Latest / 1 to 100 / E31: SaaS in the Age of AI

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E31: SaaS in the Age of AI · 1 to 100

0:00
It's almost amazing that like, you can have private companies
0:03
in Canada given the direction the country's going so.
0:07
What a statement. Yeah, you remember.
0:11
You should keep that in. Yeah, that's how I get flamed
0:17
next, right? Oh God, dude.
0:23
I don't think we should be surprised if you see a bunch of
0:25
companies leaving. I'm actually not joking.
0:28
Like I, I, I, I legitimately think that there are companies
0:31
incorporated in Canada that will truly consider moving to being
0:35
incorporated in the US or some somewhere else that's more
0:39
private company friendly. So right, it's just the exit
0:42
taxes, the I think they're so overwhelming, they're so
0:46
debilitating that to some extent I think that's preventing it.
0:50
I don't know the numbers. I imagine it's already
0:52
happening, but it man, it's a it's a tough pill to swallow
0:57
leaving Canada. Yeah.
1:01
And especially given what the capital markets are in the US
1:03
right now with like I would imagine that there are smaller
1:07
companies who will do it. I think if you're like Shopify,
1:11
you're not going to do it. But like, I, I mean, just like
1:14
between the capital availability in the US and like things like
1:17
that and like sort of direction of travel of politics that
1:22
influences business freedom as it were.
1:28
I, yeah, I just think like, I just think we're in a weird
1:32
moment where like funny things could happen.
1:35
So like, did you guys see Andreessen like raised a $10
1:39
billion set of funds? Did you guys see?
1:42
That, but I'm not surprised. It's wild though, so much money.
1:46
Who did? And Andreessen is going to
1:48
deploy $10 billion. A lot.
1:56
Is that mostly institutional money?
1:58
Then that's a lot of money. Yeah, yeah.
2:02
It's, I mean, Andreessen is all, all institutional capital.
2:05
OK. Doesn't it?
2:06
Yeah. I mean basically.
2:08
I don't know enough about the VC world to.
2:11
I don't know the players that well.
2:13
I just know who he is. But yeah, yeah, that's wild
2:17
though. That's a lot of money.
2:19
Yeah. I want a wheel drive.
2:20
Most of the migration, is it like out of necessity or is it
2:25
for opportunity? I imagine a lot of it's for
2:28
opportunity, but Canada keeps going this direction.
2:32
I think some of it's going to be out of necessity like we have to
2:35
leave, right. This is this is a spiral.
2:39
Yeah, most, I mean, I think like most things in life, it's going
2:42
to be a push pull, which is like there's going to be at some
2:46
moment there will be just enough pull, and then at some moment
2:49
there will be just enough push. And then different people will
2:51
land at different points in the spectrum.
2:55
So yeah. On the flip side, if you're in
2:58
Canada, it's better to hire overseas labor because you don't
3:02
have to worry about $100,000 tax on top of your H1B or whatever
3:08
it is so. Totally.
3:13
Totally, totally, totally. Yeah, I mean.
3:16
Manages to everything I guess. Yeah, dude, exactly.
3:20
Yeah, that's exactly right. Exactly right.
3:22
Yeah. Yeah.
3:26
OK, Jeremiah, you were, you were sharing a little bit about like
3:32
Stamp did some layoffs. Yeah.
3:33
Do you want to just give some context?
3:35
And like, I think I think it's an interesting moment because
3:40
Tomer talked about yacht post decision.
3:44
And again, like my view on these things is like not what is it
3:48
that you're not doing, but what is it that you are doing?
3:50
Because I think like the news is always about like the sort of
3:55
cut or what you're not doing. And I think it like, I think by
3:58
focusing on that, you, you like strategy is yes, strategy is
4:03
like, what do you say you're going to do and what do you say
4:05
you're not going to do? And weirdly, because humans have
4:08
such massive loss aversion, we talk so much about this thing.
4:12
But I'm actually curious, like, how you thought about the
4:14
strategy of the company and then like, yeah.
