Latest / Success Story with Scott Clary / Tim Guleri - Legendary VC & Tech Founder with Multiple IPO Exits | Building Billion-Dollar Tech Companies

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Tim Guleri - Legendary VC & Tech Founder with Multiple IPO Exits | Building Billion-Dollar Tech Companies · Success Story with Scott Clary

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  That's cornbreadhemp.com slash success code success for 30% off your first order of these amazing
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  gummies. So when I look back at the journey from Virginia Tech where I came from my master's,
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  I lost my scholarship and like I'm not going back to that. I'm just going to sell bookstore door.
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  So that then led me on to my first entrepreneurial job and then I ultimately started to obtain.
• 1:22
  How does a man go from selling books door to door to selling his company for $3.2 billion?
• 1:28
  Today I sit down with someone who did just that. Tim Galeri started with hustle an engineering
• 1:32
  degree, a master's in robotics and a side gig selling books to fun school. When I started
• 1:37
  Octane in 96, shipped in the market was the internet was happening and I was confident that the internet
• 1:43
  is going to once again change the customer interaction sort of landscape. That was my insight
• 1:48
  as an entrepreneur and that's how I built the company. In the 90s he helped build scopus technology
• 1:52
  sold for $750 million before founding Octane software. Now as managing director at Sierra Ventures,
• 1:58
  he's backed billion dollar exits like source fire, shape security and treasure data. This is the
• 2:02
  Tim Galeri story. Nothing great gets built overnight. You have to have the courage as an entrepreneur
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  to realize that and lean into the commitment and then we will be your fuck partners and
• 2:13
  capital partners to take us to that journey. Have a pretty deeply ingrained view on what a great
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  venture partner is on the stage of the company, which is giving you the gift of time.
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  Tim, you've gone from selling books door to door to putting yourself through grad school
• 6:37
  to building billion dollar companies. So talk to me about a common threat in your journey.
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  I think Scott the common threat I would say is that you know you as a when you're growing up as a
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  child or whatever you have certain sets of trainings that your parents impart on you and that
• 6:57
  tends to shape you as an individual. And for me when I look back because I've reflected on
• 7:03
  this many times, I think there were two things one I got from my dad, the other from my mom. So
• 7:10
  my mom was an avid gardener and she loved literally at a patch of dirt that she'd given me.
• 7:18
  My patch of dirt and I was responsible for it. Get my hands dirty. Make sure I kind of water the
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  plants all that good stuff. So the idea that you're constantly working if you love something and
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  then it doesn't feel like work. And the idea that you're constantly pushing the ball forward
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  right is one key anchoring attribute I guess I have. And the other one is my dad was named in army
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  when I was growing up he always you know and then he was the infantry so life was pretty hard
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  and he always had this term called boxon you know which is you know when you're boxing
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  you fall in the ground the referee says you know once you come to down he goes boxon okay get up
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  and you keep going again right. So point being that obviously you have to be smart at your skill set
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  and you have a technical or other ways but once you kind of have some lift off you got to go
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  back to your kind of core you know features as an individual work what made to you right. So when
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  I look back at the journey from Virginia Tech where I came from my master's and then you know
• 8:28
  one supper I lost my sponsorship scholarship and so in sort of calling dad for money I'm like
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  I'm not going back to dad I'm just going to sell bookstore door and earn you know 10 tall grand
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  and pay my tuition for the next quarter which is the door to door selling that I did and actually
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  and Sacramento California but it was one of those things where you fall down you know adversity
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  happens but you just kind of pick yourself up and keep going right. And so that then you know
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  sort of you know let me on to my first entrepreneurial job and then I ultimately started octane
• 9:05
  which is the company you're referring to which I had a great outcome. So when you think about
• 9:12
  entrepreneurship and you sort of you discovered I think that you discovered when you started
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  selling books maybe it was earlier than that that you had this entrepreneurial mindset and
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  I've always gone back and forth on this idea and different people at different opinions
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  I can entrepreneurship be learned is it something that you're born with is it something that you
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  learn what do you feel do you feel like it was something that you've always been or was it something
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  that you had to work for. No I think I think I'm on the on the camp work can absolutely be learned
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  so if you look at my history I didn't come from a business family I came from an army family
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  with dad got fixed income right and even from you know work from like a very regimented like
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  a 13th morning back at you know 4 p.m. then off to you know his evening activities. So growing up
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  I had no business you know being talked on the table none of that right but I think
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  going back to the you know the the the the what made me me interestingly which was kind of like
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  this always on and so and so forth when I came to California and I you know I used to go to my
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  friend's house on the weekend and you know the double conversation around the water cooler was
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  always around entrepreneur X company Y and in that guy do great so like it the the fact that
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  and that's really I think something that is the amazing Scott about America which is
• 10:36
  the can do is in the water right and it is I think for the individual that really wants to be
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  that person for them to grab that so when I was here in the early 90s kind of you know doing my
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  first entrepreneurial job and those were the conversation around the water cooler or with my friends
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  in the weekend I was like I look back at my own skill set I'm like I can do this I can be that guy
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  right that they're talking about in the in the third person and and that sort of just changed me
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  and made me this this got the fire going inside of me man remember I was kind of in my 20s at the
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  time right so this is not somebody that's you know 17 or 18 so I'm like already through Brad
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  School and doing my first job so I think the long-ass fear short question is I think entrepreneurship
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  is something that could be apps to be learned and the fire can get lit at any time in your career
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  and it just comes down to you know if that spark happens you got to lean into it I just want to
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  take a second and thank cornbread ham for supporting today's episode now cornbread ham CBD
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  I keep them in my night stand for those moments when I just need a little extra help relaxing
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  first order of these amazing gummies how do you know what to lean into because you built I think
• 12:51
  so you built two companies so scopus and octane octane was the 3.2 billion dollar exit that's
• 12:58
