product vision into where you would start, what you would build first?
Cameron: We started pretty wide. Thinking back on it, it was kind of like a Double Diamond process where you go wide, you come back in, and you go out wide again as you get user response, and then zero in on your final product. In the very early days, it was me and Mel sitting in this big cavernous, empty office that we'd hired together and jamming on ideas, sketching both physically and on the screen, and then quickly getting those ideas into code, into prototypes that we could actually interact with. And it was really important for us to feel the product and for us to know that it was the right product. So being able to... I've got a skill in design, I've got a skill in coding, and when you merge those together, it creates a really rapid iteration loop. So we could turn a sketch into something that we could actually use on our computer within a few hours. And that loop really helped us iterate the product and figure out the kind of paradigms that we wanted to use to bring design to the masses. We tried out a whole bunch of different things, including an entirely search-driven interface that filled your screen with all these design elements and you picked them, different layouts, different ways of manipulating text and images. We were also experimenting with the technology as well and pushing the capabilities of what possible inside a browser. That was one of the interesting pieces to me because I'd been working in deep browser tech for like a decade, helping to shape what JavaScript was and HTML and CSS. And pushing the boundaries of that with a super visual product that had a heap of interaction patterns in it and really asked a lot of what was possible in a browser at the time was also one of the interesting aspects of the project. So we were testing that as well, making sure that we could have hundreds of images on screen, that you could drag them around, that you could change all the fonts and resize everything, and that you could possibly make it collaborative over the internet. Testing those technological boundaries was also part of prototyping and making sure that we ended up with the right experience. So we spent probably about three months doing that and just really nailing the experience of what we wanted to deliver before we started to bring in a full engineering team behind it and properly start building out the product with an aim to shipping it.
Brett: Were you thinking about a very specific end user or an end user trying to create a specific thing, or it was built in a more vague, "I want anyone to be able to design something good," sort of much more of an abstract concept of the end user?
Cameron: I would say we leant more into the abstract concept of a user. You tend to gravitate mentally towards a particular person using it, but we really wanted to bring design literally to the entire world. And when you're trying to do that, you can't pigeonhole yourself. So we wanted to create a design platform that enabled you to create so many different things, and we worked on the experience for that from day one. It wasn't really until we started getting to the pointy end of launching that we actually started applying more of a persona lens to what we were creating, and that was basically to get traction. If you push out a product and say, "This is for everyone," it's really hard to message about that product and to get people interested in it. So we actually started gravitating towards a particular user set about two or three months before we started launching.
Brett: In the three months before you really started to build the product, is there anything else you can share about how you were prototyping or what it looked like day to day?
Cameron: We had a team of two engineers plus me and Mel for about six months. So we had a front-end engineer and a back-end engineer. Mel and I spent that three months prototyping the product and figuring out the experience. We then brought on the engineering team. They started laying down the architecture for it, thinking about the data we'd need to store, how we'd store heaps of images on the front end, how we'd do all the manipulation and keep it stable, and it took us another six months to get to the launch. So it was about a year all up from when we started thinking about concepts for Canva through to actually pushing it out the door. For the first six months, we mostly just used ourselves as the barometer for what the product should be and how it feels and what the quality was. From six months on, we started doing a few... I'd call them focus groups. So we started by getting a group of people into our boardroom, which is two-by-one table with a couple of chairs around it, and putting them in front of the product and just observing them. Telling them a little bit about it, then seeing how they interacted with it, what they wanted to do, whether they got stuck on certain points. And that's when we entered real user testing mode. We happened to stumble across a service at the time, which still exists, called [UserTesting.com](http://usertesting.com/?ref=review.firstround.com), and it was a bit of a revelation because previously you would have to physically go out, find someone, either go to their house or bring them into your office, and get them to use the product. With [UserTesting.com](http://usertesting.com/?ref=review.firstround.com), you could reach anyone at any time, anywhere in the world, and quickly get feedback on the product. So it was an amazingly fast iteration cycle. And we started doing fairly regular user testing sessions. So probably once every three or four days we would push out a version of it. We'd get about 10, 20 responses from people. We'd watch the videos, see what they were doing, what barriers they came up to, any bugs they hit. And then we'd roll that back into what we needed to work on for the product. One of the key things we really identified through those sessions was that people were a bit afraid to start designing. They approached this tool, they landed in a design tool, and they just didn't identify with it. They were like, "I'm not a designer. I'm really scared of screwing everything up." So getting them across that barrier of just putting something on the page, was really important for landing our first users in the product. So we started really iterating on that onboarding process. We knew that we had the features and the experience. Once you'd started creating a design, you could drag stuff on the page, you can manipulate the text, you could do whatever you want with the images, but just getting them to put that first thing on the page was really important. So we did quite a few reversions of the onboarding experience, and we landed on this model where we very quickly set people's expectations. So I think you need to give them an idea of what the product is and give them a reference point. So we actually created a 23-second whole product video where they were in the Canva editor and it was moving stuff around for them and quickly showing them what they could actually create, and then right after that video, after we'd kind of primed them for how they were meant to interact in Canva, we actually got them to put something on the page themselves, which was really critical. I think at the time, and still, you get a lot of onboarding that is coach marks. It points over here and says, "Hey, you might want to do this thing." And you click through the steps. At the end of it, you've totally forgotten every single step and you're just left with a blank page again. So we created this onboarding that literally got them to drag out a monkey and put a hat on the monkey and then change the color of the hat and perform a search for a slice of pizza. So they were directly using the product and overcoming that barrier of putting something on the page. And it had an amazing response. We immediately started getting people getting really excited about the fact that they could be a designer, that they could create something amazingly visual, and then quickly riffing on how they would apply that to their job or their industry. So it was exciting to see that change as we iterated on the onboarding and it was one of the critical pieces of the product success when we launched.
Brett: Were there other things like that that you figured out in watching and talking to those early customers that were trying out the product that were a big part of the early success?
Cameron: Definitely. We started seeing who really got into the products. I mean, we couldn't launch the all-singing, all-dancing version of Canva on day one. You need to pace yourself. You've got limited resources, you've got limited time, so you need to put out a product that's polished enough that people feel like they can use it and trust it. You also need to get it out quick enough so that you're getting feedback and responding to it and helping you find your direction. Through some of those early user testing sessions, both the in-person ones and then the ones that we did online, we started to see that there was this rich vein of social media marketers who just got really excited about Canva. So this was 2013\. Pinterest had come out like a year or two earlier. Instagram was just becoming popular. Twitter was a thing, but it wasn't particularly visual. More and more people were now adding images into their Twitter posts. And it was just the right moment where people were starting to having to scale their visual content needs. And there was this type of user who was helping people with their social media, helping businesses figure out their strategy, produce content that engaged people. So these social media managers needed to create a lot of content. They couldn't afford to go and get someone to do it. And most of them were actually individuals. So they were running their own business, thinking about text and visuals and strategy, and liaising with clients. So extremely time poor. And Canva was just the perfect tool for them to be able to scale themselves, to help their clients create content, to do it quickly, and then to get on with the rest of doing their business. So we quickly identified them as a key user group that the first product needed to be suited for in terms of all the features that they needed, and B, to then start building a community around it. And it was an amazing community to get involved with in the early days because they loved being on social media, telling people about the tools they were using, introducing Canva to them, giving tips and tricks, and of course creating a whole lot of content and using the products through that process. So it was a really great first customer to land on.
Brett: How would you describe the feeling that you all had as you were working on this?
Cameron: I think we knew we were onto something great. We knew the idea was really solid and we were excited to get that out. It was slightly frantic because as a founder, you're not just focusing on the product, you're also thinking about the company, you're thinking about the team, you're thinking about PR and press before you get to the launch, you're thinking about how you pay people, you're thinking about the business model. We had to get a whole lot of content to put into Canva, so all the stock photographs, all the templates that exist in there. So you have to think about the content team and a whole host of things. So you're very frantic, trying to juggle all those things, while still placing a premium on the product and making sure that we're delivering an amazing experience. But incredibly exciting. We felt a little bit of time pressure. We were always worried that someone would launch exactly Canva before we did. Luckily they didn't, and no one has for a long time afterwards. So I think we struck really the right balance of waiting for enough polish to be put into the product versus just getting it out the door. At the time, the Lean Startup book had just come out, so everyone was Lean Startup, like just launch the first HTML page you can think of and iterate upon it. And we were kind of counter to that. We knew what product we wanted to deliver. We had gotten a huge amount of user feedback already. And we knew we needed to deliver a polished visual design product that really delivered amazing content for people. So we bided our time. Few investors asked us to ship a bit earlier than we would have, and we always said, "No, we know what the product is. We know what we want to put out there as the first version." So we really sweated the details on that and made sure it was something that we were proud in, but we still knew it had a few bugs and flaws in it. So I think we struck the right balance there.
Brett: Did you find that as you got closer to launch, you were building with other end users in mind other than the social media manager that you outlined, or that was kind of like the early North Star end customer for the product?
Cameron: We focused quite heavily on that user in the last couple of months. We knew where the product was going to go after that as we expanded. We knew what features we wanted to put in to make presentations, for example. But that last couple of months, we definitely focused very heavily on that social media graphic case and just made sure it was really robust and attractive for those users.
Brett: And it was always clear that you could start with them as the tiny beachhead and eventually expand to millions and millions of people, is the way that you thought about it. You weren't trying to build a product for social media managers long-term, right?
Cameron: No. And I think it's been one of the secrets to Canva success is that we have such a broad user base, and our vision just encompasses so many possible things you can do and people that can use it in different ways. And for me, that's driven me for the last 13 years. It's like there's so much opportunity there, so many really unique and interesting problems that we still have to tackle for different types of users, and that enables us to constantly be innovating, creating new big products, releasing and launching them, and I don't think I could do that if we were just focusing on the one small user group for the last 13 years.
Brett: Up until launch days, as you were catching up with former colleagues and talking to friends, as you were explaining what you're doing, did everybody say, "Oh, that sounds awesome. Makes total sense to me." Like there was a lot of support and it all made sense to people, or there were lots of people that were saying, "Listen, it's been so long since anybody's built a design tool that has ever worked. Adobe really owns that," or whatever it might be. Like there was a lot of people that just didn't get it, that there was a mixture of sort of reaction in that pre-launch phase?
Cameron: I think there's a lot of people that say no all along the journey. We had so many investors say no. So many pitches that ended up going nowhere. I'm sure they're kicking themselves now. But I think you just have to get used to the fact that you see a different view of the world from other people, and when you're launching a product, you just need to firstly have confidence in your vision, like you know where you're going. Then B, recognize that some people aren't early adopters. Some people don't have the vision or need to think outside what they're doing, and you just need to go and find those people who do share your vision, who do get excited about what you're building and drill into them. You can win the rest of the world over time. You've got plenty of time to shape the product to be more broad, to encompass more use cases, to really meet all the different personas that you could possibly build it for. You've got plenty of time for that. In the early days, just focus on the kind of positive, optimistic users who really will lean in and don't worry about converting the naysayers.
Brett: So what was launch day like?
Cameron: Launch day was pretty electric, but also anticlimactic. We also had a waiting list of about 15,000 people who had signed up already, not even knowing what Canva was about, so we're going to send out an email to them.
Brett: How did you get those 15,000 people?
Cameron: Just over time. So we'd had a waiting list up for literally the year that Canva was going. I think Mel also had a bit of a landing page going even before that, as she was pitching various people around the world. So we'd built it up over time, friends and family, just general connections. I think it's... I don't know, getting a 15,000 person waiting list to me doesn't seem that onerous, particularly when you've got that much time to do it. And then activating that waiting list is a totally different question that we can dive into. But we had all those parts ready for launch. One hiccup was that two days before launch, I actually got in a accident on my bike. I got hit by a car and got knocked unconscious, had to go to hospital, get a few stitches on my face. Was back in the next day coding to make sure that we hit the milestone. And the rest of the team were there alongside me. And we hit the go live button. We had a big Google Analytics dashboard up on the wall. If you're familiar with the live view, it kind of lets you see users dropping into your site and which pages they're going to. And we were expecting a massive flood of thousands, tens of thousands of people coming to the site. Everything went live. The articles went live. And we watched the Google dashboard. After about 30 seconds, we saw one little drop come in of one person visiting the site. Two minutes later, we saw another drop coming in. Five minutes later we saw three drops. And then it just kind of went quiet. It was actually very anticlimactic. We went to the pub at about 11:00 PM at night for drinks as we kind of realized that there wasn't going to be this flood of users. And you just come back the next day and just continue building the product, think about how you're going to grow it, engaging with the community. And it's one of the big lessons I've learnt is that launches are important to get across that finishing line and to have that accomplishment under your belt, to have the right platform to build upon, but the launch itself is not the success of your company or your product. It is in all the days after that of how you turn up, how you engage your users, how you respond to their feedback, how you get them to talk about the product to their audience. It's in all the steps after that that enable you to grow. The launch is probably the least important thing when you're looking at a journey of 10, 20 years.
Brett: Why do you think on day one it just didn't start to take off?
Cameron: I think it's probably pretty much the same with a lot of products. It's actually a rarity I think that you get 10 million people descend on your product on day one, and most of the stories that you hear about that, they're actually untrue. It's like this thing was actually built two years ago and you just happened to hear about it the day that 10 million people decided to turn up. So I think that's kind of the hidden story in a lot of these startup success narratives is that there is a lot of hard graft and a lot of people not turning up and just a lot of very small iteration. When you look at an exponential chart, it always starts at zero. It doesn't immediately go to 10 million. So if you're starting at zero and adding a couple of users every day and then a thousand a week and then 50,000 a month, it stacks up. And that's one of the things we realized is what an exponential chart looks like and what that growth looks like in the early days, and you just need to turn up every day and plug away, make the product, engage with your customers, be firm on the vision that you want to create, and just keep heading towards that. As we progressed over the next couple of years, we started to unlock some true parts of our growth engine, which have really stood the test of time over the last decade. But for probably the first year, we just really focused on continuing to build out the product and get more features in there, make it a more solid platform, and make sure that the customers who were turning up had a great experience, that they would then talk to their colleagues and their customers about. Word of mouth in that early couple of years was like gold for us. Still is. An amazing amount of organic traffic comes to Canva. It's only a minority that comes through marketing or other paid channels. It's really about Canva users bringing new Canva users into the fold that continues to drive the success of Canva.
Brett: So when you think about those first few hundred signups, did they instantly love the product and were using it on a daily basis? Like a majority of them, a minority of them? I get one piece is the total universe of signups, clear that that was very low in the first week, whatever. What about how the actual product resonated when someone created an account and got in there? Was it instantly valuable for them or did you have to do a lot of work to start to get that deeply satisfying product experience?
Cameron: It was instantly valuable, and that's what we worked on in that year and through all those user testing iterations and working on the onboarding, making sure they actually got value out of the product pretty much straight away. Yeah, that was critical. I can't remember retention rates and churn rates from the early days, but retention was pretty high. The number of people who bothered to turn up to your site because they were interested in the concept of it, then signed up and then actually used the product, I would be guessing, but I feel like half of them turned into pretty ravenous users.
Brett: So I guess that was the thing that really fueled your enthusiasm. Even if the end number of users was not very high, you had a very retentive, loved product very early on.
Cameron: Yeah. The people that turned up loved it. When you're first putting out a product, even 500 people using it and liking it is really addictive. So being able to feed into that was good. And then we also saw that growth loop where one passionate user on Canva sent out multiple tweets about it. From those tweets, other people got interested and brought them in, and we could really tangibly see that loop happening. That also fueled us in the early days, just following along with the community and making sure that they were conversing about Canva. And that definitely helped us grow. We went from about 500 that first day. I think by the end of the week, we had about 5,000 people who'd signed up. End of the month, we had about 20,000\. I think by the end of the year, we'd had... The number of designs that had been created was something like 500,000 designs had been created on the platform in that first year. So it was all scaling up and starting to be on that hockey stick graph.
Brett: Did you just email users to get feedback? Did you get on Skype with them? Did you just respond on Twitter? How did you tangibly start to pull the road map out of early customers?
Cameron: We didn't have much face-to-face with customers as part of our product process. We had like a community team. It was one person. But she was doing a lot of reaching out to bloggers, social media managers, people that were really engaged and talking to them, getting feedback from them. She did a lot of that. As a product team, we didn't actually. We were still leaning heavily into user testing. Twitter was great because it's high volume, it's easy for you to check in, you can do it anytime. So we got a lot of feedback through there. We also had a support email, which we interacted with people over email with. So from all those signals, we kind of gathered the product feedback that we needed to continue the road map. But we've made sure, ever since we've launched, ever since Canva's been going, that we balance responsiveness to users through feedback channels like that and creating features that they love with the vision that we know where we want to take Canva with. So there's still a ton of things that we're building because we truly believe that's where Canva should go, and we kind of blend that with user feedback to make sure that we're also looking after the community and delivering the things they're clearly asking for.
Brett: Did you start to think about other specific end users like social media managers and then you had another persona and another persona, or you quickly kind of move to just anybody that could get value out of a product like this?
Cameron: We had quite a few consumers coming in. Social media managers was quite a good business use case for Canva. We also had lots of content geared towards a lot more personal use cases, so like a Halloween poster or helping with your P&C event at the local school. There were lots of people coming in through those channels. They didn't obviously monetize as well, so we kind of kept them as two separate streams. For probably the first year or two, we built out for those kind of two rough buckets, people creating professional content for social and then a lot more of this personal content. It wasn't until I think we launched presentations that we really started to think more clearly about other personas that we would start building for. And with presentations you start moving into work use cases a lot more. With presentations, early adopters for us were basically startup founders, people starting their business. They needed to really quickly get something together that communicated their ideas, whether it's going out to their investors or rallying their team around what they're building this month. So startups became a really vital part of Canva's growth through year three and four. And that's when we really started opening up Canva as a real work tool. Not just something that created some pretty graphics, but a tool that helped you rally people together, express your ideas and get things done.
Brett: When you reflect on the first two years, so that's up until, call it, the 800,000 users you had, all the way back to the first line of code that you wrote, what are the most important things that you think you intentionally or unintentionally did correctly that are able to be more broadly exported to other people that are getting going?
Cameron: I can think of a whole range of things from a micro to a macro spectrum. On the macro, having a huge vision for what we wanted Canva to be, like truly a world-changing tool that wasn't just something that we were building for one person. We're literally building it for billions of people and we can see how Canva can be used by billions of people around the world. It will take us many more years to get to billions of people. We're at roughly a quarter of a billion right now. So we're still on that journey of getting there. But having that from day one is incredibly inspiring and also makes you think about the scale. You're not just building a product for this one particular use case. We're not building a to-do list app for nurses who want to order a coffee on Tuesday mornings. It is a truly expansive platform that can do so many different things. We just so happen to, in the early days, zero in on a particular user that was really passionate about it. So I think having that balance of huge vision plus product that you're building that's useful to someone today is really important. Then in our day-to-day product processes, I think we really tapped into quick iteration and prototyping in those early days. It was something that we could easily do with the skills that we had on our team, and I find it very easy to think about a design idea, sketch it, and then get it into code, which I think is a really important step when you're building a product, because it isn't until you put something interactive in someone's hands that you actually know how it's going to behave. Or even for yourself, you don't even know how it's going to behave until you've tried it out and clicked on buttons and dragged things around. So I think that product iteration loop that we had was really important because it was fast and it was a really strong signal of quality and finding the right thing to build. I think that's changed drastically in today's age. Your ability to do that is now even faster. So with AI, you can really quickly get a prototype up. You can even skip the sketching step. You can just go straight from idea to interactive prototype. And that's really turning the product process on its head and making it even more rapid to get to that confidence stage. I think in terms of growth, really focusing on that early community and being responsive to them, building them up as your advocates and your evangelists, making them feel like they're part of the team so that they're really willing to talk about your product and take it to other people is incredibly important. And then other growth strategies can kick in after that. But having the community that loves your product and loves it because it's a quality product is for us one of the key ways that we build.
Brett: When you use the term community in the context of what you all have built and engaging and supporting, maybe you could talk a little bit more about that. I feel like community is one of those words that everyone throws around.
Cameron: Yeah, so we've never built a community like a forum. We don't have this spot on Canva where people come to talk about design. We've fostered community where it arises. So there's a ton of Facebook groups. We've had groups that we have driven ourselves. They tend to be really high maintenance, and we've kind of let those go now because people are more than willing to create their own groups like designing on Canva groups for entrepreneurs, and they'll bring people in and they'll have really great conversations. So we help foster those with people. We'll drop in, we'll give them tips about what's coming up on the roadmap, we'll respond to their requests, make sure that their bugs are filed, et cetera. So that's how we think about community. It's more of the broader ecosystem rather than building specific tools that bring community together on the Canva platform. But you can also think about community as those people who file bug reports, those people who come into your support processes. Being able to convert someone who is very frustrated with your product because it's not letting them do what they want to do, and respond to them, have a great customer service interaction and turn them into a Canva fan is equally being part of your community. Because that creates another person who's willing to talk about Canva and will sit down at a bus stop one day next to someone and tell them about the product, show them their favorite design and win you another Canva user. So we think about community as all those different touch points that you have with a Canva user or a possible Canva user and making sure that they get good quality out of it, they have a positive interaction, and that we're constantly building the brand of Canva as an empowering, design-centered, goal-oriented tool for anyone that wants to achieve things. And you can do that through so many different channels.
Brett: In those first couple of years after you launched, you figured out some of the most important growth levers of the business. Could you tell the story about those?
Cameron: We had very vague ideas about SEO before we launched. We eventually figured out we knew nothing about SEO. But we fortunately came across an amazing growth leader here in Australia who really properly set up Canva for search engine optimization. So thinking about the whole flow of someone typing in a search, then ending up on a Canva landing page, then getting them into the product, making that a really great experience. So basically putting as much thought into that experience as we had put into the core of the product. And he created this really great engine where we mapped out hundreds of terms that people might search for that were related to Canva. We created landing pages that really spoke to people's jobs to be done when they landed on that page. We gave them an easy entry point into the editor. And then we made it clear once they were in the Canva editor how they would achieve the job that they had signed Canva up for in the first place. So that was really critical and it scaled really well. So you can think of hundreds, thousands of different terms that people might search for when they want to design something, and we could create inroads for each of those. It was a very thoughtful, strategic, and well-operated operation to get all of that happening. And we started seeing returns on that within three months, and it scaled up over the next couple of years to become a massive driving engine for us, and it still is a massive source of traffic for us. So that was one of the key growth drivers. The other key growth driver for us was internationalization. So I think one of the advantages we have as an Australian-founded company is that we couldn't just focus on Australia. If you're in the US, you can sometimes be tempted just to service the US market. But here in Australia, we've only got 25 million people. You're never going to create a scaled online company just thinking about that market. So we're always thinking about other users, other countries, other people and languages being able to use Canva itself. It was in about year... It was three years after we launched when we first started executing upon our international strategy, which involved firstly getting Canva into different languages. We launched eight languages in that year. And then the following year, we launched Canva in a hundred languages. And this totally opened up new markets to us, Brazil, Mexico, Indonesia, India, massive markets, a lot of non-English speakers, and it has totally reshaped what the product of Canva is, how we surface content to people, how we give them a great experience wherever they are in the world. Our top five markets now are US, Brazil, Indonesia, India, and the Philippines. So extremely international user base, and it was all fueled from those early days of internationalization, which has now proceeded into really intense localization. So making sure that it's not just in their language, but it has all the right content, it speaks to their cultural norms, it's relevant to their society and the interactions they have with other people in their country. There's a whole deep vein of localized experience that you can offer that really help your product grow in different markets.
Brett: When you think about those first few years after you launched, is there anything that in retrospect you did that you wish you did sooner?
Cameron: We were slightly late in terms of mobile. So Canva was launched as a website. We thought of it very much as a desktop experience, though. We use like a 1,200 by 800 pixel canvas to think about the product. Mobile hadn't quite taken off when we launched, so it wasn't imperative that we had a mobile product when we launched, but I definitely think we could have done it earlier. We proceeded from our desktop product to actually creating a tablet product. So we launched an iPad version of Canva in 2015, and then it took us another year beyond that to launch our first proper mobile product. So I think we definitely could have truncated that. And in today's world, you have to be mobile first. So if we're making the product today, it would definitely be a mobile-first product with probably desktop as the secondary. But back when we started, desktop worked and it still allowed us to grow.
Brett: Why do you think you have become the dominant player in this use case? You're kind of the standalone that has really won so many of these categories. Obviously it's different as you get into more traditional enterprise use cases, but in the non-enterprise, to this day, all these years later, you've built the category-winning product. Why do you think that is?
Cameron: I think of a few different reasons. We were definitely first mover in this category. I mean, we essentially created this category of democratized visual design, and a lot of people didn't pick up on that for many years. So we managed to build up this beachhead and build up really brand equity. Canva is still the foremost design platform that anyone can access anywhere in the world. And then people know that, so it's an incredible foundation to have built upon. The attention to detail that we put into our products, making sure that every pixel that appears on-screen is well-crafted and thought about, that we constantly have a simple but powerful experience, one that's easy for people to approach, but they can, over time, still develop experience and knowledge that helps them get more and more value out of the product. I think having a very community-oriented brand is also really important. A lot of people trust Canva. They love Canva. They literally love it, and they tell us they do. And building that brand equity and love for the product of Canva, the brand of Canva, and our philosophies and ways of viewing the world is also really powerful. That helps other people want to spread the word of Canva because they love talking about a great company that they feel very values aligned with, and it just all turns into this really powerful growth engine of great product, great users, and great community, just bringing more and more people in and constantly getting more and more value out. We've also focused a lot on internationalization and localization where people haven't. We've focused a lot on content, which is kind of the other side of Canva, which people often don't appreciate. Both the product experience, but it's also having the right content for people, having the right templates, illustrations, photos, videos, and music when they want to create. So there's quite a few different levers in there, but we managed to pull it together into a seamless experience that's accessible to everyone in the world and enables them to achieve things that they couldn't achieve before.
Brett: How did you think about layering on monetization?
Cameron: In our early pitch decks, we always had $1 for elements. That was a critical innovation that we had. Because part of designing is getting access to the ingredients for a design, whether that's a photograph or a font or a video. And it was extremely expensive to do that. So graphic designers would normally go look through a stock photo library, they'd find a watermarked image that they liked, and then they would have to pay $500 to unlock that image and eventually use it in the design. It was extremely expensive, but also prevented experimentation because it was hard to get that image into a design, play around with it, see whether it was the one you liked, and then decide to make that purchasing decision. So we enabled you to design and grab the content in the same tool and do so extremely easily and extremely cheaply. So that was our original pitch to investors and they really loved it. And we built up a massive stock library that enabled us to execute upon that. We operated on that business model for the first two years of Canva, and it was going pretty well. We had like 30% month-on-month growth on revenue. It was constantly scaling up. But we also started to notice that there were a particular cohort of Canva users that wanted a bit more out of the product, and it had always been our idea to have this premium tier for the product where we could start to build a deeper product and get people to pay for it. But it really crystallized towards the end of year two. So we started thinking about what this premium tier for the product would look like. We went out, looked at all the feedback, looked at what people were asking for, and we crafted this package that we called at the time Canva for Work, which is now Canva Pro. And it was about four different features that crossed brand and running your business inside Canva that really resonated with SMBs. We put that product out there. We actually had a really great marketing campaign behind it. We had 200,000 people on the waiting list, which was awesome. People were really excited for it to launch. And when it launched, it did pretty well, counter to my previous spiel about launches not being that important. That was a pretty good launch. We got quite a few subscribers straight out of the gate with that one. And it quickly started eclipsing our $1 image revenue, I think within three months. So our $1 image revenue at that stage was I think about $2 million. Within three months, our subscription tier had already eclipsed that and was growing far more rapidly. So that quickly became the dominant business model, which we're operating on and has put us in good stead over the decade that followed. It's still an amazing revenue driver for us. We're thinking about adding different pricing packages on top and different add-ons that you can possibly add into Canva now. But that subscription package has been an incredible revenue success for us.
Brett: When you thought about going much more intentionally into enterprise and going after enterprise customers and use cases, did it feel like re-founding and re-getting into product market fit, or was it just a natural extension of the way the product was already being used and it didn't feel like that?
Cameron: Thought it would be a natural extension, and we tried that actually for a couple of years. So from about 2020, we started to think about enterprise as a distinct market that we wanted to go after. We'd seen huge amount of penetration of Canva into enterprises, but through individuals and small teams. They had just picked up Canva and started using it. So inside some companies, like 50,000 employee companies, we already had like 5,000 people using Canva. They just didn't do it in a structured way. So we saw it as a big opportunity to wrap them all up and create an enterprise package. And we basically tried to do that by putting in an enterprise package, giving some vague promises around it'll be better for large teams and brand consistency and stuff like that. Got a little bit of traction, but we realized it wasn't very successful. And we've spent the last three years, as you said, kind of going back and learning a lot more about the enterprise space, about decision makers in there, what truly scaled teams need from their visual content, how they want to control their brand, how they want to interact with teams across the organization. We did a lot of learning and properly built the enterprise product that now exists today. So we launched that about 18 months ago now. And the reception to that has been far more successful than our very early iterative attempts on an enterprise product. So now we have companies like FedEx, New York Stock Exchange, Amazon using the enterprise product and getting a huge amount of value out of it. But it did require us to not go all the way back to the drawing board, but definitely more heavily rethink about what we're offering to them.
Brett: Why do you think that is?
Cameron: I think because the roots of Canva is very much about democratization and being really grassroots. We leant into that organic angle very early on. Building community is all about getting individual users to love it and talk about it to other people. And that kind of growth doesn't quite work in an enterprise setting because you end up with a very disorganized and chaotic network graph inside an organization. And pulling that together, finding this one decision-maker who wants to champion it, and make sure that they get on the one contract and that they admin their teams, they have all the templates and the brand in place, it's a very different play to what we were used to as grassroots adoption. So it required us to kind of re-approach it and learn a bit more and build up that enterprise muscle internally so that we were approaching it from the right angle.
Brett: At what point in the journey did you feel like it was highly likely that you would build this enormous important company? It sounds like maybe some of your co-founders from the moment they sat down and started thinking about it were highly convicted, but was there a moment that everything kind of clicked for you personally, when you started to see the product being pulled into the market in a certain way?
Cameron: It built up day by day, but there was this one specific email that we got from an early customer. It was probably like, I don't know, nine months or a year after launch. And it was from an orphanage in South America. And they just wrote us a really nice letter saying, "Thank you for creating this product. It has helped us create amazing newsletters that we send out about the kids in our care, which help us ultimately find forever homes for them." It was extremely heart moving, and it was the first moment I can remember getting feedback from the product from someone I knew nothing about in a country I knew nothing about from a totally alien environment but who was still managing to get amazing value out of Canva. And that's when it really clicked for me that the capability for Canva to go all around the world, span language barriers, span personas and use cases, and just be this amazing general tool that enables people to have an impact in their lives was just made tangible in that moment. So I really often link it back to that time.
Brett: What about maybe the inverse of that? Were there a few moments that were particularly difficult or hard, other than the normal trials and tribulations of making a startup work?
Cameron: In terms of the product, it's mostly been smooth sailing. You iterate, you put stuff out, you see what works, you see what doesn't. You're kind of used to that. There was this one period where we decided to rewrite our entire editor code base, which was particularly trying. The reason was it took us close to two years to do that, and in that time we essentially launched nothing. We didn't put out any new functionality. We couldn't respond to customers with like, "Here's an improvement based on what you've said." It was really, really trying for us as a team, as a product. So that was really hard. So we've kind of vowed and never to do a huge rewrite like that ever again.
Brett: In retrospect, was that a mistake?
Cameron: I don't know if it was a mistake. I can't think of how we might've done it otherwise. Maybe parallelized it, but maybe that would've just pushed the timeline out even longer and then caused this moment at the end where you had to bring everything together. So I think it was a hard call. It was one that was really hard to get through. But it was ultimately the right call because it set us up for real-time collaboration, truly scaled teams, like hundreds of people using designs together, velocity of products, better tech stack that enables us to scale to hundreds of millions of people. It was the right call for so many reasons. And it finished just prior to COVID, which enabled us to then pick up on a huge number of tailwinds throughout that period as well. So it was the right call in the end, but it was a struggle to get through. The other critical one that I can think of that wasn't product related was probably about our third round of funding. We had a lead funder come in. They were extremely bullish on the product. They were like, "Yep, let us handle everything. We want to put in tens of millions, and we're going to value you at a hundred million." It was all rosy until the final day when they had to sign the long docs. Everyone else had signed. Everyone else had put in money. And this investor came back to us and said, "You know what? We think we overvalued you. We think we can get a better deal. How about we put in same amount of money for half the value?" It was like an incredibly dick move, and it threw us into all sorts of chaos. We kind of scrambled, put together a totally different round that excluded that investor. We actually ended up with kind of better terms anyway. But from that moment we said that we don't want to be beholden to any investor. We don't want to be in that position again where we critically need funds and someone else can determine the trajectory of our business. So since then, we've put a premium on being a profitable company, making sure that we don't need funding, that we can run the company without having to go to someone else and put our hand out. And that has informed the next eight years of profitability that we've had at Canva.
Brett: It must be a fascinating position for that investor to be in right now.
Cameron: We've had interesting conversations with them since, and they've realized that it was a mistake and certainly a costly one for them.
Brett: Want to wrap up where we always do, which is just basically the question, who's somebody that's had a disproportionate impact on the way that you think about these topics of building startups or products or scaling businesses? Is there somebody who's imparted something on you or been involved in a way that's had a big impact on the way that you think about these things? And what's the thing that they imparted on you?
Cameron: I think I've got a couple of homegrown heroes as well as one from Google. So Lars has been hugely influential in my history and the history of Canva. So introducing us as co-founders, but also learning a huge amount from him at Google about how he thought about products and vision and bringing a team together and creating something truly innovative and exciting. And also I think really leading with heart. He was always his true self in front of the team, with the way that he led the team at Google. So I learned a huge amount off him. There's also a couple of other builders here in Australia. One of them was Campaign Monitor, which is an email delivery software, which started in Sydney. Knew their two founders quite well. Particularly spoke to Dave Greiner a lot in the early days and learned, again, a huge amount off him of how to scale a business. But also, again, leading with heart and being your true self and creating a proper organization. It's not about bringing some technology to market. It's about creating a place where other people want to come and join you in this mission and are excited about it. And about the impact you have in all of your customer's lives. I think that's really important when you're building an organization of true value and longevity. Then we're also quite close with the Atlassian guys. Well, Scott's now kind of retired and Mike is solely at the helm now. But from both of those guys, we've learned a tremendous amount about building a company in Australia, scaling it around the world. They've obviously IPO'd a long time ago. Thinking about customer growth, team growth, leaders that you need along the way. That's been hugely valuable.
Brett: Awesome place to end. Thank you so much for spending the time with us.
Cameron: It's a real pleasure. Thanks, Brett.ANSCRIPT HERE
### Don’t ship your pitch deck to your website
URL: https://review.firstround.com/dont-ship-your-pitch-deck-to-your-website/
Last updated: 2025-12-04T17:00:40.000Z
How to translate investor talking points into a marketing story
_This post is for subscribers only._
### Don’t Ship Your Pitch Deck to Your Website. Here’s How to Translate Your Story for Customers
URL: https://review.firstround.com/how-to-adapt-your-pitch-deck-into-your-website/
Last updated: 2025-10-06T08:05:46.000Z
*This article is written by* [*Emily Kramer*](https://www.linkedin.com/in/emilykramer?ref=review.firstround.com)*, a B2B startup marketing advisor, author of the* [*MKT1 newsletter*](https://newsletter.mkt1.co/?ref=review.firstround.com) *and host of the Dear Marketers podcast. She previously led marketing teams at Asana and Carta.*
When you’re raising your first round, you obsess over your pitch. You hone the story, the slides and how you sell the company to investors. But once the round closes and it’s time to go to market, too many founders try that same story to attract customers. That’s a mistake.
Investors and customers care about different things. A fundraising pitch should cover what’s important to investors: your big vision, your team’s unique ability to solve the problem and the market potential. But effective marketing, especially in the early days, needs to speak to a much narrower audience and a much more immediate pain. **Your pitch deck might have helped you** [**raise a seed round**](https://review.firstround.com/heres-what-you-can-really-expect-when-pitching-your-seed-stage-startup-at-a-vc-partner-meeting/)**, but it won’t help you close your first 10 customers — unless you know how to translate it.**
I’ve seen this mismatch play out again and again, as an investor reviewing hundreds of pitch decks as a GP at my previous fund MKT1 Capital, as an operator building and leading marketing teams at companies like Asana and Carta, and as an advisor to dozens of early-stage startups. Founders don’t need to become marketers overnight, but they *do* need to understand that getting your first customers and getting your first check require two different stories.
Here are my fundamentals for crystalizing your first B2B marketing messaging, including the positioning questions you need to answer upfront before you write anything. Plus: how to translate your pitch deck into copy for your website slide by slide, from the market size down to the team slide, along with examples for each one. Let’s dive in.
## The problem with shipping your pitch deck
A great pitch deck makes for an ineffective website. It also makes terrible outbound copy. You can’t copy-paste that deck to your homepage because your prospects likely aren’t VCs. And even if they are, VCs look for very different things in software than they do investments.
**Your deck is a high-level narrative arc.** It’s meant to build belief in the market, your team and your timing. It’s meant to sell your vision, so it’s often aspirational (“Our platform will be the system of record”) and not grounded in what you’ve built today (a single feature).
**Your deck speaks to an audience that cares about a VC-backed outcome,** not an audience that is trying to easily solve a “[job to be done](https://review.firstround.com/build-products-that-solve-real-problems-with-this-lightweight-jtbd-framework/).” Your prospects want a cost-effective, easy-to-implement solution to their immediate problem. Yes, your prospects care that your company will be there tomorrow. But they don’t want you to overpromise what the product can do for them today.
**And lastly, your customers care about a broader range of things than VCs do in your pitch.** Your marketing can and should tap into those broader topics, from emerging trends in their industry to helping them get better at their jobs. But unlike your pitch deck, your marketing is an opportunity to build credibility and drum up awareness and demand by talking about things your customers care about that aren’t just your product.
## What your early B2B marketing story actually needs
Your early marketing is about telling the right slice of the story to the right people — clearly, consistently and repeatedly.
The temptation is to look bigger than you are, just like you do in your pitch deck. To speak to your entire TAM. To sound like a scaled company.
**But your early advantage is focus. You can solve a very specific problem for a very specific audience better than anyone else. Lean into that**. Don’t work against yourself by trying to appear like you solve everything for everyone.
Here are three ways to focus your marketing messaging:
- **Pick a wedge or beachhead**. The narrower and more urgent the problem, the easier it is to win. You may be building a broader product now or later, but you still need to start with a narrow GTM audience and message — even if you’re testing a couple targeted audiences at a time.
- **Speak directly to your audience.** Make people feel like your product was tailor-made for them (and not for everyone). Echo what you heard in discovery calls. Speak your customer’s vernacular, not VC lingo.
- **Don’t copy the messaging of later-stage companies**. You’re not Stripe, Airbnb or Figma. No one knows what you do yet. You need to spell it out clearly.
Emily Kramer, B2B startup marketing advisor
### **Write clear positioning to shape your customer-facing product story**
Before you write anything customer-facing, whether for your homepage, your sales deck or any other early marketing asset, you’ll need to hone your positioning internally.
This is where my [positioning framework](https://newsletter.mkt1.co/p/positioning-guide?ref=review.firstround.com) comes in. Answer these four questions in the language your customers speak to build a foundation for your website:
**1\. What’s the alternative to using your product?**
Explain why using your product is better than the alternatives, which could be:
- Building it internally
- Using a mix of tools and homegrown solutions
- Using an incumbent product
- Using a horizontal, non-purpose built tool
**2\. Who is your product for?**
Get specific and stack rank or tier [potential ICPs](https://review.firstround.com/how-vanta-clay-retool-found-icp/), and use language they would use to describe themselves.
**Don’t say:** “Distributed knowledge workers.”
**Do say:** “Fully remote employees.”
**3\. What exactly is your product?**
Describe it in plain English. Be clear, not clever.
**Don’t say:** “AI-powered revenue design.”
**Do say:** “Manage your business mail online,” “Scale B2B support” or “The AI code editor.”
**4\. Why is it better than the alternative?**
Pick the high-level reason your product is better than what the majority of your initial ICP(s) will compare it to.
**Don’t say:** “Unlike competitors, we offer XYZ *and* ABC.”
**Do say:** If the alternative is building internally: “Save months building X yourself.”
If the alternative is a mix of internal tools and expensive service providers: “Save $X in annual legal fees.”
### **Your marketing story is bigger than your product story**
Positioning covers your core product message: who it’s for, what it is, why it’s better. But your marketing story should extend beyond just your product.
So in addition to writing clear positioning, choose three to four narratives you want to focus on that speak to your audience. These can be related to market trends, what your customers have in common, your founding story or a unique insight or contrarian view you have.
I call these narratives [perceptions](https://newsletter.mkt1.co/p/episode-2-story?ref=review.firstround.com). Your perceptions may be adapted from slides in your pitch deck, like your “why now” and “vision” slides, but they’re geared toward the perspective of your customers. Focus on movements and trends your customers actually care about, rather than what excites investors.
Here are some examples of how you might describe those narratives:
- “Usage-based pricing will increase our revenue over subscription-based pricing.”
- “I can build products now, even though I can’t code.”
- “Diagnostic errors occur all the time in medical images read by humans.”
Your early marketing story should accomplish these four things:
- **Hook people fast.** Lead with the customer’s pain and explain how you solve the problem.
- **Assume zero context**. Explain what you do in plain language.
- **Speak to your beachhead users.** This isn’t your total addressable market, or every potential use case. Just highlight the most urgent, obvious one. This is how you win over competitors.
- **Prove it**. Even if you’re early, use real quotes, early traction and your team’s credibility to build trust. Not just in one call out section, but across everything you do.
You’ll get to your big vision, your defensibility, your five-year roadmap eventually. But only if you can clearly explain what you do today and why someone should care today.
> You’re not in a pitch meeting. Your website is sitting open in your customer’s tab next to 10 others.
## Translating your pitch deck slide by slide
Your marketing story comes from the same foundation as your pitch deck. But it has a different job.
Here’s how you can directly adapt your pitch deck into your marketing messaging on your website, building off of the positioning and narratives you’ve developed.
### The problem slide
- **Purpose in the pitch deck for investors:** The medium-term pain point and why what you’re building matters.
- **How to translate it into customer-facing marketing messaging:** Focus on the customer’s pain point today.
- **Where it should live on your website:** Use this language in your homepage hero. Lead with copy that evokes “we get your pain, and have a solution.”
- **Common mistake:** Writing about the problem too generically or abstractly, not connecting to real customer pain, or alienating your target audience by calling out their shortcomings.
**If your pitch deck says:** “Radiologist-read medical images are frequently misinterpreted, leading to missed or delayed diagnoses.”
**Your website might say:** “Reduce diagnostic errors.”
### The solution slide
- **Purpose in the pitch deck for investors:** Describe what you’ve built and your unique POV on the solution.
- **How to translate it into customer-facing marketing messaging:** Focus on what your product does for your ICP right now.
- **How to adapt for your website copy:** Make it super clear what your product does in your homepage hero — assume no one has any idea.
- **Common mistake:** Repeating vague pitch language or trying to be too clever and name a category on day one, instead of explaining what it actually does in concrete, familiar terms.
**If your pitch deck says:** “Compliance and security management platform, starting with SOC 2.”
**Your website might say:** “SOC 2 audit platform.”
### Vision & why now slide
- **Purpose in the pitch deck for investors:** Inspire belief in a big future and show why this moment is the right time to build.
- **How to translate into customer-facing marketing messaging:** Connect your product to a broader movement or emerging shift customers want to be part of.
- **Where it should live on your website:** Include in your About page, company story, or founder’s note, not front and center.
- **Common mistake:** Leading with the vision or an overly academic take on the market before you explain basic positioning.
**If your pitch deck says:** “We’re simplifying global trade — in a time of tariff confusion.”
**Your website might say:** "We manage the customs process for everything you ship.”
### Market size slide
- **Purpose in the pitch deck for investors:** Prove the opportunity is big enough to be venture-scale, imply that this market is massive and growing.
- **How to translate it into customer-facing marketing messaging:** Messaging should feel targeted and personalized, and imply “This is for you.” Don’t talk to the whole TAM, talk to your beachhead users.
- **How to adapt for your website copy:** Make it clear who your product is for throughout the website.
- **Common mistake:** Assuming prospects already know the product is for them, or trying to speak to everyone to increase your chances of getting customers. Speaking to everyone has the opposite effect.
**If your pitch deck says:** “We’re targeting remote-first and hybrid companies globally.”
**Your website might say:** “Built for early-stage remote startup teams.”
### Competition slide
- **Purpose in the pitch deck for investors:** Show awareness of your landscape and how you’re different.
- **How to translate it into customer-facing marketing messaging:** Highlight your differentiators, and only mention competitors where necessary.
- **How to adapt for your website copy:** Make it clear how you fit with other tools your audience uses and show why your product is better than the alternative. Use comparison pages, customer stories on switching products and sales-specific content (like battle cards) to get precise on differences compared to a single competitor.
- **Common mistake:** Obsessing over direct competitors, instead of explaining what you do and why you’re a better choice for your selected audience.
**If your pitch deck includes:** A 2x2 visual of video editing software
**Your website might say:** “We’re the only multi-player video editing platform.”
### How the product works slide
- **Purpose in the pitch deck for investors:** Demonstrate your product works, is feasible and has a clear roadmap.
- **How to translate it into customer-facing marketing messaging:** Explain how your product works for your early adopters, and don’t market or sell too far ahead from what’s built.
- **How to adapt for your website copy:** Create a product tour, “How it works” sections, feature pages or demo video.
- **Common mistake:** Hiding how your product works until a sales demo. This only creates friction and slows discovery.
**If your pitch deck says:** “We’re building an AI engine that automates post-client call workflows, starting with X workflow. Here’s our roadmap.”
**Your website might say:** “Step 1: Records clients calls, Step 2: Writes and tags notes, Step 3: Sends them to your other tools automatically”
### Business model & GTM strategy slide(s)
- **Purpose in the pitch deck for investors:** Prove you can make money and reach the market efficiently.
- **How to translate it into customer-facing marketing messaging:** Make it obvious how to buy the product.
- **How to adapt for your website copy:** Make a packaging and/or pricing page, even if it’s basic. Buyers look for this. Use clear CTAs throughout the website that set the right expectation.
- **Common mistake:** Being opaque about your pricing and packaging. Prospects will find this info regardless, so it’s better to control the message.
**Don’t say:** “Get started today” if it takes a week to book a demo and a month to onboard.
**Instead, say:** “Talk to sales” or “Request a demo.”
### Traction slide
- **Purpose in the pitch deck for investors:** Show progress, demand and momentum.
- **How to translate it into customer-facing marketing messaging:** Weave social proof into as much of your marketing as possible. Don’t just add one quote to one page.
- **How to adapt for your website copy:** Integrate (authentic) social proof throughout your website. On your homepage, show quotes and logos.
- **Common mistake:** Thinking you’ve checked this box after making a logo wall, and not adding customer perspectives into everything you do.
### Team slide
- **Purpose in the pitch deck for investors:** Convince investors your founding team is the best suited to build and win.
- **How to translate it into customer-facing marketing messaging:** Build trust by sharing the team's credibility, values and voice.
- **How to adapt for your website copy:** Include this on your “About” page, and use founder voices to kickstart content and social efforts. But don’t make the homepage about you. Make it about your prospects.
- **Common mistake:** Over-indexing on resumes and credentials, without showing why you’re able to solve customers’ problems.
### Ask & use of funds slide
- **Purpose in the pitch deck for investors:** Tell investors what you need and what it unlocks.
- **How to translate it into customer-facing marketing messaging:** Fundraising history shouldn’t be the primary message you share with your prospects.
- **How to adapt for your website copy:** If you mention your fundraise, use it as a hook to show how the new money unlocks something directly valuable for your audience, such as new features.
- **Common mistake:** Blasting your fundraising announcement everywhere, which makes it about you, not what your new cash means for customers.
A pitch deck is a great forcing function to think about your story and start compiling assets that will be useful in marketing. But you need to take a few extra steps to make it ready for prospects and customers.
The great news is you can do this on your own, most likely without [a marketing hire](https://review.firstround.com/so-you-think-youre-ready-to-hire-a-marketer-read-this-first/). Just use clear language and get real buy-in and feedback from real people in your ICP.
### Twitter's former CEO on rebuilding the web for AI | Parag Agrawal (Co-founder and CEO of Parallel)
URL: https://review.firstround.com/podcast/twitters-former-ceo-on-rebuilding-the-web-for-ai-parag-agrawal-co-founder-and-ceo-of-parallel/
Last updated: 2026-02-03T17:47:40.000Z
Parag Agrawal is the co-founder and CEO of Parallel, a startup building search infrastructure for the web’s second user: AIs. Before launching Parallel, Parag spent over a decade at Twitter, where he served as CTO and later CEO during a period of intense transformation, as well as public scrutiny.
In this episode, Parag shares what he learned from his time at Twitter, why the web must evolve to serve AI at massive scale, how Parallel is tackling “deep research” challenges by prioritizing accuracy over speed, and the design choices that make their APIs uniquely agent-friendly.
In today’s episode, we discuss:
- Why Parallel designs for AI as the primary customer
- Lessons from 11 years at Twitter and applying them to a startup
- Potential business models to keep the web open for AI
- Hiring philosophy: balancing high potential and experienced talent
- The evolving role of engineers in an AI-assisted world
- Why “agents” are finally becoming useful in production
- And much more…
**References:**
- Clay: [https://www.clay.com/](https://www.clay.com/?ref=review.firstround.com)
- Index Ventures: [https://www.indexventures.com/](https://www.indexventures.com/?ref=review.firstround.com)
- Josh Kopelman: [https://www.linkedin.com/in/jkopelman/](https://www.linkedin.com/in/jkopelman/?ref=review.firstround.com)
- KLA: [https://www.kla.com/](https://www.kla.com/?ref=review.firstround.com)
- OpenAI: [https://openai.com/](https://openai.com/?ref=review.firstround.com)
- Parallel: [https://parallel.ai/](https://parallel.ai/?ref=review.firstround.com)
- Patrick Collison: [https://www.linkedin.com/in/patrickcollison/](https://www.linkedin.com/in/patrickcollison/?ref=review.firstround.com)
- Stripe: [https://stripe.com/](https://stripe.com/?ref=review.firstround.com)
**Where to find Parag:**
- LinkedIn: [https://www.linkedin.com/in/paragagr/](https://www.linkedin.com/in/paragagr/?ref=review.firstround.com)
- X/Twitter: [https://x.com/paraga](https://x.com/paraga?ref=review.firstround.com)
**Where to find Todd:**
- LinkedIn: [https://www.linkedin.com/in/toddj0/](https://www.linkedin.com/in/toddj0/?ref=review.firstround.com)
- X/Twitter: [https://x.com/tjack](https://x.com/tjack?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- X/Twitter: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
(1:26) Founding Parallel with an AI-first mission
(3:23) From Twitter CTO/CEO to startup founder
(6:20) What the AI era spells for companies
(7:58) The CEO to founder pipeline
(11:18) Reflections on Twitter’s transformation
(17:48) How Parallel was born
(22:31) Early use cases for Parallel
(31:42) How has Parallel’s ICP changed?
(34:37) AI’s impact on competitor dynamics
(36:06) When should founders launch?
(37:43) Parag’s fundraising framework
(40:14) Building a high-impact engineering team
(44:49) Counterproductive uses of AI
(47:35) How will the software engineer role evolve?
(49:10) How are Parallel’s customers using AI?
(53:27) Defining agents in 2025
(55:02) Parallel’s long-term vision
(1:03:43) Parag’s growth as a founder
Parag: I don't tend to enjoy public attention too much. During the Twitter era, I couldn't say very much. Now I want to harness public attention towards the future I want to build.
Todd: Hey everyone, it's Todd Jackson. I'm a partner at First Round. For today's episode, I'm excited to sit down with Parag Agrawal. He's the founder and CEO of Parallel, an infrastructure startup building a new web for AI agents.
Parag: We believe that AIs will use the web a thousand x, million x, more than humans ever have.
Todd: I first met Parag when we worked together back at Twitter, where he spent over a decade rising from engineer, to CTO, to CEO, before selling the company to Elon Musk.
Parag: I was entertaining some calls about taking on jobs that might have on paper felt like big jobs. I just couldn't join a mission.
Todd: Now, he's a founder building in the post ChatGPT era. In our conversation, we dig into what he's learned from scaling Twitter and leading it through its most dramatic chapter. As well as what he's had to unlearn as he builds Parallel. We also explore what is and isn't working in production, where agents are headed and why he believes the next generation of the web will look fundamentally different.
Parag: Our customer is an AI. We are going to design an API that is excruciatingly slow.
Todd: Let's dive in. Parag, welcome to the show.
Parag: Thanks for having me.
Todd: We're going to dig into a bunch of different topics today, but just to make sure everyone has the starting context, could you start by explaining at a high level what your new company, Parallel, does?
Parag: At Parallel, we are obsessed with the open web. We believe that AIs will use the web a thousand X, a million X more than humans ever have. As a result, the web will need to transform in order to drive that transformation. We've been building the best tools that AIs can use to access content in the web. In fact, the product we've shipped recently are the only APIs that hit human and even higher than human level performance on a variety of deep research benchmarks. That's been a key milestones that we've been working towards and we finally hit,
Todd: You were at Twitter for 11 years, less than late 2022, and there was just a little bit of publicity around that. Starting Parallel and raised your seed round in 2024\. The company's still less than 18 months old and you've been pretty quietly building in stealth up until now. Is that right?
Parag: That's right. You know about our seed round because you were with us through that journey. We've been building away. We've had products out with customers and we've been working with some of the forward-looking customers, whether they are private early stage companies or slightly more established companies. It's been amazing to work with a bunch of customers who are ahead of the curve as we see them. They've essentially shaped us and our product and that's why we've been quiet, but now we think a product is there.
Todd: You and I actually met each other 10 years ago way back before that in 2014 at Twitter. One of the big projects that we took on together was how to introduce ranking into the home timeline at Twitter, which was hard. But I bring that up because I think it's so interesting to compare that to what you are working on now, because you spent a decade-plus being responsible for all these big, at scale, technical decisions at Twitter, dealing with all the constraints of 10-year-old infrastructure. And then you got this opportunity to start completely fresh in a post-ChatGPT world with a clean sheet of paper. What was that transition like for you?
Parag: When you're working with a established product with has product market fit like Twitter versus zero to one journey, I think every way of working to me feels different. When you're working with a team of 10 versus a team of 1,000, every practice you have as a leader in my opinion must be different. When you're working in 2019, Twitter with legacy infrastructure at scale versus a startup in 2025 with 20 people all in person, everything you had to do is different. In some sense, this startup is like a journey in unlearning everything I might've learned before.
Todd: What are some examples of that? It could be the pre-AI versus the post-AI. It could be just the size, the number of people. It could be incremental changes on an existing thing versus a brand new thing. What are some of the specific ways?
Parag: I think all of it... Really, you think of team. Twitter was famously remote-friendly. Parallel, we are all in-person in one office five days a week and I think you get to do that at small scale. I think you must do that. At least I must do that for who I am. For this moment, zero to one. If you think of pre-AI versus post-AI, I actually think you have to think about product very differently. At Twitter, if you ask for my framework on how to build product, it was like, "Okay, what do people need? What can be built?" You find something in the intersection, you try to ship that, and you have to track technology change at some rate in order to find that constantly. People need everything with AI. That's almost obvious. Now, you really have to zoom into what works and what can work and where is it going, and you have to look a step ahead and build towards that. It's a very different art. Everything is now stochastic. You build deterministic systems earlier and now you're really thinking about building and communicating stochastic systems. It's very, very different in my mind in terms of how you think about product.
Todd: And systems that are getting better so quickly. The leaps that are being made every 6 months, 12 months is amazing to me, but it's interesting when it comes to product. How do you design the product in such a way to say, "Okay, the models are where they are right now, but in six months they're going to be much different and better"? How does it influence the way you think about thinking ahead on product?
Parag: We've made two opinionated stances when it relates to that. One thing we did early on was we took the counter approach of saying our customer is in AI. And one of the things that led us down was we are going to design an API that is excruciatingly slow. Humans have no patience on the web. When we are building Twitter, we thought of like, "Okay, if you don't serve the timeline within a second, you can lose people." You can see it in your numbers. You can see it in your metrics, so you got to figure out how to do the best thing possible in a second.
Todd: Performance is incredibly important when the user's sitting there, waiting for the query.
Parag: If it's an agent doing something in the background, which could be running a workflow when there's no human waiting for it, or if it is someone trying to collect a large number of data and fill it into a database and you're doing 10,000 operations, a million operations, the latency of each operation doesn't matter. If you relax that constraint, you get to do more. Now, today we all call it deep research because that's better branding than slow. In terms of agents are our customers, we want to leap towards automating end-to-end and so that helped us build differently. We took a leap of faith that it's going to happen. Even if the models that day weren't good enough, we bet on models getting better to support that.
Todd: On top of all the things that were happening at Twitter and setting the drama aside, you went through some very big, what I would call, altitude shifts, the transition from CTO to CEO. I'm curious, just what was that like for you and what did you learn from that experience that may have equipped you to be a better founder in some ways?
Parag: One of the things when I was taking on the CEO role was until then, I really thought of my job as being versatile to the needs of the company and to shape myself to be most effective, which doesn't mean that you don't get to change the company around you or you don't get to shape the company to be. One of the big shifts I went through taking on the CEO role was I decided that the most productive way to operate would be to shape the company around me, take on the founder role for the company, because I think there is no other way. If you try to fit yourself to an organization, a company, a plan that exists, I don't think you do justice to the role. When I stepped then, I was like, "I'm going to shape the company to what I believe and who I am." That was a mindset I took on, taking that role. Really, that manifested as me having the conviction in that moment to change the company, to change how Twitter did things. I was there for a while.
Todd: You must have done that as the CTO as well. I'm assuming you had so much scope.
Parag: I don't think it's the same. I think it's very, very different. I think I had a lot of agency and a lot of influence, but I never... Perhaps it was my failing to not embrace it to, "I can change anything here." I tried and was often frustrated. One of the things I did as soon as I took the role is, I think, we changed the structure of the company. We changed the leadership team substantially within a month. I was about to meaningfully change how many people were at Twitter and what our roadmap and priorities were. Now, we didn't get a chance to see it all through, but really I think it's really important. It's different to embrace shaping something to you versus shaping yourself to something.
Todd: How did it feel to have so much public attention trained on what was going on inside the company? What was that experience like for you and is there anything that you took away from it?
Parag: I don't tend to enjoy public attention too much, but I think it's a very valuable thing. As a founder now, I actually think to drive the impact I want to drive, to shape the world the way I want to shape it, you have to use public attention to find the people who want to join you in your mission, to find customers, and to evangelize the future you want to live and to find partners. In some sense, public attention is really important. Now, what was unfortunate about the public attention I did receive during the Twitter era was that, in that moment, I couldn't say very much, and in that moment I was going through what felt like a zero-sum game rather than the current moment where it feels like a extreme positive-sum game. Now, I want to harness public attention towards the future I want to build, but I didn't get to do that then.
Todd: Yeah, because I was watching it from the outside at that point. Just knowing you and working with you, there was stuff being said about you, but you had to remain pretty quiet. I mean, is there anything that you want to say now?
Parag: Lots, but I think one thing I'll say... I think people assumed or might have assumed that, as an insider who's been at the company for 10 years and takes on the role of a CEO, I was going to continue going in the same direction. The reality is that my goal was to make Twitter what I think it must've and what could've been and should've been. That required a massive transformation of the company, the people, the product, and really all of that was coming together. One weird anecdote, I think, out there but not understood is that three days after we signed the deal to sell the company, which was a Monday... Thursday was our earnings call and there was a whole plan to really trim the company down by about 20, 25% going into that earnings call, because I think Twitter needed to change and adapt to the current moment and go from being just a great product to being a great product and a great business. That was the change, I think, that was coming, which would allow you to innovate on product in a real way. I didn't get to see that through and I wish most people got that.
Todd: You didn't get the chance to do that, but now that you've been an observer of what's happened to Twitter, now X, over last couple of years, what is your take?
Parag: I think I was obsessed with this idea. I obsessed with what we used to call internally Project Saturn at the time, which is how do you take this whole problem around content moderation and actually harness the power of Twitter and the community and the users to do it themselves. Now, it's idealistic, but I think that's in the realm of possible. And I think as we've seen the team continue to work on what we used to call Birdwatch and now it's called Community Notes, I think it's great. It's leveling up to the top ideals of being transparent, being open, and enabling people to contribute to Twitter in new unique ways to make the entire experience better. If you have to think of what happened, well, it's something I really believed in and I'm so glad it continues to be something, where I think I believe now others are even trying to replicate that. I'm so glad that continues to happen. It's so amazing.
Todd: Was there one or two things that you took away from the 11 years spent at Twitter, either as a leader or just in terms of the ethos of the company and of the user base that you brought to Parallel that came with you?
Parag: I think the core ethos at Twitter, the why for me was... The words we used to use was public conversation, but really what it was to me was everyone can, in a permissionless way, get access to everyone else and their thoughts and their ideas, including the best people who are changing the world, who you want to connect with directly, and to get to them unfiltered, and to build upon them unfiltered. Instead of being in closed, permissioned, invite-only, limited access environments, there's this massive democratization of access to people. You could literally DM anyone. It's still amazing. I think that creates magic when it works and it causes all kinds of problems that need solving around people misbehaving, but I think it's worth solving those problems because of all the positive it creates. I think that's the same ethos we are taking at Parallel, which I think we want the web to be open and we want it to be permissionless and we want it to be a free market and we want everyone to have access to everything including AIs. We want AIs to have access to the entire web and that's the common thread that motivates Parallel, which pulls from Twitter.
Todd: I'm curious, this decision to do this... You were leading a 7,000-person public company. There's a million things you could have done after that and you decided, "I want to start at the very beginning from zero as a founder of a brand new thing." How did you decide that that was the thing you wanted to do?
Parag: I was open-minded in the beginning, but I think I was just sitting there writing a bunch of code, having the time of my life, curious about the world, so greenfield. I was entertaining some calls about taking on jobs that might have, on paper, felt like big jobs, but I think \[inaudible 00:16:35\] Twitter long enough to have drank the Kool-Aid that I was serving to believe in this notion of openness and direct connection and public information and public data. To join a mission, I just couldn't join a mission. I think a couple months in, I knew that I would start something. I don't think you even know the story, but I ran into Josh somewhere around that time. By then, I was set on starting a company. I had no idea when and how to go about doing it. Josh gave me this piece of advice that stuck with me. It's like, "Just don't be in a rush. There's going to be 10-plus years of your life and just don't be in a rush. Don't jump on the first thing."
Todd: As an engineer, as a founder, you've developed these muscles on how to build and you are very good at building, but what you only do once or twice is pick the thing to work on. I think the luxuries that we have VCs, we get to look at a lot of things and we get to pick many things and the picking muscle gets developed. When as a founder you choose the thing that you're going to work on, that sets the boundaries and constraints for if the company's doing well in the next 10 years of your life. It's critical. Let's talk about that. This idea that you picked, I think, is a phenomenally interesting expansive idea. How did this idea come to you?
Parag: I was actually looking to do something in healthcare. I was hacking away agents for myself to research healthcare. I found myself, over time, spend more time on the future of the web and just obsessing about this idea in some abstract form, almost living in this science fiction of, "Oh, every decision we made at Twitter, we used to think about this service having 100 millisecond SLA because we're thinking about an end customer on a mobile device that had about a second and this was in the stack." And I started really living in this notion of like, "All of that's going to change completely. All of the infrastructure that we built, thought about, it's going to look completely different. Every business model we thought about, it's going to look completely different." It really started as this science fiction of the primary consumer on the web is now going to be an agent. You change that one assumption. Greenfield, what does this world look like? I would just obsessively think about this and I didn't actually think I would start something in this space because it's just like science fiction. I would just talk to people about it. At some point, it started becoming like, "Okay, so if this could happen, there's a good and a bad way it could happen." I want the good way. I have some views. What can I do? It took me months of research, understanding, talking to people, exploring paths around this idea to gain conviction to one day being like, "I'm going to do this."
Todd: Help us just understand that a little bit better. The idea is very interesting that the web, as we know it, was designed for human users with links and navigation and pages and page loads and all of that stuff. And if you're an AI, a lot of that stuff, it's not defined for you basically. It can consume data a lot faster. You don't need to see one page at a time, things like that. Give us a little bit more of that. What are the different assumptions that you make or patterns that you build for when you are building for an AI as the user instead of a human as the user?
Parag: Humans, as I frame it, operate in a very narrow band. We have a second or two of patience. We under-specify what we're looking for. We'll either implicitly just click on an app and expect the app to figure out what we want and show it to us like Twitter or we'll type an incomplete set of keywords or we'll click on a link to navigate our way to somewhere. We'd hope for the best and we'll go on this random box to get stuff done. We're also able to consume a few decisions like 10-click targets, two to three pages of content at a time. Most of the infrastructure in the web is just trying to figure out what we might be trying to do and guess and point us in the right direction. With AI, I think we get to invert a lot of this and actually that inversion is something we're starting to see. AIs can specify what they're trying to solve. In fact, to do evals, you need to know what the end goal is to be able to evaluate. To train an RL system, you need to know what the end goal is and what the reward is. When you start doing that, you can start communicating that down. That's a completely different interface for the underlying infrastructure concretely, that you no longer have to guess what might this user be trying to do. You're no longer stuck with producing a consistent format in your answer or a said quantity in your answer or a one-second latency SLA on your answer. Sometimes you'll want things in 10 minutes and sometimes you'll want a hundred documents and sometimes you'll want a one-word answer as an AI making a call to you. So the problem space really expands. Now, we, within this expanded problem, made, after a bunch of time with potential customers, an opinionated set of narrow decisions around which small slice of this would matter first. That's where we took this. Humans are different from AI, they're different in all of these ways, the query language will expand. But now what's the most interesting slice of this that we should go attack? We went after the slow end-to-end human automation, measurable, repetitive, eval-friendly work.
Todd: Let's talk about a little of that. What are some of the initial use cases customers scenarios where you felt like this kind of architecture could be really powerful?
Parag: The first few use cases we went after were this notion of repetitive work you might outsource to a BPO or KPO out there. That was an accidental discovery in some sense, talking to some customers who are doing this and they're like, "Oh, if your system can outperform this, that would be cool." I said, "Actually, we might be able to. Let's try." And then we realized that AI performance, when you have a repetitive, well-specified work, improves. Human performance, when you have to train 50 people to do repetitive work, declines.
Todd: These are people doing desk research or...
Parag: Yeah, desk research or some workflow on the public web on insurance claims processing or underwriting or figuring out some data set based on something governments published on how much to tax, what entity, how to be compliant with what, pulling financial data out of the web to create pure data sets. All kinds of this work happens. We're obsessed with the web, but we wanted to add value. We picked this as our first things that we would start working on and really pushing the limits of what's possible in a system on delivering quality. We decided we would care only about accuracy and quality in our system. We would not care about latency. That decision because this is the set we wanted to go play on first.
Todd: I think it's really exciting. If I have the numbers correct, you now have more than 100 paying customers at Parallel. Tell us about some of the use cases. What are they using the APIs for?
Parag: No, it's been really exciting to work with more and more customers and we've really scaled the number of customers we've been working with, both in terms of numbers but also in terms of the breadth of use cases that we now serve. On the one end, we serve these extremely long-running deep research use cases which would otherwise be done by a human. On the other extreme, we might serve as a search tool that a coding agent might use and call it and get an answer within three seconds. To look up documentation, to figure out how to course correct when it might need the live web. We have a breadth of usage. The other amazing thing to see as we've been building this is how it's been scaling. We now serve millions and millions of requests per day and our cheapest request on our system cost under half a cent. The most expensive requests through our system today can cost $10\. It's amazing to see this is not something I could have imagined, the breadth of customers, the scale of use going into this year. It's been amazing to have all of that come together in this moment.
Todd: It's interesting you named a bunch of different use cases across all of your customers. Is there an example or an anecdote that sticks out in your head about a customer that you worked with early on where they really pushed you and helped shape what Parallel would be?
Parag: Yeah. I think in the early days when we were working on one of these insurance use cases, really the bar was we had a data set which was being generated as a result of human operations. We got that data set, it was like ground truth, and the question was, "Could an AI system this last year compete or drive productivity or entirely replace it?" As we worked through it, we were scoring low and then we had to go dig into the data set. Turns out, ground truth is never ground truth. One of the things we totally changed in our worldview was ground truth is never ground truth, and that we actually have to do comparative analysis of quality and really reframe every customer conversation we have around, "Let's compare two alternatives." We found creative ways of doing it. It's not complicated. Two ways of solving a problem, we'll agree in some case and you don't need to look at them. Whether they disagree, you take a small sample and you grade which one you prefer on that sample of 5 or 10 and then you know which way is better roughly. We started from that one customer journey. We went through this bespoke process in the design partnership, but then we learned this very simple pattern that has really been something that has worked with the customers who are most selective on quality bar and are working on these human operations and scale human operations where they want to automate them.
Todd: I'd love to hear maybe about some of these examples. One of the customers that I know of, because they're also a first-round company, is Clay. We love it, obviously, when companies become customers of each other. Tell me about their use case for Parallel and what they were trying to do and what maybe some of their alternatives would've been.
Parag: You make it seem like a coincidence. You all connected us with Clay. That's one of the hugely valuable to discover, people who are forward-looking, people who are truly innovating. They were one of the early people who worked on building benchmarks with us. They were ahead of the curve in bringing AI to a lot of people, making it an amazing experience, a really powerful experience. They took a bet on working with us very early on and they built benchmarks with us, collaborated with us, pushed our technology, and hopefully got some benefit in pushing their product forward. Now, as early partnerships are, I think it was really co-creation, I would say. But if you think about repetitive web research, give people extreme leverage in understanding every prospective customer or current customer, everything about them, prioritizing across them, and all kinds of things that people want to do at scale, we were able to partner with them. Try to push the limits of accuracy that you can achieve in doing this work because it matters for their use cases. And in that sense, that was a really great relationship partnership, because they've really pushed us being a demanding, sophisticated customer.
Todd: What are the APIs that Parallel provides to them that they're leveraging?
Parag: Parallel, our Task API, which is just an API which allows you to get structured enrichments back. It allows you to specify compute budget effectively and we just produce answers. Now, they make a really AI-friendly API accessible to end customers. There were system on top which orchestrates on top of our API in order for people to type small, under-specified prompts. But they have pattern matched across their customer base and they know what it means, in terms of the output, someone might want and they specify those queries down to our system.
Todd: Their end users are basically writing stuff in natural language. Clay has like an AI orchestrator routing system.
Parag: Exactly. And an AI.
Todd: So the AI is what's querying...
Parag: And AI is querying us.
Todd: Yeah.
Parag: That's what I mean by forward-looking customers. We wanted our customers to be an AI. Here, we have an AI writing queries to our system. Our system is built for natural language, but humans, as I said earlier, under-specify things. You can use AIs to help humans, not under-specify things and write query. We don't particularly optimize our APIs to be human-friendly because we expect our customers to be able to do that.
Todd: So they were basically saying, "These are the benchmarks we need you to hit," or how did that work?
Parag: No, they had built real benchmark on the products they wanted their customers to have and accuracy they wanted to have. They've also built a lot of AI technologies that can actually solve for those benchmarks, but they were open-minded to working with us if, by working together, we could do better or we could provide options to their customers. Clay is all about providing many, many different ways for people to do things. We ended up being one of the options they're able to provide to their customers and customers' users in very creative ways.
Todd: I mean, Clay sounds like one of the perfect initial customers in terms of how forward-thinking they are, the amount of volume that they have, really having high demands on your system, which always I think is a great design partner to work with. Are they the ideal customer or who is the ideal customer now that you're going while you're looking to expand?
Parag: I think now we have a very broad set of customers we serve. Clay is one of the ideal patterns in that scaled, repetitive web data is really critical and accuracy matters. But on the other extreme, we have some coding agents using some of our APIs, but there we show up maybe in 5% of prompts. We need to look up some recent documentation. It's an agent really calling a tool. Instead of using our end-to-end task API, you'd use a search API as a tool. We have customers doing claims processing in insurance and running a workflow, where there are still humans doing some QA on top. Some of the BPOs and KPOs we mentioned earlier, some of them are now our customers too. We're building a very horizontal product and we have now a variety of different customers that needs really converge, too. The API that we're trying to design, we want it to be able to serve this very diverse set of customers that otherwise wouldn't fit a single ICP.
Todd: For those customers, for the data that they're trying to gather and make available to their AIs, what are the alternatives?
Parag: BPOs. Let's get humans to create extremely high quality data sets. We have a value prop on that in that we actually compete really on quality with them. In the other case, the alternative that we often encounter is some sort of build your own or use just plain OpenAI. They just recently shipped a search. In both cases, our primary value prop is quality, quality, quality and the secondary value prop is price performance. I think, for us, the reason we care so much about price performance is going back to the vision of AIs should use the web a lot and create a lot of value. I think the only way you unlock new and new use cases is taking something that can be done and incentivizing people to do it at 100X.
Todd: And removing the friction around, that basically by having extreme performance for low cost. That makes sense. This gets into a question actually that I'm sure you thought of this as you were thinking about this idea is just potential competition and how this market shapes up. One way of thinking about this is what do you think is the territory of the hyperscalers or the major labs versus what is the opportunity that's available to a new startup when it comes to this kind of next generation of AI infra?
Parag: I don't think too much about the competitive dynamics. Two reasons. One, I think we're going to live in the most positive future or the next several years. Even if you can't fully articulate what it is, it's the opportunity set for people to mobilize and make an impact is extremely high. I think hyperscalers can't move fast enough to capture the opportunity, can't build fast enough. The labs are amazing, they move really, really fast, but they're also slow relative to how fast we can move. There are so many places to innovate. We see that from our customers every day. I don't think that is something to think about. You, of course, have to on a daily basis think about in the context of what choices your customers have and why they must partner with you, collaborate with you, buy from you. And in that sense, we'd really think about it, but then that's a really product decision on how do you differentiate your product and stay ahead of the curve. We think about that obsessively.
Todd: We said this before that you had been in stealth for a while. You've been mostly heads down, building, selling, building, selling, but now you're starting to make a little bit more noise with this launch. I believe you recently launched some self-serve options so that people could just come to Parallel and find the things they want. What advice would you have for other AI founders who are figuring out, "When do I launch? When do I open up the product more?" How did you think about that?
Parag: One of the piece of advice I got starting this company... I spoke with Patrick Collison at Stripe on building an API business. He said, "Your first API design will be wrong. Just know that." I don't know if this was intended, but I took that really to mean that keeping the customer set small and intimate so that when we find it's wrong and it's limiting what we would build, you want to be able to migrate to a next version of the API even if it's backward incompatible. We really wanted to maintain that flexibility, so we made a very intentional decision to limit the number of customers who would have an API while we didn't feel that we had thought Through. We didn't want to design the API in a lab, but we also didn't want to have an API that we were stuck supporting forever, so we made that intentional choice. The other thing we did was we put a lot of... Almost like we were very selective in the customers. We wanted to work with customers that we love working with and that love working with us, because that's what drives you in terms of energy.
Todd: Another thing I wanted to ask you about briefly is fundraising. We're seeing founders raise these really big rounds but also building smaller teams than years past. What advice maybe would you share with a founder of an AI company? Particularly everything's moving so fast these days, there's so much flashiness. How did you think about fundraising and what's the maybe advice you'd give?
Parag: Maybe two different dimensions. One, who to work with. I had one very simple rubric. For me, just the people I would spend time with. If they said something to me and I dramatically disagreed with them, will I feel sleepless that night to try to reconcile why? People who I feel that way with, I want them around me. I want the coalition we have with Khosla Ventures, with Charlotte Index, with you and Josh working with us from First Round Capital is... It's kind of interesting. You all come at our company and our vision with slightly different lenses, and the advice I get from all of you is slightly different. I have respect for all of these people. I expect to build it myself and ignore advice a lot of the times, because not right for me in that moment. But I think it's very material sometimes when you get a piece of advice and it changes how you think about something, where you go. I think that's the real value I see in choice of investor. To me, building the company's binary. Either we are successful or we are not. There's just nothing in the middle. I asked myself the question. I should raise the amount where I can argue up till that amount that I have a reason for believing that my binary odds increase for some reason. Once I can't make that case, I shouldn't raise more than that. If you can raise an infinite amount and... We were fortunate in that I got to raise what I thought was, based on my plans for the next few years, the point of diminishing returns on binary success. In fact, I don't even think it's diminishing. At some point, there's negative returns. That's the decision making framework we used. There's no science. All intuition. It's like, "Okay, if we raised X million dollars versus Y million dollars, do I think there are scenarios I can imagine where we are way more likely to be successful? I can't. Let's raise Y million dollars. What if it is Z million dollars? Can I imagine that? Not really. Let's just raise Y."
Todd: And what about when it comes to team building? I remember when the seed round happened, I think you already had five or six really, really good engineers lined up ready to go. When you were hiring engineers at Parallel now, just given how productive engineers can be in 2025, what do you look for that's maybe different than what you would've looked for five or six years ago?
Parag: Of course at Twitter I got to know and work with some amazing engineers. At the same time, there's a bunch of extremely high potential, amazing, young engineers around. I really wanted this company to bring in the best of both together. One of my hiring philosophies at Parallel really is that you want to maximize how much through hiring you can get alpha. What's the upside? You got to bet on potential, not been there, done that. Now, you can't put an entire team of 20 people just betting on potential together and get stuff done, so I hire a team. It's not an individual choice, but everyone on the team is either there, where we are taking risk betting on potential or we're hiring someone because they are particularly good at taking these extremely high potential people and channeling them towards a mission, giving them room to be creative and bring alpha while aligning them towards a singular outcome for your customers. The second thing that's really important if you embrace this take risk on hiring is you have to be somewhat like the system only works if you also embrace being decent at firing. I don't know how to be good at hiring where you don't make mistakes, especially when you're trying to bet on upside. You have to learn and set the expectations and work in a world where you're good at firing. I think if you put these together, you get to have a amazing high-performing team which can build fast and build for this current moment. That's sort of the philosophy we've really embraced.
Todd: It sounds like to me like you've got... I don't know if it's half the folks who are very high potential, maybe earlier career, maybe a little more chaotic. You've got some very senior folks who are kind of like the steady hands who have seen a lot in the field.
Parag: But I think there's more to it. It's not just about seniority. I think it's about people who are good at working with bringing the best out of high alpha people and have a track record of having that. Those tend to be people I've seen do that well.
Todd: More broadly, how do you see this changing? When it comes to org design, when it comes to the number of engineers you need to build an incredible product, where do you think we're going with all of this?
Parag: There are two forces that pull in two different directions. One, you don't need a lot of... We don't have any hierarchy right now. We don't talk about roles, we don't have teams, we don't have hierarchy. We're very chaotic.
Todd: There's no subteams within the 22 people?
Parag: There are no formal subteams. People work in small project groups, but those rotate. Now, of course, people take ownership of systems they've built, but there is a lot of fluidity. There's no formal team structures or managers or any such thing so far. That, I think, you get to do at the scale. I don't think it scales to double the size, but we get to do this for now. But actually the force that pulls you towards hiring more people is the possibilities are endless, the customer needs and the products you could build where there is demand for. Once you are working with some customers in some problem spaces, you see opportunity everywhere. Everything feels within reach. That pulls you in the direction of having more people. That's why I don't know which way it'll converge over time, but I do think that definitely you should expect more to be done by fewer people. There are obviously ways to work with AIs which are counterproductive and I've done this personally a lot, but systematically if you hire the right people and they have good judgment, we get the good out of AI.
Todd: What's a counterproductive way of working with AI that you see?
Parag: Oh, personally, sometimes there are some things which I could personally engineer and I would do better, but if I truly embrace and start enjoying white coding in our code basis, I might personally take longer and it's poor. It's like a learned skill, in my opinion, that you can really, in aggregate, waste time productivity, distract others with crazy code reviews or bugs that you're fixing downstream because you don't understand what you're doing. There are bad ways of working with AI. I think it's a learned skill to be productive with AI in a real production system. I've personally, I know my team sees this, white coded stuff without deep, full understanding of what I was doing and my team had to clean up behind me. There are bad ways of working with it, but I do think by and large people figure out what are good ways, especially in teams. There's a lot of code review learning or experiential learning and sharing that happens. Setting up the code base to be more productive for AIs and understanding what works and what doesn't work from your experience and others experiences, that really gets you dialed into the right pattern. So you do expect more productivity and I think it'll only increase from there.
Todd: Is there anything intentional that you guys had to do to enable the code base to be maximally productive with the size of team and the amount of AI code gen that you're using?
Parag: Very tactical things. I would say we have this massive crawler and index infrastructure, which is not a standard, small, front-end code base or Python scripts, but this large infrastructure project. Even running tests on it takes a while, and so we had to really hook up and give AI access to our CI to be able to trigger things and do small things of that kind to make the code base friendlier for our agents to use. I think we use it a lot for code review and we've given extreme experimentation license to every engineer. We don't standardize how people do things. Everyone gets to do their own entrance. Some people are more experimental than others and they experiment with different ways of doing things. That's the approach we've taken. Everything's going to change all the time. We want to being exploit more constantly rather than pick our lane and stick to it.
Todd: Where do you net out in this debate around code gen? I think it's something that people have very different opinions on. In terms of what is the role of the software engineer in 2025, what does it look like in a couple of years?
Parag: I think a few things will continue to matter. What to build, not necessarily how to build it, and taste. Those things I think remain the role. I think good software engineers have always had that and I think that will remain. The most opinionated stance on this topic that I have is actually that there is a... Our APIs are designed to be declarative. What I mean by declarative is talk about what you want output to be but don't tell me how. I think increasingly that's the direction we'll end up in. There will be a, I think, code we write today is the how. The conversations that we have with our AI agents and code agents are essentially trying to communicate through both a combination of feedback and don't do this and how, actually agreeing on what we're trying to do. But we're not yet agreeing on it or articulating it or storing it in repo.
Todd: Okay. I mean, one of the things that we really like to think about and talk about is companies that are putting AI into production today in truly valuable ways, because people I think make all kinds of predictions. Your customers, I think by definition, are trying to push the limits of technology. So you have this unique window into what these elite teams are actually doing today in 2025\. How are your customers using AI in ways that are working or doing something that's just really interesting that you think others could learn from?
Parag: I think one of the very hard problems that we don't focus on but our customers are exceptional at is communicating to end humans how to collaborate and partner with AIs. Expectation-setting, creating an iteration playground for people to iterate with them, to communicate that the answers aren't always right and do so in a way that makes sense to the customer, to communicate what's happening under the hoods as this agent is going out and doing work. I think some of the elite AI teams are really good at having opinionated ways of doing that in different modalities for different customers. That's a common thread we see. I think the other common thread we see with our customers, which is probably slightly different from the question you're asking, is they're operating in this extreme founder mode. What I mean by that is some of our customers are established companies, even a BPO. The common thread across all of them that I can pin out is they're super forward-looking, taking risk on their own business, innovating, and operating in founder mode. It's kind of interesting to see, but I do think, to me, that's how I look at where we will truly co-innovate together is that.
Todd: On the flip side, what mistakes do you see companies making when they try to put AI into production. Or what is failing? What is not working?
Parag: I think we at Parallel fail to be great at helping everyone measure quality. I think evals are just like a famously hard problem. You can build all kinds of general purpose evals or evals for your product, evals for distribution of use cases, but each customer scenario is different and the eval is actually constantly changing. I think we haven't yet dialed in how we can help people understand quality, communicate it from us to our customers and from them to their customers when that is the case. I think that is still a thing that there is a lot to innovate on in order to understand when AI works and when it doesn't work and when to use it, when not to use it. I think that's partly our burden to solve and I don't think we have nailed that yet.
Todd: Do you have ideas on what that might look like?
Parag: We want to automate, in some sense, and estimate outputs of evals. I think the estimation problem is easier than the actual evaluating problem. I think we do that some of that internally to identify cases where we didn't do a good job. We built regression tests internally. None of those things yet for us are working well enough that we can establish a customer contract around that, but we'd like to. You want to be able to establish a customer contract around your quality, which is relevant to them and material for them.
Todd: Yeah, it's true. It's not something that really there's a standard way of measuring if you are a customer and you're expecting some level of quality out of AI that you're using.
Parag: I think if we unlock that, then you will actually access a large amount of use cases than actual customers who might today be slightly skeptical, who might have been burned by trying things that didn't work, who might want a higher quality SLA but don't even know how to measure it or ask for it or know when it's there or not there.
Todd: The word agent, I think, is one of the most overused word that I hear at least. What are agents actually doing that's truly useful that you see day to day and maybe what do you think that looks like two years from now?
Parag: I used to joke that agents is "for something that is slow" but really I think there's now a much more clear definition of agents. I'm actually starting to embrace the term. I think it's when you allow the AI to have agency to make decisions around how it wants to solve a problem and have access to a collection of tools in order to do that and don't constrain it too much and allow for many different paths to occur in order to achieve an end state. I think that's a reasonable definition of agent. I think the obvious thing is agent doing small content coding projects work. They don't always work, but they work a lot more than I thought they would two years ago. I think that is a case that it works. Our agents, if I may, I think they work surprisingly well in many, many use cases and they're not too different in terms of the liability as you might expect relative to the coding agent. I think that sort of deep web research doing work over the open web kind of use cases, I think they're working.
Todd: What do you think the Parallel APIs do exceptionally well today? And then what are the things that you're thinking about where you want to invest in and improve the Parallel of 2026, 2027?
Parag: Parallel APIs are really good at the highest quality web research. The second thing we do really well is really good attribution down to specific sources from which web research was done in a very fine-grained, granular way. That allows us to build a differentiator, which is confidence scoring for all of our output elements. Our system is calibrated to know when we might have gotten some answers wrong. I think that's been a core thing for us and it's a core need for a lot of our customers, because they want to trust the AI and we want to measure the performance of AI. We want to figure out where to allocate more compute and retrieval money as we are doing research. For all of these things, knowing when you're more likely to be wrong is really important, and we've spent a lot of time doing that, but that also shows up as something that is a value prop for customers.
Todd: Continuing on the agent thread, what do you think the modern agentic stack looks like and why are web tools such an essential part of that?
Parag: I think knowledge work is overused. It's useful to think about. If you think about work and an agent either doing it for you or helping you be more productive, there is a expectation in, I believe, every piece of software we use, whether or not it's an agent, must use some form of an advanced AI like an LLM or some multimodal version of it. I think if you're doing that, it's almost silly to not have access to the web. The expectation very soon for every piece of software we interact with, it's going to be that it has access to an LLM, it has access to the web. If you now think about building... And that's why we want to be the web tool. But now if you zoom into the agents, you think of any agent inside a work environment, let's say for getting personal agents for a moment, it must have access to all kinds of internal tools and data in that enterprise. It must have access to the web. It perhaps must have access, because they're so good at coding, to a sandbox where it can write and run code. You can come up with a few other tools it needs, but I think those are the top three. Access to the web, access to internal data, access to code sandbox. And then you can have a tool number four, you can have a tool number five, but we're building the web.
Todd: And when you think about agents interacting with the web at scale, what are some of the hard problems that most people haven't even realized yet?
Parag: So many hard problems up and down the stack. One, there is a hard problem on data access. How do we incentive align the business model and the economics of this future web where there's agents? We only deal with open data and I think there is an existential risk on the web that the web might close up more and more, unless we figure out and solve problems in a way that incentivizes this data to remain open. It must be optimal for most people for putting their content, their ideas, their products, or whatever it is that publish on the web out there, that they should be able to add maximal value and actually sustain their business's goals, whatever they might be, economics, and it must be better for their goals to be open rather than pay-walled or closed. It's not obvious that that will happen. That's why we want to show up and we're going to pave the path for that being the way the web ends up, which is incentive to remain open through open markets rather than incentives to close up shop.
Todd: You have all of this very valuable proprietary data that understandably the producers of that data want to monetize in some way. Do you have an idea for how this all gets sorted out in the coming years?
Parag: I can talk about a few properties and reasons for believing. One property is I believe we'll add so much value through AIs. Going back to the theme of positive sum, there's going to be so much surplus that we have to embrace the world where we are able to share and drive collaboration instead of creating \[inaudible 01:00:03\]. When you have the pie getting larger, you can actually figure out ways of getting people to collaborate. We have that moment today where, to everyone, it is obvious that the pie can get large. We need to take that mindset. That's one reason for believing. Another property that's interesting is when you think about information, what ads did really well was differential pricing at scale and efficiency. What does that mean? It means that most ad-supported businesses, no matter how you look at it, queries, users are widely accessible to everyone, extremely subsidized, and free. But they make money from a small fraction of users, which allows them to be accessible to a wide, wide, wide swath of users. They lose money on a large number of users, but that's how the business works. It's differential pricing end of the day. I think we need to bring in that property into getting people publishing on the web. Very simple example. If you consume someone's content through some really expensive model and spend $4 in GPU to get to some work done at first round versus my retired dad just reading the news through that, I'd like for you to subsidize that so you shouldn't have to pay the exact same for the same content. And if we built market mechanics, which were open and allowed us to have the context...
Todd: So the same content being used by different people who have different thresholds of valuing that content.
Parag: Yeah. We need differential pricing and we need scalable market mechanics. Figure this out. Part of the reason we do so much attribution down to sources is to be able to do that math, to be able to understand feasibility. We really want to create open solutions where everyone has incentive to remain open. We'll all be beneficiaries of a web that is open for AI to use it.
Todd: Incredibly interesting idea. How do you get started on something like this? Is this something where Parallel would go find certain corpuses of data that you thought were super interesting but that you'd have to pay for as a way of starting to figure this out?
Parag: Yes, but also even when we didn't have to pay for it, we would like to incentivize people proactively sharing it with us and to recognize their contribution and pay for it. We want to truly co-build this open marketplace and it'll require us to find partners and find innovators, find people who will take some risk as we learn the math together and share in the vision of a future open web and are able to see it that way. I think if we pull the right partners from the AI world and the web publishing side, I think it's possible.
Todd: Parag, let's maybe wrap up on a couple personal questions. What are some of the topics that you're going really deep on now personally and geeking out on?
Parag: I'm just geeking out on the web just all the time, but outside of this I think the future web index and how it will get built. So I read a lot of research papers, talked a lot of AI researchers. We'll build a research team and I think that is a very interesting set of things to be done there. That's the current geek obsession. It's material to my company.
Todd: Are there interesting papers that you've read or interesting new thoughts that you've had?
Parag: My worldview is currently shaping into convergence between recommendation systems and search systems and database systems. I think they're all going to start looking like the same thing.
Todd: And what are the things that you're thinking about, again, personally in terms of leveling up as an incredible founder CEO?
Parag: I used to say this thing at Twitter. I don't know if you ever heard it, but I only want to do jobs that I wouldn't hire myself for. I think it's like I do best when I'm slightly uncomfortable, insecure, don't feel up to it. That's part of why I wanted to be a founder, because it's the kind of job that makes you feel that way. Great thing is it makes you feel that way no matter where you are in the founding journey. You're constantly underqualified to be what your aspiration, ambition, and company needs from you. Today, if I have to think about where I need to really level up, it's in simplifying what we're doing. It's in communicating what we're doing. It's in expanding the coalition they're building towards the open web, towards the set of customers. Our coalition is our customers and I think there is just so much to be done in doing that. Every day, I feel like I got a third of what I wanted to get done despite having so many AIs at my disposal.
Todd: Well, Parag, thank you. This has been an incredibly interesting conversation. I enjoyed it immensely. Thank you for being with us.
### Inside Owner’s zigzag path to a billion-dollar business
URL: https://review.firstround.com/inside-owners-zigzag-path-to-a-billion-dollar-business/
Last updated: 2025-12-04T17:00:31.000Z
Dropping out of high school. A six-figure Minecraft server. A failing dog grooming business. A pandemic pivot.
_This post is for subscribers only._
### The Story Behind Owner’s Pivots to a Billion-Dollar Business
URL: https://review.firstround.com/owners-path-to-product-market-fit/
Last updated: 2025-10-15T20:11:20.000Z
We’ve shared many [paths to product-market fit](https://review.firstround.com/series/product-market-fit/) here on The Review that are chock-full of lessons for aspiring tech founders. But perhaps none we’ve shared to date are as deserving of a screenplay quite like [**Adam Guild**](https://www.linkedin.com/in/adamharrisonguild?ref=review.firstround.com)’s.
When Guild was just 12 years old, he built a Minecraft server that ballooned into a six-figure business with millions of players worldwide. He enlisted his 10-year-old brother to run its Instagram meme page for just $5 a month (which quickly racked up millions of views). By age 16, his Minecraft community was so successful that he decided to drop out of 10th grade to keep scaling it.
Entrepreneurship was a family business. Around the same time, Guild’s mom pursued her dream and opened a dog grooming salon in West Hollywood. But finding customers proved challenging, and she worried she’d have to give up the family house she’d taken out a loan against to fund the business. At just 17 years old, Guild jumped in to help her increase bookings with local search optimization. The seed for [**Owner**](https://www.owner.com/?ref=review.firstround.com) was planted.
But plenty of challenges cropped up along the way. His young age (and self-described baby face) made it hard to be taken seriously by potential customers. He hustled on cold sales outreach and got a response rate south of 1%. And even after finally building some traction for a fully bootstrapped platform that drove reservations and dine-in for restaurant owners, all the company’s revenue evaporated when the pandemic broke out in March 2020.
As Guild tells it, the nonstop grind and misfortune of the company’s early years paved the way for Owner today, now a billion-dollar platform powering the growth of thousands of restaurants across the country (which recently nabbed a [Series C fundraise](https://www.owner.com/c?ref=review.firstround.com)). He did it all with hardly any credentials or network — by the age of 25.
While Guild’s story is fascinating in its own right, his path is full of lessons for any entrepreneur with a nontraditional background. Let’s dive in.
## Helping his mom’s business sparks an idea
When Guild dropped out of high school halfway through sophomore year back in 2017, he was a full-time gaming entrepreneur. There were parts of it he loved — he got to learn software engineering and growth marketing in practice. He’d become financially independent as a teenager. He was having a lot of fun.
But he started to feel conflicted about staying in the gaming world. As he saw it, the more he scaled his gaming community, the larger his “negative impact.” “I was obsessed with getting millions more players to ultimately waste time on my games so that I could make money,” he says.
He didn’t see a clear alternative path. “I felt trapped. I didn't have a plan B. I was a 10th grade high school dropout. I knew there had to be some way to use the skillset I built to actually help people,” he says.
At the same time, his mom was getting her dog grooming business off the ground — which she’d spent years saving up for while raising Guild and his brother as a single mom. But her excitement quickly turned into worry as she was unable to increase revenue. She struggled to build a consistent customer base and wasted money on expensive, big-tech solutions that promised growth (but didn’t deliver).
With a hazy career plan of his own, Guild jumped in to help his mom. “I saw her in this really terrified place. We talked about it one night, and she asked for my help in figuring out how she could grow this thing,” he says. “But I was worried that I wouldn't know how to grow a physical brick-and-mortar business because it felt so different from gaming.”
He started by putting his Minecraft growth playbook to the test and built an Instagram page for the dog grooming salon. But even after growing her follower count with some viral posts, he quickly learned that social media marketing wasn’t effective for a local business. Virality is global in nature — one million views didn’t translate to West Hollywood walk-ins. And folks don’t generally browse social media with the intent to buy.
Guild then experimented with other growth tactics, from direct mail to receipt ads, but nothing clicked — until SEO. “It worked like crazy,” he said. “Even though SEO generally takes time to be effective, that’s only for terms like ‘best shoes’ that are globally competitive. I discovered no one was optimized for specific and local longtail keywords, like ‘dog grooming West Hollywood’ — which received hundreds of queries every month with the intent to buy.”
With a quick-and-dirty SEO revamp, his mom’s business went from struggling to crushing it over the next year, bringing in heaps of customers who discovered her shop on Google.
Guild wanted to replicate the fulfillment he felt from helping her in his next entrepreneurial endeavor. “When I saw my work finally have such a positive impact on my mom, not only financially but personally, I was inspired to build a business that could do the same for as many people as possible,” he says.
## The V1 product: A forked WordPress for small business owners
In the process of helping his mom’s business, Guild cobbled together the first prototype of Owner. It was a super opinionated, forked version of WordPress — a website builder with little room for modification that handled all the technical SEO best practices. He says this rigid design was based on one contrarian insight he’d learned from remodeling her website: **Software customizability is actually counterproductive for SMB customers**.
“At the time, most small business software had been built with the assumption that customizability is king. Small business owners can use a tool like Wix and choose from thousands of templates and then add their own site copy,” he says. “But what I noticed when helping my mom, and what I’d observed from a lot of other local businesses' websites, was that they make mistake after mistake, like not adding alt text to images or not including the right keywords in meta titles. So I wanted to build an out-of-the-box system so users would have everything they needed to rank at the top of Google.”
He planned to launch the business the only way he knew how at 17 years old: entirely bootstrapped. And the way to do that was to become profitable. So he landed on a premium pricing strategy.
“At first, we were charging $2,000 per month as a website builder that drives dine-in and reservations. To put that into perspective, the typical website builders small business owners use are Wix and Squarespace, and they cost $49 per month. So we were 20X the price,” says Guild. “To command that price, I thought to myself, we have to deliver an ROI that is commensurate with the cost.”
> A high price ends up being a great forcing function for developing an excellent product. You have to focus on whether it delivers a good ROI.
Adam Guild, co-founder and CEO of Owner
### Finding customers through brute force
To figure out which kinds of small business owners to sell to, Guild began by literally knocking on doors. He pulled up to small businesses all across his native Los Angeles, from hair salons to laundromats, to talk to owners about how they were doing SEO.
Among the many difficulties of door-to-door sales, Guild faced one specific challenge: No one would take him seriously. “I wasn’t just 17 years old — I was a teenager with a baby face. I looked like I was in middle school,” he says. He even tried going to conferences to strike up conversations with owners organically, but he was mostly shut down.
Guild tried cold outbound as well, hoping his baby face wouldn’t thwart his response rate online. “I sent hundreds, if not thousands, of cold emails,” he says. He even tried, in his words, “doxing” folks — finding cell phone numbers online with background check tools. But most of those emails and texts went unanswered.
Eventually, his volume-shooter approach yielded a few meaningful conversations within one large group of small businesses: restaurant owners. He walked away with a key insight — driving reservations and dining in is the only thing restaurant owners care about. “Everyone told me, ‘Online ordering sucks for us. We lose 30% of every order to delivery apps. We lose all of our customer relationships on those platforms. If you're going to build something, help us drive dine-in and reservations.’ And I took them literally and focused on building a product to do just that.”
So he narrowed his efforts to restaurant owners, and finally, his success rebuilding his mom’s website helped land him his first customer. “I had emailed Morten Kaag, the owner of Tortilla Republic in West Hollywood, seven times. Then I’d cold texted him, and he was intrigued enough to take the meeting. I demoed what I did for my mom, and he was naturally very skeptical,” says Guild. “Then he asked, ‘What’s your mom’s dog grooming business called?’ I told him, and he said, ‘Oh, that’s where we take our dogs.’ And I said, ‘How’d you hear about it?’ And he said, ‘Google.’ So I said, ‘We’ll do the same for your restaurant.’”
Kaag was iffy about the $2,000 monthly price tag, but agreed to try the product if within 90 days, Guild could meaningfully lift the restaurant’s sales. And sure enough, 90 days later, Tortilla Republic’s sales jumped more than $10,000 per month. Kaag owned another restaurant, so he asked Guild to help with that one as well. With that, Owner had its first two paying customers.
Guild kept hammering on cold outbound over the next year to continue growing the customer base. Even with a few happy customers as proof points, it was still a slog.
But in retrospect, he says there was a dual advantage to building up his [founder-led sales](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/) muscle — it validated the original product’s high price point. “A sales-led motion forces you to talk to customers extensively at every step of their journey, and it creates a higher perceived value of whatever you're selling,” he says. “Product-led models have basically free products because they don't offer the same level of perceived value or trust on the front end.”
> When we were bootstrapped, we had to command a high price point to be profitable. So it helped to have me as a founder personally explaining how the product works, because then people were willing to pay more.
As the product made its way into the hands of more customers, Guild points to two reasons the first version was so successful:
- **The utilitarian component:** Is the product doing what it’s supposed to do? How much sales is it driving?
- **The emotional component**: How does using the product make you feel? Does it help you become an aspirational version of yourself?
Guild’s advice here is not to discount the emotional component when building your product. “I think most people assume the utilitarian part is more than 90% of the equation. But I’d argue that it's at least 50% emotional, if not more,” says Guild. “Customers want to feel smart and ahead of the curve with software, and that’s especially true for small business owners who are outside of the tech world.”
It wasn’t just the product itself that made Owner’s customers feel like they were on the cutting edge — Guild served as a dual founder-[customer success manager](https://review.firstround.com/founders-guide-building-customer-success/) that first year. “I’d do monthly progress calls with the restaurant’s entire team, which made them feel like they were getting state-of-the-art technology and service. And they felt smart for making the decision to trust us and use our product.”
### Drumming up inbound demand through content
Eventually, Guild had hit his breaking point with his cold selling. “I didn’t want to scale a business through outbound because it was so brutally hard. I basically had to spam people to get them to take my meeting. So I wanted to develop a model where they would instead come to me,” he says.
He began to think about what a content marketing strategy might look like for Owner, starting by writing blog posts about how to grow a restaurant online. But he soon realized he needed to work on building his authority as someone who had [no credentials in the industry](https://review.firstround.com/shippos-path-to-product-market-fit/). He had an idea to contribute to restaurant-specific publications.
Leaning on his cold outreach approach once again, Guild emailed editors of all the top restaurant trade magazines. He heard nothing back until the editor of Modern Restaurant Magazine offered him a guest post opportunity — as long as it was good. Guild researched extensively to draft an article about online marketing best practices for restaurants, which made it into both the print and online edition. The online version went viral, becoming the magazine’s number one story of that year.
Guild’s viral guest post helped him secure recurring contributor positions at several other publications, in addition to writing for his blog, which created a content flywheel. **He says this process of content creation had a knock-on benefit: He’d become even more knowledgeable about his industry**. “The work I was doing to research these articles improved my ability to communicate with the restaurant community, and gave me a much deeper understanding of the broader landscape,” he says.
By late 2019, the gears of the distribution engine were turning. Owner had a roster of a few dozen paying customers, and several strong leads had come directly from the article Guild had written. He had successfully bootstrapped the company to six figures in ARR. And the company had just landed its biggest fish yet: P.F. Chang’s. They closed a contract that had the potential to bring in $1M per year if the restaurant chain rolled the product out to its hundreds of locations. Then March 2020 hit.
## The pandemic pivot
Owner’s progress ground to a halt. The whole product had been optimized around dining in. “We lost product-market fit overnight,” says Guild. “And we lost all the customers that we’d just spent two and a half years grinding like crazy to acquire. As a bootstrapped company, that was our funding, so we had to go back down to a skeleton crew of just me and one other person. We had four months of cash left to figure something out. I even thought I’d have to move back in with my mom.”
So he got on the phone with customers. “I asked them, ‘What do you need to be successful in this time?’ And they practically screamed into the phone telling me what they’d told me before: Online ordering was killing them. GrubHub and the others take 30% of every order. Profit margins were just 5%. So if that continued, they’d lose everything,” he says.
Guild knew he had to quickly [pivot](https://review.firstround.com/the-pivot-to-product-market-fit/). By the last week of March, he committed to redesigning the website builder to optimize for online ordering. The V2 product was ready to launch by May.
It was an overhaul born out of existential threat, but it proved to be a blessing in disguise. “I wouldn't truly know what it would feel like to have ‘people lining up out the door’ until we pivoted. That's when growth became hyperbolic,” he says. “The pandemic was ultimately a forcing function that accelerated us toward the product our customers actually needed.”
### Early signs of product-market fit
Guild says pivoting the product from a “nice-to-have” tool to a lifeline for restaurants to survive the pandemic is what ultimately bent Owner’s growth curve. **He knew he’d struck gold when demo requests got out of control.**
“We had hundreds of demo requests every week. I had to create group demos to fit in all the restaurant owners who’d requested one,” he says. “From 7 AM to 7 PM, every day, I was in demos. And they’d all been booked inbound.”
The pivot to online ordering prompted Guild to rethink the premium pricing strategy to better align Owner’s growth incentives with customers’. ”I'd long had this suspicion that it was hard to acquire customers in the beginning because we were the most expensive software for small business owners by a wide margin,” he says. “So I thought, ‘What if we just charge the restaurant guest a $1.50 fee for every order?’ That way, we’re incentivized to drive as many orders as humanly possible.”
He credits that pricing change as a key ingredient in Owner’s rapid growth during the pandemic. “That combination of the product being essentially free and extremely needed is what led to that explosive traction.”
## Scaling up
With demand soaring in summer 2020, investors eventually came knocking. Guild had successfully bootstrapped the company up until that point, but he says raising a Seed Round allowed him to scale the team to start supporting Owner’s breakout growth.
With that fresh cash, he was able to add engineers, a sales team and a support team. And in early 2021, he brought on [**Dean Bloembergen**](https://www.linkedin.com/in/deanbloembergen?ref=review.firstround.com)as co-founder and CTO.
While he’s deeply grateful for venture funding to build out the Owner team, he doesn’t regret starting on the bootstrap route. “The biggest benefit of not raising money until that point was the mindset it instilled,” he says. “I spent two and a half years as a product builder, support rep, salesperson and BDR. That taught me a ton about how those functions work, and got to learn from our customers on the ground. I was the first point of contact.”
Soon after, Guild started to feel pressure to deliver even more value for Owner’s customers. “At this point, I started hearing, ‘Adam, this online ordering thing is awesome, but it's so expensive and time-consuming to use 15 other tools to power every other piece of our restaurant online. Can you do those things for us too?’ So we said, ‘Yes, we can,’” he says.
He took that direct product feedback as an affirmation of the strong relationships he’d built with customers. “With the other solutions our customers used, they had to speak to support reps or account execs who couldn’t give the same level of feedback, business owner to business owner,” he says. “And I felt like I’d earned their trust by making a promise to continue to help them drive their sales. For me, keeping that promise meant customers could be a proactive thought partner in our product roadmap.”
So one by one over the next year, Guild and the expanded team began building out different point solutions into the platform to consolidate customers’ tech stacks, including:
- **Reviving the website builder to pair with online ordering**
- **CRM**
- **Email and text messaging**
Guild says these additional products made the core online ordering product stronger. “The online ordering product drives more sales if it pairs with a high-converting website. And the website drives more opt-ins to email marketing and CRM, both as a function of the lead capture forms on the website and through the online ordering product. So there's this beautiful synergy to having all of these products work together,” he says.
He was firm about bundling all of these products into one standalone offering — and reintroduced the subscription pricing model. “We said, ‘You can't buy one without the other because they work so well together,’ which we still do today,” he says. “After seeing what happens when all of these different solutions work in conjunction versus independently, I explained to customers that it wouldn’t be in their best interest to use one of the products as a standalone.”
On the decision to go [multi-product](https://review.firstround.com/going-multi-product-11-tactics-for-tackling-your-next-bet/) a bit sooner than is typical, Guild says he wrestled with it, but ultimately went with his gut. “This was before the ‘compound startup’ was coined by Parker Conrad. It was pretty contrarian to go multi-product so early. And this was at a time where our point solution had just started to work,” he says. “**Going multi-product earlier ended up being one of the best decisions we ever made because it improved everything. It improved the customer's results. It improved our retention rates. It created a higher perceived value and willingness to pay**.”
As Owner has grown and eaten up more of the market share, Guild has picked up these two lessons about building for SMBs:
- **Learn from — don’t fear — your competitors.** “I believe competitors should be viewed as resources to learn from,” he says. “You can think of them as free research and development factories that are constantly running a bunch of experiments on the same group of customers. And when some of those experiments work well, it makes a ton of sense to just shamelessly copy that approach to that specific product to bring that benefit into our platform. We’ve done that a ton over the years — we’ll distill down what worked for a competitor and build it into our own product.”
- **Get the LTV to CAC ratio to work in your favor.** “To make the very brutally difficult economics of serving local business owners work, make sure that the lifetime value (LTV) to customer acquisition cost (CAC) ends up being well over three to one. And the way you do that is by both dropping CAC through finding resourceful and creative ways to distribute the product, and maximizing LTV through delivering so much value in the product that you're able to charge a high price for it.”
## Looking forward
With the multi-product business humming along, Owner’s revenue soared past $1M in 2021, and eventually closed Series A and B funding rounds. With its recent $120M Series C earlier this year, Owner entered the $1B valuation club.
As Guild looks ahead to Owner’s future, he’d like to widen the product's impact to serve all kinds of business owners. To do that, as CEO of a scaling company, he’s focused on being the Nick Fury for his team. That means doubling as chief recruiting officer.
“In the Avengers, there's this character, Nick Fury, who doesn't have any superpowers of his own, and he humbly acknowledges that. But his superpower is constantly scouring the world for people who do have superpowers and can be a part of this bigger team and mission. So that's how I view my role as CEO now. More than 30% of my waking hours go toward recruiting,” he says.
He’s also keeping that chip on his shoulder from his days as a teenage upstart entrepreneur. “When I dropped out of high school, I had this fear that I was going to fall behind everybody who went to fancy colleges and was on the traditional track. So I promised myself that while my traditional education was ending, my self-guided education would ramp up,” he says. “That has manifested in having the humility and self-awareness to be a life-long learner.”
### Ignoring Silicon Valley advice to build a $3B fintech unicorn | Immad Akhund (Co-founder and CEO of Mercury)
URL: https://review.firstround.com/podcast/lessons-from-mercury/
Last updated: 2026-02-03T17:52:27.000Z
Immad Akhund is the CEO and co-founder of Mercury, a digital banking platform that's become the go-to financial infrastructure for startups. Before Mercury, Immad spent nearly two decades founding companies, learning the hard way what separates a good idea from a great business.
In this episode, Immad shares the hard-earned lessons from launching Mercury as his third startup. He unpacks how he recognized this was the right idea to pursue, what strong product-market fit feels like, and why trying to "iterate" your way to success often leads founders astray.
**In this episode, we discuss:**
- Mercury's unusual culture playbook – and why it works
- How to hire with intention
- The trap of weak product-market fit
- Shipping under intense pressure during the SVB crisis
- And much more…
**References:**
- Airbnb: [https://www.airbnb.com/](https://www.airbnb.com/?ref=review.firstround.com)
- Andreessen Horowitz: [https://a16z.com/](https://a16z.com/?ref=review.firstround.com)
- Apple: [https://www.apple.com/](https://www.apple.com/?ref=review.firstround.com)
- Block: [https://block.xyz/](https://block.xyz/?ref=review.firstround.com)
- Brex: [https://www.brex.com/](https://www.brex.com/?ref=review.firstround.com)
- Chime: [https://www.chime.com/](https://www.chime.com/?ref=review.firstround.com)
- Gusto: [https://gusto.com/](https://gusto.com/?ref=review.firstround.com)
- Mercury: [https://mercury.com/](https://mercury.com/?ref=review.firstround.com)
- Paul Graham: [https://x.com/paulg](https://x.com/paulg?ref=review.firstround.com)
- Plaid: [https://plaid.com/](https://plaid.com/?ref=review.firstround.com)
- Stripe: [https://stripe.com/](https://stripe.com/?ref=review.firstround.com)
- SVB (Silicon Valley Bank): [https://www.svb.com/](https://www.svb.com/?ref=review.firstround.com)
- True Link Financial: [https://www.truelinkfinancial.com/](https://www.truelinkfinancial.com/?ref=review.firstround.com)
- Varo: [https://www.varomoney.com/](https://www.varomoney.com/?ref=review.firstround.com)
- Y Combinator: [https://www.ycombinator.com/](https://www.ycombinator.com/?ref=review.firstround.com)
**Where to find Immad:**
- LinkedIn: [https://www.linkedin.com/in/iakhund/](https://www.linkedin.com/in/iakhund/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
- (1:07) Hard-won lessons from serial entrepreneurship
- (2:02) You shouldn't copy-paste advice
- (6:57) Why personality trumps culture playbooks
- (8:48) How do you hire for cultural fit?
- (12:38) The values that shaped Mercury's DNA
- (14:08) The drivers underpinning Mercury's success
- (15:50) The significance of product-market fit
- (20:41) Don't fall into the weak product-market fit trap
- (25:49) How to evaluate startup ideas that scale
- (30:14) Mercury's unlikely origin story
- (33:51) Breaking into the fintech space
- (37:31) Mindset shift: From "This is hard" to long-term gains
- (39:43) Building Mercury's MVP
- (44:25) Overcoming early obstacles to reach launch
- (47:36) Navigating Mercury's rapid growth phase
- (51:18) Competition isn't the reason you're failing
- (55:58) Crisis management during the SVB collapse
Immad: Four days after launch, someone signed up, never spoke to us, and transferred $1 million into a Mercury bank account and I was like, "Wow."
Brett: For today's episode, I'm excited to sit down with Immad Akhund. He's the CEO and co-founder of Mercury, a banking platform for startups. Mercury is Immad's third company, and he's been a founder for the better part of the last 20 years.
Immad: "What does it take for this to be your only bank account as a business?" That was my level.
Brett: In our conversation, we dig into the squishier topic of company culture and how Immad's personality shows up in everything from product building to hiring.
Immad: I never understood culture for my first 3 companies. The way I describe it now, what is the personality that you have, both you personally and then what is the personality you encourage in the company.
Brett: Immad then shares the founding story of Mercury and what he's learned about finding product-market fit on his third go around.
Immad: If you're actually a strong founder, you can sell anything. You'll get weak product-market fit almost out of any idea, and that's the problem.
Brett: Let's dive in. Well, I'm excited for the conversation. I appreciate you joining.
Immad: Yeah. Thanks for having me.
Brett: I was curious, for you, what have you learned from starting multiple companies? Meaning, like, the most important things you figured out that you could have only learned as a founder of multiple companies?
Immad: I've been doing startups for 19 years this year. I feel like one of the things that's fun about being a founder/CEO, but also knowing, is that every year you have to learn new things, especially if you're progressing. Mercury is almost 1,000-person company, so even the lessons I learned in my previous companies are not always applicable when it's 1000-person company versus a 10-person company. I'll try to pull out some that I think were hard for me to learn that, later on, I have grabbed. This is a meta lesson which really took a while to truly learn, but it's quite an important lesson for me, which is you can't take other people's lessons and make them your own. What's the cool thing nowadays? Like founder mode or something like that? I think it's very easy to take something that Brian Chesky says or, back in the day, it used to be all about MVP, minimum viable product, and you're like, "Oh, yeah, this is a great philosophy. It makes sense." And then you try to copy paste it and apply it to your situation and you're like, "This is now a prescription for how I will run this business or come up with ideas," and I just think that never works. The lessons work in that particular way for that particular situation and you have to adapt them to your situation, what's your customer segment, even what's your personality, all of these things. There is still things to learn there, but the answer isn't to take a framework and copy it and apply to yourself. The answer is to understand the framework, understand what was the specific situation that led to that working there, and then try to blend it into how you would compare it to your own situation. I'll give a concrete example of this. Once we got to a certain size at Mercury, maybe 40 people, everyone's like, "Oh, you need an OKR framework." When we were small, I was like, "Okay, this is just silly. We don't need it. We don't need a structure for objectives. There's just five people in the room. Let's just do this." But there was a certain point where when there's enough layers of management and you do have to have some sort of way to have a top-level goal and percolate that through, if you're always like, "If we measure it, we'll optimize and we only do the measurable things"... Doing an extra bit that creates a magical experience for customers, that's very hard to measure a metric against, in my opinion, and it's dangerous to have like, "Everything must be driven by metrics."
Brett: Do you translate these things to your own company in a taste-driven way? You go read books, talk to people, and then just sort of have a model of the company in your head and whatever feels intuitively right? Or if I were to study all the things that you do at the company and the related things that exist at other companies, there's more structure to the way that you figure out how these things apply in the context of Mercury.
Immad: I think some things like this probably have to be top-down and the way that translated is I go do this work and then I talk to the exec team and collect their ideas and then we percolate that down. But we also try to create a culture where people have their own ideas and there's upward mobility of ideas or they can... I want to make us every team can run their team slightly differently as well.
Brett: If you continue to push down this set of ideas, it is definitely true that most of the remarkable companies are kind of their own unique organisms and, particularly when they get started, they're a little bit weird and the founder tends to invent as much around how the company is run and the choices they're making and how they recruit on and on and on as much as it is the product. There's sort of this weirdness about it that it isn't copy-paste. At the same time, you look at most 50, 150, 200-person really good Silicon Valley companies and they do tend to look more similar than different. They eventually have a managerial ladder, there's engineering there, on and on and on, and some people push off hiring product people or this, but there is a thread that definitely runs across these companies. What do you make of that? Is it just like that there are certain things that are just broadly correct?
Immad: Yeah, I think it's not worth reinventing everything and there's definitely a lot of osmosis in Silicon Valley. We have a bunch of people from Stripe and Block and Google or whatever, so people bring their ideas and the good ideas tend to be memes that percolate. That's good. I don't think anyone should go like, "I am going to reject all ideas upfront," right? I think that's going to end up being pretty dysfunctional. I do think it's worth assessing each idea individually and not just saying, "We will get it because it exists and other people do it and it's worth saying, 'Okay, does this actually make sense for us?'" 90% of the time, yeah, if everyone else does it. Should you write tests when you ship code? Everyone does it. Everyone says it's good, "I think it's good. Let's just do it right." You don't need to go reinvent everything, but it is worth checking with your gut, checking with what makes sense, and making it slightly different if it makes sense for you. I do think one thing that is different pretty drastically between a lot of companies and I think is particularly hard to copy-paste this culture, this goes back to your original thing of like, "I never understood culture for my first three companies." People would say, "Do culture. It's so important," and I would say, "What does it mean? Is it whether you have beer in the fridge?" Those kind of things sound like culture. It's like, "This is how people work." The way I describe it now, at least what makes sense to me, is what is the personality that you have, both you personally and then what is the personality you encourage in the company. I find personality easier to think about than culture, and there's a set of personality traits that work well together. For example, for Mercury, we look for humble people that are helpful, that are curious, that are customer-centric and product-minded. I think all of those traits actually work pretty well together, but it's almost completely in contrast to some other companies that look for competitive people that are very goal-driven. It's not that we don't want goal-driven and someone competitive people, but we won't take that instead of... If there's ego associated with that and a lack of helpfulness, et cetera, we will do that trade off. But that's very much like... That's my personality, that's the co-founder's personality, and we've embedded that personality throughout the company. You need to be consistent. In my last company, we just didn't have. I didn't understand it and we had some people that were very competitive, alpha people, and some people that were like this and this. There's just this continuous kind of inconsistency and clash of cultures. So I do think that is very company-specific. There's a really good book by Ben Horowitz, The Hard Thing About Hard Things. Actually, that was the other book, but that's also good. But the What You Do Is Who You Are, I think that's the best book on how to build a company culture that I've read and I really liked it. But that came out pretty late, unfortunately, I didn't have in my earlier startup.
Brett: When you looked at the culture of your other companies, is the biggest difference that you weren't intentional about who the people you hired were or it was other parts of this idea of culture and personality?
Immad: Firstly, we never wrote it down. If you never write it down, no one knows what it's supposed to be. I think the process for culture is like you write it down, "What do you care about? How do you care about it?" That's step one. Step two is how do you then put a hiring process that tries to pick people who have that cultural attribute and you try to come up with questions of... We have a product interview that we do for almost everyone, even non-product people get the product interview. So you write down those kind of hiring traits. Then, within the company, you celebrate it. When people do things in a certain way, you're like, "Oh, that's great, that really was helpful." We have a channel called Grateful and people just post when someone does something nice and they're grateful for it. That was organically created. Because you've stated what you care about and you hire against it, then you start doing these things that reinforce it. That's why I think it really comes from the founders' personalities. It's very hard to live something you're not. I have three kids. When I imagined being a parent, I was always like, "Oh, yeah, I'll be like, 'Do things in this way or that way.'" But then, once you have kids, you'll realize you spend 24/7 with them. You are who you are and, if you want to be someone different for your kids, you have to change yourself. It's very similar in a company, you are who you are, and that is the culture of the company even if you write down a different culture from who you are. Unless you're willing to change yourself to become that culture, it has to be true to you.
Brett: Do you find that it's relatively easy to hire for personality fit or, said differently, when you think about all the people you've had to manage out of the company? Is it a vast minority that the primary reason is that they were not aligned with the personality of the company or sort of vice versa, and actually culture fit or whatever term you want to use is surprisingly hard to actually get at the essence of in the interview process?
Immad: I think, over time, we've got better at it. I think we're pretty good at getting to the essence of it in the interview process. The main thing is try to have ideally a whole 30-minute interview that's just on one particular cultural attribute. If you can pull that off, you have a pretty good sense of it after 30 minutes.
Brett: What does that look like?
Immad: I can't remember the exact wording on it, but we have a cultural attribute of pointing people who are curious. The thing that we do to test that is we give people basically an hour to prepare a presentation on any subject they want. We're just like, "Hey, pick something non-work-related that you find really interesting, spend an hour, write presentation," and then we spend 45 minutes. They're supposed to do the presentation, but it's really just a conversation around that subject. That test actually a few different attributes, but you can see the curiosity in someone super quickly if they're talking about something they really care about and you're like, "Okay, why do you care about this?" and like, "Okay, tell me about this aspect," and you just keep asking questions. I feel like within 10 minutes normally in those interviews, I'm like, "Wow, this person is super passionate about kayaking or gardening," or whatever. These are often mundane, everyday things, but curious people just have this weird level of detailed attention to some random things. It tests ego to some extent because sometimes people get defensive in those things when you ask them more detailed questions. It tests that curiosity aspect. It tests communication skills. So I really like that interview exercise. At many other companies, they wouldn't learn that much from that because it's very geared around our culture and what we're looking for.
Brett: I'm curious if you had any reflections about that. I was really interested to hear your thinking because you've worked in... and the companies that you've started have been all very different. What sort of comes to mind for you around the values and personality of you as the founder and what does it mean to harness them correctly in what the company is actually doing, or does it not really matter?
Immad: I think it matters. I don't know, if I was an investor, whether I could judge it. I think that's a level of nuance that's probably hard to pick up on. I do think it matters. I think our set of personality traits that the company has, culture is also aligned with the product we make. For example, we create this high trust environment where we give a lot of responsibility to people, et cetera. That's also how the product is. We try to speak to people very cleanly. We create transparency. Our fees are very clear. We don't want to hide details from people. We want to be like, "Hey, this is a wire and this is what a wire means and this is how long it takes, and this is a system." Internally or externally, we don't want to treat people as children. We want to treat them as adults and give them all the information and be very transparent about what's happening.
Brett: What else have you noticed across building these multiple companies? The thing I'm interested in is Mercury is on a trajectory to be the most important company I think that you've built thus far, meaningfully. What have you reasoned about that? It's the same founder of the company. Now, you could say you're much wiser, you've learned so many things, but have you learned 50 times more than before? What's the why behind the success of this company relative to the success of the other businesses you worked on?
Immad: I'd say there's two elements here that I think I would have liked to tell my younger self. Number one, I think the idea matters a lot. There's this feeling in Silicon Valley sometimes that, "Yeah. If the entrepreneur is good enough, they'll figure out the idea or something." Actually, I'm not even sure exactly what the feeling is, but it's more like the idea doesn't matter, just iterate around. We iterated a lot. We actually pivoted four times in my previous company. But if you start in an idea with... If there isn't a societal level trend that's pushing your space forward, which I think was true in FinTech in 2017 or it's true in AI now, it's very hard to iterate around it and often people don't... Actually, the right thing to do, and something else I would tell my younger self, is, "If the thing doesn't work, just go back to zero." I think one of your questions that you sent me was why didn't I do Mercury earlier, because I had this idea in 2013\. Actually, we pivoted twice more in my previous company since 2013\. I'm like, "Why didn't I just do Mercury then?" Really, because people are often stuck in this pivot box, it's like, "Oh, I raise money against this. I understand this," and like, "Oh, now, I have this other idea that's related to this." Most of the time, in that company, we're serving game publishers. We just started with flash game publishers, ended up in mobile game publishers, and then ended up in ad tech, but it was often around that core audience. But really, I could have just done Mercury then and... yeah. It was a little easier maybe in 2017, but I think I probably could have figured it out and made a lot of progress and would be four years younger or something. I do think idea matters a lot and I think people undervalue how much it matters. I think the second thing is, when you have product-market fit, it's really blazingly obvious. I've had it twice. I eventually did get it in that last company and obviously Mercury had it. I think when you are a stubborn, high-grade founder, you just don't know when to give up. At least, that's my experience. We had an idea and we would go like, "Let's sell the hell out of it." If you're stubborn and willing to do whatever the hell it takes and do the things that don't scale, you can often sell the things and make progress. Every idea we had, we spent two years on it. We made some incremental progress, but in hindsight, I was like, "Oh, it's super obvious we did not have product-market fit." Product-market fit is just so obvious when you get it. But when you've never had it before, you just don't know what it's like. You're like, "Oh, yeah, of course, I should wake up every day and I sell the hell out of this thing or whatever." The way I describe product-market fit now, which to be fair I think works in consumer, prosumer, and SMB and maybe it doesn't work in enterprise sales, it's like you wake up in the morning and you have more users and you don't know where they came from or people sign up and they want the thing and they're pulling the product out of you. Sure, you still have to figure out distribution, all that, in the long term, but at least initially the market should be so big and the demand for what you're being is so interesting that people will just come to you and you just don't have to try that hard. It's still a pain in the ass because then, now, you have to keep up with this demand and there's features you don't have and support you haven't built up and all this stuff, but you don't have to work hard to find people to want your product. That's how I describe product-market fit at least, and that's been... At least when I've had it, it's just been so obvious. When I did get out, I was like, "Why did I waste all this time trying to sell this thing that no one really wanted that, previously, I could have just learned and quickly moved on?"
Brett: What did you observe in yourself when you reflected on that why?
Immad: Honestly, it's just like I didn't know what product-market fit really was, right? It's like culture as well. You read these things and you're like, "Yeah, sure, this thing moved really fast and it was obvious, but maybe I'm different and maybe I just have to sell it and maybe I'll iterate my recent to product-market fit." I think that's the biggest element to it. As a founder, you do need all of that. You need the grit, you need the unwillingness to give up, and all those things. It's just one of those things that's hard to find the balance where you're like, "Okay, actually, there are times where you should move on and give up and do the next thing and that is the best opportunity cost answer," but yeah, I have a tendency to just not want to give up. I have an infinite set of ideas to try, so I'm like, "Oh, why don't we just sell it this way or why don't we... Maybe we just don't have the right lead list." You could just go on and on.
Brett: In the last company, you mentioned towards the end you did get the company in the slot. What was the change? Was it one click away? Was it a massive change and then it immediately started working? What's sort of like the pre to post-product-market fit in that company?
Immad: Without going too detailed, we built a mobile ad network, which I would say did not have product-market fit, but it got us profitable and it was working. And then we noticed a space that was adjacent to it, which is a developer tool around advertising to make it easy for any app publisher to plug in five or six different ad networks and optimize them for you, et cetera. The two people in that space were both bought out. One was bought by Twitter at the time and the other one was bought by Apple, and there were both these super clunky, enterprise-y tools that didn't really work for just a normal app publisher. Literally, Apple had just bought it at the second player, which was Burstly I think. From that side, no one would've understood that this opportunity exists. We were very deep in it, so we built the thing. It's called mobile mediation. So we built a platform. It wasn't instant product-market fit because the initial version just didn't work that well, so we did have to build out all the features that worked well enough. It did take launch and then six months of iterating. But six months later, it was super obvious. It was just like we'd wake up in the morning and, suddenly, the top iOS app in the App Store was using Heyzap, that was the name of the company, and we literally hadn't even spoken to the developer. They just found this and they'd started using it. We're like, "What the hell?" It's such a different feeling when that kind of stuff happens and it just basically grew by 10X and then 10X again the next year. So that was very strong product-market fit, but in a space that maybe is not huge enough. It did take some iteration. Mercury was pretty different. Mercury was product-market fit from the day we launched. We just grew by 30, 40% a month for the first year.
Brett: I think the biggest challenge is weak product-market fit, which is what most reasonable founders have that don't fully have product-market fit, and that's what I think someone can keep chasing down for five years. If you have a widget and you talk to 100 people and they all slam the door in your face and say, "I'm not interested in this," the reality is telling you, "I need to go in a different direction." But if you find a few people that are interested out of the 100 and they're kind of using... that's I think the loop that gets someone-
Immad: That's what I was saying. If you're actually a strong founder, you can sell anything. You'll get weak product-market fit almost out of any idea, and that's the problem. It is a tricky road to go down, and I see it a lot. Sometimes, people get to a few million in ARR on weak product-market fit too. It's like you can reach a reasonable scale and raise a series A. That's almost worse. I feel like the worst for founders who actually go raise a series A that have weak product-market fit, it's a slog for nine years. I look at it, I'm like, "Oh, man, this is so painful."
Brett: Going back to this question about what you figured out and maybe why Mercury is so much more successful in so many different metrics than your previous companies, you were talking about the importance of the idea what really strong product-market fit-
Immad: Again, not Silicon Valley wisdom and something that I fell for, we talked earlier about like MVP, et cetera. I had this real mindset that, "Hey, I should just be launching things in three months. I should have an idea. I should launch in three months and I should iterate, et cetera," and maybe, A, that does work sometimes, a lot of the time maybe, and, B, it probably did work way better in 2009 or '10 when social and mobile and all this stuff was new and there was just a lot of idea space to explore. I think, now, things are more mature and I think it's better to spend more time and build a deeper, better product in a space. Mercury took a year and a half before we launched. I really think maybe we could have launched a little earlier if everything had gone right, but it was minimum of one year to build this product end to end. It was a complicated product when we launched. We had four different types of payments in and out. We had check and credit, debit card and wires and international wires and non-immigrant support. We had a pretty well-developed set of features and then it also looked great, which, to make things look great, you have to spend twice as much as making things look kind of shitty. I remember even talking to some VCs. They were like, "Hey, why are you launching a new bank? Why not just..." Part of my pitch was like, "Hey, we'll give you analytics around your finances." They were like, "Oh, why don't you just use Plaid and get some analytics around people's finances?" I was like, "That's really not the point. That's just a feature of the bigger thing," but there was definitely... That's what they felt, that we'll launch this thing in three months, "Then, you can iterate yourself to a new bank." I was like, "I don't think you can iterate yourself to a new bank." One thing I have realized, once you launch a thing, it's very hard to change it. If you just spend more time... When you don't have any users and you just build, iterate a little bit more and you build the thing that you really want... There's lots of features in Mercury today that were built pre-launch, and I think if we... Trying to move things now is much, much harder. We have a hundred thousand users, we have a bigger... It just takes a lot more to change features once there's real users and people around them. Another lesson for my old self would be just spend longer thinking of the idea and spend longer implementing the idea. It's not always rush to come up with the idea in two weeks and try to launch it in three months. Yeah, I did Y Combinator twice, so there's definitely... Some of this is like Y Combinator philosophy. Obviously, it works for a lot of companies to be fair, but I do think big ideas take longer. They took longer to come up with, they take longer to execute, and I think a lot... Especially if you're a second-time entrepreneur, I think it's worth it if you can raise more money and spend more time and build a bigger thing. This often also has a bigger impact on the world. I think we're all somewhat here to try to improve the world and coming up with bigger, scary ideas that had that impact. I think it's more powerful.
Brett: Are you able to explain what you think makes a very good idea, the higher order bit? I'm very well aligned with this, which we call internally the pick, what is the person choosing to do is not obsess about and, "We just do anything and iterate," is just generally incorrect, and sure there are examples of that. But I can just come up with an example of a successful company that did all sorts of random things that the general population would not be served by sort of following that. Are you able to unpack in your own mind what makes a very good idea or what makes a bad idea or sort of anywhere in between?
Immad: I think it's really hard. Often, early ideas sounds crazy. A good example I have of this that gave me a lot of humbleness around this is I was in the YC batch with Dropbox and I was like, "Okay, amazing idea, amazing founders. This is obviously going to be huge," and I actually did two bets with people that's going to be a unicorn in the batch. I guess, in theory, they owe me some money. But I was also in the batch with Airbnb, so that was my second YC company. I was in the Airbnb batch.
Brett: That's a good bet.
Immad: I thought, "What a silly idea." I was like, "Who's going to trust people in their house? What are these people talking about?" Obviously, they seem smart, but I was like, "This is just... They've gone too far with the sharing economy. This is just obviously wrong," and I was so sure of it. I wasn't slightly wondering. I was like, "This is just obviously not going to work." I didn't say that to them, but that's what I felt. Yeah, it goes to show you it is very hard to judge ideas often at the start that look silly. You can come up with frameworks and I can come up with frameworks. Even today, I see ideas and I'm like, "Okay, this is silly," and then it works. And I'm like, "Okay, I was completely wrong." Whether you are investor or a founder, you have to have the humbleness behind it. It is tricky. So I guess to answer your question... I am also an investor, so I have a shape of things that I think works. One of the criteria is, "If this thing really, really worked, could this be a game-changing huge company? If everything went right, is this a 10 billion, $100 billion opportunity?" Again, you can't always see it, but you can kind of imagine. It's like, "Okay..." In the Airbnb case, it was like, "Okay, lots of people do have an extra room and lots of people have second houses and people go on holiday. Hotels are not always the best experience." Even if you were like, "This is never going to work," you could kind of imagine there's a path that they would have. That's one way I approached the idea, and that's also how I thought about Mercury. I was like, "Okay, if this worked, is banking going to be mostly digital in the future?" I was like, "Yes." "Do entrepreneurs really have a bit of banking experience?" I was like, "Yes, this is a market that's big enough." That's a combination of this kind top-down TAM kind of approach and bottom-up like, "Could this thing be the thing that breaks into it?" And then, sometimes actually you look at an idea, you're like, "Okay. Even if this worked, it couldn't be that big because it's in a niche market or whatever." That's definitely an analysis that can help. But yeah, I don't think there's a sure-fire way. Often, I find... Even if you take Mercury, I was just so annoyed using the business banks that I used as entrepreneur. A lot of the things I did afterwards were time analysis and this kind of post ad hoc justification to get myself comfortable with actually doing it and persuading investors and things like that, but in some ways it was an intuitive kind of idea that I just wanted to build this product for myself.
Brett: Obviously, many years later, Mercury has turned out to be a very good idea. Even if you didn't know all this back when you started the company, maybe explain to people in as much fine-grain detail why you think it was a good, correct idea to pursue.
Immad: I think there's a top-down way to look at it and a bottom-up way to look at it. Let's just do top-down for a second. Top-down, banking, huge category, but it used to make sense to go to a bank branch. Now, money's mostly digital. Entrepreneurs, especially, I think actually everyone eventually, want to just interact with their bank from their computer, from their laptop, from their mobile phone. So that's a huge trend, and it's pretty obvious that incumbent banks are not ready for that trend. Most of them don't build their own apps, they don't build their own website. It's kind of a secondary thought. They still think of themselves as a branch network and app or digital experience secondary. Obviously, fintech was happening. I started this in 2017\. There was already Stripe and Square and PayPal and things like that. In 2006, it wasn't surprising that banking was bad. Everything was bad, right? There was no Slack, no Stripe, no Gusto. I remember as an entrepreneur going like, "Oh..." It's just like, "One more slog is my bank account," but it wasn't like that was the only slog. By the time 2013 was around, which is when I had this idea, I was like, "Okay, actually, all of those experiences have improved, but banking still basically the same."
Brett: Tell the story about the sort of original moment that you thought, "Huh, maybe I could build what then became Mercury."
Immad: I guess because, my previous company, we used to pivot a lot and I was just very interested in entrepreneurship in general, I always had a list of things that someone should build. It wasn't like, "I will build these." It was just like, "Oh, someone should do this," and this idea of looking at tools that we used as a business going, "Okay, someone should..." We started my previous company in 2008, so there was no Gusto, for example. I literally had a list which was like, "Someone should build a better payroll provider because..." Someone from ADP literally came to our live workspace when there was only two people with a literal file, old-school file, that they made a sign and all this to set up payroll. I was like, "This is insane that people do this," but I had a similar experience with banking. I was like, "Okay, it's insane. I want to send a wire and it's not enabled in my account. I have to go to a bank branch and spend three hours to get it enabled." Everyone has this kind of frustrating experience with banking. I just literally had a list and it was a long list of 10 ideas that I was like, "Okay." What made the banking one a little more real for me is... I think it was around 2013 when I was like, "Okay, this isn't just an idea someone should do, but it's an idea maybe I could do is..." I met this guy called Kai, and the startup's name was True Link I think. It was a fintech company for seniors, and they basically issue debit cards to seniors because seniors often get taken advantage of and the kids want to be able to set controls and things like that on cards. It was just like two kids, it was a Y Combinator company. I guess they weren't kids, they were adults, but they weren't any different from me and I was like, "Wow, these people went and did a deal with a bank partner." I chatted to them, and it was demo deal, whatever. I was like, "Okay. If they can do that, maybe I could just do this at some point if no one else does it." I think that's actually the power of Silicon Valley. Often, you find it hard to imagine how something is even possible. Whereas when you come here, you're like, "Okay, just everyone..." When I first came here in 2007, there was the Facebook app's craze. Everyone had a million plus users and I was like, "Wow, it must be easy to get millions of users." In London, which is where I'm from, it seemed like impossible to get a million users because I had a consumer idea that only had 4,000 users. I feel like this is like a cauldron of people and ideas and it just makes unimaginable things real seeming. So that was the thing that's flipped it from just an idea to something I could probably do. I kind of assumed someone else would do it since I was busy, but it changed it from like, "No, I could never do this," to, "Maybe I could do this."
Brett: What is the context on when you decided, "Okay, I'm going to go start this company"? What was happening six months before that decision?
Immad: I sold my previous company in start of 2016\. I had to work at that company for a year, the Acquirer. At the start of 2017, I was just like, "Okay, what should I do?" That was the start of it. I was like, "Oh, maybe I want to be a VC," but then I kind of decided not to do that. And then I had a list of ideas to go down. I feel like those were my top three ideas, the bank, the API for a CRM, and a kind of hardware tool for remote work. The bank one had been in my head for years. At that point, it had been there for four years. I was like, "Okay, let me just explore this," and the more I explored it, the more it turned from impossible to doable, but hard. Doable but hard is like, "I'm in."
Brett: How did you explore it?
Immad: I mostly just talk to a lot of people. I talk to every single fintech entrepreneur I could find. Especially the Y Combinator fintech founders were particularly helpful. They were very open to chatting and laid out. When you first explore an idea, you feel really stupid. Fintech is full of acronyms. People are like, "Oh, you need to worry about KYC." I'm like, "What is KYC?" "It's... Hey, whatever," this whole list. I would make a list of everything I was like, "I don't know what this is about, but I'll just run a list until I figure it out." People are just very generous with their time, fintech entrepreneurs, fintech VCs and investors, and then lawyers. Actually, lawyers were probably the surprisingly most useful set of people. Most lawyers will do a 30-minute call with you for free, and there's a lot of fintech/financial services lawyers out there. I wrote a list once. I did 90 conversations like this. Often, some of the most useful ones were four intro chains down. I talked to someone, they'd introduce me to someone, they'd introduce, but it was a fun process. I'm curious, I like learning, and this is a completely new space to me. I think often I tell people like, "Yes, I could have gone and built the code or tried to do something else," but everyone knew I could build a product, I knew I could build a product. The hard bit was proving that I could get a bank sponsorship, I could figure out what is the framework for compliance and risk and legal and all these things, especially at the start to spend all your time doing the thing that you're the least capable of doing and the least capable of proving to the world that you can do. After four-ish months of doing this process, I had a pretty good framework that... Another thing is when you're in a space that's somewhat new, which fintech in 2017 was still pretty new, you can quite quickly become almost an expert in the space.
Brett: Maybe talk a little bit more when you think about the three types of people that you talked to. One were fintech founders, two, fintech investors, and three were fintech lawyers or financial services lawyers. What was the texture of those buckets of conversations? What in each of those were you trying to understand about the opportunity?
Immad: Entrepreneurs, I really wanted to see how did they build it. Many of these were failed entrepreneurs, some were successful. So I wanted to see, "Okay. If they failed at the idea, what failed? Where was the failure cases, and how long did it take to build it? What was the..." The entrepreneurs, you can learn so much from entrepreneurs. These weren't people building new banks for businesses, they were like consumer credit card or whatever, but similar shapes like, "What were the first five employees they had?" You can get pretty nitty-gritty. Generally speaking with entrepreneurs, there's no bad questions, no dumb questions. They're all like, "Hey, yeah, I was just like you. I was trying to figure this out," so super helpful people. I think the ideal thing is if we can find someone who literally tried to build what you were building. With investors, I was trying to figure out, "Okay. What is fundable here?" Investors tend to be really good connectors as well, so they connected me to other entrepreneurs or other lawyers, et cetera. The lawyers are also pretty good connectors as well, yeah. Just trying to understand, "What is the legal framework for this?" Yeah, the idea of law sits upstream from compliance.
Brett: When you think about yourself before that four month sprint and yourself after that four month sprint, what were the most important things that that work taught you that then informed what you ended up doing in the early months and years of Mercury?
Immad: One thing I decided in that process is that, "Hey, this is not going to be easy," and I was like, "Potentially, it'll take three years to get this live, get enough customers, and make enough progress I could raise a future round." When I set out to raise money, I was like, "I need to raise at least 5 million. So I have three years with a small team to go execute this." It changed my mindset from, "This is not going to be easy. I'm going to do it for the long run," and that was an important kind of mindset shift for me to think of this as a longer execution period to get it done. One thing that someone said to me, and this was really stuck with me, I wish I could remember who told me this because I think it was a valuable lesson, it was like, "Hey, the fintech piece and compliance and bank sponsor, all that stuff is hard, but it's all pointless if no one likes your product." I think sometimes people, and I often talk to people, they get really hung up on being compliant or sometimes they'll get hung up on some technology, et cetera. At the end of the day, if customers don't want your thing, it doesn't matter what great technology it is. That was a powerful thing. That person actually said to me, "Hey, if people want your product, you'll figure out everything else. But if no one wants your product, it doesn't matter what else you figure out," and I was like, "Okay." That have got me in the mindset of going like, "Okay, it's all about the product and I should focus on making that an amazing kind of experience for people." One thing that stuck obviously is we went with the sponsor bank model and there was other people at that time. There was a bunch of fintechs that went with the sponsor bank model and there was a bunch of fintechs that actually did try to get a charter. I think most of the ones that went with the charter model either failed to get a charter or, even when they got the charter... There's a company called Varo that was a Chime competitor, and Chime went with the sponsor bank model and Varo went with the bank charter model. I would say most people think, valuation-wise, it definitely was a better idea to go with the sponsor bank model and that's something we decided early on. I even talked to people that were thinking about building something like Mercury going down the bank charter model. Most of them did not work out. So that was a big and important decision that we made early on that stuck with us.
Brett: You didn't talk about spending a lot of time with potential customers. Is that because you just knew the problem so well because you modeled the customer in your head because you were the customer and it was obvious that there was, quote, "little market risk" that if you built this magical delightful business bank that the customers would be there, or was that a part of it in any way?
Immad: Yeah, I didn't talk to customers that much. It just seemed obvious to me. Funnily enough, after we raised money and we started building the product, it took a year and a half. There was a time during that time, I was like, "I think we thought we were six months away from launching." I was like, "Okay, let me go talk to a bunch of people, collect customer interest," so I took to about 100 founders at that point. Obviously, I was pretty committed to the idea at that point. Honestly, it was a little depressing because everyone was like, "Yeah, it sounds cool. Tell me when you launch," and I was like, "Yeah." I think only two of the 100 people were like, "Yeah, I love this." It was extremely enthusiastic. Most people were like, "Okay, sounds interesting." I think it's very hard when you abstractly talk to someone and you're like, "Would you use this thing?" It's very hard to reliably believe their feedback, at least that's what I've found. Maybe there's ideas where some people are like, "Yeah, I talked to 10 people and that's how... They prepared for something." Yeah, so there's probably some ideas where it is a little more obvious. But at least for these types of things, people can't imagine what a better banking experience is.
Brett: How did you figure out what the first version of the product was going to be? I feel like that also you run into this dangerous territory when you go into build mode with this type of product, which is you have infinite roadmap. There's an infinite amount of things you could build.
Immad: Honestly, it was very simple because I was like, "What does it take for this to be your only bank account as a business?" That was my level. That was a high bar. Obviously, you need to be able to sign up, you need to have multiple owners, often, businesses are multiple owners, I guess a whole infrastructure around there. This was probably an unusual thing for me that I really insisted on. I was an immigrant when I moved here. I want to be able to support immigrant founders. I was also like, "Hey, actually a lot of Silicon Valley companies have immigrant founders." It was kind of an annoying requirement, getting the infrastructure around, supporting a non-US person. You don't have a social security number, you don't have a US ID, and getting a sponsor bank to be on board with that was an infrastructure that was not easy to do, but I insisted on it, a fully digital experience obviously. And then I was like, "You need checks, you need wire, you need international wire, you need ACA." So that was the basic framework. I was like, in my opinion at least and I think this is actually bared out there, if any of these things were missing, people would not adopt it. I didn't think there was any point in launching with one of these things missing because the only thing we'd learned is we need to go build this thing. So I was like, "Okay, there's no point in launching until we had all of this," but there was no point in building anything more than that either. I wasn't going to go like, "Oh, yeah, also debit cards," but I wasn't going to go build a credit card or build really fancy analytics before we had all those features. I was just like, "Let's just build all of that." The thing we did end up doing, which I think is pretty unusual for most startups, but we actually built the whole thing and we had one sponsor bank lined up. They were supposed to build some extra features for us, give us wires and things like that. Every month, they'd be like, "Yeah, it's coming. It's coming." Five months later, we were like, "This isn't working. We need to go find someone else," just because they kept saying it's coming and they would never deliver. We basically scrapped that, ended in a whole new fresh sponsor bank deal, so that took an extra six months. We built the whole thing, it was ready to launch basically, and then we had another six months to go. So we actually ended up redoing a bunch of our designs at our front end for some of these core experiences, for sending money and onboarding, which made them way better. I guess, in theory, we could have built some new features. I guess, to some extent, we were perfectionists. We were like, "Oh, let's just make the existing stuff really, really good," and it actually really made a difference to our launch because people went through that new user onboarding experience. Most people expect, when they're getting onboarded to a new bank account, it would be so painful, but we'd spent so much time. We did it twice that it was this really, really high level quality experience and it gave people a very strong first impression. Because a lot of people just wanted to try it out, they're like, "Oh yeah, I'll try it out," and they're like, "Wow, this is just so good. Maybe the rest of the product's really amazing."
Brett: It was just about how did you figure out what the one ready to ship was, which I think you did a good job \[inaudible 00:44:19\].
Immad: Yeah, I don't know, just being insistent on it being pretty broad and not going too much beyond that broadness.
Brett: Did you start to onboard early customers to test the entire product before you launched, and was there a iterative process? Or it was obvious you were dogfooding the product and you just decided, "We're ready to launch now"?
Immad: No, we had a four-month period where mostly friends of mine that I'd invested in used the product. They didn't really use it for everything. They was just like, "Hey, yeah, sure, I'll put 50K and I'll test some stuff out." But really, even some really basic stuff didn't work until the week of the launch.
Brett: When they were tinkering with it, did you get a sense that they were delighted by it or still you were like, "I don't know"?
Immad: I don't know at all because they were really trying it with a small set of things. I was like, "Hey-"
Brett: And then, only, really, you get the sense of it if you're running your whole-
Immad: Yes, exactly.
Brett: Yeah.
Immad: Yeah, it was funny. A lot of things just didn't work as well. During that four-month period, I was like, "Please, try out this, but don't try this out because this doesn't work yet." It was literally the week before that probably wire started working. And then, actually, we launched and we thought international wires worked, but that didn't work. It took us four extra weeks after we'd gone live with the feature that we thought worked but didn't work, and then we had to go get it working in the next four weeks, and people were shockingly patient with us because I guess everyone was somewhat sold that it was a new product. But also, it was just me and my co-founder were doing all this customer support, so I think everyone was like, "Yeah, these are real founders trying to figure stuff out." They were very patient with things that just didn't work. Yeah, we were working all the way to the launch to get it enough well that we could really learn about whether people loved it, but we did need those initial customers just to test things out. Fintech is full of edge cases. There's just so many edge cases that all have specific ways to deal with them.
Brett: What's the story behind the launch?
Immad: The biggest part of the launch was having these 60 people kind of blast it out, and that worked really well because, A, there was trust that people had in those people that was then leaked onto Mercury. Again, trust is probably the most important thing initially for us especially. \[inaudible 00:46:31\] I would say, "Hey, we backed this thing. This is great." Elad Gil was our investor and he was supportive on the launch. That was really the initial spark, what came from those 60 investors.
Brett: Did you launch it in a wait-list style product or just anybody could come and sign up? What was interesting about the first 50 people that signed up, if anything?
Immad: The people who wanted the bank? They didn't speak to us. We had no sales team. Four days after launch, someone signed up, never spoke to us and transferred $1 million into a Mercury bank account, and I was like, "Wow." That blew my mind because my assumption was always like, "Yeah, maybe some small people would just self-service," but I always thought I'd have to build a sales team. I never thought someone with $1 million would move money into Mercury without speaking to a sales team. Even today, our sales team does about 5% of our accounts. They tend to do bigger accounts, but most people just self-service, and that was really surprising to me. I did not expect that.
Brett: In those first couple of weeks, did you go from this mentality of questioning whether there was a customer base that would really love this to instantly, "I know what we're doing is going to lead to something very interesting"? Or, at what point, going back to your original definition of how you think about product-market fit, did you think, "We really have something here"?
Immad: I was very skeptical of not wanting to believe it just because... I don't know why exactly. I didn't want to go say, "Hey, we have product-market fit and let's go higher and go..." I didn't want to extend it over our skis just because we felt we had product-market fit. There's this famous kind of thing, the trough of disillusion. I was like, "Is this just the launch?" It went on for a long time, but I was like, "Okay, maybe this is just because it's fintech and people aren't ready for it. Maybe this is a really long launch and there's going to be a trough of disillusion." We never had a trough of disillusion. We just had a launch, and then it kept growing kind of thing. But first six months, I was very much like, "Hey, this is just a launch and we just have a really prolonged growth period after the launch, but it's just not necessarily real." Honestly, when things are going like that, there's so many fires to deal with, you're just like, "Hey..." We had no customer support and we were just like... Me and my co-founder is completely overloaded just talking to customers and answering their questions. Yeah, we have to go hire people like that. And then international wires didn't work. We had to fix that. Yeah, there's just so much stuff to do. Up until launch and probably until two-ish months afterwards, I was still one of the only front end engineers. There was three of us doing most of the front end. You don't have time to necessarily go think, but I was hesitant. Then, COVID happened. We launched in April 2019, and COVID happened obviously March 2020\. COVID, initially, seemed like a disaster. We lost 60% of our revenue. Obviously, no one was starting new businesses in March 2020\. At that point, I was like, "Yeah, thank God we didn't spend much money." I never believed, did product-market fit anyway. I was like, "Approve it." That was March. And then, April, we doubled. It was insane. April and May 2020 was this insane growth spurt because e-commerce blew up. Bank branches were shut down, so people had to go to a digital experience. At that point, I was like, "Okay, if we can survive COVID, we probably have for a while." So it took me a solid year to really believe that we had it because I just didn't want to take it for granted. I wanted it to be 100% sure before... Because part of it was also, now, we had to go hire enough people. For the first year especially, we were always behind on having enough people to go serve all the customers we were getting. As soon as my mindset shifted at that point, I was like, "Okay. Now, we should go hire ahead of our growth rather than behind our growth"
Brett: When you think back to those first couple of years post-launch, so your years three and four of the company, what are the most important things that you got right that have sort of served the company incredibly well?
Immad: We grew the team pretty fast. We went from 40 to 70, one year. And then 70 to... More than 40% a year is probably a consistent pace. But we were always very strict on the culture side of things, like having that culture upfront and always going like, "Hey, we have to keep that hiring bar." Especially when you're growing fast, it's easy to start being flexible on it. We weren't, and I think that served us really well and we still have a very strong culture and a very strong team around that culture.
Brett: How has your thinking about competition changed over the course of the life of the company?
Immad: Actually, a lot of my thinking on competition came from our previous companies. We did those four pivots in my previous company. I remember every single time we were working on something, there was always competition. They were always better funded than us. They seemed to do things really great and it was very... I feel like you were always worried about it and you're like, "Oh, what did they launch? Let me go look at that," et cetera. And then I realized, over all that time, that it never really mattered. Whatever they did, it was almost always distracting to even think about them. What mattered is just talking to customers, delivering a great product and iterating on that, and having a long-term kind of vision behind it. And the competition was always distracting, it reduces your team morale when you have to talk about competition. If you copy anything, you're not following your vision, you're following their vision at that point. When I came to Mercury, I was just like, "Hey, competition doesn't matter. Just focus on customers, focus on product." Even where it does matter, which is like, "Hey, maybe the competition does do something really interesting," you're going to learn it from your customers. They'll be like, "Hey, what I really want is X. Blah is doing X. Why didn't you guys build it?" Yeah, so we do learn from competition, but it's not because we are looking at their PR or their websites. We learn from it just by talking to customers and building the product. Some things that they do are smart and we will build those eventually because we will just talk to customers or we'll have the ideas ourselves. Some things they do are dumb and customers aren't talking about the dumb things. I've always felt like, at Mercury, that competition is not that important and it's distracting and we shouldn't think about it. Actually, the funny thing is the only time I have to think about competition is when I'm raising around from VCs. VCs are freaking obsessed with competition, but I'm like, "Customers don't care." Customers are really comparing us against JPMC or Bank of America, that's who they're thinking about.
Brett: Explain more why you believe this other than, "We have ignored it and it's worked." What's the underpinnings of it?
Immad: I just think, most of the time, if a company doesn't work, it's because the whole idea was bad, the whole space was bad, which I've had plenty of experiences with, or they were doing the wrong things and it's very, very rarely that they go killed by competition. I'm sure it happens, but at least I haven't seen it that much. My experience has also been like if you just keep doing the thing that you feel you believe in for a really long time, eventually you will win, it has been my experience, if the market's there, but it's not going to be because the competition got in the way or didn't get in the way. That's been my experience. I think the negative ways it plays out is, number 1, I think you get distracted from your vision. We always wanted to build this core operational bank account. Literally, even our VCs were saying like, "Hey, look at how well Brex is doing. Why don't you go build a credit card instead?" at day zero, before we'd even launched. I was like, "Well, good for them. I'm not thinking I need to build a credit card. I want to build this amazing banking experience." Eventually, we did get to credit card, but it was just not the core part of my vision, and I think it would've been a complete mistake to have done that. I don't think I would've built a company that I was excited about. I think it's hard to go from credit card to banking, at least that's been proven out so far. You end up being distracted and doing someone else's vision. I think from a team morale perspective, no one wants to be copying people. That's not what we... Actually, I really wonder about Meta where, a lot of the time, they are-
Brett: Seems to be working well.
Immad: ... copying. But what is a morale at that company when they're like, "Hey, Zuckerberg saw staff did this really cool thing, and now we're copying him."
Brett: \[inaudible 00:55:01\] the morale of late.
Immad: Yeah, maybe. Maybe this just comes back to our previous thing about like, "I am fine with copying things because customers are asking for something and we're just building the things customers are asking for." But seeing someone know something going like, "Oh, yeah, you know what? Let's drop what you're doing. Let's go copy that thing." I would be like... extremely depressing to me, so maybe it's just a society thing again. But I think it would be depressing to a lot of people that work at Mercury because, yeah, we want to go like, "We have a vision, we have a plan, let's go execute that." Yes, that changes based on what people are asking for, but that shouldn't change based on what competitors do. I'd also say these are big spaces. There's $2 trillion in US banking. I don't think it means we have to all crush each other. We've probably all built 10, $100 billion companies and we still have space to grow. Yeah, there's a zero-sum mindset to the whole competitors thinking about competitors, et cetera, that at least hasn't played out in my opinion.
Brett: What was the story of the SVB crisis in the context of Mercury?
Immad: Every conversation we had with VCs, everywhere we thought of ourselves as a counter position to SVB, right? The question that everyone asked me, which was a very reasonable question, was like, "Hey, if my money wasn't safe at SVB, why is it safe for Mercury?" I really bought this question of trust to people's forefront. It's like, "Oh..." For a long time, people weren't worrying about bank failures. But suddenly SVB and the Silvergate, there was a lot of stuff around it. What we built over the weekend was this product called Mercury Vault, which, A, we extended FDIC insurance with our partner banks from 1 million to 5 million and that product really resonated with people because it wasn't just like, "Immad says it's safe." I could say that all day long. It was like, "Hey, look at this product. This is where your money is in, between FDIC insurance and US government T-Bill mutual funds. Yeah, the US government is backing hopefully 100% of the deposits you have on Mercury."
Brett: And you, as a team, all shipped out on Friday or Saturday or Sunday, something-
Immad: We started on it on Saturday and we shipped out Monday, at least the initial version, and then we fixed it for the rest of the week.
Brett: Wasn't this insane, intense four or five days in the company, one of these just defining moments?
Immad: Yeah. We were actually bigger than SVB at that point in terms of number of customers because SVB was really focused on venture-backed startups, whereas we had a broader set of SMBs, but still we had 8,000 customers sign up in a week or two. It was actually one of our weeks or... One of our months recently was as big as that month. That was, by far, the biggest thing that ever happened in terms of signups. We had to really have a lot of the team focus on... We de-prioritize everything else basically. We were like, "Hey, let's just get these customers on board." Obviously, a lot of questions come along with that. And then the product teams were working on Mercury Vault. It was nice though. It was a galvanizing event because, most of the time, when you're... At that point, we were probably a 300-person company or 200-person company. Everyone's all working on the same thing. We're all working on our own things, but this was like... there's only one thing to work on. It's like everyone's doing this and it's very clear what we have to do. Every day, that was like, "These are the five things we have to get done. Whoever's available, let's go do it." Our whole team was helping on onboarding and the whole team was helping the customer support on shipping these products. In its own way, at least in hindsight, it was fun. At the time, it was like stressful.
Brett: Is there anything else you did over those couple of weeks that kind of are a part of the way that you think about how do you respond to these extraordinary events when you're building a company?
Immad: I think the most important thing as A CEO especially is to be a leveling function. Actually, there's various spots to this. As an entrepreneur in general, either shit is amazing or shit is awful. Whenever things are amazing, you have to go like, "Okay, I'm not going to get stuck in that euphoria. I just have to execute." And when things are awful, you have to be optimistic. I think, in general, when things are like that, you have to path the course that's more level, but then you have to then project that out to the whole company. In these kind of situations, I'm like, "Hey, it's fine. We'll be okay. Here's the plan." Always have a plan. Even if it's a plan to make a plan, I'm like, "Hey, we don't know what's happening, but these are the five things we're going to do to figure it out," kind of thing. I think being calm, having a plan, and then just driving with urgency around that plan, it's like, "Okay, these are the people who are leading up these parts of the plan," and we try to create a culture both actually internally and with our customers around transparency. I spend a lot of that time just talking to customers. I was on Twitter responding to people, people calling me up saying, "What's happening with this? When can I get this account?" and I was like, "Hey, let me work into that." I was trying to be out there to create this kind of culture transparency, but we do that internally as well. It's not that I have all the answers, but I'm out there saying, "This is what I think right now, this is the plan right now, and let's go deal with it." But yeah, I think being calm and projecting calm... It's not like I felt it all the time either. I was like, "Oh, my God, the world is falling apart," but you just got to wake up in the morning and be optimistic and calm for people in those situations.
Brett: So to wrap up, who is the person that has taught you the most about being a founder or has imparted something that's a big part of the way that you think about building Mercury? What's sort of the thing they imparted on you?
Immad: I did Y Combinator in 2007 and, back then, it was mostly a Paul Graham show. I think the biggest thing that I feel like I learned there is just thinking big. I remember, this is 2007, and Paul Graham was like, "Hey, there's going to be a company in this bag that'll be like a unicorn, $1 billion company." Actually, the unicorn word didn't exist, $1 billion dollar company I think is... and I was like, "What are you talking about, Paul? These are kids." Literally, back then, it was like half the people were off for the summer from university where... billion-dollar companies did not just happen, where there are people who were off for the summer, but he just had this such strong belief. And then every time someone pitched an idea or every time I pitched an idea, it was always like, "Okay. How is this going to disrupt Google? What's the big thing here?" And it just gets you in this mindset of going like, "Yeah, maybe I can do that." It just gives you this... I think that's probably PG super powers, having this way of seeing how something really small could be huge and making you believe that that is possible for you.
Brett: Awesome. Well, thanks so much for spending the time.
Immad: Yeah, thanks for having me.
### Inside the ex-YC partner’s $15B self driving car company | Qasar Younis
URL: https://review.firstround.com/podcast/inside-the-ex-yc-partners-15b-self-driving-car-company-qasar-younis/
Last updated: 2026-02-03T17:40:53.000Z
Qasar Younis is the co-founder and CEO of Applied Intuition, a leading vehicle intelligence platform that helps companies develop and deploy autonomous systems at scale. In June 2025, the company raised $600M at a $15B valuation. Before Applied Intuition, Qasar was the COO and a group partner at Y Combinator, and earlier founded TalkBin, which was acquired by Google. He’s also held engineering roles at General Motors and Bosch.
In today’s episode, we discuss:
• The two founder traits Silicon Valley undervalues
• How to get 1–3 extra months of work done every year
• Lessons from YC on pattern matching and founder feedback
• The battle-tested startup formula Qasar used at Applied
• Why co-founder fit is make-or-break
• Applied’s playbook: vertical SaaS, product-led GTM, and leveraging VC networks
• Why Applied went multi-product in the early days
• Contrarian takes on startup culture, compensation, and cost control
• Why domain expertise is making a comeback
• And much more…
Referenced:
• Applied Intuition: https://www.appliedintuition.com
• Ansys: https://www.ansys.com
• Bilal Zuberi: https://www.linkedin.com/in/bzuberi
• Bosch: https://www.bosch.com
• Elad Gil: https://www.linkedin.com/in/eladgil
• General Motors: https://www.gm.com
• “Google’s Acquisition of TalkBin”: https://techcrunch.com/2011/04/25/google-acquires-talkbin-a-feedback-platform-for-businesses-thats-only-five-months-old/
• “High Output Management”: https://www.amazon.com/High-Output-Management-Andrew-Grove/dp/0679762884
• Kyle Vogt: https://x.com/kvogt
• Marc Andreessen: https://x.com/pmarca
• “Only the Paranoid Survive”: https://www.amazon.com/Only-Paranoid-Survive-Strategic-Inflection/dp/0385483821
• Paul Graham: https://x.com/paulg
• Peter Ludwig: https://www.linkedin.com/in/peterwludwig
• Sam Altman: https://x.com/sama
• TalkBin: https://www.crunchbase.com/organization/talkbin
• “The History of the Standard Oil Company”: https://www.amazon.com/History-Standard-Oil-Company-Volumes/dp/1519455860
• Waymo: https://waymo.com
• Y Combinator: https://www.ycombinator.com
• Zoox: https://zoox.com
Where to find Qasar:
• LinkedIn: https://www.linkedin.com/in/qasar/
Where to find Brett:
• LinkedIn: https://www.linkedin.com/in/brett-berson-9986094/
• Twitter/X: https://twitter.com/brettberson
Where to find First Round Capital:
• Website: https://firstround.com/
• First Round Review: https://review.firstround.com/
• Twitter/X: https://twitter.com/firstround
• YouTube: https://www.youtube.com/@FirstRoundCapital
• This podcast on all platforms: https://review.firstround.com/podcast
Timestamps:
(01:26) Two founder traits Silicon Valley undervalues
(04:23) Gain 1-3 extra months of productivity yearly
(05:52) Why founders should read outside the startup canon
(07:27) Lessons from YC
(13:44) Why it's harder to start than to quit
(15:52) The moment you become a real founder
(20:24) How great founders master luck
(21:46) Qasar’s battle-tested startup formula
(25:37) The founding insight for Applied
(31:42) How Applied expanded beyond automotive
(38:05) Why Applied went multi-product early
(45:45) What no one says about startup secondaries
(49:02) Why being cheap is a startup superpower
(51:04) The myth of "competition doesn’t matter"
(53:50) Early scrappiness: The Sunnyvale house setup
(54:50) Why domain knowledge is making a comeback
(58:32) The mentors who shaped Qasar
**Brett**:Thank you for coming on. I'm excited for the conversation.
**Qasar**:Thanks for having me.
**Brett**:What's your current thought in nature versus nurture as it relates to great founders?
**Qasar**: I think just in terms of hiring leads and stuff like that, I mean, the company's at a certain scale that we talk about this in terms of an individual person and head of design or individual person of head of sales or something like this. I think I'm more and more in the belief that, I'll address the nature versus nurture thing after, but either you got it or you don't. I think that we've swung so much into everybody can be everything and it's just as long as you watch enough YouTube videos, you can be it. And I think we have natural proclivities and natural strengths and weaknesses.
In terms of, for me, in specific, I got into the startup game at a purely practical level of, grew up poor and I kind of deduced at age 14 that ownership is the way to go. And I grew up in the Detroit area, in Warren, and which is Eminem's hometown if you like rap music. So, it wasn't Silicon Valley. So, it wasn't like everyone's starting companies and things like that.
Saw my dad start a company, he is a laborer, so he's just working at fairly unskilled jobs. And then ultimately when a bunch of jobs went to China, we grew up in Michigan, he ultimately started his own small business of one, which he still runs today, which is hugely informative to me in the sense of I see he got his dignity that way. He really became the master of his own destiny. And I think, probably to this day, I still have some level of insecurity around, got a weird name. I didn't spend my whole career at General Motors. I went to General Motors Institute undergrad. You used to spend your whole career at General Motors or at Google and you get to a certain point and your name is just kind of a weird name and they don't promote you.
And whether that's a true thing that happens or just an insecurity that minorities have or people who feel marginalized have, I think that played into my brain as well. I was like, I can be the master of my own dominion by starting something, but fundamentally, most fundamental, this is the path to wealth. Then over the years I basically learned all the traits. I mean, even at post-business school ... So, I was an engineer originally. Then I went to business school. Post-business school, for a couple of years I worked for a holding company of a hedge fund, and I did that because I was like, "I need to know finance. If I'm really ever going to really run a company, I need to know finance." And so for me, I think it's a mix of both. I mean, I think my personality ... This is the job I'm the best at, for sure.
I worked at large companies for over 10 years and I was a good employee, but I don't know if I could have made it to this level of success in that thing. So, I love this job. So, that's the nature part of it. And the nurture part of it is like, I'm doing it for a practical reason, which is it gives me control over my own destiny. I think it was like, Bill Gates has this line about whatever you're obsessed with when you're in your teenage years is kind of a good indication, and I was obsessed with working and not being poor. I mean, I got my McDonald's job at 14 and I worked multiple, two jobs all the way through college. Yeah, I mean, I just worked a lot. I've worked seven days a week for as long as I can remember. I've never not worked seven days a week. So, whether it's actually having multiple jobs or having one job where you work all the time.
Even, you just do the ... Forget the seven-day week, you just work 10 extra hours, per week that compounds in significant ways. In an annual basis, that compounds with three extra months. And Brett versus Brett plus three months—Brett plus three months, even if you waste two thirds of the three months because you just hang around the office, you're drinking coffee or whatever it is, just an extra full month worth of work.
There's two things that I think the Valley kind of underestimates on founders, or under, let's say, indexes on founders. One is work ethic and then the second one is being well-rounded. So, that was always in the back of my mind, it's like, I need to know all these different functions. So, how do I get that broad experience and, technical and non-technical?
**Brett**: Share more about the point about being well-rounded.
**Qasar:** So, I'm in the school of business that building a company and making it effective, by reading Roman history you actually learn how to build a company. I really believe that. And that's the well-rounded, like, knowing what good art is makes you a better founder. I still read a lot. And I don't read the airport books which are relevant for the whatever, high-growth hacks. That's not the content I'm consuming.
The closest would be something like The History of Standard Oil, which is kind of a business book, but it's written in 1905\. But really things that are just not in this universe, whether it's great music, great art, great ideas, they're all outside of the domain of your job.
**Brett**: Can you point to something when you were reading about the Roman Empire or Standard Oil that translated to the way that you think about building a company, where it's not like that, it's just these kinds of residual things that sit in the back of your head and you can't possibly explain?
**Qasar**: I think it's that, it's the latter. And books like Andy Warhol's autobiography, how does that impact? You can see patterns. The important thing is consuming high-quality content, because if you consume low-quality content, you're going to get low-quality ideas.
And so, then the question is how do you find high-quality content? For me, it's like the older the stuff, the better, because just time has filtered out a lot of the, let's say, the trend and the short-term noise. And so, it's simply just read books that are over 25 years old.
**Brett**: At some point in the future when there's a book that's written about you and Applied Intuition, what do you think the big idea that somebody might take away or the thing you would hope that they put it down and the take-home value is what?
**Qasar**: Probably, I mean, on the product side it is like this concept of intelligent vehicles and the broad category of vehicle intelligence, which is a category we're in many ways creating and we occupy, which is the intersection of things that move and AI. So, people sometimes say that's autonomy. Autonomy is definitely a big part of it, but there's in-cabin experiences, the engineering tools that you use to build these intelligent systems. I think we called that, I think, before a lot of people. I think we saw that a long time ago. And that's one.
I think, number two, building up actual business. And what I mean by that is we are a profitable company, we've been for many years. We've grown. We've raised hundreds of millions in the company's history, close to a billion. We have all of that in the bank. That is a functioning business. And so, I think building a high-growth company in a way that's sustainable, I think that that's probably the second thing.
And then the third thing is just the way we operate inside the company is typically we have folks from every autonomy company, every AI company, every big software company. We're about 1,000 folks in the company. And consistently people say this company's just run very, very differently. And so, we use software to do that. And folks come from, I would say, high-culture companies like a Stripe, say this is another level of that. And I think that story of the innards of the company, I think are all unique. And all that I think contributes to our success as well. But who knows if that book will be written? TBD.
**Brett**: So, winding back the hands of time a little bit, in the mid-2000s you were at YC, you were COO and group partner there for a number of years, and then you obviously started Applied Intuition. Did you decide, "Okay, I want to go build another company," and started to explore? Did it not occur to you until you bumped into this problem space?
**Qasar**: I just fundamentally see myself as a founder and as an engineer a lot more than I see myself as an investor or an employee or something else. And then there's like, well, let's see if I'm actually good at this stuff in a real way, because now I'm playing on easy mode. I have a huge network of people. I have my own established brand. I can raise money, all that stuff. I worked at YC, I saw lots and lots of patterns.
And so, to be very, very clear when I go into YC, I'm expecting to start something again. And so, as I'm at YC, all my assessment of companies is me always thinking the other side, "How would I do this? What's right about this? What's wrong about this?" And places like YC are fantastic for that. I think they're not maybe as good if that's the only thing you've done, but they're really good if you've been a founder and then you start doing pattern matching or some differences.
I think if you, let's say, you come out of college and you go straight into being an associate and then you become a partner, I think you don't realise that what investors see and what actually happens on the ground is actually quite different. And so, when I'm assessing companies and advising companies at YC, I know there's this delta that I ... It's kind of like, Mark Andreessen was our major investor when we started the company and he is formally the only board member we have, even though we're like a pre-IPO company, which in itself is a crazy, weird thing.
But Mark has been enough of a founder where he knows where his advice ends. He's like, ah, like, he's going to think about the problems that we have for minutes to tens of minutes, and we're going to be thinking about it for hundreds of hours. So, it's like, what is he going to uncover that we haven't ... So, his biggest value is going to be pattern matching. His biggest value is, "By the way, I saw this at Coinbase, I saw this at Facebook, maybe you guys should try this." But it's not like, let me actually get into the whatever, management of an executive. It's just like, well typically a head of engineering is going to act this way.
**Brett**: You mentioned you explored the full-stack robotaxi idea. Talk more about that. How seriously did you look into it and why did you decide to shelve it or not go after it?
**Qasar**:Yeah. So, this was before all the robotaxi companies kind of existed. So, seriously looked at it in terms of pitched a fund, right? Like, that serious. And then talked to Paul Graham at YC about it and then he was like, "I don't know if it's a good idea or a bad idea." And at the time, my wife was pregnant with our first kid and he's like, "I wouldn't start a family and a startup at the same time." And he's like, "Why don't you come to YC and basically get a job?" And so, we weren't sure enough, where that did dissuade me enough to go take the job. And my co-founder, Peter, he stayed at Google and he became one of the founding engineers at Android Automotive, which has a huge impact also on Applied Intuition's founding story.
And so, it was, I think if you're really convinced that this is a thing, you probably don't just let a couple of people say, "This isn't a good idea," dissuade you, but more practically, we just didn't see a good business there. You're going to spend long time, we estimated five years, which ended up being short, to ultimately replace a driver who is really cheap. And it's like, that just doesn't make sense in terms of the sensors are going to be really expensive. And it's like, well, probably one day the sensors will be cheap enough and all this stuff. It's like now we're in a dangerous game. It's kind of like being short a company, the markets will be irrational longer than you can be solvent. So, that all turned us off from it.
I mean, we were very practically were like, "This is not a good business. Let's not do this." Yeah, it's not only about passion. You have to also think is this thing going to work? You have to be quite objective. And if there's anything that founders have a really hard time getting feedback on is are they being objective? Because all of the training and all of their instincts have told them, "Generally speaking, people are not going to get your thing, so just keep at it." Sometimes you actually shouldn't keep at it. It's a bad idea. And that's tough. That's tough.
**Brett**: So, that's a very interesting and accurate point. It's like the most conventional advice that's pushed all the time is just never give up. And I think that, yeah, there's amazing stories and then there's 99% of people that destroyed themselves for 10 years smacking their head against a wall.
**Qasar**: It's more difficult to quit than it's to start. Absolutely. Because the pragmatic reason or the practical reason is unlike taking a job ... You take a job and you go work at Meta and you quit three months later, you get fired six months later. There's a thousand reasons. You can rationalise that and your cohort and your friends can rationalise it and your loved ones can rationalise, your family can rationalise it.
When you start a company, it's all on you, baby. And that's like, it's like, you win, you lose, it's all on you. And it's a very personal thing. When the company's just the founders, what is the company? It's just the founders. So, there's no distinguish ... It's literally a one-to-one match. So, then it's like, okay, well, so when the company fails, I fail. There's no hiding in that. And so, people will rather than face that reality, they will just continue to try to will it. While at the same time, everyone is saying, it's all about just willing your way there.
Yeah. I mean, one of the things I saw at YC were the good companies were good pretty quickly and then were good for, like, 10 years, and then they went public. This out in the woods for a long period of time, it's the exception, not the rule. The rule is the good companies are pretty good pretty quick. And also, the other uncomfortable truths are like the rule is mostly the highly educated, connected founders do better than the not highly educated, connected founders. I think we want to have this feeling that it's egalitarian, it's a pure meritocracy. That somehow brands and schools and things ... Working at Google is not meritocratic, but doing a startup is meritocratic. It's not meritocratic either. It's a different type of ... People can't basically suppress you for having a weird name, but there's still a system that exists and you have to operate within the system.
**Brett**: The original point that you made, I think is a really important one, which is that the conventional advice is you have to ignore all the naysayers or people that are critical of your ideas, but a lot of times, people are critical for good reason.
**Qasar**: Yeah. I say listen to the naysayers.
**Brett**: So, maybe expand on a little bit, what is a founder to do with that perspective?
**Qasar**:Yeah. I think the mistake you can make is taking advice from uncalibrated people who haven't done the thing themselves. Like, if I ask somebody who's in the suburb of Tulsa, who works as an accountant at a tool and die shop, "Should I start Applied Intuition?" They're not the right person to ask. But if you ask a partner at First Round and they're like, "This is not a good idea." Then that's an issue.
Now, the reality is the partner at First Round or wherever, is not going to tell you this is not a good idea, because they also don't know. All they can say is, I'm going to invest or I'm not going to invest. But there's signal there. If you get 5, 8, 10 funds that say, "We're going to sit this one out," for whatever reason, you should think about that. I think a lot of founders just don't think about it. Now, if you get three people to invest and 25 to say no, you've got three people to invest, that's fine.
But I would be really listening to advice. I mean, one of our strengths as a company, talk about writing a book, feedback is a big part, not only giving and taking feedback, but as a company in our strategy. I mean, literally right before this podcast, all-hands with the whole company, and we talk about very openly, "These are the faults in the company. These are weaknesses in the company. We need to address these." I talk about it, the leads talk about it. And you're like, if you sat in those companies, we had new employees starting all the time and they're just like, "There's doom and gloom there." And it's like, yeah, because we have to have a clear eye because success is a lagging indicator. The fundraising, we did this $15 billion round and we're a profitable company, we're on the way to one day being a public company, it's like, "Oh, you've already made it." And it's like, no, that's right when you start failing.
**Brett**: And you have to grow forever, that's your job.
**Qasar**:And you have to like that. And you have to like that, right? You have to like that. But the way that you grow forever is you take feedback and you listen. And so, I think probably the biggest blind spot or one of the biggest blind spots is the founder themselves, the CEO is not actually the right person to do that thing. And no one's going to say that.
At YC, we would write feedback letters for everyone who gets rejected, right? Literally emails that's like, "This is the issue that we saw." So, if you going to interview, I don't know if they still do it, I've been gone eight, nine years at this point, but at the time we did it for everybody. Everyone who interviewed, you'd write an email, little email that'd say, "These are the reasons we didn't like..." Except when it was, "We don't like you. We love your ... It was a phenomenal idea. A great market. It's going to explode. It's just you. It's just you. Literally, if you can find somebody else to do this, we're going to fund this immediately."
**Brett**: "We'd be delighted."
**Qasar**: "We'd be delighted." Yeah. So, I think if you're a founder then you're getting this, let's say, negative feedback or even getting positive feedback, it's like how do you interpret that?
I've always said a founder is not made when you decide to start a company or even when you raise money. Your founder's made when get feedback and you interpret it correctly, about the product and the market, or just about you, about everything. So, you could have 15 people in a room and it's like some AI agentic framework and you could have one person giving feedback who's a developer. All 10 people are going to interpret that feedback differently, extremely differently.
And so, how do you know that you are actually interpreting it the right way? It's not only that you start a company, it's like you have to also be right. And if we were playing basketball, it's like, more times when I threw the leather ball through the hoop, it went in, and you threw it less, and therefore, I'm a better basketball player because I just ... How do you do that when you're a founder?
And so, I think this feedback concept becomes really, really important because you have to somehow discount some people's feedback and you have to over-index on some people's feedback, and then you know all this stuff that they don't know because they've only seen a little ... It's like this analysis interpretation is the true heart of being a founder in that way, especially in the early days. Those roles change as you grow. Feedback is always important, but your interpretation of market signals.
**Brett**: Is your take that your context loading in your brain through your whole life before you start this company, and either you have really good instincts for taking all this data or you don't, or there's heuristics and shortcuts and other ways to manage that?
**Qasar**: Warren Buffett just stepped down earlier this year from his role at Berkshire, and there's a line from one his family members that said, "If Warren Buffett had gone into hot dogs, he would've been the king of hot dogs." I think there's some people who are just good at this thing.
There's another aspect to is there is luck, but there's some ability that the great founders master that luck. They figure out how to just keep getting lucky again and again. And so, what do you call that? I don't know what you call it, but it certainly exists. Some people will just say that's just nature. They just have an instinct. I think that's true. I think you practise that.
You do startups for 10 years in a row. Let's say your life mission is, "I'm going to be a founder." Just like a craftsman, if you spend a long time on it, you will just get better at it. Now the question is, there's some craftsmen who are already at the LeBron James level and they're going to get to the next level. And there's some people who are like me and they're never getting to LeBron James level, no matter how much time you spend on trying to be a better founder, being a better basketball player, being whatever.
**Brett**: So, going back to the founding moment for Applied Intuition, you spent time seriously considering building a robotaxi company before you started helping lead YC. So, what was the actual founding insight for Applied Intuition?
**Qasar**: Market timing is the biggest thing. After a good co-founder, market timing is everything. It's the beginning, middle, and end. And so, we just focused a lot on that aspect, like this idea we're going to have, is it the right time? Now, the way very practically how we ... And this is, I always say my order of operations that I had since when I was at YC of starting a company is one, you find a co-founder. Secondly, between you and your two co-founders, ideally with one co-founder, suboptimally, certainly don't start a company alone, don't start a company with four people. Again, this is the formulaic version. It's worked for me for a couple of companies. So, I continue to propose it.
Between you two or three, what markets overlap in the Venn diagram of you three? And why that's so important is then the thing that you build ends up being so bespoke to you, because then you need two people with those precise background because it overlaps. So, that's one person's idea. So, you pick the market, then the idea. So, it's founder, market, idea. Market being the overlap. Idea, and then within idea, it's like number one for us is, what is a problem? Can software solve that problem? How many people have that problem? And how many of those people are willing to pay for it through attention or dollars? It's like a formula and it's worked. I should write it down and trademark it or whatever. But I think you have to do it in that order too. It's not come up with the idea and then go find a co-founder.
**Brett**: Why is that a bad idea?
**Qasar**: Because then it's my idea and then you join, Brett, as really a glorified employee, because you weren't there at the birthing of the idea. And most likely then, the idea has nothing to do with your skills, because I independently came up with it. So, maybe it's something to do with my skills or my interest. But if we're like blank slate, first we decided we're going to work together and then come up with an idea-
**Brett**: Talk through how that instantiated itself.
**Qasar**: Yeah. So, Peter. First, decided Peter is a co-founder. We actually were going to have a third co-founder, which ultimately didn't work out, but it was me and Peter. He ended up building his own great company, which is fantastic. So, I really believe the co-founder thing is first and foremost. And I think it's very difficult to compress that into a two-month or one-month thing. You need that over many years where you see this person evolve, they get married.
I've seen people that have very, let's say, non-linear lives, a lot of problems, sometimes self-inflicted problems. It's like, wow, you might start a company with somebody like that. And when you're starting a company, you're going up the side of the mountain and you're hooking yourself to that person. They fall off that mountain, it's going to have a lot of damage to you. So, it's really important. And people don't take it with that level of seriousness, which is like, I am really connecting with this person because they're just like, "Well, I'll just fire them." No, the company then fundamentally is falling apart.
And then another thing is Peter and I's parents, Peter's parents and my parents live a quarter mile from each other in Michigan. I mean, when we say we grew up in the same area, we have some version of shared values without it being explicit. That stuff matters. I mean, our relationship unequivocally transcends an economic boundary. It is a personal, intimate relationship where we really respect each other. And I think you talk to anybody at Applied Intuition who's worked here or was working here, they'll often refer to like, "Oh, the balance between Qasar ... Literally if Qasar was the sole founder, it is a bad company, and if Peter's the sole founder it is a bad company. They really complement each other really well and together lead the company." So then from there, we both know automotive, we both know software, and that's the area that it leads us.
**Brett**: And was that obvious that you were going to start exploring that or you started with the aperture was wider and you narrowed?
**Qasar**: Aperture was wider. So, first we said the first kind of view is what markets are growing? Because this is another kind of, again, if you're a wannabe founder, you've got to go to a market where it's exploding in growth. You go to a market that's like dentist CRMs, that already has seven players, it doesn't matter that you can do it way better than them. It's tough to penetrate that market.
Like all startup advisors we're so general, you could have an AI CRM today that could maybe displace all the existing players, but generally speaking, there's a big competitor in the market, competing against them is very, very difficult. And so you want to typically go to markets that are growing. And so, at the time, markets that were growing were voice, were crypto, it was AR/VR, and it was autonomy. And the autonomy one, after actually building demos and other products and we're like, "Well, what are we doing? We don't know shit about voice. We're just unnaturally pushing ourselves into this thing. The thing that we really know is software. We really know the car business. Autonomy is the growing market. Let's learn about that."
And then in terms of timing, the idea that we had or a couple of ideas we had, which I think have turned out to be really beneficial, is one, is we didn't believe raising lots of money and doing research was the right answer. And which a lot of these self-driving companies, like I said, the humanoid and gen AI companies that are not doing, some of them are doing.
And then secondly, our view was, just getting into the details, like, how do you actually build a product that's going to be used when you're talking about this ecosystem where you don't know is this self-driving car going to win? Is it going to be self-driving truck? Is it going to be a college shuttle? Is it going to be the Tesla style? Is it going to be Waymo style? It's like, "Oh, let's build a horizontal company and basically fuel the ecosystem because we don't know when..." The biggest risk in our business was, when is autonomy going to hit? Our view was like, if you can survive long enough to where autonomy technology will converge, then you will not only have momentum, but you will be there at the right time when the market is ready to turn, but we know the market wasn't ready to turn in 2017.
**Brett**: When you started to point your attention to automotive and autonomy, what was the actual work that you were doing?
**Qasar**: So, number one, just talking to people. I mean, you got to remember, we come from the ecosystem, so we also know what the selling dynamics are, et cetera. So, we started with tooling. It's still one of the big parts of our business is just engineering tools they use to build and test autonomous systems fundamentally. And then, broadly just software. You're deploying software in a vehicle. When you think about building a web application or you think of a mobile application, you have all these tools that help you make a web application and deploy a web application. You don't have any of that when you're making software for a car. You don't have even the testing frameworks that you would test the infotainment with and specifically.
So, we knew that those problems existed because we knew how to build web applications and mobile. It was like, "Oh, these tools don't exist in this other world." That's the thing. But we also knew that these car companies are very hesitant to buy stuff from young companies, from startups. They're working on five, seven-year programmes, that just doesn't make sense, right? And so, to them, to work with a little, dinky company.
And so, that early insight was actually let's sell to Bay Area companies that are working in autonomy because the size of the companies that are similar. I remember calling Kyle Vogt at Cruise and calling some of the big, big Level 4 companies, and they all said, "No. No. We'll use your tools if they exist today. We're not going to wait a year until you raise money and then build V.1 and all that stuff." So then we came back again, feedback from the market, Peter and I were like, "Well, if the Auroras of the world never use your tools, can we actually be successful as a business place?"
Actually, we didn't know at the time are they doing it the right way or the wrong way? The Cruises, the Auroras, the Argos. Two out of the three are gone, Cruise and Argo don't exist anymore. Because they're all saying no, but it's like, oh actually, the smaller companies, the Voyages and the RideCells, the Kodiaks, we're almost the same size as them. So, then if I talk to somebody who's running a self-driving company with 1,000, 2,000 employees and raise $2 billion and we say we have five people working on simulation, they're like, "Well, I'm just going to hire five people working on simulation myself. Why am I going to wait on you?" That's not the case once you go into the manufacturers where they buy tools all the time. They're in the business of building cars and shipping cars. They're not in the business of building simulators, because they're smart enough to understand that when you verticalize all this stuff, it's so expensive that literally the costs will crush you.
You take Apple, Apple spent tens of billions of dollars trying to build a car. You never even saw the design of it because this whole misunderstanding of how this business works, where these vertical costs are just so high. And it is the people who are leading these companies, they don't actually understand the market. They're very confident, but they don't understand the market, and they're very competent in the sense of they went to great schools and built great companies. And so, they think, "Well, surely I can do the same thing." But they don't know actually the way automotive works.
But the automotive companies, who they've already dismissed ... I remember the folks at Zoox saying basically, "Screw the OEMs. They're dumb, they don't understand what's going on." And no disrespect, because a lot of people work hard at Zoox, some of those folks work at Applied. Zoox raised a billion dollars, sold for a billion dollars. That wasn't the right way. And even under Amazon, we don't see tonnes of Zoox vehicles outside. So, there was a misunderstanding of the cost structure of how we're going to get this technology out. We understood those things.
And in 2017, I didn't know, and even now I'm hesitant to have opinions like this, because we could still fail. The market is not static, it's a dynamic market, but I think we correctly understood the market in that era to say, "We don't know when this is going to come to fruition. We think that manufacturers are going to be a key player in this. We want to try to hook ourselves to the manufacturers because they're not going away, and it doesn't really matter that the vertical AV companies said no."
**Brett**: Were you worried that you'd have five customers? The TAM is maybe they could all pay 500 million or a billion a year?
**Qasar**: I worked at Bosch, the large, Tier 1 automotive supplier that does ... Just in automotive, they do like 65 billion in revenue a year. I mean, companies that are at scale that are just even hard to imagine, that are in 100-plus countries globally. So, we knew the market existed. Even, I think a misunderstanding that people have who are not in the car business is, they think, well, there's like 40 or 50 brands globally and that's the whole market. And it's like, well, individual brands, individual companies, like a Stellantis has like 12 brands. Individual brands within ... 14\. Within them will have lots of product lines and then each of them might have their own self-driving team.
A company like Volkswagen has 600,000 employees. That's 600,000 different views of that company. It's not just one company. And so, you have to understand how can we sell? And again, it's getting really into the weeds. I could do an hour on how automotive is different than other businesses, but we know those things. And so, I think we organised our go-to-market motion and we organised our products to fit into that. And so, first bootstrap with the Silicon Valley companies and then ultimately springboard into the traditional OEMs and then use them as your long term.
And then, now we do things outside of the automotive industry. We got into defence about a year-and-a-half after we started, and then we did construction and mining and then commercial trucking. And so, we got into all these adjacent industries also to diversify the company, right? So, it's not just you got to get three car companies.
**Brett**: So, who was your first or second customer and what did you decide to build and sell to them and why?
**Qasar**: Yeah. It was the local, small-barrier companies. It was like the Voyages of the world who ultimately was acquired by Cruise. And we built them their engineering tools that they would use to build and develop their autonomous systems. So, it was, in that way, a very traditional Silicon Valley company.
I think, you fast-forward today, the company is a mature company doing hundreds of millions in revenue, has been profitable for a number of years. We have lots of different products and lots of different areas, but that was the original wedge in order to get the right to sell. Sometimes people call us a vertical SaaS company. I don't know if you remember this company, Viva, or some other companies like it, which they're like, they supply almost everything in their vertical. And that's what we do. We're a vehicle intelligence company, so we supply all the things that you would need to make your car, truck, tank, plane, drone intelligent. And that's tooling, that's an operating system, that's autonomy itself. I mean, it's just like, we go from just tooling to a full mature line of products.
**Brett**: What was the path from the first couple very small Bay Area companies? Then what was your fifth, sixth, seventh, eighth customer use case? How did you go from a 20-person Silicon Valley company to really what you would consider your first important customer?
**Qasar**: So, one is those are still real customers and we have customers to this day who come from that cohort of the first few companies. So, they're real in their own way. The key thing that we get is we just mature as a company in a product set.
We are a company which only gets judged on our products. We are a hard tech, software only, enterprise company. The only analysis is, is this product do what it can do and do it in a fashion that's promised? And so, it was literally just building stuff. And those early customers, they not only give you dollars, they give you a lot of feedback.
**Brett**: How did you know that building something for one of these Silicon Valley companies and delighting them was going to translate to GM or whatever?
**Qasar**: Yeah. Because they're working on similar problems, which are autonomy problems. There's a different level of automation. Again, now we also know enough about autonomy. You have to know, okay, what is level two system? What is level four system? At the time, the view was level two and level four are never going to converge. They're very different. Today, that's a very different view. There is an ever-increasing view that actually the strategy of a robotaxi and the strategy of a passenger car autonomy are going to collapse in China, it's showing that more and more. So, we had some of those ideas, and they weren't fully fleshed out, but the view was we can supply tools to both sides, on the ADAS side and the autonomy side. On the car side, and the truck side. On the tanks, and on the what are passenger vehicles. And so, all of that gave us information as we got more information, more feedback. Then you build your next-generation product, next-generation product.
And so, at some point the product is good enough that you can actually pitch a General Motors, which we did in a formal RFQ that 28 companies bid for that tooling business, well, many years ago now 2018, 2019\. And we won against big companies like NVIDIA and Ansys. And we were a small company at the time. So, then it's just literally your products are good and then that's how you win, and that's the business that we're in today. We have to build great products. Now, people are not like, "Oh, should we work with Applied Intuition?" They're just like, "Are the products good? Are they well-priced?" And then, now the fear is will there be an upstart that can disrupt us or will any technical changes change the value of our product? So, that's the kind of things that we're paranoid about.
**Brett**: So, how long after the company was started did you get your first big account?
**Qasar**: Depends on what big is. I mean a year in, we thought we were getting some big accounts, which would be a million dollar account or something like that, over a couple of years. Now that doesn't move the needle, but yeah, it's all relative, right? It's like, even today it's like, what big is today might not be big three years from now.
But it was true, I mean, from fairly early on in the company we got traction. It wasn't this, was like, we're like, "Whoa, is this going to work? Is this not going to work?" It's worked pretty well. I mean, we've preserved all the capital we've ever raised in the company's history, which is an evidence that the company is an efficient, cash-generating entity, as in the products we build are wanted by the market and the market's willingness to pay us more than it cost to build the products. And then we just save all that money for an eventual war, which is maybe there's a competitor that comes or something, where we can deploy hundreds of millions of dollars, maybe billions of dollars into a specific fight. But yeah, luckily we haven't had to do that.
**Brett**: Maybe you can talk through how you sequence the different products that you built in the early days and the different customer segments?
**Qasar**: I think, I mean, this is the YC kind of way, which is always having conversations with customers and having that view that okay, now we went from our first product being a planning simulator and then to being a perception simulator, and then to a data logger. Literally conversations. And from the early days of the company, as a founder you kind of have to make a decision of are you going to be a single-product company or are you going to be a multi-product company? And early days we decided to be a multi-product company.
Now, why don't all companies become multi-product company? It's really hard to find product-market fit again and again and again. It's really hard to manage dozens of products and make sure they're all the right products and the market needs them and you're not just holding onto them because you started them four years ago, five years. This is a much more complex business. I mean, one thing about Applied is, it is a complex business. We have many products across many geographies, in many verticals, and just the permutations are pretty significant. But yeah, we built the muscle for it. We built the muscle to take feedback and then act on building product around that feedback.
**Brett**: Is there anything else you think you did uniquely that made you really successful as a multi-product company?
**Qasar**: I think in the objective way that people assess talent and stuff, I think whether it's experience, brand, et cetera, we have a lot of great people. I think we've managed to retain them and have low attrition and all of those things, and low turnover, but that's kind of the unwritten story as well. It's like we just have really, really high-quality folks. I've seen actually some folks though that have left the company and not sometimes be as successful in a new company that might even be, let's say, it's a robotics company or something like that. The reason being is also the aggregate culture is something we've also focused on a lot.
And it's something that is talked a lot about in Silicon Valley, but often the reason it's not implemented well ... It's kind of like, why doesn't every founding team do a good fundraise? Really hard to pinpoint. Is it a bad idea? Are they bad communicators? Were they literally entering the market in a bad time? Did they mis-price? Did they not have the right brands? Did they not have the right traction? There's many reasons that are the origin of why a fundraise isn't successful.
There's many origins of why a culture is not good, but when it is good, it's apparent. And I think we've done a lot to make a really strong culture. So, even the people who come in, we're just maximising what their potential is within the company. Some people call us a barrier, a bridge water, I've heard that as kind of a missive. So, it's an intense culture. It's not a work-optional culture. I mean, on the spectrum of Google to working for Elon at X, we're more on the Elon, X, we're not anywhere near there, but we're more towards that than being like Google. And even though we've recruited so many people, we've recruited hundreds of people out of Google, but we're not like Google in that way.
We're much more of a intense fighting company. And that culture then ... And it works really well in our heavily competitive field, because we're a global company. So, our competitors come from all over the world, right? And so, we have to play to that.
**Brett**: How old was the company when you launched your second product?
**Qasar**: A year. Under a year.
**Brett**: Do you think that's one of the reasons ... Is there something causal there where you just developed the muscle so early on, you didn't wake up at year five and say, "Okay, we're ready to launch our second company"?