4:17
And therefore how it led to the decision.
4:19
That's totally, I mean just a little bit of context on stamp.
4:23
So I, I took over CEO in February.
4:26
Stamped was purchased by Tiny, now the, the parent company in
4:32
2021 from a guy named Tommy who had started this thing in
4:41
Singapore, I believe is where he was.
4:43
I don't know if he started in Singapore, but that's where he,
4:45
he ultimately built the company. And so stamps had a history of I
4:50
think it was 2015, maybe it was when stamp first launched and it
4:54
was a rocket ship when, when it was acquired in 2021, it was
4:59
growing at a massive rate. I honestly don't know.
5:05
Ironically, the public numbers are easier to look at sometimes
5:08
than my own internal numbers because we switched everything
5:09
from like Singapore to Canada and all this kind of junk.
5:13
But anyway, So I think it was something like the trailing 12
5:18
months revenue when the company was purchased was like
5:20
11,000,000 US. So it was and it was growing at
5:25
a very fast pace when the company was acquired in 2021 and
5:31
basically reviews products effectively competing against
5:37
Yapo. I mean, it came out somewhat
5:39
time as Judge Me. So Yapo is a big player,
5:41
obviously. Shoot, what's the Trustpilot
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bizarre boys, Some of these other ones that was kind of like
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who the bigger companies were going with back then.
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Judge Me kind of came in at the bottom of the market and took a
5:55
lot of the bottom of the market. And Yapo was more of a like
5:59
everything sort of company will work with anybody.
6:03
We've got pricing and scales based on the size of your
6:05
business, all that. So that was how it started.
6:09
I don't know when exactly the loyalty product was launched.
6:14
It was 2020 ish. So a little bit before the
6:17
acquisition, they launched A loyalty product and basically
6:20
stamps became reviews plus loyalty, much like a Kendo, much
6:23
like Yapo. Those are kind of the two
6:27
biggest in that space. But this idea of you can come to
6:29
us and you can get reviews and you can get loyalty software and
6:34
and then Tommy sold and passed this off to somebody else.
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Well, Long story short, Tommy was vibe coding, whatever the
6:43
twenty 2015 version of vibe coding was this thing right?
6:47
And I don't mean that a negative way to be very clear.
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It's like the dude was a beast, just like writing code like
6:53
crazy, delivering whatever customers asked for.
6:56
It was like anything. If you were a customer stamped
7:00
and you said, hey, I need this thing to stay on the platform or
7:03
I need this thing to upgrade my plan or whatever, that was good
7:06
chance you would get that thing. And so everything got built that
7:09
people wanted to have built. But what happens in that context
7:14
is you're not paying the cost of tech debt.
7:17
Tech debt is a real thing, right?
7:19
And I think this is something like if I want, if somebody
7:22
who's listening to this, who doesn't understand SAS or, or
7:24
maybe it's just getting started in SAS, you have to think about
7:27
the cost of maintenance of the things that you build.
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Like that is actually a real problem.
7:32
So I want people to kind of take away some of that from this and
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then also focus on what you're actually working towards.
7:36
And so Long story short, 2021 acquisition happened and
7:43
basically like the system that was handed over to this, the
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team post acquisition was hard to operate.
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It's just like the easiest way to say it like not it works
8:00
mostly, but there are outages happening.
8:03
There were like it was all built in csharp.net system because
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that's what Tommy knew. So it's all like old school,
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like C# code on Microsoft servers.
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So you have Microsoft licensing fees at that.
8:20
Like pre acquisition, a lot of the stuff was done like as
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cheaply as possible, but in a way where it's like you're just
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band dating things. And so post acquisition, a lot
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of that stuff got changed, but it resulted in this really
8:32
expensive tech stack that was, yeah, extraordinarily expensive
8:37
to operate, hard to operate, hard to change.
8:41
And then you have this interesting thing that happened.