  massive number right so obviously you leaned into something that was working but for an entrepreneur
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  I think that's the biggest difficulty and one there's a lot of difficulties when you're an entrepreneur
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  but one of the biggest difficulties is there's two competing thoughts right so should I keep investing
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  into this it's always going to take longer than I expect I know that you know maybe it's not
• 13:21
  going to be at the two or three year mark but the seven eight nine ten year mark I'm going to start
• 13:25
  to see that bell curve growth curve hockey said growth curve everything up into the right that I was
• 13:30
  hoping for or on the flip side I'm putting on my time and energy into something that I can't really
• 13:38
  validate product market fit I'm not seeing the traction maybe I should just as Kevin O'Leary says
• 13:43
  take it up behind the bar and shoot it so when you're when you're trying to invest your life and
• 13:47
  energy into something how do you validate if it's an idea that you actually want to commit yourself to
• 13:53
  I think the two two ways to think about it I was telling you my journey and not every entrepreneur
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  journey is that way I was lucky to be you know early at scopus I was like in point number seven
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  and this was a company that was in the customer relationship management space so I call it the
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  granddaddy of Salesforce dot com right like the first OGs in the in the space um scopus man to
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  then clarify and um that was my light MBA so in other words uh I joined uh in in sales engineering
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  I rose up to the ranks in sales engineering which was what you learned all about selling and
• 14:33
  kind of you know what do the customer want and kind of and remember I was an engineer coming into
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  the job so I had zero knowledge about sales or you know you wouldn't even know what I was or
• 14:44
  what these sales guys who for living and then I was lucky that my CEO or is a son and uh the you
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  know my my now very close friend Aaron Oman um who ran sales gave me an opportunity to move from
• 14:58
  that into marketing and so you know I call it the live MBA because I'm in this company that is
• 15:04
  growing and getting functional cross functional training and and that sort of gave me along with my
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  other comment earlier about just being very uh naturally inclined because of those conversations
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  that I got to do something entrepreneurial to give me the skill set and the confidence
• 15:23
  that hey I could do this right so the point I'm trying to make is that um if you can set yourself
• 15:29
  off as a young young person in the company where you could learn those skills on somebody else's
• 15:34
  dying that actually sets you up really well that when you're doing your own company you don't make
• 15:39
  the mistakes and the beauty bot startup says that you know um I I I raise scars now for for um you
• 15:47
  know for entertainment and sort of you know um when your ass is two inches from the ground you feel
• 15:53
  a rebound right and that's different than you know being at a larger company like a snowflap
• 16:00
  or Salesforce.com but you might be just in a in a in a single department so what I tell entrepreneurs
• 16:06
  or want to be entrepreneurs is get into a well run small company because that's the easiest
• 16:12
  and the fastest way to get cross functional skills and I think that's what gonna set you up and you
• 16:17
  do your own company to really um you know execute uh and then make the most of it so and the
• 16:24
  and the second part of that is that also gives you kind of these filters that says that when you're
• 16:28
  doing your own company hey this is not working and hey should I go and shoot this idea behind you
• 16:33
  know you know behind the barn and try the next thing it also gives you contacts right like I was
• 16:38
  able to hire the handful of first engineers at octane because of my tenure at Scopus so my
• 16:44
  co-founder Kira Maccogon was now the president of Ring Central a very successful public company
• 16:50
  came from that because she and I you know got to know each other and he said okay we're gonna
• 16:55
  do octane together right so you get um you get uh venture capital contacts because I was presenting
• 17:02
  to the board and I was at Scopus you get a coworker contacts like Kira you get customer contacts
• 17:09
  so first three contracts actually came from customers that had churned from Scopus and I just went
• 17:16
  to the same guys and said hey I've just hung the shingle I'm the guy uh will you you know we did
• 17:23
  great business before will you give me a chance right so there's all this benefits of working
• 17:29
  in a really well run startup company before you do your own so it's just I mean when you do this
• 17:34
  you massively de-risk of building a company yeah because you see it because of all the the
• 17:41
  entrepreneurs that come to you and and probably pitch to you but do you feel like there's a
• 17:46
  an incorrect shift in the definite I mean I don't think it's new but an incorrect shift in the
• 17:52
  definition of entrepreneurship where people are like for going any work experience and just trying
• 17:58
  to build either right out of school to emulate like a Zuckerberg uh I want to build the next thing
• 18:04
  I'm gonna drop out a Stanford I'm gonna go build a company or even people that don't want to build
• 18:09
  a tech company uh I feel like social media propagates this idea of it's so easy to build it's so
• 18:16
  easy to you know be an entrepreneur and and you see it your front line to this do you see a lot of
• 18:22
  people sort of for going the delayed gratification and trying to get this instant entrepreneur result
• 18:28
  and then backfiring on the on the on the on the back of that because they haven't put in the reps
• 18:35
  in the work yeah so uh I think firstly um look I think it's it's super commendable whether you're
• 18:42
  right out of school and you jump into you know solo entrepreneurship because that's the fashionable
• 18:46
  thing to do and all your friends are doing it or you go the journey that I was distracted I went
• 18:51
  where I worked another company for five six years and then I started my second you know my company
• 18:56
  which I started right which was octane uh but in both cases kudos to you because you're an entrepreneur
• 19:01
  right so that's let's start for that right because it takes a special special person to you know be
• 19:07
  that okay and there's learning in both I think both paths uh I do feel that um that on the first path
• 19:16
  where you're just kind of launching yourself uh and you know you know handful of kids in a dorm or
• 19:22
  whatever I think the the the probability of success is much much lower right because you just don't
• 19:29
  know what you don't don't know and and and so a lot of these uh and we see this you know with my
• 19:35
  coordinator and other um you know incubators where um but the the team that came through the
• 19:44
  vc batch x x plus 2 x plus 3 they come back and that's the real company so so I mean if you look
• 19:52
  at the vc sort of you know alumni book they talk about Airbnb and they talk about all these like
• 19:59
  high flyers but there is 98% of the of these classes actually just train you to be an entrepreneur
• 20:08
  but you're learning that's kind of the scopus example I was giving you and then you come back
• 20:12
  next time around you know you're already for knowing what mistakes you made and and and so and so
• 20:17
  forth so I think um uh to me if you were planning it out you know and you're like a new you know
• 20:23
  grad and and and you were trying to like go hey I'm entrepreneurial I think I think going down
• 20:28
  the path where you put set yourself in a in an entrepreneurial school while you're building the idea
• 20:35
  puts you at the you know in a much higher um category of success and even then it's not easy
• 20:41
  but at least you break the risk down and you have some skill set to uh you know to push yourself
• 20:47
  forward and when you when you sort of walk through because obviously your journey shaped how you
• 20:53
  approach investing and how you approach entrepreneurs so your experience how did it shape your
• 21:00
  investment thesis how did it shape what you look for in entrepreneurs so I think uh the first
• 21:06
  thing is that entrepreneur that I like are the ones that uh they have an insight about the future
• 21:14
  that is not consensus so you know there's this uh classic kind of you know categorization which I'm
• 21:22
  sure you heard of which is uh uh contrarian contrarian investing uh non-consensus investing and
• 21:31
  you know consensus or beta investing right and contrarian investing as a name suggests is where
• 21:37
  you get the most alpha but the most risks so this is like you know you're like you're looking so far
• 21:43
  ahead and you're taking a complete like you know flyer right yeah uh consensus is where you're just
• 21:49
  following the market and in the middle is non-consensus investing which is the one that I like because
• 21:54