**Qasar**: The second product, yeah. Yeah. I think I would do that again. That is the right move. We did it out of a practical reason that the first product that we were building had covered so much space that the customers were still paying for a much richer product. So, our ability to build fast in those early years is really, really important. And so, we had built a mass of a product which became our second product, that we could actually charge for it as a separate, distinct product. And it's kind of like an amoeba that's just kind of a cell that splits, and then you have your second product. And that kind of blobbing was the early product. And at some point you just have that muscle and then you're like, that's a new area.
I talk about an onboarding for new employees. Amazon isn't a great company because it's really sharpened shipping books. The books thing is long in its past. Nobody talks about their ability to ship books, but that's where the company started and that's the core, original, embryonic, single-cell organism and then that ultimately it implodes to AWS and all the other product lines they're in. So, we very much intentionally were going down that path.
I think as a founder, I would try to do that. It's not easy though, because you have limited resources, so you're trying to run and if the first product isn't succeeding, the natural reaction is going to be, why are we splitting the six engineers that we have on two products? On the first product, everyone go on the first product. So, you have to build fast and you have to build the right thing and it has to get traction, and then you can invest in a second product.
**Brett**: When you were talking to customers in the early days, were they just building all this stuff from scratch themselves? Like, there wasn't a true competitive set and you were creating this new thing for them to buy?
**Qasar**: Yeah, that's part of it. There were competitors. There were a bunch of sim companies at the time and north of five, I don't think any of them exist. I mean, if they exist, they exist in name only, they just are kind of zombie companies.
Yeah. They had options. And I think we did a good job at winning all those deals. And so, why is that? We had the right products and we would turn around feature requests fast, fast, fast. So, it was like just impress the customer. It's like all the blocking and tackling build the great product company.
**Brett**: When you were talking to early customers and you were explaining and demoing the product, did they immediately get it and they wanted it and there was pull, or it didn't feel like that in those first year or two?
**Qasar**: They already knew they needed tools to build these autonomy products. If you're coming out of a Waymo, or a Tesla, or somewhere, you're like, "I had all these tools, now I got to rebuild all those tools." And Mark Andreessen, when he was funding the company in that first round, he said, "You guys build all these tools. That might be as difficult to do than doing the autonomy thing itself. Why wouldn't you just do self-driving? Because the tools are as hard to build as the self-driving thing. And it's like, the reality is we can get paid for the tools, we can get paid for the self-driving thing." And that turned out to be good. And again, paying is not only dollars, it's also feedback.
**Brett**: What about this market opportunity and the way that you've run the company has allowed it to not be massively cash consumptive?
**Qasar**: I mean, I think number one, where the Valley is really perturbed on compensation is historically the right way to incentivize in startups was low cash, high equity, and get rich through the growth of the stock. Somehow, because of large fundraisers, which really come from lots of funds existing, which has a downstream impact on valuations increasing and round sizes increasing, founders have just a lot more cash on their hand. And so, what they do is they turn around now ... And you can just look on levels, FYI, you get paid more to go to a startup than you do at Google or Facebook, and those companies generate billions in cashflow a month. So, you wonder why all these companies raise money and are never profitable, it's because they actually have a really bad compensation strategy.
And so, how do we, in a very competitive ecosystem, play against that? Our stock price has grown. We recently did an exercise, vast majority of our employees are on the 99th percentile of compensation, but they're not there from their first offer. They're there because the stock price grew. And that's the right way to do it, right? That way you get stock while it's cheap, you contribute to it, the company gets better and then you get rich over it.
Instead of what the expectation normally now is, "Pay me for that growth upfront." And the founders are like, "Well, yeah, I raised $150 million, I'm going to pay." I bet you if you did this simple exercise of the top 10 most compensated people in a company, you could see which company's going to be successful, which one's not, because there's some companies in their top 10 employees or their top 50 employees, I'm positive a bunch of these big AI companies, just their top 10 folks are over 50 million in compensation, just 10 employees.
Same thing as like, you're making 150 million in ARR, 200 million ARR, just your 10 people are consuming a lion's share of that. And I think it might be even worse, as in companies aren't making any revenue and their top 10, top 20 employees get egregious returns. And so, then the little bit of the fraud that's happening in Silicon Valley, which people don't often don't talk about is goal is raise big rounds, take some secondary, and YOLO. And if the company goes to zero or the company has a big down run on the future, you quietly step out of the CEO role and you took 10, 20, 30, $50 million in secondary.
And in any other industry, if we're working in real estate, and you gave me $100 million to build a skyscraper, or you gave me a billion dollars to build a skyscraper, at the end of it, I liquidated 10 of it for me and my staff, or 20 of the million, me and my staff, and the skyscraper was never even attempted to be built, you would be arrested for fraud. Like, you literally raised money, paid yourselves, and you didn't even buy property for the skyscraper you were supposed to build. You, quote, unquote, "lied to investors."
In our ecosystem, what you can easily do is you can just say, "Well, we had these ideas, they just didn't work out." And so, I'm not saying that it's like we need to send the SEC here into Silicon Valley and start knocking on doors. It's just that the incentives are not there, in many ways, to build actually a functioning business. They're just not. And so, we tried to build a functioning business. That's the reality.
The other big thing is, is a lot of times, folks, I alluded to researchers early on, a lot of times ... Forget research, a lot of times people who are managing these companies which are worth hundreds of millions or billions of dollars, don't have that experience. And this is part of the Silicon Valley way, the Steve Jobs at 19 starting Apple, but now the ecosystem is way more mature and actually having some experience might be relevant. I don't think you can go back to the '90s where it's the professional CEO who comes in and fires the engineer, but there are right ways and wrong ways, and it's just tough. There's no simple couple of lines you can say that makes a great company or makes a company fail. For us, we kept that in focus, make this a viable business and it's kind of worked out. There's a parallel universe, Applied Intuition doesn't work out, and we're not even on this podcast. So, you can't over-extrapolate on one person's views because I'm just so over-nexing on my view of the world.
**Brett**: In the early days, did that just translate to cash comp was much lower than most other companies, and thus, burn was much lower?
**Qasar**: That's a part of it, for sure. And just like, we didn't waste money. Also, compensation is only a part of the formula. On the low end it's maybe 50%. High end, it's maybe 70%, depending on software, hardware, a mix of company, et cetera. But it's not the only thing. How you do business trips, how you pay for office ... I mean, we in this office pay an X amount for rent per square foot. There's a very well-funded, high-growth company across the street that pays 2X, literally two times the per square foot. I know the founder, it's a late-stage company. I called him and I said, Dude, you're screwing up the local real estate market by not negotiating here. It's like it's actually way cheaper, because the landlords are talking to each other." And he said, "Ah, this is well below the top 100 things I care about. Who cares if I pay a little extra on a building in Mountain View?"
And so, it's just like that's a prioritisation as well, right? It's not a simple silver bullet, but we are cheap. It's one of our core values. Be cost conscious. It's one of our core values. Remember, business, revenue, expenses, profits. We talked about the revenues. We keep an eye on the expenses, and we've got profits on the other end. I think a lot of companies just don't, they don't really think about the profits or revenue, they don't really think about the costs. And they're like, "We're going to build great technology. It'll work out." And sometimes it really does, in incredible ways. Amazon, Tesla. Sometimes it doesn't. So, it's like you have to find out what your market is and your products are.
If we had three super well-funded competitors, you bet your bottom dollar we're not a profitable company. We also, early in days, even these podcasts and stuff like that, I just didn't go on a lot of them. I didn't want to reveal our strategy and our secrets. And now, we have enough momentum and we do it for recruiting and all these other ... Brand building. My marketing people tell me to do these things. And historically, we just didn't.
**Brett**: You said there were other companies doing something similar, but what were you figuring out or what was the reason their weren't 70 YC companies doing the identical thing? Talk more about that, because I think a lot of the general idea that competition doesn't matter, just focus on the customer, I think is quite misguided.
**Qasar**: That was the case in 2005 and 2010 when it's exotic to build a company. Now we're in the industrial age of venture capital. There's a VC who's a vice president. We are when the Rockefellers were in the White House. We are when the Carnegies ... Silicon Valley has become this institution which runs the country in a very, very real way. And so that means, which you're exactly saying, many more startups, many more dollars, and many more competitors.
So, even from 2016, that's a different ... Here in 2025\. So, we didn't know anything more, I feel like, than our competitors. And I feel like some of our competitors are actually smarter and better than us. And the reason we survived, I think, is we worked more, we worked better, and then we got our products built faster and took the feedback more correctly. And then we got luck. We mastered some of that luck.
And it's like one of these ecosystems ... This being venture-backed Silicon Valley companies, one of these ecosystems, when you get just a little ahead, if you keep it, you can become the number one player. I mean, you look at in the code completion universe of Cursor, we did a whole internal evaluation with hundreds and hundreds of engineers of all the products that are available. And Peter, my co-founder, in an all-hands, I don't know, six, nine months ago, whenever, when we ultimately concluded that we as a company are going to use Cursor, I said, "Okay, we evaluated all these companies. These are the pros and cons, et cetera."
And I asked, "Well, I just hear Cursor from everybody. Is it the really best product or is it incrementally better?" And our head of infra and our CTO are like, "Definitely, incrementally better, but incrementally enough where we're going to pick it." So, then it's like, but that compounds, right? That's how Cursor becomes this juggernaut over time.
So, if we had two or three really aggressive competitors, I'm not optimising for profits or even cash ... I'm going to be like, "Hey, my edge is, I know all these VCs and we're going to raise another 500 million because we have some traction." So, it's like you have to play within the bounds of the game that you are playing and who you are. We were fortunate enough to play in a game where, by staying quiet in that era, we learned more about our competitors than they learned about us. And I mean, maybe over exaggerating that. Really, we're learning a lot from our customers and we're just taking that feedback really to heart.
**Brett**: What did that look like in the first year, when you say that? Obviously, quantity of hour, you are busting your ass harder than anyone else.
**Qasar**: We all live together. I mean, we have a house. We had a house and I have a family, so I'm not living there. My co-founder is, and five of our early employees. That just gave us an extra turn. Literally, the first year was we were all in the house. And then we ultimately left there because we got to the size where we couldn't all work in the living room. Four people lived there and then the whole company would meet there.
And then hilariously, the neighbours started ... Literally one guy was walking into the house one day, it was in a cul-de-sac, and he says, "You guys running a company out of there?" And I was like, "Ah, it's just some friends working from home." And suddenly we all got a notice on our door the next day. It was like, "This is not a zone for..." Because they probably looked in the window, there's all these computers. And so that was helpful. I mean, it's so many things. I mean, I think we worked on the right things. It wasn't just raw hours. We worked on the right things.
**Brett**: Was there anything that did have a disproportionate advantage, where looking back there were a couple critical things that you got right? Or, was it just hundreds of little correct things?
**Qasar**: Peter's father and grandfather work in automotive. I went to the General Motors Institute. I mean, the pithy thing is, is we forgot more about the car business than a lot of people have learned, in this time we've been around. Peter has this line about how every dinner conversation growing up from middle school to when he went to U of M, to ultimately become an automotive engineer, about his father who was a chief engineer, was about how cars are made, what happened at the plant, how do you even catch up to that? I mean, literally how do you catch up to that?
And Peter, one of the reasons also I co-founded the company with him, I remember, I was at Google once and there was something about some sensor, we work on Google Maps, and it was like some sensor we were putting on the Street View car. And I asked him question, and to a group, and he was like, "Oh, the spec is like this, but it's not that." And I was like, "How do you know that?" And he laughed and he goes, "Just incidentally, I read the spec over the weekend." I was like, the guy enjoys reading hardware specs as a software engineer on Google Maps. And so, all that stuff plays into us, and we know the markets, got the right people, the right products, we know the market. Those are the big, big things.
And then, we had great investors around the table. You can't understate that having $10 million and Mark Andreessen on your board as the starting point didn't help the company, because it's like asking LeBron James, "Why do you think..." Well, the first thing he should really answer was, "Well, I was," whatever, "6'6", and that is a huge advantage."
**Brett**: Does it make you think that the sort of broad topic of domain experiences is somewhat undervalued in Silicon Valley? That there actually is goodness that comes if you know a space backwards and forwards?
**Qasar**: Today it is, because there's, again, the Valley is different today in 2025 than it is ever before, because now there's no idea ... I mean, you can go to an individual YC demo day and you'll see three companies doing the same idea. So, it's a true advantage because no one can get that fast to get to that knowledge.
I think broadly speaking, like if you worked in a hospital group and you worked on software in a hospital, you're going to know more if you're selling software to hospitals. Now, let's say you did that for seven years. I was in the automotive engineering for seven years, before I ever came to the Valley. You just learn a lot. You just learn a lot about the innards of this company. And we could do a five-hour podcast on automotive. I mean, there are thousands of YouTube channels on automotive. I mean, it is its own universe, and that's not trucking and defence and construction and mining. We play in all of those in a real way.
And so, what do we do then? We pattern match. We're like, "If we're going to get into defence, we got to find people who are like us in defence, whose dad and grandfather were in the military and who work at the DoD." Then we do trucking, same thing. It's like you start pattern matching to what worked in automotive. And today, that's how we built a diversified business. Also, it's not random that I lived in Japan, I lived in Germany. That's the automotive industries other global epicentres. That helps. It's relevant. I meet customers there and I have a sense of relationship to them because it's like, I actually lived here before, and they appreciate that. All those things, I think, helped at the beginning. That I think you can call it domain expertise, broadly speaking, but absolutely.
**Brett**: So, just to wrap up, we always like to end with the question of who's the person that's had the biggest impact on you in this founder role? And what is the thing that they imparted on you that's still something that you lean on or come back to, or is a part of the way you see the world or think about building the company?
**Qasar**: Yeah. I mean, I read a lot and so a lot of those influences are not people that I've ever met. Andy Grove's Only the Paranoid Survive, or more accurately for our company, High Output Management, it's kind of like the book we use to train our managers. All those are positive.
I think we take a lot of ... Honestly, we're Googlers, so we just learned a lot from Google, Larry and Sergey, and the senior managers, senior executives there. I haven't worked with Sam in many years, Sam Altman. So, I talk to him, obviously, our companies are working on things together. But working with Sam, I learned a lot from Sam in the way he thinks about technology and people. From him specifically, Sam is particularly good at understanding people. I mean, he is an incredible people person, and that's under-emphasised, he really does understand people really well.
I mean, Mark Andreessen, Paul Graham, I mean, Hemant, our Series B lead, Elad Gill, old friend, and Bilal, maybe our most impactful investor. I mean, I really liked Bilal at Lux. Now he has his own fund called Red Glass. So, there's a lot of people, right? You can actually look at all those people and they all have actually a pretty consistent, let's say, through line is they're all practitioners. I think every one of those people are founders. Andy Grove technically wasn't a founder, but also, it is relevant to my thing.
**Brett**: Cool. Good place to end. Thank you so much for the conversation.
**Qasar**: Yeah. Thanks for having me.
### Why Linear puts craft above all metrics
URL: https://review.firstround.com/why-linear-puts-craft-above-all-metrics/
Last updated: 2025-12-04T17:00:19.000Z
Inside the company’s slow and deliberate path to product-market fit
_This post is for subscribers only._
### Linear’s Path to Product-Market Fit — Quality and Craft > Speed and Scale
URL: https://review.firstround.com/linears-path-to-product-market-fit/
Last updated: 2025-10-17T04:03:18.000Z
“My design philosophy has always been that you should design something for someone. It's hard — impossible even — to design something really good for everyone,” says [**Karri Saarinen**](https://www.linkedin.com/in/karrisaarinen?ref=review.firstround.com).
That credo has also proven to be a successful strategy for finding [extreme product-market fit](https://www.firstround.com/levels?ref=review.firstround.com). Saarinen has built [**Linear**](https://linear.app/?ref=review.firstround.com) to impress one very particular someone: himself. And it turns out there’s a massive market of folks just like him — IC product builders itching for a better way to track their work than the incumbent tools can provide.
Saarinen has always had an eye for good (and bad) design. Growing up in Finland, he recalls shopping for a new bike at around eight years old and being struck by how *ugly* all the options were. “I just couldn’t understand — if you make a bike, why can’t you make it nice?” he remembers thinking. “Years later, I realized you need a designer to do that, and I learned that was a career path.”
His design instincts paired with a curiosity about software. Playing games on the [Commodore 64](https://americanhistory.si.edu/collections/object/nmah%5F334636?ref=review.firstround.com) sparked an early interest in computers, and as a teenager, he learned how to code with rented library books about HTML. His first real job was running a web dev agency for local Finnish businesses — and he soon understood how universal the need for better digital design was. “Every company I worked with was good at programming, but very bad at design. So I started to think about design wherever I went.”
Much like his childhood frustration with bike design, when Saarinen later became a principal designer at **Airbnb**, he was dissatisfied with the company’s project management software. “When I first started using it, I thought, ‘Why is it so messy and complicated?’” he says.
So in 2019, Saarinen teamed up with his Finnish friends [**Jori Lallo**](https://www.linkedin.com/in/jorilallo?ref=review.firstround.com) and [**Tuomas Artman**](https://fi.linkedin.com/in/tuomasartman?ref=review.firstround.com) to design an issue-tracking tool that devs — like themselves — actually like using.
Flash forward to today, and the founders’ thesis that issue tracking can and should be both efficient and enjoyable has resonated widely. Fresh off of a Series C fundraise, Linear has soared to a [$1.25B valuation](https://linear.app/blog/building-our-way?ref=review.firstround.com), winning over both fast-growing startups and enterprises switching from legacy software, with companies like OpenAI**,** Ramp and Vercel as customers.
In this exclusive interview, Saarinen traces the deliberate early moves behind Linear’s success, from running informal user research with colleagues at Airbnb to narrowing in on — and designing a remarkable experience for — an ultra-specific ICP (one that mirrors the founders themselves).
## Preludes to Linear
In 2011, Saarinen had his first go at running a startup with **Kippt,** a web bookmarking tool that he and Lallo initially built as a side project. Like most software products of that vintage, they launched it on Hacker News — and within a few months netted 10,000 users, which gave them the confidence to apply to Y Combinator’s 2012 batch. They got in, trading Helsinki for the Bay Area to work on the company full-time.
But beyond the initial burst of users, Kippt failed to [gain much traction](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/). They couldn’t find a viable route to monetizing — advertising only made sense with a massive user base that Kippt didn’t have, and the tool’s appeal among far-ranging personas from teachers to engineers meant there wasn’t an obvious customer group who wanted, or was able to, pay for it.
“We learned that it's really hard to turn a company into a business if you didn't set out to build one,” Saarinen says of Kippt’s trajectory.
But Kippt proved to be a pivotal first step in Saarinen’s entrepreneurial journey. The co-founding duo were in the same YC batch as **Coinbase** founder [**Brian Armstrong**](https://www.linkedin.com/in/barmstrong/?ref=review.firstround.com)**.** Coinbase’s early team didn’t have any designers, so Saarinen would often serve as a design advisor, and Armstrong kept nagging him to join. He wouldn’t take no for an answer: Coinbase acquired Kippt in 2014, and Armstrong brought Saarinen on to be the founding designer as the startup skyrocketed from a team of 12 to over 100\.
Saarinen later left to join Airbnbin 2015 as a principal designer, which is where he first had the idea to create a better project management platform for software development. He’d just begun using Jira for the first time and found the user experience frustrating. “So I refused to use it for a long time,” he says.
But realizing that boycotting the tool was hardly productive for himself or his team, he took matters into his own hands and designed himself a better version. “I created a Chrome extension that loaded up a custom CSS for the Airbnb Jira instance. I changed the colors, the styling, the hierarchy of the views and the screens, and removed stuff I didn’t find necessary,” he says.
His custom Chrome extension proved popular with coworkers. “I launched it internally as a ‘simplified, nicer looking Jira,’ and it actually got about 100 installs within Airbnb.”
Several years later, Saarinen got together with Artman and Lallo for beers. Artman had moved to Uber as a software engineer, and Lallo had stayed on at Coinbase. They both had the same frustrations with Jira that Saarinen had experienced. At the bar, Artman and Lallo told Saarinen: “We use all these software development tools at our companies and all of them are quite bad. I think we could build something better.”
They suspected incumbent software was bad because it targeted people who weren’t even using the product — procurement, IT leadership — instead of ICs. “We believed that we could build something that’s very good for end users. And that would be really valuable because all the work they’re doing is tracked there, and the system can be a real-time source of truth,” Saarinen says.
Saarinen was sold from that first discussion at the bar. “When we first decided we wanted to start a company, the very next sentence was, ‘This is the idea.' We didn't explore other ideas.”
Karri Saarinen, co-founder & CEO of Linear
## Validating the idea
The three friends didn’t rush to put in their two weeks’ notice to start working on this issue-tracking startup. Instead, they spent over a year letting the idea simmer while still at their day jobs — and running light [user research](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/) with their colleagues.
They already felt deep conviction in the idea given their personal frustrations, but they wanted to validate that their experience was shared by people just like them, who were:
- ICs (not managers)
- Product builders (software developers, product managers and designers)
- Working at fast-growing startups (Airbnb, Uber and Coinbase)
“We were always the type of people that we wanted to build something for,” Saarinen says of himself, Lallo and Artman. “We weren’t in management positions — we were in high IC positions because we all loved building things. And it didn’t feel like the incumbent tool was helping ICs actually do the work, which is weird, because the productivity of any company comes from ICs like engineers and designers.”
Their approach to these conversations was informal. “It was pretty random and unstructured,” says Saarinen. They started by asking coworkers, along with other friends in the tech world, including some founders, these questions about their companies’ software dev project management tool of choice:
- What do you think is bad about this tool?
- How would you want to improve it?
- What would make you more productive?
Just about everyone had complaints, but Saarinen noticed that most folks assumed this wasn’t a problem that could be solved. “What was interesting was that a lot of people had lots to say and clearly saw a problem. But no one said, ‘I wish you could solve this.’ They hadn’t even thought about it. The incumbent in this market is like the floors in the building — you don’t think about the floors, you just walk on them.”
One of the biggest grievances that surfaced during these conversations was how slow the performance of tools were. “So that made us think, what if we can solve the speed issue? What if we can build a tool that’s never slow?” he says.
Saarinen now credits much of their early conviction in Linear to this pre-work they did before quitting to work on Linear full-time.
> Sometimes it's good to not just build immediately. We didn’t want to commit right away and move really fast. We wanted to take some time to talk to people and form our thinking around this idea.
## Designing a prototype usable by the founders
The founders spent roughly a year ideating and validating on the side, meeting every Wednesday at a bar near their offices to discuss what they had learned from friends and coworkers that week.
In March 2019, they resolved to quit their jobs and start building the product. But they didn’t want to spit out a prototype just to get it out there. They were determined to build something that met their own high bar, which meant designing a tool with deep functionality from the outset — that was also fast.
“We wanted the first product to get to the state where we could use it every day for our own basic workflows,” says Saarinen. “We were the first ideal customer. So we just had to build something nice for ourselves that actually worked.”
They were also extremely opinionated about how every nook and cranny of this software should look and feel. Saarinen says this approach to product design emulates Apple’s philosophy, which creates a universal experience of using a Mac or an iPhone by allowing users to change some things, but not everything. “**I don’t think you can build the optimal tool for anything if it’s very flexible or endlessly customizable.** So from the beginning, we had a strong opinion of what a good workflow looks like and we provided standards and defaults for how to operate,” he says.
It took the founders about a month to whip up a working prototype, then they got it in the hands of 10 friends to play with. One of those friends was also a founder whose entire 10-person team liked the product so much they all switched over to Linear. That fed the trio’s confidence enough to bring the product to more people.
> Because we did so much pre-work and pre-thinking, a lot of the architecture was basically built into the product by the time we started.
## Launching a private beta to a small cohort of motivated users
In April 2019, one month after quitting their jobs and finalizing the prototype, the founders rolled out an invite-only beta with a [blog post](https://medium.com/linear-app/announcing-linear-e64e79581d01?ref=review.firstround.com), a tweet, and a signup for an email waitlist.
“We wrote the blog post very clearly to ourselves — using the language I would want to read if I were learning about this for the first time,” says Saarinen.
In a way, this language was almost like a signal to other people who felt the founders’ pain and sought a better experience. They weren’t trying to woo as many new users as they could; instead, they were extremely deliberate about choosing the right first few people to test out Linear.
At the bottom of the launch blog post was an email signup that led to a survey. The survey asked questions like, ‘Why do you want to use it and what are your current problems?’ It was designed to seem optional, but it was actually a way for the founder to identify the most motivated and promising set of early users — who ticked every box of the ICP persona.
“We knew Linear was never going to be a fit for everyone right out of the gate. So we didn't want to launch publicly and have a ton of people checking it out for a day, and then leaving, thinking the tool sucks,” says Saarinen. “So we wanted to control the process by inviting the right types of users and then seeing what kind of feedback they’d have.”
He estimates that Linear collected around 10,000 emails on the waitlist, and roughly 10% of them became users during the first year of the private beta. He would handpick people based on their survey responses and send them an invite to Linear, adding only around 10 people per week.
Even among those vetted early users from the waitlist, not everyone loved the product. Saarinen didn’t sweat over it. “When you create something new, there's always going to be people who don’t like it, especially in the beginning. So I don’t think you should overindex on why someone doesn’t like it — you should index on why someone *does* like it,” he says.
To do that, the founders struck up a rapport with early users who were in Linear every day, emailing them weekly and tracking feedback they submitted while using the app. With the strong traction from the private beta, Linear [raised a $4.2M seed round](https://medium.com/linear-app/linears-next-chapter-announcing-our-4-2m-seed-round-2b5035602b77?ref=review.firstround.com) in November 2019.
> I wanted to find the most motivated users and focus on them as much as possible, because they could help us build this thing.
### Enable your happiest users — and squash blockers for prospective ones
The selective cohort approach gave the founders higher quality feedback from people who were using Linear just as the founders intended — to manage bread-and-butter daily software work. “**With each new cohort of 10 users, every week we basically made a new version of the product**,” Saarinen says.
He bucketed the feature sets the team built out for the early user cohorts into these two categories:
- **Enablers:** The features that will make existing users extremely happy
- **Blockers:** The features that will remove barriers for people who fit the ICP bill, but are for some reason blocked from joining
One of the big blockers the Linear team discovered while vetting waitlist signups was that they’d built the whole login process with a Google authentication — which meant folks couldn’t get set up in Linear if they didn’t use the Google Workspace. They realized that when it was time to launch publicly, they’d need to revise the onboarding process with a general email signup.
“Most of the time, in the early days, you’ll be focused on building enablers to make the group of people who are really motivated about using your product extremely happy,” says Saarinen. “**But every now and then, look at your list of blockers so that you can open up your product to a larger user group, and they can be happy too. You shouldn’t optimize too much for either — you should try to do both**.”
## Scaling up by building more for the ICP
To determine when to launch publicly, Saarinen watched for steadily high retention rates. “If you’re losing the majority of your first users, you shouldn’t launch it publicly because you’ll just lose even more people,” he says.
The Linear team kept the waitlist up for almost a year, collecting roughly 1,000 daily active users by the time they eventually rolled it out publicly. But the team never swayed from the day-one ICP of IC product builders.
Saarinen says the team wasn’t too concerned with acquiring the next marginal user when plotting the product roadmap. Instead, they focused on building out more workflows for existing Linear users, scaling from just issue tracking to an end-to-end project management platform.
“If you don’t want to grow to more customer types, you can sell more to existing customers. That’s what we’ve done,” he says. “We started with issue tracking because that’s the core need of every software company. But the engineers have to do other work, so we’ve gone downstream of the stack. Engineers need to plan their work — so we built project briefs and roadmaps. And they need to tackle customer feedback, so we recently launched a customer request feature.”
That’s meant opening up the original ICP specification of startup employees to IC builders at larger companies. He thinks there’s plenty of TAM to go around by continuing to build for IC product builders, even if it’s not quite as large as the TAM of a more general purpose tool. “My hope is that every software company uses Linear. And pretty much every company today has some software aspect,” he points out.
He notes that his grand long-term vision to help product teams work more is hinted at in the company’s name. “Ironically, these processes of building software often aren’t that linear. So the name is a bit aspirational. People want linear processes and outcomes,” he says.
### Sales as an extension of the product experience
As Linear has moved beyond startups and begun selling into enterprises in recent years, the company has added several [dedicated sellers](https://review.firstround.com/0-5m-first-sales-hire/) to the team. He admits that he was resistant about bringing in sales help at first — just because they didn’t see the need for it until they began courting enterprise buyers. “Investors told us, ‘Hey, you probably need salespeople,’ and we said, ‘No, we don’t. Who wants to talk to salespeople?’ But then we started talking to customers who actually do want to talk to salespeople. We realized as you go upmarket, buying gets more complicated. Companies have to talk to a lot of people before they can buy something,” he says.
But Saarinen insisted that the sales process clear the same quality bar as the product itself. He was determined to design a sales process that was high-quality (and worthy of [unsolicited kudos](https://www.linkedin.com/posts/agrawalpulkit%5Fokay-heres-a-simple-playbook-that-worked-activity-7344050572313935872-eaDD?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAB-cydoB958voLwCYS3c3FAJs77ualgq02g) from customers) — just like the experience of using Linear.
Saarinen thinks Linear’s approach to sales as an extension of the high-craft product has proven to be a differentiator. “Quality for us just means there’s a salesperson who’s super knowledgeable about the product. It’s not that hard or complicated, but a lot of companies don’t do that because they don’t think it’s important. They think that the rep just needs to close the sale, and nothing else matters. But we think it matters because it sets the tone for the customer and how they feel about the product itself,” he says.
> Sales is very playbook-driven, which gives you an advantage to do things differently.
## Staying small and focused as the company grows
Linear has ticked off some impressive milestones with a remarkably lean team. The founders didn’t hire their first employee until six months after launch, and only roughly doubled Linear’s headcount each year. The company sat at just around 80 people when it nabbed a $1.25B valuation along with a Series C — and [it’s been profitable](https://linear.app/blog/the-profitable-startup?ref=review.firstround.com) since 2021, just one year after launching the product publicly.
And those brag-worthy stats aren’t the result of setting aggressive OKRs, but rather relentlessly pursuing a harder-to-measure metric: quality.
> Quality is our first principle. Every other metric and decision flows from that.
Hitting profitability early on in Linear’s journey created room for that commitment to quality. “We’ve set out to be profitable so that we have the freedom to do things in a high-quality way,” says Saarinen. “What often happens to startups is that the pressure to ship or hit certain metrics means they have to compromise the quality. We think we can win this market by being quality-first.”
Saarinen says Linear’s ethos of building slowly and intentionally can be traced to the founding team’s Finnish roots. “Silicon Valley is obsessed with scale and speed. We try to be more measured — for us, speed and scale come second to quality,” he says.
### What Braintrust got right about product-market fit | Ankur Goyal (Founder and CEO)
URL: https://review.firstround.com/podcast/what-braintrust-got-right-about-product-market-fit/
Last updated: 2026-02-03T17:54:31.000Z
Ankur Goyal is the founder and CEO of Braintrust, an end-to-end platform for building AI apps. Before that, he founded Impira, a data management platform that was acquired by Figma, where he went on to lead the AI team. Ankur kickstarted his career when he dropped out of college to join the founding team at SingleStore (formerly MemSQL), a formative experience that shaped his views on building for high-bar users.
In today’s episode, we discuss:
• Ankur’s early lessons on quality from MemSQL
• How frustration with evals at Figma led to Braintrust
• Why they delayed go-to-market (on purpose)
• How to find product-market fit in a new market
• Why building great software comes from a place of “paranoia”
• And much more…
Referenced:
• Airtable: https://www.airtable.com/
• Adam Prout: https://www.linkedin.com/in/adam-prout-0b347630/
• Braintrust: https://www.braintrust.dev/
• Brian Helmig: https://www.linkedin.com/in/bryanhelmig/
• Coda: https://coda.io/
• Databricks: https://www.databricks.com/
• David Kossnick: https://www.linkedin.com/in/davidkossnick/
• Figma: https://www.figma.com/
• Goldman Sachs: https://www.goldmansachs.com/
• Kris Rasmussen: https://www.linkedin.com/in/kristopherrasmussen/
• Manu Goyal: https://www.linkedin.com/in/mngyl/
• MemSQL: https://www.singlestore.com/ (now SingleStore)
• Nikita Shamgunov: https://www.linkedin.com/in/nikitashamgunov/
• OpenAI: https://openai.com/
• Snowflake: https://www.snowflake.com/
• Zapier: https://zapier.com/
Where to find Ankur:
• LinkedIn: https://www.linkedin.com/in/ankrgyl/
• Twitter/X: https://x.com/ankrgyl
Where to find Brett:
• LinkedIn: https://www.linkedin.com/in/brett-berson-9986094/
• Twitter/X: https://twitter.com/brettberson
Where to find First Round Capital:
• Website: https://firstround.com/
• First Round Review: https://review.firstround.com/
• Twitter/X: https://twitter.com/firstround
• YouTube: https://www.youtube.com/@FirstRoundCapital
• This podcast on all platforms: https://review.firstround.com/podcast
Timestamps
(02:02) Dropping out of college to join MemSQL
(02:24) Key lessons from MemSQL
(05:54) How to build quality software
(08:51) The trick to recruiting well
(12:03) Founding Impira and selling to Figma
(19:45) How Braintrust was born
(25:33) Why good founders are paranoid
(28:08) How to recognize a real market opportunity
(33:37) The biggest mistake at Impira
(35:15) Inside Braintrust’s first six months
(40:57) How AI is reshaping Braintrust’s future
(42:32) The evolution of their prompt playground
(46:53) Fighting to stay mission-driven
(52:45) Make big bets, with extreme clarity
(57:00) The cultural choices that shaped Braintrust
(58:49) Hiring mistakes they won’t repeat
(1:03:07) What PMF really looks like
**Brett:** Well, thanks for joining.
**Ankur:** Thanks for having me.
**Brett:** I wanted to start by learning about how you got into technology in the first place. We actually met very briefly when you were at what was called MemSQL at the time, that then became single store, and you were working out of an apartment, but I don't even know what brought you up to that point.
**Ankur:** Growing up I wanted to be a doctor just like my parents and then,
**Brett:** Where did you grow up?
**Ankur:** Pittsburgh mostly. but if I tell you too much, then you'll know the secret answers to my, you know, password, questions. I wanted to be a doctor. I like my parents.
And senior year of high school I took two classes, AP bio and linear algebra, and I absolutely hated AP Bio and I completely fell in love with linear algebra.
And I had like a, you know, midlife crisis in high school and realized that I, I really don't wanna be a doctor and I, I don't, I'm not into this biology thing and I really like linear algebra. One of the things that was fun about the class that I took is we learned about the page rank algorithm, which was very novel at the time.
And, I implemented it in lisp and that was like super fun just to, to experience what that was like. And so I, luckily I grew up? in Pittsburgh, and just kind of, because I was in Pittsburgh, I applied to CMU and, applied to this yes program, and. Luckily I got in and so it worked out really well for me to just kind of switch gears.
my parents weren't super happy, but I think they've come around to it since. I started studying CS and then, again trying to be like a good Indian kid. I interned at Microsoft and I did research with a professor and I hated both of them. So I had my second existential crisis and, decided to move to San Francisco that summer, and I met Nikita and Eric.
When it was, them and two, you know, two other people, and I realized like, oh my God, I can learn way more from these people about, what customers are actually doing in the industry and how to build really hard technology than I can back at school. And so I dropped out of undergrad and joined MemSQL then, and I've never looked back.
**Brett:** so you mentioned this a little bit, but when you reflect back on that sort of first chapter at MemSQL, what are the, the things that, the most tangible things that you learned there and the types of things that sort of are still part of the way that you think about building and running companies?
yeah I think, I'll tell you a few things that I learned and also some things I took for granted. so some of the most important things I learned, one, I think you have to be extremely paranoid when you're building software about quality. And, what I, what I mean is, it's actually like super, super hard to build a product that actually works and people actually use.
**Ankur:** it's pretty easy and now I would say even like easier to build a prototype. but the craft of actually taking something from 95% to 99% or a hundred percent is, very challenging and not something they teach you in school. and there was one guy, at MemSQL named Adam, and he was a pretty senior database engineer from Microsoft.
And anytime someone broke a test or anytime a customer ran into an issue, he wouldn't brush it off, he would pay attention and he'd find the relevant engineer and kind of force them to pay attention to it. And I think being extremely paranoid and that level of diligent about quality is not only important, it's just existential.
So I, that was one of the probably biggest learnings for me. I remember when we were selling a big deal at Goldman, the managing director pulled me aside. I was like 23 at the time. And I, you know, I was, I had no idea what really what I was doing. And he was like, Hey, we're about to make a really big investment in your software, and if it crashes, that group of people right there might lose their job.
and so, you know, we're really excited, but I hope you guys are taking this seriously. 'cause this is a really big deal for us. And again, that's not something they teach you in school, just experiencing, how important the, software that you produce actually is and, the responsibility that comes with it.
I think it reshapes how you think about, building software and, and, and delivering it to customers. recruiting, I learned a lot about. and I think, one of the most interesting things is that recruiting, really, really good engineers is not a transactional process. And I think that sounds very obvious to anyone who's tried or read about recruiting, but until you experience it, it's very hard.
We'd sometimes spend years recruiting someone, you know, getting coffee with them every quarter, writing down a list of all the people that you really want to hire, but, you, maybe they're unavailable and making sure to ping them, you know, just to hang out every once in a while. I think that kind of stuff is really important and, to anyone who's aspiring to start a company, one of the things I, I always tell them is if you're at a company that, you know, is really good at recruiting, for example, I was at Figma recently, I think they're really exceptional at it.
try to spend as much time as you can actually working on recruiting. 'cause that's one of the most important and challenging things when you're starting a company. and then I think taking for granted, I didn't, that was my first job out of college. And in college I was constantly around developers and CS people.
And, at Men's sql I was selling to engineers and customers who were very technical and I completely didn't realize How important that was to me. you know, at Imperia, which I started after sql, we actually sold mostly to non-technical users. And I found that really intellectually stimulating for a while, but at some point I realized I don't have as much in common with our customers as I did at MemSQL.
And it was very hard for me to, relate to them and actually think intuitively about what they wanted out of our product at MemSQL. I had that idea, totally took it for granted. So that's one of the things that I, I look back on and, and, and really kind of cherish that.
**Brett:** How do you build high quality software?
**Ankur:** I think you have to pay attention to, literally every possible sign that the software?
is not working. And I think the first step is actually just believing that when you type something or you build a feature, it's not gonna work. the, when you hire a relatively new engineer or someone who, is quite junior, they don't have that imprinted in their brain yet.
They might like type something, send a pr, test it a few times, and then say, oh yeah, this thing probably works. but the really good senior people, they have strong intuition. and at a certain point you can kind of predict based on what you're building or how pervasive the feature is, whether or not it's gonna have quality, to begin with or not.
We're starting to see this, by the way, with AI people too. Totally separate topic, but really good AI people are able to intuit, what the quality, curve will look like for a new feature. So that's really important. And then the second thing is you, you have to take feedback really seriously. I think it's human nature when it's 6:00 PM on a Friday and a user is like, Hey, I think, I, I, I think this button, like I had to click it twice instead of once to actually, you know, close this window or, I, I got like, I, I ran like an experiment in Braintrust and you know, it worked 19 out of the 20 times, but one out of the 20 times I got a 5 0 4 error.
At 6:00 PM on a Friday for me. And I think for most humans it's human nature to be like, eh, I don't know if that's such a big deal. It looks like they were able to work around it, or maybe they screwed something up. Maybe their laptop is broken. You know, maybe they're using an old version of Chrome, whatever.
But I think the really good people razor into all of those details and they take them all very seriously and they use them as an opportunity to justify that, hypothesis, that something's likely broken. And I think you just have to be really, you know, like radical, about that.
**Brett:** Why is that important?
**Ankur:** well I think that product quality is probably one of the most important?
factors for a customer, whether it's a consumer or an enterprise user to decide whether to bet their precious time and energy on your product.
One of the things that Chris, who's this Figma, CTO, used to say a lot, which I really, thought was insightful, is that Figma is a professional product for professional designers and our users, are betting their career on the quality of our software. And so that's the bar that we need to hold ourselves to.
And I think, if you aspire to build a product that is actually valuable to the users who are using it, it has to have an insane amount of quality. And then I think there's. You know, more rudimentary things to think about. If you, want to scale to a lot of users without having a lot of humans behind the scenes, answering support tickets, fixing bugs, et cetera, quality helps you do that.
So you're, you know, literally more efficient. and, and then of course, if you want to expand within an organization, if your product is low quality, it's gonna be harder for more teams to adopt it. the better the quality is, the more people will want to throw things into the product.
**Brett:** how would you teach someone how to recruit well, or how would you explain what excellent recruiting looks like outside of just, it's not transactional. I. It's oftentimes months or years of, of authentic relationship building. What else would you say on the
topic?
**Ankur:** I think recruiting is one of those, sort of trades that you need to learn by working as an apprentice, with someone who's really good at recruiting. For me, that was Nikita. Nikita was exceptional at recruiting very, very unique talent that can work on relational databases and for some reason wants to do that at a startup.
and, a lot of my preconceived intuitions about how to do it well. were just wrong, like, you know, kind of a silly thing, but I remember. Once, like almost begging a candidate to join us. 'cause we needed his skillset so badly and Nikita let me do it, but he, I, I think he knew that that was the wrong thing to do.
and it, it definitely, you know, it, it didn't end up working out. I think we left, a poor impression on, on the candidate about the viability of the company and, and so on. but one is, I, I think you should just try to find someone who is successful at recruiting and work with them. this, the second thing I think is that, you have to sort of convince yourself that it's gonna take time.
it's, it's similar in sales as well. Like if your product isn't selling for some reason, then it's almost always pipeline. And if you try to invest in in pipeline, it takes time. And So I think zooming out, if you're a founder and maybe you're starting a company and you're like, yeah, I gotta get like three or four people working on it, I think, accepting that it might take you a year or two years to find those three or four people, and trying to design around that I think is a little bit better than trying to rush into it.
And so you can almost take that as like a rule that may not satisfy your intuition, but you should just accept as true. And if you do, it might work out better for you. And then the third thing, this is something that Elad is actually really bullish on as well, and we implemented really early at Braintrust, but I think it's actually important to have a rigorous and challenging interview, even for people that you know are good.
Manu, my brother, was the first person to join Braintrust, and he got interviewed like crazy as well. and, and I think it's important, partly because if you think of recruiting as a relationship thing and you think of it as a long-term thing, sometimes you convince yourself that someone's really good or you might overlook someone else just based on how much time you've spent with them.
and if you have a really hard and, I mean hard in a, accurate, not a, a sort of bullying type of way, but hard, appropriately challenging interview, then I I think it allows you to separate the act of relationship building and getting someone to the table from maintaining and building a high performance team internally.
I've messed that up a bunch of times, by the way, by, you know, ignoring interview feedback or ignoring back channel feedback or, whatever it is. And I think I've probably like 90% of the time regretted it. so I think that's a, a really important element of it. And at Braintrust for example, I think Manu and I probably spent like three or four days early on just working on the interview questions that we still use, for the technical interview.
I think. I think it's just something that's really important.
**Brett:** So what's the founding story of your first company?
**Ankur:** So, um, after, uh, five and a half years at MemSQL, um, I kind of asked myself this question every six months or so, like, am I learning a lot? And, you know, for quite a while, five and a half years, I, I felt like the answer was emphatically yes. And at, at some point, the answer started to become no.
And it's not to no fault of anyone there. I love the team and, as you can probably tell, I still think really highly of them and stay in touch with them. But, um, I wanted to push myself to, to do something harder. And, I reflect on that and think like that, that was great. I, honestly don't think that's a good reason to start a company.
Um, and now I try to discourage people from using that framework, but it doesn't always work. that's what led me to, to leave. I took some time off. actually Elad gave me this great advice. I met him right around then, and he said like, you should take six months off because the next time you have this opportunity, you might not be able to.
And you know, you might be married. I have kids, you know, all this stuff. We don't have kids yet, but turns out we, last day of the six months, off, I met Elena, who's now my wife. Um, and this time while starting Braintrust, I had zero days off between my previous job and, and Braintrust. So as usual, I think Elad was right there.
So I, yeah, I took six months off kind of reset, and then I did something which I, I honestly don't think any founder should do. Um, we're talking about product market fit. This is a, almost a surefire way to prevent yourself from finding product market fit. But I sat down and I said, okay, I wanna start a company.
I understand this type of technology really well. Lemme figure out what kind of company to start. you and I were kind of chatting about this earlier and, and one of the things that I didn't realize from my time at MemSQL, I think partly because we revered venture capitalists and their thinking ability, you know, their choosing abilities and stuff so much, I didn't actually realize how easy it would be to raise money and, specifically, that I, I didn't realize that, raising money was no indication of the quality of your idea or, uh, product market fit or chances for finding product market fit.
So I kind of fell into all of those traps and I thought, you know, at this point, five years before ChatGPT and all this other stuff came out, and AI actually started working. I thought, okay, great. AI now works. Um, it, it definitely did not, uh, and how people use data in enterprise is gonna completely change because of ai and databases are going to evolve to be, um, AI centric, query tools.
And that was the idea behind Impira early on.
**Brett:** share more about the, the couple mistakes you made. Why? Why did you make them?
**Ankur:** As an engineer, you are very used to solving problems that are, um, in your control. And by that I mean, what comes by your desk is potentially a very ambiguous, technically challenging, or maybe impossible problem to solve. But the difference between you, having the problem and solving it is literally typing like keystrokes, like a 10,000 line PR is a large change that might be, well nowadays who maybe it's, uh, not many keystrokes, but, um, even back then that might be like a hundred thousand keystrokes or something, which if you knew exactly the keystrokes to type, you know, it's, it's not, that much time, like a few hours of time to just, type 10,000 keystrokes. So this is entirely within your control. And I think that, in some ways that's great. As a founder, you, you don't feel, that you're burdened by, um, you know, whether or not something could be solved. You feel like, you know, if you do wanna solve something, you can solve it. But I think the key thing that it, you, you sort of fail to learn.
And I think that sales or go to market founders often have this intuition earlier than engineering founders do, is that markets and what people actually want are in many ways out of your control. And, I just had no appreciation for that. So. my bias going into Impira was if I come up with something that is, technically challenging to solve and seems like a good idea, then people will want it.
And I think the reality is you need to really understand, and time what people want and don't have. And I think couple that with what you could potentially build, but I was just completely ignorant or unaware of the fact that the idea of a market and what they might actually want exists. And, you know, partly you could say the MemSQL thing didn't help.
Like databases are a big market. They're well understood. And you know, Eric and Nikita figured out the timing thing, I think quite well. So I, I, I think I took that for granted.
**Brett:** And so what did the first year of that company look like?
**Ankur:** We went through a bunch of hypotheses and, another trap that we fell into, I think a lot of, um, founders, do because founders are often charismatic people. Um, you can convince a few people, uh, especially that you meet through your network to try out your thing. And so we actually, we built like an amorphous, tool for querying images and videos and then eventually documents with ai.
and we actually got people using it and paying us for it. But the problem is that, they were primarily paying us for interest in us and to help them solve problems. There was very little repeatability, across what they were, uh, asking for. I mentioned being paranoid about software quality. Um, I think in the world of early product building, you actually need to be like?
ultra paranoid about repeatability and you need to assume that, you know, give yourself a little bit of credit and assume that you're somewhat charismatic or entertaining or whatever it is.
and say that, Hey, this person seems interested in my product, but I actually wanna be really paranoid about that and assume that despite the fact that they're interested, they're interested for the wrong reason. And challenge yourself to, to, to really think about that. I didn't do any of that stuff so people expressed interest in our product and we just, you know, oh yeah, sure, , we can modify the product, to do exactly what you need.
and that just over time, it accumulated into, um, a bunch of customers who, you know, we had, few million dollars in a RR, but very little, repeatability across what they were doing. So when we tried to bring on a sales team and scale that, um, what they were selling and their ability to scale the success from those early users into the n plus first user was very challenging.
**Brett:** such an interesting, subtle thing that you're highlighting and, and, I kind of, we sort of call this weak product market fit, right? In the sense of you have customers, they're paying you. if you had no customers and no one was paying you, the world is telling you you're doing something
wrong. right,
This, it's kind of working. There's some customers, there's very little repeatability is one of the biggest traps I think, because you can spend years pushing down that as opposed to if nobody
cares and I'd rather have no customers.
How does this ladder into what ended up becoming Braintrust?
**Ankur:** Yeah. So braintrust, it's sort of a in many ways, very different than Impira. I wasn't thinking about starting a company. I was leading the AI team at Figma. and, I was, fresh out of an acquisition and fairly tired, and, you know, a lot of other things. but what happened is, at Impira when we started using language models, we ran into this problem around evals.
Like we would, we had customers that were using us for invoices and customers that were using us for bank statements. And we might update the model or update some prompts, improve the invoices and make the bank statements worse. And obviously that didn't fly with our financial customers, so we had to get really good about actually measuring these things during the development process and not letting customers find out about them again in the spirit of building a product that doesn't suck.
and at Figma we had exactly the same issues. I think you all actually just released, an article about how Figma thinks about evals. a lot of the foundation for that was, sort of set the at at that point and, and again, basically exactly the same problems. And we built a lot of the same internal tooling. I was talking to Elad, who, you know, speaking of non-transactional recruiters and stuff is like the one person who would just ping me and, and we'd chat like every week or or two weeks and just hang out, talk about random stuff. And at some point we were talking about, parallels between the two companies.
And I was like, yeah, this eval thing is really annoying. I, I hate it. You know, I, I had to build internal tooling, twice. And he was like, huh, that's really interesting. you built the same tooling at, Impira and Figma, and you know, when you're doing Impira, you were like one of three people who were, were working on AI stuff.
now, a lot of companies care about that. And the fact that you had to build the same tooling twice, maybe it, maybe it means that other people are gonna have to build it.
And so we actually thought about incubating this as kind of like a side project, and we talked to a bunch of companies, and one of the things we did was we were very skeptical about the fact that this would be a good idea, but we wrote down the conditions under which the conditions that would have to be true, for which it would be a good idea.
So we, we actually wrote down a list of like 50 companies that were somewhat ahead of the curve, working on AI stuff at that point. companies like Notion, Airtable, Zapier, Coda, Instacart, all of whom were some of our first customers. And, we, wrote down, the company, the person who is leading AI stuff and, the founders.
And we were like, okay, let's talk to a bunch of these people. obviously Elad's Network is incredible. Mine is, okay as well. So we were able to get in front of all these people. And, let's just do an open-ended user interview. And we wrote down a bunch of, what we hoped were non-leading questions about the biggest challenges that we're having.
And, we wanted to just assess this hypothesis and it was fun. I, I, I feel like we were almost antagonistic towards the idea at first. 'cause we almost, we didn't wanna believe that it was a real idea. maybe Elad did. I certainly didn't. And so we asked a bunch of people these questions and there were some really fun learnings.
Like one of them was, probably envy from being a closed source tool at MemSQL. I sort of, I immediately assumed that people wanted an open source solution to this problem. So one of our, questions early on was like, you know, would you want to consume this as a, an open source thing or, or not?
And, and we actually heard early on from people, an allergic no reaction to that. They, were like, Hey, we we're using open source stuff and it's super brittle and it breaks all the time and we just, evals suck and observability sucks and we just don't wanna deal with this. So, we don't want to use an open source thing.
We just want to use something that we can install and it works. and I thought that was, you know, a really interesting 'cause if we hadn't done that, my bias would've been we should make this open source. but you know, we learned, I think that pretty consistently, people didn't want that. and we talked to a, a few people.
And, first of all, everyone said exactly the same thing. evals were the main problem that we're having, which is what I experienced at, at Figma as well. And, and the second thing was, it was actually triggered by Zapier. Brian, the CTO sent us an email after the user interview and he was like, Hey guys, I know you were just doing a user interview, but like, dot, dot, dot, are you actually fixing this?
Because it's becoming a really serious problem for us. And, you know, we need something to help. I just created a shared Slack channel. we'll just tell you what to build. and if you recall, Zapier was one of the first companies. They've been very ahead the whole time, so they, they were one of the first companies to actually ship something.
And, it was just fun. Like we, we, we built a prototype and five days later, the Zapier team started using it. And the prototype was terrible. It was so ugly, barely, you know, like barely ran it. I won't, I won't even bore you with the gory details, but people were using it. And I remember early on, engineers at Zapier would take screenshots of parts of the UI and annotate them with like, I wish I could do this.
I wish I could do that. I think you probably know this very well, but that it just doesn't happen very often. David, who's now at Figma by the way, but was at Coda at the time, was another person who sort of jumped on on using the product and, so Coda started using us and. they were literally asking, they started using it.
They were complaining about the same things, asking for the same, solutions. I think the one thing they asked us for that was a little bit different was they wanted a prompt playground, but it, as soon as we built the prompt playground, everyone started using it and it became the most, you know, requested thing until we shipped it.
So we started to see those dynamics, and I, you know, I, wasn't looking to start a company, but this just doesn't happen very often. And you know, it felt like an amazing, kernel into something that that could be really great. the the. The other thing is I just really enjoy spending time with Elad.
And, that summer I was hanging out with Manu, who's my brother. We were at a wedding in, in Switzerland. we're kind of joking about how we don't get to spend as much time together as we'd like, and when we do, all we talk about is computer science, and whether it's my parents or, you know, whoever's around us when we're doing that, it's quite irritating to them because that's also the time that Manu and I are spending with, other people and they don't want to talk about computer science when, When we're doing that.
So we were kind of like, you know, Manu was, had worked at Neuro for, I think six years at that point. And, we're like, you know. Well, we enjoy, we we're not spending enough time together. And when we spend time together, we like talking about computer science, so we should probably just work together when whatever any of us does next.
and so that kinda lined up and that that was like the, the, the kernel of of, Braintrust,
**Brett:** As you were explaining the first couple months of, of working on what then became Braintrust, one of the interesting things is it sounds like you were default skeptical, that in a lot of ways you were looking for reasons not to start the company, which seems like the opposite of the first company you started, and I think it's the opposite of a lot of Silicon Valley wisdom.
Great founders have this vision for the future, and they'll just do anything to sort of make it happen. and they're unwavering in their conviction for whatever this idea is. Maybe you could sort of reflect a little bit on the value maybe that you found in being default skeptical, um, that maybe has helped the company work.
So well,
**Ankur:** I think, every good founder and honestly every good investor that I know has this strange dichotomy between, being paranoid, skeptical, negative, you know, whatever, pessimistic and hugely optimistic. I certainly experienced this and I, I wouldn't say I've perfected the formula for myself, but it's evolved over time.
and I think there are certain things that are outside of your control that, you should be skeptical about until you have scientific evidence that, You know, a hypothesis is true or false, and there's certain things that are in your control that I think you should be very optimistic about and have a lot of conviction about.
in the case of Braintrust, I was very skeptical about the market. Um, I was, very skeptical about, whether people would think about evals. I honestly, I was pretty skeptical of myself. Uh, I had just come through, an acquisition wasn't the best acquisition in the world.
you know, I was stressed and tired and, uh, not, I, I, I wouldn't say I, I was like, felt like, I remember I was talking to Elad at one point, like, should we hire a CEO early on or find a co-founder to be a CEO? And he was like, no, I, you know, you've already been through the pain of doing this. I think you should do it.
Like, okay,
**Brett:** Easy for him to
**Ankur:** Yeah,
yeah, yeah. Um. But, that, you know, that's just an example. Like, I, I didn't, I didn't have really any, self-confidence that I was, uh, a magnificent CEO I still, I wouldn't put that label on myself. but at the same time, there were certain things that I was very confident of. one of them is, uh, building soft software that involves crunching data. I also had a lot of belief in the quality and sort of, value of the network that, um, Elad and I had, uh, in that sort of tech community. you know, I think it's, it's just what you have conviction in.
**Brett:** What has building Braintrust thus far taught you about what makes a good market?
**Ankur:** you know, there's a few things. early on we, at both Impira and MemSQL, I think there were times when our go to market
was way more sophisticated than our product. And by that I mean we had like great sales talent, we had a sales process, we had all these website metrics, and if anyone at all came to our front door, we'd, you know, be on top of that opportunity.
And, I, I wanted at Braintrust to, again, in the spirit of skepticism, build a terrible go-to-market motion early on, but make the product make Braintrust only successful if the product was so good that despite being grossly incompetent at selling and marketing our product, it would somehow take off.
and that meant that when the first few people started using the product, we, we didn't talk to them at all about pricing. And I, I didn't talk to anyone about pricing until they started putting us in production and they're like, Hey, I have this thing in production now there's liability. You know, like I need to do some kind of business with some kind of commercial entity to be able to, to be able to continue working with you.
can we please pay you? and that it, it's kinda interesting, like we started in August and then November, this happened with the first three customers that we had. and it's sort of continued from there. And, I think now, you know, we, we are building a really world class sales team and marketing team, so it's a little bit different, but. Foundation, sort of established a really high bar for the product. but it, it also made like weird things happen like most of last year last year we just had random companies including household names, like coming to Braintrust. Maybe they were already using the product or signing up for it. Their friend was using it.
They heard about it on Twitter. I don't post that much on Twitter, like it's just sort of happens, but people just came to our front door and started using the product and we exceeded every sales target that we could come up with, like throughout the entire year. but it was all just sort of organically inbound and people just always wanted the same thing.
Like thing I at MemSQL, imp Pira. I remember when I would meet a cool customer, I would spend like a few days before the customer meeting preparing a demo that was extremely specific to them. So let's say you're talking to Instacart, you might prepare like a grocery app demo or something. At braintrust.
First of all, we just had so many of these that we couldn't, and second, I would just show up and show them like some generic use case that, is What everyone was doing. And, and people would literally look at the screen and point, like I could see them point at the screen and say like, I need exactly that now.
and that was a very, very different experience than, Impira and MemSQL. I, I have spent almost no effort, or no energy trying to convince anyone that they need our product. and I, I think that is a pretty clear sign of product market fit.
**Brett:** one of the most important points I think you're making, which is that the, the problem is both, large, urgent and repeatable across customers. So that's like one setup, but is there anything else in terms of being a good market that comes to mind?
**Ankur:** Yeah, I think one of the things that, we benefit from is, our customers and our people really enjoy, talking about the problem that we're solving rather than the solution or the, this button or that button. I think a good example of this in recent memory is if you look at a company like DBT, a lot of the early energy around DBT was like, I'm a data engineer or data analyst.
I'm, I'm trying to figure out how to set up this warehouse thing at all. Like, who do I talk to? what are the watering holes, you know, that, where I can find other people who are experiencing this problem and, oh yeah, great. There's this cool thing called DBT, which people use and it sort of helps you with that.
But that wasn't really what it was about. It was about the problem, which is, you know, wrangling data into this data warehouse thing, which is a hugely valuable outcome. And I think that, people without us having to force them to or ask them to, they are just interested in solving the problem around evals.
And they find it intellectually fascinating on their own. And I think that leads to a lot of, organic knowledge sharing, a lot of people wanting to talk to us, but also talking to each other about evals. And I think that that creates a very sort of, rich community, where if you have success with some customers, it, efficiently translates into success with other customers.
A lot of people will read, a blog post that Simon and I.
wrote about how Notion uses Braintrust, and they read that, maybe in March just to learn about how they should be doing evals. And then in July or something, maybe they hit, hit us up and say, Hey, we, we read the blog post. We sort of implemented this, but now we're ready to take it to the next level.
I think that's a pretty exciting property of the market that we're in. And I think it's an important one.
**Brett:** You talked about this kind of janky prototype you built before you fully committed to Braintrust.
What was the path between that product and kind of what you thought was kind of a first saleable product that you were willing to kind of put your name behind? How did you figure out where to begin given how expensive the problem space obviously is, which gives you basically infinite roadmap.
But the flip side of that is how do you figure out where to begin?
**Ankur:** Yeah. One of the mistakes that we made early at Impira was protecting our name or whatever, until we felt like we had enough traction and, then we did that too late. And I think that if you think, if you consider two failure modes, one is that you die in obscurity and the other is that you, are overhyped and then fail. I actually don't know what most people would say, but I think there's only one right answer, which is, it's much better to, be overhyped and then fail. I mean, obviously within the realms of morality and integrity. but, I, I was, I, I sort of learned like I, don't wanna be an obscure product that no one cares about.
I'd rather actually put my name out there immediately and, start to create some buzz around what we're doing and get that, started.
So we started in August and then we launched publicly in September, and TechCrunch covered us and we got a bunch of Twitter posts or whatever from all of our, friends and, got the engine going, and I think that was the right move.
you know, the fact that people were already using the product, and these are very high taste engineers at companies like Zapier. to me that was enough. Like, yeah, our product sucks, it can improve. That U UI was terrible for a long time. I think we've really, really improved that over the last year.
but, you know, it, it's val, it's providing value to these people, so why wouldn't it provide value to other people?
**Brett:** when you look at that first six months, the prototype that you built, when you were working on it part-time, all you did was just make it better and better day after day.
**Ankur:** Yeah. Yeah. That's all I'm still doing other than these two hours here today. I'll, you know, that's, that's my, that is my entire life.
**Brett:** did you do that just by filing off all the rough edges or were there in those first six months really important phase shifts that happened in the product that you were building
**Ankur:** yeah. yeah.
So the first six months we built very little interesting technology. And I remember talking to, I won't name any names, but, VCs and stuff, and they're like, Hey, you know, what are you building here that's durable and what, you know, what, what are you building? What's your moat? And, what's gonna stop?
people who are now writing AI code from just rebuilding Braintrust or how come customers aren't gonna build this internally? And I just didn't care 'cause I was talking to customers and they didn't care. And so why would, why would that matter?
what started to happen, really interestingly last summer is that notion who was way far ahead of everyone in terms of real adoption of their AI products.
and really pushing the boundaries of the latest models. They had, and they also had more people working on ai. they were like searching for stuff and trying to dig through the logs that they had in Braintrust in a fairly unique way. So normally when you're working with observability products, you try to do very structured queries like, you know, user ID equals Brett or whatever.
and in ai, primarily because there's so much text floating around one, you have these enormous rows. So every span in, Braintrust Land, which is like a row of something that you'd log in Braintrust, the average size is 50 kilobytes. In traditional observability it's 900 bytes. So you have these very fat rows with lots of text and big prompts, and they have people that understandably so they just wanna search for stuff.
Like, I remember, I'll get to the end of the story in a second, but there's a bunch of stuff about users in Japan that the folks at Notion ended up discovering because they were able to search for stuff that was very hard to before. And, in the spirit of moving quickly and stuff, we were using a medley of preexisting database technologies to make Braintrust work.
But there were none of, none of the things that we were using were actually able to solve this full text search problem. And Notion was already struggling with it at their current scale and, growing like crazy. And so we thought like, oh my God, if we don't really think about, a hundred x this scale and how we, are able to handle it, then we're gonna.
Like not be able to service our, one of our most important customers. And so, we, we really have to figure out a solution to this. And, what's interesting is we kept kind of kicking the can and collecting information, and we really understood the use case at some point. Manu and I had learned a lot of lessons about how to not to do this the dumb way.
So we, first built a benchmark, and we made the benchmark like a hundred times more stressful than what Notion does. And we tried using all the stuff that we were using like Postgres and Click House, and we also benchmarked Snowflake and Redshift and all this other stuff. And then we benchmarked a few other, more interesting, libraries and technologies.
And there's one library called Tantivy, which is a rust reimplementation of the Lucene Search Index, which is a very popular and well regarded and used, search technology. It's the technology behind Elastic Search as well. and that was the only piece of code that was capable of handling this, handling this 100 x use case.
from a search standpoint, nothing else even came close. Like understandable but staggering to me how bad relational databases are at full tech search. Just, they're just awful. and so we, we saw this and we're faced with this problem and we're like, okay, We're a year into the company at this point.
Our philosophy up to now has been not to, think about moats and, Hey, let's build this big piece of technology, and that's our thing. Let's just focus on what customers want. But we just don't think there's any way to be able to help notion. And, and now other people are starting to hit this as well without making, without building like a real piece of technology around this.
So we broke ground in October and there are three of us working on it, myself, Manu, and then another engineer, Austin, who, was one of the first few engineers at Impira. And, before that was a physics PhD. super sharp, really nice, person. And, all three of us knew each other really well.
Like we'd all known each other, Austin, I mean, Manu for 30 years.
Yeah, Austin for, you know, the better part of a decade. And so we broke ground in October and we shipped it to Notion in January. and then we shipped it to everyone else in February. and, that was pretty awesome. first it was awesome to be able to work with a customer who, sort of pushed us in this interesting way to build novel tech and then helped us, you know, like ship the early versions of it and find issues.
And it, it's, it's not often that you find customers who you're able to partner with in this really cool way. but second, I, I think, It doesn't usually take two and a half months to build it a database. but one, we know what we're doing. Like we, all three of us had been working on this kind of technology for quite some time.
And two, we had such a precise understanding of the workload that we needed to make work. If you try to use this thing is called Brainstorm. If you try to use it as like a data warehouse replacement, you're not gonna have a good time if you try to use it to solve what Braintrust needs to solve. It's extremely purpose built and very good at it.
And we, we basically, we had no margin for error, but we also were extremely confident in exactly what we needed to make work well. 'cause we had a year of accumulated experience actually suffering through trying to, trying to solve the problem without Brainstorm.
**Brett:** Did you think at all about how fluid, what is happening in AI is today and were you gonna solve this important problem that would not be important in two years?
**Ankur:** Oh, for sure. I, I think there's maybe two things, I would offer there. The first is that I have the benefit of working on AI for a lot longer than the chat GPT, you know, sort of big bang if you will. And, there's a number of things that we used to do back in the day, like evals, that we still do.
And so, A very simple framework is that at Braintrust we roughly build the same set of solutions to the same set of problems that, we previously experienced at Impira and, people still experience today. And that's a reasonably good proxy for the types of problems that people will experience tomorrow.
It's not perfect, but it's actually served us really well. the other thing that we do is we try to be very explicit about what we think are long-term bets and what we think are short-term, bets, and we don't reject the short-term bets. So, a good example of this, aside from just knowing that the volume and shape, like, I think it's a pretty obvious, thing to believe that people are gonna log more AI related data and that prompts are gonna continue to get bigger.
So investing in technology that makes that easy and scalable and cheap for customers is, is probably gonna continue to be relevant. maybe something that's slightly less relevant or less obvious. we built this prompt playground early on in Braintrust and I was actually not a big fan of the idea of it.
Like as a software engineer, I like using, cursor, and using my IDE or Vim or whatever and having everything source controlled. But we noticed that one, there's a lot of, product people support people. we even have some doctors who are writing prompts and stuff in the playground. Who obviously really prefer that experience to using an IDE in a command line.
And we've actually seen a lot of developers really embrace the playground and wanna use the playground as well, because it's just a much faster way of working in the product. And we heard, or sorry, working on AI iteration now you can run evals and stuff directly in the playground as well. And we heard, a bunch of people early on, and it felt very uncomfortable when they asked for this, but people would say like, I really want your playground to be like an IDE for working on prompts and, AI features more generally.
Like, how do I do rag in the playground? How do I do version control on the playground? I, I wanted to be like a full IDE experience. And again, this made me quite uncomfortable until I just literally saw how people used it. And we started to realize that actually we can't think of this playground as kind of like a half-assed extension thing in the product that you just use to test stuff.
It can't be ephemeral. so our playground is actually stateful, like if you write something and then you refresh the page or share it with a colleague, it has Figma style, you know, multiplayer collaboration as well. but we, we realized that actually people, people really do want a serious professional, you know, maybe it's not every bell and whistle of an IDE, but like something that's as good as an IDE for actually working on prompts and, and testing them.
And so we made the explicit decision, I think about eight months ago or so to say, like, Hey, let's actually make, let's treat the the playground like a real IDE and engineer it. With that quality bar in mind, we just shipped an improvement, which, we didn't publicize. I think from an external standpoint, we've framed it as we fixed a big bug or a series of bugs.
and we, we spent like a couple months re-engineering the React state in the playground because we had accumulated a lot of technical debt from iterating on it, with these, you know, things that keep changing, like model parameters, blah, blah, blah, all these things that change often. But we, we sort of learned from that and said, okay, let's, let's zoom out and make this like significantly more robust.
And we shipped that and I think that foundation will last us for a long time. And, and we also know that that's an important bet. At the same time, there are things that are changing constantly. Like the word agent means something different today than it did yesterday. Probably will mean something different tomorrow.
and I think it's very important that when people are, sort of topically zoomed into whatever the AI du jour is, they feel like Braintrust is a, an accessible place for them to explore that. And I think that the durability with which we engineer some of those things is different. We have cookbooks, which, you know, are tutorials that make it very easy to, to try these things out.
We're constantly iterating on some of what we highlight or feature in the UI versus all the things that we collect. certain things become more relevant over time, like we've collected cash token counts for a long time, but. Actually thinking about the impact of cash token counts on pricing has become a very topical issue for a lot of users recently.
And so we've put in some effort, which is, very specific to that problem to make the experience of tracking cash tokens and looking at the pricing implications, very, very, easy and you know, front and center. But that may not be something people care about. in six months, if there's yet another dramatic change in how models are actually doing something.
You know, I'll give you an example. Let's say that the pattern which OpenAI started introducing, others are considering maybe not as far along yet, which is like running tools in the background of, of models. Let's just say that that becomes like a big thing and there's new pricing considerations for that.
That might be the thing that someone really cares about. And when they go to our monitoring page, that might be the first thing that they wanna see and that might change. So I.
think we, we sort of just think about these as different buckets
**Brett:** Is there anything interesting to share as you had your first few customers that were not, at the cutting edge of Silicon Valley, sort of scale up.
**Ankur:** for sure. I think probably the most interesting thing, and we've done this quite differently than we did before, is, we've been very true to what our product is. We say our product is for, product engineering teams that are trying to incorporate AI into their core products and services and that.
description excludes and excluded a lot of, sort of traditional enterprises, for example, early on. And we were okay with that. our hypothesis was make sense. we think that eventually the way that, you know, the Notions and Zapiers of the world are, thinking about how to use AI in their core products and the, the humans who are, you know, working on this and the way they think about engineering, that will eventually be you as well.
And if it's not you right now, we totally get it, but we're gonna stay focused on this core ICP. and what's interesting is that, a lot of those enterprises and many of whom we just stay in touch with and talk about the problem, because it's mutually valuable. they've actually come around now and they're like, oh yeah, and you know, hey, now we're actually building this into our external facing app, or we're building it into the internal tool that all of our analysts use or, or something like that.
And, we do actually want to build the way that those companies are building. We find it, you know, to be the right way. And so, we, we've been somewhat firm about what we think the right workflow is for AI engineering, and it's been interesting to see other, traditional enterprises, sort of, subscribe to that over time. What's obviously different about those companies is, there's, a bunch of, you know, security deployment, quirks, that are different. so guess what? Braintrust now has like amazing support for Azure. we didn't have that. there's not a lot of the, those cool tech companies necessarily that are using Azure yet.
another, example is that a lot of these companies, are using, PDFs. So a lot of the cool Silicon Valley companies, their multimodal workloads are mostly images. And nowadays videos, a lot of the more traditional companies have a lot of PDFs. And so, you know, our support for PDFs is now like, dramatically better than it it was before, informed by these users.
But I think those are, are, are things that feel very comfortable, within the type of repeatable product that we're trying to build. On the other hand, if we had pulled those customers and they're like, yeah, Braintrust seems great, but, we don't actually do any AI engineering. We're just, actually training our own LLMs or we think that we're only going to solve the fine tuning problem.
How do you, how do you solve fine tuning and custom inference? that would be a very different, transformation or pull away from the sort of core product that we're building than I think what we're experiencing.
**Brett:** One of the things that I think you all have done really well as this category has emerged is really tie yourselves and the companies that are building at the cutting edge together. and a lot of that is they are the ones that are always tweeting about the great stuff that you're doing. Obviously, I assume a part of that is that they love the team and love the product that you've built.
Is there anything else that has gone on that has allowed you to so closely associate with those companies? Or have you thought a lot about, if we wanna win the category and build the trusted brand, the number one way is to get all the people at the forefront to say that you're the best? Is sort of any thoughts on that?
**Ankur:** Yeah, I honestly, I haven't overthought it. I feel very grateful that people talk about the company that way and they, they do that. But I, I, I think that at the end of the day, all those companies that say nice things about us, we've been through some hard stuff together over time. They've broken our product.
we break all of their products. Like we use all of those companies, alpha versions of their AI products. we have lunch and dinner together. many of the relationships are longer than the lifetime of Braintrust and, I think that there's sort of genuine Mutual friendship and trust that we've built with each other over time.
And it is, in a very simple and literal way, gratifying to share and see people that you care about succeed. I think, for example, if you hire a new investor at First Round or we hire a new employee, they're doing a really good job. I think you feel a hu you know, as a human, you feel a sense of pride sharing that with the world.
and, actually, I mean, I think the culture that you built here is a really great example of that, with, with sort of newer investors. and I think that if you, are really focused on like a shared set of problems that?
you All care about and you work really hard together and you, you push through those challenges, then I think that on the other side of it you sort of have the opportunity to, to create that mutual, interest and, and, and goodwill around the product.
It's definitely not something we try to manufacture. I think we, it's, it's sort of, I almost sometimes wish I did more of that. but it's, it's just not in my personal nature. I, I feel very, feel like my, my, my purpose in many ways is to, work for the customers that we have the opportunity to work with and, just try really, really hard to deliver a, a great product to them and, and just sort of hope that.
The act of doing that and the act of maybe caring about the success of their, projects and careers beyond their, the keystrokes that they type into our product. I, I hope that translates into commercial success. I might be wrong, but I'd rather die trying, with that than do it any other way
**Brett:** . Maybe sort of as we wrap up and you zoom out on these first few years of company building, are there any other things that you think have been causal with the company's success that we haven't talked about, or key decisions that you've made that are, have turned out to be correct that other people that are getting going might find some inspiration in?
**Ankur:** Being extremely clear about what bets you're taking, is just very important. So, we've talked a lot about how we bet early on our customers, meaning we were very specific about who we worked with, and we bet that if we essentially listen to exactly what they tell us to do, that will translate to what other people, are doing.
And that is something that you could either choose to be very skeptical about or you could choose to bet on in this case, we bet on it. and that gave us, I, I feel like it gave us permission to have a lot of conviction in that, and not question it constantly, but, the other hand, I think we're, you know, very skeptical about whether this company should exist in the first place.
Very skeptical about whether we should build our own database technology at some point. a number, a number of other things. And, I think it's good to be, explicitly skeptical about those things as well. And, I think if you're very clear about what are the bets that you're willing to have conviction on and what are the things that you wanna be more scientific on, not only does it help focus your own thinking, but it's also really helpful when you're recruiting.
So, when I talk to a candidate, they'll say, what are the biggest risks of Braintrust? And I can tell them what I don't think the risks are. I, I don't think that if there's, if data crunching is important to the or, or, quality of UI is important to the success of this category, I think we're gonna win.
Right. however, if AI is overhyped, if, what, you know, the cool tech companies are doing is not the right pattern for building AI software, you know, if there's some crazy change, I don't know, there's a number of things one could name, these are our bets. And I think it, it makes it quite easy for candidates to, you know, pick, whether it's, it's as a set of bets that they believe in or not.
And I also think that's important because sometimes we have a tendency to recruit people by convincing them to join and. Then they do, and then they have a different set of values, or there's a bet that you believe in that they don't believe in, and then it doesn't end up working out. And we've had very little of that actually at Braintrust.
'Cause everyone sort of cards on the table, everyone knows what they're getting into. We do these work trials. So you literally see all the issues that people have with the product and either that motivates you or it doesn't. and, and I think that that really helps.
the other thing I'd say is that every, first time founder, I feel like is either a sociopath or they are, you know, have, empathy.
And they will, tend to listen to a lot of the things that people ask, of them or ask them for, whether it's their time or, you know, modifying the culture or, prioritizing things that are not actually critical to the success of the business. And, I don't think I'm a sociopath. And so at, at Impira, I, you know, I, I I feel like we built a culture that almost regressed to the mean.
and at Braintrust we've been much more specific about, what our culture is and how we operate and. you, you know, some people, it just doesn't work. Like we don't have ma we have one meeting per week as a company, and that's it. if you're an engineer, designer, product manager, and you find it, really important to meet frequently to be able to accomplish your, your work, this is not a place that you're going to enjoy.
On the other hand, if you are a designer who loves to code, or a product manager who likes to prototype, or an engineer who cares about product problems and doesn't wanna be told what to do all the time, and, you know, go try to build stuff, it's, it feels like an amazing place to work, and I think it's very clearly a great place to work for those people and not a great place to work for people that, have, you know, a different but totally valid style of working.
It's not kind of a mediocre place for both people to work. so that's been, been very, important. you know, for, for me personally, I, I can't work in meetings like I can participate in them. but it, it's, it's not, not a place for me where work happens. So I cut off meetings at noon every day. I don't take any meetings after noon.
And I, I could have never thought of doing that before, but it's been incredibly valuable I think, for us at, Braintrust and for me personally, to just be able to focus in
the afternoon. So stuff like that I think is very important.
**Brett:** When you think about those choices that you've made in terms of how the company behaves, is it just a reflection of how you like to work and it's encoded in the company, or
**Ankur:** I think that's the seed of it. and, when you have a, a really clear perspective early on, then I think you start to attract people who, share what are the fundamental values, but maybe have different, things that they care about. So, I'll give you an example. I work every weekend, and I have, since I joined MemSQL.
and it, it, it almost just feels weird to me that I, I couldn't work every weekend, or I, or, you know, I've, at first when I was, you know, a manager and I was like 22 or something, I didn't understand why other people didn't like to work on weekends. And I.
I've learned over time that everyone's different and, people recharge and stuff differently. So if you took a, an overly radical perspective on taking my personal style of working and, forcing everyone to function that way, I think that, everyone would be working on weekends all the time. But I don't think that, I mean, there's some companies that have done it successfully, and I have nothing negative to say about those companies.
But I think personally my perspective is, even if you're trying to hire like a, a pretty good, well-rounded and, you know, skilled group of people that's even, you know, 40 or 50 people, it's very challenging to get everyone to work on weekends. And so we don't, that's not been a part of our culture, even since the beginning, even though it's something that, you know, I personally do.
so I, I think, but that doesn't mean that people don't share the same values that I do around hard work and, you know, independence and autonomy. it's just, implementation detail that is specific to how I work that doesn't need to be part of the culture,
**Brett:** So how, how do you choose which, which one of those, which one of your tendencies are gonna be encoded in the company and which aren't? Like the whole idea of your, your personal preference and working style is to end meetings at noon and then focus on the work, for example, which seems like that that's a, a company-wide way that you behave or that work doesn't happen in meetings.
So we're not gonna be a meeting heavy company if you like meetings, go somewhere
else. Like what, what's your own process for figuring out what is gonna be encoded in Braintrust versus what sort of optional or what you're gonna do in your own time?
**Ankur:** Yeah. The sad answer is trial and error. I maybe someone like maybe Brian Chesky or some, someone who's like a, you know, amazing culture steward. and, I, I, I've benefited from reading a lot of his stuff about culture. Like he might have really great answer to this question. but yeah, trial and trial and error.
We've mishired, I've mishired and misfired for, a very long time now, maybe longer than I would, be willing to admit working in, in the Valley. and, just learning, about these things, like if I rewind to when I was at MemSQL and you sort of ask the same, what would you write down as the cultural stuff?
I don't know. Working on weekends may actually be on the list. I don't know. but, I think I've learned that there's a lot of people that are insanely competent who I enjoy working with and are very productive that just don't do that.
**Brett:** What is misfiring?
**Ankur:** I think the obvious answer is firing too late.
there are definitely cases where you fire the wrong person.
**Brett:** How do you know if you fire the wrong person?
**Ankur:** you can't always know, but I, I'll give you an obvious example. sometimes you hire people. and this especially happens at startups cross-functionally. There tends to be, I'm not gonna name departments 'cause I don't wanna feel, I don't wanna alienate any particular group of people, but there's certain departments where you, you hire like the first or second person, and then they tend to conflict with people and, and sort of the other groups.
And, what, often happens, and this is usually, a large part your fault as a leader, but you start to get these, sort of like factions that conflict with each other. And it, this is very natural. It's, it's, you know, in some sense unavoidable and something that you have to, to, to work through. But what what might happen is that one person starts underperforming and, ultimately whether they quit or you let them go or whatever it is, they're, by the end of it, they're underperforming.
And they were maybe performing well before. Sometimes by the way, people call this people scaling out of a startup or this person was good for the early days, but not later. I don't know how much I believe that, but, long story short, someone's not performing well. You end up, parting ways with them and then the person
that was the contributor to the drama, you realize that they're actually not doing that well either.
And maybe they pick up a new conflict and maybe they stop performing well, or maybe they just quit after some time because they're just not happy. Whatever it is, I. Then you sort of have to do this mental ablation study of, Hey, if actually if I had removed this person first, would this other person scaled as the startup grew or continued to be productive?
again, you can't know for sure, but I, those are the kinds of things that
I think, I've felt it.
**Brett:** How do you define product? Market fit
**Ankur:** I feel like you guys coined the, that that original thing with, superhuman, that really took off like the, you know, some per 40% of people say, you can't take this away. I think, this, this is, another Elad-ism, he said like, when you feel it, you know it, and if you haven't felt it, then you can't understand what that is therefore it's hard to feel. So I, I actually think that that's probably the truest representation of product market fit. at Braintrust people, we can't stop people from using the product. And, I almost find that annoying sometimes. Like, oh my God, our infra is like on fire.
Like, can you please just like not shove all this stuff into Braintrust Or like, can you run fewer experiments or something? And then you zoom out and think about it and you're like, oh wait, actually, it's like a very good thing that people are trying to do this much with the product all the time. And I.
To me that is the, clearest signal of it.
**Brett:** People can't just can't get enough of the product?
**Ankur:** Yeah. I think it's, it's people, you know, despite you or despite the quality of the product or whatever it is, people are, magnetically pulled into using it constantly. And whether it's existing people like using the product or new people using the product, they almost can't help themselves from, from using the product.
And part of this, by the way, is not convincing people to use the product.
I think if you have to convince people, it's super unlikely that you have product market fit. Whereas if without convincing people, they just find their way to the product and then they're, already convinced or they've convinced themselves very quickly, I think it, it, it's a, it's a pretty clear sign.
**Brett:** to wrap up, and it may have been somebody you already sort of talked about. when you think about getting a company in a product market fit, and early company building, who, who's taught you the most and was there like a particular tangible thing that they imparted on you?
**Ankur:** honestly I think there's two people I'd point to. and these were the first two people that invested in Braintrust and really helped us. the first is, Alana and I think that she, grew up, learning a lot about sales from, her dad and then worked in product. And I think that.
She is super technical, so if you're a nerd, you can like, communicate with her easily. and it doesn't feel like you're talking to a, someone who's too salesy or something. But she deeply understands the importance of getting the right people like customers and candidates around a company to make them successful.
And she has very high taste for those things as well. And I, I, I just don't think that comes naturally to a lot of the people that have the, skills or gifts that would enable them to create a great product. And I think the meta point here is if you can create a great product or you're very technical or whatever, you need to like almost surrender or make yourself vulnerable to people that, are wired a little bit differently and they are wired around people or wired around markets and sort of benefit from making them a really important part of your company.
Like the way that she works with companies is so oriented around the people that she gets around the company early on. That is just a very unnatural thing for people, for, for especially people like myself who are super nerdy. so I think, Alana is, is really exceptional. And then I've mentioned him like 45 times probably, but the person I've learned the most from is definitely Elad.
And it's, at this point I would say it's impossible to describe. How much I've learned from Elad, literally everything from I should take six months off before trying to start a company. 'cause, you know, and end up meeting my future wife in the process all the way through, you know, being super skeptical about company ideas.
you know, one of the things that Elad told me early on, which I found fascinating, is that, companies are successful because of things and despite things. And so if you see a company that's super successful, it's not always useful to emulate all the things that the company does. In fact, you should be very skeptical of a lot of the things that a company does because, they may have not ever had to get good at those things, to be, a good company.
A classic example of this is when companies hire salespeople from extremely successful product led, companies, and they expect the salesperson to be good for their product led company that does not have product market fit. that is not the right, so you, you actually want someone who maybe worked at a company without product market fit.
you know, great example of this is Ron from Databricks. I, I was talking to him before we, ended up hiring Brian, who's our, sales leader. And Brian would actually say the same thing. Brian was at a company that had very little product market fit and then he went to Grafana. Ron was at a company without much product market fit and he went to, Databricks.
And in both cases. It was like going from, something very hard to sell to like easy mode, but that's very counterintuitive, right? They, they didn't, you didn't hire the person who maybe did all the cool PLG stuff to make Databricks for Grafana, do all the cool PLG stuff. and I, I, you know, I think, there's just so many little things I've learned from Elad like that I, if you have the opportunity to work with Elad or work with Brett or someone who has been, around for enough time to pick up a bunch of anecdotes and counterintuitive learnings, and you build a relationship where you trust them to the point that you suspend disbelief, I think it's, it's immensely valuable.
The last thing I'll say is, we talked a little bit about market early on with Braintrust. I was very skeptical of the market opportunity. part partly because I didn't really want to admit to myself that it existed, but, also just thinking about CICD and all this other stuff, and Elad was actually really bullish about it.
And, I'd known Elad at this point for seven years or so. And, I remember, every time Elad was like, Hey, I really believe this thing. And it didn't make sense to me and I didn't listen to Elad, like literally every time I was wrong. And so at this point I had rewired myself to think like, okay, if Elad is pushing on something and I think it doesn't make sense intuitively then Elad is probably right. And that it's not something that happens overnight, right? you?
you sort of have to know each other, have that rapport and build a relationship like that.
**Brett:** Great place to end. Thanks for spending the time.
**Ankur:** Thanks for having me.
### How Carta saves 3,500+ hours per month using AI agents
URL: https://review.firstround.com/how-carta-saves-3-500-hours-per-month-using-ai-agents/
Last updated: 2025-12-04T17:00:08.000Z
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### Stop playing customer success hero. Here’s how to build your first team.
URL: https://review.firstround.com/stop-playing-customer-success-hero-heres-how-to-build-your-first-team/
Last updated: 2025-12-04T16:59:45.000Z
From hiring to metrics to first systems to set up
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### The Founder’s Guide to Building a V1 of Customer Success
URL: https://review.firstround.com/founders-guide-building-customer-success/
Last updated: 2025-07-14T22:28:38.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
Customer success will always make up some portion of a founder’s job, but at a certain point, the scales tip.
“When you start to build a meaningful volume of customers, you can quickly find yourself spending more than half your day resolving problems,” says **Atlassian's** SVP of Customer Success, [**Stephanie Berner**](https://www.linkedin.com/in/stephanieberner/?ref=review.firstround.com). “Customer success is all about getting your product into your customer's hands as fast as possible. **If founders and product builders are spending disproportionate amounts of their time solving customer experience problems instead of driving the mission forward, it’s time to formalize your customer success operations**.”
CS is a vital early part of your company. It can be one of your [growth levers](https://review.firstround.com/21-ways-to-shore-up-your-customer-success-org/). It establishes the connection between product, sales and other go-to-market functions. And even though you or another co-founder have been likely leading it up to this point, building out the org requires a different muscle — knowing what skills early hires need, team size, metrics to track and much more.
Berner has seen CS from all angles. Prior to Atlassian, she led customer success for **LinkedIn**’s Sales Solutions arm, was the Senior Director of Customer Success Management at **Box** and gained early startup experience at **Medallia**, all the while learning the ins and outs of [delivering strong customer experiences](https://review.firstround.com/the-case-for-startups-to-put-cx-at-their-core/).
While there's no exact timeline for when a startup should build out a dedicated customer success team, Berner's insights from building CS functions multiple times offer founders a detailed playbook on pulling it off when the time comes. In this exclusive interview, she gives a behind-the-curtain look at exactly how to do it right.
She starts by discussing that crucial first CS hire — the skills to look for, how to interview them and aligning on compensation. Then she dives into the organizational side, giving founders a blueprint for how to design the CS org, from where it sits within the company to early systems to implement.
This is an invaluable, tactical approach for founders who are just starting to build their customer success functions. Let’s dive in.
## The people side of your CS team: hiring, interviewing and compensation
Building your CS team starts with getting the [first hire right](https://review.firstround.com/lessons-from-the-woman-who-built-squarespaces-customer-care-team-from-1-to-370/). Berner’s advice here is centered around alignment — finding the right candidates, getting the perfect mix of people on the interview loop and making sure the compensation is connected with the team’s goals.
### Profiles and traits for first hires
Hiring in customer success can be especially tricky because of the vast skillsets and backgrounds that can lead to an impactful teammate. Even knowing where to start is difficult — but Berner suggests it always comes back to looking at the problem you’re trying to solve for your customer.
"One of the questions I get a lot is, ‘Do you start with industry specialists or do you start with people who are really technical?’ The answer lies more in what your product is and what customers are doing with that product. There's no one formula. Start by understanding what work you can reasonably expect customers to do versus what your CS team needs to handle." says Berner.
Here are two scenarios to consider:
- **How deep does CS need to go on the use case?** If your customer’s path from “yes, we want to buy this” to “we're implementing this” requires deep understanding of retail workflows, accounting functions, or sales processes, hire for industry knowledge.
- **How technical is the implementation?** If getting to value involves complex integrations, data transfers, or backend manipulation that you don't want customers handling themselves, hire for technical skills.
Seniority of that hire is another factor. “I’m biased towards [hiring ICs](https://review.firstround.com/take-control-of-your-desk-and-other-career-tips-for-ics-managers-and-founders/) first,” says Berner. “Ideally, you can find somebody who either has been a manager before or has aspirations to be one, and you can assess for leadership qualities in their early interview process.”
> At the beginning, you need doers who can go super deep on your product.
She does offer one caveat: If you've waited a while to hire your first customer-facing team member and you know you’ll need to hire significantly more within the next few months, then hiring a manager first can be helpful. “If you get a manager in the seat, they can handle the IC hires instead of the founder having to do it. But the trade-off is that there's going to be a bigger lag. ICs are the ones who handle the bulk of the tactical day-to-day work, so you’ll have to wait a little longer before you see their positive impact.”
Regardless of the profile you decide to bring on, Berner has had success hiring people with these traits specifically:
- **Speed and curiosity**. “You need people who can work really quickly, are really curious about your technology and are really curious about the customer,” Berner says. Customer success is fundamentally about velocity — getting products into customers’ hands and driving value as fast as possible.
- **Exceptional communication skills.** “They're going to be your feedback loop to product, engineering, and leadership. They need to communicate what customers need, what you should build next, where they're running into problems, and what new workflows you need to build,” she says.
- **Demonstrated bias for action.** Look for people who see problems and fix them. “In the interview process, I ask for specific examples of places where they saw a problem and then fixed it on their own, or saw a workflow involving multiple teams that was broken and took steps to foster change.”
- **Natural customer empathy.** Berner has developed a unique screening method: “Early in somebody's life, people often have opportunities to take on customer-facing jobs. If they continue to opt into customer-oriented experiences, that tells me they are inherently a customer-oriented person.”
Some of her best hires? A former Broadway actor who became a senior CS leader, and a nonprofit fundraiser who excelled at inspiring customer change. Both were [unconventional hires](https://review.firstround.com/adam-grant-on-interviewing-to-hire-trailblazers-nonconformists-and-originals/), but shared a deep curiosity for and ability to communicate with others.
While the [customer empathy](https://review.firstround.com/webflows-path-to-product-market-fit-lessons-on-creating-a-market-with-rigorous-customer-empathy/) that these kinds of roles display is important, Berner warns against over-indexing on it. “You want someone who wants to be that customer helper, but they still have to balance that customer interest with business interest. In other words, they can’t let the volume of the customer’s pain get in the way of juggling the multiple interests they need to be juggling.”
### The interview panel and questions to ask
Your interview loops should have a combination of people who are either direct inputs or outputs to customer success. “The way I see it, the more senior leaders who can make time for the interview the better,” Berner says. She suggests:
- **At least one founder**, whoever is closest to current customer experience
- **Head of product and/or engineering**, as someone who understands the technical requirements
- **Someone from go-to-market**, who knows what the CS function could look like in the future
With the interview loop in place, Berner has a set of must-ask interview questions. To test for both key skills and an underlying desire to be customer-facing, Berner advocates for [taking your interview questions a step beyond the basics](https://review.firstround.com/type-of-interview-questions/). Some of her favorites are:
- **Tell me about a time when you saw a problem and fixed it.** “This is a great one for testing for drive,” says Berner. “It doesn’t matter if their answer includes fixing it themselves or elevating it to someone higher, you just want to look for someone with that bias for action.”
- **What’s the most impactful piece of feedback that you got in your last performance review?** Nobody's perfect from day one, especially in a CS role at a fast-moving org. That’s why Berner says it's important that folks can take feedback and implement it quickly. “With this one, I’m really looking for some self-awareness because that drives an ability to work well with a varied set of people internally,” she says.
- **Your boss’ boss just called. They’re resigning, and you’re taking over the team. What are you going to change, and what are you going to keep the same?** Berner uses this question to identify folks who think system over subsystem. “CS is highly cross-functional, so you want to look for people who can think beyond their own world,” she says. “Subsystem thinking typically is, ‘Here's the problem I'm facing in my team, and I think my boss should be directly addressing it.’ System-level thinking is, ‘I'm facing this problem, but my peer is facing this other problem that’s more important to the business, so that’s why we’re focused there.’”
- **Tell me about what it feels like to receive great customer service versus bad customer service.** A great question for gauging suitability for being customer-facing. “Their answers and language generally tell you how empathetic they are to a given person's experience and how reflective they are of their own experience as a customer in the same context.”
Another Berner interview tip: use hypothetical problem scenarios. “You’re looking for somebody to break down whatever scenario you present them with and say, ‘Okay, what's going on. Let me get on the phone with a customer, get clear on the problem, and then escalate it to the people who are going to be part of my solution. And then let me build a plan for what I'm going to do to help this customer.’”
While the actual answer might not be so framework-driven, Berner notes that running through scenarios is also a great chance to surface red flags. “What tells me that somebody may not be a fit is if they scoff at the question, or if they get flustered at the prospect of getting bombarded with customer questions when they don't really have an answer,” says Berner.
### Compensation: aligning on incentives
Most CS teams work best on a base-plus-bonus structure rather than pure commission. But Berner says that the key to right-sizing comp is aligning it with the actual responsibilities of individuals on the team and the business value they’re driving (while also understanding this will change over time with scale).
“I’ve seen the most impact with incentives where the bonus structure includes some very specific commercial KPIs, often renewals percentage, sometimes expansion or adoption numbers or other measures of value,” she says. “I’m a fan of that approach instead of explicit renewals quotas, unless you have a renewals team that is actually running renewals under customer success.”
Berner says that when thinking about comp, it’s important to bifurcate — is the CS team, or some portion of them, responsible for getting a renewal transaction over the line? Because that means revenue for the company. And in those cases, you’ll want to set an expectation on how much revenue is going to renew, in addition to tracking other leading indicators like adoption or customer satisfaction. However, in a world where your CS organization is measured on retention percentage or churn percentage, it makes more sense to have KPI-based incentive structures.
> It's really important to be clear about where you want CSMs spending their time and you design your compensation systems to match that.
“The thing companies get tripped up by, is when you put a significant amount of comp against renewals or expansion quota, that is going to drive behavior. And if you want your teams focused on only getting renewals across the line, that is where they’ll focus,” she says. “Instead, if it’s important that your CS team is paying attention to product adoption, use cases or integration with other workflows in their business, then you need to incentivize that behavior in an appropriate way.”
Berner remembers, in the early days of customer success, teams almost missed the forest for the trees. For example, if a customer success team in a high-transaction business was solely incentivized on renewals, that’s where they’d spend their time — but all of a sudden, customers would churn because nobody was ensuring they were actually getting value from the product.
### The three most common reasons CS hires don’t work
Over her career leading customer success teams, Berner has found some patterns for unsuccessful fits:
- **Customer aversion.** “People who actually don't have depth in customer-facing roles and it turns out they don't really like working with customers, so they can be abrasive.” This is why Berner looks for previous customer experience, even if it's waiting tables or retail work.
- **Inability to balance customer and business interests.** “Some people get really bogged down in volume or pain that’s coming in from customers. They get frustrated when we can't solve problems immediately, and that becomes a problem because they can’t balance multiple interests at one time. They end up with a heavy heart.”
- **Difficulty taking feedback.** “Being in a customer-facing role in a fast-moving organization is hard. It's really important that individuals can take feedback on prioritization, tone and internal collaboration approach. People who have a hard time with that don’t grow and evolve with the organization.”
Watch for these patterns in your first 90 days and address them quickly through coaching or role adjustments.
## The organizational side of your CS team: systems, processes and metrics
Setting your team up for success first requires an understanding of how CS can drive impact for your business. Then you need to make that clear to everyone up and down the org chart. Berner shares her advice for the most important parts of early team-building.
### Establish where CS sits within the company
[Organizational design](https://review.firstround.com/how-to-design-your-org/) isn’t just about who reports to who — it’s about creating the right structure that fits your business needs.
**Option 1: Report to the CEO.** Berner recommends this approach, because no matter what phase the business is in, the CEO is one of the closest people to the customer experience. “I'm a big fan of the CS organization reporting right into the CEO because it puts the CEO in direct line of sight to what's happening with the customer business,” Berner says.
> When CS reports to the CEO, it creates accountability for the customer organization to deliver the company's mission.
**Option 2: Report to the CRO**. While this can work, Berner recommends making the decision based on what your sales leaders need to be doing. “The CRO approach can make a lot of sense when you’re equally focused on renewals and growth,” she says. “If you’re in a phase where you’re all about gaining market share and most of your growth is coming from net new customers, you need revenue leaders focused there. But if your revenue is mostly coming from existing customers, then have your CS team report to the CRO to create strong alignment on both of the metrics that need to be hit.”
**Why not report to the CPO?** From Berner’s perspective, CS is core to the go-to-market motion and aligning it with the revenue team creates a flywheel that might be a challenge to achieve when reporting to the CPO. “The organization problems you’re solving, the opportunities you face as an executive, the alignment you’re trying to create in your organization — that looks pretty different in a product org than it does in a customer-facing team,” she says.
### Thinking through team size
Berner says this is one of the most common questions founders ask her during the zero-to-one phase of CS building. “The answer is different depending on what the team does,” she says. “For real technical support, which is break-fix, managing a real high volume of tickets and implementations — which is basically a repeatable process — it’s a lot easier to figure out how many people you need.”
It’s really just a math problem. Berner suggests looking at your capacity in a given day and how long it takes you to do the task at hand. Put the two together to figure out the capacity you need and that translates to the number of humans on your support team.
But in the world of CSM, it’s more unclear. “There are rules of thumb, mostly by segment. But it will depend,” says Berner. “What’s your ACV? What stage of business are you in? Are you operating in multiple countries and languages? How much support does your customer need? How many extra roles do you need — like technical account managers or product overlays?”
Here are Berner’s starting points for ratios of number of CSMs to accounts:
- Strategic accounts (which are usually more than $500k): \~5-10 accounts per CSM
- Enterprise: \~20-25 accounts per CSM
- Mid-market: \~40-50 accounts per CSM
- SMBs: \~80-120 accounts per CSM
There’s also a “dial up or dial down” component to these ratios depending on a number of factors, says Berner. “How complex is the technology? How difficult is it to get a renewal over the line? How much programmatic handholding does a customer need to get their program off and running?” she says. “If a customer has 15 use cases to solve for, that’s different from a customer who just has two in terms of the amount of time that CSM has to spend with customers.”
> I tell founders and leaders at growth-stage companies, ‘You have to start somewhere and be willing to change.’
The math is shaped by qualitative aspects, like if you think customers are getting the right level of support they need. This also might surface the need for different types of programs to support customers, like establishing a self-service motion.
### The two systems to set up first
The way Berner sees it, your first one or two hires are like firefighters — dealing with customer issue after customer issue as they inevitably pop up. But in order to set your org up to successfully manage the [customer experience as the business scales](https://review.firstround.com/21-ways-to-shore-up-your-customer-success-org/), it’s crucial to put lasting systems in place.
Berner outlines two areas where she believes templatization — or at least some consistency — are key:
- **Support tickets.** “You need a way for customers to reach out to you,” says Berner. “Whether that’s through a Slack channel or an actual support system, you need a systematic way of collecting that customer feedback that's not just an email.” On top of simply being able to communicate with customers, Berner says this also becomes important as volume ticks up and you need a way of categorizing incoming questions to understand what’s happening with your product.
- **Onboarding.** “A big mistake I see companies make is that they don’t codify the multi-step process of [getting a customer onboarded](https://review.firstround.com/superhuman-onboarding-playbook/),” says Berner. “If you don't have that early mindset of creating a checklist, your business can end up scaling without you having a consistent way of onboarding customers, and that means there’s a weak understanding of what it takes to get a customer to value.”
While support tickets can take a number of forms, Berner recommends keeping your onboarding manual V1 simple — think a shared Google sheet with a templatized version of the 10-step process. “The details of that implementation are different depending on the product, but onboarding manuals should always include a kickoff call and a requirements gathering conversation,” says Berner. “Then it's planning out each of those steps. Ask yourself: ‘What data do we need to gather, and who's going to deliver those files or build that API? Who's on point to build the communications that will go out to our users when we roll out this product?’”
### Orient your team around these success metrics
No matter what stage your CS org is in, [there are always metrics that matter](https://review.firstround.com/your-data-is-your-lifeblood-set-up-the-analytics-it-deserves/). “Another mistake I see early CS leaders make is that they don’t put the time and effort behind making sure they're tracking the right data and holding the team accountable to outcomes,” says Berner.
> Measuring success from the earliest days sets up your CS org to scale because they’ll understand the path to value for a customer.
**1\. Customer health (measured as product usage)**
While measuring customer health can get a bit more complex down the road, Berner finds that, in the early stage, it’s all about product usage. “It’s a critically important starting point, because if a customer isn't using your product, they're not getting value,” she says.
The equation itself is simple: Look at the number of seats purchased, the number of seats deployed, and how many of those deployed seats are being used. “It's a three-part equation,” says Berner. “As long as you start there, that’s enough to drive action with your team. If on any given day an implementation manager or support rep doesn't know what to do, they can start by looking at their customers to understand who has low usage and just start a conversation with them. It's a very action-oriented metric.”
**2\. Renewal rate**
This helps CS teams understand retention of current customers. “The whole value of a customer success org — from implementation to CSMs to support and everything in between — is to ensure we’re delivering value to customers. The best measure of that is when a customer renews and ideally grows,” says Berner.
However, the question of where renewals sit between sales and CS is something that Berner says comes up often. Her dividing line is the type of renewal. If there isn’t a detailed negotiation, she believes it should roll up to a CS leader (or CSM, in the early days). But if that renewal is an important moment for expansion, then it becomes a very different commercial conversation more about discovery, negotiation or solution-building that lives in the world of sales.
“The question is really what the renewal moment looks like for a customer. With that in mind, you can think about which team should be closest to that activity,” she says.
Though, over the years she’s gone back-and-forth on this. “The reason I initially rejected the idea of renewals sitting under CS is because we really like to hold true to the fact that we’re the advocate for the customer. And it can feel like when you start having commercial conversations, you’re no longer the advocate for the customer — you’re the advocate for the company,” says Berner.
But her thinking has changed. When value is delivered in the right way to the customer, then she says any renewal conversation is just an extension of value. “All the pieces of a CS org are built to touch the customer and deliver on what the customer is trying to achieve with your product,” she says. “If you have accountability for all the leading indicators like adoption and customer satisfaction, and accountability for the outcomes, which is renewal, that creates the right combination of incentives for the entire team to do the right thing for the customer.”
**3\. Later-stage metrics, which you can add as you scale**
Net promoter score (NPS), customer satisfaction (CSAT), time to launch and implementation milestones. "I worry less about these in the super early days. They can be easily gamed and don't provide clear action items for CSMs," says Berner.
**While we’re here, let’s discuss another important metric: churn.**
When retention isn’t up to par, it’s time to get methodical and [unpack why churn is happening](https://review.firstround.com/the-secret-to-running-effective-growth-sprints-follow-this-process-to-learn-faster/). In Berner’s experience, high churn is typically the symptom of an adoption problem — but not always.
“You need to look at and capture all the reasons why customers are churning,” says Berner. “It’s key to analyze what's going on before you jump into fixing mode. From there, you can pick which solutions are going to have the biggest impact and which ones are going to need to involve multiple teams.”
To get it right, Berner suggests directly asking churned customers these three questions:
- **Why did you choose another solution?** You want to offer customers a space to be honest with you about why they decided to go a different direction. “This helps you understand if it was a features issue, something to do with deployment or if you didn’t train them on the product properly,” says Berner. “Typically, you end up with a list of between six and eight churn reasons, and from there, you can bucket those further into controllable and non-controllable.”
- **How did you arrive at your decision?** This question can give you clues about other companies and what you may need to do differently. “You want to be asking, ‘How did they collect information on whether this product was adding value? How did they collect information on who was using the product?’ Essentially, you want to get an understanding of the process that led them to this point.”
- **What are your alternatives?** Here’s your chance to get the inside scoop on what you’re up against. As Berner’s seen, this might be another company or a DIY solution from the customers themselves.
While getting the answers to these questions is great, not every customer is going to want to be forthcoming with every detail — and that’s ok.
“Anytime a company embarks on a retrospective interview with a customer, the most important thing is to approach it with a lot of respect and appreciation for the customer,” says Berner. “In most cases, they had to make a really tough decision. If they feel heard and you use language that diffuses the wall between you and them, you give yourself the best shot for finding a way to improve your product moving forward.”
You'll typically end up with six to eight churn reasons. From there, Berner suggests you bucket them into controllable and non-controllable churn reasons, and focus your energy on the controllable ones.
Common controllable reasons:
- Low product adoption
- Poor onboarding experience
- Lack of ongoing engagement
- Missing key features
- Poor support experience
Common non-controllable reasons:
- Budget cuts
- Company acquisition
- Change in strategic direction
- Key champion leaves
### Rituals for a customer-centric CS org
As a company scales, it’s the rituals and culture of the team that drive strong output. “Being on the receiving end of great work and a [caring culture](https://review.firstround.com/3-rules-for-building-a-more-caring-culture-this-chief-people-officer-shares-lessons-from-lambda-school-and-invision/) can make a huge difference in the results you’re getting with your customers,” says Berner.
To take your customer success org from fine to great, she recommends creating company-wide rituals that enforce the principles of great customer service.
- **Always bring it back to the customer.** This can be as simple as sending around a customer story, or asking, “What’s in it for the customer?” before big business decision — a practice Berner picked up from Box’s [**Aaron Levie**](https://www.linkedin.com/in/boxaaron/?ref=review.firstround.com). “When you do these kinds of little rituals, it builds customer empathy through the entire org and throughout the whole life cycle of the business,” says Berner.
- **Get teams together.** To drive a collaborative culture and solve problems early on, you can’t have a company full of silos. “There’s nothing more exciting for a CS rep than going to the product team and saying, ‘Guess what? Here's what I heard from my customer today. Can you help me solve this problem?’” Berner recommends a “forcing it without forcing it” approach — or making sure that cross-function meetings are happening on a regular basis. “It can look something like individual team meetings on Monday, a CS and product team meeting Tuesday and then another regroup on Friday. Ritualizing these and making them regular touchpoints is the key to creating a team that solves things together.”
- **Celebrate your people.** In the same way that cross-org meetings foster connection, more informal rituals can help too. “Make sure you're building in those moments to recognize the teams that are doing great work,” says Berner. This is especially important for CS teams, who tend to sit at the end of the line of a lot of work and can start to feel left in the dark. “When a customer launches or you get a great story back, celebrate your CS folks.
“If you build these cultural habits at the start — whether that’s shining light on the customer, getting together cross-org or showcasing the work of the people talking to customers every day — customer success becomes a habit in your org, and it fosters a really great connection amongst a lot of people.”
### How Gusto built a $9.5 billion company by identifying a burning problem
URL: https://review.firstround.com/podcast/how-gusto-built-a-9-5-billion-company-by-identifying-a-burning-problem/
Last updated: 2026-02-03T17:42:24.000Z
Tomer London is the co-founder and CPO of Gusto, the $9.5B payroll and HR platform serving 400K+ businesses. Inspired by his dad’s clothing shop in Israel, he set out to build better tools for small business owners.
In today’s episode, we discuss:
- Reinventing payroll without any prior experience
- Why you should hire for humility, not just talent
- Gusto’s scrappy customer research: cold calling from a walk-in closet
- Why founders should embrace customer rejection
- Why “emotional urgency” matters more than polite feedback
- The weekly co-founder ritual that built trust
- How Gusto expanded from payroll to a multi-product platform
- Building products customers *actually* love
- And so much more
**Referenced:**
- [ADP](https://www.adp.com/?ref=review.firstround.com)
- [Eddie Kim](https://www.linkedin.com/in/edawerd/?ref=review.firstround.com)
- [Gusto](https://gusto.com/?ref=review.firstround.com)
- [Intuit](https://www.intuit.com/?ref=review.firstround.com)
- [Josh Reeves](https://www.linkedin.com/in/joshuareeves/?ref=review.firstround.com)
- [Paychex](https://www.paychex.com/?ref=review.firstround.com)
- [Steve Jobs’ “Secrets to Life” clip](https://www.youtube.com/watch?v=kYfNvmF0Bqw&ref=review.firstround.com)
- [Steve Jobs’ Stanford Commencement Speech](https://www.youtube.com/watch?v=UF8uR6Z6KL&ref=review.firstround.com)
- [Wells Fargo](https://www.wellsfargo.com/?ref=review.firstround.com)
- [Y Combinator](https://www.ycombinator.com/?ref=review.firstround.com)
**Where to find Tomer:**
- [LinkedIn](https://www.linkedin.com/in/tomerlondon/?ref=review.firstround.com)
- [Twitter/X](https://x.com/tomerlondon?ref=review.firstround.com)
**Where to find Brett:**
- [LinkedIn](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- [Twitter/X](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- [Website](https://firstround.com/?ref=review.firstround.com)
- [First Round Review](https://review.firstround.com/)
- [Twitter/X](https://twitter.com/firstround?ref=review.firstround.com)
- [YouTube](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- [This podcast on all platforms](https://review.firstround.com/podcast)
**Timestamps:**
(00:00) How a childhood around SMBs shaped Tomer’s founder mindset
(03:24) The three things that led to the creation of Gusto
(07:17) Hiring for humility, not just talent
(09:28) The tug-of-war test for product-market fit
(11:58) Why founders should actively seek rejection
(15:34) Gusto’s scrappy customer research: cold calling from a walk-in closet
(17:45) Betting on SMBs – and ignoring investor advice
(20:44) “It’s not an MVP, it’s something that wows people”
(24:09) Serving SMBs vs. startups
(28:36) How to find the right co-founders
(31:09) The weekly co-founder ritual that built trust
(35:02) Reinventing payroll without any prior experience
(38:49) Gusto’s “start small” GTM playbook
(42:16) The big opportunity Gusto wishes they tackled sooner
(43:58) How switching costs became Gusto’s moat
(47:25) The two lucky breaks that gave Gusto an edge
(51:56) What Tomer learned about customers from his dad’s clothing store
Brett: What were things like for you growing up?
Tomer: Yeah, so I grew up in Israel in Haifa. My dad has a small clothing store. He's been running it now for over 40 years. So so much of my upbringing has been after school going and helping in the store, whether it's cleaning or answering phone calls or organizing or selling, and I think that's many small business families are this way. It's a family affair. Everyone's involved. When you are sitting around the dinner table you talk about the day, my dad comes back home at the end of the day, you see in the first 500 milliseconds to see if the look in this face was a good day or a bad day. At the end of the week, it's about closing the books and looking at all the receipts and all that stuff. So I think the multiple hats of a small business and was just a huge part of my upbringing. I saw it in my dad, I saw it also, I have my father's dad, he also has a business and his sister also has a business down the same street, all clothing stores.
Brett: Do you think it shaped your desire to start a business?
Tomer: Yeah. Well, funny enough, my dad didn't give me much advice, career advice, but the one thing he did tell me is, "No matter what, don't start your own business because it's really, really hard." And in a way, I grew up with a lot of that I guess noticing how emotionally difficult it is. I had my 386 computer and it was early days, Windows 3.11, then Windows 95, Office 95 and you start seeing like, "Hey, for consumers, for kids at home, I can make PowerPoint. There's so many tools." Around when I was, I want to say 12, picking up a Visual Basic book and building an inventory management software. So I built it and it worked, it worked really well, saved a bunch of time for him. He ended up buying a computer for the store just to run it. So definitely that upbringing, that kind of connection with small businesses then gave me a lot of that push towards doing something useful when I started touching software.
Brett: What about if you just sort of reflect back on those childhood experiences? If you didn't do that, maybe you were more of a conventional kid and you were just playing sports and not doing-
Tomer: Right, yeah, yeah.
Brett: Do you think it would've made you less successful as a founder?
Tomer: I think the nice thing of trying things out as a kid or early or you're young is you kind of have very little to lose. I just had more at bat, so it helped me build confidence that I can start with a big idea without, I don't know exactly how I'm going to build this. I don't know exactly how I'm going to solve this, but I have a belief in myself that if I put a lot of time and energy and something can come out of it. I think you also learn about a bunch about your own limitation on the other side. One funny story is one of these projects, I was determined to finish some sort of piece of software by the next day and I was like... For some reason I was like, "I'm going to finish it by tomorrow." And I ended up that night drinking seven cups of coffee. I think I was, I want to say 17 or something and I got... I ended up almost going to the hospital, it was actually quite bad for me. So I learned, okay, seven cups of coffee, that's way too much.
Brett: Six is the number.
Tomer: Exactly, six is the number. And then I think it's the confidence, that's the thing that it gets you.
Brett: What was your path from there to coming to Silicon Valley?
Tomer: Yeah, so I came here originally 14 years ago now for a PhD at Stanford in electrical engineering. I'm Israeli so I can't just show up in the US, there needs to be a path and for me it was that student path, a graduate student. The reason I ended up, I came here was, there's three things that happened at the same time. They're all just inspiration. So the first one was the Steve Jobs commencement speech of 2015\. I remember seeing that. That's definitely the YouTube video that affected my life the most. I didn't know where Stanford even is. I thought that Stanford from the name is actually in Britain when I saw it, but that speech is just incredible. He has that line around, "There's this moment that you understand that reality around you is built by people similar to you and you can change reality. You can kind of poke at it and make changes in it." That was just incredibly inspiring to me. The other inspiring story, \[inaudible 00:04:23\] Stanford for me was the story of Google, and Google founders and coming into PhD and ending up with a really great idea that ended up being really, really helpful for a lot of people in a building great business. And the third thing is actually I have, one of my best friends ended up doing a PhD here and landing here a few years earlier and he said, "Hey Tomer, you have to come here. It's really fun." I came in to visit and my first time in the US and so he was determined to convinced me to move here and I had a startup company back in Israel when I was doing my bachelor's in the \[inaudible 00:04:55\] and before that, as I mentioned a bunch of stuff in high schools and before, so I kind of knew that for me success and where I want to go is going to be something around building products that make people happy. I didn't know exactly what's the shape of it and I actually thought I'll finish my PhD and take some of those learning and maybe build a company off of that. But ended up being just really, really lucky meeting Josh and Eddie in my first few months at Stanford and then from there we started the company.
Brett: When you think about all of you being second time founders or certainly building multiple products in multiple companies and obviously the one that you spent the last 14 years plus building is an extraordinary business, a very, very big business. The other companies and products that you worked on did not turn into great businesses. Do you think those experiences helped you grow into the founding team that allowed you to build this extraordinary business? Or do you think there's a little bit of a luck element that you had the same abilities, but it's almost like you were drilling for oil and you were really good at drilling, but you randomly in your first attempts set up a rig in Connecticut and then in this what ended up being Gusto, you just happen to set the rig down in Texas and struck oil and that gave you the ability to sort of express yourself as founders.
Tomer: Yeah, I think to be successful you need to do a lot of things right and you need to avoid making a lot of mistakes. And then sure, there's absolutely, there's a lot of luck involved as well, being in the right place at the right time. I think having multiple founding journeys for me, having Josh and Eddie having previous startups, it helps you by one knowing how to avoid some mistakes so you don't repeat the same mistakes. So for me, I can give you a bunch of mistakes, we can talk about it, but helping avoid some of these mistakes is one. Two, is it kind of gives you some shortcuts to doing things correctly, doing things right so you don't need to do so much searching about how to do something because done this before. The last thing is absolutely, I think you can move faster in validating or invalidating ideas, but in the end of the day to strike gold, to get to that product market fit, to be the right team at the right time, there's an incredible amount of luck involved as well. So it's all these three things.
Brett: Share a little bit more about that, both some of the things that you and the team learned in your previous companies and then some of the ideas around some of the shortcuts that ended up being a part of your journey that you couldn't have figured out if you hadn't worked on other businesses before.
Tomer: So the first thing is around talent. I really think that, again, startups is this search for product market fit and for that you need a team that can stick together through ups and downs, have confidence in their way, and be very humble around admitting when things are not working. And I think that in my previous company at Vizmo, I wasn't smart enough to hire for that. I wasn't hiring for humility, I was hiring for raw intelligence and skillset. Like, "Hey, let's get the best software engineer we can find, get the best salesperson we can find," and so forth. As opposed to thinking about like, "Hey, no, we are actually a team together. We're going to go through ups and downs." And we should be able to sit together every Friday and say, "Are we on track or not?" And if we're not on track, we just move on and we give each other direct feedback and we're honest with to each other and we can stomach it. And that's the thing that I think the biggest lesson that then at Gusto first it's just knowing when I met Josh, when I met Eddie, knowing that they are the people. Hey, I was in the middle of a PhD journey that I loved and I loved my advisor, I loved Stanford, I had such a great time there, but I know it's so hard to find these sort of people, I just got to stop what I'm doing and work with them. And then similarly, when we started hiring people it was not about, I was really trying to avoid people who are toxic geniuses, and there's a lot of them. So trying to focus on people who are instead humble. What I mean by humble is self-critical in a constructive way. It's kind of a growth mindset. Knowing that you are a work in progress, every day you're supposed to be better, which means that if when you look at yourself a month ago or it's a year ago, five years ago, you should be embarrassed like, "Oh my gosh, that guy. I know so much more today." And then similarly, when you look a year from now, five years from now, you should look at that guy and say, "Oh my, this is going to be a huge difference for me and where I'm going to be," so we're always trying to learn. So that's the sort of stuff that we've been trying to hire for since the beginning.
Brett: What about getting the company into product market fit in the previous startup, was there any important things you learned about building and selling software?
Tomer: Yeah, so there is this analogy of it should feel like there should be some sort of a positive tension when you are pulling a rope, not when you're pushing a rope. And in the previous company there was a lot of rope pushing. So you're working with these enterprises, so I remember going to one of the biggest companies in Israel, a huge airliner and trying to convince them, "Hey look, here's how it's going to make your life better, the customer's life better, your metrics better." And you kind of see that there was interest in the product but it just was not a priority for them. So it was a priority enough to keep getting us more meetings but not priority enough to actually get to a contract. And so the big lesson learned for me is when you look for product market fit, first obviously, but very important is spend a lot of time with customers, speak with customers so much in fact that you can just start predicting what they're going to say next because you've heard it so many times before. That when you start knowing that, it's like, "Oh, I've heard this before, I've heard this before," then you know that okay, you started having good intuition. That's number one. Number two is it's about the emotional reaction to what you're trying to sell. So a lot of people, especially in the US are just very polite and nice, so when you go and tell them about your idea or show them the product, they're like, "Oh yeah, that's cool." "Oh yeah, would you want to use it?" "Yeah, sure, sure, that's great." But the problem is that this politeness and nice, that's not actually how you can build a business. You need to build a business that's built on either, I want it right now, can I get it? And then you put a price tag and they're saying, "I will pay for it." So a strong positive emotion or a strong negative emotion. It's like, "This is absolute shit. I would never use something like this." This is gold, because that's where you can learn. When someone says that your stuff is absolute shit, it means that you can learn a lot from it. There's something in your mental model that was absolutely wrong here, either it's the wrong customer or something about your service or the way you pitched it. When someone is emotionally reacting with engagement and excitement, "Where can I sign up," you know on the other side that you hit gold with that particular customer and you should probably ask and learn what makes it so exciting for them. But 90% of the conversation in the middle, there's not a lot of data in there and you should be very careful reading too much into people in that category.
Brett: Why do you think the first thing that you shared, which is spend a tremendous amount of time with customers such that you can model the customer in your brain, why in 2025 when you talk to many good founders, they're not doing this? I talked to one customer last week, I can't for the life of me understand, it's been drilled into everyone's head, why is that not happening-
Tomer: Its hard.
Brett: Even our product people, you talk to the average product manager at a great company, how much time are you spending with customers last week?
Tomer: I think it's hard. Listen, it's hard to speak with strangers. I think it's your job to speak with strangers, so you do a lot of it, but it's kind of hard. This fear of rejection is something that is very human and when you speak with a customer you kind of need to be in the mindset of seeking rejection. You go out there to learn and again, the learning comes so much from a rejection, so you got to go out there and seek that rejection and it's hard. It's a lot of hard work and you got to slowly develop that thick skin. Usually when people are spending time building a product, they love the product, they love the technology, they love what they're doing, they're in love with it. So having someone step over it is really difficult. I think that's why. It's coming from, it's definitely not coming from laziness because these people sometimes work extremely, extremely hard. So I think in that repetition of whatever you're doing right now and definitely if you're a kid or if you're early, young taking on these opportunities to experience a lot of rejection, whether it's customer facing, selling or pitching your ideas or stuff like that, that's the sort of stuff that kind of build that thicker skin, I think is really important.
Brett: The other point that you made that is important is this sort of general idea that you're looking for emotional resonance and you're looking for urgency. You want the sense... The dream is that they're emailing you the next day, when can I try this versus you chasing them. And again, most founders are in that middle spot of apathy. "Yeah, sure, it's interesting. That's cool." You email them, they don't email you back, sort of. Maybe you could share more about maybe why you think that is, why that urgency element, that sense of trying to find something that they are asking you, when can I use this is such an important thing?
Tomer: The world is full of distractions and long to-do lists and things that people care about. If you are trying to create something new and you need the world to act on it, you need your customers to act on it, you have to be an important place in their brain and that's kind of signified by this kind of sense of urgency. It is quite rare to get to that place where you get this sort of excitement and energy from a potential customer. So be patient, keep trying, change your ideas, get the hints, get the clues from the world from all these interactions, adjust what you're doing, and when you get to that place you've got to stop everything and double down on that. When we started the company, one of the insights that we had was, I closed myself in a room in a walk-in closet where we were living and every day I was like, "I'm going for a whole hour, I'm going to call up every single..." Or at least for a whole hour, I'm going to call up a bunch of businesses using a Yelp page. So every day you just kind of start calling one by one and you try to understand and you pitch stuff. So every day you pitch something a little bit different, you learn a bunch of stuff from yesterday and you're working on stuff, so you were using that as an opportunity-
Brett: So what did it sound like, "Hey, it's Barbara's salon. Hello."
Tomer: "Hey, this is Tomer, nice to meet you. Do you have five minutes? I have a product I have to tell you about." And sometimes it works and you'd be surprised how many people actually are excited to speak with technologists. Most people, outside of Silicon Valley, like small businesses and real industry and people don't get to speak with technologists often that can build products.
Brett: Why did you decide to focus on SMBs versus the payroll API idea?
Tomer: I would say the big one is the rope pushing and pulling. I remember going to some of these big platforms and we were sure that they're going to eat this up, they're going to love this. We are solving a problem, they don't need to build all this payroll shit. It's really complicated. It's hundreds of thousands of rules and regulation and we're a good technology team, we can build this for you, you can focus on building your platform. And we just saw that they were like, "Yeah, this could be cool, but it's just not a priority." The priority was to grow it, so the priority was to add more products and all that stuff. All the regulation of kind of situation with the states with 1099 versus W2 didn't start yet because it was early enough in that industry, so again, it felt more like rope pushing. Whereas when we talk with a small business, it was very clear that they were craving something better. Now, not everyone, to be clear, product market fit for me is that when you talk with 10 customers, two people are loving this and want this, that's great product market fit. Now you need to figure out who's that two, what makes it special, who are those segments and then you can pick 10 of those and then it's going to be 10 out of 10, but not every small business we talked with loved this. A lot of people we're like, "Hey, it's really hard to switch payroll providers. It kind of works, whatever." But there was people, and specifically people who knew enough about using technology in their personal lives, again, the Gmail and Dropbox. That was actually one of the big thing to know if somebody would be a good customer, it's like, "What's your email address?" If you are a Gmail user, you're going to use Gusto, \[inaudible 00:17:39\].
Brett: For Hotmail, it's not \[inaudible 00:17:41\]-
Tomer: Hotmail, I don't know. Hotmail actually is fine because it's the AOL and the other kind of things. Yeah.
Brett: When you were thinking about, okay, we're going to build this product for small businesses, did you think about how do we go from solving this problem to building a very large enduring business or did you not overthink it? You spent a lot of time with customers, there was a clear problem, let's go build something and let's see what happens.
Tomer: I think that's where my co-founder, Josh has had this incredible foresight. I think he was thinking in this narrative of building a multi-decade company, and it's not that every single day, every single decision you do is this... When you choose, for example, the logo for your business and when you just start, you can change that later. You can make it better. It's not the end of the world. When you write this one line of code, it's not about is this a multi-decade line of code or not, but there's moments, there's the specific decisions that you do need to think about that. So for example, putting down the values of the company early on and then make sure when you hire people that here's the five values for the company, here's how we're going to hire people and that's really important. There's so many companies that mess that up. So this is an example where when you think more multi-decade it makes sense for you to codify your values, put them down, make sure that you hire according to them and you reward people according to them starting very, very early, like your first, second, third hire. When we were then a part of YC and we were like, "Okay, payroll for small businesses, that's where we're going to start," and we started building it. It was very clear after a while that payroll data is very, very powerful because onboarding is so complex, there's so much that we need to know about you as a company in terms of your employees and where they work and how much they get paid and your company address and your onboarding process, everything about your employees, that it would be really easy to actually add additional products to it and solve more problems. So once you did payroll onboarding, onboarding you to benefits for example is just a click. It's really easy. Getting your insurance is really easy. Time tracking is really easy. Basically almost every internal function that's around back office and HR and people and all that becomes really, really easy. So for us, easy in terms of onboarding. So then it was clear that well we have an opportunity if we do payroll extremely well and people really love this product, we're going to have an opportunity to expand and offer more services. So when we did our pitch in YC and on demo day, over there, it was whatever the three minutes pitch back then, today it's like one minute.
Brett: Exactly.
Tomer: It's one minute.
Brett: The good old days.
Tomer: We had three minutes to tell the whole story.
Brett: Exactly.
Tomer: The last slide was all about that. It was about, "Hey, we're starting from payroll, the next step is benefits and HR and from there it's going to be a full," what we called are people platform. So everything to help you start build and grow your business. That was very much the vision since that day one we were just three people.
Brett: Once you figured out we're going to go in this direction, what's the very first thing you built?
Tomer: So payroll was the first thing and to do that, we... The biggest pushback we got from investors and why people did not believe the story in what we're trying to build is because it's really, really, really hard to acquire small businesses. So there's a reason why back then there was tons of companies focusing on software for enterprise and there's tons of companies focused on software for consumers or technology for consumers. There's not enough small business software, it was really three or four companies. And the reason it was just so hard to acquire them. You don't have enough ACV, enough pricing.
Brett: To have a traditional force.
Tomer: Exactly, you can't afford sales but you're also on the other side, there's less of them of consumer so you can't just mass put it on billboards. So that was the biggest pushback from investors. And for us our hypothesis was, hey, we're going to build a product people love so much and as service people love so much, that small businesses are going to talk about it all the time. And small business often have friends who are also small business owners. And that was the hypothesis, and again, a bunch of people did disagree and that was hard and a some people were believers and joined us. That proved up to be correct that if you built something that people really, really love for small businesses, you can get word of mouth and get the economics to really work. So it was all about like NPS of 85 and above, only serve customers if you can do it really, really well. Start really small, so say, hey, we're only going to do payroll for companies in California with just salaried employees in the particular segments. We're not going to serve anyone else. Because every person we do serve, we want to make sure they love the product. And then that word of mouth continues and then \[inaudible 00:22:34\] that work you start expanding.
Brett: So who was the first customer?
Tomer: Yeah, so the first set of customers there... We were just hustling and crazy trying to find who would trust the three of us to run their payroll. And there's kind of two groups. One, we were part of the YC batch. Luckily we just could just go to our batch and say, "Hey, do you have payroll?" "No." "Great, do you want to use us for it? And here's how it looks like. And the cool thing is that you can do it on your own using software. You don't need to call anyone or fax anyone and I can just onboard you right now. Can I actually do it? What's your name?" And that was one set of customers. The other set of customers are just small businesses we knew through all these customer conversations and just being out there in the streets and talking with people. So we had a swimming class for kids for example, that we knew. We had a flower shop actually that Eddie was buying flowers from this local vendor and he asked her, "Hey, who do you use for payroll?" And, "I don't have that actually." "You need to set that up." And we had that. So we kind of had both of these groups of customers. And for these first set of customers, they all had my phone number. I actually went, personally onboarded every single employee, every single one of these, the first, I want to say 50 companies. It was an incredible experience to learn what works, what doesn't work. You see them use the product, you see what's confusing, you write it down, then you go and you build something to make it better and you get a bunch of insights from that that can really help build a better product. A bunch of them, a lot of customers have my phone number, but back then that was the thing. You wouldn't run payroll without calling me and we would do it together.
Brett: Was there a tension in terms of do we want to serve startups or do we want to serve small businesses in that first year?
Tomer: Yeah, totally. I actually thought, and this was purely from a theoretical kind of place, my belief was that we should be the payroll for startups when we started. And the reason not because we're going to do this forever, we're more like, "Hey, we have an in here, we know a bunch of companies, we can speak their language. The more tailored you are, the easier it is." But Josh had the other opinion, so, "Hey, we're actually seeing a lot of love from these small businesses and we can always tailor it back down. Let's just start with our full vision, small businesses and put it out there and see what we get." And that was a really good decision. Since day one, basically the moment we launched, we got really good traction across verticals and industries and all of that stuff. It ended up being that the insight is that the pain from payroll was across industries, it was not just startups and the pain was strong enough that even if we did not have a personal network with dentists, dentists love Gusto and it's because of the product, the service speaks for itself.
Brett: You had a bunch of startups in the early days, but they were secondary, the core focus was SMBs? Or what was the balance there?
Tomer: We had both. It was 50/50 and... Again, so that was \[inaudible 00:25:33\] YC and we had, I want to say around 50 or 80 customers, or something like that. And then we took a whole, I want to say almost a year, maybe eight months until we did an actual launch and we told the world about our seed round and we did a big tech crunch thing and then we put out a website and put a waiting list. And then that was that decision moment of, what do we put on a website, what do you tell, how do you present yourself? We had, half of the customers were small businesses and half were like tech startups, what are you going to do? And so we ended up with the broader small business and again, that was the right call in retrospect. Then you started seeing the wait list and it was mostly small businesses actually and yeah, definitely more and more startups. The pain from small business was enormous.
Brett: How long did it take you to build the first version of the product that the flower store owner could actually use to run payroll?
Tomer: So for a full self-service products, so full meaning you could onboard, run payroll, it probably took a year until that and then the folks that used it before that year, that full year kind of used me as an interface in a bunch of places, so whether it's running reports or stuff like that. And again it was great, that was a really good way of learning from customers.
Brett: Were there other, you sort of explained that you got really close to customers, they had your cell phone number, you were effectively their customer success manager, are there other things like that that you did in the first three or six months that really had an enormous impact, or if other people are getting going, I would definitely consider doing this type of thing that we did.
Tomer: So closing yourself in a room for an hour and calling people and making yourself, having these conversations with existing customers or with new customers and prospects, just making yourself having those conversations is I would say golden. I would highly recommend it with people to people. You prove how you pitch, you learn a bunch, you learn about different segments and if you keep doing it every single day over a year, you get a lot of repetition. That's really great. The other thing around this is the way we built the first product was around releases, so we had a monthly release basically and we're all working together in this small room and it's... It's not that we start working and we see each other at the end of the month, but having a monthly release means that you're building backwards and so building forward. So you have like, "Hey, by the end of this month, here's the stuff we need to ship." And those things, you could talk later about how and what to ship but, "Here's the stuff we need to ship for sure." And now we just got to figure out how to do it and this is the time we have, there's no other way. And that helps you be very decisive about scoping, about what to build first and how to build it and I think you can get to progress really fast this way. So this was post YC, but in the first stretch of call it like a year, every single month was about, here's the thing that we need to ship and this is in order for us to get to our goals. That was really helpful.
Brett: A lot of the advice around finding co-founders is, start a company with somebody you've known for 20 years and you went to college with and you were coworkers and don't meet somebody over the course of a month or two and start a business, that's sort of what I would say is conventional advice. You obviously didn't meet on Monday and started a 14-year journey on Tuesday, but it was a very compressed time and you've had this incredible partnership. Maybe you could reflect back, again, were you just beneficiaries of good luck? Is there anything that can be learned from those few months that other people that are thinking about starting a business with somebody else might learn something from?
Tomer: Yeah, I think the reason that we ended up doing so well, I believe together as a team, one of the reasons is not just that we had a good fit, but we knew it was a good fit early and for you to know to understand that this is a good fit, you've got to go through multiple other options, other situations. So I would say that the advice here for every founder is to try to build stuff with a bunch of different teams and a bunch of different people and kind of go through these iterations because then when you get someone that's a fit for you, it's obvious and it's, "You're everything I ever wanted in a partner, let's go build this." But you got to go through some bad apples, or not a fit, it's not even good or bad, it's just, is this person a good fit for you and how you work?
Brett: What did it feel like in that first month or two as you were prototyping and exploring ideas? What was the feeling that you all had together?
Tomer: I think one, we were excited, we were having fun, we were enjoying building stuff. I think two is that we really enjoyed the... I remember brainstorming moments where every person brings their opinion, it was clear that no one is trying to, in terms of ego, it was clear that there was no one... It was clear that everybody were aware, the three of us were aware of how to control our ego or in other words know that we need to create space for the three of us equally in the room because for this to work we need to really respect one another, enable each other to be successful. So there was a lot of that. And I think that's kind of the sort of... So it felt like a very mature kind of like, "Hey, we're going to make this work."
Brett: Was there conflict in the first three or six months of building the company or was there sort of the sense of intuitive alignment and everything was hunky-dory?
Tomer: You've got to have conflict. So the startup journey has a lot of ups and downs and the downs are difficult because you believe in it so much that when things don't work out you get-
Brett: It's personal.
Tomer: ... you get annoyed. It's very personal, exactly. And then also again that you're dependent on other people. So all you need to pull and do your part and we're not perfect. So I make mistakes and my co-founders make mistakes and then how do you handle those situations? So the thing that really helped us is this idea of having a weekly founder one-on-one. So what we did is every Friday we had three one-on-ones, Josh and Eddie, Tomer and Josh, Tomer and Eddie. And in those conversations, and this was from the very, very early days, and in these conversations it was kind of a feedback session for how was the week. So we give each other, "Here's what I really liked, here's what worked really well and here's what I actually didn't like and here's what didn't work for me. Let's open up, let's talk about it." You did both sides. And it gave us a lot of repetition on having difficult conversations, which then builds trust. If you can talk about the hard things, then you don't just keep things in and then things explode later on. We were just very open on things. So I knew what Eddie for example didn't like about my work and where I needed to improve in Eddie's eye and in Josh's eye, and they knew exactly on the other side as well and I think that's really, really good and we thought of ourselves as a work in progress. And then that continues, honestly, to this day, we... Just on the way here in the car, I talked with Josh and we talked about these sort of things and give each other feedback. That is I think how we can help each other grow and kind of again, keep that high trust situation.
Brett: You talked in many different ways about how you love spending time with customers and that was a big part of the early journey and continues to be a big part of the journey at Gusto. If I were to listen to you talking to customers in that first year or two, how did you actually spend the time? How organic and improvisational was it? How scientific and precise was it?
Tomer: There was no... I didn't read a blog post. I don't know if there was a lot out there written about customer startup, customer discovery and all that. So I learned while doing it and I learned that hey, if I ask a question in a leading way, I get the answer that I was leading to, but that's not right. And I used a lot of two things. So if you listen to me in these early conversations, you would hear me say a couple of things often. The first one is, "Hey, I'm a PhD student from Stanford and I have a few questions. Do you mind helping?" So that again really opens the other person to being open, they feel like they're not being sold to or something like that. Then the other one is using the fact that I'm a foreigner, my Israeli card. It's like, "Hey, I'm actually not from here, can you just explain to me again what does this mean? I'm not from here, tell me more." So those two things allowed me to ask questions that are maybe more uncomfortable and the other person kind of not feeling awkward about it. So finding ways of disarming the other person again with the most positive intents possible, I was really not trying to sell, I was trying to learn. And then that was two of the tricks I guess that I used in these conversations, yeah. But it's so important to do these conversations right, but it's a hundred times more important to do the conversations at all. So don't let that to be any deterrent to you to start speaking and getting a sense of who these people are, what they care about, what is the role that your product could play in their lives today.
Brett: One of the interesting things about you all as founders is you didn't have domain experience in the sense of yes, you had a connection to the core customer, you told the story that sort of went back to you helping your dad out in his small business, but you were not payments geeks, you didn't work at payments companies, you didn't work at Intuit or someone selling to small businesses. Share your reflections on the fact that you didn't have domain experience and what does it ultimately teach you about founding teams and that specific topic.
Tomer: Yeah, I think for us the experience we had that was relevant and we relied a lot on is just understanding of small businesses as people and the challenges that they have in the day-to-day. But yeah, in terms of the payroll and taxes and calculations and all that stuff, we came into this understanding that there's a big customer pain, but we didn't know all of what it takes to actually build a payroll system. It ended up, to be honest, to be far more complex than we thought it would be. So in a way maybe that was actually good that we didn't know everything that it entailed. It took us a decade, there's tens and hundreds of thousands of different tax rules, regulations. The tax world in America is very complex, which is good for you I guess, it means you can do a lot for your customers. It's a big problem for customers, so it's really important for us to go and help them. The fact that it's so complex for people who are focused full time on that is kind of insane because that's what people expect of small businesses to figure out on their own, so it's just completely unreasonable. But again, that's where technology can really, really help. So proud of that. But higher level of reflection of the... I think coming in with ignorance could actually help because you can think about things from first principles. Here's an example, when we started, it was clear when you think about payroll from a small business lens that the job to do is to pay your employees. So you want to think about it as a computer game. You go in, here's the person, here's their salary or here's how much they worked, and you click a button and they get paid. That's what you want. But if you're thinking about from the payroll industry lens, the job is very different. The job is to withhold the right taxes. The job is to pay the right taxes at the right time. The job is to pay them in the right frequency. Oh yeah, sure, some money needs to go to the employees like a check with direct deposit maybe or something like that. But that's not the job of payroll. Payroll is about taxes, it's not about paying the employees actually as the primary thing. So as a result of that, when we design the product from the first place, we design that button that you click and you pay your employees and all the taxes just get done automatically for you, you don't need to think about it. Little did we know that was a very controversial thing to do and most payroll services back then actually split that job to two different things. There's one which is paying your employees and two is paying your taxes. There was two different workflows, two different situations. Some companies just did one and not the other and you had to figure out how to bring those two things together. You have to remember actually what taxes are due by when and what filings are due by when so you need to do it on your own. And sure, maybe some of the software helped autopopulate a form, but they didn't actually do the work, do the actual job end to end. So when we built this thing, from day one, the V one was back in the industry. Now I know it's called full service payroll, which means we do the whole thing end to end. But that was controversial and when we talked with accountants for example, who knew more about payroll than we did in the early days, they're like, "Oh, why are you doing it this way? Other companies do it that way. Here's all the advantages of the other way." So for us not knowing actually what is the way the industry has done it, helped us be more customer focused because instead of focusing on how it's done today, we could focused on the pain point and focused on the pain point for the customer.
Brett: How did you think about building your first handful of products? So not just everything you had to do, which is an immensely complicated, very deep product to actually do payroll and tax, but once you got the early version of the product, how did you navigate, we're going to do this next and then this next and this next?
Tomer: Okay, so kind of broad strokes, we started with payroll just in California, just for salaried employees, so to do a really, really great job for them and then we started expanding states as well as type of employees and employment, once we saw we had a product, or we had a very high NPS, over 85, that was kind of what we knew that would be the customer love we need in expanding. So that was called chapter one in the company. Chapter two was to start becoming multi-product and expanding towards the platform. That's also when we changed our name from ZenPayroll to Gusto. The second product, I guess, after payroll, was benefits. And why benefits for us, for me was we had that list of, here's the potential of what we can build and benefits presented this really, really interesting thing which is one, this huge problem for customers. Very much when you talked about health insurance back then with small businesses, it just felt exactly like payroll felt, like people hated the experience. It felt janky. It felt like you got to call people, you got to fax, you got to do a bunch of manual work, why can't they just do a few clicks and get health insurance? It's just so annoying. Can you just fix that for me? And I remember sitting in a room and calling 20 of Gusto's customers that I thought could be a good fit for it and I was pitching them, "Hey, we're going to build this. Here's how much it's going to cost. Can I sign you up?" And I got 17 out of 20\. It was crazy, way, way, way beyond... In fact, I little, I remember that I had a little disappointment actually after that because I felt like our health benefits product should take a different route, should be a different mode of benefits, instead of small group health insurance, which is what's very popular, I thought it should be more focused on the ACA, Obamacare, individual insurance and bringing money to an HRA or something like that. But when I pitched that to these customers, they were like, "This is way too complicated, just do the thing that I know that I need." So we ended up going with health insurance as this first product and it represented this combination of a really important pain point but also a great revenue stream, which is also important. So we were getting to that place where we were like, "Okay, \[inaudible 00:41:24\] is going well, I can see our team is executing, we're expanding state by state, where we're kind of halfway," but it felt like we know that worked. So now we're able to take some of the best people in the team, put them on a new team, literally put them on a different floor, have them all work together and create something from scratch and launch it in a couple of months. So that was that work.
Brett: And how long in the company's life did you do that?
Tomer: It's like three years.
Brett: Yeah. And you felt like it was the right time because you had a much more clear execution path on the core product?
Tomer: Exactly, the reason... The timing was a hundred percent based on how well the payroll product was doing. It felt quite linear, we knew what we needed to do. We need to expand states, we need to have the list of features of functionality and I know we can do it. So since our goal, our mission is to become this wider people platform to help with all these other things, now would be the best time to go and do it.
Brett: With the benefit of hindsight and you think about the important products that you've shipped over the last 10 or almost 15 years now, is there anything that you wish you had done sooner?
Tomer: Where my mind goes is funny. My mind is like, I feel like there's so many important features that we've launched the past 10 years and I kind of wish we had moved faster across everything. If I had to just really pick one, we really doubled down recently on the wider world of compliance and thinking about compliance and taxes is something that's not just about payroll compliance and benefits compliance and onboarding compliance, but just thinking about how do you keep your whole company on the right track with the government? And it's something that I think took us... We heard a lot over the years, but the thing really popped up in COVID, so people started working across multiple states. Multi-state used to be something that only large companies cared about. So it was kind of on our roadmap, but it wasn't that important for us. And then all of the sudden with COVID, a bunch of people working remotely and you start seeing a company with seven employees in five states. So then there's a lot of compliance work around managing the state entities, for example, the registrations, all the different tax compliance, regulation, every state is different. So the problem, all of a sudden, you're talking with customers, you start hearing about this over and over and over again, so that's completely changed our prioritization and we brought this up and I think we're spending a lot of energy on this now and I think we have a really good product there around compliance. So that's something that we, I think in retrospect is definitely a part of the holistic job to be done of what people hired Gusto to do and I wish we were more focused on that.
Brett: What do you think about the actual market setup for Gusto, now looking back in the rearview, ended up creating such great circumstances for a phenomenal business to be built?
Tomer: I think were we were very lucky is timing. The moment we started, this is 2012, there was this interesting thing that just a few years earlier, small businesses and people did not trust the internet with financials. They used the internet for a bunch other things, but actually the thing that changed it in my opinion is banking. So a lot of banks just went online with portals and people started using actually online banking for their personal lives. So they started thinking about, "Okay, I can actually... If these big banks tell me to use their online portal, I can start trusting it." So we came in at a time where people trusted the internet enough, so we didn't have that as a huge blocker for us to onboard these customers. That's the first thing. The second thing is, as I mentioned, the industry, payroll specifically was not technology first, so it was very much a services, human first moment for that industry. So those two things together ended up creating a product opportunity and a go-to-market opportunity.
Brett: What about the fact that you've developed a lot of power in the business, meaning yes, it's a very competitive space obviously, but it's not like there's 10 Gustos that are these incredible businesses. You have consolidated power to a certain degree for the segment that you focus on. Is there anything that you did or a property of that market that allowed you to have this more winner take most type of dynamic?
Tomer: So there's one thing that's interesting in our industry is switching is difficult. So switching payroll providers is quite difficult. So the moment you get a customer, they stick with you. So that again, it could be a good thing or a bad thing. If you're the newcomer, it could actually be really, really difficult. So we spent a lot of energy on acquiring brand new employers who are just starting out, so whether it's new small businesses or new startups. And then our thought process is that there's half a million new employers coming in to the US every year and if we do a really, really good job acquiring many of them, then over time the industry rolls over and we're actually going to have a lot of small businesses. Now we also do a lot of switchers, so a lot of switchers do move to Gusto, but we are very aware of that kind of market dynamic. I will say I don't think it's a market we win most. Our big competitors when we started are still around, are doing really well. Intuit, ADP Paychex, all have really large payroll businesses still today.
Brett: So why is that?
Tomer: Well, I think it's because of those switching-
Brett: That's the main reason.
Tomer: ... it's difficult to switch. It's a service that trust also is quite important. So sure there's a lot of value in user experience and that's our... Our main innovation starting out was user experience innovation, but there's also a lot of value in trust and trust of a brand that you've used for many years or decades even and you know they're doing their job, so that's also important. So Gusto is an interesting place today where we're we can have both. We are absolutely aspiring and are aiming to be the most modern, best user experience possible for small businesses anywhere they go, but we also have 14 years of doing this, so you know that you're not going to get, again, that IRS agent knocking on your door $going to do this correctly.
Brett: Did you think about the switching cost dynamic and financial services on the internet were just becoming a thing as Wells Fargo had their portal? Was that a part of thinking about this opportunity or it was just very customer, there's a real pain point we can go after?
Tomer: The intuition to work on this is absolutely the customer pain and we envisioned in our mind how a great online service, an online product that solves this end-to-end could look like. And we looked around and we saw that no one is built it and we could not understand why. So we decided to go for it and that's kind of where it went. We did not do a big market analysis. Actually, I didn't even know, I don't think we knew so much how hard it is to switch payroll providers. It took us a few months to, actually, while building the flow for it, we're like, "Wait a minute, this is a lot. It's a lot of data you need from customers." So I think we learned a lot along the way, but that's the sort of stuff that, again, the pros and cons I guess, of starting without the specific experience coming from the industry.
Brett: Why did it end up in the way that it did? Was it just non-obvious until COVID happened, or why did it end up taking so long?
Tomer: Yeah, I think because it wasn't totally clear what would be the business model around it because compliance is a set of hundreds of thousands of interactions. And the way we kind of did it was every time we built something, well, we made sure it was compliant and we brought in as much tools and tips and experiences to make sure that you're doing whatever, if it's onboarding, if it's firing somebody, if it's onboarding somebody, if it's doing time off, all these things, we try to bring in compliance into the flow. But I think the thing that I did not see is the need to take a step back and think about it as a, "Here's your compliance dashboard. Here's everything you need to know. Am I good? Am I okay? Just check yes or no and tell me what do I need to do to get to that?" And I think in retrospect, maybe I didn't see how it all comes together around that angle of compliance and it took a few years and then that big pain point that come from COVID I think made it really clear like, "Hey, there's something here that's quite important."
Brett: When did you think as a founding team you really had product market fit?
Tomer: I think we as a team and individuals are very self-critical and we see all the gaps all the time and we see all the stuff that needs to be done and less about the stuff that was done. So I think it took us years until we felt, I'm talking for myself, it took me years, maybe five years until I felt like, "Huh, okay, this is going well." So it may be post-series be, like I know the tens of millions of AR when I felt like, "Okay, this is going well." And it's because there is so much to do. Even this makes me feel a little uncomfortable to say it right now because I feel like looking forward, five years from now, when I'm going to look at Gusto today and I'm going to listen again to this podcast, I hope that I'm going to say, "Wow, they were just starting out. There's so much more that had to do and why was he sitting here on a podcast and talking about all their success because all the work is in the future." I really think about that. That's really how I think. So that means in terms of product market fit, I don't really think we knew in the moment. In fact, I have a bunch of emails, all the emails that I sent out to our team of showing how nervous I was about, "We're not growing fast enough, we're not doing well enough, we don't get enough of these sort of customers. Onboarding is taking too long. Here's what people are saying, we're not moving fast enough." So that performance anxiety, like we're not performing enough has been there the whole time.
Brett: Do you think that sense of being unsatisfied is a very important part of the success of the company or it's sort of off to the side?
Tomer: I think it's been really important and I think it's going to keep being important for us. We can't be complacent. Technology is just an amazing business, an amazing industry that keeps changing all the time. And if you're not on your toes and try to disrupt yourself, to innovate yourself and move fast, you're going to lose. There's no question about it. This is not the industry to sit back and hang out and think about the past. You got to keep going forward.
Brett: So just to wrap up, I wanted to end by asking you who's the person that's had the biggest impact on who you are as a founder and what's the thing that they imparted on you that is a big part of the way that you think about building products or teams or your company?
Tomer: My brain goes to my dad. I saw him have countless interactions with customers and partners and vendors and competitors in his street and stuff like that running a small business, and I think there is something around long-term orientation that I learned from him just looking at how he builds these experiences. So for the customer, it's not a transaction, it's a relationship. If you sell something or if the person comes in, returns the thing because they were not happy, it's doing the right thing for the customer. It's in the moment, it's giving the right advice to the person that you're serving, with a competitor it's building a relationship that you can be productively competitive and not destroy each other's business and both of you guys go down together. It's all the things that I think are around building something for the long-term in a respectful way that you feel proud of the how later, but without sacrificing performance, you still care a lot about performance because it pays for your kids' education and all that stuff, but you want to build in a that later on down the road you're part of the how. And many small businesses are multi-decade businesses too. Again, this example, my dad is for over 40 years. So I think that's one inspiration for me.
Brett: Good place to end.
Tomer: Yeah.
Brett: Thank you so much for the conversation.
### How to go from random wins to repeatable revenue
URL: https://review.firstround.com/how-to-go-from-random-wins-to-repeatable-revenue/
Last updated: 2025-07-14T23:20:46.000Z
A formula for sales repeatability
_This post is for subscribers only._
### How rejecting conventional wisdom grew Sentry to a $3 billion company | David Cramer (Co-founder and CPO)
URL: https://review.firstround.com/podcast/building-sentry/
Last updated: 2026-02-03T17:41:56.000Z
David Cramer is the co-founder of Sentry, the leading open-source error monitoring tool used by over 90,000 companies. A self-taught engineer, he went from 9th grade high school dropout and Burger King manager to building one of the most widely adopted developer tools in the world — by working hard and rejecting conventional wisdom. As of 2022, Sentry is valued at over $3 billion. David now serves as Chief Product Officer, after previously holding roles as CEO and CTO.
**In this episode, we discuss:**
- How David went from managing a Burger King to landing his first job as a software engineer
- How an code snippet grew into a ubiquitous monitoring platform
- Why open source is an underrated distribution hack
- How a ruthless competitive streak and obsession with excellence fueled Sentry’s rise
- And so much more…
**Referenced:**
- [Aaron Levie](https://www.linkedin.com/in/boxaaron/?ref=review.firstround.com)
- [Beats by Dre](https://www.beatsbydre.com/?ref=review.firstround.com)
- [Cursor](https://www.cursor.com/?ref=review.firstround.com)
- [Dan Levine](https://www.linkedin.com/in/danielmarklevine/?ref=review.firstround.com)
- [Datadog](https://www.datadoghq.com/?ref=review.firstround.com)
- [Disqus](https://disqus.com/?ref=review.firstround.com)
- [Dropbox](https://www.dropbox.com/?ref=review.firstround.com)
- [Heroku](https://www.heroku.com/?ref=review.firstround.com)
- [Max Levchin](https://www.linkedin.com/in/maxlevchin/?ref=review.firstround.com)
- [Okta](https://www.okta.com/?ref=review.firstround.com)
- [Omar Johnson](https://www.linkedin.com/in/omarjohnson/?ref=review.firstround.com)
- [Oracle](https://www.oracle.com/?ref=review.firstround.com)
- [Sentry](https://sentry.io/welcome/?ref=review.firstround.com)
- [Satya Nadella](https://www.linkedin.com/in/satyanadella/?ref=review.firstround.com)
- [Stripe](https://stripe.com/?ref=review.firstround.com)
- [Uber](https://www.uber.com/?ref=review.firstround.com)
- [VS Code](https://code.visualstudio.com/?ref=review.firstround.com)
- [WindSurf](https://windsurf.com/editor?ref=review.firstround.com)
- [Y Combinator](https://www.ycombinator.com/?ref=review.firstround.com)
- [Yandex](https://yandex.com/?ref=review.firstround.com)
**Where to find David:**
- [LinkedIn](https://www.linkedin.com/in/dmcramer/?ref=review.firstround.com)
- [Twitter/X](https://x.com/zeeg?ref=review.firstround.com)
**Where to find Brett:**
- [LinkedIn](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- [Twitter/X](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- [Website](https://firstround.com/?ref=review.firstround.com)
- [First Round Review](https://review.firstround.com/)
- [Twitter/X](https://twitter.com/firstround?ref=review.firstround.com)
- [YouTube](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
**Timestamps:**
(4:01) Learning to code through gaming
(6:31) Dropping out of high school
(9:47) Building infrastructure at Disqus
(10:20) “Software is not that hard”
(12:45) Early interest in open source
(15:45) The birth of Sentry
(23:37) Two common founder mistakes
(27:13) David’s unwavering focus
(28:17) Sentry’s journey to venture backing
(36:43) Finding conviction in decisions
(41:11) How Sentry found PMF
(46:34) More confidence, less ego
(48:08) Is sales valuable?
(51:31) David’s personal philosophy
(1:01:17) Money is not the hardest problem
(1:06:27) Marketing won’t fix a bad product
(1:10:34) What makes Sentry’s market unique
(1:16:24) “You’re gonna mess up”
(1:22:08) Why brand will always matter
(1:30:51) Eliminating all competition
**Brett:** Well, thanks for joining. I'm excited for the conversation.
**David:** Yeah, absolutely. Should be fun.
**Brett:** maybe a place to start, like, wh where did you grow up and what were you like?
**David:** what was I like? It's probably easier 'cause I assume I was pretty similar today. I grew up in the Midwest in Nebraska long time ago at this point I was there till, you know, almost 20 years old and then moved out and have been in SF most of the time since then. and that, you know, I'm almost 40, so it's been quite a while.
I would say I'm more San Francisco than I am Midwest at this point in that I do not resonate with anything going on there.
**Brett:** But they're nice people, some of them.
**David:** some of 'em are nice people. Yeah. Fortunately I grew up in this little pocket, not blue versus red or anything, but it's like the blue pocket, which is like the city pocket, so like Lincoln, Nebraska area.
And so it was a little bit more less farmer, more. Not well educated, but like a different persona than just, I live in the boonies and don't have any idea what the internet is or anything like that, you know? And so there was a little bit more of that. but there was no tech whatsoever. And so I'm, I'm a big fan of the echo chamber that is San Francisco.
It's good and bad but, generally more positive.
**Brett:** I love monoculture
**David:** Yeah. Yeah. And I'll, I'll take this version \[00:01:00\] over, I dunno, pick, I was in DC last weekend and I'm like, Hmm. I was at dinner with a couple friends, my wife's friends, and I'm like, yeah, it's weird. Everybody in the city's a lawyer or a lobbyist. And lo and behold, the husband and wife, lawyer lobbyist,
**Brett:** there you go. And it works the same way except, you
**David:** Yeah, yeah. Yep.
**Brett:** engineer, et cetera. But, but so what, what were things like growing up in Nebraska? Like what were you into?
**David:** Mean, this is a different era. So it I mean, I was like, your typical introvert still have an introvert, but typical like nerd, like playing video games, doing whatever, fascinated by the internet, but working class family. So we didn't really have access to a lot of stuff. And so I, I have these vivid memories of going over to my friend's house all the time to use the computer or like, I. Like seventh, eighth grade timeframe. I would go to school like an hour early just to surf the internet. And this is the era, I doubt half the people know what this is, but like hamster dance was a thing and GeoCities was a thing. And sort of all these, it was like, I guess that would've been around the.com bubble.
But like I'm in the Midwest, you don't know anything about that. Right. And I, I literally had no idea that ever happened. but it was like when the internet was taken off \[00:02:00\] and it was like wild west and, you know, small. but super, super interesting. And I just remember being fascinated by like, the thing that kind of opened my eyes, it really got me hooked was I had a friend who, his dad had EverQuest and I, I didn't have a computer, I couldn't play it or anything, but I went over there and I just see the dad playing and he's like, I dunno, he's sitting on a hill with some other character players in the game and they're chatting.
'cause this is what you did in these early games. They were just chat rooms and somebody cast like a levitate spell or something. I think that's what it was. And I just see him float. Across, like down the hill and then land on the top of a building. I'm like, so cool. You know? and I like that era for me is like when the internet was like very creative, like there were most problems were not solved, right?
Whereas today, ignoring the AI kind of shift, a lot of problems are already kind of solved and there's like, I dunno, it's different.
**Brett:** Were you into software engineering or that didn't happen until later in life.
**David:** I got into writing code, I don't know if it was software engineering. I was big on just like the, the sort of network connected thing. So, IRC was a big thing back then, which is like, you know, previous versions of \[00:03:00\] Discord, but open. and so I was on IRC. It was just interesting. Like half of it was like, I don't know, doing shit.
I shouldn't like downloading wares or. Script kitty stuff, which if you don't know what that means is like, denial of service, other dumb hacks. And these were not like real hacks back in the day. It was like run a command sent to network payload, nobody had any security, so it would disconnect somebody from the internet.
Just dumb stuff like that. but then also like video games and other stuff going on there. and the client I used was MIRC and I had a scripting language inside of it. And that was kinda my gateway. I'm like, oh, this is interesting. I can make things, do things. I actually looked back at the language, not that if you call it a language, a couple years ago and I'm like, this does not look like programming in any serious way 'cause it's all a bunch of like trigger based stuff.
but then that led me into like, I was into games and then I got into like data mining games and building like databases out of them, PHP and stuff back in the day. And it's kinda one of those things where I think I was good enough at engineering and I was really motivated and I was into sort of the, the thing I was doing.
and so like a lot of my early career was just me hacking together stuff that would take like. Probably the biggest early projects were like, \[00:04:00\] I'd take World of Warcraft's game files, reverse engineer them to pull out, say all the items in the game or something like that. And then we'd build a database out of those so people could search them on the internet.
And so that was a lot of my early career and it's inherently connected to gaming. And then nothing since then has been so,
**Brett:** And did you think that at some point you might start a company or that wasn't even a part of the way that you thought about yourself or what you were
**David:** no. So I think it's kind of interesting because startups are like, historically a more accessible version of technology companies, right? Like I, I, high school Dropout eventually got my GED just to drop out of college right away. different opportunities, right? Like nobody's going recruiting me from an Ivy League school or anything like that.
And so I was always in startups, I think partially because of that. like I was not gonna get a job at Google when I don't know what the hell I'm doing, right. but also I like kind of thrive in sort of the, the freedom and the chaos and all this stuff that goes on even today. it's, it's still me.
And so I just always worked in these smaller companies and, and kind of grew with them and developed my skills with them. And then I was also big in the open source scene as a sort of like, I think the, I really like startup culture plus the \[00:05:00\] open source scene created a lot of opportunities for me.
And then, you know, Sentry was born outta one of those opportunities, but even outside of Sentry, like every job I've gotten, every real job has been like, oh, they knew who I was because they used my code already. and so for anybody that says open source doesn't give you anything, it gives you quite a lot.
**Brett:** And what's the story behind dropping out of high school?
**David:** working class, family, not like parents are very loose. I dunno, it was like one of those things where a school is not very good in the Midwest either, so it doesn't help. And I think it was one of these things where I was just like, that rebellious kid, I didn't like it. there's things that didn't work for me and then my parents were super loose so they just allowed me to do it.
I don't think it's a good thing. Mind you, college, I think it's hit or miss, but there's a lot of value in even like what the institutions go through from a theory point of view. but it was mostly just like a. I have no idea what I'm doing with my life. I'm like, school is not working super well.
I'll probably figure something out. But there was this kid thought, there's nothing going into this. You know, there's no plan. And then I wouldn't call it luck, but there was like opportunity, I was able to like take opportunity to start doing things on the web. And,
**Brett:** what's the path from high school dropout to like your first, what you would consider real Silicon
**David:** yeah, so I, I dropped out freshman year of \[00:06:00\] high school, so ninth grade, I was working at, yeah. I was working at Burger King. I was a manager, which was interesting. I fired my cousin. Yeah. I think I had worked there like two years and they promo, I mean it's, it's Burger King, you know, there's not a lot of talent going on there. But I worked there for a little bit and then I was just hacking around on the internet on the side, right. And this video game thing worked. And, it's like true startup culture. It's like people could build technology. That technology had a need. advertising was easy back in the day to make some money off of, And I just met some people. Interestingly, one of the people I worked for is now the, they started, Kraken, the crypto thing. I haven't talked to the guy in like 15 years or something. but I'm like, I'm small world. and he was doing sort of virtual currency stuff back in the day. So I think he's actually a genuine believer.
And I dunno, it was just sort of opportunity and like you take the opportunity when you get it. So my, one of my first opportunities was I worked with these people and then there's a company called Curse back in the day, big World of Warcraft, scene. And it was like these three French dudes living in Germany were all, you know, 19 years old.
And they're like, Hey, you want to, you wanna come \[00:07:00\] like work for us? I'm like, okay. and so it's like I had gone from Burger King to like this kind of weird gaming content, virtual currency thing.
**Brett:** This is like as a late teenager
**David:** That late teenager. and then I turned that into like this slightly more legitimate business in Germany.
Which I was definitely not living there illegally or anything. and then I actually moved to California with that company to San Francisco for about a year. That was the first time. Yeah. And I actually went back to Midwest temporarily. when I left that company, I was gonna go to New York and I never did.
And then that was sort of the, the cementing moment where I'm like, I should go back to sf. partially 'cause New York, this is like the different era of tech. This is when we didn't get paid money. and so it's like housing was already expensive in sf cheaper than today, mind you. But like salaries were nothing.
and so I was like, I'm like, oh, I'll stop in Midwest, hang out with my friends family for the summer and then I'll go to New York. And then I just extended that stay and extended that stay. And then I'm like, you know what? I need to go back to like sf. It's like all the texts there. I had a couple years that like that I was in, Nebraska and it was like one of those things where I'm like, I recognize the personal \[00:08:00\] value to me to be surrounded with peers, right?
And, and no matter what anybody says, there's no other place like SF that has that. So. but that, and I think I, I would actually argue like that was the defining moment of my career. I'd already done a bunch of open source stuff, but when I came back out here, I worked for a, a company that was also a startup called Discuss.
But this was like the first,
**Brett:** that kind of like had a hot streak
**David:** Yeah, yeah. They were, they were like scale wise, technology-wise. It was interesting, business-wise, we never really got it anywhere, but, but it was like a real company. It was a YC company. Yeah, yeah, yeah, yeah. It was like a widget on the bottom of everybody's website back in the day when comments were a
thing. but that was like a, I think that was kind of the defining moment in my career. I was there about three years, ran a lot of the infrastructure back in, wrote a lot of code, spoke at a lot of conferences. And then, I dunno, I, I always believe like, invest in yourself. And what I mean by that is like somebody wants to pay me to go, like, speak about stuff that I'm really interested in telling people about, you know?
and I get to travel to like a random country, do that, and it's like beneficial for the company. Sure. I'll do it. And then it turns into like, you know, other opportunities in the future. And, so it's just kind of one thing led to another and worked at a bunch of startups.
**Brett:** what was the path into being good enough as a \[00:09:00\] self-taught engineer to work on some of those important complex problems?
**David:** Just blind confidence. I think it is, like software is not that hard. Most days. Most of what we build is, and this is why the code gen thing is fascinating because most of what we build is like really low complexities code, like it's a registration form or something like that. It's not a hard problem.
It's been solved for decades, right? It doesn't really change. and I mean, I didn't know all that back in the day, but it, like the barrier entry wasn't there. It's not like I'm building rockets or, you know, Google's page rank algorithm or, or something really genuinely complex. Most things, most technology if you will, there's not a lot of technology behind.
It's just code. and so like, definitely some of the things I did were more novel at the time. Like I did a lot of like, not academic, but like practical duct tape together, distributed systems type stuff. the data mining of like World of Warcraft. I just brute force the whole thing. I'm like, I could probably figure out what this is.
I had no idea what bits were at the time. Like even binary was clueless. I did not know what binary or hex truly were until I, I did like a, I think I did a, a semester at college, like \[00:10:00\] a community college. and this was after I was gainfully employed kind of thing. that's the first day I knew what any of that was.
The first day I learned about like CPU pipelines and stuff. And I will tell you, none of that is still relevant to my career, but, it's kind of useful to understand. So, but you can get through a lot by just trying really hard is what I would say. I, I, I would actually say this even today, like when we look for people, we look at people that are successful in our organization.
It's like you, you gotta have like the right, I don't know what it's like, I don't wanna say it's like right IQ or something like that, but you gotta have like the right capabilities and then you just gotta try really, really hard. and the combination of the two, I feel like is most things.
**Brett:** And do you think people overemphasize capabilities like they are more abundant than they try really hard is more abundant
**David:** actually think both are not that abundant. I mean the law of averages and everything, but like those combined, at least from a business point of view, from like if you, if you step back, like a lot of what I've done has not been software in my career. It's like I wanna build like a product thing and I kind of understand what my goals with the product and sometimes it looks like software, sometimes it looks more like a business.
but generally speaking, I'm trying to build like a customer \[00:11:00\] facing thing, what not necessarily monetizing or anything. And I think my sort of looseness with software in that I don't care that much about the academics of it and my aggressiveness with like sort of this ambition, which is like, I wanna build the best thing or the most used thing or whatever the version that is like, that pairs really well the, like started a company.
and I tried to spin up little hobby businesses back in the day and none of 'em worked out, but I didn't, I would say I didn't try that hard on the business and this one just had great product market fit. So, but yeah, I think, I honestly think. Hard work makes up for a lot of skill. Yeah. Like I would say every day of the week it beats skill.
**Brett:** Your interest in open source began when you were a teenager in sort of the edges of these gaming communities, or like that feels like an important through line all the way back to your first real job.
**David:** I always try to like figure this out. 'cause you know, you stuff happens in your life and you're like, well, I don't quite know how I made that decision or something. And I try to like think back, I'm like, what? How did I possibly get an open source? And the best I can make of it is like when I started, you download a bunch of stuff on from the internet to stick it on your, like your personal website, your dumb blog or whatever you had going on.
It was like Pearl Scripts and all this. I don't know if it was \[00:12:00\] actually open source or if it was just like a freeware license or something. What? But it was like, that was the thing. It was just free software existed. Free is in beer. Right. and then at some point I got, sort of like when my career started, was when I started learning Python and, and it was like I, I was big in the community and things like this, and I think the code was just public for all these things.
And I'm like. Why would I do anything else? It doesn't make sense. I'm just building stuff that I want my peers to use. It's like supporting libraries and things like that. And so it wasn't really like, I never cared about like FSF or like the freedoms or anything like that. It doesn't matter to me. like I wanna access the software.
'cause access is like a big deal when you come from like the middle of nowhere. Right. and I don't know, it's just, it, it was almost like happenstance is that that's just the way I began to operate is like I would just publicize like pretty much everything I could and all the companies I worked at basically allowed me to do that.
And so I think sort of just that desire to share my work and that it was like a useful thing to do, and that the companies were very supporting of it actually worked out really well. And, and, and so a lot of my open source, I mean, I had some stuff before I think Python and Jengo, \[00:13:00\] but not really. And then I just contributed a lot in the sort of third party ecosystem of that.
**Brett:** Is that the primary way you started to build followership or notoriety just by being prolific or were there other things that you were
**David:** I think it was mostly that, 'cause I would build all these things, I would talk to all my peers about it. Like the community wasn't that big back in the day. Like even if you rewind, like, so I moved back out here like 2008 or something like that. wildly different era. Like this was when I worked at discuss our office.
It's like 10 people. It's under the GitHub office, like 10 people. we're still not making that much money in the industry. It's much smaller. Everybody's hanging out. Like it's like us, the GitHub people might have been the early Twitter people. Like all these people that are actually like industry leaders now.
We're all just hanging out all the time, you know? really different than it's today. And so I think I was very interested in that sort of, that ecosystem. And then also as part of this jingo thing, which was like up and coming and used by a lot of these big companies, like less so these days, but it was like Instagram and Eventbrite and Mozilla and they were all Python Django companies.
and so I just grew like this following within there, but it was less of a following like you would think of today. And it was more like I contributed a bunch of stuff that people valued. \[00:14:00\] some people use some of it, some people didn't use some of it, you know. I would say pretty much if you were building a Jengo thing in that era and you were actually trying to do anything of substance, you were using something I had written, not necessarily in the core of Jengo, but like some third party thing, like Sentry was born outta this era.
but I did a lot of, I, I think at some point I kind, I had like 200 projects or something. but there were just like little things here and there. So
**Brett:** you were writing a bunch of contributed to a bunch of open source projects. At that point, did you start to think, maybe I'll start a company, or up until the moment you never thought about, I would start that then would become what would be considered a company.
**David:** yeah, I never thought about it until one day I was talking to somebody that worked at Heroku that they were like a PM for the add-on scene at Heroku and they were basically trying to like upsell me to like, Hey, you should launch an add-on of this. 'cause like they're trying to expand the add-on store.
Right. And I didn't quite understand what that meant. I'm like, oh, that'd be cool. I'd make a little bit of money at like beer money. It was like the joke at the time and I knew like Sentry already had a lot of adoption at that point. and even then it wasn't very ambitious. I'm like, oh, that'll, maybe it'll actually make some money.
'cause I had little like, \[00:15:00\] personal sites on the side that were like, content sites had Google AdWords on them. They never make that much money. and so in my head it was gonna be more like that. It's like, oh, maybe this is a little lifestyle thing and then it'll exist. Do not start a lifestyle infrastructure business that doesn't work.
and that grew and I think as it continued to grow, and especially once we decided like, let's go fundraise, like and that was sort of of like permission to be more ambitious, I guess from a business angle. And then especially the fundraising was like the full unlock because like when we fundraise, that was like my learning moment of like, you do not fundraise unless you can grow this into the biggest thing it could possibly be.
Especially in our case we had. So, we're a little bit different. Like we were bootstrapped as on the business side. we had a couple thousand paid customers, like 600 K or something before we fundraised, or profitable, if you will. But, you know, profitable is that we didn't pay ourselves tons of money and things like this.
and so it's like, well, why fundraise when you've got A a successful, if you will, bootstrap business. The answer was like, do something you can't do otherwise. And so I really like cemented that in my mind. And not everybody at the company did at the time. There were like, like six of us, three in the company I think, and \[00:16:00\] then three were about to join.
And I don't think everybody understood how serious I was when I'm like, we are growing this into like, the biggest thing it can be at the time. I think in hindsight they were thankful that we did go after that aggressive approach, but it's one of those things that I, I, I kind of equated to the software side.
I always wanted to build like the best thing. And so when you think about like companies you work at or any, any kind of job or anything you do, there's always like a reason you want to do it. Some people don't have a great reason, they're just kind of like, I don't really have a choice, whatever. But like a lot of us have a choice.
So when I worked at discuss, I don't care about comments. I'm just like, oh, it's an interesting scale project. There's interesting technical things to work on here. And I joined Dropbox for a couple years and I'm like, I don't care about file sharing. Uninteresting, right? I'm like, oh, but it's, it's Python.
And I was big in the Python community. The scale's really, really large and that's kind of interesting. And they've got like high notoriety and stuff like that. At a Sentry, it's like, oh, I'm like, oh, I wanna build a really great thing that all my peers use. And then, and then eventually it's like, okay, now I just wanna be the best business because I don't actually get to write all the code anymore.
And so you always gotta find that motivation. and I think that's partially, that's a really hard problem and, and founders of like, keeping that going over many, many \[00:17:00\] years. 'cause I'm, I've been doing this full time for, I mean, January, 2015 is when I quit Dropbox. even 10 years is a long time, but going into it, you don't think it's gonna be that long, right?
You're like, ah, yeah, startups take like four years or something. the old days. but it was just a lot of like happenstance, I think. And then allowing yourself to be more ambitious and, you know, call it luck. Call it what you will. But like we had great product market fit from the get go. We still had to do a lot of work to unlock everything, but it was like it was there.
And so there's no question on like, could we grow this? unfortunately a lot of decisions we made on the way have mostly worked out. So.
**Brett:** Was there a singular moment that that things flipped in your brain from, this is kind of an interesting project. We'll see where it goes to, I'm gonna raise money, let's go see if we can build something enormous here.
**David:** Yeah,
**Brett:** kind of like a slow build and then I.
**David:** I think it was slow and like I didn't know anything. And I think this is the hard part about not being connected. And it was like a different era. So when I left Dropbox, I left because it was like two full-time jobs and it was just a nightmare. I was on call for both. I was doing, so my, my co-founder for Sentry is a designer, so I ran the \[00:18:00\] business side, which to be fair wasn't that complex.
But I did all the software, I did all the ops, you know, I did most of the customer support. And so it was a lot of work, right? And then at Dropbox, I was running our CI infrastructure, like automated testing and stuff, which was also, I had this habit of just taking on a lot. I've never fixed this for what it's worth, but, and so I, I realized this was unsustainable.
And also Dropbox was becoming a very annoying company to work at at the time. This is when they went through like massive headcount growth. And if you've ever been through one of these, you know, like it's just lots of bureaucracy and it's just not fun. if you're a builder, it's not fun. and so I'm like, you know what?
I don't like Dropbox. Whatever. I'll leave. I gotta, I got bootstrap business that can pay my salary. And then in parallel, you know, you know, investors, how they work, it's like, we're gonna go, you know, SDR everybody, we're gonna cold email, like see if we can convince anything that looks like a remote opportunity to raise money.
And I did that and it was a very quick learning experience of like, those people were not gonna give me money. and so, so I, I had taken a few of these casual conversations and they didn't go anywhere. Right? And, and then I'm like, oh, but we gotta raise money. That's what you do. Like, literally \[00:19:00\] that was the level of ignorance I had around the whole thing.
and to be fair, I don't think people with intention have much more information going on. It's like, how do we decide how much money we're gonna raise? Or any of these other mechanics? It's, it's all made up for the most part. Right. so I didn't know anything. So I'm going through this and. We had just decided we were gonna raise money to build a bigger company.
There was a little bit of a push in here in that there were competitors in the space that were venture funded. We were so much bigger than them, but we were, you know, running barely, barely in the black, you know, it was like very close all the time. And I'm like, well, we wanna hire people. We wanna grow out.
We want to like win. We wanna be the best and we need more money to be the best. I'm like, okay, we can justify fundraising. So we go through this whole thing, pitch a bunch of investors. All of them basically ghost me. And then I, I just had a buddy, Dan Levine, who worked with me at, Dropbox, so he knew who I was, which it turns out is the game like, like just bet on people and know who the people are.
and he reached out and, and so one thing led to another, they invested. And I think when that happened, that, that was actually like very helpful because, having somebody invests one, there's like the confidence thing, but it. The useful thing of, of venture. And I \[00:20:00\] think the useful thing of a venture partner is like pushing the company to do more than it's going to do.
Like pushing, like, you know, you gotta think bigger. Like, and I, I had this lesson fundraising and one of the things I did like a partner pitch for like a whole group of people. I don't even remember what the firm was, but I think the pitch went okay. At the end of it, they asked me some bullshit trivia and it was like, if somebody offered you it was something like $200 million tomorrow for the company, would you sell it?
I'm like, absolutely. We made 600K at the time. That's the only right answer to that question. And it was like this trivia thing. they were like, well, we don't think you're ambitious enough because you've said yes. I'm like, okay. Anyways, I quickly learned to lie after that. But, that is, that was also an important lesson of like, think really ambitious.
'cause at the time we're like 600 K in revenue and we're modeling out like, how do we get to a hundred million? And I'm like, no chance. You know? And, and I'll tell you in hindsight, everybody at the company, we, we talk about this and we're like, none of us believed that you would get there, kind of thing.
We're just like, we, that is the only outcome. It's like you have to be a big real company, you know? And so when you think that way, you're like, well, it is like, what are we gonna do to get more? Our version was what do we do to get more customers because we're not an \[00:21:00\] enterprise company, or at least not one that looks typical.
and so it was always like, okay, what's the unlocked? like find more customers that can use our product and then how do we remove any objection they have from using the product? And that that's still what we do today. So, but it was all this kind of thing of like, oh, I can be ambitious here and I've got the funding now to do it.
And, and I would, I would say after probably one year of venture funding, it was very clear we were the market leader. Before that, nobody had any idea. And then probably for the next five years, still nobody knew how big we were. Even today, a lot of people have no idea how big Sentry is
What's sort of your meta observation on this path into building something that has now turned out to be large? Meaning, I, I think that there's sort of the Silicon Valley narrative that the best founders start the company with this huge vision of building a 10 or a hundred or trillion dollar company, and they're gonna go build this massive thing.
**Brett:** your story is, I think, a very common story that isn't well told, which is almost the product pulled you into sort of being this founder. \[00:22:00\] And then as you executed it seems like as you're describing it, the opportunity kind of unfolded in front of you, and obviously you willed it into existence.
It's not the common, you know, we're gonna take over the world kind of founding story. And so I'm curious, do you have any meta observations or how it maps to maybe people that you consider starting companies that aren't or anything else like that?
**David:** This is hard 'cause I invest in a lot of companies and product market fit is a really hard thing because it's, it's not just, is the product good or does a customer want the product? There's so many different mechanics that go into the same, like, is the opportunity actually there is the way you're packaging it, there is like, it's all these micro decisions that kind of lead to things.
And lot of days I think we just got lucky. Now I do recognize the things that are valuable along the way that did help us push, but I think the ideal outcome is, so here's a mistake. I think all founders, not all majority of founders make. And you know, we know the SaaS majority founders fail. Maybe this is related and I, and I'm just purely anecdotes from the companies I've invested in, and some of them are like \[00:23:00\] well-known logos.
so they are what you would consider a good investment. Venture capital is not about building technology. Maybe some people would say it is, that's fair to disagree with me. But like, but you raise money to build a business. First and foremost. It's not charity and there's nothing else. You're not giving goodwill to the world with your technology. Some people might, and that's great, that's a like a secondary benefit, right?
But venture capital builds a business and so many people are not thinking about it every day. At Sentry, I would run this script, this is even pre fundraise, that's like, what's our MRR and who are the 10 newest signups? Or something like this. And eventually we automated all this. But like that was the world we lived in was like, how do we get more customers every day?
And then that translates to, well, what are we gonna do to unlock that in the product? And people just don't think that way. And, and I think the other mistake you make particularly, and this is bootstrap versus venture, which I think is complicated. but when you're bootstrapped, you don't give things away.
It's too expensive, right? We had no free plan, like when we started Sentry. Now I don't know that if I had venture capital and I was building a product, I would make that same decision for what it's worth. But eventually, when we \[00:24:00\] did have venture and we had more breathing room, we did have a free plan.
And that was just the like. Unlock even more of the tam, right? It was like, grow the funnel even more, cement ourselves even more. but again, we were so like focused on like, we must make money like every single day it has to be money. And you, you get that outta bootstrapping something, right? And so I just think like, if there's only one thing that anybody would take away from this is like build the business right away, like monetize right away and then recognize if it's not gonna work or not.
And I think that comes down to like figuring out how you would reason about your tam or whatever, right? And I dunno, you can basically turn anything into a hundred million dollar business these days. Like the technology's really big. The, the world's really big, you know? as long as we don't figure out tariffs on technology.
and so I think you actually don't even have to think that hard about like, what industry am I am in or what industry am I in and is there a tam here? It's more like, no, it exists. There are no new industries. Generally speaking, you can, you can debate on the AI space, but generally speaking, there's not new industries.
There's just. New versions of the same industry and Sentry was in that we were, we knew we were in the a PM category, like New Relic. \[00:25:00\] I don't think they were a public company at the time, but they were already big. They were well known, right? a lot of companies were big and well known. And so it's like there's a known tam.
You don't have to think about that. And you shouldn't, honestly. But it's like, well, how are you gonna extract sort of the maximum dollars per, I dunno, person you employ or something like that. And our version was just like, well, we want every company to use it. We're gonna charge a low price point. That means we need literally all of them to make money.
and then we're gonna make every version of compromise along the way that allows that to succeed. And so for us, that was things like, okay, we have to support every technology we have to support the biggest technologies. Most and foremost, we have to support web because web is founders and emerging technology and stuff.
And on the counterside, we said in countless times in my career, we're like, we're not gonna do that. even today, I will tell you at the company, we deprioritize things like Java or.net as a technology stack because most companies are not starting a new project with Java or.net or a bunch of these old languages, right?
It doesn't mean they're not valuable and not well used, but like they don't fit our narrative. And so basically, like I would say the, the one strength I've had over \[00:26:00\] the years is I am like unwavering in my blind focus of like, my only goal is everybody uses the product and we're gonna do everything we can to make that possible.
And I, I think that was very, very useful. but so that, that was like part one. But the other part is then you also have to like charge money for it. And I think usually what I've seen often in the industry is, I mean the companies that work connect those together, right? They connect the sort of distribution with the monetization strategy.
And a lot of people have distribution, which are good bets, but then they never figure out the monetization. And that's why I think it's just really important to figure that out right away.
**Brett:** I think you sort of touched on this a little bit, but sort of that desire to not just build a product but build a business. was that just a function of in the early days, being bootstrapped, like, I, I think if you looked at a lot of founders that looked like you, right? That were prolific and open source, that started to build something that would not come naturally to them.
They would wait and wait and just say, let's get this thing really big and eh, in five years we'll figure out how to make money. It's like, what, what's the origin story of your desire to do that early on?
**David:** I think the bootstrap helps, but I could argue that, well, we could have just made an open source project, never fun, like never bootstrapped or anything, but \[00:27:00\] like you wanna make a living at some point. So that's, that's important. But bootstrapping certainly forces a lot of this. Like, no, you have to build a business.
Like if, if you don't build it, and I, even today I still think of venture as debt. I know it's not debt, but it effectively, to me it's like. From the way value works in the company, equity value, it's like you kind of have to get back like this. There's like this payback kind of concept in it, right? And like you've gotta get beyond that for the, the genuine value to unlock.
And so I still think that way today. and I think Bootstrap sort of forces some of these principles in you. And it's not even like, I, I'm actually not like, not pro or con on Bootstrap. I think it's like, do whatever you wanna do. Yeah. Different tools. and frankly, a lot of bootstrap businesses, they usually do not look like Sentry or I dunno where Visco is at these days, but like Visco is like famously bootstrap.
There's, there's a few outliers that are famously bootstrapped and get pretty successful. And then there's everybody else that never gets that far because they get crushed by venture companies. So, but all of them make money and I think that's really, really important. And so I, I think you gotta figure out how to ingrain that, but I personally do not have an issue around should we charge for this?
How do we charge for it? I'm always thinking that way, even to my \[00:28:00\] detriment in the business. I just surrounded with principles of like, well, what, what's the persona we're gonna, you know, charge for? Why do we charge, when do we charge? All these things. But I just don't, just, a lot of people aren't thinking about it.
They kind of have like this pitch deck. It's like, well, this is how we'll eventually monetize and theory is great, but like theory never plays out. And so I, you know, I I, I don't know how YC works, we didn't go through it. I dunno how a lot of investors operate, but I, I do know some sort of forces like you need to validate with customers.
And we did that at discuss and the business never got anywhere. They did discuss, like, I do not envy the founders because they spent like, I think more than a decade on that company and, you know, they're doing okay in life, but it wasn't like a crazy outcome or anything. And, you know, one, I always look back the, the most important thing, so not all founders are gonna be, you know, later in career, like have had a lot of work experience.
But I think when you have had a lot of work experience, the most important thing I draw on is just like failures or things I see of as failures. It doesn't matter if the company was successful or not. So when I look at discuss, I'm like, well, I. I think a failure was, we didn't focus on a path to monetization.
We had like one customer at the time, like CNN, they were paying for like \[00:29:00\] SAML or something like that back in the day, and it was like two grand a month or something. Like measly, it didn't matter, right? and they're like, oh, maybe we'll build an ADS platform or something like that. And, and, and so eventually they did try to do that, but it didn't work.
And I think you gotta be really, really aggressive about how are we gonna monetize this? And you gotta be thoughtful too. Like, and I, I would argue the better versions of this, of just packaging and what your product is in general are the ones that are not just like, oh, here's the playbook, let's run it.
It's like, no, let's actually think critically about the way the market works and how we will insert ourselves in a valuable position. And, and then Sentry we're just fortunate. It's, it's like an obvious path to a cloud service. It's monitoring. At the end of the day, you probably don't wanna host it yourself.
It's complicated. It has inherent timeless value, you know, and so I. You, you could have figured that out if you put your, you know, head to it back in the day. Like, I didn't have to like wait 10 years and be like, oh yeah, it makes sense. The business works. You know, it's, it's kind of obvious in hindsight that it should be capable of working and then just execution.
So, and I think the problem is if we had waited years and we had just say, worked on the open source version of Sentry, which is so exists, roughly, it's self-hosted. I don't know. I, I don't think that we ever \[00:30:00\] would've gotten here. If nothing else, you've, you've only got so much time and so much runway. And frankly, like tech doesn't need to be that good. Like Sentry was just like stitched together out of like, it was good, but it was, it was, it had a lot of compromises and constraints in the system to make it work better, for more cheap. and again, yeah, too many people, too many people are engineers when they should not be engineers.
Like, don't start a company if you're just an engineer. And I think that's like this, again, this goes back to I see a lot of these, these founders I've invested in where they don't actually monetize the business. And I think that too much thinking about being an engineer, you know. And it just, you can't be that way, you know?
**Brett:** What, what's the story behind the first line of Code for Sentry?
**David:** This is how I remember it, you know, it's a long time ago. I was in IRC and again, IRC is one of these things that like, there were so many different factors for, for value out of it. And one of the, the places I was in, in I rrc was like a Jengo channel. It was like a Jengo community channel, and I would just help random users in there.
I'd ask questions of other random users. It's kind of the same way we use Twitter these days in a, in a lot of ways. and \[00:31:00\] somebody's like, oh, how would I like log errors to the database? And I'm like, that seems pretty easy. And so I whipped up like an example and I didn't really think that much about it, but I just like tinkering and, and software is particularly fun to tinker because there's no consequences for the most part.
and so I whipped that up, pushed it on, I don't even know, Google code or something, who knows? Back in the day. and I just kept tinkering with it, like over time, like over the next few days and more and more and more. And I. I didn't quite understand the value prop at the time, to be honest with you.
I don't know if the value prop actually existed at the time because it was not, the idea of putting logs in a dashboard in the way I did, it didn't make any sense. But what did make sense was, oh, I can take errors and these really rich reports of data. And all I did was I basically emulated what Jengo did back in the day.
So I took this product, which I actually really liked, which was like, when I'm working on my software locally and there's an error locally, the amount of information it gave me was like, phenomenal. It was like best in class. And, and I actually argued today most technology is still worse than that. and I'm like, oh, if we're gonna put it in the database and put it on a dashboard, we should make it look like that.
'cause that's really good. \[00:32:00\] And then I just did, turns out that was very valuable. And so,
**Brett:** when you wrote this very simple app at the time, did you then start to hear people using it in a few days later? Were you going back and forth with folks in the IRC community or like what, what was going
**David:** yeah, I don't actually remember because there's like. There's like, okay, I kind of remember how I started and there's a bunch of stuff that just happens along the way because it wasn't the only thing I was working on. And then eventually, like there's some people actually using it and I'm like, oh, that's kind of cool, because I don't even know if, I don't even know what I was doing at the time.
I don't know if I was using this thing though. and eventually I started using it as well and I joined disgust and they were using it and, and discuss was kind this pivotal moment because
**Brett:** Oh, this was even before you joined? Discuss Yeah, yeah.
**David:** is the project's like 16 years old or something. It's, it's, it's very old.
but they were using it and that kind of gave me permission to improve it. And I always had this like line I drew for myself. I'm like, if we need this for the company, I will work on it and I will do this stuff for the company. And if I wanna mess around with it for other reasons, I'll do it outside of work hours, which I actually don't even think you should.
Companies should not care about that line. It's, it's value either way. but I did, and like fortunately it was \[00:33:00\] not good software at the time and they were using it to discuss and I joined and like the first day I caused this massive outage and the outage was worse because of Sentry. It just cascaded the failure.
So then like that second week or third week or something like this, I'm like, okay, let's rewrite it to make it scale better, because I knew a lot more than when I had originally built the thing. and then we kept iterating and improving on it. And a lot of people started to use it at the time. And this is again, this is like the era of like Instagram, Eventbrite, Mozilla, all being on DJ go and, and just very different than these days, small circles of people, you know, small communities.
And so, so we'd always talk and work on random open source things together and, and when, and I was always motivated by people using my stuff in any shape or form, right? And so I'm like, I want them to use my stuff. I'll fix the random problems. You have feedback, let me know. I'll spend my weekends and nights on this.
I don't care. You know? And, and I did that for a very long time and I still like live off of that stuff. I probably am way too frequently on Twitter only because it's a really great channel to get sentiment from people using our product. And I'm always looking for like, tell me what's wrong. Tell me what you hate.
That's the stuff that like feeds me because that's like, it's like this signal. I'm like, I know \[00:34:00\] you want the thing now. and This is your like, objection to it. And I'm like, I think I agree with that objection. So I'm gonna go remove that objection. And that, that to me is like definitionally how you get a product market fit in.
I, I actually think, like if I were to try to like reverse engineer what founder-led sales mean, it is like, fundamentally that is sales. It's like I've got a customer that has a desire for my product. All I've gotta do is remove the blockers and then like basically harass them to use it at that point. so I still treat things that way and, I think it's, it's a very valuable approach.
**Brett:** And so you are working on this part-time for many years, and you're spending hours a week, tens of hours a week. Like what? What is the multi-year?
**David:** It's a lot. so the project started in, must be like 2009, 2010 or something, right. It was just open source for a few years. And then while I was at discuss, the Heroku conversation happened. And that convinced me to spin up the cloud service. I did it over like Christmas, basically like, 'cause like end of year usually not a lot of work.
So I took two weeks off, spun it up. Turns out Heroku was a pain to use, but Stripe was up and coming and you could implement billing \[00:35:00\] really, really easily. and it also turns out I had to build cloud service, which I didn't quite know going into it. I'm like, oh, I'll just put the open source thing on Heroku and I'll make some money on it.
I, and not have to do anything. so I built this cloud service, added Stripe on it over Christmas break and basically launched it. I think that like next month. didn't charge much money, but, but it was kinda one of those things where the open source thing had traction,
**Brett:** And
**David:** it had like thousands
**Brett:** of people use it. Like
**David:** It definitely had thousands of people, like thousands of companies I would bet at the time or thousands of, I call, we call 'em organizations at Sentry, so it could be a company, it could be a hobbyist thing, you know.
and like the, the first day we started charge or allowing you to pay for the cloud service, we had a customer. I think the second day we had 10 customers or something like that. And it was all organic. and we charge like seven bucks or something awful. But there was clearly like value being delivered and demand there.
And now the mistake I made this turns out to not be a mistake in hindsight is like all these companies were using sent, and especially when, and this was just organic over time, lifestyle business. We would use the money from sent to pay for servers and then to pay for like, I would travel a bunch for conferences to speak.
I'm like, okay, now I can just like cover the cost of Sentry and sent, you know, and \[00:36:00\] or we'd sponsor a conference via Sentry. So we didn't really have income out of it for a while, for about three years. In fact, three years later we raised money. And I remember going into this, 'cause I'm a big open source believer in the sense of like, distribution is like a really, really important thing.
and I remember we had all these customers, like every great Silicon Valley logo using Sentry, they're all using it, open source, self-hosted at the time. And I'm like, yeah, we'll just convert a few of them to pay for our cloud service. And like I remember I go to like Airbnb, I go to Uber and there's one big other company.
I'm like, I'm just gonna convince you to use our cloud service or something. They're like, why? No? Didn't happen. None of them ever actually converted to cloud. And there was a period of time where I'm like, uhoh, do I not know what I'm doing? Is this not gonna work? And at least the, the do I not know what I'm doing is probably true.
But it turns out the value there was not converting them to cloud. It was the long tail funnel of what happens over 10 years. And so what we saw were two great outcomes from this early sort of traction we had. One was \[00:37:00\] people work at Uber and then go work somewhere else and then use our cloud service at that next company.
And so that worked phenomenally for us.
**Brett:** Uber didn't want it just because they were too sophisticated
**David:** yeah, yeah, actually at the time they were by for a long time they were the largest installation of Sentry larger than ours on the cloud. And so it was partially that. but like that was a really big deal, right? It's like that creates a funnel, a natural funnel for you.
Zero marketing dollars spent as, as long as you pretend the engineering isn't marketing. But if you don't think about that, it doesn't, you're like, well, how am I gonna monetize? Maybe I need to change the packaging. Like, that would be a naive version and be like, oh, I need to sell on-prem software.
'cause we didn't wanna do that. We wanted to build cloud service. And so Uber would pay, Uber actually did pay for a year for a support contract. And it was a lot of money. It was a big, big contract for us. And we did, we chose to not renew it. And I'm like, I don't wanna be in that business. I don't wanna sell on-prem software.
I don't wanna sell this kind of business. But that would've been the naive way to monetize, right? We had so much conviction, like, no, we are building this cloud service period. Like, people are gonna move to the cloud, it's fine. and so we did this and over time we saw that Uber outcome. And so I, I had no idea for many years that that was actually happening.
Then eventually you \[00:38:00\] get a few anecdotes and you're like, done. It's enough evidence for me. I'm, I'm good with it, you know. but the other great thing that happened, and I remember going into our, our seed pitches and because it was bootstrapped and we didn't charge much money, there was all these, and it was open source, different era.
You know, people actually value open source now they understand what it does with the tam, all this stuff. but. We did all these questions and one of 'em was like, how are we gonna make money? And I remember this like vividly and I was so annoyed about trivia questions at this point 'cause I'm like, we had more customers and more revenue than like most series A companies and we're raising a tiny seed at like a cheap valuation.
So I am still like of strong belief that a lot of people had no idea what they were talking about in these conversations. And so we go into this, it's like, how are you gonna make money? I'm just mad. I'm like, it doesn't matter if we don't make money, nobody will make money in this industry because we will gut the whole thing.
And that was the entire strategy of like, you know what? It's okay that Uber doesn't pay us 'cause Uber's not gonna pay anybody. And we've just removed that and that's what open source does. It commoditizes the market. You know, I didn't know it at the time. I can look in hindsight and it's clear, but, but the great data is some of those companies eventually convert to \[00:39:00\] SaaS with zero sales funnel whatsoever.
And so, like, I dunno if I'm allowed to say 'em, but like we have a big, big payments customer. They're an open source company back, they started. And what was cool is they switched from a competitor. Took away 10 or 20% of that competitor's revenue to self-hosted Sentry, didn't pay us a dime. And then I think less than a year later, you know, they paid us half a million dollars a year.