8:43
And this is the tech tech conversation becomes really
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interesting. It becomes tech that isn't a
8:48
problem until you hit scale, and that's when it becomes a
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problem. And so you get to like 2021,
8:56
this thing has been growing, you know, 400% per year or whatever
9:00
that number is. And all of a sudden you're now
9:03
adding as much data into the system on, you know, a, a
9:08
monthly basis as you added in the first two years sort of
9:11
thing, right? And so you have these things
9:14
that were that could have been done better, like adding the
9:19
right indexes on databases and some of this kind of stuff where
9:23
you can't. Now the the problem is becoming
9:28
twice as bad every year basically.
9:31
And so just like the problem gets worse and worse, the
9:34
ability to solve the problem becomes harder and harder
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because of the scale at which things are operating.
9:40
And ultimately, like that was kind of situation that Stamped
9:42
ended up in. So all I had to say that's been
9:44
what Stamped has been focused on over the last like 3 years is
9:46
getting out of that. So when I took over and that was
9:50
the main focus was like, how do we get this thing to a better
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place? Can I?
9:54
Can I ask a naive A naive question?
9:57
So when I hear things like this, I'm just like, why not just take
10:06
five of your best people and just write it from scratch and
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then migrate as much of the customer base as is willing to
10:16
onto the new product and say we are sunsetting the old product
10:23
Like because, because like they're, they're, I mean these
10:25
because you're right. Like the problem with tech dad
10:27
is it's not a linear thing. Like it does this.
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And then at some point, you're just like, what am I even doing
10:34
in here? Like, there's no documentation.
10:37
I don't know this language. Like, yeah.
10:44
Yeah. And I think the that was what
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the stamp team was working towards was rewriting everything
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when I took over. So that process had been in
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place, everything was getting migrated to like Postgres
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database node more of like a micro servicy infrastructure as
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opposed to like this monolithic thing built on top of Microsoft.
11:04
So anyway, all I had to say that was the the process and and what
11:07
was happening when I took over. And so we tried to accelerate,
11:11
but ultimately, like layoffs happened because of financial
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reasons, right And so effectively, like all of this
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paired with lots of competition in the market.
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So highly reviews is highly competitive, loyalty is highly
11:26
competitive. I think if you want to look at
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two players that are driving a lot of that right now, I would
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say Judge Me is number one in terms of like our competition,
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the things that are hurting my business, Judge Me And like Revo
11:41
is actually a great example too on the loyalty side.
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Like they, they both of those do a really incredible job of doing
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one thing really, really well, serving that market really,
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really well. And ultimately Stanford was in
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this position when I took over and where there's a bunch of
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things being done and not super well.
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And the other thing with both those companies is they're,
12:01
they're focused on Shopify only as well, right?
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And so Revo, for example, is Shopify only loyalty.
12:08
You have one segment of, I mean, there's, there's smaller subsets
12:12
of segments within that, right? But ultimately, like you're
12:14
building your tech for one type of customer, which helps a lot.
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Whereas in the stamped world, it's WooCommerce, Bigcommerce,
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Magento, Shopify, like all of these different things.
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And so there's a lot of complexity that gets introduced
12:29
into that. So anyway, that ultimately is
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kind of like the backdrop to this.
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And and so because of the lack of innovation and a product that
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just is like does a lot of things well, but not great.
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And then you've got players that are doing things great.
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It set up financial distress in the business ultimately.
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And so that's effectively like the the the backdrop to, to
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getting to the point of needing to do layoffs.
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I'm interested in the source of the financial stress.
13:04
You mentioned that there was, you know, a lot of tech debt, an
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expensive tech stack that came in to solve the the tech debt.
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It was in replacement as part of the solution.
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Is that right? Yeah, here's the other challenge
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with this is like hiring lots of people to work on the stuff.
13:21
That means more expense, right? So you're, you're basically like
13:24
if your revenues aren't increasing, you're but you're
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adding more people to this now, like we, we have to run this
13:30
business profitably. We don't have any funding that
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we add to this. So you've got more people
13:35
working on this and then your infrastructure costs actually go
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up because you have to maintain this old thing still.