  this is when you're seeing the world through the eyes of the founder so what I try to do is hang out
• 22:01
  of these founders that come through us and try to like connect the dots and what is it that this
• 22:06
  team or this founder is seeing that that the rest of the market is not seeing that I believe it
• 22:12
  because remember we're doing early stage right we are trying to be like the first and
• 22:17
  social check into these uh entrepreneurs that one of the real companies and the B2B markets so that's
• 22:24
  the Sierra Ventures ICP so I look for that and these founders and that come from my own uh you know
• 22:32
  journey as an entrepreneur because when I started um octane uh in 96 um you know CRM had happened
• 22:42
  and there was like you know scopus and seabull system that these big companies but the shift in the
• 22:47
  market was the internet was happening and I was confident that the internet is going to once again
• 22:52
  change the customer interaction um uh sort of landscape and that was my insight as an entrepreneur
• 23:00
  and that is what you know my investors graylock and sigma and backed and um and that's how I built
• 23:06
  the company so I look for the same pattern maps now when I'm meeting the founders and then my job
• 23:12
  is to agree with them that this is the road that you need to execute on to de-risk that idea such
• 23:21
  that you can get the first handful of customers and the next handful of phenomenal investors to put
• 23:26
  fuel in the tank so that I even think oh sorry I apologize now I was gonna say even your
• 23:32
  journey from operator to investor I think is a little bit uh interesting and I would say not
• 23:38
  common because okay so I have to understand this you can you can sort of walk me through this
• 23:42
  store I think it's fascinating so you had a 3.2 billion dollar exit that was Sierra was the
• 23:48
  entity that acquired octane but then there was no no no octane was acquired by Episany
• 23:56
  which uh okay okay me and then I hung out at Episany integrating uh octane and do Episany but
• 24:04
  the then CEO and a dear friend of mine Roger Saboni uh and then while I was at Episany as one of
• 24:12
  the officers and that uh Peter Bendel was a founder of Sierra and one of my good friends from
• 24:21
  uh Scopus Dave Schwab was also a partner at Sierra as a rest was a connection a big thank you to
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  how you ended up running sear that i was trying to figure out the thrill okay that makes a lot more
• 27:09
  sense so that explains the interesting so i obviously new venture capital because i raised
• 27:15
  money from some of i think the best fund in the valley as an entrepreneur and that's why i knew
• 27:22
  the venture capital game you know i returned for them half a billion dollars each you know from
• 27:27
  the opt-in experience so you know she's like a half a billion reasons for each of them to make
• 27:32
  you know still be dear friends and now we co-invest together um but then i'd never quite
• 27:39
  formally thought about uh becoming a bc uh you know i was gone on my second company and i'd
• 27:45
  likely i'll do a third or a fourth or whatever yeah and then i happened to spend time with Peter
• 27:50
  and and and Dave and um sear felt like a startup at that time the firm had been around
• 27:56
  already for 20 years but the way they were thinking about and and helping early stage founders that
• 28:02
  was what my love was so i spent a few you know um a little bit of time on with the on board meetings
• 28:08
  with uh with Peter and Dave and that's when i pulled the trigger and joined seara and in 2002
• 28:15
  okay that makes a lot more sense now i was wondering i was like yeah i was like i don't think seara
• 28:20
  had had the capital to make that kind of acquisition but then i thought i was thinking
• 28:25
  of some sort of private equity place okay so octane was acquired by pubco and then this was just
• 28:31
  relationships that led you into seara okay how has seara how has seara changed i mean why when
• 28:39
  over time what was their thesis and what was their strategy when you first started talking to Peter
• 28:45
  what has changed over time what's evolved yeah i think uh seara is uh is a phenomenal brand uh
• 28:52
  very well you know has served like some of the largest companies uh stratacomb which became the
• 28:57
  corosisco was our investment uh you look at um the beginning of uh big news of ERP uh so
• 29:04
  intuit was one of you know a signature um investment that actually Peter vandal made himself
• 29:10
  and and so and so forth so lots and lots of history before i joined the firm
• 29:15
  but in um the 2001-2002 uh you recall that this is like right after the craziness of the
• 29:23
  internet wave and the and the crash right or the market right um in the in the early 2000s and so
• 29:30
  what the firm had uh become the funded become very large and we were doing early stage and late stage
• 29:39
  and um it became clear when you rolled the clock forward kind of to you know uh uh 2010
• 29:46
  2011 that that strategy was not something that you know i was excited by as one of the general partners
• 29:53
  and my two other partners mark Fernandez and Ben you we wanted to do early stage and we felt that
• 30:00
  sort of a split strategy would would serve neither masters right you know in good job in early
• 30:05
  state investing or mid-state investing so um that's kind of when we'd you know uh discuss with
• 30:12
  with the rest of the partnership and um you know took the firm down the direction of early state
• 30:19
  investing so in 2012 uh scada would say was the birth of what i jokingly calls here at 2.0 so we
• 30:30
  reinvented ourselves in the sense that we got clarity on mission right uh the brad had been around
• 30:37
  your firm now is over 40 years uh in business investing up 13th fund so one of the iconic uh
• 30:44
  your names and and and be to be tech investing and really lucky uh to be given that
• 30:51
  pedestrian by our limited partners and entrepreneurs that you have choose to work with us
• 30:57
  but uh what really made it clear and fun and and starting in 2012 then you know we effectively
• 31:04
  took over the management of the entire firm uh because i was an in with you general partner before
• 31:10
  then and then you know 2012 won on what's running uh the firm along in the apartment market then
• 31:16
  is now we had a very very clear not star which is you want to be the first institutional check-in
• 31:22
  uh for us a second sometimes because now these are precedes and all kind of you know fun stuff
• 31:27
  happens before we find a great investment and then you have fun and fun stuffs in in air quotes
• 31:34
  so yeah i agree you know friends and family rounds and pre-preseeds and all kinds of stuff right
• 31:41
  but you know sort of this come early stay late mentality right that nothing great gets built
• 31:48
  overnight okay and you have to have the courage as an entrepreneur to to realize that and and
• 31:56
  lean into that commitment and then we will be your fuck partners and capital partners to kind
• 32:01
  of take us to that journey and i think what really helps us that you know i've personally been on
• 32:05
  the road multiple times taken several companies public you know we've kind of have all the arrows
• 32:10
  in our back so it's like hey i really suggest you don't walk down that alley because it's gonna
• 32:16
  it's gonna hurt right go keep been there and i think it's that all kinds of city of brand and
• 32:22
  love for entrepreneurs and everything that go through and deep deep respect is what i think
• 32:28
  you know Sierra has come to become and then obviously we do a lot of all the stuff for uh you know
• 32:33
  we have all CIO advisory board and all kinds of uh infrastructure to help these guys get the first
• 32:39
  10 15 20 customers but that's a little bit i think a back story yeah i know i mean i love it
• 32:45
  and i think that again if you've if you've played this game before and you've built companies
• 32:49
  multiple times then this may not be a surprise but for our first time founder
• 32:57
  maybe just describe the importance of i love this philosophy come or at least stay late i think
• 33:02
  that's i think there's an incredible philosophy and i and i want to sort of reinforce how important
• 33:08
  that is as a first time founder what that's gonna mean to you in your journey and just having
• 33:12
  somebody who's really in it for the long haul so maybe talk about the importance of that
• 33:17
  but also i think it is important without naming names because that's not cool but talk about some
• 33:23
  of the traps that founders can fall into when they work with other types of firms yeah i think um
• 33:29
  look i think it's ultimately uh uh founders have to be very thoughtful about the kind of journey
• 33:38
  they're going to embark on right so are you sprinting and you're you're building muscle memory
• 33:45
  to be a sprinter or or a marathon runner right because you know the way you train you know the way
• 33:53
  you eat uh your regimen is very different right so if you're trying to be you know instagram and
• 33:58
  kind of trying to get to a billion dollar outcome and you get bought by meta you know that's uh
• 34:04
  you know consumer compete different looking you know that's like you know what what uh i think the
• 34:09
  industry charts are called bit scaling which is like just pour a bunch of gas and you know good stuff
• 34:14
  happens we don't believe in that philosophy of incinerating cash uh we like to build solid foundations
• 34:24
  so that you can build the tallest building in downtown right like at a distance you know
• 34:29