And that was phenomenal. 'cause not only that competitor doesn't exist anymore, most competitors actually don't exist. So we were able to like actually do what we said we would do, is we would remove that sort of the market. and then we got this customer with, you know, zero marketing dollars spent, zero sales dollars spent.
Like they came inbound, like we didn't even know they were running it until they told us. And then eventually we're like, yeah, just let us know if you need help or something. We're not gonna actually do a support contractor help you in that kind of way, but like, if you ever wanna move to cloud, we're here, kind of thing.
and so I think a lot of conviction and early decisions and just seeing those through, but knowing that they were rational at the same time was like super, super important for us.
**Brett:** On a similar line of thinking, if you go back and try to reverse engineer the \[00:40:00\] three or five or seven things that you did that ultimately got you into really strong product market fit, which is both kind of the overlap of, you know, providing distinctive value and then getting people to pay for that value, what, what would those handful of things be?
**David:** mean, right time, right place a little bit. So, and I think that's true in history. Like I listen to a lot of like acquired podcasts and they're fun because these are the people that are, you know, they're the greatest people in the world of what they've done. And every single story, there is a notion of right time, right place, right?
Like, you can't reproduce what they did. But the other things you can reproduce and, you know, I, I think you've gotta, the thing, the things that we did really well is we were really empathetic for customers. And what I mean by that is, you know. I'm like, okay, how do I get you to use the product and do I agree with that kind of thing?
like the price point was a good example of this. Like me just going over the top with how we like support customers and things. And, and it was just, again, I just look back and I'm like, that was just sales. It was sales from like the founder and the engineer, \[00:41:00\] but it was like, I want you to use my product.
I'm gonna do everything I can to get you to use it. You know, and I'm not gonna say no. And that's easy with like small companies. It's hard if you're like going after like banks, like they're never gonna do that. But it's like most people are founders, you know? It's, and, and that was always our market is like, get in early, get into these small projects.
And so I actually think that is the only thing that mattered is like, I was just so driven to get these customers to use the thing I had and right time, right place, whatever. I had built a thing that actually was usable. and so if you have not done that, I don't have great advice 'cause I've not yet repeated that or we've not yet repeated that Sentry.
We have some stuff that looks promising, but like, I, I would not claim we have product market fit on, on the rest of our suite yet. and so I think that was, that was really, really important. So one, just try really hard. two, I think people always talk about this, but I don't actually think they know what they mean.
you gotta like say no to things. And so I'll, I'll give you an example. There was this insurance company. Actually I'll give two examples. These is great 'cause both are now customers. one was, I dunno, big Best Buy, I don't really care. it was Best Buy and they sent an RFC long time ago and I'm like, I don't even know what an RFC is.
And \[00:42:00\] I think I quickly looked it up and I'm like, I'm not doing this. This seems like a lot of work. It was not. And I had also then gotten advice to validate that it's unlikely we were gonna win this anyway, so don't waste the time. But I didn't wanna do it, so I just chose not to do it. And that's my personality.
I don't do things that I don't wanna do. I'm like, this does not look like the, the best spend of my time. I would rather get 10 new customers instead of Best Buy. And it wasn't optimizing for dollars, it was optimizing for traction. And so I said no. And so that was a really important note. there's another customer and insurance company that wanted us to install any virus for compliance reasons on devices.
And I'm like, I'm not gonna do that. And I said, no, they did not be, neither of them became customers at the time. Right. Both of 'em are now customers and we do not run antivirus and we do not really. Now, we might do RFCs now, but not really. and that was really important. And, and so that's one version of no.
So you can say no to customers and it actually really, really is important. same thing with the on-prem support stuff I wasn't gonna do on-prem, but that on-prem thing also required to say no internally because we had started spin up a sales team. The easy thing to do, especially back then was sell on-prem software.
It's like, oh, they're running it. They just wanna pay for that. Can we have an enterprise version? \[00:43:00\] And this came up every day at the company over and over, I swear to you, for like months from the sales team. And one day I was just mad and I'm like, we are not gonna do that. Never ask me about it again. And they never did to this day.
That was eight years ago. It's never come up again. We're better for it. And so I think this idea of like focus and knowing, like just say no to things that you don't believe in are actually really, really important. 'cause other people are not gonna do that. Like the, companies are driven by. The founders and sort of key executives, but generally it's, it's driven by one or two people.
And so if you don't sort of intervene in all these decisions, whether people like it or not, like the micromanagement kind of thing, you actually have to steer all those decisions and you have to believe in conviction that they make sense with whatever you view in your head is what's going on. And so, you know, I think that is like unbelievably important.
and I think the other, the last thing I would say that's really important that everybody messes up is, and you're gonna mess. Everybody's gonna mess it up. I still will mess it up in the future. it's just like the talent thing is really hard and you just gotta know. It's hard for everybody if like, you're gonna hire the wrong people, \[00:44:00\] you're gonna have to fire those wrong people.
Your only outcome is like, how do you minimize the consequence of, of messing things up? 'cause you will mess things up and then a lot of other people will also mess things up and so minimize all outcomes of those, or like consequences of those things. and that has been true since the start of the company.
That's probably still roughly true today at the company. you kinda get better over time, but it's just like you gotta accept that you're gonna make mistakes and like. Get rid of the ego and just like, be like, yeah, mess that up. And, and don't, you don't need to take blame for messing. Or like, rather, you don't need to feel bad for messing it up.
You just need be like, yeah, that's wrong. I'm gonna fix it. And so it's almost like an unempathetic version of it. Right. And, and I think a lot of people don't grasp this, especially people at companies don't grasp this. So like, oh, why, why do we make a mistake and not acknowledge, like take personal accountability.
It's like, that's not the point, you know, it's like you gotta make decisions and then recognize when those decisions have failed, fix them and then move on. It's not about like, can we constantly blame ourselves or blame other people or anything? And so, that's like a narrative that I've heard from every kind of industry, every kind of leader in the world.
Like, I went to this conference early on and there was like a presidential historian or something and they were talking about like actual sitting presidents, \[00:45:00\] exact same mistakes. 'cause again, they're just running organizations. So anybody running an organization has this problem. And I don't know. And, and I say this because I made a bunch of wrong hires and.
Even though this is the, the wisdom you're always given is to like, it's better for you and for them to figure it out fast. We never actually do it, especially early on. 'cause you like the confidence, right? And so there's this, there's this blend you need as a founder, which is like, you need an extreme degree of confidence that looks like ego.
And at the same time you need humility. And like, you, you need to not actually have an ego. And like, you know, I have, anybody that knows me will tell you I am very confident in everything I say, but then I, you know, gave up board control. I hired a CEO to take my job. I hired a CTO to take my job. I should have no, like, I have just full confidence.
I don't need like, the arrogance of the whole thing. Like, and I'm also like very honest about what does and doesn't work at the company and what does and doesn't work for me. And, and so that's what I mean by like, you need to find that middle ground of like, you need to be empathetic towards you know, what matters.
And then just you, you, you've also gotta not like question what you're doing a lot of times. And so, and I, I \[00:46:00\] think that's hard to be fair.
**Brett:** What's the source of that for you?
**David:** I don't know, but I, one, one trade I have seen, and if I could like find this in founders, I would is like, I definitely have like always this thing where I feel like I have to prove myself.
Maybe it's because of my upbringing or something. but it does feel like a lot of founders that are very successful have this like chip on their shoulder of some sorts, right? It's not the folks who are just like, I'm gonna cruise control my way into this thing. So I like, no, I'm gonna prove them that I can do this.
I'm gonna prove that wrong. I don't know why I'm that way. I'm sure I could hypothesize, but I also don't think it really matters that much.
**Brett:** Are there things that, you were quite strong-willed or religious about that you have since changed your mind and what's sort of the story about those?
**David:** I would say probably things I didn't understood or stand I was religious about. Some, I have changed my mind. I would say a lot of people just follow playbooks without thinking like, like first principles are really important. And so I. I don't know anything. So I'm, first principle is everything. And, and I have the flaw of if you ask me an opinion, I will definitely give you an opinion.
If you don't ask me it, I might not care. So it kind of depends, right? and so \[00:47:00\] a good example of this is early on I was fully convinced sales was a waste of time. I am now fully convinced that sales definitely increases our ACV but is not the most efficient thing in a business like ours, or cannot be run, at least in a traditional way.
and so I have changed my mind in like I actually now value sales. But at the, in the same breath, I will tell you sales teams generally speaking at companies are wildly dysfunctional and waste lots of money and lots of time on stuff that doesn't amount to anything. marketing is kind of similar where I actually, I thought marketing was super valuable and I thought it was like this generic concept back in the day and now I actually think it's even more valuable.
But the things I thought mattered back in the day. I no longer think that matters. Like a good example is content marketing I thought was really important and maybe it actually used to be. And so some of this could be just be times changing. And now for me, the things that matter to me, from ROI and Sentry of Marketing are our brand awareness.
Like, we want people to know who Sentry is, or mostly they just, we want them to know that Sentry exists. And so when they have a use, they will buy our product. That's the entire strategy versus, oh, can we \[00:48:00\] do run conferences or whatever the, like, more traditional versions of marketing are. Those we never like, had great success in.
And, and so I've actually changed quite a lot of perspective on that. and I don't know, it, it's just, it, there's these interesting things because I'm an engineer, and this goes back to the hiring thing of like, I've hired so many marketing leaders at this point, and whether they were good or bad, it is almost kind besides the point.
The programs didn't really function that well in the sense of they didn't really have the outcomes, which I think is a common problem, to be fair. but I've had to go through so much pain with some of this and I'm like, I have to, like, have better opinions about the thing that matters to us. but you gotta be willing to change your mind.
You know? I don't, I don't know. It's like I. There are things you, you should not change your mind on a whim. You should sort of have a reason to make a decision. And then there, there's this quote, I think it's George Carlin or something, but it's like, I changed my mind when the facts change, which I've just latched onto that quote because people will be like, oh, you changed your mind.
I'm like, I never change my mind. But if there's like some new signal that says my previous opinion was probably wrong, yeah, I'll change it like that on a fly. I don't care. Like, because I'm not, I'm not trying to be like, oh, I, have the ego that I must hold that opinion. True. I'm like, that's just what I think right \[00:49:00\] now based on everything I know.
**Brett:** someone calls it the, the sort of, the ability to, to let reality tell you that maybe you should change direction.
**David:** and I think you see that a lot. It's really easy. We see it in politics every day, right? Like, whatever the flavor of the week is, everybody just goes that way, you know? that may not even be their opinion. It's just the one they spit out publicly. And I, I dunno, again, you gotta have the humility to be like, that opinion is wrong.
Like, you know, this information tells me I'm wrong. And for some people that's tough. particularly like employees. Like I think the people that have succeeded at Sentry are the ones who are willing to challenge opinions, be like, no, what, what about with this information? because the, the counter version is you just end up with decision paralysis and you, or you just make decisions based on nothing, you know?
And decision paralysis, in my opinion, is like one of the worst risks of
anything, you know, indecision in general.
**Brett:** I wanna go back to the decisions you made around what we're gonna build and how we're gonna monetize. and where did like the philosophy of the product and distribution and business model come from? I. 'cause as you describe it, it sounds like it's a little bit, there's some tension between that.
And \[00:50:00\] we wanna make money and we wanna make early money early on. And so when you talk to an enterprise company and they'll pay you $700,000 for this on-premise, on-prem version of the product, like there's a lot of things that would make it feel like it's intuitive. Okay, they're asking for it, they'll pay for it.
Let's go build that. what was like the origin story of the philosophy that gave you the confidence to say, no, we will not do that and we will do this and no, we won't do that thing, but we will do this
thing.
**David:** it's tough to say. So I think the core of it is I have a measurement of if I think a company is interesting or cool or. Forward thinking whatever, whatever version you wanna paint of that. And I'm like, if I don't think your company is that I actually just don't care about your opinion or your team is that, or you are that or something.
I'm like, oh, if you're a random person, I say you're a random sales exec and you wanna tell me how sales works and I disagree. I'm like, and you work at some boring company. I'm like I got nothing to like counter this. Don't care. I just don't trust your opinion. And so when it comes to product, I'm like, I actually don't care about what the insurance company works 'cause they are like such an irrelevant technology company in the world that I'm like, they're not my peer and \[00:51:00\] I'm looking to make my, or get my peers to use myself or people I actually like respect and are building the next generation of technology.
And so I think that's part of it. And that was like implicit. I didn't, I never really thought about it, but I think that's what it's, and so it's like I respect your opinion so I'm going to build the thing you think we should build or something that solves a problem you have at the very least. and certainly any insurance company was not that.
And so I, I think that's one. I think beyond that, We had data that showed it was working well enough. What I mean by that is we were doubling customers, you know, year over year revenue, we were always missing goals. 'cause all revenue goals are basically based on some kind of sales forecast.
And when you have a selfer business and a bottoms up business, like you can't control sales at all. Even today, we can't control sales at the company. and I think today a third of revenue is sales, which is not that much at our scale. Right. it's a good and bad problem, but from a strategic value of the company and our foothold, it's a very, very high valuable thing from a can we have predictable revenue growth and create demand.
Okay. That that's the, the negative to it, right? But all I wanted was all my peers to use. That was the single motivating factor. \[00:52:00\] Not business, nothing else.
**Brett:** And that desire was just a personal desire. It was not particularly strategic. It was just, it had nothing to do
**David:** yeah. That hundred percent. It's what I wanted. I'm like, I would enjoy my, and this is what I tell people is. You start a company that the only reason to start a company is because sure, you can go in and be like, I'm gonna get rich, blah, blah, blah, blah. And maybe that's a useful motivating thing. But I think the real reason to do it is control your own destiny.
Like, and most importantly, you're gonna spend a long time at this company if it's successful and you want it to be successful. So do it in a way that you value, that you want do it. My version's like I want everybody to use our product. I didn't even, it wasn't even like a conversation or a thought. I'm like, that's just the version of me that exists and then I'm gonna make every decision that keeps that true.
Even today at the company, every decision that I push like very hard is coupled to that thing we've written in our corporate values of like, we are a market share company. 'cause that's what we want to be. Not 'cause it's the best or the easiest or anything like that. Just like that's what we want to be.
And just like you can probably extract a real business out of anything in the industry, you can in most things create a business with sort of any different \[00:53:00\] characteristics of how to approach it. So like you can build a market share company in an enterprise space, right? Like that's what we've done. and.
A lot of everything else was just like reverse engineering and figuring out how do our decisions connect to each other. So for example, open source, it was open source before as a business. So how does open source relevant? Should it still be open source? And we're like, well, we like open source. We believe in it.
And it's technically not open source anymore, but it's, it still has a lot of these freedoms. So we're like, okay, how do we make that to our advantage? Because we don't want to, we're not gonna change it because, you know, maybe we don't extract the most money. We're like, well actually Yandex uses Sentry.
They can't pay for us. Does that help us? Doesn't hurt us. You know? Or companies in China use Sentry. They can't pay for it. They self-host it. Same thing. Does it help us? Doesn't hurt us. And at least from the strategy of like, if we don't make money, nobody does. It helps us from that regard. and so a lot of these decisions, we can now at least associate with that same goal.
Like, we did this because we wanted people to use our stuff. And that was the same reason I did open source. Right? And so, at the very least, I, I, I would say the, probably the one thing that people. Have well understood about our business internally is like our desire is to \[00:54:00\] maximize the number of people using our technology.
**Brett:** how is that not at odds with these old stagnant insurers? it almost sounds like you want to get a hundred percent market share for companies that you admire, or startups that you admire.
**David:** about it, like the long tail. It's like, where's the biggest block of customers? Oh, it's like the people writing new UIs and JavaScript.
They're not those big enterprise customers, even though they exist in there. It's like, okay, that's, I can get like all of this. FedRAMP is a really good analogy here, right?
FedRAMP will be one of the last things we ever do. Or maybe China, one of these, one of these really nuanced, complicated things to pull off that takes lots of resourcing. Last thing we'll ever do, because one, the bucket of customers is smaller, not the dollars of the customers, but the bucket of them is smaller and it's a pain in the ass, right?
And so I'm like, how do you not do the work that is not gonna service that main goal first? And even back in the day, it's like, I was not optimizing for dollars spent. Now you, you gotta balance this. Of course you need to make money, but. But it was always like, how do we get the customers and do we agree that those are the most important, largest segment of customers we can get right now?
there were just so many versions of this in history where I'm like, yeah, we don't need those customers. Like all the on-prem, like I, I went \[00:55:00\] to this because like, investors will kind of help you try to help you generate leads, right? Which we have never been able to take advantage of. But I remember going to a dinner and I was, it was like a CEO's dinner and I was supposed to sit next to somebody, our investor put me there, and for some reason I ended up sitting next to somebody else.
and so the person I was supposed to sit next to would've bought cloud software. Totally good. The, the person I ended up next to was a banker who refuses to believe in the cloud. This is 6, 7, 8 years ago. no chance whatsoever. Would they ever buy Sentry while that person's employed? I'm like, that's cool.
I'll come back when you're no longer employed. I'll come back when your bank has failed. Or they've hired somebody that understands the direction of technology and that works. Like patience is a really, really important thing in this, right? And venture capital to some degree does let you be more patient, right?
Because you've got that. Safety net, you've got capital. You don't have to pay tomorrow's paycheck with what you're making, you know, today. obviously that's it all there. There's a counterbalance there. Everybody, like you still need to achieve that growth and whatnot. but I think that that was fundamental.
It is like it's a waiting game. We will eventually get there to every single \[00:56:00\] customer, but we're gonna prior, like we have like this almost implied priority of who matters most and we're gonna get all the people that matter, and then the next people and the next people and the next people over and over and over until we saturate the whole thing, which will never happen.
But that's a great problem to have. And it's like, again, I'd rather go after, you know, the 80% of web developers than we're doing game consoles right now. I don't know if it's gonna be successful for us. I don't know if we can monetize it. I don't know that there's that many customers that will pay. And I'm like, well, we got everybody else.
We, we've got all the low hanging fruit, I guess, of everybody else from a segmentation point of view. So I'm like, I guess we can go after game consoles now. Much more expensive to develop. You gotta have partnerships. Half of it's closed source. So there's like all these complexities, right? I would not have wanted to do that 10 years ago and I, in fact, I would've said absolutely not.
It doesn't make sense for us.
**Brett:** how do you define product market fit, and what is the moment that you felt like you had it?
**David:** My, my version of product market fit is when a customer like emotionally viscerally reacts in a positive way. And what I mean by this is like, here, here's the counter version. Oh, that seems useful. Not runaway. Like either the customer's wrong, the product is useful, something's wrong there, but it's not clicking.
There's, there's no emotion behind it. There's no \[00:57:00\] excitement. Like impressiveness, you know, and I'll, I'll give you my version at Sentry 'cause I don't know when I knew for a course Sentry, but what I will tell you is like we have this new tech, we're using the language models and what it does is two things.
It generates a root cause analysis using all of our data streams, which are pretty intertwined. And then it generates a, a, a potential patch for the fix. Right? Ignore the patch thing. 'cause that's what people latch onto. The root cause analysis was like the first thing I think ever at Sentry where I'm like, holy shit, that is amazing.
And, and it started because I had this belief system. And so I'm like the ICP to believe in this. So I have this belief system that says the reason senior engineers are valuable is because they have domain experience at debug systems. They can theorize how it works and get to a solution really, really fast.
And that was always why I was a value added companies. And this thing took something that I could not grow, I could not comprehend about my own code with had such little detail and it nailed the answer. And it nailed it in a way where I thought it was wrong. And then the next day somebody reported the problem to me and I'm like, oh my God, it was right.
And I like, and my mind was \[00:58:00\] just blown. And then somebody else, like similar timeframe was like, had the same like emotional reaction, but I was like, I just wanted to tell everybody. I'm like, and that, that's at the, and this is why I love Twitter, is because it is this channel where people want to talk to other people about stuff.
And you can see it like in real time live and all this stuff, and. I knew we had something here. Product market fit aside, there's something there and there's obviously like, well, can we make money and all these other things out of it? But there's something with the thing we're building that impressed me so much that I wanted to tell everybody else at the company that it was impressing me so much, you know?
And then two, three other people over the next week did the same thing. And Mike, there was something here for sure. And I've never seen that before At our company, it's usually like, yeah, we kind of have a thesis in the space. We're gonna build a thing that roughly looks like this. It'll probably be good, it'll probably make sense.
And we're like, eh, it's not quite great. You know, where did we go wrong? And that's usually the challenge of PMF, right? And the, the solution isn't like, can I go ask customers what they want? It's like, I don't know. It doesn't really get you that far. And so you, you kind of have to have a vision behind it.
And sometimes you get lucky, you know? And I think Sentry was, we had a vision for what it should roughly look like and how it should be low friction \[00:59:00\] and all these other things. But we got lucky in terms of like the domain matter. It nailed the problem use case. We could apply that same thing to many other customers.
'cause like the, the core version of Sentry, the air monitoring component does not look that different than it did 10, 15 years ago. That, that is not a common thing. You know, like most things, it's like, okay, this will get us in the door and then we gotta build this or, you know, some other, you know, shtick or change the technology to work differently.
And we've never really had to do that, which has been really, really high value. So,
**Brett:** And you think you attribute that more to luck than anything else?
**David:** think so, and you, you can call it luck or just, you know, trying lots of things, you know, eventually you kind of get it right. but, because I, I'm like, I, I'm not like a person that's like, oh, you get lucky. It's like, well, you kind of, you know, there's a, the saying of like, you create your own luck.
I believe more in that. It's like, I built lots and lots and lots of stuff. Eventually something had to be useful, and have a packaging model and all these little things that work for it. And so I, I think it's that. And, you know, if I ever figure out how to like recreate PMF in products like scientifically, I mean, if anybody does, \[01:00:00\] it'll be most successful business of all time.
Money is usually not the hard part of a business. like getting capital or even charging people money is usually not the, the trickiest problem,
**Brett:** Maybe on this point. Why do you think is so hard?
**David:** I can tell you, I, I see things that people make mistakes on and sometimes I build for themselves when that's wrong, I always build for myself and I still consider myself like the, the target customer for Sentry.
Which is a great position to be in by the way. Like, if, if you can nail that where you are your own customer, it makes everything easier. But like a lot of people don't have that, right? Like, you're like, oh, I'm gonna go build finance software. I'm like, I'm an engineer. What do I know about finance software? And that, that's hard. And those are valuable problems, right? And so given that, I think you often make the mistake of like, you don't actually know what the right, who the right customer is and what they need. Because most conversations are like, oh, that seems interesting. That seems, that seems useful. And that's like such bad feedback from like a customer.
And that's the common feedback you're gonna get, right? And what you want is like, I want that, but it sucks and this is why it sucks. Or like, oh, I really wish I could use this, but I can't because X, Y, and Z. \[01:01:00\] And I think some people fail to find those customers because the thing they're working on just isn't that important.
Like there's just not enough value there. There's not the ROI calculation, right? And I think that's even true in some of the stuff we're building today. Now I'll tell you, lots of businesses build stuff that has very little ROI and they make lots of money on it. So it doesn't mean you can't monetize it.
Like our, we have this tracing product. It is, you know, I know something, it's at least 20% of our business at our scale. You would call that like at least a good entry level success. And I would tell you, I don't think the product is very good. I don't think it remotely has PMF and more. So I would tell you, because we're in this distributed tracing space, I'm not sure distributed tracing is a future technology that will be good.
Yet if you look at Sentry, we are so invested in making it successful and building all these things because you gotta try, you gotta run, run these experiments and whatnot. And my version of that, I think is I just built lots of developer tools and lots of stuff. Sentry happened to be one that actually had sticking power and had all these other things.
Right? And I think that's what everybody does in, in startups, right? Is like trying to figure it out. And I don't know, \[01:02:00\] the, the tough part is like no matter what, you've got a limited time window because you've got limited money. you often overextend the time you're willing to focus on something, but at the same time, if you don't actually focus on something, how are you actually gonna signal that it won't succeed or it can't succeed?
to some degree, I think founders get a little lucky. Like there are certainly people with networks to leverage and they can push distribution. 'cause distribution is the thing that has no luck involved. There's a reason 20% of our revenue comes from this product it's because we have distribution, not because it's the greatest product of all time.
Right. And that is the reason, you know, IBM still exists or Oracle or any of these companies. It's like they just have distribution. They can just sell stuff. It doesn't mean it doesn't matter if it's good, right? and if you don't have distribution, if you don't have personal distribution, like personal brand, celebrity, okay, well then how do you do it?
I think maybe it's luck. Like it genuinely might just be, well, you've got a limited time window. And so then you're like, well, if it is luck, what can I do about it? I think that becomes the immediate next question. And then I think you gotta look like where are my personal competitive advantages?
You know? And mine was like, I can ship code really fast. You know, I can, I can do a lot of stuff on my own. and so I'm gonna use that and I'm \[01:03:00\] gonna turn it into something.
**Brett:** so if, you kind of poke at the, tracing product, and a lot of people would say it has product market fit in your definition, it doesn't. Maybe you could talk in more detail about like what is the gap between what is going on with that product and what you would define as really strong product market fit.
**David:** So I wanna give an anecdote for why this makes sense. So nobody roast me. I was talking to Microsoft a long time ago, strategic partnership and. They had this Azure, or this was the era where everything was Azure. Every department had to funnel money to Azure in one shape or form. So they're just chilling Azure no matter what they do.
Right. But there was one department that did like visual studio and.net that did not have this agenda. And I'm like, and I was talking to the CVP and I'm like, help me explain how your KPIs, developers and every single other organization has to be. We make Azure money. And they're like, well, once upon a time, we did just enough research that said more developers translates to something like more dollars in the work.
Like whatever it was, some loose theory. And I'm like, good enough for Microsoft, good enough for me. And so I, I don't know \[01:04:00\] if I take that to an extreme, but I'm like, all I need is like where there's smoke, there's fire and, but in like a positive way. So if, if there's something that says something's wrong or something's good and I agree with it, I'm like, done.
I don't need ample amounts of data to make this decision. And so, and this is why I love, and I, I hate what like Twitter has become, 'cause it's kind of a disaster. It's filled with boss all this stuff these days. But like, I've not found a better channel that just, that is that passive thing of like. I get genuine feedback.
And, and what I mean by that is like when you think about product market fit, and the reason I don't think our tracing product has it is because one, I don't actually think it's great yet. And so I'm not impressing myself with it. And two, I don't see a bunch of people on the internet who are real users.
You might see like derell people or marketing people like India developers, like whatever. but like I don't see a staff engineer. I respected a real big company being like, this is so fucking good. You know, I love this. When that happens, you've got it. Don't think too hard about it, but there's something there.
Just latch onto it and, and build. You may not have the tam, who knows, but like, that's what I'm looking for. And if you don't get that, I don't know. It's just not there. And, and, and people always claim it's like, oh, \[01:05:00\] it's marketing. They don't know about it. Blah, blah, blah, blah, blah. But like, marketing's not our problem.
Like lots of people know what Sentry does. They'll find this stuff if nothing else. And so I think people lean on some of these things too much. They'll be like, oh, well the reason we don't have more customers is 'cause marketing. I'm like, no, you just don't have more customers is because it's not good.
It's not useful. Not, and, and, and it, it could never be useful. Or it's just not useful yet. One of the two is true or something like that. Or it's too high friction or, you know, something. And I think the, challenge probably, and to be fair, I've not tried that hard at this 'cause we have like known tams that we operate in is like, is it never useful or is it just not useful yet?
Like, understanding the difference between those two is like, that seems like a really important question.
**Brett:** Wait say more about that.
**David:** Well in the sense of like, are you building something that just has no opportunity and, and like kind of stepping back and saying like, okay, let's actually look at the ecosystem. Is this gonna be a big market?
Can it be a big thing? Is it like, is it just never possible or No, the market's definitely there. I just haven't figured out how to sort of get into that market and differentiate and sort of capture that like, emotion from people yet. to be \[01:06:00\] fair, I think a lot of it's the latter of like, again, like I said, I think most things, there's like a real tam in these days.
but I dunno if you're building like a to-do app. There's an easy calculation that's like, how is your to-do app gonna matter in the world whatsoever? You know, kind of like, you can find some of this in, I think certain things or like the, the content. Is this a feature argument? you know, like given I was at Dropbox, there was that famous thing where, you know, apple said Dropbox was a feature.
And I'm like, I'd agree it's a feature. You know, it's like we don't even pay for Dropbox anymore. We just use Google Drive 'cause it's free. You know, it's not a great place to be in as a company, but it doesn't matter. 'cause as long as you can get a foothold and get distribution, you can turn that into something else.
And so, even though I would largely say Dropbox looks like a failure from the outside, like, or to me from my point of view of like, they haven't really done much. they make a lot of money and so it's a successful business. You know, just like IBM somehow is still a successful business, as are most of these sort of, I guess ancient enterprise businesses.
So, so I, I think there's a lot of ways I guess you can skin the cat if you will. but I do think when people are early stage, I. The challenge is just like recognizing \[01:07:00\] if there's actually something
there and figuring out why it's not working and being really aggressive about that every single day of the week.
**Brett:** I think to your point, the thing that I've noticed that's so particularly difficult is the mild interest
or kind of using it. Yeah. This is helpful. it would be so much better for most founders if people just said, no. I have no interest in this. I think what you're doing is horrendous.
It's completely useless. You can't get anybody to use this.
**David:** I actually agree I, I think there's a truth that we are not honest enough. It's tough, right? Like some people cannot handle the honesty. But also, I was listening to this interview from, who was a guy that run or started a firm,
**Brett:** max lip.
**David:** max. It was like him talking about PayPal days and stuff, and he was going through this story about.
I think he was just talking about this time where he was doing more venture stuff and he was just so pessimistic. 'cause he is like, there's no way this will work to like everything. And I'm like, I feel you. I actually believe, like that's true for most things. That's not helpful. It's not productive. Right.
So on one hand, \[01:08:00\] like you do need that honest feedback because you don't want to have this illusionary thing where you're just like wasting time. You also need a little bit of this like sort of naive, youthful ignorance of what's going on to make really great things happen. And so you, you see this in everything.
Like you hire new grads at your company versus like a 20 year veteran. There's a wildly different outcome between those two humans. The new grads might mess some things up, but they're just gonna do random stuff without knowing what the consequences are, without knowing what it, what it should be. You know?
And I think that's the challenging part. It's like what it should be or like, no, no, this is just how things are Sometimes that that matters and sometimes it doesn't. And so I, I don't know what the answer is, but I, I think there is, I mean, I'm certainly guilty of this with I, my portfolio companies of where I'm like.
Maybe if you just do this or something, instead of being like, maybe you should just not do any of this and do something else entirely kind of thing. The the cool thing is though, at least in the sort of this AI hype wave we're in right now, there is a just a genuine, real feedback you can give. Like if you are not latching onto that, you are at least missing an opportunity.
Like it's a crowded space, but like, it's the thing where everybody's minds are \[01:09:00\] right now, and so the attention is already there and attention is usually half the problem.
**Brett:** what have you noticed about what made the market that you're in so good? It, it sounds like you, you, in, in the origin story of the company, kind of the market found you,
right? You didn't zoom out and say, here's 10 different markets I could go after, but like, obviously the, the, and I'm not really interested in the size of the market.
Like what about the properties or the setup or the dynamics of the market worked so well for this business?
**David:** I think part of it was like people, people were blind and so here's, here's a really important lesson, 10 years ago. We were, it was sort of the, the beginning of this JavaScript narrative we have today where JavaScript's kind of permeated every day and it's all these UIs, these fancy applications.
It had just started, but it wasn't really there yet. jQuery was still a really big deal, and, and this is around the time we fundraise, I'm like, oh, we need a, we need to do more JavaScript stuff because everybody uses jQuery. Then every, again, going to my funnel, everybody can be our customer. Very naive point of view, I didn't look that hard at the space, but coincidentally what was happening was this JavaScript shift \[01:10:00\] and we started this investment and then we saw that we eyes wide open.
We're like, oh, this is happening. That's gonna be really important because our thing where we want all the customers and everybody's using JavaScript 'cause they have this jQuery animation thing going on now is even better because now they're just building the rich UI in it and it's like, it just makes our property even more valuable because.
Of these attributes, like, oh, it's on a client device. So they don't have servers, they don't have logs, all these little things in there, but we recognize this JavaScript shift and everybody else ignored it. Even today, half these, half the companies in observability, they're just like SRE companies and stuff.
Now they're ignoring it far less than they used to, but we only exist because people ignored the space. Like, and we might still have like grown and stuff, but, but we are dominant in that market and we are first to market in everything there. We are still first to market in everything there best solution.
And that is like the P zero of the entire company is like, we have to solve JavaScript first. And it's because we recognized that was the growth of the industry. And I think 2019, I don't remember where I get the state, I just quote it forever, was, the first year where the, the \[01:11:00\] number of JavaScript developers, was growing faster than any other market.
And it was the largest segment of developers already. And I think that's been true every single year since then. That's a really big deal when you're like, how do we get most customers? And again, so I just think people didn't pay attention. 'cause they're like, oh, enterprise customer says I need this and, you know, X, Y, Z and they're always asking for things that are in the past and I don't care about the past and this is why I don't care about Java and stuff.
I'm like, I care about the everything else we're building in the next 10 years. That's the important investment. I care about the banker that is gonna use the cloud, not the banker that refuses to use the cloud. It's like, and I don't know, especially early stage, it's, it's hard to get in the trap of like, well, I, I need to get like validation.
I need to make some money. But does that align with my view of the world? And I think no matter what, you're probably, you have the same dice world being wrong, but the better outcome is when you're like, does that align with the view of my world, in the future versus in the past kind of thing. So,
**Brett:** you're the sort of, one of the dream setups and there's probably a handful, is there's just enough people living in the future to sort of bootstrap the back of your company until the future happens.
And if there \[01:12:00\] aren't enough. the company doesn't work, and it might be seven years later that the future happens, but the company's already dead.
Like you need just enough people living in the future that gives you the time for the whole rest of the world basically to catch up,
**David:** I think this is why Silicon Valley is like super helpful for building these companies because it is this, call it a pyramid scheme, effectively what it is. But it is like we need the, to build the thing that all the next startups are gonna use. Most of 'em are gonna fail and not pay money, but they'll get venture and that'll buy us some time.
But it's a directional investment kind of thing. And even, even at our scale, I'm very much like, why are all YC companies not adopting Sentry Day Zero? Like I, I am thinking that way. And, and that is so irrational when you think about like, we are an, you know, a big enough business that it's like focused on revenue growth and things like that.
I'm, I'm like, I actually. I could not tell you any of the day of the week how much money we make. I can give you rough, ballpark numbers of how many customers we have and if we are growing net customers or not. And I can probably tell you we're probably missing sales forecasts every, any day of the week as well.
and all I care about is like, are all the new startups using Sentry? And then if they ever \[01:13:00\] turn, why? And are we accepting of that churn? Because like sometimes it might be like, oh, they had a use case we don't wanna solve, that's fine. You know, other times it might be like, oh, they churn for some bad, some, something we would say is a bad competitor in that they're, the product's not that good or something like that, but it's a direct competitor.
And those were like, how do we have stopped that kind of thing. and you don't have to build it this way. I think it's a better way to build a business, to be fair. And certainly strategic outcomes. It's, it's been better for us, but, I don't know. I, I, there's a lot of companies that are like, oh, we're gonna go do the same.
We've got, you know, five random people from banks, which I assume are just people that, investors invited that are, you know, I, I know how the network works. kind of giving them false hopes and dreams, you know. But there's value in that too. So I, I don't know. It's tricky. My world is all non-enterprise is what I'd say.
I'm a consumer person by trade, that happened to build an enterprise business that I refuse to let it look like a traditional enterprise business. So,
**Brett:** And it goes back to your idea that there are many ways to build a company, and so just all things equal. Find something that fits you really well.
**David:** and I think the one layer I put on top is enterprise companies cannot compete with us when we undercut them on price, when we undercut them on \[01:14:00\] market share, when we are the developer's first choice. It just gives that, it's a better way to build a business, is kind of what I'm saying. And, and there's a lot of stories in history, like Okta's a good one, Okta full enterprise, right?
They acquired AU zero the time was not, it was more like the bottoms up thing, but it's now just enterprise and, and this is just what I've been told by Okta people is like, it's really hard to go from enterprise to sort of that bottoms up self-serve s and v mid-market. It's also really hard to go from s and b mid-market to enterprise, and I wouldn't say we do it.
We have enterprise customers, mind you, but SB and mid-markets, mid-market alone is like, who cares? Like, I don't need enterprise customers. They're just more annoying to work with. Now, there are a few of them. Some of, sometimes it's useful to have less customers because I'll tell you the, the downside to having so many customers is like, because just like a consumer company, it's a lot of noise in the data, so it's really hard to figure things out, but, but it feels more rewarding, I guess.
**Brett:** you touched on this in, in some different ways, but I'm assuming lots of founders who are starting with some open source part of their business and then want to build, a for-profit venture scale business, come to you and try to sort of get your advice on what they're doing.
Are there things you \[01:15:00\] haven't touched on that's like part of the things that you're constantly telling?
Those type of those founders focused on that shape of company based on your own experience. Maybe you could share and then just send them a, the link to this so you don't have to keep saying the same
**David:** I, I've, I've started to blog. So again, going back to that honesty thing where maybe sometimes we should tell people, that's a bad idea. I certainly don't do that. So maybe I should do that a little bit more. I think a lot of people who have useful wisdom don't actually share it because they have ego.
I'm not that I don't care. I actually get a lot of street cred by just being authentic. And so I've actually blogged about a bunch of this stuff too. I would say that like, I don't know, like the, the main thing, the main overarching theme, and this is the theme I apply to myself. You don't know what you don't know.
That's okay. It's easy to kind of get into a, a trap, what I mean by this. So here's, here's one sort of narrative I always tell people that I haven't really touched on. You really have to trust your gut and everything. And what I mean by that is. Every hire that has not worked out for Sentry. I kind, I kind of felt like it was not gonna work out, but I went through with it anyways.
\[01:16:00\] and I optimize for, I want less mistakes, more, better outcomes. And so I would rather not do something that has a pretty strong chance of failing versus do something that has a smaller chance of succeeding, if that makes sense. I don't know if that's a good thing or a bad thing for what it's worth, people always tell me I'm risk adverse in that regard.
And so that might not be the right advice, but at the very least when it comes to hiring, it is the absolute right advice. Trust your gut on if the person knows or is aligned or whatever. 'cause every single time it seems skeptical. Like to me it's like, it's been wrong, it's been a bad hire and you have to unwind.
and that's in. And so I just think about kind of that and it's like. I talk a lot about brand and, and it's the same thing for me. I'm like, I just want people to understand genuinely how I think about things, because I think I'm rational. I, I, like, I'm thoughtful about my, my process. I don't always explain it, but, and there's a lot of things you learn and you learn them like trial by fire.
You learn them by messing things up. And the more wisdom you can get from other people's mistakes, the better. You can't apply their successes. It just doesn't work. Like great Sentry has product market fit, there's nothing \[01:17:00\] you can learn from how we achieved it that you can apply to your business. 'cause it was like just fortunate coincidence, right?
But what you can learn is maybe you don't need, you know, a, I dunno, I'm making this one up a CRO when you're 10 employees or something like that, right? and so they're almost like truths that you can definitely apply and you should talk to people who, you know, venture folks are great even though I talk a lot of smack.
Operators are sort of the ones who have lived through a lot of this pain. So you need to talk to operators about it. And again, this goes back to my, my double side then where I wish more successful founders were more, they expose themselves more in the sense of like, it's okay to like just be humble and go like, nobody thinks you're perfect in the first place.
Like, just tell people the pain you've gone through. And sometimes we do this in closed forums, right? But good luck figuring things out outside of closed forums. and so I, I think it's just like, look for those opportunities. Look for that like therapy group, if you will. I never had it like when I was a founder and it would've been super, super useful and I don't know, I don't know.
Just are gonna mess things up. That's, that's life, you know, be humble and, and confident at the same \[01:18:00\] time.
**Brett:** How do you define marketing what is the role of marketing in Sentry Story?
**David:** It's interesting 'cause a lot of companies, I think they would define marketing as lead gen or leads because they're just like a traditional enterprise sales company. the way we think about marketing is the goal is here, here's, here's my sort of on the fly thinking behind it. You have a path that a customer goes, like a buying journey of some source, right?
It's like how do you get a successful customer? Yes. There's lots of things that come into play. It's like, does the product work? Does it solve a need? Blah, blah, blah. Marketing is a thing that gets them marketing and or sales. It's kind of hard to differentiate the two in some degree, but like there is this path they go through to get your customer.
For us that path is, they know about Sentry. They have used for Sentry, they'll become a customer kind of thing. And what that translates to us is a bunch of different t. Those tactics for us are generally like brand awareness. Like make people know that Sentry exists and then make them have a clue what Sentry does.
But it's actually two stages for us. and so I, I don't know. I actually think like maybe you could define marketing as like the mechanisms that capture \[01:19:00\] attention for your product. or at the very least, I think that is a use that is a better focus than what a lot of people do with it. A lot of people just run a bunch of activities that don't really have ROI.
we're at a lot of conferences, for example, we don't get ROI outta most of those. And it's a constant conversation like, should we just like not go to half of these? But then there's like this problem of like, well then our brand is less visible. Do we, do we have a consequence there? So even though we don't get direct ROI do, we get brand ROI billboards are another version of this is like nobody will with a straight face tell you billboards, you know, translate to like demand generation or anything.
But I will tell you, I have lots and lots of armchair anecdotes that are like, I was talking to somebody here and they're like, oh, Sentry, like that billboard that made no sense. I'm like, yes, that's the one. Got your attention. That was the goal. they might not be the ideal customer, but I got their attention.
And then all I gotta do is. Get them to know what we do when the right time happens, okay, we've got them, we're ready for them. And so at least our marketing investments are really about how do we capture people's awareness and mind share and stuff like that. And that comes down to like attention, which is very hard.
Mind you,
**Brett:** did that look like before you had the resources to do what might be considered more conventional brand \[01:20:00\] awareness? Like what was
marketing in the first couple years when you actually were working on turning
**David:** I think marketing first a couple years was more sales. And so what I mean by that is like, I think as sales, it's like when a person is directly trying to talk to a customer, whereas marketing is a little bit more of like a, a broadcast if you will. You can disagree with that. I'm just making stuff up.
early days though, Sentry, I was speaking at a lot of conferences. I was not to none of this stuff. I was going and telling people about, like stuff I had built or how to, how I scale web applications or how I approach open source when it comes to monetization. 'cause I had bootstrap Sentry. I was, creating value, I guess I was giving them something to listen to me that created credibility for me, caught their attention. They knew what Sentry was that East first Sentry, then they bought it, you know, kind of thing. And that, that's it. and so to me it's the same thing I always did. early days, it's just a very different scale and approach and tactics to the whole thing. But it was just like, I, I kind of believe like the way you build distribution is like, brand is like really, really important.
And most technology companies do not invest in brand. And, and it's complicated because brand is a lot of things to us. Brand is mass \[01:21:00\] market awareness. Brand can also be, oh, I'm selling a security tool to Fortune 500 and nobody else, but my brand is trust. They have to trust me somehow. So how do I create that credibility of trust?
So whenever they think of me that I, oh, I can trust that company so I could buy a product from them. and so brand is just like this representation of yourself. And I think the problem is people get so wrapped up in like building the product that they never solve brand. But the problem is like. You also then still have to have the product that, that will capture a market and, and I don't know, it's this chicken and egg thing where you kind of wanna prove market fit and then you really need your brand to be well known and well established. And you probably should work on 'em in parallel. But implicitly for me, and I think this is true for all startups, like the brand is the founders or the founder,
Yeah, exactly.
And they still are today at Sentry, right. And I'm not in charge of the company, but they are still me, and our marketing is me. Like half of our dumb campaigns come from me and like nobody would suggest them otherwise. Like we just sponsor this like ludicrously expensive thing that is more money than we've ever \[01:22:00\] spent on a sponsorship by far.
And it was just me being like, let's do this. I'm okay with this risk and then a bunch of anxiety ensuing from everybody else in the company. But like, it's because I inherently believed in that thing and I'm like, this is a good way to represent us. We can tell our story on this. We can do this thing that really pushes this narrative.
Early days, it was like, it was IRC still Twitter for me. it was, you know, in-person conferences, speaking at these conferences and it was just representing myself, which happened to be also my company. So, you know, people like to be cheeky. They're like, my views do not represent my employer or whatever.
They always do. That's the only point like that is, that is marketing is like the people are the marketing engine. A lot of times obviously this changes at like mass scale. like I don't dunno who the people are that run Coca-Cola, but, I actually don't know what the brand means anymore either. but that's true for a lot of things.
I like, I, I think the interesting thing I would think about from marketing that, that startups do not, some sort of, so some startups get this, like Vl Iss a great example of another company that understands brand. but Liquid Death is my favorite, makes no sense company. 'cause all it is is marketing.
There is no product, it's just canned water that has, \[01:23:00\] like, I just define it as like tattoos on the can to make you look cool or something, but it's just marketing. And then you gotta be like, well okay, what are they selling? You know? 'cause like clearly people are buying it and they're not buying water.
Well, they're buying something else and your goal is to like, sell, sell, whatever that is. It's like your values, and I don't know what liquid best values are, but they're certainly not canned water. They're certainly not. Water in a canned is better than water in a bottle, or our canned water is more delicious than everybody else's canned water.
It's just like they're selling like this sort of vibe, if you will, or this culture or something
else. And, I don't know, marketing, sales, it's like the same thing to me in a lot of ways, especially when you think consumer, or be like, sort of mass market
e-commerce kind of stuff. but I do think that branding is really, really important.
And, and if you are a founder and you're not out there just like representing yourself and your company every day, you're, or as much as possible, you're doing it wrong. And so you still need to charge money. but I think the best founders I know, even if they're not charging money yet, they have cemented so much brand loyalty, even if it's just them themselves as a person, you know?
And, and that will translate to revenue at some as, as long as they have a, \[01:24:00\] a path to charging money that will translate to money. So.
**Brett:** Stripe is an amazing example of this, and when you think about like part of the business that I think that most people don't, when you think about, okay, how do you develop power in a business, right? Moats, et cetera. One of them is
brand, but I feel like in B2B software companies, it's the least understood thing. But like I, I believe that Stripe has tens of billions of dollars in enterprise value created through brand.
And to your point, the interesting thing is it just flows from John and Patrick.
it is an odd, like when you think about, well what does Stripe stand for? Or what is the brand? It is them.
**David:** Well, think about something like box, like Aaron Levy. I'm like, box is uninteresting, but I know who Aaron is for no good reason because like he is the representative. He's the voice of that company. Right? What, what I thought in his particularly interesting is it's almost always the founder founders, but it's usually like one person, maybe it's two.
it could also be like non founders, but it's like less common. At large companies, it often the Microsoft non founder, right? Like \[01:25:00\] Satya, I don't know, they're, the copilot thing feels a little bit messy these days, but the sort of move towards open source, like they rebranded Microsoft entirely, and he's not a founder. He is just really good. And, and Microsoft clearly is really good at execution, but that's the same thing. It's like, okay, Microsoft used to be known for a thing. I am a Microsoft loyalist now, and I was like the old school, like hate on Windows kind of guy, you know? And now I, I use Windows almost exclusively for like, even work.
fortunately I just don't need to log into certain things. and I love it. Like, I actually think it's way better than Mac these days and that would not have been me before. And partially, and now they might be switching on this. So we'll see. 'cause Microsoft has this famous history of, that's not great in open source, but at least they did a good job of making us believe again, that it's like, oh, Microsoft is an open source company.
They're actually helping developers and they're doing all these things and, and that's just brand, right? And they did such a great job of that brand execution. Know. Now, I'd argue whether you agree with it or not, Microsoft is now full co-pilot shill, right? Their brand is, we are so invested in this ar ai future, which doesn't matter to people like \[01:26:00\] I know that is Microsoft.
Whether I want that or not is a different question, right? and I think that goes back to like when I say no and who are the right customers, 'cause I gotta resonate with your brand. 'cause like a lot of, especially enterprise customers, like they're buying not your software, they're sort of buying a relationship. It's like they're buying like a partnership. And I was convinced of that. I think that's true. I was convinced of that pretty early on at Sentry though, because like randomly we had, I think it was like JP Morgan reach out long time ago. They did not become a customer at the time. I don't even know if they are today. But, and they just like wanted to like chat with me at reinvent to like understand how they essentially it was like tiny at the time. and I'm like, oh, I just have to convince them that I'm like really good. Like, it's not, I don't sell 'em on features. I just gotta convince 'em. I know everything about this space and I'm the expert and our company is the expert and we are the best partnership they could ever have. and I think they just didn't use us. 'cause like compliance was hard at thetime.
but that's brand, right? Like, now it sucks that I had to convince 'em and they didn't already know that. But I think once you figure it out, it's like, oh, okay. You know,
**Brett:** when you were doing what you would call \[01:27:00\] sales or founder-led sales, as you were just commercializing the company, what, what were you doing?
**David:** I was literally being what I wish every PM was, I was, I mean, obviously I was writing the code, but then I was like following up with every customer that had like, you know, if, if there's an open ticket or customer support is phenomenal for this. but it's like if there was a bug that came in through, essentially like we'd see these errors, right?
We would see the email address associated with the bug. I would go fix the bug, then I would email the person with the email address. It was phenomenal. If it was like a signup form or a checkout experience. only goal is like to win that customer in all these scenarios. Right? Again, I had no idea. It just seemed like that's the good user experience.
That's what you'd, you'd be amazed if that happened to you kind of thing. and it was just like any version of that on repeat, I'm like, anybody that wants to use the product, I'm gonna make them the most successful they can be. I'm not gonna do unnatural things, and that's the balance. But I, I am gonna make them successful using the product and I'm just gonna, it doesn't matter the size of the company.
Like I don't care. Obviously it's more exciting if it's a cool logo, but I'm like, I don't care. I don't even know who half the logos are. It's even worse now. Like there's enterprise companies that worth lots of money I've never heard of, and I'll just be like, \[01:28:00\] well, that's a random startup that said nobody.
I don't care. Fortunately, I just treat them all the same. but that's all it was. It was, it was to me that founder-led sales is not just like, am I talking to the customer over and over? It's like doing all the things to, to make that customer successful. And I, I still do that today. Like we one of the big AI companies was onboarding a Sentry, and don't remember what it was like sales is like, hey. Can, can we get your help? Like, I don't know what it was. Some something, and I look at the account, I'm like, this account is so messed up, they're just using the product entirely wrong in a way that's gonna harm them. And I'm like, did you tell them this? And they're they were like wishy-washy, like sales team was.
I'm like, you know what? I know one of the people here, we're just gonna go over there and we're gonna fix their stuff, you know? And this is literally like last six months. And so I grab one of our directors, who knows, like sort of the domain they were working in. I bring one of the sales engineers along so he can understand what's going on.
We just go to, we literally show up at their office the next day. They knew we were coming. and we just help them get past everything. And you know, there's this argument about like, return to office and remote, doesn't matter which side \[01:29:00\] you're on, you can't disagree that it's really easy to communicate in person, you know.
And so going into the office and just being able to like, we can just work through any problem that exists in front of us right now in person, talk about it, get past all the cr, and we did. And it, it was great. And like, you know, we still got a lot of work to do with this customer, but, but that is like founder led sales.
That is just, and that's what I'd love all sales to be. But it's like skillset. I have tons of domain experience, tons of context on Sentry, so it's hard to replicate is what
I would say. but I think those behaviors are extremely important. So, and early days you can do this, no problem.
**Brett:** One of the last things I wanna talk about, when you think about the last 10 plus years of, of building the company full-time, what is the role of competition in anything that you've done? Has it mattered? Has it not, how does it informed what you do?
**David:** I would tell you I'm at Sentry and I've been capable of building Sentry because I'm very competitive in a sense of like, I want nobody else to exist. And so for a long period of time, we had a bunch of competitors that looked exactly like us. None of 'em exist anymore. And that is not a, that is not a coincidence.
That was not us just \[01:30:00\] focusing and ignoring what the competitors do. That was me every day being like, we have to be better in every single way than they are in every single territory they're in. And so, for example, one of our big ecosystems is the PHP layer of L ecosystem. Phenomenal thing these days.
It's really good. Lots of people, We are only there in a tangible way. Or rather, the reason we decided to be there, was because one of our competitors was more dominant there than we were. And I'm like, we can't have that. Not only can we not have that, we have the better product, we have better engineer stuff, we can just solve this problem.
And overnight we went from like, we don't really exist there to like unmatchable solution in the space. And we're at the conference, we're hosting like, like we hosted their first official party at the conference. So everybody immediately knew who we were. And it was like, I am, I am like ultra aggressive when it comes to competition.
This is a lot harder to do at scale, to be fair. It's, you know, the numbers are also a lot harder to do at scale. So you actually rely on a lot more traditional marketing, and larger programs. But that's still the truth. Like, I'm gonna Miami next week for React Miami. I have nothing to do with any of this, but like, it is really important to me that I maintain \[01:31:00\] relationships with this community 'cause it helps me inform decisions, it helps us with market share and marketing and all this stuff.
especially 'cause there's a lot of like content creators now, like call 'em YouTubers or whatever that are actually like super high value in tech. I'm like gonna spend my week in Miami and this may sound fun, I hate Miami. last time I was there I'm like, okay, it's not terrible. But generally speaking, I hate Miami and I'm only going to like, almost main like, kind of do sales, but in a wacky way.
'cause I'm not actually selling anything. I'm not selling to customers, I'm just maintaining an extending reputation. Right. And that is some weird version of marketing. I don't know how you would describe it 'cause it doesn't fit in your clean buckets. Right. but there's just a lot of stuff like that, I don't know.
And you kind of just gotta figure it out
**Brett:** whenever a new company was scaling or there was an incumbent that launched a Sentry like product, you obsessively tried
**David:** a hundred percent
**Brett:** how do we choke the oxygen here?
**David:** every day. it's, kind of painful these days 'cause our competitors realistically, they're the Datadog of the world, but they don't even do the same thing as us. And that, that's like an annoying version of this that. I don't quite have mastery over.
our strategy for what it's worth is just like deposition. The competitors \[01:32:00\] like do stuff they can't do, not try to feature, match them or build the same products because their strength is sales, it is distribution. even though we have a lot, they have a lot. It is lots of checkbox features that we just don't wanna build or can't.
Right. And so you're like, well, how do you compete with that? You don't compete by doing the same thing. and so that part's hard, but generally speaking, if a startup enters our space right now, today in the executive team, we are like focused on that startup. Like it, you, you can't allow somebody to sort of, you know, wedge into your, your market, especially for us.
'cause one mistake, I think it's a mistake, but one thing I see people do is they grow over time. They grow their business, become enterprise companies, and then they forget about what got them there. They forget about the long tail customer, the s and b or the mid-market or something. And so many people do this 'cause enterprise dollars add up, like right.
That's where you, you gotta bias it at one point. We don't bias us there whatsoever. You know? And, and I'm still very much like you can't allow anybody to take away that, that marketing funnel, right? That's what it is at the end of the day. and so we're still very, very focused on it, but, you know, as, as is truth \[01:33:00\] in the world, it is much harder to compete from, velocity, against these small companies because we have so many, like, so many customers, so many technologies, so many things to support.
You know, we can't be loose about compliance or loose about customer data or loose about ai like training, like all these things, right? Much harder to do at scale. And so, so that, I would say that is the constant tension and the constant challenge of the business right
**Brett:** And, and why do you, other than being obsessed about going after any new company in the space, why do you think you have been successful at, keeping newcomers from, from encroaching on your territory? Is there physics or properties of the actual business that you've built makes it very robust against competition?
**David:** No, not at all. In fact, every competitor uses our tech these days. 'cause the, all of people like to give us crap because Sentry itself is not open source quotes. all the tech that makes Sentry valuable is permissive open source. And for example, we have this one technology used by every single \[01:34:00\] competitor in the world, you know, from the biggest to the smallest.
We give that away for free. Everybody should be very thankful. Doesn't mean we get paid on it, and so, no, it's like you can replicate it. There's no, there's no sticking power whatsoever. There's no, there's no sort of weird, just incumbent. We have a mode. It's easy to get outta. It's just like we only win if we are good.
Like if we are actually the great solution for you. And it's really, really good.
**Brett:** But what about like, in, in looking at the business from a, from a distance, I would've thought that the fact that you are relatively inexpensive is actually a unique part of what makes the business defensible. Because you are, you are so inexpensive that that means you, you need distribution, you need various efficient distribution, you need very broad brand recognition.
And if you don't have that, you quickly end up with someone competing with you on price with a traditional go to market, and the business gets turned upside down. Like do you think about stuff like that
**David:** that that is,
that is an intentional thing. Like the, we have to be, maybe we're not the cheapest all the time, but it's like you can't really be cheaper than us. The reality is though, you can go raise money and charge half. Like we \[01:35:00\] have some startups that like try to give you more data. Little do they know you don't need to give more data because like people don't have that much volume.
So we, the good thing is we have a margin model and cogs it. There's like, we can sustain this to infinity, startups can't, but you will take shortcuts in the name of growth and that's fine. That's what you do. Well, I would say yes, that allows us to be defensible over the, the very long timeline. It doesn't really hold us from the near term timeline.
So also it's like $30, $40\. It's the same thing if you've raised venture. Neither of those add up on your bill. and so I don't think there's anything really there that kind of cements our position. Obviously distribution is really important. Distribution is the one thing that you can't compete with.
And what I'm, I'm very interested to see what happens in the space with like vs code cursor windsurf, because Microsoft has the distribution and if they keep up on product, which they kind of are, and cursor's been growing great, for example, right? Does, does Cursor have sticking power? Does everybody just go back to Microsoft over time?
I don't know. Like it's a, it's a really big test of like, cursor has no distribution, they have no sticking power. Can they succeed in that? Maybe. It's hard to \[01:36:00\] say, but it's uncommon at the very least, right? And so that is the strength we have now, but it took a long time to get there. I think things like the ability to self-host and there, there's a lot of these little things that I think do add up a little bit.
But not in like a very serious way. And so I don't think there's an, anything inherently like a network effect or something equivalent to that that like, makes our business more safe from that. we just spent a lot of time trying to make sure those people are successful and we don't always do it to be fair, but it's, it's the same thing.
It's like, okay, you customer, why won't you use Sentry? Maybe we should solve that. Okay, you customer, why would you possibly choose that competitor? We should definitely solve that. We should remove any reason that, that you should use any competitor. And then we've also gotten clever enough to where the, we're a big enough size.
We can actually just go take customers from other competitors. Which, if you're a startup, we don't really do that. But if you get, I dunno, say you're 10 million in revenue, we will come after every logo you have. we haven't done it that much, but we have gone after two companies and they basically don't exist anymore, like two competitors.
And so just how business works, like everybody should \[01:37:00\] know this is the reality. all the big players try to do this to us. We're just pretty, we defend well enough, not fully, but it is, it is. It's very different, like early stage, you don't worry about these things. It's not a as much of a problem when you think about things, especially when you're in a, like an uninteresting space.
But we, showed that you could make enough money in this space that it's no longer uninteresting. So
**Brett:** just to wrap up, wanted to end where we always do, which is who's somebody that's had, had a disproportionate impact on this journey into sort of building something with immensely strong product market fit. what's like the thing that they bestowed upon you or an idea or something that's like, has either had an outsized impact or like has a lot of resonance or residue in your brain?
**David:** I don't actually know on the product that I think it's literally, I just, I'm out to prove something. But I will tell you one thing that has had a genuinely immense impact on my, my view of the world. So, beats like the headphone coming, the Apple now owns, there an event where the, I think former CMO Omar Johnson was speaking, about marketing.
Brand and all this stuff and how Beats competed. I think they had already sold Apple at \[01:38:00\] this point. and his background, he is, he actually worked at Nike previously. And if everybody knows about Nike, obviously it's a great brand, right? And I, I just love brand. Brand to me is a phenomenal thing. and he's speaking about this, like how they won, and this is probably the most impactful conversation I've ever, not even conversation, just hearing somebody speak that has led to a lot of decisions where he's like, we won against Bose by doing everything Bose would not do.
We didn't look at say like, how would we compete against Bose? We're like, well, if Porsche was us, you know, because that's a company we admire, what would Porsche do in the headphone space? Or something stupid like that. And that, that was just like cemented so much in my mind. I'm like, okay, like, and this is why we do wacky things in marketing at Sentry and, and frankly in anything, because I'm.
I don't care what the random boring enterprise logo company would do. Like, they're irrelevant. Like you gotta like the goal's, attention, stand out, and agree. And going back to like though, and strength we have is distribution and thus market share is like really important. It's like, get market share.
You gotta stand out, you need to do this thing that is like gonna be really representative of what you believe in. And, and so we do it. And so like we have \[01:39:00\] this open source pledge thing, you can kind of figure out that we ran it, but like we put up billboards with these funny looking faces on them that like made fun of CEOs and stuff.
It's like activism makes no sense for a business. Right? And the only go, and I don't know if it's successful or not, but it was like, that seems like a good idea. Let's try that. Like that's brand building that's like, gets attention and stuff. And it all goes back to like this one conversation where like, we were like a series a company of 25 people.
And I'm like, I would love to employ somebody that thought that way. We never have mind you. but it is the most impactful thing because it, I will also say, most founders look at me because they, they actually are like, we, like hugely admire what Sentry's done in the brand building space. And that was not always true like five years ago.
I don't think that was true. Like you didn't know us really. but I think a lot of those same principles apply where I'm like, I want people to admire what we do. And it turns out brand marketing is a really good way to like say what you care about and ideally then like get that like sort of feedback loop of people appreciating it, you know?
And so that, that, that was huge for me.
**Brett:** Great place to end. Thanks for such a fun conversation.
### Can you be a good micromanager?
URL: https://review.firstround.com/can-you-be-a-good-micromanager/
Last updated: 2025-07-14T23:41:22.000Z
How to toggle between details and delegation
_This post is for subscribers only._
### Is All Micromanagement Bad? Here's How the Best Startup Leaders Balance Details and Delegation
URL: https://review.firstround.com/how-to-be-a-good-micromanager/
Last updated: 2025-07-14T23:22:29.000Z
When you step into management, whether you dutifully trained for that promotion or were thrust into it, the collective wisdom around your new role can be distilled into one directive: “Don’t micromanage.” It’s the golden rule of management — if you want to be a *good* manager.
But has this well-meaning advice created an anti-pattern for brand-new managers and seasoned leaders alike?
Newly minted managers are so scared of breathing down a report’s neck that they feel like they can’t help when someone runs into a problem. When product and design leader [**Hareem Mannan**](https://www.linkedin.com/in/hareem/?ref=review.firstround.com) first became a manager, she remembers a fear of micromanagement holding her back from meaningfully supporting a new report. “I read everything I could get my hands on, and over and over again folks talked about not being a micromanager. I was so allergic to micromanaging that I ended up under-managing, which was probably the biggest place I failed early on — to the detriment of my direct report,” she says.
Under-managing is also characteristic of long-time execs who are so used to delegating that they never bother to poke around in the sprint plans or lines of code. Veteran CTO [**Will Larson**](https://www.linkedin.com/in/will-larson-a44b543?ref=review.firstround.com) thinks some leaders have gotten too comfortable flying at this bird’s eye view. “Too many executives take this kernel of advice not to micromanage and as they grow more senior, start to think of themselves only as resource allocators — that their main job is to allocate budgets to different teams and periodically check in on the quality,” Larson says. “While that’s certainly an important part of management, that’s not the entirety of it.”
> As you get too far out of the details, you just become a bureaucrat.
*\-Will Larson, CTO at Imprint*
We’ve long been interested in sharing strategies for better management here on The Review, from [questions for manager self-reflection](https://review.firstround.com/35-impactful-questions-managers-should-ask-themselves-regularly/) to the [micro-habits of the most impactful managers](https://review.firstround.com/the-25-micro-habits-of-high-impact-managers/) to [tips for managing up](https://review.firstround.com/a-tactical-guide-to-managing-up-30-tips-from-the-smartest-people-we-know/). With so much chatter both in favor of, and vehemently opposing, the notion of the “hands-on founder,” we were curious to explore the somewhat controversial topic of micromanagement in the startup world. As a company starts to scale, founders and startup leaders face a fork in the road: become a [mascot](https://www.businessinsider.com/duolingo-ceo-leadership-style-how-career-changed-company-grew-micromanager-2025-5?ref=review.firstround.com) or a micromanager?
So we wondered: **How much micromanagement — and what kind — is productive? Can you stay involved in the minutia without stripping teams of autonomy?**
We scoured the archives of The Review and the [In Depth podcast](https://review.firstround.com/podcast/) to surface how founders and leaders across the org chart strike the right balance between details and delegation. Here’s who you’ll hear from — a roster of founders and execs who’ve managed across all phases of scale:
- [**Jack Altman**](https://www.linkedin.com/in/jackealtman?ref=review.firstround.com), co-founder of **Lattice**
- [**Matt MacInnis**](https://www.linkedin.com/in/macinnis?ref=review.firstround.com), COO at **Rippling**
- [**Krithika Shankarraman**](https://www.linkedin.com/in/krithix?ref=review.firstround.com), **Stripe**’s first marketing hire and former VP of Marketing at **OpenAI**
- [**Mike Brown**](https://www.linkedin.com/in/bumike/?ref=review.firstround.com), early **Uber** employee and former COO at **Newfront Insurance**
- [**Will Larson**](https://www.linkedin.com/in/will-larson-a44b543?ref=review.firstround.com), CTO at **Imprint,** formerly **Carta, Calm** and **Stripe**
- [**Jay Desai**](https://www.linkedin.com/in/jdesai01/?ref=review.firstround.com), former founder and CEO of **PatientPing**
- [**Sidharth Kakkar**](https://www.linkedin.com/in/sidharthkakkar?ref=review.firstround.com), co-founder and CEO of **Subscript**
- [**Hareem Mannan**](https://www.linkedin.com/in/hareem?ref=review.firstround.com), Head of Product & Design at **Squint,** formerly **Pave** and **Segment**
- [**Michael Lopp**](https://www.linkedin.com/in/michaellopp?ref=review.firstround.com), Senior Director of Engineering at **Apple**
- [**Sam Corcos**](https://www.linkedin.com/in/samcorcos/?ref=review.firstround.com), co-founder and CEO of **Levels**
We’ve broken down their advice into both altitudes of management: Where and when to spend your time in the details, and how to empower your team to do excellent and impactful work without actually doing it yourself. Some of their philosophies may seem slightly at odds with each other. All share tactics for leading more effectively. Take what jibes with your own management style and company culture.
## Flying close to the details
With a non-stop drumbeat of back-to-back meetings, startup leaders couldn’t pore over every nook and cranny of the business even if they wanted to. Use these strategies to figure out where to focus your attention on the ground level with your limited time.
### Model the behavior you want to see from your team
To **Lattice** co-founder and former CEO **Jack Altman**, micromanagement is a tool that can be wielded both for good and for bad, particularly at the founder level.
“I believe that micromanaging has a bad rap and is extremely important and effective,” he says. “CEOs should do it. Executives should do it. Managers should do it. It's a potent tool that you should use sparingly.”
The wrong way, in his view, is hovering over someone who’s likely fundamentally incapable of doing their job. “A bad way to use micromanagement is to use it as a crutch to help somebody who’s in over their head, and to perpetually be doing their job for them,” he says. “If that's what you feel you need to do to be getting good results consistently over time, that’s a sign that you’ll need to change who's on the team.”
But the effective way to “micromanage,” as Altman sees it, is to model the kind of work you expect from your team. “One good way to use micromanagement is for standard setting and demonstrating the caliber of thought, work and effort that you want to see,” he says. That might look like writing a blog post or fixing a bug yourself, for example.
Another use is to channel some TLC toward a function or area of the business that you’d like more investment in. “The CEO being highly involved in a certain area can attract energy in that direction. So by getting yourself into the details in that area, you'll bring others along over time.”
Like any tool, Altman encourages using it wisely. “Micromanagement is a shortcut that you don't want to always use, but shortcuts have value. As long as you're using it sparingly and you're using it in a way that's either helping coach and guide, setting standards and bringing attention, those are really important uses of micromanagement,” he says.
### Look for data anomalies as a cue to micromanage
“If there's any one secret to ‘effectiveness,’ it's that great executives do one thing at a time and they do the high-priority things first,” says **Rippling** COO **Matt MacInnis.**
At Rippling, [this philosophy](https://review.firstround.com/everything-in-business-is-about-fighting-entropy-heres-how-rippling-does-it/) is codified in one of their nine leadership principles: go and see. “It means leaders shouldn’t live in the dashboard,” MacInnis says. “When the anecdotes disagree with the data, you've got a problem. **You have to go and see for yourself, which means getting straight down to the atomic level of the function you're interested in to gather context**.”
When the macro data isn’t adding up, execs need to understand why by getting to the ground truth. This could mean:
- Reading through customer support tickets
- Watching sales call recordings
- Dissecting customer interactions with the brand website
“By watching back a Gong call of a sales engagement, an exec can say, ‘Hey, I noted in this call, when the customer said X, the rep did not redirect back to the superpower we have that would solve the problem,’” MacInnis says. That catalyst should kick off a chain reaction of curiosity for any high-impact exec.
“It implies the rep doesn’t understand what our superpower is, which in turn, implies a bunch of reps don’t understand what our superpower is. Which implies our training sucks, which implies the product marketing organization has failed, which implies we’re screwed,” says MacInnis. “You’re packaging this all up as a hypothesis and serving it to your department heads, and asking them what they think.”
It then becomes the functional team’s job to disprove the exec’s hypothesis. Most of the time, MacInnis says, they can quickly point to incorrect assumptions. “But if they can’t, then we work together to figure out if my hypothesis is true or false. We’ll write it down and go through the motions over the course of weeks, trying to debug the system. But it always starts with ‘go and see.’”
> I’m not a micromanager, but I’m microinterested.
*\-Matt MacInnis, COO at Rippling*
So when can executives step back after doing some field research? Whenever that dashboard starts showing the numbers you want to see. “We haven't solved the problem until we've seen the output metrics begin to turn in the direction that we want them to,” MacInnis says. “We keep fiddling with the system until our output metrics start moving in the right direction.”
### Create review systems to maintain the quality bar
**Stripe** is known for its reverence of [taste and craft](https://review.firstround.com/stripe-square-linear-product-taste/). That’s largely because of **Krithika Shankarraman,** who was [Stripe’s very first marketer](https://review.firstround.com/why-startup-marketers-should-be-diagnosticians-advice-from-stripe-and-openais-first-marketing-hire/) and responsible for shaping much of the foundation behind the brand today.
It’s remarkable Stripe’s brand diligence hardly wavered as it evolved into a billion-dollar, multinational company. Shankarraman credits much of that consistency to the organizational reviews put in place by the marketing team — alongside founders John and Patrick Collison — to make sure everything they shipped stayed true to the Stripe brand. “**I'll be a little contrarian here and say that I don't think we scaled taste at Stripe. Instead, we invested in processes and systems that ensured that everything that went out the door had taste**,” she says.
Internal reviews don’t just help steward a company’s brand — they can help decentralize knowledge, ensuring that new hires can learn the founding team’s taste.
“Often, what I see happen at scaling startups is that everything is in the head of the founders or the one early marketer who knows everything. And by the time a new person comes in, they don't know how to succeed. Too much of it relies on social capital,” she explains. “We designed systems so a marketer in their first month at Stripe would know exactly how to take something from idea to execution, following a series of processes to make sure their work was very effective at the company.”
Krithika Shankarraman, first marketing hire at Stripe and OpenAI
She shares two tactics Stripe used to structure internal reviews:
**Assign “red pen holders” to advocate for the user.**
At Stripe, there were designated red pen holders (this was a literal title) in each domain who marked up anything that went out the door to an audience of more than 100 users, whether that was a blog post or email or event plan. The red pen holders’ role, says Shankarraman, was to act as someone looking at the project with zero context.
“There were some people who held the red pen, and as reviewers they were putting on the hat of the user and asking, ‘Hey, if I'm a user who's seeing this piece of collateral for the first time, am I confused? What questions do I have? Is it in line with the Stripe brand in terms of consistency?’” Shankarraman explains. “It was about improving the work rather than questioning the strategy.”
**Set 20% and 80% checkpoints.**
Don’t wait until the night before launch to take a red pen to the materials the team put together. Review when there’s still plenty of time to change course, if necessary.
“At Stripe, we would do a 20% strategy review to make sure we were aligned on the goals and intent of any big project,” says Shankarraman. “Then we would do an 80% review for the execution and check in on how things were going — what each of the channels and collateral looked like. It’s important to check in at the 80% mark, and not the 99% mark, because you still want the ability to make changes.”
The thoroughness of the check-ins depended on the stakes of the project. “Sometimes it would be a very quick, ‘This looks good, let's get it out the door’ situation. Sometimes it was about asking, ‘Is this really the right audience? Is this really the right positioning?’” Shankarraman says. “For product goals, we might ask, ‘Is this the right product direction if we're marketing it in this way? Are we constrained to market it in this way? Should we not be making some changes upstream to what we're launching in the first place?’”
> I don’t think you can build a good brand without micromanagement. It gets a bad rap for depriving people of independence or autonomy — but it’s about putting your user first.
*\-Krithika Shankarraman, first marketing hire at Stripe and OpenAI*
### Establish a cadence to go deep on a KPI
**Mike Brown,** [who oversaw **Uber**'s expansion in Asia](https://review.firstround.com/what-i-learned-about-management-and-culture-from-growing-ubers-asia-business-from-zero-to-billions/), recommends a regular cadence of zooming into different projects and business areas.
“Good management is about more than setting clear goals and holding people accountable. Truly great managers get deeply and personally involved in key decisions and help shape the outcomes,” he says.“I don't like it when an employee says, ‘My manager is great. She leaves me alone to do whatever I want and doesn't micro-manage.’ I understand the sentiment here, but to succeed, managers must identify the key decisions or problems that are material to the business and they must personally drive results.”
Great managers, according to Brown, are like porpoises, the aquatic mammals that can swim at both the surface and the depths of the ocean.
> The best managers know how to ‘porpoise’ — they know what’s going on with everything at a surface level, but go deep on select initiatives.
*\-Mike Brown, early hire at Uber and former COO of Newfront Insurance*
Brown “porpoised” on a quarterly or at least semi-annual basis when he was at Uber, choosing several projects most closely tied to his team’s KPIs to dive below the surface. “I would go deep on one project tied to a people/culture KPI, one project tied to a top-line growth KPI, one project tied to cost reduction/efficiency KPI and one project most likely to improve customer experience,” he says.
If an existential threat or once-in-a-startup-lifetime opportunity presents itself, leaders should recognize the signal to dive into the details immediately. “I was always hands-on in those circumstances,” says Brown. “For example, when the Philippines government shut down our business for a month, I camped out in Manila and worked side by side with the team on the ground to figure out how to get cars back on the road and repair our then-strained relationship with the transport regulator.”
### Go “conflict mining” with ICs to gather micro-context
**Imprint** CTO **Will Larson**’s advice for senior leaders coming fresh into a new role, whether that’s at a new company or within a new function at a fast-growing startup, is to get context as quickly as possible through what he calls “conflict mining.”
His experience is in [the engineering side of the house](https://review.firstround.com/unexpected-anti-patterns-for-engineering-leaders-lessons-from-stripe-uber-carta), but his advice stands for leaders of any domain. “The number one way that I see new engineering leaders struggle when they come into a new place is that they assume the context from their previous company applies as is,” says Larson.
One of his favorite tactics for resisting this impulse — and learning the ins and outs of a new culture and system — is to have long conversations with team members who are closest to a problem and might be skeptical about an executive’s gameplan.
Larson learned this by making the mistake of trying to force a system he’d used at a previous company onto his new one. When he left Uber to join Stripe, he wanted to replicate the self-service provisioning he’d spun up that worked well at Uber. But the idea was met with resistance from a Stripe engineer. He thought his new colleague was just being stubborn at first, but after digging deeper with him, he realized there was a core architecture issue preventing the proposed solution.
This process of conflict mining served Larson a key lesson. “I could have just ignored him, but then I would have missed the key learning, which is that I was the one who was missing context, and needed to refine my approach,” he says. “Things are not the same across companies, and you can figure that out pretty quickly by finding something controversial and testing for conflict. The wrong way to solve this is to actually implement the conflict-heavy thing. The right way to do it is just to go have a bunch of conversations.
> One of the biggest lessons in management over the last decade is that micromanagement is bad. But I think this is an anti-pattern, because it creates disengaged and context-free leadership, and leadership can be so much more than that.
*\-Will Larson, CTO at Imprint*
A core component of Larson’s conflict-mining strategy is talking to the people who have the most context around a problem — who are typically ICs, not other executives. “You can usually get buy-in from other executives pretty easily, but it’s much more difficult to get buy-in from people with the most context around a given problem,” he says. “Their opinion is most valuable because they are the ones who live in the details. You can’t lie to them. They know the truth of how things run.”
### Micromanage your product on behalf of your users
“If you ever talk to somebody who's worked at Rippling, you'll hear funny stories about how our CEO, Parker Conrad, personally approves every expense over $5,” says Matt MacInnis. “He still runs payroll for the whole company.”
Conrad doesn’t have a particular passion for accounting. Rippling is an end-to-end payroll platform, so he’s never once stopped using his own tool to manage the now 3,000-person, $11 billion dollar company’s finances — because it’s the best way to keep a pulse on the product and how customers are experiencing it.
Matt MacInnis, COO at Rippling
MacInnis says that dedication to dogfooding is a charter for all leaders at Rippling. “There’s a company I know, a competitor even, with a pretty good payroll business that at a certain scale, switched to Workday for its payroll needs,” MacInnis says. “When they stopped using their own product, they outsourced the work of figuring out what’s useful to customers and staying abreast of the market. **If your business is predicated on the very fine, nuanced things you believe about the market and a relentless pursuit of those things, somebody who's there from the beginning has to keep their hand on the yoke**.”
But there’s something to learn here from Conrad’s intense accounting practices even if you aren’t building a payroll platform. “If you take your eyes off these things, you no longer have a founder mindset toward spending money, it becomes an employee mindset,” MacInnis says. “You’ve got to watch it like a hawk, or that stuff will slip away from you. And it’s very hard to pull it back.”
> If you stop being the most critical user of your product, you are toast. You take your foot off that gas by 5% or even less, you’re still toast.
*\-Matt MacInnis, COO at Rippling*
## Zooming out to empower your team
Leading a startup through hypergrowth means handing over at least [some of your Legos](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups/). When you need to fly at a higher altitude, use these systems to recognize (and stop) the unproductive kind of micromanagement — and delegate without sacrificing the quality bar.
### Treat micromanagement like a symptom — and get to the root cause
Former **PatientPing** founder and CEO **Jay Desai** popularized the practice of writing a “user guide,” which is essentially a user’s manual for your coworkers. You can borrow [his template](https://review.firstround.com/the-indispensable-document-for-the-modern-manager/), which outlines preferences and expectations across all the important domains of a manager-report relationship, from communication to reporting to 1:1s. There’s a section in Desai’s user guide specifically dedicated to micromanagement, which he views as a symptom of distrust.
“I am hands-on until I trust you. Once I trust you, I’m hands-off and we’ll collaborate as you need me or when I bring you ideas for us to work through together,” he writes in his user guide. “Our relationship will feel more like a partnership or me supporting you than boss-manager if we’re successful at building trust (though I will be in the manager role when needed).”
When Desai notices that he starts creeping into micromanagement territory, he knows it's because trust has splintered. “If I get in your hair again, it’s because I’m losing trust in you or don't feel like we are making adequate progress on a given topic,” he says.
Naturally, there’s a section in his user guide for when that happens. He encourages managers to [diagnose and repair trust](https://review.firstround.com/use-this-equation-to-determine-diagnose-and-repair-trust/) before they can zoom back out. “It’s important to intervene early as soon as you recognize you’re starting to lose trust in a report. Micromanagement is a great trigger that this is happening,” says Desai. “That’s when I tell them I'm starting to lose confidence in them. Then, I refer them to the section of my user guide about feedback as a tool to diagnose why trust may be deteriorating — then we talk about it. That intervention is necessary because, once the trust is fully gone, I’ve never been able to regain it.”
### Give regular feedback to stem the need for micromanagement
**Sidharth Kakkar,** co-founder and CEO of **Subscript**, is firmly anti-micromanagement. He’s built a fully asynchronous, remote company culture with no meetings (read more about [how he did that here](https://review.firstround.com/the-secret-to-an-in-sync-startup-ditch-your-meetings-and-try-an-asynchronous-culture)) where zero micromanagement is a core pillar.
He believes the founder’s role is to think about the system-level things you can do differently so bad decisions — or misaligned decisions — don’t happen. In an autonomous workplace, employees are trusted to find solutions to the problems the founder hired them to solve.
Here’s how Kakkar keeps his own micromanagement tendencies at bay:
- **Before you give an opinion, ask yourself, “Am I right or do I just have an opinion? If I am right, what’s the cost of being right?”** You might discover what you have to say is better off left unsaid.
- **Trust others to do what they do best**. Focus on the things that only you can do and leave the rest to everyone else.
But that doesn’t mean he never gives anyone any direction. Feedback, instead, is Kakkar’s vehicle for making sure his team is operating effectively. “Everyone should give each other feedback, but without a dedicated forum, feedback always feels a little more offensive,” says Kakkar. These are his three recommendations from running the feedback process at Subscript:
- **Make it regular — monthly, even**. Subscript operates on a monthly cadence. “It’ll feel like a lot, but it’s so worth it,” says Kakkar. Regularity helps everyone get more comfortable giving and receiving feedback.
- **Design a lightweight system**. “It shouldn’t feel like a big, onerous task that you want to put off.” He suggests the Start-Stop-Continue framework.
- **Don’t leave your high performers out of the process**. “Don’t rob these folks of the chance to improve, even if they’re already operating at a high level.”
### Set up peer office hours
Like Kakkar, design leader **Hareem Mannan** gives plenty of feedback to avoid micromanaging while still making sure everyone on her team is performing. But instead of spending her own 1:1 time with a report who’s not meeting expectations, she empowers a peer to deliver that feedback.
She unpacks a few of the structures [she implemented at Segment](https://review.firstround.com/the-design-leadership-playbook-how-to-hire-onboard-and-manage-a-high-impact-design-org/) — particularly when someone on her team is struggling. “If a designer’s work is not at the visual quality I expect, micromanaging might look like this: Every 1:1 I pull up the design, give them my in-depth opinion and critique. That’s not really my style. Instead, I prefer to create mechanisms for peer accountability or gates for quality,” she says. “You can create tools and mechanisms in your team that allow for that quality bar so you’re still able to ship high-quality work as a manager, without having your hands in everything.”
That meant shoring up her team’s design critique process in the form of weekly office hours with design leads. “One of the first things I did to scale critique was implementing design office hours with design leads. I never want folks to say they didn't have an opportunity to get feedback on a piece of work. When I felt like the work of a direct report was not of the quality I expected, instead of using my 1:1 time critiquing, I would ask them to go to office hours that week. Sometimes I’d chat with the person who was leading the office hours and let them know the challenges I was seeing and where I’d like to see improvement, without dictating exactly how to get to that end result,” she says.
But you can’t just expect teammates to give each other feedback if they don’t know each other. To get her team more comfortable with one another, so that receiving peer feedback in an office hours session wouldn’t feel out of left field, Mannan also held a “Design Hangout” every other week. “I'd say that Design Hangout and doing something fun together as a team has done more for design quality than even design critique itself. Because now I find that designers I didn't even know were friendly with each other are meeting and sharing their work. As a leader, it’s your responsibility to create that environment,” says Mannan.
> You can’t expect critique sessions or office hours to work unless you create forums for folks to connect with each other socially, so they’re comfortable with using those forums to begin with.
*\-Hareem Mannan, Head of Product & Design at Squint, formerly Pave and Segment*
Hareem Mannan, Head of Product & Design at Squint, formerly Pave and Segment
### Give your team a box filled with ideas
“As an engineer, nothing ticks me off more than micromanagement,” says **Apple** engineering leader **Michael Lopp**. “I never want to tell people what to do, because I never want to be told what to do.”
Instead of barking orders, Lopp’s [communication style](https://review.firstround.com/engineering-lessons-apple-palantir-slack/) is grounded in storytelling — and sharing a grab-bag of ideas with his team. “Instead of giving people a list, good leaders offer them a box and fill it with interesting ideas,” says Lopp. “It allows the folks you’re leading to go and put themselves in that box and see what they want to do with it. Whether you influence them or not doesn’t really matter. Your goal is to get your people thinking and give them as much information as possible.”
Some people still like to be told what to do, but Lopp prefers his “season the soup yourself” method. “I’ve gotten frustration from engineers who end up saying, ‘Can you just tell me what to do here?’ Most of the time, I say no. Sure, a lot of people want to be told what to do, but even when you try to be dictatorial, they tend to apply their own approach to that order anyways.”
> As a leader, it’s your job to be a storyteller. Give your folks the soup, then leave it to them to drink it as is or add whatever they want.
*\-Michael Lopp, Senior Director of Engineering at Apple*
### Hire managers who can do the work themselves
A few years back on The Review, **Sam Corcos** shared the minute-by-minute breakdown of how he spent his time over the first two years of building his company, **Levels.** Recently, he returned with the [5-year update](https://review.firstround.com/how-i-spent-17784-hours-in-5-years-as-a-startup-founder) of his data — and had several reflections on where he could’ve spent his time differently as CEO.
In hindsight, one of his regrets is that he stopped writing code as the company scaled and he turned his attention toward growth, operations, strategy and recruiting. “I took about a two-year hiatus from the codebase. This was a costly mistake that was quite painful to undo,” he says.
As Levels grew to 60 people and added new management layers, shipping decelerated. “What happened next was all too predictable: Velocity ground to a halt. Two-week projects ballooned into three-month ordeals. We drowned in pre-work, specs and planning meetings. We’d spend months building in one direction, then change direction without shipping anything. Meanwhile, our app was becoming a buggy mess,” says Corcos. “Looking at the data, I have no one to blame but myself. It’s easy to see from reviewing my time from these couple of years that software development was not my priority, and it should have been.”
Corcos has since recalibrated both his own time spent on software development and the team’s processes. Now, across functions, he looks for managers who can still do the job of the people they manage — so the CEO doesn’t have to swoop in to micromanage when things break.
“We no longer hire pure ‘managers’ at Levels, and we probably never will again,” says Corcos. “The managers we hire need to be capable of performing the tasks of those they manage. If they manage engineers, they need to be able to write excellent software. If they manage marketers, they need to be exceptional marketers themselves. Hire people who can be ‘[button clickers](https://review.firstround.com/passing-the-button-clicker-test-and-other-0-to-1-lessons-from-lattices-first-marketing-hire/)’ instead of finding someone else to click the buttons for them.”
### Inside Linear: Why craft and focus still win in product building | Karri Saarinen (Co-founder and CEO)
URL: https://review.firstround.com/podcast/inside-linear-why-craft-and-focus-still-win-in-product-building/
Last updated: 2026-02-03T17:54:37.000Z
Karri Saarinen is the co-founder and CEO of Linear, the project management tool built for high-performance software teams. Since its founding in 2019, Linear has achieved a valuation of $1.25B and now counts companies like OpenAI, Ramp and Vercel as customers. Before founding Linear, Karri led design at Airbnb and Coinbase, and previously co-founded Kippt, a bookmarking tool acquired by Coinbase.
In today’s episode, we discuss:
- Karri’s childhood love for computers that shaped his career
- The lessons he learned from a failed first startup
- Linear’s founding principles
- The early validation strategies used to shape the product
- Why Karri believes in small teams
- And much more…
Referenced:
- [Airbnb](https://www.airbnb.com/?ref=review.firstround.com)
- [Brian Armstrong](https://www.linkedin.com/in/barmstrong/?ref=review.firstround.com)
- [Brian Chesky](https://www.linkedin.com/in/brianchesky/?ref=review.firstround.com)
- [Coinbase](https://www.coinbase.com/?ref=review.firstround.com)
- [Jori Lallo](https://www.linkedin.com/in/jorilallo/?ref=review.firstround.com)
- [Linear](https://linear.app/?ref=review.firstround.com)
- [Tuomas Artman](https://www.linkedin.com/in/tuomasartman/?ref=review.firstround.com)
- [Y Combinator](https://www.ycombinator.com/?ref=review.firstround.com)
Where to find Karri:
- [LinkedIn](https://www.linkedin.com/in/karrisaarinen/?ref=review.firstround.com)
- [Twitter/X](https://x.com/karrisaarinen?ref=review.firstround.com)
Where to find Brett:
- [LinkedIn](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- [Twitter/X](https://twitter.com/brettberson?ref=review.firstround.com)
Where to find First Round Capital:
- [Website](https://firstround.com/?ref=review.firstround.com)
- [First Round Review](https://review.firstround.com/)
- [Twitter/X](https://twitter.com/firstround?ref=review.firstround.com)
- [YouTube](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
\---
**Timestamps:**
(1:37) Childhood roots in computers and design
(6:54) Founding Kippt and lessons from a failed bookmarking startup
(13:14) Lessons from a serial entrepreneur
(19:32) Why teams shouldn’t grow too quickly
(25:03) Linear’s early beginnings
(36:55) The unexpected power of intuition
(42:41) Linear’s unusual approach to user growth
(47:29) What shaped Linear’s early product roadmap
(52:02) Startups shouldn’t try to boil the ocean
(57:30) The power of extreme focus
(59:18) Design “something for someone”
(1:04:29) Flexibility vs. simplicity
(1:17:27) Lead your team with strong principles
(1:24:45) Design founders vs. engineering founders
**Brett:** Thanks for joining. I'm excited for the conversation.
**Karri:** Well, thanks for having me.
**Brett:** Maybe kind of a place to, to start, was your childhood like? Like when did you get excited about software and design?
**Karri:** I would say like quite, quite early on the software or on the computer side, so I was told, I don't really remember this, but like, when I was five years old, I wanted to play like we, uh, we got the Commodore, 64K or something at our house. and I, I, I wanted to play those games, but to play those games, you actually have to type in the launch command and I couldn't even read them.
So I had to like have my sister to help me show me like how I type the right commands so I could match it visually. even though I didn't know what the letters are, I couldn't read really but I could match the visual combination of things.
So that got me into like computers and then that continued with other like PCs and, gaming, online online gaming, and which then got me into designing websites. Like I, I wanted to design a website for a gaming clan or team. And, that got me, like, I went to the library, to get a book on HTML and, and got learn about that.
on the design front, I also feel like since I was very little, I always noticed things that, weren't right, like to, to my perspective and, I remember like one story that with my parents, we went to look for a new bike for me, and then I, told me like, go to the store and look at the bikes.
Like what, what kind of bike is interesting to you? And I f elt like a lot of the bikes were just ugly. And I, I just couldn't understand. I was like maybe seven or eight or something, and I just couldn't understand like, why do you make ugly bikes? Like if you make a bike, why don't you make it nice? and then like maybe years later I realized that, oh, you actually need someone to do it.
Like you need to have a designer or some kind of person that selects the design or creates the design. and then I kind of realized that, that there's that kind of career. but I actually entered the computer side from, from the programming. So I, my first job when I was 16 was, actually like building websites and that was my job.
But even in that job, I saw that actually what the company needed more was the design help. So then I got sucked into the design and every company I went to is I found that like I'm pretty good at programming, but they're very bad at design. And so that always like got me to design, wherever I went.
**Brett:** Why do you think that is? Or was?
**Karri:** I can visualize things quite well, so like when I look at something, I kind of like noticed that something is off and then I start thinking about it. Like, why, why is something off? What is bothering me?
And then I can visualize a version that is what I think is better. So I, I think there is some innate ability to see how things can be better. And then it, it's like, easier to do designs when you can do that.
**Brett:** Did you, growing up, think of yourself as an entrepreneur or as a programmer or gamer or designer?
**Karri:** I've never been too focused on any specific identities. So like even in school, I wouldn't join this like group. So like I wouldn't form my identity along like some kind of group that like, I don't know if you are a skateboarder or you are like a musician or something, would like hang out with all of those people and I found some of the aspects interesting, but I was never a person that I'm gonna go hundred percent in it.
And I think when I was thinking about where should I study and what should I study, I did feel that way that I am interested in, entrepreneurship because I had, I had my own little agency. I built websites for some, some customers, so I had some concepts of running a business.
I was interested in it, but I also know programming and I also knew design, so my choice eventually was those three. Like what should I study out of those three? And my thinking at least back then was that I think that, I can learn design by just doing it. And programming is similar that I can, I, so far I've been just learning it by doing it.
I'm not sure what I find in this school. So what, do I actually learn there? So I actually went to the business school ' cause I wasn't sure like what you actually can learn now. Can I learn something there? And then like later I realized that like business schools are not really about some founding companies or entrepreneurship.
They're more about the middle management or the kind of the theory of like, how do you run a company, but not actually the practical aspects of it.
**Brett:** Were you into school or it was sort of an a side thing as you were pursuing building and designing and all that type of stuff?
**Karri:** Yeah, I was never into school at any level. Basically, I think how my motivations or mind works is that I always was more interested doing something where I could see there's a value to someone. So when I was younger, that could mean that we make events, like we made this like LAN gaming events. Like we, booked some space and then we sold tickets and like we, created something for someone.
And that always felt to me like the real work or like the real thing you can do in this world is like you can create some kind of value. So I was always interested in that, but school is not like that, so I always found that the school is kind of like fake because it's actually, you learn something yourself, but you, you do these exercises or tests or studies, but you are just learning, you are not actually creating value to anyone else.
I And that, doesn't feel motivating to me. So yeah, it, a lot of times it was more like a side thing that I, did, and actually I did end up dropping out because I, I could see like, I can just go work in these companies or startups and I don't necessarily need this, studies.
**Brett:** So what was the story behind your first company?
**Karri:** when I was very young, I had like just an agency on around building websites, but then like in 2012, I had this other startup, called Kippt and it, basically just came to be from an idea that back then, Delicious was the kind of bookmarking tool. And, and Yahoo had bought it like in the early 2000s and basically done nothing with it for 10 years.
And it was kind of stuck there. And, I didn't like using it then. I felt like maybe a lot of other people feel the same way. And, there was some other things that I don't quite like about the model model they had. Like, for example, the tagging. Like I, I found like tagging was this like, hot thing back in the day.
Like a tag, like an interesting idea how you can categorize everything. The problem with tagging is that you might end up with more tags that you have content and to me it doesn't feel like it has some kind of purpose then like you, you are categorizing for really no benefit.
Like you just have too many things. so we created this product kit, which was basically bookmarking service for saving things from the web, like different articles, videos. We could actually also try to like, bring in the content to your library so you could kind of access it, even if the, the content went away.
we also built some social features. You could follow people or like make lists that other people can follow. And one of the ideas there was that Google, even back then was kind of bad at finding quality content if you actually wanna learn something like, Hey, I wanna learn about React. and it's like, what is the best content around that?
It's not curated because it's just based on the search rank. And the search rank can be like, it's probably like just gives you the React website, but it doesn't give you like someone's like, great tutorial that they created, but someone who knows the subject, they could like actually create these things.
But, we built that tool and then, found out a lot of people liked using it, we put it online, we put it on Hacker News, and then turns out like a lot of people liked using it.
**Brett:** You start it as a company or as a side project?
**Karri:** It started as a side project. So yeah, how it went was that we, we just put it on Hacker News, Hey, we built this thing and then in a couple months we had 10,000 users on it.
And then at that point we were like, oh, maybe this could be a company. So we went to apply to YC in 2012, and then got into the summer batch and that, that kind of like, also got me to move to California or San Francisco. I, grew up in Finland, so that's where I'm from and where, where I was at the time.
And then, um, the YC kind of made the reason for me to move. And then we came to do the YC and then, then run the company from the US.
**Brett:** What was sort of the trajectory of the company?
**Karri:** It's like definitely like lessons learned. So we always, I, I still like, even like yesterday someone was, I was talking to some, some investor and they said like, Hey, I really remember this Kippt service you had and like, I really liked it. so I think we had like a good group of people who were very excited about the tool and liked using it.
Some of the, I think the mistakes we made, and maybe it was also like a timing component that we just didn't, because we didn't start it as a business, we didn't actually think like, what is the business? so Delicious, I don't think really had a business like they got sold. Like I think like advertising is only works if you just hit a massive scale.
And so, and we weren't there, so we some hundreds of thousands of users, but, but tens of thousands of users, and then later a hundred of thousands of users. But not then in millions of users. And it's still, I think what we found out is like, not everyone likes to like, collect stuff and it's not, the most mainstream thing. So, so we, we struggled a long time with the business and we, people like did some different ideas, people that, but like in the end we were just running it, two of us, like two founders, um, most of the time for a couple years and just tried different ideas.
We didn't really raise any funding because we didn't really have like a vision, but what we are actually doing. So we were trying to figure it out the same, same time as we were building stuff. And in the end, I think it was like a good experience on, on building things. And then also like, maybe made me realize that the advice on like starting a company and not thinking about the business model too much is, is not good.
Like it, I think you should think about it a little bit. It's like, what is, what kind of business are you in? Like what, who is gonna pay for it? And like, are they gonna pay for it? In our case, these were like mostly like individuals. and then I think back in the day, people weren't really like willing to pay for like web tools as much.
So I think like if we had done it now, I think we probably could have gone and done it better. But I still don't think it's like a venture scale type of business. It's, the market is not there to, to support it now or probably never. It's just like, it's not a thing or it's not that interesting for that many people.
But I think the ending for that company was that, so Coinbase was in our YC patch in 2012 and they didn't have any designers on the team, so, so I sometimes like advise them on some stuff early days and, Brian Armstrong was always hounding me about, it's like, Hey, maybe you should join Coinbase.
And I was like, well, we have our own company and, eventually it got to a point that like he offered to like buy our company, so we ended up being acquired by CoinBase in 2014.
**Brett:** What, I mean, you talked a little bit about one of the lessons, I guess I'm always interested in sort of this topic of, founders that start multiple businesses and there's obviously this pattern where there's many spectacular companies that were built by founders. When you look back, their first company didn't really work or their first two companies didn't work, and then they land on something and it really has the properties of something that can really get big and, and kind of create something that, that's adorable. the thing I kind of find curious about is kind of the question of this intersection of the founder and the idea and product that they're building, and ultimately sort of, how much of it. When a founder goes on to build a really good second to a third company, is it that they've learned a lot or is it just more that there's more randomness than anyone would imagine? And that you take a capable founder and they're pointed in one direction, it doesn't really go anywhere.
They roll the dice again and get pointed in another direction and, and that we're kind of overfitting to a bunch of these things in that, you know, certainly you've learned a lot since the first company, but maybe you're more similar and you know, it's almost like, you were drilling for oil and you were really good at drilling for oil, but you were kind of drilling in Massachusetts, not Texas, and then you put the rig down in Texas and now you know you're building something pretty special in Linear. Like it's not a very well-formed question, but like when you think about those type of topics, what kind of comes to mind for you?
**Karri:** I would say like, you, definitely learn something with any company, and I think it's always like important to understand like, what, what are the lessons and like maybe. try to think if those, what went wrong or what went well. Like how, how much was it about your specific situation versus how much was like your choices you made or how much was like conceptually you just went to the right, wrong direction? I think like, few lessons I've learned, one was the, the business side that, like, I probably at the time, like after that company thought like if I start a new company, I will definitely start a company that I know there's a market for and make sure that there's a market so linear. Like is that gonna company?
We knew that basically every software company needs some kind of issue tracking, project management tool. it's just a matter of like, it's linear, that, that tool or, or something else. and then also that software companies and engineering tools are type of. Products that people are willing to pay for because the engineering functions are already highly paid and, and software companies have, especially VC funded software companies, they have a lot of money to spend.
So it's like you could build linear to some other domains, but I think like the problem sometimes can be that you could build linear for stu like, uh, teachers or something, or schools, but schools are not willing to pay. Like they don't have the money to pay. So I think there is some importance of understanding the market, like what you're entering and what is the dynamics there. I think second thing which we explicitly try to do well with linear was kind of like certain kind of focus and especially the ideal buyer kind of focus. so in the first company it was this like bookmarking tool that was used by all kinds of people. It could be engineers, could be designers, could be teachers, could be sometimes book writers.
like authors And every time you hear this stories like, like as a startup founder, you might get really excited like, oh wow, someone is writing a book and they're like, using our tool. Like, that's great and maybe we could do more for them. But the reality is that you are probably just getting distracted that's probably not your audience. Like that's like a pretty specific audience. Like maybe you could build something for it, but like you probably shouldn't build anything right now, especially when you're small. so with linear, we, we set out that we basically are building this for product software companies, especially early on it was like very small early stage companies. and like whenever we looked at any kind of feedback, we are looking at who is this feedback coming from? Like why do they need this? And like, are they in our focus kind of user group? and then I think there's that focus thinking can also go beyond that. Similarly, even from that group, you might get things like, Hey, we need SOC 2 and this like security certification.
And that's like one of those things like, yes, you should one day have SOC 2, but like, is that, day today, like, is it in the first month of your company or the first six months? Probably not. So you should always think about, is this something we should do today? Like, is it blocking us in a massive way or is it, is, this the most important thing to do right now?
So there's I think, lesson on the, on the focus. I feel like I learned a lot from YC just generally that they, I think they give like pretty sage or pragmatic advice, which I don't think people usually follow though. Like, I think there's all this, they say like, don't raise a lot of money or try to be profitable if you can, but no one does it ever.
And then I don't know exactly why, But like, it's all there. It's like they give all this advice and I think we kind of been trying to follow that advice and it seems like it, it does work. but I think people get distracted by other things
**Brett:** Well, there's lots of things in life. Like how do you be healthy? Well, you exercise and you eat well. Then you look at how many people are exercising and eating well. Well, there's not many, you know, like part of it is that there's the, there's the whole host of things that, are pragmatic good advice, and
the real world is complex and humans are complex and their status seeking games and all sorts of other things going on.
**Karri:** So yeah, I would, I would definitely say that like there is things you can learn, just like practical things and there can be like just philosophical things or just experience can help. I think I also was helpful too, after my first startup, I, I worked at Coinbase, which I joined there when there were 12 people or so, and then saw them grow to like 100 people.
And then I was at the Airbnb when there were like, already quite massive scale and, but they were still growing. and it was kinda like good to see like how different companies operate, how the CEOs operate. Like what, what goes wrong? Even in this like very successful companies. And I think you, realize that even like these very successful companies are, they have problems too.
Like every company has problems. And, and as a startup you don't have to get everything right, like you just have to get few things right. And then you can like, fix things over time.
**Brett:** you think linear would be successful if you didn't work at Coinbase and Airbnb?
**Karri:** I think it's likely, it depends. Like, I think it depends what else would have done in, in those years. I like, I think it's about
five years basically of my life. So, I don't know, maybe I think what was really helpful about that experience was seeing that how these organizations get built, how they make decisions, like how do they operate? And I, I still think like there's a lot from those days when I'm designing something or talking about the product in the company, a lot of times, like in the end, like what the problem we are solving for companies is this like organizational coordination and communication problem.
And especially like the larger the company is, more problems you have with that. And it basically, the problem is always no one ever knows like what is going on and like who is doing what. and I think like having the experience, seeing those companies, seeing like how they do planning, how they make these spreadsheets and how bad the experience is or like how they prioritize things. It does help me think about like the product itself. It's like, I remember people doing it like this. Maybe we could build solution for that. And those simple things, like we have, this product project updates feature that is basically every company almost does something like that.
Like you have some kind of weekly meeting maybe that like everyone puts the slide and this is like where the project is at. So we just kind of built that into Linear, that there's a specific place you can do that and you can mark your projects like green, yellow, or red and then, then people can follow those things.
And so it's like we are trying to almost productize the practices companies already have and make, make it like more easier and streamlined for them. I think it would be hard to do if I didn't have that experience.
**Brett:** What about, are there philosophical things that you took from those companies that have expressed themself in what you're doing with Linear?
**Karri:** I think one, one would be the small teams, like with Linear. So we, we've been trying to keep the teams like the whole company quite small or not overly growing it too fast. So I think there's two problems with growing the teams too fast. One is like the, it takes a lot of time and the culture gets diluted very easily.
And I, I could see that happening in these companies that, especially in Coinbase when, when you have 12 people and then it suddenly goes to like a hundred people in one year, almost, majority of the people now has, has been there less than a year, sometimes even like weeks, and they don't know what they're doing or what they're supposed to do.
And then I think the second thing around that was that I looked back and, and tried to think like all the projects that I, I was part of, what were the projects that went really well? Like where the output was really good, where the, the speed was really fast, or executing execution speed for was really fast.
And it was always like projects where we had a small team working on something quite intensively. And it, it was like a Airbnb when I just joined. I put bold into this, project, basically redesigning the whole Airbnb application and there was like five of us. And, it's almost those kind of things are almost like impossible to do with 50 people or like a hundred people.
There's just too many opinions and too much like pool to different directions or just like communication problems. So I think like that, that was like one thing I took, that small teams can actually be powerful. And if you just find the right type of people for that, and the companies don't really do it that much because I don't, I find they often think about the, the resources as number of people, not, not necessarily like the output of those people.
So it's easy to say like, we need to hire like a hundred more engineers, but maybe you only need to hire 10 more engineers if you just structure the organization differently.
**Brett:** So on the, on the small team's point, like how do you foot that with Coinbase and Airbnb being two of the largest software companies of the last 20 years is it just there are many ways to build companies? Is it for them, maybe it was good that they scaled quickly, that the market set for them required them to do that or they would be more successful if they were much, much smaller and they didn't grow head count in the same way.
**Karri:** Airbnb, for example, Brian Chesky is now running, it's very differently than he was running before. Like this whole idea of founder mode and be more in the details and, and I think like he is looking at this differently.
He probably agrees that he has too many people. I think it, it's, what happens in this company is, is I don't actually believe that those people are needed for the success. It's more that the company is so successful that they can hire these people. So it's like when you have the growth there, you are able to do that. that's the lesson people should take from that.
Not, not necessarily like that. I, sometimes see startups like following the hyper growth kind of model where they think the success comes from hiring a lot of people, but it's the opposite. Like Coinbase was still quite small. Like when I joined it was already like, yeah, it was two years in and there was like 12 people there.
why did they decide to grow so fast and like keep growing that fast?
**Brett:** What was the earliest moment that you thought about what then became linear?
**Karri:** Well, I would say like the actual idea, it came from my co-founders, like probably in 2000, early 2018 or something. basically they, they wanted to do start a company. I wasn't wanting to start a company. And, and basically I think their, their first idea was like, Hey, we used all these tools in our companies and all of these different companies we've been at, like, around managing this work and all of them are quite bad and I think we could build something better.
but like interesting enough, there was like a little precursor to this, like when I actually joined Airbnb in 2014, I think 2015, that was my first time using Jira. Like Airbnb was using Jira. They had some kind of self hosted instance maybe. And, and the IT team had customized it a little bit with the Airbnb colors, but not really doing a good job with that. And so when I was first required to use it, I looked at it, I was like, what is this thing, like, it's so messy and so complicated, and I can't quite understand what I'm supposed to do with this thing?
So I refused to use it for a long time, but eventually I kind of realized, well, it's kind of, it's not great for my team to, refuse to use something and I should just play along. And, but what I did was that I, created like a Chrome extension that loaded up a custom CSS for that Jira instance, for the Airbnb instance.
And so I started redesigning it. So I started removing some of the elements. I started changing the colors, the styling, the hierarchy of the views or the, the screens. And, and then I also like removed a bunch of stuff that I don't think like are necessary, like the elements that I don't think are necessary for the actually to use it.
And so I packaged it into this Chrome extension. I, I launched it internally and they're like, Hey, I made this kind of simplify, like a nicer looking Jira for myself, but like, maybe you want that too. And I actually got like a hundred installs on it inside Airbnb. And this was like, yeah, like a couple years, or three years before we ever, ever talked about Linear.
But when, when they started talking to me about this idea is that I had this like personal experience where I actually went to the lengths of building something like custom chrome extension to, to make this tool kind of parable for me, because I'm a visual person, so this kind of stuff does bother me.
**Brett:** Were you at like lunch together at Airbnb and they were saying, Hey, we've been wanting to start a company. What do you think about like what, where did it actually start?
**Karri:** Um, so all of us founders, we are all finished and, and we are friends. And actually one of the founders, Jory, he was my founder in, in the first company. Um, so we already had this kind of relationship, and then he stayed at Coinbase, I went to Airbnb, but, uh, we all kind of were friends and we had beers every, every now and then, like, I don't know, weekly or, or so, and I think it was one of these sessions, like they just start talking like, Hey, I met like four years into my company or five years into my company.
I wanna do something else, but I don't want to go take a job. I would actually wanna try something on our own. and it kind of like came from that so it, it came from this kind of like, discussions and, and then we started looking into it. Like we started thinking about the problem. Like we started a little bit, um, designing and building prototypes and, and talking to our friends and talking to coworkers in the company.
It's like, Hey, what do you think is really bad with these tools? Like, how would you wanna improve it? Like what are some of the things you really hate about it? What, what would make you more productive? And those kind of things. And so, we kind of started this little bit of like a research before we actually like committed doing anything.
We wanted to see if that idea is actually, actually there. I think the interesting thing about it was that a lot of people had a lot of things to say and they clearly saw the problems. No one was saying anything that, Hey, I wish someone would solve this, or I wish I you could solve this or something.
Like, no one really even thought about it. Like, I think this market is like weird where you have this incumbent and I, I think people just assume it's the thing. It's like, it's always been there. It's always gonna be there. And it's, it's, it's a little bit like the, floors in the building. It's like you don't think about the floors, you just walk on them.
so I think a lot of people haven't really thought about like, could there be something like better and, and do it. obviously there's been companies, other companies doing project management and stuff, but no one has really focused on the engineering use case that well, I think and haven't been able to get to the scale where, where Jira is.
**Brett:** From an order of events perspective, so I understand it. Did, did you all first say, our next thing, let's start a company together and then landed on this thing that you wanted to work on? Or were you just kicking around ideas and then decided after that?
**Karri:** I would say that both of them came together in, in some ways. Like we, first decided like, hey, we could, like, start a company and this was the phrase next sentence, like, this is the idea. we didn't ever like, explore other ideas, so there wasn't any, anything like that. We, we were already like, sold on this idea and wanted to like start like evaluating or researching it before actually fully committing on.
**Brett:** You just talked a little bit about this sort of in a, in, in sort of broad strokes, but in its most tangible way. Like in the weeks after that, what did you actually do? What were the types of conversations you had and how much of it was organized around like, there's sort of the dominant players. It's a very large company, like studying them, looking at what Asana was, do like all the things that going on. Kind of ignoring everything that was there and just trying to figure out what customers wanted.
**Karri:** the thing we focused was like what the customers were saying. And like if they mention other tools, then that's, that's fine. And like that's, that's part of it. But we, we didn't look at, we didn't go benchmark the other tools or look at them too closely. I think the main thing thinking was just that.
Why isn't Asana used in our, like, tech companies? And I think like the, the, basically the reason is like the feature set is not there for, I think, technical projects. And maybe they've made some, like, progress there. But overall that was like just the thinking. Like basically companies start with something and then they end up with Jira because there's nothing else.
Like there's no alternative to that fate. So that, that was like the rough understanding on the market, or the different players. But yeah, we, mostly just focused on can we talk, basically let's talk to anyone who wants to talk to us about this. And usually they were like friends. Sometimes there they're founders, sometimes they're like engineers, sometimes they're designers, PMs.
I interviewed some PMs at their Airbnb and just went like, let's, hey, can you have a coffee with me and talk about something? And then I just went to like. talk to them like, what is, what is problematic in, in your current world? And, and like when it comes to this tooling or running your team or, or something.
And I found like there was like a lot of different answers. So there was more, like this step was more about the user research. So understanding are there some patterns? Like are there something that people feel strongly about? We had our own thinking all this time. Like we, we experienced all these issues ourselves.
So a lot of this, it was like, it came from us too, that one of the number one thing for us was that we were always the type of people that wanted to build something and we, we weren't really in management positions, we were more like a high IC positions because we all loved building things. And when we looked at this tool, they just didn't feel like they're helping us to do anything.
They're not helping the ICS to actually do the work, which is weird because. I think in the end, the productivity of any company comes from the ics, like what the actual, what is actually the work output and the ICS engineers or designers or someone are building that output. So I think if the tool should be optimized around anything, it should be that like to, how do we make help them to, complete that output, like, or do that output faster or better or easier somehow because then the PO company can be more proactive.
What I could see, a lot of tools, and this generally I think goes for enterprise tools, they're optimized around the buyer because that's how they get bought. you, you don't, the users don't go by the tools. The, like the actual end users don't go buy the tools. Some, someone in the procurement, it, the leadership, someone like make the decision like which tools to buy.
They might have their. Different favorite things that they want from these tools or sometimes they don't even care, like they may be. Sometimes the favorite thing is just the cost or something else. So we, we just believed in that, like you could build a tool that is very good for the end users, for the engineers and that would be really valuable because if they use the tool a lot more than, than something else, it means that all the work they're doing is like more tracked there.
And then if it's tracked there, this system can be more the real time source of truth. It's, it's kind of like tracking what, happening in the front lines. So anyone beyond those front lines have a better understanding like what is actually happening. So we had to like some of notions like this that there's certain things that we should just like hold dear or do really well, but we wanted to also like talk to people, like what are some of the other things people have problems with?
Some of the things I noticed, one of the patterns came from this conversation was speed. So. Almost everyone said that they hate when these tools are slow. So that made us think like, what if we can solve the speed issue? What if we can build a tool that is never slow? And so we went down to this exploration of prototyping on a tech stack that could allow us, and, and what it came to be is, is more of this like a local first architecture where the data is synced to the client, to the, to the actual client that user is using.
And then like all the actions you take with the data or with the tool, they, they happen locally on the client and then the changes get synced to the server versus the normal way of doing web apps is that you, you just run the app on the server and then whenever user needs to do something, they, they, request the data from the server.
And then when you make changes, it also at the same time pushes the data to, to the server. So you get this loaders in your experience and it, it makes. Sometimes if the services are slow, it, it can be really jarring. So, so we built that because we, we knew that, like, it's number one thing everyone said, so the speed is one thing.
so the first thing was the optimizing for ic, the speed was second. And then maybe the third thing was that I noticed in all of the companies I worked at, that actually the, the ICS and the high level leadership was, I think more philosophically aligned. Because I think CEOs and a lot of the high level leadership, they just wanna see things happening.
They wanna see output, they want to have progress. I see as, I think something similar. I, I don't want to sit in these meetings. I wanna complete my work and like build something. But like something weird happens in the middle where things get really messy or like lost, like that kind of thinking like, hey, we need to go push forward, like go forward and like do this thing just gets modelled by all kinds of other things. Like we need to have this kind of organizational path and like these, these kind of processes and, and something. And so what, what I saw happening in these companies is that the leadership would have very clear initiatives, what the company should do, but then the planning would happen in the middle and then like they would create this spreadsheet of 300 projects.
But then now that, the leadership wouldn't know like what those projects are actually doing. Are they like pushing those initiatives or not? And then when people work on those projects, they don't know why they're working on those projects. Like the connection wasn't there throughout the layers 'cause No, none of these systems like actually supported that.
So our thinking was always that like, could you connect the highest level of goals basically of the company to the day-to-day work and make it more meaningful that way. But for example, at Airbnb it's like, it was a pre IPO company. So there were some annoying things that maybe engineers had to do for the IPO readiness, but.
If you worked on some of those things and you could see like, oh, this is, we're doing this because we need to get, we're gonna, like, IPO think would make that work feel much more meaningful and you would understand why you're doing this. so that was one thing is like we wanted to see like if we can connect all these different layers, of the company and, and that's why kind of both helped the leadership but also also the ICs.
**Brett:** Before you committed to starting the company, as you were having these conversations, did you intentionally try to talk to people in different roles in different size companies, or was it just more whoever was around you were just sitting down and grabbing coffee and chatting about these things in a pretty unstructured way?
I.
**Karri:** Yeah, I, I, I would say like it was very random and unstructured. It wasn't, to some level, I probably tried to find a little bit different people, but a lot of times it was also like, who, who do I know and who, who do I think I could have like, interesting opinions about this? And it was very unstructured.
Like, just tell me like, what is wrong? And so it, it's, it's type of a user research in a way that like, I don't, I just wanna hear, I wanna see what people have to say and how they think about these things. And then maybe I'll just have some additional questions when, when needed. And I think there was also like quite interesting to see the variance and, like some, sometimes with the PMs they would have very, this like process oriented way of thinking.
Like, I need these tools to support my process and this is my process. And then some people were kind of like the opposite, where they're like, I don't really care anything except how well the team is doing. Like my only job as a PM is to make sure that the team is productive and I don't really care what the tool does for me that much. Like that's not the, that's not kind of what is important and that, that's more like what we try to do with linear is that we want that your team is the, the productive unit. And, and maybe there's some cost to, like, it doesn't support all kinds of crazy processes, but it, it tries to be like more simpler so people actually can use it.
**Brett:** I think obviously one of the benefits of talking to people is to try to understand if your model of the customer in your head and what they want, those two things are aligned, right? The nice thing about what you were building with linear is you were the customer, right? You used all these tools, and so you have this model in your head about likes and dislikes and what good would look like. you know, I think the goal of talking to other people is to understand is that model representative of a broader population, or is it kind of just you? And sort of with that thinking, you, you just mentioned this a little bit, but can you sort out like in what way was your model changed by these chats that you were having before you committed to the opportunity?
**Karri:** You have some kind of intuition about things, and I believe as, as a founder, you should probably start companies that you have some kind of intuition about or some kind of understanding about. I know like people start companies that in fields that they don't really understand or know much about, and I think that's respectable.
But I would never do that because I, I do like the fact that I can imagine myself using this and, and imagining like how it, how it works for other, people in that position. So I think there was definitely like a strong intuition we had. And then what, the customer or user chats or research does is like, we are trying to, yeah, partly like you said, like see if that model we have is shared by other people, but also I think it's like there to hone the intuition or the thinking.
And so I think it can be. It's never been, even in the beginning or later stages, it's never that, like we listen to these users and then we build what they want or what they, they say, we went there. Like, it's more like we have that model in our heads, and then if something doesn't quite fit into it, then we, we try to like, ask them more questions about it.
Like, why, why would they wanna do it this way and not this way? Um, or like, why, just generally why they wanna do it. And then try to understand the why and see if you could, if your solution could still solve their need. It's just like, it's not the solution they, they were looking for. I wouldn't say like there was anything too much that changed from those chats.
maybe there was some like additional ideas. Maybe it just gave us validation. Like I. The ideas we had, or maybe it helped us prioritize the ideas a little bit because if someone said, a lot of people said something and we knew that like, that's okay, that's probably like area we need to like focus on early on because it seems like more, critical.
But I think like how we started line was very much like, this is our vision, how this should work. And we built that and then put it out there and then kind of see if that resonates. And it, it did resonate. And kind of even from the very blog post, we could see like, oh, this is actually resonating.
Then it's like actually getting the people in and trying the product and, and we could see like, it didn't resonate with everyone right in the beginning, but it resonated with certain people. So we knew that we're, we're onto something like, this is our thinking wasn't completely wrong here, but it, it was actually like quite right and maybe like exciting or interesting or something different that people could get excited about.
And that's, that was what was really helpful. because like if you, if you think about this like, domain of project management or issue tracking, it's maybe not the most exciting area in the world. Like, you probably don't wake up in a, in the morning, it's like, ah, I wonder if I could think about project management more or something.
It's, it's like you need to get some kind of trigger to it that like, oh, there's something new, different. This could be like, interesting. So I think it's been kinda like part of the linear to, from the beginning, it's like, we wanna make this feel exciting and not just that, okay, here, here's a new, new tool for you.
**Brett:** When was the exact moment that you said that you committed to going and building linear? And how easy of a decision was it?
**Karri:** so yeah, during 2018 we, we had this like some months of like researching and, and thinking about this and designing something. And I think along pretty quickly there, I think we made some level commitment. Okay. Like next year, like in, in January, 2019 or, or something, we will start working on this like full time.
But then I think there was some like personal things, like the end it started being more like March, 2019, which ended up being the, the actual commitment date. Like we resigned for from our jobs in March. And then basically started like full-time in April, 2019\.
**Brett:** In the time, in, in, in 2018, before you did that, was it like three to five hours a week you were playing around and prototyping and talking? How much of a side exploration was it before you jumped in and started doing it full-time in March? In, in 2019?
**Karri:** I mean, I, I think it probably varied by person and by, by each week. But I wouldn't say it was just like probably some nights and weekends, during the week. So I would, I would probably assume it's like, maybe like, yeah, 10 hours or something, but not like 20 or, or more hours. and then we did, like, I think we did one offsite, kind of like we, we booked like an Airbnb and we went there for a weekend to, to plan some stuff and talk about things.
So that was my bigger time commitment. But basically how it worked during that year is that we met once a week on Wednesdays in this bar nearby. And then, we sat in this like corner table and then brought our computers and then basically talked about like, what did we do this week and what did we learn and what, did we try?
And then we. Maybe make some decisions, like, okay, like next time, like next week, like, we should do this thing, so research this more. Or just like, whatever comes to mind. But it was like basically every, every Wednesday, for yeah, almost a year that we, we met and, talked about this stuff.
**Brett:** So you quit in March and you start working on this. What in its most tangible way, what happened next?
**Karri:** We basically have set the goal. It's like we need to build the, the product so to a state that we can use it. And we we're basically trying to use it every day. And then the basic things are like, Hey, you, you should be able to create an issue. And so, okay, like we need that function.
And it's like, we need to be able to view these things, or we need to able to change this. Like, I need to be able to delete this and, and all those like little things. I, so the first goal was just that we should get this to a state that we could use it basically daily to do our basic workflow.
**Brett:** before you started writing a first line of Cone, did you say, I really want the early users just to be IC developers or product people, or did you punt sort of the specific user you were building for?
**Karri:** Yeah. I mean, I, I would say like, we probably had some writings about this, that like, based on all the research and all the, the talks we had, we, we had defined that we want to build this, this kind of tool. I ideally for these people, so I can keep the focus, like I think for example. These kind of project management tools can be used for consulting companies, but consulting companies with clients operate very differently from like companies that build their own products.
It's like a different model. So we always funded that like, we are not building this for consulting companies. They can use it, but we, we should be like, really honed down on this user that, that they should be really good for the, I think initially for the engineers was the, the user that we were building it for and probably working in this like early stage startup, mainly because, or like a small startup, mainly because we knew that these kind of tools require a lot of breadth.
Like there's just lot of things you have to build, like a lot of those basic functionalities. You need to move things around, you need to edit them, you need to change them. Like there's a lot of, a lot of like small features that you need to build to make this even, I feel like usable product, like you could build a very simple version of something, but in this category it's like just doesn't work because people already have like pretty high standards or high needs for how this kind of tools should work.
So yeah, so we set that ideal customer and then just went to work with, in the end, like we were the first ideal customer. We just have to build it for us. Like let's build something nice for us that actually works. And that, that was the goal. And then the next goal after that was that we should have few of our friends use this, like few, maybe it's five like people or like, or something that would, that was the, or 10, we would set the goal to be 10.
**Brett:** And so how long did it take you to get working for you, where you were pleased with it, and then to get your first five friends using it?
**Karri:** I think about a month we had it in a state that we could use it, like day to day. And then basically, I think months after we had maybe like 10 people or five people using it.
**Brett:** Because so much of the ethos and philosophy of the company is around craftsmanship. Was there some tension, like not wanting to give it to your friends until it was crafted perfectly, or just after a month it felt like it was good enough, we'll invite some friends kind of way of thinking about it?
**Karri:** I think we were happy to give it, I think I would say like, yeah, probably our way of doing like a early version is like probably still pretty good. Like, so it was maybe like limited in the feature set, but it was actually like, well done. And like we, we did this, like all this like pre-work and pre-thinking on a lot of stuff so that the architecture was already almost like kind of built by the time we started.
So we already had this speed kind of solved. And that was one of the reasons, like for the early customers, like early users, that was already like a huge improvement. And if you, if that's the thing you care about, then we solved that. And, and that, that was, it was already better than something else out there.
at least for a certain group of people. So that's why like we were okay, like giving it out. There were also friends that like, looked at it. It's like, I don't, I don't get it. Like I don't really care about the speed or I don't get, like, I don't get it. so I think the friends was more just that we can't convince our friends to use it, it's kind like hard to like maybe get other people to use it. So it was kind of like the next easiest step to do. and then after that, like we, in April, we just, I wrote the blog post about what we're trying to do and why, and tweeted about it.
and we got a lot of people interested and like, it seemed like the messaging was resonating and we just wrote it very clearly, like, to ourselves that this is like with the language and the way I would wanna read this. So I think what worked there was that, was that, that like, it resonated with the people who are, who were feeling the same frustration we were feeling.
And in the first, like after that blog post, we, we also put this website up with this wait list sign up, which, how do, like, basically you enter an email and then after that it sends you, gives you a survey that you also need to fill out. Survey was kind of optional, but actually you wouldn't really get in without filling the survey.
So the survey was kind of like required to like actually get, into the survey. So
**Brett:** Why did you choose to do that? Well, let me go back for one second. You gave it to five or 10 friends and what happened? were they emailing you saying, this is incredible? Did half of them not use it? Like what was going on?
**Karri:** so we shared with some friends, like maybe sometimes it was like live and like sometimes I would demo it or we would demo it live and like get them on it and, and kind of like see, try to see their reactions and yeah, there was different kinds of reactions. Some, some people just didn't get it.
Some people were excited about it, so they wanted to try it. And yeah, I think like there was some, we could see like there was actually one company our friends companies just started using, it's like a 10 person team. They started using it and they were like. Basically they were using a in company, like, like any other tool.
so there was few of those people that it seemed that it's already something that works for them, that gave us the kind of confidence to move forward.
**Brett:** How did figure out that early roadmap after that? Or how did you figure out s omeone who didn't like it, that you didn't care if they liked it, versus if someone didn't like it, you did care and needed to improve the product or evolve the product?
**Karri:** It's probably like a normal thing, like when you create something new, there's always gonna be the people that, not everyone is going to like it, and not everyone is going to like it ever. Especially at the beginning.
Not, might not look like something that people find that interesting. So I don't think you should overindex on the side of, well, why didn't that friend or that person like it, it's more like you index on the other side is like, who are the people that actually do like it and like, why do they like it? so I think what we're probably doing, I don't remember exactly that well, but I think we were talking with those people that, that started using it and were starting using it on the day to day. And then we could email them or try to like talk to them weekly. It's like, Hey, how's it going? Like what are the problems?
And like we also had this like a feedback button built in very early on so you could very easily like email us feedback from the app itself and we would read those email emails and like respond to them. so I think it was, well the roadmaps just came from. What did we need personally and then what did we hear from this early, customers, like for example, I think this sprint store, like what we call cycles was one of the early additions was that, Hey, we, we are running a sprint, like how can we do that here?
And that was something like, oh yeah. I, I think like a lot of companies, even if they don't exactly do Agile, they might still like this concept of some kind of contained time where you work on some something which is a sprint. but yeah, we call them cycles 'cause we think it's more like a continuing kind of activity of, working on like focusing on something and it's not really like you're sprinting towards something. so I think that the other roadmaps just mainly came from the people who, who actually did wanna, and then some, maybe some, sometimes we would track this blockers. Like if someone comes to us, hey, like, I, I would love to use it, but I really can't. Then that wouldn't be something like we put it on the list of like these other po potential blockers and, maybe we address them now.
Maybe we address them later. Like, I think my thinking is like early on the blockers, like I mentioned the SOC 2 for example, like I think it's a usual like easy example to give to any startup founders that like, if you start some kind of business product, eventually someone's gonna come to you ask like, do you have SOC 2?
And your kind of way to address that might be like, yes, we, we will go get it. But like, it doesn't, might actually like, not be a good idea because like that user might not even be the right kind of user and, and like that might be also like an excuse, maybe they don't really even really care about the product.
Like they just like are wondering about it. So like initially, you don't have to like get everyone, like you don't have to like win every deal. You don't have to win every user. You just have to win some that can use the product or, and can be happy about using the product and can use it like more and like maybe like daily or in their normal workflow.
And then you get feedback from them. Like, what do you need is someone to use the product. So you get feedback, not that you get the most amount of users who maybe kind of eventually stop using the product or don't even give you a feedback.
**Brett:** When you started to give it to people before you had a wait list, was it like a third of people it connected with? Half? One out of 10? Because you're getting, I think you're hitting on a very simple but important idea, which is, you know, the classic thing of you're looking for, if you're trying to build the future, you're looking for people that get the future and want the future that you're building, not trying to convince everyone on planet Earth that you're future is correct.
Maybe in 20 years that's the case, but there's also this tension of like, if you went to thousand people and only one of them wanted your future, à la work in your product daily, or whatever heuristic you want to use, that's probably also not the correct thing. Or one in 10,000\. So was it just organically in the 10 or 15 people, it's like there were three or five, there was just enough that you just didn't think about it?
**Karri:** Yeah, I think like what, what you're hitting there is that basically the boiling the ocean problems. Like yeah, as a startup you shouldn't try to like, boil the ocean. You, you should start with a pot of water and try to like boil that first. and then like, just like always try to like increase the pot size.
But, I don't remember the exact numbers. I would say like on the wait list, I remember that eventually we had about like 10,000 emails on it. I would say about like 10% of them converted during that year. but I think like on a weekly basis. So what we did was that each, so we did this, wait list and this survey, and it asked some questions about like why they wanna use this also, like what kind of tools they use currently and and kind of like qualifying questions. So what we did is like, I, just went on the list and like picked like maybe like five or 10 names from that list, and then I emailed them like, Hey, here's your invite to Linear and like, try it out. I think like out of those, I think almost probably like 90% of those people actually at least signed up.
Maybe I would say like, like half or even 30%, like I think probably became users from that like initial group. Like, because I would pick the, the users based on their, how interested they were. Like, so there was open fields, like why do you wanna use it and what your current problems. So reading that answer I could get like, who is the most motivated to try this out?
And then I would pick those most motivated people. we always invited like different amounts of people, I would say like. In the very first weeks, I think the users active user account increased by 10 each week, basically. Um, and, and we tracked like retention and we try to keep tabs of these people.
It's like, why are they leaving or why they're staying? Like, what would they need more? So it was like very much like focused on very, maybe like small group of people. And then eventually, I think like in the first maybe like six months or something, we, we already picked all the like, highly motivated people who the, the product was fit currently.
And so, so some of the like long tail of that wait list was just that we weren't a fit yet. Like we weren't able to like, serve their scale. Maybe they weren't that motivated, but we got into a scale, like in the first year we did this like a private beta with the wait list. when we launched, we had over, I think over a thousand.
Thousand like daily actives so that there was at least some, like a good group of people using it.
**Brett:** At what point did you decide okay, we can go launch with a wait list and start to get people, like what was the indication to do that and how much of it was just intuition and did you think about just publicly launching it, or did it just always make sense? Let's create a wait list.
Let's try to find the right people that have the right set of problems to be our first thousand users, that type of thing?
**Karri:** I don't remember exactly where the wait list came from, but I think it was, the thinking was that, we felt that the product, product like this, and it, eventually, it's very expensive. Like I said, like it there's a lot of features that you might need in, in a certain scale when you use the product, and so we knew that it would never be like a fit to everyone, or most people, right out of the gate.
And so we didn't wanna launch it so that we get a lot of people checking it out and then leaving. And it, it's like, it goes back to what I said earlier about the focus. Like I, I just wanted, like, there's very, like, we have the most motivated users and we can focus on them as much as possible and they can help us, like with the feedback and, and building this thing.
but we are also like, even though like we like quality and, and doing things well, we are also, we are also not type of people that wanna run like a stealth company forever. So I think we pretty quickly saw that. I think we can do this wait list for a while, but I think at least like maybe in a year we should just launch this.
And it doesn't, it doesn't help us that much in it after that. I think there was some like signs definitely that we were supporting. Like retention I think is, to me at least what I look at the most, like are the peoples there. Do the peoples stay. ' cause like if they don't, if no one stays or majority of people don't stay, you have like a problem and like probably you shouldn't launch it 'cause you are just gonna lose those people as well.
obviously there could be something else going on that could be like maybe the people you invited weren't the right kind of people, but, or something else. But I think retention is, to me the number one thing. there's also like wait list has a decay that it's people's just interest doesn't last forever.
So I think I would say like the, the realistic timeframe is probably months or maybe at max six months. I, I think like what we started seeing after a year, people weren't that like interested when we invited them. So, so I think like you have a kind of time, like a decade there that people just don't hold the interest for that long to wait for something.
but we kind of like saw the wait list as a good way to like, keep the cohorts like focused. So we would invite like 10 people. See what happens. Like do they start using it? What kind of feedback they have? Then fix those things that they tell us. Then you might the new cohort, like, is this cohort better? Like now they complain about different things, so let's fix those things and like build those things.
So it gave us a little bit more like a, like a focus is like each week we made a new version basically of the product and then we could get feedback on that version with the new users again. So rather than having this like one moment in time and in the very beginning you get like a thousand users checking it out, but maybe like lot, there's a lot of problems, that they notice now all of those people are kind of have this impression that your tool kind of sucks or it doesn't like work that well.
So we wanted to kind of like control that better, that we can invite the right type of users and then see, see, um, what kind of feedback they have and try then try to fix that.
**Brett:** Did you think about in those early days of product building, are we mainly trying to make our happy users happier or trying to get the next marginal user that it's not quite right to be happy?
**Karri:** I would say like both. So yeah, like I think early days I would call them like enablers and blockers, like the, the different feature sets. And I think it was definitely like a lot of focus on the, on the former that let's try to make the, the users we have extremely happy and build the things that they, they seem to need and like, have good reasons to need.
but then every now and then we would like collect all the blockers. Like what we heard also from people is like, why can't they use it? And then like, especially. Before we launched, like one of the limitations we had really in the system was that we built the whole sign up and login around Google off.
So you, you couldn't use linear if you didn't use the Google, workspace or whatever, G Suite, whatever's called this is. so that was like a limiting factor. We knew that like, if we're gonna launch it, not everyone has that. So we need to build like a basic signup, like a email login. We just didn't never get to it because we didn't think like it was important to try to get those users because we already, there was enough users that had the stack that we supported.
So I think it's more like the way I think about, it's like, in the early days of the startup just focus on like, finding that group of people who are really motivated and kind of like can see the future and build more stuff for them and get, them extremely happy.
But every now, and then, like, look at the list, it's like what are the blockers we're collecting from other people? And could we solve one of those things that then would like open up as in like a new, like a larger user group that then we could get in and they could be happy to. So that's kind of like balancing that, that like, I don't think you should optimize too much of the either side, but you just have to like try to do both.
**Brett:** How did you think about how opinionated you wanted to be versus flexible?
**Karri:** My like design philosophy has always been that you should design something for someone and it's really hard to design something really good for everyone or design everything for everyone. It's just like, it's not even possible I think.
Things about linear. We had from the beginnings, like the goal was to be the best in class tool for this particular purpose. So the purpose of building software in software companies and, and managing that work. So that was the goal. Like, and I think, like to me, trying to be the best in class means that it is actually the best tool and it is the highest quality tool.
But also like, in order you to be actually really good and the workflows and how the app application operates or the, the platform operates in order to be really good or work well for the user, you have to be opinionated. And like, I, think it's more like the Apple way. it's Like they think like, this is the experience you should have.
Like this is the experience you have with the iPhone and or Mac or something. And that's the, that's the experience you get. Like you cannot change all the things that they do. You can change some things, but you cannot change all the things. Like if you want that, if you wanna change all the things like don't use it.
But I think, like to me it's always been that I don't believe that you can build the optimal tool for anything if it's very flexible and endlessly customizable. So from the beginning, like we had this thinking of like, we wanna be opinionated there should be a good way of doing this. We should provide certain standards and, like defaults to people how to operate, which is also important in our domain.
I think that, I think like the more of the companies grow and the organizations grow, the more structure and standardization they need, even if they don't always want it. But I think eventually they need it. And I, think what we saw and heard actually from customers that what happens in other tools is that it becomes very chaotic when one team uses the tool this way and then the other team uses this very different ways like There's not a standard, like what is a project like? It, it's like sometimes it's like this epic and then maybe it's like has some sub epics or something. And sometimes it's just like a list of things. And having this like guard rails or this kind kind of opinions or some kind of defaults, it is actually also value for the organization.
And what it does also for the individual is that they don't have to think about it. I remember like being in a lot of meetings at the Airbnb basically every year with whatever team I was on, was that hey, how do we configure out Jira board? Like how do we do, it's like what are the states, like what are these things?
Like, should we do it this way or that way? And I realized like no one really care. Like I don't like, that wasn't what we wanted to do. Like we just wanted to do the actual work. Not like, think about like how the work is organized. So the idea with linear is like, it's not like.
DIY system like you, you just build it for yourself. And I don't think that's what companies or teams should be doing. It's like a more like a purpose built application around this your teams to build software. And we have the workflows and features that support that.
And yes, it's like maybe not as flexible or something else, but we don't think that the flexibility I is that good in, in some of these situations.
**Brett:** when you started the company and today is it. That at some point in the future, everyone that's building software is using linear or you could care less. You have a point of view on what the product is and how it should work, and for whoever that's good for that's great?
**Karri:** I mean I, my hope would be that like everyone would use it, like at least every software company would use it. And I think like every company, company today out there, almost like has some kind of software aspects to them. So I do think it's, it's almost for every software company one day, I think I'm also like, realistic that I, do think like it's probably not gonna be a fit for everyone, but I, I do wanna see that, that list.
Uh, I would say like the best companies use it, the next generation of companies, the kind of like leaders of the domains or the markets should be using it. So I would like to see it that way. Like, I would be happy about that, but like if there are some more of the legacy companies or some like less that don't, basically don't take software seriously, then like, yeah, maybe that's, that's not the customers we need.
**Brett:** How does sort of this philosophy that you're articulating kind of foot with the idea that I think if you look at most business software companies that are doing more than $500 million in revenue or more than a billion dollars in revenue, and you look at their products, they're not beautiful and elegant and easy to use.
then if you start to ask yourself, why is that? Well, there's certainly sort of a taste component, but I think one of the reasons is that their goal is for everyone to use the thing for everything, right? And so the goal of a company not saying this is the goal of your company or all companies is to basically grow forever, um, what that ultimately means is that you're always trying to expand TAM.
Like one of the misunderstood things about Salesforce, which is a really good example of something that is maybe the opposite of what Linear is in terms of product quality and craft. Is that it is the way it is because you can use it for anything. They use it in hospitals, they use it in retail set.
Right. And this act of ultimately allowing something to be flexible and powerful and customizable is that tension with simplicity and elegance. And you think about that at all? Or like, what's your reaction to sort of that line of thinking?
**Karri:** Yeah, I would, I would say like, first of all, like I think like it's, part of the quality is also that something that you just have to, sometimes I think the company don't even try, and I think that's like You might be able to build like a nice product that is customizable and is very high quality.
It's like, it's not like the quality, like preventing your market like. Or reducing your market TAM but, but to your point about focusing on a certain kind of customers and that customers that maybe align with our vision or the thinking. yeah, it's true that like, maybe, maybe the TAM is not as large as the, as the more of the general purpose tools, but I think like the TAM is like large enough for a company to like us grow.
And then I think what you can do then is like, if you don't wanna grow from a, like to more customers, you can potentially sell more to the existing customers so you can like, go deeper with the current customers. So I think that's like what we've been doing. And basically we started with the issue tracking 'cause we knew, that that's the core need of every software company.
Basically you need to track bugs. So, the engineers also have to do other work, not just like fixing bugs. So it's always morphs into project management as well. But what been doing, especially going downstream of the stack, which is like, well before you actually build anything, you have to actually plan it.
Like you need to like have some kind of ideas which you're gonna plan, like whatcha gonna build. So you need to have some kind of projects, briefs and like you roadmap. So we built that and then like we recently also launched this customer requests, which is basically we think that it could be for us and, and for others, like, it's very powerful to, to capture the feedback from the customers and then like have it in the same system where you actually built the things.
Because when you, bring the context of like, why are we doing this? Like what is the actual problem? Like it could be a small thing, like something we to fix. Or it can be a bigger thing where, we get customers saying they have this kind of like a planning problem and, and then we just capture things around it. And then once we think this, we should prioritize it. We can kind of like take all that feedback and then morph it into to a project. Then like, I think that why we are building this in the same system is that like, ironically, I think like these processes are not linear even though people might wanna think that way.
And that's kind of like why the company is also called Linear. It's like a little bit like, uh, aspirational, like people like linear kind of outcomes or, or processes. but like, what happens is that, is that you start building something, you realize your plan was wrong, like you learned something else.
You have to go back to like update the plans and then maybe for you to update the plans, you actually have to know like, where did this come from? Like, why are we even building this? Like what did the customers say? And go back to that. Like go talk back to those customers who said it. And then you can get, back to the planning, like, how do we like fix this?
And then you can go into the building. I think like there's opportunity. We see that the Linear, what we're trying to do is helping companies to build products and it, doesn't have to be limited to the, the issue tracking or project management. We can do other things too.
**Brett:** So when you think about that first 18 months and you started to really get into strong product, market fit, what are the the things that you figured out or did correctly that are generalizable? So I'm sure there's lots of things that you did that if other people knew, it's like not gonna help them with their companies, but are there, you obviously hit on a bunch of these little story points of what you ended up doing, but if you kind of zoom out a little bit, what are the most generalizable, important things that you did and got right that might be useful to other people that are maybe going and building a new product or a new tool or a new company?
**Karri:** Yeah, I would say like, it's, probably the first thing, like the, like if you start a company then like you probably should have some kind of intuition or some kind of point of view. Like what is, what is wrong out there? Like what is the. What is something better you're gonna do or what is the problem?
And probably like much easier if you have that kind of starting point. I think two, it's like we did that research before we actually started, partly because of practical reasons. Like we didn't, we didn't have time and like we didn't wanna quit our jobs at the moment.
But I think part of it's like sometimes it's good to like create the space of like, let's not build anything right now. Too much. Like, let's not commit into starting this company and going really fast. But let's just take some amount of time to talk to people and like take it like easy a little bit.
Like don't go like hundred percent right on the problem, but more like, oh, there's this problem. Let's try to like shape it a little bit. Let's try to like, Form our thinking around this. So when you actually start building it, or you go out there to talk to investors or something, like, you have some kind of point of view formed and it's not just like you, you're kind of coming up with it as you go.
And I think at least, um, probably depends on the personalities, but I did, find it useful to have that, like some amount of time that you, you reserve in the beginning to just do, let's just like see what the customers say or like potential customers could, could want. I think the third thing is the focus I mentioned that like having maybe from those conversations, maybe from that thinking that you do, you would really kind of like find that clarity of like who could be like a good initial customer that you wanna focus on and like try to put all your efforts into that. I think that. Probably like for a startups though, always the hardest thing is like you don't have a lot of time and you don't have a lot of resources and you don't have a lot of anything.
So the more you can like focus your efforts into one direction and one type of area or something specific, the better outcome you probably will have. I think like what I see often startups happening is like there's a lot of like tweaking like people think and be tweaking that direction, which is I think useful or like often is, necessary.
But I, I think sometimes maybe there's a good time to like pause. It's like, what are we even doing here? It's like, what are we trying to do? And try to find that like clarity. I think like you should also think about the dynamics of the market and like what kind of advantage you can have. So something like, we noticed that brands can be like very impactful, especially if you try to be the best at something. Then I think the part of like being best at something is that people also have to believe that you're the best at something. Like it doesn't, not always enough that objectively, in some measures, you might be the best, but if you don't, people don't believe it, then it's like kind of pointless.
so I, I saw some companies like Slack for example. I feel like they always had like a good, like a brand from the beginning and it, it's kind of engaged people and made, it much more stronger that eventually they became this like default tool for certain type of companies or basically for everyone.
Like when it came to chatting or, or company, communications. so I would like the, brand is not, I think often people misunderstood the brand, brand thinking, branding is like the logo and the
**Brett:** I. wanted you to talk about What is brand?
**Karri:** The brand to me is, is a little bit more about the what do you stand for? Like what is your take or what is your, almost like the manifesto or what is your worldview and what do you hold dear?
What do you care about? And then you just try to like operate based on those like principles or those values or that thinking and then always try to like, talk about it or try to like put your work in that context. So, why I think it's like important is like that you, you from the beginning have very, staple narrative.
Like something that people can easily understand, oh, this company's doing this because of these reasons. even if they can article it exactly the same way you can, but you feel like finding like the few things, that resonate, then you just keep like hitting those same, same things.
what we found that like in this market, the brands are kind of non-existent or they're bad, or they're negative. So if you think about project management tools, there's anything, and no one is like that exciting. Like it's even hard to say like, what do this company stand for? Like what are, what are they about?
So we wanted to make clear, it's like we are about quality, we're about this craft, and like we're about the speed. And like, there's a few of these things that we always like remind people or we talk about it often in different ways. And that's kinda like what is building a brand is about, is that you, find some kind of message and you basically like keep repeating it then until like everyone has some kind of idea of it.
so what I was kind of going with it was that you should look at the market, like what is currently underserved there. Like what is, is there like opportunity to do something differently? So I think like for startups, often one of the problems is like, Have someone to pay attention to you and be excited about you.
So if you are like everyone else, then no one is probably, or you are worst version of, or a simpler version of something. It's, it's probably not that interesting. So you have to find some kind of angle that maybe you're just weird, maybe you are doing things look differently and like that creates that attention, and interest that people have.
so depending on your market, that might be different. Like if all the players are very weird, then maybe you should be like very non weird and like if the all the players are, kind of rigid or, or something, maybe you should be very freeform or flexible or something. And so, so I think like you, I find that startups sometimes or founders make the mistake of trying to emulate the other companies and not play into their own strengths or their own, like where they're coming from.
The context they're in. So you shouldn't probably emulate, you should almost do the opposite what all the other players in your domain are doing. And maybe you can take inspiration from some other companies in other domains and do something like similar there. It's like, are you the apple of, of this industry or are you the Amazon of this industry or are you the, I don't know, some other company that has some like a clear culture that like, yeah.
And some people use that, like they wanna be a Costco of this. and it's more just like, which cultural track you choose, kind of like what is your, like if you play RPGs, then it's like almost like which type of character you pick. and that's like the company that you're,
like building and the brand you're building.
**Brett:** What do you think the impact of being Finnish is on the company ?
**Karri:** I like to say to the candidates that we have all this experience working in the Silicon Valley companies and, and, uh, we do a lot of stuff like they do, and that, that's kind of like the model we follow, but there's also stuff that we do differently and, that's maybe like the, some of the finish or European roots.
And I think there is, I think I would say that from, from US or or Silicon Valley. I think that, I feel like there's like this like obsession on scale and speed. Those are always like the two things that everyone cares about or talks about, and I think. for us, it's more like the Finnish-ness maybe comes in that being like a little more measured on those aspects that maybe speed is not always the most important thing and maybe scale is not always the most important thing.
Maybe especially like when it comes to team, like we don't actually think like it's, it's a good thing to have like a massive team or scale the team very fast. We think it's actually like a bad thing. Like, and, and like maybe a lot of people just don't agree with that sentiment, but we think it's, think it that way.
so I think there's that little bit of, uh, I don't know. I feel like Finnish culture is a little more calmer. there's like a little less of the extremes. Uh, it's a little more balanced in a way. So I think that's probably like what we're trying to do. And actually I think it's works well for our domain because in, in some ways we are like a critical component of the customer's operations and I don't think we should be playing fast and lose there. I think you lose your reputation very quickly if you, if you start breaking people's stuff, you lose their data or like you do something, something bad.
I think again, like maybe it depends a little bit. Domains like what, like today, like ai, I think it's that speed is probably important there because the, the industry is moving fast, but our industry, it's like, it's pretty stagnant in some ways. So what we are trying to like optimize for is the, like, how do we remain and, and can be the best player and, and the highest quality player and try to win with that.
instead of like, try to be the, the fastest or, or like, something else.
**Brett:** thing I was curious on this exact line to, to hear your thinking, just sort of as you said, there's a lot of things that you've chosen to do differently, whether it be the way that you've capitalized the company, how small the company is, this sort of craft orientation, you know, we could talk about some of the other things. And then there's other things where I'm sure you said we're, we're actually not gonna go to first principles. Generally companies are run this way. Generally companies have a website that you go to that tells you about the product, you know, whatever it might be. do you think much about like, where do you want to invent or where do you want find, go back to first principles versus like, when are you willing to adopt best practices as a company?
**Karri:** I think the general advice on this that you should be, you probably should be not innovating things that are not your core and or meaningful to your core, whatever you're doing. And so the things like might be HR practices or some, some of these other things, but, the way I think about it more as, as more like from the principles that what is your principle?
So I think for us it it's, the quality is, is one of the number one principles. So then everything kind of like follows from that. It's like, why to be profitable? Well, partly because we can, but also like we can get this stability or, freedom to do things in a high quality way. I think like what, what often happens to startups or any companies is like the quality goes down because they get pressured on some, some something else.
They pressured on the we need to ship this or we need to get, get these metrics up and. And then the quality goes down because they're making that trade off. So, so in some ways that being profitable, for example, serves that purpose of, we think we can win this market being quality first.
And, but like we have to like, create the environment. We can actually do it. It's also goes direct recruiting, like how do we do it the type of people we are trying to find. It also goes into the, how we structure the organization. So in some ways, like it does affect a lot of things, but the specifics of like, well, how do we decide the compounds or how do we, do some like contracts or some, some operations.
I think like that's not like good finances or legal stuff. Like I, I always been like avoiding trying to innovate, innovate on the legal side or when you do fundraising or something coming up with like crazy setups. Um, but more like, okay, like this is like. Favorable for the company or for, for the, for us.
and that like, it's, it's quite close to the standard, what you see in, in the market. So try to be not to innovate on those things that can potentially cause problems down the line. but I think like I, I more do that, division between the, like what is, what is actually important for us to do differently and what's maybe not.
but even like recently I've been thinking a lot about the go to market and I think that domain is very, this best practices and playbook driven, which I actually think that you also could have an advantage there to do things differently. And like one of the things we not surprisingly try to do is we try to provide like a quality experience even in the sales process.
And what quality experiences is The salesperson is knowledgeable about the product and can help the customers. It's not that hard or it's not that complicated, but a lot of companies don't do that. They, they don't think it's important. They just think that the rep needs to close the sale and nothing else matters.
But we think it does matter, especially in this market. And, and we think it matters because of retention purposes also, like it sets the tone for the customer and like how they feel about the whole experience. So we think it's important and we, we try to do it a little bit differently. And I think there would be other, other areas we're trying to figure out like what we could do differently.
**Brett:** Have you had a point of view on the way that you were doing something or running the company that you changed your mind on? Or does that often happen as you sort of grow and scale? Like there, there's often this, this tension of like, what got us here might not get us there. And I think in, in startups, the thing that's unique is that you're growing, right, and companies grow at different rates.
but I think it's easy to have a set of things that you believed in when you were seven people, and maybe it's 70 people, there, there are things that you should change because the company worked because of, or in spite of those things that a certain period of time. And then there's obviously the things that, that I think some of the things you're getting at, which are, have to be sewn into the fabric of the company forever. And because you've chosen to build the company in a very specific way, oftentimes deviating from what Silicon Valley companies would do. I wondered, as you've grown the company and you're call it six years in, are there things that you were doing in a different way that you said, oh, we're just gonna do it this way, or are most of the things pretty well solidified?
**Karri:** I would say that we are, we have this like principles when, but we are also pragmatic that we don't get overly dogmatic on that this is the only way you can do things and this is this, we, we can't think about anything else. So I think we are always open to thinking about things. is this still working?
And especially, yeah, often what happens is something works now, but or like worked in a smaller scale, but even like a slightly bigger scale. We do need to change something. But I wouldn't say like there is that many things that like, drastically has changed. I think there's things, for example, the sales process initially where like the investors were saying that, Hey, you probably need some, like, sales people.
And we said no. And it's not like who wants to talk to salespeople? But then at some point you start getting these customers that do wanna talk to salespeople and then like, oh, like there's actually a reason for this to exist. And then as you go more up market, you realize, oh, this, this actually gets more complicated.
Companies can't just go and buy something. They actually have to like talk about it a lot before they do it. So that's like where, I wasn't like dramatically against sale. I just didn't see the need. And then once I see, saw the need, I could say like, okay, like we can do it, but we should do it this way.
Like we should, keep, keep the quality high and like try to like, make sure that the experience is secured for the customers. I think there's some areas like we talked about like being ated before, and I think there is something, I, I talked a lot of company leaders in larger companies and try to understand their planning processes and, and found out that everyone does it differently and no one is quite happy with it, but they also have a certain way of doing it.
And what, it made me realize that I think the higher levels we go try to like support the, the processes or the, or the different things the companies are doing. We actually might have to have more flexibility there because we are not in a position to tell, go tell the, the CEOs or the boards of the, these companies to like, Hey, you should organize your company differently or you should set up this, your goals a little bit differently.
we can influence them in some ways, but I don't think we're in a position to tell people what to do on that front. So again, I'm kind of more pragmatic on it that I do think like we could still be more opinionated on the lower levels where there's more of this volume and need for structure because there's just more people and more things happening and the more flexibility you introduce, it multiplies a lot more.
But once you get to the very highest level, you might not have that many things in there and you might not have that many people there that even look at those things. So I think the flexibility can be greater, higher you go into the stack and we can then make the app fit better for the company as a whole or for the leadership.
But then the day to day can be much more opinionated or structured so that, majority of people don't have to think about this stuff and they could still like use the product and don't have to design their own workflows.
**Brett:** I wanted to wrap up by having you talk a little bit about sort of the role of a founder and CEO who came up through design, and maybe it felt like 10 years ago there was this movement towards more founders and CEOs that came up through design. Obviously you have someone like Brian Chesky who's been immensely successful, but it has tended to under index when you look at people building great companies like Linear.
Um, I think it's mainly more product and or mostly dominated by engineering oriented founders, as opposed to design oriented founders. And do you have any reflections or maybe thoughts on that?
**Karri:** Yeah, I've definitely thought about it and talked about it with people and I wouldn't say like I have the clear answer to it. I actually. Asked this question on X like some weeks ago, and I got a lot of different comments on it, but I couldn't say that there is a very specific reason for it. The couple of observations I've done is like, one is that I think engineers might often have this mindset or way of doing things, which is that they're building something and then they start thinking like, oh, maybe I could build this thing differently.
Or when they're working on some kind of project or like building some kind of feature, they might start thinking like, oh, it would be really great if we had this new infrastructure or this new system or something that is, it's kind of like irrelevant to the problem they're actually solving, but they have this like additional side thoughts and then they might go home and then like actually build it and then they realize like, oh, actually this is like a pretty good idea and this actually works.
But what happened now is that you actually, they already built it so that they have this like functional prototype that someone can use and then maybe they can show it to their friends and they. The friends are interested in it, then they maybe even wanna use it. So there's a little more like clear, like quicker bath to some kind of validation, I would say versus like designers, you, you might have this idea, something could be better, but so you design it, but you still just have designs so you don't actually have the product that someone can use or you can even yourself can use.
you are a little bit further getting to the front of the customer. And so it doesn't happen accidentally as much. Maybe there's also, I find like in my career, working in design, that for some reason designers can be quite focused on what is front of them, not, not thinking beyond that or is going around them.
So they're just focused on like making their designs and then they listen to the feedback and they improve it. But for me, my interest has always been, whenever I join some company, I always, I'm interested to understand like, how does the business work? Like why does this company exist? Like what are they doing? Who are they selling?
What people are buying, why are they buying it? What is happening in the market? Like, why is this company successful? I just want to understand the context I'm operating in. So when I'm actually working on the designs. And then maybe I, I might even wanna understand the context of the company itself. Like we have this kind of personalities here.
They have this kind of agendas. Generally they, they have this kind of role, they're pushing this kind of things. So I'm trying to understand the external and internal context that I'm operating in. actually then like when I'm designing something, I can try to like make it more aligned with that context of, I can speak to it like, why is this a good idea for the business or why this is a good idea for some, some specific person or role or something. So I think like what happened to me then is like, when you start thinking that way is you start seeing that there's actually opportunities to do different things differently.
Or there's, there's actually, you could solve problems that people have. And like what I noticed in working in this companies was that the processes weren't Optimal. Like could see where the quality fell down and where the, the process fell down because there wasn't, it wasn't like structured or there wasn't some something in place or it was too freeform or something.
So I could start thinking about this problem, so maybe I could solve this. Like maybe I could think about the incentives of these people have, like in this company, like why? I think like why quality doesn't happen in most companies. It's like, it's just because it's not incentivized. No one ever says you should do it.
It's almost that no, we, we just want you to complete this task. We don't actually care how do you complete it too much. We just wanna complete it now. so you incentivize the, the speed, but you don't in incentivize the quality. so I think that there's maybe that a lot of designers are too focused on their like a little bit too narrow, like looking at things or narrow minded and not maybe interested enough like what happens, like around them or like around there, or they out there more just looking at the design type of things.
But yeah, I, I wish there would be more design founders.
**Brett:** Are there any interventions that you think would, you know, if you wanted to 10 x the successful founders who came up through design? Or a designer that's listening to this conversation, and they might wanna start a company, they should consider doing this, this, or this?
**Karri:** I would say just like anyone individual listening to this or, thinking about this, that like, yeah, you shouldn't think your job is a designer. Maybe like it, it is your job, but like companies don't necessarily care like who, what your job title is.
They take care of what you do. So I think beneficial, even if you don't become a founder to think about like the broader context of what is happening. and so it might be just like paying more attention to companies. Like what is, what is happening? Like why are they making these decisions? And, thinking about like, are there ways that these, things could be better.
Like sometimes I would actually propose like changes in the, in the ways the projects were run or the processes were run. Because I just, I saw that there was problem and no one was addressing it. It wasn't really my job to do it I wasn't there to do that. I was there to design, but I would still like propose those changes and they could like, take it or leave it.
I don't have to force it on anyone, so I could just like point it out. So I think it's thinking that your place in this world that it's, it's something greater than just what your job title is and you can, you can pay attention to these things. I think there's probably what I said before about that as a designer, you are not, usually, some people are, but often you are not able to like build a thing you, you design.
So luckily you don't have to, like I, have two technical co-founders and they can do that. And so I have to just bring in something to the table and they can bring, bring their own skillset to the table. So I think it's always good to look for people that you like working with and who are very good at what they do and then try to see if you can start thinking about problems with them and try to see something that you could be interested working or both you would be interested working with.
And, think it's like very. Each individual probably has different reasons for this, and I think something I've been talking with some people, if, if we should make more of these examples and talk about this more and maybe it'll inspire more people. I think sometimes examples are just like a good thing and, and can inspire people more.
So I think that's definitely like one thing I can try to do or that other people can try and do as well.
**Brett:** So just to wrap up, I wanted to ask you what we ask everyone, which is in this case, in the topic of company building and. You Know, driving a company into product market fit, is there somebody who's had a real outsized impact on the way that you think about any of these things, where there's like a lot of residual value in the way that you think about building companies and products? and like, what's that person and the thing that they've imparted on you that's been so useful?
**Karri:** I would say the YC and, and probably like Paul Graham, where I think a lot of this stuff came from has been like probably the most influential thing. I still have the poster, like I think behind me, can't really see it, but it's just like, make, make something people want. And I think it's as simple as wise and there's a lot of other things.
Like I think that what YC does well is simplifying the startup problem, that a lot of this stuff doesn't really matter. You can read all kinds of books and like all kinds of, I don't know, look at all kinds of podcasts and like look at, look all kinds of materials. I think it's actually good to like read that stuff, but in the end, like what really matters in your company is like, do you have someone using the product?
Do you have customers for it? Are they using it? Are they paying for it? Like, did you actually make something that people want? then basically focusing all your efforts on that. And until you have that and until you have some kind of traction or scale, you don't have to think about anything else.
That's the only thing you can think about. so I think that, for me, has been the the the most impactful.
**Brett:** Thanks for spending so much time in this conversation, I thought it was awesome. I really appreciate it.
**Karri:** Yeah. Thanks. Thanks for having me as well. It was fun, to chat about these things.
### Rent-an-exec: Should you hire a fractional leader?
URL: https://review.firstround.com/rent-an-exec-should-you-hire-a-fractional-leader/
Last updated: 2025-07-14T23:41:43.000Z
A fractional COO explains
_This post is for subscribers only._
### Should You “Rent” an Exec for Your Startup? A Fractional COO Weighs In
URL: https://review.firstround.com/fractional-exec-hiring-guide/
Last updated: 2025-07-14T23:24:20.000Z
Everyone tells you that hiring execs is some of the most consequential work you’ll do as an early-stage founder. And yet it’s frustratingly hard to find the time to do it well.
This might sound familiar: You desperately need a head of ops, but you have few spare hours in the day to find one. Even if you could carve out the time, you’d feel ill-equipped to assess candidates, and the hiring process would probably drag on for months. Then, of course, there’s the paralyzing fear of dropping a bad-fit leader into your single-digit team. You could promote a star player into the role, but you’d need to sink a ton of time and resources into training them.
But [building or buying a new exec](https://review.firstround.com/podcast/a-deep-dive-with-eeke-de-milliano/) aren’t the only options. There’s a less risky alternative: renting.
After a decade of standing up new business units and corporate functions at **PayPal** as a strategy and BizOps leader, [**Amanda Schwartz Ramirez**](https://www.linkedin.com/in/amandamschwartz?ref=review.firstround.com) is now an exec “for rent” as a fractional COO and advisor. She helps founders zoom past a months-long search, skip the “90-day listening tour” and battle-test open leadership seats. As an “internal advisor,” she can help fill a founding team’s immediate needs — while also helping them prepare for a full-time search.
Schwartz Ramirez (who previously stopped by The Review to share her [ops wisdom](https://review.firstround.com/the-silent-killer-of-your-operating-practice-fear/)) is part of a wave of seasoned operators shifting into part-time and advisory work. Driving this boom of fractional executive talent, in her view, is a mixture of scar tissue from the pandemic and a desire for more ownership over their employment. “There’s a growing movement of mid-career, senior execs who want the freedom to work from anywhere, for anyone, on things they care about and on their own terms,” she says.
That was true in her case. “I started down this road a few years ago, after a founder friend pushed me to consider going fractional,” she says. With a stint at a hypergrowth startup and a decade-plus of experience building businesses in emerging industries under her belt, Schwartz Ramirez had to decide between going all in on a single company or staying broad in one domain and building a portfolio. She chose the latter, and [Garden Labs](http://gardenlabs.xyz/?ref=review.firstround.com), her fractional and advisory practice for early-stage startups, was born (she also teaches a [Maven course](https://maven.com/the-greenhouse-by-garden-labs/transition-to-advisor?ref=review.firstround.com) for execs looking to make the same transition).
You’ve likely seen this legion of fractional CMOs, CTOs, CFOs — leaders in just about every function — pop up on LinkedIn. But on the startup side, this new crop of free-agent execs has created some confusion around what “fractional” really means.
In this exclusive interview, Schwartz Ramirez answers the FAQs she regularly fields from early-stage founders and their teams about working with fractional execs. She lays out how this type of leader fits into the [product-market fit process](https://www.firstround.com/levels?ref=review.firstround.com) and which functions they can slot into to drive the most impact at each level (spoiler: they won’t tell you what product to build, but they can offer the horsepower and expertise to help you climb over obstacles and move through the levels of PMF *faster*). She also shares pointers for finding and vetting the right fractional support.
Whether you’re actively hunting for a fractional leader or weighing alternatives to a full-time hire, this guide has you covered.
## Common reasons for bringing on fractional executives
So how is a fractional exec different from a consultant or advisor? Schwartz Ramirez offers a simple definition of her own work to better paint the picture for founders: A fractional exec is a part-time leader, or an internal, hands-on advisor (or to extend the housing metaphor, a leader with a short-term lease).
She also advises startups, which has a typical hands-off dynamic. Founders will ping her for advice, and they’ll still make the call or execute the task themselves. But she finds that the startups she advises often reach a point where they need someone more experienced to actually *do* the work, whether that’s building the financial model, running [the planning process](https://review.firstround.com/annual-planning-sucks-a-cpo-cro-cfo-and-coo-share-advice-on-how-to-make-it-better/) or hiring the VP of Eng.
“I found my way into fractional work as an advisor. I’d be helping a founder with COO hiring, or digging in with a crypto startup on fintech partnerships. After some time they’d turn to me and ask, ‘Could you just do it?’” she says. “A fractional leader has the expertise of a senior exec, but lends it on a part-time basis. They bring with them the guidance and wisdom of an advisor, but also the horsepower and management muscle to execute. And unlike an outside consultant, they embed deeply within the team to move things forward.**”**
Across her tours of duty, her work has included:
- Helping a pre-PMF fintech startup navigate payment processing partnerships
- Standing up an initial HR function at a Series B startup
- Helping a growth-stage startup thoughtfully build out their management team (with both full-time and fractional leaders)
- Providing in-context, hands-on guidance to a recently promoted COO
“All fractional leaders bring a mix of functional, industry and stage-specific expertise,” Schwartz Ramirez says. “As a founder, your job is to figure out what unique mix you need right now.”
These are three of the most common signals that tell Schwartz Ramirez that a startup could benefit from the steady hand of a fractional exec, versus just an advisor or a consultant:
1. **You’re preparing for or navigating an inflection point or milestone**. There might be extra demands on your business from market pull, a regulatory push or an unexpected leadership exit. You could benefit from some internal leadership muscle, fast, without long-term strings attached.
2. **Exec roles have sat open for awhile**. Maybe you’re not on the same page internally about what you need for these roles, or the talent pool is slim pickings. You can learn more from a fractional leader about what you’ll eventually need out of a full-time hire while relieving immediate friction.
3. **You feel ongoing pain in a particular function**. You may not be ready to hire a full-time exec, but you know you could benefit from some new thinking and best practices.
**How fractional execs compare to freelancers, contractors, consultants and advisors*
She sums up the potential upside of going the fractional route like this: **Fractional execs can jump in and drive impact on a tight timeline — without the pressure (and cost) of long-term commitment**.
Here are a few use cases she sees most often for startups that bring on a fractional exec:
- **Bring in an expert you couldn’t afford full-time.** Maybe it’s the ex-CRO with the exact background you’re looking for, or a CFO who tends to work with companies more flush with later-stage funding — you can “rent” senior talent that you otherwise may not be able to hire full-time, for a fraction of their time and cost.
- **Add management muscle.** Bring in someone who’s done their reps with the gnarlier parts of company-building: leading a team through a rough patch, giving tough feedback, hiring and firing.
- **Coach an A-player.** A seasoned fractional exec can mentor a high-performer toward or following a stretch promotion.
- **Kick the tires on new functions.** Figure out who and what you’ll need to seed a new function or team before making the mistake of over- or under-investing.
> Fractional execs give startups an opportunity to borrow some big guns to get you to your next horizon.
### Tripwires of opening up a full-time seat or white-knuckling internally
Say you’ve been missing sales targets and struggling to fortify your pipeline — it’s [just the founders](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/) and a handful of junior account executives. So you opened up a search for a full-time head of sales, but so far, no dice. Should you trudge on with your search, give your star account executive a shot at leading the team or pause and look for fractional help?
“As an advisor, I regularly help founders weigh their options. Fractional is one route, but there are others,” says Schwartz Ramirez.
Before going with a fractional hire, she recommends thoroughly assessing your alternatives, which are typically:
- Promote someone on the existing team into the role
- Find and onboard a new full-time exec hire
- Keep tacking the scope on to new team members and hope it sticks (as Schwartz Ramirez calls it, “white-knuckling it” as a team)
Thorns can crop up on many of these paths. Shifting an existing teammate into the open exec seat is a gamble. That person succeeding in the expanded role is the best-case scenario, but you’re betting on whether they have the resources and capability to grow into that role, while covering their current responsibilities — and without burning out.
“If you load up somebody inside of the business who doesn't have outside expertise, you just hope that they learn it fast,” she says. “It's a bet on the existing team, which likely requires reprioritization of efforts underway and some degree of support. I’ve seen this work well when a high degree of internal knowledge is required, but sometimes, you need industry expertise and networks, and those take time to build.”
Finding the right full-time person to fill the seat is another type of time-consuming bet. This person needs to complement your company’s needs, and as an early-stage startup, those change often. They need to mesh well with your culture — and set the tone for the team as it grows, but this isn’t always obvious upfront. And they need to have the right skills and pedigree, but it takes careful discretion to determine what kind of background makes sense. At the center of this Venn diagram is the “slam dunk hire,” as Schwartz Ramirez puts it, which is both hard to find and likely in short supply.
**A Venn diagram of executive hiring*
“I see this often with HR, finance and even product and engineering. Even if you have enough conviction around a need for functional leadership, the profile is still unclear,” she says.
Winding up with a costly mishire has real ramifications. “Once you lock in a full-time exec, there are incentives at play to keep them around for at least a year,” she says. "This lock-in impacts not just your small team’s velocity, but its morale as well — so tread carefully.”
> Finding the perfect executive is like trying to throw darts at a moving dartboard and hit a bullseye. A fractional leader can help you understand what you need while you're figuring out what it is you're building.
Your budget will also likely inform the route you choose. “Sometimes, outsourcing is the most effective way to staff a problem, and once you reach your next company milestone, you internalize the function. In this case, slotting in a fractional exec could be a way to ensure strong oversight and connectivity without breaking the bank,” she says.
**How to think about open leadership seats with budget constraints*
## Where fractional executives fit into the product-market fit process
Don’t rush to assemble a Frankenstein-like [org chart](https://review.firstround.com/make-an-org-chart-you-want-to-ship-advice-from-linear-on-how-heirloom-tomatoes-should-inspire-team-design/) of fractional talent for an early-stage startup. Schwartz Ramirez offers a word of warning for founders in the earliest rungs of the PMF ladder: “**I don't think that fractional is the answer for every function, especially as you build out the core product, design and engineering engine**,” she says. “The question you should be asking is: Are there any industry or functional gaps that we can close to help us move faster?”
She advises starting with the areas of the business where you’re feeling the most friction or have a lack of experience or intuition. Fractional leaders can layer into your PMF process to help you avoid detours and take a straighter path.
She shares an example of how she supported a startup while they hunted for PMF. “I dropped in as a fractional head of business development, and I helped the founding team clarify their value proposition and pitch for several customer groups and then go out and test each. This was all before they had a product,” she says. “So while I was an input in the PMF process, I wasn’t driving it.”
To steer clear of diluting the core [product discovery process](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/), she recommends asking these questions upfront before hiring a fractional exec:
- Are you clear on why this person is here, and what perspective you’re hoping they will bring that informs your PMF process?
- Are there specific bottlenecks that you’re looking for an experienced leader to clear? Specific types of functional or industry expertise you’re lacking?
- Can you establish a part-time working relationship that ensures your fractional leader gets the context they need without falling out of sync every 48 hours?
Below, she breaks down the role of a fractional leader throughout each [level of PMF](https://www.firstround.com/levels?ref=review.firstround.com) and which areas of the business make the most sense for them to tap into.
### Nascent PMF: Accelerate toward your thesis
The primary goal of bringing on fractional execs at this stage — likely around pre-seed or seed-stage funding — is to build out functional and industry knowledge where the founding team has gaps. “You can grab a fraction of an industry insider to help you accelerate your learning,” says Schwartz Ramirez.
She sketches out several examples of how a fractional leader can slot into make-or-break functions in this first leg of the PMF journey:
- **Sales:** A fractional CRO with extensive connections in your industry can give the team more at-bats with qualified leads. They can help you test product assumptions to close your next handful of customers.
- **Technology:** A fractional CTO can complement a non-technical founder and manage tech teams (onshore or offshore) and advise on overall architecture and strategy.
- **Product or design:** A fractional CPO or design lead can add rigor to the product discovery process along with customer or industry insight to guide product iteration.
- **Compliance:** A fractional CCO can make sure your initial product clears regulatory hurdles and set up compliance guardrails as you iterate.
“In all of these cases, the founding team still owns the core PMF engine. Fractional folks are there to move things along faster and prevent costly mistakes,” she says.
### Developing PMF: Dial up your efficiency
As you start to tick through some of the classic early PMF milestones, like clearing your [first few million in ARR](https://review.firstround.com/zero-to-5m/) or closing a double-digit number of customers, fractional leaders can jump in to fill new leadership seats that are outside of the founding team’s domain. “Hiring fractional folks at this stage can also help you preserve your budget and invest smartly — rather than over- or under-investing,” Schwartz Ramirez points out.
Here’s where fractional leaders can plant the seeds for new functions:
- **Marketing:** A fractional CMO can help manage external resources, like agencies or freelancers, while connecting sales insights with marketing messaging. They can also help you [crisp up your company’s positioning](https://review.firstround.com/positioning-your-startup-is-vital-heres-how-to-do-it-right/?%5Fgl=1%2A1eig57g%2A%5Fga%2AMjI0OTA2NDgwLjE3MTc1MjQ5ODQ.%2A%5Fga%5F4R19QPD3KP%2AczE3NDczMjExODIkbzQyNyRnMSR0MTc0NzMyMTI2NyRqMCRsMCRoMA..).
- **HR:** A fractional CHRO can put up the scaffolding for the employee lifecycle process and smooth out hiring, onboarding, performance reviews and exits. They can help document culture norms before you hire more people in the future.
- **Finance:** A fractional CFO can help build and tune your financial model and keep an eye on your burn rate as ARR grows.
- **Operations**: A fractional COO can help diagnose functional needs, like marketing and HR, and help you start to build them out in a way that makes sense for your budget and stage.
### Strong PMF: Put out fires as you scale
Once the gears are cranking on your PMF engine, the next challenge becomes scaling sustainably — and stamping out all kinds of new risks. “At this stage, you’re growing quickly and there are fires everywhere. In the frenzy, you know you need leaders now, but you can’t risk a leadership mishire,” says Schwartz Ramirez.
It might feel too risky to commit to a full-time exec in a brand-new function. “While board members and advisors can help you decide what ‘good’ looks like for those new hires, you’re worried about organ rejection,” she says. “Instead, you can drop in a credible fractional exec, relieve initial pain and proceed from there.”
Schwartz Ramirez lays out a few scenarios where fractional execs can help you de-risk your scaling machine:
- **Operations:** As the team grows along with the business, the needs of the day-to-day management of the org might move beyond the founder’s skillset and interest. A fractional COO can lighten up the management load so you can stay focused on the product vision. They can also help you figure out what you want out of new leaders.
- **Engineering:** A technical co-founder might find themselves swamped with new people management duties they don’t feel equipped for. A fractional VP of Eng can introduce [management muscle in your engineering org](https://review.firstround.com/new-engineering-manager-advice/) and build out things like ladders and performance reviews so that you can focus on architecture and strategy.
- **Product or sales for a new market:** You’ve found an [adjacent market](https://review.firstround.com/going-multi-product-11-tactics-for-tackling-your-next-bet/) that you’d like to tackle with your product, but the founding team doesn’t have any experience or contacts in that area, and it’s too soon to tell if you’ll stick with it. A fractional product or sales leader with that specific industry experience can help you suss out if this new bet is worth making.
### Extreme PMF: Build out the corporate side of the house
With a PMF flywheel in place, building your company becomes just as important as building your product. You’ll likely need to stand up new “corporate” functions like business operations sometime soon.
“When it does come time to introduce new corporate functions, you're faced with a choice: Build the team now, or wait,” says Schwartz Ramirez. “I often hear from startups that think they may need a BizOps team — but they’re not sure how early they want to start building it out. So they’ll bring me in, and I’ll help diagnose the need and help the team figure out when and what they’ll need to stand up the function.”
Fractional help at this stage can help you "internalize" new or outside capabilities to get up to speed with new functions. Here’s where fractional leaders can layer in to help you climb toward the next phase of scale:
- **BizOps**: You’d like to tune your operational chops to allow for more aggressive scaling with the next round of funding. You have a longtime ops lead in the business, but you know they could use some mentorship and perspective to grow their BizOps capabilities. A fractional BizOps leader can help nurture this new internal capability and mentor the existing team as they build it.
- **Strategy and insights:** You're not sure how, but you know you'd like to stand up a stronger research and insights capability to help your teams scout new market opportunities. A fractional strategy or insights lead can help your team test this new capability.
- **Communications:** A fractional communications leader can help nurture thought leadership, advocacy and community-building in your market. You'd eventually want this capability to be on your leadership team, but you’re not ready for a full-time hire.
“With a fractional communications leader, for example, you're taking a step toward staffing the function internally, but not going all in yet. It’s a bridge,” says Schwartz Ramirez. “Your teams are getting the added benefit of being able to — and knowing when to — pull this new function or person in, and you're getting high-impact and well-integrated work that would be hard to get from a new outside agency.”
**Amanda Schwartz Ramirez, fractional COO and advisor for early-stage startups*
## How founders can land the right leader and set them up for success
Once you’ve sorted out what fractional support you’re looking for and which problems they’ll solve, these are Schwartz Ramirez’s suggestions for sourcing the best talent, making sure they’re a good fit for your team and clearing a path so they can hit the ground running.
### Tap your network
The fractional talent market works by and large as a referral business. Folks who’ve made the transition into fractional work are generally deep into their careers and have a Rolodex of connections within their field. If you can’t find the right fractional leader in your network, a board member, advisor, fellow founder or investor might be able to connect you with one.
“My fractional work tends to come from referrals from people I’ve worked with before, or people they know,” says Schwartz Ramirez. **Her advice here is to put out a call to folks who have worked with great fractional leaders, or might know people who have.**
If they do have recommendations, be sure to do your due diligence. “[Reference calls](https://review.firstround.com/25-questions-for-reference-calls/) matter. Talk to other folks who they've worked with in this specific capacity to understand what impact they drove in their fractional role. And ask what conditions were established for them to be successful,” she says. “You may end up with clues about what you’ll need to offer in terms of context and collaboration.”
That said, if your network runs dry, Schwartz Ramirez says this [fractional talent marketplace](https://www.fractionaljobs.io/?ref=review.firstround.com) is a good place to get paired with great fractional leaders.
### Skip the interviews and take a test drive
Schwartz Ramirez’ recommendation for the fractional hiring process is that once you’ve found a solid contender, try working together as soon as possible.
“The evaluation process should be much more trial-based than interview-based,” she says. After all, bypassing a lengthy interview process is one of the advantages of hiring a fractional exec.
Her order of operations typically starts with two calls with the founding team. “First, I do a 30-minute call with the founder. It’s very consultative. They’ll tell me what they’re seeing, and we’ll trade notes: ‘Okay, I’ve seen something like that, and here’s where it may head, ’” she says. “If the first call is productive, we’ll do a follow-up call. On this call, the founder might bring on someone else I should be working closely with, like the co-founder who’s overseeing product or an early employee. I’ll play back what I’ve heard, dig in further and then pitch a few goals or outcomes we might iterate toward. If we all agree, we'll go straight into structuring a trial.”
She sets up a work trial just like the full engagement, with a standard independent contractor agreement and the same hourly rate. Some fractional execs charge on an hourly basis, but many bill on a monthly retainer. Because the nature of most fractional contracts is fixed-term, you’ll know how much the engagement will cost upfront. “I'll typically start with something pretty tightly scoped and pretty short-term in nature, and give the founder some examples of the work I can do. And if that works, and everybody's happy, we’ll keep working together,” she says.
Beyond vetting skills and leadership chops, Schwartz Ramirez says good chemistry is critical. The feeling should be mutual, and you can really only test this by working side by side. She shares an example from a fractional friend who learned only during a work trial that she and a founder just didn’t jibe. “The founder told her that he really loved the work she did, but she couldn’t get into a flow state with him or collaborate effectively. And that’s important to know before you start working together for real,” she says.
The accelerated work trial helps establish trust between the founder and the fractional leader from the outset of the engagement. “If there's already good chemistry and a real belief in my expertise before I start, I can hit the ground running and ramp faster, ” she says.
After a work trial, the ramp-up period should be speedy. “Give a fractional exec around two weeks to gather context, and then they should be able to start steering conversations in the right direction and checking off to-dos.”
### Calibrate your expectations
Even though the stakes of bringing on a fractional leader are lower by design, Schwartz Ramirez says that founders must still be extremely intentional about setting appropriate expectations for this person — both your own and your teammates’.
On the fractional exec side, Schwartz Ramirez has seen mismatched expectations play out disastrously. She says a typical anti-pattern for founders is treating fractional folks like full-time exec hires. “Sometimes a founder will pull a fractional exec into every meeting that a full-time exec would sit in on. Before you know it, they’re in all weekly syncs, presenting at all-hands meetings and keeping up in all-company Slack channels,” she says. “Suddenly the fractional exec has no hours left in the week to drive impact — they’re all spent gathering context.”
A seasoned fractional exec will know the right ratio of getting context to doing the work, but a founder needs to recognize the balance as well. It’s the founder’s job to set the tone for how visible a fractional exec will be across a company. “In all fractional engagements, no matter the role or how incredible the fractional leader is, you’re eventually going to bump up against the fact that the person is part-time,” she says. “I’ve been in fractional roles where nobody was ever told that I was part-time, and that led to a whole slew of expectations in my day-to-day that didn’t match what I was brought on to do.”
> A fractional leader is only going to be as successful as the clarity of the goal that they come into.
## Wrapping up: Fractional execs will work themselves out of a job
You’ve found a great fractional exec to work with your team for anywhere from a few months to two years. But if there isn’t a fixed time horizon, how do you know when it’s time to bring on someone full-time?
One common signal, she says, is when your fractional exec spends their time “chasing work.” “If a fractional leader is spending half their time just getting context, and the other half driving impact, you’ve probably put them in a situation where what they’re working on is too dynamic, and you need somebody dedicated full-time,” she says. “If the source of truth evolves faster than what could be put on paper or talked about in a five-minute meeting, it’s time for a full-time person.”
Hitting growth goals — which is good news, of course — also means you’ll likely graduate into needing someone full-time. “When you’re defining a product, going to market and growing a customer base, ultimately what you’re hoping is that the needs of the business outweigh what a founder should be shouldering personally. When that happens, maybe you’re complementing a founder with a fractional leader, and then graduating from fractional to a full-time head of marketing. A strong fractional CMO can help you hire and onboard your full-time CMO,” she says.
Schwartz Ramirez has also experienced the less desirable flip side, where a startup fails to raise the next round or runs up a high burn rate and can’t afford a full-time exec. In these scenarios, a fractional leader can help the team course-correct. “As a fractional COO, I’ve helped a startup restructure back down after scaling too quickly. In this case, the core team absorbed essential responsibilities, we plugged gaps with part-time support, and then I zoomed out and supported the founders as an advisor,” she says.
Ultimately, the best fractional execs will come into a startup with the goal of working themselves out of a job — they’ll solve the problems they were tasked with solving and set the full-time team up to muscle through the next slate of problems themselves.
> The right fractional exec will have the foresight and the maturity to help a startup fill their needs long-term, even if it's not with them.
### Inside Figma's human-centered approach to building AI
URL: https://review.firstround.com/inside-figmas-human-centered-approach-to-building-ai/
Last updated: 2025-07-31T16:42:45.000Z
From determining success metrics to structuring qualitative feedback
_This post is for subscribers only._
### The Art of Evals: How Figma Put People at the Center of Its AI Product
URL: https://review.firstround.com/figma-ai-eval-process/
Last updated: 2025-08-03T07:08:49.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
AI tools are changing the entire process of product-building, where people of all skill levels can turn an idea into something that actually works — something they can see, feel, interact with and iterate on. As [Apple engineering leader Michael Lopp says](https://review.firstround.com/engineering-lessons-apple-palantir-slack/), democratization is a good thing because it makes this capability available to anyone, but it also makes for an extremely crowded market.
What’s that mean for builders who want to create a standout product? Maybe [taste](https://review.firstround.com/stripe-square-linear-product-taste/) matters more than ever. Or maybe it’s speed.
Figma’s newest tool, [Figma Make](https://www.figma.com/make/?ref=review.firstround.com), places human craft and creativity at the center of that product-building process. The company’s new prompt-to-functional-app experience that just [launched at Config](https://www.figma.com/blog/introducing-figma-make/?ref=review.firstround.com) (along with [three other products](https://www.figma.com/blog/config-2025-recap/?ref=review.firstround.com): Sites, Buzz and Draw) further blurs the line between design and production, reducing the technical skills required to actually bring a product to life.
[**David Kossnick**](https://www.linkedin.com/in/davidkossnick/?ref=review.firstround.com), Figma’s Head of Product, AI, didn’t just make humans the focus of the product’s experience; they were also the focus of the product’s development, and specifically, its evaluation process.
Much like using an AI product, building an AI product requires a different approach. Unlike traditional software where there’s a clearer path to see what’s possible, the capabilities of an AI product exist in a foggy middle ground that’s only validated through actual testing.
Here on The Review, we’ve looked at a few of the different ways Figma makes decisions rooted in how real humans use its products. FigJam was born out of [people in the community using Figma as a whiteboarding and brainstorming tool during the pandemic](https://review.firstround.com/lessons-in-product-scaling-and-storytelling-from-figmas-cpo/#mining-for-ideas-and-bringing-new-user-personas-into-the-fold), according to the company’s CPO, [**Yuhki Yamashita**](https://www.linkedin.com/in/yuhki/?ref=review.firstround.com). Figma Slides was a “[bottoms-up project that came to life via a series of internal viral moments](https://review.firstround.com/how-to-make-your-product-idea-go-viral-inside-your-company-lessons-from-figma-slides/),” says its founding PM, [**Mihika Kapoor**](https://www.linkedin.com/in/mihikakapoor/?ref=review.firstround.com).
In this interview, we explore the evaluation process Kossnick and team used to launch Figma Make, one that kept humans at the center of every step — from defining success metrics, to the process for gathering qualitative feedback and then exploring how you can assess this data. If you’re interested in building, testing and validating AI products, this one is for you.
## Developing the infrastructure shared by different AI products
Figma Sites was a massive infrastructure undertaking across the whole company, involving different rendering technologies, Kossnick says. But that’s the groundwork that made it possible to build Figma Make so quickly.
Sites allows you to publish a Figma design as a public website. To do this, Figma had to bridge the gap between design tools and web publishing — developing entirely new systems that could translate design elements into functional web code. Kossnick gives the example of converting a blue rectangle with specific dimensions in a design to HTML and CSS that browsers could render correctly. This was done by deterministic code-gen, not AI code-gen.
But as they were developing Sites, AI code-gen models were rapidly advancing. Then, a designer had an idea: What if, when you’re designing a static website, you could make these components functional with AI?
“That turned into a hackathon project and was extremely compelling,” says Kossnick. “**It drew a ton of internal attention and excitement, people playing with it, showing examples. But it barely worked end-to-end. Failure rate was high. When it did work, it was incredible.**”
This idea led the team to develop the second crucial pre-component of Figma Make — Code Layers in Figma Sites, which added three important capabilities. The first was making code a primitive on Figma’s canvas, allowing users to write code directly inside of Figma. The second was converting designs into code, and specifically React, not just HTML and CSS. And third, it created a chat interface where users could prompt to add coded interactions and behaviors. These innovations tackled some of the most difficult aspects of design-to-code conversion.
Code Layers in Figma
With this technology being tested internally, another hackathon led to the concept of Figma Make. A designer, tinkering on the side, created a standalone prototype of Code Layers as its own surface, where the interface lent itself to users asking AI to build a whole site or app, not just a component on a page. “It worked surprisingly well, a surprising percentage of the time,” Kossnick says.
> We took the technology we’d been developing internally for something else and applied it to another form factor, another use case.
So, it worked (mostly). But was it actually viable as a product?
### Figma’s decision tree to determine AI product viability
Kossnick says developing an AI product is difficult because of its malleability. “It’s easy to look at a product and imagine any part of the surface where AI could fit,” he says. **“So deciding what *not* to do is really important.”**
These are the four different paths for product development he uses to assess if allocating more time and resources into any AI project is worth it:
**Path 1: The technology isn’t ready yet**
“In AI product development, a prototype is becoming the gold standard as a validation mechanism before really starting on projects,” Kossnick says. This is especially true as the cost of prototyping has decreased tremendously.
> Prototypes are the new PRD. We’re at the point now where it almost takes as much time to get to a prototype as it does to write a good PRD.
The first step is figuring out if the technology can actually support your idea, which can now happen very quickly and easily. Will the models be able to do it? Sometimes you have to wait until a new model drops.
“We’ve had projects where we started them, had a false start, and realized it was just too hard to build,” he says.
**Path 2: It’s almost possible (with a lot of custom development)**
This is really a consideration in how much work you’re willing to put into a project and its ability to scale.
“Maybe you can get there with clever prompting techniques, or maybe you end up fine-tuning or building a custom model,” says Kossnick. These projects require a whole different set of inputs to determine their success: the right staffing (e.g. modeling folks), training data sets, and more.
**Path 3: It’s possible, but you need to adjust the product**
The path here is a bit clearer if you’re able to ruthlessly prioritize and narrow scope. Ask yourself: how can I change the product in some way to make it easier for AI?
**Path 4: It works**
This is the happy path, where you’re striking the exact right intersection of technology and product capabilities.
Kossnick says builders need to ask themselves where they’re at in this decision tree. And once you’ve identified a path, speed is important — when prototyping happens fast, so can validation.
> We took some of the earliest prototypes to users and got their feedback. The level of excitement on the vision was extremely high, and interestingly, from a wider set of personas than we anticipated.
### Tips for constructing your AI product team
Each AI product has its own set of goals and constraints, which determine the structure of the team building it. Kossnick shares some of what he learned from staffing Figma Make:
1. **Role blending lets you keep the team small (even if you’re at a big company):** AI tools bleed the stark lines in skillsets between different functions. Designers can code. PMs can prototype. Engineers can design. “A designer wrote the first system prompt for Figma Make,” he says. This has benefits for many reasons but the main one is that it’s easier to keep a team small, enabling you to move quickly.
2. **Almost everyone should be touching code**: AI tooling makes this far more possible than it was years or even months ago. Getting everyone in the code creates a shared understanding around product functionality.
3. **Treat AI products as centralized teams**: Code Layers and Make operated as one large integrated team sharing technologies and infrastructure with two different UX treatments. Builds can happen faster and when issues arise in the tech, fixing them is more streamlined.
4. **Get your target persona involved in the eval process**: It was a conscious decision to have designers and PMs in the eval process because they’d be the ones using the product. Having their taste represented was important. “Garbage in, garbage out,” Kossnick says.
AI tooling is changing how all teams operate, not just engineering, product and design. But on the technical teams actually building AI products, embracing fluidity across roles allows processes to adapt to this new reality, resulting in greater pace and efficiency.
## Figma’s three-step, human-centric eval process
Qualitative feedback is an important part of assessing traditional software, whether it’s user research programs or behavior tracking. Scaling these approaches can work for deterministic software where behavior is mostly predictable once coded. But AI products require a more continuous and widely-scoped approach to qualitative feedback — in large part due to the probabilistic nature of AI outputs and creative subjectivity in determining “good” performance.
Prototyping is so valuable here, especially when it’s increasingly more common, cheaper and expressive. It’s a tool to obtain feedback and sharpen a product quickly. “Continuous prototyping and refining enabled rapid validation,” says Kossnick.
Figma’s process for defining, obtaining and evaluating the product was rooted in what real people expected of it, how they used it and their quality assessment of its outputs. To use that human feedback — whether in the next prototype or the features that’d make it into the final version — Kossnick and his team had to figure out how to scale human taste while also making it actionable.
Prototyping in Figma Make
### 1\. Define the success metrics that actually matter to your persona
Picking goal metrics is absolutely critical. As part of that, it’s important to have good coverage of classes and scenarios you care about (a mockup vs. a prompt, one shot vs. long shot conversion, desktop vs. mobile). “Every slice adds more scenarios to cover, so be rigorous about how many are core and in what order,” Kossnick says.
To determine what good looked and felt like, **Kossnick considered three key elements of usability: the personas, the scenarios in which they’d use the product and which deliverables they expected**.
But depending on your product or feature, these elements might hold vastly different weights. For example, Figma shipped AI text tools inside of Figma Design, and the team did very little custom quality work — instead mostly using the feature out of the box. “It was a case where users have more vanilla expectations,” Kossnick said. “There’s a question of what level of novelty vs. familiarity you’re leaning into, and what the quality bar is for the persona you’re picking to surface.”
For Figma Make, Kossnick used two key evaluation metrics: design score and functionality score, where each would be graded on a scale of 1 - 4:
- **Design score**: this assessed if, visually, the tool did what it was supposed to do. If you gave it a mock, did it create something that looked like the mock? If you gave it a prompt, and asked it to build something, did the thing look good? Would you actually use that thing?
- **Functionality score**: this assessed if the thing you created actually worked. It may not look polished, but specific, expected behaviors needed to be validated.
> An evaluation of success has multiple facets. This is a piece that people often miss in doing evals — deciding what success means for their product.
You’ll notice both of these metrics were subjective and dependent on what the product actually delivered to the user — which means the evaluation process relied upon real product use cases to actually return valuable data.
When choosing your own evaluation metrics, Kossnick recommends thinking about how users will perceive the results of these metrics, and what orthogonal components of that assessment they’ll have. “The most important thing is humans, with taste, doing the evals in a way that’s aligned with what users will expect, on the right axis,” he says.
### 2\. Gather qualitative, human feedback at scale
Toil away in the qualitative metrics all you want, but there’s no substitute for getting your product into the hands of people and seeing what they do with it, even (and especially) at the earliest possible stages.
Figma had four increasingly broadening concentric circles of user feedback as part of their eval process: the internal AI team building the product, the PM and design teams as target personas, the entire company to see what was possible, and an alpha group of customers for final viability assessments.
The first group of 30 people on the AI team received an “unoptimized prototype,” says Kossnick. “And we just saw what they wrote in it.”
At this point, there wasn’t a thumbs up or thumbs down feature in the product. But given the relatively small set of testers, the team could be scrappy. Designers, engineers and PMs on the AI team were asked to give their feedback in Slack — showing their prompt, a link to the thing they built, and the assigned design and functionality scores from 1-4\. “**In one day, we got hundreds of example prompts. We quickly learned there isn’t one quality bar,**” Kossnick says.
Prompting in Figma Make
While designers (quite obviously) cared about look and feel, all personas cared about look and functionality — they wanted to create mini apps that were usable enough. “It was helpful, early in the project, to see that there were different hills to climb in terms of quality. We had to figure out where the center of the onion was,” he says.
To find it, Kossnick and the team broadened the feedback group to the entire PM and design teams — their intended target persona.
This time, instead of using Slack threads, they made a giant FigJam board where they asked users for the same feedback: prompt, result, and scores. The infinite canvas proved great for collaboration and thought starters. “We got 1,000 examples of real things people wanted to build, use cases where the product fell over, places it did great and unexpected areas for each of these,” says Kossnick. “This shaped our features and designs.”
> It was probably the most helpful day of the entire project.
These two groups of users were an onion-peeling exercise for Kossnick and the team. At its center, they identified the problem they wanted to solve for: designers, starting with designs, who wanted to bring these to life as prototypes. “Once we felt like there was a path on quality, we could invest a ton more in the whole product experience, its form factor, longtail features and workflows,” he says.
The next phase of feedback expanded company-wide, where the team hosted “The Great Figma Bakeoff,” which was a much larger version of the FigJam board they used with the PM and design teams. There were 15 in-person sessions across different timezones where people from around the world came together to create things using Make, get questions answered, record prompts and share use cases.
As the broadest group of potential users for Make, this showed the outer possibilities of the product — things Kossnick had no idea people would do. “We were optimizing for designers who’d start with a design and try to turn it into a prototype, but we got such a wider range of interest, engagement and success cases than we expected,” he says. Someone on the people team used an API to connect Figma Make to the company’s HR platform and made a game where you could guess people’s names and faces to get to know your colleagues. Someone on the sales team put together a microsite for an offsite. “My six year old made three video games in Figma Make,” says Kossnick.
Last to share feedback was a group of alpha testers composed of customers and external target personas. By this time, in-product feedback features had been added to the product — creating a more systematic and formalized assessment experience. But it was those internal FigJam feedback sessions that were most helpful, largely because of the speed to understanding what mattered and where to invest in the product further.