  very very thoughtful and thoughtful execution understanding also that along the way
• 34:35
  there'll be a lot of like discovery and and and and your decision that have to be made that
• 34:41
  might be painful you know for the entrepreneur because you letting people go or you're you know moving
• 34:46
  strategies but again somebody that has been that done that as a steady hand on the till and
• 34:53
  you know really work entrepreneur hours i mean you should talk to some of the entrepreneurs that
• 34:58
  i'm involved with the mark my partner Ben Shashank etc i mean last night i was on a phone call
• 35:04
  to like 10 30 right but there's some guy and we're texting right and the guy like hey Tim
• 35:10
  Irouek i just finished dinner i'm watching you know the game yesterday uh the playoffs and bang
• 35:15
  you know he just calls me we have a quick like half an hour conversation and it doesn't feel like
• 35:19
  work to me because honestly i don't think i've ever worked since 2001 honestly Scott like and i
• 35:27
  you know don't tell an apartment this i shouldn't get paid a dollar for doing this right i'm having
• 35:30
  i have so much fun because you know i love these entrepreneurs i love what they're building and we're
• 35:36
  invested in it not just writing the check is the easy part can you give them the time that's the
• 35:42
  hard part so i'll answer your question which is when you're choosing um a VC partner don't worry
• 35:51
  about the cash with much is worried about the time are they going to give you the time and really
• 35:57
  be there be a thought partner as you're navigating these these these holds and alleys i was talking about
• 36:02
  before and i think if they cannot give you the time uh which is what happens when you're you know
• 36:09
  multi-stage and multi-billion dollar fun because look you're you cannot possibly have time because
• 36:15
  you know you have 300 people in your organization you have seven billion dollars to invest
• 36:22
  you're writing like 150 million dollar checks a piece that's a different beast right and those
• 36:29
  GPs also make great money for the investors but that is not the game that we play and i don't
• 36:36
  think that's a game that all you say don't know should be looking to play so i have a pretty you know
• 36:43
  like deeply ingrained view on what a great venture partner is at the stage or the stage of a company
• 36:50
  which is giving you the gift of time and um and you can only do that if if you're if you're making
• 36:58
  these concentrated bets right like i write like one check maybe one and a half check a year um
• 37:05
  you know and so do my partners so we're not spray and pray we're not like doing you know
• 37:11
  70 companies it's a very conviction-based um investment strategy um and then you know i think
• 37:18
  that's paying paying us very well and uh LPs and funds are really great because of that
• 37:24
  i know i think it's smart and i think it's a healthier strategy for the entrepreneur because
• 37:28
  this spray and pray blitz scaling oh it's okay if nine companies fail at least one will be a unicorn
• 37:34
  i think these are very toxic ideas and i don't love these ideas and
• 37:39
  sometimes entrepreneurs just see money and they get excited and they they jump at the money
• 37:44
  and they don't realize that like listen your your life is not going to be as great as you think it
• 37:49
  is just because you take uh take some money from an investor so yeah i think it's important i
• 37:55
  i i love it you're you're so focused and you're so careful and thoughtful with your checks
• 38:02
  because that means that and another idea like money is relatively cheap but time is very expensive
• 38:09
  very expensive so to get time from a managing partner is yeah i don't think that happens that often
• 38:15
  yep i i really don't i mean what your risk is that you make the wrong bets so maybe just
• 38:25
  talk about how you make sure that that one one and a half checks that you write per year is not
• 38:32
  is not betting on the wrong company or the or the wrong person i think that's a that's a great
• 38:38
  great question and you know the interesting thing about venture is uh scopt and the reason i love
• 38:43
  this this you know job that i do is that um you cannot rest only laurels because the market and the
• 38:51
  and the and the and the and the technology trends keep changing so you always have to keep
• 38:57
  reporting yourself so 20 years doing this i could still tell you that i'm still learning
• 39:04
  and i still have that you know that that lures mindset personally at that you know because it's
• 39:09
  just like and i love a lot from entrepreneur because it teaches me a lot and i'm constantly
• 39:13
  looking for that right constantly spending time like today i have lunch with the tutor's
• 39:19
  law officer of GSK um you know we're gonna spend an hour together and you know i mean she sits
• 39:24
  on top of a massive budget so you know both on the industry side entrepreneur side and then
• 39:29
  senior execs right so we're constantly learning um i think for for me what uh what i think is super
• 39:37
  important is that uh these learnings are the stuff that you transfer over to these entrepreneurs
• 39:43
  so that you know the transfer learning on the osmosis is happening and they're just like figuring
• 39:48
  this out and and not you know again going in wrong directions or or making the most
• 39:54
  efficient use of the capital that you've given them right and so um we do uh six optimizations
• 40:03
  in the seed through series aid journey and the six optimizations are there's product marketing or
• 40:11
  you have a product positioning optimization there's team optimization so how do you structure your team
• 40:18
  there is company positioning optimization so the whole series of exercises we take the entrepreneur
• 40:23
  through like okay what is the category what should you really call it right there's a financial
• 40:30
  model optimization there's a whole series of exercises there there's a captable optimization
• 40:36
  which is like okay captable is a is a is a you know is it very much like cash there's only so much
• 40:43
  of it to go around so there's a whole notion of okay how do we how should we think through seed to
• 40:47
  A to B to C because ultimately we're on the same comp land as the founders we're working for equity
• 40:54
  and equity value right uh and the final is you know funding a fundraising optimization so these are
• 41:00
  the sub pillars if you may or building a great foundation of a startup company and uh it's that's
• 41:08
  what we spend time on and I think that's what makes great great great companies happen the mistakes are
• 41:15
  when um and we make it and I make them personally as well where um uh and most of these have to do
• 41:23
  with the individual CEO uh that we took a bet on and that bet ends up being wrong so the
• 41:31
  a read of the CEO the reading CEO or on the market right uh was not like on the nose and I'll
• 41:40
  I'll give you a couple of examples so in one instance um it was a seed check uh it was a company that
• 41:49
  was based in in the Rockies and uh it was a very very aggressive and a very fundamentally disruptive idea
• 41:58
  uh so we she did this company along with another small seed fund adapting the raised maybe 3.5
• 42:04
  million bucks or so uh and then the year into it the CEO was not seeing the not star B the not
• 42:13
  star so the market had shifted quickly openly I had done something different than what expected
• 42:18
  them to do and suddenly that market idea disappeared and the CEO just you know called me one day and
• 42:24
  said hey I'm gonna do something else right so that's an example of uh two things going wrong
• 42:32
  that actually one is the CEO's resolve to work through a knot right uh I I didn't read it correctly
• 42:42
  I thought that that that particular gentleman and vigil would actually go through that wall
• 42:48
  but he chose not to and the second is we didn't expect the market of shift so no harm no foul
• 42:55
  you know I'm still you know very friendly with with that CEO but that's what seed bets are all
• 43:00
  about you know you you you make the best um sort of bet based on the information you have at hand
• 43:07
  at that particular point and and you know you truly understand what you have once you're six
• 43:12
  nine months in the journey with the ultimate market in a situation like that
• 43:17
  is there something that you could do to or or that you try and do to help the founder CEO
• 43:27
  see a line on the same vision like real line because from every person that I've spoken to who
• 43:33
  does venture investing the the individual is the most important component like yes the market can
• 43:39
  shift but the individual is the x factor like if that person goes rogue you're done so what
• 43:46
  what are what are the as let's talk to investors in the audience they they put money into an early
• 43:52
  stage company what can you do in that case is there is there strategy is there tactic or is that
• 43:59
  right off yeah I think so the first thing is that um do as much work uh as you possibly can
• 44:09
  for you write the check and I really mean this with all the this is why I'm not a fan of you know
• 44:14
  these party rounds that happen over the weekend and I breathe out in a 300k check and then nobody
• 44:19
  shows up for work right so because there's no ownership to the project right yeah you know the
• 44:25
  the founders raised you know four million bucks but everybody's put in 200k like okay and then there's
• 44:31
  no um you know there's no nobody to challenge your ideas or give you new ones and it's a very
• 44:38
  lonely place to be so if I was advising for you know entrepreneurs I would say don't do that right