**“It’s easy to over-engineer your eval stack, your data set, some part of the quality loop — but it all depends on what users want to use your product for,”** says Kossnick. **“Building conviction on where you want to invest is the key part to get right.”**
### 3\. Figure out how to assess the data you’ve gathered
Kossnick follows one simple rule to make sure evals are working: are we moving in the right direction? “What do you really want to test and what do you want the outcome to be?” he asks. When you’re looking at all the different product hills you can climb, there’s some intuition on determining the right one.
Even though he admits the initial data collection wasn’t the most sophisticated, it was extremely valuable — so he and the team had to figure out the best form factor in order to make it useful at scale.
Still focusing on product quality for a core persona (designers) and use case (designers bringing prototypes to life), Kossnick used four evaluation types:
**Deterministic**
Pretty straightforward, like a pass/fail class: did it do the thing or not?
While the benefit here is scalability, its scope is limited to things that can be judged as binary. For example, on Figma Design, those AI text boxes have a “shorten text” feature. You can very clearly see if the text was shortened. Another example is code generation. Could the AI-generated code actually run? Does it compile?
Kossnick implemented a script to assess these because they’re purely rooted in a yes/no answer.
**Taste and judgement**
Think about the text box example. Maybe the text was shortened — but was the shortened text actually good? This requires humans, and humans at scale, but the considerations are cost and speed.
> There’s a different playbook being developed inside every product team right now about how to scale human taste.
Here’s where Kossnick and his team had to take all the qualitative feedback they were receiving and put it into some sort of structured dataset. Contractors and employees used an internal tool to track quality per different prompts, use cases and configurations throughout testing.
Every night, a team of contractors evaluated different versions of Figma Make — whether that was different system prompts or model choices like Claude vs. OpenAI — and log the results. The golden set of prompts they evaluated was initially built off the seed set from the company’s own dogfooding. When they received new scores back the next morning after each experiment, they could see which prompts progressed and regressed. Over time, they categorized both the scenarios (like, is this prompt supposed to result in an internal tool or a game?) and other modalities (does this start from a mockup or just a prompt?). “We wanted to make sure we had coverage and density for areas where we wanted to rigorously measure improvements,” says Kossnick.
These contractors used a Figma-created brand guide to evaluate the product’s quality, with examples of what made a good or bad form of a feature. “How do I explain to someone — who’s not just me, if I’m working on a bigger team and trying to scale up — what good looks like?” he says. This process is similar to how Google assessed search results using [detailed training documents](https://static.googleusercontent.com/media/guidelines.raterhub.com/en//searchqualityevaluatorguidelines.pdf?ref=review.firstround.com) with hundreds of pages. Of course, your startup probably doesn’t need the Google-style, 100+ page booklet explaining evals to your raters. But if you’re a product at massive scale, and a 2% improvement in quality is a huge impact, you might consider it.
This feedback was used to see overall quality trajectory and resolve which internal experiments, branches and versions to move forward with while testing.
**AI as judge**
“Can you take human judgement and teach AI how to do it?” Kossnick says. “Depending on your task, this is either reasonably doable or not at all possible.”
In some cases, Figma was able to write a system prompt for an AI judge with examples and context for why a feature performed well, providing guidelines — then asking the AI to go and assess a number of its responses. “You’re getting into this meta-loop where you’re grading the graders,” he says. “You can double check its work, see what it’s saying is good or bad, and change the way it’s judging to try and scale up the work your human contractors are able to do.”
“That’s the appeal of some of the AI as judge playbooks you’re seeing come out of the industry,” Kossnick continues “What if you could evaluate every pull request or see every prompt change and how things improved? How tight can you get that loop?”
**Usage analytics**
A/B testing in production is also a form of evaluation. For example, does one model perform better than the other? You can have humans grading results internally as Figma did, but you can also take this framework external — with 50% of users on one model, and 50% on another. “We’re also running A/B tests on quality and features to help iterate faster,” says Kossnick.
## A human-centered problem requires a human-centered solution
Every stage of Figma Make’s ideation, development and testing can be traced back to product experience — people use the product, and thus should play a large role in the evaluation of its quality. Kossnick was intentional about bringing Make’s target users into evals. While having designers and PMs turn concepts into prototypes is indicative of larger product development trends spurred by AI tooling, it also shows the human touch required to make a standout product.
“One of the worst things you can do in the quality loop is hill climb for a long time on something that’s not actually representative,” Kossnick says. “If you’ve been working in isolation and go out to users and their prompts are 30% different than yours, you’ve been optimizing for the wrong thing and need to start over again.”
### How Wes Kao coaches founders to influence, lead and get what they want | Wes Kao (Executive coach, co-founder of Maven)
URL: https://review.firstround.com/podcast/how-wes-kao-coaches-founders-to-communicate-more-effectively/
Last updated: 2026-02-03T17:54:43.000Z
Wes Kao is an executive coach, advisor and instructor, best known for her newsletter on high-impact communication, and for co-founding course platform Maven and the AltMBA with Seth Godin. Across her career, Wes has helped leaders communicate with clarity and conviction, whether it’s rallying a team, pitching investors or influencing stakeholders.
In this episode, Wes and Brett unpack how founders can be more persuasive, why playing to your strengths is critical and how everyone can raise their own standards.
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In today’s episode, we discuss:
- Wes’ “personality-message fit” framework
- Why charisma is misunderstood
- How anyone can improve their communication
- What being told you need to “be more strategic” actually means
- and much more…
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**Referenced:**
- AltMBA: [https://altmba.com/](https://altmba.com/?ref=review.firstround.com)
- Maven: [https://maven.com/](https://maven.com/?ref=review.firstround.com)
- Seth Godin: [https://www.sethgodin.com/](https://www.sethgodin.com/?ref=review.firstround.com)
- Udemy: [https://www.udemy.com/](https://www.udemy.com/?ref=review.firstround.com)
\---
**Where to find Wes:**
- LinkedIn: [https://www.linkedin.com/in/weskao](https://www.linkedin.com/in/weskao?ref=review.firstround.com)
\---
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
\---
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
\---
**Timestamps:**
(1:54) Charisma is misunderstood
(4:44) What underpins authenticity?
(13:53) Clarity in communication
(16:02) Start with your ideal outcome
(22:05) The role of power dynamics
(26:39) Should you work on weaknesses?
(29:02) Effective self-reflection
(32:13) Role-strength fit
(37:39) What do you resent?
(39:17) “Be more strategic”
(45:20) Stack ranking
(51:45) How AltMBA started
(60:04) Defining your craft
Brett: Thanks again for joining us, Wes.
Wes: Yeah, really excited to be here, Brett.
Brett: I wondered have you spent time thinking about charisma in the context of communicating and company building feels like one of those things that's not like fully explored and I, I was curious if you've thought much about it particularly. Because I think you're quite charismatic. I dunno if you identify that way.
Wes: I feel like being charismatic is one of those things that other people can call you, but if you call yourself charismatic, you seem like a little bit of a jerk, but thank you. Like being a
Brett: visionary or something like that.
Wes: Exactly, exactly.
Yes.
Brett: Gross. If you say it about yourself.
Wes: I haven't spent too much time thinking about charisma as a topic, but I, off the top of my head, I think there are so many different ways to be charismatic. You know, you see founders of all types, styles, idiosyncrasies being successful. And so I think the main thought with charisma and leaning into being more charismatic is thinking more about what makes you, you instead of trying to copy someone else and having those tactics fall flat or having it feel inauthentic, leaning more into your own idiosyncrasies.
One of my life mottos, uh, especially in recent years is a little bit silly, but I'm gonna share it with you. It's be the mees me. I saw this, I think like on a Facebook post a couple years ago, someone had posted that their toddler said they wanted to be the mees Me. And I saw that and I was like, I love this.
Yes. Like, you know, we all have read adages, like know thyself, you know, be yourself, et cetera. But there's something about be the mees Me that just feels so pure, so raw. So, you know, I am me. Like how can I lean more into the things that make me, me? And you can kind of unpack it in so many different directions.
But I, I think that charisma kind of comes down to leaning into being more of yourself.
Brett: So how does that manifest itself for you? What have you figured out about yourself, and then how does it translate into all the things that you do and the way in which you behave?
Wes: That is a big question. Um, I'm gonna, I'm gonna scratch at the surface of it here probably. I think in the past, I thought that leaders had to look and act a certain way. Namely, you know, much more serious, much more formal. And I think I'm a pretty professional person, but I don't think I'm the most formal person. And one thing I really liked about Maven and my co-founders at Maven were that we weren't overly obsessed with an air of formality or, you know, being more, more serious for the sake of it being more corporate, for the sake of it, or acting like a bigger company than we really were.
And I really like that. I think it allowed us to be more of ourselves and care about the quality of the ideas that we were sharing. And a big part of our ethos in the company was everyone should speak up and we should be able to back up our ideas no matter who we are. So if you're a co-founder, you need to back up your ideas too.
If you're the most junior person. You need to back up your ideas. And, uh, yeah, I think that that ethos was really pervasive and in the past I would've thought, you know, well, you know, we need to be serious. I need to be more buttoned up. And when I kind of relaxed that rule, realized it wasn't actually a rule that you can inspire people, you can be a leader that people wanna follow without necessarily being super formal.
I think that's, that's one example.
Brett: And so when you kind of think about this topic of authenticity, why do you think that it is so important? Like, what is it about being authentic? I mean, people talk about that all the time, you know, be authentic.
Wes: Yeah. I think that, I'm not a huge fan of the word authentic.
I think that it gets thrown around a lot, and I think that we are sometimes different versions of ourselves in different settings, in different contexts with different people. And so this idea of, you are being authentic or you're not, or there's like one true way to be authentic or one true way that you are, I don't know if I believe that. Um, I think that it can be very helpful as a founder to know what makes you spiky and know your idiosyncrasies, uh, I have a, a concept that I call personality message fit. And it's this idea that, you know, sometimes you'll see a coworker say something, and just think, wow, I, I could never get away with saying that, you know, I used to think that about my co-founder.
He would say certain things and people would love it. And I would just know that if I said something similar, it wouldn't land in the same way and vice versa. So there are things that I could say that if he said would feel off or cringe or, or whatever. And so I think a lot about, about this concept of personality message fit as a way for us as founders to understand our baseline.
What is our baseline style? Where do our heads naturally go? Uh, what's our natural reaction to things? I think it's so important to know your baseline and then if you want to adjust it in, you know, to move a little bit to the right, to move a little bit to left on whatever spectrum you know you wanna be on, you can do that, but knowing your baseline, uh, I think is so important. And I'll give an example. Some people are very low emoting. So I have a client who, if he's happy, you can barely tell if he's upset, you can also barely tell. And the solution for this person is not, you should learn to really emote, like you should be more energetic or you should, you know, show your expression on your face more.
I don't think that we as founders or leaders can change 180, like even if we want it to. So it's better to know here is how I am, and then this is basically a constraint. So if you are someone who's low emoting, um, instead of trying to be, you know, high emoting, you should basically take that into account and turn up the enthusiasm in your words, in the actual content of your words, instead of relying on your facial expressions or tone of voice to do heavy lifting because you, you're basically like a zero on that criteria, which means that if you want people to know how you feel, you need to amp it up on other levers.
So that's an example of understanding yourself and understanding if the outcome I want is for people to better understand and read me, then knowing the levers that you actually have to pull can be really useful.
Brett: So how does somebody figure out what their baseline is?
Wes: Like many things, I think it's using your powers of observation and honing your sense of self-awareness.
It's not a shortcut, you know, silver bullet type of answer. And your mileage may vary because some people are more perceptive. They are better at noticing the reactions of others and whether, Hey, I just said this and I noticed you reacted in that way. Was that the reaction I was hoping for? If I say this or if I approach it this way, am I gonna get the reaction I'm looking for more?
You know, so I really take an experimental, iterative approach and it's very much first principles based. Am I getting more of the reaction I wanna get, basically is the main question. And then I'm gonna try a bunch of different things along the way to see, does that get me closer to that? Does that feel natural for me or does that feel off?
Does it feel off because it's a new behavior and a new habit? Or does it feel off because there's something that I don't really believe about what I'm saying. So I think you have to get reps basically. You know, this is not something where you can pontificate in your own mind endlessly and then come to a breakthrough.
I think you need to get out there, you need to be willing to try and then to be honest about the reaction that you are getting and be honest about what you could do to get closer to getting the reaction you wanna get.
Brett: Could you quickly kind of get into this sort of interesting question, which is basically like, in what way should you change or in what way should you improve?
If we're talking about communication or persuasion or influence? And I think it makes sense, like we've all seen somebody trying to present, pretending to be Steve Jobs that's not right and how bad that is, or, um, trying to be Mark Benioff who is like uniquely classically, sort of charismatic. And at the same time, obviously there's a lot of things you can evolve and grow and get better sort of in the way that you communicate, influence, et cetera.
In your mind, is it sort of testing different things that leverage kind of the unique parts of you and ultimately the North Star as are you getting the thing that you want or the reaction that you want in people?
Wes: Yeah, I think testing different things and also getting feedback from others, so both explicit feedback and implicit feedback.
I think that most people. Over index on explicit feedback. So we wait until, you know, our colleague complains about something or you know, gives us very direct feedback before we're like, oh, okay, this was bothering them. Whereas if you took a step back and noticed more, you would probably notice that this thing was bothering that person long before they spoke up about it.
So I'm a big fan of looking for implicit feedback as well as whatever someone is is explicitly saying. And uh, yeah, I think, I think going out and trying is the way to see what feels natural for you and what is resonating with your recipients, with your audiences. You can't know that until you go out and try.
Uh, and I would say that trying in a lower stakes way is better than trying in a very high stakes way. So before you try to present like Mark Benioff or Steve Jobs in a, in a high stake setting, try presenting that way with some of your coworkers behind the scenes. And if you can tell that it's not really working, it's kind of cringe or you're getting that feedback, then that's a sign that, hey, maybe I switch things up.
Maybe I try something different.
Brett: Do you think most people can get quite good at actually understanding how what they're doing is landing with other people or reading sort of people's reactions? I think there are people who are innately better at "reading the room". There are a lot of people who tend to be like, struggle with actually understanding what other people are feeling or thinking about the thing that they are doing, and so do you think that's like a muscle that most people can sort of get better at?
Wes: I totally agree that there are some people who are naturally better at this, who are naturally more attuned to reading situations, reading people. I do think that this is a skill that you can get better at. I think from far away a lot of things look like magic, but if you come closer and you dissect what is actually happening, uh, a lot of things can be broken down into component parts.
And so, you know, I've personally seen clients really improve in this area. I teach part of this in my course as well, where, you know, students will come in and they'll, uh, report being shocked and horrified that an executive that they were presenting to was skeptical about something. And upon just a little bit of further digging, I realized that they didn't present their idea very well at all.
The reason why their audience was confused or skeptical, or there was a lot of friction or apathy was because they explained their idea extremely poorly. That when they explained it to me, I was also confused. I also was like, what, where are we going with this? This is confusing. Why are we talking about this?
And so, you know, it helps to, to get that feedback from someone. Because sometimes in our own minds we make a lot of sense. Outside of our own heads, other people lack the context or tacit knowledge that that we have that we don't even know that we have. So I often find that there is so much room for improvement before you reach the edges of, wow, it's really hard to read the situation or read that situation usually upon a really quick glance, I'm like, yeah, like you jump straight into nitty gritty details. Started talking a really chronological way of what happened starting from the past three months up until now. And that is confusing for someone who is hearing about this for the first time.
Right. And what you could have done instead was frame the topic up front to say, we are here to talk about the new feature that we're launching for X. The last time we talked about it, we had said that this product flow was confusing and so I took a stab at rewriting some microcopy working with the UX team, and I wanna show the new flow to you.
And what I'm looking for is your feedback about whether you think this is clear and if so, we're gonna launch this next week. If you, if they had said something like that versus jumping straight into, you know, the deep end, their audience would've understood more clearly what they were trying to say.
Right? So I think that there's so much that we can do to communicate more clearly, to be clear about what our own main point is, and then to frame that up to make it easy for our audiences to receive.
Brett: Why do you think there often is so much lack of clarity and communication?
Wes: I think as founders and as operators, there's so much going on on a daily and weekly basis.
We are often back to back jumping from one meeting into the next and then answering slack messages in between. I think that people just don't put enough thought into their communication. One big takeaway that students of my course have is even by spending a couple moments, literally 15 to 30 seconds, getting grounded on what am I really trying to say?
What does this person need to know? What is my main point and what's potentially secondary? Spending a couple moments asking yourself these questions allows you to write a message that is much clearer and allows you to speak up on a call, in a meeting in a way that gets your main point across much better.
So I think that the, the biggest bottleneck to clear communication to being concise is lack of preparation. And I don't mean that you have to prepare for hours for every call, for every meeting, for every Slack message you're writing. Even a couple moments can make a really big difference, because if you are not clear in your own mind about what you are trying to say, of course when you say it out loud, it's going to be confusing.
Of course, it's gonna feel meandering because when you're there in real time speaking, you're actually asking your brain to do a bunch of different processes. You are taking in information in that real time setting. You're processing it, you're thinking about it. You're connecting it to previous information that you have, and then trying to formulate a response and then execute, say that response out loud.
All in the span of milliseconds, which is asking your brain to do a lot. So in my experience, this is a very unglamorous solution, but preparation is the most surefire way to be clear. Whether you are communicating in writing or in a meeting.
Brett: Sort of in a similar vein, what are the things in this sort of broad bucket of communicating more effectively or clearly, what are the things that you end up talking the most about with people that are sort of seeking you out on these topics or the few frameworks or perspectives that kind of tend to have the biggest impact on the folks that you're working with?
Wes: I think one of the biggest ones is starting with your ideal outcome in mind. So instead of sharing what comes to mind in an ad hoc way, especially for high stakes or important conversation, thinking about: what is the end goal? What is my ideal outcome? And then working backwards from there to where am I now?
Given my situation, who's my recipient? Who are other potential stakeholders involved? What are the levers that I have that I could potentially pull that I have access to? What are any sensitivities that I need to be mindful of given the situation? And then, and only then thinking about what should I say? Starting with point B, which is where I wanna end up coming back to point A with where I am.
And then what you say is how you get from point A to point B, but that's really all it means to an end. And so I find that breaking down a situation and having a very goal oriented approach is a useful way to clarify what might I wanna do, what might I wanna say in a way that is more focused so often with my executive coaching clients, we'll do that.
So we'll start with what is the outcome that you want from the other person? And I'll give an example. One of my coaching clients is, uh, Head of Finance at a Series A company and he wanted to convince his founder CEO to adopt a more standard way of measuring CAC. 'cause the way that they were doing it was, was not standard.
And my client, head of finance thought that this would cause issues down the line. So the CEO was, was pretty resistant over a couple months. And Head of Finance said, my ideal outcome is I want the CEO to hear me. I want to be heard. I've tried talking about this to him, you know, for so long now I, I want him to hear me.
And I said, that is not a good ideal outcome. The ideal outcome is your CEO agrees to calculate CAC in this way. The way that you suggest that is actually your ideal outcome. Whether you feel heard or not, is a means to an end. That is kind of a nice to have, but that's not really the actual outcome. So even figuring out what is the end result that I want takes some judgment. And then of course, working backwards into, you know, where are we now? How do we get there? What is most likely to appeal to this person based on what you know about their worldviews, uh, things that bother them. You know, especially a lot of my clients are startup executives that report to a founder, CEO, and founder CEOs are idiosyncratic creatures. You know, they are who they are and you are not gonna get very far in my experience, trying to change who they are or trying to force them into entering your world. It's much better to frame whatever it is you wanna talk to 'em about, or your recommendation under an existing umbrella of what they already care about of values they already have, of ways that they already think the business should be run.
And so in my experience, being strategic about your communication is much more likely to get you more of what you want than being more ad hoc about it.
Brett: What else could you share about that dynamic of communicating specifically executives with founders and sort of that specific dynamic? Is there anything else you've noticed in the most productive ways to communicate or things that tend to get in the way in that specific sort of set of relationships?
Wes: I think most founders have a pretty strong point of view about the way that things should be, and they tend to be more obsessive than executives in my experience. I think this is a good thing. I think that you want founders who have a strong point of view, who are obsessed about whatever they're obsessed about.
I think something that can get in the way is when executives are expecting the founder to be less spiky, to be more balanced or more reasonable, I would say. I think that many pairings of execs and founders that work really well are when execs recognize that their founder can be spiky in different ways that might not really make sense that they are really good at certain things and not as good as at other things.
And instead of expecting your founder to get better at those things, I think as an executive, you'll get further if you assume that their, your founder's personality is a constraint. That is a constraint. And if you are especially reporting to a startup, CEO, I think you need to be okay with the founder's personality as it is.
In my course, I get a lot of questions from folks who essentially ask how to better handle their managers, including startup CEOs. But the question behind the question, the underlying question is basically, how can I change this person? How can I make them more of the leader that I want them to be? And you as an individual likely don't have the leverage to do that.
You are battling years of this person being this way, having reached success, being the way that they are. And so it's kind of a losing battle to try to change that person. It is much better to assume that that person is the way that they are. You are not gonna be able to change them. And so asking yourself, can you live with that?
Can you be happy and thrive in an environment where you have to work closely with this person? Uh, and second question is, what can I do to make this working relationship better? So instead of assuming that the CEO or the the founder will change to make your relationship better, if anyone is changing, it's, it's you as the executive.
You have to ask yourself, how can I better mold myself to work better with this person? And I have an exercise in my course about getting in the head of your manager. And one really funny, interesting insight that comes out of this when we review the exercise responses, some people, you know, a lot of people will say, yeah, like I, I know my, my manager wants more of X, Y, Z for me, or wishes I were more this way. And I keep hoping that they won't want that anymore, but it's been two years supporting this person and every single time they wish I would bring more data or every time they get skeptical in these areas. And so like, clearly there are patterns, right?
These are both probably implicit and explicit clues that we are getting about what our manager or CEO or founder wants from us. And yet we dilute ourselves thinking maybe they'll change, maybe they won't want this from me anymore. And that's, that's not really a winning proposition. It's much better to acknowledge that and then decide, you know, how do I wanna adjust my behavior?
Brett: Is it just that the executive or manager is, is in a place of power, which means that they should not change, but the person underneath them should? Like, there is a little bit of irony in that. Like this is the sort of immovable object and I'm the one that that, sort of has to, You know, contour around that.
Wes: Yeah, I think that's the reality of the situation.
I think acknowledging things as they are is useful because you don't end up spinning and wasting cycles and emotional labor trying to change something that you can't really change. And power dynamics are one of those things. So especially if, if you are the exec reporting to the CEO, to the founder, then yeah, I think that that acknowledging that power dynamic is very useful.
On the other side, I think if you are the founder in this situation, it is also useful to be self-aware of the ways that you might be impacting the people that you're working with. And if you are consistently getting feedback that you know, a certain part of your behavior is not productive, then it's up to you to decide, do I wanna continue that and suffer the consequences?
Can I live with the consequences or is that something that I might want to change? Knowing that being the person in power, you know, by the time anyone's speaking up to challenge you or to give you feedback, this has probably been bothering them for longer than you knew. And so I think on the founder side, it's not, I think it's, it's treating that power dynamic with the respect that it deserves, knowing that, hey, I'm the one in, in power here.
I know that you are probably going to mold yourself to fit me, but that doesn't mean that I should act in ways that are potentially destructive or unproductive. Like I also wanna make sure that I am making this a good relationship. And when both parties try, but don't expect anything from the other person, I find that that ends up creating a, a solid relationship.
Brett: How do you think about the adjacent topic, which is basically, in what way should people change, right? And you know, if you're the person you're reporting to wants more quantitative rigor, but you're a much more intuitive person. Maybe to be successful in this specific role, you need to be more quantitative.
But maybe to sort of get the most out of yourself you need to find another environment that actually values the intuitive nature that you have, or whatever it might be. There's this great book from decades and decades ago called The Effective Executive that a lot of people haven't read, but it's this famous book from Drucker.
And like one of the basic points is that companies generally focus on weaknesses of individuals and improving weaknesses instead of trying to get an incredible understanding of what people are actually insanely good at. And just like pushing entirely into those things.
And I would say like in general, if you think about like traditional performance management, it is, here's the three things you can do better. Go work on those things. And I'm interested in sort of what you've noticed either in the context of founders or executives, sort of how to reason or work through like what are the gaps you actually should close.
Wes: I am a huge proponent of leaning more into your strengths, if only because there's usually only so much that you can do to address something that is not strong for you, and so it's much more highly leveraged to dive deeper into your strengths if possible.
I think the challenge with that on the ground floor is that especially with founders, you are often the best person or the most available person to do something, so you don't always get to only focus on your strengths. There are many times when. You need to operate out of your core zone of genius. And so I think ideally, yes, like ideally focusing on, um, the parts that come naturally for you and choosing roles that allow you to leverage your strengths and being able to leverage your strengths maybe 80% of the time, in your role, whether as founder or operator. If you find yourself having that ratio flipped, where 20% of the time you're using your strengths, 80% of the time you're, you know, kind of feeling like you're flailing, kind of feeling like you're, you're doing stuff that you're not very good at, not very naturally suited for.
I think that's where a role change could make sense. And I think it, it's actually a lifelong practice, an endeavor to get ever closer at understanding what are you very good at and comes naturally for you, and where is their market demand? After every role in my career, I've reflected on this, and I think I've, I've gone ever closer to a setup where I am using my natural strengths.
But I, I do think it's something that you need to actively reflect on because it's so easy to get pulled in, you know, a bunch of different directions, and you might look up one day and realize that you're working on a bunch of stuff that you don't find very fun and you're not very good at it. That's just not as enjoyable of a way, I think, to go through your career.
Brett: So what, what did that look like for you when you think about your own arc of your career and like the first couple things that you've done and now the last couple things that you've done, like how has it become more aligned with sort of that set of ideas you were talking about?
Wes: Yeah, so I'll give an example where I worked on this skill, uh, or on this weakness I would say, until it was not a blocker for me, but then intentionally started choosing roles where this was not a core need.
So I used to be pretty disorganized and bad about operational details. And early in my career, this was pretty prohibitive for me because I was, uh, in a brand management role and had to manage multiple launches for multiple SKUs with different, uh, launch timelines, production timelines, et cetera. It was a physical product and it was really overwhelming, keeping track of all of it.
I dropped a ton of balls and I realized that. If I am to advance to the next level where, you know, as a manager, I might not have to manage all the details myself anymore, I'm never gonna get there because I'm never gonna get promoted if I'm so bad at managing all these different details. And so I put concerted effort into learning to become more organized, to become better at project management, to a point where, I could keep track of different projects and where they were and could communicate upwards and keep the appropriate parties aware of what was happening. But I knew that this was never going to be a strength of mine. That to this day, logistical details very much stressed me out. I tried to outsource it as much as possible.
I still dread doing things that, that require a lot of logistical detail, especially ones that have a high downside if you get any detail wrong. And so one, I realized that brand management was not for me. So I literally changed career paths after that role. But I also learned a lot about myself from that and realized that choosing roles that had more ideation, that had, uh, thinking about shaping something from the ground up, how to sell it, go to market, like those were things I liked about brand management.
And so for my next role, I looked for more of that. And so with every role, it was like, okay, here are the parts that I dreaded, that I could brute force my way through, but were not very enjoyable. And then here were parts that came very naturally to me that I kind of lost track of time doing it or, you know, wish my more of my role were doing this aspect, what org might need this?
What type of role might need this? And how do I position myself for, for that?
Brett: After you sort of had that role, do you sort of sit down and open a notebook and sort of collect your thoughts in that way to try to figure out what to do next? Or is it more organic in your, in terms of the way that you've gone about doing it?
Wes: It's probably a mix of both. I think writing out what I'm thinking and writing about my problems, often by the end of writing it out, I come to a solution for myself, which is fantastic. So I'm a big proponent of, I don't know if you wanna call it journaling per se, it's more like problem solving through stream of conscious writing.
I do a lot of reflection that way. The other aspect that is a bit more organic is more driven from, I guess, strong feelings in either way, strongly disliking something and wanting to avoid it and just realizing that and then strong feelings in another direction of, oh, like I really liked working on this part of the project, or, I really like working with this type of client.
I look forward to working with this type of client. The hour went by so quickly and we had, I had so much to say for this type of problem. Whereas with other clients, sometimes I have a bit less to say, like, it still feels helpful for that person and they tell me it's helpful, but I feel less on point. I feel less on fire, you know?
So I think it's checking in with yourself on how did that feel? So that is a bit more intuitive, but I see those as clues that our bodies are, are trying to tell us about what was exciting and what was not.
Brett: And having the chance to work with lots of people in a variety of different rows over a long period of time, i'm often struck how few people are introspective about this topic of like, what am I purpose built to do and how well fit is that to the job that I'm doing? And maybe there's some sort of cognitive bias that oftentimes when somebody starts down a path, they just, there's kind of like the status quo bias, like, I'm gonna keep doing that thing.
You have somebody that's in marketing and they generally just want to keep perpetuating, well, I started out as a junior marketing manager, and then I want to be a marketing manager and on and on and on. And oftentimes I've just, it feels like, and maybe I'm wrong in some of these situations, but like when you're observing the person, you're kind of saying, I just think they're doing the wrong thing.
But it's interesting how infrequent it feels like there's kind of that type of reflection and then sort of a meaningful change where somebody recognizes that this thing isn't shaped correctly for me. One of the things that I've reflected on is it feels like one of the most valuable things for society, would be to better match people with the thing that they're doing. You know, you find, you take a job that you or me might find really difficult and unpleasant to do some sort of, I don't know, obscure accounting role. And yet you find somebody who's really lights up and is purpose built for that and you watch them doing that thing and it's this extraordinary thing when you see sort of that type of matching.
But I've often wondered, and, and maybe there needs to be just more directness at work where other people are, are trying to explain that maybe they're built for something else and they should reflect on that. I don't know. I see most people like what they start to do, they just kind of keep doing.
Wes: Yeah, I think whatever default status quo you're facing, you know, I'm in marketing, so I continue to be in marketing.
I think that ends up being what most people do, probably partially due to sunk costs. Like I've already invested x number of years in this field. If I change fields, I have to start over. That sucks. There might also be an element of golden handcuffs too, with not wanting to start over or not wanting to, to take a pay cut or, you know, a lower title, whatever.
But, uh, I love what you mentioned about there are accountants out there that love the kinds of things that you and I would hate doing, and I think it's such a great reminder that whatever it is you find extremely difficult and unnatural for you. There is someone out there who loves doing that, and it comes extremely naturally for them.
So if you are in a role that requires you to do this thing that you are not very good at and could not see yourself getting much better at, in some ways you're competing with someone. Who naturally is good at this thing and enjoys it, and who is going to win in the long term? The person who, where this comes very naturally for them, or you struggling barely, you know, making things work, where five units of input of effort result in one unit of output.
Whereas that person who, you know, where this comes naturally to them, it's one unit of input, five units of output. When I think about that, I think that the deck is stacked not in my favor. If I choose to work on something that is not a natural strength of mine, that there's just no way that I could potentially win or succeed and my day-to-day wouldn't be very fun either in if I'm working on something that, that I'm not very good at. So from a very practical, you know, pragmatic perspective, I think that each of us needs to be more introspective on this because most things take longer than you think. Most things are harder than you think, especially if you're building something new and you need the deck stacked in your favor as much as possible.
I always say, you know, to to folks who pitch me with, with their startup ideas that what is your unfair advantage doing this? If a random person, the next person who walks down the street could have an equal likelihood of making this work, I think you're probably working on the wrong thing. And that unfair advantage doesn't need to be years of prior industry experience.
It can be a weird obsession with this problem. Like you've never worked in retail, but you are super curious about it and you've always been obsessed about it. Awesome. There's plenty of people who founders have started companies in, in industries they, they had no experience in who are succeeding. So there needs to be something though, and I consider obsession an unfair advantage as well.
But that there's interest there, right? You wanna be thinking about it, you wanna be working on it, you are curious about it. You know, it's, it's where your head is naturally going, like working with not against who you are and what you're naturally good at. I think it's something we could, we could do more.
And I personally spent years working against that. And I think also earlier in your career you have more energy and you are able to brute force your way through things. And as I've gotten older, I've realized that it is increasingly harder to get myself to do shit that I don't wanna do. Before I used to be able to just power through and I'd make it work.
And so from, again, from a practical perspective, when I think about the next, you know, couple decades of my career, like if I am increasingly finding it harder to, to get myself to do things that don't come naturally to me, then looking ahead, like I need to make sure I'm doing something that comes easily to me and make sure that there's market demand for it and it's providing value to others, et cetera.
So I think, you know, early on in your career, most of us start by brute forcing, you know, because we don't have a lot of skills, we don't have a lot of experience, and then we forget midway through our career that maybe we shouldn't just brute force things anymore. And that there is a difference between good struggle and bad struggle.
And I think that especially for high performers, ambitious people, we're so used to reframing difficulty as opportunity, right? It's the whole like, oh, it's not anxiety, it's excitement, right? We're very good at reframing these things in order to climb bigger mountains, climb the next mountain, et cetera.
But I think at a certain point in your career, being able to distinguish bad struggle, as in, you know, I find this really hard. I don't ever see it getting easier. Like I would say that that's not really productive versus like, oh, this is in, in an area that I like working in. This is a hard problem. I don't know the answer yet, but I'm excited to work on it, and I can see myself finding a solution that is a different kind of struggle that is much more productive.
So I've gotten much more attuned at differentiating between bad struggle and good struggle.
Brett: Is there anything else sort of in the theme that we're talking about that you, you tend to sort of tell folks that are sort of seeking your advice or thinking about, do I wanna change roles or change directions or, you know, you've been doing marketing for five years and as we were talking about a second ago, for most people in the next five years you're gonna be doing marketing and there's often not a lot of introspection.
Wes: I think doing an audit and taking stock of the parts of your role that really light you up and the parts of your role that you have to summon internal fortitude to really get through.
I think doing that reflection is helpful because as we go through our time, you know, within a certain organization things often change pretty quickly without us realizing it. And so your role might have started being very much aligned with what your strengths are, but over time, due to changes external to you, your role might now be only, you know, a small fraction is what you actually like doing.
And so, you know, looking up once in a while from the day to day to take stock, I find that to be helpful.
Brett: Do you advise people to take stock in any specific way?
Wes: The way that I would recommend is to pay attention to what gives you energy versus what feels like it is depleting energy or something that you dread.
So it might be, I wonder if, you know, I don't know if paying attention to your emotions is necessarily the right way to put it, but paying attention to your excitement level and energy level, I would say. And then the, the other aspect of that is thinking about what would make you not feel resentful. I think that a lot of times we continue on because we're continuing on, and you know, if there's not a big payout at the end of that, or if there's not a promotion or, you know, some reward, I've found myself in the past looking back on, you know, wherever I worked on and thinking, just feeling a bit resentful about the time spent there or like what I did, you know?
And I don't think that that's productive for anyone. And so I like making sure that the journey is as worth it and as enjoyable as whatever destination. Because especially with startups, I see a lot of operators picking a company because, you know, they're betting on that company and you should do that.
But like, chances are, the bet is not necessarily gonna pay out with, uh, a really big payday. And you don't wanna look back and feel resentful about that, right? You wanna look back and be like, I learned a ton and I did a bunch of things that I wouldn't have gotten to do and I built a bunch of cool stuff and I'm a different, sharper, better leader now and operator now than I was before, you know, even without whatever, you know, golden payout.
And so I think as you think ahead to, you know, do I want to commit to another X number of years here or double down on this path, thinking about avoiding resentment is another good thought experiment.
Brett: One of the things that you've written a decent amount about is sort of the topic of being more strategic or communicating in a more strategic way.
I, I'm interested when, when someone gets the feedback, you need to be more strategic, which I think is a very common thing that is given to all sorts of people. What's sort of the coaching that you tend to do with somebody, let's say they came to you and said, oh, my manager said I'm not strategic enough.
What should I do?
Wes: The first thing that I would suggest if you hear you're not being strategic enough, is to get more clarity about what your manager actually means. I think that all of us have either had a manager over the years tell us, I would like you to be more strategic, or we have been that manager who has told someone, I want you to be more strategic. So we throw this advice, or this recommendation or feedback around so casually without really, I think on the manager side, getting more specific about what does that actually look like for you in your role in this context, what does not strategic look like or less strategic, and then what would more strategic look like across a couple different dimensions of the things that you work on. And so I think that the worst thing that you can do is if, if you hear that feedback is start making a bunch of changes, thinking like, now I'm being more strategic. And then you check in with your manager three months from now and you're like, so manager, what do you think?
You know, I've, I've made all these changes. And usually the response you're gonna hear is, wait, what? Like I, first I didn't notice, and secondly, that wasn't actually what I meant. Like, I'm glad you're doing those things and that's awesome, but it didn't actually solve the core problem that I was, that I was actually trying to get you to work on.
So, you know, I've learned this the hard way. I now teach this in my course that if you hear vague behavioral feedback, like be more strategic. Other examples are improve your executive presence, manage up more, be more data-driven. These are all very common things. Think more strategically, right? These are all very common things that we might hear, and it's a good idea to get more context.
And your manager might not be able to share more specifics if you just ask them point blank. So you may need to ask indirectly and draw that information out of them. So, you know, for example, when I did this thing, like, would you say that that was strategic or did it not feel as strategic? Or, what are examples of my peers, you know, other product managers or other marketers that you feel like are strategic, right?
So if you get some examples, you can then read between the lines and realize, oh, that person always does this. I've noticed, you know, the couple people that this my manager mentioned tend to do this, right? So you kind of read between the lines to put together what is, what does being strategic really mean, and then run it by your manager to say, A couple patterns I've noticed are this, like, if I start to do that, would that be valuable?
Would that, you know, feel more strategic? And it's much easier for most leaders to react to something you're putting in front of them to correct you basically to say yes, that, no, not that than it is to say, you know, teach me ways to be strategic or define what that means for me. Um, your leader hasn't done that thinking like, they've gathered from all of your interactions with you that you are not strategic and they're now sharing that with you. And I think it's our job as operators to then unpack it and clarify and get to that next level of specificity so that we can fix the right things.
Brett: Do you think in your experience when a manager gives feedback like that about being more strategic, that there's a few things they're generally trying to communicate?
Or is it truly like a long tail, it could be 60 different things that that manager is trying to communicate?
Wes: It's probably a few things for the individual that they're giving that feedback to. So the problem is, if you are the operator hearing that, you're not sure what those things are, but for the manager saying it, yeah, I do think that it's a couple situations that have shown that manager that, hey, this person could be thinking more strategically. And so a couple examples of, of what it could be, you know, I see operators sometimes be too zoomed in to the project or the, the task in front of them without considering organizational context.
So that could be an example of you're not really thinking strategically. You're, you're focusing on the how of getting this exact thing done, but you're not thinking about how does this stack rank amongst other things that we're doing. How does this impact other things or how is it impacted by other things?
So that's one way of, you know, what be strategic could mean. Another could be thinking more about what, like choosing what to do versus just the how. If you are used to something being fairly scoped and defined by the time it arrives at your desk, you are thinking about, well, how do I get this done? How do I bring this to fruition?
Whereas the next level that your manager might be looking for is you doing the shaping. You saying We should do this, not that, and here's why, and here are the trade-offs and here are the risks involved. And choosing what to prioritize and doing that shaping. So that's another idea of what be more strategic could look like.
And so yeah, for the operator it's, I think it's, you know, you need to be the one to figure out, okay, what does my manager meet here?
Brett: Yeah. I've noticed a lot of times it also feels like, to your point about maybe just focusing on low level tactics or some project in isolation versus figuring out how everything is constantly connecting to what needs to happen in the business, I think is like another form of that.
The ability to sort of understand the business and then translate that into this thing over here. Then break that thing down into sort of the actual things that sort of ultimately need to happen. I think it's very easy in companies and startups to just get lost and not focused on things that actually matter.
Like what are we trying to do in the business? Why are we trying to do those things? What are all the different levers we have to pull? And then like, is this thing over here that I'm doing, does it ultimately matter to the business? Like that tying back to sort of things, multiple rungs above you, I think is often sort of a, a gap that I've noticed.
Wes: I think another gap that I've seen is stack ranking and prioritizing which problems are actually worth solving. And so, you know, junior operators will come up with different ideas and it's not necessarily a bad idea, right? Because most of the time, if it's, if it's obviously a good idea. Done. We're gonna do it.
Awesome. If it's obviously a bad idea, you probably wouldn't have brought it up. And so most ideas are in this gray area, middle ground of like, yeah, like that's a problem and this would solve that problem. But the next level of thinking strategically is, is this a problem worth solving? Because a business is pretty much a bunch of problems all the time, and when you solve some of those problems, you have a new set of problems.
And so you're just constantly dealing with problems. And just because something is a problem doesn't mean it warrants resources to solve or the resources that you are asking for to solve. And so, you know, developing that sense of right sizing of context of, you know, is the juice worth the squeeze here to try to solve this? Are we gonna get enough upside if we improve this or is this a problem that we live with? You know, it's a little fire that we're gonna let burn because working on these other problems are more important. And so it's, I find that it's, it's rarely like, this was a bad idea or this is not a problem.
It's more like, this is a decent idea and yes, this is a problem, but it's not hairy enough to warrant taking action on, or the upside isn't big enough to invest, you know, all this effort in building out this program or building out this campaign or whatever else. And I find that with junior people that that can be harder to learn.
Brett: So I wanted to switch gears a little bit. A while ago you worked on creating what is called the altMBA with Seth Godin, who seems like a very interesting human in general and, I thought it would be interesting just to hear more about that specific effort that you started and like what, what were some of the interesting things that you took away from that?
Wes: Yeah, so Seth and I started the altMBA together.
Brett: How did you meet Seth?
Wes: He put out a job posting on his blog, and I did not know him before and was vaguely familiar with this work as a marketer. You know, I knew he was a, a famous author and he wrote a blog post saying that he was looking for a special projects lead.
And I was in San Francisco at the time. I grew up in the Bay Area and was looking to move to New York and was like, okay, I'm gonna apply for this if I get it. Awesome. It was a six month, uh, stint and then I can find a full-time thing in New York afterwards. And so that, that six months ended up turning into three years.
Brett: What was in your application? Like how did you get his attention?
Wes: I'm reaching back into memory lane now, 'cause this was, this was 2014, so 11 years ago. So the application, there was a written portion with like short answer questions and then there was a video component. I actually borrowed for hiring at Maven because I found it to be so useful.
Um, but the video was, you know, film a, a two to three minute video talking about what you wanna build, what you wanna learn, and what your strengths are, something like that. And I did my video in one take because I thought like, there's no way I'm gonna get this. Like a lot of people wanna work at Seth Godin.
What are the chances that, that I'm gonna make it through? So you don't wanna be too emotionally invested in, you know, creating this perfect application, doing 50 takes, and then not getting it. So I didn't, one take, I thought this is good enough. I sent it off and the next day I see Seth in my inbox and he's like, Hey, I liked your application. I think you could, you know, be a good fit. Do you wanna hop on a call? Uh, so we did a Skype call because Skype was a thing back then. Zoom wasn't even around. And
Brett: Skype is literally last week as being sunset. I know, I know
Wes: know. Yeah. Yeah.
Brett: Nice connection there.
Wes: Yeah. Um, so we did a Skype call and then we did an in-person interview because he, he's normally based in Westchester, New York, but was gonna be in California for an event, for a speaking event in the Bay Area.
So we met up, did an interview there, and then I got the role.
Brett: And so how did that role translate to what ultimately became the altMBA?
Wes: The first six months were special projects lead type work. And so a big part of that was, you know, Seth was closing down the last company he's working on, he'd worked on it for eight years and was looking for what to do next. And so I did a lot of research on potential businesses he could start, interesting projects, books he could write, teaching that he could do. So it was a lot of bouncing ideas. We had this giant magnetic board with a hundred colored index cards with magnets, just like a bunch of different ideas.
And towards the tail end of that, we coalesced around learning and teaching. Seth's been a teacher for, you know, decades by that point. And his audience got a lot from learning directly from him. And at that time we also were seeing that massive open online courses, MOOCs prerecorded courses with videos were the dominant form of learning, but they weren't engaging.
And you know, as I started digging into it, uh, by the way I was digging into it because one of my other projects at the time was creating Seth's Udemy course, which became a bestselling course. And you have the top selling one that year. And so, as I'm thinking of ideas for Seth to do, plus working on this, this course.
I started digging into the completion rates of video courses and realized that they were abysmally low. I think three to 6% is completion rate. And there just seemed to be a huge gap from people learning asynchronously and all the work we were putting into making this Udemy course great. And the fact that three to 6% of people were actually gonna finish it, it felt like this couldn't be the pinnacle of the internet connecting us and like bringing access to different experts like Seth.
And so we thought, you know, was there a way that we can flip the script on this? Especially because Seth at that time was, was still doing a lot of speaking gigs and it was expensive to see Seth in person. So, you know, I, I also organized, you know, a couple in person events and it just seemed to be such a big gap between you, you know, you either learn watching videos and a tiny percentage won't finish, or, you know, you come see Seth in person and it's expensive. And also only a tiny percentage of people can afford flying to New York, so there must be some middle ground. And so that's when we started kicking around ideas that eventually led to launching and founding the altMBA. And so that's where, you know, at the end of that six months that said, sounds like we're both really excited about altMBA. Would you wanna stay and build it out, run it, grow it. And so that's, that's how we continued on.
Brett: How did you actually get it off the ground? Like where did you start with the first group?
Wes: The first group I downloaded and scraped, um, Seth's email list and sorted based on at domains for email addresses to see which companies had the most Seth fans. So it was like@lululemon.com, at nike.com, at uh, Clorox, et cetera. And the idea there was how do we reach out to folks where there's a density in Seth fans in organizations that we want more students from.
And so part of the thinking there was, you know, Seth has a lot of readers who are freelancers, solopreneurs, business owners. But when you see students from brand names. That tends to be a bit more exciting for everyone, including the freelancers, seeing that, wow, there's people from Whole Foods taking the course.
There's, you know, a director from Kickstarter, et cetera. And so I wanted to create that excitement in the beginning by getting some of these more, uh, logoed names in the course. And so I sorted the email, looked people up on LinkedIn, thought this person seems friendly, this person seems like they, you know, they're curious, et cetera.
And they would reach out to reach out to specific people. So that first cohort, we were pretty deliberate about, about, you know, getting the right kind of people in to really set the culture and the ethos of the program to set the bar that we wanted to set. And then shortly after, I wanna say after maybe the second or third cohort is when I realized that relying on set's email list was not going to be sustainable for growth first because he didn't like spamming his email list, talking about the course. He has his blog, you know, it's mainly about ideas and then also because I wanted the opportunity to nurture leads over time, prospective students over time and, and the freedom to do that without always relying on, on needing to use Seth's blog. And so early on I started building an email list separately and we would drive folks who were interested, uh, into that email list.
And then, yeah, I think for that one I wrote, I wrote 50 email campaign for emails twice a week for months, where once someone joined, you would get dripped out content that would nurture you over time and then build out flows from there with, you know, once you applied for the altMBA, you would get kicked off that list into a different list.
It was a lot of hands-on building, a lot of nurturing and, and driving um, customer acquisition, student acquisition after the initial program was more set.
Brett: For those that aren't familiar with Seth, how would you sort of describe him and what was it like? I mean, I, I followed him from a distance for a long time.
Many, many years ago. He spoke at a big conference that we put together. He's such a, a unique human. What, what is it like actually working day to day on something with him?
Wes: It's hard to describe Seth in a few words because he is, he's such a unique creature and it was such a privilege to get to work with him so closely for three years, I learned so much, and I would say transformed as an operator, as a leader, as a builder. Um, from working so closely with him, what's he like on a day to day? He's even sharper in person than he is online. Which I think is impressive because, you know, sometimes I'll, I'll read people's writing or you know, watch them in videos and stuff and then, and then I'll meet them and I'm like, okay, like, you know, you're pretty, you're pretty sharp.
But like, right, Seth is like 10 times funnier, faster thinker in person. Like he's just even better in person, I would say, which I find impressive. He also has really high standards. He thinks incredibly quickly and so, you know, there were so many times where I had prepared an explanation to describe something.
I don't know, maybe it would've taken three to four minutes and he would get it in 30 seconds. You know, and I'd be like, oh, okay. You know, and I'd remember going home for the holidays one year and then coming back to the office and feeling like I had actually dulled in like the two weeks that I had taken off.
Because coming back to the office, I'd forgotten just how fast he thinks and how fast I needed to be to keep up. It was like a culture shock, like reintegrating, you know, back into the office kind of situation. He has incredibly high standards. You know, before I was at a, a Sequoia backed series C or D startup in SF before working with Seth.
And we talked about shipping quickly and iterating, and I thought I knew what shipping quickly looked like, but when I started working with Seth, I realized that it was child's play. That that was, that was not shipping quickly at all. And that, you know, our standards, my standards were low. He would have these standards that felt so unreasonable that it would like, it would be upsetting that they were so unreasonable, but then I would find a way to do it.
And so this happened over and over and it really taught me that. A, like your standards are probably too low, at least for some things, and that you can probably raise them and that, you know, trade-offs like speed versus quality. You know, like people talk about that and throw that around like, you probably have room, or I had room to be faster and to produce better quality without starting to trade off on either.
That in most situations there's so much slack that until you get to the fringes, yes, there's a trade off, but you are nowhere close to that. That by sharpening my craft and being more strategic, being a better operator, executing better, being ruthless about where I was hiding or avoiding doing work I didn't wanna do because it was uncertain or it was hard, or I was afraid to be wrong.
There are just so many ways that, that I sharpened my execution so that I was both faster and produced higher quality work. And so that, that like bar setting was probably the biggest thing that I took away from working with them. That, that I continue to think about a lot and continue to, to try to espouse.
Brett: When you talk about sort of having an unreasonably high bar, can you make that tangible? Like what, what's the story that comes to mind to really bring that to life?
Wes: The story that comes to mind that I've shared on a couple other podcasts as well is that we were figuring out the book list that we wanted to send to ultimately students.
So, you know, a box of, you know, seven to nine books to pre-read before joining altMBA, I had created this list and was starting to, to vet some of the books. And so I ordered a bunch on Amazon and they arrived and I told Seth, okay, so I'm gonna read through these and it's gonna take a couple weeks, you know, I'm gonna try to go through a few a week, just, which felt fast already.
And he was like, you have two days. And at first I just thought, this is impossible. Like this is a huge list of books. There's no way I can do this in two days. But once he said that, I started to reframe the problem in my mind and realized that I could get it done in two days if I had to. And so like this reframing I think is, is something that, that when I am faced with a problem that feels impossible, I still now do that reframing like, how can I adjust the scope, for example, to make this work?
How can I think about the end goal, which is finding books that we can stand behind and I don't need to read the entire book page by page cover to cover to get a sense of whether this is a, a valuable book or whether it's kind of fluffy and not as relevant. And so shifting my mindset on that problem and changing how I was viewing that problem made a huge difference.
And that just happened multiple times a day. Every day there'd be something and I would think, okay, I'm gonna come up with something in the next day. And he'd be like, come up with something in the next hour. You know? And I would find a way to make it work, you know? And it wasn't like it needs to be exactly as good as it would've been if you had spent days on it.
But can we do a directional check-in? Can we kind of. Get faster, get to the core of the idea faster. Like oftentimes you can. And so I'm a really big fan of shortening the feedback loop as much as possible these days. And you know, a big part of it was, was learning that from Seth.
Brett: Is that just the way that he intuitively behaves, that he is equally unreasonable for himself as he is for those around him?
Wes: Yes. Seth is one of the fastest sharpest thinkers I've ever met from near and far. So he has equally unreasonable standards for himself. He also is very good at his craft and has spent years honing his craft. And so he can get to the right answer quite quickly because he has so many reps. And so I think the meta lesson also from working with Seth is that if you wanna do things that seem unreasonable, the leverage needs to come from somewhere and getting sharper at your craft, at translating your intentions into reality, at translating your idea on paper into something that your customer or your audience, your reader feels you can improve on, on that, and you can improve on that by studying your craft.
Brett: So how does that translate to like you today? How, how do you define what your craft is and what does it look like to try to hone it in the way that you just described?
Wes: I think one part of my craft is explaining ideas clearly and in a compelling way. And I see this play out in my newsletter, in social posts, in my course in coaching. A lot of it comes down to can I persuade this person to try this way? To see why this problem exists to consider whatever approach it is that I am suggesting might be better.
And so I think breaking down that craft even more is thinking about what objections might that person have, right? So my brain, immediately when I have an idea, I immediately think, is this really true? How might it not be true? In what situations is it true? And in what situations is it not true? And what questions might someone have if I said this?
How might someone misinterpret this? How might someone misapply this? And so I consider all of this the craft of explaining something well and explaining something clearly. So I think a lot about that. I also think a lot about persuasion and influence. So how can I get to the end goal that I'm looking for as quickly as possible?
What would be compelling for this person? What are both explicit and implicit things that I can play around with to create something that people wanna be part of. You know, I think as founders, that's very, very important too. I think part of your raft as a founder has to be selling your ideas and building hype.
Building hype, not necessarily like over-hyped crypto, you know, stuff like that. Like, but building hype as in getting people excited about the thing you are excited about. And that is not always simply saying, this is really exciting, right? Like that's a little bit too on the nose, it's a little bit direct, or this is groundbreaking, right?
It's a lot of telling, not a lot of showing. Whereas the craft of building hype often is creating this aura of this is something that is going places, this is something that other people like you are interested in. So. That might look like getting the right people participating in something, especially early on and then amplifying that.
Uh, it might be design choices that signal who this is for and you know, design that's modern and not cringe. Like it's all these subtle subconscious clues that often get people excited about things. And so I would say that that is very much craft and I think a lot about that as a builder. And yeah, so I think those are a couple examples of crafts that I think about.
Brett: Maybe sort of on that theme, what else might you be able to share in terms of people who are trying to build followership on the internet? You've done that in so many different forms. You've done it for yourself in the past handful of years. You did it for the altMBA and there's tons of examples in between there.
And I think you hinted on some of those things, but like for people that are trying to build followership around themselves or a thing that they're doing. What are some of the things, the highest leverage things that they should sort of keep in mind?
Wes: From a founder perspective, keeping in mind how you can add value to your audience, I think is, is probably the biggest one.
So at Maven when I was building up, especially our supply side and appealing to instructors getting subject matter experts on our platforms, they could teach courses. A lot of my work was adding value to subject matter experts so that they were learning something new when they interacted with Maven, when they read our posts or my posts, that they were reading something that made them think differently, that help them solve a problem that they were working on.
You know? And so I would create content around that. I think that a lot of building in public content is sometimes too much about your customer versus to your customer. About your customer meaning, you know, here are revenue graphs of our growth and like, this is so exciting and that is interesting for customers, but I think the meat of what you're sharing should be valuable stuff that is showing your credibility, showing your expertise, showing how you can make your customer's life better.
Uh, and so for example, with Maven, I would share frameworks on how to turn your ideas into named claimed frameworks in IP. So how do you put a visual around it? Is it a pyramid of something? Is it concentric circles? Is it, you know, some kind of named framework that encapsulates your ideas, right? And so subject matter experts flocked to posts like this because this is something that they think about. Another was talking about how to engage audiences. If you are teaching on Zoom or lecturing on Zoom, it's very hard for audiences to stay focused for an hour or two hours on Zoom. And so I shared a concept I called the state change method about how every three to five minutes you should have a state change of some sort, whether that's switching from gallery view mode into slides, or vice versa. Asking people a question, telling them to put something in Zoom chat, having someone else speak for a little bit, whatever it might be. So this was also very valuable. By doing this over and over every month, you know, for years this allowed instructors to realize, wow, Maven really knows what they're talking about.
I'm not seeing useful ideas like this anywhere else. And if I am building a course, to package up my ideas, Maven is the one that I wanted. And so I, I really thought about it in terms of our instructors being kind of like baby ducklings. I talk about this kind of behind the scenes, uh, with my co-founders, that customers aren't always ready to buy when they first hear about us, and that's very normal.
We don't wanna force anyone to do it, to do anything they're not ready to do. It's very useful if we are showing up consistently with the right group of people that we believe are, will eventually become great instructors, and we can have them imprint on us. Like the first thing that you see, you know, the, the baby duckling sees it's it's mother, right?
And so it instructors are kind like baby ducklings and Maven is the first platform that they're interacting with as, you know, a source of an option for how to teach online. Then when they're ready months later, or even, you know, a year or so later, they're gonna come think of us first. And so how can you add value all along the way to establish yourself as a really strong, credible partner?
Brett: Do you find that when you're trying to build an audience or followership around a thing that almost all the same ideas always apply if you're trying to build it around yourself or a person?
Wes: I think, yeah, I think a lot of the principles apply, I think with an individual, but I would also say this works for companies, having a spiky point of view is really valuable. And so when I say spiky point of view, I don't mean stirring the pot with controversial statements just for the sake of it. I mean, having a unique stance based on your lived experience that you are able to back up with evidence, stories, logic, et cetera.
And so something that teaches your audience something that they don't already know. If you are just saying stuff people already know, that's just not as useful, right? Like as consumers of content, we are, we're seeing a bunch of stuff and stuff that helps us think differently. That challenges a viewpoint in a productive way that when you read it, you think.
Oh, I never thought about it that way, but now that I read this, this makes a lot of sense. And this is actually giving me clarity about some problem that I am dealing with. Like we all encounter content like that and it's awesome and we wanna follow that person. We believe that they have something to add to our lives and values that they can add.
So on the creator side, if you want to grow your audience, you wanna connect more, you know, with your audience, thinking about how can I be that person? That is helping people think differently and teaching them something they don't already know, offering a spiky point of view, I think that's a really good place to start.
And I would say that almost all of my content starts with considering what is my spiky point of view here. It's very hard for me to write content that theoretically would perform well if I'm not interested in it. I just don't have the internal fortitude to, to follow through and write this post if I don't really, if I'm not fascinated by this thing myself.
So it's almost always what is triggering a reaction in me. If I read something and I think I really agree with this, and I, I think that, you know, the writer didn't mention this part enough and that's the part I wanna write about, or I disagree with this. I think that this is a bad take or the person is missing this variable.
And so I wanna talk about this factor, you know? And so something that triggers something in me that that gives me a spiky point of view. That tends to be the source of pretty much everything that I write, whether for a newsletter or for social or for anything else.
Brett: When you're sitting down and writing something, are you good at knowing what will really, like if you put five things out, are you able to sort rank, which will resonate most?
Or you're often surprised when you put things out on the internet while this really took off and people connected with, and this I thought was really interesting and nobody really cared?
Wes: I'm definitely surprised by folks either liking something more than I expected, or less than I expected. But everything that I post and put out I expect to do well.
Like I don't put out anything unless I think that it has a chance to really resonate. There's not a, a very wide range where, you know, I'm, I'm posting something that I think won't really land and then it lands, you know, it's more like within this range of a bunch of things, I think will land, some things land harder and more, more than I expect.
And then some things land a little bit less.
Brett: And do you think that's fairly random in the sense of like, somebody reads one thing, they share it and then it creates sort of this cascade? Or just you can kind of create a threshold, which is like knowing my audience and knowing myself. I have a bar in my mind that I will not put something out that's below it, but outside of that, I actually have no idea what will resonate more or less like humans are complicated.
Wes: Yeah. I think if we're looking at engagement metrics as what resonates, there are times when I post something and it has 700 likes and dozens of comments, and I would say that that's a pretty successful post on LinkedIn, and then I'll post the same thing six months later and it'll have 300 likes. The content was the same.
That to me is a sign that looking at the engagement itself is not a super clear picture of did this resonate or not because the algorithm, timing, et cetera. What else happened that day? Like there's a lot of things that are outside of my control. I generally have a sense of if I write something, I would say like 10% of the time I think, this is gonna be a banger. Like this is good. You know? And then the other 90%, it's like, I think this is important. I think people need to know it. I think this is interesting. And then I'm not sure, you know, are people gonna resonate or not? But again, there are so many things outside of your control. So like a couple months ago I posted about how to give senior leaders feedback without getting fired.
So it was a newsletter post, and it became one of my top performing newsletter posts because someone shared it on Hacker News. Then it like made its way around a bunch of people. You know? So there are those factors which, you know, it's, it's just harder to control. But generally I find following my own interest to be the best way to figure out what topics to write about, which I wouldn't have expected that to be the case.
I think I always thought, I was always a little bit self-conscious about that. I thought that there was a, a more official or better way to, you know, write what people want and, you know, the whole listen to your customers thing. But I found that when I asked newsletter readers to share what they want me to write about, to share questions, I wasn't inspired by their questions.
I just didn't have anything to say. Like, I would see the question and be like, okay, that's a good question. I don't, it's not triggering anything for me. You know? Whereas when I reflect on my own experiences and things that bother me, pet peeves of mine, things that I think are annoying, that's where a lot of my best stuff comes from.
And I think I. You know, that's kinda going full circle to, to what we started with, how important it's for founders to have a point of view. Some of it has to come from within you, and the stuff that comes from what I am personally fascinated by and think is annoying or whatever, that tends to create the best stuff, I think.
Brett: What's the last thing that annoyed you, that turned into something you put out in the world that was interesting?
Wes: Everything, almost everything I write about the root is something that annoys me and then I turn it into something much more positive. Because the frustration part isn't always, you know, isn't always the best angle, but one that is more literal is, I did a newsletter article and then posted this on social as well about, no, I don't wanna hop on a call. And so this was about how many of us default to live conversations when they don't need to be live conversations. And it actually wastes everyone's time. And how, you know, if you are not sure how you wanna write a message and you're not clear on your idea, I, as your colleague, do not wanna be taxed listening to you talk, you know, meandering for 30 minutes as you figure something out in real time.
Like, take five minutes, think about it. And then if you really can't come with an answer, find the top on a call. But don't make that just your default. And there's obviously many good reasons to hop on a call brainstorming, you know, situations where showing your facial expressions or tone of voice matters, discussion, et cetera.
In my experience, many of the day-to-day interactions we have aren't that like it's a simple question or, you know, sharing information. And you can do that in writing in a much more scalable way that respects the other person's time. So that was an example of something where the beginning of that actually came from a question from a student in my course, because I'd shared a screenshot of a Slack message that was a little bit longer, multiple paragraphs and stuff.
And the student said, well, that Slack message looks long. Like, should you just hop on a call? And I got so annoyed by this question, like, what do you mean? First of all, this is not too long. I had grayed out to redact the content. So you have no idea what this says. How can you say it's too long without knowing the content A.
And then B Hop in a call doesn't solve the problem of this being a complex situation that needed to be explained. And in fact, it would probably take longer to hop on a call to talk through something that was really complex if you hadn't figured it out than putting it in writing after putting some thought into it where the person could read at their own pace, reread certain parts, note parts that they agreed with or disagreed with, you know? And so that's kind of the root of that post came from this question where I was like, wait, like there's, there's a gap here and you know, how can I write about it to address that?
Brett: And then you got that student right out of the course, ejected them.
Wes: No,
Brett: I was having dinner with, with a pretty well-known author last night, and she was saying that most of her books, the origin story is something that bothered her. And that's sort of how she chooses what to write about next. And so she was reading an article in the Washington Post where the author clearly didn't know basic statistics in the way that they were talking about this thing.
And I got her so frustrated that it ended up leading to the current book that she's writing, and that's basically how she decides what to do.
Wes: Yeah, I would say that the inspiration for my course was rooted in, in frustration too, because I feel like there's so much communication content, books, courses that basically roughly equate communication with public speaking and delivery.
So there's a lot of advice on make good eye contact, project your voice, look around the room and there's a bunch of stuff on, you know, only 7% of what you say is, you know, based on the content. The rest is body language, et cetera. And I feel like most operators already know this unless you're super junior, like you kind of already know this.
And it's just not that helpful for learning and improving your ability to do well in a high stakes meeting that's moving quickly with stakeholders with different points of view, or it just doesn't help much with written communication either. Like how do you structure your thoughts in writing so that the other person quickly understands what you mean, understands what you need from them?
And I just, I felt like there was so much of communication that operators and founders do on a day-to-day basis where public speaking is actually a terrible mental model. If you think about it with public speaking, it's one directional. You're sage on stage. You have one speech, which you perfect your TEDx talk, where like every hand gesture and word is so perfectly mapped out, no one's interrupting you midway to ask you questions.
This is not how presentations or meetings or conversations go in a company, you are constantly getting interrupted. It's not always bad, like people are sharing information or wanting to redirect. You're talking about different things every time. You're not repeating the same speech and perfecting it.
It's much more bi-directional. It's much more of a guided conversation than than a true, you know, speech or presentation. And I would say lastly, I think the most important thing is you are interacting with other intelligent colleagues. So this is not like you are the expert and everyone else is a lay person, and you have supreme like knowledge about something.
You are an expert speaking to other experts who are also sharp, who also have strong points of view. And they're not gonna suffer fool, you know, fools. They're not gonna pull punches. If something that you said doesn't make sense, the logic doesn't track, you missed a crucial insight, they're gonna call you out on it.
So the logic of what you are saying, the underlying idea matters a ton. And I just wasn't seeing any communication content. Focusing on that piece on situations where like your underlying idea really matters, being right, really matters. So how can you learn to be more right and communicate your ideas clearly, taking into account your recipient, the amount of cog of load there is, sharing your rationale and yeah, realizing that there was a gap there and, and wanting to fill that gap.
Brett: Maybe this is sort of a, a good place to wrap up and I think you already talked about Seth, so you, I, I wanna ask you to choose someone else, but wanted to sort of wrap up where we always do, which is like, who's the person that's imparted something on you that has had like incredible residual value? Like it's the type of thing that you're constantly going back to.
Wes: Seth is the one who jumps to mind here. I used to have a little Seth voice in my head for different situations and you know, I still hear it in my head with, you know, if I'm, he used to call it hiding where you do stuff that you know how to do 'cause you're more comfortable with it. There's less uncertainty and you delay writing the strategy doc, you delay solving this problem because it's very uncertain.
You're not sure what the right answer is, and he was so ruthless about calling me out whenever I was hiding, that I became very intellectually honest with myself on that as well. And so, yeah, I'd say that Seth is probably the person who comes to mind for that.
Brett: Awesome. Well, thank you so much for joining and having such a wide ranging conversation.
I really appreciate it.
Wes: Yeah, this was a lot of fun, Brett. Thank you.
### How to hang on to conviction in an emerging market: Braze's long game to PMF
URL: https://review.firstround.com/how-to-hang-on-to-conviction-in-an-emerging-market-brazes-long-game-to-pmf/
Last updated: 2025-07-14T23:42:32.000Z
The origin story of the now publicly traded company
_This post is for subscribers only._
### How to Build for a Market That Doesn’t Exist Yet — Braze’s Path to Product-Market Fit
URL: https://review.firstround.com/brazes-path-to-pmf/
Last updated: 2025-10-15T20:12:12.000Z
It’s summer 2011, Apple’s latest release is the iPhone 4, and Facebook and Angry Birds top the charts in the App Store (which is only three years old). Two Bridgewater software engineers and a serial entrepreneur meet for dinner in NYC, musing about the future of the mobile industry and their own startup ambitions.
A chance introduction at TechCrunch Disrupt brought the three together. [**Bill Magnuson**](https://www.linkedin.com/in/billmagnuson?ref=review.firstround.com) and his colleague at Bridgewater at the time, [**Jonathan Hyman**](https://www.linkedin.com/in/jon-hyman?ref=review.firstround.com), were looking for a business to start. [**Mark Ghermezian**](https://www.linkedin.com/in/markgher/?ref=review.firstround.com) was working on a social network for app developers called Appboy and wanted some help rebooting it.
Over dinner, they discuss how they might help mobile developers monetize their apps — beyond simply pocketing $1.99 after a download — with a platform to engage users across different channels. So they set out to start working on Appboy 2.0 together.
Over a decade, a rebrand to [**Braze**](https://www.braze.com/?ref=review.firstround.com) and an IPO later, $BRZE now pulls in hundreds of millions of dollars in Committed Annual Recurring Revenue (CARR) and has a multi-billion dollar market cap.
Their bet on mobile seems like an obvious one in retrospect, but at the time, the notion of “mobile marketing” was unheard of — software developers were still the ones running their apps’ growth, relying primarily on the App Store as a distribution engine. The consensus path to make any real money in the mobile industry was to build for gaming apps. Existing enterprises like banks and retailers hadn’t yet built out their presence on mobile.
Braze’s path didn’t come without growing pains and hefty skepticism. Many of Braze’s first 1,000 beta customers churned — because most of their apps died. And it wasn’t until Braze’s Series D, six years after the company’s inception, that the founders received more than one term sheet.
“The market wasn't ready for us to sell to it yet,” says Magnuson, who was originally CTO and is now Braze’s CEO. “Our best answer to ‘why now?’ was to get a multi-year head start on something we had strong conviction in. But not everyone agreed with that. In the early days, it was sometimes difficult to maintain that full conviction because of how long it took.”
But the Braze team held firm on their vision and built a horizontal engagement platform before the market had fully materialized and before their [ICP even existed](https://review.firstround.com/how-vanta-clay-retool-found-icp/).
In this exclusive interview, Magnuson is joined by [**Kevin Wang**](https://www.linkedin.com/in/kevin-wang-96131916/?ref=review.firstround.com)**,** Braze’s 8th employee and now Chief Product Officer, to share all of the early instincts and decisions that led them to the floor of Nasdaq.
**The Braze team celebrates the IPO in November 2021*
## Seeing early potential in mobile
Magnuson always knew he wanted to start something. He grew up in rural Minnesota during the dot com boom — the computer in his parents’ basement was his gateway to the rest of the world. “Being able to build new things with new discoveries is what makes me tick,” he says.
He went on to study computer science at M.I.T. Shortly after graduating in 2009, Magnuson got his first glimpse of the mobile wave while interning at Google, where he worked on a visual programming language for Android apps and finished up his master’s thesis.
But most people seemed to think that the business potential for mobile apps was murky. “People were still nervous about putting a credit card into a mobile app. This concept of digital purchases was brand new,” says Magnuson. “In the early days, this held people back from thinking about building businesses for mobile, because there were no recurring revenue streams from mobile app users. All the money you were ever going to make from them was right up front, when someone purchases an app.”
Still, Magnuson suspected mobile phones had paradigm-shift potential. “I could see that the energy was there. I wanted to make sure that as the world was going to change with mobile, I would be part of it,” he says.
After Magnuson left Google, he took a brief foray to Bridgewater Associates to take care of some personal finance goals so that he’d be ready to take the leap to start a company in the mobile space.
“I felt like mobile was going to be as important as the dot com boom in the nineties. And I knew that I wouldn't be able to forgive myself if I was at a hedge fund on the sidelines as the whole world was changing,” says Magnuson.
At Bridgewater, he met Hyman, another software engineer who had entrepreneurial dreams of his own.
## A chance meeting connects the founders with the idea
Magnuson and Hyman had been living near Bridgewater's HQ in Connecticut. In May 2011, they traveled down to NYC to participate in TechCrunch Disrupt for a totally unrelated project.
The demo they presented was [a plugin for Gilt](https://techcrunch.com/video/hackathon-backstage-gilt-ii-interview/?ref=review.firstround.com), the flash auction site, that allowed users to hold items in their cart and let other shoppers bid on it. Hyman thought of the idea after his girlfriend successfully snagged a trendy pair of shoes in her cart on Gilt, but then no longer wanted them for herself. “It was an arbitrage opportunity on top of a place where you were allowed to hold inventory for free,” says Magnuson.
The pair wound up taking home top honors at the hackathon, which caught the attention of some aspiring entrepreneurs and VCs in attendance. But it was a run-in on a busy Manhattan intersection that would lead them to their third co-founder — and a great idea for a mobile startup.
On their way to present the demo on the final day of Disrupt, they bumped into [**Bipul Sinha**](https://www.linkedin.com/in/bipulsinha/?ref=review.firstround.com). At the time, he was a partner at Lightspeed Ventures (he’d later found **Rubrik**) and recognized the pair from their winning demo. Sinha insisted Magnuson and Hyman meet Mark Ghermezian, a serial tech CEO who was living in Houston.
In short order, Ghermezian flew up to NYC to meet Magnuson and Hyman for dinner. He’d been working as an oil and gas CEO at the time, but he had a side project called Appboy, a website for app developers to interact with their users, that wasn’t [gaining the traction](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/) he wanted.
Magnuson and Hyman saw the potential of the idea immediately, and in the pair, Ghermezian had found the technical talent he needed to overhaul the platform. “The idea for the company was born from that original idea for Appboy, which is the fundamental business insight that if you want to build a sustainable business, you do that on the back of high-quality, long-term relationships. And if you want to build a relationship with someone, you should pay attention to people when you meet them,” says Magnuson. “**We wanted to take those very basic human and business concepts and translate them into software that would help mobile app owners.**”
After that dinner, they all agreed they were ready to take the plunge. “We pretty much decided during that meal that we were all going to quit our jobs and have a go of it. We knew what we were going to work on right out of the gate.”
**Bill Magnuson, co-founder and CEO of Braze*
## Building a prototype for a fledgling market
In the following weeks, Magnuson, Hyman and Ghermezian all moved to NYC and started sketching out product specs and an early object model on whiteboards.
They had a strong opinion for what the product should be from the outset. “The questions we wanted to answer were: How can we help someone building a mobile app stay connected to their users and encourage ongoing usage? And what do we want to know about the user to drive more relevance and value? That shaped a lot of the early product design,” says Magnuson.
“So we knew we needed to be cross-channel from the very beginning,” he says. “Unlike a lot of companies that are built to only send push notifications or do email marketing, we were trying to solve a business problem.” The first product offered these four message types:
- Push notifications
- Email
- Newsfeed (this was pre-Facebook newsfeed)
- Slide up message
“Our vision for our product was fully incorporated into the actual mobile apps. So that meant it couldn't just be an email or push notification coming in over the top. It actually had to be part of the look and feel and the interaction of the app,” says Magnuson. To brush up on the latest in mobile UI, Magnuson stayed active in the mobile app ecosystem that he’d been involved in since his days at Google, working with app developers and going to meetups.
But many folks he spoke with didn’t seem ready for the product the team was building. Most app developers at the time relied solely on the App Store for distribution. “I remember going to meetups in 2011\. Our tagline was ‘turn your app into a business,’ but people were skeptical because a lot of app developers at the time were just hobbyists who were building things and throwing them into the App Store,” he says (think of apps from this era like [Run Pee](https://runpee.com/?ref=review.firstround.com) that had a clever idea but no business model to speak of).
Some who played with the early Appboy product flat out told Magnuson that they didn’t want a customer engagement platform, and the $1.99 they got from the App Store purchase was enough. “**That was an interesting example where we had to take that and say, ‘That customer feedback is wrong**.’”
> Our conviction was that the mobile app ecosystem would turn into a thriving economy with great sustainable businesses. But no one was there yet.
Because the team was building for a future state, competition didn’t inform the early product iteration. In fact, Magnuson didn’t perceive any direct competitors in the beginning at all. “I couldn’t have even told you what ‘CRM’ stood for when we started building the company,” he says.
### Raising slowly
Given the lukewarm interest from some mobile app developers, the team knew there wasn’t extensive selling to do right away. So they focused most of their efforts — and hiring — on engineering and product development (the early team was an “amorphous engineering blob,” in Magnuson’s words). Beyond raising a Seed Round in November 2011 and an expanded Seed in March 2012, Magnuson felt no rush to stock up on follow-on capital.
“**We didn't intend to raise a tremendous amount of money in our early rounds because we knew the market wasn’t mature enough for us to go and rapidly scale a GTM machine**,” says Magnuson.
The raise-to-scale-fast approach eventually proved disastrous for a few early competitors. “They’d raise a $10 to $15 million Series A and then burn themselves out. Despite having more resources, they were effectively trying to push on a rope. And we had that visibility into our market. We also had the patience to understand that.”
### Assembling the early team
Around six months into building, Kevin Wang entered the picture. He and Magnuson were fraternity brothers at M.I.T.
Wang had been working as a consultant at Accenture in the energy trading industry with clients who relied on old-school enterprise tech. “Kids don't grow up thinking, ‘Man, I really want to do enterprise SaaS,’ but from working with this technology and seeing how successful it was, I felt that there was a huge amount of promise,” says Wang.
Like Magnuson, he also felt that mobile was going to shake up the business world and wanted to find a way to bring mobile to enterprises.
So when Magnuson and Appboy’s first business hire, [**Spencer Burke**](https://www.linkedin.com/in/spencertburke/?ref=review.firstround.com)**,** were passing through Boston on their way back from a ski trip and met up with Wang, Magnuson pitched Wang to join. It was exactly the opportunity Wang had been looking for.
Magnuson wanted Wang for his double threat coding chops and neuroscience smarts. “We were thinking about the science of human relationships and how to connect with resonance and relevance. His cognitive sciences background along with the ability to build and execute code in the early days was particularly valuable to us as we were growing.”
Wang then moved to NYC where he was the 8th employee — the team worked from one of the first WeWorks in existence in a tiny room with bare concrete floors in the Meatpacking District, where Rihanna’s “We Found Love” blared on the speakers. “I remember thinking, ‘This is very different from big consulting. The people are way smarter and this is a much scrappier environment,’” he says.
**Kevin Wang, early employee and Chief Product Officer at Braze*
## Churning customers to find the right ones
In fall 2011, after several months of building, Magnuson and the small Appboy team rolled out a private beta to some 40 app developers across multiple categories. It tested well enough for apps with large user bases that they decided to do a public launch. In March 2012, they released a free SDK and announced it on TechCrunch — and netted 1,000 beta signups within two weeks.
But those initial signups proved to be ephemeral. Few wanted to pay for it, and over time, many of those apps didn’t make it.
“**It's a funny number to look at because today, we only have a little over 2,000 customers. Out of those 1,000 beta signups, I don't think we have any customers today that came out of that initial set**,” says Magnuson.
Turns out the market still wasn’t ready for this kind of product yet. “A lot of mobile app developers were hobbyists. They weren't willing to spend money. And if they couldn't make money on their customers in the long term, there was no reason for them to pay someone to be able to engage them in the long term,” he says. “That created some interesting early friction. Our ideal customer just hadn't emerged yet in the market.”
Wang likens the sales approach in the early days to building a huge net to catch as many fish as possible — rather than precision-fishing with a rod. “We didn't just have conviction in a pond — we had conviction in a huge ocean. Despite the lack of paying customers actively pulling us in any direction, we were very focused around that core idea and the market that we were increasingly sure was going to emerge.”
### A new ICP emerges
Then slowly over the next few years, just as the founders had suspected, popular mobile apps started to mature as businesses, and established businesses launched their own apps. Broad adoption of mobile and a maturing market had created the right kinds of customers to start selling to.
And with that shift arrived a new type of marketer to manage a business’s growth on mobile. “We had to grow up with the mobile app economy and these new ways of organizing marketing teams,” says Magnuson. “It was interesting to be at the convergence of an entirely new craft and set of skills to run a marketing team.”
The ideal Appboy customer began to crystallize. “We found that early growth teams of mobile apps were our ideal customer. They were a pretty tight-knit community because they were forging a new, more data-driven and experimental way to approach marketing,” says Magnuson. “So we looked for those teams and those job titles.”
To find marketing teams that would be a good fit, the team pressed on outbound sales — [founders included](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/). “We would occasionally pick up a good warm lead by presenting at a meetup or conference, but we didn't have any meaningful budget to spend on broader demand gen,” he says.
But they still had to be picky. “One of the easiest qualification questions in the early days of the sales cycle was asking a customer how many monthly active users they had. Shockingly, a lot of them didn't know,” says Magnuson. “They knew their downloads, installs, app store chart rankings, but no one was paying attention to what was happening after day zero of the install.”
And it still took some pitching to show those customers what the product could do. “We had to paint the vision for people. It was a direct motion and a lot of us were involved in it. **The adage that everyone needs to be a seller in the early days was absolutely true**.”
> We had the patience to understand that there were exogenous factors that we could influence. So we’d go to a meetup and encourage people to think about their app or run their marketing team in a certain way. We had to train our customers to use our software.
The team’s conviction in building a horizontal product proved to be a wise bet, and they began to sign customers across industries. “Our early customer base was a mix of online retailers trying to drive incremental purchases, and then early mobile subscription businesses,” says Magnuson. “We had delivery and dating apps, even some in gaming. So as a result, most of our early customers had businesses where real-time messaging was non-negotiable.”
Wang notes how some marketing teams’ early experimentation with mobile campaigns created a survival of the fittest competition. “If I’m running a much better marketing team than you are and we have a similar brand, I’m going to win, and I’m going to win really big,” he says. “As a result, there’s some powerful natural selection in the marketing world. Once the first crop of brands out there started to use products like ours, there was intense competition in the market.”
That’s because many of those marketers recognized similar signals from the beginning of the dot com boom. “Especially in the early 2010s, marketers remembered how the dawn of the internet was a massive sea change that was really scary. If anything, they were overly jumpy to hop onto the next paradigm, especially once it was working,” Wang says.
### Creating feedback loops to sharpen conviction
With a roster of customers spanning industries and with several real businesses (and not just “hobbyists”), the team finally had an avenue for meaningful feedback.
“**A lot of our development in years two and three was about cutting early scope that we had built, and then deepening the things that survived through that**,” says Magnuson. “So we removed the editable user profile and the user feedback module entirely. But we also allowed that profile to be much more comprehensive and flexible behind the scenes.”
Wang likens the coalescence of the mobile market in the early 2010s to the rise of AI now. “Every week we were crystallizing more and more of the way that we thought that the world was going to be. There's some interesting parallels to where AI is today. People still don't know what's going to happen.”
> What the customer feedback did wasn't necessarily giving us new ideas about new places to build, but it told us where to focus and shift in those first few years.
### Graduating to enterprise
“We had a distinction in the early days between the mobile titans, which were the mobile apps that were growing and scaling quickly, and the enterprises that were trying to build a mobile presence. We were trying to build for both,” says Magnuson.
As big enterprises like banks started to build out a mobile presence, the team already had a wedge — because they came with an established business model. And the ICP of the early mobile adopter was often working within an enterprise marketing team.
Appboy found like-minded customers in the retail industry. “They were leaning into mobile as a place that people would do commerce in the future. And they knew that if they could engage customers in real time with higher relevance, they were going to drive more purchases,” says Magnuson.
Wang remembers the moment several years after founding when Appboy’s traction with enterprises really clicked. “They were all using Appboy in the same approximate way, which was the way that really aligned with our vision for where the world was going,” he says. “This is where we need to be. These are the buyers. We've got three of them right now, but 10 more conversations next week, it's going to be 100 the week after.”
## The benefits of staying horizontal before the market grows up
In the long run, building a mobile product for all industries proved to be the bet that led Braze to breakout growth.
With a fully baked mobile market, Braze’s growth soared. In seven years from launch in 2019, Braze cleared $100m in ARR, and then $200m in 2021\. In late 2021, Braze filed for an initial public offering. Today, Braze serves over 2,200 customers worldwide.
Meanwhile, their gaming-focused competitors started to crumble. “From 2012 to 2015, probably 85 to 90% of SaaS businesses in mobile were focused on the gaming industry,” says Magnuson. “So we stayed focused on building a product that would be widely useful across all different verticals.”
That turned out to be a fatal decision for gaming-focused companies. “When the market did come together, we were already there with a diversified capability. And everyone else actually had to spend time pivoting away from gaming — and some of them never managed to actually complete the pivot,” he says.
To this day, there’s no one biggest piece of the customer pie. “When you look at Braze today, actually, our largest single vertical is only around 21 to 22% of our revenue. And we have a highly diversified customer base across a whole bunch of different places.”
## Founders building ahead of a market curve: Stay patient
In reflecting back on the journey to get here, Wang and Magnuson stress the need for founders — especially those eyeing a nascent market — to settle in for the long game.
It’s hard not to set expectations for flashy and fast progress when every buzzy new startup seems to hit staggering ARR in record time. “A lot of people fall for the headlines of this or that acquisition happening quickly and in the early years,” says Magnuson. “So when they guess how long it takes on average for a company to IPO, they grossly underestimate it.” In Braze's case, it took a full decade from founding to IPO.
But a dose of stubborn optimism certainly helped fend off doubts in that early waiting period. Did Magnuson see all of this coming? Not *no*. “I’d often get this question as we reached these milestones, like opening a new office or ringing the bell at Nasdaq or speaking at an in-person all hands to over 1,000 employees,” he says. “I've always answered that I never thought we wouldn't. I didn't like to explicitly think through the details of what scaling would mean, but I never assumed we wouldn't succeed and continue to grow.”
### How to spot the wrong customer before they burn your roadmap
URL: https://review.firstround.com/how-to-spot-the-wrong-customer-before-they-burn-your-roadmap/
Last updated: 2025-07-14T23:42:48.000Z
How Vanta, Clay, Retool & more startups found their ICP
_This post is for subscribers only._
### Thinking about becoming a founder? Here’s how to emotionally prepare
URL: https://review.firstround.com/thinking-about-becoming-a-founder-heres-how-to-emotionally-prepare/
Last updated: 2025-07-14T23:43:11.000Z
A psychologist’s advice on preparing to take the founder leap
_This post is for subscribers only._
### Thinking About Taking the Founder Leap? Here’s How to Prep for the Emotional Gauntlet
URL: https://review.firstround.com/preparing-for-anxiety-of-becoming-a-founder/
Last updated: 2025-05-14T06:53:42.000Z
*This article is written by* [*Dr. Emily Anhalt*](https://x.com/dremilyanhalt?ref=review.firstround.com)*, psychologist and co-founder of* [*Coa*](https://www.joincoa.com/?ref=review.firstround.com)*, the gym for mental health. She’s also been a therapist and executive coach for over 15 years, working closely with startup founders as they ride the tumultuous waves of startup life. Previously, Dr. Anhalt has shared her practical frameworks on the Review for the* [*five traits of high-impact founders*](https://review.firstround.com/the-art-of-self-awareness-a-founders-guide-to-assessing-strengths-and-weaknesses/) *(and how these same traits might hold you back) and the* [*seven traits of emotional fitness*](https://review.firstround.com/hit-the-emotional-gym-the-founders-framework-for-emotional-fitness/)*. If you want more wisdom from Dr. Anhalt, you can pick up her brand-new book, “*[*Flex Your Feelings: Train Your Brain to Develop the 7 Traits of Emotional Fitness*](https://www.dremilyanhalt.com/book?ref=review.firstround.com)*.”*
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
Founding a company won’t give you autonomy. It won’t give you validation. It won’t give you the flexibility or recognition you’ve been craving — at least not right away, and often, not at all.
As a psychologist who has worked with hundreds of founders (and now as a founder myself), I've observed that most aspiring founders spend countless hours preparing for the logistical challenges of starting a company but very little time on the emotional resilience required to run that company. They’re perfecting their pitch deck, not unpacking why they want to start the company in the first place. They’re building financial models instead of community. They expect stress, certainly, but they frame it as something to push through until they “make it.” This mindset sets them up for a harsh wake-up call.
The founder journey isn't just about managing long hours and a heavy workload. It's about navigating profound identity shifts, handling persistent loneliness and learning to lead through failure. The “building the plane while flying it” metaphor gets tossed around frequently. But I don’t think it quite captures the fact that you're also building yourself as a founder while you're doing it. You're simultaneously constructing the plane, learning to fly and getting your pilot's license in mid-air.
This parallel journey — building both your company and yourself — is what makes being a founder particularly challenging.
> You cannot fully prepare yourself to be a founder before you start — you become a founder through the process of building. But that doesn't mean you can't train for the emotional demands ahead.
So how should folks who are thinking about taking this leap prepare for what’s to come? In my close work with founders as a psychologist and an executive coach, I've identified four steps to take for managing this emotional journey. Some of this guidance might challenge your assumptions about what it means to be "ready" to start a company. Some might provide the framework you've been looking for to make this leap feel less like a cliff dive and more like starting a taxing hike — one that you can navigate with intention and resilience.
💡
**After reading through the advice that follows, make a copy of the* [**summary on Notion*](https://firstround.notion.site/Steps-for-managing-the-emotional-journey-of-becoming-a-founder-1e5487375c85808687f9d994546f624c?ref=review.firstround.com) *to stay on track.*
## **Step 1\. Identify your fears so you can face them**
Completely divorce yourself from every successful startup story you’ve heard. They skip over the messy middle, jumping from brilliant lightbulb idea straight to life-changing exit. Rarely do they show the sleepless founder worrying if they can make payroll, or deep-breathing moments before an all-hands when they know things aren’t going well. The successful startup stories don’t capture the identity shifts that happen when your friends can no longer relate to your daily challenges or when “colleagues” takes on a completely different meaning because you’re now the boss.
What these stories ignore is real human emotion — specifically fear.
In my therapy practice, founders often tell me about their fears: fear of failure, fear of success (yes, both simultaneously), fear of judgment, fear of financial instability. But what many don't anticipate is how these fears evolve as their company grows.
Here's something that might sound counterintuitive: there's actually not much pressure when you're just starting out. Why? Because there's not a lot of pressure for something that doesn't exist yet. The real weight comes later, when people's livelihoods depend on your decisions, investors are counting on returns, and customers are relying on your product. **I've sat with founders who've hit major milestones — securing funding, launching products, hitting revenue targets — only to find themselves more stressed than before, because achieving one goal becomes the starting line for ten new ones.**
So when I say “prepare yourself,” I’m not saying to prepare yourself for everything you don’t know yet. It’s about preparing yourself not to know. Because there's an element of founder life that you can hear others talk about and intellectually grasp, but not really understand until you're in it — much like having children.
> You can read every book about parenting, but nothing quite prepares you for the sleepless nights. The same is true for founding a company. But while we've normalized extensive preparation for parenthood, we haven't done the same for founderhood.
This isn't meant to discourage anyone from starting a company. Rather, it's an invitation to prepare for the journey with eyes wide open and to build the emotional toolkit you'll need along the way.
So when you’re riddled with anxiety about taking the founder leap, start by pinpointing the fear and naming it. Is it financial instability? Judgment from others? Torpedoing a relationship with a friend-turned-co-founder? Not being able to raise funding? Getting specific makes it easier to take tactical steps to address that specific fear. Here are some examples of turning fear into action:
- **Build financial resilience.** Yes, you’ll want 6-12 months of savings or alternative income streams, but not just for the obvious reasons. Financial runway isn't just about keeping the lights on — it's about creating the mental space to make clear decisions. When you're not in constant financial panic, you can think more strategically and take calculated risks rather than desperate moves.
- **Get on the same page with your co-founder.** This is crucial — don't wait until you're in the thick of it. I remember when my co-founder [Alexa](https://www.linkedin.com/in/alexandrakmeyer/?ref=review.firstround.com) and I were starting Coa, we did something that might sound excessive to some: we essentially went through [pre-marital counseling together](https://review.firstround.com/the-founder-dating-playbook-heres-the-process-i-used-to-find-my-co-founder/). In addition to working with a therapist who specialized in founder dynamics, we sat down and asked each other tough questions about our values, fears and breaking points. This wasn’t just nice-to-have prep work — it became a crucial foundation for our working relationship.
- **Take the** **emotional fitness assessment.** Think of it like a pre-founder physical, but for your mental health. Look at the [seven traits of emotional fitness](https://review.firstround.com/hit-the-emotional-gym-the-founders-framework-for-emotional-fitness/): self-awareness, empathy, curiosity, mindfulness, playfulness, resilience and communication. Which ones are your strengths? How can you leverage them as a founder? More importantly, where are your growth areas? If you know you're not naturally empathetic, for instance, you might need to ensure your co-founder excels there or build systems to compensate for this gap.
- **Practice rejection therapy.** Every day, ask for something you're pretty sure you won't get. The point isn’t to hear a “yes.” The point is bolstering resilience to hearing "no," because as a founder, you're going to hear it a lot. Build up what I call "emotional calluses," just like a weight lifter’s palms after months of training.
Remember: The goal isn't to eliminate fear or anxiety. It's to build your capacity to function effectively alongside these normal human emotions.
> Think of it as creating shock absorbers for your emotional vehicle — they don't eliminate the bumps in the road, but they make them more manageable.
## **Step 2\. Figure out your “why” to address uncertainty and build confidence**
Back when I was in undergrad, I was a pre-med student and struggling mightily with my biology and chemistry courses. My advisor asked me a simple but profound question: "Do you actually like these classes?" When I admitted I didn't, she (rightly) wondered why I was even pre-med in the first place. She pointed out that if I didn't find fulfillment in the journey itself, the destination wouldn't be all that great either (even if my parents would have certainly been proud of me for becoming a physician).
The same principle applies to founding a company. When I begin working with founders, I let them in on something up front: **My goal is not to make their company as successful as possible.**
Rather, my aim is to help them live as satisfying and authentic a life as possible. Sometimes, that journey of self-discovery means they don’t actually want to start a company. Other times, that entrepreneurship identity gets even more vivid.
Dr. Emily Anhalt, Psychologist and co-founder of Coa
The point is, this is potentially a decade of your life — there are only so many decade-long blocks in a lifetime. The path to your ideal destination needs to be worth spending your one precious life on.
So clarify your why. A startup is too hard to sustain on a vague dream. Be clear on what’s driving you so that when things get tough (and they will), you have a compelling reason to keep going.
I've worked with founders whose ‘why’ was that the company was working toward a mission that was incredibly meaningful to them, like one founder starting a biotech company trying to cure the disease that his grandfather suffered from. Other times, the “why” is that they want to be their own boss and lead differently than they’ve been led in the past.
And then sometimes the “why” is more psychologically complicated. It's quite common that founders want to prove something to everyone who didn't believe in them. And while that can be a real driving force, it’s also centering your motivation externally instead of internally. Separate what anyone else will think or feel about what you're doing. Why are *you* doing it?
> Ask yourself: In five years, will I regret *not* trying more than trying and it not working?
Identifying your why can also help propel you forward into the unknown. I see too many aspiring founders waiting to feel completely ready — a moment that never arrives. Instead, focus on micro-wins: small steps that build momentum. Ask industry experts to give you feedback on your idea. Try building an MVP in a weekend. **Confidence comes from action, not thought.**
When my co-founder and I were starting Coa, I first presented our slide deck to two close friends who understood the market. Yes, I was partly looking for feedback, but I was also looking for allies who would tell me they believed in me. Their supportive response gave me the confidence to start pitching more broadly.
The key is understanding that confidence isn't a prerequisite for founding — it's built through experience. Study successful founders you admire and you'll notice their struggles often mirror your own. They didn't start with unwavering confidence; they built it through consistent action, learning and resilience.
The goal isn't to eliminate uncertainty or self-doubt. It's to learn to move forward alongside it rather than being frozen in analysis.
> Every founder you admire has felt the same fears you're feeling. The difference is they've learned to take action anyway.
## **Step 3\. Create systems for longer-term resilience**
I worked with a founder who had just hit a major milestone — a successful Series A raise. Instead of feeling triumphant, she found herself more anxious than ever. "I thought once we raised money, the stress would ease," she told me. "Instead, I'm terrified of letting down our investors, my team and our customers." This is a pattern I see repeatedly — I can’t tell you how many times I’ve had founders tell me for months (if not years) about the milestone they’re striving to hit. But that milestone comes and goes and it doesn’t bring fulfillment.
In my experience, when first-time founders achieve some important metric of success (which could be raising a round, hitting a certain number of customers, or validating the MVP), that’s usually the “oh shit” moment. They realize that they’ve been grinding toward this achievement and they’re not any less stressed.
> The “just push through” mentality doesn’t work in the long run. Sure, there are times in startup building where you will just have to grind it out. But there is always a new milestone to hit or fire drill waiting in the wings.
That's why I'm adamant about building sustainable systems early. Don't wait until you're burning out to create boundaries. Put structures in place before you need them: maybe it's a rule about not working after 9 pm, or blocking off non-negotiable time for therapy and exercise. Do not rely on willpower alone here or wait for time to “open up” to take care of yourself. The most successful founders I work with aren't the ones who can push through anything — they're the ones who build sustainable practices.
And when you feel unmoored, identify what is certain. Even in the midst of chaos, some things are stable — like your skills, your network and your ability to pivot.
- **Identify your burnout warning signals.** Do you get short with your team? Stop sleeping well? Poor eating habits? Lose interest in things you usually enjoy? Then create a regular check-in for yourself, like logging your sleep each night or journaling one line each night about how you felt that day.
- **Share the burnout flags.** Sometimes others notice our patterns before we do. So share your burnout indicators with trusted advisors or your co-founder and ask them to flag them for you — for example, if it’s the third day in a row that you’ve skipped lunch. Sometimes others notice our patterns before we do.
- **Keep a hype doc.** Collect positive feedback you’ve received over the years and return to it when you feel imposter syndrome and self-doubt creep in.
- **Start a “team-esteem” channel in Slack.** Create a central location where anyone on the team can add positive feedback from customers or kudos for each other.
- **Celebrate your wins in tangible ways with your team.** Don’t let milestones (even small ones) pass by unacknowledged. As one example, a founder I worked with created little wooden blocks for every single milestone (like hitting a certain number of customers) and everyone got a block to add to their desk.
- **Invest in a simple meditation practice** to teach yourself the art of coming back to the present moment.
- **Maintain your hobbies outside of work** to remind yourself that you are more than just the company.
> It’s like putting gas in your car. It doesn’t feel like a priority when you still have a half-full tank. But you’ll wish you’d filled up when you hit long winding roads with no gas stations for miles.
## **Step 4: Find circles of trust to manage founder loneliness**
As a founder, you have a singular vision for the way things could be. There is an intense passion for solving problems and a fervent desire (and impatience) for change. This me-against-the-world mentality can be exhilarating — for a while. But it can also bring suffocating loneliness that makes the lows (of which any startup has many) feel even more debilitating.
I see this loneliness stem from three main sources.
- **First, there are the identity shifts.** Friends and family may no longer understand your world or relate to your challenges.
- **Second, there's the power dynamic.** Being a leader often means maintaining appropriate boundaries, which can create distance.
- **Third, there's the pressure.** Founders carry a unique emotional burden that others, even their closest allies, don't fully grasp.
One founder I worked with described it perfectly: "I have to maintain confidence in our vision publicly while privately wrestling with doubt."
> There's a fundamental shift that happens — from fear about uncertainty ("Will this work?") to pressure about sustainability ("How do I keep this going?").
To mitigate this, the most resilient founders I know have built what I call "circles of trust" — different groups they can turn to for different needs. Maybe it's a therapist for processing personal fears, a founder group for tactical challenges, mentors for strategic guidance and friends outside tech for perspective and a connection to who you are outside your founder identity. Each relationship serves a purpose and together they create a complete support system.
That’s why when I started my own company, one of the first things I did was join a founder group that a friend invited me to. This wasn't just about networking, it was about creating a space where I could be vulnerable with people who truly understood the journey. (If you’re looking for a group to join, I recommend checking out different founder coaching companies who often offer groups or asking your investors to put you in touch with other founders in their portfolio.)
Building relationships with fellow founders a few steps ahead of you also brings some invaluable perspective. There will be countless moments along the journey where you don’t know what’s coming. Moments where you bang your head against the wall and think, “A smarter person would have figured this out by now.” Hearing directly from folks who have faced down those same obstacles helps to reframe "I don't know what's coming," to "no one knows what's coming. This is part of the process."
> I encourage founders to adopt a scientific mindset. Every setback becomes data. Every unexpected turn becomes an experiment. Everything that doesn't work takes you one step closer to what does.
## **The path forward**
Recently, I was working with a founder. He looked across the table from me and kept repeating “I’m a failure, I’m a failure, I’m a failure.” That week, he’d shut down his company after three years. “We didn’t have a successful exit,” he said. This mindset — measuring success solely by exit value — misses the profound impact and growth that can happen along your founder journey. He didn’t even mention the tens of thousands of people his company helped to improve their financial literacy.
> If your company didn't have a dramatic exit, would you still be glad you did it? If the answer is no, reconsider your motivations.
Here's the truth about the founder journey: you're not going to go back to being the person you were before you started. You'll learn, grow and evolve — regardless of the outcome. The question is whether you're ready to embrace that evolution.
This brings us back to the beginning: the myth of entrepreneurship. The founder path might eventually bring you autonomy, validation and recognition. Or it might not. But more importantly, it will bring you challenges that force you to grow, relationships that shape you and insights about yourself you couldn't have gained any other way.
The key is starting with eyes wide open and tools at the ready. Build your emotional fitness now. Gather your support system early. Create sustainable practices before you need them. The path of a founder isn't easy, but it doesn't have to be lonely.
So as you consider taking this leap, remember that your emotional toolkit is just as important as your technical skills. Your mental preparation matters as much as your market research. And your journey — however it unfolds — is valid and valuable, regardless of the destination.
The journey ahead will transform both your business and yourself. Make sure you're ready for both.
### From reluctant founder to $2B valuation: The story of Persona | Rick Song (Co-founder and CEO)
URL: https://review.firstround.com/podcast/from-reluctant-founder-to-2b-valuation-the-story-of-persona-rick-song-co-founder-and-ceo/
Last updated: 2026-02-03T17:49:00.000Z
Rick Song is the co-founder and CEO of Persona, the identity verification platform used by some of the world’s largest companies. Before starting Persona, Rick worked on identity fraud and risk products at Square, which laid the groundwork for what would become Persona’s highly technical, horizontal platform. Since founding the company, Rick has scaled Persona into a category-defining leader, recently raising a $200M Series D at a $2B valuation.
In today’s episode, we discuss:
- How Rick’s skepticism shaped Persona’s early strategy
- What it takes to scale a true platform company
- Successful execution in hypercompetitive markets
- What Rick’s learned from his co-founder, Charles Yeh
- and much more…
**Referenced:**
- Accenture: [accenture.com](http://accenture.com/?ref=review.firstround.com)
- Anthropic: [anthropic.com](https://www.anthropic.com/?ref=review.firstround.com)
- Braze: [braze.com](https://www.braze.com/?ref=review.firstround.com)
- Bridgewater Associates: [bridgewater.com](https://www.bridgewater.com/?ref=review.firstround.com)
- Charles Yeh: [linkedin.com/in/charlesyeh/](https://www.linkedin.com/in/charlesyeh/?ref=review.firstround.com)
- Christie Kim: [linkedin.com/in/christiekimck/](https://www.linkedin.com/in/christiekimck/?ref=review.firstround.com)
- Clay: [clay.com](http://clay.com/?ref=review.firstround.com)
- Kareem Amin: [linkedin.com/in/kareemamin/](https://www.linkedin.com/in/kareemamin/?ref=review.firstround.com)
- MIT: [mit.edu](http://mit.edu/?ref=review.firstround.com)
- Newfront: [newfront.com](http://newfront.com/?ref=review.firstround.com)
- Palantir: [palantir.com/](https://www.palantir.com/?ref=review.firstround.com)
- Persona: [withpersona.com](http://withpersona.com/?ref=review.firstround.com)
- Rippling: [rippling.com](http://rippling.com/?ref=review.firstround.com)
- Scale AI: [scale.com](http://scale.com/?ref=review.firstround.com)
- Snowflake: [snowflake.com](https://www.snowflake.com/?ref=review.firstround.com)
- Square: [squareup.com](http://squareup.com/?ref=review.firstround.com)
- Y Combinator: [ycombinator.com](http://ycombinator.com/?ref=review.firstround.com)
- Zachary Van Zant: [linkedin.com/in/zacharyv/](https://www.linkedin.com/in/zacharyv/?ref=review.firstround.com)
**Where to find Rick:**
- LinkedIn: [https://www.linkedin.com/in/rick-song-25198b24/](https://www.linkedin.com/in/rick-song-25198b24/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
(0:05) Life before Persona
(2:11) The push from Charles
(3:09) Early reluctance and low expectations
(9:50) Winning the first $50 customer
(13:08)“Invalidating” Persona
(16:43) How Persona found their edge
(19:35) Transitioning from MVP to platform
(24:18) Turning down a $5K deal on principle
(26:47) Generalizing bespoke solutions
(28:28) Finding product-market fit
(33:51) Founder-led sales and consultative approach
(39:30) Building a culture of reactivity
(45:47) Landing the first enterprise customers
(51:34) Silicon Valley’s obsession with frameworks
(58:17) Developing first principles thinking
(1:00:24) Stay competitor-informed
**Brett:** \[00:00:00\] before you wrote the first line of code for a persona, what was going on the year before?
**Rick:** working on Square Capital at that time, square Capital was kind of expanding into a multi-product kind of category I was working primarily on risk. So, Audrey Kim was my product counterpart at that time, so I'd worked closely with her doing a lot of things around kind of, building identity fraud risk products and also generalizing that across like all of the work at Square.
So it was a mix of the same thing. I'd been on capital at that point, and also working on around like fraud and identity stuff for four years. It was an extension of that, but capital's growing like a weed at that time. So I, spanned out, worked on some other products. I did a brief kind of like trip to New York at that time, meeting some of the folks that were out there.
But at the very end of it all actually, there wasn't any like, you know, spark before, kind of like, uh, you know, that led to persona. Charles, who's my co-founder and my roommate for up at that time, maybe three, four years, he'd been wanting to a start for a long time. A joke I always told folks is that a Dropbox on iPod them. So he didn't know the travesty that like the startup journey never ends, but Square had already iPod. I'd \[00:01:00\] already gone through like the trough of, disillusionment and understanding that, every startup is a success until it's just a failure or something in the public market's eyes.
And then, maybe you'll correct the narrative. I think Square kind of did, but you know, it's kinda like that. So Charles is really pushing on this idea of we should do a startup together. He had, the YC DNA in him too with the Dropbox. So he was all about it. So he's the one who actually had pushed us, to be like, Hey, we should go like just do something.
I'd been doing, like identity fraud related stuff for quite some time. A lot of orchestration stuff with all sorts of vendors. we used to joke at Square sometimes that hey, there's probably some company in this, none of us have the ego or the uh, ambition to make it, but I'm sure someone out there will build something really great in this space.
And I was joking with him. I was like, yeah, at least we can do this. In the back of my mind, I was also thinking at the very least that way when I go back and get a job at Square, it won't be like I went off and did nothing for like, six, nine
months. I'd be like, oh, you know, I was exploring all the same work I was doing, still relevant to my job.
So that was honestly a lot of the impetus, what had led over to persona. it was just an extension of a lot of the ideas that were already brewing for maybe four years, five years \[00:02:00\] at Square. Just observations on what we were seeing on some of the challenges within this space and otherwise.
**Brett:** what was the bit that flipped for you two when you went from just chatting about it to saying, okay, we're gonna go start a company.
**Rick:** Charles was gonna go off and do start with someone else. At that point, he was like fed up with me. I had been telling him for like a year, you know, being like, oh yeah, I'm gonna quit at some point, right?
Dragging my feet I was really happy at Square, like I'd been there for so long. I even had a quip that I stole from someone else there, which is life's too short to try new things. I was kind of heels dug in and he was like, oh, I'm gonna go think about other startups, you know, thinking about doing something else.
Got little worried about that, and I was like, oh, shoot. So at that point I was like, ah, why not? Let's take like a six months of BAB goal. We had this packed at that time. if it goes nowhere. we, you know, would join the company together. 'cause we'd always wanted to work together in some capacity.
It was just a question of like, would it be a start versus at a company together? And, uh, my thought was like, oh, why not? You know, I've been here for so long, why not try this? I'm of the age in which, you know, you get outta your system and then I'll go back and be a corporate guy for the rest of my life.
that's kinda what led to it.
**Brett:** So why do you think such a reluctant \[00:03:00\] entrepreneur, why do you think it's worked thus far? what I always have been curious about your story is it's the opposite of Silicon Valley lore,
**Rick:** Oh, I mean, that's the grand question, right? That's, if I could answer that. all my existential, my imposter syndrome, oh, that would be in an instant. I, I thought about it. I have some theories on it. my immediate quip is, it probably a half of the valley is backward rationalization where
like, Oh.
yeah, this all makes sense.
Then after, you know, of course this all makes, how could you not tell? Right? I mean, I've joked with some people right now that regardless of the outcome of ai, it's all gonna be completely obvious in five years. Right? Like, how could no, no one tell that, you know, this was all a sham or the greatest thing that we've ever seen.
Right? And everyone's gonna be like, how could those people back then could not it was so obvious. I mean, at the end of the day, this is kind of where my, you know, all the rationalizations come to. I think it's a combination of, there's a motivation factor of like what continues to push you.
And there's a lot of ways at it, right? And I've seen all sorts of founders of different motivations. The second I think is uh, in the categorization kind of, insight or like just, if you are like \[00:04:00\] everything else, then the market already is kinda like discovered.
It's efficient. So at the end of the day, everyone, if you're trying to find edge of any form, it's are you different from everyone else, right? And if the market pulls too heavily on one way, you know, it flips the other. It's kinda like that, right? So like when the, Silicon Valley lures pushed so heavily in one direction, I can kind of see a second kind of rise up. On the motivation factor side, I think a. Big part is like I've seen like founders get motivated by something like just they have to see this vision come out to the world, right? Some sort of product vision. Um, I actually think uh, a very fine motivation is just a desire to build a company.
I actually think some of the best companies out there is just like a desire of any company and just in relentless desire to build that uh, mine, I think at this point is a lot fueled by the sense of duty or just a fear of letting folks down. I mean, you know this better than anyone, right? there's a lot of folks at Persona now who I've known for a long time.
persona is the one that are more unique traits of it is just the long tenure. A lot of folks that have been for a long time. So I think that's kept me really motivated, just like making sure it continues. So that's kept it locked in, but I don't think like the lore, anything, all that doesn't really matter as long \[00:05:00\] as you have that motivation aspect.
And then I think the second one's like, can you bring some sort of unique insight and not, I think the unique insight I have is that reluctance is fundamentally tied
to a certain skepticism and cynicism. When you're skeptical of like, this thing doesn't automatically work in effect. I think that's a form of first principles in which you're almost by default asking like why is like what everyone else thinking wrong.
And that I think continually allows you to find some form of edge in like, I oftentimes tell folks that uh, identities a very long like, kind of deep space. It's been around for a long time, so to find edge in it requires folks to really be able to constantly like, kind of peel back the layers and find something no one else is thinking about, however small that edge is.
And I think that cynicism helped, that reluctance has helped us differentiate. That's where I've kind of wound up at now.
**Brett:** So going back to, you and Charles starting this company, you doing it somewhat reluctantly. You decided that given you had so much experience building a bunch of this infrastructure from scratch at um, square, you kind of had an edge in that space. What exactly happened after you two said, okay, \[00:06:00\] we're gonna go start this company?
How did you figure out what to start with? What the first version of the product would be. Did you spend much time thinking about how fractured and fragmented identity was?
**Rick:** So we knew how fragmented it was. that for sure, we were very well aware of it. The MVP part was hard. We knew we wanted do something around identity and at that point it was a lot of like just setting small goals. The first goal we had was if anyone would pay us anything, we're a game, right?
And I think the first customer of ours was paying us like $50 a month. It was like the small e-commerce shop, like $50 a month. We were like, we'll build, exactly what you want. a lot of what we do is like, we build something and then, I think sometimes if you just keep on iterating with MVPs, you just end up with this Frankenstein of a product.
So the second half is like, okay, can we generalize? You know, once you get to, it's like, can we generalize, take a step back, not keep on selling and see is there like, some sort of common thread between these two? But, uh, we knew it had to be something identity related 'cause we thought, one, we understood the space fairly well.
We thought there was a lot of kind of ideas around like PII, the vision of persona never really changed because the \[00:07:00\] grand idea was pretty much. There is an opportunity to build a universal, kind of like identity platform slash network. And that doesn't really exist today, right? Because like in payments you have like Visa, MasterCard, it enables everyone kind of collaborate, enables every single merchant to benefit from, you know, like shared risk intelligence otherwise.
And identity was super fragmented. Every business, every vendor, every technology was all fragmented. So we knew that end state.
**Brett:** so before you even started writing the first line of Code, the long-term play was to build this consolidated end-to-end platform and identity as just a broad, squishy idea.
**Rick:** yeah, I mean in the sense that we knew that is a big idea. Like it's one of those things in which you know, for us, like we weren't creating brand new industry. It was. I feel it's like, that's why there's so many competitors in this space too. It's such a crowded space because I think the idea behind it is just so obvious, right?
Like I always tell whenever someone new joins, I never tell 'em like, oh, we have a, market risk, like just identity's not a market risk company. It's fundamentally really an execution risk \[00:08:00\] and it's a very high execution risk because the idea is just so obvious. to me it's like kind of online payments where you can argue how large is it.
There's also a question there, but is it a utility? Isn't it valuable? I mean, I don't think anyone ever argued that, of course. Like being able to just transact online has to be valuable from day one. And uh, I think the idea of like a real identity
is very similar in which. Yeah, wanting to know who someone is and like, is there a person behind it?
That's just a very kind of tried and true idea. And then the second part of that is because the idea is big, if there is a way to consolidate and like, you know, build a large business I think a natural offshoot of that would be a large business. that in and of itself, we never really had a question about.
So like how it was nebulous and fluffy, but we never kind of had to like steer away from that. The question then became like, how do you navigate, you know, these infinite paths to get there?
**Brett:** Why did it not keep you from starting the company? why did you not just say it's in some ways overfunded, there's too many competitors and thus it's uninteresting.
**Rick:** I think the benefit of not having an expectation of success made that really possible. my thought at the time, a lot of it was, I'd rather do something I kind of understand than like just completely something \[00:09:00\] random and then afterwards go back and try to explain to everyone, you know, oh yeah, I learned a bunch of stuff about something that I'll never use again.
And that's great. So that felt as if I was just continued deep in my understanding on something, that joke earlier, life's too short to try new things. I was like, Hey, I've done so long of like identity, why not continue understanding it but better? And the second half was just, we had so little expectation of getting anywhere.
raising any capital at all, I think was like, Kind of cool. I can't believe that happened. And I think on every leg of the journey, even today, I'm very surprised of where we are. But I think that lack of expectation made it such that, you know, you can kind of continue along with it and continue to try to push on this space, continue to try to develop it.
**Brett:** okay, so we took a little bit of detour, but you had the broad direction you were gonna go, and then the question was, where do we start? and you mentioned you started with this e-commerce company and just did whatever they wanted, where did the, company come from? Why did you care about going and building a widget for them?
Like what, What's the whole backstory?
**Rick:** we'd actually met y'all. We just got out of our YC interview at that time. I think we weren't planning to do YC regardless. we didn't wanna drive down constantly.
\[00:10:00\] And at that time, you know, we were like, oh, I don't know. I don't even understand why exactly. We didn't wanna do, why see? But one of our good friends, I mean mutual friends, Nico, he actually wrote our entire application for us. And he submitted it, I gave some like, light feedback, like, Nick, I'm not doing it anyway, so just try it.
Right? So I went down, we drove down that day, did the interviews, we're on our way back up. I think we stopped at a coffee shop. 'cause a friend of ours,
like, hey, one of my friends, he like runs a small e-commerce shop, they knew to kind of like age verification for the things they're selling, right?
So we're like, cool, you know, put us in touch and we like chatted with them. And that's actually our first customer. Like, just at that coffee shop. I called the guy, he's like, you know, like, I'm only gonna pay like 50 bucks a month. And I'm like, I'll do anything like 50 bucks. That's more than zero.
We're at zero right now, so I'll take that deal.
**Brett:** so you had, not written any code at this point,
**Rick:** We'd written some code because it felt bad to do nothing all day. So we'd ran a lot codeless to deploy. We had like the base of an app. We'd ran like a bunch of like just small MVPs and things like that.
**Brett:** but void of talking to customers or anything, just building
**Rick:** yeah. But like we knew, you know, as both \[00:11:00\] of us are engineers, we're like, there's just a, that like finite
stuff Yeah. Like you have to deploy, you have to have like some database out there. You know, you gotta, like we had sign up, GCP, we knew kind of had some base of a deploy system, some testing at that time the joke was like, might as well, you know, every single day like build out a foundation that just does something.
But I think this was like maybe a month two in which we were chatting with him and like one of our first goals was just if we can get any, cus if anyone's paying us anything, at least like we can go back and say we had one, you know, we had one person paying us. So, I think we stopped there and then at that point we kind of like really started revving and like started building something for him.
**Brett:** what did you hear from that customer and what did it lead in terms of what you would build?
**Rick:** So that was kind of interesting at that time. 'cause like what they needed was kind of like age verification. because like a lot of their uh, segment were, um, younger age, like 18 to 22 in which you have a thin credit profile, like database based verification would be tough.
the same time you're buying like, you know, something from e-commerce. I think one of the bigger challenges then is like, you know, the speed of it has to be fast. Like you can't just like, you know, like wait for a long time. So, a lot of folks with \[00:12:00\] submit, submit government IDs, A lot of law of government IDs, right.
Uh, That would be submitted. So we were like, okay, let's take a look at the state of the art. A lot of the state of the art at that time was like getting a person to actually look at it. And, you know, that could take anywhere from like 30 minutes to an hour. So. That's kind of our first impetus for the first proc was like, let's just automate that.
Like, let's see if that's actually possible. So that became kind of the impetus for our first, you know, core Pro, which is government Id like verification in a fully automated way. And that kind of led to another customer who was like interested in that technology but viewed it more so, uh, from a fraud prevention perspective where they're like, oh, I could collect government ID to do fraud prevention.
And we started like introducing biometrics as a way to kind of help stop fraud as well. 'cause like comparing the phase to kind of government ID would be a double kind of like pseudo two factor kind of approach towards a physical identity verification. So that was kind like the evolution of like where the kind of platform evolve.
But the benefit, one kind of crazy thing we had at that time was, I think as soon as we got that e-commerce shop, the position of the business was we will never get two customers who do the same \[00:13:00\] thing. And that I think was kind of really wild at that time. I.
**Brett:** Why did you choose that? Right? Like the obvious conventional wisdom is you wanna narrow in on a customer profile and then. Focus on that customer profile for months or years, and then move on to the next customer profile. You obviously did the opposite.
**Rick:** I think a lot about like these days, I mean a much more personal reason why I think that was the case was even at that point I don't think we had been, we've become fully convicted that like there was any business here. I almost feel as if I was, far past our series A before I really kind of realized, oh shoot, this might actually be somewhat of a real thing.
At that point I think I was always under this feeling of I don't think this is real and I just need to figure out why this actually is not a real thing. you know, it's like we're living in some fantasy land right now and like there's not a real like actually long-term business here.
We're just gonna get far, somewhere and then we're gonna just hit a hard wall. So I think at that point, what I was really trying to prove to myself was like this idea that something universal that could actually go cross platform that's just a farce. Like it \[00:14:00\] doesn't exist. 'cause like a lot of identity prior to this is very verticalized.
You have all sorts of businesses who are all like, you know, they all have this idea of we're gonna build this universal thing. But in reality it oftentimes just a vertical like, hey, we generally focus on fintechs and like some maybe payments in particular, we generally focus on this. So I had a very strong conviction like, they all probably are right.
I just don't know why it's not possible yet. I was like, let's just get that outta the way. Find out that there actually isn't a business here, so we can stop wasting our time. You know? Uh, Vincent, the first person to join us, he like flown down, was living on our couch at that point, and I was like, Vincent, need to go back to Seattle.
You need to go home. You know, like, I feel bad that you've like, come out here on this startup, so let's like spend these next three, four months and we'll figure out like why this is a terrible idea. There's nothing here. So, uh, yeah, we had this whole thing and like, even, you know, after a couple more folks joined, I think the first bit was all about like, is even possible close customers across in Berkeley?
Can we figure out how to speak to each one of them? It was really kind of, it didn't make a lot of sense that times, but uh, I think a lot of it was driven by this idea of it's better \[00:15:00\] prove that this doesn't work sooner rather than, you know, continue to like uh, fool ourselves.
**Brett:** what's the story behind the first five or 10 customers that came after it? And what was the actual product that you were selling? ' cause the first product was this quick um, government ID verification product that you sold to this e-commerce company?
Yep. And then how did you end up with the next handful of customers and was it the exact same use case?
**Rick:** I was really no, same use case. Like, has to be different use cases and it had to be different industries. So we really pushed on that
**Brett:** but it was all because you wanted to invalidate the idea as fast as possible, not because you thought it would be the most likely way to not become a verticalized niche player.
**Rick:** So I said that a lot. Like that's what I said back then and I reflect on it a lot 'cause I, you know, these days you go through all sort of self-reflection of who you were six years ago. I think, like I said, that I was like, oh, like the only way we can actually prove that this is actually big business has to be that.
when I think like, in self-reflect and like introspect, I think the real reason was more \[00:16:00\] because I really kind of wanna prove like that, you know, I don't know. I was like so scared of like just wasting everyone's time and like pretending as if there was something big here. ' cause yeah, I mean.
The reason why I've intersected so much on that was like, I think the rational thing would be, Hey, we should do this. Like, and like first like talk grow, and then we'll figure out those problems later on. But I don't know, I mean, the early days was so much about like invalidating core, kind of like long-term problems as opposed to like just trying to get off the ground, which was kind of insane.
But uh, that's why I say I think actually in, in truth it probably was driven by this personal feeling of, I don't know, I just didn't wanna like spend like four years on this, realize that there was like a dead end of a company and then like have to go tell all these people, I'm sorry I was wrong. And like I've been lying to all this time that there was this like grand vision and I understand this grand vision.
**Brett:** So do you think that approach in those first few months is actually a good approach that other people who are starting companies should consider doing that? Even if you kind of did it for maybe the wrong reasons? Or do you think it was somewhat anomalous that it happened \[00:17:00\] to randomly work in this thing that you're trying to do at Persona?
**Rick:** Every great business I think has an atypical path. All of 'em, every single one of 'em.
There's something kind of like unique and I think about that. 'cause I think the core of it is that you just like, if you like start doing what everyone else is doing, there's just no, you know, there's no edge anymore. There's no opportunity. So I
think every business, like at the end of the day, there's something atypical about, I don't think many people go down this like.
Heavy, kind of like invalidation path, but there's also like great business. I mean, one, I always uh, hear what was it I respected? Tremendous balance, rippling, like Parker Conrad's approach on rippling was the, we're gonna build like consolidation from day one. We're gonna build a massively ambitious platform from literally series A, not launch for multiple years.
I have a good idea of exactly what we're building here. We're not gonna talk to anybody and then we're gonna unveil it and like really just go and like it's taken off. Right. And I think that's a crazy approach. A lot of people are all about like the lean MVP,
whatever. I think like any kind of approach, if it's differentiated enough. So the second half is like, can other companies do it? And I think that's where the founder \[00:18:00\] personality probably comes into play because I think for many others, especially at Persona, when they hear that, like that was kinda our approach in the early days.
It's not like, oh, that's insane. It actually when I've told some of my close friends about this outside of work, they're like, yeah, that sounds like something you would
do. And I think that's kind of where it comes to is like most likely whatever approach that works your business, it'll probably sound like something you told your close friends.
It'll be like, oh yeah, that makes sense. Exactly how you'd probably approach the
problem or think about it.
**Brett:** let's go back to the story of the next handful of customers. Like what did you build? How did you find them?
**Rick:** one of our customers uh, we'd the first engineer who joined us, bill he'd attended one of the first round events and he was talking with a another company here.
And, you know, he was like pitching like, Hey, we do identity verification. You know, and like, that's actually how he found the next one. I think. Uh, They
were within the uh, marketplace space, you know, uh, helping kind of, connect parents with sitters. And, you know, they needed to do some things around like fraud prevention, background checking.
So that was actually how we discovered the next customer for us, which was, Hey, all right, well, you know, and then we kind of iterate on the platform. Adjusted kind of like the core, kind of like a
**Brett:** To meet their \[00:19:00\] to meet their needs. Right. a lot of that became kind of later on, I mean, this continuous iteration of like, you know, we work with a uh, there's a crypto company in which like their core consideration really was about the global onboarding and streamlining kind of K-Y-C-A-M-L.
**Rick:** So that was very different from both the age verification kind of fraud prevention approaches. So we kind of like had to adjust the platform kind of, uh, meet their needs too. and I mean, I love the customer where there was a FinTech customer and theirs was similar to the crypto one about K-Y-C-A-M-L, but like with kind of variations.
They were much more US focused. And they had a demographic they were really trying to serve. So we partnered with them too.
**Brett:** When you were talking to those customers and sort of effectively building a custom solution or maybe. Half of the solution. You were repurposing your existing infrastructure and half of it, I guess you were just spinning on the fly for them. when you were talking to them about being a customer and talking to 'em about the product, even if it didn't exist that you were building, was there a lot of pull from them?
Like they were telling you they have a lot of pain, this is exactly the type of thing we need, \[00:20:00\] or like what was the reaction you were getting from those early customers?
**Rick:** they were all small. I mean, one of the bigger challenges early on, we, you know, we all came from kind of like a tech industry, so we'd also met a lot of larger customers and we got a lot of nos. They were like, we're not gonna work with a seed stage startup on like managing personal information.
There's just no way. Right? Like we are, you know. Borderline public, you know, there's no way. So we got a lot of nos back then. So at that time, working with lobbies early companies, I wouldn't say they had a burning problem, you
know, they're, they're a startup usually. Like a couple founders, a couple other folks working with them.
They hadn't really had a team dedicated this, and we could definitely talk to 'em. It's like, Hey, we're just effectively an outsource identity arm for y'all.
**Brett:** That's what you said to them.
**Rick:** I mean, we didn't say exactly like that, but it's like, you know, we talked with 'em exactly how they should think about their problems and we're like, we can adjust our platform to meet that.
Right? Like, we understand exactly what they give. Kind of really a the first salesperson who joined us, Dan who now does product here, he told me You were Challenger Salesing people before. They're, you know, but without reading the book. And I was like, I have no idea what you're talking \[00:21:00\] about, dude.
I don't read. if you've ever read a challenger sale, I think that's what it is like we're really just trying to understand their problem and then proposing a solution and being like. If your game, that's the solution we'll deliver for you. And that's kind of like what got them kind of through it because they were looking for advice.
I mean, identity is one of those spaces in which you're probably, if you're early, you're not gonna hire someone to focus on. Identity is just not within like your first 10 or even 20 hires, except for very specific spaces. Generally you're trying to find park market fit, just build out core product identity is kind of an auxiliary thing.
And having someone both provide advice. 'cause you know, I understood a lot of the problems within the space at that time. Provide advice, be genuine, like, you know, honestly from a pricing perspective. Also just very generous pricing. And like building trust on delivering that solution. I think that I think resonate a lot.
And like many of those customers, especially the ones who are still operating, they're still with us.
**Brett:** were you concerned at the time that when you went up market, no one was interested?
**Rick:** throughout our series A, that was a major concern for me, right. Was just like, is it even realistic? Like that became the next, after I kind of had a settled on the \[00:22:00\] idea of it's probably possible to go horizontal and like try to go after many industries.
Um, I think after about like 10 or 20 customers, we did this grand re-architecture 'cause we'd realized like everything had gone too, kind of, you know, uh, bespoke. So, uh, we created this whole versioning system of like our products. Like now 2.0\. No, it's not an external thing,
it's just internal. Like we have to refactor it all.
But after that, like kind of refactor the next just constant concern for me was this myth of like, oh, we'd be able to like just level up and like, you know, this idea of we'll start small and get slightly bigger customers, slightly bigger and slightly bigger, that would probably die. So that became like just, we were constantly wondering about it and I think we were kind of able to get through it because even today, I mean you just never really stopped selling, right?
Like for the largest customer, I mean, I'll be on a call at 9:00 PM tonight with a prospect. 'cause uh, I'm always wondering can we push that next kind of type of archetype of customer and someone's always kind of pushing towards can we grow up market? So, yeah, I mean we were able to kind of like, I guess, staircase our way up.
But it was for a long time before I \[00:23:00\] realized, and even af once we started getting like later stage startups, we started wondering is it realistic to work with like public companies? Is it, you know, and I mean there's still a lot of uh, major industries, I don't think we've broken into still today.
And I still wonder, is it possible.
**Brett:** Were you worried that you were just creating a consulting shop for identity as opposed to an actual products company?
**Rick:** No. Well, the reason why I say no is uh, at that time I didn't think so because I didn't really care if it was a consulting shop or not. I was like, eh, you know, if we get a customer, that'd be great. And the second one is how we were pricing them, was like, we're pricing a product. You know, that's why it was so unbelievably like a good deal is that, I mean, we were just the cheapest consulting shop and like the product itself, like as long as we had faith that we could like repurpose it, I wasn't too worried.
Like, it wasn't like we're just building a brand new solution every single time. It really did feel as if there was this organic evolution. And even as we're building things, we always, in the back our minds had an idea of, oh, I could see how we could like, you know, reconsolidate these two into a generalized kinda idea.
So there was never really this idea. \[00:24:00\] The solutions were never so far apart. And because we had the vision that one day all these identity operations, all these identity verification methods, this whole identity platform will all sit together. It never fell as if we were like doing wasted work.
**Brett:** When you think back to the first few dozen customers, did you continue to just take anybody who was interested in what you were doing, or at some point did you develop a point of view?
**Rick:** So we had two types in which we probably would not work with. Identity is like a very census space. There's a lot of like regulatory, legal kind of pressures in it. Sometimes I think some of the asks were I'd probably say like, not kosher, probably not within our wheelhouse.
So. I'll, I actually will never forget 'cause the first customer, I mean this might have been customer or potential customer number three or four, they were offering $5,000, which, you know, when you're working in the land of like 50 bucks, you're like, holy moly, 5,000\. I won't say what their ask was, but the ask was weird.
I was like, and I remember Tony Charles because we were at that time like, holy Cru, that's like, I mean, we'd be able to tell everyone a hundred x growth. Think about a hundred x growth month over month. I mean, we at this point, you \[00:25:00\] know, we're joking that we could, like, we'd be in Google and like a hundred x every single month.
We had Google Scale in no time. Maybe, you know, 12 months. I don't know. I remember we were like putting in like a Google sheets pertaining how fast if we could just keep getting it. The next one's, you know, 500,000 just continue. But then we're, once we heard their ask we're like, this is really weird.
And I'd feel, I wouldn't feel good doing this. It took some confidence to turn that down. I think what we had said was like, I mean, 5,000 still isn't enough to pay both of us, so, you know, this doesn't, it's not worth it, man. Like we shouldn't do this. And like we turn to each other and we're like, yeah, we're gonna not work on this one that you guys can probably find something else.
that was a test of character for us. We're pretty proud of like turning that one down. I know it's not a lot of money, but we were pretty proud of that. And I think later on that helped at least like set the foundation for once we got bigger as a company. There were a couple other really large opportunities where, and at this point it was actually meaningfully sized opportunities where we're like, this is weird.
I don't think we should do it. So those were ones we always turned down. The second types were ones where It \[00:26:00\] strayed a little too far from like what we thought would sit in this unified identity platform. I don't know. Quite like Exactly. So it's like there were a couple things around, like more so like, what about this person versus who they are?
We always knew like if there's an identity platform, but we should always focus on this core question of, are you who you say you are? And like, you know, with all that, like all these other additional things. But we knew that like the question that we didn't want to answer is you know, things about you, right?
Like, are you know, credit worthy? Are you a background check? Like, because of my work a lot on Square capital, I knew. Pretty in depth that there's a hard separation between are you who you say you are versus, you know, like, hey, should you have access to something and all of that. So there were a lot of ask then, which really helped us narrow our scope and make sure that we didn't ever get into, you know, too wide of a vision.
So whenever, if else, if someone's asking for, to say a background check, we'd be like, we're not background check provider. There's a lot of really, really great businesses doing that. But we answer the question of, are you who you say you are not? You know, should you have access? So that helps narrow the scope sometimes,
**Brett:** So then at call it 15 or 20 customers, what was \[00:27:00\] the shape of the product at the time?
**Rick:** We had a bunch of modules, which like a lot of like, just these modules and I think like we'd sometimes hard coded, especially for some customers, like, Hey, these modules sit together for this person's flow. Already. For some customers, we'd already built out some rule logic to be like, Hey, you know, like if it's, you know, if they had this configured for them versus this, we had a whole concept called a template, which is every single business had a template, which now like runs everything on our business.
Every single thing is a template now, but we had already built up this concept of a template. It would be the generalized idea of what specifications they have for all these modules and how they'd all orchestrate together. But we'd also had a lot of hardcoded stuff where it's like, I can't figure out exactly how to logic this
right now.
Or the logic engine that we first started with to do all the orchestration wasn't powerful enough to support them. So, you know, we'd be like, if it was this customer do this, and at 15, 20 we were pre, we realized this was like you on wieldy. So we kind of stopped, pulled back a bit on like continue hire on.
beyond uh, Dan who, I mean honestly at this point, didn't really operate as a sales. He was like product \[00:28:00\] plus sales. Once we hit that, we were like, Hey, we really need to like rethink, recalibrate, re kind of do the platform at this point in time.
**Brett:** were you just doing founder-led sales for those first few dozen customers? That was sort of part consultative, part sales as you
**Rick:** yeah, absolutely. I mean, it would be Christie, our CO still with us today, but like, you know, she was the fifth or the third person to join us Christie, myself, Dan, Vince, like. I mean, honestly, the whole company kind of at that point, like almost everyone was on sales in some way, shape, or form.
But yeah, I was for sure,
**Brett:** at what point did you feel like we might have product market fit, and how do you define what product market fit is or was?
**Rick:** that's the grand question. my sassy answer to that is product market fit is, does, is the, will the product be large enough for the you know, for your investor expectations of how large your product needs to be? Uh, And if that's the answer I wonder all the time, I don't know if I've ever really found pro market fit.
I'm always, because, you know, you're always like, oh, is there real? Are you really gonna hit the size and expectations of, you know, what all your investors have? So, \[00:29:00\] and by the time you even get close to it, at that point, if you waited it long enough, your existing investors will, you know, push you to already go and like expand the vision anyways.
On those ends. I don't know, like really, it's like I knew, I would say around probably at towards the end of our Series A in which like, you know, we're about a hundred customers at that point. I knew there was a business here, I don't know if it's a venture scale business, but I was like, this is a business.
Like, you know, and in all honesty, I don't think we ever wondered, could a business be built in this space? It's can you build a massively massive scale business? And that I think was uh, I probably am just starting to feel that that's possible now. Within the last year or so, I'm like, yeah, I think there actually is really, really something big here.
But I mean, it took a long time.
**Brett:** what changed? What did you see or what changed in your thinking that caused you to think that now there is a real path here.
**Rick:** A couple of things. I mean, a lot of like the core risks had disappeared, right? I mean, you know, the stat we saw in share is like three of the top five largest companies in the world. It's like work with a persona and like now. I do believe, you know, we may not have figured out \[00:30:00\] all of our go-to market messaging, but I do feel there is a way in which persona can work for every single thing.
Like my core two big risk was, is it possible to build something that universal, horizontal across many, many different use cases? And two, can you do it at scale and like what the largest companies find this to be valuable? Those two I really do believe are true now, and I think persona can support both of those.
The second one is really like, I think this question of who is someone online has become more important than ever. If you believe that AI and agents are going to be so powerful online, and what you really can't differentiate is as a person like, you know, online anymore.
I mean, there's nothing really stopping. I genuinely believe that like, within the next two, three years, you won't be able to differentiate human behavior from age agentic behavior. CAPTCHAs are already better solved at this point than uh, by ai. like zero shop models can already solve some of these.
Like, oh, we're gonna randomize the challenges you're solving. They're so good at this. Right? You're watching like, you know, oh three, tackle the arc challenge better than humans at times. It's really quite incredible. I think what we're gonna
start \[00:31:00\] seeing the internet move towards in my belief is it's not a question of.
Are you a human or a bot anymore? That's just an irrelevant question. The behavior, at least is not possible distinguished. It's really just gonna be if this is a bot who's accountable for this bot and who are you who's like in charge? I mean, all internet traffic, all activity, someone's accountable for it.
Some human at the very tail end of it is the person who's like, this is my thing. And that has made me really feel as if this future in which like who online is gonna be really important. 'cause there's a, longer term existential question of how important is it to know who is someone online?
Like there's this question in my, the back of my mind, like beyond these two, a far larger one, which is what if everything online, like maybe one day who are you, just doesn't matter. And now I'm watching AI and all that. I'm like, no actually. In fact it's the opposite. That's true. Which is who are you is the only question that matters probably.
It doesn't mean that you should de anonymize the person, but you have to be able to trace something back to like, yeah, there's some human at the very, very tail end of this.
**Brett:** Let's sort of go \[00:32:00\] back to kind of those first a hundred customers. What was going on with the pricing model over that period of time and were you worried that like at some point this sort of consultative sales or sales motion has to map towards an A CV that's not $500?
**Rick:** of course.
**Brett:** Because like there's a difference between somebody's finding value in the product and somebody willing to pay you for that value.
And if ultimately a customer was worth 300 bucks to you, it'd be very hard to make a fantastic business out of that.
**Rick:** so I think that we did get a couple of larger customers at this point. You know, ones who are paying maybe a couple tens of thousands a month. That had helped kind of, and that was somewhat random to be honest, in which, like, we just saw a customer in which they were like, oh shoot, this is great and we just need someone to do this.
They were still rather early stage, but like the prom for them had become so big and like the amount of modules that we built out, like they were, they just really found a click with the platform that time. So at some point, I actually, I don't remember exactly when, but I don't know why we were never really too worried about will someone pay enough for this? Um, \[00:33:00\] So that never really kind of had crossed our mind. I do think the consultative sale process that is, and I think will always be a worry for me because it's a really hard sales motion. And there's a question of like, can you scale out this sales motion? this goes to a, much broader kind of challenge, which is if you're trying to sell a platform, like inherently selling a platform means that your overall go-to market messaging becomes like really tricky.
And in particular, it becomes hard to scale because like, it's no longer just, this is what we do, but instead we help solve this entire problem, then you have to help solution people to show how the platform can help solve that. That inherently means that you can't, like, train up as many salespeople. You can't like scale out a go to market team.
There's just all sorts of complexities involved with that. That I think will always be a concern on like how large and how quickly can you grow. I don't know. I, I don't think, like, I've never really kind of had the thought of like, oh, you know, like that shouldn't be the way that we sell things.
**Brett:** Maybe talk more about like some of the things you figured out in bringing a true platform that can do many different things to market versus, you know, a single point \[00:34:00\] solution.
**Rick:** the first one I'll, I'll reiterate on is like the go to market motion for selling platforms is fundamentally different. One of my core beliefs now is that you pretty much have to do a bit of like founder engaged, like almost at all scales. You will, the founder will never be fully disconnected from sales because like understanding the, it's no longer like, here's the simple thing that solves this problem anymore.
You always have to understand like a platform ATS core is solving not so much like, you know, a core problem statement, but rather entire suite of different problems, right? Like the value of a platform is that it's dynamic can solve many problems inherent within that becomes there is a solutioning nature to all of your sales process and the solutions people are looking for will probably continuously evolve.
So if you go towards the platform motion, I think that you will never really leave a founder engaged sales motion at any sort of scale. I mean, going back to rippling again, 'cause I, I can't, I think Parker's just incredible, at least as a, founder, he, forever engaged, right on sales.
I mean, you look at this guy, like he is \[00:35:00\] consistently on Twitter on always, always, always trying to understand, what the buyer problems are and what business' problems are. So that's one. It's like I've become, you know, sometimes I. As a founder, especially as a technical founder, you're like, oh, maybe one day I can like stop being, you know, on the sales side of things.
But now I'm like no, no. I think like if you're gonna build a platform business, you will never stop. It's very important to continually understand and like the problems evolve constantly. I mean, especially within our space right now with ai, with, you know, all sorts of new regulations with legalization, you are just always gonna be like in the process of like, understand problems, translate back into how the platform can solve it, add in the building blocks or you know, whatever kind of components, whatever you wanna call them in your platform to make sure you continue to meet the needs of like all the new things out there.
And I think this has a really challenging translation to how do you scale out or go to market motion around this, because your top level messaging will be easy. The top level messaging will be like, I can solve all your problems around identity for example, using rippling again, it's like you're all in one hr, it, you know, finance solution.
That gives you an all-in-one kind of messaging, but \[00:36:00\] once, like no buyer's buying all in one, right? Every buyer's buying something that's like targeted towards them that you're all in one can solve. And training folks to be able to always connect those two dots is really, really challenging. Not to mention the more powerful your platform, the more things you have to train salespeople on.
So like you're almost constant on catch up. So enablement as a result becomes one of the most important things. Making sure that you can scale out how you kind of, teach out your sales team. And the second thing that uh, probably becomes even more important, like a lot of times if you have a PLG like single product motion, you can scale out sales and like post-sales, oftentimes you can figure out like a more scalable solution for it.
Post-sales becomes just one of the most important thing for any sort of platform engaged solution. Because even if you're able to like connect the dots on like,
hey, here's how my solution translates over the implementation, the support model, all of that becomes so, so, so important. I think a lot of businesses, especially ones who have like, I mean one of the most complex platforms in my mind is the Palantir.
Like their platform is just unbelievable. Can build anything you could possibly imagine. For them, like they have such an innovative like \[00:37:00\] go-to-market emotion in which they blended and like re-architect rethought truly from first principle's idea of what sales and post-sales is. They've really made that far more nuanced because I think the more complex your platform becomes, the more customized, the more your go-to market motion entirely will we differentiate probably from any other business out there. You won't be charting on like the same te you know, you will not engage on the same path. There's not really a tried and true motion you can copy anymore. Hiring people will suddenly become very different as well because if you hire, say if VP of sales from one place to another, they're gonna also have to learn about, hey, this is really different.
Like, you have to hire VPs who are comfortable with, you know, flexibility and like evolving their existing conventional wisdom. A willingness to, kind of think things from first principles with you on what an entire go-to market motion looks like. So platform businesses, I think like, you know.
All products aside, which I think has its own set of challenges. But I do think you can kind of map and like figure it out. Um, On the go-to-market side, I think it's gonna be super uh, it is hard to \[00:38:00\] overstate how differentiate your go-to-market motion probably will end up looking for any sort of platform business.
And that becomes hard to explain to all sorts of people too.
**Brett:** On this theme, I think, conventional Silicon Valley advice is sort of as you begin to scale, you wanna get out of the consulting and customizing business. So you sort of standardize the widgets that you're selling and you standardize the way that you sell them. over the last year or so, you've always had a highly consultative element.
Into the business, but it feels like you are going in the other direction, which is you want to go as hard in this sort of consultative style of pre and post sales. Maybe talk about like how you landed on that.
**Rick:** There's a lot of, I would call like pseudo platform businesses. And when I say platform business, like I have to kind of like define that. I mean, to me a platform business is one which you have multiple products that are truly like independently used, ideally by many teams.
Like, you know, um, you are just not like a single skew. I think like a lot of businesses are effectively single product with maybe a constellation of uh, features that are also being sold to and like that you can upsell, but like, it really is this \[00:39:00\] single kind of like, product, right? And generally this product can either be for multiple use cases or one use case, but you know, it's really kind of like the core product that you have.
I think the difference of a platform business is really you're selling a whole suite of products to solve some ambiguous problems. Companies have. And you're mapping multiple products into solutions for every one of them. And the product mappings there probably will be pretty kinda like dynamic and ambiguous.
And I think that kind of overall setup is really quite different.
**Brett:** So what was the story behind your first one or two real enterprise customers?
**Rick:** I mean, the good news for us, we didn't have to change much of our go-to-market motion. 'cause effectively what we were doing is enterprise sales for startups, which, you know, incredibly scalable. So, that didn't change too much. like we had a very large company engagement since the early days of like, oh, we'll build all sorts of things like in our DNA was, we'll build things for new deals as necessary.
So there wasn't also this like cultural misalignment of, you know, if you go down a \[00:40:00\] platform trying to build a platform, you oftentimes, I think for product side you have to have a more re a culture that's more uh, comfortable with reactivity, right? So that, I think like culturally too, like for enterprise, oftentimes the big like shock I think for businesses in which like they're very heavily PLG into enterprise is suddenly your roadmap, all your planning, how you think about the product becomes a lot more reactive and oftentimes that creates all sorts of chaos.
But we didn't have too much of that problem 'cause we're already
doing that for startups. The first enterprise deal for us depends on, you know, how you define enterprise. But I would say our first like large, you know, like multi, multi-billion dollar company that we're working for. That one I think was a $5,000 contract for a year.
It was the smallest thing, but we were like, we just, you know, again, the insecurity of all like, gosh, we need to just get someone who's big. So we like built something completely custom for them. Charles actually built it completely custom plans 5,000 a year for it. And I think he spent a good couple of weeks.
I mean, if you're talking to ROI that's as negative as I guess.
**Brett:** why Did
you choose
to
do
**Rick:** that?
We \[00:41:00\] had to get it. I mean, we were just like, you know, it's like this, like the staircasing of like, Hey, could we find, you know, could we get this next thing? Could we even do it? It was, we had no one, so we're like, Hey, yeah, of course we'll do it.
We, we wanna just see if we can like actually close someone of that size and they would trust us. 'cause one of the other kind of like outstanding questions was, would anyone trust the company so small to deal with such sensitive information?
**Brett:** What's the type of thing that was built for them?
**Rick:** it was something for Japanese identity verification,
Like.
I mean, and there's, it's really crazy stuff for Japan.
Like, like, for example, all their ID cards these, they don't use a Gregorian calendar, right? So like we had to do a lot of custom work to make sure, even for like Japanese day parsing making sure that it respects Imperial Calendar there and all sorts of aspects. I think we also had built a module for them around you know, license plate verification, which isn't used anymore.
It was like a very temporary thing, but I think that's how we got our foot in the door. It was like, you know, we're just like, yeah, well, we'll build a classifier for license plate detection you know, if you'll work with us. And I think that at least \[00:42:00\] create the relationship so that way we could continue to work with them on other projects as well.
**Brett:** And so did it look like you, in whatever way got connected with this customer and you were just rooting around for anything that they couldn't find somewhere else that you could build for them?
**Rick:** Honestly, yeah, as long as it was like even tangentially related to identity. Like, I mean, the license plate stuff was like effectively not related at all, but it was the same team. So we're like, oh, you know, it's good to be able to just work with them. And frankly, I think, I mean, we'd gone so many nos up until that point, I mean, you could stretch the imagination of what makes sense anymore as long as it was something technical that didn't require, you know, like
too much I probably would've said yes to.
**Brett:** Were you able to take that customer and turn them into a platform customer?
**Rick:** Yeah, no, that was the other big unlock. 'cause I mean, they're one of our largest partners now. We continue to work with 'em today.
**Brett:** how did you go from this Japanese license plate widget to them being a full persona platform customer? I.
**Rick:** well, part of it was like after that they were, they came to us with more and more problems. And I think that's one of the core things of why, like The solution component becomes so important is either you push the \[00:43:00\] solution upfront, like early on in the process
**Brett:** talk more about what you mean when you say solutioning upfront.
**Rick:** um, solution upfront, meaning like, helping them like craft out, Hey, this is all the problems we're gonna solve and this is how we're gonna solve it, right?
Like, the same motion that I talked about from the earliest days of the startup in which, you know, we were like, what's your problem? This is how we propose to solve it. That's really fundamentally solutioning. You do that for all enterprise deals, right? Because like for enterprises, it's very rare that they're coming and saying like, I want this proc.
Usually enterprise motion is more like, Hey, I have this problem. Who is some the person who's gonna help me solve this end-to-end? And now you come into this process like this is how we are going to solve it. And you're proposing effectively a custom process. 'cause for them, they want the whole process kind of like solved.
They don't want just, you know, like, oh, we'll figure it out ourselves. that is kinda like the fundamental solution part. It's like we will explain, hey, these are all the parts of persona that we have and this is how we solve our problem. Here's some things we're missing, but we will commit to building that, you know, whether contractually or otherwise to help you get like this end-to-end thing done.
That I think like for usually you're either gonna do that \[00:44:00\] whole process really upfront in which like, you know, for companies in which you line in larger contracts, earlier I mentioned Palantir. Palantir would be a business in which they do a lot of that upfront. You could also do that like kind of, on the post-sale side in which like you first get something small, prove out value, and then gradually work with them to continually solve more and more problems.
We fall more in that motion in which like a lot of our long-term kind partnerships emerge over time through doing a really great job proving out value and then them coming and thinking of us hopefully increasingly as a thought partner in which we can help them continue to solve more problems that are like adjacent with overall space for 'em.
**Brett:** It. It seems like one of the dreams in building a software business is if you can be your customer's trusted confidant in and around your space, and that they're constantly coming. When they think of a problem, they think of coming to you with that problem, and that's sort of how you get NRR. That's sort of top in class I think.
**Rick:** I think that's definitely the dream, but I think in practice, the hardest part of that is the connection back to uh, engineering and product and design, like the culture to support such a thing. 'cause like if a customer comes to you \[00:45:00\] and they're like, Hey, this is a burning problem. Effectively what that means is, yeah.
The roadmap we had, I. Ignore that, that's gone, right? Predictability is out the window. So it requires a culture that really is comfortable with that reactivity. And a lot. That's why I think like a lot of businesses in which, if you start off with like a single pro motion, which it's like, oh, feature this, feature that and like every single quarter you have like a very clear idea of this is exactly what this quarter will look like and this is where we're gonna wind up.
That I think is why it becomes difficult for them to become this trusted confidant. 'cause you're never gonna move fast enough to actually seize on an opportunity they have. Like if a customer has a burning problem, they're not going to wait a quarter for you to go and like roadmap and plan this out for them.
So that ends up carrying this motion in which like simultaneously, if you're going into a deal, you have a huge opportunity, a huge enterprise deal, but won't match that. You know, whatever your cycle planning length is, everything kind of falls apart.
**Brett:** And so what does that mean for how you run roadmap and engineering at Persona?
**Rick:** I genuinely think almost every single thing that we build for one enterprise is almost always universally applicable. Maybe not to every single customer out there, but there is at \[00:46:00\] least.
3, 5, 5 x the opportunity that one thing that we build benefits others. So I think that also helps a lot of folks kind of, uh, feel good about, 'cause it's like not, we're just building one-off solutions. More often than not, it's a generalizable thing that every single customer will benefit from, or at least like some subset who are solving some type of problem, right?
If we build like some sort of fraud solution here, it's a really generalizable fraud solution oftentimes. The second I think that helps with it a bit is yeah, you have to know when to say no. Like, sometimes, you know, it's like we are just at capacity. And understanding that is important because, you know, at the end of
the day, knowing, I think a really core part of it's, you just have to know where the company's sentiment morale.
Like, you know, state of it is because it is really tempting. If you're confidant for all these companies, their laundry list of things that they can come to you with is infinite. I mean, they, you know. They have an infinite number of problems, which is great because that's a lot of opportunity for you to continually have ideas for your roadmap and on what you can build.
But yeah, I think like burnout, like making it such that the company cannot scale, like not support everyone becomes a real problem too. and there's a lot of finite problems on scaling too. Like, how many kind of a people you \[00:47:00\] can add because the platform gets ever increasingly complex onboarding, continually like without, you know, streamlining things and, you know, encapsulating things.
I think we still had a lot of work, actually a persona to do on these ends, but we are trying to be thoughtful and invest in it. Like the onboarding becomes ever more complex too. Especially to learn about the entire platform and make it such that, I think one of the bigger challenge, especially on the product side, is can you enable folks to be productive and be able to like um, build things without having to understand everything else?
And I think that's both an architectural challenge as well as a product design challenge.
**Brett:** you've developed a very rare. Commercial sensibility as somebody that's super technical, starting a company for the first time, and As long as I can remember, you've been as interested and obsessed with go-to-market pricing and packaging product strategy as you are with building something that solves the needs of a customer.
I'm interested in like, how did you develop those muscles? Like where did that come from?
Was it something you were always curious about? Like you were the type of engineering manager that was curious about the whole \[00:48:00\] business and that allowed you to develop those sensibilities?
**Rick:** I've now seen it emerge a second time for a whole different function, which I'll share too. But I think a lot of it was self-doubt because I don't think this is the thing I catch myself a lot on, and I think it's very natural for a lot of
founders to do it. But I definitely am not like well, I was gonna say, it's like I don't think I'm unique I definitely fell prey to this, which is, it's really easy for myself to be like, Hey, this is something I don't understand.
And because I don't understand, it's probably not important. actually early, early on I didn't care much about sales. In fact, like I uh, I had told Dan you know, our sales product person this thing in which, you know, he was like, you really need, you know, like the most important thing for startup sales.
He was like giving me advice at that time. I was like uh, and I have this whole perspective, which I, oh my gosh, I hate myself for saying this. I can't believe I thought this way. It's like one of those, like when you're 16 and you just can't believe how you thought. I think I had said something.
I was like, if the product's good enough, people will buy it.
**Brett:** But that's still a lot of founders say that.
**Rick:** yeah, and I mean, I was saying that because I was like, I just don't need to learn about sales. Like, I was trying to like, I think at that time, the reason, like, in my head I \[00:49:00\] was saying it because I think I genuinely, part of me believed it, but the real reason I think I said that, and again, like, you know, the, maybe this is all fueled by self-doubt and some degree of like, self hatred or something, which is I think I said that because I didn't wanna learn about it. I felt as if like I've gone far enough in life, like on the technical side, like that's the secret of being, you know, like to me and like where I've gone to those things, I don't need to understand like, yeah, just 'cause I'm ignorant on it, it doesn't actually matter.
That's probably what I was thinking at that time. honestly, after having said that, I kind of caught, I think whether, I don't remember exactly how, but I was like, am I just trying to be like intentionally ignorant to like not learn something just so I can like preserve my ego? And then, you know, I was like, oh, maybe.
And that became actually a huge insecurity, which I think helped me. At least want to understand it better. And I still don't think I'm very good at it. You know, like just I haven't spent nearly enough years or time at it. But understand that I probably am actively trying to avoid it has now made me almost over adjust into like trying to be hyper attentive towards it.
And that can help. And I mean, this is emerged again because there's a period in which like after, you know, this whole like understand commercialization the
business side of things, I had a period in which I was like, \[00:50:00\] I don't need to understand the financial, if the business is doing well enough, you know, the financials will prove themselves, right?
Like, why do I need to understand? I mean, these days I check the markets all the time and try to understand how to think about valuing companies, understand about, you know, like, multiples and you know, like what's best in class and are all like, just how do investors think about things? But there was a real period in which I was like, that knowledge is pointless.
Like, you know, if a business is doing well enough. The proof is in the pudding. And I think, actually there's a lot of businesses at my stage right now and founders who think the exact same thing. And they're like, why do you have to understand like the markets, why do you have to understand like investor dynamics?
You need to focus on building a business and the business good enough will prove itself. And I think that's just insane. It's like, yeah, maybe you could get there, but why? Like, be proud of your ignorance or something. Like why aim to be ignorant? Um, but I mean, I, think that's crazy.
'cause I think about that. I'm like, oh, the whole time I was always under this impression of, oh no, I'm past that. Like ever since the whole go to market thing, I don't need to, I don't fall prey to that anymore. And I caught myself doing that for honestly, probably multiple years in which I continue to think that way about like the financial side of things.
And then you now I'm like trying to deeply understand that a little better. But that's probably, it was like catching
\[00:51:00\] myself and realizing I was celebrating my ignorance.
**Brett:** how did you learn about the commercial aspects of the business and develop sort of these sensibilities in a bunch of your.
I find a lot of your most interesting thinking is around the commercial aspects of the business as opposed to the technical aspects of
the business.
**Rick:** thinking sometimes is pretty interesting.
**Brett:** I'm not technical enough to know, so
**Rick:** No,
**Brett:** bias
**Rick:** I'm messing with you. I'm
no, that's
actually all Charles these days. I don't think, honestly, uh, these days actually as I've understood this stuff better, I've become a worse engineer,
which kind of bothers me. But You're sales. I, Hey, I'm on. I haven't been doing that for a little bit. Got worse there
**Brett:** Uh.
**Rick:** Yeah, yeah,
Yeah. No, Anna on our side. She's, She's a wizard. I mean, part of it's the in intent to learn, but other ones like just, I get a lot of reps now on like deals, right? And like, just obsessing over why we, like, why this didn't work.
Honestly, I think it's actually the core of almost becoming. An expert on everything is to not oversimplify. I think like, you know, another thing I think that was very common within or just an observation I think about sometimes like so common within the valley for founders is this obsession with \[00:52:00\] frameworks.
Like everyone loves, like new frameworks and new ways to think about things. And I think like frameworks as a way to like expand your thinking is very helpful. But more often than not, I find people using frameworks as a way to almost like constrict and like almost shortcut their thinking to be like, oh, of course.
Well this framework says this, so you know, the details don't matter anymore. And I actually see this a lot amongst engineers too, in which you apply like these wide generalizations to not find the understanding of a detail. And I think to master anything the core of, it's not like reducing something down to these like overly generalized frameworks or axioms, but rather.
To understand the nuance of why this worked in this case, but not in this case. And you see this, I mean, for professional sports too. Like I watching like some of these interviews with folks like you find like the details that like professional athletes care about are usually so minute you're just like, that's insane that you like obsessed over that small thing to find a um, to find an edge.
But I think that's honestly like the trick of it is like, for me, for like having been on so many deals, obsessing over why did we actually lose this and why was it that the thing we did \[00:53:00\] before did not work in this case? And I think if you continually think of things that way I don't know if you'll become good, but you'll find a lot of like unique insights.
And those unique insights eventually will emerge into at least you were differentiated on it.
**Brett:** so to sort of expand on this, when you poke at the way that you think about building this as a platform business versus a point solution business, like what is the origin of that Think. Where did you, how and where did you develop that way of thinking about the business?
**Rick:** I mean, the first one was. This idea. I actually I think I told about this to you like very, very early on was all these companies that we would like just constantly celebrate. They're so small in comparison, you know, like these giants and you've actually, like, we think about that first chasm, but it's like, what about the second chasm in which like, very few are able to cross
that one too.
And that original thought emerged from it was actually a joke a bit self-deprecating of one, but I think when I was at Square at that time, I was joking with someone once that uh,
have we ever thought that all of our work at Square is smaller than Microsoft Word?
Like everything we've done, all of our efforts we're smaller than \[00:54:00\] Microsoft Word. Like
something that.
**Brett:** just smaller, I mean a spec.
**Rick:** A speck, right? Like, you know, like, and like Microsoft Word is just a speck in Microsoft's universe and it's like a speck of a speck. And I think at that time we were joking about like, you know, the sci-fi movies in which you realize, I think it was like Men in Black or something.
You realize your entire universe is actually the locker for someone. Or I think there was something like that. that original thinking was original, like what led to this idea of we celebrate all these specs and like somehow we are not a. Observing that none of these specs have like become this grand thing and just we're all praying that one day we'll be able to become it, and we have no idea how, we just think it'll happen.
So, it's almost like this idea. That's why I kind of, I think a lot of founders all say this of oh, you have to be first principles minded. Like, how can you be a first principle thinker? But to me a lot of it, if you translate in that another way, it's actually the avoidance of like generalized frameworks and like, just, you shouldn't, I mean, I think you should learn frameworks, but like the reliance on framework is really, I think the underlying of what actually is more important there.
' cause first principles, I mean, everyone will say they're first principles thinker. It's a very, you know, \[00:55:00\] like of course I think with like no bias, but you know, then at the same time, oftentimes anyone who I hear is a first principle thinker. They're very into frameworks as well. And to me there's some sort of uh, inconsistency between the two there.
Yeah, I mean on, on the, on that overall thought, I think a lot of it is like finding things that break the pattern. Things in which, like whenever someone says, oh course is the way to do things. Trying to find the counter example. Why is that just not the case? Another example I have, I can't remember who tweeted this, but I love this tweet so much.
It was something about like great companies hire great people. The best companies can hire anyone. And when I read I was like, that is such a, you know, such a banger. It's so interesting because, you know, again, that's another like Silicon Valley line, which is you just have to hire the best people, right?
But if you look at like the biggest and the best companies out there, it feels like they can just hire anyone in the world and they'll make them kind of successful. And I remember, you know, like the subsequent tweets was like, the best companies can turn any person into ROI positive where like, you know, like
great companies, you have to find someone who's like really good and like bamboozle them into like producing ROI for you.
I mean, great companies, they \[00:56:00\] don't care who you are. You're gonna find value anywhere. But it's like lines like that in which it inverses the thinking or like just frameworks that break the rule. You know, everyone talks about great culture, but like there's companies that don't have great culture.
And I'm not saying you should build one without that, but like, understanding the art of like building a great business oftentimes is. Everywhere. It's not like the set frameworks. It's like the combination of all these things that come together that create something really unique that all seem to just click and work together.
**Brett:** It's funny, I was talking to a founder that we worked closely with last week and they were talking to somebody who's an incredibly well-known had a 10 year run as a president of a very well-known company and, you know, he was bringing him this problem where he is building as go-to market function and he is finding it hard to find the right sellers and the president, his take was like.
The goal is that the system that you build is so good that you can hire anybody and make them a successful seller. And he's like, and I don't mean that like in a hyperbolic sense, like I have and believe that I could walk outside of this \[00:57:00\] building and if I found anybody outside that would work hard. I am confident in the system that I built.
This company does two or 3 billion in recurring revenue that I could make them successful at our company.
**Rick:** So
I was talking with Zach, our VP of sales, about this. 'cause this was an interesting one. We have a, you know, a go to market kind of advisor who uh, he shared with us that he had a so he was the former CRO of like a massive, massive, like B2B company, right? Former CRO. And he said something about like how he had a 95% hit rate for being successful in hiring.
You know, like the immediate impressions of, my God, this guy must have an unbelievable read on people. I was like, Quip, you know, we were joking, I was joking with Zach. I was like, alternatively they've created a system which anyone can work at. I mean, it could be either or, you don't know. I mean, you
just implicitly assume that, you know, the person like is just has a great eye, but they got, honestly, the more likely of the two is the opposite in which they've created a system in which probably they can make anyone successful within it or have reduced it down to such a degree in but I think of that a lot, which is like just the inversion concept in which usually it's actually like when everyone's like all \[00:58:00\] on something, the edge, the value probably is in the one thing that's the exact opposite of what everyone is kind of looking at.
**Brett:** what does it actually look like as you're trying to learn and figure these things out? Is it mostly studying other companies? Is it finding people in these subdisciplines who actually have gen generative sort of original thinking or first principles thinking what are all the inputs to sort of the output being we're gonna build our platform in this way, or we're gonna do this versus that.
**Rick:** You know, honestly, I think it's a, so it's not the latter. I'm notoriously bad at like finding a. Mentorship. I've tried many times. I mean, you always hear like these stories of like these great mentorship ones and stories of like, oh, they've helped develop each other for so many years. I'm just so bad at it.
Like, I mean, it was a huge insecurity. When I was at school, I was like, and I, there was a period when I was like actively trying to reach out people, but I'm like a bad mentee and I don't know how to like, engage 'em so awkward and I couldn't figure out, you know, how to ask them. I feel as I'm wasting their time
too, and I don't understand why they would wanna talk to me.
So \[00:59:00\] I've never been good at that. Even today, like, you know, when I wanna go out and ask someone for advice, I'm terrible at going out there and asking. Like, unless like the question's very pointed, I know exactly what I want out of them. Like asking general feedback has not been effective, at least for me personally.
I've seen a lot of people who are so good at that and I honestly think that many founders by nature tend to be folks who are better at that, but I'm not, and I've never been. It's more so the former and I think and like going out and like just
trying to find the counter example, and I think a lot of that honestly is fueled by almost a, I like to tell folks I'm a kind contrarian, I'm pretty nice about it, but like, I like to prove there are people wrong in some way, shape, form, or find something in which like, it doesn't quite make sense exactly what they're saying. So, I mean, even the example earlier of like, you know, with about like hiring salespeople, it's like, it's oftentimes trying to find whatever that doesn't meet, kind of like what we're all, you know, what we're saying here, just to show that
like, whatever the problem is, it's more nuanced and more complex and there probably is a hidden variable that we're being overly generalized about.
for companies, it'd be like, and whenever people are saying like, Hey, this is the strategy, \[01:00:00\] like finding something that's the exact opposite, whatever that may be, that does not match the pattern of the strategy everyone else is saying, you know, a product building or strategy or like roadmap or anything.
It's like, can you find something, which it doesn't operate that way and it's still massively
successful and
or, you know, otherwise.
**Brett:** be most people say, just focus on your customer and ignore the competition. I. I think that's another thing that you think is just immensely incorrect.
Maybe you could talk a little bit about that.
**Rick:** it's like honestly tied to this thing kind earlier of like, it just feels like intentional ignorance. I get like the perspective where it's like, oh, you know, then they're biased. You're thinking, but I mean, gosh, if you have to like bias, you know, like protect yourself from bias by like putting on blinders, that just seems insane.
It's like I have to cover up my eyes so that way, you know, I can like actually have creative thought. That just seems bad, right? I don't know, it, it doesn't make too much sense to me. I think ' like competitor obsession is bad. I suspect where that advice originated from is probably it's really easy to be sucked into just being obsessed with what your competitors doing. Because you know, like there's the competitive \[01:01:00\] nature of building startups. Like there's this natural pool towards constantly watching everyone else. I mean, I kind of like could feel a subset of that too.
Even like for non-com competitors, like you hear all this fundraising news, this company's growing faster than you and like no matter what, like this whole space is fueled by insecurity of some way, shape, or form. So I bet that original advice, like you obsessed too much on competitors, you'll just get sucked into a hole and never think about your company. But again, I think like you need a certain level of maturity and like in which you can just pull yourself out That for
the same of like not paying too much attention to, you know, other fundraising advice, but still learning about like, hey, this is the story they told that was kind of really effective.
And trying to pull out things that you can learn from that for competitors I think is the same thing in which, in every single space, especially if it's competitive space, everyone's trying to solve this problem together. There is almost a pseudo collaborative kind of nature in which every single person at the end of the day, if you can pull back the idea that like it is a finite, you know, like kind of a zero sum thing.
We're all trying to solve the same world problems out there. And in that sense, there is a kind of collaborative nature of it. Learning from others, I think it's important. To me, it'd be the equivalent of saying I don't read kind of like a, you know, I'm a uh, PhD who doesn't read other papers. I don't like to \[01:02:00\] understand.
I like to rediscover calculus on my own, you know, Newton, that guy's, you know, poisoned my thoughts too much and now I can't think of, you know, non-Newtonian calculus. I think that just sounds insane. So I think like a lot more for every single company you're building on the shoulder of giants, it's just a question of like, can you learn the things that are important?
And I think for competitors it's absolutely one of those things in which they're the ones who are the closest to your problem as well. And you should absolutely be looking at what prior artists or you know, the state of the art on their end.
**Brett:** how do you actually action on that? Or what does it look like? To not be competitor obsessed, but to be competitor informed or aware of what they're doing. Like What does it actually look like for you as the CEO of the business? Maybe, you know, over the last six plus years.
**Rick:** Well, so in the earliest, it's different in the earliest days to where it's at now, the earliest days. A lot of it frankly was just reading about everything on every single competitor just to understand like, are we doing something that someone else already has done? Right. I think it's honestly a little bit similar probably to I have a couple of close friends in academia, and it's kind of similar to the academic process in which.
Just finding a problem that like some other person, some other \[01:03:00\] PhD hasn't done already is really hard in practice. So oftentimes for the PhD, the first whole bit of it is just understanding the state of the art, the, like the problem
space you're in to find something different that some no one else has really kind of tried to do already.
So I think the earliest days it was that like trying to find every single approach as many of them as possible understand that hey, this one might have not worked for X, Y, or Z reasons whether timing or approach or team dynamics, who knows what. But just calling through as much of like the overall space as possible so you can at least develop a unique perspective.
And uh, I think for a lot of stage founders, that part they don't like because. It's really disheartening because you realize quickly that it's hard to have unique ideas out there. Like almost every idea you've had, someone tried in some way, shape, or form, and your final, like, unique idea. Uh, again, mentioning academia as an example.
Uh, one of my friend, uh, close friends had said pretty much like the final idea you end up with and academia ends up being like just minutely different from the last one. Like, It is so hard to push, especially for like popular \[01:04:00\] spaces like AI research. Like it's hard to come up with super novel ideas. Back in the day, I mean, these days you're in a whole golden age, but back in the day it was hard.
So I think that's like in the early days, I think like these days it's a lot more just keeping informed on like, hey, this is like a cool thing someone's doing right now. And like. It's working to some degree, but there's maybe some challenges there and you know, is this something that we should either be looking at from partnering with them or, you know, building something and like that's competitive because we believe a different approach might be more effective.
Would this be something that's effective within our market segment? And I think even looking at adjacent industries is really important. I oftentimes tell folks that a lot of our learnings these days is not from like, you know, just like identity verification companies from cybersecurity. Like cybersecurity has a long, long history of threat detection and like it's fundamentally and this bad actor kind of, you know, detection of bad actor game.
There's a lot of philosophies there that I think a lot of folks in identity, the identity space oftentimes just doesn't look at and they think of it more as like an adjacent space that's not really tied to it. And I mean, I think it's a lot about that. It's just like keeping informed on like what's kind of \[01:05:00\] going on.
In a way, I would kind of almost give the analogy of like, it's the evolution from being a PhD student trying to write your thesis into becoming more of a professor in which like trying to master and just stay up to date of all the kind of new innovations happening.
**Brett:** Do you have sort of higher order thoughts on what makes markets well set up for a startup to go after and has a chance to build a very large business versus markets that tend to be more challenging? is There a dominant strategy that allows a company to get outside of that stranglehold of, I guess it's competition or sort of something else?
**Rick:** So honestly, I think tech as a whole, like just the startup market these days is so wildly competitive no matter what you pick anymore. Like, um, I thought a lot about like, why is technology so hard now? And like I do think, I mean, as someone who like kind of entered the tech space in like the, you know, the early 2010s to now technology is wildly competitive.
And I think a couple things have changed things. The first of which is we're at the kind of tail end of the \[01:06:00\] smartphone, you know, innovation cycle of like, just amplify everything. There's some app for it all. Like everyone's tried everything. Second, there's so many more. Engineers now, like engineering used to be a scarce resource.
I don't think that's the case anymore. Not to mention, I mean, AI's making everyone be even more capable than ever. Watching some of the junior engineers how fast they develop now, like engineers are so quick on developing. I feel as if there's engineers in which It took, you know, I've spent 10 years at it.
I mean, in two, three years they're all already caught up to me. And I think that's just crazy of how fast, like people are growing now. So engineering I don't think is a scarce resource anymore. And I think the cloud has changed everything. I mean, back in the day, like capital became a huge constraint to prevent companies from emerging.
Now, you know, as long as you have the cloud, you have the opportunity. I think some of that might be the thesis of first round. That's all happened now, right? So, these days I think every market's hard as, honestly my take, I think effectively building a start breaks down to one of three categories. And those three categories is either number one it's a brand new technology and you are going to just compete with every other company trying to figure out how to like, you \[01:07:00\] know, like.
You know, take advantage of this technology. I mean, AI was this, there was blockchain prior to that. And I mean, for ai, they are so, no matter how you look at an application of an agent, no matter how insane there is someone else also doing it, and they are just as eager, just as excited, working just as hard.
I mean, I hear how hard some of these like AI companies are working now and it's crazy. I mean, they are. It is so, so, so competitive and you see all of them kind of going at it. We saw the same kind of emergency blockchains there with so much talent. The second kind of category I think that you have to go down Figma is my favorite example of this.
It's a company in which you effectively compete against a giant that just it, it seems insane to compete against that giant to me. You know, it would be like saying, I'm gonna like redo Google Docs or like beat Microsoft Word at their own game. Right? And there are a couple of companies there that notions done
that Figma has done that in which it's a huge upfront investment and you are gonna go on that journey and believe that with your under-resourced kind of product, you will be able to eventually take on something that has.
Infinite more resources than you. And that's a really tough game. 'cause I think it's like, \[01:08:00\] usually those type products require like a four or five year kind of like heads down sabbatical kind of thing. And you'll go at it. I think the third category is the category we're in, which is a legacy space in which there's a bunch of competitors, so many competitors, everyone's still been at it for a long time and you will out execute.
But the underlying theme for all of these, the execution has become more important than ever. And it's not so much about like idea discovery or like untapped market discovery anymore. It's just a question of pick your poison on how difficult you know it'll be. But I think every space now is really challenging.
**Brett:** What does execution mean?
I feel like it's a word that, just got out, executed. What does it mean?
**Rick:** Honestly, I was gonna say it's just time investment plus like, uh, time investment ability of like, you know, quality of kind of output plus time investment. And generally now you need both. You need like, you know, quality ideas, quality kind of output of whatever form. And now I think it's just incredibly high time investment.
And like, I think time, like investment of time of how hard are you working in comparison to someone else is just real. Like you have to, like, if you're, you know, I, you \[01:09:00\] can, in the past I think there just weren't so many competitors in every single space. People oftentimes could over time shift and adapt to their own lane.
But these days, I mean, you almost always have a borderline direct competitive one in which there's a very strong pressure in which you have to find out some way. Maybe your output of ideas is just consistently better than someone else. I think that's tough. Everyone's so talented. Now, there's again, no more scarcity of inputs anymore that it's usually more so like just time investment's hard.
So I think almost every market is challenging now. And then at the end of the day, like even if you invest the same time, then it just becomes who has like consistently better, higher quality ideas at a faster clip and is more adaptive than you.
**Brett:** Now that you're six plus years into this are there things that you haven't shared that you just think for other people, the engineering manager at Company X or company Y that's starting to build a company are just things that you figured out that might be worthy of them thinking about that might be useful in their journey and kind of going negative one-to-one.
**Rick:** So I met with Kareem from Clay yesterday and we \[01:10:00\] both isolate on one thing. 'cause I actually asked him for some advice too. 'cause I think Kareem's journey is. Truly, Truly incredible. And like, you know, just to give a recap of it, clay, I mean, right before we were talking, like they didn't start off with the product they have now.
And unlike for many other startups, they went through constant iteration, a lot of discovery before they finally like, just overnight found like the fit and it all worked out. But like even all the technology there, a lot of things they built plus like the cultural learnings and everything that took, I mean, six years plus probably to like lay the foundation there.
And I'd asked Kareem at that point, like, how would you get through it? Like, that seems insane. I mean, I don't think I have the uh, the, I don't have the mental durability to last like that. And I think he shared something about, it's a lot about the journey itself. Like he's like, I just ask myself every year, am I still having a good time?
Do I still like doing this? Am I, the reason why I'm doing it is still why I'm doing it? And if I were to give advice on, it's like. Trying to think about, like, especially early on, it's so tempting to always think about like, oh, where's the destination gonna be? \[01:11:00\] What's the destination look like? And I oftentimes think people who are really obsessed on like the destination of things, they oftentimes really struggle the most as a founder.
There's like a almost a weird aspect in which like a lot of founders uh, tend, I mean, not all, there's always exceptions to rule, but like one thing for a lot of founders is that they have a tendency in which maybe they're. I mean like A less planning oriented, that's not like always clear exactly where things are gonna wind.
There might be a little bit of, you know, like a spontaneity to like the thinking of it all. I think that the reason why that someone exists is that folks who want to know what's next, it will be really hard. And like, and especially if you are always trying to plan out, I will do this and then this will, you know, this is what I'll gain from it and this is what's going to happen next.
I mean, the star journey becomes so tough. I mean, that's why I'm so impressed by Kareem oftentimes. 'cause like I think those six years you're constantly wondering like, oh, this goes nowhere. Like, what am I gonna do next? you have to exhaust all those sauce and just not think about it. And some people are so maniacal about wanting a company, they can just ignore all of those.
But for many, I think it's a very tempting thought of like, oh shoot, if this all fails, like, what's next? And like at \[01:12:00\] 60 years, what I, how am I gonna explain all that? That's hard. I think the way to get past that really has to be like, Understanding, like really taking the journey for what it is. That's what I've kind of found out of all this is for me, where I've derived a lot of the meaning of the journey is from all these folks who've I've had the opportunity to work with for so long, but also see their lives evolve as a result of this business.
From seeing folks have multiple kids now from seeing folks get married, from seeing friendships emerge and like best friendships of like many years. Seeing all that and realizing that this business has been the vehicle to enable that has at least made this very fulfilling for me.
And, you know, continues to feel like making me wanna protect and make this thing continue thing to create all these dynamics outside of work, frankly, that have become really meaningful to me.
**Brett:** Who's the person that's had the biggest outsized impact on the way that you built the company and left things, you know, imparted things on you that's sort of a big part of the way that you build the company. And I thought maybe I could, point you to somebody to talk about, because he doesn't get a lot of airtime, which is Charles who's been \[01:13:00\] kind of your co-conspirator and other half in this company.
Maybe you could talk about him and kind of what's unique about him and what he's taught you or infused into the company.
**Rick:** I think Charles is really the heart and soul of the business more so than I the thing about Charles, I think like beyond like being like an. Like Peter Natural, like, technical talent. And I mean, I really think even today, I think people underrate him and how technically like excellent he is.
I mean, truly like, um, a person, you know, I think especially for engineers, they'll know is Evan Wallace over at Figma. Like that guy's an unnaturally good like engineer, like truly one of a kind. I think of Charles in a very, very similar class. I just think he's like, just not as public and his humility under like to such a degree almost will make it hard to ever, ever over rest.
You know, like to overrate him, he's incredible in that. And, but I think I, I mean, look I've known the guy for so long, I don't know which part of it's, it's either he's not aware of how incredibly talented he is, which it could be.
I mean, that's, you know, \[01:14:00\] he's, I think actually probably my understanding of Charles now is he doesn't care. He genuinely doesn't care about Like it is not about like how good he is. He doesn't care about what other people how to, how he stack ranks or compares to others. I think his great talent is actually, he just wants to do great things 'cause he enjoys doing things well and like there's such a purity of taste and like just wanting to build something great because of nothing else.
No final thing. Just I want to be good at something and I'm, I, it means something to me. And I think that unleashes such a. Creativity and how he approaches prom fearlessness of like, whether he's right or wrong, he doesn't care about it. I'm guilty of all these things. I mean, I've shared so many of like just my own insecurities and reflections of how so many of my decisions despite me trying to rationalize and pretend as if it's something different.
It's fundamentally driven by, you know, some, like much deeper insecurity or perspective on myself, especially as I reflect on, I'm sure it's happening even
today, Charles, I never feel that's really been the case. Like for him, whenever you realize something, it's purely off that intellectual understanding of it.
And I mean, many people at persona \[01:15:00\] often say this, like, Charles has achieved a certain zen that, I mean, all of us aspire to towards you know, sometimes I think people think I'm very cynical, which frankly I am. charles for me, gives me that hope that like, its very purest form of like, if you're able to achieve and understand it all, like have that zen people fundamentally are good and unbelievably kind.
He makes me feel that way all the time. I mean, he's one of my best friends. We've continue to talk every single day. I haven't gotten tired of the guy hope. I'm pretty sure he is tired of me. I'm not gonna, but he's too zen to
No,
No. Right. Like, you know, oh my gosh.
And he deals a lot from me.
you know, I'm trying to contain the multitude of my emotions and just, you know, like public. But yeah, I think he never understands just unbelievably how rare he is. And I think everyone feels that way about him.
**Brett:** Great place to end. Thanks, Rick.
### How to make craft your moat
URL: https://review.firstround.com/how-to-make-craft-your-moat/
Last updated: 2025-07-14T23:46:24.000Z
How Stripe, Linear, Square & more top companies operationalize taste
_This post is for subscribers only._
### The Unsung Ingredient in Stripe, Square and Linear’s Success: Taste
URL: https://review.firstround.com/stripe-square-linear-product-taste/
Last updated: 2025-07-14T22:24:18.000Z
Tactical advice for weaving craft into your product and operationalizing taste.
_This post is for subscribers only._
### How to build and grow the human side of your engineering org
URL: https://review.firstround.com/how-to-build-and-grow-the-human-side-of-your-engineering-org/
Last updated: 2025-07-14T23:47:28.000Z
Lessons from Apple, Palantir and Slack
_This post is for subscribers only._
### Mastering the Human Side of Engineering: Lessons from Apple, Palantir and Slack
URL: https://review.firstround.com/engineering-lessons-apple-palantir-slack/
Last updated: 2025-07-14T22:22:38.000Z
Apple engineering leader Michael Lopp gives tactical advice for managers on how to empower individual engineers — and become better leaders themselves.
_This post is for subscribers only._
### From weekend project to Fortune 10 adoption
URL: https://review.firstround.com/from-weekend-project-to-fortune-10-adoption/
Last updated: 2025-04-29T15:02:24.000Z
How this founder closed millions in ARR with no sales hires
_This post is for subscribers only._
### From Weekend Project to Fortune 10 Adoption — Reducto's Path to Product-Market Fit
URL: https://review.firstround.com/reductos-path-to-product-market-fit/
Last updated: 2025-10-15T20:12:39.000Z
If you’re a [**Reducto**](https://reducto.ai/?ref=review.firstround.com)customer, you can text or Slack founders [**Adit Abraham**](https://www.linkedin.com/in/aditabraham/?ref=review.firstround.com)and[**Raunak Chowdhuri**](https://www.linkedin.com/in/sauhaarda/?ref=review.firstround.com)at any time.
It’s a simple, but effective instrument for keeping a pulse on customers, as close to [sidling up to their desk](https://x.com/aditabrm/status/1832201110985306607?ref=review.firstround.com) as an early-stage startup can get. Abraham credits it as one of the most powerful tools in the young startup’s toolbelt. But it’s, admittedly, not the sort of splashy advice you typically look for when trying to parse a breakthrough company’s path to product-market fit — and that’s precisely the point.
“There’s a disparity when founding a company. We hear inspirational stories of these grand visions and the big-picture ideas. So when you’re a new founder and you’re thinking about how to talk to customers, it doesn’t feel instinctively right to just reach out to people on Slack. It feels like you should be doing something flashier or cooler,” he says. “**But in the beginning, it only matters whether or not people are using your products**.”
He likens novice founders to newbie exercise enthusiasts — they both tend to overcomplicate things:
> If you ask a bodybuilder for advice to get fit, they would tell you very simple things: Focus on your nutrition, go to the gym, prioritize sleep. But you see folks trying to get into fitness will instead agonize over figuring out the perfect training regimen and complex routines.
Most company profiles chronicle the rise to success long after it's already been cemented. While we've shared a number of stories in our "[Paths to PMF" series](https://review.firstround.com/series/product-market-fit/) featuring companies that have long since found extreme product-market fit, we think there's equal value in mining the stories of startups that are a few clicks earlier in their PMF journeys. As time removes you further away from the early days, recollections get hazy, and tactical steps slowly morph into broad platitudes like “stay close to your customers."
But before we dive into the nitty-gritty of how they made it all happen, a brief explainer of the problem that Reducto is solving: 80% of the world’s business data is in unstructured file formats (like PDFs or Excel spreadsheets). If you’re trying to build a reliable AI application for handling, say, insurance claims, health records or financial statements, you’ll find that even the best LLMs start to hallucinate trying to read these unstructured documents. Multi-column layouts get jumbled together, key figures are ignored, and tables are a nightmare. Reducto reads these complex docs the way humans do and creates LLM-ready inputs with remarkable accuracy.
And while Reducto is still early, the trajectory has been remarkable, and as seed investors First Round has been ringside as Abraham and co-founder Chowdhurihurtle past milestones. **In just one year, they went from a pre-seed to a seed round to their just-announced** [**$24.5M Series A**](https://reducto.ai/blog/reducto-series-a-funding?ref=review.firstround.com) **and nabbed a** [**Fortune 10 enterprise customer**](https://reducto.ai/blog/reducto-enterprise-sales?ref=review.firstround.com)**.** If you printed out every page that Reducto has parsed so far, it would be something like 3.5x the size of Mount Everest.
In this exclusive interview, we pluck out some of Abraham’s biggest lessons on building Reducto so far, while they’re still incredibly fresh. And while there’s advice that follows specifically for founders building in AI, other early startup folks will have plenty to jot down in their notebooks — from Abraham’s one-man GTM show, to how they’re keeping the team quite lean. Let’s dive in.
## **Early brushes with entrepreneurship**
Abraham’s entrepreneurial ambitions can be traced back to perhaps an unlikely place — the mobile game Flappy Bird. “Games were the thing that drew me to computers and Flappy Bird was what made me interested in programming,” he says. So as young, ambitious high schoolers, Abraham and his friend started making their own apps. The rumors that Flappy Bird’s creator was netting $50,000 a day off the app didn’t hurt, Abraham laughs. “We had these moments of like, ‘Forget school, we should just be making apps and we won’t even need to go to college.’”
So the duo spun up a goal-setting app, and while it didn’t make Abraham a newly minted app mogul, it did launch something of a side hustle. “I learned more about marketing than I did about building apps. We started making Instagram pages to promote the app, where we would post summaries of books like ‘How to Win Friends and Influence People’ and those pages started taking off. Even when the company shut down, I started running Instagram pages for other companies,” he says.
And while the goal-setting app might have fizzled out, Abraham’s entrepreneurial spark was just starting to ignite. He went on to M.I.T., where he eventually joined the Accelerator program and started building [Sidewalk](https://mitsloan.mit.edu/ideas-made-to-matter/17-mit-startups-to-watch?ref=review.firstround.com), a Shopify plugin that would recommend products from other stores during the checkout process.
But it was a chance classroom encounter that would truly turn the tides for Abraham’s founder path.
## **The team up**
Abraham, then a junior at M.I.T., had walked into the first day of a graduate-level ML course with a heavy dose of undergrad imposter syndrome. So imagine his surprise when a freshman was standing at the front of the lecture hall. “The professor introduced Raunak to the class and told us he would be walking us through the first problem set. It was kind of obscene to be sitting there and see this person who had been doing ML research since he was 12,” Abraham recalls (Chowdhuri actually had 100 citations to his name before he even got to campus).
The two struck up a friendship, joined the same living group at M.I.T., and stayed in touch after Abraham graduated. After running Sidewalk for a year, he joined the ads team at YouTube. And frankly, he was bored. “We were both in a transition phase. Raunak had wrapped up his previous company and was going to be graduating from M.I.T. soon. I was vocal about being ready for something new,” Abraham says. So they did what plenty of other young engineers do — they started applying to hackathons together (they actually [won Anthropic’s hackathon](https://www.linkedin.com/posts/sauhaarda%5Fwe-with-adit-abraham-tinah-hong-john-activity-7091896164714778624-CAfG/?ref=review.firstround.com) fresh off the release of Claude).
After a few of these hackathons (and a few trophies) under their belts, they finally broached the topic: [Did they want to start a company together?](https://review.firstround.com/the-founder-dating-playbook-heres-the-process-i-used-to-find-my-co-founder/) “At least for me, it was an immediate yes. There was no question in my mind that Raunak would be an exceptional person to work with,” Abraham says. Their areas of interest also tipped the scales — Abraham was more drawn to the GTM and product side of the business, Chowdhuri was deeply technical.
> At the time, I wasn’t focused on the idea that we would work on or whether we could get funding. I was just excited to build with this person.
So they plucked an idea from a past hackathon project Chowdhuri had worked on, and applied to YC, getting accepted into the Winter ‘24 batch.
Reducto co-founders Adit Abraham and Raunak Chowdhuri
## **The initial idea**
Their initial YC application was far removed from PDF processing — it was a long-term memory solution for language models. And the co-founding duo gave themselves a simple rule: “We decided if we got into YC, we would at least stick with the idea for the duration of the batch. We were worried about just pivoting around aimlessly,” Abraham says.
But there were some early signals that, while attention-grabbing, their idea didn’t have legs. “It did go somewhat viral on X — people thought it was cool to see a language model bring up something you mentioned in the past,” he says.
Hundreds of folks asked to be onboarded to the product, then called Remembrall (“Harry Potter” fanatics will notice a pattern with these company names), but early onboarding calls hinted that they were a bit too early to the space.
They had conversations with enthusiasts who would *maybe* try adding it to their AI application. “It was never the case where people were saying, ‘I’ve noticed that customers get angry at my product because of X, Y, and Z and Remembrall can fix it.’ That was the first signal. The second signal was that people were maybe willing to pay $10-20 a month because they found the idea interesting. But no one’s product team *needed* it,” he says.
> We set up demo calls with everyone who expressed interest and we asked what their use case was and what problems the product would solve for them. And we would very rarely get a real answer. It was more of a ‘This seems cool’ curiosity.
But buried within these somewhat directionless enthusiast chats was an ember of an idea that needed fanning.
## **The pivot**
“One of the most common feature requests for Remembrall was, ‘Hey, you’re managing my user’s chat history, can you manage the files that they’re uploading as well?” Abraham says. “We went into our projects expecting to help teams with fun ML problems, but very quickly learned that one of the biggest bottlenecks across most pipelines was actually well before retrieval or generation.”
So the co-founders built a very simple solution — they would upload the docs, parse them using an external parsing solution, and then chunk the information for you. “It’s embarrassing to look back on it now, it was a very ugly Streamlit app with a super simple document segmentation tool. It would do nothing other than split your documents into little boxes of content. **I can’t stress this enough — it was literally a weekend project that we threw together,”** says Abraham.
But they posted it on YC’s forum anyway, and the response was immediate and overwhelming. “We started getting replies, ‘This is better than what I’m getting from Textract. Is this a hosted API? Where’s the Stripe link?’ **The pull was much stronger than everything else we had worked on**,” he says.
“We knew how annoying it was to build a PDF processing pipeline. We knew how much time we were putting into post-processing that content. So when other people mentioned the same painful experience, it was a clear aha moment,” he says.
Unlike the “seems cool!” enthusiasm for extended LLM memory, there was a distinct need and a massive pain point. “These companies are not trying to spend many hours of engineering time on PDF processing, but it’s the bottleneck that’s stopping them from building the things that actually matter. If we can be that ingestion team for our customers and take that problem off their plate, that’s clearly very valuable,” he says.
> We had spent enough time exploring things that were not resonating. In comparison, it felt like we were getting punched in the face by this new idea — it was something people cared about an order of magnitude more.
### **The competition conundrum**
But let’s be clear here, while the team was getting inundated with signals that they had sniffed out a winning idea, they were somewhat hesitant to wholly embrace this new direction. For one thing, neither co-founder had expected to build a PDF processing company. And there was an initial gut fear that they wouldn’t be able to build a moat quickly enough.
“PDF processing is not a new space,” says Abraham. (Brace yourselves here — PDFs have been around longer than both Reducto founders have been alive.) “Every day we were looking into this idea, we’d find a new, different solution that claims to solve the problem. But the way we thought about it was that everything on the market will get you *part* of the way there. Nothing we tried was at the accuracy level for what we wanted, and clearly not at the level our customers wanted.”
Here’s how he explains the difference in layman’s terms: “There was an old era of parsing PDFs using the metadata and just trying to read the file itself. Our insight was that these documents were made for humans, not machines, to read. Every little visual cue, like a gap between two paragraphs, is me telling you, ‘Hey, this is a new semantic piece of information.’ Or a tab structure in a list tells you, ‘This is a sub-idea of that parent idea,’” Abraham says. “We wanted to read these documents like a human would. And that is a very deep problem, but thinking about it from a first principles lens unlocks a whole range of different ways to improve parsing.”
> I think younger founders like ourselves are more afraid of competition than they should be. Our question wasn’t, ‘Is the market big enough?’ The question was, ‘Can we be better in a meaningful way?’
Once the founders felt confident that the answer was yes, they put blinders on. “We didn’t want to spend a year or two of our lives parading around pretending to build a company. We just wanted to focus on this one thing,” Abraham says.
## **The MVP**
Today, Reducto has six different vision models to ensure accurate outputs with any document, but they started with just one. “We trained the first model for layouts, breaking down a document into sub-regions. As a human, when you look at a multi-column layout, you know how to read it. But that’s not immediately obvious if you have text just sitting there. You'll read the text from left to right, you might merge the columns together, etc. And so we tried to break it down into how we understand the paragraph structure and the position,” he says. “We actually see PDFs as just images, and so we convert them to images. It’s not about PDF as a standard, it’s about documents and human content overall.”
They cobbled together an initial pipeline and paid UI barely any thought at all. They managed to officially launch just two weeks after that initial post on YC’s internal forum — although they were hesitant to do so, despite prodding from folks to get the tool out there.
> We got a lot of advice to launch early and not be afraid of failure. But we knew we were in a space where if we launched *too* early and the product wasn’t good, it would just be a waste of everyone’s time.
“**People already had PDF processing solutions, Reducto needed to be decidedly better**. Then once we cleared that bar, we would try to launch as soon as possible,” says Abraham.
They kept the launch simple. “We just put up a post on our social channels saying essentially, ‘Hey, we know PDFs suck. Reducto’s building vision models to address that. Try it out for yourself,” says Abraham.
But here’s the genius behind their launch buzz: “We had a playground with a pre-populated document, but you could also upload your own file. People usually had some sort of file that they’d seen fail with parsing all the time. Seeing it work with Reducto immediately sparked attention.”
Inbound interest poured in from startups, consultancies, even BigCos (by the time demo day rolled around in April, [Reducto was getting 55K in monthly traffic](https://www.linkedin.com/posts/crustdata%5Fycombinator-w24-demoday-activity-7180972283686010883-VlT0?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAABA1u3kBtrP1EzUcqVKi6bXB4Mefn8MB%5F00)). But Abraham and Chowdhuri were intentionally choosy about who to initially partner with.
## **The first customers**
To sidestep the enthusiast problem that they had faced with Remembrall, the co-founders wanted to focus their attention on an ICP that felt the pain most acutely. That meant industries where accuracy was imperative — like finance, legal, or insurance. Making an error on someone’s insurance claim isn’t just a silly typo.
And while they started having some initial conversations with enterprises that had expressed interest, they mainly targeted startups. “They would be able to integrate us by the end of the week,” Abraham explains.
The onboarding experience was white-glove, and even today, Reducto does not have fully self-service onboarding. “We still manually onboard every customer because we learn a lot from the process,” he says.
It was also a quality control mechanism. “We didn’t want to be in a situation where someone integrates us into their production environment and all of a sudden our infra wasn’t ready to handle the next million pages we were hit with. We wanted a failsafe on the customer experience,” Abraham says.
### **Pricing for acute pain**
To sketch out their [pricing model](https://review.firstround.com/pricing-lessons-from-working-with-30-seed-and-series-a-b2b-startups/), Abraham balked at the more expected usage-based approach and instead went with a tiered system that starts at $300/month. “Our pricing tiers assume that you’re processing at a certain volume. The startups that we work with tend to be processing above 15,000 pages a month, at minimum. In some cases, hundreds of thousands or even millions,” he says.
Part of this thinking stems from a bit of scar tissue from the initial enthusiast reaction to Remembrall — and the $10/month price tag that came with it. “We want this to be something that’s tangibly impactful and real infrastructure for companies to build AI products. In order to do that, we wanted use cases that matter to the end customer.”
## **Enterprise comes calling**
While their preliminary focus was on getting quick-acting startups onboarded into the tool, it didn’t take long before enterprises took notice of Reducto — with one seemingly landing in their lap just a few days after publicly launching. “A Fortune 10 company actually tried out the playground and signed up for a demo call,” Abraham says.
After some exploratory calls, at one point during the sales process they brought 14 of their engineers to meet with the Reducto co-founders for an entire day — the signals of [developing PMF](https://pmf.firstround.com/levels?ref=review.firstround.com) can’t get much clearer than that.
“Their entire team just sat with us to learn more. The depth at which they cared and had thought about the details showed that it mattered to them. I didn’t feel that we had product-market fit until our enterprise conversations started getting escalated in a way we didn’t expect,” says Abraham. Eventually ([after 154 days total](https://reducto.ai/blog/reducto-enterprise-sales?ref=review.firstround.com), over 20 hours worth of meetings, an acquisition attempt and a few hundred emails), the Fortune 10 signed on.
But other enterprise deals were an even slower burn. Abraham’s former college roommate was on the team at Scale AI and connected them to Reducto, but it would take another year before they eventually signed the deal. Here’s Abraham’s advice for maintaining focus — and patience — during these prolonged sales cycles.
“The clearest signal is how much your champion seems to care. There are enterprise deals where I’m reaching out to the champion almost begging them to get on a call and they never respond to me. Other times, there are just hoops you have to jump through, maybe their legal team is taking forever, but your champion still seems very engaged. You can clearly tell which bucket you’re in,” he says.
Along the way, Abraham picked up a bit of classic sales advice that he passes along to other folks doing the [founder-led sales grind](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/). “**At first, I felt like every lead could not be dropped, but I’ve changed my perspective over time**. The best answer you can get in sales is a yes, the second-best answer is no. It’s the maybes that will kill you.”
And remember, you’re never *really* done selling. “When selling to the Fortune 10, there were three different points where we got some form of verbal yes and felt like we had the deal secured and, in retrospect, there were still so many stages to go. A signed contract just leads to you needing to deliver at onboarding, and even after onboarding you need to keep nurturing the relationship so that they'll renew,” Abraham says.