• 44:46
  investors which is a question you asked I think um I now have a much more rigorous process on
• 44:52
  understanding the individual behind the CEO right like what is this personal about and doing like
• 45:01
  you know blind references and other calls now one of the benefits we have as a 40 year plus bench
• 45:07
  capital firm as we have were one call away uh for almost any entrepreneur to find out like
• 45:14
  you know what are they all about because you know we've got such a massive network right so unless
• 45:19
  you're a UFO you know one of these uh kids from college that doesn't have a history in the valley
• 45:26
  uh if you've done five seven ten years of work in the valley we know one person that you know
• 45:31
  will give you yeah so I do a lot of work in advance I also spend a lot of time with them um
• 45:38
  sort of off-cycle picking up a dinner or go for a walk before we write the check there's ready to unpack
• 45:44
  the person dying the person um but I think having said all that um uh still then it's
• 45:51
  I think it's still go wrong uh because people are people and so the answer to that is for the
• 45:57
  the you know the listeners are investors is uh surround them with a highly skilled set of either
• 46:06
  co-founders or advisors early on and I think um because you know CEOs tend to learn about osmosis
• 46:15
  the best of that they have a learning mindset and a great example of this is one of my favorite
• 46:20
  CEOs uh my had been ready to use you're running now a very very large company uh investment
• 46:25
  discomfort based in Philly it's a company called phenom in the HR tech space and just a rocket
• 46:31
  ship company profitable while you know all the other competitors that burnt and Scott incinerated
• 46:37
  hundreds of billion dollars of cash here in the valley this guy's kind of uh you know raised less
• 46:44
  money than the ARR that he's putting on to you know on his top in every year right now just a
• 46:49
  phenomenal company and the big big thing that I respect about my is that he surrounded himself with
• 46:58
  he's only seeking out that next great idea from the next great person right so the job of the
• 47:05
  early sage aunt the norris given capital doing all your work for you right the check as much as you
• 47:10
  can but still can think think think and still go wrong and then surrounding the CEO with but you
• 47:16
  know what I'd call experts or people that can really get them um sort of additional ideas
• 47:23
  once you've identified what their soft spot might be so one of you know early sage CEOs happens
• 47:29
  to be uh this phenomenal founder from PayPal technical guy had to learn go to market on the job
• 47:37
  right so I've like inserted like this guy um uh whose company I've invested in that you know
• 47:45
  worked at a very very great company on the GTM side called act dynamics and that person is now
• 47:52
  advising uh Sir Ash who's the CEO in question that this company I've done called Sir Die on GTM
• 48:01
  so again that's a great you know sort of a fit and and you know he's learning a lot from them
• 48:07
  and I think that brings down the risk of these founders going um you know off the off the trip
• 48:14
  I think that's very wise I also think that it's it's sometimes uncomfortable for a first time
• 48:20
  founder to ask for help yeah and understanding that there's like a mental block there
• 48:25
  for them to put you know put them in that a little bit of a position of
• 48:31
  I'm sort of saying I don't know what I don't know and and please like I want the advice but
• 48:37
  I think there's an evil involved in that too that a lot of people have a tough time asking for
• 48:42
  so if you're putting those people around them you're just it's just a very great environment
• 48:48
  that's going to allow that person to thrive the other thing and you remind me of something
• 48:52
  Scott when you said that the other thing I've kind of noticed is that uh these founders talk to
• 48:58
  other peers and and you know get go to go to advice and you know lock into that advice uh which
• 49:08
  might be different but maybe a few degrees sometimes completely opposite to the way I would advise
• 49:16
  them on that particular point so I've been thinking about that because um you know one of my CEOs
• 49:23
  does a lot of this where you'll go and talk to another CEOs 28 and try to get advice from fundraising
• 49:29
  or timing of fundraising and so and so forth and I'm like that is not that guy at personal
• 49:35
  gal is not giving you the right advice right so the point here is not that don't talk to your peers
• 49:42
  you should but filter what you're getting based on the experience that somebody has right because
• 49:50
  it's more likely I'm not saying I'm all this right it's more likely that somebody that's going
• 49:56
  on a pack that has a perspective and does this professionally it'll probably give you a better
• 50:01
  advice than uh than a buddy you have in a beer with right yeah and sometimes I've actually found
• 50:07
  this a lot and I I think that it's also very damaging so if somebody achieves some early success
• 50:13
  and they haven't been in the game long enough to understand that their early success is not the
• 50:19
  the way that they achieve their early success is not the only way to achieve success they become
• 50:25
  almost like there's like a like a religious conviction about how they achieve success and that's
• 50:31
  the only way to do it and that's the only advice they give and they speak with such conviction and
• 50:35
  such charisma that you know that they're receiving the recipient of that advice starts to believe
• 50:42
  that yeah that must be the only way to do it or that must be the only way to operate through this
• 50:46
  specific and they're only like you know they're 25 26 and they're giving they're giving this advice
• 50:52
  that serve them well for the first you know four years of their life but they don't realize it
• 50:56
  multiple things can be true at the same time and that what worked in one industry or one
• 51:00
  instance it doesn't always carry over and this is bias towards this you know they're they're
• 51:05
  short lived experience and I think that's also damaging and that yeah probably get that
• 51:09
  few peers the balancing comment is right that's not a yeah age thing or an experience thing right
• 51:14
  because I think that I met 22 year old that are that are very very insightful and there were
• 51:20
  different set of experiences so I think the point I think we're both trying to make is as uh as a
• 51:25
  first-time founder understand the source put a filter on top of it okay figure out you know
• 51:33
  based on a lot of life is all about having a gut instinct right so when you've had enough
• 51:39
  wraps you just know right and so they need to get enough wraps and you know if you're if you're
• 51:45
  taking feedback from founders go talk to 10 not one if you're trying to take get feedback on a
• 51:50
  particular point from like 10 year VCs or whatever talk to fight not one right and then you balance
• 51:56
  it and you'll get the right and then I'll comply all own intuition so um uh this is just kind of
• 52:03
  having one conversation over a cocktail doesn't uh make a strategy a quick shout out to the HubSpot
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• 54:19
  you know you mentioned six six pillars correct the you the you work through to help the entrepreneur
• 54:25
  optimize their business first time founders which pillar do they have the most trouble with what's
• 54:31
  the biggest issue they have I think first time founders have the biggest challenges with
• 54:40
  positioning like what's the how do you position the company and they don't understand the
• 54:47
  importance of positioning on a relative basis because positioning is needed not for you know
• 54:55
  tech crunch or whatever but it's needed to to clearly deliver your 30 second pitch or two minute
• 55:05
  pitch when you talk to a prospect right that's why positioning and positioning is a relative
• 55:11
  exercise is some natural exercise right so we could chat about that maybe later so I think
• 55:17
  that's one thing to be struggled with a lot and the other obviously is the the product the GTM
• 55:24
  side right because a typical art type Scott for our founders is that they're technical deeply
• 55:31
  technical tongue from a deeply technical background don't quite know GTM and that's the muscle that
• 55:37
  they have to learn the rest of the stuff is I think relatively easy you know like finance
• 55:42
  cap table and and so and so forth but those two are the ones that they are the least sort of
• 55:50
  knowledgeable about and have to learn and the next thing I'd say is once they've been in seat for a
• 55:55
  while they the successful ones figure out how to build teams the the CEOs that sort of power
• 56:04
  through the learning curve and continue to grow are the ones that actually are like have this amazing
• 56:13
  instinct to find the best position players in the market for what they're looking for before
• 56:20
  becoming necessary so before you need that amazing VP of marketing you've already been talking to
• 56:26
  and had dinners with you know a bunch of people that point you towards that they're all over six to
• 56:31
  nine months ahead right and again building the team like I guess is the point the putting in
• 56:38
  the work to build a great team is the ones that you have great entrepreneurs to so I'd say those
• 56:43
  two and then the team building being sort of the the next one out of the six you mentioned a new
• 56:50