### Founder-led sales: Relationships matter
Reducto only recently opened up a search for the first sales hire — after Abraham closed millions in ARR as a one-man GTM band. “I learn a lot from the sales calls I hop on, so I didn’t want to outsource that too early. **It felt almost deadly for the company to lose that pulse with customers**,” he says.
And so far, that lack of sales expertise hasn’t slowed Reducto down — if anything, it’s been a competitive edge. “I don’t think the reason why we’re selling at the scale we are is a matter of wordsmithing the right answer. It’s just an obsession with getting it right, and I think customers feel that. It’s hard to quantify, but caring really matters,” he says.
He points us back to that pivotal moment of signing the Fortune 10 customer quite early on. “We certainly didn’t have full feature parity compared to other vendors that they must have talked to. But they weren’t only betting on the immediate state of the product; they were betting on me and Raunak,” says Abraham. “When they brought up a missing feature or had a complaint about an edge case, we would have it fixed for them an hour later.”
> Your energy as a founder is contagious. When people see how much you care about the product, they start to care about it more, too.
He imparts a bit of advice for other technical founders trying to sell to enterprise — think emotion, not logic. “You’re probably someone who approaches your own buying decisions from a very rational perspective — you choose whatever you think will perform the best. That’s how our startup customers treat Reducto, it’s very objective,” he says. “But with enterprise sales, it’s much more relationship-driven in a way that surprised me as someone who didn’t come from a sales background.”
Legal teams, security teams, procurement teams — there’s an enterprise gauntlet that startups must face down to get a contract signed. “The only way that you will navigate that efficiently is to have at least one person who’s willing to [champion that process for you](https://review.firstround.com/the-startups-guide-to-customer-advocacy-how-to-get-closer-to-your-champions/). Spending time with that champion and making them excited not just about the products, but about working with you is way more important than I would have known two years ago,” he says.
To put it into perspective, he borrows a piece of advice from former founder and First Round partner [**Liz Wessel**](https://firstround.com/person/liz-wessel/?ref=review.firstround.com) (who [led our seed investment in Reducto](https://x.com/lizwessel/status/1841523560533393749?ref=review.firstround.com)). “**I remember her telling me that she built such deep relationships with her own early customers as a founder that she would feel comfortable inviting them to her wedding**. The more I’ve thought about selling from that lens, the easier everything else becomes.”
And while he’s learned this lesson most painfully from founder-led sales, it’s one that applies more broadly: embrace the fumbling phase.
“On day one of starting this company, I had reticence about doing things that I wasn’t comfortable with because of the fear of doing it poorly. The first demo call would be daunting because I hadn’t done it. Prompting a user to pay feels weird,” Abraham says. “But over the course of building a company and sucking at something, you do it over and over again until you almost forget how bad you were at the start. **As a founder, you need to realize the things you suck at are not a negative reflection on you. It’s an opportunity to unlock a new lever for the company.**”
> It’s very important to learn how little it matters to fail on the micro level.
## **The Benchmark: Show, don’t tell**
As a team, Reducto was obsessive about being best-in-class. “We were always very methodical about validating, benchmarking and testing what we were doing,” says Abraham.
But in a sea of “We’re the most accurate parsing tool!” claims, how do you stand apart to customers? Reducto kept butting up against this exact problem.
"Our space isn’t differentiated by feature lists — accuracy differences for our customers directly translate to fewer mistakes that would otherwise impact everything downstream. But we kept finding on first sales calls the buyer would often say, ‘I’ve taken so many calls this week, what’s actually different about you guys?’” he says. “Once they spent a lot of time looking at our outputs against others, they would conclude that Reducto worked better.”
But in startups, time is not always on your side — Reducto needed to find a way to close the education gap and for customers to get to that lightbulb moment faster. “We wanted to remove all the burden on customers to have their eng team come up with data points, the scoring framework, everything they needed to evaluate different tools.”
Building a comprehensive benchmark would be no weekend project (in total, it took about three weeks), but Abraham had firm conviction that it was worth the undertaking. Reducto employed a team of PhD-level human labelers who manually annotated 1000 complex table images from a diverse set of publicly available documents (a mix of examples with different structures, text density, and language). Next, they came up with a fair scoring system ([more on that here](https://reducto.ai/blog/rd-tablebench?ref=review.firstround.com)) and then [open-sourced the benchmark](https://reducto.ai/blog/rd-tablebench?ref=review.firstround.com).
> People with zero data points will still tell you that their models are state of the art. We wanted to show our work — here’s how we back up what we’re claiming.
It’s rare that a go-to-market move flips the switch so quickly — it’s usually more of a slow burn. But Reducto saw this tactic bear fruit almost right away. “We had people reach out who hadn’t engaged with Reducto before because they saw the benchmark and appreciated the work that went into it. And we’ve also had people in the sales cycle specifically call out that the benchmark did the heavy lifting for them,” says Abraham.
While benchmarking is quite common in ML research organizations, Reducto was the first in the parsing space to open-source their benchmark. “Now it’s becoming trendy and I see a lot of other startups releasing their own versions. I don’t mind, more data is always good,” Abraham says. “Reducto is solving an incredibly hard problem. We constantly measure ourselves so we can be even better.”
## **Growing fast, hiring slow**
Reducto has intentionally kept the team extremely small — in fact, they crossed $1M in ARR when they were just a team of four (and they’re still around a dozen today). “We care a lot about the efficiency of each person. One of our first hires was an ML researcher who did his entire PhD in document processing. Nailing that one hire was way more important to us than trying to assemble a 10-20 person engineering team,” says Abraham.
Part of this is preference (“having a large, unwieldy organization was never attractive to me and Raunak,” he says). But much like Abraham’s shrunken GTM team of one, he sees it as an upper hand. “If you're an engineer in a 40-person organization focused on PDF processing, you probably have a very siloed sense of what your task is for that quarter for that year. But if you have a small set of people working on a very important problem, each person is forced to go deep,” he says.
It also means that each person is exceptionally close to customers and their urgency.
> Every single decision and feature that we’re working on, we know there’s a customer waiting and counting on us to do it. The problem isn’t abstracted away into numbers on a dashboard.
Every startup taking on big established players must do everything they can to capitalize on this sense of urgency, Abraham says. “One of our large enterprise customers actually had an internal document processing team and had engineers staffed on the same problem. But at the end of the day, they ended up choosing Reducto because they saw that Reducto was getting better day over day — not month over month or year over year. That matters in ways you can’t quite put a label on.”
When deciding which [legos to give away](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups/), Abraham abides by a simple mantra: “What’s the step in the pipeline that I’m not learning from anymore?”
## **The roadmap**
While Reducto briefly toyed with the benefits of a more verticalized go-to-market strategy, they stuck with a broader appeal. “It would have been easier to be a healthcare-specific doc processing company. But being able to handle different industries has made the product better. We value seeing data points that we’ve never had to deal with, and that’s only possible if you’re building a horizontal product,” Abraham explains.
That means the array of features Reducto could build is quite vast (and perhaps a bit daunting). Here’s how Abraham delineates what gets added to the roadmap: “There are features that are fundamentally transferable and features that are point solutions. If someone comes to us from healthcare and says X type of document needs to work, the limitation to doing that might be our table parsing. Improving our table-parsing is not a healthcare-specific issue, it will improve our product for customers in finance and insurance, too,” he says. “But if a customer is looking for a niche file extension and that’s the only thing they care about getting parsed, given our team size, that’s not the customer we’ve decided to chase. We’re very upfront when we’re not the right solution for them.”
He shares a specific example: “For months, we would have people reach out and say, ‘I have equations as part of these research papers, can Reducto parse this?’ And our answer would be no because we couldn’t prioritize building it at the quality bar we’ve set for ourselves, we needed to fix fundamental issues like table parsing because the dollar value is orders of magnitude higher.”
We mentioned up top that Reducto has a Slack channel with just about every customer — here’s where that comes in handy, too. “We can see where dozens of customers are asking for this one thing and it’s meaningfully impeding the value that they expect from us,” says Abraham.
And while parsing was the initial wedge that drove hordes of folks to sign up for Reducto, it’s now table stakes. “RAG as a paradigm introduced this need to think about chunking. It wasn’t just, ‘Can you parse my documents?’ It was, ‘After you parse it, what do I feed into my VectorDB?”
But today, Abraham says he almost never gets asked about chunking. “We’ve built this entire pipeline for chunking that’s incredible, but we’ve come to realize that what our users want to do is beyond just reading the document. So today we have features that go beyond that, like process automation on top of Reducto. People will classify their documents, split them, and they’ll do structured extraction on those documents, all within Reducto.”
As he thinks about divvying up the work ahead, parsing still gets the biggest slice of the pie. “Every single one of those things is downstream of our ability to parse them really well. Even though we have these other features, a majority of our time is spent thinking about that core,” he says.
## **The path forward**
Back when Abraham and Chowdhuri started the company, they made an initial promise to stick with it for two years. At the time, it seemed like a threshold where if they had stopped before that mile-marker, they probably wouldn’t have tried hard enough, Abraham says.
“If you asked us two years ago if we would be excited to work on PDF processing, the gut reaction would probably be no. But as we’ve gone deeper, we’ve found a love for what we’re doing. The moments of pride where our customers put us head to head with competitors and say that our app is 10x faster — that’s enough for us to want to work on this for who knows how long,” Abraham says.
### How a weekend hack became a multimillion-dollar AI startup | Adit Abraham (Co-founder & CEO at Reducto)
URL: https://review.firstround.com/podcast/how-a-weekend-hack-became-a-multimillion-dollar-ai-startup-adit-abraham-co-founder-ceo-at-reducto/
Last updated: 2026-02-03T17:49:03.000Z
Adit Abraham is the co-founder and CEO of Reducto, which helps leading AI teams extract and structure data from complex documents and spreadsheets in their pipeline. Within 6 months of launching, Reducto went from 0→7 figures in ARR. Reducto has grown to process tens of millions of pages monthly for companies ranging from startups to Fortune 10 enterprises. They just announced a $24M Series A. Before Reducto, Adit was a Product Manager at Google, working on Ads and Search, and conducted machine learning research at MIT's Media Lab.
\---
**In today’s episode, we discuss:**
- How listening to customers revealed an opportunity to pivot
- The weekend project that became Reducto's breakthrough
- Landing a Fortune 10 customer
- A technical founder's guide to sales
- Key insights from Reducto's fundraising journey
- Advice for founders: “You’re going to fail”
- Much more
\---
**Referenced:**
- Anthropic: [https://www.anthropic.com/](https://www.anthropic.com/?ref=review.firstround.com)
- Chetan Puttagunta: [https://www.linkedin.com/in/chetanputtagunta/](https://www.linkedin.com/in/chetanputtagunta/?ref=review.firstround.com)
- Diana Hu: [https://www.linkedin.com/in/sdianahu/](https://www.linkedin.com/in/sdianahu/?ref=review.firstround.com)
- Liz Wessel: [https://www.linkedin.com/in/elizabethwessel/](https://www.linkedin.com/in/elizabethwessel/?ref=review.firstround.com)
- Raunak Chowdhuri: [https://www.linkedin.com/in/sauhaarda/](https://www.linkedin.com/in/sauhaarda/?ref=review.firstround.com)
- Reducto: [https://reducto.ai/](https://reducto.ai/?ref=review.firstround.com)
- Scale AI: [https://scale.com/](https://scale.com/?ref=review.firstround.com)
- Stripe: [https://stripe.com/](https://stripe.com/?ref=review.firstround.com)
- Textract: [https://aws.amazon.com/textract/](https://aws.amazon.com/textract/?ref=review.firstround.com)
- Y Combinator: [https://www.ycombinator.com/](https://www.ycombinator.com/?ref=review.firstround.com)
\---
**Where to find Adit:**
- LinkedIn: [https://www.linkedin.com/in/aditabraham/](https://www.linkedin.com/in/aditabraham/?ref=review.firstround.com)
\---
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
\---
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
\---
**Timestamps:**
(00:00) Hackathons, YC, and an unexpected pivot
(05:23) The weekend project that became Reducto's breakthrough
(09:11) How customer signal led to PDF processing
(14:46) Landing a Fortune 10 customer
(22:42) Building “transferable features”
(25:58) How caring beats sales skills in startup growth
(30:28) The strategy behind Reducto's horizontal expansion
(36:18) Hire slow, go-to-market fast
(41:45) A technical founder's guide to sales
(43:45) “You’re going to fail”
(46:27) Why startups win
(48:30) Key insights from Reducto's fundraising journey
(51:43) Less structure, more impact
(55:00) How frustrations shaped Reducto’s culture
(57:35) The question you should always ask in meetings
**Brett:** So what was the first glimmer of what then would become Reducto. Not when you decided you were going to go build the company, but like if you trace all the way back to where it first began, what is that?
**Adit:** We didn't know this at the time. but when. Raunak and I decided to, you know, work on something, and to apply to YC, we actually applied with something fundamentally different. So we were building long term memory for language models. that was a little too early. This is before people cared about long term memory. but, Raunak and I have known each other for quite a while. My earliest memory of him is, I was a junior at MIT. I had signed up for my first \[00:02:00\] graduate ML course, and I had a lot of imposter syndrome about this, like, It was just something that I hadn't done. And I remember on the first day, the professor introduced to the class like, Hey everyone, meet Raunak.
He's going to walk you through your first PSET. And to be clear, like, Raunak was a freshman at this point, so this was his freshman fall. so it was kind of obscene to have me sit there, and see this person who had been doing ML research since he was 12\. I ended up talking to him as a result of that.
He joined the same sort of living group as me at MIT. we were a big little pair there. So it was this sort of mentorship program as part of that, but when we really became closest, we both had this sort of middle transitionary period where he had wrapped up his previous company. He knew he was graduating soon. I was very bored at my job at Google and was vocal about that. And so we started applying to hackathons together. We did Anthropic's hackathon when they first released Claude. Won that hackathon together and just even putting aside the project just really enjoyed working with each other. When he was graduating, we just had this conversation \[00:03:00\] around like, hey, like I I think I want to start a company, like, would you be interested in starting a company together? And it was, at least for me, immediately a yes. There was no question in my mind that he would be an exceptional person to work with. He's a person that I admired, a person that I enjoyed working with. And so we weren't too focused on, like, the idea that we were working on. We weren't too focused on, like, whether we had funding in hand.
It really was just like, I am excited to do this, and I'm excited to do it with this person. we had a almost like hard and fast rule of if we get into YC by day one of YC, we will choose something and stick with it at least for that period. Because we were really worried about sort of pivoting around aimlessly. We have friends and mentors that we knew had had great experiences with YC.
And so we sort of just, defaulted to that. Honestly, it wasn't like a sophisticated conversation of this versus raising a standard pre seed, it really was just like a, we know really smart people go to YC, we know that they sort of go through a similar stage and process that we are in today. so we just did it, got in, really enjoyed our conversation with \[00:04:00\] Diana and moved forward from there.
**Brett:** And what was the process by figuring out what you were going to actually apply with?
**Adit:** So remember all the long term memory solution that I mentioned, even though I still think it was too early then, did go kind of viral on Twitter. Like it was immediately an attractive demo. It's cool to see a language model, bring up something that you mentioned in the past. and so it was just a reasonable thing to apply with, but even a day after we got into YC, we were very upfront, like, Hey. Every conversation we've had is sort of with a enthusiast, not somebody that's willing to pay for this. So it might be an extension of this idea. It might be sort of like a platform around this or something completely different. But like, we don't think that this is necessarily the end state of what we're going to build.
**Brett:** How did you even think of focusing on that first specific idea?
**Adit:** It just felt like a limitation of language models of sorts. The very early form for Remembrall was actually a hackathon project that Raunak worked on. so it was just meant to sort of expand the context window of language models. effectively that was the sort of goal there. When \[00:05:00\] that sort of had initial traction on Twitter, there were hundreds of people reaching out asking to be onboarded. It seemed at least worth looking into it from there.
**Brett:** Did you think a lot about complimentary skill sets or how we would actually build the company together? Or was it more that like, we just feel very aligned. We enjoy spending time together. There's mutual admiration.
**Adit:** we know that we Compliments each other. Well, I'm like I've always enjoyed sort of more of the go to markets and product side Raunak is a deeply deeply technical person But in terms of the actual decision there really was this sort of question of like, can I imagine going through some of the best and worst periods of building a company with this person? And something that I mentioned a lot is Both of us have been in long term relationships for a while, and I really see co founding a company as very similar to that, honestly. and the things that you learn in terms of settling disputes and like talking through things, not as a me versus you, but as like a we need to get through this together, translate well to being a good co founder, which I've always \[00:06:00\] seen in Raunak, and I hope he sees in me as well.
**Brett:** What else did you write down or align on?
**Adit:** I honestly think that for the most part everything sort of boils down to we don't want to be dishonest with ourselves about what we are doing. I think if you ask Veronica as well, if we sort of look back on our prior attempts at building a company. For Raunak the answer is that it was really more of like a consulting business than it was like a product company. For me it was this idea of going back to like, it only matters if people are using your products, like it wasn't focused on that sort of core pursuit. we just didn't want to spend a year, two years of our lives sort of going around like a parade of pretending to build a company.
We just wanted to focus on this one thing. there's details about that, um, in terms of what we discussed.
**Brett:** Fast forwarding back to where we were a second ago.
what was the process by which you started to iterate away from the original memory IDN? One of the things that you mentioned was sort of willingness to pay. you sort of put this \[00:07:00\] out there, it was resonating, but then the sorting criteria was, do we think there's a business that can be attached to it?
Or what was like day one, two, three, four, after you sort of had some resonance with the original memory idea?
**Adit:** Yeah, so we set up demo calls with everyone. We got a bunch of them onboarded to the platform. and as part of that, we would ask them about their use case. Like, what does this actually solve for you? And we would rarely ever get a real answer. it was more of this like, this seems cool, like maybe I'll try adding it to my AI application.
Like when users chat with it, maybe this will be part of it. but it was never the case that people were saying like, Hey, like I've noticed that customers get angry at my product because X, Y, and Z. that was sort of the first signal, two as we sort of started asking people to actually pay for the product, it was very clear that it was in this like enthusiast category of people are willing to pay 10, 20 a month because it's interesting, but it wasn't something that you know, their product team needed or anything like that.
so. As sort of that, like, exploration of \[00:08:00\] where does the product go from here, one of the more common feature requests we got was, Hey, you're managing my user's chat history. Can you manage the files that they're uploading as well? And we had a very simple, we uploaded documents, we parse it using an external parsing solution and just chunk it for you.
And interestingly, that had a lot more interest than the core product itself. we put a lot of work into improving that because the loss cases that people were mentioning were because we chunked a document incorrectly or read it incorrectly and so on. And what Reducto is today, really wasn't supposed to be a pivot, it was almost this like marketing stunt where, it's embarrassing if you look back at it now, but we had this very ugly Streamlit app.
with a super simple document segmentation tool, it would do nothing other than split your documents into little boxes of content. And that, I can't exaggerate enough, like this was a weekend project that we just sort of put together. We had the document context feature. This thing was sort of just \[00:09:00\] showcasing part of what was going on behind that. We posted that as a technical blog within YC's forum of here's how we segment documents. And interestingly, that just immediately clicked with a lot of founders there.
We started getting replies like, Hey, this is better than what I'm getting from Textract. Is this a hosted API? Like, where's the Stripe link? Like, how do I actually use this? and the pull for that was just so clearly stronger than everything we'd worked on to that point that we decided to really double down and that, kicked off everything that we've built to date.
**Brett:** Was that an easy, obvious, intuitive decision or was it one that you labored over in some way?
**Adit:** we'd spent enough time exploring things that clearly were not resonating that it almost felt like in comparison, we were getting punched in the face with like, uh, this is obviously something that people care about in order of magnitude more than everything we've tried.
**Brett:** And were you both sort of getting pull in that I could use this and I will pay for this both at the same time?
**Adit:** Yeah, and it was also something that we were sort of deeply familiar with by that point, because we'd \[00:10:00\] spent so much time building on top of that point, Google Cloud, We knew how annoying it was to build a PDF processing pipeline. we knew how much time we were putting into post processing that content.
So when other people were mentioning that they had the exact same experience as us, it was this, like, clear moment of, okay, we weren't trying to build a PDF processing company. These companies are not trying to spend X hours of engineering time on PDF processing. It's this bottleneck that's stopping them from building the things that actually matter to them.
so if we can be that sort of ingestion team for our customers, if we can take that problem off their plate, clearly that is very valuable.
**Brett:** When you started to think that there might be this Pivot. Did you think a lot about the long term business opportunity here? Could we create a compounding advantage or moat? You know, how competitive is this space? How many end customers are there? Or did you just sort of follow the customer pull and just said we're gonna go all in and didn't think about any of those types of things.
**Adit:** We did think about it. there was this immediate gut fear. I think especially \[00:11:00\] younger founders like ourselves are probably more afraid of competition than they should be. PDF processing, as you know, is not a new space. So every day, as we were looking into this, we'd find a new different solution.
that claims to solve PDF processing. the way that we've always thought about it is there is an initial wave that will get you part of the way there. nothing that we tried was at the accuracy level that we would have wanted for ourselves and clearly wasn't at the accuracy level that our customers wanted.
And so our question wasn't, um, is this market big enough? Because it was just obvious that people were spending so much money on this already. The question was more so like, can we be better in a meaningful way for our customers? And as soon as the answer for that was yes, we stopped thinking about it in the sense of what else is out there?
We strictly think of it in terms of how much better can we be for our customers today?
**Brett:** How did you figure out how much better you had to be to sort of satisfy the criteria of I will go spend the next X number of years of my life on this?
**Adit:** A lot of it was vibes based,
it was trying really hard documents and seeing what \[00:12:00\] our initial attempts would yield versus other solutions. I think we also really believed that we had a interesting technical approach to what we were doing. A big part of why Reducto is able to be the most accurate solution is there was an old era of parsing PDFs using the metadata and just trying to read the file itself. Our insight here was that these documents were made for humans like you and I to read. Every little visual cue, like a gap between two paragraphs that's me telling you, hey, this is a new semantic piece of information.
Or a tab structure in a list is me telling you, hey, this is a sub idea of that parent idea. And so we wanted to almost read these documents the way that a human would. And that is a very deep problem, but thinking about it from that sort of first principles lens, really unlocks like a whole range of different areas that you can improve parsing on.
Chunking was a big thing that we started with, but for every element of a PDF, like parsing a table or a form region and so on, there are a lot of visual cues that matter. And \[00:13:00\] we've been focused on sort of capturing that entire long tail.
**Brett:** What was the process to get to that insight from posting this feature and sort of seeing it resonate to sort of there?
**Adit:** The first thing that we worked on in terms, at this point, we have six different vision models in a VLM, but the first model that we trained was for layouts. Um, so just breaking down a document into sub regions. the like very clear example for us there is as a human, when you look at a multi column layout, you know how to read it.
Like you don't think about the fact that you read the first column and the second column. but that's not immediately obvious if you just have text sitting there. oftentimes the issues that you'll find is you'll read the text from left to right. you might merge the columns together and so on.
And so we tried to break it down into like how do we understand the paragraph structure and understand the position, such that we know that these are two column layouts. and it naturally extended from there into everything else that we've built.
**Brett:** What was the four weeks after you sort of said, Hey, let's pivot into this \[00:14:00\] insight.
**Adit:** it was kind of all over the place. we had gotten this advice of you should launch early. You need to like get this out there. Don't be afraid of failing with your launch. But we knew that we were in a space that if we launched too early and the product wasn't good, it would sort of be a waste of everyone's time, right?
People already had PDF processing solutions. And so we decided that For this little slice of layout parsing, we want it to be decidedly better. And once we did that, we would try to launch as soon as possible. So we ended up launching, I think, two weeks after that initial blog post. and got a lot of interest on that launch because we had a playground that had a pre populated document.
You would see that this is a hard document that, Is working well here. but we also allowed you to upload your own file. and so people will almost always have some mental example of like, I've seen this file fail all the time and seeing that work for them is like an immediate, okay, this is interesting.
So we had inbound come in from all sorts of companies, startups, consultancies, and \[00:15:00\] large companies as well. and we also were just reaching out to everybody that we knew. We had a, what I think is a kind of interesting way of getting people's attention, which is that I would upload a hard PDF into AI applications, and I would show them that their application is hallucinating.
would be a very clear, like, here's the document that I sent in, and your model is actually making up information that wasn't there. and for any product team that cares about that sort of accuracy, that's enough to get the first call. and so we went from there.
**Brett:** Why are PDFs stilll a thing in 2025?
**Adit:** honestly, that's an interesting question. Like PDF as a standard has been around longer than I've been alive. I think it was started in like 1993 and I've met the people that worked on the original PDF to printer driver conversions and everything in between. it's a convenient format. Like ultimately it's almost like a whiteboard for the human mind.
You can. put information any which way and it's just images. part of it also is just the convenience of there's been so much infrastructure built up around PDFs that that's just how enterprises communicate today. on our end, I mentioned that we treat this as a \[00:16:00\] vision problem. So we actually just see them as images.
We convert them to images. and so it's not even about PDF as a standard. It's about documents and human content overall.
**Brett:** Did you think much about who you wanted to be your first three or five customers and did you want them to be similarly shaped or very different? Did you want the use cases to be similar or different sort of those types of things?
**Adit:** We knew that the accuracy delta that we were presenting really mattered and industries where accuracy matters, right? The people that we reached out to tended to be in finance and legal and insurance. simply because we knew that for them, making a mistake on somebody's insurance claim is not just a silly typo.
Like that's a tangible thing that has millions or even hundreds of millions of impacts potentially at scale. so that's the type of company that we reached out to. At the same time, a big part of how we sort of approached the initial push is we recognized that this, like, bimodal splits of startups were immediately pushing for AI features and enterprises were interested, but at the time there weren't a lot of \[00:17:00\] true production enterprise AI features to use reducto.
so we mainly targeted startups to start because they would integrate us by the end of the week, while still starting those initial conversations with enterprises as well.
**Brett:** And did you let anybody use the product or did you want to sort of white glove, be involved with how they were leveraging it and deploying it?
**Adit:** Even today we don't have fully self serve onboarding. So we have a free playground where anybody can go through and see that their documents work. But in terms of actually using the API and deploying it, we manually onboard every single customer.
**Brett:** How did you make that decision?
**Adit:** There's a few parts of it. One, we learn a lot from that process of, you know, hearing about their use case, seeing what they're sort of considering in their decision.
and two, there's also the second part of, we want everybody to see Reducto as this best in class product. And we really didn't want to be in a situation where, you know, somebody integrates us into their production environments. And I don't know, let's just say our infra wasn't ready to handle. the next million pages that we were hit \[00:18:00\] with.
at this point we are processing many hundreds of millions of pages. I learned yesterday that if you printed out every page that Reducto has parsed, it's something like three and a half times the size of Mount Everest. and you can just imagine like if we did that on day one, it would have been this horrible experience that everybody would have been able to point to and we just didn't want that.
**Brett:** And so once you decided that as you were kind of nurturing more enterprise relationships, you would work with startups. Did you care what type of startups or how mature are the use cases for that sub segment?
**Adit:** We did and we still do. a common question that I get is like, why is this not just purely usage based? And I think part of it is if we are approaching it from this like white glove experience perspective, we almost need the end customer to have a recurring use case that's as part of a real production workflow.
And so our pricing tiers and everything are Almost assuming that you're processing at a certain volume. So the startups that we work with at minimum tend to be processing above 15, 000 pages a month. in some cases, hundreds of thousands or even millions.
**Brett:** how did you make \[00:19:00\] that decision?
**Adit:** I think it might be partially like a visceral response to initially serving the like enthusiast crowd. there's a lot of fun and excitement with working with that, but we really wanted this to be something that's was sort of tangibly impactful, and was like real infrastructure for companies to build AI products.
And in order to do that, we wanted use cases that mattered to the end customer.
**Brett:** You said that this sort of got kicked off two weeks post launching the first real version of the product. What was the actual launch?
**Adit:** So YC has a way for you to announce that you are part of the batch. Our initial launch was a simple playgrounds where you upload the documents and see the outputs. and we just post on social channels saying, hey, we know that PDFs suck. Everybody has experienced that. Reducto's building vision models to address that.
Try it out for yourself. and I still, to this day, when I do sales calls, my framing is not like benchmarks or anecdotal data. It is really like you will see it on your own data, that this works in a way that other \[00:20:00\] solutions might not have.
**Brett:** At what point did you have the conviction that you would go spend years of your life working on the problem?
**Adit:** So when we started a company, we sort of had an initial, like, we will try this for two years, at least. If we stopped before then, we probably might not have tried hard enough. YC also has some interesting stats on, the percent of companies that make it to two years and how they do after. Outside of that, I really think it's almost been this like, learned love for what we're doing.
I think if you asked us two years ago, like, would you be excited to work on PDF processing? The gut reaction would be no. It doesn't sound like a fun problem, but as we've gone deeper into it, I think we've just really enjoyed what we're doing. And there are so many little moments of pride where I've seen our customers be put head to head with their competitors on socials.
And it will be like the PDF upload feature where people will say, like, it is 10 times faster on this AI application than this other one. and of course, like, it doesn't have a Reducto logo slap there, but like, we know that we are helping power that. and that is enough for us to want to work for \[00:21:00\] this, work on this for who knows how long,
**Brett:** When did you think you had product market fit?
**Adit:** I don't think that we really thought we had product market fits until our enterprise conversations started getting escalated in a way that we didn't expect.
As you know, there's a very large company, that powers a really broad range of use cases with Reducto. And we saw through that process that they, at one stage in the sales process, they brought 14 of their engineers to meet with us for eight hours of that day. their entire team basically just sat with us to learn more and the depth at which they cared and the way that they clearly thought about details for this, Showed that it mattered to them, and that I think was the clear signal of if it matters for these people and it matters for the other people that we're talking to, then clearly what we are working on matters overall, and from there it's just a question of are we the right people to do it?
**Brett:** You mentioned that sort of when you put the word out for the very early version of the product, that a bunch of the early customers were startups for all the obvious reasons, and you started to nurture \[00:22:00\] enterprise relationships. What was the source of those conversations and what did it look like to actually start to engage them?
**Adit:** It's a broad range, in some cases it was me asking friends at those companies for intros, Scale. ai is now a customer. my roommate in college was on a team there. And so I asked him for an intro that led up to the engineering manager and it took about a year for us to plan them as an actual customer.
There's a, a fortune 10 customer that we signed on relatively early. we actually really lucked out in that they tried. a document on the playgrounds, and decided to sign up for a demo call, they almost landed in our lap in that sense. So it's been all over the place. A lot of it was just doing whatever we can to find the companies that we knew had this use case.
**Brett:** For enterprises that took a year, how did you debug If it just wasn't an urgent and important problem versus they're a large enterprise, it's going to take 6 to 12 months to get the deal done irrespective of market puller enthusiasm?
**Adit:** I think the clearest signal is \[00:23:00\] how much our champion seems to care. So there are enterprise deals that take a while because their legal team is taking forever. You know, there's just hoops that you need to jump through. And there are enterprise deals that, I don't know, maybe I'm reaching out to the champion and they're just never responding to me and I'm almost like Begging them to hop on a call. You can very clearly tell which bucket you're in. Um, and at first I was in the camp of like, every lead cannot be dropped. it's almost sad if they don't hop on the next call with me. and I really changed my perspective over time. do you know Ryan from Vendor by any chance?
**Brett:** I know of, but not personally.
**Adit:** gave a fantastic sales call. Like overview to our YC batch that just changed the way that I look at this. Framing was just the best answer you can get in sales is a yes The second best answer you can get is no and your job
**Brett:** And the worst is the long drawn out potential maybe.
**Adit:** Yeah, exactly and So now we're at this point where if we're in the buckets of the person that we think should really want this clearly doesn't care, it's maybe not the right time and that's okay. but if that \[00:24:00\] person is trying really hard, then we put a lot of work into to make sure that whatever other logistical steps there are, we're doing what we can to help fix this.
**Brett:** In the first six or 12 months of the company's life, how did you decide what you wanted to build yourself from scratch versus what you wanted to leverage other infrastructure, open source, et cetera?
**Adit:** So we had a sense of what the minimum viable version of a document processing product would look like. it should parse tables, it should parse images. and to start, we cobbled together that pipeline with a combination of open source and our own models. Over time, we've sort of expanded to cover that full pipeline. But actually, , I think for what we do, we are not this sort of platform. There's no like major UI components and all of that. In that restrained scope, a lot of the way that we've been looking at this is not a build versus buy decision. It's a, does this feature even need to exist? Like our customers really, really asking for this, or is this something that we are sort of lying to ourselves about it being important. And so, for a lot of what we've built, the reason why we've been able to do it with a \[00:25:00\] small team is we've constrained the set of things that we do say that we do. We do those things very, very well, which means we haven't had to sort of take off the shelf solutions meaningfully in our product.
**Brett:** So maybe on that point, how did you go about figuring out what to build in what order? And kind of to the point that you were making, what is the role of what you're hearing from customers?
**Adit:** we have Slack channels with almost every customer. Many of them have mine or Raunak's phone number so they can call us when, they get a new client and that client needs something done. I think at this point we are fortunate to have enough data points where we can see that dozens of customers are asking for this one thing and it's like meaningfully impeding on the value that they expect from us. And those are obviously the types of things that we want to prioritize. In the early days, a lot of it was intuition about what we would want if we were building a product on top of Reducto. and almost like being the type of company that isn't blocking you from getting what you want.
**Brett:** Did you think at all about what you were hearing from \[00:26:00\] customers who didn't buy but would if you had this set of features versus existing customers that wanted feature one, two or three?
**Adit:** the way that we generally think about that is there are features that fundamentally are very transferable. And there are features that are very, they're almost like point solutions, right? And so when I think about a, I don't know, let's say somebody comes to us in healthcare and they say this type of document needs to work, the limitation there might be our table parsing and improving table parsing there is not a healthcare specific thing.
It's something that will improve our table parsing for customers in finance and insurance and so on. And so those types of things we will focus a lot on. But there are customers that will come to us and maybe they're looking for some niche file extension, or maybe, you know, they have an internal documents type and that is the only thing that they care about getting parsed. given our team size, that's not the type of customer that we've decided to chase. We're very upfront about whether or not we are or are not the right solution for them.
**Brett:** How structured or unstructured are interactions with customers over the \[00:27:00\] past couple years? Like, do you just have informal chats in Slack and use that roadmap or is there more structure to it?
**Adit:** For the larger enterprise customers, we do. Standard like quarterly meetings with the leadership and all of that. for a lot of our customers it's really just like they will text me or they'll message on Slack and we'll get lunch or dinner and we try to have a regular cadence of just meeting with them in some capacity whenever we can.
**Brett:** I thought it could be interesting to talk about, some of the biggest customers that you landed, obviously the ones that you can talk about and maybe sort of share the origin story of a few of them, and sort of how the deal came together.
**Adit:** There's a very broad range, I've mentioned the startups, I've mentioned the trillion dollar market enterprise. But there's a lot of companies in between there where Scale AI is a customer, there's a really large set that I unfortunately can't name today. But what we've seen across these companies is they're incredibly technically talented, and they have a more premium products that they sort of have impressions that they want to maintain there. And at \[00:28:00\] every stage of our conversation, you can tell the difference between how a company like that approaches their vendor evaluations, the features that they're building, and that they aren't looking for like a good enough solution that they can sort of stop thinking about this problem for. They care a lot about the edge cases of our processing. they will ask us a ton of questions on like how we came to a certain decision. And that rigor of building exceptional products I think forces us to also build an exceptional product because if we are not at the bar, they can't be at the bar for the products that they're building on top of Reducto. So yeah, overall we've been very lucky to have companies that I consider to be, you know, some of the best product teams in the world choosing Reducto. we're hopefully going to continue seeing that trend over time.
**Brett:** Maybe sort of on a similar thread, one of the ways that you've approached sales, and I think one of the ways that. Folks who are great at sales approach sales is you often get very deep with your customers long before They've signed and then you spend a tremendous amount of time in some cases going to their office \[00:29:00\] weekly. Are there any interesting sort of things that you've picked up that you just thought have been intriguing to you as you've had this chance to work with and study so many different companies, maybe that is different than when you basically had one true large tech company experience in Google?
**Adit:** I would say it's the pace of iteration on AI teams in particular is A lot faster than I think people give it credit for, because we are in this phase where Every week Twitter will have this, this is the new best thing and here's the thread on, like, why you need to drop everything else.
And so people have a lens of skepticism, but they also have clearly developed frameworks for rapid experimentation and sort of plugging and playing with different things. So we end up learning a lot about what the industry is doing and where it's headed as a result of what our customers are doing and what they're asking of us as well.
**Brett:** Maybe you sort of partially answered this in sort of the last answer, but, how did you balance as you were spending time with big enterprises and their needs and wants relative to mid-market or startup needs and wants?
**Adit:** I think we are \[00:30:00\] lucky in that the most likely thing that a user will complain about is that the parsing output wasn't what they wanted it to be. When we talk to enterprises, we are very focused on what we say is our scope. It's actually been helpful on that lens of they have the engineering bandwidth to build things around it if we say that this is not what Reducto does. we sort of solve the problem by just having the offering be almost the same to both mid markets and enterprises. There's some details that differ in terms of the scale at which they're operating and so on. Those we will, of course, take care of because we don't want it to be a reason why they can't use the products.
But outside of that, that's my answer.
**Brett:** What are the most important things you've figured out in terms of founder led sales thus far?
**Adit:** One is that it's hard to quantify, but caring really, really matters. My background is, of course, not in sales. Like, I don't think the reason why we are selling at the scale that we are is like a matter of wordsmithing the answer well or anything like that. it really is just like a obsession with getting it right. and I think \[00:31:00\] customers feel that. Whether it's another startup where you're talking founder to founder or even enterprise, like they can tell that the way that they're talking to you is not the way that's like a scaleup's BDR would talk to them. And we've seen this for the fortune 10 that I mentioned, we actually certainly were not like a full feature parity option compared to some of the other vendors that must've talked to them. But A big part of what they were betting on wasn't just the immediate state of the product. It was me and Raunak. It was them seeing that when they brought up a missing feature or had a complaint about an edge case, we would have it fixed for them an hour later. And that sort of energy I think is almost contagious through the sales process. When people can tell that you care about the products, they start to care about it more too.
**Brett:** Did you think deliberately about, do you want to verticalized in some way and have even early on, kind of spend the next few months just focused on healthcare companies and shaping the product for that, and then we're going to go after financial services and sort of those types of \[00:32:00\] things?
**Adit:** We did briefly on a go to market perspective, obviously it would be easier to sort of be a healthcare specific document processing company and to be able to point to the entire industry for that. But I think a big part of what we are doing, going back to what we were talking about earlier is, it's a very different problem to be able to parse a specific type of document than it is to be able to not know what's about to come in and still be able to accurately parse that. And to that end, even though it's harder for us to do this, it is very valuable for us to not deal exclusively with healthcare customers and not deal exclusively in insurance or finance or any given use case, because the learnings that we have from each type really transfer across them and they've made the product into what it is today.
**Brett:** So did you make a deliberate decision that we're not going to verticalize and that kind of being stretched in all these different directions was going to, I guess, maybe avoid the local maximum sort of problem?
**Adit:** We just saw it as this like forcing function almost of this is what it will take \[00:33:00\] to build a truly exceptional product. We really value being able to see data points that are outside of our distribution that we've just never had to deal with. And you can only do that if you're a horizontal product.
**Brett:** You touched on this a little but from a product building perspective, it seems like most effort has gone into making the core document processing engine better and better. But I assume as you spend time with customers that there were all sorts of adjacencies or potentially net new products that you could build alongside it that would be accretive from a revenue generation perspective. How do you sort of think about, do we just want to make core better, do we want to stamp out adjacent use cases, sort of those type of early trade offs?
**Adit:** So this definitely matters a lot. Part of the initial interest for Reducto is RAG as a paradigm introduced this need for thinking about chunking, for example. So it wasn't just, can you parse the documents? It was, after you parse it, what do I feed into my Vector DB? That was a Initial selling points, like that was a big part of why people would sign up for Reducto. And I almost \[00:34:00\] never get asked about chunking today, like we've built up this entire pipeline for it, it's incredible, but what we've sort of come to realize is a lot of what we want to do and a lot of what our users want to be able to do is downstream of understanding the document exceptionally well. So today we do have features that go beyond, you know, just reading the document. We have features that will let you almost do like process automation on top of Reducto, where people will classify their documents, they'll split their documents, they'll do structured extraction on their documents, all with just Reducto. But every single one of those things is downstream of our ability to parse the documents. Every single one of those things benefits from our ability to parse them really well. So in terms of what we spend our time thinking about, Even though we have these other features, a majority of it is still that like core, if that makes sense.
**Brett:** Do you think intentionally about resource allocation, X percent, insert a core document processing versus not, or is it just more intuitive?
**Adit:** It really is just intuitive. Um, we're a small enough team that this is just a weekly conversation that we have. There's always going to be sort of fires \[00:35:00\] or things that we need to put out that take time away from that. But a majority of our time is on that core problem.
**Brett:** Did you spend time thinking about, you know, we're getting these different requests from customers. This request might lead to X dollars in revenue and this might lead to Y dollars in revenue. did you think about the difference between pain points and like the value of solving those pain points?
**Adit:** We do. Equations are one example. For months, we would have people reach out to us and say like, hey, I have equations as part of these research papers. Can Reducto parse this? And our answer would be no, because we knew that before we sort of focus on these one off things that some people were asking for, we needed to fix issues like table parsing because 80 percent of our customers were asking for this and the dollar value of being able to parse any table well is just orders of magnitude higher. So it does factor in, I don't think that it's like a rigorous exercise for us.
Like we don't do a market opportunity analysis for each feature, but there's almost like a gut \[00:36:00\] instinct of what will actually move the needle for the company.
**Brett:** How did you begin to think about where the long term edge in the company is going to come from?
**Adit:** A big part of sort of like the, the source of my optimism about where we're headed is the, the nature of what people need to do with these PDFs is changing. and what I mean by that is all of the large cloud providers have sort of like the de facto PDF processing solution that people have used for a while. But where we are today is you're getting these models and these agents that are incredible at reasoning. Anybody that you talk to is convinced that over time, more and more business decisions and actions will be made by these agents and models. And if you're moving to a future where humans are not really part of that loop, but you have this massive repository of human data and intelligent systems that need to interface with that human data, it's an infinitely \[00:37:00\] valuable problem to be sort of the interface that connects it to. The U. S. alone has on the order of 4 trillion paper documents, um, at some point those will be scanned, at some point those will need to be fed into GPT 5 or 6 or whatever else is out there by then, and if we continue to be the most reliable way to parse that data if we continue to be the company that is clearly the way to improve your end reasoning as a result of what you're passing in. I don't know exactly what the number for that opportunity is. I'd be guessing if I said something, but I know that that is incredibly important for the world.
**Brett:** In the early phases of building the company, how have you chosen where to go very slowly and where to go very quickly?
**Adit:** Hiring was the first thing that came to mind for where we went slow. I think we were at four employees when we crossed a million in ARR for the first time. and it's something that I sort of heard both sides of the story for. Um, of like, we \[00:38:00\] should have been hiring faster or like this was the right thing to do. But we care a lot about the efficiency of each person. And I don't mean that in terms of like, um, performance management perspective, I mean that in terms of having a large unwieldy organization was never attractive for me and Rodak. and so we were very thoughtful about each individual person that joins. our founding ML researcher is this guy that did his entire PhD in document processing. Um, and he had the best open source models in document processing and nailing that one person was way more important to us than like trying to get a 10, 20 person engineering team that didn't care as much. In terms of things that we've tried to move fast for, I think part of this is like the almost reactive nature of being an AI infrastructure company. Especially today, the rate at which models improve is honestly insane. And there are paradigm shifts on what matters constantly. I mentioned that RAG was sort of the, like, go to reason to use \[00:39:00\] this, and chunking really mattered then.
It doesn't matter so much now, and now people care a lot more about the embedding approach for our chunks and so on. And we need to be at the forefront of what the best ingestion looks like for today's models.
**Brett:** Are there any areas where you've changed your mind, where you were going quite slow and now you've decided we have to go very fast or vice versa?
**Adit:** Two things. One, we are newly starting to ramp up on GTM. at least so far, I'm the only person on GTM at the company. But we're finally at a point where I really think that the product is resonating with people. And that was sort of like the key gate that we went across before we worried about hiring our first few GTM hires. And the second is on the rate at which we work on the core model work. We started with this constraint, we will only do PDF processing because we don't want to sort of, there are others in the space that sort of extend across all file types, but not at the same accuracy, and we really did not want to be that company. but we are at a point where our \[00:40:00\] customers don't want to be sending only this file type to Reducto and like sourcing their own pipeline for this other file type and we need to be almost like the unified ingestion pipeline for them and that just requires hiring more exceptional engineers to be able to do that.
**Brett:** On the GTM hiring, to the point that you're making, you've made it very far with no GTM org other than yourself.
And you said that sort of it felt like at the right time because the value prop was resonating with customers. does it actually mean to resonate? And do you think that three months ago wasn't the right time and nine months ago and twelve months ago or knowing what you know now you could have started to build a GTM org earlier?
**Adit:** that's a good question. I don't have like a exact month breakdown for when it would have been okay or wouldn't have, but a big part of how me and Raunak see this is, I learn a lot from the sales calls that I hop on. It's not just a matter of learning about what the customers need. It's a matter of learning where the product needs to be for people outside of \[00:41:00\] the voices we already hear in Slack. I really didn't want to outsource that too early. It felt almost deadly for the company to lose that sort of pulse with customers. But we have reached this volume where I know that there are more companies that are ready to onboard with reducto than we can handle onboarding. we are.
supply constraint, not demand constraint. And that's the point where, it's not that I'm taking a step back from GTM. It's just that there's so much interest in what we're doing that we shouldn't sort of be our own bottleneck.
**Brett:** And how did you decide as you're going about building the GTM work for the first time in what order, you know, you could more hire on the success side or sales engineering or post sales and free you up from that. You could obviously have people sort of building pipeline, you could have AEs, you could sort of do anything.
What, what's been your sort of process or thinking about the first couple, roles you're going to hire for?
**Adit:** Our first GTM hire is likely going to be our founding customer success manager. The thinking there is really just, it is more \[00:42:00\] okay for us to maybe not prioritize net new ARR. It is not at all acceptable to me for existing people that trust Reducto to not continue to be this excellent solution for them. I never once Reducto to be at a point where we are dropping the ball on our customers. And so post sales and making sure that they're getting value from it's that we are listening to what their needs evolve to, as the first function for us to solve. Once we are confident that every customer that decides to commit their confidence to us, is happy and growing with Reducto, then it's, of course, a lot more important to get more people in that pipeline. We sort of sequence it as we're hiring a BDR first, and then at some point we'll hire a junior AE to focus more on the SMB side. And then we're going to hire enterprise AEs. I mainly see it as a function of what is this sort of step in the pipeline that I'm not even learning from anymore. I don't think it shapes my understanding of the company or the products to do outbound content, for example. And so a BDR is the right person to hire \[00:43:00\] for that. And we're just sort of progressively stacking from there.
**Brett:** You mentioned this a little bit, but for technical founders who have not sold to enterprise specifically,
are there any other things that you figured out that would be useful for them to understand sort of either as global principles, or maybe if you're selling to startups versus selling to enterprise, here's the key things that you need to know.
**Adit:** I think if you're a technical founder, you are probably somebody that approaches your own buying decisions from a very rational perspective. you're probably, as you're sort of thinking through your startup stack, Choosing whatever you think performs the best, which is in fact how our startup customers treat Reducto. it's very objective. I don't think that that is true at least in my experience for enterprise sales Like it matters a lot what our accuracy numbers are in their benchmarks But it's so clearly Relationship driven in a way that I at least did not know as somebody that doesn't come from an enterprise sales background. Enterprises are these massive behemoths of \[00:44:00\] organizations where it's not just a matter of is the team that you're working with happy, there are leadership people involved that maybe you didn't know to talk to. They're just like a whole legal process and a security team and a procurement team. And the only way that you will navigate that efficiently is to have a set, or at least one person who's really willing to sort of champion that process for you. and spending time with that champion, like making them excited about not just the products, but about working with you is way more important than I would have known, two years ago.
**Brett:** So specifically the depth of relationship in the champion that's going to help you navigate everything?
**Adit:** Yeah. Our seed round investor, I think is exceptional at this, uh, Liz. and a lot of what I sort of think through is she mentioned that a lot of her early customers were at a point where like she would feel comfortable inviting them to her wedding. They're friends for her, not just like a paycheck. And the more I sort of think of it from that lens of really just getting to know them as people, the easier everything else becomes. Like you just have a natural \[00:45:00\] relationship. It's not quite as transactional as it would have been otherwise.
**Brett:** One of the interesting things I think is when a lot of people talk about. how their company got into really strong product market fit. It's often like nine years after they start the company, right? And they're at some event and it's coming up and They sort of paper over a lot of what happened just because it was so long ago and it kind of tied up into a nice bow.
One of the nice things about talking to you now is that you're sort of recently into this really strong product market fit where you kind of have this dynamic where both you have really strong market pull, a deeply satisfying product, that's solving a real problem and thus translating into an economic model that actually works for the company. And so I'm curious because it's sort of fresh in your mind, are there other things we haven't talked about that are broader lessons that you think other founders might find useful who are six months away from starting a company or three months into starting a company?
**Adit:** The number one thing that I've learned is actually not a specific skill. It's \[00:46:00\] almost just this general idea about how malleable you as a person are. And what I mean by that is I think on day one of starting this company. I had reticence about doing things that I wasn't comfortable with because there was almost this like fear of doing it poorly. The first demo call would be daunting. Prompting a user to pay even after they're telling you that they're interested in the product is like weird thing where it almost doesn't feel right. You get so many reps in over the course of building the company of like, Sucking at something, doing it again and again and again until you become kind of good at it and you almost forget that you were bad at it to start. Those sorts of like skill issues kind of become exciting, where now when I hear that like, Oh, maybe I'm doing a horrible job of post sales of like growing contracts over time. That's not a bad thing. It's, it's not like, a negative reflection on me. It's more so just like an opportunity for us to \[00:47:00\] unlock this new lever for the company. if I was talking to myself and trying to instill something in myself six months before starting the company, it really would be this idea of just do the things that you know you need to do, without a fear of failing at them, because you are going to fail.
And that's, just not important in the broader picture.
**Brett:** Do you think that's always been the way that you've seen the world?
**Adit:** I don't think so because especially when I was, you know, working my first job as a new grad, I don't think you get the same level of opportunities to fail. I think it's a very important thing to learn how little it matters to fail on a micro level. and so it really is just something that we got as a result of working on the company. It wasn't something that I think is, you know, intrinsic to me or intrinsic to Raunak or probably most of their founders.
**Brett:** What is sort of the meta idea about what enables startups to even exist, particularly in this context, which is you're not creating a new market. You're just doing something better?
**Adit:** This goes back to sort of this idea if we didn't want to scale the team too \[00:48:00\] aggressively. I generally think when you have a small set of people working on a really important problem. each person there is really forced to go deep into the nuances of what matters. What that leads to is if you're an engineer in like a 40 person organization focused on PDF processing, you probably have a very siloed sense of, you know, what your task is for that quarter for that year.
But for us, like every single decision and feature that we're working on is in this, like very real context of Scale AI needs us to parse this document. We've seen this type of document fail for this other customer. And that, I think really changes the way that we approach our work. It changes it on a technical level because we have, you know, tangible things that we're working towards.
But it also changes it in the sense of how much we care about the problem because we know that there's somebody that's waiting and counting on us to do it. The problem isn't abstracted away into like a dashboard of numbers. and that might sound abstract but I think that's a very real competitive edge and it's probably been true for every company that's \[00:49:00\] going up against big established players like we are.
**Brett:** I think that that's a great point. And I would assume that large companies understand this, but there's something about the vessel of four people that really want to make this thing work.
There's some magic in that.
**Adit:** I don't know how to quantify it. Clearly it translates into something meaningful and we see this where one of our large enterprise customers had an internal document processing team, like they had engineers staffed on the same problem. And yet at the end of the day they ended up choosing Reducto because for them they saw that day over day Reducto was getting better.
It wasn't like a month over month or a year over year They were watching the product improve over the course of their like weeks long trial, and that matters in ways that you can't like quite put a label on.
**Brett:** Something we haven't talked that much about thus far is kind of how you chose to capitalize the business and maybe In the few rounds of financing that you've raised all with relatively short time horizon, you can sort of share a little bit \[00:50:00\] about how you approached it and maybe are there any higher order bits that are useful to other founders that are starting to raise capital?
**Adit:** So, as you know, we went from pre seed to seed to series A over the course of a year. I don't think that that is a testament to our fundraising skill set. It's more of a testament to the business itself. We've been incredibly fortunate and the reason why we raised that funding isn't actually money itself.
We actually still haven't spent our seed funding. It really is because the investors that we ended up raising from, we really admired the way that they thought about the company and thought about the problems that we were dealing with, that we voiced to them. If I were to give advice to other founders, and again, I'll caveat that, I think in any sort of mutual selection relationship, there's always one party that thinks that they are worse off in that transaction. that applies to people dating that applies to like you selling a product and somebody buying the product. and that applies to fundraising as well, where oftentimes when you're selling a product, you sort of come at it from this lens of like, I need this \[00:51:00\] person to buy and like, there's a desperation that comes with it. And there's a similar power dynamic by default with companies raising from investors because investors meet thousands of companies and the default answer is no.
but If there's one thing that that's you sort of need to keep in the back of your mind as you're fundraising, it's really just this idea of what you are offering, this ownership and what every founder hopes will be a generational company is incredibly rare. It is ideally like a opportunity that people don't come across often.
And so there's details of communicating that that I'm sure people workshop and improve over time, but the fundamental thing to like keep in mind and to try to strive for is to be in a position where ideally you don't need to fundraise. Because when you come at it from that perspective, you're not attached to the outcome of any given investor call and you really start to choose not based on like I need dollars in my bank today, you start to choose based on, will this person be the person that I reach out to when I'm confused or struggling with a core moment of the \[00:52:00\] company?
**Brett:** In the case of raising your seed from first round and your A from benchmark, what's sort of the way in which you prosecuted the relationship in this case with Liz, or Chetan, that sort of gave you the confidence that they are the people that you would want to be an owner in your business?
**Adit:** The number one thing that was most helpful for us was actually talking to companies that raised from them that didn't work out. think it's often the case that you find out what it's truly like to partner with a person and the bad scenarios as opposed to the good ones. For both Liz and Chetan we directly had incredible interactions with them, but everybody that we reached out to trying to like poke holes in their story didn't have a like instance of vacuous interactions that are cases where they like really let them down. Both of them Across their relationships clearly put in so much effort like their heart and soul into the people that they were partnering with and that sort of consistency I think is very rare and it's made it obvious to us that this is somebody that we \[00:53:00\] would want To work with as well.
**Brett:** In the sort of 18 months since you've started the company, where do you think the luck has been?
**Adit:** All over the place. I think we got really lucky in terms of our fundraising process, not in terms of the dollars, but in terms of the people that we get to work with. I think I got exceptionally lucky in terms of who I landed as a co founder. Like, I don't regret that decision whatsoever. We were super lucky to have very understanding early customers that, you know, saw the promise in what we were doing, even if, on day one our uptime wasn't three nines of SLAs.
Like, they knew what we were working towards, and it was almost like they were building Reducto alongside us. I don't think we would be where we are today if you sort of stripped away all of those, those happenstance encounters.
**Brett:** What about sort of the inverse of that? What are the most skillful things that you've done thus far?
**Adit:** I think a lot of it is the product work itself. I really think the work that we are doing, not just in terms of how we think about the models that we train, but also in terms of how we think about what \[00:54:00\] the product experience is like, what is and isn't in scope, sort of prioritizing that to really make the seamless experience end to end, is not sort of like a happy accident.
We haven't been throwing stuff at the wall to see what sticks. We are very, very thoughtful about the things that we work on. The way that our team works is, we'll of course have small tickets, but every single week each person has only one thing that they are focused on. and when we do our weekly team meeting, that one thing is what we discuss, there's a singular focus for what we are working towards, and that's transpired into what we've been able to build.
**Brett:** Are there other rituals like that? This idea of a singular thing that someone is accountable for? Are there other things like that in terms of the way that you built a company that you think have had an outsized impact?
**Adit:** I generally think that we lean on the side of not forcing structure for the sake of structure. This is sort of me like rubberbanding from seeing what I was annoyed by at Google, we don't do daily one on ones. we don't have sort of like extensive write \[00:55:00\] ups for the work that we're doing for the sake of showing that it's a lot of work.
The way that we approach product building is we have a channel on Slack called Daily Updates, where everybody will post whatever's working well or isn't. If you need to talk to somebody, we are fully in person, so you will just talk to them for the time that you need to. And the only structure that we really have is that week over week checkpoints.
if this is what we said we were going to do, here's the impacts that, we actually landed versus, like, we need more help here. And that's worked out well. We really try to see it as everybody's solely responsible for the thing that they're working on. If you need additional hands, like you need the whole team to stop what they're doing and just label data with you for the next three hours, each person on the team will sort of fight for that and I love the energy that that creates.
**Brett:** How did you focus on one thing? Don't you have customers asking you morning, noon, and night for things?
**Adit:** This applies to everyone at the company, not just me, because I mentioned that we have Slack channels with everyone. So we'll get requests and tickets throughout the day. That's something that we're still figuring out to be honest. it's just a, a \[00:56:00\] natural part of building an early stage company is just, there's so many things pulling at our attention.
To the best that we can, we try to sort of, silo those into like directed periods where we're focusing on customer support and so on, but we do try to block off time for the things that we see as core fundamental efforts for the company.
**Brett:** In what ways did effectively never having a job help you both in building the company? And obviously you had a brief stint at Google, but it was probably short enough that it, you know, it wasn't like you had a 15 year career building and scaling companies. So in, in what way did sort of not really having work experience been immensely helpful to you building the company?
In what ways do you think it's sort of been made the journey more difficult?
**Adit:** I think a lot of what you see as like default practices, like Google created the structure of OKRs, for example, are things that people repeat at their startups because they've seen it work that way in the past. And for better or for worse, Raunak and I have a sort of fresh slate that we are working off of.
And so as we \[00:57:00\] think about how the team works together and all of that, we can try these things because our mentors will mention them and they'll say, this is how we do it. And sometimes those things work well for us and we stick to them, but there's no sort of coercion of every great engineering org does this and therefore Reducto must do this as well. it really is just like a, we try it. If it works, great. If it doesn't, that's fine. Like we will find our own process for it.
**Brett:** Is most of the time when you're trying to figure these things out, it's mainly just trial and error to the point that you're making?
**Adit:** On some level. Yeah. we will have a Friday team meeting and we'll say, Hey, We want to try this structure for the next two weeks, we'll all write a one pager for what we're working on, and at the end of the two weeks, the team will just honestly say, like, I didn't think that this was helpful, I think that it distracted me from the time that I would have spent working on it, and of course that's a hypothetical, but that's fine, there's no attachment to that idea, it's, we will do whatever it takes for the team to do their best work.
**Brett:** What have you found is the importance of just working \[00:58:00\] insanely long hours thus far in building the company?
**Adit:** I know startups that almost like measure themselves on the number of hours. And I don't think that we are in that bucket. Candidly, of course, by nature of what we're doing, it does sometimes require that, but we really try to focus on the end output and the quality of that output more so than the inputs on that sense. And so I couldn't tell you how many hours each employee works because it's not something that I've logged anywhere. They're doing incredible work. Sometimes that means late hours in the office and weekends at the office. Sometimes they don't need that. And as long as our customers are happy at the end of the day, like, that's what we care about.
**Brett:** Maybe just to wrap up, we could end where, we often do, which is, who's someone who's had an outsized impact on how you've approached building the company or maybe it's something smaller and kind of what's the thing that they've imparted on you?
**Adit:** For me personally, one of my first managers at Google, this guy named Ollie on YouTube ads. changed my \[00:59:00\] perspective on what organizations need to look like. And what I mean by that is ads is one of the largest software organizations, maybe ever. There's a lot of bureaucracy there. And I remember coming in as a new grad expecting that sort of bureaucracy, but Ollie in meetings would just. interrupt and say, guys, this doesn't make sense. Like, why are we doing this thing that we know is going to have close to no impact? and there'd be this like awkward silence after where everybody sort of knew like, it wasn't the right thing to focus on and somebody just needed to say it. I think after seeing him do that again and again, I sort of have an internal monologue of is this thing that I'm doing just me trying to produce output for the sake of feeling busy?
Or is this like truly the thing that's going to move the needle? And we try to do that on every level of the company. And I think that's been very, very helpful.
**Brett:** Nice. Well, thank you so much for the conversation.
**Adit:** Thanks for having me.
### 1Password’s growth story | How they went from bootstrapped to $6B company | Jeff Shiner (CEO)
URL: https://review.firstround.com/podcast/1passwords-growth-story-how-they-went-from-bootstrapped-to-6b-company-jeff-shiner-ceo/
Last updated: 2026-02-03T17:49:05.000Z
Jeff Shiner is the CEO of 1Password, the access management company used by over 100,000 businesses and millions of individuals worldwide. He joined 1Password as CEO in 2012, when the team was just under 20 people. Under Jeff’s leadership, 1Password expanded into B2B, launched a SaaS platform, and scaled from a small family-run operation into a global company. In 2019, Jeff led 1Password through its first-ever funding round – a $200M Series A from Accel – to build out its go-to-market team and accelerate product development. Before joining 1Password, Jeff held senior roles at IBM and led teams through multiple acquisitions and integrations.
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**In today’s episode, we discuss:**
- Why bootstrapping isn’t always what it’s cracked up to be
- The switch from a consumer product to B2B
- Launching before billing — and why that worked
- When being “too secure” nearly killed the product
- Becoming CEO… without telling anyone
- Much more
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**Referenced:**
- 1Password: https://1password.com
- Accel: https://www.accel.com
- Arun Mathew: https://www.linkedin.com/in/arun-mathew-b7186412/
- David Teare: https://www.linkedin.com/in/daveteare/
- Floodgate: https://floodgate.com
- LastPass: https://www.lastpass.com
- Mike Maples: https://www.linkedin.com/in/maples/
- Natalia Karimov: https://1password.com/company/meet-the-team/natalia-karimov
- Roustem Karimov: https://www.linkedin.com/in/roustem/?originalSubdomain=ca
- Sara Teare: https://1password.com/company/meet-the-team/sara-teare
- Shopify: https://www.shopify.com
- Tobi Lütke: https://www.linkedin.com/in/tobiaslutke/
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**Where to find Jeff:**
- LinkedIn: https://www.linkedin.com/in/jshiner
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**Where to find Brett:**
- LinkedIn: https://www.linkedin.com/in/brett-berson-9986094/
- Twitter/X: https://twitter.com/brettberson
\---
**Where to find First Round Capital:**
- Website: https://firstround.com/
- First Round Review: https://review.firstround.com/
- Twitter/X: https://twitter.com/firstround
- YouTube: https://www.youtube.com/@FirstRoundCapital
- This podcast on all platforms: https://review.firstround.com/podcast
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**Timestamps:**
0:03 – How Jeff got involved with 1Password
2:01 – How 1Password was initially set up
10:41 – The secret CEO
13:44 – What Jeff’s first six months encompassed
16:13 – The lightbulb moment that caused a pivot
17:50 – 1Password’s unusual company journey
22:08 – Creating an aligned product roadmap
29:19 – Retaining a customer-centric focus at scale
30:40 – Why 1Password’s first B2B product failed
39:43 – How Jeff thinks about competitors
46:44 – Building different go-to-market functions
52:45 – Staying bootstrapped for 15 years
57:17 – Jeff’s one regret
1:02:00 – 1Password’s most pivotal moments
**Brett:** Well thanks so much for joining us.
**Jeff:** Yes happy to be here.
**Brett:** maybe we could start with the sort of story about how you got involved with the company.
**Jeff:** Yeah. I've been, wow, 13 years now. It's been a, been a long time. And so, it started with two founders, so Dave and Sarah Roustem Alia, those were the two founding families of 1password Well, Dave and Sarah had been friends of mine for many years ahead of time. back in the late nineties, very late nineties.
I was actually Dave's boss at IBM. And so we were building e-commerce back at the time and he and I worked together and then we both moved to town homes, which turned out to be just up the road from each other, technically on different streets. 'cause we kind of backed onto each other, but just, just up the road.
So we became family friends for a number of years and then, both sort of moved our way, both from a work point of view and also from a, you know, where we live point of view. And \[00:02:00\] then around the end of, of 2011 that Dave reached out to me and said, Hey, he's, he's got this company.
And it was getting bigger. It was up in, I dunno, getting close to 20 people. And, you know, he wants to build and invent. He doesn't necessarily wanna, run a big company, which, you know, when you go from nothing to 20, it's, it's a big company. And I was working in the us I still lived in Canada, but I was doing the road warrior thing, leaving Sunday night and, doing consulting, actually eCommerce consulting from Sunday night to Friday.
And then, driving home and. We had actually just been sold, to Publicis. So we had started, when I had started there, it was a company called Berlin. It was about 200 people. We'd grown it, merged with a company called Rosetta. So now we were Rosetta and then just sold to, to Publicis. And so, you know, it was, do I want to be part of a large, 50,000 person company again? Do I want to try something new? So it was great timing for me. as a result of that, I, spent some time with Dave, spent some time with Roustem looked at the company, really got excited mostly by what they were trying to accomplish, right? That combination of productivity and \[00:03:00\] security. Make an app for people, you know, build a good product, support the heck outta your customers. That was their way of building the company, which really appealed to me. And so it just became, this is great. I want to be a, I want to be a part of this. And, we'll just figure it out as we go. And, that's what we did.
**Brett:** So what was the state of the company? You said it was about coming up on 20 people.
**Jeff:** yeah, it was all consumer at the time. honestly, it was mostly Mac. It was like Mac and, iOS. It was, very, very little. I think they had a reader for Android and, something similar for Windows, but it was really very much of an Apple focused company, around 17 or 18 people.
I can't remember the exact number, but again, very small, but, growing, it was, it was growing organically and the company was doing well from that perspective. but that was, that was it. There wasn't a, vision, I would say, other than build a good product to support the heck outta their, customers, which is what the company was.
It was a boat. Half, I'll say engineers, half customer support. But even back then that mix itself was very mixed. So almost every night we would make sure all of the customer questions were \[00:04:00\] answered. Doesn't matter who of us were answering, we're all answering the questions. And that's how we grew is by listening to the customers back then.
And, it was all licensed based as well. And that was the interesting thing. So it was, you know, you would buy the license of, I don't know what password, four maybe it was, or three, I can't even remember the version back then. And you would hold that and then you'd sync through something like Dropbox or iCloud it was a very young company, but it was, you know, even back then, the brand was known and the brand was, was well respected.
**Brett:** And what was the, the origin story of the company when it got off the ground? Like where did the idea come from?
**Jeff:** It's a little bit of you know, an inside joke slash lore of it was a 30 day project. That's what it was. So Dave and Roustem had a web, company where they would build you a website. You gotta remember this was what, 2005? Right. that happened back then and they couldn't, win their bids.
They were always being underbid. And so they thought, well, okay, you know, most of those websites were gonna be commerce websites and things like that. And, they were building them for small companies, so they had to do that very inexpensively. But you still needed things like to be \[00:05:00\] able to sign in or to be able to add your address or, credit card.
And so they thought. One of the ways that we can make it less expensive is to, automate some of the testing. we'll just spend a few weeks, build this tool that will allow us to autofill so that when we do testing we can, use that tool to autofill addresses and credit cards and sign in and do that sort of stuff. And as they start to build it, they start to realize, well, this would be really useful, like for themselves. And so they added the security part to it so that it would be more than a testing tool to actually be secure. And they thought, wow, this is really, actually quite useful for themselves. And so they put it out there on, the shareware sites and that where you could go and charge, I don't know what they charged you know, 20 bucks or whatever they charged for the, for the app back then.
And pretty quickly people started buying it and they actually started making more money from 1Password than they were making at their own job. And it wasn't long after that that they said, well this is our way forward. It's to actually do what's a, making us money.
And b is, is the product that they found so useful. it's kind of an interesting story and, I mean, you gotta remember, these are, they're living, I think at their parents' houses. \[00:06:00\] It's the typical, bootstrapped, out to their own garage as it were. But, yeah, it was, it must have been quite the, quite the experience for them.
**Brett:** So you mentioned this maybe at a, at a little bit of a high level, but what did you see in them and what they had built, given things were still so nascent when you committed to joining them?
**Jeff:** Yeah, I think there's two sides of it. There's the, the company slash product side, and then there's the personal opportunity side. For me, it was just, don't get me wrong, I loved my time at IBMI still say I blew in my blood. The time at was really, of transformative for me as I went from the architect to actually running the p and l of, of a big part of the company. But there was just such an appeal to, again, being part of something where I could really make a difference. I went back to being the programmer, with all the challenges that that took for that at the beginning. 'cause I'd never programmed, you know, on, on, iOS or Mac before. And it had been a while, but like, that was, fun to just, to be able to, to have such influence on a small company and be part of that small group as opposed to. I don't mean to meanly, but being a cog in a \[00:07:00\] much bigger wheel. So personally, I found that very, appealing. It was just to be able to be a part of that and make that difference. But at a company level or at a, at a product level. Again, both from the way that they ran the product and the product itself. I'd been in e-commerce again since the, you know, the late nineties when IBM had brought me in, I started to see that e-commerce was really taking off. This was again, 2012 at this point in time that I actually joined and. There was a need for security online. There was, even just the knowledge of being, of needing to be secure online was just starting to creep up in, people's mindsets, right? the development community that worked online, that worked on, the new products and stuff like that, they were already recognizing, and that'd be, that was very much who our customers were at the beginning, was just other tech people who started to see the type of data that was being stored online and, and started to realize, hey, there's, there's a wealth of information here that needs to be protected.
But the average, person on the street was just starting to understand that using, you know, full cap for their password wasn't a good thing, but didn't have anything they could do about it. \[00:08:00\] And here we had something that not only could they use 1Password to stay protected, but we wanted, their input.
We wanted to know how to make it easy. We wanted to understand how do we make it actually useful for them. All you can aim for is not being intrusive with most security tools, right? You think of a lot of security tools and they're stopping you from doing things.
You think of maybe A VPN as sort of that middle ground of, it just runs and you hope it's doing something good and, and it usually doesn't get in your way. Here, we could actually make your lives easier because, not only could you be more secure, but just logging in, just filling in credit cards and addresses and stuff like that was so painful back then and, most companies didn't even remember it for you and stuff like that.
We can make your lives easier and more secure and that was just super appealing at a time when the, internet and internet shopping was itself just really starting to mature. So it was, it was a lot of fun.
**Brett:** when you decided to join, did you think it is likely this can be an absolutely massive company, what was kind of your mindset around the \[00:09:00\] potential trajectory to build a really very, very large business?
**Jeff:** I still kind of think this way. I used to have a saying like, I can double the size of your company. I meant that by people, because I can always look around and say, there's Sue, there's Chris, whomever. You know, they're doing a good job. We could have another Chris, we could have another Sue. But I didn't know what to do with 10 Sues. I didn't know what to do with 10 Chrises. So I could see the growth, I could see the opportunity, and I could see, again, this is a case where it sounds somewhat silly, but it's like everybody in the world needs 1Password. and you think that's.
For the most part true. But I didn't think of at the time of, Hey, we're gonna be multi-billion dollar companies, and that's the opportunity. That wasn't the allure, that wasn't the appeal. but there was very much of a, people need this, like we can really help a lot of people. I didn't know what a lot was.
I didn't, I I didn't have it in my mind of, here's this humongous opportunity that's gonna grow into, something that, where I'd be sitting here today or, things like that. But I did see the opportunity to protect a lot more people that were, than were there. It was a problem that was, I think everybody could \[00:10:00\] start to recognize and that was appealing to me.
I think it was probably a few years later that I started to, to realize, yeah, there's a really big opportunity with this,
**Brett:** Did a lot of your peers and former coworkers think this was odd, what you were going to do? Like, was it a weird thing at the time?
**Jeff:** Yes and no. I think those who, knew me best knew, I just, I love to problem solve. I love to sit there and figure things out. I do like to, I'll call it lead. And that's being nice to myself. Like I do like to talk and voice my opinion so that you know, I think that they knew that I liked to be in a position where I, where I could help make the decisions, help with the ideas. So I don't think that side of it was, a surprise to anyone. I had never had this, I want to be a CEO my whole life. never knew I wanted to be, I always had my career kind of grown by who's the role I want next, like, who's doing what I want next? so I don't think anybody looked at it and said, oh, well, Jeff always said he'd wanna be a CEO.
I had no idea. so that part was a surprise. I think going to such a small company was also a surprise \[00:11:00\] to people because I'd worked at the large companies. I mean, I'd, I'd left IBM once in, in, in my. Early career and, and went, worked for a startup I was not part of the leadership. I was part of the startup, so that's not super foreign to me. But I do think people were somewhat surprised to going from this company that had grown from 200 people to, you know, 1100 got bought by 50,000 person company and, I was, one of the most senior people there of the 1100 out of the 50,000, to be clear that I would then all of a sudden go to the small company.
But I think those who knew me knew my goal's, not based on my career's, not based on like, hey, some sort of status. It's, based on what's interesting. And I think if you're in computers, especially back in 20 12, 20 13, it's not all that much different. Now. You knew that your, your career was safe.
This company hadn't succeeded. It's not like I, I would never find another job, which hadn't really occurred to me much. But I think it's sitting there in the back giving you comfort to make some of these decisions that, that otherwise might seem scary.
**Brett:** you joined as CEO in 2012, and that very rarely \[00:12:00\] works, at least in, in terms of statistically in Silicon Valley. If you think about founder-led companies that bring a CEO in that early in particular, so when you reflect back on the last 13 years what's the underpinnings of why it has been such, a productive dynamic?
**Jeff:** I think there's a few things that came into that. First of all, they did bring me in CEO from a standpoint of when I signed the paper it said CEO, but we also agreed not to tell anyone. And so for the first six months, we didn't tell anyone. Now, I mean, there was only, I. Probably 20 of us at the end of the six months.
And people knew I was there to help. help lead and, stuff like that. But it wasn't ever said formally. 'cause you know, Dave at the time was the, I think the formal CEO and every, at the beginning of every year we used to take a, a cruise. that year.
We, we went to, a resort instead, but we were sitting there at the circle, and that's where they announced to everybody, okay, this is Jeff's role. So part of the discussion there was like, well, let's make sure it works. Let's make sure at least we think we've got a good opportunity for it to work before we go and \[00:13:00\] disrupt, the entire company, and then six months later have to disrupt them again.
So there was a little bit of, can we see, but I think it, came down to, a couple things. One is decision making, the other's personalities, and from a personality point of view, I think there was a really good fit there with, Dave Roustem and I, I didn't know Roustem at at the time. Dave and Roustem are, quite intense. They can be quite intense. I am. Far less so my emotions are a lot more on the, the mellow side and, I think I act as a good shock absorber between the two. And so it was always a case of how do we problem solve and how do we lead as a group 'cause it wasn't a, I'm the CEO go do that. That can work in some companies, but I don't think that can work when you're coming into a company that has, has leaders. You, it has to be a case where you work together and lead. And then over time, and this is the tough part, Certainly something that I can see not working at other companies in \[00:14:00\] different circumstances you take the lead over the time you take the lead and then, over time, and that's probably three years, I'd say, I took the lead more and more especially as we got larger inside of the company, you know, Dave and Roustem We would call like Roustem for a time was, was brain and vision. Dave was heart and soul. And so Dave started focusing more with Sarah on things like the customer support side uh, Roustem focused more on the new technologies and where we were gonna go. And there was just sort of a natural, well, Jeff's gonna lead and Jeff's gonna lead the company, but we were still gonna all make sure that we're going in the same direction eventually, to the point where now again, as board members, they still have the opportunity to stay very much engaged, but they're not engaged in the day-to-day of the business.
But again, that took, you know, took 10 years and that was something that we all just sort of navigated into. It wasn't planned, it wasn't stated, but I think over time you need to have a single leader. You can't have three leaders for a decade. shouldn't say you can't. I think that'd be very difficult.
**Brett:** So what, were you doing over the \[00:15:00\] first six months when you joined? Like every week?
**Jeff:** We were building the app. was, a I believe it was the iOS app at the time that we were building. And, we'd spend a few days at Roustem's house, a few days at Dave's house or, my place We had a small group of us. We would come out to, California and just spend a week at a hotel and We were building the app. We were just focusing on that. Now, at the time, as I said, we were also, even though we had some formal customer support, at the end of every day, there was always tickets left over that, the, the group of us would make sure we're were cleared out And that gave us a great opportunity to. Talk, I mean, it's email, but talk directly to the customer. Find out what they like, find out what they don't like, find out what was working, find out was not working. And as a result of that, influenced the product. Now there was, financial side as well, which Sarah largely ran from the standpoint of making sure people were paid But there was also then slowly got into, okay, well let's actually start to plan the financial side, especially because as an app as opposed to a, like a subscription or things like \[00:16:00\] that. the big challenge with an app is when you have a renewal, a big chunk of, money comes in, and then after that it's sales.
People always look at it from a subscription point of view and say, oh, you want subscription so that you can make more money. No, I mean, we, you know, you think of our, of our individual, we make 2 99 a month, on the individual. We used to sell the app for 75 bucks. Like, if anything, we're probably making less on it, but.
That's consistent, right? I remember Sarah and I always talking about, and Dave as well, like the sleep at night factor. I'm not go hire that 21st, 22nd, 23rd person. If we don't know we can pay them in six months or a year like that weighed heavily on us, still weighs heavily on me. And so that was very different where, where then you start to look at it and say, okay, we've got some really cool ideas. Instead of putting them into the app, let's hold them back and then let's add them to the next version of the app because that would make it worthwhile for people to upgrade. It's the other thing that to me, always kind of stunk about having. app as opposed to a SA subscription. Like if we've got good \[00:17:00\] stuff, like I wanna give it to the, to our customers now, but then if we give all our good stuff to the customers now they'll say, well, why would, why would I upgrade?
But, you know, it's things like that that we started to think about a little more. Not that they didn't think about them before, but a little bit more. And then as time went on, we start, going even broader and looking at new opportunities to eventually where it was B2B.
**Brett:** What year was that?
**Jeff:** probably 2013, although 2014 was sort of the lightning bulb moment.
We had started to talk about some of the capabilities of B2B early, and now we weren't an app which means we didn't have a SaaS component, which means we couldn't have the concept of sharing. So we had actually put in this honestly, really, really poor way of sharing through Dropbox, where like people would need the same, Account password to get in and things like that. And it was just, it was terrible. And so we were starting to think of, of ways that we can enable some of this. But what I started to notice was, earlier on, in, the first couple of years, you'd have some companies that would buy copies of 1Password for all of their employees or Christmas to keep their employees safe. And then it started to change for some of the companies, not many, but some of the companies started to \[00:18:00\] buy copies of 1Password for all their employees to keep their business safe. And that was, the change. And so I remember I was at a conference, and I was just talking to, the folks next to me that were having dinner and they were talking to me about, you know, their use at their company, I think it was, they all individually used 1Password, but their company was thinking of getting Last pass because they have had a company account. all of the things that we had been talking about and thinking about just all came whoosh into me at a moment. and it was like, we need a SaaS app and we need a business app. And I went, I. Running off and the next morning I got Roustem at breakfast he got super excited. I don't think any of us went to the rest of the conference. We booked a, one of the conference rooms and all spent the weekend there talking about what we could build in this idea. And it was just the start of, what became 1Password for business. It was one of those lightning bulb moments where just everything we'd been you know, floating around your head just solidifies into a aha. I know what we need to do.
**Brett:** One of the things that's interesting as you describe the path of \[00:19:00\] the company is it feels like a company where the opportunity unfolded as you sort of built it, the sort of traditional Silicon Valley company is you have some visionary founder and they explain this big idea about how the world is gonna change and then they marshal resources to make that happen over some period of time.
and I'm curious, like what's your reflection on that?
**Jeff:** I mean, you're a hundred percent I say this with AI a lot, Where I personally, I think there's gonna be three phases, broadly speaking of AI you know, the first phase was sort of like, do you ai? Right. You know, and that, that really meant to you chat GPT and that we're in the second phase where every company is leveraging or looking how they can leverage ai both within their own products, within their own, tools, but also for their own use.
But it's still, we're thinking the way we do work today, and then we're just thinking of how AI can make that better, right? there's gonna be that third phase that I can't quite understand, um, where it will be completely different. for myself it's been less of, can I see that third \[00:20:00\] phase of, of security, not until we're kind of at phase two and a half.
So to your point, I think we can see far enough ahead, but it, it is by very much listening to the customer. whenever anyone talks to me, I'll just say that over and over again, your customer's telling you what's valuable and I, I mean customer, not user. the difference is, you know, if you come up with an idea and you go around to all of your family members or frankly people on the street and tell them, you've got this idea, you'll get the, that's awesome. More often than not, you go to those same people and you're like. Look at this thing I've got, will you buy it for a thousand bucks?
Uh, I don't need one today. and so there's a difference between kind of a cool idea true value. And so I think you need to have that broader idea, right? The broader idea. Even if that idea is something simple like, hey, we can keep people safe on the internet while actually making life easier for them, that can be considered, especially back in the early, you know, or mid two thousands.
And that like a pretty \[00:21:00\] revolutionary idea. Most people didn't know they even needed to stay safe. But the how you do it has to be rooted in something real. And that's where it's a case of you know, looking at your customers and trying to understand what your customers. Really are telling you it's the same reason why the Waymo looks like a car and not, you know, if we had started by just saying all vehicles will be self-driving it, probably would've looked completely different. you've gotta find a way to get there. And so I agree with you. This wasn't a, here's this a hundred billion dollars company I'm gonna build and I'm going to fundamentally, change humanity. I'd love to have that sort of idea and that, just wasn't me. but what I can do is, is I can listen to people, I can start to see the, the opportunities or the challenges they're facing, and most times it, it comes in the form of a challenge. Most times people aren't even realizing that they're asking for a solution. They're just complaining about something or, they're just, frustrated by something.
So I think if you look at it and you stay \[00:22:00\] focused on what's the core idea, and the core idea is how do we make, people and now businesses safe online, but in a way that still is a lot, still allows 'em to be productive. As long as we stay with that mission, with that vision, we can really listen at the, customer business or individual.
And that's the other thing. They're humans, right? I sort of Detest this difference between B2B and B2C. there's different needs without question in terms of the problems we're solving. But at the end, like, I'm not business Jeff 'cause I'm talking to you. And then if I go out and get a text from my wife, magically transform into, family, Jeff, I'm just Jeff or Shiner as everybody ever calls me. You know, like I'm just, I just am. And so we're all people and it's people that we're trying to make more productive while keeping them and their businesses secure. I would agree with you. I think the, the interesting side of it is for a lot of cases, if you don't have that magic vision of what the solution will be like, keep that vision of what you are trying to change, what fundamental \[00:23:00\] problem are you trying to change?
**Brett:** How do you. Translate what you hear from customers into what you should do as a company. Because you could go back to the Henry Ford quote. If you ask people and they say faster horse, but also you obviously, you don't talk to 30 customers. They all say, well, I need this button and this thing and this thing, and then all of a sudden your product roadmap is created.
over the course of the company, what's that translation look like?
**Jeff:** There's two sides of that. There's the what, and then there's the, the order. 'cause the order, the order's a little more challenging at times just because of, you want themes in that to emerge more than just features. But customers will by and large tell you solutions. You have to dig out of them the problem, and I think spending, you know, the, what was it, six and a half years in consulting in the US really helped me with two sides of that one. I used to say like, for every 21 features, the customers going to give you, there's gonna be seven that we're gonna say we're not gonna do seven that we'll absolutely do, and seven that we'll talk about how we're gonna do with them. \[00:24:00\] 'cause you can't do them all.
Right? And, and some of them just don't make sense. Some of them are so unique to that customer, that situation that they're not gonna have wide appeal. So the first thing you need to do is figure out you know, sorts of, of features slash problems, which are the ones that really fit in your, vision, which are the ones that are ours.
And you can't go chasing money. You can't sit there and say, well this large company really wants us to. build a video game on the side. you just have to be, be cautious there. So I think that that helped. But I think more importantly, customers will say, I want a blah, I want a report that does this, or I want a, a feature that does that. And you can build that, but you have to instead really try and understand what problem are they trying to solve. And there's two reasons for that. One, we found in a lot of cases what the customer's trying to solve, we could actually solve 80% of it out of the box just in a different way. and much of the time, certainly not all, but much of the time, that's completely fine to the customer.
Like they're, they're like, oh yeah, that's, what I, that's what I wanted. But \[00:25:00\] humans tend to talk in terms of solutions. And so I think the most important thing to do is to try and understand. What's the problem? Even, even if it's a complaint, like, I don't like how blah, blah, blah works. trying to understand why, and then trying to understand, well, is it the case that the customer is trying to do something that's very reasonable and other people are gonna wanna try and do it in the same way and now you need to find in your product?
How do you solve that problem? Or is the customer trying to do something in their way where, you know, we and our product philosophy are just fundamentally saying, Hey, well we're, we're solving that in a different way. It may, it may not be for them, but I'm not going to, try and, and, change the, the fundamentals of our approach.
So I think first of all, understanding that is, a, is a real challenge. And that's where, you know, we spend so much time, so much focus on customer support of, its, many different ways. You know, we still got hundreds of folks that are doing customer support. we've always. Tried to do it in our own groups.
We've got now the Dave Chan and the team that goes out and, works especially with the B2B customer. \[00:26:00\] So when we look to build something new, we try and get a bunch of customers involved as early as possible to sit there and say, will you help us form this feature, form this product? otherwise we're making it up as we go, thinking we know how to solve a problem that's really theirs. And so if we can get, you know, a bunch of customers, especially business customers now coming in and, and helping form that, feature, boy, that a, gives you advocates from day one b gives you real stories as to what problems it solves. And see it just helps you solve you know, in a real way.
And so I think it's all about trying to understand the problem behind it. And I remember I was at University of, Western in, London, Ontario, and was taking q and a from, it was like a, TechX, I think it was called. And it's, it is like their tech accelerator group and The one, university student and she was asking like, how do you come up with a billion dollar idea? And I said, well, you don't, I said, I don't know how to come up with a billion dollar idea, but you look for the billion dollar problem. And then you try and figure out if you're the one to, solve that problem. And \[00:27:00\] that's how we approach it, is there's going to be a problem out there, and that's gonna be worth however you want to think of it, in terms of dollars or whatever. It's worth a lot of value and somebody's gonna gain that value by solving that problem.
Then you have to think, are we the ones that are right to solve that problem? That's actually what led to even, extended access management to our newest set of, products now where we looked at it and we said, this is a real problem, but we also said it's a problem in large part because.
The employees are trying to be productive. The business needs to keep them secure. Hey, that's what we do. Right? And then you have to really think about it, and that's where priorities come into play, where you start to look at it and you say, where does it fit in our roadmap? what's our roadmap themes?
Are we focusing on, you know, different segments? Are we focusing on different plans? And that's where I think getting enough of them together that you're not just solving the one problem, but you're solving that class of problems for the customer. Because usually if they have one problem, they have a class.
So unless that class fits directly into \[00:28:00\] EPM, then we need to look at and building enough of it that we can, we can help solve a broader problem.
**Brett:** When you think about prioritization, do you think about the economic opportunity tied to this set of features or that set of features or this set of problems?
**Jeff:** I do. Yeah. I mean, I think you have to, It's only one of the things that goes into there. So again, I, I look at it first and foremost and I say, do we have an unfair advantage? are, are we gonna be in a position where it makes sense for us, the company 1Password to tackle this problem? even if there's a huge economic opportunity?
And it's, you know, I I say it kind of silly inside. we're not here to build a game, right? we're here to make people productive and keep people and businesses safe. That's what we do. So if there's a huge economic opportunity that's outside of it, that's, that's just not for us. I think if we don't stay focused in that way, we will eventually, struggle and strain. but when you do look at an opportunity, you do have to look at the economics of it, and you have to sit there and say. Are we going to be able to put a real \[00:29:00\] solid investment in here and really make it a great product? We had that discussion, fairly early on.
So we actually had a separate product called NOx, and NOx was a file volt. and this was early on and we wanted both, NOx and 1Password to continue and, and that, but we got overwhelmed with all of the feature requests and all of the opportunity with, you know, 1Password, the password manager at the time, and we couldn't do it at Justice to NOx.
And so we just said we've gotta put nos aside. I'm not gonna allow us to have, have a small number of people make aeh app I want the app to be great. And so when we look at it from an opportunity, from a financial opportunity, sure. We're, now big enough, we're gonna have the finance people and stuff look at it from true, true finance.
But I, I'm gonna look at it from a standpoint of I wanna build something that I can build. Great. And that means I need to be able to justify putting the spend in, putting the people there, putting the focus on \[00:30:00\] so that we can make it great. And I don't want to just build parts that are gonna be okay and now they may start off okay. You know, again, it's all gonna start off somewhere. When we launched 1Password for Business back in 2016, I mean, it was, we called it 1Password for Teams, and it was like, really maybe 1Password for bowling leagues. Like, it was, you know, but it was, it was V one. You just keep iterating, keep iterating. that's fine. But the goal's gotta be, gotta be great.
**Brett:** Why do you think that's so important? I mean, said differently. That's obviously the thread for anybody that's used your products is that they are great, but if you look at most enterprise software companies that are worth more than a hundred billion dollars, no one would say that their products are great. do you, do you ever think about that?
**Jeff:** I do, I mean there, there, there's some that I really enjoy. slack would be one that I, that I really enjoy. slack was the one that just seemed to, again, care about the user. and there it was little things at the time, you know, even like expanding a Twitter link. I remember it was one, I'm sure they all do now, but, you know, at, at the time. And so there was, little things. And if you \[00:31:00\] remember going to their website, they had those moments of delight in their website and things like that, that matters to humans.
Especially I think in security, because security can be scary. at best you're thinking the security, even if it's not scary, is gonna just hold me back. It's just gonna make my life more miserable, right? Like, that's, been our experience with security. So the more we can make it easy to use and friendly and really focus on the human at the end. Then the more likely we are to actually be used now at an individual or a family level, that's gonna be important. 'cause that's how you're obviously, you know, gonna make a sale. But at a business level, sure, you can have somebody sitting there and forcing it on you. But imagine that software that, your CISO comes up to you and says, Hey, you have to use this.
And a month later like, this is awesome. everybody wins.
**Brett:** I want you to go back and talk more about. How you actually built the B2B product and got that into product market fit. You shared a couple bits of the story, but it began with, you were at this conference, you were talking to somebody and it sort of occurred to you that you were really well set up \[00:32:00\] to build a business product.
What was the 90 days that happened after the conference?
**Jeff:** it was, yes, very, very much of duck on water. Yeah. Paddling furiously underneath. so it was, I'm gonna say a week after, we got group of about eight of us into the basement office that we had at the time, and the big whiteboard there.
And we spent the next few days refining, refining our solution that we were Oh, so tremendously proud. This thing was so secure. It had service tokens, it had all this type of stuff. It was gonna be so secure. And then what we did was we actually went and we, came, actually came up to California and, talked to a few folks that we knew who were high up in, CISO type positions and that, or security positions at, companies.
And they all told us how crap it was. Nobody's ever gonna use this. It's unusable. you get a bunch of security geeks together and we're gonna go and, sometimes make the biggest mistake of all, which is like, how secure can we make this? Right?
**Brett:** their critique was, it was not secure
**Jeff:** no, no. Their critique was nobody's going to use it \[00:33:00\] because it was way too secure. you know, to the point of we didn't have a web interface because of things you can't do on the web to, it was just, we'd gone overboard. It, it was a fun exercise, but we'd gone overboard. But there was, the nuggets of it they loved, they're like, look, this thing's available.
We're buying it in a minute, but it's got a, you know, it's, it's got to have, have these, these things.
**Brett:** Did
you think about, when you were thinking about the early customer base, did you think about the difference between, you know, a company with 30,000 employees talking to their CISO versus a small business with 30 employees, and who were you building for, or you didn't think about it in that context?
**Jeff:** Somewhat like we knew the large companies. Now our goal is you gotta build it for the large companies. You gotta build it for, maybe not the, the world's most complicated customers, but the every company, right? the every company that's out there, 5,000, 10,000, a hundred thousand people. But it's a journey, and then you need to understand what they need versus what a company of 2000 needs \[00:34:00\] versus a company of 200, which is very different from a company of 20\. and you need to understand at each spot. But if you don't focus there and say like, what would that company need? You're not gonna put the right fundamentals in place.
And then, then you need to start thinking of it in terms of releases and tiers. Like we've got, we still have 1Password for teams and we have 1Password for business. And then, you know, the enterprises will, need it. And now we're doing the exact same thing with the full extended access management, where you look at it and you say, what do companies of, different sizes need? But your fundamentals have to be there. They're all solving the same problem. You know, with, password management. It's, three things, only one of which we had with the consumer. So at as broadest, it's one, humans need a way to stop using fluffy cat, that's whether you're an individual or whether you're a business, like the risks are there for you as a person, you as a family, you as a business.
And that's still where the vast majority of breaches start is, is credentials. The second thing that a business needs is they need, the teaming ability, right? We didn't have a SaaS app at the time. We were, we were just an app. So we \[00:35:00\] needed to build the whole SaaS solution, and that's, where we had focused, our attentions.
And so you can do things like sharing, you can do things like, access control and reporting and all of those capabilities, right? And then we needed, from a, from a business size, you need sort of the, you need to solve the business problems along with the end human problems, which means you need all of the abilities that the CISOs need to understand risk, profiles and things like that.
When you think of a, 20 person company, they all need the first one. They all need the second one. Sure. They're, sharing may be far simpler, it may be, everybody gets, this vault, here's the two people that have access to the social vault. I remember at our company for a long time, there was.
You know, three people that ha had access to the company bank account, those are the three people you need to, share with and stuff like that. Those problems exist. They don't exist at the same level. You may not be using, you know, an IDP at that level and you're not doing reporting, so you're not doing provisioning.
You still need to make sure when somebody leaves your company you remove their access. So it's degrees, which turns into \[00:36:00\] features to be sure, but it's still the same fundamental problem. I would say that third problem of, compliance and things like that are the ones that the small companies just, it's not, that they don't care about, they haven't grown large enough yet to care about.
They're like, Hey, I may not be around, in, a year. I'm not gonna worry about whether I'm making this compliance. So there's, is that third one that, that we at the time and back in 2016, had sort of purposely put later on 'cause we still hadn't built up the capabilities yet to satisfy the larger companies in 2016\. but. From a fundamentals point of view, your, your architecture and your infrastructure is, going to largely stay the same. We wanted to build it to scale. so yeah, so we, went in the basement. We then went to California, which was best trip ever because it, it just a demonstrated that what we were trying to, accomplish was spot on. we had just done the typical mistake of pendulum swinging too far. I went back, pendulum swinging back a little bit the other way. Went, talked to those folks again. when we were comfortable that we had it largely right. we started building and then we just, it was \[00:37:00\] again, building the SaaS app, hiring a number of people. you talked earlier about the financial side. you know, we were bootstrapped, this was our money. We were like, Hey, we've gotta go and hire a bunch of people that no one can support, infrastructure. 'cause I. You're an app. We didn't have an infrastructure before, or very little infrastructure, right?
We had to hire a bunch of people to help build this new app So there was a, time when, you know, we looked at it and we said like, yeah, we, we believe in this. But there's also that time when you've just gotta say, we're jumping in both feet and we're gonna go after that.
So that's what we did. We jumped in with both feet and took us about, I wanna say about a year to where we got it, to where we had our first beta. And I'll, I'll tell you a, a fun story that I share at our company every once in a while. You know, it was, somewhere around September, October of 2015, we decided we'd have a, free beta for the next few months. And, you know, it was everybody thought it was a cool idea. Well, the reason we had a free beta is like. We hadn't built any of the billing code. That wasn't important, you know, Billing's, like the last thing you wanna think about, you want to build the app, you wanna make sure the app is good first before you worry \[00:38:00\] about billing.
**Brett:** So who were like the first five customers, these beta customers for the B2B product? And what was like, what did the product look and feel like at that time?
**Jeff:** what we had started, because we built the SAS app, we had built it for quote unquote everyone. What? By, by that, what I meant was we had built it for individuals, families as well as businesses. 'cause it, there really wasn't. A huge difference between what a family needs and what a business needs.
Again, other than in degrees, if you think of it, you know, they each need a copy of 1Password, so they don't have fluffy cat you're gonna share passwords at your family. Right. Even if it's, you know, your wifi and security codes or things like that. Or maybe back then Netflix, and stuff like that. and so we had built it and we'd actually had the families one go out first as we continued to build some of the capabilities for business. So that helped us understand that, you know, the product would stand up. And again, all of that, we, we always dog food it ourselves. We always do. You know, as soon as we can get in. I'm not user number one and I'm still upset about that. I think Tim is who at the time ran our it, 'cause he set up the, the \[00:39:00\] database, but it's, use it yourself and then onboard, I think we did families and then eventually, companies who by and large had, had been. waiting for it.
So these were back then, so we still didn't have any marketing folks or go to market folks. It was people who had gone from being individual users saying, look, as soon as you have it ready, let me know and we'll try it out. And, and they did. They tried it out, in teams, in their companies or in small groups or that, because they were just, they'd been waiting for this.
They, they needed it from a business point of view and they were already, loyal one pass customers. And did It immediately. Resonate in work.
it did. again, I would say back at the time, we didn't have all of the capabilities that a lot of the companies needed, which was just fair.
We just flat out didn't, and it was, V one or V 0.9 or whatever you want to call it. So the adoption of that wasn't immediate for a lot of those companies. but yeah, it, Again, I would say it, resonated even before we had it out there, in terms of as a need. And then \[00:40:00\] it's a matter of, just building the features that were truly needed, and that, that was the next few years was just, what did our company need as our company grew?
I'm trying to remember how big our company was back then. Probably, I don't know, maybe 50 people. I, I'll be wrong, but something like that. and so what does our company need then? What does a company of 500 need? What does a company of a thousand need and, and,
**Brett:** Did you think about. Other products in the market and competition and things like that, or it was never part of the way that you thought about building products.
**Jeff:** I always look at competition in two ways. One, you don't want to, Fight the competition's battle. I don't have a good way of saying it. In other words, if, if the competition adds a good feature, that's legitimately a good feature, you look at it and you say, is that something that, we should do? you see that everywhere, right? Like you look at it and you say like, if they're tackling this problem right, whatever, problem is, should we tackle that problem, even in our own way, But a lot of the times, a lot of the features that are being added aren't that useful.
They're flashy or things like that. And so I think if you, if you watch the competition from a standpoint \[00:41:00\] of, trying to keep up with them in that way, you're, playing their game, not your game. What is it about us that we make great?
Well, what makes us great is our focus on the usability, our focus on the human that's using it, not necessarily every report that comes out. And so when we're gonna prioritize it back then, because again, you want everything, not everything, but you wanna do 10 times as much as you're doing all at once and you can't. so our priority was, gonna be instead of adding a ton of, just, reports or things that we're gonna try and compete directly there, let's just make sure that the things we. Are known for, you know, make those stronger and then start making our weaknesses invisible at the beginning.
It's the same thing I tell people just from an individual point of view, right? Like, if you're going after whatever the next role or the next job, don't try and make your weaknesses, your strengths. Like, you see that all, the time where it's like, this person over here is a great public speaker and I'm, terrible at public speaking.
And they'll say like, so I'm gonna take all of these lessons and become a great public speaker. \[00:42:00\] Well, how about you take enough lessons that you, you become an okay public speaker, that people don't look at it as a negative and then the things where you're good at push on them. Yeah, exactly. And so it, it, it's the same thing so early on you have to really, you know, really focus there, but then your competition continues to change over time. you know, as we evolved beyond password management into broader, I. Zm, we have to look at it and say, where's the competition now? And, what are we, battling against? And that's not even just companies. It's what problems are we trying to solve? So for instance, as we, as we moved from password management, you know, back in even five, six, but certainly seven, eight years ago, there wasn't really the same sort of problems that we have today.
Not problems, I'd say, problem slash opportunities that we as, humans have today in terms of, now SaaS apps are everywhere, right? It, I say someone jokingly, software used to be sold on golf courses, right? You'd get a salesperson, get an executive, six months later you're using Lotus Notes. That's how it worked.
Nobody quite \[00:43:00\] sure how in between that works. Now SaaS, you, you go to a conference, you go anywhere and it's like, oh, I heard such and such is good, I remember Figma coming into 1Password where our, design team had used Figma. And so I, just assumed, uh, that's for the design people, right?
I, I can't draw Stickman. Well then Matt Davey, who's, you know, one of our, lead designers, he had a a Fig Jam. if you're not familiar with the Fig Jam, it's, it's kind of like the, you know, everybody get, gets their cute little sticky notes, but virtual sticky notes I kid you not, two weeks later, every team in our company was doing a fig jam. It just blew off like us. and it's, that sort of thing that that's how software gets in. And we didn't even, you know, for the most part it didn't know Fig Figma was even in the company. 'cause it's just a team using it.
So those are the sorts of, challenges that, people face now is it's personal devices. You know, you think of it 10 years ago, a phone was. you know, first of all, it was probably, well, maybe 15 years ago, it was a Blackberry Right. You know, and, things like that. And then 2005 started to change, and now, now a \[00:44:00\] phone, like you try and convince my 24-year-old son that the phone isn't, a virtual version of himself. you know, you'll fail. And so now people want to use Sure. Company devices, but also personal devices. Sure. The enterprise apps that are deployed and, and, probably behind, uh, your typical SSO, but also all of these SaaS apps that come in. And the businesses have gone from being really against that to now where it's like, Hey, what's most important for almost any business?
We have to succeed. We have to grow. How do you do that? You'd be productive. Well, how do you be productive? You let your employees be productive. I always say, say it this way, at the end of every year, almost every employee gets a performance evaluation. How many of those employees get a performance evaluation based on, did you only use company devices?
Did you only use company apps? Right. Did you, no. It's like, did you make your, your results, whatever it is in marketing and go to market and design and finance, everyone's gonna have different ones, but it's all based on their own. We can \[00:45:00\] make the employees productive. The company can be, productive, but we still need to keep the company safe. And so it's, it's now that same problem that we had back when I started, you know, in, in, in 2012 of productivity and security coming together. And how do we have them not be at odds? But the problem space is different now. The problem space is how do we do that with devices and apps and how do we allow you as an individual to choose what apps or largely choose what apps are gonna make you and your team successful largely use your devices that make sense, which is probably your company issued, device during the workday. But in the evenings or on the weekends or things like that, it's probably your personal device if you, you know, you get a Slack or whatever that comes in, you have to address. And so how do we make the, the human productive and how do we give the tools to the business that allows them to allow their human, you know, their employees to be productive, but also to keep the business safe.
And that's only gonna get worse, with ai. \[00:46:00\] Because one of the cool things to me about the way we're going with AI is you're gonna have your little AI buddy, right, your AI paperclip for those who remember clipy, you know, who's, who's gonna help you with everything you do. But you're gonna have to give that AI a ton of power, and that's gonna be scary. Some of that power is gonna be business power. In other words, you're gonna give them access to, you know, so you might have a, Salesforce and, and then they're gonna have their AI agent running to say if your pacing is on target.
But it might be also something where it's like, Hey, you just book me my travel. And not only is it going to have access to the company stuff, but it's gonna have your passport and all of your other information. And so how do we do that in a way that allows us as, as individuals, to keep our information that we need to keep private, private, our information secure, but again, productivity.
So that's the part that, privacy and security. Such a big opportunity that we can just navigate our way into what parts of that we solve best?
**Brett:** as you sort of started to talk about this, the second chapter of the \[00:47:00\] company when you went for, when you built teams and then you built, the business product. You haven't talked that much about how you thought about go to market. at what point did different traditional go-to-market functions start to get built in?
In what order?
**Jeff:** I mean, it came through hard work. We were fortunate. We did have good, product market fit and because of that, a lot of organic, inbound from, customers. And so for the first, you know, 2016 and in 2018, we, formally launched 1Password for business. 'cause we had a lot more of the capabilities obviously, you know, continue to build seven years later, but. that's when we started to get a lot more, I'd say, real businesses, really entering. And with that, it, it was still half of us are customer support, half of us were engineers, you know, build a good product, support our customers.
**Brett:** were most of the customers, most of the business customers, did they start as individual users of 1Password at home and in their family and brought it to work, or it wasn't that elegant. They'd actually just, a friend of theirs was a leading it at a company and really liked 1Password, and they adopted it in a more traditional fashion.
**Jeff:** if a company came in, \[00:48:00\] how would they sign up? They would go to the web, they would sign up for a free trial and they put in a credit card.
I kid you not, it doesn't matter. The size of the company is some very large companies. that would do that. and so that was considered a business, like an individual who, worked at a company, wasn't a business, it was an actual business. So when we were still getting a ton of individuals, still getting a ton of families, but we were getting a, a lot of, employees, like a lot of people using it because their company signed up in most cases.
In the vast majority of those cases, there was. A person or people at that company that used us as, individuals. And that was the, the flywheel for that company to get it. So in terms of the actual sum of businesses we got, the businesses by and large came because there's people of influence at that company that were using 1Password at that time.
We, again, we weren't doing marketing outside of our website and things like that. So we started to see two things that started to happen. One, I remember Russum and I started to play with marketing and I do mean play. So we, went into, Google Ad words and we were like, you know, what ads, what words should we bid on? that was sort of \[00:49:00\] the very start of, of marketing from a go to market point of view. our customer support team started to have group within them that would help the, the businesses. 'cause we are now starting to get enough businesses, probably at this point in time, 10,000, I mean, maybe even 20,000 coming.
Yeah, maybe, maybe even 20,000, something like that Many of them small, but now growing in size as well as we, as we started to have the, the bigger capabilities. And we were just at the point now where some of them started to need, some legal things.
And so we had an outside counsel that was helping us at the time who we eventually hired in house. And we had a team from customer support of folks who would actually talk to the, to, to these businesses and maybe they needed an MSA, we started to slowly take, invoice pricing and things like that.
And for some of the larger deals, negotiate on pricing. 'cause again, it was all just, you know, go to the website. So that, just started to obviously force the need for, you know, a sales \[00:50:00\] team, as we called it. At the time it was all inbound, it was all organic. We didn't have any outbound or things like that.
Mm-hmm. And then over the next couple of years, it started to evolve a little bit. I actually hired company, um. friend of mine had started a, uh, digital marketing agency. that's what Rosetta was technically a digital marketing agency. he did the, um, like the bidding, the SEO and the SEM.
And so I had hired him to come and do a review of our website from an SEO point of view. And then, then they stayed on and ran some of our, SEM for a while. It was very nascent. It was very small, but it was just the start of it. And then we, started to try and mature our, our go-to market team a little bit, right?
Like I said, we brought the, the council in-house and we, we separated that, that group, I think it was six, we were getting some in a couple of cases, some very big companies, you know, that, I and a couple others would go and, and visit as part of the sales cycle.
And that's when it occurred to me like, we need to grow. These orgs, but I don't know how to do that. Like, well, I know, I know how to do it from one standpoint. And that is you \[00:51:00\] get in good leaders who know how to do it. What I didn't know how to do is attract world class leaders in, areas outside of, what 1Password was traditionally known for, especially because we had been so private you know, we were still bootstrapped, still, you know, running independently that nobody knew were we successful, were we not successful?
Were we growing, were we, broke? Like nobody had a clue. And you're not gonna come to to 1Password especially to come build a go to market or a marketing. You're not even gonna look our way without some reason. And so that led in the sort of the middle of 2019 for me to, actually bluntly go to Arun and say, okay, let's talk.
So I had built relationships with a ton of VCs over the years, More to the point VCs had come and build relationships than me. And, and they're smart people. I'm more than happy to, to listen to anyone. but I always said sort of the same con look, I, I dunno what we do with your money. we've got our own money.
Just, we were smart with our, our money and we'd built it up from nothing and, had remained a business and it remained profitable. And so there \[00:52:00\] wasn't a need. Well now there was a need and the need wasn't specifically money, but the need was what we could do. And, and that's where the first round of, funding came from was how do we announce ourselves to the world per se, so that I can hire world class talent and world class leaders. and that's what we did. So at the end of 2019, we announced the, you know, the first ever funding round was the 200 million round with Excel. and in January I hired Jeannie as my, uh, CFO, now COO. And she was my first executive hire. She was actually introduced to us Through Excel, well through David Fogo, who, I had met through Excel and then, you know, over the next few years, hired, the rest of the, the C-suite.
And, also I called 2020 year growing and growing up. So growing. We had grown from like 176 people, I wanna say we had at the end of 2019 too, you know, now the 1400, but also maturing, right? Build a real go-to market team, build a good marketing team, do proper financing and, things like that. as well as \[00:53:00\] continuing to make sure we're product led and, and we're growing, customer support org and we're growing our engineering org at the same time.
**Brett:** You only just hinted at this, but what was the thinking behind choosing to be bootstrapped for 15 ish years? And what were the biggest positives of making that decision that maybe are only clear looking in the rear view.
**Jeff:** Yeah. So, you know, Dave Alia were the, were the ones that that started it and they started it, like I said, you know, in, in the proverbial basement and it grew over time. So I don't know that they had a plan at the earliest of stages to stay bootstrapped as much as it just sort of organically happened that way.
**Brett:** Which is interesting 'cause so much of the company's origin feels like it just sort of flowed out of them. It wasn't we're gonna go build a company. It sort of had this step by step sort of nature.
**Jeff:** I think that's one of the benefits of \[00:54:00\] staying bootstrapped. So, you know, for instance, when I came in, in, 2012, first couple of years it was very much of just, you know, the first year in particular was just trying to figure out what were the opportunities and, getting us into, in things like localization and translation and, do a better Android app and a Windows app.
So we had a more broader suite and that gave us the opportunity to look at B2B when it, when it started to come about. But when I look at it from a bootstrapping point of view, the challenge there becomes how do you grab and run after. Every opportunity. Your vision doesn't have to be super set. And I think that's the side of it, that, when I look at it from a bootstrapping point of view, if we had gone funding, I, I could be wrong. 'cause again, we didn't do funding early on, but my perception of it is, they wanna know where you're going.
They want to know when you'll get there. They want to know what that opportunity is as opposed to what we call our North Star. and our North Star is, what we as a company do, right? It's that combination of productivity and \[00:55:00\] security. You know, bringing that, convenience and security together for humans in a way that allows humans to be productive in businesses or their families to be safe.
That's our north star, that's where we're going at. And instead of saying like in five years and in 10 years, the same thing with my career. I get, you know, if you'd asked me back when I was younger, what do you wanna do in five years? I dunno. You know, I, I can tell you what I'd want next. and it's that same sort of thing.
And then it's, jumping after each opportunity requires a degree of, flexibility and a degree of just, I don't wanna say bravery, but I don't have a better word for it. Gumption, what, whatever word you wanna use when I looked at it from a, B2B point of view, it would be a great example.
Like I said, it was quite literally, you know, that night at dinner that everything just clicked. And the next morning. We were in the room at that hotel, on the whiteboard, drawing out what we would need. We didn't think about how we were gonna explain it to,
to VCs, whether or not we, you know, needed to get permission or any of that.
\[00:56:00\] We just said, we believe in this done like that. that's the, that's the jump after it. because we know it's in our North Star direction. Again, it's not, ooh, it'd be really cool if we made this other thing e even if that other thing is, is super exciting.
Like, that's just, like, that's what our company is for, . And so this was squarely in there, it, it was an obvious extension in some ways of what we were doing. But again, taking us from an app, taking us from, individuals really only into.
We have to build a SaaS app, we've gotta build all of this B2B, like it was a huge jump and a huge risk from that perspective that we didn't have to convince anybody other than, really, the group of, five of us that this made sense for us to do. And even there, it wasn't an economic decision other than do we have enough money, you know, to fund this so that we can, we can give it a try.
So I would say that the benefits are that flexibility. Now, on the opposite side. what if we didn't have enough money to make it happen, Or what if it took three years longer than we had planned? Or things \[00:57:00\] like that. So there's, definitely downsides, but I would say if you've got a great vision, a great North Star, but you don't, you don't know exactly where that trajectory is gonna bring you, you need that flexibility because otherwise what you're thinking today.
Might be useful in five years, may not be useful in five years. The, the next five years are gonna bring us tremendous change. So how do I set that direction, that path, that fundamental vision or problem to solve and stay flexible and not have to spend all of my time trying to convince others that, I should be able to do this.
That's, that's the benefit.
**Brett:** Do you look back and you can clearly see that at certain points there would have been benefits if you chose to raise capital
**Jeff:** hindsight being, 2020, I would've raised capital earlier. you can get to a point where you're proud of things. You should no longer be proud of maybe said a better way the things that you're proud of can inhibit you. And so, you know, once you've been bootstrapped for \[00:58:00\] 10 years and everybody's like, wow, you've grown this, great company, all bootstrapped, how impressive is that, that becomes becomes your identity.
It becomes a blocker when it's like, does that mean I'm less successful if I take funding? you just have to try and ignore those and like ignore those thoughts in your own head. if we had had marketing and go-to market and like real marketing, real go-to market, if we had been more mature earlier, that would've helped us because in some ways we're a, company that's been around for, you know, 19 years in others. We've been around for four now going on five years and. the changes over the last four or five years have been dramatic, but in every aspect. that's tough to keep your focus. Right? so if we had, had an extra couple of years then go to market, would've been ahead by a couple of years and marketing would've been ahead, you know, it's easy to look back and say that that's true.
But I, I think in hindsight, I waited too long for that. But I \[00:59:00\] do think going B2B would've been very challenging in an environment where we had had funding based on a consumer experience. You could certainly see the opposite, right? Like, if, if we were B2B, if any company's B2B and says, Hey, we wanna go after to the consumers, their investors will be like, no, you're not.
**Brett:** when you look back in the 13 years that you've been at the company, what do you think are the most skillful things that you've done
**Jeff:** focus on the, human. we really do care about the experience that, people have with the app. that can be something that can be easily lost, especially as you grow and change and move into B2B and things like that. You could start to think, well, businesses don't care about that.
The consumers do. we care about that. And to the point where at times we've had to defend that not greatly. even with, you know, VCs and stuff like that is like, are are we spending too much time in focus? I think everybody understands now that's gonna be our advantage. That's going to be the \[01:00:00\] reason why people choose us.
But I would say that that focus and maintaining that focus is, really been the reason that we've been successful.
**Brett:** This sort of simple idea of being customer centric or building delightful software, how do you keep that alive all of the time now that you're at scale? Other than talking about it?
**Jeff:** at some level, it all comes down to people. So I would look at, Even how I got hired as an example. So that was set by Dave, Sarah, Roustem and Natalia right? You know, we were gonna listen to our customers, we're gonna build a usable app. Like that was what really mattered to them. And it's what a attracted me to the company in, part.
And, so they saw that in me and they're like, okay, like, you know, Jeff can be a shepherd of that as well, as opposed to having to train, you know, somebody that this matters. So you have to look for that in, in people now in certain roles, to be clear, right? We have to look at that from a design point of view.
You have to look at that from a product point of view. You have to look at that from your most senior execs, that they're, they're gonna understand the value because you can \[01:01:00\] have plaques on every wall or whatever, whatever you want. You know, none of that matters, right? People are going to, to lead, especially as you grow and you give, more people responsibility for things.
So it does come down to are the people in the foremost positions. at a minimum aware of and supportive of that as your, unfair advantage. if you can do that, then it's very easy to just gain the momentum and, say, yep, we're gonna continue to do that. it's part of the reason why, you know, when we look at collides, so for instance, collides company that we acquired last year, and and Jason, who's, the founder, had a very similar philosophy.
It's part of the reason why that made sense to us. It wasn't just buying a technology. Now you can buy technology for technology's sake, but then you're gonna have to look at the UX side of it and, and redo it. But that was, that was really important to him. And again, we, I looked at his company and it all fit and everything, but also he, as a person, I'm like, he's gonna help us maintain that.
That matters to him. It was personal to him. And he's gonna be in a, position of influence on the product side \[01:02:00\] here, and he's gonna make sure that continues. I think that's the, the only real way you have to do all of the other things. You have to tell everybody. It's important. You have to, be able to demonstrate that But it's gonna come down to are you hiring people that really care?
**Brett:** You sort of shared the origin story of how you kicked off the whole process to go B2B, and it seems like one of those kind of pivotal moments or pivotal stories in the company's life. Are there any other sort of, moments like that, that come to mind that you think are like some of the input drivers of what's made the company so wonderful?
**Jeff:** oddly enough, when we went for the round of funding. it's a weird thing to say, when you ended your sentence with that made the company so wonderful. because that's not certainly how I would've thought of funding. Right. but the funding round was, such a pivotal moment. and there's two things I would say that were really pivotal about it. One was, again, Dave, Sara, Natalia and I, it was our company before that, like it was, we made the decisions again, we had the broader team and \[01:03:00\] stuff like that, and the company was getting larger, but it was still very much, nobody had to decide but us if we wanted to do something.
And so giving that up. Even in some way, we made sure we retained ownership and we didn't give up very much to the company and all of those sorts of, but it doesn't matter. It's still just, it felt It felt very much like we were giving some sense of control to this other entity that wasn't us. that we had so many heart to hearts internally between the, five of us about the pros and cons. It was a huge emotional, exercise for us to understand
**Brett:** What was that conversation like?
**Jeff:** it was, why would we do this? It was like, what do we think we will gain? is really what it came down to. And then it was, what do we think we will lose? How do we technically, or legally, or whatever the word is, prevent ourselves from losing it.
those were the bulk of the discussions. And then every once in a while we'd have the real discussion. How do we feel? And that was the, those were \[01:04:00\] the raw, we're feeling excitement, but we're also feeling fear. Like it was, it wasn't ignore all of the data. It was just how do we feel?
And that was, those were the discussions we needed to have. And we were close enough as friends to have, and there wasn't a reason for any of our feelings. We recognized that there wasn't a, the concerns were so easily mitigated, especially, we were in a good position. We were able to sit there and say like, we're not giving up there's no magic voting rights, no magic dates we have to hit.
Right? I mean, they just, you know, wanted us to, continue to grow and, and, and all those sorts of things. So, so the emotions were just. I don't wanna say unfounded, like emotions are always founded, but it was, it was something we just had to be honest with each other about and admit that this was yet another case of, somewhat conceptually similar to the B2B side of like, this is an exciting opportunity we're scared because we have to take a big risk.
And what have we always done when we've looked at the big risks, we've looked at it and we said, \[01:05:00\] let's, you know, understand our emotion. Let's, recognize that it's there, but this is the right thing to do. Let's take this risk. And it was the same thing with funding because the reason we were doing it was to, to go and hire, people that could grow world class.
Organizations for us that we couldn't get another way. And so once we started to look at, at again the pros and cons, how do you, how do you really mitigate the cons so that they weren't a real concern? Then it was about just facing your emotions. And anytime you do that, you're like, okay, like it's okay to be scared.
that's how we move the company forward. that's where the five of us being friends makes all of the difference in the world. We can have the, have those discussions. That's why even when I, look at our C-suite now, that's why we try and get together so often as people, you need to be friends.
Yeah. You may not be friends on a, you know, some of us are, some of us aren't. But you know, on a, on go for a whatever basketball game. But you, you need to, to know each other as people because you need to make those decisions.
**Brett:** Maybe just to wrap up, we'll end with the question we always do, which is for you personally, who's the person that's had the biggest impact \[01:06:00\] on you in this case as a CEO
**Jeff:** many years ago I was a, developer at IBM and, Mike Poland was my, boss and our team lead had left the company. And so I went to Mike Poland and I said to him, I wanna be the team lead. And I laid out my reasons for being the team lead. He says to me, okay, but I'm not gonna tell anyone.
I went home and thought, what a jerk. And so six months later, as the team lead and I, and I finally asked him like, what, what was that all about? And he goes, three people came to me that day and I told him all the same thing. He goes, A leader leads, it's not, yes, having the title and everything can help, but a leader leads and so who is going to actually lead and I led, and that to me is, now, I wouldn't do that.
I've never done that to anyone. I, you know, I'm not sure that, that, was necessarily the best way, but in like, it was the lesson I needed to hear. and so, you know, from a CEO point of view, and that was, that was a team lead of a, of a, of, of a small team with a ton of support and everything, but it's still leaders lead.
And that doesn't mean \[01:07:00\] that you're gonna go out every type of leader can be different. You have the type of leaders, they're the, I'm gonna march this way and, and a hundred miles an hour. I'm only gonna hire people that, that are going to be behind me and not challenge me, but also walk a hundred miles an hour.
And that could work. There's the type of leader that are gonna be a lot more collaborative and things like that. But you have to lead, you know, the responsibility is ultimately yours. It doesn't matter. Like who makes a decision when you support that decision, that your decision.
And, you have to take it. So I, you know, I would say being a CEO is, is, it's very lonely. it's tough, it's rewarding, it's a bunch of things, but lead and lead doesn't mean on your own, but it does mean take all that responsibility, put it on your shoulders, and then, you know, make sure that you've got your teams back so that it's always, Yeah, you're, you're with them on those decisions. But that was, that was many years ago, and I will, I will probably die thinking about that.
**Brett:** Nice. Great place to end. Thank you so much for joining.
**Jeff:** Yeah, it's been fun.
### Inside Superhuman’s onboarding strategy: from human-led to self-serve
URL: https://review.firstround.com/inside-superhumans-onboarding-strategy-from-human-led-to-self-serve/
Last updated: 2025-04-24T06:53:12.000Z
An extremely detailed look at building and scaling onboarding
_This post is for subscribers only._
### Obsessing Over Onboarding for 10+ Years — The Architect of Superhuman's Onboarding Shares His Playbook
URL: https://review.firstround.com/superhuman-onboarding-playbook/
Last updated: 2025-04-28T16:33:37.000Z
*Here on The Review, we've covered just about every aspect of sales in extreme depth — from* [*founder-led sales*](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/) *to* [*building teams*](https://review.firstround.com/0-5m-first-sales-hire/) *to* [*pricing*](https://review.firstround.com/pricing-lessons-from-working-with-30-seed-and-series-a-b2b-startups/)*. But less has been written about what happens post-sales, and specifically, how to keep customers once you've worked so hard to acquire them.*
*The "leaky bucket" problem keeps founders up late at night. There are many levers you can pull to address it, but* [*Gaurav Vohra*](https://www.linkedin.com/in/gvohra/?ref=review.firstround.com) *says onboarding might be the most effective.*
*Gaurav Vohra is a growth specialist, leader, and advisor. He built* [*Superhuman*](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/) *from the ground up — starting, scaling, and leading their growth, product, marketing, and analytics functions, and creating their iconic growth engine combining a high-touch product experience with viral distribution. He now advises high-growth startups, and publishes essays on his* [*Substack*](http://substack.gauravvohra.com/?ref=review.firstround.com)*.*
*Among many things, Superhuman became known for its unique approach to onboarding: A highly personalized, white-glove, and human-led experience. Gaurav Vohra personally onboarded hundreds of customers and at one point, was running a team of dozens of Onboarding Specialists who onboarded tens of thousands of paying customers per year.*
*What follows is one of the most detailed analyses of onboarding you'll ever read. Gaurav Vohra details how he built and scaled Superhuman's onboarding engine — first with 1:1 onboarding and eventually transferring those learnings to the in-product experience that enabled the company to go fully self-serve.*
*We won't keep you waiting any longer. Here's Gaurav Vohra.*
---
The most important question for every startup: How long will customers stay?
If your hard-won customers slip away you have a leaky bucket, stalling ARR. But keep them, even grow them, and ARR accelerates.
Retention has always been important, but it's taking on new urgency for founders. AI hype cycles are getting larger, resulting in "[vibe revenue](https://x.com/gregisenberg/status/1898814322417295791?ref=review.firstround.com)" and "[annual curiosity revenue](https://x.com/Samirkaji/status/1899993809293107470?ref=review.firstround.com)."
Startups need to be dialed in on retention now more than ever. And of all the levers a founder can pull to improve retention, onboarding may be the most effective.
The moment a new customer touches your product, a clock starts ticking. For subscription products, the majority of usage drop-off happens [within the first few days](https://www.elenaverna.com/i/159919614/first-term-churn?ref=review.firstround.com). It's most disastrous on mobile: The average app loses 77% of its daily active users [within the first 3 days after installation](https://www.businessofapps.com/guide/mobile-app-retention/?ref=review.firstround.com).
Customers make up their minds on whether to return within minutes of encountering a new product. So founders, product, and growth teams rightly obsess over their onboarding.
As they do, they run into the same questions:
- What is the best approach to onboarding?
- Should I onboard customers myself? Is that scalable?
- When should I invest in self-serve onboarding? How do we make it special for customers?
I've spent the last decade obsessing over these questions — both at [**Superhuman**](https://review.firstround.com/articles/superhuman/) and in my role advising 30+ startups. These experiences have shaped a specific point of view on how startups should approach onboarding. These lessons will help today's founders who are troubleshooting retention.
Gaurav Vohra, startup advisor and growth leader
Many have written about Superhuman's unique approaches to product and growth. This [viral post on product-market fit](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit/) from **Rahul Vohra**, Superhuman's CEO, published right here on The Review, is a good primer, as is [this](https://kwokchain.com/2019/10/24/notes-on-superhumans-acquisition-loops/?ref=review.firstround.com) write-up by **Kevin Kwok**. Meanwhile, [this](https://growth.design/case-studies/superhuman-user-onboarding?ref=review.firstround.com) teardown from [growth.design](http://growth.design/?ref=review.firstround.com) is a great deep-dive into Superhuman's human-led onboarding.
But the more detailed story of how we scaled white-glove, human-led onboarding — then transitioned to product-led — has never fully been told.
I spent five years on Superhuman's first phase, starting, and then scaling our human-led onboarding. In this phase, we might have spent more time onboarding customers 1:1 than any other startup in history. I personally onboarded hundreds of customers before hiring our first Onboarding Specialist. At peak, we had dozens of Onboarding Specialists, who onboarded thousands of paying customers per week, and tens of thousands per year.
Then, to achieve the next level of scale, I spent another three years building the in-product onboarding, transitioning to fully self-serve. We migrated all of the hard-earned lessons into scalable product experiences. And we re-focused white-glove time to our highest-value prospects and B2B customers.
Our focus on human-led onboarding was unconventional, but we weren't alone. For example, **Clay's Varun Anand** [recently recounted](https://review.firstround.com/the-gtm-inflection-points-that-powered-clay-to-a-1b-valuation/#inflection-point-2-reversing-the-demo) a similarly opinionated human-led strategy with their early *"*reverse demo."
In the age of AI, a human-led approach might seem more counterintuitive than ever. Yes, tools can help you build a self-serve onboarding in a day. But startups that invest in human-led onboardings [build a sharp edge](https://x.com/mikeyyyzhao/status/1900187319283433881?ref=review.firstround.com).
Each conversation is an opportunity to develop a deeper, more intimate understanding of your customers. And companies with deep understanding — from real conversations — have an advantage that no LLM can replicate.
When you begin scaling, you'll understand your customer's first mile deeper than anybody else in the world.
This post is for you if you're an early-stage founder, product, or growth hire, working on product onboarding.
If you're in product or growth at a later-stage company, this post likely has nuggets for you. And many of the lessons also apply to high-velocity inbound sales and customer success.
I'll cover the biggest lessons from Superhuman's journey, including:
- **Part 1: Do things that don't scale**. Why every startup should practice human-led onboarding, a detailed cost-benefit analysis with actual figures from Superhuman, and a framework to figure out when to transition to self-serve.
- **Part 2: Unconventional wisdom for productizing onboarding**. Unconventional wisdom on building self-serve onboarding, with inspiration from real life and video games to create memorable experiences that are opinionated, interruptive, and interactive — and overcoming roadblocks that might stand in your way.
## **Part 1: Do things that don't scale**
I believe every founder should spend time manually onboarding their earliest customers. This advice is also true for product owners at later-stage companies launching new products.
Even if you couldn't possibly *scale* human-led onboarding, you should do it at the beginning.
The specific questions become: What should you focus on? And how long should you do it for?
Let's unpack the first question.
### **Five reasons to practice human-led onboarding**
**1) Customer success: world-class customer experiences**
This is the most powerful reason of all.
Startups live and die by customer retention, and retention starts with activation.
Nothing activates a customer better than manually onboarding them to your product.
At Superhuman, we took inspiration from Apple's Genius Bar. You might walk into an Apple store expecting to buy a new MacBook Pro to watch Disney+ with your kids. But through a guided conversation, you'd walk out with a much better solution: a fully set up iPad, a kid-friendly case, and the knowledge of how to use it.
We also deeply considered premium experiences such as 5-star hotels. You might check in, exhausted, not knowing where to go next. But the concierge can pleasantly guide you to your room, or the spa, bar, or beyond.
As the founder or product leader, just like the Genius Bar staff or hotel concierge, you know the product best. You know every feature and every bug. You can anticipate every moment of delight and every sharp edge.
In other words, you can craft the perfect experience for each customer.
Let's examine a classical framework for activation, from Reforge's [Retention Series](https://www.reforge.com/courses/retention-and-engagement?ref=review.firstround.com):
A human-led onboarding can push every new customer to make it through 'Signed up,' 'Setup Moment,' and 'Aha Moment.' If done well, it can set them up with 'Habit Moment,' and put them well on their way toward 'Engaged.' And it likely can be done in half an hour or less.
> Over 65% of new customers fully transitioned their email to Superhuman after their human-led onboarding.
This was more than double what we observed by simply dropping users into the product, absent any in-app onboarding, and letting them figure it out themselves.
What indicators suggest customers may especially benefit from human-led onboarding?
Look for the following four attributes.
**A) Changing a pre-existing workflow**
Maybe the customer gets the job done today with different tools. Maybe they have existing data that needs migrating. Maybe they just have *strong opinions*.
If this is the case, they need to change their pre-existing workflow to adopt your product.
90%+ of early Superhuman customers had been using Gmail for over 10 years. They came with a tremendous amount of email baggage. It was common to see 100,000+ emails in the inbox, 10,000+ unread, and no good workflow for handling email.
Humans are exceptional at pattern-matching to swiftly identify issues and propose solutions. We could rapidly diagnose each customer's current setup in our human-led onboarding. Then, we could provide exact migration steps to persuade them to adopt a new and better workflow.
**B) Learning a new physical paradigm**
Perhaps your product demands that customers build new muscle memory. Or maybe it introduces new surface areas, never before seen.
Products with this property might have new interaction modes. Consider apps taking user input through novel swipe gestures, voice, movement, or image recognition. AI companies focusing on multimodality or robotics would fall into this bucket.
As an example, Superhuman was famous for popularizing keyboard shortcuts for *everything*.
Learning keyboard shortcuts is a very unusual experience. Like a piano lesson, our customers benefitted from a real human encouraging them to try new interactions, helping them turn awkward physical movement into fluid muscle memory.
**C) A desire to see specific functionality**
Your product might exist in a space with a wide variety of jobs to be done. This might be because the incumbents support a huge number of use cases, such as Superhuman tackling email or [**VimCal**](https://www.vimcal.com/?ref=review.firstround.com) tackling calendar. Or maybe your product flexibly supports hundreds of potential workflows. Consider, for example, go-to-market tools like [**Clay**](https://clay.com/?ref=review.firstround.com) or [**Iterable**](https://iterable.com/?ref=review.firstround.com) that have the potential to become company infrastructure.
If this is the case, customers likely have different features they want to see. And humans can jump straight to those features.
At Superhuman, an onboarding for a busy founder with an overflowing inbox might prioritize Auto Labels, Split Inbox, and Remind Me. Meanwhile, an onboarding for an outbound salesperson might deep dive into Write With AI, Snippets, and Send Later.
Personalization shortens time-to-value from days to minutes. Customers are delighted at how quickly they discover their new favorite feature and are more likely to become engaged.
**D) A need to build repeated habits**
Finally, your product might require that customers commit to recurring usage. Many products require repeated use to build growing value.
Examples of products that require customers to build a habit to unlock compounding value include gym memberships, e-learning, and productivity apps.
A live conversation is the most effective at persuading customers to make that commitment.
To bring this to life, the internal Superhuman onboarding playbook included the following list of tactics that Onboarding Specialists could use:
- Have customers verbally commit to the Onboarding Specialist that they will use Superhuman every day for the next 30 days
- Log into *all* email addresses in Superhuman
- Create a browser bookmark for Superhuman
- Pin the Superhuman Chrome extension
- Set Superhuman as the default desktop mail app
- Add Superhuman to their iPhone "home row"
- Set Superhuman as the default phone mail app
- Delete Gmail and Outlook bookmarks
- Delete Gmail and Outlook from the browser URL autocomplete
- Delete Gmail, Mail, and Outlook phone apps
With the most customer-centric reason for human-led onboarding now articulated, let's explore the company-centric reasons.
**2) Product feedback: workflows, features, issues**
The first company-centric reason is that each onboarding lets you rapidly and deeply learn about your customers, and how they interact with your product.
In Superhuman's early days, onboardings ran up to 90 minutes:
- The first 30 minutes were devoted to discovery: Learning about customers, their pain points, and their email and broader productivity workflows.
- In the subsequent 60 minutes, we would do the onboarding, during which time we would obsessively capture every feature request, bug, and point of friction, including ones the customer hadn't even noticed.
It was common to come out of each conversation with 10 pages of notes, 5-10 feature requests, and 5-10 bugs to fix before the next onboarding.
This depth of insight is impossible to gain from analytics alone, even with a session recording tool like [**Amplitude**](https://amplitude.com/?ref=review.firstround.com) or [**FullStory**](https://www.fullstory.com/?ref=review.firstround.com).
Of course, as we scaled, we tightened all aspects of the operation. We pared onboardings down from 90 minutes to 30 minutes. Learning about customers shifted to a pre-onboarding [**Typeform**](https://www.typeform.com/?ref=review.firstround.com) survey, plus two minutes at the start of each call. And the number of feature requests and bugs encountered drastically went down as the product matured.
> But the value remained: human conversation yields a continuous lens into who your customers are and what they care about.
**3) Drive loyalty: methodically manufacturing evangelists**
Spending live time with customers generates a tremendous amount of goodwill.
Customers see that you are real people putting in real work to make their lives better.
You can build personal rapport by going above and beyond to help them. During Superhuman onboardings, we would give productivity advice *whether or not* it had to do with email.
And you can establish connections to follow up on later.
We'd listen to what was going on in their work and lives, take notes, and make a point to ask about it later. For example, one customer had recently become a parent, and we'd follow up a few weeks later to see how they were doing. Another said they would be running a marathon, and we set a reminder to ask them their time. We'd connect with our customers on social media, bringing them closer to Superhuman, and invite them to events at our office.
This has the effect of making each customer, on average, far more loyal than if they spoke to no one at all.
> Spending time with customers methodically manufactures evangelists.
This, in turn, results in the following positive outcomes over the customer's lifetime:
- Customers are more likely to stay engaged and retain.
- Customers are more likely to recommend you to friends and family.
- Customers are more forthcoming about their needs, feeding your product development cycle.
- Customers are more likely to report bugs they encounter, increasing your product quality.
**4) Sidestep issues: from moments of disappointment to moments of delight**
One of the best-kept secrets of the early Superhuman onboarding was how little the product initially supported. The earliest version was:
- Gmail only (no Outlook)
- macOS only (no Windows)
- Chrome only (no native app)
- Desktop only (no mobile app)
In addition, there were missing features that many customers simply expected — unified inbox, CRM integrations, and [**Grammarly**](https://www.grammarly.com/?ref=review.firstround.com) support — to name just a few.
And yet, we were still able to delight a majority of customers.
How?
A major benefit of speaking to customers in person is being able to directly share why functionality is missing, while also noting their request so you can delightfully inform them later on.
Instead of the disappointing experience of discovering gaps on their own, customers are usually happy to hear that the startup *knows* a feature isn't ready yet but has it on its roadmap.
Then, they're intrigued when they see you write down their request. And they're blown away when you follow up to let them know their feature is available.
A similar flow can be used for any bug encountered: Observe it, troubleshoot in the moment, take note, and close the loop later on.
An in-person conversation can turn moments of disappointment into moments of delight.
**5) Resource arbitrage: solving the hardest problems first**
Last but not least, if you are resource-constrained, it's possible that you are better off dedicating build cycles toward core functionality.
Consider that an engineer could spend a week building a critical missing feature, or, they could spend that same week building the self-serve onboarding.
> Humans can gracefully fill in for the lack of self-serve onboarding. But humans cannot fill in for critical missing features.
If push comes to shove, it's better to onboard the customer manually and build core functionality, than to automate an onboarding into an incomplete and potentially disappointing product.
### **Mandatory vs. optional**
There is a critical choice to make between making human-led onboarding mandatory or optional for customers.
Companies with a sales-led go-to-market already face this dilemma: Should all new customers be required to 'talk to sales', even if the product *could* be self-served?
At Superhuman, we initially mandated that all new customers attend a 30-minute human onboarding to access the product.
Our unique combination of ideal customer profile (time-sensitive founders, who would later become sales decision-makers in a land-and-expand motion), competitive landscape (a fallback in Gmail), and price point ($30 per month), pointed to a "no customer left behind" mentality.
We would not leave it to chance that customers might hit critical issues in their first few moments. We wanted to provide everything possible to succeed with Superhuman.
We experimented with making the onboarding an *optional step* after accessing the product. Even with our most pushy lifecycle marketing, the typical attendance rate was 15% — down from 100%.
### **Cost-benefit analysis**
We have explored reasons to conduct human-led onboarding. But in many founders' minds, human-led onboarding sounds so expensive that they might never consider it.
A practical approach is to fully reason through a quantitative cost-benefit analysis. Let's unpack the trade-offs using Superhuman's numbers as a starting point. Take this structure and apply it to your own product.
**Benefits**
**1) Revenue**
Each fully ramped, full-time Onboarding Specialist was able to add up to $650k of topline ARR per year.
Assuming enough customer demand, each full-time Onboarding Specialist could lead 8 to 12 half-hour calls per day, or 4 to 6 hours per day. This provides room for asynchronous activity such as supporting new customers over email, as well as team rituals, and breaks.
The biggest inefficiency was unexpected customer no-shows. At Superhuman, this averaged 15% and spiked as high as 30% during public holiday weeks such as Thanksgiving.
Net of no-shows, each teammate aimed for 40 completed calls per week, over 45 weeks per year. The remaining weeks were expected to be vacation, public holidays, company offsites, and other out-of-office.
At Superhuman's price point of $30/month, this set of assumptions amounted to 40 customers \* 45 weeks \* $30/mo \* 12 months = approximately $650k per Onboarding Specialist per year.
**2) Improved activation and retention**
As mentioned above, human-led onboarding saw nearly 2x the activation rates versus self-serve.
It is worth noting that this was hard to perfectly test. Due to selection bias, the segment of customers willing to show up to a 30-minute call was always a subset of the segment willing to self-serve into a product. So we paid extremely close attention to qualitative signals: Customer feedback both during and after the call.
Even if the actual uplift was half of these numbers, a 1.5x lift would still blow any normal self-serve onboarding experiment out of the water.
**3) Virality**
We saw the same 2x uplift in customer virality: Double the number of referrals per customer who was manually onboarded.
Again, to be cognizant of selection bias, we paid special attention to social signals.
Early "whale" referrers publicly shared their referral ability on social media, sometimes garnering over 300 referrals per customer.
And we continuously see founders bring Superhuman to their teams many years into the future.
**4) Accelerated learning**
We were able to learn about customer needs several orders of magnitude faster. Feedback loops that might have taken weeks could be observed within minutes and closed the same day.
**5) Brand boost**
Superhuman undoubtedly benefited from the brand benefits of manufacturing legions of evangelical early adopters. The downstream benefits are far-reaching and many.
**Costs**
**1) Operating expense**
A full-time Onboarding Specialist based in the Americas might cost anywhere from $60k to $130k fully loaded.
**2) Manager expense**
At scale, each squad of 10 Onboarding Specialists required one full-time manager, and approximately 10% of a full-time executive (at the time, me).
A sensible concept for evaluating these costs is [sales efficiency](https://www.surfe.com/blog/sales-efficiency-metrics/?ref=review.firstround.com): A team generating at least 3x the revenue as what it costs is generally considered good.
Of course, manager time carries a further cost that must be considered: The opportunity cost of that time not spent elsewhere.
**3) Supply and demand mismatch**
Human-led onboardings introduce a challenge that is very typical for fixed asset businesses, such as airlines or doctor's offices, but somewhat alien to most startups: A supply and demand mismatch.
The problem is that at any point in time, customer demand and onboarding supply never perfectly equilibrate.
Most founders rightly worry about customer demand exceeding onboarding supply, ultimately throttling growth.
> But the concern also runs the other way: Too much supply creates operational inefficiency.
These challenges were most apparent for customers in different timezones and over weekends. They were also apparent for large demand spikes such as right after a launch, and large demand troughs such as over Thanksgiving and Christmas.
**4) Customer experience**
Some customers experienced frustration waiting for and attending their onboarding.
For a suitably short wait and suitably incredible onboarding, this was a non-issue. But, there will always be customers who are better off figuring out how to use the product themselves, especially in certain industries. For example, it's commonly the case that engineers prefer to try products themselves, which is why most developer tools avoid 'talk to sales', and have a self-serve option.
Of course, each startup will vary drastically in these benefits and costs. At any moment in time, it's important to understand yours, and identify your [single decisive reason](https://www.youtube.com/watch?v=0igjSRZyX-w&t=4748s&ref=review.firstround.com) for picking one path over another.
With costs and benefits fully explored, let's zoom out to a broader framework of how long to practice human-led onboarding.
### **How long to practice human-led onboarding**
As above, I believe *every* startup should start out doing human-led onboarding.
In the beginning, the benefits of generating revenue, delighting customers, accelerating learning, and building a brand most likely outweigh the costs. But there is a question of when, if ever, to transition to self-serve.
This can be boiled down to a 2x2\. On one axis is the price point, which can be thought of as Average Revenue Per User (ARPU) or Average Revenue Per Account (ARPA). On the other axis is product complexity, which is a proxy for the benefits previously explored.
**High price point, high complexity: potentially forever**
Imagine complex B2B SaaS at a high price point. Examples might include a CRM or marketing automation suite. Or imagine a high-end direct-to-consumer service, like personalized healthcare.
These products might benefit from human-led onboarding for a very long time — potentially forever, via an Implementation or Solution Engineering team.
Implementation can be baked into your expected cost to acquire a customer (CAC), in turn supporting a high expected lifetime value (LTV).
**High price point, low complexity: as much as desired for ongoing learning**
Imagine an expensive product that is also extremely easy to understand. Examples might include car insurance or a talent marketplace.
These products generally don't *need* human-led onboarding after the startup has reached product-market fit.
These startups can decide how much they want to continue onboarding manually. The most durable reason is typically to support ongoing learning.
**Low price point, high complexity: as long as economically viable**
Consider a startup intentionally keeping prices low to win market share, even if the product is complex. Imagine a new CRM aggressively discounting, for example.
These startups should manually onboard customers for as long as economically viable. Their objective is to make customers successful while winning the market.
Over time, they can increase prices to justify continued human-led onboarding. Or they might do the challenging work of building a self-serve onboarding.
**Low price point, low complexity: as long as needed to reach PMF**
Finally, imagine a tool with an extremely simple value proposition, that is either very cheap or free to get started with.
Most consumer software falls into this quadrant. Consider gaming, social media, or utilities like photo editing.
These startups should manually onboard early customers only as long as necessary to reach PMF. Beyond that, the costs of onboarding likely will not be further justified beyond ad hoc product learning.
**Superhuman: existing in superposition**
In general, startups exist in a superposition across this 2x2\. Different tiers or customer types might reasonably require different onboarding motions. The free tier might be entirely self-serve, while the enterprise tier might be entirely human-led.
> To design your onboarding flow, consider each SKU and persona as though they were their own distinct product.
Superhuman began in the top-right quadrant: High price point, high complexity. For example, a CEO with fifteen years of email baggage to migrate, whose thousand-person company represented a future six-figure revenue opportunity. These were customers we wanted to spend one-on-one time with: The beginning of a sales motion. And we still seek to manually onboard these customers.
But at other times, we existed in the lower-left quadrant: Low price point, low complexity. For example, students on a discount tier, who are already hyper-efficient and able to hit Inbox Zero. We implemented a carve-out to let all students self-serve as soon as we found product-market fit.
As we scaled beyond the highest-expectation customers of Founders and CEOs towards go-to-market professionals and wider teams, we increasingly found ourselves in the lower-right quadrant: Smaller long-term revenue opportunities, but sufficient complexity to require human-led onboarding.
We scaled human-led onboarding until the costs, particularly supply and demand mismatch, overtook the benefits. This precipitated a steady transition towards a productized onboarding.
## **Part 2: Unconventional wisdom for productizing onboarding**
Nearly all products — except for the *most* expensive and complex — eventually transition to some kind of self-serve onboarding.
But the transition can be tricky to get right.
Plenty has been written on the topic of what a good product onboarding entails. Some of my favorite materials include [The Elements Of User Onboarding](https://www.useronboard.com/user-onboarding-ux-design/training/?ref=review.firstround.com), [What is a Good Activation Rate](https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate?ref=review.firstround.com), and the Activation sections of [Reforge's Retention Series](https://www.reforge.com/c/retention-series-eg/activation/introduction?ref=review.firstround.com).
I recommend readers absorb these guides to build a good mental model for how to productize onboarding.
But despite these materials and more, I noticed an under-served area in onboarding literature: What *specific* qualities should product onboardings contain? How should they *feel*?
Product and growth teams — particularly those who have spent limited time 1-1 with customers — often struggle with these questions. This results in watered-down, unmemorable experiences.
But coming from human-led onboardings, the answers felt obvious.
### What you'd tell customers in person
When building your product onboarding, imagine you were right there with customers, just like a human-led onboarding.
- You would comprehensively guide customers to accomplish their setup moment.
- You might have a predefined workflow or reverse demo to get them to their aha moment.
- You would carefully watch for issues, and jump in if you notice any hiccups.
In other words, you'd be *extremely* attentive to the customer's every need.
Reforge likens this to removing one's marketing hat and thinking like a personal assistant.
This helps with function, but it doesn't fully explain form. How might software further replicate what a human might do?
We needed a second source of inspiration. So we asked: Where else are there countless examples of software guiding users through a brand new world?
We turned to a long-standing source of inspiration at Superhuman: video games.
For decades, video game creators have been perfecting the art of dropping players into new and complex worlds and then setting them up for success. They teach players to learn the controls, take action, and embark on their adventure.
> I discovered that the most effective product onboardings embody three attributes that product and growth teams typically shy away from: opinionated, interruptive, and interactive.
**1) Opinionated**
**What it means**
There are many ways to use your product, but there is likely a *best* way. And you owe it to your customers to help them down that path.
This is the path that most rapidly accomplishes the setup moment, reveals the aha moment, and primes the habit loop.
**Nan Yu**, Head of Product at [**Linear**](https://linear.app/?ref=review.firstround.com), [describes the following](https://x.com/thenanyu/status/1886147190168428757?ref=review.firstround.com): *When you adopt business software you're often adopting a practice along with the tool. You're adopting packaged wisdom and putting it into practice.*
This perspective applies just as readily to consumer software as it does to business software. For example, [**Duolingo**](https://www.duolingo.com/?ref=review.firstround.com) has a point of view on how you should learn a new language. [**Airbnb**](https://www.airbnb.com/?ref=review.firstround.com) has deeply held beliefs about what it means to travel and host.
At the core of every great product is a problem that exists in the world, and its creator's opinionated solutions to that problem.
New users come to your product looking for those solutions.
**Inspiration**
We drew inspiration from one of the most iconic video game experiences in history: 1985's Super Mario Bros 1-1.
This level is a [masterpiece in opinionated design](https://mainstream404.wordpress.com/2018/01/03/how-super-mario-bros-world-1-1-teaches-you-everything-you-need-to-know/?ref=review.firstround.com). Without instruction, the player is encouraged to move right. Then, as the Goomba trundles towards you, you must either jump or perish and restart the level.
It opinionatedly tells the player: "This is a game about jumping. You will learn to jump perfectly."
As you proceed, you learn everything needed to succeed — movement, enemies, power-ups — all in pursuit of your goal.
**How to do it**
Consider the following simple exercise: What would you tell the customer if you only had 10 seconds? What about 1 minute? How about 10 minutes?
Progressively follow this thinking and capture the most salient messages.
Some of my go-to opinionated onboarding elements include:
- A mandatory introduction video that gives the product elevator pitch and tees up the user's next steps.
- An on-rails experience where users must take certain actions to build familiarity.
- Dropping users into a stripped-down version of the product containing *only* the flows relevant to brand-new users.
**Case Study**
Superhuman's first self-serve onboarding was hyper-opinionated. Similar to Super Mario Bros 1-1, we opted for an experience that taught users to move in a controlled environment.
The first step drew inspiration from requiring Mario to move right: We required users to hit "enter" to get started. Clicking buttons made them jiggle helplessly, encouraging users to abandon the mouse.
The demo then stepped through basic navigation, such as "j" and "k" to scroll through emails.
This first version worked. But we knew it could be much better.
**Samuel Hulick** of [useronboard.com](http://useronboard.com/?ref=review.firstround.com) even told us at one point: Teaching navigation this way felt like we were forcing users to "eat their vegetables."
In our next iteration, we strongly prioritized our *most* opinionated objective: Inbox Zero. We removed navigation like "j" and "k", and prioritized the controls necessary to hit Inbox Zero: Marking done with "e" and setting reminders with "h."
This shift had astounding results: "e" and "h" usage increased by 50%, and self-serve activation rates improved by 25%, from 40% to 50%.
**2) Interruptive**
**What it means**
Great onboardings dare to be interruptive.
In the last 15 years, unobtrusive elements like checklists, tooltips, and in-line nudges have somehow become an industry standard.
Particularly on desktop, it is typical to click through a series of tiny tooltips when onboarding to a new product.
Over time these elements become clutter, piling up in the corners of your app. Cruft that slowly degrades the new user experience, dividing user attention between guidance, and the product itself.
> If an experience is tucked away, it will be ignored. And if it is ignored, it may as well not exist.
Great product onboardings arrest a user's attention with something important to say.
**Inspiration**
Our source of inspiration was the unforgettable "Hey, listen!" call from Navi, Link's fairy helper in 1998's The Legend of Zelda: Ocarina of Time. Navi shouts when there is salient information necessary to make progress.
It might be a meme, but this guidance goes beyond simple help, forming an emotional bond that many players remember decades later.
**How to do it**
Again, consider what you might say in person. If your customer had missed a crucial concept, you'd earnestly jump in. The product should be no different.
> At the outset, it's important to establish a golden rule: If you are going to disturb the user, it needs to be for something extremely valuable.
This filters out 90% of what you might interrupt the user with. It leaves you with only the ideas that you absolutely must convey.
These interruptions might be at the very beginning. Think about, for example, when you set up a new iPhone. The entire screen is dedicated to core setup: Face ID, Location Services, iCloud login, and more.
Or they might be deeper into the journey. Consider [**Headspace**](https://www.headspace.com/?ref=review.firstround.com) greeting you with an explanatory video from the founder after your third meditation, or [**Simply Piano**](https://hellosimply.com/?ref=review.firstround.com) enticing you after your first lesson with a preview of becoming a proficient musician.
It is critical to identify concepts that are useful to a high enough percentage of users. And these moments must be timed extremely thoughtfully — optimizing for moments of high user receptiveness, and avoiding moments when they might lose context or progress.
**Case study**
At Superhuman we experimented with checklists, tooltips, and timed nudges. These yielded zero impact.
The checklist was the most surprising. We hypothesized that users would be completionists, seeking to accomplish every step in a checklist.
So we gave them "side quests" to complete: Clean up old email, activate Superhuman AI, and more.
Only 50% of users completed each task, and only 30% of users completed *all* tasks. And we saw no change in activation rates. Worse, we now had an experience obscuring a core piece of functionality.
Reflecting on our sources of inspiration — Navi's interruptive call, the iPhone onboarding mentioned above, and more — we rebuilt the checklist as a full-screen experience.
We shifted from steps in a tucked-away checklist to full-screen panels before hitting the main product. And we made them impossible to skip, instead providing smart defaults so users could quickly zip through.
This drastically elevated total completion rates from 30% to over 98% — because users were *required* to complete the steps or bounce entirely. And opt-in rates for key features rocketed from 45% to nearly 80%.
We then took this insight to several other areas of the user experience. Perhaps the most extreme is "Get Me To Zero." This step interrupts customers right before they hit their "real" inbox, persuading them to pick a date, such as three days ago, and Mark Done everything before then.
For anybody who takes their email seriously, this might feel incredibly scary.
Despite this, an astonishing 57% of new users opt in to "Get Me To Zero," and it is responsible for archiving close to a billion emails and counting.
**3) Interactive**
**What it is**
A common objection to being opinionated and interruptive is that it removes agency from users.
The antidote is to make these experiences interactive.
The pedagogy mantra of "do > show > tell" can be applied: Customers retain far more when they have directly taken action.
Moments of interaction have the added benefit of building up user muscle memory.
And last but not least, they are fun!
**Inspiration**
Video games, by definition, put players in control. Our specific source of inspiration was an experience from Super Smash Bros: A Training Mode that lets new players try every button in a safe environment.
The magic of this experience is giving players 100% agency at the same time as 100% safety.
**How to do it**
When pushing a message during the onboarding, ask yourself: What *action* could a user take to internalize this message?
This might be a setting to toggle, CTA to click, or feature to play with. These actions help customers internalize and remember your message.
Then ask: How can you make it *as safe as possible* to take this action? One of my favorite mental models for new user onboarding is "[the user is drunk](http://theuserisdrunk.com/?ref=review.firstround.com)." So it's important to prioritize simplicity and safety. You must make clear *what* the action is, *when* it is needed, and *how* it can be done. And you must make sure the user is protected against adverse outcomes, like losing work.
Finally, it's best practice to have customers *use your product* *to* *learn the product*. A brilliant example of this is [**Readwise**](https://readwise.io/?ref=review.firstround.com)**'s** read-it-later app, [**Reader**](https://readwise.io/read?ref=review.firstround.com). Reader pre-loads an article from the founder explaining how to use the product. Throughout, it self-referentially explains how the user should interact with *that* article, including highlighting, notetaking, and ultimately archiving.
**Case study**
The centerpiece of Superhuman's onboarding is a synthetic inbox within which users can clear emails and hit Inbox Zero. It is fully interactive and entirely safe.
This was such a success that we wanted to replicate interactivity elsewhere in the onboarding.
In Superhuman we teach new users how to "Undo Send." The best time to learn this isn't during setup, or even just before sending. It is in the split second after sending, when context around sending is at an all-time high, and when users may safely try the feature.
When we notify users about "Undo Send," we don't just explain the feature. We make it so that tapping "Z" actually undoes the send. Meanwhile clicking "Got it" safely dismisses the alert, while allowing the user to "Undo" for another 10 seconds.
This arrests attention with the initial interruption, and then safely allows the user to play with the feature, unlocking a sense of satisfaction.
### **Why is this hard?**
One of the most fascinating aspects of product onboarding is unpacking why teams shy away from building opinionated, interruptive, and interactive experiences.
Founders, product, and growth leaders should be vigilant against these traits, and work to erase them from company culture.
**Lack of conviction**
A common challenge is the startup lacking conviction in its ICP, and their jobs to be done (JTBD).
It is understandably difficult for the onboarding to be opinionated if the product itself is not.
This is especially common when a startup is bringing a technology or capability to market, prior to being specific about who, exactly, they are building for.
It is also common when a startup has multiple customer profiles with a wide variety of jobs to be done. This creates decision paralysis where the startup does not know how to balance the various personas.
In both cases, it is critical to pick *the most important* ICP and their *most important* JTBD, and then build the best possible flow for that. These decisions are rarely one-way doors.
> Better to pick a path with conviction and pivot if required, than to never pick one at all.
In the case of products serving multiple personas, once a primary ICP has been chosen, it is much less work to branch the experience for different personas. This is typically done by customizing suggested content and workflow for new users.
For example, social apps like [**Pinterest**](http://pinterest.com/?ref=review.firstround.com) and[**X**](http://x.com/?ref=review.firstround.com) and media apps like[**Netflix**](http://netflix.com/?ref=review.firstround.com) and [**Spotify**](http://spotify.com/?ref=review.firstround.com) commonly ask new users to pick their interests to seed their recommendations. Meanwhile, SaaS apps like [**Miro**](https://www.tenscope.com/onboarding-teardowns/miro?o&ref=review.firstround.com), [**Airtable**](https://www.tenscope.com/onboarding-teardowns/airtable?o&ref=review.firstround.com), and[**Notion**](https://www.tenscope.com/onboarding-teardowns/notion?o&ref=review.firstround.com) all have some version of asking users for their use-case such as education, work, or personal, then suggesting templates matching those details.
**Fear of backlash**
It is extremely common for teams working on onboarding to fear backlash, either from customers or from within. Shaping the onboarding for 100% of future customers is already a big deal. Being opinionated, interruptive, and interactive only heightens that tension.
Consider controversial moves such as making an explainer video mandatory, changing a setting to be on-by-default, or removing 'skip' options from the onboarding.
The antidote is rapid testing to reduce risk. Tests, by definition, are reversible, with a clear framework in place of when to proceed versus when to backtrack. It is natural for stakeholders to balk at a controversial onboarding step — until it yields a 10% improvement in activation.
**Faulty ecosystem**
Typical plug-and-play elements for onboarding such as checklists and tooltips approach onboarding the wrong way. They are simply widgets that are the easiest to drop in.
They do not represent what customers need most, and they certainly do not match the nuances of your product.
Instead of being swayed by the typical menu of options, think deeply about what customers need to understand your product. You might be able to create these solutions through low-code solutions, but consider that your solution might require a more bespoke approach.
## Create delight
At the root of everything I've described is an obsession with the customer.
Customer obsession is one of those squishy values: Oft-touted, rarely operationalized. We built Superhuman around the concept so deeply that our core value, Create Delight, permeates every part of the company.
There is no better way to build the best experience in the world for your customers than speaking to hundreds, if not thousands of them. Our Onboarding Specialists did just that, onboarding thousands of customers. Special appreciation must go to [**Kyle-Prescott Ogunbase**](https://www.linkedin.com/in/ogunbase/?ref=review.firstround.com) with the most individual customers to his name at over 3,900\. Others including [**Laurel Johnescu**](https://www.linkedin.com/in/laureljohnescu?ref=review.firstround.com) and [**Matt Waters**](https://x.com/wat%5Fmatters?ref=review.firstround.com), conducted thousands of calls, then became managers, leading the growing team that delivered countless more delightful experiences. And our Growth Product Manager [**Ben Ophoven-Baldwin**](https://www.linkedin.com/in/ben-ophoven-baldwin/?ref=review.firstround.com) and Pod obsessively drove product improvements from the insights they gleaned. Their customer dedication astounds me to this day.
We made a simple but important decision to place the customer at the center of everything we did at Superhuman — and from there, it shaped everything we do.
### From two-person consultancy to $4.2B software business — dbt Labs’ Path to PMF
URL: https://review.firstround.com/from-two-person-consultancy-to-4-2b-software-business-dbt-labs-path-to-pmf/
Last updated: 2025-04-25T06:52:03.000Z
Co-founder Tristan Handy shares the startup’s unconventional backstory
_This post is for subscribers only._
### How dbt Labs Built a $4.2B Software Business out of a Two-Person Consultancy
URL: https://review.firstround.com/dbt-labs-path-to-product-market-fit/
Last updated: 2025-11-21T20:48:27.000Z
Many founders spend years searching for product-market fit. For some, product-market fit finds them.
In 2016, [**Tristan Handy**](https://www.linkedin.com/in/tristanhandy?ref=review.firstround.com) opened up a small consultancy with modest ambitions: help startups shore up their data systems. He and his co-founder quickly pulled together an internal product — which they dubbed the data build tool, or [dbt](https://www.getdbt.com/?ref=review.firstround.com) — to speed up their consulting work.
Almost a decade later, that tool would morph into a $4.2B cloud-based analytics engineering platform used by more than 50,000 teams every week. Today, the company behind it is known as [**dbt Labs**](https://www.getdbt.com/?ref=review.firstround.com)(which recently cleared [$100M in ARR](https://www.getdbt.com/blog/dbt-labs-100m-arr-milestone?ref=review.firstround.com))**.**
Handy never expected he’d be sitting at the helm of a billion-dollar venture-backed company, or even a consultancy, for that matter. Despite stints at several startups, he never harbored dreams of one day starting a business of his own. His entrepreneurial journey began instead while he was working at analytics tech startup **RJMetrics** — and he fell in love with the cloud-based tech that ultimately pushed him to strike out on his own.
He left to start Fishtown Analytics, named after the Philadelphia neighborhood that he called home. Within a few weeks of running the consulting business, the founders had developed dbt for their own use. They threw up an open-source repo, thinking maybe a few folks might find it interesting, and got back to work with clients.
Turns out the tool had a much larger audience than just Handy and some data nerds on GitHub. Over the next three years, dbt’s word-of-mouth traction spread online and it quietly amassed over 1,000 users — growing 3X year-over-year. By 2019, Handy reluctantly agreed to raise some money to scale the free tool’s organic growth, and in 2021, rebranded from Fishtown Analytics to dbt Labs, leaning into the tool’s breakout success.
“I didn't want to take venture funding, but it was so clear that we were doing the product and the community we’d built a disservice by under-investing in it,” says Handy. “We had three engineers supporting a thousand companies. It was widely used and yet totally under-resourced.”
Pivoting from consultancy to SaaS business was an uncommon move, but it had its merits. By the time Handy signed his first term sheet, he already had inroads with dozens of startup data teams and a community engine behind dbt.
Here, Handy opens up about dbt Labs’ unconventional [path to product-market fit](https://review.firstround.com/series/product-market-fit/), sharing all the twists and turns from the company’s start as a two-man consulting shop. This is a worthwhile read for aspiring entrepreneurs who aren’t quite sure if the VC route is for them — a reminder that there’s no fixed path to building an enduring business.
## Bootstrapping a consultancy
Handy spent the first decade of his career leading analytics functions at **Deloitte** and **Squarespace**, and eventually RJMetrics, where he served as VP of Marketing for several years. Then, in 2015, the advent of cloud-based data shook up the market.
He got access to Amazon Redshift and within two queries, he knew it was going to change everything for his profession. “The performance was orders of magnitude faster than the analytical products that I had used previously,” he says. “Before Redshift, you had to be a large enterprise to get access to that kind of performance. All of a sudden, you could swipe a credit card and pay $160 a month for this class of technology.”
Handy could see the technology landscape shifting under RJMetrics’s feet. “We would have never been able to anticipate the rise of the cloud for data specifically,” he says. “We were supposed to become [what **Looker** became](https://review.firstround.com/the-inside-story-of-how-this-startup-turned-a-216-word-pitch-email-into-a-2-6-billion-acquisition/). The cloud came for us and disrupted our entire business — it created an opening for Looker to steal the exponential growth curve we were sitting on.”
Handy was so floored by the technology that he was excited to help startups take advantage of cloud-based data platforms. But he didn’t want to start a VC-backed company to do it. The threat of failure loomed too large.
“When everything goes well for a VC-backed company, it's great. But often, it doesn't go that well,” he says. “Being a leader at an organization that’s not winning brings an unbelievably high level of personal stress. You fundamentally feel like you’re not in control of the process because you have investors who have expectations.”
So Handy figured a consultancy was a less risky place to start, but even that option was daunting. He struggled to picture himself as a founder.
“I'd never started anything before. I'd worked for three other founders, and always had this idea in my head that founders were a different type of person, and I was not that type of person,” he says. “This was the era when *The Social Network* was made, which convinced people that founders were supposed to be college dropouts who’d pound on the table and say, ‘We're going to change the world!’”
Other doubts clouded his head. “I was afraid of having to tell all my friends and family that I tried and failed at something,” he says.
So he floated his idea for a consultancy with the founders he’d previously worked with, which ultimately helped ease his impostor syndrome.
In retrospect, Handy thinks his hesitation around starting a business was a useful way to keep his priorities in check. “Instead of being so attached to the outcome of building a company, I was attached to the outcome of solving a problem in the world,” says Handy.
> If you’re so obsessed with this problem that you couldn't imagine *not* spending all your time on it, you increase your chances of actually being financially successful. The success of your company has to be downstream of that.
With his founder friends’ encouragement, Handy felt more optimistic about starting Fishtown Analytics. And to minimize his own personal risk, Handy wrote a $10,000 check out of his own wallet and deposited it in a bank account. “Worst case, I could lose some months of my life and 10 grand. It wouldn't be the end of the world,” he says.
**Handy’s blog announcing the launch of his new consultancy*
### Bringing on a co-founder
Given his own misgivings about starting a business, Handy was reluctant to find a partner for his new consultancy at first. He didn’t want “another mouth to feed,” as he puts it.
Then [**Drew Banin**](https://www.linkedin.com/in/drewbanin?ref=review.firstround.com)came back onto Handy’s radar. Banin had worked part-time at RJMetrics as a software engineer to pay his way through college and was finishing up his degree at the time. He caught wind of Handy’s new business — and rather than lining up a gig post-grad, he made a pitch to join.
“Right around when I was starting, Drew pulled me aside and said, ‘Hey, can I help?’” says Handy. “I was pretty resistant to that at first. Not because of Drew — he’s freaking incredible. But the idea that I had another salary to pay when I hadn’t even closed my first client was stressful. I just hoped I could figure it out.”
### Landing the first clients
Now with two paychecks on the line, Handy needed to grow the book of business, fast.
His deep familiarity with the needs of SaaS and B2C companies informed a natural client profile. Fishtown Analytics’ first two clients were folks he’d met through his work at RJMetrics. “It felt obvious. I knew e-commerce and SaaS, and I knew how many e-commerce and SaaS companies there were because I'd actually done the market analysis at RJMetrics,” he says.
Here’s how Handy thought about finding clients:
- **Stick to a** [**super specific**](https://review.firstround.com/clays-path-to-product-market-fit/) **client profile to make new business repeatable**. All of Handy’s early clients fit the same bill: Series A, B or C B2C or SaaS startups, and specifically their CEOs or VPs of Marketing, who needed to understand their data. “This is something that people who build consulting companies get wrong: They accept whatever work comes their way.”
- **Clearly articulate to clients how you’ll create value and save them money.** Handy pitched Fishtown Analytics as a lean stand-in for an entry-level data analyst. “We said, ‘Look, we’ll produce more value for you than if you hire internally,’” he says. “Our annualized rate was something like $60K a year. We knew we could deliver a really unbelievable amount of value very quickly without a lot of consulting dollars.”
The nature of this consulting work meant Handy could hire and train younger talent, like Banin, to join the crew. “If you drop a consultant in and say, ‘Go solve these random data problems with this startup executive,’ they need to have 15 years of experience. But if you say, ‘Hey, this is exactly the set of problems you're going to solve, and here are some instances where we've solved this before,’ you can have somebody brand-new in their career do that.”
> There isn’t a “venture-scale exit potential” in a consulting business, but there is a really satisfying founder-scale potential.
## Crafting — and open-sourcing — a dbt prototype
As Handy and Banin got Fishtown Analytics off the ground, they had scrapped together an early prototype of dbt. They saw it as a means of boosting their own productivity as consultants — so they expected to be the tool’s only two users.
At the time in 2016, Handy felt there was a missing category in the data process known as ETL: extracting, transforming and loading data to be analyzed. Plenty of software companies handled the bookends of extract and load, but there weren’t many tools built for the transformation in the middle that [cleans up data to be used](https://review.firstround.com/starting-an-analytics-org-from-scratch-lessons-from-a-decade-at-doordash). “In order to do good consulting work, I felt strongly that we needed a tool,” he says.
The premise of dbt was this: Analytics as software, authored by anyone who knows SQL, to bring together the best of both worlds of analytics and engineering.
Handy didn’t think there were many other data pros with the hybrid data and technical skills he had who’d be equipped to use dbt. “It was so different from anything that existed before,” he says. “Data tech prior to 2016 treated data analysts as low-level, non-technical people. You can see that in Excel or Tableau — you could do powerful things with these products, but the interface is more drag and drop.”
Handy even told a few friends in VC about the tool he was building, and they agreed that there probably wasn’t a big market for it.
> VCs told me, “dbt sounds interesting, but you might be an N of 1 user who wants something like that.”
So Handy and Banin built a quick and dirty product that was immediately useful — without sinking a ton of engineering hours. Banin had the stronger coding chops of the pair, so he was able to whip up a prototype on nights and weekends.
The initial version was bare-bones and had no fancy UX. “We had a version that had roughly two weeks of engineering time put into it on day one,” he says. “When you build command-line tools, you don’t have to build a user interface or a login, so you can get a lot of value out of a small amount of effort.”
So they kept the tool fully behind-the-scenes to clients. “**If we'd tried to convince people to use this piece of technology that nobody had ever used before, it probably wouldn't have gone well,**” says Handy.
But Handy and Banin were happy users. “This is an unscientific number, but I’d say we could deliver work at least 10 times faster than we would have been able to do otherwise. It was the magic silver bullet that made the entire consulting model work.”
dbt was [open source](https://review.firstround.com/vercels-path-to-product-market-fit/) from its inception, when just Handy and Banin were the lone users.
“When we first built the initial version of dbt, we stuck it in an open repo on GitHub and put an Apache 2.0 license on it so that it was just out there, available,” says Handy. “Early users started telling their friends about dbt. People would just find it.”
This might sound like a counterintuitive move for a tool developed for Handy’s and Banin’s own benefit. Handy says his decision to open-source the software instead stemmed from a commitment to knowledge sharing. “We didn't know that a ton of people were going to use dbt, but we thought it was a good idea, and maybe some other people out there would find value in it,” he says.
Tristan Handy, CEO and co-founder of dbt Labs
## Building an ecosystem
Once Handy had two clients signed, he didn’t need to rely too heavily on the Rolodex he’d built from over a decade in the data space. Instead, he leaned into marketing and community building to drum up inbound leads.
Here are a few of the moves Handy made that buoyed Fishtown Analytics’ and dbt’s word-of-mouth growth in tandem:
- **Betting on content marketing from day one.** Most people who start consulting companies don't have a background in marketing, but marketing was Handy’s day job for seven years at startups. So instead of hustling on cold pitches to find new consulting clients, he spent his time writing. “I built a brand for us by writing [blog posts](https://www.getdbt.com/blog/building-a-mature-analytics-workflow?ref=review.firstround.com) that really resonated with a bunch of people. I had a newsletter that was read by about 6,000 people.”
- **Pulling back the curtain on dbt for clients**. Eventually, Fishtown began working with later-stage startup clients with more sophisticated data teams — which meant they hired technical data folks who’d know how to use dbt. The first Fishtown client to use dbt directly was mattress startup **Casper**. “Their data team hired us to scale their data warehouse back in 2016\. We told them the way that they were doing stuff was bad and we needed to move it over to dbt. So they asked for a demo. Over the next week, we refactored all of their existing pipelines and brought them over to dbt. And they were elated,” he says.
- **Setting up a Slack channel for dbt users.** Once dbt had a handful of external users, between Fishtown clients like Casper and folks who’d found it on GitHub, Handy set up a Slack for the early users to trade notes. “There were maybe a dozen people in it by late 2016 who were early adopters. We were all just trying to figure out how dbt allowed us to work in new ways as a data practitioner,” he says.
### A glimmer of dbt’s standalone potential
Handy recalls the moment he realized that dbt might be destined for more than just an internal side project: A prominent data leader popped up in the dbt Slack group after finding it online. (He’d go on to become one of dbt’s long-time users to this day.)
“A random person showed up in Slack and said, ‘I heard about dbt and we’ve been evaluating it for internal use.’ That person was the VP of Data Science at SeatGeek. And we were just like, ‘What?’” says Handy.
Eventually, the Slack community started to do marketing for dbt on Handy’s behalf. “One of the weirdest experiences was that people in that community who ran data teams would host meetups to try to convince other people to use dbt — so that they could hire dbt users,” says Handy. “We didn't have a designated marketing channel for dbt. Instead, people would invite us to meetups about the product that we were building.”
## The pivot to software business and raising capital
Even as Handy won a steady client roster for Fishtown Analytics through his marketing and community building, dbt’s growth began to quietly outpace the consulting business. By 2017, dbt — which was still a free, open-source tool — had 100 users.
### The aha moment: Enterprises come knocking
Initially, Handy just saw the uptick in dbt’s usage as a positive for the consulting business. But given his natural curiosity in data trends, he and Banin installed event tracking inside of dbt after it crossed the 100-user mark. “We pulled up the chart and realized there were now 100 companies using dbt, and we'd only worked on a consulting basis with about 20 of them,” he says.
The staggering growth rate wasn’t lost on Handy. “We threw that time series in a Google sheet and we fit a line of S, and it was very consistent, 10% month-over month-growth. When I was at Squarespace, we consistently grew at that same rate. And so I understood the value of compounding very clearly.”
By 2019, Fishtown Analytics was comprised of Handy, Banin, and three engineers. And sure enough, the line kept ticking up and to the right. **The consultancy now counted SeatGeek and Casper as clients, and huge enterprises like USAA and Coca-Cola became interested in using dbt — but Fishtown had no way to support them**. “They couldn't use open-source software by itself without a support contract,” he says.
Soon, dbt hit 1,000 users at a 3X year-over-year growth rate, and by late 2019, Handy realized that he faced no other option than to raise capital to continue operating sustainably. “We had three engineers supporting a thousand companies. dbt was generating literally hundreds of millions of dollars of underlying compute spend from the warehouses that it plugged into,” he says. “We had to convince ourselves to do something other than run the business the way that we had been, because it was fun.”
**dbt’s growth curve from its launch on GitHub in 2016 to its pivot to software business*
### Unexpected team hiccups
The pivot into a venture-backed business wasn’t all smooth sailing, however. Handy says Fishtown churned about a third of the existing team over the next year.
Fishtown had steadily grown into a roughly 20-person team by early 2020\. In April, Handy publicly announced the combined $12.9M Seed and Series A round, the first fundraise.
He admits he didn’t break the news in the best way. Immediately after closing the deal, the co-founders told the rest of the team at a virtual company offsite. “When I shared that news, I thought that everyone was going to be really excited. And I realized there was some weird energy in the room,” he says.
“This is probably true of any meaningful change in strategy for a business, but I underestimated the amount of work that would be needed to explain the strategy and the reasoning behind it and how different people fit into the new world. Instead, I just dropped a bomb and said, ‘Hey, isn't this exciting?’”
Despite some painful team transitions, Handy was excited to start scaling dbt’s growth.
## Monetizing an open-source tool
The first order of business for Fishtown as a newly venture-backed company was making a commercial version of the beloved open-source tool. There were two phases of this next chapter as a commercial business: building a cloud offering and convincing enterprises to pay for it.
### Adding a cloud platform (and engineers to build it)
Handy and the team had already been working on the cloud platform in the lead-up to the first fundraise and launched it in early 2020.
Fishtown had to funnel its limited engineering horsepower — at the time, only about five engineers — into building out functionality for the cloud. They worked on some standard enterprise-grade features, including:
- Browser-based IDE
- Orchestration
- Role-based access and control
- SSO integrations
Once Fishtown was armed with more cash, they were able to build out a double-digit engineering team over the course of 2020 to scale the cloud platform’s development.
### Winning over enterprise buyers
Handy found product-market fit organically for dbt as an open-source tool mostly used by data practitioners and developers. But a few years into running a commercial business, he realized he had to build a growth curve all over again with C-suite data leaders.
“Even though we had an unbelievable amount of market pull, as we initially commercialized, it wasn’t easy for us to transform this open-source command line tool into a product that enterprises would pay a million dollars for,” says Handy.
dbt’s product-led growth set the cloud product up with a solid base of users, which shortened the time it normally takes to land enterprise customers. Within two months of closing Fishtown’s seed round, the company signed two Fortune 500 companies. But that product-led momentum couldn’t sustain the same growth curve within the enterprise for long. “Our first roughly $10 million in ARR was PLG-oriented, and so it felt like that would just continue to be true. But in data, that’s almost never true,” he says.
“When you have enough product-market fit, sometimes it allows you to get away with not being super tight on product marketing or sales motions. So around 2022, we went from this gigantic acceleration curve and overnight we realized, we have to sit at the adults’ table and figure things out real fast,” says Handy.
After the PLG flame started to fizzle, Handy turned his attention to layering on a sales-led motion for the cloud platform. “We had to focus our efforts on telling cohesive stories to senior data leaders. We had to have a very clear, explainable answer to the question, ‘Why should I use the commercial product and not the open-source product? And it had to be digestible by someone with a C in their title,” he says.
Handy’s answer: dbt Cloud can handle complex data for companies of every size.
“The longer people used dbt, the more complex their code became,” he says. “It was a problem for the most sophisticated dbt users, who were often at the largest companies. So there was a real opportunity for us to step in and solve that for them with dbt Cloud.”
To tell that story to enterprise customers, Handy relied on data, naturally. “At a user conference we presented a chart that showed the number of dbt projects that had a certain number of models in them — over 100, over 1,000, et cetera,” he says. “We watched that number climb and we knew as users ourselves, ‘Oh my God, trying to work in a dbt project with 5,000 models in it is challenging.’ So we started with that quantitative data point and asked folks in our community about their experiences with these very large, complex dbt projects, and validated that this was a pain in the ass without a cloud platform.”
> One of the things about product-market fit people don't realize is that you have to keep solving for it. Constantly.
## The hidden benefits of delayed fundraising
Handy operated Fishtown Analytics as a bootstrapped consultancy for nearly four years before raising any venture money. He’s now thankful that he chose this path.
“There's two superpowers you get if you come via the consulting route, and there’s plenty of costs,” says Handy. “I'm not suggesting that this is the only right answer or that it's for everybody.”
These were the pros of starting as a consultancy, in Handy’s view:
- **You can keep your fingers on the technology.** “I spent all of my days focused on client work up until the day we raised venture money,” says Handy. “I was deeply in the weeds of our product and the problem it was solving. I was writing code as a user would every day.”
- **You can grow on your own timeline.** “To unlock a venture-scale outcome, you need an exponential growth curve. And sometimes you can’t magically will those into existence.”
> Sometimes you need to give yourself time to innovate, and earning revenue buys you time. And you need to stay close to customers — which a consulting business lets you do.
## Looking forward
Focusing on dbt Cloud’s ability to solve data complexities has helped kickstart enterprise growth in recent years. As of 2025, the company now counts some 5,000 companies as customers and has 85% year-over-year growth in adoption among Fortune 500 companies — and blew past $100M ARR (scaling from $2M in just four years).
These numbers are a far cry from dbt’s humble beginnings as an open-source repo on GitHub. Now, Handy’s eyeing the next phase of growth for dbt Labs: data engineering powered by AI.
He’s never been one to fight the changing tides of tech, and just as he embraced the advent of the cloud, he’s excited about what AI can do for his line of work. “It will be hard to compare data engineering in 2024 and data engineering in 2028 and say ‘those are the same things,’” he [wrote](https://roundup.getdbt.com/p/how-ai-will-disrupt-data-engineering?ref=review.firstround.com). dbt Labs recently rolled out some new AI tooling, including [dbt Copilot](https://www.getdbt.com/blog/dbt-developer-day-2025?ref=review.firstround.com), an AI assistant in dbt Cloud.
Nearly a decade into a wildly unexpected entrepreneurial path, he’s come to enjoy the ride. “The first couple of years of the venture-funded journey were extremely stressful for me. It was a big transition. But I'm having a lot of fun at my job now.”
### A playbook for running “founder-led” growth
URL: https://review.firstround.com/a-playbook-for-running-founder-led-growth/
Last updated: 2025-04-17T16:02:10.000Z
You're not ready for a Head of Growth — yet.
_This post is for subscribers only._
### You’re Not Ready for a Head of Growth: Run This Founder-Led Growth Playbook Instead
URL: https://review.firstround.com/founder-led-growth-playbook/
Last updated: 2025-04-25T16:43:30.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
There are plenty of reasons a startup fails — lack of [product-market fit](https://pmf.firstround.com/levels?ref=review.firstround.com), [co-founder strife,](https://review.firstround.com/how-to-fix-the-co-founder-fights-youre-sick-of-having-lessons-from-couples-therapist-esther-perel/) poor [management skills](https://review.firstround.com/the-best-managers-dont-fix--they-coach-four-tools-to-add-to-your-toolkit/), the list goes on. But growth expert [**Matt Lerner**](https://www.linkedin.com/in/matthewlerner/?ref=review.firstround.com) (a former PayPal B2B growth lead and co-founder of [**SYSTM**](http://www.systm.co/?ref=review.firstround.com), an online accelerator for startups that need to unlock growth) suggests something less obvious: **“Nearly always, a startup's failure has to do with the founder's approach to growth**,” he says.
Through his experience working with hundreds of startup founders, first as a VC and now as an advisor, Lerner has become an authority on “founder-led growth.”
It’s a concept we’re seeing [gain traction](https://substack.gauravvohra.com/p/the-rise-of-the-growth-founder?ref=review.firstround.com), recently referenced in a write-up from founding member of [**Superhuman**](https://superhuman.com/?ref=review.firstround.com) and growth advisor [**Gaurav Vohra**](https://www.linkedin.com/in/gvohra/?ref=review.firstround.com), that makes the case for having someone on the founding team who specifically owns growth.
While it’s common for founders to sit in on early sales calls and spearhead product development, Lerner has observed they seldom bring this same hands-on approach to growth channels. Many are even tempted to make an early growth hire to get this off their already full plates. **“Ultimately, founders need to be the ones that figure out how their business is going to grow,**”he says.
> Founders can't afford to delegate growth right away, nor do the best founders have to. It's in great founders’ DNA to get stuck in something and make a mess of it until they figure out what drives their business forward.
This theme is central to all of [Lerner’s work](https://www.systm.co/blog?ref=review.firstround.com), from his widely-referenced Review guide [on language-market fit](https://review.firstround.com/finding-language-market-fit-how-to-make-customers-feel-like-youve-read-their-minds/) (a cornerstone resource for founders conducting their first customer discovery interviews) to his latest book, “[Growth Levers and How to Find Them](https://www.systm.co/growth-levers-matt-lerner-book?ref=review.firstround.com),” which transforms these insights into practical frameworks for ambitious founding teams.
So Lerner returns to The Review with another comprehensive guide, this time, answering one of the top questions founders ask him: “**How do I start executing growth myself?**” What follows is a playbook for founder-led growth, where Lerner unpacks the most tactical insights he's collected from working with hundreds of startup founders.
To start, Lerner shares the three common traps founders fall into that slow down their learning and sabotage their startup’s growth potential. Then, he zooms in on his signature “[growth levers](https://review.firstround.com/the-secret-to-running-effective-growth-sprints-follow-this-process-to-learn-faster/)” framework, providing real-world examples that founders have used to drastically improve conversion rates with small tweaks. He then unpacks his founder-led growth toolbox, with clear instructions for founders to use when they're stuck. Finally, he gives strategic advice on how to imbue an experimental spirit and growth mindset into your whole team.
Whether you're an early-stage founder grappling with growth or a later-stage founder looking to get closer to the details, this guide serves as your roadmap.
## Don't let these be the reasons you wait on growth
When writing “[Growth Levers and How to Find Them](https://www.systm.co/growth-levers-matt-lerner-book?ref=review.firstround.com)” Lerner’s editor posed a question he couldn’t immediately answer. “One day, he asked me to explain the big reasons a startup fails in language simple enough that a 12-year-old could understand.” The answer seemed straightforward on the surface, with obvious issues like lack of [product-market fit](https://pmf.firstround.com/levels?ref=review.firstround.com) and poor [management skills](https://review.firstround.com/the-best-managers-dont-fix--they-coach-four-tools-to-add-to-your-toolkit/). But as Lerner thought more about it, he looked back at lessons from his own career and found that often, a startup fails because a founder gets in their own way of learning useful information as fast as they can. These founders often fall into three buckets:
- **The overthinkers:** “Founders who debate, theorize, strategize and talk to other smart people all day long and think things through, but never execute,” Lerner says. “I don’t need to tell you how that story ends.”
- **The underthinkers:** “These founders’ philosophy is to build, build, build, and fair enough.” he says. “But if you’re just building off your sense of the market, and your product isn’t working, adding more features that your customers don’t need, founders are just adding complexity to the product, the code base and maintenance — and slowing themselves down.”
- **The hire-and-delegaters:** These are founders who come from [a senior role inside a big company](https://review.firstround.com/how-to-scale-yourself-down-not-up-as-a-leader/), or who are humble enough that they rely on hiring experts for leading all the different functions. “But those outside experts don't have the right context,” he says. “They're thinking in terms of their own function, not the entire company. The founder needs to be involved in growth at the early stage.”
Lerner can see strengths in each one of these approaches — once a company is at scale. “A big business *needs* all three of these people,” Lerner says. “It needs smart, forward-thinking strategic thinkers, it needs executors, and it needs people who can hire brilliant people and delegate. But what a startup needs to do first and foremost is be humble and open and curious to experiment and learn.”
> Strategizing, hiring and delegating are great ways to execute, but they are very slow ways to learn.
In the 0 to 1 stage, it’s easy to look at all these elements of growth — the lists of ideas, case studies, frameworks, and best practices — and feel overwhelmed. That’s where Lerner urges founders to consider this: **If it works, how big can it be?**
“Don’t let effort be a factor in your prioritization. I’ve said that all of PayPal’s growth came from five things, but they did way more than that. They built products nobody ever used and spent hundreds of millions of dollars on ads that didn’t move the needle,” Lerner says. “Again, often the big levers are uncomfortable, but think less of the effort and more on the opportunity cost. They’re seldom obvious, but you can find them with a process.”
## The three-step process for finding your growth lever
Lerner works with founders to uncover their “growth levers”: the highest-leverage tactics for growing their businesses. “The 10% of work that's going to bring 90% of the results as quickly as possible, before you run out of money,” he says.
> You’re starting with this tiny amount of resources and time and you need to have a big impact, which means you’ve got to find something that works like crazy.
Lerner first got the idea of growth levers as an investor. “As a VC, you get pitched hundreds of times and are looking at dozens of decks every day,” Lerner says. “Since my background was in growth, I focused on the go-to-market slides of each pitch. But it was also clear that many of these companies’ strategies weren’t going to work. They weren’t so much strategies as theories and lists. And if any of them did work, the impact they’d have on the business would be small.”
Watching founders focus on fruitless growth tactics made Lerner reflect on his role at PayPal, where he observed that the majority of the company’s massive growth could be traced to a handful of key bets like:
- Getting eBay sellers to use the product and turning that into a network effects loop.
- Keying in on dev relations, since developers were the ones building checkout flows for e-commerce businesses.
- Partnering with the hosts of e-commerce platforms like the predecessors to Shopify, because of course all of these platforms needed payments.
This was an important realization for Lerner, calling this [power law](https://en.wikipedia.org/wiki/Power%5Flaw?ref=review.firstround.com) principle “growth levers.” And eventually, Lerner developed a process for how founders can systematically find these growth levers on their own.
Lerner will only work with a startup that has a live product and some happy customers — to figure out exactly who they are and how to get more of them. Founders then often engage Lerner at a pivotal time in their company’s life where they can shift their focus toward growth. “Once a startup has some happy customers, but isn’t growing, there’s an instinct for some product people to add more features that customers want,” Lerner says. “The mentality is ‘If we add enough features, maybe then we’ll grow.’ Usually that’s not the problem. **The problem at that point is go-to-market.”**
These are Lerner’s simplified steps for finding your growth levers:
- **Step 1: Map the customer journey.** Use data to find the bottlenecks where customers are dropping off.
- **Step 2: Dive into customer motivations.** Interview your customers to understand what’s driving (or stalling) action using [Jobs to be Done](https://review.firstround.com/build-products-that-solve-real-problems-with-this-lightweight-jtbd-framework/).
- **Step 3: Run rapid experiments.** Pinpoint a specific “lever” you want to test, designed to tackle these bottlenecks and optimize growth, and run those tests.
The goal of running through the growth process is to identify a growth lever. But that oversimplifies things. Let’s break down each of these steps in more detail.
### Step 1: Mapping the customer journey
Lerner shares an example of a UK-based company called Popsa, which he invested in during his time as VC. Founded by serial builders, the app lets people make photobooks using pictures on their phones — they found a wedge in a crowded direct-to-consumer market to do this quickly and easily.
“It was clear to us that this was a product people liked,” Lerner says. “They were ranked number one in the UK App Store for photobooks, had good engagement, good retention and good repeat rates. Despite this, their view-to-install rate was low.”
Since Popsa had such a high ranking in the App Store, this was many people’s first touchpoint with the brand. “That’s where we started,” Lerner says. “Very few variables go into an App Store listing, just five or six words and a screenshot. So we looked to their tag line, which at the time was ‘Fast, Easy Photo Books.’”
Through user testing, they eventually learned that one person thought “fast” meant two hours. But Popsa could do it in five minutes. So Lerner says, “They tweaked their tagline to ‘Photo Books in Five Minutes,’ and with that one small adjustment, quadrupled their install conversion rate overnight.”
The payoff was massive. “They were already ranking number one in the App Store for their category, so with this change they were off to the races. Now, it made sense to put ad spend behind it and keep the funnel up,” Lerner says. “The company recently passed $45M in annual revenue.”
Finding this growth lever resulted from the process:
1. Identify the bottleneck: app store listing page.
2. Understand the customer: a misconception about the meaning of “easy.”
3. Experiment: test different words to convey the value.
Now, let’s return to step one, how do you find *your* bottleneck?
**Identify your North Star metric**
“There are lots of ways to generate revenue, most of them will not lead to a billion dollar business,” Lerner says. “But when you’re a startup, you first have to be better than everyone else at delivering value to customers, at getting lots of customers, delighting them and retaining them. If you can do that, monetization is usually straightforward.”
So you want to find a North Star metric that measures the value delivered to your customers. This can be weekly actives, daily actives, or in Popsa’s case, the number of photo books made or number of memories solidified.
**Pinpoint your key drivers**
Once you have this North Star metric, work backwards to find what point in the customer journey leads you to achieving it. “You may have different traffic sources, but ultimately, you’re looking at each behavior point where a customer has to make some kind of decision,” Lerner says.
In other words start by asking questions like:
- How many people who view a blog post are subscribing to a newsletter?
- How many people who read the newsletter are doing a free trial?
- How many people who start a free trial are doing more than five actions in the product?
- How many people who do more than five actions in the product end up paying?
An influential factor here is the channel through which a customer discovers your product. For instance, a customer's journey would look very different if they saw an advertisement for your product on the subway versus searching for a solution in the App Store. It's important to recognize that even as an early-stage startup, you're likely to have more than one growth channel.
Once you have this funnel mapped out, Lerner has his teams do a quick pencil sketch putting numbers to these.
“Teams love to get deep into the analytics, and it’s tempting to debate these numbers, differences, definitions, and attributions for months. But at this level, founders only need to have a rough idea of the stats that line up closest to their North Star metrics,” he says. “Map that journey at a high level, and you can then go through and start to find your bottlenecks.”
**Uncover your bottlenecks**
While growth is often perceived as an all-out push, Lerner's model focuses on identifying and removing specific obstacles. To illustrate this approach, he draws on an unexpected source of inspiration: his experience working at an oil refinery.
“It's a great marketplace business because you get paid at both ends: First by taking dirty used oil, then again by refining and selling it again as clean fuel oil.” Lerner says. “But the rub on a refinery is that all your revenue is delineated in gallons. Your costs are all delineated in hours, salaries, leases, etc. So the more gallons you can refine per hour, the more money you make.”
But it was at this refinery where Lerner first learned the [theory of constraints](https://fortelabs.com/blog/theory-of-constraints-101-table-of-contents/?ref=review.firstround.com). “At any given time, there's the narrowest point in the throughput,” he says. “It might be how quickly we're unloading trucks of dirty oil. It might be the number of centrifuges that are working or the number of filters clogged. It doesn’t matter. What does matter is finding that bottleneck and addressing that.”
> If you apply resources to a bottleneck, it makes the whole system run faster. If you apply resources anywhere else, it's wasteful and inefficient.
The same logic can be applied to startups. Unlike an oil refinery with its clear input-output model, startups rarely have such straightforward operations. But by closely examining the constraints at each stage of their funnel, founders can gain valuable insights. This granular approach allows them to measure progress against their North Star metric.
Don’t be discouraged if the bottleneck you found doesn’t end up surfacing your big growth lever. It’s all part of the journey. “Often what you think of as the bottlenecks at first don't end up being it. It’s a complex system. But at least if you start working on them and then watch how everything else in the system moves, you’ll discover the next layer deeper, one that’s closer to the root cause.”
For example, Lerner once worked with a D2C subscription company that had poor second-order retention. They tweaked everything they could about the first order experience, and nothing worked. Eventually they realized all the churn was coming from affiliate-sourced traffic, and their referrals and Meta ad subscribers had good retention rates. “They fixed retention by shifting their affiliate budgets over to Meta — what looked like a churn issue was actually down to traffic quality,” he says.
### Step 2: Understand your customer
Mapping the customer journey is the behavioral side of the equation but that data won’t tell you *why* people are dropping off. “That’s why the other side is the mindset funnel,” Lerner says. “What’s in customers’ heads at each stage of this journey? You really need to know that before you can fix it.”
To illustrate this point further, Lerner crafts another scenario. “Let’s say you've mapped out your customer journey and discovered that people aren't converting from a blog post you wrote,” he says. “One quick solution might be to slightly animate the sign-up button on the blog's landing page, as you've read that can drive more clicks. **However, what's far more valuable is understanding *why* your customers aren't clicking that button in the first place.”**
In this step, Lerner shares tactics for both conducting quality customer interviews and how to use those insights in experiments.
**Conducting interviews to uncover your customer’s mindset**
“Over time, my focus has moved away from the metric side of growth experiments and more towards what's in customers' minds at any given stage,” Lerner says. “Because the metrics, I realize, just don't tell you very much. People are coming to the page and not signing up. You have no idea why. Are they not qualified? Are they confused? It’s important to move towards those answers.”
Customer interviews are a skill to be developed, like a sales call or a recruiting pitch. Lerner leans on the [Jobs to Be Done framework](https://review.firstround.com/build-products-that-solve-real-problems-with-this-lightweight-jtbd-framework/) (JTBD) here, a classic product interviewing technique, but he’s also amassed quite a few questions that can illuminate what’s going on between a customer’s ears.
Questions to peel back the layers of a customer’s goal:
1. Tell me in your own words, what did you buy? "Obviously, this one is a little weird because it's your own company, and you just sold them a product. But it anchors people on the purchase."
2. What would that enable you to achieve? "This immediately takes the conversation away from your product, which is what you want," Lerner says. After this, don't talk about your product in the rest of the interview until you get to their goal. "It could be a simple, functional goal such as 'I need to move all my data into one place and stop using spreadsheets.'"
With that last question, Lerner found it's best to prod even more, because there’s usually more to the story:
1. Why is this goal important to you?
2. Who else cares about this outcome?
Once you have a solid idea of what exactly your customer is trying to accomplish, now it’s time to dig into the specifics of how they would get there.
Questions for to map motivations to different parts of the customer journey:
1. Do you remember the first time you started trying to do X?
2. Where did you look?
3. Where were the specific steps you took to find a solution for X?
Lerner is listening for a few things throughout these conversations:
- What do they *think* they’re looking for?
- Where did they look?
- Who did they ask?
- How did their conception of their project or goal change over time?
- What criteria were they applying?
- What other options did they consider? How did the other options they considered come up short, and how would you position against them?
- What anxieties or worries or questions did they have in this process?
A lot of this exercise is aimed at finding the ways your company and product can establish trust as a customer considers purchasing it. “You have to understand what specific worries and questions your customer is going to have, and address those at the points in the journey where they turn up,” Lerner says.
By following this approach, founders can uncover valuable insights that inform their growth strategy. “You do this five times, and you’ll start to see patterns,” he says. “That’s when you start to get ideas about what to experiment with.”