  once is to have we look at positioning yeah can you go deeper on that yeah so I think the position
• 56:58
  exercise is and you know I'm a big fan and I'm sure you obviously read and heard Simon Seneca
• 57:06
  you know the onions right the three circles I think for me what I try to educate and I
• 57:13
  the discussion and the white boarding that I do with these founders is like how do you
• 57:19
  relatively position your product or your offering and what I mean by that is
• 57:26
  in technology everything moves and waves right yeah and so if you're innovating now in wave
• 57:32
  number three you have to have a narrative and a story that talks about wave one and wave two
• 57:38
  and this notion of by this why now right that's a question you've got to be able to answer that
• 57:44
  why does this company deserve to exist now and once you answer that and that answer to that is
• 57:51
  based in a in a trend that's going to happen whether that company existed or not you know what I
• 57:56
  mean so for instance I have a great company that is doing some incredible early-state work in
• 58:03
  e-commerce search that came out of MIT and they've invented something called the customer GPT
• 58:10
  so it's basically a transformer that can detect customer behavior automatically without
• 58:17
  looking at log files and all that stuff it is what every other technology company before that
• 58:22
  is based on so there why this why now is this customer GPT which is anchored in generative AI
• 58:29
  which is happening now right so when that CEO talks to the market says hey this could not have been
• 58:34
  done before 2022 because now is when this this technology got built so we're like part of that
• 58:41
  generation right but to be able to articulate that becomes important and then the second thing is
• 58:47
  okay relative to what which is the question the point I was making which is like okay if indeed you
• 58:52
  are innovating on that technical curve relative to which companies are you better and how so that's
• 59:00
  a relative positioning that that you know I think entrepreneurs sometimes struggle with and and
• 59:06
  we help them unpack that in a way that the narrative and the story and the two-minute pitch
• 59:12
  to the Chief Digital Officer of GSK who I'm going to go see today if they were sitting in the room
• 59:17
  you got two minutes to tell her what your company does and it just needs to be very crisp so it
• 59:23
  needs to come out anchored in a tech trend why this why now and the next thing you have to talk
• 59:29
  about is relative to the other options you have why would this be better and then the third is
• 59:35
  heavy combustible so it's that narrative which is super critical two thoughts on that actually
• 59:43
  I'll go into the first idea quickly but is it always required I would say for Sierra obviously
• 59:52
  it seems to be a requirement but to have entrepreneurial success to find true product market fit to
• 59:59
  have some sort of hyperscale opportunity yeah is it always required to find some sort of
• 1:00:07
  tech trend or wave to piggyback off of or have you seen entrepreneurs that truly find novel ideas
• 1:00:13
  that have not been explored but are not sort of time bound I think that's a great question I
• 1:00:18
  think there's plenty of examples where the innovation was not anchored in a tech break true
• 1:00:27
  but was anchored in a distribution breakthrough right for instance I'll give you a great example
• 1:00:33
  one of my first investments was the company called source fire which was in the
• 1:00:40
  information security space so this this category called IPS intrusion prevention system so the
• 1:00:46
  notion that you put these devices on a network and it does any intrusion happening on the
• 1:00:52
  network we're able to detect it and you know water right so yeah we wrote the first check into
• 1:00:58
  this company I think five pre-reasoned three million dollars something you know and you know
• 1:01:04
  took us a decade but you know took the company public and Cisco systems bottom for 2.7 billion
• 1:01:13
  now that company and Marty Rosh who was the founder was not based on a technical innovation or
• 1:01:20
  discontinuity in the market right checkpoint was already in the market selling the product and
• 1:01:25
  a whole bunch of other people what Marty did which was masterful was that he it was an open source
• 1:01:31
  company and he built an open source space piece of software called snort and snort just got
• 1:01:38
  insane adoption in the market right and because of the distribution when we met him first
• 1:01:46
  my partner Mark Fernandez and I went and met him he was kind of building appliances for Honeywell
• 1:01:51
  and for all these enterprise companies out of his garage and the reason was that they love the
• 1:01:56
  open source products so much and they were saying hey can you put this in an appliance and give us
• 1:02:01
  SLA and we'll buy it here's 150k here's 100k intel etc etc so that was a great example of a
• 1:02:08
  distribution advantage that he was able to sort of ride the wave on and that became one of the
• 1:02:14
  most successful companies I still remember the board meeting right before we went public
• 1:02:20
  there were only three deals Scott and that and that board meeting that were above 500k every other
• 1:02:26
  deal was like sub 100k give or take right which means that just the power of the distribution
• 1:02:33
  right and the fact that you had these 50k 100k deals that are being bought all over the world
• 1:02:39
  is what you know they exploited and became a great company do you think that there is a playbook for
• 1:02:45
  understanding potential distribution that has not been discovered yet something that you would
• 1:02:52
  recommend other entrepreneurs look for that you saw with Marty yeah so I'm a big fan of open
• 1:02:57
  source obviously you know we've made a ton of money using open source as a distribution channel
• 1:03:03
  and a source of competitive advantage so I have a very successful company based on New York called
• 1:03:09
  astronomer which is building data pipelining software so data orchestration how do you how do you
• 1:03:16
  connect a snowflake you know to some other you know a system that you were trying to move data
• 1:03:22
  to a data breaks or something else and that's based on open source product company called airflow
• 1:03:29
  um so open source is very well understood and that's something that is you know
• 1:03:34
  certainly it's got to cut you to kind of I think pay dividends in fact Dave McJanet was a CEO
• 1:03:42
  of hashi corp which got sold to IBM recently and I were at a football game he's a good friend of mine
• 1:03:47
  and he said in one of my interviews I did for with him that in his opinion they will not be an
• 1:03:53
  infrastructure software company what consequence being built in the future that is not open source
• 1:04:00
  so he's like that black and white on that point right and there's some truth true to that because
• 1:04:05
  if you look at the cost of distribution as the companies get to 500 million ARR you take 40%
• 1:04:13
  of 500 mill right you know that's a lot of money right and then double like what you're spending
• 1:04:20
  in sales and marketing so if you can shave off like 15 20 points on that that just drops to
• 1:04:24
  the bottom line so that's where distribution becomes important but the other angles are I think
• 1:04:32
  consumer and enterprise are becoming you know they're coming closer
• 1:04:38
  more and more customers are discovering what enterprise product does or doesn't do
• 1:04:46
  sort of themselves on top of the funnel so a lot of the techniques that you know we've used
• 1:04:52
  traditionally in consumer marketing which has dried before you buy or paywalling or
• 1:05:00
  information you've lost certain information and people come through these social channels like
• 1:05:04
  LinkedIn happens to be a very effective channel for all of my startup companies
• 1:05:10
  you can law them actually use TikTok as well and we'll see what happens with that
• 1:05:14
  which you know what's going on with the with the controversy there and the decision on screen
• 1:05:20
  court but I think consumer coming closer with enterprise and the techniques that they're
• 1:05:25
  using to the consumer marketing are going to bleed into what are called traditional selling in
• 1:05:30
  the enterprise and I think that's where there's lots of innovation to be. Thank you NetSuite
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  slash Scott Clary compact lots of opportunity the second the second sort of thought or question I
• 1:06:56
  had about when things hit this massive growth when a company is this massive growth curve and
• 1:07:02
  everything's working out obviously that's every entrepreneur's dream but I do know that that's also
• 1:07:08
  when a lot of things can break yeah so when a company is scaling and you have product market fit
• 1:07:15
  obviously this is great but what should founders or entrepreneurs look for or pay attention to
• 1:07:21
  so it doesn't blow up in their face yeah yeah that's so that's a great great question
• 1:07:28
  and you know I'm lucky enough to have been board members and these companies that have gone from
• 1:07:32
  like 50 to 115 ARR and that's exactly when the kind of that stress starts to shake the
• 1:07:40
  up leg right and you don't want to see the Revit flank you go up right midair right so I think
• 1:07:49
  the most common issue that occurs is the two things that occur one could be the cost of sales
• 1:08:02
  and distribution right so the point being that let's assume for a second you have a very deep
• 1:08:07
  balance sheet you've raised like two 300 million dollars so you've got unlimited fuel you can