### Step 3: Running rapid experiments
[Growth sprints](https://review.firstround.com/the-secret-to-running-effective-growth-sprints-follow-this-process-to-learn-faster/) apply a concept from Agile software development to a single outcome: learning. Come up with a hypothesis, test it, and learn as fast as possible. Lerner even says that growth sprints operate on a tighter, more responsive cycle than Agile. “It’s more Agile than Agile,” he says. “Growth sprints typically take one week, maybe two.”
Unlike product sprints, most growth experiments fail — so learning from them is important, especially in the fast-paced world of early startups searching for their growth levers. These growth sprints give founders a framework for quickly finding what’s most impactful for their companies.
To make them more regimented and meaningful, Lerner suggests the following structure:
1. Document your experiments — For each growth idea, Lerner recommends creating an experiment document. "It starts with an observation and hypothesis. Then have everyone make a prediction. Doing this in groups helps eliminate hindsight bias," he says. This collaborative approach also ensures that the team learns together, regardless of the experiment's outcome.
2. Run, analyze and iterate — After running the experiment, thorough analysis is crucial. "Come back, look at the results, figure out why whatever surprising or weird thing happened."
3. Focus on key bottlenecks — "At any given time, you'll be focused on one or two or three bottlenecks," Lerner says. This focused approach allows teams to direct their efforts where they can have the most impact. But more than that, it's about structuring your efforts over time. "So founders can say, 'For this quarter, we're going to focus on this and this.' Then you're going to go to your backlog and figure out the ideas that can have the biggest impact. Maybe you tried that and it didn't work, but we learned this thing, and therefore, now we are going to try another one." This ensures you're not running experiments randomly, but strategically addressing your most pressing growth challenges.
4. Maintain flexibility — Perhaps most importantly, Lerner advocates for a highly responsive approach. "You're really steering the ship week by week based on your learnings," he says. This flexibility allows teams to quickly pivot based on new insights, ensuring that growth efforts remain relevant and effective.
Growth sprints have short timelines to encourage founder engagement in the growth process. The sprint also helps avoid confirmation bias. By [making speed a habit](https://review.firstround.com/speed-as-a-habit/), founders have a better chance to keep the integrity of their experiments intact, according to Lerner.
Here are a few more real-life examples of rapid growth sprints:
- **Popsa,** the digital photobook app, suspected their landing page design was too cluttered. They tested comprehension by showing customers the page for five seconds, then asking for their interpretation. Finding that customers understood it, they immediately moved to the next prepared test, focusing on audience appeal. When that yielded no results, they shifted to targeting different audience segments. This rapid experimentation continues, with Popsa running up to 10 growth experiments weekly.
- **Sonic Jobs**, an hourly service job marketplace, had high sign-ups but low job applications. Their welcome email used generic language like “Click here to find jobs.” Analysis showed users searched for specific roles, not broad categories. The founders updated the email with 15 links to specific jobs like “Amazon driver” or “Warehouse operative.” This simple change doubled their activation rate, significantly boosting the platform's performance.
- **Smart Tales**, an educational app for children, struggled with paywall conversion despite good installation rates. Through customer interviews, they discovered parents' core desire: giving their kids an iPad without guilt. It became clear the app's marketing didn't effectively communicate this value. So the founders revamped their ads, App Store listing, and pre-paywall content to address this need and alleviate parents' concerns. Without changing the paywall itself, these adjustments led to a 65% increase in conversion rates.
> With each growth experiment, it’s just like you’re debugging your code. You want to break it into pieces and isolate each variable.
Lerner points out that on paper, these experiments look fairly simplistic, but each one can take several weeks at a time to get to even one answer. “Start where you think the problem is, and with efficient growth sprint hygiene, you’ll end up finding your growth levers eventually,” he says.
### If you’re stuck, identify shared outcomes among your customers
If you’ve run many tests and aren’t seeing results, you can go back into customer interviews — specifically looking for the outcomes these customers hope to achieve by purchasing your product.
Lerner often notices founders go after people who *didn’t* buy the product in an attempt to identify where the funnel broke, which logically makes sense. But he cautions against this temptation: “There are a lot of reasons why someone might not have bought your product, but the common theme will be that it wasn't right for them in some way,” he says. “If you interview them, everything you learn might lead you in the wrong direction.”
If you don’t have customer interviews to fall back on, that’s a sign to do more of them. “You can even recruit people who just signed-up for your product,” Lerner says. “The purchase journey will still be fresh in their minds.”
Whether this user research is old or new, finding experiments is a process of pattern-matching why customers chose your product. But how you do that might look different depending on how many outcomes your product offers.
**If your startup offers a single outcome, you can scan customer surveys for these patterns**. “If you’re lucky, you’ll find that your best customers all have a single goal that they have in common,” Lerner says. “It could be a shared thing all customers hate doing, like asking people for a copy of their passport. Or maybe it’s a shared outcome, like all customer segments agree that the goal is to remotely verify and onboard employees and clients in minutes. You can craft your entire conversation with them around this.”
**For startups that solve multiple outcomes, have customers self-select their goals.** “Calm, the meditation app does this well,” Lerner says. “If you go to their site, you’ll get a screen that asks you ‘What brings you to Calm?’ It’s a multiple choice survey with options like: I want to sleep better, reduce my anxiety, improve my focus and performance at work, etc. People can then go in and self-select their outcome, making your research process that much easier.”
Once you have this data, the goal then becomes identifying and focusing on an outcome that brings in customers who might convert the easiest — they know their pain point, they have the budget and are willing to pay.
### Remember: Your growth levers won’t always be novel
Don’t cringe if you’re employing the same tactics as everybody else. Perhaps the best kept secret is knowing that growth levers are not always novel, and using that to your advantage. Here are two tricks Lerner has up his sleeve when you find yourself with an inspirational block:
1. Study a company who has solved an analogous problem —“For example, if you’ve got multiple use case customers or heterogeneous customer segments, Calm solved that really well with their onboarding flow. They have multiple choice questions they offer first-time visitors of the website/app asking them what they are trying to achieve. I’ve now seen B2B SaaS companies succeed with that same approach.”
2. Look outside your industry all together — “Look at someone who’s in an industry that’s way further along than yours that’s nailed an analogous problem. A lot of these businesses end up combining a couple of things together. Content and inbound for example, which leads to a network effects flywheel.”
But even if growth levers feel similar at a high-level, copying and pasting shouldn’t be done mindlessly. “As soon as you get more specific than running an ad playbook, or an influencer marketing playbook, that’s where you have to get creative,” Lerner says
## Tactics for getting the whole team into a growth mindset
Finding your startup’s growth levers is only 5% of the battle. “The other 95% of founder-led growth is figuring out what needs to happen at each stage of your company’s life,” Lerner says. While a founder should continue to stay intimately connected to growth levers as their company scales, it’s important to make a growth mindset part of the fabric of their startup.
Here, Lerner shares a handful of tactics that are uniquely at the founder’s disposal to cultivate a growth mindset in their org.
### Overcome the “strain of mental resistance”
Lerner finds that when it comes to growth levers, founders often already have the right answer in their backlog somewhere, but resist implementing it. This "strain of mental resistance" manifests in various ways. Lerner identifies two common forms:
- **Fear of simplicity**: Lerner recalls working with a founder who sells software to architects in Germany. Two years after developing a proposition through customer interviews, the founder reported their best month ever in July. Surprised, Lerner asked why it took two years to test the message. The founder replied, “Well, it seemed too simple. We had all these other ideas. It just didn't seem like the right thing at the time.” It wasn't until they began rapid testing that they finally got around to trying it.
- **Fear of effort**: Lerner worked with Fatmap, an app with high-def 3D terrain maps for outdoor enthusiasts. Customer interviews revealed their bottleneck was qualified top-of-funnel traffic, yet tons of users were finding the app through specific Google searches. Lerner suggested programmatic SEO for their 300,000 trail maps. The CTO initially resisted: “They told me they thought of that. But the map rendering engine was slow. There was so much data, the pages just wouldn't load fast enough. So they nixed it.” Lerner proposed using static images with background map loading. They implemented this, leading to increased traffic and eventual acquisition. “It was more complicated than that, of course, but the point is, they crossed the idea off the list because they thought it was high effort. **Instead, they focused on things that are easy, but wouldn't have a big impact**.”
> If you can’t put it on the back of an envelope with a pen and show me that an experiment at least has the potential to have a huge impact, then it’s just not worth the time.
To combat this kind of cognitive trap, Lerner recommends public accountability. “Have the team post growth experiments in Slack and get everyone to vote on which variant they think is going to be the winner,” he says. “Let the founder and the Head of Product and Head of Growth be very public about their bets, and then if they're wrong, let them be very public about not having all the answers. That’s quite empowering.”
### Put growth in everyone’s job description
Another way to think about scaling growth more broadly is to give everyone ownership of growth. “Most companies are organized around skills or job functions, but growth isn’t a singular skill. It requires a lot of different skills,” Lerner says.
“Some of those teams are organized around job titles, which promotes inside-out thinking and internal competition,” he says. “Some teams are organized around customer segments, which is a great idea. But growth is everyone’s job. I mean literally everyone — operations, fulfillment, customer service, finance, HR.” Founders should be asking themselves: “How can we get every single person aligned to support our growth?"
He suggests [a four-step process](https://www.linkedin.com/posts/matthewlerner%5Fwho-should-be-on-the-growth-team-i-disagree-activity-7242918261367914497-4YBx/?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop) to achieve this:
1. Share your North Star Metric with everyone in your company (e.g. weekly active users, meals delivered, gross merchandise volume, etc.). Take time to answer their questions and understand it.
2. Ask (don't tell) each person to explain to you how their work impacts your North Star. “Have a little discussion about that, you should each learn something,” he says.
3. Ask each person which work they could do, or do differently, to have the greatest positive impact on the North Star.
4. Put that work into their quarterly goals.
### Bring on the right people at the right time
Perhaps the most obvious way to scale growth at your company is to simply hire folks whose full-time job is to run these experiments. But before you add this function, Lerner says founders must be able to answer three questions:
1. What's our first growth lever?
2. How are we going to pull it?
3. What's one way we can reliably get customers if we just double down?
Hopefully, after running hundreds of growth experiments on your own, you’ll develop a sense of what you’re good at and what’s still missing. “You’ll learn what muscles you already have and which ones you need to strengthen,” Lerner says.
This is the inflection point for building a dedicated growth team. “In other words, start hiring when you have your growth levers figured out, and you’re starting to wonder how to run experiments at scale,” he says.
There’s not one magical background that makes someone a good candidate for growth. But there are two reliable types of hires that Lerner recommends when you are just starting to build out a dedicated growth team:
- **The Junior Generalist**:In Lerner’s experience for hiring early growth people, there is a particular resume that stands out to him over the rest. “My first hires would be bright, junior generalists,” he says. “My best growth people I’ve ever hired had no product or marketing experience at all. They were analytical thinkers, former scientists who had a bias for action and good people skills.”
- **The Internal Co-Pilot**:Often your first growth people aren’t going to be “growth” people at all, but core members of your team who are already on board. “This could be anyone from the internal analyst to the customer service rep or product people or engineers that start naturally getting involved in some of the experiments you run. Get them started on one piece of the problem. They’ll grow and learn alongside you, and start to figure out the business. Hopefully, they’re going to advance into more senior roles.”
# Wrapping up: Prioritizing growth will always pay off
Understanding the growth model, surfacing your growth levers, running experiments — all of this is a result of first adopting a founder-led growth mindset. Lerner emphasizes that doing this successfully requires intellectual honesty about what you don’t know. “The best founders, in terms of growth, have a really clear sense of the limits of their knowledge and what they need to figure out,” Lerner says.
With everything on your plate, it can be hard to make the argument to focus on growth yourself. But Lerner gives an interesting example: “**You’d never hire someone else to be your head of product before you make your first product**. Why do you think you’re going to hire someone off the street who can figure out your growth?” he says. “If you don’t know how to grow the product yourself, you’re not hiring someone to run growth, you’re hiring someone to figure it out. That’s a hard job, and people who can do it well are starting their own companies, not working for a teeny fraction of yours.”
He argues that growth is a founder’s job, partly because the process of discovering growth levers gives founders critical insights that inform every aspect of the business — by interviewing customers, identifying bottlenecks and running experiments, founders develop a deeper understanding of their company and the market that can’t be delegated. This knowledge circles back to inform everything from product to hiring decisions.
Hiring a Head of Growth sounds like a high-leverage move to figure these out. But you might already have the answers, and you might be the best person to uncover them.
### Square’s former CEO on the two crucial components of org design
URL: https://review.firstround.com/how-to-design-your-org-2/
Last updated: 2025-04-09T06:56:19.000Z
Building a structure to enable scale.
_This post is for subscribers only._
### How to Intentionally Design Your Org, From Square’s Former CEO
URL: https://review.firstround.com/how-to-design-your-org/
Last updated: 2025-04-25T16:43:46.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
There isn’t one right way to build an organization but there’s definitely a wrong way — without intention. No matter what stage of company-building you’re in, connecting the different business functions, the people driving them, and how they communicate is an intentional decision a founder must make and continually revise.
[**Alyssa Henry**](https://linkedin.com/in/alyssa-henry-0905692?ref=review.firstround.com), the former CEO of [**Square**](https://squareup.com/us/en?ref=review.firstround.com), thinks about organizational structure like a distributed system. “Just like you learn in computer science, you always need to be thinking about the distance between the nodes in your network and how communication scales across those nodes,” says Henry.
Henry has spent her career developing and growing durable software products. Before her nine-year run at Square, she helped build [**AWS**](https://aws.amazon.com/?ref=review.firstround.com)from the ground up — joining as the first GM less than a year after launch, and eventually leading all of storage services. Before that, she spent 12 years at [**Microsoft**](https://www.microsoft.com/en-us?ref=review.firstround.com) across roles in engineering, product management, and program management. She serves on the board of [**Intel**](https://www.intel.com/content/www/us/en/homepage.html?cid=sem&source=sa360&campid=2024%5Fao%5Fcbu%5Fus%5Fgmo%5Fgmocrbu%5Fawa%5Ftext-link%5Fbrand%5Fexact%5Fcd%5FHQ-intel-brand-global%5F3500186468%5Fgoogle%5Fb2b%5Fis%5Fnon-pbm%5Fintel&ad%5Fgroup=Corp-Brand%5FBrand-Core%5FCore%5FExact&intel%5Fterm=intel&sa360id=43700079788652491&gad%5Fsource=1&gclid=Cj0KCQjwxqayBhDFARIsAANWRnSTABYptJ8hvk2%5F0KzV6uA0ZUcaqDvVS96itaCq-wYqlez3szV4WtwaArlbEALw%5FwcB&gclsrc=aw.ds)and [**Confluent**](https://www.confluent.io/?ref=review.firstround.com), and has learned directly from [**Jeff Bezos**](https://x.com/jeffbezos?ref=review.firstround.com) and [**Bill Gates**](https://www.linkedin.com/in/williamhgates/?ref=review.firstround.com).
In this exclusive interview, Henry walks us through how she thinks about building organizations, informed by her first-hand experience inside some of the tech industry’s blue-chip companies. While these companies have different priorities and business models, she identifies two key sides of org design that leaders everywhere must consider: the environmental condition and the human condition.
She starts by providing tactics for identifying and prioritizing the business context for how you’ll shape and build your org. She then gives us perspective on the human condition — creating and operationalizing a culture around a shared set of values. And finally, she assesses some of the squishier parts of org design, specifically scaling taste.
Her guide, which is rooted in systems-thinking, is valuable for founders and execs at any size and scale.
## **The environmental condition: How your business and customers shape org design**
Part of organizational design is a mirror-gazing exercise for your company. The other part is external context — ultimately, the best org structure is the one that supports the needs of your business. Henry shares three areas to consider when thinking about how to build an org.
### Know if you’re a follower or a pioneer
Henry believes that most companies fall into one of two buckets: they’re either pioneers or fast followers (and rarely are they able to do both well). Founders and executives should understand where their company stands — which is a combination of many things like their market, the people they bring on, the technology they’re building and more.
“Microsoft is an incredible fast follower, very good at seeing something happening out in the landscape and doing it better, cheaper, and faster,” she says. “[Competition](https://review.firstround.com/take-on-your-competition-with-these-lessons-from-google-maps/) has to seep from a fast follower because it’s all you’re defined by. And frankly, in the absence of competition, the company struggles.” Amazon was a pioneer. “Amazon struggled at being a fast follower because its operating mechanisms weren’t built to follow. They were built to pioneer something.”
While both companies obviously have pioneering and following traits, Henry found the distinction really mattered when it came to product-building. When you’re a pioneer, there’s less of a difference between a [minimal viable product](https://review.firstround.com/the-minimum-viable-testing-process-for-evaluating-startup-ideas/) and a [minimal remarkable product](https://review.firstround.com/dont-serve-burnt-pizza-and-other-lessons-in-building-minimum-lovable-products/) (because there aren’t other viable products in the marketplace). “If you’re new, and if it’s viable at all, the reason it’s viable is because it’s remarkable,” she says. “But if you’re a follower going into an existing space, you can’t say ‘Oh, we launched this and it does all the minimal things somebody needs.’ The marketplace is going to say ‘So what? If it’s not 10x better, I don’t care.’”
Early at Square, the card reader was viable and remarkable — partially because it was new and there was nothing else like it in the market. The company’s culture had been built on this concept of pioneering, but that made expansion a struggle.
> Moving into other spaces where it was very crowded, the bar for minimum is very high. There’s so much competition that, to stand out, you have to do pretty different things. Culturally that’s very different.
Henry says that part of the reason Square’s initial products got such amazing traction is because they existed in this whitespace. But its payroll product didn’t take off — there wasn’t anything that made it look different than other products in the space. “Teams have to rethink: How do you build a product roadmap? How are you going to differentiate? Or, are you going to play the fast follower playbook?” she says.
### Consider which constituents you’ll prioritize and identify ROI
Henry says every company has four constituents: customers, employees, shareholders, and the communities in which they operate. “How you stack rank them really changes how the company ultimately operates and what the culture is like,” she says. “But it’s not just the stack rank, it’s also how much you do on each of these.”
When Henry was at Microsoft, it was more technology-first. Amazon was customer, customer, customer. Square was, in some ways, more employee- and community-first, so much so that the team would pick up garbage around the Tenderloin every Friday. “The culture then, at each of these three companies, was an implicit stack ranking of each constituent,” she says.
> If you had $100 to spend, how much would you allocate to each constituent?
This framework forces executives to think about how they prioritize constituencies and moreover, how that business prioritization trickles down throughout the organization, whether that’s where they invest time and capital, or how they staff.
When Henry left Microsoft and joined Amazon, she saw large differences in the lack of quality assurance. “I was like, ‘Where are all the testers?’ We just built stuff, deployed and watched to see what happened — it felt insane. It was incredibly confusing to me that two super successful companies had such different models.” Using the “Five Whys” (a framework developed in the 1930s by the founder of Toyota Industries, Sakichi Toyada) she arrived at the root cause: it all related back to ROI.
Microsoft was shipping physical products, so a failure or bug was incredibly difficult and costly to roll back. It made sense for the company to spend more up-front to prevent this type of incident. At an internet-based company like Amazon, the risk-based ROI equation completely changes — that upfront cost isn’t worth it.
“You really have to think about things like: How much risk are you willing to take? What's the margin of safety? If it goes wrong, how much is it going to cost to prevent it from going wrong?” she says.“Once you’ve gathered that context, it’s your job to manage that equation through people, products, compliance and everything else.”
### Understand the role of your customers
A key component in org design is [intimately knowing your customers](https://review.firstround.com/a-ux-research-crash-course-for-founders-customer-discovery-tips-from-zoom-zapier-and-dropbox/) — and in Henry’s assessment, where clusters of customers exist and where the product was fundamentally serving different customer needs. “Having one design team or one product team trying to serve very disparate customers is problematic because there isn’t really common ground,” says Henry. “You’re trying to do very different things.”
Square started in the payments space, which in general is very horizontal — the functionality and software required to take payments across a number of industries and customers was quite similar (and required less software, Henry argues). But for a POS, that wasn’t going to work. “Once you start moving up the software to operate a business and start to look at workflows, it’s entirely different,” she says. “And as you expand and work with larger customers, if you want to replace some of their existing systems, you think about moving into adjacencies for different customers with different needs.”
Henry felt like Square was building product pieces but it wasn’t connected — so they needed to not just assess the product from a feature lens, but also from a customer lens. “Our product team was going ‘We’re hearing from our customers, from our sales team, that for all these major verticals, we’ve got an incomplete,’” she says.
> At Square, we didn’t have product bingo. We've got certain squares but none of them line up straight.
This changed how she organized the teams: there was a horizontal payments team, but then verticalized teams focused on different customer segments like retailers, health and beauty. Each of the customers in these verticalized industries had their own needs Henry made sure product teams addressed. “If my head of product is trying to think about how to beat all the legacy players plus the incumbents across all these verticals, I don’t know how you wake up every day and figure out how to do that,” she says. “So instead, we moved to a general manager with the equivalent remit of leading a startup that’s doing the same thing in each vertical.”
Henry believes that every organization is matrixed in one way or another. “If you have a functional org and multiple products, you’re organized by function and matrixing the products across the functions,” she says. “Or you flip it and organize by product, you’re matrixing the functions across the product, where the functions are not rolling up into a functional head.”
There’s, obviously, no right or wrong way to do this. But Henry believes the more products you have in your portfolio, the more you have to move to a model where you’re organized by product at the highest level, not by function — instead, pushing the functional organization one rung down. Though in Square’s case, the platform team remained horizontal to maintain the value prop of the suite of products.
Alyssa Henry
## **The human condition: How to operationalize culture, values and goals**
Henry makes the analogy that [joining a new company](https://review.firstround.com/30-tips-for-new-startup-employees/) can feel like traveling to a foreign country. “The food on the menu looks totally different,” she says.
But the more you see different companies, the more you understand what’s part of the human condition and what’s part of the outside environment. “You notice the differences, but slowly, you also start to notice all the similarities you’ve been part of before,” she says.
Regardless of context, Henry has found several elements of human beings that remain true no matter what organization she’s been part of. These beliefs shape the people side of org design.
### Create a set of beliefs that lets people opt-in to your culture
Not every culture is right for every person. And that’s okay.
Once you understand that, you can orient around what you want the [collective beliefs for your culture to be](https://review.firstround.com/build-your-culture-like-a-product-lessons-from-asanas-head-of-people/), and find the people who might share them — this creates belonging. “How do you increase retention? How do you increase job satisfaction? It all comes down to belonging,” says Henry. “You’re less likely to end up with [warring factions](https://review.firstround.com/fighting-factions-how-startups-can-scale-without-mutiny/) because warring factions often come from a non-shared belief system.”
> The more you can organize to have a shared set of beliefs, the more you can really focus on your customers and your business and the outcomes you’re trying to drive.
Henry fosters belonging by cultivating fulfillment, starting from the premise that everyone is well-intentioned.
“**I call it the Thomas the Tank Engine Theory of Humanity. Everyone wants to be a useful engine,**”she says. “Knowing that helps you find ways for people to maximize their own utility, because that’s what is fulfilling.” This might sound like an individual pursuit, but it's part of how the entire organization operates. And execs play the role of amplifier. “How do you amplify an organization’s good intent? How do you amplify the utility of people that make up the organization and create a team of complements of folks and skill sets?” she says.
Plus this mentality can be helpful as you navigate the inevitable disagreements that surface during high-stress times.
### Motivate by uniting an org around shared goals
Given Square’s breadth of products, Henry felt like it was almost as if she was running a collection of companies with shared infrastructure — a company in service of the beauty industry, another in service of restaurants. Multiple products, serving multiple customers, introduces complexity when aligning them all around shared goals.
“It’s hard to distill down to any one thing because you end up with the least common denominator, usually some financial goal that leaves some teams thinking ‘Hey I can’t move the needle on that,’” she says. Instead, Henry aligned on a set of themes or strategic priorities. And it was always a set of three, not just one, because of the company’s breadth. “Every team fit into one or two of the overall priorities and understood how their work laddered to that,” she says.
Omnichannel was one example. It was important for Square’s business and was a thematic priority that touched many teams. International was another. “When you have a clear set of overall priorities shared by every team, you set your org up to create a whole that’s much greater than the sum of the parts,” she says.
### Roll everything up into company values
When company values are just a bunch of words on a page, that’s where they wither and die. Unless they’re operationalized, they don’t serve their intended purpose of helping scale judgement and decision-making.
To actually guide behavior, Henry rooted everything — big and small — in company values. Day-to-day, this might look like referencing values when you’re establishing product strategy. “You can say, ‘Based on our values, the tiebreaker goes this way,’” she says. “Let’s say you clearly define your company as customer-centric. That makes it much easier for a team to make a call when they’re deciding between an option that saves money and one that’s markedly better for the customer.”
When values are imbued into [decision-making](https://review.firstround.com/decision-making-steps/), employees are more likely to absorb them through osmosis because they’re interacting with these values daily. Key areas Henry found this to be true were hiring and performance. “You’re giving candidate feedback in the context of those values. You’re framing evaluations of people in the context of those values,” she says. “When you’re doing performance reviews, when you’re assessing promotions, all your people processes — they have to tie back to the values.”
## Using communication systems to scale the squishy parts of your org
When there’s disconnect between different parts of the organization, Henry believes it comes down to a communication issue — so she intentionally designs and adapts mechanisms of communication. What should be written? What should be talked through? How do these systems change to give everyone the right amount of information at the right time to make informed decisions?
> The trick to building a business that can scale is putting in the scaffolding. Strong communication and value systems make up the foundation that will allow you to scale without crumbling.
This is important because, when communication systems are part of the culture and have been clearly articulated, decision-making gets pushed down the organization — which enables scale. “You have a shared framework that, based on your values, helps everyone make decisions,” she says.
### Operationalizing “taste”
As organizations grow, scaling their subjective parts becomes increasingly difficult. Taste is one of those things that might feel squishy but needs to remain consistent and part of how every team operates and makes decisions.
Henry had different experiences with this at both Amazon and Square. While each company had its own take on taste, the concept was clearly stated in their company values and operationalized in how teams made decisions.
“A focus on design and aesthetics was not AWS and frankly, it wasn’t Amazon. I figured out the ugly homepage converted way better than the prettier one. So they went back to the one that converted better,” says Henry. This makes sense because of Amazon’s focus on customers and shareholders as part of its four constituents. It was different at Square. “Before I joined, we figured out that the black card reader sold better than the white card reader. And we said, ‘We don’t care, we’re going to stick with the white one.’ That goes back to a cultural element. We value design and aesthetics, maybe more than what the exact data is telling us,” she says.
At Square, this concept of taste was part of the company’s operating principles so that it could scale. [The broad product suite](https://review.firstround.com/from-flagship-back-to-fledgling-lessons-on-going-multi-product-from-an-early-stripe-pm/) made this difficult — you can’t reasonably do a design review for 40 different products. So the company had to be extremely clear on first defining the culture, then thinking through the things that mattered to them, and finally, continually pointing back to those things. This helps train an organization on the company’s shared aesthetic eye or what tradeoffs to make between things like elegance and functionality.
An example was the next generation of its card reader. “One camp said we shouldn’t include the ability to swipe because we should be paring the product down as the most simple. But another camp was saying the US isn’t a tap market yet, so while it looks beautiful, everyone is going to need two of these readers,” she says.
> Before you get to the point of having to make a tradeoff, ideally you’ve already made a meta tradeoff based on your values.
From the top down, Henry sought to drive a set of taste-specific values spanning all parts of the org. But she found that different teams would operationalize these differently — hardware, software, sales, HR. “**If you’ve got five sets of values, you have no values**,” she says. “You have to drive it from the top down at the point where all the different parts of the organization meet.”
Some of that was actually a benefit, especially for Square and CashApp: two very different products, serving very different people, with very different aesthetics, and ultimately, different takes on taste. But it comes to an impasse at some point: “How do you marry hip and edgy with elegant, tasteful, and trustworthy?” she asks.
So Henry found that, outside of trying to operationalize the value of taste through decision-making, the connective tissue of the organization played a large role. “It comes back to how you organize and how you then build some of these supporting functions like HR, where you need to cascade values,” she says.
## Intentionally building your org is a lasting bet on your company
Your organization is a living, breathing thing that is constantly changing and requires close attention to work efficiently. It can feel extremely overwhelming to build, scale, and maintain it — but like any other project, knowing how to prioritize for impact is a good place to start.
To figure that out, Henry built a complete picture of the org by surveying the landscape and blending the quantitative and the [qualitative](https://review.firstround.com/why-qualitative-market-research-belongs-in-your-startup-toolkit-and-how-to-wield-it-effectively/). “I spent weekends rummaging around the data warehouse to get that quant view,” she says. “I saw how many customers we had, which customers were using which products and where most of the revenue was coming from. Then I did a total 360, which was going out and talking to everybody — on our team and from our customer base.”
Then, it’s all about evolution. The best companies have the ability at various points along the way to figure out what has served them well and the ways in which they need to update their thinking. “Amazon did this really well, explicitly asking what our ‘sacred cows’ were, and questioning them and revisiting them,” says Henry. “Because there was a ‘why’ initially but context changes and the ‘why’ changes — and some of those things need to get tossed out as you grow.”
### The Pivot to Product-Market Fit: How Plaid, Clay, Lattice & Other Startups Broke Out
URL: https://review.firstround.com/the-pivot-to-product-market-fit/
Last updated: 2025-04-25T16:45:17.000Z
Slack was originally a gaming app. Twitter started out as a podcast platform. Brex first pitched Y Combinator a VR headset.
These pivots, now, almost feel like startup campfire stories — we see the results, but what’s often obscured in the successes are the specific, painstaking moves founders made to find product-market fit.
We’ve had the opportunity to share dozens of lesser-known pivot stories here on The Review in our ongoing [Paths to Product-Market Fit series](https://review.firstround.com/series/product-market-fit/), and in the process, we’ve developed a more granular definition of pivoting than simply “going in a different direction.” In our detailed essay breaking down the [four levels of PMF](https://pmf.firstround.com/levels?ref=review.firstround.com), we offered our own take on [the four Ps of marketing framework](https://blog.hubspot.com/marketing/4-ps-of-marketing?ref=review.firstround.com) — four levers you can pull to get unstuck and jump to the next level:
- **Problem:** The fix your customers badly need (or don’t realize they need yet).
- **Persona:** Who’s buying your product, which can either be an individual decision maker (like a CTO) or a company profile (like a thousand-person manufacturing org).
- **Promise:** How you articulate your unique value proposition.
- **Product:** The solution that’ll deliver on your promise.
Many of the founders we’ve spoken to made pivots that might not sound terribly dramatic on paper, but they tuned the dials on one (or more) of the four Ps and soon after saw the first [sparks of traction](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/). [**Clay**](https://www.clay.com/?ref=review.firstround.com)’s[**Kareem Amin**](https://www.linkedin.com/in/kareemamin?ref=review.firstround.com)originally went wide and juggled multiple personas before committing to a specific one. [**Jack Altman**](https://www.linkedin.com/in/jackealtman?ref=review.firstround.com)realized [**Lattice**](https://lattice.com/?ref=review.firstround.com)’s original persona had a much more pressing problem than what the company was solving. [**Jason Boehmig**](https://www.linkedin.com/in/jboehmig?ref=review.firstround.com)hit a wall trying to convince [**Ironclad**](https://ironcladapp.com/?ref=review.firstround.com)’s persona that this was the right product for their problem — and found it was just a matter of tweaking the promise.
Here, we’ve curated our favorite pivot stories from The Review, applying our four Ps framework to spotlight how these founders climbed out of the pre-PMF trenches — lasering in on the exact aha moments and all the decisions and discoveries that led them there.
## Problem
### [Vanta hunted for solutions before asking what customers needed](https://review.firstround.com/vantas-path-to-product-market-fit/)
Founders tend to fall into one of two camps: those who set out to solve a problem they’ve felt firsthand, and those who’ve always known they want to start something — long before they know what to solve.
[**Christina Cacioppo**](https://www.linkedin.com/in/ccacioppo?ref=review.firstround.com) was the latter, and she ran into a classic entrepreneurial pitfall before stumbling on the idea for [**Vanta**](https://www.vanta.com/?ref=review.firstround.com)**:** building something no one wants.
After stints in VC and product management at **Dropbox,** Cacioppo knew she wanted to start her own company —so she quit her job and learned to code so she wouldn’t have to rely on a technical co-founder to build. She then scrapped together a series of products that failed to excite anyone.
This was back in 2016, so her first instinct was to ride the audio wave kicked off by Amazon Alexa. First, she built a meeting recorder that automatically transcribed all meetings across a company, and then a microphone that transcribed notes into Slack. But neither sparked much interest from startup buyers.
So Cacioppo turned her focus to a more niche use case: a voice assistant for biologists working in a lab. They do stuff with their hands, they wear gloves, they work with chemicals — how great would a notetaking tool be? She found a lab, shipped them a microphone, and even built them an iPad app. “They were thrilled because no one makes software for biologists in labs,” she says. “But the market for this was the size of my thumb and I didn't even know anything about biologists. It’s funny to talk about now, but it was a true low point at the time.”
> It was a bit like the children’s book, “Are You My Mother?” We had built this tool and then walked around to people asking, “Do you want our tool? Do you want our tool? What about you?” And the answer was no — no one wanted our tool.
**After a few unsuccessful paths, Cacioppo resolved to stop building — and start talking to people.** She turned to the startup folks she knew to pick their brains. “We decided we weren’t allowed to build anything at all. We had to just talk to people, and talk to them until we had a lot of confidence and a mental model of customers, their jobs, the problems they might have and how we might solve them.”
To find the most pressing problems, she turned to everyone’s most precious resource: time. So she asked people about their daily routines.“To find a good problem to solve, we really focused on what the customer’s day-to-day was like,” she says. “For discovery, the best thing we did was ask people to pull up their calendar. What were the best parts of those past weeks? What were the worst parts? That finally got us to a problem worth solving.”
One thing kept coming up over and over again in those calendar conversations. Startup leaders wished they could focus on security compliance and nab a SOC 2 certification — but could never find the time. That’s when the idea for Vanta crystallized: automate this process that people want to prioritize.
The moral of Cacioppo’s story: Talk to plenty of people to find a problem worth solving *before* writing the first lines of code.
### [Shippo realized how broken shipping was while exploring e-commerce marketplace ideas](https://review.firstround.com/shippos-path-to-product-market-fit/)
[**Shippo**](https://goshippo.com/?ref=review.firstround.com)co-founders [**Laura Behrens Wu**](https://www.linkedin.com/in/laurabehrenswu?ref=review.firstround.com)and [**Simon Kreuz**](https://de.linkedin.com/in/simonkreuz?ref=review.firstround.com)started a business so they could stay in San Francisco. The friends met in college back in Germany, both found their way to the Bay Area, and figured a startup was a good enough excuse to extend their tenancy. So they began ideating in an area they thought would be easiest: e-commerce (because Stripe and Shopify created a lower barrier to entry for small businesses selling online).
The first thing the co-founding duo built was a Shopify store that was supposed to be a marketplace showcasing independent designers. But kickstarting a brand new marketplace required too much initial inertia, so they decided to create demand by buying a few items from designers and selling them themselves.
After a few early orders, the founders became immersed in the ultra-complex world of shipping. They had to get the items they bought delivered to them from emerging designers, then ship those items outbound to their customers, all while managing inventory, shipping timelines, last mile problems — and more.
“Shipping was the least fun part of that experience,” says Behrens Wu. “We were learning as we were building. So we agreed to just build, get some customers and if we developed a passion for shipping along the way, we'd go all in.”
Once the duo decided to focus on shipping as a broad problem area, they toyed with a series of iterations before landing on the right solution. First was a search engine for buying shipping labels, but Behrens Wu says they realized that SMB customers were shipping too high of a volume per month to need that product. “If you ship many orders (like on a daily basis), clicking through this interface one by one was too tedious and time-consuming,” she says.
An aha moment arrived when drawing inspiration from Stripe’s API model. “The Stripe model is API first, and we thought that model could work for the shipping industry as well. So we pivoted to that approach — which we're still doing today.”
The founders decided to build a dashboard on top of the API and connect that to the Shopify App Store, which was fairly new at the time, to drum up exposure with small businesses whose owners likely didn’t know how to integrate an API.
Shippo rode the rising wave of the Shopify App Store to gain its first few customers. “The numbers were small in comparison to where we are right now, but seeing that chart was incredible. It showed us that we were onto something, and this was working,” she says.
### [Lattice realized people leaders had a bigger problem than OKR planning](https://pmf.firstround.com/levels?ref=review.firstround.com#level-1-nascent)
[**Lattice**](https://lattice.com/?ref=review.firstround.com)co-founder [**Jack Altman**](https://www.linkedin.com/in/jackealtman?ref=review.firstround.com)initially tried to tackle a problem he experienced firsthand at his previous company, **Teespring**: quarterly OKR planning was a painful process. “The execs get mad at each other. The employees are like, ‘Why are we doing this?’ Nobody adheres. It was in fact a real problem,” says Altman.
But it took pitching a solution for that problem to prospective customers to realize no one wanted to pay for it.
“The first thing we built was an OKR software tool. We had seen at our last company that quarterly OKR planning was a painful process for companies,” says Altman. “We validated that there was a real problem by talking to a bunch of other companies about how hard it is.”
He soon learned that OKR software was more of a nice-to-have for customers. “While it was in fact a real problem, we never built software that truly solved that problem,” he says. “There were two things that made that clear. One, it was really hard to get people to actually pull out their credit cards and pay us,” he says.
“The second issue was that once we did get people into the product — even entire teams where the whole company would do an OKR planning cycle in Lattice — the next quarter didn't come easily. They were like, ‘Ugh, we’ve got to do this.’ And then by the third quarter they were like, ‘This is not happening naturally.’ For the employees, the retention was just not there. So both sides were not strong enough,” he says.
He took this feedback seriously and pivoted to a new problem before wasting more of the early Lattice team’s time working on the original problem. But the work wasn’t all for nothing. They’d already built strong relationships with HR leaders while building the OKR software, so they were able to pick their brains about other more pressing problems. Performance management rose to the top of the list.
“After nine or 10 months of working on OKRs, we got to a place where there wasn’t any line we could draw between what was happening and a business that was going to make any sense for the next round of funding by the time we ran out of money. So we ended up needing to pivot a couple of times before we landed on the thing that really worked, which was performance management.”
> More often than not, if you're working on something that is not getting great traction, you’re probably not a 10% adjustment away — you’re probably a 200% adjustment away.
After the pivot to performance management, the difference in traction was immediately clear. “It was very obvious what market pull looked like then. We had people paying us annual upfront contracts without ever touching a real product, just on our design mocks — which couldn't be more different than the experience we’d been having with OKRs,” says Altman.
### [GOAT found a much better problem to solve from a serendipitous personal snafu](https://review.firstround.com/goats-path-to-product-market-fit/)
Perhaps no path to product-market fit is as full of winding turns as [**GOAT**](https://www.goat.com/?ref=review.firstround.com)’s.
Co-founder [**Eddy Lu**](https://www.linkedin.com/in/eddylu?ref=review.firstround.com)and his former roommate and co-founder **Daishin Sugano** tried all kinds of entrepreneurial endeavors to varying degrees of success before eventually landing on the idea for a sneaker marketplace. Their first few ideas? A cream puffs franchise and some of the first iPhone apps to hit the App Store (this was back in 2008). Nothing took off.
When they moved to Chicago from their home state of California with no friends in the city, they had their first compelling idea — why not build something to help them meet new people? GrubWithUs was born: a social dining app for sharing meals with strangers.
Lu and Sugano got into Y Combinator with GrubWithUs and successfully raised Seed and Series A funding. But they eventually ran into some insurmountable [marketplace friction points](https://review.firstround.com/classpass-founder-on-how-marketplace-startups-can-achieve-product-market-fit/). “People are thinking: What if I’m vegan, and there are no vegan options at the restaurant? What if the restaurant’s too far and people don’t want to travel out of their way? And then there’s the social aspect of having to socialize with strangers. So that social friction, plus all the other friction points, made it impossible for that marketplace to function,” says Lu.
After a few years, Lu and Sugano knew GrubWithUs wasn’t working, but they felt trapped on their current path by the sunk cost fallacy. “We tried to create a new startup using the existing restaurant data we had. But honestly, we were just trying to save face with our investors. If you had asked us if we were passionate about building this next idea, we would have said no. We were just trying to salvage the scraps that we had,” says Lu.
So the co-founders forged ahead anyway, and ended up wasting months building something they didn’t care deeply about. And sure enough, when the new company finally launched, it failed.
Amid these panicked attempts to pivot, there was a bit of bad luck that turned into an unexpected lightbulb moment: Sugano, a lifelong sneakerhead, received a fake pair of Air Jordans from eBay.
To Sugano and Lu, it was obvious that there was a need for a sneaker marketplace where everything was authenticated. “It raised a question in our minds: how come, in this day and age, we have hundreds of options for purchasing sneakers online but still have to worry whether something is real or fake?” says Lu. They knew how massive the resale market was and figured this had to be happening to other people.
Even though they were excited about the kernel of an idea (much more so than their previous venture), Lu and Sugano were nervous about presenting such a dramatic pivot to their investors. They first approached Greg Bettinelli, a partner at Upfront Ventures with a lot of marketplace experience.
After hearing their pitch, Bettinelli was convinced of the new idea and gave Lu and Sugano the green light to drastically change course. So the co-founders got the emotional buoy they needed to email the rest of their investors, who encouraged them to keep their remaining money and go for the pivot.
> You need passion, a solvable problem, and luck: That’s the equation for pivoting.
## Persona
### [Clay focused on GTM teams after building for everyone](https://review.firstround.com/clays-path-to-product-market-fit/)
**Clay** co-founder **Kareem Amin** spent six years working on a data enrichment product before figuring out who needed it most — and unlocking up-and-to-the-right growth numbers.
The original idea for Clay was incredibly broad and abstract: to make the power of programming accessible to more people. Amin and his co-founder [**Nicolae Rusan**](https://www.linkedin.com/in/nicolaerusan?ref=review.firstround.com)first built an initial product that scraped dozens of databases to pull information directly into a spreadsheet. But when they started selling it, they were overwhelmed by how vast their ICP could be.
Recruiters told Amin how useful their product was for finding candidates. Salespeople wanted to use the platform for their inbound and outbound efforts. Front-end engineers could use the spreadsheet as a low-code backend. They even had a customer who was using Clay to transform and send data to their accounting software.
So for a while, the Clay team avoided committing to just one ICP and sold wide, tailoring it to different customer profiles. “When you narrow the scope, it feels claustrophobic. Why are we doing something that’s smaller when we could be doing something bigger?” says Amin.
But they eventually realized this approach wasn’t netting customers who actually continued to use the product, and revenue growth stayed low. “People would feel excited by the possibilities the product opened. But they weren’t always going back and using it the next day,” says Amin. “So actually we had a lot of, ‘Wow, this is so powerful!’ and then no usage, or inconsistent usage.”
To gain traction, Clay fully committed to the ICP of outbound salespeople and only sold the same product each time — even if Amin didn’t feel complete confidence that was the right call. “It wasn't so much that I was 100% sure that outbound was the right call, although it was a faster starting point because all companies need it, versus typically only bigger companies needing inbound support, ” says Amin. “It was more that I realized we need to pick one thing at a time, test it out clearly, and then make sure that it aligned with our larger goals — to get a lot of customers that can come in, self-serve and give us feedback that we can react to quickly. That’s when we’d earn the right to execute on the more expansive parts of our mission.”
> This is the line of reasoning that helped us climb our way out of the use case spiral: How do we get customers as quickly as possible, so that we can learn as fast as possible, so that we can improve as quickly as possible?
### [Plaid took a bet on an enterprise solution after spinning off a consumer budgeting app](https://pmf.firstround.com/levels?ref=review.firstround.com#level-1-nascent)
**Plaid** was an early entrant to the fintech space in 2012, the pioneer of the “invisible plumbing” fintech infrastructure that powers everything from paying your friends back on Venmo, to making an investment on Robinhood, to buying Bitcoin on Coinbase. But the bones of the product today were originally built for a consumer budgeting app.
“The response of consumers was such that we pretty quickly realized we weren't going to be any good at building budgeting apps. We tried for a while. We built six different versions of budgeting management, analyzing your spend types of applications and they didn't really ever get any traction,” says co-founder [**Zach Perret**](https://www.linkedin.com/in/zperret?ref=review.firstround.com).
The idea to switch the target persona from consumers to businesses actually came from one of Perret’s friends. “One day, a friend who was one of the early engineers at Venmo came to us and said, ‘Hey, your consumer products are not so good, but I'd like to license the backend that you've built, the way that you've integrated with the banks in order to get the data into your app.’ It took awhile, but eventually we decided to make this pivot and shift over to building the platform,” he says.
“We then had five or seven people who said that they would probably use the product if we built it. We even had one who said they would pay us if we built it. And so it was pretty easy to find nascent product-market fit in that very early stage once we landed on the right idea,” says Perret.
But despite feeling some early pull, Perret wasn’t confident that the market was much bigger than those first few customers. “The bigger challenge for Plaid was that the market didn't really exist. So while we had these five or seven companies that wanted us to build something, the real challenge was market development. That was the reason that almost every VC passed on investing in Plaid in the early stages. They said, ‘You've built an interesting product, it could be useful for some customers, but the market's not very big.’”
With minimal validation in the new direction, Perret and the team had to take a leap of faith with the pivot. "When I think back to the earliest stage of Plaid’s product-market fit journey, the challenge wasn't finding a product that people would buy. It was creating a market around the product that we believed would be very important for the future, but was yet to be proven."
## Promise
### [Ironclad sharpened its positioning after hanging out with enterprise legal teams](https://pmf.firstround.com/levels?ref=review.firstround.com#level-1-nascent)
After serving as outside counsel for startups, **Ironclad** co-founder **Jason Boehmig** started tinkering with automating parts of his own practice with coding that he had taught himself along the way. After realizing that there was a gap both in new solutions for lawyers and a team that understood how they actually used software products, he decided to leave his law firm life behind.
“It’s wild to think back to this now that we're in the AI assistant boom because the first version of Ironclad was an automated assistant for legal paperwork — but it was really me on the backend of an email address,” Boehmig says.
“We started by doing everything from corporate filings to NDAs and everything in between. So if you were doing an NDA, you would CC admin@ironclad.ai and be like, ‘Hey, I'm doing an NDA with Joe Smith. Can you help us get it done?’ And I would send a series of responses as the Ironclad AI such as, ‘Hey, I need the following information,’ or ‘Here's the template. I filled it in.’ I later met my co-founder, Cai, who was an amazing engineer, and he’d watch me work as the assistant and then would automate what could be automated away.”
But it was spending time in person with their initial customers that helped narrow their product’s focus. “I remember that we flew out the whole company — which was four or five people at the time — to Boulder to see a customer who had a bunch of product feedback for us. We all just sat around and watched them use the product,” Boehmig says.
“They had two monitors, one showing their email and on the other was Ironclad. They were just doing their day-to-day routine, working on a legal team. And by observing them and seeing how important these routine, repeatable transactions were to their profession, we realized we had to go all in on these corporate legal teams — particularly legal operations, which was a role that was just getting defined back in 2015.”
From there, Ironclad repositioned from an AI legal assistant that promised to automate lawyers’ tasks to a Contract Lifecycle Management platform that promised to help enterprise companies create and manage legal contracts end-to-end. That way, they could play in an existing category instead of trying to create one.
> At Ironclad, the early "aha moments" came from watching our customers use the product. It enabled us to pick a niche audience that we could go after — legal operations — and the specific task they were doing — routine transactions.
## Product
### [Alma moved a brick-and-mortar business online when the pandemic broke out](https://review.firstround.com/almas-path-to-product-market-fit---8212--how-to-pivot-and-succeed-as-a-solo-non-technical-founder/)
[**Harry Ritter**](https://www.linkedin.com/in/harryritter?ref=review.firstround.com)had already found product-market fit for his original vision of a co-practicing space for therapists. In late 2018, **Alma** opened its Midtown Manhattan location, and then a second location in Downtown Brooklyn in 2019, and both were quickly packed to the brim.
Soon after, the pandemic happened. And just like that, 70% of Alma’s revenue disappeared in one weekend. In the year and a half after launching, Alma had found its market, but the market had changed almost overnight. With its main source of revenue gone, Alma had to pivot — and fast.
In those early days of the pandemic, Ritter saw a glimmer of opportunity: “If we're all about to go into lockdown, and we're about to experience all of the challenges that are about to come with this emerging pandemic, mental health is only going to matter more. And moreover, these small business owners who struggled to figure out how to run a business during normal times — how much more are they going to need us to show up for them now that things are getting even harder?”
But in the meantime, Ritter had to face his investors. “The first two were the worst board meetings I've ever had in my career as a CEO because we were trying to figure out what to do, and I wasn't so sure,” he says.
So Ritter pored over Alma’s customer data and found a few interesting threads: a spike in providers joining Alma to access its virtual support services and insurance program, with promising early metrics around growth velocity, retention, close rates, time to sale, utilization and customer satisfaction.
From there, Ritter convinced investors at the next board meeting that facilitating providers’ shift to virtual care was the path forward. “That was the change moment where everybody in the room said, ‘All right. If you believe in it, you're willing to do it, and you've got this data that seems to make sense, let's see what’s going to happen.’”
There were bumps on the road ahead — the unstable economy in 2020 necessitated a reduction in force. But as business started to bounce back, Ritter eventually rebuilt the team by hiring go-to-market talent to grow the provider and client base and product and engineering folks to develop the tech. And his bet on virtual proved to be fertile ground for expansion: Though still New York City-based, Alma was able to open up applications for providers from across the country.
### [Rupa's focus on root cause medicine didn't change — but its product had to](https://review.firstround.com/advice-for-the-pre-product-market-fit-days-this-founders-playbook-for-pivoting-with-purpose/)
[**Tara Viswanathan**](https://www.linkedin.com/in/taraviswanathan?ref=review.firstround.com)**,** co-founder and CEO of [**Rupa Health**](https://www.rupahealth.com/?ref=review.firstround.com), had already fallen in love with a problem: giving more people access to root cause medicine to better understand their health concerns, instead of just managing symptoms. She just happened to build the wrong product to solve that problem first.
“When starting Rupa, I had conviction in the problem and where the market was going. I saw that the way we think about health, wellness, and medicine was changing. The first solution I started building was a ‘Zocdoc-style marketplace’ for holistic health providers,” says Viswanthan.
A year went by, and despite Viswanathan’s and co-founder [**Rosa Hamalainen**](https://www.linkedin.com/in/rosa-hamalainen?ref=review.firstround.com)’s iterations to the marketplace idea, it never netted any customer traction. “We tried everything to get this to work, from concierge, 1:1 text conversations to help people find their doctor, hosting in-person meetups called Rupa Circles, partnering with high-profile doctors at Stanford, Sutter Health, and One Medical, and numerous other product iterations,” she says.
Viswanathan says it was a combination of gut and logic that ultimately told her it was time to pivot the product. “My gut knew we were hitting a wall and this was not the right direction, I just needed my brain to catch up and understand why a marketplace wouldn’t work.”
> In startups, there will be times you need to persist, and times you need to pivot — therein lies the founder’s dilemma. To get conviction on the right path, validate your gut feelings with logic and research.
It took a series of product pivots to eventually land on the lab testing platform. “What we discovered is that every product iteration we launched got us closer to the right answer. So the faster we could put products out into the world, the faster we’d get to something that works,” she says. “Insights and feedback from that first product helped us get to where we are today, but if I’d been rigid on sticking to that solution, we would have never gotten Rupa off the ground.”
After the marketplace, Viswanathan and Hamalainen tried their hand at a virtual clinic, doing the heavy lifting to operate it themselves. It was through building the clinic that they became intimately familiar with the hassles doctors face when operating their own clinic.
“After seeing just a handful of patients, it became obvious that labwork was the biggest problem,” says Viswanathan. “We were spending hours and hours figuring out where to order the tests, signing up doctors at different laboratories, determining pricing, and explaining instructions to patients. Without our help, doctors would have to spend hours on this themselves. One day my co-founder and I looked at each other and said, ‘This has to be it.’”
Immediately, Viswanathan fired off a series of texts to a few doctors in the Rupa network, asking if a portal that handled all labwork would be valuable. “At that point, we didn’t even know what a solution could look like, so we didn’t bother pitching a specific product. We focused on pitching the problem. Instantly there was a reaction we had not seen with the virtual clinic platform or the marketplace,” she says. “For all the other products we built, we were pitching it to the doctors. Now suddenly with one text message, it was the doctors convincing us to build and telling us exactly what was needed. Within minutes, we realized we were on to something.”
### A playbook for building deep tech startups
URL: https://review.firstround.com/a-playbook-for-building-deep-tech-startups/
Last updated: 2025-04-04T06:54:18.000Z
When traditional startup advice falls short
_This post is for subscribers only._
### Building a Deep Tech Company? Most Startup Advice Doesn’t Apply — Read This Instead
URL: https://review.firstround.com/building-a-deep-tech-company-most-startup-advice-doesnt-apply-read-this-instead/
Last updated: 2025-06-22T22:31:48.000Z
“I tried to raise a Series B in Q4 of 2022, and it failed miserably,” [**Celine Halioua**](https://x.com/celinehalioua?ref=review.firstround.com) recounts with her signature frankness. As the solo-founder of [**Loyal**](https://loyal.com/?ref=review.firstround.com) (an animal health company developing the first drugs to help dogs live longer, healthier lives), she had the underlying scientific data, the big ambitious vision, and a compelling pitch — but as the saying goes, timing is everything.
“The market turned. Then SVB happened. And nobody wanted to take the risk of telling LPs, ‘Sorry, we lost a shit ton of money on a dog drug.’ I ended up having to pivot to raising from angels and family offices, and it took me six months to raise $10 million, which is obviously terrible,” she says.
Fast forward just one year, when Loyal’s first dog longevity drug earned the [FDA's first-ever formal acceptance](https://loyal.com/posts/loyal-announces-historic-fda-milestone-for-large-dog-lifespan-extension-drug?ref=review.firstround.com) that a drug can be effectively developed to extend lifespan for any species — including humans. With that simple one-page document, everything changed. “We got terms on our first day of our next Series B attempt after that,” she says. “It was probably the two most opposite raises you could have had.”
This stark contrast in fundraising fortunes is indicative not just of market timing, but of the challenges of building deep tech companies, where early progress isn't measured in users or revenue but in binary milestones that unlock — or destroy — value.
“What’s funny is that we had the data that unlocked efficacy approval for a year and a half before we got it. I was very confident we were going to earn it, I just didn’t know when,” Halioua says. “But that didn’t count with growth-stage investors during our first raise attempt. While it was frustrating initially, when you step back, it makes sense. Proving efficacy is one of the most challenging parts of developing a novel drug. Checking off that section of our conditional approval application dramatically decreased the diligence load and the bet they’d be underwriting.”
Just a few weeks ago, Halioua was able to cross off another major milestone on Loyal’s journey by nabbing [the second-ever efficacy approval](https://www.washingtonpost.com/technology/2025/02/26/antiaging-pill-dogs-fda/?ref=review.firstround.com) for a longevity drug, this time for LOY-002, their chewable for senior dogs of almost all sizes. (She also [announced](https://loyal.com/posts/loy-002-receives-rxe-from-the-fda?ref=review.firstround.com) a Series B-2 round, which brought total investment in Loyal to over $150M.)
As early backers of Halioua (since her 2020 seed round), we here at First Round could point to countless examples like these as to why she’s a founder who’s dangerous to bet against. But the rigor which she’s running her business with merits studying as well — in our view, her superpower lies in building an adaptable strategic plan and navigating a tricky milestone-based roadmap, relentlessly revisiting her priors along the way.
So in this exclusive interview, we’re diving into those topics, mining Halioua’s earned experience to surface the thorniest problems deep tech founders face, sharing the tactical solutions and frameworks she's developed to overcome them at Loyal.
Should you focus on one approach or hedge with multiple products early on? How do you handle inevitable delays and puzzle through possible contingencies? How do you distill technically complex topics during fundraising and board meetings? And how do you maintain your motivation as a founder through a stream of setbacks?
For deep tech founders navigating similarly long and uncertain paths to market, Halioua offers practical advice for navigating this terrain — where traditional startup advice often falls painfully short.
## **Deep tech challenge #1: The playbook paradox**
From canine biology and federal regulations to drug manufacturing and design packaging, Loyal’s challenges don’t resemble those of B2B SaaS startups in the slightest, says Halioua.
“If you understand the consumer dog market, you almost certainly don't understand biotech. If you understand biotech, you don't get the veterinary market. And if you're a deep tech person, you probably haven't played in consumer. Generally, pharma sells to payers, and while Loyal’s drugs are prescribed by veterinarians, they’re going to be consumer-marketed at the end of the day — the ultimate customer is the dog owner advocating for their dog.”
This creates unique challenges, making Loyal a difficult company to evaluate for both biotech and consumer VCs alike. It also means that Halioua didn’t have many established playbooks to lean on.
> For deep tech founders, it can be a company-killing move to just copy-paste advice for B2B SaaS. I've read what feels like every single piece of startup content out there, but it’s in order to educate my own model. Understand from first principles what applies to you, why, and what you’ll need to change to fit your business.
### **Solution: Lean on unexpected inspiration**
Halioua recommends actively seeking out analogues, even if they're in seemingly unrelated industries. “A lot of what I've borrowed has been from companies like [**Boom**](https://boomsupersonic.com/?ref=review.firstround.com),” she says. Her conversations with founder [**Blake Scholl**](https://x.com/bscholl?ref=review.firstround.com) helped shape her approach to scenario planning and milestone-based development. “Everything we do at Loyal is tied to milestones,” she says.
“Certain hiring plans are allowed at milestones, certain capital spending is triggered by other milestones. We'll start working on this program when we get efficacy approval for that. It's the same for fundraising. I could go raise today at X situation, or I could raise at this milestone, and that increases the probability of that happening, but it adds risk in this new way.”
For each milestone, Halioua develops multiple scenarios. “We have three scenarios until reality collapses on one of them at a particular milestone, and then we go down that path,” she says. “Before it was more of a vision pitch with great science behind it. Now I more intimately understand the levers that matter for our business.”
> We have every single day mapped out on what it takes to go from today to approval, what can go wrong, and where we can slice things off if we need to.
### **Solution: Build a board that spans domains**
“What makes this difficult is that people who could most help you navigate one domain likely have little understanding of the others you operate in. **The solution is not to waste your time looking for a single unicorn advisor who understands everything, but to assemble more of a constellation of perspectives**,” she says.
This is how Halioua has approached board composition. “I have a pretty big board — nine people, but not all voting. I had the choice between trying to find a founder who had experience in both veterinary medicine and biotech, or what I ended up doing, which was trying to find the best possible person in each vertical: veterinary regulation, deep tech operating, biotech company building, marketing,” she says.
“For example, I [added an FDA regulatory expert](https://loyal.com/posts/dr-linda-rhodes-loyal-board-of-directors-press-release?ref=review.firstround.com) to our board. Now when we get an update from the FDA, I actually call on her first at the meeting and say, ‘What's your interpretation of this?’ so it helps everyone understand.” (And sitting in that deep tech seat? Scholl from Boom, of course.)
## **Deep tech challenge #2: The delay domino effect**
In deep tech, delays are inconvenient, if inevitable. “We had a surprise six-month study the FDA asked us for mid-last year, which we didn’t predict would happen,” she says.
> When you’re building in deep tech, you just get delayed in the weirdest of ways that you don’t expect. It humbles you.
### **Solution: Open another decision-making door**
To navigate high-stakes decisions prone to delays with appropriate care, Halioua developed a framework that builds on Jeff Bezos's well-known one-way/two-way door concept: the slow two-way door.
“A lot of deep tech decisions fall into this bucket,” she says. “It’s *technically* reversible, but with big time or reputation or money costs associated.” Regulatory submissions are a perfect example. “When we submit something to the FDA, we’re locked into the compound and safety strategy, and we don't get feedback for six months.”
This framework creates clarity around how much time and attention different decisions deserve. “Even though it’s a two-way door and I push my team hard on moving fast, I will never push them on a final FDA submission to cut corners or submit faster. I will always take the extra week, sit on it, and feel confident.”
### **Solution: Rigorously scenario plan for inevitable delays**
Halioua has since retooled Loyal to build around the expectation of the unexpected, with comprehensive contingency plans addressing every aspect of the business. “What do we still need to spend? What do we cut and when? What are our funding scenarios for if we're six months delayed to market, for if we’re 12 months late to market?”
She shares a specific example: “When we were waiting for the efficacy package, I sat down with my regulatory advisors, who've gotten dozens of drugs approved, and asked them, ‘If this goes wrong, what would that look like? Is there precedent for this happening? Is there precedent for that happening?’ Then we map out that we think there's a 40% chance of this and a 20% chance of that. And then we decide which scenarios are worth building redundancy against.”
Celine Halioua, founder and CEO of Loyal
## **Deep tech challenge #3: The fundraising slog**
“Adoption, revenue, and other metrics typically derisk software startups and give early signs of [product-market fit](https://www.firstround.com/levels?ref=review.firstround.com). You can find charts on LinkedIn that say, ‘At this ARR, you can raise a Series A; at this ARR, raise a Series B,’” Halioua says.
“That doesn’t exist in deep tech, where derisking the company is predominantly tied to specific milestones that come with long wait periods. Us being five years in and about a year from market is pretty damn accelerated for getting a drug approved from 0 to 1,” Halioua says.
### **Solution: Give investors new mental models and reframe the conversation around probability of success**
Halioua learned the hard way that even when making scientific progress, investors might not value it without clear translation. “Typically the fundamental risk is whether people will pay for their product or whether the market is large enough. Our risk is, can we reach the market with an FDA approval? Can we find a drug that works?” she says.
“But sometimes I still meet investors who say, ‘I don't think the market's big enough.’ My reaction is always to say that **there are a laundry list of risks to this company — TAM is not one of them**,” says Halioua. “Apoquel, an anti-itch drug, makes about $800 million a year. The Farmer’s Dog [has passed over $1B in revenue](https://pitchbook.com/news/articles/pet-food-farmers-dog-profits-more-than-1b-annualized-revenue?ref=review.firstround.com). The COGS are great. We’ll have effectively 10 years of federally enforced exclusivity. There's market risk because nobody's approved a longevity drug before, but the baseline economics, even on day one, are going to be pretty good.”
While this disconnect was initially puzzling, Halioua has learned to take it in stride. “**You have to create mental models for investors to evaluate a deep tech company. With traditional software, they know what to look for.** But with a company like Loyal, we have to educate them on what matters and why,” she says.
> Raising for a deep tech company is an art I've constantly had to hone and optimize. I was punched in the face a few times before I really developed an understanding of how to talk about what we're trying to do to a Silicon Valley audience.
This required Halioua to develop an entirely different fundraising framework — one built around communicating how they were inching closer to reaching FDA approval. “**My advice is to build every fundraise around an increased probability of success of unlocking this market.** Break down the drivers of that — both objectively, such as making regulatory progress, but also on what investors will care about,” she says.
“Now our fundraising strategy is based off of A) helping investors who don't normally invest in this space understand how to think about the market and what good should look like, and then B) understand where we are relative to it. So it's pretty formulaic: **Here's where we are, here’s what we need for approval, here’s the differential, here's how we fail, here's how we succeed, here's why I think we're going to succeed, but here's the discount**,” says Halioua.
> For deep tech, the endpoint is usually objectively valuable. It’s not about convincing investors that people will want your product or that the business can scale — it’s about whether it’ll work (and if you can execute). When we shifted away from selling on vision alone and reframed in terms of our probability of success, it transformed our fundraising.
### **Solution: Expand your fundraising horizons**
When traditional VC leads weren’t panning out for Loyal’s initial Series B attempt, Halioua got creative. “When ZIRP ended and everything was exploding, the sophisticated version of retail — high-net-worth individuals and family offices — saved us. We raised about $10 million in the summer of 2023 from that route, which is what gave us enough runway to go out and raise our big Series B from Bain later on.”
Though time-consuming, this experience gave Halioua confidence. “**There’s a lot of money in this world and if you're willing to put in the ungodly hours, you can always raise the capital you need.** You don't always have to pull from the same five, 10, 20 VC funds that everybody talks about,” she says. “If you're doing something weird or the market's weird, that can be good differentiation. People personally care about many of these deep tech ideas in a way that they don't care about a SaaS company.”
The key is to build the networks before you need it. “Family offices want to get to know you and deeply understand what you're doing,” she advises. “It’s a relationship, not a transactional process.”
## **Deep tech challenge #4: The binary bind**
For software startups, iteration is king. Release an MVP, gather feedback, improve, and repeat. “For Loyal, due to the extensive regulation, the final product — the drug — is locked years before it launches. If the drug doesn’t work, there’s no iterating. If you want to modify the product, you need to restart the entire process over again,” she says.
“Regardless of your religious beliefs, there's a God in biology,” Halioua says. “**When you’re attempting something that’s scientifically challenging, there's an objective truth that's already predetermined in the universe — and it's your job as a founder to figure out that truth as quickly as possible**,” she says. “It's been predetermined since Day 0 whether LOY-001 will extend large dog lifespan. All I can do is make sure the experiment is run as cleanly and efficiently as possible.”
> There's a chaos variable that you can't predict in deep tech. You can't force or iterate your way to making a drug if it ultimately doesn't work.
### **Solution: Build in redundancies, big and small**
This immutable constraint led Halioua to take more of a portfolio approach of developing multiple products simultaneously, even when resources were scarce and conventional startup wisdom demanded focus. “**A big debate we had in the early days of Loyal was why to spend the money to go multi-product so early. And I'm really glad we did — we'd be dead today if we hadn't**,” she says.
She shares a specific example: “Our lead drug today is LOY-002, but we actually started working on it second," Halioua says. "We wanted to have redundancy in case something happened to LOY-001, something that we couldn't predict and didn't have any data to suggest would happen. Even though we felt the thesis was correct and it obviously ultimately got efficacy approval, we didn't want Loyal to fail on the chance that LOY-001 didn't work.”
Halioua’s thinking here applies to more granular decisions as well. “One example is our [STAY study](https://loyal.com/clinical-trials?ref=review.firstround.com), which is our big, 1,000-dog lifespan and healthspan clinical study. It's a binary moment: We'll run the study for five years, and we'll either see statistically significant improvement in lifespan or we won't. But today, five years before that readout, we're doing things like thinking about year-four retention bonuses, the type of clinics we bring in, and doubling up enrollment to build redundancy. The goal is to create experiments where failure, if it happens, is clearly due to the approach itself rather than execution issues.”
> When you're working on something deeply technical, there's not just your opportunity, there’s 20 opportunities around it. How do you not get distracted? But how do you still follow your intuition and get distracted just enough so you find new opportunities?
### **Solution: Engineer learning opportunities**
Halioua’s determination to not place all of her product eggs in one basket has also led her to look for ways to remove blinders and allow for organic opportunities to emerge wherever she can.
“Early on, we decided to run what became known as The Healthspan Study, where we measured aging biomarkers in over 450 dogs old and young, big and small,” she says. “We knew we were going to have to run a large lifespan expansion study in dogs at some point and we'd never done it before, so we wanted to build the organizational muscle and learn by doing.”
The team went beyond the minimum requirements, investing additional resources that ultimately proved invaluable. “Since we had money at the time, we decided to biobank samples from these dogs. That data actually ended up becoming the foundational data to all of our FDA submission packages — but we couldn’t have known that at the time,” she says.
> Focus is key, but opening yourself up for discovery is just as important when you're working on something deeply technical. You never know what information you’ll need.
Of course, not all of these bets will pay off. “The counter example is a project we ran called X-Thousand Dogs,” she says. “We wanted to develop a way to determine a dog's biological age from a saliva swab. Essentially, we wanted to develop a way to create a health score for dogs.”
The project seemed promising, but didn't deliver proportional returns. “We ended up spending a ton of money on sending people these DNA kits for free, on getting the approach validated, on AWS infrastructure — and we haven't done anything with that data yet. It was multiples more expensive than the healthspan study, and we certainly learned multiples less. But it's always difficult to know that at the time,” Halioua says.
## **Deep tech challenge #5: The founder’s emotional tightrope**
Deep tech companies require the unbridled optimism needed to tackle impossible challenges, balanced with the calculated pessimism necessary to predict and hedge against frequent setbacks. This psychological balancing act becomes especially tricky over the years-long timeline. “You have to be so naively optimistic as a founder to be willing to do anything,” Halioua says.
> If I knew how hard building an FDA-approved longevity drug was five years ago, I probably wouldn't have even tried. But at later stages, you have to abandon optimism and actually be massively pessimistic.
### **Solution: Stay emotionally attached to mission, not method**
Halioua's first guideline for this balancing act is to be unwavering about your mission while remaining flexible about how you achieve it.
“As you start making progress, you are forced to commit to a path. Now at this stage of the company, it's very regimented. But in the early days, it’s very open-ended. It’s ultimately about deeply understanding the vision that you’re emotionally attached to. What's the core bet of the organization? Everything else is just a strategy to achieve that,” says Halioua.
“**From Day 0, I have always been emotionally attached to getting the first FDA-approved drug for lifespan extension**. I had a very strong hypothesis that the way to do this was to focus on big dogs with short lifespans. And early on when I was first starting as a solo-founder in 2019, I had a low conviction bet that the way to go about it was gene therapy to knock down IGF-1 production, which is what we think accelerates their aging,” she says.
This unwavering commitment to the core mission — rather than to a specific technical approach — allowed Halioua to pivot when necessary. “When I hired my scientific team and we were deciding on the right direction for LOY-001, I was crystal clear that I just want the highest probability shot on goal for getting drug proof for lifespan extension in dogs,” she says. “So they were comfortable pushing back on how the COGS on gene therapy would be terrible and safety would be tough. It turned out I was right about big dog, short lifespan, but I was wrong about gene therapy.”
> Don’t get emotionally attached to your approach until there's objective data to prove that you should.
“I don't attach ego to literally anything but the end goal, so I don't give a shit if I'm wrong. **I really, in fact, I assume I'm wrong**,” Halioua explains with characteristic candor. “If I feel fire or if I have that niggling feeling in the back of my head, I run towards it because I'm not trying to protect a prior assumption I have. I’m trying to protect that end goal, and I'd much rather find out what's wrong today versus in two months.”
## **Deep tech challenge #6: The hammer-nail hiring trap**
Deep tech companies require bringing on highly technical talent, but this specialization comes with a significant risk. Experts who’ve spent years becoming world-class in narrow domains often see every problem through the lens of their specialty.
“The hiring fail mode I often see is ‘hammer nail,’” Halioua says. “That's a reason a lot of biotech companies started by people straight out of their PhD fail. They're extremely emotionally attached — and have their blinders on—- for the problem they’ve spent 7+ years working on.”
### **Solution: Hire for thinking process over domain knowledge**
Halioua has come to look for the ability to apply rigorous thinking to novel problems, rather than simply being experts in Loyal’s exact field.
"If you're doing something novel, there’s not a ton of specialized PhDs to even hire. Right now there’s only a couple of groups getting PhDs on dog longevity. **So actually the background of your early scientific hires doesn’t matter in some ways**. A good scientist can learn and ramp very quickly in a different field,” she says.
“As an example, a lot of our early team had neuroscience backgrounds. We're not doing anything neuro related. But neuroscience is very complicated. A lot of things are not understood, and you have to go extremely deep to make any progress at all. So they're able to apply those mental frameworks to a new problem.”
Here’s how she hunts for this trait in interviews: “One of the biggest hacks is seeing the questions they ask you. With the best candidates, the quality of the question-asking is very clear. How much do they interrogate what you're doing and the rationale, and how do they then update their priors?
> When you’re trying to hire scientists, the best ones will assess you as much as you assess them.
She also tests depth of understanding. “I make them explain things to me. I'll pick some aspect of something they've worked on and go down deep, deep, deep. A lot of people will hit a level of depth and get stuck versus somebody who's great can go all the way to the atoms.”
## **Deep tech challenge #7: The technical translation gap**
When you're building at the frontiers, developing trust with investors who lack the specialized knowledge to directly evaluate your work sets up another barrier. “There's such a trust aspect when you're doing something weird, hard and different. I used to be so pissed off about it,” Halioua admits. “Like, ‘Why do I have all these hoops to jump through?’”
Even once investors send the wire though, things don’t necessarily get easier. Running a top-notch board meeting is tough for any founder, but it can be especially challenging for deep-tech startups with heaps of technical info to communicate and complicated chess-strategies to consider.
“I had somebody tell me recently that my first board meeting was the worst board meeting they'd ever been to,” Halioua laughs. “But I think at least my board meetings are at least competent now.”
### **Solution: Radical transparency**
“Instead of complaining about our hurdles**, I've tried to engineer it in a way where it's undeniable**,” Halioua says. “**Externalized signals of competency and of accuracy are super important here.** ”
Halioua has also found that being extremely upfront about problems and mistakes is the fastest path to building trust. “Trust can be lost in an instant, so I'm always upfront about something going wrong,” she says. "When we got an FDA delay last year, I called Josh within an hour. I'm not sitting around coming up with some way to package it up. I default to, ‘This is what happened, and now we're figuring it out.’”
This approach extends beyond just sharing bad news to openly acknowledging mistakes. “When I’ve made bad hires, I've gone in front of my team and apologized. I've sent detailed emails to investors about firing an executive, and one of my investors was like, ‘Literally nobody does this. What are you doing?’ But my reasoning has always been that **because I'm a solo founder building something extremely technically complex, I want to be ridiculously transparent about what I'm thinking and why**.”
### **Solution: Apply a consistent formula**
“It's your job to educate the board about what they need to know, but the lazy approach is just trying to teach them everything."
Here’s how she does it: “I now use this framework: **Here's what we said we were going to do last time. Here's where we are today. Here's the delta. Here's why.**” This consistent approach creates continuity between meetings. “That way I can start with, ‘Here are the five follow-ups from the last board meeting. Here's the status. We decided not to do item 2, here’s why. Here’s how we completed item 3, and here are the results.”
She’s also learned that board members need regular reminders of the overall framework, so for critical pathways like FDA approval timelines, Halioua provides clear tracking. “Here was the date I gave at the last board meeting. Here's the date today. What changed? Why? Which of these is the rate limiter? Which of these is high risk, medium risk, low risk?”
> Don't make people remember things — that's something a lot of bio founders get wrong. It should be like a mantra: Here's the framework we’re using, here’s our progress, here’s the change, here’s the risk.
## **The deep tech advantage: turning challenges into moats**
“There's a really good Sam Altman [blog post on why doing hard things](https://blog.samaltman.com/hard-startups?ref=review.firstround.com) is paradoxically easier,” Halioua says. “I’ve felt that 100% with Loyal. There are so many problems that other companies have to deal with that we don't. We've had so many tailwinds. So many people want to join our company, we have an almost 100% offer acceptance rate. We’ve been on the cover of WIRED, The New York Times, The Wall Street Journal. The enthusiasm for what we’re doing is really high. People care.”
Aside from the recruiting advantage, Halioua has come to spot other benefits as well. “There are many moats when building something deeply technical — patents, federal incentives, the team. A moat that is often overlooked is simply time,” she says.
“When working in atoms, it takes a fixed period of time to hit certain milestones. In animal drugs, every time you submit a technical section to the FDA the review period is six months. This is the same for a little company like Loyal and an $70B+ behemoth like Zoetis. No amount of resources can make those go faster — a valuable advantage for a startup. I have felt confident for years that this will eventually get approved. Really then the question is how long would it take?”
The milestone marathon continues, but now more than five years in, we’re getting closer to finding out.
### Scrappy tactics and a huge post-COVID pivot | Owner’s unconventional journey to product-market fit | Adam Guild (Co-founder and CEO of Owner)
URL: https://review.firstround.com/podcast/scrappy-tactics-and-a-huge-post-covid-pivot-owners-unconventional-journey-to-product-market-fit-adam-guild-co-founder-and-ceo-of-owner/
Last updated: 2025-08-14T23:51:15.000Z
Adam Guild is the co-founder and CEO at Owner, an online food ordering system for independent restaurants. Within a year, Owner went from being about to run out of money to having hundreds of customers. Last year, they raised a $33M Series B.
Adam’s entrepreneurial journey began as a teenager when he built a successful Minecraft server, which led him to drop out of high school to become a founder. His passion for helping small businesses was sparked by his mom’s struggles running a dog grooming shop, which led him to launch the early iteration of Owner.
In today’s episode, we discuss:
- How working with a small business kickstarted Owner
- Adam’s unusual outbound strategy
- Why the pandemic accelerated Owner’s success
- How Owner’s pivot led to “hyperbolic” product-market fit
- The two qualities Adam looks for in new hires
**Referenced:**
- Alex Bard: [https://www.linkedin.com/in/alexbard/](https://www.linkedin.com/in/alexbard/?ref=review.firstround.com)
- Dean Bloembergen: [https://www.linkedin.com/in/deanbloembergen/](https://www.linkedin.com/in/deanbloembergen/?ref=review.firstround.com)
- Guisados: [https://www.guisados.la/](https://www.guisados.la/?ref=review.firstround.com)
- HubSpot: [https://www.hubspot.com/](https://www.hubspot.com/?ref=review.firstround.com)
- Jack Altman: [https://www.linkedin.com/in/jackealtman/](https://www.linkedin.com/in/jackealtman/?ref=review.firstround.com)
- Kimbal Musk: [https://www.linkedin.com/in/kimbalmusk/](https://www.linkedin.com/in/kimbalmusk/?ref=review.firstround.com)
- Modern Restaurant Management: [https://modernrestaurantmanagement.com/](https://modernrestaurantmanagement.com/?ref=review.firstround.com)
- Naval Ravikant: [https://www.linkedin.com/in/navalr/](https://www.linkedin.com/in/navalr/?ref=review.firstround.com)
- Neil Patel: [https://www.linkedin.com/in/neilkpatel/](https://www.linkedin.com/in/neilkpatel/?ref=review.firstround.com)
- Peter Thiel: [https://www.linkedin.com/in/peterthiel/](https://www.linkedin.com/in/peterthiel/?ref=review.firstround.com)
- P.F. Chang's: [https://www.pfchangs.com/](https://www.pfchangs.com/?ref=review.firstround.com)
- Sean Rad: [https://www.linkedin.com/in/seanrad/](https://www.linkedin.com/in/seanrad/?ref=review.firstround.com)
- Thiel Fellowship: [https://thielfellowship.org/](https://thielfellowship.org/?ref=review.firstround.com)
- Tim Ferriss: [https://www.linkedin.com/in/timferriss/](https://www.linkedin.com/in/timferriss/?ref=review.firstround.com)
- Y Combinator: [https://www.ycombinator.com/](https://www.ycombinator.com/?ref=review.firstround.com)
**Where to find Adam:**
- LinkedIn: [https://www.linkedin.com/in/adamharrisonguild/](https://www.linkedin.com/in/adamharrisonguild/?ref=review.firstround.com)
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
**Timestamps:**
(01:29) Adam’s first business
(04:15) The transition from Minecraft to Owner
(05:58) The dark side of the gaming industry
(14:20 Adam’s scrappy strategy to landing his first customers
(16:52) The COVID pivot
(21:31) The quest to find product-market fit
(30:53) What actually worked to get new customers
(36:03) Inside Owner’s explosive growth
(46:41) How Owner secured its crucial first round of funding
(53:34) The bet on going multi-product
(64:28) What Adam wishes he knew at 17
(76:22) Sales-led vs. product-led growth
**Brett:** Thank you so much for joining.
**Adam:** Thanks for having me. I've been a long time listener of yours, so it feels surreal to be on this side of the table and very happy to be here.
**Brett:** Well, let's start. What's the first business you ever started?
**Adam:** It was this Minecraft server that I started when I was 12 that initially wasn't supposed to be this business.
It was this way. I was having fun online and making friends, initially playing on other people's Minecraft servers that at some point realizing that I could build my own. Which quickly evolved when I realized that I could also make money from that Minecraft server. That's the point that I started leaning in and figuring out how to make it distinctive and known within the Minecraft community, and learning a lot about growth marketing in order to scale it to be as big as possible, which over the next four years grew and grew and grew to totally consume my life because by the time I was 16, it had reached millions of players, was generating hundreds of thousands of dollars in profit.
Then led me to drop out of high school halfway through 10th grade to focus on scaling it up and then on building my own independent games for that community.
**Brett:** What was going on from a parenting perspective that you were allowed to go do this?
**Adam:** I would say a free range parenting philosophy of letting my brother and I explore our interests.
We didn't have a ton of limits on the amount of time we could spend online, and we were generally encouraged to do what we found interesting. Without limitations, we never had our parents stopping us from watching R-rated movies or any of the other usual limitations, which. At the time was a very controversial philosophy, but I think ended up leading to developing more maturity and wisdom through exposure to the real world pretty early on.
**Brett:** Is your brother sort of equally entrepreneurial?
**Adam:** I would say so. He is a huge inspiration to me. He, when I was starting that Minecraft server at 12 was 10, and at some point when I started making money, I needed somebody to be the full-time social media manager for the Minecraft server. 'cause one of the ways that we were growing it was we had these big meme pages on Instagram that were bringing together the Minecraft community with memes and news posts when there was new updates to Minecraft to keep people informed.
So I went to my 10-year-old, 10-year-old brother who was the only person that I could afford to pay $5 a month to be a full-time social media manager. Then over the course of the next few years. He built those pages to hundreds of thousands of followers and started to build his own meme pages within various other Instagram niches.
He had this comedy page and this fashion page, and various others that got pretty big. Then at some point, when he was 14 or 15, he started building up his own social media, following through posting on Instagram and then TikTok, and now about 10 years later, he's one of the largest social media creators in the world.
He's got more than 80 million followers.
**Brett:** So how did you go from this teenage Minecraft business to starting owner?
**Adam:** When I started focusing full-time on building games, which was what happened when I dropped out of high school, halfway through 10th grade, it was first scaling the Minecraft stores up, and then using that community of millions of players to build my own mobile games, I started to feel very conflicted.
There were certain things about that experience that I loved. It was so much fun. Day to day, and it was a great environment to learn software engineering and growth marketing in. But what I started to hate about it and hate about my life as I thought about my future was I felt when I looked forward 3, 5, 10 years of what my life would become focused in gaming, that it was basically scaling what I viewed as this negative impact because I was obsessed over how to get millions more players to ultimately waste time on my games so that I can make money.
That's what you do as a gaming company. And that felt wrong to me. It, it didn't feel like something I wanted to spend my life doing, but I also felt kind of trapped because I didn't have a plan B, I was literally a 10th grade high school dropout, didn't even finish 10th grade, and I knew there had to be some way to use that skillset that I built in software engineering and growth marketing to actually help people.
But I wouldn't know what that way would be until about a year later I built the first version of Owner for my mom's dog grooming business. Then, so I completely transformed her life.
**Brett:** It seems like gaming was one of the things that set you on this incredible trajectory in life thus far. So why didn't you see gaming in that way as this positive thing that helps people develop these new skills that makes them more entrepreneurial, that helps them develop some sort of mental plasticity?
Like why did you put it in the empty calories bucket?
**Adam:** Because I knew that experiences like mine were anomalies. I've met a few, but I also had spent time with thousands of our players over the course of those five years and got to know the people that, on the other end of the spectrum were living vicariously through their gaming identity.
That were literally spending 80 plus hours a week building their faction within our Minecraft server or building out their their base. And while I. believe in Agency and the ability to make personal decisions. There were some people that were clearly addicted to gaming and, and using it to replace every other element of their life, and there were far more of those than these anomalies that were able to find great meaning and success through playing games.
So as I was introspecting about the impact I was having, while there were certain people that benefited through having this way to explore the software engineering world in that Minecraft server community that I'm still friends with today, I think the vast majority were actually using it as this escape from life, almost like the Matrix where they were plugging in and replacing every other element of their life with how they were playing those games.
And that is what the gaming industry is. Monetized on. There's always this extreme power law where there's whales of players that play way more than the average and spend thousands or tens of thousands of dollars. We even had some of those in the Minecraft server world players that spend tens of thousands of dollars after spending years, 80 plus hour weeks playing.
And the idea of scaling around trying to capture as many of those people as possible to play on my games versus other games just felt completely empty, particularly when I had the contrast of that experience with my mom.
**Brett:** Yeah, so you were starting to talk about that. So what, share more about it.
**Adam:** I saw my mom open her dog grooming business with so much excitement early on.
'cause she dreamed of opening a business for many years and it saved up to do it. Then it finally came time to open, and that excitement quickly turned into worry as. It was initially very difficult for her to attract new customers. The, the customers that she was able to get, loved her, loved her services, loved her vision of having this dog salon and boutique for the dog lovers of, of West Hollywood.
But it was hard for her to attract the critical mass of those people that she needed in order to sustain the business. And what started to happen was slowly the cash was starting to run out. Um, every month she was losing money at first, and the salespeople from Yelp ads or Facebook ads or various others swooped in and basically said, we can help you drive more customers.
Just sign up for our ad packages. My mom was, at the time, desperate for customers, so she went along with it. It sounded reasonable, but ultimately they weren't able to produce the result that they promised. And they took thousands and thousands of dollars from her. She not only was scared about losing our business, but losing our house, which she had taken out loans against to start the business with.
And I saw my mom in this really terrified place. We talked about it one night and she asked for my help to, to figure out how she could grow this thing. But I, I was very worried that I wouldn't know how to grow a physical brick and mortar business because it felt so different to be growing games where I was a player myself.
So I started experimenting of, of course I agreed to help and, and started.
**Brett:** But you were doing this not with, oh, maybe there's a, a business opportunity yet. You were just helping your mom out at the time.
**Adam:** Totally, yeah.
**Brett:** Was this already after you decided you were interested in finding a new opportunity outside of gaming or that happened at the same time?
**Adam:** I had that feeling, but I didn't know what to do with it. I didn't think that I had an option other than continuing to build up these games, which were basically funding my life. So when I, I saw my mom struggling and we had that conversation where she asked me for help. I, I jumped in and started experimenting with a lot of the things that I'd used to grow the Minecraft servers.
We initially tried social media and built up her page to a large amount of followers. Interestingly, that didn't work.
**Brett:** Why is that?
**Adam:** There's a intent related reason why social media never works for local businesses, which is that when people are browsing Instagram or Facebook or TikTok, they aren't browsing with an intent to buy dog or egg services, or now that we serve restaurants to buy restaurant food, they're there to be entertained ultimately.
So when you're promoting a service for people to buy, it's difficult to channel this entirely different intent of being entertained and having fun into the intent to buy. And then the other macro reason is that particularly back eight years ago. The Instagram algorithm that drives discovery on new posts is extremely global in nature.
So we'd have these posts that would get hundreds of thousands of likes, but then as we went into the insights, those people were coming from all around the country, or in some cases all around the world. And my mom's customers are really only people within five miles of her location in West Hollywood.
So the idea that we were getting all of these thousands of impressions and likes was basically just a vanity metric that wasn't translating into sales. And we needed to figure out a channel that would work for each of those dimensions, both driving a large amount of impressions and. Ensuring that those impressions had the proximity to her business to make them viable customers and the intent to buy.
But this is all in retrospect, after spending eight years now obsessed in this space, at the time I was pretty perplexed about why it wasn't working. I, I started to pick up on some of these things, but basically just continued testing the whole spectrum of, of strategies. We tried direct mail and receipt ads.
Wasn't working, wasn't working, wasn't working, and then we tested the strategy of search engine optimization and conversion rate optimization. That worked like crazy. It, it was so effective. Even though SEO tends to be something that takes time to kind of fully be effective, the answer is yes. It takes time for terms that are globally competitive.
Ranking for best shoes is hard because you're competing on a global stage with Nike and Adidas and all the rest. But when you're competing for these long tail keywords that have a huge amount of intent in a specific city, like Best Dog grooming in West Hollywood, it turns out that nobody's optimized.
Or particularly eight years ago, nobody was optimized for best dog grooming in West Hollywood or best dog daycare in West Hollywood, or all these other terms that now drive her thousands of customers. And uh, when we started testing this, it was basically just the first business that was actually optimized for these local terms of which there are hundreds of queries every month locally with intent to buy and translated into sales bananas like over the next year, I saw my mom go from struggling to then crushing it.
She's the top rated Dogger in all of California now, hundreds of them. And she's built a amazing team. This wouldn't work if she didn't have strong product, product, market fit and customer love, but it was the ultimate top of funnel and it still is. And it was seeing that finally my work was having this positive impact, not just financially on my mom, but personally.
I was inspired to build a business around doing that for as many people as possible, no matter what it took and quickly refocused from gaming to building a business around that.
**Brett:** Can you break that apart a little bit more? Like you saw this working for your mom and that what, what was the exact next thing that you ended up doing?
**Adam:** When I saw the transformation in my mom, I started thinking about where the biggest group of people like her was that I could help because I knew early on that I wouldn't be able to build an ambitious software company serving the dog grooming market. Then in doing a ton of research and discovery and talking to different forms of business owners, from salon owners to various others, I met a series of restaurant owners that made me realize that the best place to start.
Would be in helping them both because they could benefit more from that specific strategy, and because it was the largest group of people with the most pressing need of making this online shift successful that they're going through
**Brett:** In that discovery phase, did you just like knock on the doors of all these businesses or did you call them?
What were you talking about on the calls as you kind of iterated your way towards restaurants?
**Adam:** I did a lot of door knocking. I also did hundreds, if not thousands, thousands probably of cold emails that were saying, Hey, my name's Adam. I. I would love to be able to help your restaurant with SEO. I just did this for my mom's dog grooming business.
Would love to chat about how you're thinking about this. I was not very effective at cold outbound. I was rejected many hundreds of times before the first person gave me a shot. And when I'd walk into restaurants trying that strategy all throughout Los Angeles where I grew up, I had a problem, which was not only was I 17 years old, but I have a baby face.
So when I was 17, I looked like I was 12\. So I would walk into these restaurants and they were not taking me seriously at all. It looked like I was their middle school intern or something walking in from my first day at work.
**Brett:** So when you walked in, what was the type of conversation you would have?
**Adam:** I wouldn't ask, can I talk to the owner here?
'cause that would make me sound like a salesperson. I'd walk in as though I were a customer, and then I would quickly try with visual cues to figure out who the owner was and strike up a conversation that way, and then chat them up and say, I would love to learn more about how you think about growing your business online.
I'm building a company in this space, but the first step is I, I need to understand how you think about this, what you've tried in the past that hasn't worked. I, I just had this awesome experience with my mom and it's, it's helped her business and I'd love to be able to help yours too. I'm not trying to sell you anything right now.
I don't have anything to sell, but I wanna figure out how I can be most helpful. This strategy completely flopped. To be clear, it only worked through brute force of hundreds of attempts that yielded a few conversations. And in those conversations, the big takeaways for me were, our restaurant owners would say to me, Adam, the key is driving, dine-in and reservations, because online ordering totally sucks for us.
We lose 30% of every order to delivery platforms like DoorDash and Uber Eats. We lose all of our customer relationships on those platforms. If you're gonna build something, build something around helping us drive dine-in and reservations, because that's how our business is designed to run. And I took them literally and focused around that.
So then built this specialized website builder that was around helping restaurants drive dine-in and reservations, and was hyper optimized for both search engine optimization and conversion rate optimization for that job entirely focused on a restaurant for the next two and a half years. Ended up building it up, bootstrapped to hundreds of thousands of dollars in profitable revenue heading into 2020.
We were so excited because we had just signed PF Chang's as a customer, which is a bootstrap startup, was a godsend. It was. Not only a large amount of immediate cashflow, but that contract had the ability to expand into over a million dollars a year through their portfolio of hundreds of locations.
So it felt like after years of grinding and thousands of rejections, things were finally starting to work.
Then March of 2020 hit, which was so brutal, the third week of March and fourth week of March were when the Covid lockdowns were mandated across the United States.
**Brett:** The whole thing is about getting people to go and physically,
**Adam:** yes, that is what we sold everybody on. That is what we were optimizing for.
That's what all of the different websites were built around. It was around helping drive the reservation and dine-in intent into customers for restaurants, and it was counter positioned against online ordering because that's what we'd hear they'd say. Just drive, dine-in, not online ordering. And it was, we're gonna drive more of the types of orders that make your business more profitable.
Dine in. And then in two weeks, that wasn't even a thing in the restaurant world anymore. So we lost not only our product market fit overnight, but all the customers that we just spent two and a half years grinding like crazy to initially acquire and build relationships with. And as a bootstrapped company, that was our funding and we had to get back down.
To a skeleton crew of me and one other person. Even then we had four months of cash left to figure something out, or I thought I'd have to move back in with my mom or something. It was a very scary time after a few days of, of being truly just petrified thinking, if there's a way out of this, I, I don't see it yet.
I, I started calling all of our previous customers and asking them, how are you thinking about this? What do you need to be successful in this time? In those conversations, they were now screaming into the phone what they'd been saying for years, but in the most extreme possible way, saying, Adam, online ordering is killing us.
GrubHub is killing us. They're taking 30% of every order. Our profit margins are just 5%, and if this continues going on, we're going to lose everything. So that's what inspired in that last week of March, us committing to refocus the entire website builder around online ordering and build the online ordering module to our product, which we then launched in May.
Praying to God that this thing would take off and work. And then thank God it took off over those next 10 months. We went from no customers, no revenue, about to be no money, to then thousands of customers, over a million in revenue, over $10 million in venture raves from all these famous investors. It felt surreal and we had all this newfound momentum towards that original vision of building the software that makes local business owners successful in the online future.
**Brett:** And take a step back. When you spent this time doing what would be considered customer research, you reached out to thousands, talk to hundreds of different small business owners. What was the level of conviction you had before you built that first version of the Dine booking product?
**Adam:** I didn't interpret them not responding to my cold outreach as them not being interested in what I was doing.
I interpreted it as them being extremely busy business owners that are constantly being bombarded by salespeople and just wanting to stay focused on growing their business. But I didn't take it personally and I didn't ascribe the meaning of. oh They don't care about what I'm doing, which maybe was wishful thinking, but it was wishful thinking.
That served me because it ended up leading to then doing enough outreach where I'd have enough conversations and I was committed to making it work regardless of how many times I had to be rejected. So when I had those few conversations, I continued the wishful thinking and I'm like, Ooh, it sounds like if we can drive them more dine-in and reservations they'd be interested in in buying that and paying a lot of money for it.
And one of the things that we did in the early days that was extremely important was we had a very high price for restaurant owners. We were charging $2,000 a month as a website builder around driving dine-in and reservations, which to put. that into perspective Typical website builders that restaurant owners use are Wix and Squarespace, and they're 49 a month products.
So we were 20 x the price. And in order to command that price, I thought to myself that we've gotta deliver an ROI that is commensurate with the cost.
**Brett:** How did you decide on that pricing strategy?
**Adam:** Knowing that we needed to be profitable for those first two years, and that was the only way to be profitable.
And knowing that it would give us a huge amount of signal if they were willing to pay that much money for a product, which ended up being a, a huge godsend. That still carries through to the business today. We're still by far the most premium price product, and it ends up being a really good forcing function for developing an excellent product that focuses on the outcome and ROI and doesn't just get lost as another tool of software that they can maybe use.
**Brett:** So did you have a few restaurants say, we will pay you $2,000 a month? Yes. If you can build this. And that's what gave you the conviction to go build the first version.
**Adam:** Kind of, when I say kind of, I mean, it was a very long time before we got any restaurant owner to take the meeting with me, uh, from a lot of cold outrage and door knocking and cold calling and all the rest, and the first few meetings didn't go that well, but maybe meeting seven was with this restaurant owner, Morton Cog, the owner of Tortilla Republic in West Hollywood.
And after emailing him seven times and then cold texting him, because I realized that I could find people's cell phone numbers online using background check tools and basically docx him and used that to break through the noise, I cold texted in. He was intrigued enough to take the meeting. Then in the meeting, I, I gave him the whole presentation.
I, I demoed for him what I'd done for my mom. We had a very scrappy product, but it was still a product. We, we basically had forked WordPress. Built a version that was super opinionated that had all of the best practices for restaurant owners to drive SEO and conversion in this extremely contrarian way.
When I say contrarian way, I mean. From the very beginning, we've taken the view that all small business software before owner has been built incorrectly with the assumption that customizability is king. The story that small business software companies tell themselves that leads to this assumption is we need to build a tool that helps small business owners bring their vision to life that they can customize with their website builder Wix.
They can choose between thousands of templates and then figure out what headline and subhead and the call to action to use what structure to put on their homepage. Sounds really good in theory, but then in practice, what I noticed with my mom using Wix and a lot of other local business owners that I had met at that point, they make mistake after mistake, mistake against best practices of driving sales and then jeopardize the only result that they actually care about of sales.
Mm-hmm. So from the beginning, we took this very contrarian stance that customizability is stupid. What we actually want Is this proven system that has all of the best practices out of the box in a way that the small business owner can't screw up and we're not gonna do customizability. So it was this version of WordPress that had been built to enable them to modify a few sections of the website, but mostly use this very rigid structure of the sections that needed to be there to rank at the top of Google and to drive maximum conversion for dine-in and reservations.
So that was what I was showing them, and he was very skeptical. Naturally he is like, wait, why? And I, I explained that there's, there's 90 plus factors that Google factors in to whether you rank at the top, that many of them are very technical things, whether your images have alt tags and whether your meta title has the right keyword in it.
And basically this just does all those things for you so you don't have to think about it. He's like, Adam, I'm not sure about this. What's your mom's dog room business called again? And I told him, Mo, it's Groom on Nemo Street. And he's like, oh, that's where we take our dogs. And I said, how did you hear about Groom?
And he said, Google. And I said, yes, that that is what we're doing for your restaurant. When we currently Google Mexican restaurant and tacos and all these other terms, SDOs, the Mexican restaurant down the street is beating us, and he's like, SDOs has terrible food. That is ridiculous. We've gotta beat them.
Instead, he said, $2,000 a month is a lot, but if you can prove to us for 90 days that you can meaningfully grow our sales, we'll pay it. Got him set up that day. Then over the course of 90 days, he saw his sales rep more than $10,000 a month. It was crazy because there's so much search volume for all these different restaurant terms.
Even today, interestingly, there's millions of Google search queries related to restaurant discovery in the us and it is the best way for restaurants to drive discovery. It's still not DoorDash. Uber Eats. The vast majority of restaurant discovery still happens on Google, but that was especially true eight years ago.
And his sales popped. Then he is like, this is awesome. We're paying 2000 a month. And I'm like, yes. We got our first customer. And he is like, I didn't mention this because I didn't wanna get your hopes up, but we also owned taste this American restaurant down the street. Can you do this for taste too? Yes, we can.
So then that became two customers. He studied a point to of a very happy customer using this product that then in future cold outreach led to an increase in response rate and more credibility in demos. It was still a ton of brute forcing for those next six months to get a few more customers paying that price point.
But it got up to six figures in ARR at which point eventually I'd had enough between cold outbound. I didn't wanna scale a business around that because it was so brutally hard in so many different ways, and I knew that if we could figure out a way to, instead of going to restaurant owners, have them come to us and already trust us as an authority in the space that can help them.
That it would totally shift the way these conversations went and a lot more people would be interested and buy and it would scale much better.
**Brett:** So in that first six months you had, you ended up getting, how many customers
**Adam:** First six months, maybe seven to eight customers paying two grand a month a piece.
And it was all driven by this sort of just outbounding hold outbound brute force and cold texting people. Even the finding people's cell phone numbers through these background check services online, like in Intes and a bunch of others, was great.
**Brett:** In that first six months, were you questioning, are you doing the right thing?
**Adam:** I was so energized by what I was seeing in my mom's business and now Morton's business and a bunch of the other early customers, Mauricio's business. We had all these great group chats going on with their managers and their business partners, and so I, I didn't like question. This idea of is there enough market pull I, I wasn't familiar with any of these startup terms or startup content at this point.
I was just like, I'm gonna build a business around this no matter what it takes. Did you have anybody trial the product and then churn in that first six months? Yes, I remember very well. I had gone to this restaurant conference and met the owner of this other Mexican restaurant that was in Arizona and he seemed very interested.
We did the same paid trial type of thing where free trial, but if it works, you pay us money. It actually worked. But there was a disagreement with his marketing person 'cause this was good scaled up brand with a few more locations then we were used to, and I think in retrospect that the marketing person felt threatened by me and sabotaged the pilot, which was a bummer 'cause I'd spent a bunch of time on it and I was very sad about that.
But those first few customers actually lasted a very long time. 'cause I was not only the person who sold them, I was their customer success manager. I was checking in with them constantly. I was making them weekly loom videos. Like, Hey, just reviewing the progress that we've made. We'd love to hear about your sales lately so we can map this back to the amount of new discovery we're seeing.
And basically walking them through, through Google Search Console, the Google Business profile, like how their results were trending over time. And I think they really loved both the personal talk as well as the real sales results that they were seeing that justified the cost.
**Brett:** Maybe share a little bit more about what that looked like for those first five or seven customers.
So you had this early prototype, what else were you doing to make them successful?
**Adam:** I would split this into two different parts that made them successful. The utilitarian part of how much in sales, this is driving me and the emotional part. Which is how do I feel about using this product and do I feel like I'm making progress?
I think most people would assume that the utilitarian part of sales, sales, sales is 90 plus percent of the equation of whether they continue to retain and use the product. But I would argue that it's at least 50% emotional, if not more, and 50% sales oriented people need to feel like it is emotionally meeting their needs of making progress.
And there's also this interesting emotional need of feeling smart and ahead of the curve in using cutting edge technology that relates to software products. Is there social status that is gained among their business partner and their general manager and all of the other business owners that they know because they're using a cutting edge new product?
And the way we met those emotional needs was I would do monthly progress calls with their entire team, so that would make them feel like they were getting state of the art, technology and service, and they felt smart for making the decision to trust us and use our product. And we would constantly get back to what are you seeing in your sales figures?
And it was the combination of those two things that led to those customers retaining for a very long period of time and also being happy raving fans that would then refer their friends.
**Brett:** Did you think at all at that period of time, am I creating a consulting service or a software business, or did you always know there was a path to create a high leverage, high gross margin software business or just weren't even thinking about those types of things?
At the time,
**Adam:** I was definitely thinking about will this business scale to the global impact that would make it worth all of this sacrifice and grind, which a consulting business would not. I was also balancing that with.
we need to build extreme Love with our earliest users and loyalty with those earliest users to be able to really deeply earn the right to sell more customers. And if I have to provide consulting like services to achieve that, that is a very good trade because providing the consulting like services to them where I was giving them all these weekly updates and hearing their feedback ended up having them treat me almost their CMO of their business where I got to see how restaurant groups operate with Morton and Mauricio.
And it was through that relationship building and exposure that then I was able to develop a clear perspective on how our software should evolve over time and what specific needs we could evolve to meet.
**Brett:** I also assume there's some irony. When you were building the company and that you were helping people with a great product, get more customers, and you had built a great product and service and it was hard to get new customers.
So there was something meta about that. I guess
**Adam:** there was, and it weighed on my mind heavily that we should be using the strategy we were advocating to other business owners to use to grow our own business after a ton of cold outbound, to develop that initial group of a few customers that were very happy, paying us thousands of dollars a month each.
I had enough of cold outbound at some point and it was just too brutally hard to get attention. And it also just felt weird or wrong to me that I, I was having to spam people with good intent, but still spam people with getting them to take my meeting. And I wanted to develop a model where they would instead come to me.
So I, I thought to myself, how do you develop the type of re reputation and authority where people come to you for help in solving the problems that your software solves? And the example that came to mind was actually, I love Neil Patel's content online. That's where I've learned a lot of online marketing stuff.
What if I became that authority in our space in publishing extremely valuable content on how to grow a restaurant? So I started writing blog posts on it, which did pretty well. And then I decided that as somebody who had no credentials. that I needed to figure out a way to get some level of credentials or authority to, to make when they would come to me, these conversations go better.
So I started realizing that there's a bunch of restaurant specific publications that all write for lists of restaurant owners about how to run those businesses. And that if I could write for them as the online marketing authority for those publications, that that would both help my blog do better, drive some traffic, and also position me more as an authority.
So I started now cold emailing all of the editors and owners of these different magazines to ask if I could do some guest posts for them. Almost all of them ignored me for a long time.
**Brett:** That seems to be a pattern with you, a lot of the cold, outbound, no one interested in you.
**Adam:** It was a pattern in the early days until Barbara Castiglia, the editor in chief at Modern Restaurant Management Magazine, probably felt bad for me because she'd ignored me so many times and she's like, okay, we'll we'll try one guest post, but it's gotta be really good.
And we'll, we'll see from there whether you can do recurring column Star magazine. So I'm like, challenge accepted. Let's do it. And this was early 2018\. I wrote this guest post that I'd researched so extensively and tried to the best of my ability to make great on the best restaurant marketing strategies for 2018 that then she posted in her magazine, which was also an online publication.
The online version of this went super viral. It went really, really well. It was her number one story of that year.
**Brett:** What were some of the things in the article?
**Adam:** It was me doing a lot of research on how the largest restaurants and most successful restaurants were growing. Oh, taco Bell and Chipotle and all these other groups that people admire are driving growth.
And then distilling that down into simple language that would help restaurant owners learn from what the extremely well-funded, successful restaurant groups were doing, but in a tangible way that felt actionable. Posted that article, it did super well. This was literally their number one article that year, which was so exciting.
And then I became a recurring writer, not only for her, but then I did outreach to the others and I'm like, Hey, I wrote for Modern Western Management Magazine and did very well. Can I write for you too? And so over the time I wrote for two publications and three, then four and more than 10, and also was writing my blog.
And what I realized in this process of content creation was that it was almost learning more about our customers in ways that would benefit them, was also becoming a distribution flywheel for us. But the work that I was doing to research all of these articles and write them was. Improving my abilities as a communicator to the restaurant community because I had now all of the language that restaurant owners tend to use to describe these different things at scale that then I could boil down to independent restaurant owners.
And it gave me much more depth of understanding of the broader landscape of restaurants. And it really started to drive us a lot of leads with super high intent people that had read the article and were like, this was awesome. I'd love to learn more about how I can work with you. Uh, and then I'd be like, I've got a great product that makes the number one strategy easier to do.
And they're like, let's do it. And, and so it started being this content flywheel first with written content. Now with video content, we've got a very popular YouTube channel in the restaurant community and Instagram page in the restaurant community that basically does the same thing of sharing what is working best for the most successful independent restaurant owners and the most successful large restaurant corporations.
In a very tangible and actionable way with the rest of the restaurant community, we've become the Moneyball of a restaurant where we're constantly keeping a pulse on what is working and then sharing that with the community. And this content has driven us millions of views over time and has developed a cult-like following, which I say in the most positive connotation of that word.
Among restaurant owners that want to take this more proactive role in making sure that they're successful in this online shift.
**Brett:** So as you sort of started to figure that out in month six and nine and 12, and this is all pre pandemic, did it now start to feel like people were lining up at the door? Or was it still a slow grind customer by customer?
**Adam:** It felt a lot better than the cold outbound stuff. To me, it felt like people were lying up at the door, but I wouldn't truly know what that would feel like until a year and a half later when we executed that post pandemic pivot and added the online ING bot to our product. That's when things went hyperbolic.
I thought it was great that we had a few dozen customers that had come to us from the inbound stuff. 'cause as somebody that has spent months grinding the outbound stuff, that was awesome. But what was really great was when we lost that online ordering product in May. We had hundreds of demo requests every week.
We had so many demos that I had to create group demos to fit all the restaurant owners in that wanted to chat with me, where I'd bring a group of three and four restaurant owners that had requested a demo, and I'd show them all the software together from this.
was such a grimy period of the company from like 7 AM Pacfic 10 Eastern till 7:00 PM Pacific. I was in demos all fucking day that had booked inbound and it was group demos, a lot of them. So three or four restaurant owners together would be seeing the software and then signing up. That was what real people lining up the door would feel like, and that's what real product market fit feels like.
I had a very weak version of product market fit if that, with the old Dine-in focused website builder thing, that costs $2,000 a month. But when we launched this online ordering product, it took off. Do you think the company would be successful if the pandemic didn't happen? Yes, because I believe where there's a will, there's a way and eventually would've figured it out.
But that was a forcing function that accelerated it.
**Brett:** Maybe sort of as you're describing this, the original instantiation of the product had a weak product market fit, and then you found extremely strong product market fit. What was going on in that setup that kept it bounded in a certain way?
**Adam:** The explosive momentum came from when our product shifted from being this nice to have to, this must have product to survive, which is how it was viewed when it was this online ordering product in May at the start of the pandemic.
That made all the difference in the amount of inbound demand and intent to buy even before the conversation started, and that's what real product market fit feels like. I realized in retrospect, the other thing that shifted over that period was I'd long had this suspicion that part of the reason why it was hard to acquire customers is because we were the most expensive thing that they could buy in the software world by a margin of at least double, probably triple at 2000 a month or a.
thousand dollars a month or we'd really discount And I thought to myself with this online ordering product, we actually have the payments blowing through the platform. So what if we could perfectly align our incentives by just charging the ordering customer of the restaurant, which the restaurant calls the guest, a dollar 50 fee on every order we could make more than what we're currently making and make it a no-brainer.
Easy yes for the restaurant owner to say yes when they need this online ordering product that helps them drive direct volume. So that was what we relaunched in May. It was partially the online ordering module, but it was also partially this new business model of it's going to be free and we're gonna make a dollar 50 for every order so that we're incentivized to drive you as many orders as humanly possible.
That combination of like free and extremely relevant needed product is what led to that explosive traction and growth.
**Brett:** Before we talk a little bit more about that pivot point at month 18, what was the product and service that you were delivering?
**Adam:** It was just a more advanced version of that.
**Brett:** And it basically allowed you to create a website and then you did the SEO optimization on the backend.
**Adam:** Not quite. What differentiated owner's product is this very contrarian view that restaurant owners don't need another tool to figure out how to create a website, because when you're creating a website with a website builder, the way that works outside of owner even today is it is on you to figure out.
All of the different thousands of little pieces of that website. So from the very beginning that WordPress based V zero of our product was, it is not going to be on you to create the website. We're going to create the website based on this structure that we're constantly testing for all of the other restaurants that we're using to figure out how we can make it perfectly, not only rank at the top of Google, but also match the intent that a customer has when they're evaluating which restaurant to go to.
When you are a potential new customer of a restaurant, first landing on their website, you're asking yourself first, what type of restaurant is this and what makes them distinctive, which we realized we could boil down to a really pithy phrase as that restaurant's headline that would also as a subhead include the most important primary keyword for them.
Then. One of the next questions you're going to ask yourself is, is this restaurant popular and can I, can I trust it and rely on it to order food from this restaurant? So we quickly pull in social proof in the form of reviews that we take from Google and Yelp on the restaurant's website, because more than 70% of new customers of a restaurant are factoring in reviews to determine whether to eat from that place and so on and so forth.
And that was even the product at that point. It was a nascent version of it, but that was basically what we were selling and why people were willing to pay more for it because it was much better at driving sales growth.
**Brett:** So going back to the pivot, explain a little bit more detail. What was that first version of the new widget that you shipped in May of 2020?
**Adam:** It was the ultimate way to convert. Your website visitors into direct online orders, which is a combination of both creating an easy user experience of going through, loading up your cart, getting through the checkout process, and the right incentives for the guest to actually want to order directly from a restaurant instead of ordering from the delivery apps.
The big mistake that restaurants even still before owner make is nobody tells the guests why they should order directly from the restaurant in their own interests. They all say it's better for the restaurant order directly, and while that resonates with 10% of the population that are making these decisions based on what's better for the restaurant and the restaurant owner, the vast majority of consumers are making the decision based on what is better for them, which is the combination of either value.
or convenience on the value side, this is the one that's easy for independent restaurant owners to win on that we made easy in that product to understand, which was, where do I get the most bang for my buck and save money? So we basically showed them, you're saving this much money in fees on every order.
'cause it's not just 30% that these delivery apps take from the restaurant, it's also 20% on average that they're charging the consumer. So you're not gonna be paying that 20%, you're saving multiple dollars on every order. And then we also added in a loyalty program as a fast follow, which gives them free food every two to three orders to make it significantly better value in ordering directly from the restaurant.
And it was this original messaging around, we're not just going to put an online ordering link on your website, but we're going to optimize it to. Maximize the amount of people that actually want to use it and understand why it's better for them to use it so that you're able to drive a lot more of these orders directly to you and not through the channel where you lose all of the profit margin and all of the customer relationships.
**Brett:** And it was still fulfilled through Uber and DoorDash, or how did the food actually get to people?
**Adam:** Yeah. It was also, in most cases, fulfilled through delivery partnerships, including with those two. In the early, early days, it was just one of those partnerships, but it was enough to cover all of the restaurants that were signing up.
And the magic there is that it doesn't just save the restaurant money and save the consumer money, but it also ends up being a. More profitable, more sustainable order for those delivery apps because they don't have to spend any money in acquiring or retaining that consumer demand when it's fed to them via API call.
The driver tip also tends to be more when people are ordering directly from the restaurant, which offsets the driver cost and ends up making it higher gross margin.
**Brett:** Do you think you could have started the business with that product or you actually needed the pandemic to get product market fit for it?
**Adam:** If I knew then what I know now, we would've started with that product. The pandemic accelerated the. Product market fit. It took it from strong to extreme in first round terms, but it was already pretty strong because everybody, even before the pandemic, was extremely frustrated and concerned with how the delivery apps were impacting their business.
And were looking for a way out. Even in those discovery conversations that I'd mentioned, people were saying, online ordering sucks for us. I made the mistake of taking them literally online. Ordering sucks for us. Just drive, dine-in. Okay, literally, I will do that, but I should have taken them seriously and asked myself, is there an even better way to solve this problem rather than circumvent the problem?
The solution they were proposing of just drive dine-in was circumventing the problem, but the online sales growth was already very clear. This is the fastest growing segment of restaurant revenue by far, and has been for the past 15 years, and clearly it's the future. So if I knew then what I know now, it would've been easy to start with this value proposition and it still would've gotten.
Significant adoption and then would've been accelerated even further from the pandemic.
**Brett:** Maybe you could talk a little bit more about what happened next. May you launch the new ordering product you're doing group demos. Talk about what happened like in the most specific way, how you chose to grow the business Over called the next 90 days into the summer of 2020.
**Adam:** That was when we raised our first round of venture capital, which accelerated the rate of progress in pretty much every dimension of the business we were able to invest in having a. A few engineers and build up a sales team. So it wasn't me doing all of the sales and support. We got a support team too, and went into company building and scaling mode with those additional resources, at which point we started to hear from customers.
Adam, this online ordering thing is awesome, but it's so annoying and expensive and time consuming to have to use 15 other tools to power every other piece of our restaurant online. We're using Wix for our website, churn Out for our branded app, MailChimp for email, easy text for text message marketing, five stars for loyalty, and 10 other tools for every other piece.
Catering and reputation management. Can you do those things for us too? We started saying, yes we can, and one by one building all of those different point solutions into our platform to replace them so that we could build the only software that restaurant owners needed to be successful in this online future.
That's what took our growth from Pretty Good before to then. Bananas awesome. It took that product market fit to extreme because now it was solving a whole set of online problems for the restaurant owners and saving them huge amounts of money just in the subscriptions they could cancel when they were first signing up.
Not to mention the massive sales growth benefit that they would see when their email marketing and CRM and text message marketing were happening in conjunction with the data from their online ordering platform, which is what we've scaled into today.
**Brett:** Did you think about raising money? Before that point, or it just wasn't even really a consideration.
It, it was like a non-decision.
**Adam:** I had thought about it, I'd fantasized about it. Really, it would be great to be able to do this, but for the longest time in starting off, I didn't know anybody in tech. I didn't know venture capital was a thing at first. And then when I realized it was a thing, I didn't think it was a thing that would be accessible to me.
I didn't know where to start. And was, in retrospect too, focused on building the business the bootstrapped way, maybe at some level out of pride or imposter syndrome. And then when venture capital became an option, which came with all of these people that could really help develop my leadership and product abilities and, and advise in all these different ways, it felt like this huge blessing and superpower that I'm, I'm still extremely grateful for the whole story of that.
How that happened is bananas, if you're interested.
**Brett:** Yeah, go for it.
**Adam:** It happened through the Thiel Fellowship because I'd applied for the Thiel Fellowship a year prior and I hadn't gotten it. And then I reapplied.
**Brett:** No, I thought Thiel Fellows are to get you to drop out of school. You had already dropped out.
**Adam:** I was four years after dropping out of high school when I got it.
Which we are working on evolving the program to be even earlier. Yeah. This year in particular, which I'm
**Brett:** What made you think of a, of applying to it in the first place?
**Adam:** I'd heard that there was this program that was trying to prove that college wasn't necessary to be successful. That gave young people a hundred thousand dollars grant for not going to college.
And that sounded pretty awesome with somebody that already wasn't going to college to have not only the money, but the resourcing and network behind that. So I, I had applied, I, it wasn't impressive enough to get it. The first time I applied, the second time I'd applied, I thought that I'd finally be able to get in because this was after we'd signed PF Chang's as a customer, which alone was worth over a million dollars a year.
As that revenue expanded for us, we had all these dozens of independent restaurant owners loving it. This was still pre pandemic pivot. Things were really going well in the business. When I'd applied, it was end of 2019\. 'cause we had just signed PF Changs. We were heading into 2020\. Then by the time the interview came around to start going through the process of discussing more about what I'd built and how I saw it developing, our revenue had been flattened weeks prior by the start of the pandemic.
And I, I was so intimidated going into these conversations because all of the progress and traction that I'd applied with was wiped out from the pandemic. We had just launched this online ordering thing, which was just starting to take off, but we were also very close to running out of money. So I remember getting into this interview terrified.
So I explained like it was previously this other thing that was what had driven those impressive revenue numbers. Now we've got this online ordering product that's really starting to take off and I've got way too many demos. Then I can even sign up. And that's starting to work. But it's very early and honestly, we're also about to run out of money.
And I, I went and told the whole explanation of how, and John Andrew, my interviewer stops me and he's like, Adam, how'd you get into this whole world? And I told him, well, it all started with Minecraft servers. He's like, Minecraft servers? No way. What were your servers called? And I told him some of the big server names.
He's like, oh. I was the owner of Nirvana and we realized over this very beginning of the conversation that we were semi competitors in the Minecraft survey days. We were each major server owners and operators and knew of each other's games. And now fast forward, what was it, six or seven years later, we were in this other context of each building startups.
And he is like digs in more on, on how the business is going and the online ordering product and the traction we're seeing. And I show him my calendar of how many demos I've got booked and he, Adam, you finally found product market fit. After three years of doing this, you can't let it die Now. He knew we were very close to raising outta money, so he is like, I'm not.
An angel investor, but I really believe in what you're building and think you've had incredible perseverance to get to this point, so I'd love to make my first ever angel investment in you and help you find some investors to get the right amount of resourcing behind this thing. 'cause I think you could build something really special here.
And I, I felt like I. I was in a fantasy. I, I'm so grateful still for him having reacted that way. 'cause it ended up totally changing my life that day. He introduced me to the partner at RedPoint that had led his first round at coder, Alex Bard. And Alex jumped on with me, learned more about what we were building and how it was growing.
Not only was Alex extremely experienced in building small business software, but in a past life he'd owned a restaurant 'cause he was very passionate about hospitality and food. So he deeply understood the problem we were solving. Over the course of an hour long conversation, he's like, Adam, this is awesome and I really believe in you.
I'd love to be your first investor. Let me talk to the team. But I'd love to get a partnership meeting together where we could discuss what it would look like to, to work together. But I'm, I'm very interested and would love to be a part of this, which I'm also extremely grateful to Alex. 'cause we were such a shit show in those days in so many different ways.
And those two at the very beginning of the process. Just meeting them ended up totally changing my life because it was just a week later that we had this signed term sheet of this seed round and all of these people that I'd admired for years like Naval Ravi, K from AngelList, and Sean Rad, the founder of Tinder and all these other great people, Kimball Musk, who was a legend in the restaurant industry as somebody that had actually gone in from tech, became our first group of angel investors, and I started learning so much from them and got this newfound momentum and life breathe into the business as that round came together.
And this extreme gratitude to have venture money to use on this journey rather than building in the most scrappy, time consuming grindy way possible.
**Brett:** What do you think were the benefits of not raising money until that point, if there were any?
**Adam:** I would say the biggest benefit of not raising money until that point was the mindset it instilled.
Of being and feeling extremely blessed for the awesome thing in the universe that is venture capital. The ability to invest in your product and building your company ahead of where revenue would otherwise fund has very much. Shaped the way that I build the business today. So it was partially extreme gratitude for and never taking the blessing that is venture capital for granted.
And partially those two and a half years of being a semi product builder, semi support rep, semi salesperson, BDR au, doing all these different functions. Gave me a huge amount of perspective, both in how those roles work and in our customers lives, because a lot of them were treating me as their outsourced CMO and CTO for the restaurants.
I was being invited to their partnership meetings of restaurant owners where the business partners would get together and talk about the business and ask my advice on things. So I was able to learn their businesses at a much deeper level than if I had the resourcing to start to hire a customer success manager or hire a support rep, or hire an account executive in having to play every role myself and then being invited into their businesses in that more intimate consultant like way to be able to really deeply understand their needs and how they.
Thought about their world.
**Brett:** You started to talk how you went from a single product company to a multi-product company, and a lot of it came from your customer saying, Hey, you built this amazing ordering thing. Can you do messaging and you know, email messaging, tech messaging, et cetera, et cetera. What do you think you got right about the product or the way that you went about things that gave you the permission to then do a second and third and fourth product?
**Adam:** I would say it was the combination of them feeling like they had a direct line to the founder and CEO. Unlike with those other solutions, they were basically speaking to support reps or AEs that they weren't able to give that same level of feedback to business owner, to business owner. That paired with the fact that we'd earn their trust by making a promise of, we'll help you grow your sales, and keeping that promise, there's a huge trust shortage in business, but especially in the restaurant world where they feel like.
Over the past 20 years, there have been all these faceless corporations that have promised them great things would happen for their business if they signed up for their products, and then feel like that trust was abused and misused the way restaurant owners would say it is. They built huge, multi-billion dollar businesses on our backs while making our business much harder, eroding our profit margins, taking our customer relationships from OpenTable in the late nineties to Yelp in the early two thousands to a variety of other examples we could name.
That's how they feel about technology companies. So the idea that they both had a direct line to me as the founder and CEO, and that I'd earned their trust through making a promise of, I'm gonna help you grow your sales and drive direct business. And keeping that promise led to them wanting to be proactive thought partners in our product roadmap and thinking about how they might be able to use this trust that they developed in us to solve all of their other online problems too.
**Brett:** So how did you decide what the second product was gonna be?
**Adam:** The combination of hundreds of conversations with our customers and. Trying to distill which of their needs was the single most important to solve, which was interestingly reviving our website builder and making that a necessary pairing to the online ordering product.
Then it was adding our CRM email marketing and text message marketing, because in those customer conversations I'd hear them say, this is really important. We also want this to work in conjunction with our website, which at the time we kind of had to fragment off for most customers for a different complicated reason about how they were previously set up.
But the online ring product was going really well as a standalone product, and then we bundled it with the website and bundled it with the CRM, and it was able to more holistically work towards both meeting their perceived needs of, I need something that does this for me. And it also was able to more consistently and scalably drive the outcome they were buying the software for, which was growing sales profitably when these systems were.
Integrated and worked in conjunction using each other's data. Like the online ordering product is able to drive more sales if it has a high converting website pair with it. And the high converting website drives more opt-ins to the email marketing and CRM, both as a function of the lead capture forms on a website and through the online ordering product, which then we can automate messages to drive more online orders and website visitors.
So there's this beautiful synergy to each of these products where they work even better when they're combined.
**Brett:** How long after the May launch of the ordering product did you then launch or relaunch the website builder? Did you feel tension to just focus on the core? Because you had these people pulling this sort of out of you, and I assume that you were just overwhelmed with demand and it would be easy to say, let's just for the next couple years focus on this ordering product.
**Adam:** There was definite tension because the conventional wisdom, including a lot of the advice we were getting is you've gotta become a best in class point solution before you think about going multi-product. And this was at a point where our point solution had just started to work and it kind of saved the business.
But that point solution was still not ideal by any stretch of the imagination. It was buggy, it had uptime issues like the idea that we'd go multi-product while that thing was still barely working, but it just found extreme product market fit on the need it was solving and and immediately start going multi-product was extremely counterintuitive to a lot of the people that were.
Advising us for good reasons and good intent. But I knew that there would be a huge advantage from a business model standpoint and unlock from a customer value standpoint to adding in these other components while we optimize the online ordering system because they all work so well together and are able to drive more of that sales growth.
So this is one of the moments where I actually had to just trust my own instincts as a founder to go multi-product, and that ended up being one of the best decisions we ever made because it improved everything. It improved the customer's results. They were seeing more sales growth. It improved our retention rates.
It created a higher perceived value and willingness to pay. We ended up reviving the subscription model in addition to the transaction fee model that we were making. So we ended up monetizing in two ways as a result of being able to offer this more holistic solution. This was before the compound startup was coined by Parker and still at a point where it was pretty contrarian to start going multi-product so early.
**Brett:** When did you launch the new website builder?
**Adam:** It was less than a year after the online ordering product took off. That it, it actually didn't just get launched, but we bundled it. We said You can't buy one without the other. 'cause they work so well together, which we still do today. Like you've gotta adopt the whole system.
'cause the whole system is designed to work together and if you're buying us to grow your sales, this is what it takes to maximally grow your sales .
**Brett:** What was the process to get to that decision?
**Adam:** It was grandfathering in the people that just wanted to use online ordering. I explained to them why it would be so much more advantageous to add in the.
Website and add in the CRM and email marketing and text message marketing. A lot of them ended up converting and we basically offered to convert them over for free. Like saying You don't have to pay the subscription cost. I just wanna drive you more sales. Some people chose to just stay with online ordering 'cause they were for whatever reason attached to their prior website builder or email marketing software.
But it, it was few relative to the overall base at that point.
**Brett:** And the decision to force the bundle was that the impact was so significant or there were other underpinnings to the decision.
**Adam:** It was purely the calculus that the restaurant owner is buying our software to grow their sales profitably. And after seeing what happens when all of these different solutions work in conjunction versus working independently, it would not be in their best interest to just use one of the products as a standalone.
So we've gotta develop a customer experience where they use them all together. That will not only give us the ability to retain customers for longer and make them happier. But it also makes it that we can charge a higher price for new customers when these things are working in conjunction and the end state is one software that does everything you need to be successful in this new online world.
**Brett:** Did you spend time thinking about, in kind of this next phase of the business, sort of what's all the competition out there? How do we become a monopolist in the category? What's our competitive advantage? How do we develop a moat?
**Adam:** I've definitely thought a lot about each of those questions over the past seven years of building this company, and especially in the past four or five since the post pandemic pivot.
And where I've landed on my overall philosophy here is I've got a very clear vision of what the end state needs to be to drive as much value as possible for restaurant owners that trust us to power their restaurant in this online shift that's happening. And I also believe that competitors should be viewed as.
Resources to learn from. Not that they should ever drive strategy or be this looming, terrifying threat within the business, but resources to learn from is the way that I've viewed them from even early on, from reading a lot of biographies of great entrepreneurs over time, which specifically I, I take that to mean that you can think of them as free research and development factories where they're constantly running a bunch of experiments on the same group of customers.
And when some of those experiments work well, it makes a ton of sense to just shamelessly copy that approach to that specific product in order to bring that benefit into our platform. So we've done that a bunch of times over the years where we see something working well for a new product that a competitor releases, and then we learn from that and distill the best parts of that and build it into our own.
**Brett:** When you think about the SMB category more broadly. There's obviously examples of some companies who have been wildly successful, but also there's thousands of startups that tried to sell to local restaurants and businesses that either got stuck and they themselves kind of got capped at X millions of revenue or just the whole business was always upside down.
What have you sort of figured out in maybe a more meta sense that might be useful to other people that are specifically thinking about other things that they want to do for this specific customer segment?
**Adam:** To summarize my thinking on how to make the very brutally difficult economics work of serving local business owners and restaurant owners.
It comes down to making sure that the LTV to CAC ends up being very favorable well over three. And the way you do that is both dropping CAC through finding resourceful creative ways to distribute the product and maximizing LTV through delivering so much value in the product that you're able to charge a high price for it.
Ultimately, we're doing both. At Owner on the drop in cac, we've got not only this massive content marketing machine that. Is developing a large community of restaurant owners that trust us and are learning from all of the resources that we're putting out there for free, which then ends up making them wanna become customers.
But we've also got now our AI Greater and AI website generator that makes it so that restaurant owners in a matter of minutes and for free, can start to experience the benefits of growing their sales through owner before they give us any money at all, which ends up giving us customer acquisition costs in the future that look more like Squarespace or Shopify with lifetime values that are even greater than toasts over time because the attach rate is so high once you earn the trust on free products.
On the ensuring lifetime value is very high. That comes down to figuring out what the dollar ROI is on adopting your product. In our case, it's both sales growth and more importantly, profit growth. How do we reduce costs and drive sales in a way that makes it so that they profit, that they make for buying our full platform today at $500 a month or $6,000 a year is well in excess of $6,000 a year.
So we're constantly measuring what that number is and how much sales growth is happening on average of our customers, and optimizing it further as we add in more products so that we're ultimately able to acquire people with these very easy to use low cost solutions in the form of content or AI greater, or AI web, website generator, which have been massive growth levers recently, and are the future of how our business is going to grow.
And then on the customer journey, developing a value ladder. That gets them quickly from experiencing value and trusting our company, so then wanting to experience more of that value and being willing to pay more money so that they're worth far more than they cost to acquire.
**Brett:** What about sort of a, a, another meta question, which would be, what are the things that you've figured out in building this company that would be helpful to the next 17-year-old that's kind of looking for their startup opportunity and get going?
**Adam:** The team you build is the company you build. That's what I wish I'd figured out years earlier because it would've turbocharged our rate of progress. First of all, I have to give credit for that quote. It's a Vinod coastal quote who I've learned a huge amount from in watching all of his interviews and writing on this topic.
But it is the single most important thing that I've. Learned as a founder, that ultimately team is everything. Results of all kinds from a product perspective and from a growth perspective are downstream of team. So with that insight, I would've spent a lot more time obsessed with ensuring that I had a group of people that had superpowers, even in those earliest days.
Finding a really strong co-founder TTO is one of the biggest unlocks in our entire journey, which is a crazy story in and of itself, and I, I would've spent more time doing that, less time doing the brute force sales and onboarding and support work, which. To some degree was valuable, but I definitely passed the point of finishing returns and spending thousands of hours doing that in the early days from the level of insight that I was gleaning.
So first team you build is the company you build. Second, there's this other great quote from one of our investors that I spiritually believe in. I don't take literally, but I think he has a really great point, and it's the Naval Ravikant quote that the reason you do sales is because you don't know how to do marketing.
And the reason you do marketing is because you don't know how to build product. Now, I don't take that literally that if you build the best product, you don't have to do sales or marketing. But what he is getting at there is that there's massive leverage that comes from having a truly best in class product that people really love.
It makes the sales and marketing. Significantly easier. And I saw part of this in action when we went from having very weak product market fit post pandemic to then extremely strong product market fit in that pandemic pivot. But I've seen it as we've invested more and more time in product that it ends up making everything so much more efficient.
So if I could go back in time to that version of myself when I was 17, 18, or 19, spending all of that time brute forcing sales and customer support and all these other functions, I would've spent a lot more time thinking about the product and where things were going and how to make the best possible product and a lot less time doing the more manual, consultative service-based elements as well.
Not that those don't, don't have value, they have great value, but there's a point of diminishing returns that I, I passed by many thousands of hours.
**Brett:** Why? Why was that not intuitive for you in the moment?
**Adam:** The way I thought about. Business from the Minecraft server experience and then starting what would become owner was basically that.
The way team building works is that you figure out what jobs need to be done and you find people that have that skillset to do those jobs, which is this attitude that implies that you are the mastermind behind the business and that you've gotta get a a thousand helpers to help execute your vision. I think that's the way business is often portrayed in movies like the Social Network or various others that I'd seen, and that's how I assumed it worked.
What shifted in that is I realized that if I'm building a business where I am the person that is the best in the business at every one thing that I haven't built. A great team and that my job actually as a founder was not to be the hero that could do a thousand things in the business really well and hire a bunch of helpers to execute those things, but actually to find people with real superpowers that are much better than me at owning specific parts of our business or parts of our product.
And then. Do everything in my power to get those people on our team and then set them up to maximize their impact. The analogy I like using is in the Avengers, there's this character, Nick Fury, where most founders think in the superhero analogy that it is their job to be Iron Man or something, or the hook to have superhuman strength and this superpower in the case of Ironman, of this incredible suit and a thousand helpers to constantly do the engineering on the suit where they go and, and save the day on every little piece.
But the, the power of the Avengers is there's this character, Nick Fury, who doesn't have any of those superpowers of his own, and he humbly acknowledges that. But his superpower is actually constantly scouring the world for people with their own that can be a part of this bigger team and bigger mission.
And then convincing them to join this bigger mission and setting them up for success in a way that the Avengers are able to operate much better than any one of them can do independently. So that's how I view I. My role as CEO, now more than 30% of my waking hours go toward recruiting and specifically that form of recruiting.
We've got more than 20 founder types throughout the company with superpowers that have previously started companies. Many of them have raised millions of dollars in venture capital or one hackathons and are extremely capable builders. And we basically set them up for success and being able to make that type of impact through roles internally.
And it's partially that archetype. The other archetype that's extremely valuable for scaling a company is looking for people that Vinod Kla calls the gene pool engineering of a team, of asking oneself what are the biggest risks that we face in scaling up this company? One of those risks in our case, for example, is making the customer acquisition model of acquiring thousands of small business owners really efficient, so that even with a.
High endemic churn rates, which small business owners always will have. There is a really efficient distribution motion that ends up still making the LTV to C equation work. And so I asked myself then in this process, what are the companies that have successfully de-risked against that and still built really valuable businesses?
Two that came to mind were Shopify and HubSpot. Each built amazing businesses serving small and medium sized business owners through extremely efficient distribution strategies. So when it came time to look for our first sales leader, I met a bunch of the people who had built each of those companies and ended up recruiting our amazing now, CRO, initially, sales leader.
From initially having built the Shopify point of sale business from inception to tens of millions of dollars in revenue. 'cause he had so many relevant experiences to draw from and an extremely capable network that he'd already worked successfully with in solving a similar challenge that he could bring to us and de-risk that potential pitfall of building a small business focus software company.
Our marketing leader, David, was the head of marketing at HubSpot Asia, which he basically created this nascent market and made it very successful for HubSpot and similarly. Has a series of learnings from being obsessed for years with how to acquire small business owners effectively with a similar value proposition that he could take to this new experience and de-risk against that possibility.
Our, our team is built in one of these two archetypes, either industry veterans with amazing experience to contribute or founder DNA types, and the combination of the two unlock superpowers where you both get the founder intensity and extreme ownership mindset from the founder, DNA archetype. And you get the extremely relevant experience and network, and often intensity from industry veterans as well who have successfully de-risked the company.
So I, if I could go back and give myself advice, it would be to more clearly understand this secret of company building and spend a lot more of my time doing that in the early days so that I could develop a. Even stronger team faster.
**Brett:** Maybe you could sort of talk about this in a little bit more precision.
How do you know which tool you need industry expertise or founder DNA in any given slot?
**Adam:** I've stopped thinking about recruiting as filling slots in the company altogether. When we find somebody that is excellent in one of those two areas, we often create roles for them. This is the right answer. As a scale up post PMF, I wouldn't advise myself to do this pre PMF 'cause we didn't have the money to do it.
And even if we did, it wouldn't have been a bad idea. But post PMF, this dynamic changes where, in my opinion, the potential of the company ends up getting capped by the strength of the individuals on the team. So when you find extremely strong individuals that are in either of these two archetypes that either have extremely relevant experience or amazing.
Founder type builders. We basically create roles for them and it has worked extremely successfully. A lot of our highest impact people are in these types of roles.
**Brett:** What about when you sit down with a candidate, regardless of sort of how you would sort them, what do you look for that you think is differential relative to other talented founders?
**Adam:** I have studied how the best VCs evaluate founders and built my entire interviewing methodology around that, looking for the traits, mindset, and values of the individual. Entirely in my interview, I, on the skillset dimensions, don't assess those in an interview. I assess those via references, which I do a huge amount of references on any key hire, and a lot of our team has interviews that are designed to tease out those elements.
But when it comes time for my interview, I'm asking myself, is this person a force of nature? Do they have evidence of extraordinary ability? And some of the questions that I find most insightful are simple, open-ended questions like, what drives you or what books have been most formative to you, or what experiences have been most formative to you?
Conducting the conversations so that I can really deeply understand. What is that? The essence of this person, what they're motivated by, how they see their future developing, what superpowers they have, which I can often glean from these conversations, and I am able to develop a sense of who is going to be most successful at owner from those conversations.
**Brett:** What about sort of the, in inverse of the question, which would be, if you had to reflect on why you've turned out to be an excellent founder, other than perseverance and, and grit, what would you say?
**Adam:** Perseverance and grit are absolutely critical parts of the equation, but what I would add is the humility and self-awareness to constantly identify as a lifelong learner with.
Much to learn in a long way to go, which manifests in spending huge amounts of time trying to make myself better through reading books, taking courses, listening to podcasts at a much greater degree than other people would consider reasonable. We're talking over a hundred books a year, plus a lot of courses and podcasts.
I allocate time to consistently making myself better because I acknowledge that the person that I am today, the leader I am today, the CEOI am today, the contributor I am today is not good enough for the next stage of scale and to have any chance of being good enough. I've gotta be extremely proactive in making myself better through doing the things that condition my mind and give me the wisdom and lessons of, of people that know more than me, ultimately, so that I'm able to learn not just through my own experience, but through the experience of other people through.
A huge amount of time around that.
**Brett:** Where did that come from, or what's the source of that?
**Adam:** When I dropped out of high school, I had this fear that I was going to fall behind everybody that. Went to fancy colleges and was on that, that traditional track. So I promised myself that while my traditional education was ending, that my self-guided education would ramp up.
I started immediately from that point, reading hundreds of books every year, listening to any business podcast that I could find. We're talking tens of thousands of hours over the past 10 years. The reason I've listened to a lot of these episodes is this is one of the resources that have been useful to me.
And initially it came from that sense of fear that I would not be good enough to develop the life that I wanted or to get the things that I wanted, that I wasn't good enough, ultimately 'cause I wasn't, and that I needed to become good enough through having the humility of, first of all, acknowledging that and second of all, doing everything in my power every day to make myself.
The type of person that was capable of achieving what I wanted.
**Brett:** One of the things we haven't spent a lot of time talking about yet in detail is even though for most of the company's life, you've figured out this really unique demand generation engine, which was the guest posts in these important magazines and publications, content, early on, video, et cetera.
Most of that demand was then converted into customers through what would be considered a more traditional sales led motion. More recently, I think you've started to experiment with some really interesting sort of opportunities in in, in a much more product led motion. But maybe you could talk about how you thought about the role of sales led versus product led, you know, once you started to pivot into the post pandemic ordering product.
**Adam:** Such a great question because we're now seeing our fastest growing revenue segment as being product led seven years in. But we actually started, as you mentioned, with a very sales led model with that called outbounding, and then me doing all those group demos. So the way I think about this is when you're first starting out and have limited resources to sell to small business owners.
There are great advantages in initially having a sales led motion because it forces you to talk to customers extensively at every step of their journey, and it creates a higher perceived value on whatever product you're selling. There's a reason why all product led products are close to free because they don't have the level of perceived value or trust on the front end.
That commands a high price point. So in the early days when we had to command a high price point to be profitable or wanted to quickly accelerate our go-to-market engine. It was beneficial to have me and then a sales team explaining how the product works and what the benefits were and people were willing to pay more for it at that point.
What we've also realized is that to build a generational business with millions of small business owner customers, that we've gotta make the distribution model continuously more efficient and in order of magnitude more efficient to break the distribution bottleneck. That tends to stop small business software companies from growing well, and that is making it so that the customer is able to self-serve and experience as much value as possible as quickly as possible with.
Parts of your product so that when it comes time to expand into the full product, they already have that foundational trust in what you're building because they've used it and they're already partially onboarded and sold because of that. So the way our motion is looking now is a lot of our new customers are coming through this self-serve flow where they use our AI grader and AI website generator to first diagnose all of the problems with their restaurant's online presence.
In less than a minute, it produces this very detailed report that they can follow on everything their restaurant is doing wrong that makes them problem aware. And then we present this one click solution of if you want a website that addresses all of these things and doesn't take you more than 10 hours to fix them, which it would do if you followed this report.
It's just very time consuming stuff. Then you can use this one click solution that we've generated for you in the background because that then ends up giving the restaurant owner the confidence that this company is solving an important problem. 'cause they're first problem aware and that they've built a great solution that they can start using in a matter of.
At that point, there's so much trust and problem awareness, and so solution awareness that those customers can quickly ascend into higher value paid products when we deploy the sales team and it basically augments the output of any given sales rep or onboarding specialist when people come in. So problem aware and solution.
Solution aware and trusting that they've already used the product for benefit, which is ultimately the model that HubSpot and even Shopify to a large degree have iterated towards in making the model efficient in serving very small business owners.
**Brett:** And so there's still a light touch sale involved in there, but they're really primed through this workflow that you mentioned.
**Adam:** There's a light touch sale involved to get them to start stepping up the value staircase. We're structuring our experience as a value staircase. It started as just this platform that they'd have to leap onto. There was no staircase. So it, it requires a lot of trust to make that leap of faith and start paying $500 a month in this industry where the average restaurant owner is making 50,000 a year in profit.
So 6,000 a year is a lot that has worked for the people that were the most problem aware and solution aware. But it's left out the people that are less problem aware and less illusion aware and less trusting of a software company because they've been burned so many times. So what we've developed is these lower rungs on the staircase in the form of our AI greater and AI web website generator that enable them to, in minutes get value, drive profitable growth through implementing all of the different things that we call out about their online experience and having this one click website builder.
But then to get them to ascend into large LTVs, we have the sales team walk them through as a trusted consultant behind the product that they're already using that can help them activate it and use it further.
**Brett:** How would you articulate what product market fit is?
**Adam:** I would describe it as the effect that occurs when a.
product Meets really pressing customer needs and solves them both functionally and emotionally for the people that have them, which is a spectrum. There's degrees of product market fit from weak to extreme. I love that first round post on this and very much subscribe to that belief.
**Brett:** We always like to sort of wrap up with basically the question, who's the person that's kind of had a disproportionate impact on you in, in, in terms of building this company and what is the thing that they sort of imparted on you?
**Adam:** There's so many people that come to mind that have been so extremely generous and kind and helpful to me and have had an impact on me. It, it's very hard to choose between them. One of the. Taught people that comes to mind is the one that introduced us, Jack Altman, because in addition to being an extremely helpful investor and partner in building this business in all sorts of tactical ways that have shaped how we've grown and how we've thought about building team and building product, there's all these tactical things that he's imparted, but the most formative thing that he is done for me.
Is believing in me before I fully believed in myself, unconditionally believing in my abilities in a way that was really helpful in all of the ups and downs of this journey, because I admire it and look up to him so much that when he felt that way about me, it helped me get to a place where I felt it more about myself and has been extremely comforting and valuable over the years in a way that I am eternally grateful for and feel extremely blessed to, to receive from him.
He's one of the best friends and mentors and partners that I could ask for
**Brett:** Such a great place to end. Thank you so much for joining.
**Adam:** Thank you for having me. It's been an honor.
### 17,784 hours: Exactly how one startup founder spent 5 years building
URL: https://review.firstround.com/how-i-spent-17-784-hours-in-5-years-as-a-startup-founder-2/
Last updated: 2025-03-27T07:05:02.000Z
Sam Corcos, co-founder & CEO of Levels, on tracking every 15-minute block
_This post is for subscribers only._
### How I Spent 17,784 Hours in 5 Years as a Startup Founder
URL: https://review.firstround.com/how-i-spent-17784-hours-in-5-years-as-a-startup-founder/
Last updated: 2025-05-05T16:30:35.000Z
*Here on the Review, we devote many thousands of words to every granular detail of company-building. From mastering* [*founder-led sales*](https://review.firstround.com/0-5m-how-to-nail-founder-led-sales/)*, assembling* [*the early team*](https://review.firstround.com/our-6-must-reads-for-hiring-tactics-that-break-the-mold/)*, and* [*crafting the initial product*](https://review.firstround.com/8-product-hurdles-every-founder-must-clear-this-pm-turned-founder-shares-his-playbooks/)*, our archive is packed with tactical advice for make-or-break moments.*
*But here's the question that keeps founders up at night: How do you actually structure your day when everything feels urgent? You know the mission-critical tasks: signing customers, refining product, nailing go-to-market, recruiting top talent. The real challenge? Turning this daunting checklist into a rhythm that doesn't leave you drowning in to-dos.*
*A few years ago, we got a rare peek at* [*exactlyhow one startup founder and CEO spends his time*](https://review.firstround.com/an-exact-breakdown-of-how-one-ceo-spent-his-first-two-years-of-company-building/) *— down to the minute.* [***Sam Corcos***](https://www.linkedin.com/in/samcorcos/?ref=review.firstround.com) *is (in his own words) obsessive about tracking his time, and after the first two years building* [***Levels***](https://www.levels.com/?ref=review.firstround.com)*(a metabolic health tracker), he decided to crunch the numbers.*
*Unsurprisingly, we weren’t the only ones floored by the astounding level of detail that Corcos shared — the article went on to rack up tens of thousands of readers, and it continues to be a resource that founders (and folks considering taking that plunge) return to. If you haven’t read it before, we can’t recommend it highly enough.*
*So when Corcos came to us three years later, we jumped at the chance to dive back into the data. And while much has changed for Corcos (like marriage and a baby!) and Levels has graduated from 0-1 to the 1-10 phase, his obsessive commitment to tracking every minute hasn’t waned.*
*What happens when a startup levels up from survival mode to scale-up? How does a founder’s calendar (and its ruthless honesty) reflect this evolution? That’s what we wanted to find out. So, with that, we’ll pass the pen back over to Corcos.*
---
It’s a bit weird to see five years of your life plotted on a chart. But many years into relentlessly tracking my time, I’ve gotten used to it. When every minute is accounted for, there's no room for self-deception about where your time actually goes, or whether you're truly focused on what moves the needle.
With that, here’s the chart for exactly how I spent my time working on Levels for the last five years:
5 years' worth of time spent on Levels
Hitting the five-year milestone, I was certain the data would show dramatic shifts from our two-year check-in. After all, the leap from pre-seed to Series A changes just about everything. You have more folks on the team, more customers, more complexity. It certainly *feels* like I spend my time differently than those early chaotic days.
But the numbers tell a different story. Take team management, for instance: Even with triple the number of direct reports, the time allocation in this bucket barely budged year over year.
> As the product matures, the customer base expands and the team grows, it seems inevitable that the founder spends their time further from the nucleus. Less coding, more strategy discussions and 1:1 meetings. And yet, that’s not been my experience.
Don’t get me wrong — there are plenty of times when I’ve felt the pain of a larger, more unwieldy org compared to when it was just a group of folks who could all fit around the table together. **But I’ve found there are a lot of things that founders *assume* have to change about how they spend their time as a startup grows up, but these patterns can be corrected.**
When Levels has begun to slip into these predestined paths, we’ve taken drastic measures to right the ship — in the most extreme case, completely overhauling our approach to software engineering (more on that later).
A few years ago with our first installment, I set out to share an unvarnished, unsanitized view into how a founder actually spends their time. Not to be prescriptive to other founders or to preach the “right” way for how you should allocate your time when building a business. But my hope is that this project gives other builders a chance to press pause and reconsider where their calendar isn’t serving them, or their startup.
## **The burnout fallacy**
Before diving into the data, let’s get something on the table: Admittedly, I work a lot. During the peak of our seed round fundraising, I averaged 110 hours a week. I haven't had a single month in more than five years where I've worked fewer than 50 hours per week.
But no matter how many hours I’ve worked along that 50-110 scale, I’ve never seriously flirted with burnout. This is not thanks to some sort of burnout-banishing superpower. Over time, I’ve come to hold one simple truth: **burnout is only loosely correlated with hours worked.**
In fact, as I reflect back on the data, it might even be the opposite. The times when I’ve worked the most on Levels were the periods where I was most inspired by the work I was doing. I’ve seen similar patterns play out with founder friends of mine.
> Burnout is much more tightly correlated to working on things that suck your energy than the number of hours worked. You can work 10 hours a week and still feel like you’re burning out if what you’re doing for those 10 hours is quite draining.
With this as my guidepost, I’m extremely diligent about spending my time on the things that give me energy. That means making space to get into the codebase and write software, batching my meetings so that I have more open space in the day, and blocking off time for strategy and writing.
That’s not to say that 100% of my time is spent on tasks that bring me energy. There are plenty of periods as a founder where you have to just grind it out on activities that you don’t enjoy. For example, there was a point in time where we had to clear out some of our technical debt, transitioning from our hacked-together system for running the company (with no database, no source of truth, and mostly a bunch of spreadsheets) to an actual database. That meant manually reconciling discrepancies between *thousands* of orders.
Looking back, was it my favorite 50 hours I’ve ever spent working on Levels? Far from it. But it was a finite activity, so I could live with it knowing that returning to more energizing work was around the corner.
### **Takeaways:**
- **Do not accept that some degree of founder burnout is an inevitability**. Be relentless about spending your time on the things that give you energy and propel the company forward.
- As the saying goes, **if you find yourself in a hole, stop digging**. I've found that it's important to make space to reflect and consider what my priorities should be on a regular basis.
- **It's also ok to not feel inspired all the time**. When those waves come, I make some space, do some reading and reflecting, and think further ahead.
## **Don’t take a hiatus from the codebase**
Here is a story that will probably sound all too familiar to a lot of founders. In the early days, I devoted many hours of my time to writing software, building the MVP alongside a few other developers.
But then, around that first year mark, I stopped writing software and started passing the baton to the product, design and engineering leaders on the team. Meanwhile, I shifted more of my focus to growth, operations, strategy and recruiting.
> I took about a two-year hiatus from the codebase. This was a costly mistake that was quite painful to undo.
This led to completely overhauling how we approached engineering at Levels — but first, you need to understand how we got here.
Time spent on software development
### **Engineering Era 1: Pork Tacos (2019-2020)**
We call our first era "Pork Tacos," named after our most memorable early bug. In our first release, every single meal logged showed up as "pork tacos" because I'd forgotten to remove a hard-coded test value. (It was fine — almost nobody was using the product at the time and we shipped a same-day fix.)
Looking back, this era was magical. Our velocity was insane. Our process was beautifully simple: Ship fast (often messy), get immediate feedback, iterate overnight. No PRDs, no endless planning meetings, no bureaucracy. Just our small team of 10, talking directly to users, and pushing code.
A lot of the most popular (and foundational) features in the Levels app came from this time period. In fact, the hastily-written code for many of these features is still in the app today, largely unchanged. Sometimes I'll spot some questionable code, run git blame, and laugh when I see my own name from 2019.
But eventually we hit a threshold. The feedback we were getting from our customers was too incremental — we spent too much time reorganizing how things were laid out in the app and debating color schemes instead of shipping breakthrough features.
In other words, we needed to take a bigger swing and the conventional wisdom was clear: It was time to professionalize our engineering org. Time for experienced managers, proper PMs, and a real design team.
That’s when everything started to break down.
### **Engineering Era 2: Corporate (2021-2022)**
At 60 people, we weren't exactly Fortune 500\. But "corporate" perfectly captures what this era felt like. More managers. More layers. Bigger product teams and an ever-expanding design org. All while our revenue struggled to justify our bloated headcount.
Levels org structure, pre-reboot
What happened next was all too predictable: Velocity ground to a halt. Two-week projects ballooned into three-month ordeals. We drowned in pre-work, specs and planning meetings. We’d spend months building in one direction, then change direction without shipping anything. Or worse, we'd ship features nobody wanted and celebrate our "wins." Meanwhile, our app was becoming a buggy mess.
Our product and design team had grown to 12 people, nearly matching our 13 engineers. I'd[ publicly stated that I wanted](https://podcasts.apple.com/us/podcast/75-what-is-product-and-what-does-a-product-manager/id1563263076?i=1000551383304&ref=review.firstround.com) to maintain a 1:5 product-to-engineering ratio at minimum. We'd done the exact opposite.
The consequences were severe. Our support team flagged critical issues, but nobody moved. Why? Because in our beautiful new org chart, nobody felt truly responsible. Product teams could flag problems but couldn't fix them. Engineers had devolved into code monkeys, robotically implementing whatever specs landed on their desk.
> There became a huge disconnect between what our customers were saying about our product (“it’s getting worse”) and what we were telling ourselves (“it’s getting better”).
There are a lot of idioms to describe how I was feeling around this time: treading water. Pushing on a string. Screaming into the void. But looking at the data, I have no one to blame but myself. It’s easy to see from reviewing my time from these couple of years that software development was not my priority, and it should have been.
### **The Reboot**
You can't fix terminal bureaucracy with pep talks and OKRs. I took control of software development and laid down an ultimatum: **Hit 15% month-over-month growth, or we’d reduce the size of the team.**
The target was aggressive but achievable — and we missed it. We needed to take action and reduce our burn, while we still had cash in the bank to turn things around. So we took drastic action: dismantling our entire product and design org. Instead, we’d make use of contract design help and lean on our support and engineering teams to make product decisions.
This was, in part, inspired by the “[responsible engineer](https://medium.com/carre4/inside-spacexs-culture-of-accountability-312c3507cbca?ref=review.firstround.com)” culture at SpaceX — and our goal was to get back to an environment where engineers are major decision-makers. In tandem, we also elevated support within the company, giving them significant input into our decision-making process.
Levels org structure, post-reboot
### **Engineering Era 3: The Scientific Method (2023-present)**
Sometimes the oldest ideas are the best ones. We rebuilt our entire development process around the scientific method — the same approach that's worked for centuries, and largely the same ideas from the book “The Lean Startup.” Every project starts with a clear hypothesis. We build to test it, measure the results, share what we learned. Anyone can propose an experiment, but I personally review every hypothesis that might touch our product.
Every time we learn something new, we write up a retro, share it with the whole team so everyone can benefit from what we learned and agree on next steps.
> Everyone in the company, regardless of their role, must talk to a customer at least once per month. That includes every engineer and executive.
Projects that used to take months now take days. Huge waterfall projects now get shipped incrementally with feedback from customers along the way. The app is stable, performant and bugs get fixed quickly.
That’s not to say everything at Levels is perfect — we still need to get better at working cross-functionally and avoiding the “waiter-chef” dynamic that[ Brian Chesky talks about](https://www.lennysnewsletter.com/p/brian-cheskys-contrarian-approach?ref=review.firstround.com). Rather than making products and features and then handing them off to marketing to figure out how to sell them, we need to get marketing involved in the process earlier to guide what we build.
### **Takeaways**
- During Era 2, I knew there was a problem. I had lost touch with the people making and using our product. **But I didn’t have the courage to do what needed to be done.** When I would make an effort to get back into the codebase and the product development cycle, or even just talk with customers again, I would hear from the leadership team that my involvement was disruptive and I should let them do their jobs. I didn’t push back strongly here, because I was too busy listening to conventional wisdom — likely because it leaves less room for criticism.
- I continued to place my focus in other areas of the business — which was a huge mistake. **I had allowed myself to become the passenger and not the driver of my own company**. It wasn't until I made the drastic change that I felt like I was running this company again.
- **We no longer hire pure “managers” at Levels, and we probably never will again. The managers we hire need to be capable of performing the tasks of those they manage.** If they manage engineers, they need to be able to write excellent software. If they manage marketers, they need to be exceptional marketers themselves. Hire people who can be “[button clickers](https://review.firstround.com/passing-the-button-clicker-test-and-other-0-to-1-lessons-from-lattices-first-marketing-hire/)” instead of finding someone else to click the buttons for them.
## **Ditch your rote 1:1s**
Here's a number that should break everything we know about scaling startups: My direct reports tripled from 6 to 20, but my time spent on management didn't budge much at all.
Time spent on team management
This is quite atypical compared to the grumblings I hear from other founders. Usually, the story goes, that the further along they get in scaling, the more of their time gets eaten up by team management. More people means more meetings, more check-ins, more time playing therapist and mentor.
But the biggest unlock for me was inspired by how[ Nvidia CEO Jensen Huang manages his 60+ direct reports](https://fortune.com/2024/11/12/jensen-huang-nvidia-ceo-leadership-mpp/?ref=review.firstround.com) (far from the management golden rule that no leader should have more than 8-10 direct reports). Instead of being a mentor first, he's a decision-maker first.
Here’s how I made that decision-oriented approach happen at Levels:
- **Delete Every Recurring 1:1**: Yes, all of them.
- **Create Living Documents**: Each report gets a Notion doc. Have something to discuss? Add it to the doc.
- **Meet Only to Unlock**: When decisions need to be made or bottlenecks cleared, that's when we talk.
The result? Meetings that actually matter.
Now when I sit down for a 1:1 meeting, I know it's because something critical needs attention: A product lead wrestling with feature direction. A support manager making the case for team expansion. Real decisions that move the business forward, not status updates masquerading as management.
### Takeaways
- Let me be clear: This isn't a universal solution. **It works for me because I also over-communicate everything.** What I don’t say in meetings, I write in memos or voice over in Loom videos.
- Make space for other leaders on your team to have different approaches. Our Support lead, for example, has a much more hands-on management style. And he gets fantastic results — it’s been inspiring to see the folks in his org who have grown from entry-level support to highly-impactful leadership roles, largely thanks to his mentorship. **While decision-oriented management works well for reports to the CEO, others managing earlier-career folks might need a more traditional structure.**
## **Put strategic work in a time box**
Looking at five years of data, something surprising emerged: Despite writing[ many Notion pages worth of memos](https://www.youtube.com/watch?v=IM6P%5FLB6W80&ref=review.firstround.com) (as my team can attest), I spent just 5% of my time (924 hours) on strategy work.
Time spent on strategy
This runs counter to what I hear from other founders. Many get consumed by endless planning sessions and strategy offsites. Others, especially early on, find themselves too busy fighting fires and playing whack-a-mole to think strategically at all.
So from the very beginning of Levels, I borrowed from [Bill Gates’s Think Week](https://www.theblogsmith.com/blog/bill-gates-think-week-reading-vacation/?ref=review.firstround.com) concept.
> The basics of Think Week: Block your calendar, don’t take any meetings or calls, put your phone in Airplane mode — just think and write. (OK, I’ll sometimes sneak one hour of email each morning, but that's it).
While Bill Gates would take these Think Weeks twice a year, I upped the cadence to quarterly, which works better for our pace of growth. And in the five years of running Levels, I’ve never missed one. I can’t overstate how important this practice has been to ensure that we’re making good decisions as a company. Every Think Week I come back with a fresh perspective that changes the trajectory of the company in some way. (I've written a detailed guide for anyone interested in implementing this practice[ here](https://levelshealth.notion.site/How-to-Think-Week-8ab48e2dff3f4cecad1e425e0c264358?ref=review.firstround.com).)
For example, the memo I discussed earlier with the Software Engineering reboot (and the 15% MoM growth goal we needed to hit) came from a Think Week where I realized that we were not on the right track. **After failing for many months, it wasn’t until I zoomed out and thought deeply about the problem that I realized how dire the situation had become.**
Setting aside the full week proves essential for this practice to work. The first few days, I find my thinking still anchored in tactical problem-solving. It’s not until days four or five that I can fully detach and realize that winning might mean going in a completely different direction entirely.
> When I’m working on a project, all I obsess over is how to do that project more effectively. Think Week allows me to step back and consider if we should even be doing the project at all.
Alongside these focused bursts of strategic thinking, reading remains a constant thread through my work. [I aim for about 100 books annually](https://www.goodreads.com/user/show/17957837-sam-corcos?ref=review.firstround.com), mostly through audiobooks these days.
Admittedly, the number of life-changing or company-changing insights per book has gone down over the years (and at some point it starts to feel like most business books use the same ghost writer with a degree in behavioral economics), but I still find it useful. Many of my best ideas came from reading something that was seemingly unrelated to the problem at hand within the company.
> There are an unlimited number of problems in startups. Identifying what problems are worth solving and which ones you just have to live with determines whether your company succeeds or fails.
### **Takeaway**
- **The daily pressures of running a startup make it tempting to postpone strategic thinking.** But creating dedicated space for long-term thinking isn't a luxury; it's essential. The key is treating this time as sacred as you would any other critical meeting, protecting it from the constant pull of Slack notifications and daily firefighting.
## **Take investor relations beyond board meetings**
Back when I did the two-year reflection, I flagged raising our Seed round as one of the major spikes. Early-stage fundraising is a grind, especially if you aren’t well-established.
Since that checkpoint, we’ve raised both a Series A and an opportunistic Series A extension, neither of which completely took over my calendar in the same way the Seed round did. Both were only about 15% of my time, I was spending far more on sales and operations.
Time spent on investor relations
Context matters here: [Our Series A](https://www.levels.com/blog/levels-38m-series-a-driven-by-member-and-community-alignment-to-solve-metabolic-health-crisis?ref=review.firstround.com) landed during the peak 2021 boom cycle. We didn’t even put together a deck — we sent out a long-form Notion doc and closed the round with minimal meetings. While we had encouraging traction, macroeconomic timing certainly worked in our favor. The [subsequent extension](https://finance.yahoo.com/news/levels-raises-10m-series-extension-130000836.html?ref=review.firstround.com) came together efficiently when existing investors expressed interest in increasing their positions. The Series B will likely demand more time — markets have shifted considerably since then.
This approach to fundraising stems from a lesson I learned the hard way at a previous startup. We’d bootstrapped it for the first two years before starting our raise with just three months of runway remaining. We figured we’d get the process done in a couple of months and then we’d have plenty of money — at least that seemed reasonable at the time.
> Cash itself is an asset — the less you have, the harder it becomes to raise more. The ideal time to fundraise isn't when you're running out of money, but when you have momentum.
This philosophy shapes our ongoing investor relations. I maintain a steady cadence of about five investor meetings monthly, which serves two purposes: keeping a pulse on market cycles and nurturing relationships. A lot of fundraising happens in cycles, and it’s important to know how things are trending. And when it comes time to raise significant capital, these aren't cold conversations — they're extensions of relationships built over months or years.
I’m also relentless about activating our networks with clear asks for how they can help the business (detailed in my piece[ for Lenny’s Newsletter](https://www.lennysnewsletter.com/p/how-to-activate-your-investor-network?ref=review.firstround.com)). In return, I send extremely thorough monthly investor updates, covering everything from email subscriber growth, support response times, and SEO keyword tracking. We’ve made[ many of these investor updates public](https://app.levelshealth.com/investor-updates?ref=review.firstround.com) to share our learnings with other builders.
### **Takeaways**
- A flashy pitch deck won't save a struggling fundraise. **I've seen countless founders obsess over design and formatting, convinced the perfect slide layout will unlock investor interest.** They’ve gone through their 10th revision and hired several designers and consultants. But at the early stage, investors primarily evaluate three things: team, market and early signs of traction. For perspective, here's[ our seed deck](https://docs.google.com/presentation/d/14nG0feoDGD5h3GNQNC6qvtgBu5KAesoxmG5yODubDNU/edit?ref=review.firstround.com#slide=id.p) and[ Airbnb's](https://www.slideshare.net/slideshow/airbnb-first-pitch-deck-editable/45768374?ref=review.firstround.com).
- **While positioning and storytelling matter**, the best way to raise money is to build a good business.
## **The reality of running a startup while starting a family**
The data from these past few years reflects more than just the rhythms of a startup — it captures a profound personal transformation. Marriage, and then the arrival of our first child, rewired my relationship with time.
The numbers tell a clear story: When I was single, my working hours regularly stretched between 90 and 110 per week. That shifted to 50-70 hours when I got in a serious relationship, and has settled into a consistent 50-60 hours since becoming a father.
Having written extensively about[ productivity](https://review.firstround.com/a-tactical-guide-to-working-with-eas-how-to-make-delegation-your-superpower/) over the years, I frequently field questions about how fatherhood has affected my output. The assumption seems to be that babies, with their wonderfully unpredictable schedules, must wreak havoc on productivity.
Honestly? I don’t think it has.
Yes, empirically it has reduced the number of hours I put into Levels. Admittedly, I don’t really have hobbies — so once I had family, the only time available to claw back was time previously going into Levels. But I've reallocated those hours rather than lost them.
I used to spend a lot more time doing email, going to conferences and collecting context from across the company. But now that I’ve reduced the time I commit to Levels, I’ve cut out most of these low return-on-time-spent activities. Instead I try to hyper-focus on the activities that matter most for the CEO to do, like steering major company decisions and strategy.
> I've always viewed productivity through the lens of intentionality rather than hours worked. By that measure, my productivity remains steady.
### **Takeaways**
- Life changes like marriage and parenthood will inevitably reshape your relationship with time — but how you respond to that shift remains a choice, as is everything in life. Yes, there will be unexpected schedule disruptions (the dreaded "nanny called in sick" message comes to mind) and so **the correct answer is to adapt instead of trying to fight it**. How we spend our time changes during different life stages, and that’s ok. We shouldn’t expect everything to stay the same as it was in our 20s.
- **There's no universal formula here** — each founder needs to find their own balance based on their priorities and circumstances. What matters is being intentional about the choices you make.
## **Looking ahead**
Five years of data tells a story of what was, and it feels like a cliche to say it, but the only real constant in running a startup for five years is change. Changes in life, changes in business strategy, changes in team — everything evolves. What happens when we hit 100 employees? 500? The patterns that worked at 50 people won't necessarily translate.
The data from these first five years has been useful for me because it captures our journey from founding through early scale and gives me an empirical record of my priorities. But the next five years present entirely different challenges. How do you maintain startup speed with enterprise-scale operations? What's the right balance between being in the technical weeds and steering the broader vision?
I'll keep tracking every 15-minute block, not because I expect to find the perfect formula, but because the data keeps me honest about the tradeoffs ahead. The next five years won't just be about working differently — they'll be about choosing differently.
### How Plaid, Clay, Lattice & other startups pivoted to find PMF
URL: https://review.firstround.com/how-plaid-clay-lattice-other-startups-pivoted-to-find-pmf/
Last updated: 2025-03-21T07:03:22.000Z
Why & when these founders knew it was time to switch
_This post is for subscribers only._
### A complete guide to your startup’s first sales hire
URL: https://review.firstround.com/a-complete-guide-to-your-startups-first-sales-hire/
Last updated: 2025-03-11T14:54:36.000Z
Expert advice from first hires at Dropbox, Figma, Stripe & more
_This post is for subscribers only._
### What makes (or breaks) executive hires | A deep dive with Eeke de Milliano (Head of Global Product at Stripe)
URL: https://review.firstround.com/podcast/a-deep-dive-with-eeke-de-milliano/
Last updated: 2026-02-03T17:49:08.000Z
Eeke de Milliano is the Head of Global Product at Stripe, helping drive innovation and success in the company's product line. Before this role, she was Head of Product at Retool and co-founded Constellate. Eeke previously spent 6 years as Product Lead at Stripe, working with the company during their hyper-growth era.
–
In today’s episode, we discuss:
- Eeke’s wealth of experience as an executive leader
- The challenges companies face when hiring new executives
- Common hiring red flags and pitfalls
- Practical advice for measuring success
- Why learning your strengths is an underrated piece of the process
–
**Referenced:**
- ASML: [https://www.asml.com/en](https://www.asml.com/en?ref=review.firstround.com)
- Claire Hughes Johnson: [https://www.linkedin.com/in/claire-hughes-johnson-7058/](https://www.linkedin.com/in/claire-hughes-johnson-7058/?ref=review.firstround.com)
- Constellate: [https://constellate.team/](https://constellate.team/?ref=review.firstround.com)
- John Collison: [https://www.linkedin.com/in/johnbcollison/](https://www.linkedin.com/in/johnbcollison/?ref=review.firstround.com)
- Mike Maples Jr.: [https://www.linkedin.com/in/maples/](https://www.linkedin.com/in/maples/?ref=review.firstround.com)
- Patrick Collison: [https://www.linkedin.com/in/patrickcollison/](https://www.linkedin.com/in/patrickcollison/?ref=review.firstround.com)
- Retool: [https://retool.com/](https://retool.com/?ref=review.firstround.com)
- Stripe: [https://stripe.com/](https://stripe.com/?ref=review.firstround.com)
- Will Gaybrik: [https://www.linkedin.com/in/william-gaybrick-5730347/](https://www.linkedin.com/in/william-gaybrick-5730347/?ref=review.firstround.com)
–
**Where to find Eeke:**
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**Timestamps:**
(00:00) Should you ‘buy or build’ a leader
(03:45) Why do executive hires fail so often?
(09:35) Why the stakes are so high for leadership hires
(12:26) The hardest document Eeke ever wrote
(14:06) Two red flags in a new hire
(17:27) An example of an outstanding leader
(21:40) What creates dysfunctional exec relationships
(22:38) The three steps towards hiring successful leaders
(30:30) What you should know about outside hires
(33:12) Eeke’s advice for easing leadership transitions
(42:06) How to notice success patterns
(47:21) Why high-functioning executive teams are like parents
(52:02) The most surprising lesson from Eeke’s first stint at Stripe
(55:11) The leadership data Eeke wishes we had
**Brett:** Thank you so much for joining.
**Eeke:** Thank you so much for having me.
**Brett:** So I know that you've been spending a lot of time thinking about, um, what makes great leaders? Why is there such a high failure rate? And I think you've also been spending time over the past month talking to people who, you know, really well about this specific topic.
Um, and maybe we could start by just hearing some of your reflections from those conversations.
**Eeke:** Most of this actually came out of my, my own frustrations as I was going through, you know, having both now at this point done many hiring processes for executives, but also having been on the receiving end of maybe some like worse fit, Leaders who we hired and, I've sort of been lucky enough to talk to a bunch of founders to give them some advice as they were thinking about hiring execs and, you know, particularly product leaders.
so I spent a bunch of time actually talking to, thinking about the stuff myself, but then also talking to a bunch of my founder friends and, talent execs and then, uh, other execs who've been hiring as well.
**Brett:** you spent the last four weeks kind of chatting with some people like Around the topic that we're talking about have there been interesting insights from that experience?
**Eeke:** Nothing super surprising. The only thing that was really surprising was how consistent the insights were, like I broadened the search because as soon as I kind of got into this idea of. Wow. Hiring leaders is actually incredibly painful. We spend so much time on it as you know, execs at companies and as founders at companies.
And somehow we come out of having spent all that time still having failed 50 percent of the time. It just baffles me. Like, why does that happen? Also, when the stakes are so high. So initially I was like, I'm just going to ask a bunch of my founder friends. And I was like, I'm also going to ask a bunch of my exec friends.
And then I also asked a bunch of. Talent firm friends, because I thought, Hey, like they probably have some good insight and, yeah, it's so interesting across the board, everyone has more stories about bad hires than good hires.
**Brett:** Is that just sticking people's brains in a cognitively strange way?
**Eeke:** That's probably true. but I actually think it's like just surprisingly hard to find someone just great. or someone who's just a great fit for you. Like the funny thing about all these things, like when you are interviewing someone. Inevitably, they were good for someone somewhere, otherwise you probably wouldn't be interviewing them.
**Brett:** But it's the hard part is finding the right fit. and then the second thing that sticks out is like, they all at this point are like pretty aware of their mistakes and they still kind of feel like they make them over and over again, like all the biases. Was the perspective was like why it's broken in the eyes of the founder and CEO the same reason that the exec on the receiving end thinks it's broken?
**Eeke:** definitely not. Well, maybe I, I think the, the, the person who's like on the receiving end who's, you know, either feels like it didn't work out generally feels like the expectations weren't the right ones. Like they weren't set clearly. and the founder and the CEO generally feels like, you know, this person was hired to come and be a leader and either sink or swim.
and they sank But I don't think they generally have done the sort of like extra thinking or the sort of extra retrospection of like, Hey, why did this person sink? Or why did they, why did I think they were originally good, but they didn't end up being good. And that I think to me has been sort of the most interesting learning, like, A lot of the literature even on this is all about how do you onboard these people successfully?
And very little of it is about the like the actual pre interview stage. And I, I actually think 80 percent of the work in hiring a great leader who's a great fit for you is figuring out That piece of it, like not even doing the interviewing, it's the, like doing the introspection of whether this person is a good fit.
Mike Maples, who's a VC has this great book, called pattern breakers. And it's, it's basically his main thesis is like, yeah, if you're a VC and you're going to try and find the right founder, like, you're not just looking for someone who's like generally smart or generally ambitious.
Like you're looking for someone who is the right authentic fit for whatever future idea they're trying to, to put into the world, which as you, you, as a VC, probably you're like, are very aware of that. But, think the same is actually true for leaders, but we don't really treat it that way. Like, we don't spend that much time thinking about, What is it that I need in this leader over the next year or two years? Like really thinking about it. Generally, the way these processes go, it's like founder or, you know, exec is frustrated because something in their org isn't working, or there's a part of their org that they like, don't want to manage anymore.
They will reach out to their network or to some recruiter. And they'll be like, who is the best product leader you've ever worked with? Then they'll do like 50 interviews. And then at the end, a couple of them will have seemed interesting and like, they'll have to make some sort of agonizing decision and like, still 50 percent of the time they fail in their decision after a year or 18 months.
And instead, I think, you know what founders and leaders who are hiring execs or other leaders should be doing, they should spend a good chunk of time sort of understanding themselves better, like. What are my values? What does the team need right now? What's the complementarity that I need on the team?
What does my company need? Like, what is the sort of leader future fit for my company? And then only then really start interacting with these leaders and figuring out, you know, is this person actually a good fit for me?
**Brett:** How did you land on that being sort of an important idea?
**Eeke:** Honestly, so much trial and error. Like, I spent so much time interviewing leaders myself and also being on the receiving end, like having been lucky enough to, be considered for a bunch of roles, and I didn't quite understand why it was so hard to do the assessment.
Initially, I thought it was just like, look, I'm just not calibrated. I like need to see more people who are great. But Eventually, I think I just realized like the thing that was missing was like, I did not have a clear idea of what my future needed to look like with this leader. that was really the, the moment for me.
Do you think it's,
**Brett:** vastly different than hiring non leaders? And if so, why?
**Eeke:** the stakes are just so much higher with leaders a bad fit leader is so tough for the organization for like the obvious reasons, like they come in and they You know, spend a bunch of your orgs time and headspace you spend as a leader, spend a bunch of your time with them, and then they sort of end up not accomplishing much.
So that's like, reason number one, why it's bad. But like, reason number two, why it's bad is because Everyone looks at that bad hire or that bad fit, basically, again, like, I don't think they're generally bad people, but like that person who's in a good fit, and they look at the leader who hired that person, either the founder or the exec, and they now all of a sudden don't trust that exec or that founders judgment.
In the end, judgment is almost like the most important value you have as a founder, as a leader, and that gets really bad. And that's when your you know, star employees start quitting because all of a sudden they kind of feel like, Hey, I actually, I'm not sure I trust this person's judgment anymore.
So, yeah, I think the stakes are really high with the sort of leadership hiring, and then it's also just harder to fire them for, you know. Kind of the same reasons the stakes are very high, like you've just spent a bunch of time getting the whole organization excited about this leader, like, honestly, looks bad if you all of a sudden say, like, Hey, I don't think this leader is a good fit.
but also because, like, the work that these leaders do, like, it tends to just be longer term, it just takes a little longer for it to really pan out. Oftentimes they come in, they like probably really want to assess what's going on.
They might want to redo the strategy. They might want to hire some people, like all of a sudden you're a year later. And it's like, it's just really hard to fire these people as quickly as you would. Maybe someone who's an IC,
**Brett:** You've hired so many product managers. And like, if you think about the difference between
hiring accuracy and an average product manager and hiring accuracy as a chief product officer, VP of product or whatever leadership role, do you think the accuracy is wildly different or you just truly don't know?
**Eeke:** anecdotally, I think it is like, I think it is just easier to hire. even like a line manager or an individual contributor, like there's the pattern matching is easier. It's like, at least like anecdotally, like there seems to be less turnover there. You just, I think, seem to hit or miss less often.
but I don't have a sort of actual data to back it up.
**Brett:** think that your, your point is correct that when you get to executives, The difference between amazing and okay and bad is so
consequential,
What's
your thought on like globally excellent execs versus sort of like context dependent excellent execs? Is there a small percentage of, of people in around your orbit that you've observed that can be in so many different environments and be an incredible C suite executive?
By globally excellent execs, you mean like just put them anywhere and they'll, they'll crush it.
Of a reasonable shaped company. So like put a pin in culture that are in between Stripe's culture and Amazon's culture or pick other 8000 person companies
that are selling generally to a developer audience or generally to a business, uh, to sort of other businesses. So take 20 of those companies. They're all valued between 10 billion and 30 billion.
They all have, you know, one to 5, 000 employees or whatever. And you take this C level exec and you have them operate across each one of those.
**Eeke:** it's really hard for execs. The other thing that came out in all of these conversations with folks is like, if your values aren't aligned, there's like literally no way it's going to work. think it's just actually pretty hard for there to be like globally relevant execs.
Like there's just like the right exec at the right time for your company is totally right.
There's something about this idea of values, particularly in the context of executive hiring that I put into like the eyes are glazing over sort of category.
**Brett:** And yet it feels like to your point, if you correctly define values, that has to be one of the top reasons why there's organ rejection in one form or another.
**Eeke:** I actually think that that part is so incredibly hard. Correctly defining your values. When I was at Stripe, my first round, we, we had to serve like a couple of operating principles and at one point, like Patrick pinged me and he was like, Hey, like, I really want us to write a guide to Stripes culture, and I want us to share it with candidates when they join, when they are considering Stripe, and ideally, half of the candidates who read it are like, I'm out.
I don't want to be a part of this. writing that doc is maybe the hardest thing I've ever done in my life. It's so, like, how do fish describe water? It is so hard to describe the thing that you are in every day in a way that actually A like sort of like is understandable to people outside of it.
And also in a way that doesn't feel like a platitude. . Of course, every product manager should talk to customers, but it's like, okay, well, how are you going to manage that amidst all of the other things that you have going on? How are you going to get the right customer feedback at the right time?
And how are you going to relay that back to the organization and there's like so many nuances to how it actually shows up that I think it's like, it's just so incredibly hard to articulate. Most early stage companies they really struggle to articulate what they want to be yet.
They don't quite know. And then the other piece of it is, like, in some ways you're bringing in a new leader or an exec because you want them to, like, you want them to change the culture a little bit. Maybe not the whole thing, but you want some sort of change, otherwise, you wouldn't be getting this leader. And change is like, by definition, pretty uncomfortable. So how do you differentiate between the change that feels good or that's actually ultimately good, even though it doesn't feel good and the change that's like ultimately bad, I think that's pretty hard to do as well.
So like my only like good litmus test for that, or like red flag is if a leader comes in and they're starting to make a bunch of changes without deeply, deeply, deeply understanding the company or the company's problems. And without bringing like real humility, they're just copy pasting whatever else it is that they brought over.
That to me is always just like a recipe for disaster.
**Brett:** There's also the inverse of that, though, which is that the person spend months just sort of building context and doing nothing, which is like another, again, all of these things are about trying to be in equilibrium and in anything being in equilibrium is sort of very difficult. But I think the number one failure thing is we did it this way.
I'm doing it this way at this company.
A hundred percent. Yeah, but I also, I agree with you, I think the number two failure is like, I'm going to spend three months on a listening tour. What was the process of writing that doc?
**Eeke:** a couple of people have asked me that actually, because they've wanted to do it for their own companies. Um, It started with Patrick and like kind of like jotted down some ideas like this is stuff that's like kind of important to us.
**Brett:** Just sort of sitting down and collecting your own
**Eeke:** Yeah. And like writing, um, and it was like, I don't want to say it was kind of mediocre. It was, it was not that good. the document now I love, I like refer to it back all the time. We ended up taking it down or stripe ended up taking it down. Like, you know, at some point, like companies kind of outgrow this stuff. There, there was some controversial controversial, there was some stuff in there that was basically just like, like, you gotta be willing to work really hard to actually, you know, be successful here long term.
**Brett:** true I
**Eeke:** my gosh, it was so controversial when it came out on Hacker News, it was eviscerated.
Yeah.
**Brett:** feel like we're in a different phase now though
I do also think it's true that at some point, I don't know, companies get big enough that you have folks who, who maybe are just not up for that. And like, you just have to kind of be okay with that if you want to have that many employees in your company. Yeah.
**Eeke:** Anyway, so it was after I kind of wrote that first shitty draft, shared it with a bunch of folks who were, I thought, both culture carriers and really great writers. And they took a bunch of stabs at it. And then myself and Sir Patrick took the last stab and that was really it.
**Brett:** I don't know if you can remember this What are the types of things that they contributed that didn't occur to you when you wrote the first draft?
**Eeke:** honestly, some of the writing, just like the way they described it was way better. Um, like we would do the, the actual search principle and then we would do this, like questions you should ask yourself if you're joining Stripe. and one of the sort of. Revisions that someone made who was, a friend of Stripe's who actually wasn't at Stripe themselves.
they said something like your LinkedIn is never going to be as tricked out if you work at Stripe, like there's just never going to look as good. it was very true because like Stripe doesn't do titles. but just the way it was said was just like, I think that really stuck with a lot of people who read it.
there was another thing where one of The revisions was from a fantastic writer, where he said something like, Stripe is not a competitive place in that, like someone else needs to lose for you to win, but it is the kind of place where like someone else is going to do something amazing and it's going to push you to want to like work way harder.
so it was like that kind of stuff that just like made it much clearer, like how this place was kind of different. thought was, yeah, very good.
**Brett:** When you look at the document, do you think it's just by and large a, encapsulation of John and Patrick? Or there's a delta between their behaviors and what they value and what ended up kind of being the, the way that the company behaves?
**Eeke:** Oh man, I would love to hear their answer on that. I think they felt it really reflected, how they felt about yeah, their values in Stripe.
**Brett:** Tell me the story of an exec or two that has come into Stripe in your tenure. Who is the positive case? That was just extraordinary.
**Eeke:** Well, this person isn't less known, but I think they're the perfect example, which is Claire Hughes Johnson. Claire joined Stripe when we were around 150 people and we were very, very close to organizational rejection with her. she interviewed and there were many, many people who were like, I don't know, she's like big Google exec.
I don't think this person's going to be a good fit for Stripe. Patrick, to his credit was like, I think this person will be exactly the right fit and actually even in her book, scaling people, Claire mentions that, you know, Patrick kind of told her, it's like, Hey, I think people, people are kind of worried here that like, you're a good fit for Stripe at, you know, 500 people, but maybe not the right fit for us right now. But, you know, we're going to get to 500 people pretty soon. and of course he was right about that. I think that the most key thing was the complementarity between her and Patrick and John. Like she was just such a great balance to, to them as leaders.
We were just talking about my, you know, my podcast that I do it with some friends. And like, what we do is like, we, we research enduring companies. One of the themes that has come out of that, that has been surprisingly consistent, especially with these sort of like deeply technical companies, is that there's almost always a pairing of like, a deeply technical founder with a, more operations, peoply person who can help scale that vision. We call them Bert's and Ernie's. And like, once you see it, you see it everywhere. It's yeah. Tim cook and Steve jobs, the co founders or the co CEOs of ASML. it's I, the pairing, I think works really, really well.
Billy was also on the, the leadership team and Patrick and, and John and Claire. and then I think the thing that's like actually kind of amazing that happened after that is that they then hired Will Gabrick who, you know, initially came in as the CFO of Stripe
now is Stripes.
Uh,
well, yeah, he was an investor and, you know, incredibly impressive background, but like no operating experience really. And Claire writes in her book as well at the time, Claire was like, I think we need to make him take a personality test to see how he's going to fit in with the rest of the leadership team.
And she like her intuition to kind of been right that he was like, the perfect sort of compliment to the rest of the team. And that team that leadership team was so strong. And so they were so tight, they really felt like a unit, everyone looked up to them as like, this is the unit of the team.
They were, you know, There for a long time, I think it was like phenomenally successful. probably a lot of how Stripe got through some, very hard times.
**Brett:** aside from that sort of yin and yang sort of dynamic is there anything else that is useful to understand that other people can positively pattern match against?
**Eeke:** I really think it comes back to that, like initial introspection of like, what do you think your company really needs? Like in the, the sales leader example is like a very apt one I think, like almost never have I seen like a founder or an exact hire a sales leader and like actually be able to articulate very clearly, like,
I'm going to be a sales led company, or I'm going to be a product led company. if they are going to be a product led company, then to be able to articulate to the sales leader, what that means for that sales leader and having them sort of operate in that kind of environment, I don't actually know if John and Patrick did this with Claire, but I think because Claire came from Google and like that was already a product led company, she fit quite well into the sort of product led sales mindset. And that worked, I think, quite well for that stage of Strive's life cycle, You know, I've also seen it work the other way where folks bring in a sales leader who's just like, well, now we must focus entirely on enterprise and do an enterprise sale.
You must completely change how you build your product. That just doesn't work at all. So to me, it all comes back to like, have you done the upfront work to really understand, what is this future with this leader look like? will they fit into that future? And have you guys talked about that together?
Like what that actually means for that person's job.
**Brett:** What about sort of the opposite? Are there threads that tie the people that haven't worked out together?
**Eeke:** Other than like the values misalignment, which I think everyone would say, and it's kind of obvious, I think they really are all dysfunctional on their own dysfunctional way. I was talking to Andrew Abramson, who, who works at Fusion is like a talented exec.
And he's like, you know, I think one, one mistake that founders make is they hire this extremely, potentially like expensive exec and they just expect them to come in, like, be able to be successful without helping them. There's work you need to do to set up the, these execs for a success, a hundred percent.
It's like baseline, like, you know, give them your social capital, make sure they are introduced to all the right folks to get all the right work done. But like, ultimately, I feel like the good ones will make it work and the bad fit ones don't.
**Brett:** So going back to what you were talking about a little while ago, maybe you can share more about when you think about doing this introspection ahead of the search, which I think is kind of one of your ideas of the things that will increase the hiring accuracy, sort of an exec,
maybe talk about that in more detail, like what that actually looks like in its like most concrete way.
**Eeke:** I think you need to do three things. you need to understand yourself. You need to understand your team and you need to understand your company. So on yourself as a leader, I think you really need to spend the time understanding like, what is it that I like doing? What I don't like doing? Where do I really want to be involved?
Where do I not want to be involved? What am I good at? What am I not good at? And like, really do that work. I actually, again, think very few people really. understand themselves in that way. piece. Number two is okay, now you're, you're hiring this leader. What do you actually want them to do for the team?
Do you want someone who's going to set vision and strategy, or do you want, do you want like a leader or do you want a manager? Do you want someone who's going to go like manage the product managers? Cause you don't want to do that anymore. think you have to sort of be pretty concrete with yourself on exactly like what success looks like in year one and what success looks like in year two.
Nothing past that because you have no idea what your company is going to look like past that. but until then, yeah, you're, you're really kind of need to that. And then the third piece is do you you need to like have this future view of what your company is going to look like in the next year or the next two years?
And what do you think it's going to need? Do you think you have to upscale to enterprises? And if that's the case, that's going to be a very different type of leader that you might need versus you really want to focus on that product led growth motion. So those are the sort of like introspective things you have to do.
And then I do think you also have to go and get data on the person once you go and like interview them and talk to them, et cetera. But you have to start with that first piece and have a pretty succinct list and understanding of those three pieces.
**Brett:** somebody's listening to this, they go do this, like what's the most likely things are going to screw up when they go try to do the introspection?
**Eeke:** I don't know if it's that hard. I just think people don't really do it. It's like, why are meetings bad? it's the same thing. It's like, there's actually just a set of things that you have to do to just make them good, but how many people actually send out the agenda in advance? And how many people send out the notes afterwards?
And how many people actually write down the action items? Very few people. So it's just you just got to do the work. I actually really don't think it's that hard. You just got to know to do it.
**Brett:** And so then once you do it, how does it actually map to the interview process or the sourcing process or any of that type of stuff?
**Eeke:** on the interview process itself, the thing you really need to figure out is like, You're going to have a bunch of biases going into it, regardless of whether you've done this process or not, that are really going to, I think, influence how you view these leaders, one of the biases that I've seen a lot is, This leader is just awesome publicly.
Like I've seen them, post cool stuff on X or like great blog posts. that's just one piece of bias. another bias is sort of like the one hit wonder bias. Man, I got, I have a list of companies that I really admire. This person's worked at one of these companies, but have they done anything else?
Another bias is the tailwind bias. they just happened to like ridden a bunch of great waves in the market.
Piece one is like being very aware of the biases. Piece number two is okay, now try and figure out, what is it that this person did that no one else could have done? what is the counterfactual of them having been in the role that actually made it such that they were successful in some way that, no one else could have done. I think really what you have to do is you have to try and figure out with this person, if they hadn't been there, what would have happened? oftentimes I, I asked sort of like the before and after, Hey, like, what happened?
what is the team that you inherited or what it looked like? And what did it look like after? And oftentimes I try to get examples of things that other people had filled out before them that they somehow succeeded at. And if they were able to do that a lot over time, that's always like a really, really good signal.
**Brett:** And you do that in, in sort of the actual interview or it's mainly in referencing?
**Eeke:** No, I did that in the interview. my main view on references that I actually don't think they're that useful, unless you can find someone who has more incentive to tell you the truth than to like have the back of the person they're giving the reference on and someone who really understands you and your company.
So like, you kind of need those two pieces to work together because on that second piece, it comes back to is this person actually a fit for your company or like what you need at this time? So you kind of need someone who's pretty close to your company to be able to give you like pretty good advice on that.
And then the first piece, just most people don't want to say bad things about people
**Brett:** But why does it not work to ask the reference what was the state of the org before the person joined, what was the state of the org after, and then did that match what the person said
in the interview?
**Eeke:** You can definitely do that. Like you can just fact check that this person say real things for sure. but I, I think the most useful references are the ones who like really, are going to go a little deeper on Hey, how much of this was like this person's role and like, what did they specifically do and how did they get that?
Oftentimes the person you're doing the reference with was not that close to the work to be able to give you all those details in a way that you probably need to. so you just kind of need to trust their judgment and trust that they're telling you the thing that's true about this person.
**Brett:** Do you think most of the time when you, when, you know, a cross section of the employee base thinks that person X is a star, they actually are?
**Eeke:** Hmm.
**Brett:** there's a lot of noise in that?
**Eeke:** Oh my goodness. I have a lot of thoughts on this. I think there's a lot of noise, unfortunately. Yeah, which is why you have to go back to like, is this a person who whose judgment I really trust? Yeah, I think it's just like pretty hard to, to really know how good someone is from even like a medium distance.
**Brett:** Is the inverse also true? If a bunch of people think the person sucks, they might not suck.
**Eeke:** No, I think it's easier to see when someone isn't good at their job.
**Brett:** That's interesting.
**Eeke:** Yeah, I think that is a really interesting insight.
I think it goes back to like, well, I mean, maybe this is an unfair way to put it. you know, I think generally like no excuses. if things aren't going well in your org, I think it's generally like,
person X has to figure out how to fix that. If things are going well in your org, to me, the question is always is it going well because of tailwinds, exogenous reasons or is it going well because you did something really different here? and like, if you had not been here again, what's the counterfactual, if you had not been here, which is what I ask, in every performance review cycle of the people who work for me, if they had not been here, what would have happened?
**Brett:** going back to sort of the interview process with execs. Talk more about like how, the end-to-end process you think is the best.
And who's involved and who shouldn't be involved and how are you spending the time and sort of that type of stuff
**Eeke:** I think the first chunk of the process needs to be basically just the founder and or like hiring manager and the exec just spending a whole bunch of time together. Then there's like the in between chunk of
like a relatively unscruptured fashion?
totally relatively unstructured fashion, choose a problem together that you want to work on that, maybe you're like dealing with as a founder or as an exec spend like a couple of hours in a room together, how would you actually work through problems together?
that to me is like step number one. Step number two is bring in the sort of core people who's judgment, you really value and then also who are going to work very closely with this person. and then step 3 is you know, let's say they kind of get past that is okay, now get him buy in from the rest of the team that shouldn't be a like a decision making for him.
That's more of a hey, I want you guys to like, meet this person and get a sense of who they are. But that's not a like, you get to veto this person.
and then the final step is sort of doing your like actual references.
**Brett:** how should the decision be made? In terms of the hiring decision, is it just single trigger, the founder should just unilaterally make it?
**Eeke:** Absolutely. Yeah, I don't, I don't think any. Important decisions like this can be made by committee, like they should, I mean, they should use input from all the folks who, you know, were part of the interview process, but ultimately the founder has to decide that or the hiring
manager.
**Brett:** hmm. Mm hmm.
Something you haven't talked to a lot about yet is what about how the exec relates to other execs and works with other execs and what's like the role of that or reflections on that specific kind of working dynamic on the team that is the exec team?
**Eeke:** I do think the complementarity really matters. So that was like, you know, some of the stuff that we were chatting about a little earlier. Are they going to fit in with the team well, and are they going to work well there? Sometimes you bring in an exec because you want them to shake it up a little bit, or maybe you'd like, don't know how you feel about the rest of your leadership team.
But generally, if you're feeling good about your leadership team, it's like, I think it's pretty important to, bring in that complementarity for sure.
**Brett:** How do you think about, the kind of classic question of growing people internally versus hiring externally?
**Eeke:** I have a, a good, good friend and, um, technical sort of leader, founder, who, I asked him sort of about just generally, like, hiring and his thing was like, oh, you should really try and look for future potential. Often the mistake that people make is like, candidate A is good now, candidate B will be better in 6 months or like, they'll invert. But generally, people tend to think just about like whether a candidate is good in This moment. The nice thing about hiring internally is that you have a really good view of like a person's trajectory. So like you could probably project out Hey, I actually think in six months time, this person will actually be really, really good.
So that's great. I think oftentimes when you're looking for a new leader, you're looking for a skill set that, doesn't exist in the organization. And the question I think you should always ask yourself, like, what are the skills you want to build versus the skills you want to buy? If you're hiring internally, you're like, You're buying, you're just getting for free, someone who has the domain knowledge, someone who understands the culture, like you're not taking any risks on, you know, whether or not they are a good fit for your company from a values perspective, but you're probably going to have to build a lot of the like, the knowledge of whatever function you want them to take over and like the sort of that kind of experience.
Whereas if you're hiring someone externally, you're like. You're buying their external experience and they're probably like going to be bringing in a lot of things that like no one at your company knows about yet, but you're going to have to teach them probably taking a little bit of a risk on like, are they a good fit for your company from a sort of culture perspective?
But I do think generally it's really, really good for a company culture to promote internally.
**Brett:** you think there's some general rule of thumb? Like, it's good if you can have a third of your execs be homegrown versus external or those type of things.
**Eeke:** I haven't really seen that sort of rule of thumb.But I'm just like thinking about my own, like what I've seen at companies so far, it's probably about right. It's like a third of the execs are homegrown. And that's
**Brett:** Hmm.
seems really good. Like they, yeah,Do you think you're more likely to be successful if you're hiring an exec that is stretching up into the role? Or coming down into the role?
**Eeke:** I think you're way more likely to be successful when someone is stretching up into the role because they're going to have a chip on their shoulder.
And like, you really want them to prove themselves, or they want to prove themselves, whereas like, I think someone who is kind of stretching down into a role or I guess like, detracting down into the role, they're going to get bored.
They like, just might feel like the role isn't big enough for them. They're going to want to hire a team that's bigger than it needs to be. They're going to just, they're just going to want to do things that are like, just generally, I think unnatural for what you need them to do for that period of time.
With that said, I've seen plenty of counterfactuals, obviously, obviously the Clare Hughes Johnson counterfactual is a totally good one, but then you really have to test for humility. Is this person willing to kind of take on a smaller role for some period of time.
And even then I think, in a lot of those cases, those leaders are stretching, but in different ways, because they've been leaders at these large companies with a big support system that already had built a lot of these systems and processes and like their stretches actually, like I'm actually building all this stuff from scratch for the first time.
it's just a different stretch.