• 1:08:13
  hire per sales guys or you can hire 80 sales guys or gals I think what traditionally happens is
• 1:08:20
  of typically happens in something that founders need to watch out for is what is the cost of
• 1:08:27
  every incremental ARR dollar that you get back based on you know what you're putting into sale
• 1:08:33
  in marketing and there's lots and lots of metrics we measure this there's magic numbers and then there's
• 1:08:38
  you know kind of the overall efficiency of the PNL which is called the burn burn number
• 1:08:46
  or burn ratio so I think that's a culprit number one which is the
• 1:08:52
  inefficiency of the selling unit whether that happens in with a ease or account execs it
• 1:09:00
  right I think what production are you getting per account exec because there's many ways to hide
• 1:09:06
  the inefficiency in that in that group right because now you could be losing reps you're not
• 1:09:12
  training them well I mean there's all this bleeding that happens so your top line is drawing
• 1:09:17
  but you know it's coming at a incremental expense and the problem is if you don't fix it when
• 1:09:22
  you're doing 50 it's going to be so expensive when you're doing 150 that it's just kind of the
• 1:09:28
  company is going to just kind of keel over all the growth rates are going to come down so the
• 1:09:32
  efficiency of the sales and marketing engine at 50 mil an ARR is the most important thing to focus
• 1:09:39
  on and you know something that trips up entrepreneurs the most that's number one and number two is like
• 1:09:46
  tech trends like you know what's what's happened with chat GPT and LLM where a technological wave comes
• 1:09:53
  at you so fast and you don't sort of pivot the company right fast enough and I'll I was hearing
• 1:10:04
  a podcast from one of my favorite CEOs you know Mark Benioff or just on the Saturday and Benioff
• 1:10:12
  talks about the fact where I think he was talking to Steve Jobs and you know Jobs sort of pivoted
• 1:10:18
  the whole company on the iPhone and the iPad right like you just went boom in one direction
• 1:10:23
  and uh in that particular podcast he calls it the Steve Jobs moment right where you just like have
• 1:10:30
  so much conviction as a CEO just you say hey if you were going here Ben we're just going to go there
• 1:10:35
  and he himself talks about how he's done that at Salesforce with this agent force uh change
• 1:10:41
  in architecture and I what I didn't know when I was uh when I heard the podcast is he actually did
• 1:10:47
  made that call two weeks before dream force okay which is like crazy to me right two weeks before
• 1:10:55
  dream force he he Benioff probably is marketing at PM and all the people hey everything is agent force
• 1:11:02
  now okay go rip up those PPT build them again you know like signage all that stuff right wild and
• 1:11:08
  I'm sitting you're going okay but so much conviction now so much good it is and we're taking that
• 1:11:13
  hill so I think that is uh culprit number two which is what I'll call the slow boil and the
• 1:11:20
  and the and the frog in the slow boiling water right where entrepreneurs just they know it's
• 1:11:26
  happening but don't have the the confidence and the koana is to say hey let's burn the bridges
• 1:11:34
  behind us where we are going and there's a lesson to be learned about that from Benioff and I'll
• 1:11:39
  be jobs have you found in in your life as an entrepreneur as an investor and some of the
• 1:11:46
  entrepreneurs you've invested in there is a decision making framework that works very well
• 1:11:52
  for which which of these uh so no for for for making such like a drastic high conviction decision
• 1:11:59
  what is I guess the question is like what's the signal that's I mean maybe it's just intuitive
• 1:12:05
  maybe it's an unfair question but somebody's listening to this being like shit I don't know if I
• 1:12:09
  should if I shouldn't be pivoting or not like it just seems like overnight all my work could blow up
• 1:12:16
  if I make the wrong decision no I think that's right that's a great question I think there's there's
• 1:12:20
  there's what my companies do is we first recognize this uh rapid shift at the board uh just
• 1:12:28
  in a board meeting setting and then then we do an internal exercise which is can we do a little
• 1:12:35
  tiger team like take three people in engineering and and let's prove that the tech actually dramatically
• 1:12:40
  works to you know give because the customer is looking for the same outcome they just want it better
• 1:12:46
  right um cheaper faster so there's an internal exercise that we do and the other exercise is an
• 1:12:53
  external exercise where we go and talk to our uh talk 10 customers and and run this idea past them
• 1:13:00
  all almost like they were as part of the company and with those two signals uh you have enough data
• 1:13:08
  internal and external to make the call and the call might be here let's wait for six months
• 1:13:13
  but that work has to be done and unfortunately there's no framework like a MBA sort of framework
• 1:13:20
  that you were talking about which is uh which can be applied to this right it just has to be this
• 1:13:25
  inside look outside look quick call and the call could be go or wait or we'll wait for six months
• 1:13:32
  and we'll read rest this and you also need to look at what competition is doing because competition
• 1:13:38
  is not just sitting around and that's sort of the third axis that might have you move faster or
• 1:13:43
  sooner than you initially plan I think that's very very smart very wise and I think that
• 1:13:49
  also just a caveat having these customer focus groups and speaking to your customers at any stage
• 1:13:56
  even if it's not a major pivot decision is probably one of the best practices you can do regardless
• 1:14:00
  absolutely I think any CEO that's not spending you know close to 50% of the time in front of
• 1:14:08
  customers or at some customer facing activity once you've got to got the meat and potatoes going
• 1:14:13
  in your company which comes down to that third pillar I talked about it's a job team
• 1:14:18
  so I call it does got the no past team the no look past team right like and again we're in
• 1:14:24
  playoff season right so you know like these quarterbacks that you know are looking here but the
• 1:14:29
  throw there yeah and the ball gets caught so once you built the no past team no look past team
• 1:14:38
  and you're confident that the lights are gonna stay on and and kings are optimal back at the shop
• 1:14:45
  your job the CEO is to be part of the customers because that's the best signal on where to take the
• 1:14:51
  company where the competition is going and all the street getting your numbers exactly I use
• 1:14:56
  okay yeah I know that yeah no I think that's I think that's such a missed opportunity for founders one
• 1:15:01
  of my favorite stories I have a friend Aaron Spivak and he sold a company hush blankets for I think
• 1:15:07
  50 million to sleep country candidates of canate I'm we're both Canadians and he would jump on
• 1:15:14
  customer calls and ask them after they purchase and just ask them obviously not an enterprise be
• 1:15:19
  to be a consumer product but still same concept you jump on calls and he'd ask them if they like
• 1:15:24
  their purchase what he could do better and obviously he got massive feedback and he'd be doing this
• 1:15:28
  up until the day when he actually sold he jumped on say 10 customer calls a week and I thought it
• 1:15:32
  was a great idea and he also noticed outside of the fact that he built rapport he got you know
• 1:15:37
  he got this great data from his customers as to what he was doing right and wrong he also noticed
• 1:15:42
  that the the lifetime value of the customer increased dramatically because they felt this personal
• 1:15:46
  connection with the CEO so usually blankets are like a one-time purchase he noticed after he
• 1:15:52
  jumped on a call with them on a zoom with them they'd be buying blankets for all their friends and
• 1:15:55
  their family so like the LTV of the customer so it's just small things but it makes a huge difference
• 1:16:00
  it really makes a huge difference um last idea that I just want to sort of just touch on
• 1:16:06
  because obviously this is something that a first-time founder will eventually have to think about
• 1:16:11
  be the exit so obviously you can uh private equity you can go to strategic you can IPO
• 1:16:19
  tell me just some wisdom or some insight around uh what the founder should be thinking about when
• 1:16:24
  they should be thinking about it um should they think about it when he raised their pre-seed should
• 1:16:30
  they think about it much later on what do you recommend founders ideate around exit yeah I think
• 1:16:39
  the way to approach this question is to always remember uh that the best companies get bought
• 1:16:46
  and not sold that's sort of the first point and that is true for actually even going public
• 1:16:53
  because the public uh investors also buying right and they they have an opportunity if you're
• 1:16:59
  putting them and you're trying to deploy a hundred million dollars in like pack you you have options
• 1:17:04
  right should I put it in power out on networks or should I put it in z-scaler or like whatever
• 1:17:08
  right so you have to the best companies are bought they're not sold that's point number one second
• 1:17:15
  is that um uh sort of mass matters so in other words your outcome would be disproportionately higher
• 1:17:26
  if you're at a higher ARR number of customers number of blankets what the case might be right so
• 1:17:32
  so uh you have to kind of be heads down uh till you get to some mark and in my opinion you know