**Brett:** Going back to sort of a thread from a couple minutes ago, how do you think about managing the existing org? A thing that happens all of the time at scaling companies, is there's lots of people that want the exec role that have been there for four years and seven years and eight years and I can't believe you're hiring a VPN when I'm the director and I should obviously be promoted. And the reality is a lot of times those people actually end up leaving, there's nothing you can do. But is there anything around doing anything in the way that you communicate or go about it that increases the chance they'll stay and do great work as opposed to be sort of disenfranchised?
**Eeke:** Truly the best thing you can do is hire an incredibly inspiring leader. Really great people want to work for really great people and learn from really great people. So like, number one thing you can do. The second best thing you can do, I think it's just be super transparent and open throughout the process, like really good high performers want to hear how they can get better.
Generally telling them like, look, you're not ready for this role. And here are the reasons why you're not ready for this role. but here are all the ways in which like, you're going to have opportunities to grow, especially under this new leader. Generally, I think works honestly, really well, or even saying like, look, like if you, if we'd had you here for another two years, you would have been ready for this role, but we don't have two years.
We need this person today. Just being honest, I think really, I've seen least work really well in my career so far the place where this all falls down is like you hire this leader and they suck. And then, you know, you go that that's, you know, that's obviously just like bad for everyone involved.
**Brett:** How long do you think it takes to figure out if somebody is going to be successful as an exec?
**Eeke:** I think like way faster than people realize, um, if they're like a bad culture fit three months max. If it's like a, the harder, the harder cases are the like, I think they're like a pretty good culture fit, just like not totally clear to me whether they're going to be able to like, whether they're really executing as well as they could.
And this is where something comes in that I like, I call this sort of the new leader dilemma where like new leaders have in almost every single scenario, a huge incentive to say that they need to change the strategy and like the reason for that is I just think about sort of like the outcomes a leader who comes in is like, actually, the strategy is fine, like, really hard to prove that you, you know, you're kind of proving your value, like the worst thing you can be called as a leader is non strategic.
So that's kind of like, you know, reason number one, why they kind of want to say, like, I don't know, guys, I think we should go and change the strategy. Reason number two is you come in and you kind of buy yourself six to eight months. If you say you need to change the strategy, which means that if execution is poor, or you're not hitting your numbers or whatever it is, that's been expected from you, you just be like, well, the strategy was wrong. We were working on the strategy. So, I think there's like a lot of reasons for new leaders to like want to change the strategy. But I think it's like really incumbent on the founder or on the like you know, who the leader is manager to push very hard on what is the key insight is from that leader as to why they think they really need to change the strategy and if it's true that they really think they need to then to push them to change it over one to two months versus like the six month period. And then to push them to actually like test sort of the impact of that change very, very quickly. so like, sure. to really live out the strategy you have to like, let's say your strategy is Hey, we have to move from self serve users to enterprise users to like really see that play out.
You have to look at it over many, many years, but you can start testing it pretty quickly
by, you know, building a prototype of a product and, you know, getting it out to enterprise users and seeing how they feel about it. So I think it's like really important that as the founder, you don't create the, like sort of this weird incentive structure where the leader has to feel like they have to change the strategy.
Same with reorgs, like that's just another, I think, like really funky incentive structure where like, it, feels like you're doing a lot as a new leader because you're doing this big reorg and everyone's talking about it. But like rarely, is that really the answer to solving your problems? and then I think also same with like changing tool stacks or platformizing.
That's like another sort of like thing that comes up a lot. That's just like a, like multi year project. It's really hard to assess whether it's going to be successful very quickly. And so like, it's really, really important when your new leader suggests this, that as the their manager or founder, you're, you're pushing to understand, like, how do we figure out that this is going to work as quickly as possible?
**Brett:** Maybe sort of on a, on a similar thread, what are your perspectives on the entering exec and how they should behave or what they should do to increase the chance that they're effective?
**Eeke:** I think humility is like a really underrated value that the thing that really used to grate me when like new leaders would come in is they'd come in and they'd be like, they'd look at stuff that was happening or stuff that hadn't been done yet. And they'd be like, they'd make these very bold statements like, I can't believe we're not doing it this way or like, have you guys even thought about doing X, Y, Z without really sort of understanding, basically asking the question or even just saying Hey, I'm sure you guys have thought about this, but like, why haven't you?
so I think just like, Understanding the problems deeply is kind of step number one.
That doesn't mean like a three month, you know, uh, listening tour, but it does really mean like using the product, understanding the problems, that I think is like number one thing that like a great leader can do in like their first few months.
**Brett:** what else?
**Eeke:** Assess the talent pool. pretty quickly, like just fire the people that aren't good. especially if they're not a good culture fit, but also if they're just, not doing well. One thing I've, I've experienced myself, but also I've like seen with other leaders, like you come in and you do your, like, I don't know, your transition talk with whoever's been managing all of the people that you're now going to be managing.
And, During your transition talk, person's like, yeah, so and so's okay, I don't know, they probably need to be performance managed, but I don't, like, there's some good, there's some bad, those people, you just, you just need to fire them immediately, like, if that's sort of the open question already, like, chances are that person's not going to recover.
Even if actually maybe they are recoverable because the organization has kind of already decided they're not that great. So yeah, I think start in, like understand the problems deeply, figure out of the teams, sort of the right team, fire quickly and then come up with the plan. what are you going to do that's actually going to be different for this company.
**Brett:** What about how should an exec decide if they're going to join the company?
**Eeke:** I think it's the exact same process as you know what these founders are going through. have you done your introspection? Have you done your like your process of what is my future leader? My leader future fit? does this company fit into that basically.
The way I've described leadership hires at companies, it's like, it's kind of like an arranged marriage. You both really have to choose to want to like make it work. It's not like a love marriage where like, you know, which is like, what I think happens with early employees when they joined a startup or just man, I like, I love it here.
Like I never want to leave. I. You know, I'm obsessed with this place, by the time you have a founder and a leader coming together, they have pretty established things, the ways they like to work and opinions. And so like, you both have to decide, is this, is this something I want?
**Brett:** it's like a second marriage.
**Eeke:** Yeah, maybe. Yeah. I don't know.
I can't speak to actually either sort of like an arranged marriage or a second marriage. Yeah, exactly. It's
like you.
**Brett:** in your ways, you know more about yourself.
**Eeke:** Totally. Yeah, 100%. you have to be okay with some of the like the stuff grating a little bit. And like, the only way you're going to be okay with that is if you've decided I really see me here as a leader, In the future of this company.
**Brett:** What about in the first, I don't know, three or six or 12 months disagreeing with the founder? Are there right or wrong ways to sort of go about that?
I think founders and myself and I've hired leaders, I want them to come in and disagree with me. Like if I didn't, then why was I even, why did I even hire them? So the, the real question, yeah, per your point, I guess the real question is like, how are you disagreeing with this person?
Like, have you really deeply understood the problems? because if you have, and you still disagree with whatever the direction is, then how about it? And like, have the real conversation, like lock yourselves up in a room for, I don't know, a couple of days and like, figure out, you know, where the disagreement is and why, but if you have both have done your due diligence right and like, you're both good thinkers and rigorous thinkers you're going to figure out at some point, like there's some sort of like difference here and like how we understand the world. So you need to understand that together.Do you think there's a pattern in previous tenure for execs that you're hiring that they were a company X for 11 years versus four years versus one year versus their resume is a bunch of two year stints versus two nine year stints. Do you think there's any rhyme or reason to any of that in terms of increasing or decreasing the chance that that they're successful?
**Eeke:** I personally really worry about the, like the two year stints sort of like multiple, like two year stints. Like it's just actually isn't enough time to show that you've done anything significant, I think as a leader. So like this like gross generalization, but it feels a little bit like those are sort of like the leaders for hire or the like the sort of mercenary type leaders, where it's just they're just jumping from company to company based off of, you know, the next interesting thing.
And so like those, those always I'm wary of, the leaders have like been at companies for a long time, I think generally. Very highly of, because inevitably those companies have gone through hard times. Like there's no way a company did in over a nine year stint. and that to me, really says something about a leader's resilience.
but a leader who's only been at one other company, I think I'd always have a few questions about, because they're going to be very tempted to copy,
**Brett:** The
same thing. Yeah.
**Eeke:** Yeah.
**Brett:** You hit on this a little bit, but what about, how important is it that the shape of the company is similar? So, the company sold to developers. This company had both the bottoms up motion and an enterprise motion. The company was, hardcore enterprise and were hardcore enterprise.
The company was consumer. Like, if you remove the values and the way that the company behaves, like the shape, the deal size,
the, you know, Sector how
important is any of that?
**Eeke:** I think it's quite useful just because pattern matching is quite useful. So like, even if you're not going to like copy paste, it's at least useful to have perspective. And you're like, I've actually seen this before, or like, this is something we should worry about, or this is something we shouldn't worry about.
This is, there are some real like playbooks or way to do things with enterprises, you don't always have to reinvent the wheel. I don't think it's necessary. And actually like, you know, again, my sort of friend in was saying that like nine out of 10 times, the first interview between a founder and a leader goes better when that leader has domain expertise because they just have things to say about the founder space.
But his point of view is that is like not at all correlated to ultimate success. I think again, again like useful, absolutely not necessary and certainly not a sort of a positive, indicator all on its own.
**Brett:** But all things considered, you lean towards hiring people that have operated in a similar?
**Eeke:** If I could have that for sure. 100%. It's just like nice not to have to spin up folks on these, on these areas.
**Brett:** Do you think There's sort of any correlation in terms of people who have worked at a variety of companies, some of which were not successful or are not hot companies versus somebody that, you know, was a Google and then Palantir and then came to Stripe, does that matter in one way or the other?
**Eeke:** Yeah, I think it really does actually like I, the folks who only been at companies that have themselves done well, it's just really hard to be able to distinguish whether the company did well because of the founder or because of the leader, sorry, or the leader did well because of the company.
**Brett:** or in spite of company did well in spite of the leader.
**Eeke:** Exactly. Uh, yeah, a hundred percent. So like, I, I like seeing leaders who've like gone off and like worked at some honestly, like less known company for a little bit, A, like it shows that they have, it's probably a strong opinion about some wanting to have gotten somewhere that like, maybe it was like less popular or like less well known, like they just went there because
of X other reason. And then B, if they can show that they were successful at that company, then I feel like, okay, that's like a real data point. Hey, you actually were able to. Yeah, you were really able to move the needle here, in a way that wouldn't have happened without you. again, like these are all like heuristics that aren't perfect all the time.
Like there are plenty of people who have a beautifully pedigreed resume and are fantastic leaders. But I think, I think it's good to have some, to have some experience where you're like, just weren't always at the sort of place that was the winner, so to speak.
**Brett:** Something you didn't talk a lot about is the role of the leader in creating an incredibly talent dense org underneath them. And do you have any thoughts on that? And is it something you spend a lot of time thinking about? Or if the exact delivered results, it doesn't really matter one way or the other?
**Eeke:** I don't think they could have delivered results without having a incredibly talent dense org, but results that they actually were themselves responsible for, yeah, I think about that a lot, actually, some of the better indicators are like, did people, but in interview processes, actually, per your, per your point of like, what are questions you should ask?
How many people moved to the next company that you worked at that you worked with before? I think it's always a really, really good sign.
**Brett:** What about how much firing they did? Do you like somebody that's fired a lot of people or you don't care?
**Eeke:** No, I do. Per your point, if the, if you just have to assume that the distribution of failures is like pretty much the same across the org, I think it's always a pretty good sign of people have fired, a lot. It's only because like, they're going to have to in whatever job they're taking on, if they don't have that experience, they're going to take way too long.
**Brett:** What is a high functioning executive team look like and what is a low functioning executive team look like?
**Eeke:** It's like parents. as a child, you kind of know that you can't go to one parent and get a different answer from, you know, them versus the other. A high functioning executive team is like that. They're like, they're consistent. You feel like you're going to get the same answer from every single executive, but you also know that the, like the, how they do it or like how they're going to get it done is like, they have different strengths, they'll be able to show up differently.
A low functioning executive team, honestly, you can just tell, like, you just tell how they show up at the all hands. It's they're not coordinated. You can tell that they don't agree with each other and like, they kind of air their dirty laundry out and towards the rest of the company. They don't run the company well, like they don't, They don't hold their teams accountable in the same ways.
They're like, they're not consistent across the board. you know, they're not following up on commitments that were made. think you feel it pretty quickly.
**Brett:** If you think about these two sort of hats that you're wearing that are sort of overlapping, one is the function that you're owning and delivering results in the function and the other hat is your role as an executive on that team. when you're wearing the executive hat?
What is that look like to do well?
**Eeke:** Well, actually, it's interesting you mentioned that, like, in that order, like your team has to, though your main team has to be the executive team over your functional team, even though I think it's very tempting to want to, like, spend more time with your, your functional team. In terms of like within the executive team, I think it's like, a very high, divergence, It's able to have like different opinions, able to sort of speak up and share those opinions kind of teams tend to, I think personally, I think are the sort of the ones that are the most high functioning, but with a lot of trust.
So you need both the trust to know that like when this person says Hey, I kind of really disagree with that or really need to push on like why you're saying that it's coming from the right place, but you also need to be pushing on those things.
**Brett:** Something you talked about a little while ago is just there's nothing worse to be called not strategic as an exec. How do you define being strategic?
I think it's like the difference between managers and leaders. So like leaders are able to set the direction and the vision and the prioritization and the focus of the organization and have a clear reason for why that is and be able to explain and articulate why that's going to help the company or the organization when, whereas, yeah, I think managers they're just like, they're, they're good, like they're good like keepers of the team, like they can like hold the team and they can like help run it on day to day basis, but they're not directing it. you think charisma matters in as a leader. I do, but I don't think it's like charisma in the turf in the traditional sense. I, I know very, quote unquote, charismatic leaders who are not incredible speakers, but are great writers or, are wonderful one on one. so like in, you have to, you have to be able to get people behind the thing that you believe and people have to want to follow you, doesn't have to be in the, like, uh, Tony Robinson way.
If you're an up and coming star and you aspire to be an exec and you're trying to sort of. Exercise and get really good at that strategy piece. How do you go about doing that? Or do you think it's like either you have that thing in your brain or you're just don't have it?
**Eeke:** I think there's absolutely people who are natural strategic thinkers.
**Brett:** Since they were a teenager, basically, like their brain just works in that way?
**Eeke:** I don't know since they were a teenager, but like kind of, yeah, their brain just works that way. Like they, they just think about these things in that way. Like they, they read an article and they like, they immediately see the link on like why this business is going to win or why it's good. Or they also just like interested in it, but I also think you can learn it.
And I think part of it is just like practicing, like writing, like writing the little strategies for like your products or for your areas and just like doing that over and over again and getting feedback from, you know, your leaders and seeing if it like resonates. so that's one piece of it.
Part of it is also just like. Looking at how, what other companies are doing, just articulating their strategies in itself. I think a really good way to like practice, uh, if you can get a good sense, Hey, what, why is this company able to win? He'll like help you. I, I know there's people who like swear by Porter's five forces and, there there's good literature, pretty good literature out there, but I think it's like practice, practice, practice, and then you have to kind of,
you have to see it play out in person. You have to, um, you have to be wrong a few times, basically. Like you're going to put forward a strategy and like, test it out. Maybe it wasn't quite right. but like when you're younger and up and coming, that's actually like a great. That's a, that's fine.
It was like, the stakes aren't that high.
**Brett:** What did being at Stripe for a long time, leaving and joining Retool and then coming back to Stripe teach you that you didn't know
**Eeke:** Yeah.
**Brett:** until you left and came back?
**Eeke:** I thought there was one great way to build a great company. Like leaving, seeing that there was a complete different way to build an awesome company. And in fact, like seeing that I grew so much as a leader in that way, was like a huge Huge learning for me, and actually, now that I'm back, it just made me a better leader because it just also made me question sort of how we do things at Stripe sometimes, in a way that I probably would have not really done before, because I'd really only seen it in one way.
And I was, I think I felt very breathless about how we did it and like very loyal to how we did it.
**Brett:** What's like an example of that?
**Eeke:** Stripes and Retool's leadership teams functioned very differently. Retool's leadership team was, like, a collection of very different personalities. it was, it was a big team of like, you know, I think we had 10 people on sort of the overall operating leadership team Stripe's team was always tight knit five people.
it's different now, but like, you know, back then five people who were just leaders and like, even though they were different personalities, obviously, and like they, you know, in a lot of ways, we're more alike than they were different. And so that to me felt like a verylike, there are actually two ways to run successful leadership teams.
What about you spent some time working on starting a company? What did that teach you about being an executive?
I don't think you learn much starting a company early on being an executive.
**Brett:** What about what was surprising in the inverse of that experience? Like you had built lots of products.
**Eeke:** I think the biggest surprise is yeah, I joined Retool when we were 30 people, Stripe when we were 50 people, but there was already so much pull, and the biggest surprise when you start a company, as I'm sure of all the, the founders, if you're listening to this now, it's you're creating the pull, you're creating all the energy yourself.
Like it's literally all, any kind of entropy or heat is coming from you. I think that can be really energizing and can also be really, really, really hard.
**Brett:** Did the experience teach you that it's just not your jam?
**Eeke:** No, not at
**Brett:** all, no.
**Eeke:** I, I think it'd be really fun to do again sometime.
**Brett:** It's just an entirely different thing.
**Eeke:** It's just an entirely different thing. It's like you're putting your energy in an entirely different place.
**Brett:** What else can you kind of say about the difference between building a product in the context of an existing company or a post product market fit company versus starting with a clean sheet of paper?
**Eeke:** You're, I mean, you're creating the market. You're like when you're joining a company at like, you know, 15, 20, 30, 40, 50 people, like there's already some sort of market already exists. Like you have some sort of like pretty clear direction. but when you're like, you're first starting off, like you are, you're really out there trying to like, figure out how do I get customer number one and customer number two and customer number three. Like you're just, creating it out of thin air a lot of ways. so that's, I think is like one big piece. but you know, I think the sort of like, there's some awesome differences there too. Like you're solely working on this thing that like, the stuff you're working on is stuff that, you think is important all the time. Whereas, like, that might not always be the case that, sort of a, a larger company where, like, there's stuff that is, you know, quote unquote important, but it's more part of, like, the overall big company processes or things you just kind of have to do.
**Brett:** What data sets don't exist around leadership hiring or execs that if it did exist would make everyone better off?
**Eeke:** Even some of this core is like, actually, like, how big were this person's teams? how did this team change over time? just the sort of like the timeline of someone's overall career arc and just being able to compare that to like what people say, I think would be just like honestly, super value valuable.
So that's like a small sort of piece of data. If you could get data on, actual hardcore data on like the before and after in like financials or whatever it is that the company uses to measure their, their success, MEUs, DAUs, whatever it is, that would be a, I think a really good piece of data.
I'm personally very curious about what actually is the failure rate and the distribution across all companies, all startups or all, All tech companies, most of the data that I've seen on this is fortune 1000
companies, uh, and it's usually C suite.
So that's also like a little harder to, to get a good sense of. I think the thing that's like. It's weird to me that no interview tool has done this, but like really like you should be able to measure or like track like interview feedback to like how a person actually ends up doing at the company and their talent cycle.
I really don't know why this doesn't exist, but that feedback loop seems important. you want, you want to be able to track your false positives. We also want to be able to track your false negatives.
If you fire or like, if you decide not to hire someone, what happened to that person?
**Brett:** Which is hard to know because they could be successful in someone else's company and not in your company. So it has its own set of issues. That's true, that has its own set of issues,
**Eeke:** but at least it's data.
**Brett:** most of the, the, all the work that goes into interviewing and how much of it is just performative nonsense that
means
**Eeke:** Yes. Yeah.
Or how
**Brett:** much of it is, is removing signal
**Brett:** is still not well instrumented.
**Eeke:** I think that's totally right. so yeah, I think all of that would be really useful.
**Brett:** What about, you hinted to this a little bit, but when you think about kind of different rungs of leadership.
Is there a simple way to sort of think when you go from a VP doing it? Just not to get into titles, but to simplify it, VP, SVP, C suite. Do you think there's very different ways to sort of think about the job or expectations or that there's a clear, the clear difference between an SVP and a C suite executive
is X sort of those types of things?
**Eeke:** I think it's an ambiguity of problem. It's just like, it's that scales up exponentially. yeah, they sort of, I can't speak to the specific titles, but like the, the most ambiguous problem should be at the like C suite level. And everything kind of scales down from there.
**Brett:** Do you ever ask to see someone's performance reviews as a part of interviewing an exec? I
**Eeke:** I never have, but I love that.
**Brett:** think that's quite interesting.
so maybe one place to end. You talked about Claire earlier, but maybe you talk about someone else that sort of an exec that you had the chance to work with that sort of shaped your worldview or kind of imparted something consequential on you.
and like, what's the thing that they shared with you? That's has so much residual value.
**Eeke:** I worked with this incredible design leader at Retool, who, um, as I think simultaneously, maybe the best design leader and product leader I have ever met. I learned a lot from him, but I, you know, the, I think the thing I really learned from him was that the value of the three legged stool of product design and, engineering,
I had always heard, but per your point was one of those, like eyes glaze over sort of things. and I, he really showed me like what incredible product you can build when those three forces come together in like a very real way.
**Brett:** Who is the person
**Eeke:** Ryan Lucas.
**Brett:** and maybe you can kind of bring that to life in more detail, like, what do you sort of mean by that? Or what, what did you see or what did he explain that brought it into focus for you?
**Eeke:** It was just in everything we did, like we, we wrote the product strategy together, with our engineering leader and it's the best product strategy I think I've ever written. And I think it was entirely due to the fact that it wasn't just a, like a product view. It also had sort of a really strong technical view, a really strong design view, Retool's product is like, really benefits from these sort of three, three functions, but, I think that's kind of the case for any company that's trying to build really good product.
And so, it just showed up in at our level, but then at every level below that we had, like, very much the three legged stool as well. Sort of the trifecta, you actually, I think, see that surprisingly little. There's always like 1 or 2 functions that are like, really dominant, and in this way, like, you know, I think all of those sort of functions have to kind of.
fight for it. Like you have to kind of figure out how to work together, if that makes sense. but like it ended up, resulting in fantastic products.
**Brett:** Awesome. Great place to end. Thanks so much for joining.
**Eeke:** Great. Thank you so much for having me.
### How Figma chooses, builds & launches new products
URL: https://review.firstround.com/how-figma-chooses-builds-launches-new-products/
Last updated: 2025-03-05T16:30:10.000Z
From spotting user hacks to the “screenshot test”
_This post is for subscribers only._
### Lessons in Product Scaling and Storytelling from Figma’s CPO
URL: https://review.firstround.com/lessons-in-product-scaling-and-storytelling-from-figmas-cpo/
Last updated: 2025-07-31T16:50:00.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
[**Yuhki Yamashita**](https://www.linkedin.com/in/yuhki?ref=review.firstround.com) was **Figma’s** ideal customer. Then he joined the company to head up product strategy.
He’d been working as a PM at **Uber,** where he grew frustrated with the time wasted navigating tools he needed to do his job: redesigning Uber’s rider and driver apps. He had to fumble around for design mocks in Photoshop or Sketch, taking PNG files from designers back into one of the tools to edit them the way he needed. “I was someone who bounced back and forth between product management and design,” he says. “I believed that the boundary between these functions should be more blurred.”
Then he discovered Figma. Uber was one of the first large companies to adopt the tool, and Yamashita happened to be on the team that brought it in. “It completely changed the clunky process I’d been using before. If I needed to put together a product review or make some adjustments, I could do that myself for the first time,” he says.
Eventually, his love of the product compelled him to take a bet on the company itself. This was back in 2019, three years after the startup’s public launch and long before its place on design tool Mt. Rushmore. “I went to Figma not because I thought it'd be a big business, but because they were building a magical tool that I loved,” he says.
Yamashita’s pipeline from passionate user to builder is a familiar story in the tech world — becoming so enchanted by a product that you set out to help build it yourself. These are often the folks who can help propel a startup from up-and-comer to generational company.
We’ve dedicated a substantial share of our digital pages here on The Review to the grueling 0 to 1 phase of product building, or put simply, [finding product-market fit](https://review.firstround.com/series/product-market-fit/). But there’s no ribbon at the finish line once you’ve found it. The goalpost immediately moves to the next phase of growth, whether that’s expanding to new markets and users or [launching new products](https://review.firstround.com/going-multi-product-11-tactics-for-tackling-your-next-bet/) — you’re now going 1 to 10\. Yamashita has carved out a career dedicated to this messy middle stretch of a startup’s life: charting a path toward steady growth after nailing PMF and assembling a team to pull it off.
> I have a worldview that not everything has to start from scratch. I'm more optimistic that I can take an existing product and evolve it, or radically change it, or extend it in really interesting ways.
And Figma’s 1 to 10 product roadmap has been jam-packed under Yamashita’s direction: On top of core product iterations, the Figma team has rolled out countless features and new hits like [FigJam](https://www.figma.com/figjam/?ref=review.firstround.com), [Dev Mode](https://www.figma.com/dev-mode/?ref=review.firstround.com) and, most recently, [Figma Slides](https://www.figma.com/slides/?ref=review.firstround.com) (for the detailed backstory on how Figma Slides came to be, check out [our deep-dive](https://review.firstround.com/how-to-make-your-product-idea-go-viral-inside-your-company-lessons-from-figma-slides/) with founding PM Mihika Kapoor).
In this exclusive interview, Yamashita walks through his three-phased approach to building and launching new products. He starts by sharing tactics behind idea generation and Figma’s successful expansion into different user personas, how he staffs the teams to build products that support these personas, and eventually, the core tenants for great launch storytelling (does your product pass “the screenshot test”?).
In the spirit of Figma, there’s something in here for everyone who leaves their fingerprints on a product — founders, engineers, marketers, designers — not just product folks.
## Mining for ideas and bringing new user personas into the fold
Figma spent its first five years refining its core product for one primary audience: designers. Then over the next four years, the company was able to broaden its user profile, adding more product managers and engineers into the design file — both by launching new products, but also because the app was open and web-based. Interestingly, one-third of its users were developers before the company even launched Dev Mode.
“As we've embarked on the journey of becoming a multi-product company with FigJam, Dev Mode and Figma Slides, we’ve changed the way we work significantly,” says Yamashita. “We already knew how to talk to designers. But with new products, we had to figure out how to meet the needs of the entire product team. So we had to change the way we work, starting from who we talk to and how we communicate with them.”
Screenshots of Figma's product suite: Figma Design, Dev Mode, FigJam and Figma Slides.
Today, Figma has expanded beyond its core designer persona so successfully that non-designer users outnumber traditional designers. “**Two-thirds of our weekly active users are now non-designers,**”he says. “These new products that we've built have started to widen the aperture and optimize for our different audiences.”
Here’s how Figma tackled balancing new bets with the core product and speaking to new personas.
### Watch how users are hacking your core product
The inspiration for Figma’s second product, FigJam, came during the lonely days of lockdown in 2020, about a year after Yamashita joined the company as VP of Product.
“We noticed that people were using Figma design as a whiteboard and brainstorming tool. This was during the pandemic when everyone was working remotely and sick of Zoom happy hours. So people started hanging out in Figma instead,” Yamashita says.
The product team’s ears perked up. “**We thought, ‘Okay, we should capitalize on this,’ because whenever your users are hacking your product in a fun way, that's really great inspiration**,” he says.
But even if this was a compelling option for Figma’s second product, Yamashita knew not to rush to stamp the decision. The next product had to support the business and fit within the company’s larger goal. “A lot of people see Figma as a design tool where you draw some mocks and build some prototypes, but we know that’s not the end goal,” Yamashita says. “The broader goal is to actually get a product built and in users’ hands.” FigJam was a step toward that process.
After deciding to build the product, the team faced a classic fork in the multi-product roadmap: Carve out a new team to own FigJam and ship as fast as possible, or keep its development within the core team?
Internal debates centered on two factors: speed and creative divergence. For speed specifically, the team mulled over the state of their competition: “We were playing catch up. There were a lot of great players. Speed seemed of the essence,” says Yamashita. But speed comes at a cost. If you’re building quickly, it’s difficult to fully grasp how a second product might fit into the bigger picture. “The more we create divergence, the more difficult it becomes to unify later on,” he says.
The question sparked productive dialogues that informed Figma’s approach to future product rollouts. “Now, as we build our third and fourth products, we have more of a framework,” says Yamashita. “We know we should have a different way of organizing so that there's a team that's thinking about these shared primitives right out of the gate. But back then with FigJam, we were just kind of winging it.”
### Build forums to let winning ideas (and their advocates) bubble up to the top
Yamashita says Figma’s leadership team is always on the hunt for hungry upstarts who can bring something new into being. “At Figma, we often talk about ‘starters,’ the people who are really great at getting something off the ground — people who can come up with a core idea that you can latch on to. So whether that's in engineering or design or PM, we definitely look for that skill set.”
Figma has created an internal forum to give grassroots ideas a platform: [Maker Week](https://www.figma.com/blog/the-making-of-maker-week/?ref=review.firstround.com), a hackathon that gives all employees the chance to pitch new projects. “People make everything from software to physical things that express themselves,” he says. “People often pitch new products, and you see who emerges as particularly entrepreneurial. It’s a forum that allows you to be experimental with these prototypes.”
So how do you spot those “starters”? Sometimes it’s brute force and hustle and scrappiness. Other times it’s the ability to sell the team on an idea. But in Yamashita’s view, starters all tend to share one trait. “**I think entrepreneurs are slightly irrational**,” he says. “Bytaking something from nothing and bringing it into existence, they’re doing something that people didn't really believe was possible. There’s a lot more brute force and selling that needs to happen.”
> New products don’t emerge from a rational line of thinking.
The poster child of a Maker Week success story is [Kapoor’s pitch for Figma Slides](https://review.firstround.com/how-to-make-your-product-idea-go-viral-inside-your-company-lessons-from-figma-slides) — who later presented her pitch to Yamashita in a product review.
## Staffing up for a multi-product suite
Once you’ve got new bets locked into the roadmap, how do you start divvying up your roster of builders?
Yamashita’s experience with FigJam helped him outline a more intentional approach to assembling the team for Figma Slides and Dev Mode.
### Chart the quickest path to prototype with a lean crew
Yamashita cautions against routing a ton of talent to tackle a hot new bet — instead suggesting that a dedicated few can get to work building a sample product.
“With new products, we always start pretty small,” says Yamashita. “We can do all the reviews that we want, but a working prototype can take an idea from something on paper to something that's actually believable.”
That was the case for Kapoor’s initiative to get Figma Slides onto the product roadmap — it was just her (a PM), an engineer, and a handful of other team members who she successfully pitched to work on a Maker Week demo. After that initial company-wide presentation, the small team was able to quickly scrap a prototype together so that decision makers (like Yamashita) could visualize the idea’s potential.
“We didn't give that green light to Mihika right away. But her small team persisted and she convinced some teams to start using it. And the next thing you know, it proliferated internally.”
> A small prototype or MVP completely changes the game — when you see a surge of everyone wanting it internally, it gives you more conviction that there’s something there.
### Bring in outsiders to deepen understanding of new users
When it comes to weaving new products into the core offering, Yamashita thinks that some disagreement among the product team is useful: “**The best products come out of a bit of internal conflict, when people stand up for a use case in a way that’s counterintuitive to the core product team**.”
When a core product team has built years of intuition around one set of users and one way of thinking, it can be hard to suddenly consider the needs of a completely different persona. Yamashita has found the internal debates that spring from these conversations to be productive.
This became clear when launching Figma’s third product, Dev Mode, to a user persona with a wholly unique set of needs: developers. “You look at our core product and you'd think that every new product has to create an infinite canvas. That's just table stakes at Figma, right? But it turned out that developers found a blank canvas really hard to navigate,” he says. “It was important to bring on people who could advocate for that perspective and challenge core assumptions — and through that debate, you build the best product.”
FigJam may have been a new product, but it was created by existing teammates for an existing persona. For Dev Mode, they decided to bring in external people who could build for developers, a completely new persona. These weren’t just any new hires — Figma acquired a company working on a Figma dev tool spinoff, [Visly](https://www.ycombinator.com/companies/visly?ref=review.firstround.com).
“For our developer efforts, our engineering leader, [Emil](https://www.linkedin.com/in/emilsjolander/?ref=review.firstround.com), was someone who we found through an ‘acquihire’ of a team that was thinking about how to translate design into code. So they built their own tool because they didn’t think Figma was doing enough,” says Yamashita. “The fact that this company existed meant that Figma as it stood was not doing enough for developers. So they brought in an outsider's perspective, which was really healthy.”
> To build new products, you need to create an environment where people can really feel ownership of their new audience without feeling the burden of legacy.
Yuhki Yamashita, CPO at Figma
## Launching new products: The two hallmarks of a compelling debut
Yamashita’s product launch strategy can be boiled down to one skill: [storytelling](https://review.firstround.com/storytelling-as-a-craft-advice-from-5-experts-on-how-to-tell-a-compelling-business-story/). It’s a discipline he finds central to product building, and he credits his high school English teacher for nurturing that instinct.
“My high school English teacher taught me all about literary commentary, or reading something and making a case for what it’s about,” he recalls. “That’s so connected to product building because it’s all about storytelling. Why does this alliteration matter here, for example? This is an approach I take to product building — you have to take those little bits of insights to derive a thesis on why you need to build something.”
To double down on the English class inspiration, Yamashita contends that much of Figma’s multi-product success can be chalked up to great storytelling around the launch of each new bet.
Below are Yamashita’s tenets of great product launch storytelling, along with simple tests to run your own products through. He shares examples from Figma’s past launches, from how co-founder [**Dylan Field**](https://www.linkedin.com/in/dylanfield?ref=review.firstround.com)thoughtfully spun out the OG product to the design community to the storytelling magic behind recent launches like Dev Mode and Figma Slides. Spoiler alert: they’re not all that different from the ingredients of a great *story*, full stop.
### Tension: The feather-ruffling test
Nothing gets a community talking like controversy. “**Every good narrative has a little bit of tension**,” says Yamashita.
Perhaps no Figma launch story sparked more online chatter than its original product. “Dylan wanted to get the design influencers on board, the people in the community whose voice mattered,” he says. “He kept going back to them, not trying to sell them on it, but just showing Figma to get them excited.”
Field understood that he wouldn’t be able to create any momentum if the product didn’t have a strong perspective on the way design teams should work. So he gave those influencers a somewhat controversial idea to talk about: Everyone could work in a design file at the same time. That got people talking.
The mark of a shrewd bet is, of course, the product’s eventual success — and Figma’s vision for collaboration ultimately created a new norm for the design process. “Now, it’s intuitive, but back then it was considered undesirable to have a hovering art director in your file. That your product manager or your CEO is going to be able to see every movement you're making wasn’t something that was necessarily welcomed, but it also had a view about design and what it should be that was more progressive.”
> Figma’s balance of standing for what design should be while creating a little bit of controversy supplied a narrative that influencers and evangelists were excited to talk about.
### Simplicity: The screenshot test
Yamashita has a simple litmus test to gauge the effectiveness of a product’s story: Can its value be distilled into one single, self-evident screenshot?
At Figma, visuals are just as important — if not more important — than words. “What’s the one screenshot that’s completely self-explanatory?” he asks. While he acknowledges this might be a “superficial” way of thinking, distilling the product’s story into a single screenshot or gif or tweet helps arrive at something evocative. “You need to show something people want. That’s a design problem. That’s a storytelling problem. That distillation is really important,” he says.
But this isn’t just a thought experiment to conduct the week before a launch. Preserving simplicity is an ethos that starts in the very earliest stages of product development, and Yamashita takes care to push his team to always whittle as much as possible. “When we’re in the process of designing a product and adding new features, it’s easy to just add more and more stuff,” says Yamashita.
This test is a useful way to push his team to simplify things further. “It forces people to think about simplicity, but it also forces people to think about brand as well. Because the best stories make you feel something.”
> If you’ve been involved in the evolution of the product, you can empathize with how you got there. But users don't see that evolution — they’re coming fresh at a screenshot with no context. If you have to explain what's going on, that's an indication that you haven’t made the value proposition simple enough.
A screenshot of Dev Mode in Figma.
Yamashita points to the launch of Figma’s Dev Mode, which gives designers and developers the ability to work in different modes in the same Figma files. A single screenshot packed a punch in luring a new persona to the Figma suite: developers.
“For Dev Mode, we used screenshots to show how developers can have a diff in their designs with a green and red view that they see in code all the time,” he says. “To be able to see designs with code underneath is really evocative, because now developers will think, ‘Oh, now you’re speaking my language.’”
## Don't let expansion compromise simplicity
As Figma has grown into a multi-product shop, Yamashita and the team remain dedicated to product usability. The products are so usable, in fact, that third graders can find their way around Figma Design, FigJam, and Figma Slides. “We have a big education investment right now, and I was recently watching third graders in Japan use Figma,” says Yamashita.
Bringing new (fifth grader) users into Figma.
But watching children use the tool for social studies was a stark reminder for Yamashita that every new user today needs to find Figma products just as intuitive as the Figma that launched almost a decade ago. “Simplicity shouldn’t be equated with fewer features. It’s about mental models. When you look at a really complicated product, you’re like, ‘I’m trying to do this thing. I know it’s somewhere, but I have no idea how to get there.”
The 1 to 10 product journey is a constant balancing act of building for new use cases while preserving simplicity. “Products only get more complex over time. You still need to pass the screenshot test — you can look at it and quickly parse what’s going on. The design should tell you what to focus on. The best product managers can push for that.”
### Inside Guideline's mission to modernize 401(k)s | Building from first principles, finding strategic edges, and rewiring retirement | Kevin Busque (Co-founder and CEO)
URL: https://review.firstround.com/podcast/inside-guidelines-mission-to-modernize-401-k-s-building-from-first-principles-finding-strategic-edges-and-rewiring-retirement-kevin-busque-co-founder-and-ceo/
Last updated: 2026-02-03T17:49:10.000Z
Kevin Busque is the co-founder and CEO of Guideline, a 401(k) management company revolutionizing the retirement space for small and medium-sized businesses. Prior to Guideline, Kevin co-founded Taskrabbit, where he encountered firsthand the complexity and low participation rates of traditional 401(k) plans—largely due to confusing fee structures.
After launching Guideline to address those problems head-on, the company has seen remarkable growth, hitting **$120 million in ARR** by June 2024\. In this conversation, Kevin shares pivotal moments that shaped Guideline’s trajectory, including a strategic partnership with Gusto. He also explains how his “Do the hard thing first” mindset helped the team build an industry-leading platform and disrupt an entrenched market.
–
**Referenced:**
- ADP: [https://www.adp.com/](https://www.adp.com/?ref=review.firstround.com)
- Aydin Senkut: [https://www.linkedin.com/in/aydins/](https://www.linkedin.com/in/aydins/?ref=review.firstround.com)
- CalSavers: [https://www.calsavers.com/](https://www.calsavers.com/?ref=review.firstround.com)
- DoorDash: [https://www.doordash.com/](https://www.doordash.com/?ref=review.firstround.com)
- Fidelity: [https://www.fidelity.com/](https://www.fidelity.com/?ref=review.firstround.com)
- Guideline: [https://www.guideline.com/](https://www.guideline.com/?ref=review.firstround.com)
- Gusto: [https://gusto.com/](https://gusto.com/?ref=review.firstround.com)
- Intuit: [https://www.intuit.com/](https://www.intuit.com/?ref=review.firstround.com)
- Jeremy Caballero: [https://www.linkedin.com/in/jeremycaballero/](https://www.linkedin.com/in/jeremycaballero/?ref=review.firstround.com)
- John Zimmer: [https://www.linkedin.com/in/johnzimmer11/](https://www.linkedin.com/in/johnzimmer11/?ref=review.firstround.com)
- Josh Reeves: [https://www.linkedin.com/in/joshuareeves/](https://www.linkedin.com/in/joshuareeves/?ref=review.firstround.com)
- Mike Nelson: [https://www.linkedin.com/in/mnelsonio/](https://www.linkedin.com/in/mnelsonio/?ref=review.firstround.com)
- Leah Solivan: [https://www.linkedin.com/in/leahsolivan/](https://www.linkedin.com/in/leahsolivan/?ref=review.firstround.com)
- Paychex: [https://www.paychex.com/](https://www.paychex.com/?ref=review.firstround.com)
- Plaid: [https://plaid.com/](https://plaid.com/?ref=review.firstround.com)
- Taskrabbit: [https://www.taskrabbit.com/](https://www.taskrabbit.com/?ref=review.firstround.com)
- Tomer London: [https://www.linkedin.com/in/tomerlondon/](https://www.linkedin.com/in/tomerlondon/?ref=review.firstround.com)
–
**Where to find Kevin:**
- LinkedIn: [https://www.linkedin.com/in/kevinbusque/](https://www.linkedin.com/in/kevinbusque/?ref=review.firstround.com)
–
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
–
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
–
**Timestamps:**
(00:00) Teaser: “I don’t believe in stealth mode”
(02:51) Inspiration behind Guideline
(07:56) Lessons from a year’s research before Guideline
(10:44) Identifying market pull for Guideline
(14:28) What Kevin learnt before shipping their first product
(19:10) How Guideline set their fees up
(27:51) The surprising range of Guideline’s early customers
(31:48) Kevin’s insights from the Gusto integration
(39:48) Guideline’s first year
(44:44) Working with Plaid as Guideline’s first customer
(53:28) Guideline’s auto-enrollment feature
(57:53) Lucky 8: Kevin’s unexpected pricing strategy
(62:04) Franchise opportunities
(64:49) Kevin’s reflections on Taskrabbit
(71:36) Will Guideline ever go multi-product?
(72:37) Kevin’s take on product-market fit
(73:30) Guideline’s compounding advantage
(78:51) The challenges faced by introverted leaders
**Brett:** Thank you for joining.
**Kevin:** Yeah, thanks for having me.
Maybe we'll just start at the beginning. What what was going on like a year before you started the company? Yeah, so that would have been 2014\. I was still at TaskRabbit. Uh, really the inspiration behind Guideline was some of the earliest employees there not using this benefit called 401k. and that was something that, you know, me as a little bit older, as in my late twenties at that point had come from previous startups and also larger companies like IBM.
I knew what a 401k was, I knew what a pension was, um, and I saw a ton of mistakes and the biggest mistake you can make in 401k is not participating and that's exactly what happened at TaskRabbit. So for that, that's kind of where the inspiration came from. It's like, why it kept coming up.
As a founder you always think of yourself as wearing, you know, so many different hats. And this was one, I just, I wasn't qualified to wear, but people were asking me anyway. I was like. The older person there, I guess, and kind of I did, you know, VP of engineering and technology stack, etc. But I also ran some portion of HR and they're asking me about this and I couldn't really help them.
I wasn't knowledgeable in it and I started digging into it and that was really the inspiration. This is a problem and I'm a problem solver and a builder and I figured, you know, I could probably take a Take a hard look at this and see if I can find the right angle for me and also to develop a product that I would want.
**Brett:** And did you offer a 401k?
**Kevin:** Yeah, we did.
**Brett:** But it wasn't being taken advantage of?
**Kevin:** It wasn't. It wasn't. It was a 36%. I remember this number because I was like, so flabbergasted when I found out about it, 36 percent participation rate. And it happened to be pretty much director and above, right? The younger folks weren't using it in any way.
They, they took that piece of paper home with them. Never to see it again. Right? Like that was the enrollment form where you have to, uh, add up all the stocks that, you know, get it to a hundred percent and then magically pick a number that you want to Contribute. month or every pay period.
people just weren't doing it and no surprise. Right. so yeah, we had one, but it took a while for us to get there because they always thought 401k was. You know, a big company benefit. Right. And that's just, that's not true. But back then, you know, this is 2014\. it was really like, that was kind of the MO of, of 401k.
It's like you go to work at Google or Facebook or something like that. And you get a 401k. But as we started hiring vice presidents, et cetera, and Taskrabbit scaling, people are asking about the 401k. We didn't have one. So we, we went down that path and we looked, all right, payroll. So we were on ADP at the time.
and then we hired another third party administrator on top of that that was supposed to bring some sort of value, uh, called Sequoia, I think they're like Sequoia Benefits or Sequoia One or something like that now, and all of that just still meant that people weren't using
weren't using the benefit and we were paying 20, you know, a year for it for a benefit. Nobody was using and we're supposed to be this scrappy San Francisco startup. Right. So we had to look into like what, what we're spending money on. And that was really the, you know, the precipice of like this issue.
And I thought I could solve it. I was a data engineer before in healthcare space. so I figured, I could probably come up with some sort of angle to make this a better experience.
**Brett:** When you started to notice it, did you start to think about it as a startup opportunity or you were just, this is odd. I was curious
**Kevin:** Yeah, and that was just about the timing, right? This is 2014, 2015\. TaskRabbit is 7, 8 years old. Getting a little bit long in the tooth. you know, behind the scenes, Leah had already met with the IKEA folks numerous times. That deal was long in the works. Kind of knew it was coming. Um, and that wasn't something I was interested in doing.
So, um, I was kind of looking for the next thing anyway. And, and this, you know, opportunity popped up. And, and I started running with it. And did about. A year and a half, two years of research before we really did much with it.
**Brett:** and were, when you started to think about doing something else, and this was sort of one of the areas you were exploring, were you exploring other areas or are you mainly focused on this.
**Kevin:** Yeah, I'm a problem solver and a builder and like, this was one of the things that I was most interested in. I was getting ready to leave. I'm like, what am I going to do with this money? I had 401k assets, right? Like trying to figure out a little bit of self interest there, like figure out what was going to happen.
Most people don't know, but we actually Leah and I at the time when we founded TaskRabbit, we actually cashed out some IBM pension to go and start TaskRabbit. We bootstrapped TaskRabbit for a couple of years before we took the first investment. So I'm thinking about these assets. Can I do something similar again?
And I was like, this is such a mistake. Because had I left that money when I was in my mid twenties, I would have had so much more in my retirement. it's just over and over this problem just kept coming up and I finally just sat down and I went through the IRS code Um, and it's 401 dash k right? So that is that's where the name comes from.
Um, etc so, started reading through it and it was just like This is such a regulated industry and there's the rule sets on what is fair and not fair and it's By the Department of Labor, the IRS, and the SEC And I love being able to piece things together in a way that comes out to like this win win win.
**Brett:** You mentioned a second ago you spent like a year and a half going deep on it. Can you, in, in sort of some level of detail, talk about what the research was?
**Kevin:** yeah, absolutely. So what I wanted to solve was obviously we had an onboarding experience. I think generally speaking, 401k is a set it and forget it. You should join when you first start. It's part of your onboarding process. People weren't completing that. And that's where you get to that 36 participants.
Percent participation rate. So that was one, like that was tried and true. The next one is like, what do I invest in? I don't know. Like you have this list of funds, you don't know what those funds are. What's a Lord Abbott, you know, s and p, whatever. Like nobody really understands that when you're first starting in your early twenties.
So I wanted to solve that. part of the reason to, to even go and try to do something different in 401k or in retirement in general, is the pricing is incredibly opaque. You don't really know what you're paying. You don't know who's paying it. If it's, if it's a company paying for it because it's a sponsored benefit or it's a participant paying for it in an asset based fee.
What is my asset based fee? Is it wrapped in the mutual fund expense? All of these things were just like completely opaque and I started digging through them and Really understanding what an asset base fee was. And it's really a lot of people just not adding value to your 401k plan, but getting paid for it.
And I figured if I could do this the right way and come up with this win, win, win situation, I wouldn't have to do it the same way that everybody else does it. and that was really like one of the things that I unpacked and that was kind of the epiphany early on was like, I could actually figure out a way that's best for the participants, best for the company, and also Guideline can make money.
when you started to think about the problem space, because you were sort of one of the key stakeholders, in observing the problem when you were building TaskRabbit, did you kind of commit to, I'm going to go after this and then do this work? Or did you do the work to give yourself the confidence that you would go spend the next decade plus on this?
Yeah, I did the work. I'm pretty conservative overall, as far as like, Taking risks, but you know, something that's always stuck with me is something my grandfather said was when you thoroughly understand something, it's nothing to it. So I truly believe that. And I went down this path of just like understanding absolutely everything about 401k.
And in the end, I just found my angle and that was really important. And then I talked to Mike and cabs about it, that I convinced them they liked the product. They hated the original product that they were also using, And that was the end. And we just. Went and committed to fundraising, before doing any work.
**Brett:** But
was this after you did all the research?
**Kevin:** This is after the research.
**Kevin:** We didn't build anything yet. So we had to come up with something flashy, to build and show people what kind of this problem exists. Cause most people didn't really know that it existed.
and the SMB wasn't one of those things. There's like clamoring for 401k. We totally made this market with the help of Gusto in our early days. and that was just something that we had to tell the story to be able to raise capital to get this done, but we were pre product. We didn't have anything before we raised the seed.
How did you think about, validating the opportunity in the eyes of the company versus the eyes of the employee? Because a lot of what you were articulating was pain points for the end employee, but obviously for it to be successful. the initial customer is the business owner. Yeah, naturally, right? So at TaskRabbit, I was the business owner, but also the employee. Uh, so I saw both sides of this. And when you start talking to people early on about this idea, and I did a bunch of, you know, talking to other startup founders. I'm like, what are they using for 401k? Did they think about it?
A lot of them just came back and was like, Hey, that product you were talking about. I also want that product. and generally speaking, I like to build things that I want, just personally. I did that with, with TaskRabbit, I did it with Guideline as well, and I feel like that was kind of the need, and that was kind of the core validation, at least for me to do the first year of work on it.
**Brett:** what's the type of work that you did to validate that there would be market pull for the product that you were going to
**Kevin:** Yeah, talking to pretty much anybody that would listen to me, um, including Mike and Cabs my earliest co founders, talking to VCs that I knew through my experience at TaskRabbit as well about the market opportunity size, right? The TAM, everybody talks, it's a massive TAM for this industry. I'm not one of the guys that believe in stealth mode. I figure. Like if you, if you can't talk about it, then like, you don't really have an advantage because everybody has an idea. So, I don't believe necessarily in first mover advantage. It's always about execution for me. So I talked to everybody that would listen to me, including some of our earliest customers, like Zach at Plaid.
And I went to Zach because I wanted to know if he could get me the data that I was looking for, for other people's outside investments, what did they already have? Because I wanted to do something at Guideline that could either mimic. Sort of their investment philosophy or take into account at least that philosophy so I could do something that was additive to it.
So I was talking to him about this. He came back and was like, hey, I want that product too Which is great and they became our first customer before anybody else and it was Guideline and Plaid, early on.
**Brett:** What kind of work did you do on other companies in the space already? And did you think a lot about who the competitors are or would be, or were you just more problem and customer centric?
**Kevin:** No, absolutely investigated the space a ton, mostly because I wanted to get Taskrabbit off the ADP in Sequoia. and that was really the precipice to like, Hey, I gotta go find something that's better than this. And I didn't find it. So for me, that was just some people ignoring the SMB opportunity completely.
Nobody wanted to talk to us. Fidelity didn't want to talk to TaskRabbit, you know, we had. 70 employees and zero in assets, right? So in a legacy 401k ecosystem, if you don't have assets, other people aren't making money because they're not charging a SAS space fee. We were the first one charging SAS space fee for a 401k benefit in the country.
So that was really important to kind of understand. but I also knew that Fidelity wasn't going to punch down into my space immediately. They tried to now, but they weren't going to do it immediately because there wasn't a lot of assets right in their mutual fund company. So for them, I knew they weren't going to be in the space.
My research turned up a couple of others. One had just started. the other one was originally called the online 401k, which became Ubiquity, um, as well. So they were still kicking around, but they were doing some things differently that I thought, well, you don't really have an advantage. You're kind of just being like everybody else.
charging asset base fees. so I knew that if I was going to go and do this, it was going to be completely vertical. I was going to own absolutely everything in the software stack to be able to deliver a differentiated product.
So walk through. What was the set of insights that you landed on before you actually built or ship the first product,Yeah, so on the plan sponsor, the small business owner side, you hate wasting money, right? At least, at least I did at TaskRabbit. So, if you're going to offer a benefit, you want people using it. So again, that participation rate, why are they not using it? I'm paying 20 grand a year for this. Nobody's using it.
Nobody's getting the benefit. Nobody understands the benefits. So that was one and then the other one was like people need to understand that small businesses can afford a 401k if it's done properly just because you don't have assets doesn't mean they won't build over time, right? Like that's the whole point So and then make it as easy as possible.
So for us and ADP and sequoia like Our payroll and our 401k weren't even integrated and it came from the same company and that was just like mind blowing to me. Why am I validating contributions after every pay run? Why, why am I doing this? This should all be handled in the data set in this product. Um, and it wasn't, and that's kind of the way it is even today with some of the larger legacy companies, uh, they still haven't figured out that you need to have this seamless integration.
The small business owner doesn't. And isn't qualified to administer 401k, Um, and, and part of our first product was building these 360 degree integrations with forward thinking payroll companies like us though. And that was absolutely so important to product market fit for, for Guideline, because if we had to go back to the small business owner every two weeks or every week on a payroll run and ask them to validate all this stuff, that's a ton of work that they don't want to do and they don't have time to do it. So that was really a key insight into developing the product we have now. On the participant side,
I truly felt that 401k overall. had kind of lost its direction, right? The whole point of this benefit is to get people to save successfully in retirement in 20 or 30 years. And to be able to somewhat guarantee a success, or at least the probability of success, you need to do a few things. And this is where Modern portfolio theory kicks in, and that's truly what we believe at, at Guidelines.
So we don't have to differentiate on what is actually in your 401k, from an investment product. We're not trying to beat the market, but I'll take that six, seven percent of market appreciation for every year for the next 20 years, and I'll show you a huge difference. By controlling the things that I know I can control.
And those are your fees. And your fees pay, play a huge portion of this. So this is your asset based fees that most people don't know they're even paying. It's like 65, 70 percent of people don't understand they're paying asset based fees in their 401k. No idea. so that was really important insight for me.
So we really brought that forward. And when we launched, it was incredibly low. I think we launched at 0 percent AUM and people couldn't believe that we could do something like that. The truth is, it was very difficult, but we were in early startup mode and we weren't making we didn't need to make a profit.
We just raised the seed. So over time, we're still incredibly focused on what we call a participant outcome. And that drives absolutely everything that we do. Uh, at Guideline, we're really focused on keeping those asset based fees incredibly low. So those are the two things. And then obviously what's my experience in 401k.
I remember resetting my password for ADP like 30 or 40 times. it seems like maybe you've done that in the past too. that was really important. Just, it needed to be a modern product experience and you need to understand it, we need to have a mobile application. all of those types of things just, and the next one was really fixing.
That onboarding process where you had to pick from a fund menu and understanding how much you can afford To invest and what it looked like from your paycheck perspective, right? Like you could say I want four or five percent But what does that mean in actual dollars in two weeks, right when you don't have that those funds anymore So that was really important to understand and we built a suitability algorithm inside So essentially a robo advisor for 401k had it certified by a third party at the time and and that was really important.
So now you could Pop in, go through a web experience that was modern and fresh and like used common language. None of the co founders were in finance in any way. We're two software engineers and a product designer. So we used just really clear sort of basic English. We weren't overwhelming or intimidating with the terms being used.
And that was very intentional. get people through this experience and then make a portfolio recommendation to them. All they had to do was click yes. If they didn't want it and they are You know, maybe more financial literate than than most they could bounce out of it. There's an escape hatch They could pick from the fun menu.
That was fine, too. But 92 of all of our participants
take our recommendation
**Brett:** Going back to the fee structure, were fees set up as just money grabs that people didn't recognize? Or was there a structural reason that there were fees and you basically using software sucked things out of the cost structure that allowed you to do something that incumbents couldn't do from a fee perspective?
**Kevin:** Both right. So traditionally speaking and 401k and the legacy ecosystem, people charge asset based fees from your record keeper to your TPA to your fund investment manager, all the way through to even the 316 who administers the, the overall 401k plan, they all charge asset based fees, right? And they just all stack up.
So in the end, the asset base fee for task rabbit early on was 1\. 67 percent or 167 basis points. and that's just insane, right? Like I'm literally investing in S and P 500 target date fund. Like, what are you, what are you doing that that needs to be 1\. 7%. It just didn't make sense. Um, and that was really just the structure of 401k.
It's not that way anymore and I think Guideline had a lot to do with that. Um, but that industry average has come way down. It's now maybe like 80 basis points, 90 basis points or something like that. just feed compression over time, but, Yeah, that was kind of just the structure that it was and it didn't need to be that way.
And again, focusing on participant outcome, that was my opportunity, right? So they're charging 1\. 67%. I could charge something completely different if I built the software correctly. And this was the most important thing that we ever did, was understanding why was every person in this ecosystem or every company rather charging an asset based fee.
It's because once you charge an asset based fee, Everybody else has to charge an asset based fee. So if I want to offer you a modern, and some of our competitors did this, and this is where we kind of surpassed them very quickly. If I want to bring you a modern 401k experience, I can go about it in many different ways.
But the most easy one, the basic one, is to put a flashy front end on it and use all of the legacy Institutions under the covers, right? Like I'll go get a census for a record keeper. I'll go find a TPA, another third party to administer the plan. I'm just going to do the front end software. And what I'll do is I'll just tack on a little bit of asset base fee, right?
That's my margin, but that's 15, 25, 35 basis points of that 1\. 7%. and that's over time. That's just so detrimental to the participants. So when you look at it and you're like, okay, if I'm going to do that. I have to pay a record keeper all this stuff all the way down the line. And I said to to Mike and Cabs I'm like, look, if we're gonna do this, we need to start at the bottom.
It's gonna be super boring. We're gonna spend a year building record keeping. Um, but it's gonna give this advantage all the way through. 'cause we don't have to charge any of these asset based fees that everybody else does. And then we can just pick off. We used to call it hands in the cookie jar. So we would pick off each hand in the cookie jar.
As we went up the stack from the bottom of record keeping all the way until we delivered an end product on a web experience. And that was super important. Gave us the advantage that we needed.
**Brett:** Going back to sort of the phase before you raised money and before you wrote a line of code, at what point did you commit? Did you find that it was like a moment in time or was a slow build over months?
**Kevin:** It's a good question. I think honestly, it was, it was a slow build and then it was a moment. And that was a moment that Leah and I had together and it was very much like, Hey, I'm going to quit. I'm going to leave TaskRabbit. And this is going to be a thing. Um, we tried to make it not a thing and it went extremely well, actually.
people thought I had just kind of disappeared a little bit, but, I was actually, I had left and I committed to fundraising and that was really it. the moment in time is like. I need to raise capital because I need to pay employees to come build this thing with me, and that was really important.
That was the moment in time, but I knew I was going to do something different at some point, but I just felt like that was the right time for me in my life to kind of go out there and do my next thing.
**Brett:** So when you were doing a lot of the research to understand the opportunity, you were still working at TaskRabbit at the time?
**Kevin:** Doing the research, I was still around. I didn't have a lot of responsibilities. Actually, how I met and became like really good friends with, with Mike and Cabs is we were set out to do a whole different product. Um, besides TaskRabbit, there's a company called Kelly Services,
It was hourly work that you could outsource like a Robert Half, etc And they were super interested in coming outside of the brick and mortar and doing it all online. So we built this entire product for them that sat on top of the TaskRabbit platform to be able to hire people immediately. we were back and forth to Detroit.
They're based out of Detroit. so we're in the winter, they're going back and forth, just going through specs and delivering product and doing demos, and it was just the three of us. And it was a designer and two engineers. And essentially I was the face of the company doing the demos, et cetera. So, I really figured out that these two guys, like we whole company to this other company.
and then I forget what happens, but they had some sort of reorg in The section of the company, the innovation side of that company got completely shut down. And then we were kind of stuck. And that was also like the moment in time, like we were going to go back to TaskRabbit and be reabsorbed into the organization after running on this sprint essentially for the last almost three or four months.
And that just felt like disingenuous to come back into the company knowing I was going to leave it as well.
**Brett:** So what were you hearing in research and spending time with customers that gave you the conviction to then effectively go heads down and build all this plumbing?
**Kevin:** Early on our very first product wasn't 401k, wasn't Guideline. It was really just surfacing these fees to the people that were already participating in a 401k. So we built this tool so you could look up your 401k and we would give you an estimate of the fees that you're paying. and we would show that to the people responsible, the small business owners, the people in the plans and get their feedback from them.
And most of it was like, I had no idea. Like I'm looking for a new solution. This is before we raised money. Yeah. We actually ended up using that demo in the fundraising process, which is super interesting. Actually, Rob and I have a funny story about that from way, but you might've been, you might've been here.
but it was a funny story about that, but you could essentially look up people's 401ks and figure out how much they're paying and then take it and make it personal, right? Like take it to an individual and show them how much money they're losing over the next 20 years. Just by paying those fees. And it's a large sum of money.
Some of it is 400 to 600 thousand dollars. The difference between 1\. 6 percent and 8 basis points is, it's a ton of money.
**Brett:** seeing people's eyes light up gave you the conviction or like what, said, okay, I'm gonna go spend a year plus to get this thing off the ground?
**Kevin:** Yeah, I mean that was really it and I knew that I thought we had a A tactical advantage between Mike and myself, and Cabs as well, because he was delivering what that product experience look like. But I was a data engineer previous to my life at TaskRabbit in healthcare space. Mike is one of those 10 X engineers that, you know, we could build something super fast and that was just what we really liked doing. So I felt like we had the right skill set. We had the right team to be able to actually go and build this where a lot of other people were going to come from it from a financial point of view and think, why would you do that?
Just hire a census or hire a matrix. And I knew they were going to go down the wrong path. and for us as software engineers, we were like, let's go, let's go do the hard thing first and build bottoms up. That was really the con the conviction came from the customers and the insight into fees that they didn't know they were paying.
**Brett:** And then it was like, I was really excited to go build this product. When you were spending time with founders or business owners as one of the key stakeholders, when you were intersecting them, were they all like emailing you, when can we have this we want it or it was a mix of sort of, yeah, I don't really care about this. I'm focused on other
**Kevin:** No.
**Brett:** range of
**Kevin:** Yeah, it was it was definitely the former and so when we have it Zach was very adamant about like hey If we're not going to do this now, like when are you going to do it? and I think we launched Zach's plan, and so this is Plaid, in december of 2016 so he was very first to market. We didn't have the integration yet with Gusto, et cetera.
So, it was very manual process, but it was really important to get that first year because then we had to do 5500 filing and integrate with the IRS shortly thereafter so that we could keep those plans in compliance. Yeah, I mean, so many people that I were talking to are like, when are you launching?
When can I have this? Have you thought about this? Can I connect you with this person? just super helpful. And I think that's part of the beauty of San Francisco. Uh, overall, it's just like people want to be helpful. And as long as you talk to them and are authentic about what you're doing, what you're building, there's generally a good amount of excitement around it.
**Brett:** Did you think about early customers in terms of separating the Plaids, venture backed tech companies versus main street small businesses, or didn't think about who the first 10 or 1000 customers would be in that lens?
**Kevin:** Yeah, I didn't think about it and quite honestly didn't care. Um, and that was really important because we wanted to, you know, encapsulate that whole TAM and the TAM
for a formal game.
Oh, every side of it. We had cupcake
**Brett:** Yeah.
**Kevin:** makers in San Francisco from bakeries, that we were using it, you know Taskrabbit that I knew about that I talked to We talked to VC's, VC's wanted it as well.
They're highly educated financially literate folks, right? They understand they get the game with the asset based fees and then we had forward thinking companies like Gusto, who also was a customer at the end, right? we built this whole ecosystem with them and they became a customer. So it was a very easy sell early on.
It was really about what does it go to market going to look like? How do we tell people that we've built this thing? and how do we educate people that it's not just a big company benefit?
**Brett:** Did you create some sort of basic financial model to sort of get your arms around is there a real economic engine to this or you just thought if we solve this we'll be able to make money?
**Kevin:** No, we definitely, you know, did a lot of work going into it and came up with pricing, etc. We knew we were going to change the game a bit on pricing, because we're focused on delivering a SaaS, you know, software as a service.
when we actually did go live and become generally available, it started taking off almost immediately. and that was really important, but of course you do the modeling on that, even to raise capital.
You're like, this is what we're going to charge. This is, you know, how much money we're going to make in year one, year two, year three. We get a lot of validation, mostly from VC folks. I'm like, can you actually sell, 10, 000 plans in a year? Like, can you do that?
it seems like a lot. And you look at ADP and paychecks and like, they weren't selling 10, 000 plants in a year. So how are you going to do it as a San Francisco
**Brett:** On
that point, did you think about distribution? Like, I think one of the reasons why Fidelity and others haven't gone after the market, or if you think about what did Square do in the early days, it was the identical thing. The main merchant processors didn't want to deal with somebody selling cupcakes at, you know, some sale some weekend.
So did you think about how can we get efficient distribution into SMBs? Or again, was it more the pain is really High and if we build a great product that's priced correctly Distribution will take care of itself?
**Kevin:** Little bit of both. we definitely wanted to deliver on the product. PLG was super important product like growth, was going to be, you know, our go to market motion. And it was absolutely going to build a product. That's what I had been selling when I was talking to all of these folks early on about, this is the product, this is the experience, et cetera.
They want that product, right? They weren't talking about where they found out about it or what it was going to be to sign up, et cetera. But in the end, that model that you show venture capital needs to have some go to market motion and whether it's going to be sales led growth or product led growth and what that looks like over time is just incredibly important.
So my angle there, not being a salesperson and actually generally being uncomfortable talking to people, was like,
**Brett:** broadly uncomfortable
**Kevin:** uh, we just need to understand that, right? I don't want to hop on the phone. This is, you know, zoom was a thing, but like it, it wasn't going to be a sell motion. I wasn't going to take people to steak dinners and do the fidelity thing or the ADP thing that was just, wasn't how we're going to do it.
So I look for our advantage and our advantage was really in and around our integrations. so where, where do people actually look to bring on new benefits? And that's what the payroll company, I'm thinking back to my taskrabbit experience, that's what I did. I went to ADP like. Actually, the probably the worst place to go and buy a 401k is through your payroll company, right?
Like it's like buying it from your bank. Like what do they know about those types of benefits in the end? Um, so that was really insightful for me, but also it's like, okay So how do I make this also attractive for this payroll company? And that's why we pay for integrations And that integration gives us operational excellence and scale in the end.
So it's good for Guideline, but it's also great for Gusto. It's a hundred percent margin business for Gusto. They don't have to be involved in
the bill. Yeah. So what we do. So Guideline in general as a 401k you need payroll data. It's a pre tax benefit. It's a post tax benefit It needs to be set up in payroll so that you know how much money is going to be put away So that Guideline can invest that money on an individual basis, right?
So to do that and do it Well, you have to know what that data is and this is my point earlier about with ADP in our existing 401k plan. We had to go and validate all of those contributions. We had to validate that somebody didn't change their contribution from 4% to 5.2%, et cetera. All of that is data.
All of that is in the payroll system, and we needed to ingest that. So we built this first of its kind integration with Gusto and honestly like. Guideline wouldn't exist without the forward thinking folks over at Gusto and Tomer and Josh who knew that, who understood what I was trying to build that was so important to us.
So we built this 360 degree integration where you change your contribution on Guideline, I'll update it in Gusto for you. You change it in Gusto, it'll come back to Guideline. We change something in one system, changes in the other. Of course, there's like some sort of source of truth and that's kind of industry stuff.
But that was so important to get right and it allowed us to get to the scale that we are right. So 92% of all of our customers are on an integrated platform and that's where we play like really well. So we're we're 400 people at Guideline, but we service almost 60 000 small businesses at this point and if you look at any other like ADP or You know paychecks, etc that are at our scale.
They have hundreds and hundreds of people just servicing 401k We do it all in the system.
**Brett:** Did you figure out the integration insight before you started the company and raise money?
**Kevin:** I didn't
That came after, obviously I knew I had known about this problem with ADP. So I was experiencing it myself, at TaskRabbit, but I couldn't figure out the angle to make Gusto care or make my first payroll partner care that I was going to go do this. and eventually we figured that out and that was really important to, to understand.
But one of the things that I didn't realize until after the fact, and Gusto actually told us this, So payroll in the United States is incredibly fragmented, right? They have high churn. It's 25, 35 percent on the higher end of their annual logo churn. So when you take that into account and you attach a 401k or an integrated 401k solution to the payroll product, it cuts it in half, right?
So their LTV doubles, which is fantastic for them, right? So now I'm starting to think, this is why they're going to care because I'm going to cut their churn in half when they attach a integrated 401k and now I can start paying them as well. Right? Like the long tail of it with that integration, it gives me operational scale.
I can actually start giving them money. Now I'm giving them, I'm giving them money for essentially maintaining an API, right? That's a hundred percent margin business for them. So that makes it really exciting. Doubles the LTV. and I pay them. Now I'm starting to understand like, Hey, this go to market motion has legs.
Now I have like the win win win win, right? Now I have my payroll provider. I understand that the participant is so much better for them. The small business, it's hands off and Guideline makes money. This is a scalable
business. did you come up with that?
I mean, just all the way through, right? Like I'd never thought that I would convince Gusto or an Intuit, et cetera, to be able to give me this data, right?
Like we'd have to go down through, you know, lengthy partnership process. Luckily for me, like Josh and Tomer are amazing. they saw it right away. I didn't, didn't take a lot of convincing to them. they also wanted the product, right? So there's a little bit on their end of like, of course I want to, I want this kind of 401k as well.
So,
**Brett:** you spend time saying, okay, I need payroll providers to align with me to make the whole distribution thing work? How can I get them?
**Kevin:** No, that's exactly how I did it. So for us, and I remember talking to Mike and Cabs, I'm like, we've got to figure out how to make this worthwhile for, for the payroll partner. If we're going to do Gusto or Intuit or whomever, Zenefits, we're going to need to figure out our angle.
Otherwise they don't really have much. We're going to have to be sold, Cause people need to find out about us some way. But we also, you know, failed early on in. You know, we, we brought in a few sales folks. There's probably two or three of them.
I was like, you guys sell 10 plans this year. I will take you to Mexico. We didn't sell 10 plans. Nobody went to Mexico. So the next year we sold many hundreds of plans. So that was only after unlocking, the payroll partner.
**Brett:** Because we're going down, we're cold calling small businesses. We're trying to, you know, tell them about our value prop. We tell them about our fee structure, et cetera. They're excited about that. How much work is it going to be for me? Well, here's the kicker, right? Like every two weeks or whenever you run payroll, you need to validate your payroll.
**Kevin:** You need to validate your contributions. You need to make sure there's not an error. No, by the way, if you get it wrong, there's a bunch of penalties. So for that reason,
**Brett:** and were these folks that weren't offering a 401k
**Kevin:** Yeah. So
**Brett:** what about going after the people that did have a 401k and getting them to switch
**Kevin:** No, because we didn't have a sales force, right? So like that's a long sales cycle we had early on.
It was just people that knew 401k, but they weren't salesmen, right? They're answer folks. Like what is the vesting schedule or, those types of questions. So we didn't have this and we still generally don't. Compete in like a sales led motion. We're starting to now, but that's very recent. That's within the last eight months.
for us, it was just like, Hey, build a product that people want. I knew once we did the demo, we would see a higher close, right. But it was actually getting people to do the demo. and they didn't have a 401k before, so they didn't know how bad it was at an ADP or Sequoia, etc, right?
So, they didn't have anything to compare it to. For them, that was their first experience. And that's still the case for many of our customers. They think 401k is the easiest thing in the world, but they've only had Guideline, um, which is a great, great spot for us to be in. But early on, it was, it was tough to sell, to sell plans until we unlocked that, Hey, you don't have to worry about anything.
Like we're going to ingest your, your employee census. We're going to invite them via email. They're going to click on some links. That's going to automatically happen for you. Um, that was really the unlock.
**Brett:** Why did Gusto Not want to compete and own this category. Why why do you think they wanted to partner?
**Kevin:** Yeah, it's a good question. I mean, it took some convincing on my part to like, Hey, let us, let us build this thing, was very, is very interesting. Early conversations for sure with myself and Tomer. but also there's a lot of regulatory issues around 401k. So if you want it to be completely. full stack or bundled solution.
You also had to become an RIA. Becoming a registered investment advisor means you have to register with the SEC. The SEC has all of these different things. Now you have the SEC, the IRS and the Department of Labor, and you have to comply with all of those rules and regulation. It's actually very difficult for a company that's growing as fast as Gusto was at the time, and probably still is, to say like, oh yeah, I'm going to go and figure out this RIA thing.
That in conjunction with like, oh, Kevin's going to pay me anyway for accessing my API and get a hundred percent margin. That's a no brainer, right? So when they go through a build by partner motion, it definitely points towards partnership. And with Switzerland. we partnered with, you know, pretty much every forward thinking cloud based payroll in the country that is at scale or matters.
**Brett:** I wanted to sort of recontextualize the journey with, you raise money and then you said you had to go heads down to build all the building blocks because you wanted to own basically the whole supply chain. Talk about more like what was year one and who was there and what was the order of operations?
**Kevin:** Year one was, it was a trip. So it's myself, my co founders, Cabs and Mike, it's Jeremy. and then our first employee was actually a lawyer. and this was a person, you know, generally not fresh out of law school, but somebody young enough to essentially interpret, interpret ERISA, the IRS regulations, Department of Labor, SEC, et cetera.
And that was really important to understand. We actually had a blueprint, right? the blueprint was the regulation. as like completely opposite to TaskRabbit, where it was kind of the Wild West. You had some like gray area around the employee versus 1099, but in Guideline, like you have regulation and you can look things up.
There are books sold on Amazon that dictate what you can and cannot do. for us, like we brought in an attorney that just was an amazing, amazing employee early on. And she helped us essentially productize all of those regulations. So as much as Guideline is a FinTech company or reg tech company too, that was year one.
There was probably five to eight of us fluctuating in between all engineers, no salespeople. We started bringing in some marketing positioning folks towards the end of year one, then an attorney. And that was, that
**Brett:** And so at that point, you're not interfacing with customers. You're just building and you explain this a little bit, but you had to build each part of the supply chain in software from scratch. How did you figure out how to do that? There's like these legacy entire companies that have been around for decades and decades and you were trying to rebuild what they were doing in software?
**Kevin:** Yeah, absolutely. So each hand in the cookie jar that I mentioned, anytime there's a fee being associated with, an entity was something that we had to go build. Right. So you look at record keeping, you look at TPA, which is the three 16, sorry for all the acronyms.
and then there's an investment manager. These are the people that control which funds you can actually invest in. Then there's the product delivery folks, right? Like, what does this thing look like? so each one of those things we had to build and we essentially built them independently. so that at any point we could kind of move things around and control that product experience.
there was a lot of learning. Going into that,
**Brett:** how do you go and build any of those things?
**Kevin:** we rebuilt record keeping where I think we're probably on the 10th generation at this point, right? Like you don't get it right the first time, but you do your best and then you have to file taxes and like all those types of things.
So, um, we always joke, like there is no beta at Guideline because you can't sign up for a free 401k. Like the IRS does not care. Like I promise you that like you better be licensed day one so that was really important to kind of understand that we needed to get this right That's why it took us a year to go to market where actually some people launched ahead of us but they weren't doing the hard things, right?
**Brett:** They were doing the easy thing they're putting a front end on a census or whomever So, but if you don't have experience with record keeping, how do you go build that?
**Kevin:** Yeah, so I did have experience with record keeping because I was actually
**Brett:** With the healthcare
**Kevin:** That's right. So like we did a bunch of I was doing employee health records on unstructured data, knew generally speaking, like how to build a data store, people call it a ledger ledger is kind of like the front part of it. But there's so many things that you have to do underneath of the ledger, which is just You know, something that Mike and I were again, like we had a unique skill set that we understood how to go build this Taskrabbit was not a simple product either. When you look at it, it's like, yeah, you might've been doing like burrito delivery and all that stuff. But there's a ton of data that goes into that as well. that was just really important to understand. But again, like you go back to what are the things that we need to understand?
We need to understand, you know, when somebody buys, an equity, right? Like, what does that mean? What are all the dates associated with that? For cost basis for say, like there's so many different things and we just needed to understand that. And that's where we really leaned on our first employee to help us with that.
**Brett:** Did you use any existing providers or every single thing was built from scratch?
**Kevin:** everything that we could at the time we built from scratch and that what I mean by that is the thing that we were very careful to understand was. If we're going to be build record keeping what we're not going to build is like the trading platform, right? like where's the money actually clear, right?
So we signed up with state street bank through an intermediary or custodian And that was really important to understand. So there's a lot of the early questions. We're like, hey, you're san francisco Startup and you have 90, 000 in AUM, which was like, you know, mine Cabs and Mike's money at the time.
Like, What happens if you guys disappear? Like, where does my money go? And that was really important to understand. So it wasn't just Guideline, but it was Guideline and intermediary, um, sub custodian, then State Street Bank. So the assets were all at State Street Bank. So when you say that, and it's like the oldest financial institution in the world, like your money's over there.
In the end, so like that gave people a lot of peace
**Brett:** if you went out of
**Kevin:** yeah that it was still there Right, like at that point we would just have to deliver like who owns what portion of it and luckily for
us Like we were really good at that.
**Brett:** talk a little bit about the first customer. And I think you said that Plaid was the first customer. once you sort of built this infrastructure, you went to them and you just focused on making them successful, Did you build the Gusto integration at that
**Kevin:** No, we did not. It was separate. Yeah. So the Gusto integration didn't come until maybe early 17, late 2016\. we had two customers to start. It was Guideline ourselves eating our own dog food, which was super important, right? Like we were building this product for, you know, me, Mike and Cabs at the time.
Like, what did it look like? What did we want in the product? And then it was like incorporating like Zach and and his engineers at the time where there's, these are financial folks, right? Like they understand what the institution looks like. They understand ounces and like how things move.
They were giving us so much good feedback early on some of the stuff. I'm happy to say we're actually launching this year. One of the earliest engineers was like, you need mega backdoor Roth conversions. Like you need to be able to do this. And I'm like, We're just trying to figure out like, hey, payroll day one, what does that look like?
so that was just really important to, to understand, but it wasn't, it wasn't a hard sell, uh, with Zach and the early folks over there, they really wanted that, that product. And luckily enough for us, they were great about it and we could work with them. If there was an issue, we would work with them on solving it, et cetera.
And that was really important just to keep it small, but they grew incredibly fast in the, in that timeframe. So actually keeping up with Plaid, we called it the Plaid problem. Like that enabled us to go up market. Even today that enables us to go up market.
**Brett:** The version of the product they had required them to do the weekly or bi weekly sort of manual process?
**Kevin:** That's right. Yep. And I think at that time we were probably outsourcing to another third party to actually do all those checks because Zach didn't have time to do that, right? So, and I wasn't going to do it for him. think we were outsourcing at a time we called it a non integrated plan or NIP. Uh, we still have a few of those today for the bigger plans that maybe have a homegrown payroll or something like that.
but that was really important to kind of understand and get in the weeds there and look at it and then essentially take that back. Take that experience and productize it and bring it back in house and develop it in software so that you got all the things correctly.
**Brett:** when you got them set up as effectively the second customer, because you all were the first customer, was it immediately apparent that you had really strong customer set?
**Kevin:** Not really. we definitely saw high usage. even when we started, the onboarding flow wasn't where we ended up. Right. It wasn't a perfect suitability algorithm at the time. We didn't do a lot of the validation that we should have been doing early on. and that was really important just to build confidence in that recommendation.
The, the recommendation wasn't at 92%, that's for sure. It was, you know, in the mid fifties on, on taking that. we just. Open the floodgates for product feedback. we got a lot of it early on which was great I think i'm sure there's still stories that exist from those time frame from that time frame.
**Brett:** And so what percentage of people in those first few months signed up?
**Kevin:** Yeah, it was like 80\. or
**Brett:** is that started to give you confidence? If it TaskRabbit, you were in the thirties and Absolutely. Yeah It was so validating. And one of the earliest decisions we made, and this really came out of my experience at TaskRabbit, was to be what is called an opt out plan, or automatic enrollment. So essentially, you're going to be in the 401k plan if you do nothing. You're going to be in it. I'm going to give you a target day fund.
**Kevin:** And you're going to be set at a contribution rate. And obviously the IRS, the department of labor allow this to happen inside of 401k. So if you sign up as a company and your employees don't do anything, you actually, as the small business owner and the plan sponsor can set a default contribution rate.
Normally that's pretty low, two, 3%, just to get people in the plan, right? So now you're invested automatically. You probably didn't know that you got in there in the, in. You knew because we told you, but you probably ignored it, right? So now you're in there and you're investing and the market's going up and you're in a target date fund.
You're like, what is this 401k thing? Um, and that's just a really good experience overall to, for people to understand and first learn how to invest. I think the stat is 76 percent of all investors in the United States first learned to invest in their 401k, which is a great place to be at, right? So we were doing the right thing. Today, a hundred percent of our plans are auto enrolled. so we don't have anybody that's opted out. If you don't want auto enrollment, you don't get a Guideline plan.
**Brett:** Why did you decide that?
**Kevin:** It was just really important, like philosophically to me, if we're going to affect participant outcome, we want to prevent people from making the wrong decision.
The only wrong decision in 401k is not to participate. So what's
**Brett:** the story behind your third customer?
there was a flurry, after that, I think we probably signed up 10 a week from that point forward. they were all over the board. I think it was a cupcake company. So you had Plaid as your second and then likely something like a
cupcake company.
**Kevin:** and it was very, it was a whole different. You know problem set for us hourly workers. They weren't salaried anymore. So like payroll look differently And then our companies from that point forward, we started with the Gusto integration and they were all over the board, but they're very small, right?
So six seven person companies, and they could be blue collar white collar behind the desk. It didn't matter They were all coming in. So we had to develop this sort of this product for everybody, uh, and that was really important for us to, to understand. And we've got a lot of learnings from that, but the next hurdle for us was hourly workers.
And we didn't really think about that being a startup in San Francisco. Kind of everybody was on salary, right? So when we went more broadly with the Gusto ecosystem, that kind of hit us in the face, day one, and we had to, we had to iterate pretty quickly.
**Brett:** How does that sort of align with the point you were making around you hired a few salespeople or quasi salespeople and they were unsuccessful? Where is that in the order of events?
**Kevin:** Yeah, I would say that's before the Gusto integration. The Gusto integration was the biggest unlock for us. And that was really about You know, selling people what the experience was going to be like, again, that was the issue early on after the fact, it was like, sign up, you kind of sign up through Gusto, you do an OAuth there, we can show you all the data right in the moment, we can show you your employees, we can show you how much they're making.
**Brett:** So we built a lot of trust at that point. So when you went from, call it your, the cupcake, customer, which was your third to your 20th or 30th, how were people finding you, like
**Kevin:** Yeah
**Brett:** Where did they come from and was it all inbound at that point?
**Kevin:** All inbound, at that point we didn't have outbound until maybe a year and a half ago and we're almost 10 years old. so all inbound, we did a lot of in product displays. So went to Gusto and said like, Hey, when people click on your benefits tab, let's show them a 401k, you know, Chiclet or modal or whatever you want to call it.
that they can actually just sign up for this thing now and make it really simple and like click through it. OAuth will deliver the, the census, go through some product, plan design features and away they'll go. And they can be start to finish. It was eight minutes. Um, and that was just like unheard of in, in the 401k land.
Was there ever a question of do you, would you be willing to white label it for someone like Gusto versus have your own brand?
Yeah. There's a lot that goes with white label. We have these discussions all the time from smaller companies than, than Gusto as well. in the end you have a customer service problem. So who owns the customer? are Gusto, you know, service folks? Qualified to answer 401k questions that just adds a ton of confusion, right?
So like for us we can do something That's you know powered by Guideline. We have those conversations all the time But in the end we need to own that participant for regulatory reasons as well Not just customer service, but you don't want to get it To be to a point where it's just really confusing on who owns what you don't want to be like, Oh, it's a Gusto 401k, right?
And have Gusto take these calls. It's a bad experience for them. So yeah, we get those calls quite a bit, but also we don't want to be a commodity record keeper as well. And that's where, you know, you go down that path bundling and delivering a full product experience is super important to us.
Otherwise you're going to look like in a census or a matrix or et cetera.
**Brett:** going back to sort of the third, fourth, fifth, tenth customer, how hands on were you with them versus it was pretty self serve and everybody just kind of did it on their own?
**Kevin:** Yeah, I remember the 6th or 7th, maybe the 8th, customer that came on. I didn't know about. Had no idea they weren't in a pipeline somewhere. I didn't know that we were talking to them, etc It came in through a through a uh a salesperson that had answered a few questions on like vesting schedule or something like that so at that point I I knew like hey, like I don't have to be you know, co selling everything It's not about vision or where we're gonna go.
It's about the product that I currently
have and that was a great that was a great moment for for Guideline
**Brett:** One of the unique things that it sounds like in that first 20 or 30 customers is how varied they were. Like I think more conventional wisdom is narrow in on a customer type and then just get repeatability and exhaust that and then move to the next one. Did you make that super intentionally or it was just people were coming to you.
We want to service everyone.
**Kevin:** What we knew at the time,
I would say post Gusto integration, is that if you were forward thinking enough to have, you know, um, be a customer of Gusto, an online payroll company, you were generally open to new types of experiences in software. and we knew we wanted to enable that. So if you're on that platform, We wanted you as a customer of Guideline. we had to enable that because Gusto isn't just behind the desk. I think. Maybe 50 or 60 percent of their businesses behind the desk, but then they're in every SIC code, just like Guideline is right, across the country. You have all these different sort of buyer personas, but in the end, it's the same.
It's a small business owner that doesn't want to pay high asset base fees and doesn't want to administer a 401k. So we had to be able to service them. so early on There was only one restriction, that I fully remember. And that was like, if you didn't want an auto enrolled plan, then we couldn't service you.
And that was, baked into the product. We didn't have an experience where you could, you know, you had to opt in. It was only opt out. We had only created opt out. We'd only developed that feature. so we couldn't, we actually couldn't do it. and opt in, opt out plans rather are heavily regulated by the Department of Labor on what you need to do, what types of notices you need to give, etc.
So that was a lot of, you know, development and engineering work and we weren't compromising.
**Brett:** was that an easy decision for you to make?
**Kevin:** It wasn't, we definitely lost some early plans in the first 100, I would say we probably lost 5, 10 plans, um, and then we had to build a talk track around it. Right? you can always click the button to opt out and like, let them have the ability to do that.
And then at some point, you know, we were looking about different ways that the small business owner could opt people out with their consent if they didn't want to log in or have anything to do with Guideline. but in the end we kept it. It and just stay true to who you are. And now it's funny enough, secure 2.
0\. All plans are auto enrolled. So we were totally way ahead at the time. but we, we did that nine years ago, eight years ago
**Brett:** And when you were originally making the decision before you came to market, was that an easy decision to make?
**Kevin:** it felt right again, focusing on participant outcome definitely took I had a lot of conviction around this was the right thing to do. It might feel weird to kind of demand that somebody do this or participate there. But in the end, like you could just click the button to get out of it as well.
If you didn't want to participate, we weren't forcing you to give us your money. but in the end, like we have so many thank you notes of people like, Hey, like, thanks so much for putting me in. I didn't have time to do it. I've been in it for three years. I've made 30 percent or whatever it may be. so many of those types of emails.
So I feel like. We did do that correctly and now obviously like the US government agrees. So it's a good spot.
**Brett:** you mentioned that up until very recently, call it 12 or 18 months ago, the entire distribution engine was inbound. Do you think knowing what you know now that was correct, it should have been like that?
I think probably the largest, you know, sort of decision that I didn't actively make at the company, was just being so focused on PLG, and not actually thinking about the opportunity for sales led growth. I didn't know about that. I've never been in a sales environment, at all.
**Kevin:** I didn't know how to hire these folks, etc. Definitely a big opportunity and we, we love it now. Like it's working in conjunction with PLG. So we're, you know, roughly 50%, depending on how you measure it as bought on our website. And then 50 percent goes through the sales
process.
**Brett:** Already just in like 18 months, or.
**Kevin:** Yeah, we've had it for a little while.
So the way that we do it, the way that we measure it now is like, if we get a lead from a payroll company, we give them a set amount of time to essentially close on their own. And then they go into a sales process, right? So we're changing that up a little bit and being much more clever about how we do that and the type of lead and lead scoring and all that sort of stuff.
But, Right now I would say, as far as like actually selling, but it's not true outbound, right? We're not dialing for dollars. These leads are warm.
Sales assisted. but now we're actually like, Hey, you came to us a year and a half ago. You never made a choice. Like we're calling you now.
you briefly talked about this that the way that you price the product was a big part of the product experience. But how did you actually figure out what you were going to charge? Because it seemed like there was a ton of room because the fee structure was so high.
**Brett:** this was so lazy and I'm just going to tell you the truth. Eight was my lucky number. I was starting there. It's going to be literally a placeholder on the website was 8 dollars. and then in the end it, it matched up at the time. It was the same amount that you would pay for your Google suite, your Gmail account, or your corporate one.
**Kevin:** And I wanted to be able to say like, Hey, this is a financial benefit for you. It's the same price as your email.
**Brett:** And it stayed that way?
**Kevin:** Stay that way. We've done so many different sort of pricing, you know, what's your pricing power, et cetera. It's still 8 dollars we always come back to 8 dollars and it turns out like that was just a lucky guess.
**Brett:** do you think it lucky guess? Or did you accidentally sort of educate the market and set expectations?
**Kevin:** it's possible since we were first, In the market doing this with the with the SaaS offering But we've experimented going up and we've definitely surveyed and and like there's something about eight it's under 10, but it's not the tricky nine where it's like Might as well be 10 if you're at 9.
99, right? So there's something about 8 that just works really well. The pricing changes that we didn't make because we had a lot of, early folks where it was kind of all inclusive. We've had different iterations on pricing over, over the time. When we first started, it was just 8 dollars. Whoever used it, we would charge 8 dollars to.
And that's a big difference. Even today on Guideline, we charge on participation. we still only charge you if you use the product. So if you have a 10 person company and seven of you are using it, we're only charging you, you know, seven times eight.
then did you have a, a, uh, AUM style fee as well?
Yeah. So early on, we didn't have any asset based fees whatsoever. So it was zero. That was really important to get to, but we were losing money, right? I had to pay the custodian. So that was really important to understand what I didn't understand early on is that custodian, not only were they charging a very small asset based fee at the time, but they're charging a transaction fee.
So when you had certain things happening in a 401k, you want to take a loan or a hardship withdrawal or a distribution of some sort. You got charged, uh, essentially a distribution fee. They mailed out a check, right? Like that costs them money. They charged us money. We had to charge money for that. The experience that really brought it home for me was actually, uh, an early participant.
Was in a car crash or had a flat tire or something and needed money and they needed it immediately and Guideline was charging them I think 100 to get a distribution because that's kind of what we were getting charged and that was really important for me to understand So somebody's coming to Guideline who've they trusted to like save for retirement now, they need help And we're going to charge them 100 to get it, uh, just felt really terrible, quite honestly.
So we started charging a small asset based fee on the entire platform to cover all transactions. So that's what we do today. We charge asset based fee, but that really covers just every transaction on our platform. So if you want to have a loan, you don't pay a loan origination fee. You want to have withdraw, you don't pay for that, et cetera.
So that was really important to understand. And it was really just bad timing. So people will pay a small amount, pennies, et cetera. You know, every month or whatnot, but they don't want to pay like the 50, 100 to get a check.
So now we charge a small asset based fee.
**Brett:** Were you tempted early on to charge a larger asset base fee given you, if
sort of the standard quote was 167 bips,
it gave you, you were giving away a lot.
**Kevin:** We definitely were giving away a lot, but it was really important to just stay true to who we are. And even today, we're focused on participant outcomes. We could charge a ton more money and be wildly profitable. but that in the end, like that's not what we're here for. We're here for people to save for retirement and charging a high asset base fee.
It's just counterproductive to that. So if you at the way that our assets grow compared to everybody else in the industry. It's the night and day, right? Like we're not charging these asset base fees. We're not pulling down capital from being invested and that's really important. So we managed almost 17 billion in assets now.
**Brett:** when you think about the first five years, it's clear that this insight you had around integrations was sort of a phase shift for the company. Were there anything else like that that you unlocked that sort of brought you into some sort of next step function of the company?
**Kevin:** I think we're kind of in the middle of one now, which is really interesting. something in conjunction with franchises and LRGs. LRG is a legally related group. So they have some sort of co ownership across multiple businesses. That's incredibly difficult to administer, on an individual basis. And that is a huge unlock for us right now.
We're selling a lot of these types of businesses just because it's so complex to do the compliance testing and the tax filing across all of these different entities as one single service provider.
**Brett:** like, if Subway wants to come to you and have
**Kevin:** 100 percent Subway is a great
example. So Subway, Chick fil A, McDonald's, Dunkin Donuts, like all of these, the biggest thing right now for us, when you think about these types of companies, and generally speaking, like blue collar service workers, retail workers, etc. They're not in a position now because of regulations and mandates, state mandates in particular to say like, Hey, these people don't need a 401k. They're actually mandated to have one
in in California. There's 16 different states that
have required
benefits. So you have to have some level of retirement benefit.
And now this is like really easy for us to compete in, right. We're competing against the state saying you have a mandate to offer retirement program. You're in sort of a franchise, a subway, a Chick fil A, whatever. You have a very complex entity structure. What you have to do from to meet that mandate is either take the state run program, the state run retirement IRA program that has no integrations whatsoever, is completely burdensome on the employee or the common owner to be able to administer that plan, or you can take this forward sort of modern 401k solution and give your employees a benefit they actually truly appreciate. So we're in this unlock right now. And this is all around 2025\. It's probably going to be our biggest opportunity that we've seen since you know launching
**Brett:** is that regulatory change something recent or it's
**Kevin:** it is yeah, so the state mandates are relatively new I want to say that cal savers came into effect in 2023 but it was always like all right, they started in wave So it's 10 plus employee companies had to meet the mandate then it was five plus and now it's one to four. So if you have one or more, employees in California, you now have to meet this mandate, which is just a huge, that's 200, 000 small businesses across Gusto and Intuit alone.
**Brett:** What did your experience building TaskRabbit from day zero In what way did that inform anything that you did, in this company?
**Kevin:** There's so much to unpack there, but. I learned a lot about Silicon Valley in general and like what not to do, what not to get caught up in, how to focus on delivering and staying true to kind of who you are. In TaskRabbit days, this is 2000, I think 2010, we moved to San Francisco.
**Brett:** Because you were Boston
**Kevin:** We were Boston based.
Yeah. So from Boston, we started. Taskrabbit it was called run my errand in 2008, but really bootstrapped it for those first two years and then took first investment when it was actually through Facebook. It's called Facebook Rev or Facebook Fund or something like that. and that was just like our first, you know, foray into Silicon Valley as a whole.
We're in this large conference room and, you know, next to us is, Zimride aka Lyft. All of these companies that became quite large actually. Um, we had a very cool cohort of experiences there, but You could see a lot of people pivoting and moving quickly and not having conviction on what they were doing, or looking for data that, you know, brought them down a different direction.
so I think for me, uh, at TaskRabbit, we tried absolutely everything we were chasing, you know, product market fit forever. I don't think they even have it now. I don't know what's going on with that company now, but, for us, there were so many different things that looked like hey, there's heat over here.
Let's run that down. There's like this whole thing in Silicon Valley around cleaning companies I forget the names of them now, but like Homejoy great great example Like everybody on the board was like homejoy is kicking your ass. Like you need to go beat homejoy.
**Brett:** Now the interesting thing is that Instacart came up at the same
time. And that was the one that that form factor did work.
**Kevin:** Oh, there's so many beyond just Instacart right like The first 10 Lyft drivers were TaskRabbits because John at the time didn't know how to do background checks. And like we wrote background checks for TaskRabbits, right? So like, there's so many missed opportunities, but again, like it was focused on what are we going to do and what, and that was, that's been true for Guideline for me.
It's just like, Hey, we're, we're focused on retirement here. We need to focus on one thing in it, participant outcomes, all these other products that have heat that we know of. We can do over time and we're starting to do that this year But, and not ignore them, right? Like, but also don't just get distracted by like, what's new and shiny and all that stuff.
Like in the end, TaskRabbit should have been Uber, right? Like, or it should have been, DoorDash. we were just talking earlier, like we developed a whole micro site called BurgerToMe, um, and we were just doing like super duper cetera. And like, there was so much heat around that.
And then we got all these cease and desist. I always joke like we collected cease and desist for everybody in the ecosystem that was like in this economy. But that stopped us kind of in our tracks, right? Like we didn't have the foresight to push through and like continue on or pivot into like, okay, unlicensed drivers, like let's go get black car limos. Like
we missed that.
**Brett:** And so, did you deliberately choose to build this company differently?
**Kevin:** I did I specifically chose to build something that had guardrails. That I could read and fully understand again This goes back to like the gray area of 1099 Versus W-2 employees I love the fact that there's an irs code. There's an ERISA Regulation that I can read and I can understand I can look for my angle inside the Guidelines that are given to me now.
And I love that because people haven't looked at those for so long. I don't agree with all of them and definitely you could try and push on certain aspects of them, or you can lobby for those changes. And they are happening. The biggest thing that's happening in 401k now is deregulation. That's secure 2.
0\. That's enabling us to build whole new products like starter K, et cetera. So that's been really cool to see. again, like going back to my risk aversion, I love having sort of the playbook to be able
to operate in.
**Brett:** Do you think part of the reflection is that the shape of the company that TaskRabbit Was was actually not the best shape for your personality or no?
**Kevin:** I think that's true for sure. double sided marketplaces are incredibly hard. you're dealing with different types of folks on both sides of it. Um, and that's really difficult to understand. And all, all of the attributes in between all of them, um, were really hard. And the, the thing that I also said I would, I would never do again would be a transaction based company.
I love the recurring revenue model. Like AR is like just where it's at. At Taskrabbit, it was like, all right, get all these tasks posted. And then at the end of the day, you go to bed and you wake up and you start from zero. So tough and so hard to like, understand and build momentum around that. I just knew I was never going to do that again.
**Brett:** up until recently did you choose to be a single product company for almost 10 years or did you Start to introduce other products?
**Kevin:** Most people don't know, but we've had IRA for almost four years. So individual retirement account IRAs in the United States are just essentially catch all buckets for every other, corporate, 401k or pension or whatever it may be. Most people less than two percent actually contribute to an IRA annually from all the taxpayers in the united states so we've had that product from day one and it's really about giving people when they're dismissed or terminated or what, whatever they quit they leave the change Jobs, which happens a ton, give them a place to essentially keep their same investment philosophy so that they don't have to like redo all the decisions that we helped them do in the first place. Uh, so that was a really easy one for us. And really we just kept it the same pricing to start.
Now it's half the price of the 401k cause we don't have to pay integration fees, Um, so that was really, just a product that we knew we had to build just to keep people, keep the users that we obtained from the B2B relationship. B2B2C now becomes a larger component of what we're doing at Guidelines.
So there's some other products that are very similar that affect your retirement outcome. One of them is a healthcare event. So healthcare is the second leading cause of unsuccessful retirement in the country. so what can we do about that? Like healthcare, savings plans or HSAs are going to be really important to us.
And turns out you can invest them and they don't, you don't. Have to use it or lose it at the end of the year, right? So that's right in our wheelhouse and what we can start affecting, from a retirement outcome. And then there's some tax advantages to be able to move from a 401k to an IRA to an HSA when you do have a healthcare event.
so all of those types of things, again, like focusing on participant outcome will unlock all of these other sort of products, but 401k for us is still the best vehicle in the United States and offers a company match. So it'll always be the tip of the spear for us.
**Brett:** Do you think sort of Doing multiple products or use cases relatively late in the company's life. Looking back is the correct decision?
**Kevin:** I think so even today, you know, I question, like, should we be spending investment dollars, R and D, time and resources, on other products rather
than 401k, it's really quite honestly, like 401k TAM is just so large. but now where we're at, like we've, we have every feature that you could possibly want, we're getting into like the sexier ones with the mega back door stuff and all of those, you know, after tax contributions, like stuff that doesn't exist in most plans, like we're getting to those now and we'll have those before we launched the other products.
So I feel like. As far as like left to build, we can always have a better participant experience, but like the core feature set for 401k exists in Guideline now. Now's the right time to start innovating on what the interaction between your 401k and these other vehicles to deliver a participant outcome.
Now's the right time to be focused on that.
**Brett:** how do you define product market fit?
**Kevin:** this is a funny story. So one of my employees was, telling another person who was in the Bay Area, what they work on. And that person said, Oh, like Guideline.
And she was like, actually Guideline, like that is product market fit for me when we become synonymous with 401k Guideline's a, 401k company, or like, you should just have a Guideline 401k. That's really important for me to understand that people think of the best 401k companies is Guideline. that's product market fit for me.
I've always had this vision of becoming the default 401k so that you can't make a bad decision if we stay focused on participant outcomes. There should be no other choice other than like you just default into Guideline and that's going to be Eventually, hopefully that'll be like true success.
**Brett:** in sort of that lens of being the category winner or leader. Did you think about how do we build a moat here in the early days? How do we build a compounding advantage? How do we make sure there's not thirty YC companies that are going to compete was that a part of any of the strategy or the direction?
Absolutely
**Kevin:** I think starting at the bottom and
Doing the hard things first, isn't necessarily like the MO of YC, at least not out of the gate, not that they don't do really hard things they do, but they don't do them first. and that was going to be really important for us to understand and kind of get in and build our technical moat. Our technical moat lead to our pricing moat. You couldn't compete with Guideline on pricing. Still, it's very difficult to compete with us on pricing because we don't have to pay all these middlemen. so that was definitely very intentional. and probably one of the smartest things that we did. now I would say I'm less worried about moats.
I'm also less lazy in my thinking about, I have to win the whole space. It's a seven trillion dollar TAM. I don't have to be the only 401k provider out there, but i'm gonna win my my share of it and that's going to be really important but understand like saying I could be the only one is just lazy so I think that's enabled us to be like have some focus around maybe we're never going to sell google their 401k plan, right?
That's okay with me. but any company that comes to Guideline when they're five or 10 people, they should never have a reason to switch, whether they become a public company, etc. I want to hold on to them forever. If I can't do that for a technical reason, I feel like I've failed. I think the co founders would probably also think that way.
**Brett:** in a similar theme when you think back to the things that you did sort of the 18 months before you started the company and 18 months after you started the company, or kind of ship the first line of code. What do you think are like the higher order insights that other people can actually learn from?
Some of them are pretty basic, right? Like you always look for your advantage. And there's a few of them at Guideline that I knew, like, Mike, and I were technical. Cabs is an award winning, you know, mobile designer that was going to be an advantage for us. So there are some basic ones when you construct the team, that's going to go do this thing.
**Kevin:** But the biggest unlock for, for Guideline is building this win, win, win scenario. I would hate to have to go and sell somebody something where I know it's not the best product for them. and that was really important to understand. So when you go to a small business and you say like, Oh, it's totally free for you, That means nothing if their employees are getting their faces ripped off with 167 basis points, right? So I never wanted to have that conversation. So I built this, this company around this win, win, win. And it turns out the one that I hadn't thought about was the payroll
company. And I got lucky because I could find a win for them too.
**Brett:** Something you didn't mention you obviously weren't the CEO of Taskrabbit but and you are the founder and their co founder and CEO of Guideline What's been interesting about
being in that seat that maybe you didn't even understand
**Kevin:** Investor relations are so difficult. being a builder, not speaking the, you know, the financial language of an investor, not measuring things the right way, or not giving them information in the right form factor. These are all conversations that I've had with my investors over time.
And as a company gets bigger, they get more in depth so hiring the right people along in the right time But that was a huge undertaking. I give Leah a lot of credit For being you know forthright and having those hard conversations and TaskRabbit was not always up and to the right and it was very difficult.
I really underestimated that going into founding Guideline
**Brett:** If you sort of introspect and think about your own talents and personality, what's like, other than you got
lucky,
what's
kind
of
your
current theory
as to, what way you were personally built that has worked so well in the founder and CEO role of this specific company?
**Kevin:** generally speaking, I don't give up and that's just who I am. I like to do hard things. you know, work isn't work for me. I'm building something and it's fun and I enjoy it. the parts that are hard are obviously like employee management and making sure that I'm hiring the right folks and having difficult conversations, around that.
So I would say, you know, for me, like just fortitude is, has been the biggest advantage. I have a. I think an interesting ability to kind of see all different angles, kind of all at once, that works out really well, specifically in this ecosystem led, growth arena that we're in. and being able to, you know, appease each of the individual partners that lead up to building this, this thing that is Guideline and having it be successful. But those are really the two things that I would say, like, you know, there's, I think there's some luck and timing is everything. If you look about, you know, look at TaskRabbit, we were too early. Like we should have waited. Five years followed on Uber or something like that. Like we could have done that a totally different way. but definitely some timing, right time, right place, solving the right problem. and 401k is one of those sleepy industries and you don't realize, but it's the second most requested benefit next to healthcare. But you would never think that it's like now everybody's like advertising 401k modern 401k Whatever it may be to retain good employees and that's true, but it wasn't true 10 years ago
Why do you think people problems and building a team and why is that always so hard? I think there is this sort of curve to it You start off incredibly technical and you're setting the vision and you're talking to, you know, your co founders on what it should look like and et cetera. And like, that is a skillset that you already possess. You knew about it, you built your company around it. And then you get into a hiring phase where you're meeting demand, you have. product market fit, and you're trying to scale and now you're in a hiring process. And I'm a, I'm an introvert and like, it's very difficult for me to have, you know, large scale interviews when you're bringing on 10, 15 people a month. that is something that's just not natural to me as a person. And I think you're always going to find that an individual can't be everything to everybody all the time. so you lean into what you're good at. I think over time, when you actually have some success. You can start like picking and putting on like what you do want to work on and what you don't want to work on and Make sure that you fill the gap that you understand that you have. My CTO is a great example and we've been lucky enough to bring on an incredible vp of engineering But mike started early coding.
He was the only one we had he was doing all of it And then you know year three year four, he's like in this architect role. It's not really Pounding out the keyboard the keys on the keyboard anymore Um, and then we hire a VP of engineering and like even now like we're we're going into this new phase of these new products. Mike's coding again, and he's so happy. And I think you just have this up and down sort of thing as you build a company and it's the right time. It's the right place and you just have to be flexible and adaptable to it. but also as a founder, you just kind of have to do the things you have to do. I don't have a choice to not hire people.
I don't have a choice to not interview my CFO, right? And have him like, understand that Kevin knows nothing about, you know, corporate finance. and that's okay, but you find your right partner so that he can explain those things to me. I can talk intelligently or speak intelligently to my board or put him in front of my board instead. So that's really important to kind of understand as you grow a company that you don't have to do all the things. But generally speaking, I try to manipulate. Kind of what I do every day with the things that I like to do the most. And like, generally speaking, people management isn't one that I love doing.
So some of the things that we did early on was we came up with a CEO council. this is just a council where I bring all the executives together. I talked to them in a group. I don't have to relay what one said to the other. We just kind of all do it together. It's kind of like an executive stand up. and that's working incredibly well. Now I don't have one on ones with them every single time. I have a one on one with them when they need me to solve something or block something, but it's not taking a ton of my time, which means I can do more about on the product side and work with Cabs and the designers on what the new product should look like or what the integration needs to understand or how we need to sell it to a partner.
That's where I get, you know, my energy from.
**Brett:** On that theme, how did you figure out as the company was growing? What things you weren't good at or you didn't really like that you felt like you were required to become very good at? Versus i'm just going to hire somebody that can be great and i'm not even going to work on that?
I
**Kevin:** mean People just told me, right. So very authentic sort of conversations, even with the co founders, you know, Michael be like, Hey, you need to like rally the troops. I'm like, I can't do that. Like, how am I going to do that? Mike doesn't know how to do that. Cabs barely knows how to do it. So like those types of things, then you lean into what you're good at.
Like, I'm just going to tell you the truth. This is how I feel about how we're doing this month or what we could be doing or why we got our ass kicked or why we didn't or why we're successful. so those types of things are just. I don't know, really important, but generally speaking, listening to feedback, feedback is a gift.
**Brett:** Maybe just a place to end when you think about this evolution of of getting to product market fit scaling a company Is there someone that has had some disproportionate impact on you in this journey?
That is kind of like they imparted something or was a sounding board in a certain way that's just like a big part of the journey and if so, like what, what is the thing they imparted on you that was so useful?
**Kevin:** actually Aydin Senkut from Felicis who's one of our series B he passed on my seed and this is the feedback.
So you guys like when you pass and you do give the feedback, it's really important. So Idence was like you're biting off too much You need to focus on one thing. At that time we were thinking about something more encompassing in the benefit space and hadn't honed in on like, this is just going to be 401k. and he really like made me focus. And luckily enough, he came back in our series B and wrote the lead check on that one.
**Brett:** Maybe just on that point before we end, talk a little bit more about how you narrowed the focus or what that was about.
**Kevin:** Yeah. Narrowing was, was really important. So I was passionate about finance and that was something I'd led with in the conversation, right? So I had gone down this path of buying hr. com. and I thought that we could actually get it, cause it had been like inherited and moved around a bunch of times.
So I'm like, man, this could just be like the whole thing. Like let's just go and become, you know, not Zenfits, but something bigger and like more HRIS type stuff. but I kept leading with in 401k and 401k and 401k. And then at the end of that meeting, Aydin was like, forget about this HR. Dot com stuff, like focus on this passionate thing that you're about.
And that was 401k. So that really like put me on this track and be like, you know, he's right. Like, this is where my advantage is. It's not in HR. It's actually in the data needed to become successful in 401k.
**Brett:** when you started thinking about 401K as a problem, at what point in the journey did you start to sort of expand it and think that you were going to go broader?
**Kevin:** that was kind of a very interesting time for Mike and myself and Mike is very much my, my kind of thought partner as a, as a co founder. And we go down this path, and we're talking about 401k and what we can do differently, etc. And Mike's like, Oh, yeah, we could do we could do this kind of same thing for HR and like employee onboarding or something like that. But that's the trap, it's the same problem, we had a task rabbit, where it's like, we could do this one thing really well, or can do this thing. And then this thing and this thing, and it kind of took, Aydin to bring it back and be like, actually 401k is massive on its own. Do that really, really well.
So those conversations were very, they're fleeting, but we definitely had them.
**Brett:** Well,
**Kevin:** Yeah.
**Brett:** for a great conversation.
**Kevin:** Yeah. This is awesome.
### The rotation program that keeps this startup’s engineers learning (and not leaving)
URL: https://review.firstround.com/the-rotation-program-that-keeps-this-startups-engineers-learning-and-not-leaving-2/
Last updated: 2025-02-19T07:41:20.000Z
How Checkr’s VP of Eng squashes attrition
_This post is for subscribers only._
### The Rotation Program That Keeps This Startup’s Engineers Learning — and Not Leaving
URL: https://review.firstround.com/the-rotation-program-that-keeps-this-startups-engineers-learning-and-not-leaving/
Last updated: 2025-04-25T16:52:03.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
[**Checkr**](https://checkr.com/?ref=review.firstround.com)’s VP of Engineering [**Krista Moroder**](https://www.linkedin.com/in/kmoroder/?ref=review.firstround.com) found inspiration for leading an eng org at a late-stage startup from an unlikely place: the teachers’ lounge. Before she became an engineering exec, she was an educator — first a teacher, and later a program director at an education nonprofit.
“There’s this one activity that always stuck with me,” says Moroder. “School leaders would put up this big chart in the teacher’s lounge with the name of every student in the school on it. Then over the next few weeks, they’d ask teachers to add a sticker next to the kids who they knew were engaged. Maybe the kid’s in an after-school activity, or they speak up a lot in class, or they hang out in the classroom too long after the school day until a teacher has to kick them out — those kinds of things.”
The exercise helped school leaders spot the kids who needed some extra attention. “They would go through the chart and see who didn’t have any stickers. *Those* are the ‘at-risk’ kids,” she explains. “It's not always the kids who have bad grades, either. A kid could have great grades, but if they didn’t have a teacher champion, they’d end up slipping through the cracks. The shared goal of the school was to eventually get every kid a sticker.”
After nearly 10 years in education, Moroder left her post in the nonprofit world, learned to code and landed a gig as a software engineer, eventually joining Checkr as an engineering manager and rising the ranks to VP. Now, she’s recreated that same sticker board to oversee the engineers in her org — in a spreadsheet. “**I religiously track every single engineer on my team and what they're working on**,” she says.
It’s a system that’s proved useful as Moroder has navigated one of the toughest problems for eng leaders: the threat of [regrettable attrition](https://review.firstround.com/why-this-engineering-leader-thinks-you-shouldnt-aim-for-zero-regrettable-attrition/). Moroder arrived at Checkr during a hiring surge back in 2019, which meant many of the engineers on her team would hit the dreaded vesting cliff around the same time.
Worried about an impending mass exodus in her 80-person org, Moroder and her fellow eng leaders started tossing around ideas to shore up retention. She found herself asking that same question from the teachers lounge: **How can we get every engineer a metaphorical sticker**?
So she looked to a practice that her org had already been informally supporting for incident management: rotations. The idea was to give engineers who’d already been at Checkr for some time the opportunity to get exposure to different problems, work on cross-functional projects and train up on new skills, like AI or data engineering. This, in turn, has allowed Checkr to rotate around its sharpest tech talent to tackle the company’s most pressing projects.
Over the past several years, Moroder has helped formalize the rotation program at Checkr, and she’s scored some pretty brag-worthy retention stats as a result. “Two years ago, non-regrettable attrition was zero, and the year after that, it was 2% — because one person left. Across the board, my team is extremely tenured right now,” says Moroder. “For staff engineers and above, about 60% of them have been here six years or longer.”
> Folks now point to this rotation program as the main reason they’re still here. They’ll tell us, ‘I've had three careers here.’
Rotation programs are often a standard practice at large, established companies, offering a test drive for new grads before they take on a full-time position. But there are considerably few resources out there on how to actually pull them off, especially for scaling startups with eng headcounts in the dozens or hundreds, not thousands — which is why Checkr’s program piqued our interest. Moroder has generously opened up her playbook for executing rotations for more tenured folks at such a thorny stage of growth.
In this exclusive interview, Moroder starts by unpacking her theory on what really drives engineers to put in their two weeks. She then details Checkr’s rotation program, walking through the steps engineering leaders can take to implement a similar system in their orgs and what’s made hers so successful. She also offers up advice for getting buy-in from managers — even when it means rotating out their star players.
Moroder may have honed her strategy in the engineering domain, but her tactics are well worth a read for any org leaders looking for a fresh approach to keeping their best talent.
## The real reasons behind the engineer's three-year itch (hint: it's not just the equity refresh)
### Stalled learning at scaling startups
Moroder acknowledges that flight risk isn’t as much of a concern for engineers at early-stage startups because a rotation system is practically built in. “Rotations happen automatically at a lot of smaller startups because everybody has to wear a lot of different hats,” says Moroder.
The threat of turnover looms larger when startups grow and eng teams become more specialized. “Once startups start to scale, it becomes accepted that people will leave after two to three years. But they don’t have to. No one digs into why,” she says.
Moroder doesn’t want to accept the inevitability of constant engineer departures — especially when so much critical knowledge is floating around in their heads. “It’s also a question of who’s leaving. I don’t want my subject matter experts and people with deep knowledge to leave. So those are the people I need to really pay attention to,” she says.
In her view, [comp](https://review.firstround.com/a-counterintuitive-system-for-startup-compensation/) isn’t always the culprit. “Most people assume it’s just about an equity refresh,” she says. “**But that’s not always why people leave. It’s also about a career path. Engineers want to be constantly learning.**”
So instead of making peace with the revolving door, she resolved to take action. “If you know that engineers might start thinking about leaving around year two or three, you need to design interventions before then.”
> The one thing I've seen across the board is that engineers leave because they get bored. Engineers are allergic to monotony — the job itself is literally automating repetitive tasks. If engineers aren’t constantly learning, they’ll leave.
### Technical FOMO
An especially timely reason for engineers to jump ship is the fear of falling behind as AI and ML tech advances at a breakneck pace.
Continuous education has always been a reality for this line of work. “**No one becomes a software engineer and their job is the same 10 years from now,**” says Moroder. “So they can either go somewhere else to learn it, or we can train them up internally. I’d rather keep the knowledge and context they have, even if it means they’re in a different role.”
Moroder says the robust rotation program gives Checkr an edge in this current market — and an opportunity for engineers to brush up on new tech without leaving the company.
“Over the past year, I sponsored an AI taskforce and opened up rotations to some engineers who were already self-motivated to learn,” she says. “That rotation quickly evolved into a full-fledged, permanent team, which has now upleveled the AI skills of the whole engineering org. This team even hosted an org-wide AI Hack Week and brought multiple GenAI solutions to production.”
> Rotations are just about giving people the opportunity to have an even greater impact.
Rotations have been equally impactful for training up engineers who came from non-technical backgrounds, just as Moroder herself did. “I've had a lot of junior engineers who did something completely different before they became software engineers. Those people often end up on accelerated career paths — because they’ve already developed senior problem-solving abilities and just need the technical skills to catch up,” she says.
Moroder points to two folks on her team who’ve been able to apply skillsets honed outside the realm of software development. “I had one engineer who was a sales account manager before engineering. I put her in front of every single customer — she became my most customer-facing engineering manager,” says Moroder. “And I have another person who used to be a structural engineer for the [Moscone Center.](https://www.moscone.com/?ref=review.firstround.com) She spent an entire career as a systems thinker, and that skill translates. Now she’s leading the systematic effort to modularize our monolith.”
Above all, rotations have allowed folks from all kinds of backgrounds, technical or otherwise, to tackle problems with fresh eyes. “With anybody internally who's transitioning into another role, they instantly see a problem in a different lens. So the value that they can add is much higher because they know how to speak the other language,” she says. “**It requires a little bit more investment from the company, but the payoff is way, way, way better**.”
## Structuring the rotation program
Most eng orgs have some version of an informal rotation program to put out fires and staff up big projects. That’s how Checkr’s program started out. “We’d already been doing rotations reactively, even if they weren’t called ‘rotations,’” says Moroder. “So we wondered, can we use rotations *proactively*, as risk mitigation for retention?”
Once Moroder saw the potential, she got to work designing the program. Here, she lays out her order of operations for transforming rotations from ad hoc incident clean-up into an org-wide system.
### Step 1: Create a “sticker board” spreadsheet to track your org
The first and most essential prerequisite before setting up a rotation program is to get in the habit of tracking metaphorical stickers.
“**Every manager should have that spreadsheet, full stop**. You should know every year what everyone is working on at a higher level,” says Moroder. “Even if you're managing a 100-person org, you need it.”
There are three columns that Moroder monitors in her spreadsheet:
- **Participation in a rotation or cross-functional task force**. “Some rotations involve joining a neighbor team for one or two quarters to derisk a project, while others involve joining a cross-functional taskforce to solve a hairy problem, like when we created our “Monolith Enablement” team to jumpstart our modularity work,” she says.
- **Work on multiple teams. “**Rotations have made internal mobility a lot easier and makes engineers feel safe trying something new,” she says. “I’d say about half of rotations end in a permanent placement to the team they rotated into, while the other half go back to their home team. And that’s okay, too! They come back with fresh context and new practices, which is good for everyone,” she says.
- **Training for a new role**. “About 20% of the team has changed roles entirely during their tenure. We built out an internal [manager training program](https://review.firstround.com/your-startups-management-training-probably-sucks-heres-how-to-make-it-better/) in 2022, and we’ve also had training surges when needs have changed,” she says. “For example, we recently supported a cohort of quality engineers learning about data engineering.”
**The spreadsheet Moroder uses to track engineers in her org.*
Eventually, her goal was to get every engineer a checked box. “As long as everyone had at least one checked box by the time they hit three years, I felt good,” says Moroder.
As a school teacher I managed 120 kids. You can keep track of 120 people in an org along with one thing they’re focused on each year. It's not hard, it just requires a little bit of organization.
This three-pronged approach to tracking engineers’ engagement opportunities is helpful because manager openings are often in shorter supply than demand. “People think the only growth opportunities they have are to [climb the ladder](https://review.firstround.com/the-engineers-guide-to-career-growth-advice-from-my-time-at-stripe-and-facebook/), but that’s far from true,” she says. “Not everybody can be a senior manager because they want to be a senior manager. There has to be scope for it. So an opportunity to learn something new is often what people are looking for, but they think moving to the manager track is the only way to do that.”
### Step 2: Map the sticker board against quarterly priorities and projects
The next step is to look for high-priority business problems that you’ll need your most seasoned tech talent to solve — and are currently under-resourced.
At Checkr, Moroder’s leadership team sizes up the most urgent needs on a quarterly basis. “At the beginning of the quarter, we’ll say, we need six people over here, two people over here. How are we going to staff this project?” she says.
As a result, Checkr’s engineering [org chart](https://review.firstround.com/make-an-org-chart-you-want-to-ship-advice-from-linear-on-how-heirloom-tomatoes-should-inspire-team-design/) ends up being quite fluid. “We ended up in a matrix management situation for many of my teams over the last year,” she says. “Together, my managers read [*Team Topologies*](https://teamtopologies.com/?ref=review.firstround.com) and [*Dynamic Reteaming*](https://www.heidihelfand.com/dynamic-reteaming/?ref=review.firstround.com)— and we started supporting pods where managers could end up working with engineers who didn’t report directly to them. It allowed us to be more nimble to meet the needs of the business.”
Moroder then tracks all of these inter-team movements in a secondary spreadsheet. “We have the spreadsheet of who manages whom, and then in the second tab, I track who's working on those 10 major initiatives, and you get a mix from every single team,” she says.
Engineering managers take point on overseeing individual projects. “There’s an engineering manager who acts as the project manager,” says Moroder. “But then the actual team working on it might be a mix and match from all the teams under it. So it’s very flexible.”
While the bulk of this planning work happens quarterly, Moroder keeps tabs on priorities constantly. “We do more formal planning for rotations at the quarterly mark. But then within the quarter, **I'm having these conversations at least once every two weeks around certain projects — because things are constantly in flux.**”
Rotations make room for organic reshuffling as project needs ebb and flow. “Right now, one part of my org is growing and the other part is reducing as they automate things. This means I have about six people on rotation from one org to the other, and at some point, we may shift more permanently,” says Moroder. “It makes for a more graceful transition.”
In some cases, rotations happen between two separate orgs and the remits of different VPs to put company-wide priorities first. “I recently discussed a rotation from another VP’s org into my org because we needed to stack-rank at the company level,” she says. “So there are always a few projects across the entire company where we’ll *need* rotations to get them done if we don’t want to deal with a reorg.”
> Priorities are constantly shifting. Unless you want to reorg every single quarter or year, rotations are a smooth way to tackle those shifts.
### Step 3: Check in before making permanent switches
“**A rotation isn’t a transfer**,” Moroder clarifies. “An engineer can’t just move teams if they want to. We do have an internal transfer process — so when it comes to actually moving teams, that requires a bigger conversation around capacity planning.”
Checkr’s rotation program functions as the middle layer of a three-tiered system of working across different teams:
- **Matrix management:** Regular work across multiple products, managers and teams.
- **Rotations:** Temporarily working on the org’s highest stack-ranked priorities.
- **Transfer:** A role opening and permanent transfer to another team.
Rotations do occasionally result in a permanent transfer. “Once an engineer hits the six-month mark on a rotation, and if the capacity is there for the long term, we'll ask if they want to stay with that team,” she says.
One recent example of a rotation-turned-transfer is an engineer who joined Checkr as part of an acquisition. “We hadn’t fully integrated the new systems yet, so he was working in a completely different tech stack,” she says. “He raised his hand anyway when we needed more support in one of the core product teams. He quickly ramped up in [Ruby on Rails](https://rubyonrails.org/?ref=review.firstround.com), started picking up support tickets, and then three months turned into six months. Now, he’s a permanent member of the team, ramping up other engineers rotating in.”
With engineers in perpetual rotation and even occasionally changing teams for good, though, Moroder admits that things can start to feel transient. “One of the risks of this system is not feeling a sense of stability on the team because people are constantly moving,” she says.
To guard against that, Moroder recommends keeping some folks fixed in their spots on the org chart — which often happens organically. “You do need some ‘anchor’ people who don’t move between teams,” she says. “People will often self-select into those anchor spots. There are some engineers who love to drill down as far as they can into a focused area, and the fun for them is seeing how deep they can go.”
Still, only a fraction of the engineers within the org are on rotation at any given time — because it all ties back to project needs. “The checks and balances are the higher level company business needs. We don’t approve every rotation. You can't just rotate or move teams because you want to. We have to agree that there's space for it and it makes sense,” she says.
Krista Moroder, VP of Engineering at Checkr
## Have these tough conversations to get buy-in from managers
So you’re game to start implementing rotations in your org. How do you convince other managers to give up their best engineers?
When Moroder proposed turning rotations into a formal system, managers bristled at the idea. “**Managers will say, ‘Oh, I don't know if I can support rotations.’ But any time there's an incident, any time you need to de-risk, you end up doing rotations anyway**,” says Moroder.
This was Moroder’s first hurdle in setting up an org-wide system. “If I say, ‘Hey, can you rotate out one of your best engineers?’ The immediate reaction from any manager would likely be, ‘Absolutely not. I need to meet my goals,’” she says.
Here are the two conversations Moroder had with managers to change their minds.
### Conversation #1: If you can’t give away your best people, that’s a succession problem
First, Moroder encouraged managers to [give away their people](https://review.firstround.com/give-away-your-people-how-managers-can-prep-for-high-performers-to-leave/).
The first big project that Moroder staffed up through rotations was for a massive technical undertaking: modularizing the monolith. So she needed the company’s sharpest engineers on the case.
“We weren’t going to be able to solve this problem without our most tenured and experienced people,” she says. “So I went to my managers and said, ‘All right, who’s the one person on your team who you can’t afford to lose?’ And they all named someone. So I said, ‘Great, give them to me.’”
If managers were reluctant to rotate out their domain experts, Moroder made the case that no one on the team should be irreplaceable. “**If you can't afford to lose someone on your team, that's a succession issue. You need to figure that out**,” she says. “The monolith is like the city center. If you’re not sending your domain experts in to make our primary codebase better, you’re just making it harder for yourselves.”
In turn, she reminded managers that the give-and-take nature of the rotation system meant that their teams would eventually get great talent in return. “This was the first step to building trust with other managers. If you give someone away, you’ll get good people back. We have to hold each other accountable to that,” she says.
Moroder understood she’d need to set a good example of that accountability herself. “It’s important that I model this behavior to my managers,” she says. “As we’ve grown, I’ve given away many of the teams I started — the Monolith Enablement team became part of our Platform org, and the AI Enablement team just recently became part of our Data org.”
And when former reports go on to work for other teams, Moroder already has rapport with them when it comes time to collaborate again. “What I didn't expect is that there’s actually a self-serving benefit to giving your people away. When those people shift from your management chain into your collaborators, it’s so much easier to get stuff done because you’ve already built that trust with them.”
> If you want to be a really good leader, you need to uplevel the whole org, even if it means sending your best people away.
### Conversation #2: This is a group project, and we need to get an A
The other manager hangup Moroder confronted was a question of loyalty: Most managers feel [a stronger sense of duty to their direct teams](https://review.firstround.com/fighting-factions-how-startups-can-scale-without-mutiny/), which can make them hesitant about cross-org collaboration.
“I told managers this: ‘**Your primary team isn’t the engineers you manage. Your primary team is each other**,” she says. “That’s the level you need to operate on. Your scope just happens to be the team you manage today, but that doesn’t mean that will be your scope in the long term. So you need to work with all the other managers.”
That wasn’t always an easy pill to swallow. So Moroder leaned on a classroom analogy to plead with managers. “I’d always tell managers that we’re working on one big group project. And I want an A,” she says. “It’s just like school. You're sitting with this team of four people at any point in time. Who those four people are doesn't matter.”
> Our org needs to get an A, even if that means one manager taking on more for certain projects — because eventually we'll uplevel the whole org.
### Vet for team players in the hiring process
Moroder notes that some managers will be tougher to convince, but that reluctance often reveals something larger: a tendency toward factions and playing politics. So getting managers on board with a rotation program ultimately starts during [the hiring process](https://review.firstround.com/interview-questions-for-management-position/).
“One of our core values at Checkr is humility. So some of our interview questions are designed to find people who aren’t going to fight to [protect their Legos](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups/),” she says. “I look specifically for people who care more about walking straight into the mess and cleaning it up. That’s the type of leader I want.”
That’s in part because of the nature of the product work Moroder is tasked with overseeing. “I'm managing the core screenings and their supply chain. We're not building new things all the time — we're usually trying to fix what exists. So I need people who care about cleaning up the mess, whatever that takes” she says.
To screen for managers with low egos and a bent toward collaboration, she asks these questions to manager candidates during interviews:
- What are you cleaning up right now?
- How do you handle quality?
- How do you handle technical debt?
- Give me an example of a time when you had to help someone else out.
## Wrapping up: Don't stop asking, "What's your next career here?"
Moroder isn’t naive in thinking the engineers in her org will stay forever. “It’s a pretty tenured team at this point. So I know one day, people are going to leave,” she says.
But in the meantime, she’s resolved to help folks chart new paths within the company. “We’re continually asking our engineers, ‘What’s your next career here?’”
### Inside Braze’s blitz to $500M in CARR | Building broad, going global, and outfoxing the competition | Bill Magnuson (Co-founder & CEO) and Kevin Wang (CPO)
URL: https://review.firstround.com/podcast/inside-brazes-blitz-to-500m-in-carr-building-broad-going-global-and-outfoxing-the-competition-bill-magnuson-co-founder-ceo-and-kevin-wang-cpo/
Last updated: 2026-02-03T17:49:15.000Z
Bill Magnuson is the co-founder and CEO at Braze, along with Kevin Wang, who joined as employee #8 and serves as the CPO. The two MIT graduates have built Braze into a publicly listed customer engagement platform with a $4.4B market cap. In 2023, Braze surpassed $500M in CARR, and serves over 2,200 customers worldwide. Before Braze, Bill spent time at Bridgewater Associates. Kevin’s academic background is in brain & cognitive sciences, and prior to joining Braze he worked at Accenture and Brewgene.
–
In today’s episode, we discuss:
- The Braze founders’ early insights into the mobile revolution
- How a TechCrunch Hackathon sparked Braze's creation
- The journey from 1,000 beta signups to 2,200+ paying customers
- Breaking traditional lean startup rules
- Navigating early fundraising challenges
- Finding product market fit by “fishing in every pond”
- Approaching competition strategically like a boxer
- Much more
–
**Referenced:**
- Accenture: [https://www.accenture.com/](https://www.accenture.com/?ref=review.firstround.com)
- Appboy: [https://www.braze.com/resources/articles/appboy-social-network-for-mobile-apps](https://www.braze.com/resources/articles/appboy-social-network-for-mobile-apps?ref=review.firstround.com)
- Bipul Sinha: [https://www.linkedin.com/in/bipulsinha/](https://www.linkedin.com/in/bipulsinha/?ref=review.firstround.com)
- Braze: [https://www.braze.com/](https://www.braze.com/?ref=review.firstround.com)
- Bridgewater Associates: [https://www.bridgewater.com/](https://www.bridgewater.com/?ref=review.firstround.com)
- Jon Hyman: [https://www.linkedin.com/in/jon-hyman/](https://www.linkedin.com/in/jon-hyman/?ref=review.firstround.com)
- Mark Ghermezian: [https://x.com/markgher](https://x.com/markgher?ref=review.firstround.com)
- MIT: [https://www.mit.edu/](https://www.mit.edu/?ref=review.firstround.com)
- Rubrik: [https://www.rubrik.com/](https://www.rubrik.com/?ref=review.firstround.com)
- WeWork: [https://www.wework.com/](https://www.wework.com/?ref=review.firstround.com)
–
**Where to find Bill:**
- LinkedIn: [https://www.linkedin.com/in/billmagnuson/](https://www.linkedin.com/in/billmagnuson/?ref=review.firstround.com)
- Twitter/X: [https://x.com/billmag](https://x.com/billmag?ref=review.firstround.com)
–
**Where to find Kevin:**
- LinkedIn: [https://www.linkedin.com/in/kevin-wang-96131916/](https://www.linkedin.com/in/kevin-wang-96131916/?ref=review.firstround.com)
–
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
–
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
–
**Timestamps:**
(00:00) Teaser: Finding “terminal value” product market fit
(00:24) Introduction
(02:34) Bill's insights into the mobile revolution
(04:43) Lessons from Bridgewater Associates
(09:12) First principles thinking in action at Braze
(14:14) Meeting co-founders at an NYC Hackathon
(24:35) Braze’s scrappy scaling
(33:37) Early product development
(39:37) From 1,000 beta signups to 2,200+ paying customers
(43:51) Braze’s fundraising struggles
(47:01) Breaking the rules of a lean startup
(53:02) Riding the mobile wave to success
(60:02) Building a global customer base
(64:04) The never-ending quest for PMF
(70:29) 3 things every founder needs to know
(73:56) Navigating competition like a boxer
(79:03) When scale helps or hurts
(80:32) 1 thing they’ve learned from each other
**Brett:** All right. Thank you guys both for joining.
**Bill:** Yeah. Happy to be here.
**Brett:** Bill, maybe we could sort of have you kick it off. And
the place I was curious to start is what were you doing in the 12 months before you ended up working to get Braze off
the ground?
**Bill:** Yeah, so I'll actually go back, a couple of years because I graduated from MIT, studied computer science there and finished my undergrad in 2009\. So that was well timed with kind of the early launch of the smartphone industry, early launch of the app stores. And then I moved out to San Francisco and worked at Google in Mountain View, for a time, ended up writing my master's thesis there, but I was working on a visual programming language for building Android applications right at the launch.
I remember a cupcake. Launched that summer the big fiberglass cupcake out on the lawn of the Android building, definitely a really exciting time to be at the ground floor of mobile and the visual programming language we were working on was actually targeted toward education and trying to kind of bring app development.
To people that were still introductory computer science students, we were working with a number of colleges in their freshman courses to teach computer science, but do so in a way where someone could make something tangibly useful to themselves on a mobile device and do so in a way without a ton of software sophistication. And it was really cool to see that come to life because you know, the idea that you would be able to do that even in a desktop application would require big teams and huge amounts of time. But because mobile was so new and because these devices could interact with the physical world and they would be your companion, even simple ideas could come to life quickly.
And so, you know, I was there for the ground floor and you could see all this energy and this excitement in mobile. But This was still very much early days. You know, people were still really nervous about putting a credit card into a mobile app, this concept of digital purchases was brand new, paradoxically, even the purchasing of mobile apps in the app store. I think in the early days was holding back people thinking about building those businesses because you didn't have any recurring revenue or ongoing revenue streams from your mobile app users. It was like all the money you were ever going to make from them was right up front. And, you know, but I could see that the energy was there and really wanted to make sure that as the world was going to change as we
adopted mobile, that I was going to be a part of it.
**Brett:** What did you identify as back then? Were you just sort of like a product builder and hacker? were you interested in businesses? what were you kind of like before you started the company?
**Bill:** there's
a brief foray in between that where I went back. So I went back to school, got my master's, kept working at Google while I was getting my master's and actually wrote my thesis on that visual programming language. But then I had a brief stint in the finance industry when worked at Bridgewater Associates, which is a macro head global macro hedge fund up in Connecticut.
And, you know, I always had a strong interest in macroeconomics and in business and largely in systems and, you know, wanted to kind of make the leap to be an entrepreneur or start a company for a variety of reasons. As I graduated from my master's in 2010, you know, related to kind of family and finances that I won't get into right now. I made the personal choice to just go and work in the hedge fund industry for a little bit of time. but you know, through that time, the family situation stabilized, I accomplished the kind of financial goals that I had in 16 months later was ready to, to take the plunge and go start a company. And so, I left there, but, you know, consider myself a software engineer for sure.
I started out as the CTO. At Brace had studied computer science in school, still consider myself certainly a software engineer and a technologist, but was also always very interested in the, you know, the economic side of it, and a big part of what made mobile really interesting to me was just how it was impacting.
Our systems and our way of living, you know, our relationships with institutions and with each other and really giving us that access to knowledge and communication that we were going to be able to bring with us everywhere we went. And, you know, it's easy to look back at that now and see why it fundamentally changed the way that we lived our lives.
But I still remember debates even back at MIT with people that was like, why am I ever going to need a smartphone to speak like, well, life's not about need, you know, the fact that this brings you freedom and it brings you communication and access to knowledge, wherever you are in any moment of the day, you know, I felt was fundamentally important.
And it was just something that I wanted to be a part of in order to help people build businesses. And what I thought was going to be a fundamental change
in the economy and the way that we lived our lives.
**Brett:** Did you
find that Bridgewater was useful, that experience was useful in the context of eventually being a founder or was it just sort of a digression on the path and there's not a lot of residual
value?
**Bill:** No, I absolutely do think it was incredibly useful. One of the major values at Bridgewater is focused around transparency. And one of the things that that means is that if your ears are open, you know, you can really learn a lot about a lot of different parts of the business and, you know, Bridgewater's transparency is even at the level that.
The equivalent of their board meetings would be recorded and sent out, not just for viewing, but sometimes even for lesson work where you would listen to recordings, happening in the management committee meetings and hear about how the company strategy was being formulated. You know, you could very visibly see where things were breaking due to scale. I was there as an intern actually in 2008 and I came back a couple of years later and they had tripled in size during that time period. And there's a lot of things that break as you scale and triple, you know, in a short period of time. And because of the transparency and the introspection of the Bridgewater culture, you know, anyone that wanted to could have a front row seat for really seeing where those systems were breaking down.
And it wasn't just in the investment process and the investment strategy. It was in all the different operations of the business, you know, the finance organization, the talent team, the client services department. and really looking at how the organization developed and scaled in a way that was hypercritical, very analytical and very transparent. I didn't really realize how valuable that was until later on when we ran into some of the same scaling challenges, and I wasn't approaching them for the first time, and I wasn't. Approaching them in a vacuum. And I also already had the experience of seeing it at a company that actually is pretty similar in scale to where Braze is today.
We're about 1700 employees now. And when I was at Bridgewater, we were about 1500\. and that actually carried over into, aspects of the Braze culture as well, where, you know, we make sure that. We're providing push based transparency out there. There's a lot that's available to any employee in any part of the company in any part of the world to be able to understand what the strategy is down to a detailed level, how we define success, how we measure success, how we're doing against those targets that we have.
And you know, not everyone opts in to actually ingesting all that transparency. It's obviously, you know, it's a lot of work. It's a lot of reading. It's a lot of time. But one of the things that I learned at Bridgewater was both the value that that has for people that really want to lean into it in terms of growing, you know, their part of the business and taking more comprehensive ownership, but also the value of having those values in your, you know, in your company culture and in the way that you operate.
**Kevin:** I'd also say as somebody who was in the early days of Braze, but did not work at Bridgewater our other co founder and now CTO Jon Hyman was at Bridgewater with Bill. One aspect of Bridgewater's culture that I really appreciated and continue to appreciate is that there's a very strong emphasis on first principles thinking.
And I think that particularly when you have a journey, in the startup days like Braze does, where you're entering a new, very rapidly evolving market, and there isn't a lot of history that you can necessarily lean on that sort of first principles approach and approach of thinking about how do we debate and discover The underlying ground truth of our market sort of from those first principles.
I think that that was actually really instrumental to the early success.
**Bill:** Yeah, absolutely. Especially when things are changing so quickly, there's a lot of noise. There's a lot of opinions about where you should, prioritize and, you know, place your chips and to be able to have a, a well regarded, you know, well reasoned, well debated opinion about where the puck is moving to so that you can anticipate that.
And we talk a lot about being on the right side of history. You know, as we were going through early product development, and I think that, especially when you're a small company in a highly competitive space, and you in some cases have incumbent or enterprise competitors, you need to just make those calls correctly more often than not, because you just don't have the resources or the time to be, making mistakes about where the future is going and how things are going to evolve.
And I think that When you approach a lot of these problems from that more first principles thinking, you get more robust models about how the world works, how you know this lever is connected to that one, how these things are going to respond over here, and that helps you make better investments.
**Brett:** Given first principles thinking is sort of one of those phrases that's sort of thrown around a lot but not particularly well defined, how did it instantiate itself? In those first few years, what's a story of early building that shows kind of what that actually looks like.
**Bill:** I'll actually use an example from data privacy, which is a landscape that has. really evolved a lot over time. And in the early days of mobile, there were a lot of abuses of of data privacy because the operating systems didn't really have protection around them. You know, there was a lot of use of hardware, identifiers and location data and such that are foreign to today's digital landscape, even as you know, a lot of the, you know, for instance, the ad tech or the analytics world has advanced quite a bit. And location data, I think, is a good case study in this because if you just think about yourself as a human and you think about some of the data that's most valuable to you, location is close to the top of that list, like where you are in the physical world. you know, so we actually in the early days, we had basic geofencing capability, but there were a lot of companies that were building a lot of kind of insights that are derived from location data.
They were building, taste graphs and other sorts of, trait information that you could kind of harvest and pull in, and be able to use that to help target message marketing messaging that was, you know, based off of location data that was coming from ad networks and other places. we just felt that because we as humans treat that with such sensitivity, that it would be a game of cat and mouse forever and was not one that was worth playing.
You know, we were very focused on the first party ecosystem. We wanted to, I've always used this phrase of being a good listener rather than a creepy detective. and really making sure that to the extent that you're using data in order to personalize or enhance the relevance in marketing messaging or in, you know, other ways that you might be modifying the product experience, that those should all be done in a way that's respectful and that has reciprocation, where when someone's providing you the data, You're doing something good with it in order to enhance their experience.
You're not just like bundling it up and selling it to the highest bidder, which is what a lot of competing services were doing at the time and what a lot of, you know, early mobile apps were doing as well. And a lot of our competitors also were able to provide a differentiated, you know, targeting and personalization capabilities because in many places, you know, at least we felt that they were abusing privacy in a lot of ways. And it was our perspective that along the way, whether it was governments or it was the, operating systems, you know, or it was consumer sentiment. And then eventually, you know, you see the chain of events where it's like, there's investigative journalism around these topics and then outrage follows.
And then, you know, Congress takes action or the platforms change. And along the way, there were a lot of things that were existential threats to people's feature sets or to their business models, or they were like really disruptive changes where they had to change the way that they But because we stayed rooted in what we felt was a kind of first principles understanding of the sensitivity of certain data and of value exchange when it comes to kind of trading your privacy for relevance and personalization, I feel confident saying I don't think we've ever had to roll back a feature we've built over time because of new data privacy legislation or new changes in the operating systems.
And so that's just a great example of being on the right side of history, making sure that you're, you know, you're actually being very efficient with your resources. You're not building things where the, you know, the whole world's gonna get turned upside down on you a year from now. And, you know, we were able, while everybody else was like scrambling for GDPR, or they were dealing with the IDFA changes in iOS or all these other things, we just kept building and we kept executing.
And none of those things were issues because we predicted that, you know, changes of that ilk would eventually happen.
And we stayed on the right side of history.
**Brett:** Bill, I wanted to
go back to the journey we were talking about, was the transition from Bridgewater to actually founding the company?
**Bill:** there's kind of
the mindset around it. There's the literal actions that happened. And I think that, you know, I had grown up in rural Minnesota during the dot com boom. And, my computer was my gateway out of rural Minnesota to the rest of the world and was really attached to that and kind of enamored by how comprehensively and how quickly the world changed through, you know, the late nineties and the early 2000s. you know, I was also a kid in my parents basement, you know, luckily had a computer and internet connection, but didn't really have a lot of opportunity to interact with it more, meaningfully. And then, you know, as I entered the job market and graduated from school, here came mobile. And it felt to me like mobile was going to be as much or more important, you know, on a similar timeline as, you know, the, the.
com boom was in, you know, the mid and late nineties. And I just knew that I wouldn't be able to forgive myself if I was at a hedge fund on the sidelines for it, as the whole world was changing. Because, you know, going back to your first question, absolutely still, you know, consider myself a technologist.
It's what really, um, you know, the being able to build and create, you know, new things with new discoveries and new innovations is really what makes me tick, as a person. And. you know, the, the things that I mentioned before that were kind of in my life that I needed to stabilize, that was mission accomplished.
And so you know, I'd already had a bit of a wandering mind, if you will. And I was ready to make the jump. And then I actually took part in the TechCrunch Disrupt New York hackathon with Jon Hyman, who, as Kevin mentioned before, was, he was my boss when I first started at Bridgewater and, was my fellow technical co founder when we started, Braze, then called AppBoy all the way back in 2011.
**Brett:** we ended up getting top honors in the hackathon and, that resulted in a, chance encounter a few days later where we were on our way to the conference to present our, our winning hackathon project. And I met Bipul Sinha who, coincidentally, I actually just had a call with earlier today and got some advice from him on, uh, on a hiring, a role that I'm working on right now. I was really awesome to see him because. I ran into him on a crosswalk corner on the west side of Manhattan in, I guess it would have been May or June of 2011.
**Bill:** And he's the one who then saw us on stage and tracked me down. Afterward, and introduced, Jon and I to our third co founder, who happened to be living down in Texas at the time. And, you know, wanted to do something in mobile. He knew Bipul Bipul was a partner at Lightspeed at the time. He later would go on to be the CEO of Rubrik, who actually IPO'd midway through last year. and that kind of chance encounter brought, you know, the three of us together to be able
to decide to start a company.
**Brett:** And then me, Jon and, you know, Mark, we all got together at a restaurant in New York and we just discussed our ambitions and our excitement for, you know, the mobile ecosystem.
**Bill:** And Mark had been, he actually, crazily enough, was the CEO of an oil and natural gas company in this moment when we're having this dinner. but he had been working on some entrepreneurial pursuits on the side as well. some of them around mobile he had worked on building this social network for app developers. I think it would have been about a year prior to this. So in like 2010, under the name AppBoy before. that ended up not going, you know, gating traction the way that he wanted it to, and kind of having a website for app developers to interact with their users was, you know, switching, you know, for mediums, if you will, and so he decided that he wanted to reboot it and, you know, Jon and I kind of came together as technical talent and, The fundamental goal, in his original social network that also then carried through, and then what we built the idea of AppBoy around, you know, more specifically was just that as a mobile app developer, you wanted to, in order to kind of run a more sustainable longterm business with your mobile app, you should know your customers really well and be able to communicate with them in order to drive, you know, longer term engagement. And the idea for the company was just born from that, which I think is just a fundamental business insight, which is if you want to build, you know, a sustainable business, you do that on the back of high quality, longterm relationships, and if you want to build a relationship with someone, you should pay attention to people when you meet them. Use that understanding to learn more about them and then have more relevant interactions with them. And that'll build a strong relationship over time. And so we were just trying to take those very kind of human and basic business concepts and translate them into software that would help mobile app owners be able to, and they were primarily software developers at the time, actually, mobile apps didn't even have marketing teams.
And we can talk a little bit about the implications of that later. But, you know, we really built to try to help encourage people that were building apps, turn those into sustainable businesses. And we were all just really excited about the
opportunity that that represented.
**Brett:** what was the thing that you built at the hackathon?
**Bill:** It was totally unrelated, and it was actually, if you remember Gilt, which, was the flash auction site where they would do at a certain time each day, a whole bunch of products would become available at really attractive prices, and they had this cool game mechanic in their cart you know, there was limited inventory when they would do the flash sale. And you would buy it and it actually wouldn't check out right away. You'd have a certain amount of time while it sat in your cart and there'd be a countdown timer. And if you went to that product page while everything was sold out, it would say that something was in members carts and sometimes it would show back up in the inventory.
So we actually built a plugin that let you register items in your cart as an auction. And then people that were on the page showing that it was sold out could bid on the items in the auction. and effectively then when you would check out, it would just ship it directly to the person that won the auction instead of, you know, you buying it yourself.
And so it was an arbitrage opportunity on top of a place where you were allowed to hold inventory for free. And, you know, you could, you could imagine that wrecking havoc on a restaurant reservation site or really Anywhere, you're allowed to hold inventory for free. and funnily enough in the example, you can probably go dig up the video on YouTube somewhere. But when we did the live demo It's Jon buying a bikini for himself because we found out partway through the hackathon that the guilt website Actually was different whether or not you had a male profile or a female profile and we did our prototyping and Jon's wife's account And then when we were going to do the demo, we decided to make our own account, but the plugin didn't work because the website had changed enough by being a male user profile.
So we had to switch back to the wife's user profile
and just go with it for the demo.
**Brett:** That's awesome. You mentioned sort of the insight that you landed on around businesses sort of understanding their customers, at least sort of in this sort of early days of app ecosystem getting built. When you have that meal, did you actually just talk about these ideas and land on that as the higher order bit in a meal or this is days or weeks of just open ended discussion?
Like what got you to the higher order idea?
**Bill:** Yeah, crazily enough, we
did land on that in the meal. and you know, I would spend years afterward on places like Hacker News, reading these articles about you know, startup advice. And so many of them were, you know, you got to treat your co founder relationship like a marriage and you got to really vet it out and you could end like You know, it all just kind of clicked together and we just went with it. you know, none of us were living in New York city proper at the time. Mark was in Houston and Jon and I were up in Connecticut cause we both live near where Bridgewater is located. we decided kind of in the, in a couple of conversations after the word, but it was really just that one in person meal, um, that we were all going to quit our jobs and have a go of it.
And we did spend weeks afterward together. in New York on whiteboards, you know, working out the product spec and kind of going through all the capabilities that we wanted to be there and really work through the details of it. But that high level problem of, you know, how do you help someone that's building a mobile app stay connected to their users better and be able to encourage ongoing usage?
Like we knew that
was what we were going to work on right out of the gate.
**Brett:** So
then maybe you could talk a little bit more about those few weeks. So you had the lunch and you kind of explored a bunch of ideas and said, okay, that's interesting. You were then whiteboarding in those. Like what, what did you actually do to go from the higher order insight to something you would actually ship to
someone
**Bill:** we worked out kind of the early object model and you know what we wanted to be able to keep track of, how we wanted to communicate with people and when the important moments were, you know, in a, in a mobile app user journey to be able to create that strong early connection and then ongoing engagement with people. And interestingly enough, the early version of AppBoy actually was a lot more opinionated and a lot more rigid. we built a number of game mechanics. We built out a user profile. I had cross channel communication from the very beginning because, you know, when you try to solve a more fundamental problem like that, you realize that actually unlike a lot of companies that are built to just be, Oh, we're going to be a push notification service, or we're going to do email marketing.
Like they all start on a single channel. We were just trying to solve a business problem. And so we knew that we needed to be cross channel from the very beginning. So we had four different message types. we had push notifications, email. We had a newsfeed, before there was a Facebook newsfeed. I used to call it a mini blog inside your app. but it was, it's proper noun was the, the AppBoy newsfeed. and then we had our slide up message. We had a user profile, the early version of AppBoy actually let the user interact with the profile itself, because it was meant to be like a profiling system that the user would be able to, present themselves in like the app community as that person, things like that ended up changing, you know, that profile goes into the background. we ended up building more and more customizability for the onboarding. You know, message flows and, you know, various triggers that would happen throughout the life cycle and all those kinds of things along the way. But a lot of those early building blocks were all there because we were really working on that problem of what do we want to know about the person in order to drive more relevance and value? and then how are we going to communicate with them in an ongoing basis? And that really just drove a lot of that early product design.
**Kevin:** It was also right at the transition point between, the social way into the mobile wave, which of course ended up being very tightly intertwined over time, but a lot of the things that you described about, like the user profile moving to the background and it originally being the sort of editable concept was, I think, sort of an offshoot of the tail end of social being a huge part of how we were interacting.
And as the market continued to evolve, yeah. It's like you have that North Star of what Bill and Jon and Mark were aiming at, but you end up evolving it for the way that the consumers and the way that the overall society as a whole is able to kind of interact with the technology. And I think that the way that they ended up sort of traversing that landscape was really instrumental to getting to product market fit, achieving traction and ultimately making a lot of the product decisions that led to braise growing the way that it has.
**Brett:** Kevin,
maybe you could talk a little bit about what were you doing before you got involved with Braze and like, how did your AppBoy at the time and what caused you to join, what was going
on at the time
**Kevin:** I
was working at Accenture doing consulting in the energy trading industry for a number of years prior to Braze. It was actually a fascinating industry. I am like as far as one can possibly be from it right now, but I sometimes still think about how it was really interesting. Like. You know, you can go and trade like a strong wind over Texas.
This is a financial instrument that exists out there. and from that experience, I got the, chance to work very closely with a very, very old school legacy enterprise software that was. Being used in ways that were wildly productive for these energy companies and that sort of planted the first seed in my head of, I mean, you know, kids don't grow up thinking, man, I really want to do like enterprise SaaS one day, but from working with this technology, seeing how successful it was, I definitely got that idea that there was a huge amount of promise.
And then that combined with observing from, you know, a completely different place, a completely different state from where bill and Jon were the rise of mobile. I was very, very keen on figuring out a way to get to a place where I could both sort of pursue the fact that I saw a lot of opportunity in enterprise SaaS and also make sure that I was sort of catching these early side of of the mobile wave that was blowing up. so Bill and I actually know one another from college. We were fraternity brothers at M. I. T. One time bill was passing through Boston where I was living with our now head of growth and our first employee Spencer Burke I think you guys were coming from a ski trip. Yep. Yeah, we're up at
**Bill:** Killington and swinging through Boston I think we were other we're doing something hiring related.
Like yeah, I remember that was going on or there was interviewing Yeah, I had a candidate or something
**Kevin:** like that and Stopped by made the pitch and it was pretty much exactly what I was looking to get involved with obviously new bill I had a ton of respect for bill and also enterprise software in mobile sort of really aimed at the way that the world was going rather than where it was right now.
And yeah, that's how the journey
began.
**Bill:** I
gave it to him and I called him back and I was like, Dude, when we were hanging out in Cambridge, all you did was complain about your job. And so I don't care if you take my job offer, but you need to go to your job and take someone else's job offer.
**Kevin:** Yeah,
I remember that. It's funny. I actually have the email where I turned it down. But I remember this phone call. It was one of those phone calls where like, you know, you hang up and you just kind of look at the phone for a while and just sort of think about your life and think about your future.
**Brett:** what was the state of the company when you joined Kevin?
**Kevin:** I was the 8th
person into the room and and literally into the same small room, same room. So we were in what was like the second or third WeWork created. Yeah, it was
down in the meatpacking district. It was the early days of, uh, WeWork and they actually ran out of money while they were building it as
seen in the, in the TV shows.
And so we
still had bare concrete floors and the heat exchanger for the entire building was in our little glass box. And so it would get up to like a hundred degrees in that room.
Yeah, one of the nice things about the concrete floor, too, is that we were also we had a sort of an open music policy in the office, and I remember one time sort of the third time that Rihanna song We Found Love came on the day very, very loud, sitting there on the concrete floor, just like, wow, you know, this is very, very different from big consulting, I would say.
The people are way smarter and this is, this is a very, uh, much more scrappy environment, but overall, I think that what really struck me was that it was. Clear from the way that we were seeing the market evolve, but there was going to be something here and the pace of development that we had at the time.
And this is all I would say, like very firmly pre product market fit. The pace of development was so high and was so fast and our understanding of the market was evolving so quickly that I remember that providing a lot of optimism very, very quickly, to have that experience where it's like, you know, that there's going to be a pot of gold, but you're going to have
to really explore the whole forest to find it.
**Brett:** Bill what did you see in Kevin that made you want him to be your, you obviously had a long relationship, but like, what about him? Made you want to hire him, particularly because there are a few things more important than those first 10 people that join a company
**Bill:** So Kevin's, academic background. He didn't share. This is actually a neuroscience. And, he decided to learn to code along the way because he wanted to actually make money, and had participated in a number of the coding challenges at MIT. Well, getting his neuroscience degree. but I felt that, you know, given what we were working on and the way that we were thinking about, you know, kind of the science of like human relationships and the way to kind of connect and have that resonance with people and relevance that the combination of someone with, you know, brain and cognitive sciences, background along with the ability to actually build and execute in the early days from a software engineering perspective would be particularly valuable to us as we were growing.
And that was one of the major
reasons that, you know, I really wanted to get Kevin on board.
**Brett:** Bill When you decided to commit to work on this, did you think you were going to build a giant company? Or did it just seem like, Oh, this is interesting. There's a lot of like, what was your level of ambition and confidence that you would be eventually running a publicly traded company?
**Bill:** I
often get the question as we reach these milestones, you know, you, you open a new office, you ring the bell, you do a, you know, an all hands for the first time post COVID. And there's like a thousand people in the room. And people are like, did you, did you picture it like this?
Like, did you ever think we would be there? And I was, I I've always been like Well, I never thought we wouldn't. I didn't like explicitly think through the details of what scaling would mean, but I understand how exponential growth works, you know, and, I never assumed we wouldn't succeed and continue to grow and scale.
And so, there's definitely a little bit of You know, the blissful ignorance of all the downside risks and all the ways that you might fail and just staying focused on the path that we're going to keep building and executing and knowing that, you know, if we do that, as we continue to grow, you know, if we've got the right vision and we keep effectively putting one foot in front of the other, that we're gonna get there eventually. I never really put a lot of time and explicitly visualizing what those milestones would be or what they would feel like. but there wasn't necessarily doubt along the way. maybe there should have been, you know, but I think that's one of the magic, things of being a founder is that you just need to, in many cases, it's not even that you need to ignore it.
It
just never really comes knocking.
**Brett:** I want to go back to that first three to nine months when you were getting the company off the ground full time. Did you spend time looking at what other companies were in the space? And did you spend a lot of time with customers or was it more just ideating? A little bit removed.
**Bill:** we didn't have,
or we least didn't perceive direct competitors, uh, necessarily. So there was no competition to look at. And in fact, I couldn't even told you, like what CRM stood for when we started the company, comically enough. we also. Interestingly, didn't start out building for marketers, which is interesting, but it's just primarily because mobile apps didn't have marketing teams.
When we first started the company, you know, if you don't have a business model, there's not a lot of reason to try to pour fuel on the fire of your business model, and you know, along the way, as mobile apps started to mature into businesses and they started to become more sophisticated, the space that we were building for ended up getting owned by marketing and obviously now is helping define what the leading edge of marketing and customer engagement even is. you know, at the time we were really building for mobile app developers, the reason that I think developers alone were able to be effective in those early days was because the distribution mechanism of the app store was just so incredible. And so we were definitely working with mobile app developers. we were going to, you know, a lot of mobile app meetups. you know, I had already been in the mobile industry a bit before. And so, lot of great opportunities in my network and community to be able to bounce ideas off of people and really figure out, you know, along the way, what was going to be valuable to mobile app developers.
We also did look at things like game mechanics, we were definitely watching the way that UI and UX paradigms were developing and evolving because that was really important in the early days. especially because our vision for our product would involve being incorporated into the actual mobile apps.
And so that meant that you couldn't just be an email or push notification coming in over the top. You actually had to be part of the look and feel and the interaction of the app. And so we were very I would say immersed in the entire mobile app ecosystem at the time. but interestingly enough, as I alluded to at the beginning, the mobile app ecosystem itself wasn't really ready or open to us.
You know, I remember giving presentations at mobile app meetups in New York in 2011 and 2012\. And the tagline was to turn your app into a business, you know, and people were skeptical because a lot of app development at the time was just hobbyists that were kind of building things and throwing them into the app store. And so we definitely had things that we could draw on, but we also really tangibly had to make a bet about the way that the app. Economy would grow up in a way that we couldn't tangibly see. and, and even when we went and talked to some of our potential early customers, I remember someone telling me that they didn't want our service because the sooner people stopped using their app, the sooner they could stop paying the server bill for those people. And they had already made all the money they were ever going to make on them because they bought their app for a dollar 99 and that was it. And so they didn't, they didn't want an engagement platform. And so that was an interesting example where we had to look at that and be like, okay, that customer feedback is wrong. our conviction was that the mobile app ecosystem would turn into, you know, a thriving economy with great sustainable businesses, but they just weren't there yet
to be able to even talk to.
**Brett:** Can you talk
in a little bit more detail you started to, but in that first year, how would you articulate the different versions of the product that you actually shipped? It sounded like the earliest product was less sort of the, what the product is today and more like. User management and user profiles and engagement sort of all in one.
Like what were those first handful of turns and what did that actually look
like?
**Bill:** we thought about it
as like a toolkit for engagement and, you know, you picked up on something there, which is actually that, it also included a user feedback module in it so that people could do customer support from within the AppBoy platform. And interestingly enough, a lot of our development. In years two and three was about cutting early scope that we had built and then deepening the things that survived through that. And so, you know, removing that that user editable user profile, but at the same time allowing that profile to be much more comprehensive and flexible behind the scenes. we actually removed the user feedback module entirely. You know, first we experimented with stopping, demoing it because it ended up being a distraction during sales cycles. And we felt that the space we were working in around specifically in, fully automated engagement, as opposed to engagement from a one on one basis was where we really wanted to go. and we started out with a lot of like hard coded user journeys where you would get, you know, badges and you would get, specific messages like that would show up in your newsfeed based off of your usage patterns or accomplishments or achievements that you had in the application and such. And really started to make a lot of those more generic and they were they were generic in the data models. But the way that we actually presented them to the people that were using our software was much more hard coded. And so that was what a lot of the early development was was we started with kind of an opinionated toolkit. And then we ended up whittling it down, while also making the surviving parts substantially more flexible and customizable.
**Kevin:** Yeah, I think during those months is also when a lot of the foundational elements of how we really differentiate the product today. A lot of those foundations were really laid then. So starting to have the realization that mobile was not sort of the second of two channels that were going to exist for marketing between email and mobile, but what mobile really was creating was an entirely different paradigm, an entirely different network of ways that you could reach somebody and that that was going to cause sort of this Cambrian explosion of other channels and other platforms you would have to to. And so a lot of the architecture decisions we were making then were like Bill said, Laying that foundation in a way that could be expanded, another set of, I think, important, decisions that were made that's around when we start to really settle on this, event streaming architecture that we still have today so that we can be a real time and responsive platform.
That was really critical because that's what we needed to do just to get even our most basic, say like in app channels to work in any sort of coherent way. But what we start to realize with this was that that's the way that the entire world was going to work in a few years. And so we bake that into the very direct assumptions of the overall platform.
And so a lot of the work that was happening, if you were sort of. Looking at the product from the outside looked like sort of, you know, tweaking and adding a few different ways of messaging here and there, but on the inside, it was really sort of retooling the engine because every week we were crystallizing more and more of the way that we thought that the world was going to be. I think there's some interesting parallels say to where like AI is today where I think that AI is probably a few quarters earlier than that. And people still don't know what's what's going to happen. And there's a lot more change going on. So it's probably a little bit harder to predict at this moment in time.
But that's sort of the journey that we were on in those early days.
**Bill:** Yeah, we also had
really interesting early kind of product development moments and customer feedback moments as we backed into some of these older industries. So like email marketing is an example. For us, it was non negotiable to do everything interactively and in real time.
And for us, real time didn't mean faster than a nightly batch. It meant literally you're using a mobile application, and if it freezes for more than 50 milliseconds, you think that it's died and you're going to force quit it, right? Like you had to be interactive in terms of the personalization of the delivery. And so we applied that to everything that we did, and then we would go and talk to marketers and they'd be like, Oh, and so when I define an audience like this, like, how long do I have to wait before I can send to it? the question didn't even compute for us because everything that you did in our, product was completely real time, like everything from an audience.
Perspective, it was streaming, it was a real time classifier. It wasn't this batch process where you run a SQL query and you get a bunch of people out of it and you write them down and then you send an email to that list. It was like, it was all really built to, to use real time classifiers and to live in that stream of data.
And that was. You know, second nature to us because it was just required by the interaction paradigm of mobile, it resulted in a whole bunch of capabilities that we had that we didn't even realize were differentiated against, you know, that kind of more legacy space of just siloed specifically email marketing products.
But it also resulted in some places where there's things that are easy to do in SQL that are hard to do in real time streaming. And so we had this funny, juxtaposition of having this differentiated, extremely powerful capabilities. But we were also missing things that a lot of customers of existing categories would have considered table stakes. And, you know, that resulted in some interesting, prioritization Jenga that we had to do where we needed to make sure that our go to market was targeted at the people that appreciated our differentiators enough that they were willing to ignore the things that we were missing that were table stakes. And we knew that we couldn't just kind of build all those table stakes things. Cause we were literally almost 20 years, you know, we were, I guess at the time, 12 years behind the email marketing clouds we were competing against. We weren't just going to be able to build all that stuff overnight. So we had to both be really choiceful about how we close the gaps on the expectations for the existing category.
while also finding the right people out there in the market that, you know, really appreciated us for our real time capability. So as a result, you know, most of our early customers were places where real time was non negotiable. So, you know, delivery applications, dating apps, like, anything that was interacting with the real world. there was a lot in gaming and anything where in product use cases were more important, say than email, use cases.
**Brett:** Maybe sort of on
that point, what's the story behind your first handful of customers?
**Bill:** when we go back to the
early, early days, we actually, we had a beta and I think we had like over a thousand people sign up for the beta. We announced it on TechCrunch you know, and all the, all the normal places, from back in the day. And it's a kind of a funny number to look at because we had a thousand beta, signups in like the first two weeks when we announced it.
And even still today, we only have a little bit over 2000 customers and, you know, out of those thousand beta signups. I don't think we have any customers, today, uh, that actually would have come out of that initial set. And so the earliest foray into customers, you know, we weren't asking people to pay for it either.
And so that was a chasm that needed to be, you know, moved over. And at the time, as I mentioned, a lot of mobile app developers were hobbyists and, you know, they weren't necessarily willing to spend money. And if they couldn't make money on their customers in the long term, there was no reason for them to pay someone. to be able to engage them in the long term. And so that created some interesting early friction because as I mentioned, the early customer hadn't really emerged yet in the market. And then what happened over time is, growth teams started to grow up. And this was around like growth hacking and data driven, marketing tactics and being able to kind of evolve strategy quickly, compounding learning through experimentation and being able to do that in a data driven way. And that was actually something that was just a very natural use case for us, because we had this agility built into everything being real time. We had this data driven user profile to be able to determine the messaging. We were still pretty rudimentary from an analytics standpoint at the time, and that was something that needed to kind of be built and grow up.
But what we found was that these early growth teams that were part of mobile apps were they were our ideal customer, and that was something that was still in the early days, but they were also pretty tight knit community because they were kind of forging a new, more data driven, more experimental way of approaching a lot of marketing.
And that wasn't something that was being taught in school. It was something that was being, you know, learned as it was growing and as it was evolving. And so, what we did in the early days really, it was, we, we looked for, those teams, those job titles, and we looked in the mobile apps that we felt were gonna benefit from, you know, what we were doing.
And so, early subscription apps were important as well. You know, it, it took a while before, for instance, Sell data was cheap enough and fast enough that you could do music streaming. But, you know, those were places where you were able to transplant an existing business model over to a new form factor. And, you know, the music streaming applications already had a way to make money as an example. And so they were, you know, great early customers, dating applications that were charging subscription fees and, and just really anyone that was. Getting that early user traction and actually had an incentive to keep their customers around for a while.
**Kevin:** Yeah, the moment that I really remember was we had a holiday party at a garden. And I remember thinking like, wow, this is really working because we had just signed a number of our early true enterprise customers. And what was more important, I think, about these enterprise customers than just the fact that we had them was the fact that they were all using, then AppBoy and now Braze in the same approximate way, which was the way that really aligned with our vision for where the world was going. I think of an enterprise customer it's like a little bit like dating or like a little bit like dating to get married and it's sort of, it's a red flag if you go on a date and all, you know, all the person wants to talk about is like, wow, you got a great car, you know, you've got, you got a great apartment or something like that.
It's like, that's not really why you want to go on a date with them. whereas with these customers, they were very locked in on that overall vision that we had with that sort of, you know, very early proto version of a growth team where you would talk to them and they would say, all right, I'm running a mobile app right now and these are my ambitions and these are my KPIs.
And this is something that we look for in a modern growth team right now. They tend to be very tied to core business metrics. And they would say, All right, I'm running mobile right now, but really, I ought to be running the web team to I ought to be running the email team. All of this should be working together. All of this should be working in real time. We should be building like a much deeper relationship with our customers. And for us, it was like, Yes, exactly. That's exactly what we think you should be doing as well. that was sort of the moment for me to realize like, okay, we are now we've reached sort of like the root node of this overall web of different possibilities.
This is where we need to be. These are the buyers. We've got three of them right now, but 10 more conversations next week, it's going to be 100 the week after
that. And that was really the moment for me.
**Brett:** How far into the company's life was that?
**Bill:** it was a couple,
two to three years really. and you know, thankfully, uh, venture capital is an industry. it allows you to build things for a couple of years before you have revenue. we ran out of money once. We almost ran out of money twice. In each of our early fundraising rounds, you know, I've mentioned several times that the market really wasn't ready for us to sell to it yet. our answer to why now the best one we probably had was so we can get a multi year head start on something we are very convicted in, but not everyone agreed with that conviction. it wasn't until our series D six years into the business that we ever had a fundraising round where we got more than one term sheet. it was tough in the early days and, you know, we had that conviction and I remember someone telling me, you know, the first customer is as hard as the next 10 and that's as hard as the next hundred. and I remember thinking to myself, I fucking hope so because that first one was so hard. and you know, the, the early days. it was sometimes difficult to really maintain that full conviction because of how long it took. but then of course, one of the things that happened was that as the market started to come together. And by that, I mean, you know, mobile apps started to develop as businesses, you know, smartphones obviously deployed very rapidly around the world. and those things kind of came hand in hand. That all started to come together for us in a really positive way. And the would be competitors at the time, actually, many of them had distracted themselves or they had kind of cut corners or taken shortcuts. And one of the examples of that actually is that mobile gaming was one of the first places to make any money in mobile. And so if you go back to 2012 to 2015 Probably 85 90 of the SaaS businesses that were in mobile were very focused on helping the gaming industry because it was the kind of quickest route to make money in the early days. But we had conviction again that this was going to fundamentally change the way that we live our lives and change the economy.
And so we stayed focused on building a product that would be, you know, widely useful across all different verticals. And we didn't you know, focus ourselves specifically in on gaming. we also felt that gaming at the time, a lot of it was about either kind of milking whales or tricking children into, you know, buying a lot of in app purchases on their parents phones.
And that was like, not a business model that we felt was sustainable either, and didn't want to really run after that. And so as a result, when the market did come together, we were there and we had already built this diversified capability. And everyone else actually had to spend time pivoting away from gaming.
And some of them never managed to actually complete the pivot. You know, others tried to turn into a more of a horizontal offering for mobile games, as opposed to being a more vertically focused offering around customer engagement, which we, you know, we're very focused on the, the vertically integrated stack and on building comprehensive capability around, you know, all these product areas we've talked about.
And when you look at Braze today, actually, our largest single vertical is only around 21, 22 of our revenue. And we have a highly diversified customer base across a whole bunch of different places. And gaming is one of those. It's, it, it lives in the, it's about a teens percent of our revenue. and we, of course, eventually did come back to compete in that, but it was a little bit of a Nash equilibrium play where we're like, everyone else is going after gaming. This other prize is over here. It's not as big as gaming is right now, but we think it's going to eventually be substantially larger. And so we're going to just keep investing for that future that we think is going to come.
**Kevin:** Yeah. We kind of violated one of the rules, I think around like that, like a traditional lean startup methodology of build a super narrow product for one use case, be 10x better and then grow, grow, grow from there because.
We had that really strong opinion on where the market and the technology were ultimately going to go. with that opinion, it's like you look at this world of, you know, cross channel, real time, very robust engagement. And you realize, okay, no, we can't just build this one narrow thing that market requires 50 things requires a whole lot of functionality.
And in a way, the fact that it took some time for the market to really turn towards what we were building for, obviously, it's scary, you don't want to run out of money. But it did give us a lot of time such that we had built probably 35 of those 50 things by the time it turned over. And we were then able to grow very, very quickly with a lot
of differentiation, which was really helpful.
**Brett:** So you
mentioned this a few minutes ago, but when you originally did your TechCrunch announcement of the beta and you had a thousand people on the waiting list, did you go email them and said, Hey, we're excited for you to try the product. And then they came in and just churned and never activated. what happened with those early customers that weren't obviously the right fit or the product wasn't quite there at the time?
**Bill:** a lot of them did
integrate. And that was great because it was good technical vetting. a lot of them continued using our product for quite a while afterward. But, you know, a lot of those early apps just Didn't make it.
**Kevin:** They weren't, they
weren't businesses. They were just sort of hobbyists.
**Bill:** Yeah. And, and some of them did, you know, eventually turn into businesses, but, there was a bit of a step function that happened where we had those early customers, and it was, uh, you know, a different lens on, the product, you know, same product space, but. We weren't charging for it, and actually the biggest pivot that we made in the early days was really around the business model and the way that we ended up charging customers because in the early days there was an idea that we could potentially build a B to B to C kind of network to be able to do app install ads or, you know, other sorts of kind of advertising injection into the newsfeed, and that would allow for us to kind of finance this toolkit that we then provide to app developers.
But as we were going, a lot of the feedback that we were getting is like, people wanted to kind of break it apart. You know, they wanted, they didn't necessarily want, anything branded by us and the application, et cetera. And, you know, we were kind of looking at it as like, okay, we can get more early customers where they want the newsfeed here and they want to be able to use the slide up, they're not going to use this or that or whatever.
And our early business model. Idea would have required that everything stayed intact. It stayed together as a bundle so that we would be able to run the advertising in the feed what we eventually decided to do is like, okay, there's a willingness for people to pay for these capabilities.
They just don't want it the way that we bundled it and that we're trying to deliver it to them. And so why don't we remove those constraints and just start charging them for it directly as like, you know, SaaS contracts. And so as we went through that, that then required us approaching a new type of customer in a new way with a new commercial model and the product, you know, the product didn't need to change a ton, but we, it was basically adding flexibility to the product, in order to, give people what they wanted from it or what parts of it they wanted from it, and I think along the way, you know, it's possible some of those early thousand signups did eventually become customers. there was kind of an abrupt change when we shifted from trying to monetize in a network based way and shifting over to actually doing annual contracts. And that then resulted in in kind of a bifurcation of where we were trying to go to market and who was there.
But those early beta users were really helpful in, you know, a lot of the technical vetting, a lot of the early customer feedback and also ultimately in crystallizing that we needed to change the approach
that we were taking from a business model perspective.
**Brett:** What's the story behind those first few enterprise customers using the product in the way that you wanted in this repeatable fashion?
**Bill:** So the first
enterprise customers and we had a distinction the early days between the mobile Titans, which were the mobile apps that were growing and scaling quickly. And then there was like the enterprise who were companies that already existed that were then trying to build a mobile presence. We were trying to build for both. we weren't trying to sell the banks in the early days. Right. So it wasn't like enterprise with like really heavyweight compliance and security and things like that. It was more like online retailers. And our wedge that we found there was that they already had a business model. They already knew that, you know, if they could engage customers better, they would make more money. and they had data driven marketing teams. And, you know, I've, commented a lot over the years that one of the really cool things about, you know, braise and our evolution and with the market is that we sell to a bunch of job titles that didn't exist when we started the company. And, you know, that's, that's been true for a long time, but that also meant that as this mobile space was emerging, You know, there was also a new way of doing marketing that was emerging at the same time. And so, you know, those early customers on the enterprise side, they were primarily like online retailers they were places where, you know, they had someone that was ambitious.
They were leaning into, you know, mobile as a place that people would do commerce in the future. And they knew that if they could engage customers, you know, more in more real time with higher relevance, they were going to drive more purchases. And then on the other side where the mobile Titans and these were primarily subscription or freemium mobile app services where for them getting people through that early subscription funnel you know, really taking a lot of money was being spent on mobile acquisition at the time in order to drive installs.
But this was still the early days and people thinking about things like daily active users, monthly active users, you know, stickiness, looking at different cohorts and how they were onboarding and what your retention curve looked like. This is the very early days for a lot of that data analysis. In fact. One of the easiest qualification questions in the early days of the sales cycle was asking a customer how many monthly active users they had, shockingly, a lot of them didn't know, right? They knew their downloads and their installs and they knew where they were in the app store charts, but no one was paying attention to what was happening after, you know, day zero of the install.
And so it was really like, who are those people out there in the market that understood how important the shape of their retention curve was to their overall economics of their business, and we're, we're gonna go after it in a data driven way, in an experimental way, and really like understood how that impacted their bottom line.
And we had to go find those people.
**Brett:** When you think about those first few years, would you describe it as more of a random walk of just trying different things, being convicted that there was a broad secular trend here that mattered?
Or was there a level of precision by which you were going about this work?
**Bill:** there was
a precision to it and maybe actually if I was going to fault us in one direction, it would be that we were a little too opinionated and precise. and then the feedback was like kind of sharpening us, right? kind of shaving things off and focusing them in. you know, to Kevin's point before we didn't pick a really narrow slice and, and, you know, we're focusing on that. We actually, because we had this broader conviction, we were building a little bit more comprehensively than probably we should have. And what the customer feedback did wasn't necessarily gave us new ideas about new places to build, but it told us where to focus and where to, you know, shift and, the first few years. Probably involved just as much, or not like literally the first few years, but in those kind of years, three through five, it involved just as much like orphaning of ideas that we had early on that we decided weren't going to have legs in the long run as it did, you know, really building and growing, things that we knew that we had to focus on.
**Kevin:** I would say like fishing in, in this one pond that we had, a lot of conviction was maybe not a pond. It was maybe like a huge ocean, and so if anything, it was like, all right. We're just going to fish every single spot in this pond and we're going to use a rod, we're going to use a net, we're going to try anything we can like there was a lot of, busy activity, we were at a very, very high pace, I think, despite the lack of at that point, paying customers that were actively pulling us in any direction, but what I would say is that was all very, very focused around that core idea and around the market that we were increasingly sure it was going to emerge.
**Brett:** Was it a step function change that sort of got you oriented correctly? Or in those six months before that holiday party, when you started to see happy customers in the enterprise that were willing to pay, it was like this gradual, slow turning of the
crank, if you will.
**Bill:** I think it was more gradual because
it also required evolution happening around us. You know, it wasn't just us building and growing into a market that already existed or a demand function that already existed. It was us growing up with. The mobile app economy and it was also growing up with these new ways of organizing, marketing teams and operating them. I mentioned the, the new job titles, but it was kind of really interesting being at the convergence of an entirely new craft, a new set of skills, a new way of running a marketing team, a new way. and one that was also more interdisciplinary because, you know, there was this opportunity to interact in the product. Even here in 2024, people talk about the customer 360 and they talk about sales and support and ignore the product experiences, you know, that are so important for us to be able to maintain connection to a brand and be able to drive that longterm loyalty and engagement and all these revenue generation opportunities. but the entrance of that kind of first party interface through a mobile application meant that a lot of these goals that you might have had before around CRM or marketing or what have you, we're now starting to permeate other places as well. It wasn't just shooting an email in your inbox, taking your, you know, your billboard, trying to get it in someone's inbox and trying to get them to your website.
You know, it was really. Integrating into the entire customer life cycle. And so that just meant that a lot was changing at the same time. and a lot was maturing and growing and, we needed those things to come together. And it's actually one of the reasons why, you know, when we raise money in the early days, you know, a, it was, it was hard to do.
Um, but we also didn't really have a goal of going out and raising a tremendous amount of money in our early rounds because. We didn't feel like the market was actually mature enough for us to go and rapidly scale a GTM or, ramp up the expectations on our early scaling and growth. we actually had a number of competitors in the early days who went out, you know, at the same time we went and raised, 10 to 15 million Series A, they went and raised a 50 million dollar series A, uh, and they actually burned themselves out. Despite having more resources, they were effectively trying to push on a rope. And we had that visibility into our market. And we also had the patience to understand that there were some exogenous factors that certainly we could influence. We could be out there at a meetup, you know, trying to encourage people to think about their app in a certain way or run their marketing team in a certain way, we can train our customers on how to use our software and how to be more data driven, experimental, et cetera. you know, we were only, a few dozen people, depending on kind of what, what period in time this is, in a market that, you know, was much, much larger than us. And so I think just being cognizant of the evolution of those exogenous factors, along with the product development that we were doing and how those things paced together. And then thinking about what that meant for our scaling strategy as well, was really, really important for us to navigate and survive, through those early years.
**Kevin:** But what I think was also interesting about our buyer and is worth thinking about for for any startup out there. in terms of the buyer they're focusing on is that these marketing buyers did have there are a lot of network effects of marketing because if I'm running much better marketing than you are and we have a very similar sort of brand, I'm going to win and I'm going to win really big. I'm going to win sort of like a power loss sort of way over you, whatever brand has much worse branding or much worse marketing.
And so, as a result, there's some very, powerful sort of like competitive natural selection in the marketing and growth world. So, as a result, once, uh, the first sort of crop of brands out there started to use products like Braze and start to really find success with them, Very, very rapidly, there was intense competition in the market and the market start to pivot on mass really, really quickly.
I think there's also this aspect where a lot of these marketers, especially in those times early 20 teens, they remembered the dawn of the internet and they remembered that this was such a massive sea change that it was really scary in their industry. And so if anything, they were kind of like a little bit overly jumpy to hop onto what the next new paradigm was, especially once it was working.
They really flooded in and that really helped us in the early days because I think again, since we had built a much sort of thicker rather than thinner product in the early days, we were really ready to kind of welcome them with open arms. Once that network effect really kicked off within that industry.
**Bill:** Yeah. And I mentioned earlier that it wasn't uncommon that we would ask people how many monthly active users they had and they, they didn't know. but then, you know, Facebook goes public and they obviously had, arguably one of the most engaging products ever built, and they talked about their daily active users and their monthly active users on a regular basis.
It was in every earnings call, and so that was actually, you know, an interesting example where that was an exogenous factor, but it kind of happened all at once because once that started to be part of how people describe success, you know, in a mobile app as an online business. That very quickly permeated the rest of the customer space.
And, you know, people started to understand, like, Oh, I need to know what this is. I need to be able to optimize this, concepts like stickiness or your seven day or 30 day retention, those were new ideas, but they're correct ideas, you know, to Kevin's point, like they caught fire. And I think once some of those new ideas about how to.
Be more efficient with your acquisition spend, how to think about retention cohorts, once those started to permeate those communities of marketers, you know, that really
created ingredients for us to scale more rapidly.
**Brett:** So when you think back to your first few million in revenue, what was the product, what was the positioning and what was the customer base at that time?
**Bill:** The product in broad strokes, very similar to what you see today, there's obviously much more sophisticated and comprehensive now, but it was, you know, data and event driven, messaging across different channels in order to keep track of where the user was in their user journey and what they were interested in, and then be able to leverage that understanding to deliver messaging to them.
That was either going to usually either going to help early retention. Help convert them into a premium subscriber or help drive incremental revenue through purchases. You know, those were the, the, the major money generating use cases. There was also a lot of transactional use cases, just a lot of operational messaging along the way, to be able to communicate with people.
We also had a lot of delivery applications where for instance, we would tell you that your order was on the way or that the driver was outside, like those kinds of things. And so we were broadly doing all forms of messaging. But a lot of times when you're underwriting the business case and what drove the revenue, it was about kind of those three things.
It was like, Hey, you're spending a huge amount of money on user acquisition. We're going to improve your retention curve. And man, if we could even move that 50 basis points, you know, on day seven or day 30, that's, that's a 10 X ROI because of how much money you're spending on acquisition. similarly, you know, same concept is just optimizing your premium subscriber flow and then driving the incremental revenue.
And so our early customer base was a mix of those online retailers trying to drive incremental purchases and then early mobile, primarily subscription businesses, or just ones that had a premium upsell through in app purchases of some kind if it wasn't a subscription and trying to drive people through that purchase funnel through additional retention. It was surprisingly global, even at 3 million. and actually today we do 45 percent of our revenue outside the United States. but that number has been in the high thirties, early forties, you know, since well before IPO. I used to get questions about that when we would raise financing grounds, be like, why is your business so global? and I would also look at it and be like, it was kind of annoying on the one hand because we didn't have people in those places. So we had to spend a lot of time getting on planes to go visit, you know, early customers cause our. first 10 very large customers, like one of them was in Berlin, one was in Norway, one was in Armenia, we had one in Singapore, you know, and then there were another half a dozen that were in the U.S I think only one of them was in New York. And so we only had one that was in our own backyard. The rest of them we had to get on planes. Some of them we had to cross oceans. but I think that was, you know, really a testament to how global of an opportunity it was and how great of a distribution mechanism the app store was because You didn't need to be in the U S to take advantage of, you know, the wealth of the U S market as a new mobile app, you could launch from anywhere in the world and you were in the app store and you could process, in app purchases and every currency. And, that was just an incredible distribution mechanism and opportunity for those early businesses.
And that resulted in us being very global right out of the gate. They had those two qualities, either they were already selling something to someone or they were one of these mobile Titans often in subscription, but they were spread out across a bunch of different verticals as well.
And that really helped, you know, keep the drive a lot of the demand signal for things being flexible and customizable. and, you know, performance was obviously an imperative all the way through because of what we were doing with real time, you know, on demand services, car share delivery. like local dating apps, things like that.
**Brett:** When you think about the first handful of customers, did you get them through some inbound, they heard about you, they were at a conference, or were you outbounding and sort of trying to develop, you know, what would be considered account based marketing or something now, where you found, you know, the head of growth at company X, you hustled to get a meeting with them, sort of that type of thing?
**Bill:** Yeah, it was much more outbound. You know, we would occasionally pick up a good warm lead by presenting at a meetup or being at a conference or something like that, but we didn't have any meaningful budgets to be able to spend on kind of broader demand gen. the early customers, you know, it was, there was a lot of qualification required and a lot of active selling.
We had to kind of paint the vision for people, in many cases. And so a lot of it was a direct motion and, you know, a lot of us were involved in it, that adage that, you know, everyone, everyone needs
to be a seller was absolutely true in our early days.
**Brett:** Did you find as you started to get into stronger product market fit the next marginal customer became easier to get? And there's sort of this classic metaphor of it was like you were pushing a rock up a hill and eventually it started to go down a hill?
**Bill:** it ebbed and
it flowed, because I think there were times when we would, we'd get a great, you know, we would launch something new that you know, really resonated with people. we had a lead on the competition in the early days. And so there was kind of this, this moment where as the market came together. And before competitors woke up to it or had time to kind of pivot over to the opportunity, we had some free sailing there for a little while. but as I mentioned, you know, we also had a hard time raising in the early days and, you know, we, we had other people that were kind of come in from, deeper pocketed adjacencies and things like that.
And so there was, there were moments where then the noise and we were in New York, we weren't in Silicon Valley, you know, we weren't a YC company. We didn't have, you know, big, big brand name backers and things like that. And we had competitors that did. I'm obviously biased, but I feel like we had the better product the whole time. we would go through these kinds of ebbs and flows where we would have some clear sailing and then there would be a lot of noise in the market and our lack of kind of brand presence and awareness would really harm us. you know, there would be new opportunities coming up and we just weren't getting a seat at the table for those opportunities. we would evolve our go to market. We would start to get, you know, those seats at the table. We would break into those networks, you know, people, within that marketer community would start to know more about us. And so we'd get those at bats and we, we were, we could win those at bats when we would get them. especially when we would build something new in the platform that took a long time for our competitors to be able to imitate or be able to answer. and so, you know, I, I think it was, it was both at the same time. Like we would have these downhill portions that felt really good and things are coming together. and then we'd have, you know, a bunch of competitive noise would happen for some reason. Or we would, in order to hit our next set of goals, we needed to be able to double or triple or, you know, 10 X. The amount of lead flow, and we just didn't have the demand gen budgets to be able to do that. Or we didn't have the sales team coverage to be able to do that.
And we need to work out, you know, a new way of being able to go to market more efficiently. And a lot of learning along the way. So yeah, I mean, if you're, you're in this journey, I think sometimes it's one, sometimes it's the other. And that's probably pretty natural.
**Kevin:** Yeah, I think there's also this element where product market fit isn't static, because you can end up, you end up in a situation where you have really tight product market fit, say for those early mobile Titans. But we didn't necessarily like bill referenced earlier have really tight market product market fit for a bank. And so it starts to feel really, really slow in some places. And if anything, you're pushing an even bigger rock up and even steeper hill when you're say, entering a new market adjacency, you're entering a new sort of customer persona.
That's maybe structurally or for whatever reason, not really as ready a buyer as your as your core market. And so. You do end up with a lot of places where there's really high growth in sort of one sector of the business that you've been selling to really successfully. But then I know one large transition for us was that we had a lot of strength in the early days out of mobile email.
Of course, we now know is a mobile channel, but a lot of marketers did not necessarily realize that in sort of the early days of mobile, but it was all going to be so tightly intertwined. And so as we were making a really big push into email, that felt like something where we're certainly pushing the rock uphill, for a certain period of time, just because we were really entering a different, very, very large market.
And so I think it's a natural evolution, but what's really key is just to not view product market fit is sort of a stamp that you get in your passport and then you're off to the races. It's something that you are continually. consolidating and also continually looking to expand if you want to have
the time to build a really large business.
**Brett:** If you strive right now to be as intellectually honest as possible, when you think back to the first few years of getting into product market fit in the way that you've articulated it, what things would you bucket in you were just lucky, and in what areas would you say the most skill was at play?
**Kevin:** One of the most important pieces of luck was that through a combination of being very persuasive, uh, Bill didn't mention this about his background, but he's like a national champion debater, or, you know, having a really strong team or having a really strong prototype that we were able to survive to the point that the market turned in the direction that we were aimed at. You know, it was probably more skill than luck that we had sort of picked the right direction to go in. I mean, we were very, we were all on the early team, very early adopters of mobile and really in sync with where we thought that market was going.
But I will also say to your question, there's one element which is different, which is that you really need to just put in the hours and just do a lot of stuff to get product market fit. Otherwise, the or you just can, I guess, get incredibly lucky. But generally speaking for for I think almost any software business, you just need to take so many shots on goal just to really consolidate that strong product market fit to get kind of explosive traction.
and that element is something that I think is pretty universal across all startups, but is really important for anyone listening to consider is that you should expect to have to put in a lot of effort just to have enough shots on goal that you capture product market fit.
**Bill:** Yeah, and I think I would agree that the biggest luck component was probably just the timing, you know, that we didn't, in fact, fully run out of money that we didn't stall out and that the market did come into its own in time for us to take full advantage of that.
you know, choosing mobile because of our tremendous conviction and just how big of an opportunity it would be. I do think that to some extent also surprised on the upside. you know, you look back on even just the most recent past of the last few years and just how thoroughly mobile has really permeated every aspect of our lived life.
that I think created an opportunity that was just tremendously large. And, you know, we obviously. We were born from a conviction behind that. but I think even, even looking at it now, it's like the fact that mobile has permeated. Every corner of the globe and spread more than any technology that's ever come before it, including even like literacy to be able to read your phone, there's a phone in almost every human being's hand. The average number of them is greater than one per human on this planet. And you know, the spread of mobile cell networks goes further than, you know, even terrestrial electricity and the ability to charge them from a grid these devices have so thoroughly permeated every part of our life, and that's created huge economic opportunity.
The timing and the scale of that, we couldn't have planned that specifically. And, and, you know, we embarked on a journey without a real answer to that question of why now specifically, we had a why now generally, but I think we got lucky that we survived not having why now specifically answered pretty well.
**Brett:** What are the most important things that you figured out that if a friend of yours, who's really talented is going to start a company, you try to impart on them?
**Bill:** I think the first one is just about commitment and endurance and making sure that the thing that you want to go and build is something that you want to dedicate at least a decade to. I think a lot of people, they kind of perceive startups as these like great opportunities for like, you know, to be disruptive and build, you know, wealth and what have you, but they also succumb to a lot of the headlines of this or that acquisition happened.
And it happened, you know, quickly and in the early years of it or whatever. And, and there's a lot of people that I talked to who. you just ask them how long do you think it takes on average for a company to IPO, they grossly underestimate, things like that.
And so just making sure that there's commitment and conviction and that it's something that they want to dedicate, you know, every waking hour to for many years from here on out and therefore, that requires like passion in the space that requires like conviction. The other big thing that I try to challenge people on is the path of fundraising because everyone also just defaults to go out and raise as much money as we can like right away and don't really grapple with you know, the fact that A, there's a lot of businesses that people may start that are not appropriate to be venture backed.
And when they go and they try to kind of back them with other investors, they very quickly lose control of exactly what trajectory it needs to be on and, you know, how, how they're going to build it and, and things like that. In a way that ends up being detrimental to their passion and to their connection to it.
And so if those things are not aligned, well, if it's like, Hey, if you're going to go raise venture capital, your only option is to go keep scaling this to the moon, that's what you need to earnestly work on for a long time from now. And if that doesn't resonate with you, you know, you need to rethink aspects of that.
On the other hand, if that does, fantastic, you know, and then I can, you know, then we have a longer conversation about, where and how you pace that and, you know, how you go about it and a lot of details there. But those two starting conversations of just, like, dedication, conviction, your endurance to do it over the long term and the way that you want to go about it and how you're going to fund it and how you're going to grow it.
**Kevin:** I've got a slightly more tactical one, which is, it's well known sort of out there in the industry that you need to have technical ability and, you know, like YC very famously talks about how they like technical founders and things like that, like that's not a big secret.
But. I would take a much more pointed approach to it, which would be to assume that the life and death of your company will at some point and potentially at multiple points in the company's life hinge on your ability to win a product velocity foot race against every competitor in your market.
because in this sort of house to house fighting of what SaaS inevitably becomes, because I think that a lot of folks think like, okay, I'll be able to get a product built and then, you know, I'm going to put marketing behind it.
I'm going to put sales behind it. We're going to raise a bunch of money. Like. 100,000 Twitter followers, it's going to be awesome. This whole thing is going to work. all of that helps, all of that can be a great accelerant. But ultimately, to have, let's call it like terminal value product market fit, like the ability to actually kind of win an entire category, that requires just getting into these product foot races for a very long period of time, and then winning them and If you don't have that DNA, and you know, I think we were fortunate enough, Bill and Jon, very technical, brilliant engineers.
So we were fortunate enough to have that DNA. If you don't have that DNA and you don't really invest in and cultivate it, then you're not going to win that foot race and somebody else is going to be able to marshal all of their go to market resources against you in the long run.
**Brett:** What things did you figure out that are more sort of insights that might be useful to folks as it relates to competition specifically?
**Kevin:** It's important to think about pre and post product market fit. I think pre product market fit competition, it's sort of more of an abstract sense because you don't even really know who you're going to be competing against or what you're going to be competing over. And even I would say up through maybe 2 million to 5 million ARR, I think that thinking too much about competition is generally distracting.
for two reasons. One is that you don't really know the identity of your company, and also you don't know, you are not seeing enough of the deals in the market. You're not seeing enough of what's actually going on in the ecosystem that you actually have any leverage to do anything with competitive knowledge.
So I think it's important to be competitor aware, but not really to act on it. But in the longer run, I actually disagree with the advice that you should just, you know, completely ignore the competition. I mean, think about it. If you are in a boxing match, You would go and you would prepare for the match and you would work out and you would train on your own,
but you're also probably going to like look at tape of of your competitor and just try to figure out, you know, just generally what's going on. It's certainly a minority of the activities that a company should be doing but I think it is part of the overall constellation of understanding what the environment is that you're operating in. For that matter I think it's important to also understand like your supply chain. Like what are the large cloud providers that you're reliant on going to do? Are they competitors in the long run? Are they partners? Are they allies in the long run? Just being very, you know, situationally aware, I think is is very, very important.
**Bill:** Efficiency in this matters a lot because you have to dedicate the vast majority of your resources to building your own vision, but also, if you're losing deals like at the finish line and your sales team has spent, you know, six months or, or longer and many, many hours trying to get you the opportunity to sell to a customer and you lose it, you know, somewhere close to the finish line, that is a wildly inefficient use of the company's resources as well.
And so I think if, if you're going to kind of pragmatically try to figure out how to balance out staying focused on the customer and running your own race versus knowing when to look at the competition, I would say, look at those late stage losses and figure out, you know, what led to those losses. Some of them, it makes sense and you should have lost those deals.
And that's really good feedback to go back to qualification and say, Hey, you know, we need to get our sales teams time focused and prioritized. And so, you know, if there were these criteria that led to us losing at the finish line, let's make sure that we qualify out of those deals, you know, as long in the early days, you don't need to sell to that many customers.
Like your market penetration is going to be very, very low. And so you're better off trying to find the right customers. In that ocean of opportunity that you are needing to win every single opportunity, and that obviously starts to shift over time as your scale gets bigger and your opportunity gets gets larger.
and then the other side, and we talked about this a lot is finding points of leverage where you have an unfair advantage against competitors. And almost like a product, you know, jujitsu, if you will. And so when you're analyzing those losses and you're like, Hey, we've got this product gap, you know, looking at that and saying like, all right, what's the bare minimum that we need to do?
Or what's some way that we could take advantage of the way that we are architected versus our competitors to build something that's either going to be hard to imitate or where we can build it with a lot less effort than, you know, then it took them to build it in the first place or where they may be overbuilt something and we lost because we were missing part of this thing, but not the whole thing, right?
Those are all examples where you would look at it and be like, all right, this was an inefficient use of go to market resources. We think we should have won this customer, this thing, this reason that we lost it was on our roadmap. It just wasn't on our roadmap until next year, you know, And that I think changing your product vision to adapt to competitors is absolutely an error to make. But changing the prioritization and then also finding opportunities for differentiation where you've got, you know, some form of unfair leverage because you're relying on your architecture or some other thing that's unique about your company, those are both responses to competition.
that I think are extraordinarily valuable to build for. And you should be able to do those without taking your eye off, you know, the bigger ball of your, customer feedback and everything else.
**Kevin:** there's just a very strong, management leadership, emotional side to this as well.
Because I think that competition if you obsess over it, and if you talk about it all the time, and if you talk about it in a fatalistic way or even too emotionally agitated in a way. it has an element where it will start to trigger something in large teams where they will start to obsess over it and they will think about competition all the time and they will start to ignore things that, are much, much more important, like just operating and doing your job and just executing really, really well.
And so I also think that it's really important, as a leader of a, of a company or somebody who's in a position where people are kind of listening to your opinion on competition to just be very, very measured about how one is operationally talking about and thinking through and reacting to competition because if you're not, This is just one of those areas of startup management that has the ability to get completely out the barn door and take on a life of its own.
**Brett:** I like Bill, what you said earlier, when you're talking about one of the, I think it was you that mentioned sort of one of your architectural insights was this idea of real time streaming. And so maybe it made sense to sort of find customers that cared about real time streaming instead of trying to sell customers that don't care about it.
And they're asking you about features that an incumbent has. And I think that that idea of changing your customer is often the most valuable thing that you can do, where I think the intuition is just to change your product basically, or value prop.
**Bill:** And I think also, you know, there's two sides to early scale. On the one hand, you know, if you're successful, the size of your customer base, you know, at time of IPO or, you know, 5, 10 years from now is going to be 100 or 1000 times higher than it is when you're in the early stages of product market fit.
And so that's a really good reason to actually, well, it is important to listen to customers, you know, you can't lose sight of your vision for how you're going to sell and conquer a much larger market and make sure you're building for that. Because some of those early customers could be just as distracting as some of those early competitors, right?
If you don't keep your eyes on that much higher scale opportunity that you're building toward, you know, on the flip side. In the early days, you also in the private markets, you only need one person with a big checkbook to believe in you , you know, to make it to the next stage. in the early days of product market fit, in order to, hit those early, you know, scaling milestones, you only need, you know, one, 10, a hundred, you know, a few hundred customers.
And that means that, you know, if there's hundreds of thousands of businesses out there that you could potentially sell to, you can be pretty choosy about the ones that you talk to, if you only need a hundred to hit next to your sales goal. Right. So keeping in mind, like what scale does and does not do for you and allowing that to, you know, help you prioritize, I think is super critical in the early days.
**Brett:** So just a final question to wrap up. I would love each of you to sort of share, what's the thing that the other has taught you that's kind of had the most residual value or kind of the thing that rattles around your brain the most?
**Kevin:** The ability to be very strategically patient. I mean, something that I've always, really respected about Bill and I would say have, have come to respect and appreciate even more as Braze has been a public company and has been on this very, very long journey is the fact that I think Bill is very good at thinking about what the company is going to need to do positioned in the, in a very general sense, like positioned in the marketplace, but also in terms of like company culture, in terms of, you know, certain elements of, team structure, things like that to win big prizes over a very long timeframes in a very definitive way. And I think that thinking in that way, rather than just reacting, because at a startup, there's so many things that happen. There's 100 decisions a day. You know, 30 new things come up, half of them are really scary, like every single day for years and years and years, it's very easy to become very reactive.
I think Bill is good at not being reactive when you shouldn't be reactive, but also has the ability to be reactive. And so that's probably one of the biggest things I'd say I've learned.
**Bill:** Yeah, the first thing that jumped to mind for me is, uh, I really hate repeating myself. It's one of the, when people ask me, like, what's it like being a public company?
And it's like, well, uh, when I have to start at the beginning over and over and over again, and every single, like, you know, investor meeting, I really just want to claw my eyes out. But I think Kevin actually taught me the value of repeating myself. you know, Kevin was our first like full time, product person.
Like we, we were broadly just like a group of engineers designing and building the product, as kind of one amorphous engineering blob in the early days. And we, we first started to formalize product management and that required communicating like the product strategy and the product vision to people.
I had this allergy to repeating myself and Kevin, you know, really beat it into me that you just need to get up at every all hands and at every, you know, company meeting and repeat the product vision and make sure that, you know, people understand it. They understand its consequences. It's second order effects.
They can distill it down. They can repeat it. and that's going to require you to repeat yourself. and there's, there's tremendous value in that. And so, He didn't just teach it to me. He had to beat it into me to really, for me to really embrace that. Um, but I think that's incredibly valuable to make sure that everyone is really aligned and deeply understands the vision and where the company's going.
**Brett:** Awesome. Well, great place to end. Thank you guys for such a great conversation and sharing so much
**Bill:** Yeah, absolutely. Thanks for having us on today.
**Kevin:** Thanks Brett.
### EvolutionIQ’s path to product-market fit — and a $730M acquisition
URL: https://review.firstround.com/how-evolutioniq-turned-an-early-vertical-ai-idea-into-a-730m-acquisition/
Last updated: 2025-02-09T08:01:43.000Z
Lessons from a vertical AI success story
_This post is for subscribers only._
### EvolutionIQ Just Got Acquired for $730M — Here's Their Playbook For Building an Enduring AI Business
URL: https://review.firstround.com/evolutioniq-path-to-pmf/
Last updated: 2025-10-18T07:35:52.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
"A lot of the early-stage company ideas I see in the application layer these days sound like they'll be an awesome product for the user — and a terrible business for the founder. It’s going to cost $1 a month because you’ll have 100 people who take a weekend to build a very similar thing."
This warning from [**EvolutionIQ**](https://www.evolutioniq.com/?ref=review.firstround.com) co-founder [**Mike Saltzman**](https://www.linkedin.com/in/michael-saltzman-9536812b/?ref=review.firstround.com) captures a central paradox facing founders in 2025: AI has made it easier than ever to build powerful products, but harder than ever to build lasting businesses. When new entrants can emerge seemingly overnight, competitive advantage teeters on a knife's edge. (As the [recent DeepSeek news showed](https://www.wired.com/story/openai-deepseek-stargate-sam-altman/?ref=review.firstround.com), even the biggest players in AI might not be immune from this challenge.)
For EvolutionIQ the answer lay in an unlikely place: the staid world of bodily injury claims. And the team certainly built something durable. Last December, EvolutionIQ's $730M [acquisition](https://www.evolutioniq.com/resources/evolutioniq-joins-ccc-intelligent-solutions?ref=review.firstround.com) by [**CCC Intelligent Solutions**](https://www.cccis.com/?ref=review.firstround.com) marked one of the first major vertical AI exits.
EvolutionIQ started with an obscure but interesting idea to apply AI-native software to create the basic framework of a claim, filling in the gaps by turning messy unstructured data (including documents like detailed medical records) into clear next steps so frontline claims experts could see the full picture and focus on helping more people get back on their feet.
But the journey from idea to big-ticket acquisition was far from smooth sailing. What the headlines don't capture are the real stories behind these outcomes — stories that often go untold until years after success has smoothed over the rough edges.
That’s why we set out to document EvolutionIQ’s unique [path to product-market fit](https://review.firstround.com/series/product-market-fit/) in full, so other founders could grab takeaways from that deeper (and admittedly much longer) story right away. Luckily, we’ve seen this team’s journey up close over the years, ever since First Round partner Bill Trenchard led EvolutionIQ’s seed round back in 2019\.
The founding team — Google ML engineer [**Tomas Vykruta**](https://www.linkedin.com/in/tvykruta/?ref=review.firstround.com), Stanford MBA Mike Saltzman, and enterprise veteran [**Jonathan Lewin**](https://www.linkedin.com/in/jonathan-l-0306091/?ref=review.firstround.com) — had chosen to tackle an unsexy, relationship-driven industry where only 150 people in the entire country could greenlight a purchase. "The pushback from investors was brutal," says Saltzman. "We heard a lot of, ‘There are only 20 or 30 carriers in U.S. disability insurance, each of them are going to pay you X, so the whole TAM is only 20-30X.’ A lot of VCs couldn't get over that hump — but Bill could."
Given these dynamics, EvolutionIQ's journey was a tightwire act where every element had to be precisely calibrated — from a complex technical product that could deliver immediate value, to a go-to-market motion built on long sales cycles and white-glove service. There was no place for growth hacks or standard SaaS playbooks — and no room for error.
But these constraints became their advantage. By focusing intensely on this narrow market, they dug deep moats through proprietary data, nuanced workflows, and tight customer relationships that would be nearly impossible to replicate.
After six years, with only $63M raised and a team of 200, EvolutionIQ had created — and won — the category of "claims guidance," with nine products, international expansion, and most importantly, a sustainable model that didn't rely on technical novelty alone.
Their story offers more than just impressive metrics — it reveals what it truly takes to get a company to work in a tricky space. We sat down with the founding team to understand how they threaded this needle, documenting their unconventional choices and hard-won lessons for founders building in the AI era.
## Exploring ideas: EvolutionIQ's origin story
For co-founder Tom Vykruta, the path to founding EvolutionIQ started at Google, all the way back in 2010\. Selected by [Jeff Dean](https://en.wikipedia.org/wiki/Jeff%5FDean?ref=review.firstround.com) to join an elite group of "Machine Learning Ninjas,” he landed on a team of 15 engineers who went through intensive AI training before fanning out across the tech giant’s org chart.
“I was hopping around different parts of Google, bringing machine learning to groups that were using older heuristic methods," says Vykruta. “I felt like I was 12 years old again, learning how to program for the first time. I worked on everything from self-driving cars to improving Maps’ business recommendations to search optimizations. At some point, I started to realize that this technology had insanely broad applications, and it was going to just take over the world."
With that conviction, Vykruta spent a couple of years exploring opportunities for a company of his own. “I went through probably dozens of ideas at different levels,” he says. To narrow in from a sea of possibilities, he established a clear criteria as he tried to [find a startup idea](https://review.firstround.com/12-frameworks-for-finding-startup-ideas-advice-for-future-founders/):
- Repeatable problem
- Massive dataset
- Using primarily manual or rules-based solutions
- Not much competition yet
- Interesting mission
“I eventually landed on this idea of bringing AI to bodily injury insurance — to essentially build an AI that can understand the human body, learn about injuries and recoveries, and then use that knowledge to drive better outcomes by getting people to recover faster and shorten their disability time,” he says.
This space checked all his boxes: predictable patterns with finite outcomes, digitized but underutilized data, and an industry that was just starting to dip its toes into the waters of machine learning. “Some carriers were running experiments, but the claims were all mostly handled by non-medical experts: insurance adjusters. Their job is to review the file, make sure that it meets the regular requirements and move it forward,” he says.
"I also had a good feeling about the mission," says Vykruta. "Every year millions of people get injured and become disabled in work incidents. This is a huge multi-billion dollar problem for the economy — not to mention the tangible impact that getting healthy and back to work can have on people’s quality of life.”
For co-founder Jonathan Lewin, what stood out most was the underserved market. "Insurance is the second or third largest industry, if you count government. It's huge. But there are lots of underserved areas. People gravitate towards health insurance because it's something that we all interact with, or auto insurance because most of us drive,” he says. “Disability insurance is fairly esoteric — most people probably don't know exactly what it means. But it's meaningful — the U.S. disability industry alone has tens of billions of dollars of revenue, they're far from small entities.”
> A massive part of what made EvolutionIQ work is that we jumped on something narrow to start with and understood it really well. The economy is so complex, and every little facet of it is going to change with AI — there's tons of opportunity. But founders tend to gravitate towards the same set of things.
*– Jonathan Lewin, co-founder of EvolutionIQ*
## Assembling the founding team: A deliberate build
Finding co-founders can often be a rushed affair, with founding teams coming together through serendipity or mere proximity. For EvolutionIQ, while the founders already knew each other through their shared passion for aviation (all three are pilots), the process of formally joining forces was more intentional, with each addition carefully chosen to complement existing strengths and fill crucial gaps.
This more methodical approach was driven by the unique complexity of the business. EvolutionIQ was tackling multiple challenges that increased the level of difficulty: working in a heavily regulated environment with sensitive health and financial data, executing a relationship-based B2B sales motion, and taking on the high-risk technical problem of building claims guidance from unstructured medical data. This stands in contrast to the more typical early-stage startup profile of low-regulation spaces with lead-gen driven, high-volume sales and lower technical risk.
"Mike joined in early 2019, and Jonathan came on full-time in 2020. **I don't know if I could have handled the pressure and workload without them as co-founders**," Vykruta says. “While I had the technical chops, I hadn’t started a company before and I had no experience working in the regulated insurance space or with B2B relationship sales.”
Here’s how Saltzman and Lewin filled those gaps: “At Bridgewater, Mike worked with insurance companies, so he had some sense of how they worked and built up a network in that world," says Vykruta.
**Mike and Tom in the early days of EvolutionIQ.*
"Jonathan was a good friend, and as a repeat entrepreneur, he'd been an advisor for me for many years. In particular, he was helping us think through how to structure B2B enterprise sales because it was a very special type of sales motion — email templates wouldn’t work. He also has a lot of legal expertise, which was crucial as we were dealing with a very regulated space,” says Vykruta. “I just kept asking him, can you just come join full-time?”
“I told him, ‘No, I've done startups before, they're totally exhausting and I have a two-year-old right now, but I’ll help you,” says Lewin. But what started as advising quickly turned into something more. "Tom and Mike were calling me 10 times a day," he laughs. “I just got sucked into it, and I felt like I could add more value by coming on full-time.”
For the first several years, Vykruta was the technical founder in the CEO seat. “Tom gravitated towards tech, so he was also the CTO, overseeing the engineering, data science and machine learning parts of the company,” says Lewin. “Mike gravitated towards go-to-market, so he was out looking for buyers, and figuring out how to reach real product-market fit with major customers. I gravitated more towards the back-end of the business, stitching everything together and figuring out the strategy — what we went after and how hard we went at it,” he says. “I also brought an understanding of how to grow teams, how to incentivize and motivate, how to interview people, and how to manage customers.”
As their first investor, First Round partner Bill Trenchard had unique insight into where each member of this trio spiked: "Tom was clearly brilliant, and his background in ML at Google was impressive. Mike’s experience at Bridgewater was very relevant, and he’s proven to be aggressive and very strong commercially as an executive. Jonathan was amazing on the business side and very strategically strong."
**EvolutionIQ investor Bill Trenchard’s notes on the company from 2019.*
### Unconventional advice: Split the CEO seat — and double your bandwidth
As EvolutionIQ evolved (the only time we’ll use that formulation, promise), the co-founders' roles naturally started to specialize further. “Over time, Jonathan's role morphed into wider responsibilities, and I started doing less of the managing of our people ops," says Vykruta. “And while in the early days, Mike and I were in all the sales calls figuring out founder-led sales together, around 2022 I started focusing more on just managing engineering and technology.”
This led to one of EvolutionIQ’s bigger break-the-startup-rulebook moments: opting to move to a co-CEO model, with Lewin and Saltzman teaming up to share the top seat.
“Everyone told us that it was crazy and made no sense — but it ended up being a great decision,” says Lewin. “**The startup CEO role is almost an impossible job because you never have enough hours in the day**. **Having two people share that role gave us incredible leverage**. I didn't have to do everything, and Mike didn't have to do everything.”
**Mike and Jonathan at their first CCC’s All Hands meeting post-acquisition.*
He points to their different backgrounds as key to making it work — and why YMMV. “Mike and I basically share the same brain and talk 10-20 times a day,” says Lewin. “But we're pretty different — we each have our own focus areas, and there's an age difference, too, which perhaps creates less of a competitive dynamic. He was a first-time founder who saw things in a fresh way, while I was able to bring a lot of pattern recognition and put frameworks around our challenges from my previous companies.”
> Most startup advice says that co-CEOs are a terrible idea. For us, it was a force multiplier. We could get so much more done.
*– Jonathan Lewin, co-founder of EvolutionIQ*
## Validating the idea: The customer discovery that unlocked the first design partner (and data set)
“Tom had been having conversations before I was involved, but we started talking to insurance companies together around January of 2019,” says Saltzman. “When Tom first called me about this insurance idea he had been working on, my initial take was ‘I don't really know if it's a good idea or not, but let's just talk to insurance people and get their thoughts,’” he says.
“I thought it had all the hallmarks of a good idea,” Lewin adds. “And Tom is at his happiest knocking down doors, he runs straight through them like they don’t exist. So he started calling massive Fortune 500 companies, getting Prudential and those types of big entities on the phone and pitching them the idea. It wasn’t even close to being baked yet, but it sounded like there was a real need. For me, that validated that there was something to it.”
Despite early glimmers of interest, the risk-averse insurance world was shaping up to be more of a founder-led sales slog. "A lot of companies said, ‘Look, this is interesting, but we're not going to be someone's first customer,’” Saltzman says. “There were a lot of no's. We probably heard ‘No thank you,’ or ‘Come back to us when you have something more mature,’ 100 times,” Vykruta says.
> There was this inherent chicken and egg problem: You needed the data to prove the value but you couldn’t prove the value without the data.
*– Tom Vykruta, co-founder of EvolutionIQ*
“The insurance industry is very opaque — they're not used to sharing data with vendors. A lot of them have never done it before,” he says. “We interviewed a lot of the insurance executives and operators, and built a compelling fully-clickable demo without a real data back-end to sell the vision. But without that data it was really hard.”
The EvolutionIQ team's patient approach to customer discovery paid off when they found their first design partner, [Reliance Matrix](https://www.reliancematrix.com/?ref=review.firstround.com) — which remains one of their largest customers to this day. “They were interested because although what we had pitched them wasn't what they wanted, they saw similarities," says Vykruta. "They said if you guys can change this a bit, it looks like the perfect solution for us."
The team later learned that Reliance had previously worked with another vendor on a similar problem without success. "They didn't want to give up, because they thought this was a big opportunity. They just needed the right technology partner,” Vykruta says.
> The demo alone was a low hit-rate. It took a year to get the first customer who was willing to share their data set. Once we got it, we used that to launch a product, build a case study, get a reference on the customer. That’s the recipe for getting more data sets — you’ve just got to hang on and keep going.
*– Tom Vykruta, co-founder of EvolutionIQ*
“To their huge credit, they were very excited about the promise of the tech and wanted to go on a journey with us,” Saltzman adds. “This was in the spring of 2019, right before we raised from First Round in the early summer. **This first pilot was a small contract — I think they paid us only $30K — but critically, they eventually gave us access to their claims data**. And we agreed to work together for several months to see what kind of prototype we could build off of that would improve their business."
Saltzman and Vykruta walk us through how the design partnership unfolded, sharing advice for other founders bogged down at a similar stage:
### Show up (literally)
What followed was an intensive period of collaboration and learning. To build up expertise as outsiders, the team went what we here at First Round like to call “unreasonably deep.”
“We spent a ton of time just reading, reading, reading claims and medical data so we could intuitively understand what was encoded," says Vykruta. “An important part of being a data scientist is becoming an expert in that real world domain so you can double the machine and teach it how to think and predict more effectively."
What made their industry uniquely suited for this approach was the rich documentation already built into the claims process. "During various stages, the insurance industry requires examiners to add notes to say, ‘On this date I made this phone call, I learned this information, I made this decision,’" says Vykruta. "We can learn a ton by reading through it and training our models on this data. In other industries, where they have purely quantitative data sets, they have to go and ask the customer 'Why did you do this?' But we had that documentation layer.”
Even so, the team didn’t skip over the heavy lifting of customer discovery. They in fact went out of their way to embed themselves with their design partner, making regular trips from New York to Philadelphia to work directly with the frontline staff. “This was pre-COVID, so we were there all the time, sitting with their examiners and iterating quickly,” says Saltzman.
This meant hundreds of hours of IRL [customer interviews](https://review.firstround.com/how-to-know-if-your-ideas-the-right-one-a-founders-guide-for-successful-early-stage-customer-discovery/). "Going on-site adds such an important dimension. We still go on-site even today to many customer calls, whether it’s sales calls or post-implementations. **The personal relationship piece of it is enormous, you can’t undervalue it**,” says Saltzman. “I'm a huge believer that people don’t just buy software, they want to work with people they like. Regardless of what the technology might do, if a group of people like the partners they're working with, they will get more out of it.”
This wasn’t just founder-led sales work from Saltzman and Vykruta either. “We had hired a few engineers — who now lead our engineering team actually — but it was a small team working closely with the end-users to build the prototype product," says Vykruta. “We'd have several one-hour meetings per week for months to tackle the first problem alone and those meetings would include several of our senior data scientists.”
> If an AI team is living in a silo just looking at data on their own, they're going to have a tough time cracking these older established industries. Everyone from the founder to the newest engineer has to be deep in there with the customer — otherwise you’re not going to make it.
*– Tom Vykruta, co-founder of EvolutionIQ*
### Win hearts & minds at every altitude of the org chart
“One of the things that I think our business has done really well — and has been important to do well — is **we have been good at building and maintaining relationships across the verticality of an organization**," says Saltzman.
“From the frontline desk person who could be a recent or junior employee, to the manager, to the director level, to the VP, to the Chief Claims Officer and the President of the business — we built relationships with everyone in the reporting line, and we adjusted our approach depending on what they needed," he says.
This meant paying as much attention to frontline workers as to executives. "I still remember our partners six years later — Gia and T.J. were the frontline examiners we were working with, and they were our confidants. They were into it, we were into it, there was just good energy," says Saltzman. "And importantly, **we made it clear that whatever we were building was in no way a threat to their job.** It was meant to enhance what they were doing, to support the hardest parts of it.”
The team created feedback loops that spanned the organization. "With the frontline examiners, we were white boarding out what we could do at the desk level,” says Saltzman. “And then once a week, we were meeting with their manager, and once a month meeting with the head of claims and saying, 'Look, this is what we're hearing, this what we think we're building, does this problem work for you as well? Do you want a solution here?' We got all the stakeholders to dive into the process.”
This multi-level engagement approach would become a cornerstone of EvolutionIQ's success as they expanded to new customers. From Trenchard’s perspective as an investor, what stood out was the founders' communication chops here. “They had this ability to really explain at a deeper level what was going on inside of disability insurance, and why AI was going to be a big difference maker for them,” he says. “You only develop that skill from immersing yourself in the problem and going ‘unreasonably deep’ to understand it from every angle.”
### Find your feedback rhythm — and the single metric you want to move the needle on
The EvolutionIQ team eventually established a rigorous weekly rhythm of iteration and feedback. "On Wednesday, we’d receive a new data dump. We would evaluate it, retrain the models, re-score it all, make it available to the frontline examiners by Friday. Then by next Tuesday, they would have viewed our recommendations and given us feedback," says Vykruta.
“Essentially they’d review different medical diagnoses, and would say, ‘Yes, this one is correct, this person could go back to work,’ or ‘No, this one cannot.’ Every single week, the model would get better,” he says. “Say they accepted 40% and rejected 60%. Our ML team would review all the rejections and then look for patterns to improve the model. **Our goal was to improve the acceptance rate by 10% every single week**. So after five weeks, we would go from 40% to 90% and the model would be at a high enough acceptance rate that the examiners could actually start to use it for day-to-day work.”
### Go out of your way to explain the why
There were, of course, plenty of nuances to navigate. “Sometimes we were giving the wrong recommendations. Sometimes we knew we were right and the frontline examiner was wrong — but we had to figure out how to explain the recommendation in a way that would get them to agree,” says Vykruta.
The early EvolutionIQ team focused on making their AI system's recommendations interpretable and actionable. **"Rather than just serving up raw scores or simple severity ratings — which was very popular at the time — we would give them an English sentence that would explain *why* we made the recommendation,**" says Vykruta.
“It might say something like, *‘For people of a similar age and gender and medical background, it typically takes six weeks to recover from this type of injury. And this particular claim has been on leave for 18 months. Therefore it makes sense to reach out and see if they have made progress*.’ Then the frontline examiner would then realize that there was an additional complication they’d missed, like a chronic disease that complicated the medical picture. So they went out and got more information, updated the data and were able to manage that claim better — and then our predictions about outcomes got better too,” he says.
## Building the product: AI that humans actually use
Most startups face intense pressure to expand their product footprint quickly, especially when tackling a more constrained market. But the EvolutionIQ team tried to not let that sap their focus.
“It's tempting to do many things because there are big opportunities, and you want to open up new markets. But we've remained very diligent,” says Vykruta.
“There were a lot of pressures, internal and external, to try to make the TAM as big as possible and go after everything,” Lewin adds. “**The mantra I always share with other founders is to crawl, walk, run**. Completely nail one thing perfectly before you expand the aperture. Because stuff breaks in unexpected ways. If we were trying to take more on, we wouldn't have had that core team focus on what turned out to be existential level stuff.”
Saltzman agrees. “Our approach was to build incredible products to start, to achieve great success in a couple of years because our first customers are really happy and the first things we build for them are working great. Then we'd go solve the next problem the next day,” he says. “**And that mentality has served us quite well — to date, that first product has never churned a customer, even six years later**."
> We had a rule to try not to worry about the business issues we didn’t have yet. So while we felt pressure to go multi-product and get the land-and-expand motion up and running, we were laser focused on making our first product an incredible one.
*– Mike Saltzman, co-founder of EvolutionIQ*
The technical complexity that it took to craft that initial product shouldn't go unnoticed. “The biggest challenge we faced — which we've now solved — is that every carrier has a different way to represent the data,” Vykruta says. “They have different schemas, different versions of databases, so we had to work with many custom data sets before we could finally create a unified schema. Then we were able to transform and normalize every carrier's data to look the same. That took us a couple of years.”
Below, Vykruta shares more about the product choices and strategic focus that enabled EvolutionIQ to nail the most important dimension of [nascent product-market fit](https://pmf.firstround.com/levels?ref=review.firstround.com#level-1-nascent): satisfaction.
### Loop in the humans
"The choice between automation and guidance is key for any AI product. Our decision early on was that we don't want to get into automation. It’s the low-hanging fruit. It's easier, it's higher frequency — but it's more competitive," says Vykruta. "The internal teams might not be able to do it as well as an AI company, but they can do it reasonably well. The much harder piece is the tasks that cannot be automated entirely."
Instead, the early EvolutionIQ product focused on helping claims adjusters make better decisions about where to spend their limited time. "A human expert might be dealing with managing 150 claims, or even thousands of claims at any given time. They need to decide where to spend their time. That's hard for humans to do well," says Vykruta. “Once they're in the claim, that's when you want the human expert to make the decisions — to pick up the phone, get more information from the doctor, call the employer, and so on.”
### Design for adoption, not just accuracy
A key insight came from observing how other attempts at AI adoption in insurance had failed. "A lot of the clients we spoke with back then had an internal team building a model, or they were working with a ML vendor. And maybe these models worked, but then they gave the frontline examiner a spreadsheet with 20,000 rows that had some score in it," says Vykruta. "A team would try to use it, but it didn't really fit into their workday. They have to take an hour to go into the spreadsheet, look at stuff, and go back to their other UX and try to make sense of it."
The EvolutionIQ team took a different approach. "**To get adoption of complex AI, you need to have a beautiful interactive visual tool that people can work within**. You can't give them just a spreadsheet of scores and say, 'Go run with this,'" says Vykruta. “We made a big investment from day one in not only developing the models, but also developing that UX they could log into and interact with."
> Adoption of AI is actually much harder for technical teams to solve than building the technology itself. You should be spending something like 70% of your time figuring out how to get people to use it. We're all great engineers, we know how to build technology. But can you get somebody to use it? That part’s not as easy.
*– Tom Vykruta, co-founder of EvolutionIQ*
"Our initial team was purely data scientists. I was looking for AI engineers who had specialty in either unstructured data NLP or tabular data, and specifically sequential data," says Vykruta. "But I also hired React engineers to help build the front-end very early on." The early EvolutionIQ team even went so far as to train special models just for the purpose of explaining what the main model was doing, to get users excited about using it.
The result was a system that felt natural to users' existing workflows. "We wanted it to be where they start their day — they log into our system, and it leads them down the right path to which claimant they should be speaking with. Then they’d jump back into their system to add notes about what they had been doing," says Vykruta. "They actually helped us build it, telling us exactly what elements they needed to see. We were able to win over the adjusters because they loved seeing our UX laid out how they’d envisioned.”
## Turning the flywheel: Building a bespoke GTM motion
After finding the inroad into the industry with their first design partner and building out the initial product, the EvolutionIQ team had to figure out how to scale without compromising the high-touch, relationship-driven approach that made their first deployment successful.
For context, the majority of EvolutionIQ’s contracts are multi-year, six- to seven-figure enterprise sales deals that require nurturing with internal champions in long sales cycles (12+ months).
First Round partner Bill Trenchard recalls being struck early on by the EvolutionIQ team's thoughtful approach here. "For the first two years, it was a very long product build, and the game was making sure it worked and demonstrating efficacy to get credibility in the market," he says. "They truly nailed every piece of their GTM, from navigating the long sales cycles and establishing credibility that led to strong references, to the pricing and positioning with this premium, Rolls Royce-like product. And that matters tremendously in the insurance world."
> Ultimately, the product has to work. Then, you have to make sure that you're telling the story of how it’s working in a way that’s compelling for your specific market. For our market, that was getting people to talk to their peers, building a machine to facilitate that, and creating an aura that we were a company that would make you look good if you took a chance on working with us.
*– Mike Saltzman, co-founder of EvolutionIQ*
Here, Saltzman and Vykruta walk us through the lessons they picked up along the way, specifically breaking down:
- How they approached the market and positioned themselves
- How they got in the door
- How they moved deals forward
- How they delivered and expanded
### How they approached the market and positioned themselves
***Aim carefully when elephant hunting***
This founding team knew that traditional enterprise SaaS playbooks — armies of BDRs, mass email outreach campaigns, growth hacks — wouldn't work in their smaller pond. To mix our metaphors, they went elephant hunting instead, focusing intensely on the more methodical approach of building deep relationships and delivering measurable value to nab the important players.
The team was strategic when it came to selecting their targets at the watering hole. "It's a careful balance between getting more at-bats, but also not completely whiffing and souring an organization on you forever," says Saltzman. "That’s why we didn't want to try to sell to the biggest companies in the early stages," says Vykruta. "We actually tried our hand at it once, and it was hard. There was too much bureaucracy, and we were a smaller company back then, so they were more risk averse."
> Building our account target list was a deterministic effort. Networking to the right contacts, starting the first conversation, navigating the long sales cycle — it all requires a huge amount of time for a 10-person company. So we’d try to find Goldilocks-sized companies until we felt ready for the bigger players.
*– Tom Vykruta, co-founder of EvolutionIQ*
***Price it high — if you can make the case***
Another key component was how EvolutionIQ was able to command a higher ACV than most. “One of the things I think we got right is our pricing. We would have to work just as hard and our sales cycles would be just as long, even if our prices were 10% of what they are," says Saltzman. "**A lot of founders get this wrong. They think 'If I raise my prices, it's elastic,' and that's not true — with the big caveat that you have to do a good job at articulating the case for it, of course**.”
The team moved aggressively here. “We spent a lot of time making ROI models, helping our customers understand what they were going to get, how they were going to get it, and how we would measure it,” he says. “And then we’d check back at three, six, nine, and 12 months into the implementation to say, ‘Okay, we said we'd be halfway there by now. We're ahead of schedule,’ or ‘We're behind but here’s the plan.’”
Here’s how they got customers comfortable with the premium pricing models upfront:
- **Making it measurable**: "On the continuum of venture-backable businesses, we were lucky to be in the insurance business, working on things that are more or less measurable,” says Saltzman. “There are nuances, but broadly speaking, you can measure the impact of what we do. But if you're building a next generation Salesforce killer, it's harder to measure the value of a CRM and figure out how to price that,” he concedes.
- **Picking a space where you can move the needle:** “Insurance is a big business, so if you have an impact, you have a *big* impact,” he says. “If you're building a system that makes something that was going to cost $100,000 cost $90,000 instead, and there's 100 of those things per year, you've created $1M of value.”
- **No long-contract lock-ins:** “We didn't make prospects sign five-year contracts. If it didn't work, they could fire us after the first year — that never happened, but I think that approach was hugely helpful,” says Saltzman.
***Break the rules when your instincts tell you to***
There was another unconventional pricing move, too. “When we were negotiating with our first customer, we had a choice between a fixed fee, which would probably have been low- to mid-hundreds of thousands, or to have less money fixed but success fees on top of it," says Lewin.
“We were told ARR is very important, and the push across the board was, 'Don't do success fees.' But **we realized that the only way to get this deal to be really significant was to have success fees and share the risk with our customer**. We decided to go for it, and it was very much the right decision because the software really worked. We took in millions of dollars from that customer, and then it eventually became a fixed fee of millions of dollars.”
> Pattern recognition is helpful, but sometimes as a founder you just have a very strong sense of something. The conventional wisdom is there to help you — not to handcuff you.
*– Jonathan Lewin, co-founder of EvolutionIQ*
### How they got in the door
***Score an invite to the party — and don't show up empty-handed***
The EvolutionIQ sales motion was high-touch from the very start. "We try to get a warm introduction as much as we can via an advisor or someone we know," says Saltzman. The team looked for inroads, searching LinkedIn for retired insurance executives and sales leaders, but mostly relying on word of mouth. "Once people know what you're doing, you can ask them, 'Do you know somebody who would be interested in talking to us?'"
These connections proved invaluable because they truly understood the space. "They get the pain point because they've been in this industry their whole life," says Vykruta.
The team's approach once they were in the door wasn't drawn from any playbook. "**It wasn't like there was a particular sales book that blew our minds. It was a lot of common sense — treat people with enormous respect, expect them to take you seriously and put in the work to earn it and show up with analysis**," says Saltzman.
That analysis piece was crucial. “If they're a public company, dive deep into their financials. Figure out where they're doing well and where they need help. Give them a thesis — not quite in a ‘[Challenger Sale](https://www.amazon.com/Challenger-Sale-Control-Customer-Conversation/dp/1591844355?ref=review.firstround.com)’ adversarial way, but to really get inside their business to every degree that you can and then layer on top of that deep personal relationships.”
***Find the right champion***
These efforts were, of course, hyper-targeted to get to the *right* person. But finding the right champion inside these large insurance carriers wasn't just about a specific title — it was about identifying a particular mindset.
"We had to find the person who had both the organizational clout to get something a little risky done, and also was personally open to shouldering that risk," says Saltzman. "They needed to be all in on the bet that they’d look really prescient when this thing started to work."
There were some other non-negotiables in their criteria. “They needed to hold responsibility for the overall profitability of the business line," Saltzman says. “If it was someone who was only focused on one particular aspect of claims operations, like efficiency, they probably weren't the right sponsor for us,” he says. “We needed someone who understood, 'If I save $10 on claim outcomes because I'm getting people healthy faster, but I have to increase my spend on manpower or my adjusters by $1, I'm still saving $9.' But some people would get overly fixated on, 'Oh, this cost went up by $1' — that type of person couldn't be our sponsor."
This often meant swimming against the typical sales process current, for two reasons:
- **Most insurtech products are bought by CIOs,** **but EvolutionIQ never worked with a CIO as their core sponsor**. "They're great partners, and they're involved of course, but they’re rarely our core champion," says Saltzman.
- **Most software’s business case is built around an efficiency argument, but EvolutionIQ led with the product’s health outcomes**. “We were focused on claim outcomes and returning people to health faster — so that meant we were selling software to a buyer who typically didn't buy software,” says Saltzman. “That cuts both ways. It was good because it allowed us to educate each other and build the rule book from scratch. But it was also hard because we had to convince them, ‘No, *you* are the person we have to work with. There's no one else here who we can do this with.’”
***Hire sellers who sound like natives, not tourists***
Building these relationships in this specialized world requires a different breed of salesperson. "Hiring for our sales staff has been hard. Finding them has been hard, making sure that they're great has been hard — you just don't know until six or nine months later," says Saltzman.
The team quickly learned they had to show up to their clients with a level of sophistication that matched the industry. **“That meant no SDRs, no BDRs, no folks straight out of college mashing the phones**,” he says.
> Even though we were an early-stage startup with six people, we had to act and be perceived as though we were an established company — not through obfuscation, but by professionalism, clarity, level of service, commitment to customers, and deeply understanding not just the business problems, but how their organizations worked.
*– Mike Saltzman, co-founder of EvolutionIQ*
Another critical ingredient was finding sellers with deep insurance experience — and the team learned this lesson the hard way with their first sales hire. "He was from the fintech world, so he had sold to banks and financial institutions. We were thinking, 'Great, you're sophisticated, you know banking tech.' But he bounced off this industry like a steel ball bearing. It was almost funny — both of us were like, 'Nope, this is not working.' It was just so clear," Saltzman laughs.
“What we're trying to do is talk people's language and show them that, yes, there's this technology that’s crazy and modern, but we're just solving human problems,” he says.
Bringing a sales mentality too, of course, ended up being an important trait. “You couldn’t just be an insurance operator,” Saltzman says. “Our most successful sellers ended up coming from two specific backgrounds:
- **Those who had sold insurance** coverage to major enterprises like Boeing and Walmart. “They're sophisticated, they knew how to navigate complex organizations, and they also knew insurance.”
- **Those who came from big consulting firms selling into insurance companies.** "Someone who can sell a multi-million dollar engagement for Cognizant or Deloitte, get the buy-in and handle the seniority of the buyer — it's actually very similar to what we do."
> What we do from a technology and a gross margin standpoint looks like tech, but from the customer standpoint, it looks like change management. The tech is just a tool.
*– Mike Saltzman, co-founder of EvolutionIQ*
This approach allowed the team to maintain remarkable sales efficiency even as they scaled. "**Even coming into 2024, we only had three sales people, plus me. Now we have seven, and we've been able to sell into a majority of the largest disability carriers in the U.S. with just this small team**," says Saltzman.
“Our contract values are significant. And so if the product works and people buy it, it doesn't take 100 people to pull it off. Having 100 SDRs annoying our prospective customers is not productive, so we don't do that.”
### How they moved deals forward and got unstuck
***Battle the build vs. buy dilemma***
Customers torn between building an internal version of the software and buying it was a roadblock that frequently popped up. “**Build versus buy is our number one competition, that’s been the case since 2019\. Now with advances in AI, the dynamic is similar, but it's like both sides got bigger guns**,” says Saltzman.
“In some ways the build versus buy question was counterintuitively harder early on, back when we were 10 people, and their internal eng team was 10 people. The answer there was that we just hired better talent than they could — but you can't say that, so we lost some of those opportunities back then,” he says.
“We still win the majority of the time on that question now. Your internal teams are going to build a prototype version, maybe similar to what we have. They're going to ship it. But then they’re going to go start a different project,” says Saltzman. “We've been on that particular value proposition for the last six years — and we have a team that’s going to be on that value proposition for the next six years. That's all they do. That’s the case we make whenever build versus buy comes up.”
***Play the (long sales cycle) game***
“There were definitely signals to monitor, even with 12+ month sales cycles — for example, if a company was setting the next meeting 10 weeks out instead of one or two weeks out,” says Vykruta. "Even if things were stalling, we would not drop accounts, because in a small industry, you have only so many shots on goal," he says.
> Even if an account didn't convert in the first year, getting to know us was still valuable. We knew we would be twice as large and have twice more case studies the following year when we checked back in.
*– Tom Vykruta, co-founder of EvolutionIQ*
That’s why the EvolutionIQ founders treated every interaction as an investment. "Our belief, even back then, was that there is no future without claims guidance. We didn’t think half the industry would still be doing it the old way,” says Vykruta. “Our view was that every company will end up using the software, and we had a really high chance of being the category winner, because we created the category, and it's hard to catch up."
### How they delivered and expanded
***Ship change, not just software***
But while EvolutionIQ’s sales team has always stayed lean, the founders made the unconventional choice to invest early and heavy in service, never charging for it and instead wrapping everything into the product price. This included building a substantial customer success team dedicated to the post-sales change management process that many companies pass off to the customers.
"We build a guidance product, which is to say, our system doesn't actually do anything – it guides frontline examiners to take action," says Saltzman. "**What we learned early on is the AI part of it, which is predicting what's possible, could be accurate — and also commercially useless if the people using it didn't take the actions that it would suggest**.”
“We knew early on that we had to staff up a whole group here. We told prospects, ‘We're going to take your data, give you the software, give you the machine learning models and all that. But we're also going to become a part of your claims team. We're going to help you deploy this. We're going to coach your people. We're going to help your management team keep them accountable.’"
> A lot of SaaS companies deliver the software, and then between software and value is the customer's job. But most software, especially in enterprise, falls down in that gap. We got as close as you possibly could to just delivering value itself — there was very little gap between our deliverable and the thing working.
*– Mike Saltzman, co-founder of EvolutionIQ*
This approach flew in the face of conventional wisdom about maintaining high margins. "If the gap is narrow, you're more likely to jump over it. If it's wide, your customers will feel like they're taking more of a risk. And so we made it as narrow as we possibly could, and that was expensive in the early days," he says.
The team didn't let potential investor concerns about this being a services-heavy model deter them either. "We didn't let VC questions about if this was more of a services business or consulting model get in the way of building. We just didn't care," says Saltzman. "**We were quite convinced that if we lost our customers, that would be worse than overinvesting in customer service**. We did the math that if we delivered enough value for our customers, and we could capture a reasonable percentage of that value, we could build a business off of that."
***Turn your first fans into your sales force***
The real engine of EvolutionIQ’s sales motion was making early customers wildly successful. "**Our motion has always really hinged on one thing: demonstrating value and making the customer really happy as soon as we could**. And this is still our motion when we enter new markets today,” says Saltzman.
> It was a race to get a customer so happy that they’d be a reference and we could do a case study about their actual quantitative outcomes. Before we got to that point, we basically didn't even try selling. We had conversations, of course, but we didn't put people in a position where they had to say yes or no when they didn't have enough information yet.
*– Mike Saltzman, co-founder of EvolutionIQ*
This dedication to developing the customer reference motion paid off. "**Our best salesperson was our first customer.** He's an incredible guy, he took so many reference calls," says Saltzman. "He knew that he needed us to stay in business, given our system was working for him and he was paying a lot less than the X number of employees' salaries it would take him to build something similar. He was like, 'If you guys do well, I'll do well. I know startups go bankrupt all the time, and I don't want you to go bankrupt, and I also don't want to pay 10X what I'm paying, so let's get you some customers.'"
This reference-based approach might seem counterintuitive in such a small, insular industry. But word of mouth and introductions from other customers became a huge lever. "These companies focus on different market segments. They're not exactly directly competitive in all places," says Saltzman. "We were lucky to have champions who could take the long-term perspective of, 'Do you want to support the startup delivering you a 30x ROI, or do you want to have them go bankrupt?'"
***Make sure your first $1 funds your next $10***
The EvolutionIQ team’s focus on proving value quickly was the foundation of their expansion strategy, too. "**Our commercial model centers on land and expand**," says Saltzman. "We have different modules of our platform, and most customers start with one or two, and then when it works, the proceeds from using the first or second to fund the next several. It's a compounding partnership process."
He points to a self-funding venture capital portfolio as a parallel. "We wanted to assemble something where you can get the proceeds from earlier funds reinvested to the next fund, it's all snowballing, and our customers — or limited partners in the metaphor — are putting money in their pocket at the same time," says Saltzman. "We did the math for them, very clearly showing that if you spend $1 on one module, it'll make you $10\. If you pocket $8 and spend the next $1 on the next module, this time next year you'll have $16."
PQ: Our land-and-expand model started very organically, but we honed it to make it really commercially successful — and that meant making sure that people got to see the value from their first product modules as soon as possible, so that value could be recycled and fund the next piece of value we could deliver. - Mike
"Interestingly, **we don't have a real beachhead product**, which is different from a lot of platform companies," says Saltzman. "Our products are quite diversified by first purchase, and when they are at scale and working, they have relatively commensurate value impact and pricing.”
This meant their expansion conversations were deeply strategic. "It’is more about what would make most sense for that particular carrier right now, based on where they are and their challenges. It's not like 'We got you to do this, now we want you to do that.' It's more of a, 'Okay, tell us about your five-year strategic plan. Tell us what you're telling your board. What are you working on?'" says Saltzman. "And then we expand to the product that's most aligned with that."
## Focused execution: Maintaining discipline across planning, fundraising and recruiting
"The company consistently executed and beat forecasts, even in challenging markets, from COVID to the 2022 reset," says Trenchard, EvolutionIQ’s seed-stage investor. "They raised little external capital and were just generally very disciplined.”
That rigor was also evident in how they approached building their team from the earliest days. “Even at the seed round, I was struck by how they already had a great AI product team, largely sourced from Google,” says Trenchard. “I wrote down in my notes at the time, *'I think they will be able to stay ahead of any competition on features / ROI*,' and they’ve continued to do that in an impressive way."
The EvolutionIQ team's execution playbook centered around a few key pillars: an obsessive early focus on metrics and planning (even when plans changed), a disciplined approach to fundraising that embraced constraints (despite rather frothy environments), and an unrelenting drive (paired with unusual patience) when it came to recruiting the team that could pull it all off.
The co-founding trio helps us dive deeper into each one below.
### Embrace early planning, even when plans change
"Our North Star success metric is how many additional people we are able to return back to work, and how much can we reduce the total number of absence days," says Vykruta. "We're very metrics-driven — we believe if it can't be measured it didn't happen, which is definitely something I picked up from my Google days.”
**The team adopted Google's OKR system from the very beginning, too.** "**We started that very early — when we had three employees**, knowing that we didn't really need it at that stage, but that it would also be much easier to implement as we scale up to have that muscle early on," says Vykruta.
While the actual OKRs often shifted in their early days, the process proved invaluable. “OKRs helped to motivate people and set a really high bar for delivering exceptional results to our clients. If the client didn't see results, it didn't matter,” he says. “But as far as the actual tactical parts of the OKRs themselves, we were so early and changing our path so quickly that whatever we decided for the quarter would be different even just a week later," he says.
"**But the process still was very useful, and almost existential in a way**. I don't think that we could have made nearly as much progress without it. We needed that kind of vision reset every quarter to keep pushing ourselves to set really high bars."
> In the very early stages when things are chaotic, it's very important to have a plan. It’s okay to not follow it, but it's not okay to not have it. The plan is extremely valuable, even if it's only used as a starting point that you diverge from.
*– Tom Vykruta, co-founder of EvolutionIQ*
This became crystal clear when they briefly abandoned OKRs as an experiment. "We did try one or two quarters without OKRs, and it was very unpopular. We got a lot of complaints — as much as people didn't love the OKRs and complained that it was getting in their way, when we took it away, people were saying, 'We don't understand what the company is doing. We don't know what other teams are doing.' So we brought it back quickly."
### Let constraints be your guide
While many AI startups chase the biggest rounds possible, EvolutionIQ took a more measured approach to fundraising. "**We raised in 2019, before the big inflation in valuations. And I think it actually helped us, because we didn't have an infinite budget**. We were very tight with hires and very careful with everything. We didn't have a choice," says Vykruta. "We were very swift with decisions like letting people go. We set hard limits on the time and resources dedicated to new bets, time-boxing initiatives and tying ourselves to agreed-upon metrics in order to move forward,” he says.
"You can end up getting addicted to fundraising. Things get bigger than you can control, and you end up not being master of your destiny," says Lewin. "So **we were always running the business in a way where we could be profitable within 18 months**. Our approach was always very managed, which meant the metrics on the business stayed healthy. It ended up making it easier to raise money because our metrics were good and our burn wasn't crazy."
This disciplined approach extended to how they sized their rounds. “In each round, we had a strong sense of what was sensible and limited the amount we took on,” says Lewin. "Our Series B was only $7M, which is small, but it was all we needed at the time.”
As a result, the team also implemented strict guardrails around new initiatives. “Once things start to get crazy, when you're hiring more people who haven't gelled, and you're going after too many new ideas that may not work out, the whole thing becomes a house of cards," says Lewin. "**But if you're solving one thing at a time — you have a new product idea, you put it into market, you see product-market fit, then you scale it and see that working — the risk you're taking on with the next round of funding is contained.** You're not taking on so much that if these bets don't work out, it all comes crashing down. Our business was never at risk.”
> We didn't take the position of ‘Let’s raise as much as possible.’ We raised as much as we thought we needed to get to a potential place of profitability. Once we get to that place, we would decide, ‘Do we want to slow things down and be profitable, or do we want to turn things up and raise again on the new story with the new opportunity?’
*– Tom Vykruta, co-founder of EvolutionIQ*
Saltzman adds: "**I saw so many founders contorting themselves into a position where the only successful outcome was an extremely, extremely unlikely event**. We never wanted to put ourselves in that position," he says. “We didn't work with investors who would be horrible to work with just because they offered us the highest valuation. And we didn't tell people that we're going to be ‘the AWS for insurance’ or whatever," he says.
“**Our belief is that if you build a company that has more ARR than net money spent, that's good. So we've always kept those two numbers in mind as we've built**,” says Saltzman. “If you’re on the opposite end of the spectrum of that, maybe it works itself out 15 years from now because you build some crazy thing, but in the medium term, that's going to be very painful.”
### Start building systems ASAP — but recognize where to keep the startup spirit
“**One thing I think founders miss is changing their managers' mentality from startup to scale-up — and doing that earlier than you think is necessary**," says Lewin. “It’s not sustainable for the founders to stay hands-on in every aspect of the business. I can't hold everything in my head that we're doing — we have 200 people, nine different products with a lot of complexity, and too many customer relationships that are all very important.”
Sometimes there's resistance to this shift. “People react like, 'This feels like big company stuff, why are we doing this?’” says Lewin. "It doesn't mean your entire business needs to be scale-up immediately. We still have some teams that are startup-y and some that are scale-up. The goal is to get them all there eventually, but you have to do it thoughtfully.”
At EvolutionIQ, it was trickier to get the sales team to the scale-up phase. “We tended to hire the exact number of salespeople that we thought we needed, and then we would find out that half of them were not the right fit — but then we would have half the number of salespeople we actually needed. It’s also really difficult to get out of founder-led sales,” he says. “But one of our biggest sales victories last year was that there were a couple of accounts where Mike had zero involvement, which was phenomenal.”
Here’s the warning sign of where you need to spend more time on systems: “When you're just fixing stuff and ICing a lot, it's helpful for someone else to try to think through your day with you to figure out where your time is going, and identify what needs to change,” says Lewin. “Wherever I saw people being heroes, or wherever I saw senior leaders firefighting, I would always try to focus on why it was happening: Who else do we need to hire? What are we scoping incorrectly? What are the systems that are broken here?"
> If you need people to be heroes for the business to work, that means you actually don't have a great business. You're lucky to have them, but you can’t scale a company on that dynamic.
*– Jonathan Lewin, co-founder of EvolutionIQ*
### Make recruiting your #1 execution priority
For Vykruta, talent was the foundation that underpinned EvolutionIQ's disciplined execution. "**Our early team was perhaps one of the biggest reasons that we succeeded as a company — outside of everything else that we did correctly.** We wouldn’t have pulled it off without [Karan](https://www.linkedin.com/in/karanuppal/?ref=review.firstround.com), [Georg](https://www.linkedin.com/in/georg-m-goerg/?ref=review.firstround.com), [Benjamin](https://www.linkedin.com/in/benjaminberry/?ref=review.firstround.com), and [Stanley](https://www.linkedin.com/in/yangstanley/?ref=review.firstround.com)," he says.
This conviction shaped how Vykruta approached his own role."**A founder should make 'recruiting top 1% talent' the number one task on top of their weekly priorities**," he says. "I’m firmly in the camp that a company with top talent can get a lot of things wrong and still win in the market, but that a company doing everything right while hiring the wrong talent is unlikely to win any market."
On top of the founder-led effort, the EvolutionIQ founders packed in additional investment here. "I hired a full-time in-house recruiter in the first year of founding the company, and immediately added full-time sourcers," says Vykruta. "Everyone thought this was mad — most startups rely on outsourced recruiting until they are north of 100 headcount."
By the time they were 30 people, they had around four in-house recruiters. "Some investors would say, 'Why don't you have more sales people? And why are you running a recruiting agency?'" says Saltzman. "But that was the denominator. **We didn't see it as four recruiters out of a 30-person team. We saw it as four out of the 100-person team we wanted to be a year from now.**"
The team also made the decision to only hire senior talent, even though it meant higher costs. “**I think there's a misconception that if you're a startup, you need to hire junior people to stretch your runway**,”says Vykruta. “But I think the reality is the opposite. Startups are very difficult because you're solving foundational problems. There's no infrastructure there at all. Everything is built from the ground up,” he says.
Saltzman adds: "We learned that while you'll pay 30% more for someone with five years experience, they're worth 10 times more."
### Never compromise — especially on executive talent
The team's conviction about getting the right people meant being willing to move slowly, even when it hurt. "I **spent six or seven months not having a team, just recruiting. I could have hired people in the first week if I wanted to**," says Vykruta. "I had clients and investors asking me questions like, 'What's going on? Why don't you have any hires?' We had all this money in the bank, our client was looking for results, and I was losing sleep,” he says.
> I was convinced that we need to get the right people — not the first people we could find and convince.
*– Tom Vykruta, co-founder of EvolutionIQ*
This overinvestment in — and patience for finding — talent wasn’t just confined to the scrappy early days, either. “I interviewed something like 40 or 50 people for our VP of Product position, and it took a year to get the right person,” says Lewin.
“It was very painful having the role unfilled for that long, but it makes all the difference in the world. Every time I talk with him, I'm so happy that we waited a year. **Virtually all of the startups that I advised that have run for a while have compromised hiring at some point, and it always becomes a massive problem**. **It takes much longer than you’d think to reset from it**.”
> Fight for the perfect hire for your leadership team. It’s indescribably better to wait to get exactly the right person.
*– Jonathan Lewin, co-founder of EvolutionIQ*
Another area to never compromise on is a candidate’s ability to create strong working relationships. “**When we hire senior people, we have all the folks who they'll work with interview with them, and I want a very strong yes — from everyone**. If someone's not a yes, I'll examine why. Fundamentally, there's usually something there, even if I can't quite understand it — it typically means downstream there's probably going to be a problem, says Lewin.
“If you ignore these kinds of flags, your exec team can easily evolve into a ‘Johnny ate my sandwich’ dynamic, with people fighting all the time and you having to separate them and pour all this energy into just trying to get these relationships to work,” he says.
## Parting advice on managing your founder mindset and keeping your eye on the (business) ball
There’s a simple truth that's often glossed over in startup circles: The path is always harder than it looks from the outside.
"There's a whole category of problems that are not discussed in management and startup books," says Vykruta. "Founders should realize that 50% of what they need to know will be in the books, and 50% will not be — because it's just not appropriate for book material. [**Elon put this best**](https://www.youtube.com/watch?t=2459&v=vDwzmJpI4io&feature=youtu.be&ref=review.firstround.com)**: He says doing a startup is like eating glass and staring into the abyss. Accepting that this is the norm — not the exception — was really hard for me**,” he says.
“Initially, I always felt like every startup around us was doing so well, hiring quickly and scaling up revenue, and we were just struggling and struggling. Eventually, I came to realize that this is the norm. Every startup is struggling, and it feels like it’s on the verge of collapse and the founder is not getting any sleep. The sooner you can accept that reality, the sooner you can be a little bit easier on yourself,” says Vykruta.
“What I always tell founders who are just starting out is that you have to work really, really, really hard, especially in the early stages. It’s an absolute must. It's not an option,” he says. “And it does not set you apart from other founders. It does not guarantee success. It only gives you the possibility of success.”
Saltzman’s parting piece of advice is for AI founders to direct that energy into a particular area. “If you're trying to build an application layer business like we have using AI, you have to figure out what's going to be your moat,” Saltzman says.
> Planning for success is really important. This is obvious, but it can’t be overstated enough because it’s skipped over with surprising frequency.
*– Mike Saltzman, co-founder of EvolutionIQ*
“Assume it's going to work, because if it doesn’t work then nothing else matters, game over. But **assume that it works, and it’s three years from now, when you have $10 million in ARR and 30 customers — what’s going to be your moat so another company can't do a weekend project and build the very same chatbot or agent?”**
That answer might change over time. That's fine, Saltzman says, but parts of the answer should include:
- How is my data set going to be materially different than what others can get?
- How is my workflow going to be materially different and more nuanced?
- How is my relationship with my customer from a commercial or distribution perspective going to be materially different?
“**If you can't answer those questions, you're probably going to be in a bad spot. I think part of why EvolutionIQ worked is that we did have those answers**,” Saltzman says. “Some of them have changed, some of them haven’t. But we have a valuable business today because: 1) the data is something no one else can get, 2) the workflow is intensively nuanced, and 3) there's a ton of work in the application layer — not just the AI layer — and 4) our word-of-mouth distribution has such compounding, almost network-effects because of the insular relationships in insurance. No one would fund a business to compete with us at this point, because we already are in a lot of these companies,” he says.
“When it was just software, it was all about the product. Now, it’s so much easier to build a good product — which is awesome for a lot of reasons — but that also means that building a good business has become that much harder. Figuring that out is where I would focus a lot of my time and attention if I were a founder starting an AI-native company today.”
### An engineering leader’s advice for pivoting from manager to IC
URL: https://review.firstround.com/an-engineering-leaders-advice-for-pivoting-from-manager-to-ic/
Last updated: 2025-03-10T07:16:38.000Z
A 90-day plan to land the jump
_This post is for subscribers only._
### This 90-Day Plan Turns Engineering Leaders Back into Frontline Developers
URL: https://review.firstround.com/this-90-day-plan-turns-engineering-leaders-back-into-frontline-developers/
Last updated: 2025-04-25T16:55:42.000Z
[**David Loftesness**](https://www.linkedin.com/in/dloftesness/?ref=review.firstround.com) has had a legendary run in engineering leadership. During stints at companies like **Amazon, Twitter** and [**eero**](https://eero.com/?ref=review.firstround.com), he steered teams from dozens to hundreds of engineers. But with such a stacked resume, you might be surprised to learn that his current title isn’t VP or CTO, but “Developer” at [**Nitid**](http://nitid.co/?ref=review.firstround.com) — and manager of none.
So why trade in his management duties some thirty years into his career? For one reason: “**I just missed that feeling of shipping code**,” he says. It’s an unconventional move for someone of his tenure, but he’s found it incredibly rewarding to return to his coding roots.
This wasn’t the first time he downsized his management scope, either. He’s switched between manager and IC engineer roles (and back again), even cycling between managing ICs and managing managers multiple times.
Loftesness knows a handful of fellow engineering leaders who’ve pulled off the same pivot, and suspects many more are curious about looping back to [IC work](https://review.firstround.com/the-ics-guide-to-driving-career-conversations-25-tips-for-purposeful-career-planning/), for a variety of reasons — but it can be a difficult subject to broach.
> The transition to management isn’t a one-way door. Returning to hands-on engineering doesn’t signal failure as a manager. You can continue to be a leader without being a manager — they’re not the same.
So now, Loftesness wants to remind managers itching to get back to the technical trenches that this option is on the table — and it’s not a step backward. But there will be organizational, communication, and even psychological hurdles ahead, from navigating resistance from your manager to dusting off the cobwebs on your coding skills, especially with how rapidly the tech landscape is changing lately.
Several years back on The Review, Loftesness shared a hugely popular [90-day plan for newly minted EMs](https://review.firstround.com/this-90-day-plan-turns-engineers-into-remarkable-managers/) (which he later expanded into a helpful book on managing through hypergrowth called “[Scaling Teams](https://www.amazon.com/Scaling-Teams-Strategies-Successful-Organizations/dp/149195227X?ref=review.firstround.com)”). Now that he’s settled back into life as a dev, **he’s following up with yet another 90-day plan — for EMs who want to transition back into IC work**.
In this exclusive interview, Loftesness outlines a set of considerations to make sure this is the right call, offering a preview of the challenges and thorny emotions that lie ahead, with examples from his own cycles between EM and IC. He then walks through his transition plan, breaking down how to work with senior management, communicate the change to teammates and adjust to new rhythms over the course of a 90-day period. He’s also got plenty of guidance for how engineering orgs can do a better job supporting these pivots.
Whether you’re a veteran eng leader hungry for a change of pace or a newer manager at wit’s end, Loftesness has wisdom for every type of crossroads. And his advice isn’t just for engineers — managers of any function who are tempted by a move back into the IC domain can pull from the pages of his playbook. Let’s dive in.
## Common scenarios for a lane switch
Loftesness has observed a host of reasons that push EMs to return to IC work — and he’s had different motivations each time he made the switch. He sketches out the three most common candidates for this transition, alongside what each should keep in mind before making the decision official.
### The new EM who’s not fit for management: Look before you leap
It’s a familiar story: a talented engineer who communicates well is rewarded with a management role and a host of new responsibilities. But with little to no training or mentorship, the new manager can easily [crash and burn](https://review.firstround.com/new-engineering-manager-advice/#wrapping-up-don%E2%80%99t-let-promo-tracks-get-folks-into-management-for-the-%E2%80%9Cwrong-reasons%E2%80%9D).
“**I run a training course for engineers considering a management role — and I consider it a good outcome if roughly a third of the participants decide *not* to make the jump,”** says Loftesness.“Strong technical skills aren’t sufficient to succeed as a manager. So as a class, we’ll practice management skills like giving difficult feedback, closing a candidate or handling conflicts between teammates. There’s even a scenario where I play a struggling engineer and a participant has to ‘fire’ me. These are critical responsibilities for managers and, just like catching bugs in your code, you want to find out as early as possible if there’s going to be a problem,” says Loftesness.
But of the engineers who do decide to make the jump, even those who go through [ample training](https://review.firstround.com/your-startups-management-training-probably-sucks-heres-how-to-make-it-better/), many only realize management isn’t for them *after* the transition. If you fall into this camp, Loftesness cautions against jumping ship as a manager before you’ve given yourself enough time to fully recalibrate into your new role.
“Sometimes the initial shock of imposter syndrome will scare someone off within three months,” says Loftesness. “More common are people who never fully transition into management because they can’t let go of the code — they’re still jumping in to fix things instead of learning how to delegate.” (We highly recommend giving [his original Review article](https://review.firstround.com/this-90-day-plan-turns-engineers-into-remarkable-managers) a read for more pointers on this tricky transition period.)
“It can take six months or more to really lay down the keyboard and focus on the needs of your team: clear goals and priorities, [effective 1:1s](https://review.firstround.com/managers-take-your-1-1s-to-the-next-level-with-these-6-must-reads/) and productive communication,” he says. “And thenyou might need another six months to develop your skills and feel comfortable. After that, if the manager’s mantle still doesn’t feel right, you can go back to an IC role knowing that you gave it your best shot, and hopefully learned some things along the way.”
> Even with adequate training, it can take a year to fully adjust to a new management role. Don't cut bait too quickly.
### The seasoned EM who wants to get closer to the tech: Prepare for a steep (re-)learning curve
On the other end of the spectrum, there’s the senior EM who’s forged a career in management. They’ve successfully scaled teams, produced great outcomes and found leading others deeply fulfilling. But years fly by and one day, they zoom out of their planning meetings and 1:1s only to realize it’s been years since they shipped a single line of code.
That’s exactly where Loftesness found himself after his tenure as Head of Engineering at eero. He was hankering to go deep again and play around with the latest tech — the reason he fell in love with engineering in the first place.
“As a young engineer-turned-manager, my understanding of the developer experience was a strength that helped me manage better. But over the years I felt more and more out of touch. I’d have conversations with my team or listen to tech podcasts and I could grasp the concepts, but I knew I was missing the details. And sometimes, those details matter,“ says Loftesness.
He also felt that his lack of familiarity with the cutting edge was impairing his [technical taste](https://review.firstround.com/podcast/developing-technical-taste-sam-shillace/) as a manager. “Even though I was still involved in architecture and technical design decisions, at some point I realized I was following much more than leading. **I may not have been *expected* to code, but I couldn’t really review it anymore, much less write it effectively**.”
If Loftesness’ code cravings resonate with you, the switch back to IC might be fulfilling. But know that you’ll probably encounter a steep learning curve and some uncomfortable emotions as you ease back into a routine you’ve likely not had for years (more on the exact flavor of those emotions below).
Loftesness has also seen these two secondary factors compel experienced managers to step into an IC role:
- **The tour of duty to better understand the developer experience:** “I’ve seen situations where a team’s productivity wasn’t at the level it should have been. I’d think, ‘This is a solid team. Why aren’t they getting more done?’” says Loftesness. “In one case, I asked the manager to temporarily get more involved in the development process while I helped cover her manager duties. By returning to the engineering front lines, she was able to find gaps in tooling and processes that were causing delays, and then prioritize fixes in the next milestone.”
- **Stepping aside to let a rising star step up:** A long-tenured manager may feel they’re inhibiting the growth of someone who’s ready to operate at the next level. This has happened twice in Loftesness’ career — which reaffirmed his personal desires to make the shift (and made succession planning easy). “Each time, I was already thinking about reducing my scope, moving from manager-of-managers to a frontline EM,” he says. “By handing the reins to a rising star and taking a new role myself, I gave them an opportunity to grow while remaining available for guidance and mentorship.”
### The burnt-out EM who needs a break: Plan for a management hiatus
Even the best managers get [burnt out](https://review.firstround.com/practical-frameworks-for-beating-burnout/). Daily meeting marathons, working nights and weekends, being on the hook for quarterly goals — and being responsible for your team’s happiness — can start to take a toll.
Loftesness has been in this boat, too. The first time he scaled back his management duties was for personal reasons. While a Senior Manager at Amazon, his first child was born. He’d enjoyed his run as a manager, but the demands of parenthood forced a change.
“After returning from paternity leave, I told my boss at Amazon ‘I’m so focused on my kid’s needs, I have no cycles left to worry about anyone else,’” he says. For whatever reason — a child, an illness, a major life event, burnout — there are times when forging ahead with your management responsibilities feels unsustainable, or even detrimental to your health, at least in the short term. But you might be worried that if you abandon your post now, you’ll never be able to return to management.
Loftesness’ own cyclical career proves otherwise: **Stepping back from management doesn’t have to be a permanent change.** You can take a one- or two-year detour to IC work and switch back to management when you feel better equipped to shoulder your responsibilities. Your management credentials won’t expire — and you’ll return with fresh technical knowledge to boot.
“Engineers are given a management opportunity in the first place because they’ve demonstrated good judgment, clear communication, and the ability to deliver. Those qualities don’t just go away,” he says.
> If anything, you’re going to get asked to manage again — probably sooner than you want. So you should worry more about fending off a return before you’re ready, instead of not getting asked again.
Loftesness also reminds folks in this camp that taking on more and more management responsibilities isn’t the only way to grow as a manager. In his experience, taking breaks from management has actually made him a better manager.
“**The cycle can feel like deep breathing. Breathe in to take on new levels of responsibility and challenges, then breathe out to step back, reflect, and prepare for what's next**,” he says. “You may find yourself much more prepared next time around.”
Loftesness first ran into this phenomenon while honing an entirely different skill: snowboarding. “I'd make progress on a new technique up to a point, but then it felt like the harder I tried, the worse I got,” he explains. “I realized that taking a break was the key. After a few weeks, I’d hit the slopes again and surprise myself by nailing it the first time. I later learned that our brains have the ability to continue working on problems or skills subconsciously, a process called [*incubation*](https://en.wikipedia.org/wiki/Incubation%5F%28psychology%29?ref=review.firstround.com). It’s the same for shifting levels of responsibility as a manager — when you get to the point where you’re like, ‘Oh boy, I’m struggling here,’ consider pulling back for a year or six months. Then when you return to it, it’ll feel easier and more comfortable.”
> Every time I've taken a break to return to coding, I've become a better manager. Sometimes you need to step away from the trees to see the forest.
David Loftesness, Developer at Nitid (previously Head of Engineering at eero and Director of Engineering at Twitter)
## Brace for these psychological roadblocks
Whether it’s been a year or over a decade since you last contributed code on a daily basis, settling back into developer rhythms won’t happen overnight. It’ll take some time to retrain your coding brain — which will bring all sorts of pesky emotions.
These are a few of the uncomfortable feelings Loftesness has run into during these transitions:
- **Some awkwardness with your new teammates.** Remember when you first started managing and your peers suddenly became your direct reports? The same is true in reverse. You might now be working side-by-side with people with much less experience than you — maybe even people you used to manage — but who are much more comfortable churning out code. “It's tough to have a 25-year-old recent grad looking over my shoulder while I'm fumbling around with syntax details that I don't quite remember,” says Loftesness. “But you just have to be humble and power through. Take advantage and learn from your peers’ expertise and you’ll return to form more quickly.”
- **Imposter syndrome 2.0\.** You felt it when you first became a manager — why should anyone listen to you? Now get ready for imposter syndrome in the opposite direction as you refresh your technical chops. “But it’s easier this time around because you’re familiar with the role, and you have the perspective of a former manager,” he says. “After all, you used to set the expectations for your team members, so you know what’s required to perform in your new role.”
- **Leadership meeting FOMO.** “ICs are often jealous of the management team because they have access to information that they don't have. There are meetings they can’t go to where juicy stuff is shared,” says Loftesness. “But your knowledge of communication channels can still be a huge asset — you just need to tap into them only when necessary. Remind yourself, ‘I don’t need to know that,’ and ‘That’s not my problem anymore.’ The feeling will dissipate with time.”
- **Re-wiring your brain to find a flow state.** Days that used to be stuffed to the brim with meetings will now be wide-open — so you’ll need to figure out how to get back into execution mode. “The longer you've been in management, the more your brain is wired around a tight loop. So it’s hard to get really into that focus state.”
- **Technical rustiness.** It’s probably been some time since you learned a new technical skill or got your hands dirty in a new environment, so you’ll need some patience with yourself as you brush up. “For example, the explosion of cloud computing platforms in the 2010s fundamentally changed how we build systems,” he says. “At the time, I was observing these changes while learning how to be a director of engineering — and was honestly more focused on the challenges of managing managers. It wasn’t until I handed the reins to my successor and took on a 4-person team that I started to fully internalize how the shifts in the industry impacted what we did day-to-day.”
> When you flip back down to the IC level after years of leading engineering orgs, you’ll often find yourself paired with engineers who were in diapers when you were writing your first lines of code. It's humbling — and it’s healthy.
## The 90-day plan
Once you’ve decided the switch back to IC is right for you, you’ll face two options: find a parallel rung on the IC ladder within your current company — or seek a new role elsewhere.
Loftesness would recommend making an internal transition, if possible. “It's ideal to make the change within your current company where you have working relationships and lots of context,” he says. “But if your manager isn't supportive or you don't see an IC role that fits, consider looking externally. Make sure to reach out to former colleagues who know your past IC work."
After pulling off this transition several times and coaching a handful of folks through it, here’s how Loftesness would tackle the transition over the course of 90 days. You’ll find his advice from pre-day one through day 30 most helpful if you’re embarking on an internal transition, while the pointers from days 30 onward will come in handy no matter if you’re opting to start fresh at a new company or staying under the same roof.
We’re echoing the 90-day framing Loftesness used in his plan for becoming a manager, but these changes will often take much longer to play out, of course. Use this framework as a starting point for your own transition plan.
### Before day 1: Break the news to your manager and help find your successor
**Put together a transition plan**.
You won’t just be able to update your title in your company’s [org chart](https://review.firstround.com/make-an-org-chart-you-want-to-ship-advice-from-linear-on-how-heirloom-tomatoes-should-inspire-team-design/) and call it a day. It’ll take some thought to figure out what your transition means for your team.
First, ask yourself: **Is there someone at the company who’s ready to step into my manager role**? Take some time to think about succession planning *before* you tell your manager. “Your boss has probably come to rely on you, so having a recommendation for a replacement at the ready will make the change easier to swallow,” he says.
If you don’t have a potential successor on the team, remember that hiring externally will take time. But by leading the search for your replacement, you can ensure that your team has the right leader going forward (while trimming back your boss’s workload).
Even if you know the perfect person to take over your role and have a compelling reason to switch to IC, your manager might not be on board right away. “You can allow room for negotiation, but don’t forget that you can’t take care of your team [if you don’t take care of yourself](https://review.firstround.com/6-counterintuitive-rules-for-being-a-better-manager-advice-from-lambda-school-quip-and-facebook/). The reminder to ‘Put on your own oxygen mask first’ rings true here,” says Loftesness.
Finally, expect a range of reactions from teammates. “When I made my announcement, I got three different reactions,” he says. “It was a mix of, ‘Aww, I want you to stay being my manager,’ and ‘What happened? Are you getting demoted?’ and ‘Good for you!’”
**Ask your burning questions about compensation and level.**
You might be worried that switching to an IC role means a demotion or a reduction in pay. But most tech companies have [parallel career ladders for ICs and managers](https://review.firstround.com/the-engineers-guide-to-career-growth-advice-from-my-time-at-stripe-and-facebook/).
Approach this conversation with your manager with the understanding that this is a lateral move and make sure your manager agrees, even if there aren’t precedents for this kind of transition at your company.
Here’s how Loftesness navigated the levels conversation with his manager back at Amazon, where he wound up coining a new title: “As a manager, I was at a high enough level that the equivalent IC level was principal engineer. It didn't feel appropriate to me or my manager to take on that title right away, so we worked out a custom title of ‘Product Search Architect’ to better reflect how I'd be able to contribute in the near term,” he says.
**Don’t forget to tell candidates in the hiring pipeline about your plans.**
Recruiting new team members while you’re planning your transition can be especially delicate. After all, working for you may be a key motivator for a new hire to join. Deciding how to handle this will depend on the specifics of your situation.
Loftesness made the mistake of not communicating his plans to a new hire while he was a Senior Manager at Amazon. “I’d been trying to hire a strong EM for months and even spent time during paternity leave talking with them. They signed their offer and started work almost exactly when I returned from leave. When I told them my plan to return to IC work, they said, ‘But I came here to work for you!’ I wish I’d thought more about the situation ahead of time and had a plan already in hand.”
### Days 1-30: Communicate the transition and refresh your tech setup
This first month, focus on explaining your transition to the team and getting your replacement up to speed. **Close out this phase of your management career by staving off disruption and ensuring a smooth handoff to your successor.**
But Loftesness notes that all kinds of communication tripwires can crop up during this first portion of the transition. Here are his order of operations to bring your org into the loop:
- **Draft up a plan with your (new) manager:** Whether you have a new boss in a new org or you’re keeping your existing one, make sure to put a transition plan in writing, complete with milestones and success criteria.
- **Circulate your plan with your new peers and former reports.** Communicate with former and new colleagues that you’re beginning the transition into an IC role and what that means for their relationship with you.
- **Hear out concerns from your team.** Your former reports might be confused or upset by this change. “But unlike when you’re leaving the company entirely, you can signal to people that you’ll be around to collaborate and offer guidance,” says Loftesness.
- **Train up your replacement.** Keep your existing slate of management meetings during these first 30 days and bring in your replacement to shadow you. Once they’re settled in, switch to “reverse shadowing,” where the replacement takes the active role. And be prepared for this training to last well beyond 30 days. “I would keep that 1:1 with the person taking over your job for a while,” he says.
Loftesness would also recommend carving out some time in these first 30 days to dust off your favorite dev environment and play around with new ones — so you can hit the ground running when you do start coding.
“I’d lived inside Emacs for most of my coding career, but my default setup was pretty outdated,” he says. “When I started pairing with other devs at Nitid and saw what they were getting out of the box with VS Code or RedMine, I knew it was time to modernize my setup or switch altogether. Newer features like AI integration are a must-have, too.”
### Days 30-60: Settle into the maker schedule
Around the one-month mark comes the exciting part — it’s time to shed your management duties and get fully back into the coding mindset. **But remember that you can’t have your code and be a manager, too**. This means winding down recurring meetings, 1:1s with former reports and teammates, and any other obligations that might get in the way of refinding your rhythm.
While the second month is a good time to start restructuring your calendar, Loftesness acknowledges that setting these boundaries is hard. “It takes a while to cut the cord. Folks are used to dropping by for advice or to escalate a problem. It’ll take some time to reset their expectations,” says Loftesness.
He’s made the mistake of hanging on to old manager meetings for too long in past IC transitions. “Even after it had been a few months, I kept a lot of one-on-ones on the books with people I worked most closely with, because it’s hard to just stop them cold — but that can fragment your calendar and get in the way of the focus time you need for your new work,” he says. “Catch up with them at lunch or after work instead so you can maintain the relationship without delaying the transition to your new role.”
> Don’t try to do both jobs, or you risk failing at both.
Here are Loftesness’ tips for priming your schedule — and brain — for the technical learning ahead:
**Deep-clean your calendar.**
**“**The first time I returned to an IC role, I had no problem with small coding tasks and debugging, but felt like I was struggling with larger, more complex tasks. At first I chalked it up to being rusty, but I eventually realized that there were two other factors getting in the way: Lingering obligations and expectations,” says Loftesness.
“I knew I needed to shift from a [manager’s to a maker’s schedule](https://www.paulgraham.com/makersschedule.html?ref=review.firstround.com), so I cleared my calendar of most of my meetings. If there are people you still want to keep in close touch with, push these meetings to ad-hoc check-ins or catch up over lunch.”
But he adds one caveat — **you should absolutely keep 1:1s with your replacement on your calendar for a while.** “This is worth the cost of one hour a week,” he says. “You can help them figure out what’s appropriate to share from leadership meetings to the rest of the team.”
Holding on to this 1:1 also has the knock-on benefit of keeping you in the loop on leadership happenings while you step back from that orbit. “It’s an opportunity to know the kinds of things that happened in that meeting — I wouldn't have to feel like I was left out.”
**Carve out long blocks of time to try (and fail) to refind your flow state.**
“After managing for a few years, I had adjusted to the manager’s workload of frequent meetings, lots of interruptions and shifting priorities. **But even after clearing my calendar, my brain kept interrupting itself**,” says Loftesness.
“Instead of focusing on the task at hand, my attention would go to, ‘Am I prepared for my next meeting?’ or ‘Have I followed through on my action items for the day?’ I found it hard to focus on one task for very long.”
You probably won’t be able to go hours on end in your first 30 meeting-free days, and that’s okay. The goal is to keep pushing to work for longer and longer periods uninterrupted — with others or by yourself.
Loftesness is still working on finding his [flow state](https://review.firstround.com/track-and-facilitate-your-engineers-flow-states-in-this-simple-way/) a year into his stint as a developer. “I can lose track of time and go really deep, but only for an hour or two,” he says. “One thing that’s helped me is setting a timer for longer and longer time periods to try to stay focused until it goes off. This helps retrain your subconscious to stop worrying about being late to your next meeting or checking Slack.”
For some long-form reading on how to harness your deep focus, Loftesness recommends [*Finding Flow*](https://www.amazon.com/Finding-Flow-Psychology-Engagement-Masterminds/dp/0465024114?ref=review.firstround.com)by Mihaly Csikszentmihalyi.
### Days 60-90: Learn and lead with humility
“By now you have enough context to set specific goals for yourself and measure your progress,” says Loftesness. “Use these 30 days to build a training plan for the next 90 days. Figure out a plan to pair up with ICs on your team and build a week-by-week agenda of going through tutorials. It helps to have a more structured learning process,” says Loftesness.
**Firm up a self-education plan.**
The good news is that there are also heaps more engineering educational resources available compared to the last time you picked up a new programming language. Take advantage of the wealth of information out there and build learning time into your schedule by signing up for classes, digging into YouTube tutorials, and leaning on Claude and ChatGPT to walk you through it. “Just take these resources with a grain of salt. Generative AI can answer a lot of questions, but make sure you understand its suggestions before you copy-and-paste them,” he warns.
Here are a few of the learning strategies he’s added to his own toolkit:
- **Brush up with online learning platforms (like** [**LeetCode.com**](http://leetcode.com/?ref=review.firstround.com)): “For a month, I solved one coding problem a day on LeetCode. By the end, I definitely felt the solutions come to mind more easily and didn't need to stop and look things up as often,” he says.
- **Lean on pair programming, or coding alongside peers:** “It was awkward at first since pairing wasn't a common technique when I started coding,” he says. “But watching how other people approach problems and use their tools can really accelerate your progress. Your pair can answer questions quickly and provide guidance and context. And pairing helps keep you focused, since you won't be checking your email while sharing your screen with your pair.” Loftesness likes using [pop.com](http://pop.com/?ref=review.firstround.com) for remote pairing or small group collaboration.
- **Take advantage of your company’s education offerings.** “My current company Nitid has a weekly professional development lunch session where one person presents on a specific topic. We've been working our way through Typescript tutorials, and the weekly cadence helps maintain momentum. It's also great to be learning with others — so you don’t feel like you're the one who's lagging behind.”
Loftesness would also encourage you to break out a pen and paper when you’re learning new technical skills. “**Keep a work log. Write more things down. Your brain works differently now — it’s harder to retain new information**.”
**Embrace the vulnerability of the learning process.**
A growth mindset is a must during this period. “It’s uncomfortable to shake off your rust and relearn stuff because it makes you vulnerable,” says Loftesness. “But that’s a good thing. Strong working relationships are built on trust, and you have to [give trust to get trust](https://review.firstround.com/our-6-must-reads-for-creating-and-accelerating-trust-on-teams/).”Remember that everyone’s rooting for your smooth transition. “Nobody wants to make fun of you. No one is like, ‘Oh my God, I can't believe Dave couldn't figure that out.’ They want to see you succeed, too.”
**Keep leading — but don’t manage.**
As a manager, you’ve seen how strong ICs can help set the direction for the team. Now it’s your turn. “Your years of experience, seeing what’s worked and what hasn’t is a real asset. Use this to help your manager and the team see around corners,” says Loftesness.
“But don’t be the grumpy veteran and cry ‘Kids these days,’ or ‘They don’t make things like they used to,’” says Loftesness. “And remember that as a former big wig, you may be intimidating to folks on your team.”
He offers up an example of how he learned to adjust how he showed up during meetings back at Twitter. “As the Director of Twitter's Core Services org, I sometimes had to ask tough questions in technical meetings to make sure we were headed in the right direction. But after I handed the reins to one of my direct reports, I took on a smaller scope and had a different role in those meetings. I realized I needed to make space for *her* to ask those tough questions and provide direction. Otherwise, the team might get mixed messages or give my opinion too much weight,” he explains.
Loftesness also cautions against being overly dogmatic based on your past experience. **Don’t assume that what’s worked in the past is the best thing in your current context. Ask your teammates questions instead of making sweeping statements**. “You don’t want to be the guy at a party who’s talking the whole time. I find it’s more helpful to draw on your experience in the form of a question. For example, you might ask, ‘Do you think it would be better if we tried this?’ As opposed to, ‘This is what we did in my last job and it always worked better.’”
> Apply your experience wisely — sensitive to the context of your new situation. Dispense wisdom as questions, not answers.
He shares an example of a time at Nitid when he was able to pull on his deep experience to catch a blind spot that younger devs wouldn’t have clocked. “I’m able to contribute at a different level than they can,” he says. “They knew the exact syntax to use the library, while I was able to recognize what was wrong architecturally.”
He also likes to implicitly demonstrate leadership to his junior (and even senior) teammates by showing that it’s okay to ask “dumb questions.” “Sometimes everyone is confused but no one feels comfortable asking for clarity,” he says. “So the question that seems silly is what actually helps move things forward. I’ve seen this happen enough times that I’ll take the risk of revealing ignorance for the chance of boosting understanding.”
> With experience, you get more confident in your ability to put yourself out there for the sake of learning. Being embarrassed in front of your coworkers felt like the worst thing in the world when I was 28, but now I can take it when I have my own kids making fun of me all day.
### After day 90: Take a temperature check on your new life as an IC
As you commit to your new routine and learning process, it’s a good time to take stock of how things are going — and how you’re feeling about this change.
A word of warning: The hardest work of the transition will extend far beyond 90 days. “**Over a year in, I'm still not fully comfortable in the IC role**,” says Loftesness. “I have high expectations for myself and want to contribute at the same level as other developers with similar tenure. That may be unrealistic, but by continuing to set learning goals, I can hopefully close the gap over time.”
Loftesness suggests asking yourself these questions after month three:
- **Where are my knowledge gaps?** Invest time with fellow ICs to observe how they do things or pick their brains about a new tool or domain that you haven’t been making huge strides with on your own. “Development environments have a lot more features now than 20 years ago,” says Loftesness. “So when I first started pairing, it became obvious that my old-school Emacs setup needed modernizing. With help from my coworkers, I set a goal to get a specific set of features working in my dev environment.”
- **Am I still getting roped into old management duties? What can I do to protect my schedule?** If you keep getting interrupted with asks that aren’t your responsibility anymore, have a conversation with your manager to make sure former reports and teams have the resources they need without you being on call.
- **Do I see myself staying as an IC for the long term?** Check in on whether your intentions before the change are tracking with your experience so far. Do you actually love coding as much as you thought you missed it? Do you miss having meaningful relationships with your reports? Be honest about how it’s going.
## A call to engineering orgs: Build parallel IC and management routes (and off-ramps)
Whether an engineer plans to return to management or wants to switch back to IC for good, org leaders need to create an environment that supports both outcomes. That starts with having parallel career tracks for ICs and managers — and being careful when messaging “promotions” into management.
“When an IC steps into a management role, avoid announcing it with a bunch of fanfare,” says Loftesness. “If the new manager eventually decides to return to an IC role, they may feel that they’ve failed — instead of feeling proud of making a difficult decision.” So when people do step into EM roles, message it thoughtfully. “It shouldn’t be, ‘Let’s have a party and celebrate this person’s new title.’ Because then it makes it really hard to go back — that’s how people end up stuck in a management role they hate.”
> Announce management transitions as an opportunity, not a promotion. With too much fanfare, new managers will feel stuck in their new role, even if they decide it’s not for them.
If orgs don’t set up a landing pad for managers who want to pivot back, they’ll risk losing great engineers to opportunities elsewhere.
### 10x, 10x, 6x — The exact GTM moves behind Clay’s explosive revenue growth
URL: https://review.firstround.com/10x-10x-6x-the-exact-gtm-moves-behind-clays-explosive-revenue-growth/
Last updated: 2025-01-23T16:23:16.000Z
Lessons from a newly minted unicorn
_This post is for subscribers only._
### The GTM Inflection Points That Powered Clay to a $1B+ Valuation
URL: https://review.firstround.com/the-gtm-inflection-points-that-powered-clay-to-a-1b-valuation/
Last updated: 2025-04-25T16:56:29.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
The pre-product-market fit days are, for some, a bit like wandering around in the desert — each promising customer conversation is a mirage that beckons you forward, only to dissolve upon closer inspection. Your champion leaves their company and suddenly no one’s picking up your calls. A big fish customer will only sign if you agree to build a complicated feature that no one else is asking for. Every deal looks different from the last, leaving you with no clear path forward and no way to predict where the next watering hole might appear.
As we previously chronicled in our "[Paths to PMF](https://review.firstround.com/clays-path-to-product-market-fit/)" interview with founder [**Kareem Amin**](https://www.linkedin.com/in/kareemamin/?ref=review.firstround.com), [**Clay**](https://www.clay.com/?ref=review.firstround.com)'s “7-year overnight success” came from focus. After years of building a horizontal productivity tool, it took complete commitment to an incredibly narrow wedge — data enrichment for cold email agencies — to finally burst through the pre-PMF desert to greener pastures.
It was a move that turned the tide, unleashing the sort of explosive growth that startup legends are made of. In 2022, Clay 10x’d revenue — a remarkable achievement. Not to be outdone, they came back and did it again in 2023, followed by 6x revenue in 2024\. Today, Clay counts category leaders like OpenAI, Canva, Anthropic, Ramp and Rippling among their 5,000+ customers. And on the heels of last year’s [$46M Series B](https://www.clay.com/blog/clay-raises-62m-to-turn-any-growth-idea-into-reality?ref=review.firstround.com), they’ve just announced a $40M Series B expansion and a [whopping $1.25B valuation](https://www.forbes.com/sites/alexkonrad/2025/01/21/clay-ai-growth-software-one-billion-valuation/?ref=review.firstround.com).
As investors since the very first round, we've had the privilege of partnering closely with this team as their GTM machine evolved from early experiments to a well-oiled engine — and we thought the exact moves that powered their growth were worth sharing with the broader startup community.
So while Amin previously traced Clay's product evolution here on The Review, today we’re sitting down with [**Varun Anand**](https://www.linkedin.com/in/vaanand/?ref=review.firstround.com), who joined in 2021 and quickly earned the co-founder title by helping to architect the go-to-market moves that bent Clay’s growth curve.
> The real work isn't in the initial growth spurt — it's in building the machine that can sustain and repeat it.
**In this comprehensive guide, Anand breaks down the seven key decisions that, in retrospect, proved to be foundational.** While some elements might sound familiar, like finding a narrow ICP, the exact "how" is incredibly granular. Many moves defied conventional wisdom, from creating a new type of sales role instead of hiring traditional AEs, keeping their waitlist gate up for 15 months after launch through millions of ARR, and making multiple attempts at cracking enterprise pricing before finding their formula.
Whether you're trying to make a PLG motion work, get content to take off, or land those lighthouse logos, there’s a lesson for just about every GTM conundrum your startup might be facing.
## **Inflection Point 1: Starting from scratch with customers**
Let’s set the scene: At the time Anand joined, the product was a spreadsheet connected to a handful of APIs — a few of which were data enrichment providers, but there were a bunch of others to support a wide range of horizontal use cases. As for the customer base, there were roughly 20 customers, paying anywhere from $30-$200 a month.
But that was all about to change. As we [covered with co-founder Kareem Amin](https://review.firstround.com/clays-path-to-product-market-fit/), the team had made the gutsy decision to laser in on the outbound sales use case. That meant the slate was about to be wiped clean. “**We had few true customers because almost none of the existing ones fit our new ICP**. Nearly all of our original customers churned once we narrowed our focus to outbound sales,” says Anand.
So Clay was starting from scratch at the potter’s wheel (this is the last clay metaphor, promise) and needed to find more folks in this new outbound sales ICP bucket — and fast.
### Step 1: Find your crew
“The very first thing I did was join a group called [Modern Sales Pros](https://modernsaleshq.com/?ref=review.firstround.com),” says Anand (at the helm of this community is [Pete Kazanjy](https://www.linkedin.com/in/kazanjy/?ref=review.firstround.com), who’s [shared sales advice](https://review.firstround.com/the-anatomy-of-the-perfect-sales-hiring-process/) [with us on the Review](https://review.firstround.com/to-build-an-amazing-sales-team-start-here-first/) [for many years](https://review.firstround.com/youre-losing-hundreds-of-thousands-of-dollars-because-of-poor-sales-onboarding/)). “I looked through the archive for words like ‘enrichment,’ ‘data,’ and ‘outbound.’ And I winnowed it down to 30 people who had said something interesting about the topic in the last few years,” he says.
The group of 30 was a mixed bag — some folks were SDRs, some were agency owners, and some were VPs. But nearly all of them agreed to talk to Anand. Tuning into the chorus of these few dozen conversations, it was the cold email agency owners who began to sing the loudest. “In retrospect, it makes sense, because these are the people who feel the pain most acutely,” says Anand.
He explains a few of the key reasons why agency owners ended up being a perfect fit for Clay 2.0:
- They have many clients that all have the same needs
- They’re often trying to duct-tape together systems across several tools
- They’re technical and speak Clay’s language
- They’re scrappy entrepreneurs
- They’re price-sensitive, so they wanted to be able to automate repetitive tasks
Would there be enough cold email agencies to sustain business growth in the long term? No. Would the revenue be enough? Also no. But Clay didn’t care about that — at least not yet. “Everything is about getting to the next step and earning the right to keep going,” says Anand. “**In the beginning, it wasn’t about thinking 10x. It was about helping the right people as quickly as possible**.”
This may seem counterintuitive. After all, to build a generational company, one that can go the distance, founders must try to cast themselves many years into the future, envisioning the chessboard ahead. But as Clay investor and First Round Partner Brett Berson told Anand (and shared [here](https://www.lennysnewsletter.com/p/angel-investing?ref=review.firstround.com) in Lenny Rachitsky’s guide for angel investors), “**No company has ever made it to the summit without successfully passing through basecamp first.** Focus on the next 18 months — not the next 18 years. Start assessing the opportunity to get to a more near-term milestone, versus fixating on the fuzzier question of ‘Can this be a $10B company?’”
### Step 2: Join their hangout spots
But Anand needed to meet a heck of a lot more of these agency owners. Rather than hang out a shingle for Clay, he decided to go straight to the town square. “The next tactical step is where do these people live? And I found out that they actually live in WhatsApp and Slack groups, like [SaaS Yacht Club](https://nas.io/syc?ref=review.firstround.com) or another one called Sales Technicians started by [Eric Nowoskawski](https://www.linkedin.com/in/outboundphd/?ref=review.firstround.com).” (Remember that name — he’s going to come back up very shortly).
“I joined all of these WhatsApp groups and at least a dozen sales and marketing Slack communities and basically just waited for people to talk about problems related to data enrichment. And I would respond immediately to ask if I could help (ideally with Clay),” says Anand. To keep track of all the chatter, he set up notifications for keyword mentions in Slack and also used [Syften](https://syften.com/?ref=review.firstround.com).
This commitment to generating online word-of-mouth is something of a full-circle moment. As it turns out, before even joining the company, Anand had first heard of Clay through a Slack channel for no-code software enthusiasts. “I saw a post about a webinar on Clay — and I was the only one who showed up,” he says.
Varun Anand, co-founder of Clay
### Step 3: Befriend the popular kids
Anand was starting to make inroads, but he also brought in an early superfan — one with heaps of cache in the space. “We hired [Eric Nowoslawski](https://www.linkedin.com/in/outboundphd/?ref=review.firstround.com) and brought him in-house as a certified expert. He’s the king of the WhatsApp groups and is one of the most respected agency owners out there. He gave us a huge amount of credibility with the agency audience,” says Anand.
It may seem like an offbeat hire (he was only the third business hire and one of the first 10 employees) for a company that was still trying to find its footing. But it actually reminded us of two similar early startup stories: [Notion hired one of its earliest superfans](https://review.firstround.com/how-notion-does-marketing-a-deep-dive-into-its-community-influencers-growth-playbooks/) as its first community hire, while [Figma brought on an in-house designer advocate](https://review.firstround.com/the-5-phases-of-figmas-community-led-growth-from-stealth-to-enterprise/) to be the face of Figma to the wider designer community. Sometimes, you need a bit of street cred to grease the wheels.
“Hiring Eric made a huge impact. He was constantly posting on LinkedIn, getting us credibility in the community groups and his own WhatsApp groups. It became a huge part of getting more of these agency owners on board with Clay,” says Anand.
He also ran point with Anand on showcasing the product. “It was like having the best expert in the world helping our customers with their problems. Even startup folks who didn't know who Eric was could see that he knew everything about cold email and outbound. So, in turn, they trusted Clay, too,” says Anand.
## **Inflection Point 2: Reversing the demo**
As Clay started chumming up more interest from agency owners, Anand and Nowoslawski were constantly hopping on the phone to show them the product — usually powering through at least eight of these calls a day.
But this was [no ordinary product demo](https://review.firstround.com/your-product-demos-suck-because-theyre-focused-on-your-product/). Here’s how Clay’s “[reverse demo](https://www.clay.com/blog/reverse-demo?ref=review.firstround.com)” flow worked:
“Let’s say you signed up for the waitlist. I would review the list in Clay every morning, and if you fit our ICP I would trigger an email that said, ‘Hey, book some time with me and come prepared for this conversation with a dataset you want enriched or a problem that you wanted solved in this 30-minute slot,’” says Anand.
If they showed up empty-handed, for the first five minutes of the call Anand and the potential customer would come up with a personalized use case.
Here’s where, if this was an ordinary demo flow, you might expect Anand to take over the steering wheel and walk them through the product and the key features with a canned script. But instead, Anand acted more like a GPS, with the customer’s hands still firmly planted on the wheel.
> If you’re learning how to drive a car, you don’t sit in the passenger seat while the instructor lectures you. You take the wheel while the instructor safely guides you.
The customer would share *their* screen, Anand would give them a Clay signup link, and then use Zoom’s annotation features to guide them through which buttons to click to help solve the problem at hand.
Here’s an example in action: “I spoke to one small private equity firm in Kansas City that was trying to find plumbers in Oklahoma and Missouri that they could acquire. They wanted to scrape Google Maps for these types of businesses,” says Anand. “To enrich the data, they wanted to know what year the plumbing business was founded, which ones were well reviewed, the owner of the company and their contact info. Over the course of 30 minutes, with me guiding them through the product, the customer was able to do it.”
> Our goal with every reverse demo was simple: Solve the customer’s stated problem within 30 minutes — and try to blow their minds in the process.
This reverse demo structure worked for a few key reasons:
- **Customers gained the confidence to come back.** “Now they were equipped to do all sorts of other things in Clay. In the beginning, we had to do probably seven demos to convince someone to pay us $200-300 a month. But eventually, we got it down to one call or even none.”
- **He got a UX masterclass.** “I got to see up close what was wrong with the product because I was seeing exactly where new users were going wrong and I could pass that feedback along to [Eric Engoron](https://www.linkedin.com/in/eengoron/?ref=review.firstround.com) and other engineers to fix.”
- **New ideas unlocked.** “Occasionally someone would have an idea for a use case that we would immediately act on that would unlock the next stepping stone,” says Anand. Take his previous example of enriching Google Maps data to find plumbers. “It opened up a whole series of use cases for us of vertical SaaS companies that cater to small businesses on Google Maps. That one integration basically helped us win the business of 50-60 companies in short order.”
- **Folks joined the community:** Anand ended every single reverse demo the same way: “I wouldn’t end the call until this person had joined our Slack group. We removed Intercom support from our product, so you had to join Slack to get help. I would literally have them type in [clay.com/slack](http://clay.com/slack?ref=review.firstround.com), join it, send me a DM and only then would I hang up the Zoom call.” ([More on the thinking behind this decision here](https://review.firstround.com/clays-path-to-product-market-fit/#building-community))
Instead of running a scripted demo, imagine the insane amount of feedback you get seeing how new users interact with your product. Imagine how 8 calls a day compound over 7 months.
There’s one downside with the reverse demo approach, Anand admits: You’ve got to assemble the right folks to pull it off. “You need early hires who are creative enough and nimble on their feet enough to do basically any use case at the drop of the hat,” he says. “But if you can pull it off, the customer gets their problem solved in a 30-minute call, they believe that Clay is their solution going forward, and they know how to use it.”
In this case, Clay found two incredibly high-agency folks to help with [Yash Tekriwal](https://www.linkedin.com/in/yashtekriwal/?ref=review.firstround.com) and [Matthew Quan](https://www.linkedin.com/in/matthew-quan/?ref=review.firstround.com) joining the squad. “They were technical enough to do anything short of feature development, and super resourceful — which is [necessary in such an early-stage environment](https://review.firstround.com/30-tips-for-new-startup-employees/). And, most importantly, they were really passionate about Clay and the problems we’re solving for customers,” says Anand.
## **Inflection Point 3: Unlocking the power of compounding content**
A [non-obvious sign of traction](https://review.firstround.com/non-obvious-signs-of-early-startup-traction-and-how-to-spot-them/) came from an unexpected place: their customers' LinkedIn feeds.
“We started to see these agency owners posting on LinkedIn about Clay,” says Anand.
To be clear — this was completely organic, Clay hadn’t nudged these folks to post. “Their incentive was that they wanted to win more business and position themselves as an expert in this nascent technology,” he says.
But while Clay hadn’t directly planted this seed themselves, they weren’t going to let this wither on the vine. “We immediately pounced on it — how can we enable more people to do this? So Eric and I started posting content every day, as well as partnering with customers behind the scenes by telling them about new features and helping them make content. That became how we generated a lot of demand,” he says.
While today Clay has a much more robust and methodical content strategy, in the early days it was admittedly a volume game. “At the time it was more brute force of will, just regularly and diligently putting out content and getting other people to do it as well. The central mantra of our content was to show people how to do things that are really valuable to them — that’s all you have to do.”
> There are many ways of growing your business and generating traffic — you can do email outbound, paid ads, SEO. But at the time, LinkedIn and content were working, so we went all in on those two things.
Fast forward to today, and there’s much [more of a method to the madness](https://www.clay.com/blog/how-we-assessed-our-growth-marketing-bets-at-clay?ref=review.firstround.com). “So much of our business is a loop. Every conversation turns into product feedback, every conversation turns into content.” Here are three examples:
- **Community.** “We have 60 different [Clay Clubs](https://lu.ma/claylive?ref=review.firstround.com) hosting community events all around the world, from Bangalore to Sydney to Toronto, where they share Clay tables. There’s content that comes from the events that we can put in a LinkedIn post. We can combine those LinkedIn posts and make a blog post, and then those blog posts become a guide. You have this loop where you keep repurposing the content that compounds over time.”
- **Incentive.** “We are constantly thinking about how we can encourage people to post about Clay. Now we have [Clay Creator programs](https://www.clay.com/creators?ref=review.firstround.com) to incentivize that behavior.”
- **Enablement. “**We spend a considerable amount of time supporting our experts with their own marketing campaigns, from promoting new business lines, to webinars, to one-off promotions, etc. We’re also now using software internally to programmatically help creators post videos online about Clay features that are personalized to them and their own voice. At the end of the day, we want to help them look legit because if they grow, we grow.”
## **Inflection Point 4: Cracking the 4 elements of PLG before layering on traditional sales**
Clay's hands-on reverse demos might make it seem like they were building a traditional sales motion. But the co-founders had a different vision in mind. “Kareem and I were very intent on making a PLG motion happen. At minimum, you need a $5K-10K annual contract to make a sales-led motion work. Clay was only getting $200-$300 a month. **At our price point, self-serve had to work** and then we eventually could turn that into a sales-led motion,” says Anand. “We were going to give it our all before we tried something dramatically different.”
With their hearts set on PLG, Clay needed four specific elements to click into place.
> Here are the four steps of PLG: 1) You need demand coming in, 2) you need to convert them on the website, 3) you need them to get quick value from the product, and 4) you need them to pay you money.
### Demand
“[Emily Kramer has some good frameworks on this](https://newsletter.mkt1.co/p/gtm-motion?ref=review.firstround.com), but you have to fit the marketing motion to your product. For us, we noticed that LinkedIn and content were going really well. And we knew that those levers dovetailed quite nicely with word of mouth,” says Anand.
“With our own content efforts as well as with our partners, we were able to go all-in on those two things, and that’s what drove our early acquisition.”
### Conversion
“We always enjoyed very high website conversion rates. Part of that can be attributed to these visitors being high-intent coming from word of mouth and evangelists,” says Anand. But he says Clay’s early [commitment to brand](https://review.firstround.com/great-startups-deserve-great-brands-build-a-strong-foundation-by-avoiding-these-mistakes/) also helped tip the scales. “**We’ve always overinvested in brand way more so than other early-stage B2B software companies**.”
This started with a gap that the Clay team pounced on.
> When you look at other early-stage B2B startups, few invest in brand, so everything ends up looking the same. When no one else is investing in something, that’s a way to have alpha and stand out in a meaningful way.
For starters, what’s in a name? “First of all, we benefit from the fact that the company’s name, Clay, lends itself to brand building,” he says. You can see these fingerprints all over the website — from the logo to the [artwork for each blog post](https://www.clay.com/blog?ref=review.firstround.com). After all, how many SaaS companies do you know with an [in-house claymation artist](https://www.linkedin.com/posts/grow-with-clay%5Fta-da-your-2024-clayback-has-arrived-ugcPost-7272973591384604673-BESp?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop)? Clay even hired a Head of Brand as one of their first 25 employees. “**Brand is not a short-term investment by any means — we think it** [**pays long-term dividends**](https://review.firstround.com/this-brand-strategy-can-make-your-startup-look-bigger-than-it-is/).”
### Getting into the product
Clay had leaned on the reverse demos to get folks’ hands on the product. But for true PLG, this step wouldn’t cut it. Users would need to get immediate value using the product, without Anand’s guiding hand.
Eventually, with enough product feedback to make the tool simpler to use, Clay was able to cut out the reverse demo step altogether. But Anand learned quickly that at this stage, a mass influx of users would prove challenging.
While Clay had a waitlist for the product when they were initially talking to the growth agency folks (to make sure they were paying closest attention to those who fit their narrow ICP), when Clay publicly launched on Product Hunt in February 2022, anyone could create a free account. “We debated on whether or not to include a waitlist at launch, but we decided to remove it for the Product Hunt launch,” says Anand.
Clay's launch on Product Hunt in Feb. 2022
There was a massive influx of new users, but the volume grew too staticky too quickly. “We had a lot of feedback, but it was all unfiltered and we were talking to all sorts of people who weren’t the right fit. It was hard to find signal versus noise. We made the decision about two months later, in May 2022, to turn the waitlist back on. That was one of the best decisions we made in the early days,” he says.
And the waitlist stayed on for another 15 months, much longer than the typical startup gate. But it gave the Clay team time to fine-tune the GTM machine without an influx of users. It wasn’t until Clay was in the millions of ARR that they dropped the waitlist and felt ready to let in the masses.
### Monetization
To complete the PLG flow, Clay needed customers to pull out their credit cards. But this was far from elegant in the early days. “**As recently as January 2023, we didn’t have billing in the product. I was just sending Stripe invoices to people, which is crazy for a self-serve product for $200/month**,” says Anand.
It wasn’t until Clay was past $1M in ARR that they finally turned on billing. Why wait so long? “The most important thing at this point was to land on the right value metric. After that, we could fiddle with the feature gates and the exact unit costs, but we had to get that right first,” he says.
So building a billing feature was always floating near the bottom of the product priority stack. “If you can get to $1M ARR with so much billing friction in a self-serve motion, you likely have something you can scale,” says Anand. Today, Clay is ultra-transparent with its pricing and [publishes detailed memos](https://www.clay.com/blog/behind-the-scenes-with-clays-new-pricing-plan?ref=review.firstround.com) for any big [pricing change](https://www.clay.com/blog/introducing-clay-pricing-3-0-the-most-flexible-credit-system-on-the-market?ref=review.firstround.com).
## **Inflection Point 5: Figuring out the right pricing for self-serve *and* enterprise**
Clay made an unconventional bet [with their pricing](https://review.firstround.com/its-price-before-product-period/): usage-based credits instead of the standard per-seat model that dominated sales tech. Fast-forward to 2025 and AI has made usage-based more in vogue. “But back in 2022, our customers were shocked that we weren’t a per-seat company and investors thought we were leaving so much money on the table,” he says.
So what gave Clay the conviction to swim upstream? It goes back to the product, essentially a spreadsheet of columns and rows. “We realized that all the value is in the columns because every column you add is a new enrichment. So the pricing lever should be an equation: Columns X Rows. And that comes back to credits,” says Anand.
If you’re [wrestling with your own pricing model](https://review.firstround.com/the-price-is-right-essential-tips-for-nailing-your-pricing-strategy/), re-center it on the value prop, he says. “We are a product of efficiency. **We’re not trying to charge you to have so many people using Clay because we want you to have *fewer* people using Clay who can drive crazy ROI for your whole company**.”
Contrast this with other PLG darlings like Notion or Figma who use the more typical per-seat pricing. “These are collaboration products, so it makes sense for them to have per-seat pricing. But we are not that — **we are a tool where you do one thing to orchestrate the actions of many. So it intuitively made sense to stick with usage-based**,” he says.
> When in doubt, go on the side of what’s better for the customer.
But Anand isn’t exclusively [tooting the usage-based horn here](https://review.firstround.com/podcast/usage-based-hybrid-tiered-which-pricing-model-is-right-for-you-stripes-jeanne-dewitt-grosser/) — there’s a hazard up ahead. “Seat-based creates a clearer path to going from self-serve to enterprise. You’re expanding from team to team, and you can go to IT and make an easy, compelling case. It’s less a sell on the value and more about pointing out what is already happening bottoms-up,” he says. “With us, it was more challenging.”
### Moving upmarket
The trees of PLG were starting to bear fruit, and enterprises were beginning to make their way into the self-serve product.
> Signing bigger companies was an inflection point that we could expand from growth agencies to not just regular startups, but also $10B enterprises.
But while signing these logos was an internal boost for the team, it wasn’t a monetary one. “We still weren’t able to charge a significant amount of money — it was just the normal self-serve pricing scaled up,” he says.
So in the fall of 2023, the Clay team made up their mind: It was time to [build a big-boy sales motion](https://review.firstround.com/to-build-an-amazing-sales-team-start-here-first/). “Self-serve was working. Not amazingly, but it was becoming more of a machine. We also hired [Bruno Estrella](https://www.linkedin.com/in/brunoestrella/?ref=review.firstround.com) from Webflow to lead growth marketing, which gave me the confidence that I could hand off PLG marketing to him to run with and I could spend more time focusing on sales,” says Anand.
> If we want to be a generational company, we need the best companies in the world to use our product.
But cracking the enterprise would mean spending way more time with them to properly enable their Clay usage — and, as the cliche goes, time is money. “How do we get enterprises to pay enough money to justify the high-touch, white-glove experience? Plus, we needed to differentiate it enough from self-serve, because they could just sign up for Clay at any time,” says Anand.
As it turned out, it took three at-bats to finally crack Clay’s enterprise pricing model. Anand walks us through each attempt he puzzled through along with Yash Tekriwal and Matthew Quan:
### Attempt 1: What if we do the work for you?
“Our customers were telling us, ‘Hey, I would pay you $X, but you should just build this for me.’ Basically, they were asking for professional services,” says Anand. It was worth a shot — so Clay closed two of these types of deals, priced at $60K and $84K.
Not long after the contract ink dried, Clay realized this was the wrong approach. “First of all, it was an insane amount of work — way more than $84K — to fully service these customers end to end,” says Anand.
“Second, and most importantly, we were actually competing with our [Clay Experts](http://clay.com/experts?ref=review.firstround.com). We had this ecosystem of professionals who had built businesses helping people use Clay, and by offering our own service, we were competing head-to-head with them when we wanted these Experts to thrive,” says Anand.
Back to the drawing board.
### Attempt 2: What if we charge a platform fee?
For take two, Clay was still struggling with finding a happy medium between meeting their margin goals, remaining usage-driven, and keeping a higher price point to warrant the investment in these enterprise customers.
“So we came up with a platform fee, plus credits that were priced similarly to the pro plan,” says Anand.
Admittedly, not too many enterprise customers ended up with this pricing structure. “There was still a lot of experimentation happening and not that many enterprise sales were closing in Q1 and even Q2 of 2024,” he says. Here’s why he found platform fees inherently challenging, and why he’d caution other founders from this approach:
- **Doesn’t scale:** “After the first year, it’s difficult to increase a platform fee because it’s challenging to defend the value that you’ve added to the platform over that time.”
- **Procurement teams will tear it apart.** “They’re like, ‘Why are you charging me this amount of money for this nebulous set of services?’”
### Attempt 3: What if we simplify?
This brings us to Fall 2024\. “I took a lot of inspiration from [Snowflake’s pricing model](https://www.snowflake.com/en/data-cloud/pricing-options/?ref=review.firstround.com), and we basically bundled the credits, the platform fee, the support, everything into credits to dramatically simplify the pricing. It comes with more support and more features, so that warrants the higher price point,” says Anand.
Here’s why bunding was (finally) the Goldilocks just-right approach:
- Sticking with credits simplifies the pricing dramatically
- It aligns customer interests with Clay’s interests
- It’s usage-based, so it can scale more seamlessly
## **Inflection Point 6: Fine-tuning the enterprise playbook**
When selling to enterprises, founders often forget they're still talking to Sally from RevOps or Martin the VP of Sales. Instead, the company name and potential contract value loom large, adding unnecessary formality to every interaction.
Anand shares three tactics that helped Clay stay grounded:
### 1\. Start small, then expand
Initially, Clay pitched enterprises on completely transforming their sales operations. "But buyers were hugely skeptical," says Anand. "We set the bar too high to prove in a POC."
Instead, they returned to their roots: data enrichment. "We say: ‘It’s hard for you to find and access quality data providers in one place. We'll solve that first.'" This narrower wedge worked because it had an existing budget line item, was easy to prove, and opened the door for expanding to other use cases later.
### 2\. Be radically transparent with your customers
The elephant in the room with enterprise sales layered on top of PLG? The fact that customers could just sign up for Clay's (much cheaper) self-serve tier. "We address it head-on," says Anand. "'Yes, you could go self-serve. But we both know you probably won't, whether that's because of company policies, feature needs, or support requirements.' Buyers respect that honesty."
### 3\. Keep it human
Anand's most tactical tip? "Get on texting terms immediately. On the first call, I say 'Let's exchange numbers.' It instantly changes the dynamic." These small touches help cut through the typical enterprise formality.
> To build an authentic relationship with your buyer, get out of the formality of email and text them instead.
## **Inflection Point 7: Embracing atypical hiring and compensation**
“With our product, we’re taking the engineering discipline and bringing that to go-to-market. So we try to build the whole company in that ethos, bringing in people with new perspectives to their disciplines,” says Anand. “**So many of our key hires at Clay are not out of central casting for their roles**.” He could rattle off a dozen examples of this, but here’s three:
- Their Head of Sales is an engineer by training, a former founder, and a former head of growth of a growth-stage startup. Notably missing? Sales experience.
- The person running their global community motion is a former founder who studied physics at Yale.
- Clay’s Head of Brand and Head of People is the same leader, “because we want our external brand to be consistent with our internal one,” says Anand.
### Meet the go-to-market engineer
It’s not just hiring atypical people for your standard company roles — Clay has also made up completely new ones like their [GTM engineers](https://www.clay.com/blog/gtm-engineering?ref=review.firstround.com).
The idea originated in their reverse demos, where Clay’s early hires had to think quickly on their feet to solve the customer’s data enrichment problem in just 30 minutes or less. They didn’t need to be stellar salespeople, they just needed to be agile, creative and technical enough to grok any potential use case.
As Clay layered on an enterprise sales motion, it needed salespeople. But over the course of some initial interviews, they were getting nowhere. “We realized that the most fundamental skill set for this role wasn’t sales — it was being amazing at Clay,” says Anand.
> I’ve been on too many sales calls where an account executive can’t answer a basic product question and says, “I’ll need to bring a technical resource to our next call.”
So they landed on what they call go-to-market engineering — part AE, part SDR, part sales engineer, full-on Clay expert. That meant high-agency folks with a technical bent. Today, the GTM Engineering team is around 14, filled with former founders, mechanical and structural engineers, and growth experts.
“I wouldn’t recommend this for every company. But for our model with our type of product that’s got good inbound demand, and prioritizing adoption and engagement, it works really well,” says Anand. (Today, Clay is seeing more and more of these GTM engineering roles pop up across the startup ecosystem.) “**One person can deliver an amazing customer experience, generate content ideas and demand, and relay product feedback — instead of having it segmented in three different roles**.”
### Interrupt the typical comp schedule
Clay's unconventional approach extends to [compensation](https://review.firstround.com/a-counterintuitive-system-for-startup-compensation/). “Sometimes we give someone a raise just months into the role because they're blowing away expectations," says Anand. "I've been on the other end where you ask for more money and hear, 'Wait for the next review cycle.' Why? Because it benefits the company to save money.”
By the time someone comes to you about compensation, you've already lost them – they've been thinking about it for weeks.
They also reject rigid [industry benchmarks](https://review.firstround.com/how-instacart-uses-data-to-craft-a-bespoke-comp-strategy/). "**Events and social media roles typically command lower salaries, but these functions are critical growth drivers for us — so we benchmark them against growth marketing instead,"** says Anand.
While the past few years have been the stuff of startup legend, for Anand it’s about sustaining the pace — and retaining the folks who make these hockey-stick years happen (and those who [climb aboard the rocketship](https://www.clay.com/careers?ref=review.firstround.com)).
“**We try to build a company that is very people-oriented so that if the music ever stops for our growth, people won’t immediately leave. They’ll stick with us for the long term**,” he says. “Maybe for specific periods of time we can turn the volume up, but we’re focused on the long-term sustainability because we’re trying to build an enduring business, and how we treat people is a huge part of that.”
### Inside Clay's unconventional path to $1.25B: Rethinking GTM, pricing, and enterprise sales | Varun Anand (Co-founder and Head of Operations)
URL: https://review.firstround.com/podcast/inside-clays-unconventional-path-to-1-25b/
Last updated: 2026-03-13T21:54:57.000Z
Varun Anand is the co-founder and Head of Operations at Clay, a GTM development environmentthat combines data and AI to help over 5000 companies power everything from CRM enrichment to highly targeted outreach campaigns.Clay recently announced their Series B expansion, raising $40M at a $1.25B valuation. Before Clay, Varun was the Director of Operations at Newfront and the Head of Expansion at Candid. Varun also spent four years working on Hillary Clinton’s presidential campaign.
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In today’s episode, we discuss:
- Clay’s unconventional GTM machine
- 3 changes that unlocked Clay's upmarket motion
- Layering enterprise customers on top of PLG
- Scrappy sales tactics: WhatsApp groups, Reddit threads, and reverse demos
- Thinking long-term about brand and content
- Building an elite team of people who are “technical enough”
- Clay’s contrarian take on compensation
- Much more
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**Referenced:**
- Anthropic: [https://www.anthropic.com/](https://www.anthropic.com/?ref=review.firstround.com)
- Clay: [https://www.clay.com/](https://www.clay.com/?ref=review.firstround.com)
- Clay’s Series B expansion: [https://www.clay.com/blog/series-b-expansion](https://www.clay.com/blog/series-b-expansion?ref=review.firstround.com)
- Eric Nowoslawski: [https://www.linkedin.com/in/outboundphd/](https://www.linkedin.com/in/outboundphd/?ref=review.firstround.com)
- Figma: [https://www.figma.com/](https://www.figma.com/?ref=review.firstround.com)
- Jesse Ouellette: [https://www.linkedin.com/in/jesseoue/](https://www.linkedin.com/in/jesseoue/?ref=review.firstround.com)
- Kareem Amin: [https://www.linkedin.com/in/kareemamin/](https://www.linkedin.com/in/kareemamin/?ref=review.firstround.com)
- Nick Merrill: [https://www.linkedin.com/in/nick-merrill-64562310/](https://www.linkedin.com/in/nick-merrill-64562310/?ref=review.firstround.com)
- Notion: [https://www.notion.com/](https://www.notion.com/?ref=review.firstround.com)
- Oyster: [https://www.oysterhr.com/](https://www.oysterhr.com/?ref=review.firstround.com)
- Pave: [https://www.pave.com/](https://www.pave.com/?ref=review.firstround.com)
- Rippling: [https://www.rippling.com/](https://www.rippling.com/?ref=review.firstround.com)
- Snowflake: [https://www.snowflake.com/](https://www.snowflake.com/?ref=review.firstround.com)
- Verkada: [https://www.verkada.com/](https://www.verkada.com/?ref=review.firstround.com)
- Webflow: [https://webflow.com/](https://webflow.com/?ref=review.firstround.com)
- Yash Tekriwal: [https://www.linkedin.com/in/yashtekriwal/](https://www.linkedin.com/in/yashtekriwal/?ref=review.firstround.com)
–
**Where to find Varun:**
- LinkedIn: [https://www.linkedin.com/in/vaanand/](https://www.linkedin.com/in/vaanand/?ref=review.firstround.com)
- Twitter/X: [https://x.com/vxanand](https://x.com/vxanand?ref=review.firstround.com)
–
**Where to find Brett:**
- LinkedIn: [https://www.linkedin.com/in/brett-berson-9986094/](https://www.linkedin.com/in/brett-berson-9986094/?ref=review.firstround.com)
- Twitter/X: [https://twitter.com/brettberson](https://twitter.com/brettberson?ref=review.firstround.com)
–
**Where to find First Round Capital:**
- Website: [https://firstround.com/](https://firstround.com/?ref=review.firstround.com)
- First Round Review:
- Twitter/X: [https://twitter.com/firstround](https://twitter.com/firstround?ref=review.firstround.com)
- YouTube: [https://www.youtube.com/@FirstRoundCapital](https://www.youtube.com/@FirstRoundCapital?ref=review.firstround.com)
- This podcast on all platforms:
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**Timestamps:**
(00:00) Teaser + Introduction
(03:13) Turning traditional GTM on its head
(05:37) How Clay hustled for its first customers: Reddit threads & WhatsApp groups
(08:53) Unpacking Clay's credit-based pricing
(14:29) Building Clay's self-serve engine
(16:54) Why Clay rejected the usage-based model
(19:04) Clay’s big bet on content
(23:59) How "reverse demos" win enterprise deals
(27:49) 3 changes that unlocked Clay's upmarket motion
(36:59) How to build trust with enterprise buyers
(38:49) Applying the land and expand model
(40:40) Hiring people who are “technical enough”
(46:33) Inside Clay’s hands-on interviewing process
(48:15) Why Clay invested in brand from day-one
(50:21) Clay’s contrarian take on compensation
(58:35) The person who shaped Varun’s career
**Brett:** All right. Well, thank you for joining.
**Varun:** Thanks, Brett. Excited to be here. Let's go.
**Brett:** Let's start by talking about how you approached go to market in the very, very early days when you joined and how did you think about, building a PLG motion versus more traditional top down sales?
**Varun:** At the time, for whatever reason, Kareem and I were very intent on making a PLG motion happen. arguably it was a little irrational and actually in many all hands meetings with the team, from the months of May, 2022 to January, 2023, People were asking, why are we doing this? Why don't we just sell?
But, at least for me, I thought it was very clear that we could make this happen because I could see how this could be a self serve product and I think Kareem believed that as well and we had early evidence of it and we believed that with enough loops we could kind of make that happen. So maybe I can kind of walk through the journey to answer your first question of like how we approached it in the earliest days.
The first thing was, actually the very first thing I did in a very tactical way is, you know that, that, that group that Pete Kazanjy has called Modern Sales Pros, I'd been a member of that group for four years and,
**Brett:** funnily enough was inspired by a lot of the early first round community building. Yeah. And we spent a bunch of time talking about it, but yeah, yeah,
**Varun:** Amazing. So I like looked through the archive for the previous like three, four years, um, for the words enrichment and data and outbound and things like that. And basically, I windowed it down to 30 people who had said something, um, somewhat intelligent about this topic, uh, in the last three or four years.
And I emailed them all. And some were SDRs, some were agency owners, some were VPs of marketing and sales. Most of them agreed to talk to me,
**Brett:** of the product when you were doing this?
**Varun:** it was a spreadsheet connected to a handful of APIs that, a few of which were data enrichment providers and it, but also there were a bunch of others that were more horizontal in their use cases.
And so it was a very horizontal kind of thing, but we had decided we're focusing on the go to market kind of use case and figuring out where to start.
**Brett:** And you had how many customers using it at that point?
**Varun:** maybe 10, 25 paying customers, any of whom were paying somewhere between 30 a month to 200 a month.
The true answer is really zero because all of those people were not ICP and all of them, or maybe all of them with the exception of two or three churned within the year when we really focused.
**Brett:** Oh, cause you had recruiting use case. You had All sorts
**Varun:** of things. Yeah, there was like an E. A. Person in there. There was all sorts of random people using it in different ways. yeah, technically there was 30 K of revenue or something, but they were all not using the product the way we wanted to focus. So they were not really our customers in that sense.
So we were kind of scratching starting zero from this focus area. So So anyways, we talked, I talked to these 30 people and the only ones who kind of, um, really understood this were these agency owners, these like cold email agency owners. And, you know, I think Kareem had known that pull from them for a while.
Um, but that's when it like really stood out to me at least. And, In retrospect, it makes sense because these are people who have, they feel the pain point really acutely because they have so many clients that all have the same needs. They're also technical. They are scrappy because they're entrepreneurs and they're like price sensitive.
So they want to do things in automated ways. and so that's why we kind of started with that because we felt immediate pull from them. And then the next tactical step is like, where do these people live? So, they actually live in WhatsApp groups. Uh, there's some really funny ones. Uh, there's one great one started by this guy, Jesse Ouellette, who's awesome.
and it's called the SaaS Yacht Club. there's one started by Eric Nowoslawski. It's called Sales Technicians. There's, there's a few more of these. So I would just join all of these WhatsApp groups and, um, basically would just wait for people to talk about problems related to data enrichment, which we kind of suspected was going to be the first preliminary use case.
**Brett:** You figured this out through the Modern Sales Pros conversations?
**Varun:** When I talk to these people from Modern Sales Pros, yes, yes. That's, and then, and then we'd have more conversations. They'll be like, well, where are you talking about this? And then eventually these WhatsApp groups kind of emerged. I'd use tools like sift in for social listening to like track these conversations on Reddit.
You know, pretend to be different people and like reach these people on reddit when they're talking about these problems, but the whatsapp groups were definitely the most effective. Um, and. And so we would use that as ways to, like, get these conversations and get into this ecosystem and get people they're really, solving their problems with Clay.
And then when we started to do that, that's how we'd get some of these meetings. We would start, we would have these, like, reverse demo conversations where I wouldn't traditionally demo the software. Basically, they would demo, like, they would demo it, themselves. Like, they would sign up, share their screen, do the flow.
I would help them do the individual steps through zoom annotations and they would learn the product that way. And so, because once they feel like they've done it once, they feel like they can do it again in a self serve way later.
**Brett:** So this is before they're a customer? It's a normal sort of first demo conversation?
**Varun:** And that is what actually helped us do a lot of things.
So that helped them have the confidence to come back to the product by themselves. It helped me get. Like a UX masterclass in what was wrong with the product, because, you know, they would make all these mistakes and clicking this button or clicking that button. And so I would have a litany of like product, feedback that I could share with Eric and our engineering team to fix.
would also have like, I would have like eight of these calls a day. So it was an insane amount of feedback to get. And then I broke with Eric and other engineers to fix all of these things. And you can imagine that compounded over seven months is kind of how we went from these initial sales calls, we're taking like seven demos to get someone to pay two, 300 a month to January, February of 2023, where it was taking one call or even none.
**Brett:** When you started to focus in on growth agencies, did you think at all about like, are there enough of them? Uh, the quality of the revenue from them, any of those types of things?
**Varun:** No, no. It's all about getting to the next step. You're just trying to get to the next step and that earns you the right to keep going and getting you to the step after that. And you know, they're kind of like stepping stones and stepping stones to help you find something great. 'cause you're, when you're building something new, there isn't a playbook for it.
And so you're just trying to get to the next stepping stone and you're kind of following novelty and interestingness along the way. And what I mean by that is. I would have eight of these calls a day, and occasionally someone would say something or have an idea for something that we would act on immediately that would unlock the next stepping stone.
So, just as a small example of that, you know, I'm on one of these calls. It's a random small private equity firm in Kansas City. They're trying to find plumbers in Oklahoma and Missouri that they want to buy and acquire, and they're like, you know, I wish I could scrape Google Maps for this. And I was like, we can make that happen, actually.
And that happened in a day, thanks to Eric on our team. And that opened up a whole series of use cases actually to be even more like practical about that. There's this entire venture firm, called fractal. It's a, it's a incubator and it's filled with vertical software companies. Every single one of those vertical SaaS companies, they cater to audiences that are on Google Maps.
the small businesses on Google Maps. That one integration basically helped us win the business of those like 50 or 60 companies that we would methodically go through. And so that's like a stepping stone to a use case that we would have never had if we weren't listening to that and like being open to that.
So one addendum to what you were talking about was, you know, you were asking like, Hey, our growth agency is too small of a market. How much are they going to pay us? Remember the use case was data enrichment. Right. And so we knew that like that has a massive market.
A zoom info has a several billion dollar market cap and minimum. And we, we knew that's just the first step. And so it's more like, okay. Growth agencies are the first customers who are. I have the skill set needed and the pain needed to use the product in the current state. And then we will improve it, take all their feedback and add more and more data partners.
That was my sole focus. My core top priority for 2022 was how can we get, how can we make this the best data enrichment product in the world by adding as many data partners in here as possible? And then we knew we could expand. And there was actually like a seminal moment when, When we closed Rippling, in March of 2023.
So We got connected to Rippling through, um, one of our investors. And, what was really cool about it is once we got talking to the actual users, they started using it themselves.
And obviously they had lots of problems that we helped with, but they started using themselves and they started expanding really quickly. Started using credits. And, um, And they went from a self serve customer paying a few hundred a month to, paying several thousand dollars a month in like an eight week times period.
And this was really meaningful for us because it was one of the first examples of a real company, of, of a significant, size and scale with our core ICP being able to self serve almost completely, with some basic support, uh, into a real contract. And so. That was a really significant sign for us and how we knew we could expand this from just growth agencies to regular startups, but also to major enterprises like a 10 billion company like Rippling.
**Brett:** Why did you think that PLG was important? Because it's slightly antithetical, like one of the benefits of, of doing a more sales led motion is, is you're interacting with customers in real time. You're then able to take that feedback back to your team. And so there's a diversion in terms of just, you know, go use the product yourself.
What was sort of the origin story of you went from the sales led motion, talking to lots of customers every day, getting some early traction, and then
**Varun:** But they're only paying us two, 300 a month. at minimum, it has to be a 5k, 10k annual contract to make a sales led motion work. So at this price point, um, and a credit based model like self serve has to work, and we can talk about how we eventually turn that into a sales led motion, charging six figures and more, but yeah.
So that's why the self serve motion had to work. I think to be honest. It was a more emotional reason than a purely business driven one. I think we just wanted a PLG business and wanted a self serve business. And I think we knew we could make that happen with Clay. I think it's a, it's certainly a better business model in many respects. and it's a more elegant one in many respects.
And, and, and at certain scales, you obviously need sales and that's an important element of it. But I think the honest answer is that we wanted it and we knew we could, we, there was, there was light at the end of the tunnel and we could get there. Um, and. At this price point and this type of product, the sales motion was not a sales that motion was not going to work.
We wanted to really give it our all on this before we tried to try something else dramatically different.
I think a couple of thoughts on your earlier points in the growth agencies, like they are also how we helped, right? That, that's how we learned about LinkedIn as the main growth lever for us. And I think we were open to that. We started to see the early signs of them posting on LinkedIn about Clay and the use cases and their incentive to do that wasn't like an affiliate fee from us.
Their incentive was that they wanted to position themselves as the expert of this nascent technology. We saw that and immediately pounced on it. Right. And it's like, okay, how can we enable more people to do this? And going all in on that, I would post content every day. Our team would post content every day that became how we generated a lot of demand.
And even to this day, we are still all in on LinkedIn as a main driver of growth for us. And, and, and, and we have a whole ecosystem that's not posting about us all the time. And so like those growth ages, like seeded the first elements of the growth motion on the marketing side as well.
**Brett:** A minute ago you were talking about how LinkedIn was kind of an early growth driver, but you didn't, you didn't share as much about, um, how you went about getting PLG going. where you were transitioning from actually doing a more sales led consultative sale that was driven by some of the WhatsApp conversations over to something that was more PLG
like.
**Varun:** So what are the elements of PLG? You need, um, you need demand that's coming in. You need to, um, convert them on the website. And then you need them to get into the product by themselves and get value and, and pay you money. Right. So those are the four steps. And so you have to kind of break it down into each of those elements.
So on the, on the acquisition side, how are you getting customers for us? You kind of have to fit the, and Emily Kramer has some good frameworks on this, but like you kind of have to fit the, the. The marketing style, the marketing motion to your product, and there has to be a good fit between the two. And so for us, we noticed that linkedin was really going well and content was really going well And we knew that both of those levers dovetailed really nicely with word of mouth And so for us, we were able to go all in on those two things, both through ourselves and through our partners.
And that's what drove the, the acquisition. Then it's like, okay, now you have to convert them on your website. we always enjoyed very high website conversion rates.
And part of the reason we did that was because we were able to Part of that can be attributed to these people being high intent coming from word of mouth or content and things like that. And part of it, I think we've always had a really high emphasis on brand and always overinvested in brand way more so than any other B2B software company that I'm aware of.
And I think that was always a strong intentional decision from the very beginning. Then they have to come into the product and get value on their own. So that was the entire purpose of the reverse demo and like having confidence in that. And so being able to take the seven sales calls into one to zero, that's how we got confidence.
And then people being able to come in, by themselves and get value. And then the last piece of that is monetization. So how are you going to charge? And so, um, in January of 2023, it'll be interesting to share that. Like we didn't have billing in the product. You couldn't pay for Clayton, the product until past a million in ARR.
until a million in ARR I was just sending Stripe invoices to people, which was crazy for a self serve product for like 200 a month. And so ultimately I think we made the right decision and landed on the right value metric. And that's like the most important thing, which was we landed on credits. And then we fiddled with the feature gates and the exact unit costs and all the pricing from there, like every month we would iterate on that, but we had the right value metric.
And so we felt confident in the pricing. So I'd say those are the four elements to building a self serve motion and kind of how we, at a surface level, did each one.
**Brett:** How did you think or land on the idea of credits?
**Varun:** Clay at the time was a spreadsheet and a spreadsheet has columns and rows. We basically realized that all the value is in the columns because every column you add is a new enrichment and that's what really matters and really the, the pricing lever should be, an equation, which is, Multiplying the columns by the rows.
And that comes back to credits basically. And we actually, this was actually fairly controversial at the time. We were a usage based pricing model in 2022\. at the time it was fairly controversial because everything in sales tech was, per seat. Now it's obviously changed with AI. So it's, it's, so it's changed, but I think we were at the vanguard of that.
And constantly our customers would be shocked that we weren't a per seat company. People thought we were leaving so much money on the table, but ultimately There were many things here, but it's like, okay, we're first counter positioning against all the other sales tech companies that are per seat, but it's also,
it's about our value prop. We are a product of efficiency. We are a product that is aligned with your interests and we are not trying to charge you to have so many people using Clay because we want you to have fewer people using Clay. We just want you to have a few people using Clay to drive crazy ROI for your whole company.
And so it's very aligned with the customer. And I think we were early to that. But, uh, ultimately I think it was the right decision.
**Brett:** What gave you the conviction to do that versus do the conventional thing?
**Varun:** It's obviously the better, uh, choice. Like, it's obviously aligned with, uh, what customers want. And I think with pricing, generally aligning your interests with the, the customer interests is what's going to work. I mean, I think, like, I don't, like, we knew that it was that we didn't want lots of people to use it because it's not a collaborative tool like Figma is, you know, Figma is a collaborative product.
So it even makes sense for them to have per seat
pricing, but we're not that right. We are a tool where you do one thing to orchestrate the actions of many. And so it had kind of intuitively made sense. And I think when in doubt, you go on the side of what's better for the customer, because you want to engender that long term loyalty and knowing, and even since then, by the way, I've Every decision we've made on pricing, we publish a memo every year on like our pricing updates and we're pretty transparent about why we make certain changes because when we make changes, we want it.
We want our users to know that we are aligned with them. And that's why we're making these changes.
**Brett:** What's some of the other things that got the growth engine of Clay working in the early days? And I think for folks that are less familiar with the company, one of the most unique parts, ironically, is for multiple years, you've had this incredible inbound machine that you've built. So building on what you were talking about with LinkedIn, what are the other things that you did?
**Varun:** Honestly, I think to keep it simple, if you just blow people's minds, people will come. I don't really think you need to overcomplicate it beyond that.
And that was basically the central mantra of our content just do things and show people how to do things that are really, really valuable to them. And that's all you have to do. Because if you do that, and you actually solve people's problems, you are clearing so much of a higher bar. Then what 99 percent of business software actually does.
And I think if you can do that and communicate it well and have a good brand that that reflects what you're trying to do, people will come. And we were really just focused on content and delivering that content and blogs and and on LinkedIn. There are many other ways of growing your business, right?
You could obviously do email outbound. You could do email outbound. paid ads, you could do SEO, there's many ways of generating traffic. We now have billboards all in San Francisco. For us at the time, these were the things that are working. And we were basically going all in on these two things.
**Brett:** And did you go about them in any particularly interesting ways?
**Varun:** So I think the honest answer is that now we go about the mining in particularly interesting ways. And we can talk about those. At the time, it was more brute force and it was more just regularly putting out the content and diligently doing that with some discipline and getting other people to do it as well.
and, and these would be the, the agency owners or customers and things like that. Now we have turned that into a machine that I think is actually pretty interesting. and what I mean by that is I think that so much of our business is a loop and there are so many feedback loops and we have now tried to create feedback loops in many parts of the business.
And so from a content perspective, it's like, as an example, we have, you know, 50 different Clay clubs hosting community events all around the world, from Bangalore to Sydney to Toronto and things that these amazing people do is, they like share play tables and there's content that comes from that.
We take that content and we can like put that in a LinkedIn post and we can combine those LinkedIn posts and put them into a blog post and combine the blog posts and put them into a guide. And you can have this loop where you can keep repurposing the content that I think is super powerful and can compound over time.
our growth marketing team led by Bruno has done an amazing job at enabling the rest of our community to, uh, to power content, and that can mean, like, how do we enable people to post something to now? And how do we incentivize them to do it? And how do we have Clay creator programs and Clay expert programs to incentivize that behavior?
But it could also mean, you know, we're using software internally. to help our creators post videos online that are personalized to them about Clay features, uh, in their own voice and doing that programmatically. And so I think there was actually a bunch of things that we're now doing that's very interesting and unique, but at the time it was more force of will.
**Brett:** And were you asking early customers to post, or this was just all organic and then you would try to amplify it, or thank them, or
**Varun:** It was a mix of both. I mean there was obviously something organic there happening and the reason it was organic was because Clay as a product enables that and it was in their incentive to do it because their agency owners, they're trying to win business and so they want to post on LinkedIn to position themselves in a certain way, but there was also a lot that we were doing to enable that.
And so we were telling them about new features, helping them make content, partnering with them to write things. So there was a lot that we were doing behind the scenes to help them with this. But there was a huge undercurrent of organic things that were happening that we couldn't just pull out of thin air.
**Brett:** What was the team structure in terms of generating and getting this stuff going? Obviously you have a large team now that does a bunch of this stuff.
It
**Varun:** was mostly a couple of people DIYing it. So early people were like Matthew Kwan and Yash and Eric Nowoslawski. I mean, I'll actually call out Eric in particular because I think hiring him was a huge accelerant to a lot of this because he is the king of the WhatsApp groups. He is one of the most, if not the most respected, agency owner there is.
And so us hiring him and bringing him in house gave us a huge amount of credibility within the audience. And it's one of those hires where I'm not thinking four years in advance. I'm thinking like, how do we get to the next step? Cause as First Round likes to say in the early days, it's all about getting to base camp.
And so we are just trying to get to base camp there. Right. And Eric really helps us get to base camp and he was with us for a year and made a huge impact in that year. And that's posting on LinkedIn. That's getting us the credibility in the, community groups on WhatsApp that he's already creating.
And he's already a huge part of that's getting all these agency owners on board. that's working with some of our top customers because he's the most creative outbound person there is. So we were having almost like an in house agency person doing these calls. remember that it's all a feedback loop.
So the people, myself, Matthew, Yash, Eric, who are working with customers. you know, we all have different skills. And so. We are very versatile. And so what that means is we can have these these reverse demo calls with customers. And then each one of those reverse demo calls is an idea for content.
It's not only an idea for content, but it's also product feedback.
**Brett:** Because you're seeing what they're trying to do with the product?
**Varun:** Yes. And then you can post about that. And obviously, I'm not going to say that this company is doing that, but you can just post about it, generally speaking. And so every conversation we have turns into content. uh, anonymized content.
Um, uh, every conversation we have turns into product feedback. And so there's a loop keeps on building when you're doing that.
**Brett:** As you were sort of building the early PLG motion, you were still doing a lot of sales conversations and reverse demo conversations all along the way?
**Varun:** Right. And remember that all of this was actually still what we were on a waitlist. We actually, launched our product in February 2022, removed the waitlist, two months later, put the waitlist back on, and then we didn't remove the waitlist until multiple millions of ARR in, you know, July of 2023.
**Brett:** What was the thinking behind the wait list?
And why did you remove it and then add it back?
**Varun:** Well, when we removed it, we was like, Oh, we should be general access and then it was overwhelming. And we were talking to all sorts of people who are the right fit. And we wanted to like, make sure people were bought in to have some barrier. We actually use Clay to manage the wait list internally.
And we, every morning, actually, I would go through the list of people who would sign up for the wait list. And some people I would let off directly into the product who I kind of didn't prioritize. And a bunch of other people, I would say, I want to talk to them. And effectively the ratio of that, from spring of 2022 to spring of 2023, over time dramatically shifted.
I didn't have data or metrics to track how this cohort was doing. It was more anecdotal and listening to that. But that's what we did. And at some point in the spring, summer of 2023, we felt, hey, I think we can let everyone in.
and we're ready for that. So let's do it.
**Brett:** What else were you doing in early customer reverse demos?
**Varun:** Well, let's do one together right now. So let's say you signed up for the waitlist. I would click a checkbox in Clay. That checkbox would trigger a workflow in Clay that would send you an email. That email would say, hey, book some time with me and actually come prepared for this conversation with a data set you want enriched or a problem you want solved in this.
You would show up to the call, and ideally you would have a CSV or some data you want enriched. Alternatively, you might not, but we'd spend the first five minutes coming up with something. We'd come up with a problem for you. So that, I'll just, let's. Let's spitball an example. So you could say, you know, to pull from our earlier one about Kansas City, it's like, okay, let me get a list of all the plumbers in Kansas City.
I want to know what year they were founded. I want to know, and that I want that because I only want to sell into, you know, plumbers who are founded more recently because there'll be, there'll be more amenable to buying software than much older plumbers. I want to know which ones are well reviewed.
I want to get the owner of the plumbing company and I want to get their contact information. , remember, my goal is to blow their mind, right? So my goal is to solve that problem in 30 minutes. And I think that is a bar that most software companies cannot achieve, can you solve someone's entire problem in 30 minutes and have them do it?
And basically. You would say, let's do this. And you would click the buttons. I would tell you which ones to click. You know, in order to do this, you need someone who's able to, and our, all our early hires embody this creative enough and on their nimble on their feet enough to basically do any use case at the moment of a, uh, the drop of a hat, right?
But it's a great thing for the customer because they solve their problem in a 30 minute calendar invite. They believe that Clay is their solution going forward as well. They know how to use it and I get a ton of product feedback, and content ideas to work with.
**Brett:** in the 30 minutes you want to solve one use case themselves and then hopefully then they have, then they're equipped to go and do all sorts of other things with Clay.
**Varun:** That's right. And I think as Kareem shared in one of his podcasts with you is, we removed intercom from the the product, so you had to join our Slack community to get help at the very end of the call, I would force them to join the Slack community. I'd be like, literally go into your bar, type in Clay dot com slash Slack, join it and then send me a dm when you're there.
And I would only hang up the Zoom call when they had sent me a DM. And that way I had a point of touch with them where I could manually keep up with them and make sure they were doing things and there for help if they need it.
**Brett:** I want to go back to something we're talking about a little while ago, which is, you uh, started to develop a PLG motion. You generally had agencies and then smaller businesses who were customers that got you to call it your first X hundreds of thousands in ARR. And then you started, with Rippling to move upmarket.
And I want you to sort of share the story of like how those two things work together and ultimately how you started to build the enterprise motion of the last 12 to 18 months.
And I think you all have made this pretty elegant, transition. And so we'd love to hear the story behind it. it
**Varun:** Rippling was one of the first, another, one of the first, that was still kind of self serve. And again, we were helping of course, was like Verkada comes to mind. And around the summer, fall of 2023, we were like, let's, we should build a sales motion.
**Brett:** And like in the case of Verkada, do they start in a PLG fashion?
**Varun:** it was a similar story to Rippling where we like got connected through mutual people and then, started trying to enable them and then work with them more on self serve and started getting them to use the product. And so then there were a couple of companies like Rippling and Verkata and a few others that were starting to do this with but we still weren't able to charge a significant amount of money.
**Brett:** Did you just use your normal credit pricing with them? Or you started to think about enterprise
**Varun:** so this was still like normal self serve pricing just scaled up. So nothing changed at all,
**Brett:** you didn't change the product for them?
**Varun:** Didn't change the product for them. So we're now in the fall of 2023.
basically it became clear that if we want to become a generational company, we need the best company that is in the world to use our product. And it became clear after these experiences with Rippling and Verkada and a couple others that if we want the best companies in the world, we need to spend way more time with them and we need to like properly enable them.
And that means a sales motion of some kind that feels authentic to us. And that was the first like, okay, let's try and do this. our first attempt at this, which was not the right one, was how are we going to get people, first question was, how are we going to get people to pay, enough money to warrant all the time we're going to spend with them?
And so it's like, you know, how are we going to get someone to pay 50 to 100k? And to us at the time, remember our ACV was just a few hundred a month. That's an insane amount of money.
**Brett:** But also why at that moment, did you want to do it? You could wait six months, a year.
**Varun:** The reason at that moment was we, I felt that, the self serve motion was working, that we had those four elements, acquisition, website conversion, activation of the product, and monetization. Not amazingly, of course, but it felt like it was more of a machine and we just made the hire to hire Bruno, from Webflow to, to lead our growth marketing.
And so I felt personally, like I could hand that to him. He could run with it and I could spend more time focusing on sales. and so that was kind of why at that moment. Our first question was like, how do we get people to pay this much money? And our first answer to that was incorrect. And it was, what if we do it for you?
Because our customers were telling us, Hey, I would pay you this much money, but. You should just build all this for me. And so basically they were asking for professional services. And so we did this with two customers and they, we actually closed them and they charge, we charged them one was like 84 K and one was like 60 K.
what we quickly learned was this was not the right approach. And this wasn't the right approach for a few different reasons. First of all, it was an insane amount of work. It was actually way more work than 84 K and 60 K was to fully service these customers end to end. Second of all, and maybe more importantly, we were actually competing with our Clay experts.
We had this ecosystem of Clay experts that wanted to service customers and charge them for that. And by us offering a, a service that our sale was to do the exact same thing. We were competing head to head to them and we want them to thrive. So we don't want that either, right? And so then we had to learn, okay, how do we sell this just as the software, and not as, and how do we price that in a way that we can actually make enough money to make this motion work? And how do we differentiate that from the self serve motion, which by the way, these people could sign up for at any time. And so that was the next question. And so this probably brings us to early 2024.
January ish. And it's like, okay, how do we think about this? So the first thing is like, we kind of needed. a pricing model to actually support this kind of, uh, sale. And so we came up with a platform fee and we had to justify that platform fee. And then we had credits that were priced similarly to the cheapest credits on the pro plan.
This approach carried us for about six, seven, eight months where we would have a platform fee. And, and really, I would say most of this happened, there was still a lot of experimentation and not many sales that were closing in Q1 and even Q2 of 2024, just like one or two. The other big unlock was positioning and how we were positioning the value. At the beginning, we were positioning it as like, Hey, you can move all this work from. SDRs and whatever, and just do it in RevOps and save all this time, save all this money, things like that. We basically ran into a huge amount of skepticism. Effectively, people didn't believe us. The, the bar to clear and getting them to believe us and pay money for it was just too significant. And it was too hard to prove that on a POC. What we then found is that actually, we should start with something much more narrow and build up to that.
And what we should start with is data enrichment. Remember, that was our first use case in self serve. And that remains our first use case with enterprise. And we say, hey, we will solve your data enrichment problems. you are paying for too many data vendors. It's too expensive. It's too many to manage and your data quality still isn't very good.
The great thing about this is it is, an existing budget line item. Everyone has the same problem. Everyone is paying for the same set of vendors. And by the way, there is a POC we can run that is very numeric driven. And we win every data test we're in. And we will, we have the highest data quality.
And so we can prove to you we are better. And so that turned into the motion and it became much more like rinse and repeat and something that we can actually do. So it was the positioning change. Then it was the, the, the pricing change, but that pricing change only took us to the summer of this year, maybe early fall.
Then we changed it again, actually. And the key learning there was two things. First, platform fees are inherently challenged. They are not great, pricing mechanisms. And the reason for this is, first, it doesn't scale. After the first year, you want to keep raising the price because you want to, you know, you want to create more margin.
It's very hard to increase a platform fee. Procurement teams will eat it apart because it's like, why are you charging me this amount of money for this nebulous set of services? then you're left with the credits which are on the low margin that you had on the cheapest plan on the self serve product.
And so we needed to figure out a way to meet our margin goals. Remain usage driven and also keep a much higher price point to warrant all the investment we're making with these customers on the enterprise side. And then, by the way, the challenge we had as an undercurrent through this whole thing is differentiating it from self serve, because why, at any point in time, would these customers not just pay on the website in a self serve way and get access to the product way cheaper?
And ultimately, the answer to that question is to be super transparent about it and just be like, Hey, It's your choice. You can go self serve and do this. Or you can work with us on this higher price point. But you and I both know that you're not going to do that. And maybe it's because your company doesn't allow you to do those things, but maybe it's because you need our features, many of which we didn't have at the time, but we were building in the, in the moment and in the year of 2024 to warrant the platform being warrant the enterprise offering.
Maybe it's because you need our support. Maybe it's a mix of those two things. Maybe it's because this is just how you buy. and it's just embracing that and being really candid and honest with The customers and giving them that choice and then letting people go in whatever direction they want to go in. Honestly, some, amazing logos ended up going self serve and we would probably, of course, give them more attention and love and than we would normally, because we would hope to over time, put them into the center price bucket.
And that brings us to the fall of 2024, where we basically bundled all of this. I took a lot of inspiration from Snowflake's pricing model, and we basically bundled all of this into, the credits and bundled the, platform fee and the support and all these things into credits to dramatically simplify the pricing and they come with more features, and they come with more support, and all these things, and that warrants the higher price point, and it simplifies the pricing dramatically, aligns customer interests, and then we're entirely usage based, and so it can scale much better as well.
**Brett:** Are there any other things that you have figured out in this path to crack enterprise that might be useful for other folks that have a PLG or down market motion that's working as their approaching going after enterprise for the first time?
**Varun:** It first depends on, on your pricing model, right? So it's like, are you a usage based company or a seat based company? And so that kind of dictates how you would go about it. I think we had a more challenging approach because we were usage based, and translating that, translating that to enterprise.
I think that companies like Notion and Figma, have a clear path to going from self serve to enterprise because it's seat based, you're, you're expanding from team to team, you can go to IT, and you can make an easy, compelling case, and it's, and there's a lot of precedent for it, and it's more straightforward, and it's less about a sell on the value, and more about, hey, this is already happening, bottom's up, and, uh, you just need to formalize it, get these security features, pay a premium for that, and go, right?
With us, it was more challenging because We didn't have that many complimentary effects from the self serve motion. We don't have that many examples of self serve customers turning into enterprise customers. A lot of these enterprise customers are coming in cold. and so you don't have that many complimentary effects from it.
You're almost doing a sale from scratch and you are doing a value based sale. But I think what's interesting is that when you're not doing seed based, you're doing a value based sale and you are pricing in this usage way, you can, you can price more aggressively and that probably enables you to go way higher over time as you generate more value in a way that most seat based pricing models don't enable as much.
**Brett:** What about, how you approach relationship building and enterprise selling?
**Varun:** I would encourage people to be on a texting basis immediately. I talk to people on the first call and I say, let's just, let's get on text now. Like, let's, uh, share your number. Let's, let's go for it, right? So, that just immediately makes it a much more human connection. This is also, by the way, where the events play a big role. Because what you're really trying to do is you're trying to stand out again. You're right. You're trying to be different. and the events are yet another arbitrage moment of where people are doing one thing and we can do another to be stand out and be different.
You know, a lot of people say that enterprise buyers don't respond to certain types of content that like, Hey, it's not in, Forrester or Gartner. And like, it's not like professional enough for enterprise rights, but remember that enterprise buyers are just human and they're just humans like everyone else.
And they respond to the same things that we do. And so being human with them and approaching them in like unique and creative ways is probably going to work because if it would work with you, it will work with them. And so that might mean figuring out ways to sit next to them at a dinner and, talk to them, uh, about how you can help and like connecting with them in that way, that could mean putting on unique events for them.
That could mean like being on a texting basis with them and helping them. And it could also mean like just understanding their own personal goals and how you can help them. Right? So as an example of that, we had, you know, Oyster was one of our customers and Petra was our champion there. her goal, she wanted to get promoted and, and, and we through Clay enabled her to do that.
And she also wanted to, over time realized that she wanted to start her own agency and it's like, let's help her do that. we weren't like concerned with what about our champion leaving or this and that. So let's help her start that and let's help her do that. She ended up having Oyster as her like main client.
And, this is a huge one for everyone because Oyster is now saving 40 hours per rep, per month. Uh, Petra is thrilled and having a successful agency, and we're supporting both them. And that's great for all of us.
**Brett:** You mentioned that one of the unlocks was positioning, was repositioning the product for enterprise and landing with sort of the insertion point, which is enrichment. How are you thinking about then going from landing an enterprise with enrichment to, other use cases to ultimately sort of expand?
**Varun:** I would say for us, that model is so success, basically customer success is almost as important, if not more important than the sale itself because we're usage based and because we have a very methodical plan led by Jess on our team to start with enrichment, make sure the data quality is high, and then build use cases on top of that, on that strong data foundation.
Each of which, by the way, uses credits. And so that could mean keeping your CRM enriched, but that could also mean like using Clay to automate outbound at scale, automate your inbound at scale, like Anthropic use us to automate all their inbound at scale, and triple their enrichment rates on that and finding way more leads through that.
Verkada was using us to. come up with new growth ideas to personalize web pages at scale for ABM efforts you know, doubling their ad targeting rates. And so basically it's like, you have a good data foundation and it's like, how can we work with you to come up with growth ideas across outbound and inbound and you're in, and expanding your existing customers, and we are partnering with you to grow your business.
the consequence of that is they grow their business. They also use more credits, which also leads to a bigger contract. And so it's a win win across the board.
**Brett:** And so do you do that via sort of consultative CS on the back-end?
Or what does it actually look like?
**Varun:** Yes, it's, it's, it's done through, um, Jess's like consultative CS team and it's like working very closely with them to understand, this is what could help them grow their business, helping them understand their growth ideas and helping them put those into practice, in a methodical kind of way, one by one.
And we even goal against that internally of like, how many recurring use cases like that are we unlocking per customer per month? and how does their credit usage track relative to the ramp that they should be on relative to what they bought and things like that?
**Brett:** What do you think are like the, the big ideas that are, you think generally useful to other people starting companies?
**Varun:** So a couple of things that come to mind, and again, some of them still may be more applicable to us than other companies. But I think one thing we did in the early days is you could consider Matthew and Yash, myself and Eric as some of the first salespeople, even though that wasn't really what we were doing, but I can imagine for a lot of products, maybe not enterprise products. Or security products. But for a lot of products, I could imagine for the first couple of customer facing hires to hire people who, you know, are obsessed with your product and love it and, uh, have passion for it. And because I think in the early days you were trying to optimize for customer love and customer adoption.
You're not trying to optimize for maximizing the revenue from any particular customer. And so choosing people who are great with your product and that doesn't necessarily mean poaching your customers, but finding people who can be real lovers of your product is like a good start.
**Brett:** There must've been tons of passionate customers that would like to work at Clay. what were you looking for in terms of like the raw material that you would hire?
**Varun:** Yeah. Well, we can start with the three, those three first people, then we can also draw today where we continue to hire people who aren't classically trained to do things to do new functions. So at the time we can talk about Eric and Yash and Matthew in particular, and all three of them are high slope, unique, wonderful humans.
Actually, I would say that only Eric was truly a Clay power user and passionate user. and he was one of the first users. I think because of that and like how deeply he knew the space and how he was our customer, how we knew how valuable that was going to be. Yash and Matthew actually weren't Clay power users when they joined or like shortly before that, that being said, they were deeply embedded in like the no code space and, were really proficient at tools like this.
So they understood it immediately. And, they started to see the value in it. And, and. they started to get in that direction. But I think like what we saw in them, which is true, is they are extremely high agency. They are, amazing with customers and like our, our builder mentalities, like they owe their, their instinct is to build and like to do the work.
And that's rare. They're all fairly technical. None of them know computer science or maybe like know how to code and maybe a little bit, but they all are technical enough to work. Use Clay to the 99th percentile, and build really unique things with Clay and other no code products. and there's obviously a bunch of soft attributes of what makes them amazing people to work with as well.
And so I think those are kind of some of the attributes, but even to this day. We still have so many people at Clay with, you know, not out of central casting for certain roles. And so, for example, Everett, is our head of sales out of go to market engineering, and he's a great example of this. You know, he's an engineer by training. He's a former founder. He was the head of growth at, um, at a, at a growth stage startup. and now he's doing sales. Right? And, and he's doing an amazing job of it.
But then again, I think the work that we're doing in sales is different than most companies. But I think we see this in lots of different roles. Lele on our team went to Yale and studied physics and started a company, and is now running our events motion and, and leading all the community events that are happening globally.
So we just hired a growth investor to be a go to market engineer. we have Puneeth, our head of brand, who's also a head of people. and he's doing that because we want our, our brand designer, external thing to be consistent with our internal thing. And he's designing both of those experiences and he understands our culture better than anyone.
And we know we can support him on the operation stuff with other people. And so those are just three examples and we have a dozen more. And so those are a few ways that we like bring different people with different perspectives to new, uh, to new disciplines and, and help them bring that. And I think we're also doing that with the product, by the way.
So it's, it's, it's our product that's taking the engineering discipline and bringing that to go to market. And we are trying to do that in our, the way we company build as well. everyone in the company is on the business side is super technical. And so that leads to really tight feedback loops amongst people. And so you can have way fewer people. And so that helps us move a lot faster.
**Brett:** Maybe you could talk a little bit about that.
**Varun:** There are many examples of this, but, one thing, right, is like our support team is super technical and this leads, we don't have like an outsourced support team in India or the Philippines, and this leads to the fact that, sure, we're paying a premium for these people, but they're delivering extremely high quality support to our customers and they're technical. So they deeply understand the issues and they are much better at translating those issues to product feedback to our engineers.
And that leads to a much tighter feedback loop, as opposed to having a support engineer and a support person in India, and the communication lags in between. Another example of this is how we do sales. So we do sales through this, you know, we call it go to market engineering. And so this is collapsing three different roles into one.
An AE, an SDR and a sales engineer all into one role. And this is a person who's a bit more technical and background who is good with customers, who has high agency and high slope. again, I wouldn't recommend this for every company, but for us with our model with our, type of product that's, good inbound demand, but needs help getting usage.
And we are focused on adoption and love and engagement as opposed to maximizing revenue. It works really well for us. And as a result, you have really tight feedback loops where that one person can work with customers, generate content, generate product feedback and deliver an amazing customer experience, as opposed to having it segmented out in three different roles to generate demand and help customers have a good experience and close them.
**Brett:** And when you say technical, do you mean like CS technical?
**Varun:** No, not necessarily. I mean, if you look at this team, it's like 12 people. It is actually led by Everett, who's a former founder and engineer, but some of these people are structural engineers by background, but some of them are mechanical engineers. Many of them are former founders. some of them do have a couple of them have like CS backgrounds.
but I would say it's just a technical bent and one of them is a growth investor actually. So I would say it's all like a bit of a technical bent and varied backgrounds. But no, they don't need to know how to code or anything like that. And it's ultimately just a proxy. It's not like a requirement.
It's just a proxy that they would probably be good at this job.
**Brett:** How do you end up running an interview process, for someone who didn't do the thing before?
**Varun:** It's heavily weighted to work trials and take homes, we, like, give them a chance to focus on that. It's much harder, obviously, to do a behavioral interview where you go in a methodical way through their background and, and kind of identify what they've accomplished and how that translates to the job.
That's not really possible, but I think through work trials and take homes, you can identify high slow people and people who can. make an outsized impact in a new role.
**Brett:** How do you approach designing a take home?
**Varun:** A lot of it is trying to simulate what the actual work is as much as possible. actually, uh, I think, uh, I got that aphorism from you. That's what you're trying to do the most. You're trying to simulate the real work as much as possible. And so, you know, for Bruno, who is, uh, who we hired as our head of growth marketing and put together one of the best take homes I've ever seen in my life, It's like, okay, we need to have a growth marketing strategy and then we need to execute it.
And what does that look like? Right? You know, for Osman, who also made an incredible take home. It's like, uh, who leads are a lot of our go to market systems teams. It's like, okay, we don't really know what we need. help build a plan to make it happen. But it also goes into how we hire go to market engineers.
And so for those roles, which is our sales role, we say, Hey, go build something fun and amazing and Clay and blow our minds with it, you know, because that's what the job is actually. Uh, and you need to have the ability to do that. And we've, and our minds have been blown by people who have. built Clay tables that simulate Santa giving Christmas gifts to lots of children around the world to engines that generate, tarot card readings and your astrology signs.
so the creativity in those are really unique and like those give us good signal into whether these people will be able to do this job in real life.
**Brett:** One of the passing comments you made a little while ago was you invested a lot in brand early on. What does it actually mean to invest in brand early on?
**Varun:** So first of all, I think we benefit from the fact that the company's name is Clay. And so that lends itself to many things that, make it much easier to, to build a brand around. Right. And so what does this mean tactically? Well, tactically it means we hired a Claymation artist, who we worked with part time for many, many years and is now full time at Clay.
And we have a full time Claymation artist it was building imagery and, and art, with Clay, uh, Uh, online. Right?
but we also have a lot happening in real life as well. And so, we try to bring a lot of this brand creativity in real life as well, because we, we are trying to stand out from the normal kind of tech audiences.
Right? So for Dreamforce, as an example, our team put on a spa day. And which is pretty atypical for a, a SaaS event at Dreamforce. and the intention was how can you like relax and wind up for a really depleting few days at, at conference. And so how can you bring this energy and creativity and brand, both in your digital presence and in your.
In real life presence. and that is something we invest a lot in. And there are several people at the company just focused on that. we think it pays long term dividends. It's not a short term investment by any means,
last point on this, on the brand name is when you look at other B2B software. No one invests in it. And so when you have something that no one invests in and everything kind of looks the same, a lot of early stage software is just about standing out because you're trying to make news about something.
You're just trying to stand out from the crowd because it's so crowded in the early stage and brand is a way to do that. And you obviously have to have a point of view on it and you also have to be creative, but when no one else is investing in something and you invest in something. That is a way to have alpha and that is a way to really stand out in a meaningful way.
**Brett:** I think it's a good point. I think one of the things that I've noticed is that people focus on being better, as opposed to being different. And just being different, Is valuable.
**Varun:** Yeah, it's enough. And, and you have to look for those areas in company building where there's an arbitrage that you can capitalize on and also feels authentic to who you are.
**Brett:** what are the other things that come to mind when you think about arbitrage moments for Clay with that idea?
**Varun:** Um, so in terms of other areas of arbitrage moments, I think one that comes to mind is around how we compensate people, Clay. we are very proactive in giving people, more compensation if they are truly high performers. And, um, sometimes people are, have just been here for a few months when we, when we changed that it's because we noticed that they are defying our expectations that we had when they joined.
And we're not trying to wait for some formal performance review. to make that happen. We are trying to do that immediately when we notice it in a consistent way. And I think that's not super common. but I think it's both the right thing to do. and I think it engenders like longer term, like loyalty too.
I think that I have been personally on the other end where I feel like maybe I was a top performer at a company And, you know, I felt like I was warranted more compensation and the process of getting it is really painful and actually, actually leads to a lot of embitterment and it's like, okay, so you ask for it and they're like, okay, yo, you have to wait till this performance review.
Why do you have to wait for this performance review? Because it benefits the company, Brett. It doesn't benefit them because it benefits the company to save some money to have some arbitrage on the time that the person is higher performing than what you're paying them. And the truth is, if they're actually overpaying them, the company is getting a bargain.
And so you have to wait till this arbitrary time and then you have the arbitrary like performance review conversation and then there's a negotiation and after the end of this, you maybe get what you asked for, you get a fraction of that and you don't feel good and ultimately it's about how do we make people feel good, how do we make people feel whole and full and like excited and all in and feel seen for their contributions and that way is not the right way.
Okay. And so, like, tactically, what does this mean? Tactically, it's like, first, we should separate performance and feedback reviews with compensation. feedback is a gift to you to help you improve. Compensation is fluid because as things change, as you perform, we should reward you and you should, and you should get more.
And the top people will always deserve that. You know, just treating people well and treating people, in the right way and being generous with your best people, pays long term dividends, not only for doing the right thing, but also for the company and for both people involved.
And, um, It feels not standard for how most companies handle compensation.
**Brett:** Do you do it, according to some sort of leveling system?
**Varun:** we use benchmarking, right? But with the best performers, not that you throw the benchmarking out the window, but for the top people, like obviously, it's going to be on the higher end and so it may not make sense. And so a natural follow up question is like, you know, how is this fair or how is it equitable?
And so one thing you have to think about is like, I've heard like, some companies that I've talked to actually have, or one company I've talked to has a program where they call them like, like, You know, founder of grants or executive staff grants, and they just have a specific program where they say, okay, here is, you know, this pile of stock, and we will just give it to the top performers at completely at our discretion.
And then if people are like, well, this person has more than me, it's they can, they can point to the fact that, Hey, this person actually got a founder grant. And so that's okay. And that's why. You know, we don't have like a formal structured program like that, but I think that in every case, we can justify actually almost all of these things, even with leveling, because it's, uh, and the benchmarking data, because it is people who are exceeding the expectations of where they were before, therefore, warranting more.
And maybe that's a higher percentile of where they are, or maybe it's a brand new level. And so I think in retrospect, you could look at every single one and justify it in that way. But we are kind of using that as a baseline to understand the ballpark of what we're talking about from a compensation perspective and revisiting it, both at fundraising moments, when the company valuation and we should reassess to make sure everyone's is good.
But also when we feel like, Hey, let's take another review of the people and see who's really performing and do that on some normal cadence, maybe every month or something and, and like notice and like reward people in the moment.
**Brett:** When did you come across this idea and start to implement it?
**Varun:** we've been implementing it for the last three years. We've been doing it, since we started really scouting the team in 2022\. the core thing is we want to be proactive. We want to be ahead of, our team, uh, as much as possible. because we want them to know that we value them.
That we are grateful for all their contributing that they feel that we really see them and we, really appreciate them. And I think that taking the reverse approach or waiting and waiting for them to come to you, If someone on your team comes to you, you've already lost the game. Because they have been thinking about this, I promise you, for weeks if not months.
Because it takes a lot of courage and bravery to like, Go up to your manager or the founder and ask for more money. they've already been thinking about this for a really long time. And so being proactive, is at first the right thing to do. But also, helps you as well in the long term in building a really, strong relationship with this person and having them with the company for a long period of time.
**Brett:** Are there downsides that you've observed?
**Varun:** I can name some downsides. I have not personally observed them, but I could, you know, come up with some that I have been concerned about in the past. So the first thing, first thing that comes to mind is, well, if you just keep giving people more money, aren't they just going to keep coming to you for more money all the time?
**Brett:** Yeah. Or, you know, they join. Eight weeks later, they get a bump,
and then another nine months goes by and there's no bump.
**Varun:** yeah,
**Brett:** that feel like
you've set an expectation that right. That's right. Yeah. And, and then it's like, oh, that's messy. And then you don't have a standard time to do all these things. I don't have a great answer to that, except for the fact that we've been doing this for three years, and that hasn't been an issue so far. And so something is working there.
**Varun:** My guess would be that people get it and they're grateful. They appreciate that this is way more than what happened at other companies. And by the way, it's all defensible. So let's just play out your example where it's like, Hey, someone comes in 12 weeks in, they get, uh, they get a raise and then they come back eight months later and it's like, Hey, I didn't get a raise.
And it's like, why? Well, there was a reason this happened and let's look at the benchmarking data. that I haven't had that conversation yet, but that would be the conversation I'd have.
If the benchmarking data has changed and their performance has changed, actually, Brett, if they get a pay raise in 12 weeks and then they come back eight months later and are still crushing it and are still defying expectations that we had for them at that 12 week mark, let's give them more money because they continue to set new standards.
**Brett:** I have so many issues with benchmarking data in general. Like I just, it, it is an odd thing that, know, it's, it's a collection of all the data points theoretically in an industry, but your company is its own unique thing.
**Varun:** And also we have insider information, right? We have, we are probably valuing someone way more than the market would value someone because of context, because of personal relationship, because of trust, whatever.
**Brett:** Or it could just be that your business, ultimately compensation in its most idealized version is representative business value, not just the abstract, what is someone could get paid down the street. It also doesn't sort of capture that you may have a specific role that is quote, not highly compensated in another company, but for your company, it's creating extraordinary shareholder
value.
**Varun:** So there's two examples to talk about. First of all, let's talk about events. For example, events, if you look at Pave or other benchmarking data sources, events, people will be paid very little social media. If you look at social media, they'll be paid very little, but for our business, events and social media are really important.
This is how we grow. So for us, I don't look to events and social media as a benchmark. I look to growth marketing. Another example, like I said, is we have people who are coming from different backgrounds to do different things. So as an example, I was talking to a a finance person who is interested in doing the, people operations role.
Now, this is a really high caliber, amazing person who's coming from a finance background. I was talking to another person from an operations and legal background, also highly compensated from that field, going into a marketing position. Now I'm getting a really amazing human. To work on a, on a field and a problem that is valuable to us, but it's traditionally undercompensated relative to these people's backgrounds.
So I'm not going to compensate them at the, at this, you know, brand marketing benchmark or this people operations benchmark. I'm going to compensate them as if they were finance and legal people coming into the company because that's who they are. And the things they're working on maybe aren't finance and legal, but are really important to us.
**Brett:** I want to wrap up, uh, by asking the question that we always do, which is basically, who in your career has had the biggest outsized impact?
**Varun:** this guy named Nick Merrill, who was, I worked for Hillary Clinton for almost four years, um, the years of like 2013 to through the campaign in 2016, and he was my mentor and manager actually throughout that entire period of time. He has probably had more impact and influence on me than, almost anyone except my parents.
Uh, because it was a very formative stage of my life. It was like the ages of 19 to 22 or something. and, you know, he, I think he in many ways taught me how to be an adult. He taught me how to contribute. He taught me how to, work in a professional environment and make an impact.
and I learned a lot from his example and, and more specifically, like he was always, you know, on the Hillary Clinton campaign in particular, a lot of ups and downs. A lot of crazy things happening every day, and he was able to be extraordinarily level headed through all of that and taught me a lot about how to do that in my current circumstances, which are frankly way less stress and way lower stakes than a presidential campaign.
**Brett:** Do you think he is just a level headed human being or did he work at being level headed?
**Varun:** I think he probably worked at it over time and I think that being in the, the melting pot of chaos that politics and government can be, especially for as long as he was in it, it's a real training ground in that. And I think that when you start with that as your standard, going into startups where the stakes are not about like the future of the country and the stakes are B2B software, it's easy to have things in much greater perspective.
And so for that, and many, many other things that are too many to name, uh, I own like an enormous amount of gratitude.
I feel I'm so fortunate that I now get to work with Kareem at Clay, who is even more of that, who brings a level of calm and thoughtfulness to every, every interaction, And so I think like I'm unbelievably fortunate I am able to work with two people in two of the most formative kind of career experiences of my life that bring this, you know, emotional energy, that I learned from and continue to, do myself.
**Brett:** And he also has a very good sense of humor. one of the things I was wondering is just, in general, do we just under value humor at work?
**Varun:** Yeah. I think so. I mean, it's like, you know, it's like, we don't, we shouldn't take ourselves that seriously. and it's important to remember that and it's important to remember what we are doing in the grand scheme of things, because it's like, you know, we're here to make an impact.
And actually I could argue that like, we are making a huge impact on people's lives at Clay and that's really important and it's meaningful, but we have lives beyond that. And I think that's important by the way. I don't think you actually are going to be, do the best work of your life if you don't have perspective beyond that.
If you give it all to your work and don't have, things beyond that. And having that perspective and having those passions is really important to being, like, successful. A full human and enjoying life for what it is and building the business is one part of that. And for Kareem, it's maybe creating music and, uh, as his passion.
And for me, it's other things, but these are things that are important in our like human identity and like what we need to do the, our best work. And, and I think we believe that we try to bring that ethos into Clay as well. And how we hire people and how we, you know, foster the company culture and our own expectations, by the way, of, oh, how people should be performing?
Like this is a, we try to have a company that is very consistent and very long-term oriented. So that, by the way, like when the music stops or if the music ever stops for the company in our growth, people won't leave. People will be there for the long term and maybe for specific periods of time for a sprint or, or a specific goal, we can, we can turn it up, but we're focused on a long term because we're trying to build an enduring business and how we treat people is a huge part of that.
Great place to end. Thanks for joining.
Thanks, Brett.
### The inside story of the idea & launch of Figma Slides
URL: https://review.firstround.com/the-inside-story-of-the-idea-launch-of-figma-slides/
Last updated: 2025-01-14T16:40:15.000Z
How PM Mihika Kapoor built momentum for her product idea
_This post is for subscribers only._
### How to Make Your Product Idea Go Viral Inside Your Company: Lessons from Figma Slides
URL: https://review.firstround.com/how-to-make-your-product-idea-go-viral-inside-your-company-lessons-from-figma-slides/
Last updated: 2025-07-31T16:53:48.000Z
Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech?ref=review.firstround.com) AudioNative Player...
A few months before [Figma Slides](https://www.figma.com/slides/?ref=review.firstround.com) launched in beta (to [great fanfare](https://twitter.com/zander%5Fsupafast/status/1806114037161447709?ref=review.firstround.com)) at [Config 2024](https://config.figma.com/?ref=review.firstround.com), something unusual was happening behind the scenes: engineers from every corner of the company were clamoring to join this emerging project team. What started as a simple observation — users “hacking” the core Figma design canvas to create presentations — had transformed into the hottest internal initiative.
Behind this groundswell of enthusiasm was [**Mihika Kapoor**](https://www.linkedin.com/in/mihikakapoor/?ref=review.firstround.com), founding PM of Figma Slides (or “Flides” as she affectionately calls it). Her product intuition was already tested — she was an early PM on FigJam, Figma's successful whiteboarding tool, and had previously launched Creator Shops at Meta**.** And her product spidey senses were proven right when she found out 3.5 million Figma files had been turned into makeshift slide decks the year leading up to the launch.
“A lot of the existing players in this space either enabled solid slide design, or team-wide collaboration, but rarely both,” Kapoor says. “I saw an opportunity here for Figma to be the perfect blend of both.”
But even with her impressive track record and compelling user pain point, to win over leadership, she would need even more ammo. “Figma is powered by a philosophy that our CEO [Dylan Field](https://www.linkedin.com/in/dylanfield/?ref=review.firstround.com) holds pretty strongly, which is you can’t just invest in a space because you think you can outdo the competition. **You have to be able to show that your idea would truly elevate the way people are working,”** Kapoor says. (In fact, Figma didn’t release its second product, FigJam, until five years after publicly launching Figma’s flagship design product.)To pull it off, Kapoor knew she would have to over-index on [storytelling](https://review.firstround.com/storytelling-as-a-craft-advice-from-5-experts-on-how-to-tell-a-compelling-business-story/).
Kapoor's pitch and subsequent campaign to rally internal support proved so compelling that Figma's VP of Product, [**Sho Kuwamoto**](https://www.linkedin.com/in/shokuwamoto/?ref=review.firstround.com), [called it](https://www.youtube.com/watch?v=uDq6%5FCPaRjM&ref=review.firstround.com) “one of the best he's ever seen on what a product could become and why it would be differentiated.”
So what was Kapoor’s secret sauce? A carefully orchestrated parade of internal touchpoints to turn skeptics into champions and build unstoppable momentum for this bold, new product bet.
> Figma Slides was a bottoms-up project that came to life via a series of internal viral moments.
On the arduous path from idea to yes, product folks face a series of dead-ends: resources are tight, engineering says it can’t be done, it gets booted from a one-year priority to a five-year one, etc. Perhaps the most chilling outcome of all is getting stuck in approval purgatory, where your idea may get a verbal thumbs-up from leadership, but nothing committal.
How can product folks avoid this limbo? In her [retelling of the behind-the-scenes story](https://maven.com/p/6abc69/3-proven-strategies-for-pitching-an-idea-to-your-company?ref=review.firstround.com) of pitching Figma Slides, Kapoor unfurls her advice for getting your product idea to break through the noise. (And if you want more here, we highly recommend [signing up for her upcoming Maven course](https://maven.com/mihika-kapoor/pitch-and-build-0-to-1-products?ref=review.firstround.com), which examines these topics in even greater detail.)
In this deep dive, Kapoor reveals the five strategies she used to create the “viral moments” that turned even the biggest internal pessimists into advocates. With incisive storytelling and a little bit of internet humor, Kapoor’s tactics drive home why it’s so important for product leaders to get extra crisp around their product vision.
Whether you're a senior IC looking to drive a new initiative inside a BigCo or the first product hire at a startup trying to win over the founder, Kapoor’s playbook for turning Figma Slides from an idea into a company-wide movement offers invaluable lessons for anyone trying to get breakthrough ideas off the ground.
## **Five Proven Strategies to Get Your Idea to go Internally Viral**
### 1\. Add some drama to your demo
Let’s rewind the clock back to 2022\. Kapoor had spent the previous year executing on [FigJam](https://techcrunch.com/2021/04/21/figma-introduces-a-whiteboard-tool-called-figjam/?ref=review.firstround.com), and was starting to brew up a new product idea. She was inspired by the interactive features users were loving in the new whiteboarding tool, and wanted to merge that with the visual fidelity of the core product.
Thinking of the millions of presentations she kept seeing pop up in Figma, she began informally pitching a slides product to leadership. However, the idea didn't initially get much traction. She received some head nods and murmurs of approval but no thunderous applause yet. “It was clear that words alone were getting me nowhere,” she says. “Especially in a see-to-believe culture like Figma.” Intent on making the idea larger than herself, she set her sights on making waves in front of the entire company. [Maker Week](https://www.figma.com/blog/the-making-of-maker-week/?ref=review.firstround.com), Figma’s internal hackathon, looked to be the perfect springboard. (For good reason too — past projects that have come out of Maker Week include [Jambot](https://www.figma.com/community/widget/1274481464484630971/jambot?ref=review.firstround.com) and Figma’s entire widget platform.)
The first thing she did was approach her colleagues one by one, hoping to fortify the project with some muscle. “I walked around the NYC office asking every single person ‘Will you work on this thing with me?’ she says. “If one person says yes, you can use that to build momentum and assemble the early team.”
Mihika Kapoor, Product Lead at Figma
Once she finally managed to convince an engineer and a few other folks to come on board, they put their heads down and got to work on a scrappy demo they could present at the Maker Week showcase. “My advice for anyone going into a hackathon with an idea is not to be discouraged by the time constraints of a few days,” she says. Instead, lean into that restraint to focus on solving the most critical user problem, not obsessing over refined details. To prove just how barebones the demo was, the initial slides prototype:
- Took the Figma editor and added a carousel for a more slide-like feel
- Hacked together makeshift templates
- Leveraged FigJam for the presentation mode to demonstrate interactive feedback
> The biggest myth is that hackathons are for engineers, but that isn’t true. Hackathons are for anyone who has an idea.
But what the demo lacked in last mile polish, it made up for in theatricality and storytelling. Kapoor took a gamble on a meta approach to the pitch. “We role-played as a PM who was late submitting their Hackathon project, and used Figma Slides in order to submit on time,” she says. “The Zoom chat immediately blew up.”
0:00
/0:34
1×
A clip from the Slides team's Maker Week pitch
But hackathons aren’t the only forums for PMs to present new ideas. As Kapoor reflects back on what made that moment so special, she condenses some of her learnings into tactics anyone can try for their first showcase:
- **Find (or make) a forum for your idea.** Company-wide events provide unparalleled exposure and visibility. For PMs inside larger companies, find a way to get involved in a cross-functional event. For PMs at smaller startups, that doesn’t mean you’re counted out. “If there isn’t already a company-wide forum that exists, make one,” she says.
- **Fortune favors the bold.** “It’s easy to be intimidated by large ideas or features, and wave them off as something that will take months, if not years, to build,” she says. “But people remember the idea more than the execution. Being bold and telling a powerful story is much more compelling than showcasing a polished product.”
- **Lean into your playful side.** Acting out skits isn’t everyone’s forte, but the more playful details you can add to your pitch, the more likely you will make an impression. To up the ante on her big reveal, Kapoor amped up the dramatics. “We dressed up in red carpet attire for our demo day, and then I switched into the role of a PM who was late for submitting their hackathon project,” she says. “I took inspiration from my first Figma hackathon, where a colleague of mine played both a developer and designer by throwing a hoodie on and off again to showcase a front-end project she created. Coming out of that hackathon, her idea is the one I remembered more than anything else.”
> When it comes to presenting, the scale of the idea is more important than the execution. The stories, the pain points you talk about and the extent to which you truly lean into that playfulness will always be the thing that people remember.
### 2\. Anchor around a vision
With the entire company now cheering on Figma Slides, you may think Kapoor would have gotten the official green light to start building out a team. But that’s not quite how it played out. Armed with the positive response she received at Maker Week, Kapoor then went on to pitch the executive team.
There was little precedent here, however. Most of Figma’s most recent products (like FigJam and DevMode,) were top-down bets, rather than bottoms-up pitches. With no formal pitch process in place for new ideas, Kapoor would have to face the blank whiteboard fearlessly. She delivered a second product review a few months after Maker Week to Field and Figma’s CPO [Yuhki Yamashita](https://www.linkedin.com/in/yuhki/?ref=review.firstround.com). “I laid out the competitive landscape, stated why I thought Figma Slides could make a splash among all the existing players and ultimately painted an overly optimistic view of the market.” To her surprise, this backfired. “Only sharing the upside led to a lot of skepticism that this product could stand its ground,” she says.
> When you’re sharing in company-wide forums, those are the moments you want to be overly optimistic, because hype is the thing that carries across the company. But any time you’re sharing in a small group forum, such as an executive team, you want to be incredibly real about what the risks are. Otherwise, you might degrade trust.
#### If you like Mihika Kapoor's advice for pitching 0-1 products, consider taking her course on Maven
[Learn More](https://maven.com/mihika-kapoor/pitch-and-build-0-to-1-products?ref=review.firstround.com)
Figma Slides wasn’t dead in the water, but Kapoor would have to change her approach to convince Figma’s leaders that her product could pass the smell test. Which brings us to Kapoor’s next strategy for virality: **To build the intense emotional connection needed to fuel great product ideas, you must anchor your idea around a shared vision.** “Vision is so powerful for a 0-1 project because it’s the constant amidst the changing chaos,” Kapoor says.
> If you have a vision deck or document that folks are working towards and there’s alignment and excitement about that vision, any pivot along the way still feels like forward progress.
Conversely, it’s the teams without a vision deck that she sees spin out of whack. “Without a clear vision, every pivot feels like a step back. Teams might feel they wasted time marching in the wrong direction. However, with a clear north star, the reality is you’re always going to be working on a subset of your vision, so having something you’re tethered to that maps the grander vision ahead keeps morale and pace up.”
**Crafting the vision deck**
Pulling an idea out of your brain and onto the page can get messy (think whiteboards covered with sticky notes and incomprehensible scribbles). Fortunately, for the more left-brained among us, Kapoor says there is a methodical way to sprinkle in a little process here:
- **Frontload the solution.** Lead with where you are going, not how you got there. Opening with your solution immediately pulls stakeholders into the possibility of what could be, turning the rest of your pitch into evidence of your vision, rather than wasting time building up to it.
- **Showcase your vision with mocks and prototypes.** As Kapoor learned when pitching Figma Slides after the PM offsite, talk will only get you so far. Instead, showing the solution you are pitching through demos and prototypes lets execs experience your vision firsthand, making abstract concepts tangible and memorable.
- **Speak directly to the end user.** Get specific about who you are building for. Instead of talking about abstract market segments, Kapoor sprinkled in some of the imaginative role play she used for the hackathon to put the target user (startup founders) front and center. For example, to tee up a Slides feature that would allow meeting participants to “pin” a question to a particular slide to return to later (rather than interrupt the presentation), here’s how Kapoor framed the problem:
Excerpts from Kapoor's internal pitch deck for Slides
Her revised pitch passed with flying colors — Figma’s C-Suite was now on board.
### 3\. Meme-ify your idea (seriously)
Right around the time Kapoor was pulling together her anchor vision deck, she made one simple, yet deliberate decision that would have an outsized impact on her product. “In January 2023, I added the term ‘Flides’ to my personal dictionary,” she says. “It’s a totally absurd name that you could not go to market with, and yet, this was the thing that made people feel the most irrationally attached to the project.”
The result was a domino effect of pure fun at work:
- The animation sync became the “flanimation” sync.
- The layout workstream became the “flayout” workstream.
> It may feel random, but a big part of what made Figma Slides go internally viral was the fact that we called it ‘Flides.’
Anyone not taking memes seriously should take it up with Duolingo’s owl, which pulls in [millions of views](https://www.tiktok.com/@duolingo?lang=en&ref=review.firstround.com) on TikTok. And Kapoor argues that this internet phenomenon isn’t just for amassing followers on social media. Bringing a little tongue-in-cheek humor to your shared Slack channels can also do wonders for making your product more visible.
“It was ultimately this meme that people were able to take and run with it,” she says. “That’s because being kooky humanizes your idea. It makes it easy for someone to bring it up in a Zoom chat, or with a Slack emoji.” The “Flides” meme became so popular that it sticks to Kapoor like glue. “To this day, people are pitching me on why Flides is a better name for this project,” she says.
On a tactical level, Kapoor offers up a few low-lift techniques to get your creative juices flowing:
- **Give your project a code name.** “Brand can be built in so many different ways. Think about code names for your project. Think about iconography — what visuals do you want to be synonymous with your project? Use that to inspire you,” she says.
- **Apply the “double take test.”** “If someone is getting an overview of all the initiatives going on at the company, will a new hire ask to learn more about your project?If you’re telling your mom about your day at work, is she asking to learn more about what you’re working on?” she says.
- **Lean into your company’s communication tools.** Make a custom Slack emoji — yes, seriously. “It will cause this interesting trickle-down effect. It starts with you reacting to every message with it. Pretty soon, your team will start using it, and then your company will. It’s a programmatic version of taking a project and getting it in front of the company asynchronously.”
> If you haven’t already made a Slack emoji for the project you’re working on, I recommend doing it right now.
Even Kapoor’s mom felt attached to the name ‘Flides.’
### 4\. Turn company-wide meetings into your product team’s stage
By now, ‘Flides’ was picking up steam. Kapoor had assembled a scrappy team of go-getters and unblockers, and for months, it felt like the hottest ticket in town. “There were engineers begging their managers to get assigned to the team,” Kapoor says.
It felt that her idea was officially viral inside Figma, and she wanted to keep the momentum going. That meant increasing the amount of “airtime” Figma Slides would get in front of the whole company.
“In many industries outside of tech, there is a high importance on the concept of face time. **But if I could pitch one thing it’s that airtime, not face time, is critical for product success,”** she says.“The best way to do this is to rely on company-wide forums to advance your agenda.”
So when Kapoor got the news that Figma Slides wouldn’t be featured as one of the company’s spotlighted priorities for 2024, she was crushed. “Personally, I was really sad about this,” she says. “I felt that there was a lot of power and evidence to suggest that this was going to be a winning idea.”
It wasn’t that Figma’s leadership didn’t believe in the idea, she says. But there was extreme skepticism that the product would be ready in time for its mid-year user conference, Config.
“There was a widely perceived notion across the company that Figma Slides was a complex product that required a lot more baking time to complete,” Kapoor says. “Of course, from my perspective as the PM, I knew we were going to do everything necessary to get there in time.” Product managers reading this may be tickled — it’s usually the other way around. “There was this interesting disconnect where the Figma Slides team wanted to convince the executive team that we should accelerate the development time,” she says.
> When you’re pushing your own idea, you need to be the one being irrationally ambitious with deadlines and pushing the pace on your team.
So she did what any PM worth her salt does after reaching a dead end, she pivoted. If Figma Slides couldn’t be presented as a top company priority, she would do the next best thing and hitch her wagon *alongside* the main priorities.
Again, leveraging the power of company-wide forums, Kapoor set her sights on Figma’s 2024 Sales Kickoff. “Every year, the entire sales and marketing orgs get together at an offsite location and talk about product priorities for the year,” she says. “Our CTO [Kris Rasmussen ](https://www.linkedin.com/in/kristopherrasmussen/?ref=review.firstround.com)and our CPO Yuhki Yamashita were going to deliver a product keynote on those priorities.”
She had another bold idea: What if that keynote presentation was made using Figma Slides?
Despite pushback from the tech team (after all, it was still an untested product) Rasmussen and Yamashita were game to try it.
But despite Kapoor’s optimism, with Sales Kickoff right around the corner, Figma Slides wasn’t exactly camera-ready. “The product was still buggy and rough around the edges,” she says. “The videos didn’t work. The speaker notes didn’t work. A lot of the features that Kris and Yuhki were going to be reliant on weren’t going to be ready until many weeks after the presentation.” That wasn’t going to cut it. “The entire team went on pause from their regular activities for two weeks to get this presentation in good shape.”
The show must go on, and despite not having a perfectly polished product, it was worth it for the movie-ending reveal Kapoor had in store. **“The moment that Yuhki revealed to everyone that he was actually using Figma Slides to deliver the presentation blew everyone’s minds,”** she says. “It definitely contributed to the internal hype.”
Looking back on everything that could’ve gone wrong that day, Kapoor reflects on the three pivotal things she did that went very right:
- **Be irrationally optimistic.** “You need to believe in timelines that no one else does in order for your vision to end up somewhere in the middle,” she says.
- **Be persistent.** “It takes a lot of work to get someone to use an unpolished product, even at a company like Figma where we use our own products pretty religiously,” she says. “Getting someone to use something that’s barely working, scraped together and requires 24/7 on-call assistance takes an insane amount of persistence.”
- **Remember, the first reveal sets the tone.** “This only becomes more true as you scale towards working at a larger and larger company. People will remember only a few meetings each year, and you can bet that first all hands will be one of those meetings,” she says.
> You might think of your product reviews as your one-and-only stage. I’d like to push back on that. You should view every single all-hands as your product stage and as your opportunity to show your progress and push pace.
Not only did Figma Slides’ cinematic reveal keep the project top of mind for everyone in the company, it ended up changing the course of its fate. “Two weeks after Yuhki’s presentation, we got the green light to work towards a Config launch, something that wouldn’t have happened had we not pulled this off,” she says.
Kapoor leveraged every tool available to her to reinforce her idea, including adding a literal slide to her Slack profile picture.
### 5\. Bring your energy, not your script
If Figma Slides was the company’s hottest band of the year, then Config 2024 was Kapoor’s Coachella. In the final moment in Flides’ viral rollercoaster ride, Kapoor was officially getting the chance to debut her longtime vision on her company’s biggest stage: its annual keynote conference for product builders.
Kapoor was psyched. Not only had Figma Slides become a heavyweight inside her own company, but it was now going to get visibility and exposure alongside keynote speakers like Figma’s CEO Dylan Field and product experts like Linear’s [**Nan Yu** ](https://www.linkedin.com/in/thenanyu?ref=review.firstround.com)(who, as it happens, delivered such [a compelling presentation on org design](https://review.firstround.com/make-an-org-chart-you-want-to-ship-advice-from-linear-on-how-heirloom-tomatoes-should-inspire-team-design/) that we published it on the Review.) She had managed to successfully drum up tons of internal momentum — but if Figma Slides flopped with customers, it would all be for naught.
The stakes rose even higher after her appearance on [Lenny Rachitsky's](https://review.firstround.com/the-power-of-performance-reviews-use-this-system-to-become-a-better-manager/) [podcast](https://x.com/lennysan/status/1782082559654219805?ref=review.firstround.com), where a casual mention of a “secret product” set to be revealed at Config sparked unexpected buzz. Now, with anticipation building, everything hinged on Kapoor's upcoming keynote presentation.
But instead of preparing perfectly polished speaker notes to rely on, Kapoor took a hard left. “I actually found out the night before Config that I’d be presenting the entire Slides section of the presentation," Kapoor says. Speaker notes, and perfectly memorized speeches, were out of the question. But she would’ve ditched the polished prep work either way.
“I believe that speaker notes are the enemy,” she says. “It’s incredibly clear to someone in the audience when you’re using speaker notes versus when you’re not. **In order to make things go viral, especially externally, you need to** [**master the art of speaking for yourself**](https://review.firstround.com/this-advice-from-ideos-nicole-kahn-will-transform-the-way-you-give-presentations/) **as opposed to reading a script.”**
Yes, she wants to pry these presentation crutches from your clutches. “Being on stage was my first perfect run-through, since I only found out the evening before that I was going to be speaking,” Kapoor says. “You have to learn to build the muscle of presenting on the fly, which means giving up prompts. At the end of the day, this will help you connect with your audience the most.”
Rather than memorizing an entire script, Kapoor encourages anyone presenting an idea to focus on the phrases that are a killer (in a good way) and kryptonite:
- **Killer phrases:** “These are the ones where after you say them, you pause, wait for questions (or applause), and then move forward. These are the ones that will resonate with people,” she says. “For me, it was ‘visual communication is the most powerful form of storytelling.’” She recommends having 1-2 sentences per presentation where you have these memorized, verbatim.
- **Kryptonite phrases:** “These are the phrases you keep stumbling over in rehearsal,” she says. Don’t waste time trying to memorize these word-for-word. It doesn’t matter. What matters is that you know what these are, so you know to avoid them day of. Create a mental checklist in your head of the things you need to skip.”
She emphasizes that public speaking is a muscle, so patience and practice are both key.
> Start with transitioning from speaker notes to bullet points on a slide. Then, try relying on the slide’s visual cues to signal the things you want to underscore. Bit by bit, you’ll be ready to present without a script.
Once again, the proof of Kapoor’s tips is in the pudding. “What was really cool is that after this keynote, Flides once again went viral. Only this time it wasn’t just internal. Externally, it was all over X.”
## **Newton's Law of Product: An Idea in Motion Stays in Motion**
At the heart of Kapoor's story lies a powerful truth about product development: the best ideas often come from humble beginnings. “The reality of the product development cycle is that it's messy and chaotic,” she says. “You're going to have extreme highs and lows. You’re going to march in one direction only to hear from your users that it's the totally wrong direction and you'll have to pivot.”
But it's precisely this willingness to put an idea into the world—even if it's rough around the edges—that sparks the conversations, debates, and iterations needed to shape something truly revolutionary.
From a scrappy Maker Week demo to going viral on social media, Figma Slides emerged not because it was perfect from the start, but because Kapoor understood that an imperfect idea in motion beats a perfect idea in a standstill.
For product leaders looking to drive meaningful change, the lesson is clear: your boldest bets might start with something as simple as a ‘Flides’ meme or a buggy prototype—but it's the courage to put that first stake in the ground that sets the stage for a breakthrough.
### Sam Corcos
URL: https://review.firstround.com/sam-corcos/
Last updated: 2025-04-08T05:13:37.000Z
First Round Review is one of my favorite resources for startups.
### Pete Kazanjy
URL: https://review.firstround.com/pete-kazanjy/
Last updated: 2025-04-08T05:12:29.000Z
The Review has done more for distributing and democratizing startup expertise than any other single entity.
### Indra Sofian
URL: https://review.firstround.com/indra-sofian/
Last updated: 2025-04-08T05:11:09.000Z
I love First Round’s content on their blog and podcasts. They're always so oddly specific—yet perfectly helpful because of that.
### The 30 best pieces of advice we heard in 2024
URL: https://review.firstround.com/the-30-best-pieces-of-advice-we-heard-in-2024/
Last updated: 2025-01-08T07:15:21.000Z
The 12th edition of our annual roundup is here
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