• 1:17:38
  and so neither work that I do would be to be that's maybe you become a serious company when you're
• 1:17:43
  like 25 to 30 in ARR before that you're in and quote unquote the value of death where a little sneeze
• 1:17:49
  from here and I'm competitive move from there and bang your over right so everything else before
• 1:17:54
  that is an experiment um now giving that given that framing I think that um uh as an entrepreneur
• 1:18:04
  you're always looking at technology trends right like is the wave gonna come to you to kind of keep
• 1:18:10
  rising the wave that I'm writing okay what is competition doing these are the little guys that are
• 1:18:16
  other startups relative to you and what are the big guys doing right constantly being six eight
• 1:18:22
  months ahead what is this going doing what's data dog doing if you happen to be in that particular space
• 1:18:28
  and then realizing that um M&A and opportunities to sell it's like I give this example to my CEOs
• 1:18:35
  it's like uh in the in the solar system it's like less hill objects that are moving in you know
• 1:18:41
  in different orbits and what happens is so you're here spinning away as a small company and here's
• 1:18:48
  IBM on its you know big swing and if you get they get close to you and my buddy Rob Palmer's
• 1:18:57
  runs all of product and all GTM for IBM gets interested in you and and you want to pick you up
• 1:19:04
  for 300 mil or 400 mil that likely is stupid that that is likely to be in a very very short
• 1:19:10
  wind of time because when IBM wins past that apex they have other priorities and other things so
• 1:19:18
  you have a short wind of time to get that bid or hit that call it that's what happened with me
• 1:19:24
  so you know when when octane got purchased for 3.2 billion if I'd not hit that window and I was
• 1:19:31
  very lucky and got good good advice and obviously right place right time but the market crash right
• 1:19:36
  it like you know six months after that so if I'd not hit that window it would have been a very
• 1:19:42
  different story now uh obviously that is not it's not true for every single company some companies
• 1:19:50
  are running so well and so fast that they might have other options but I think that's again
• 1:19:55
  in like single digit uh sort of probability and ultimately I think the market is big enough and
• 1:20:01
  I think you have a CEO that's got juice and performance is happening like this company phenon
• 1:20:06
  I think then the world you're always sure because if you ask Mahi he's just gonna
• 1:20:11
  he's on a mission to build a multi-billion dollar company and and you know
• 1:20:16
  and we're very supportive of that and because he's producing the results the competition
• 1:20:21
  is falling off and the market is getting just even more interesting so um but you also always have
• 1:20:28
  to have a constant to you uh sort of a a very mindset on what's happening around and then
• 1:20:34
  you know craft your eggs at based on that what would be I mean we've gone through almost the full
• 1:20:40
  life cycle of a of an entrepreneur but it would be a question that I didn't ask you that I
• 1:20:45
  should have or maybe some last words of wisdom or insight or an idea that's even like
• 1:20:50
  floating around your head right now that you're dealing with I think the the thing that I always
• 1:20:56
  I'm thinking of is um again you know again I do early stage work and I'm obsessed with this uh
• 1:21:02
  personally I just want to be associated with the best entrepreneur building the most well-beating
• 1:21:07
  company so I'm like constant to look out for that right and my advice like what the hell are you
• 1:21:12
  reading at 11 30 at night when I get the tap on my head under the blanket you know and or or you
• 1:21:17
  know I wake up in the morning at 5 30 or whatever I think um I've been obsessed with this idea of
• 1:21:25
  the 100x uh multiple and first check which um you know which is like as an early stage investor
• 1:21:33
  you write a check into an entrepreneur uh and that that check hundred x's right because the
• 1:21:40
  entrepreneur is produced like tremendous value and run and that's a combination of the idea the
• 1:21:45
  entrepreneur and and the very few companies that they're able to achieve that for a seed stage
• 1:21:52
  investor so I'm just uh it's not a direct answer to your question on like a new idea I'm thinking
• 1:21:58
  about but I'm thinking about the framework or what are the commonalities between uh those projects
• 1:22:06
  that hit that hundred x mark um and and you know like uh just also in a in a way for us it's here to
• 1:22:14
  be able to find more of those and that's where you found it so we always going to say have you found
• 1:22:19
  and have you found the commonalities uh we have we have uh we're doing a lot of back testing we have
• 1:22:25
  so much of data now um and also looking at external markets I think one thing is this is founded
• 1:22:31
  that sees the future before the rest of the world sees it um that just gives them a escape
• 1:22:36
  velocity before the rest of market wakes up uh and the other is really a trend uh that is uh not
• 1:22:43
  obvious today but it's going to be the big wave that's going to break so this is like the the Uber
• 1:22:50
  example the 100x thing is something that my friend uh Mike Naples talks a lot about also at floodgate
• 1:22:56
  that he's also an early state investor investor I respect a lot but the prototypical uh what's the
• 1:23:03
  archetype of that perfect founder and perfect idea uh to get you that hundred x because I think if
• 1:23:09
  that happens the company's going to be insanely successful and and uh so we're trying to constantly
• 1:23:16
  wall-up playbook and I think God that's what makes uh you know my job is a military state investor
• 1:23:23
  working on behalf of my LPs that are kind enough to give us their confidence and money
• 1:23:28
  um super exciting because um you know there is no ceiling at the time I'm here I'll be talking
• 1:23:34
  about the 150x hopefully you know it's like you can do better come on there's no as I say there's
• 1:23:41
  no a grade in venture capital exactly it's listen the space you play minus
• 1:23:48
  no I was going to say the space you play in is so much fun it's so much fun because you you work
• 1:23:53
  with some of the best most innovative people in the world that the best ideas most innovative ideas
• 1:23:59
  you see the future before it happens which is incredible absolutely incredible but just
• 1:24:05
  correct that Scott we don't the entrepreneurs do and what the art to others or our job is to look
• 1:24:11
  through the eyes of the entrepreneur and see the art of the possible so the reason that you know
• 1:24:17
  so we have these startup ideas entrepreneurs come and pitch us on write this room right behind me
• 1:24:23
  and we have this discussion and all my guys are like with this we'll go right I'm like okay this
• 1:24:27
  is all great but tell me what could go right right that producer the massive company let's talk
• 1:24:31
  about that that's the discussion what happened and then like trying to figure out whether the
• 1:24:36
  soundtrack or the steam is the one that levels that right and to me that's that's the exciting it's
• 1:24:41
  like you have to be glass half full and obviously you manage risk at the fun level you don't manage
• 1:24:49
  risk at the individual company level disorderly if you if you want to connect with some listeners if
• 1:24:55
  they're interested about a work with Sierra yep and who do you serve and where should they read you
• 1:25:01
  so if you're building you know thoughtfully building a company in the B2B space globally so I
• 1:25:10
  don't care whether you're in the US or you know you're in Europe or have you could be a best
• 1:25:15
  all of the world and you're looking for you know thoughtful stable partner and firm and this
• 1:25:24
  is not just me you get the entire Sierra family and the 80 CIOs that you have on our advisory board
• 1:25:30
  and in the power of that then you should reach out to me and the way easiest way to get to me
• 1:25:36
  is just write me an email I'm pretty I have an SLA of reporting responding in 24 hours so
• 1:25:42
  um and it's uh Tim at Sierra Venturers dot com that's super easy okay I love it I last
• 1:25:49
  question I always like to finish up with so this has obviously been a very um a very business
• 1:25:53
  heavy podcast which is incredible but the last question it ties back to a little bit more of um
• 1:26:00
  it could be a personal professional growth and development because the question is really simple
• 1:26:04
  out of all of your you know your experience or success um if you can take all the lessons and they
• 1:26:09
  can be entrepreneurial or not and you can only pass on one lesson to your kids to your children
• 1:26:16
  out of all the things you've learned what would that lesson be wake up burly and make a bed
• 1:26:21
  it's it's it's it's it's the only thing that matters uh over time because uh press separation
• 1:26:28
  all those beats inspiration uh and uh the best companies take time and uh so I think people that are
• 1:26:37
  uh that are you know that are um that have the juice to go at it day by day because some days
• 1:26:45
  are great some are not right and um and then so you give yourself the time to be successful
• 1:26:53
  and the second is you know do the dirty work you know make sure that you're you know learning the
• 1:26:59
  skills uh calling on your customers talking to investors that's the make a bed part um but
• 1:27:07
  you know that that's that's the that's the easiest that's a good start to your morning