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That's still the same cost to run.
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Plus now you're spending money on these new things.
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And so there's this expansion of expense that happens at the same
13:52
time as contraction of revenue and that can only go on for so
13:56
long until you end up in a situation where that's
13:58
untenable. So that was going to.
14:02
Be a good question. I was going to say, is it is
14:03
this a growth in operational expenses that impact the
14:07
ability, the business's ability to scale or does it create an
14:12
expectation of scale from the business?
14:14
But sounds like it did both right.
14:16
If your fixed costs from labor, from salaries and growing up,
14:19
but then also your infrastructure cost is going up,
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it's getting increasingly more expensive to fulfill to
14:25
customers at the same time as creating an obligation for the
14:29
business to be bigger to meet the fixed cost.
14:31
Correct. Yeah, to to maintain
14:34
profitability, the business revenues have to grow and in
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this environment they're shrinking.
14:38
And actually I think it, I'm just going to blame judge me.
14:43
Like honestly, like that is the number one factor.
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If I had to pick like one come like 1, you could you could also
14:50
chalk it up to market. Like it's not just the fact
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that. Yeah, I.
14:55
I in the market for cheaper software like he's he PJ has
15:00
really like driven this idea that reviews are worth $15.00 a
15:03
month and that makes it harder to sell reviews at 305 hundred
15:07
$2000 a month. Like that is the reality of this
15:10
unless you have something that is differentiate differentiating
15:15
enough to make that worth doing right.
15:17
So like when we have a customer that's trying to push their
15:20
reviews into Sephora, we can enable that judge.
15:24
We can't that for that brand because they're actually driving
15:28
purchases in a marketplace using reviews to to help with that
15:32
whole process that is actually worth thousands of dollars a
15:36
month potentially to that brand in a way that they another brand
15:41
who's just trying to like. All they want to do is collect
15:43
reviews on their site and show them.
15:46
They might say it's only worth $15.00 a month to me.
15:49
I'm going to share something that was shared with me
15:52
yesterday. So I I met this investor
15:54
yesterday. I'm not going to share anything
15:57
that will identify either this person or the companies in any
16:02
way. I don't think that it is.
16:08
Yeah. I don't think that your
16:11
experience is a micro issue in a totally different category in
16:19
e-commerce. There's a different company that
16:26
has seen shrinking revenues over the last like call it 6-7 months
16:35
to the point to which that company is now like expanding
16:39
outside of e-commerce, very like the founders back in quote UN
16:44
quote, founder mode and they're expanding outside of e-commerce
16:47
and doing so like with extreme speed.
16:52
And I, I, I think, like, I think there are two things that are
16:59
being underappreciated about like quote UN quote, core
17:03
Shopify e-commerce today. I think the customer base is
17:07
more challenged than most people are willing to discuss publicly
17:11
because it doesn't actually help anyone to talk about it
17:16
publicly, especially and including Shopify to whom it
17:22
would hurt the most if they disclosed anything publicly.
17:26
Right. OK.
17:27
So that's one thing, which by the way, I don't know that it's
17:32
true, but I'm saying I suspect it is.
17:35
And if it is, then we will never know because it is not in
17:39
anyone's benefit to disclose it. And then the second thing is
17:45
that, and this part I think is really under depreciated is that
17:50
all new software expense is AI software expense, 100% of all
17:56
software expense. And in fact in every other
18:00
category that is not AI software, there is consolidation
18:03
happening at rates that are unimaginable, unimaginable like
18:09
because that budget is being taken for like you have the rest
18:13
of your tech stack budget and then you have your AI budget.
18:17
And the AI budget, yes, some of it was made-up, but some of it
18:19
was made-up by saying, hey, guys, from over here, you need
18:22
to go from this to this, then I'm going to take this and put
18:26
it in the AI bucket that's happening.
18:29
And I think not acknowledging that if you're operating a SAS
18:37
business is like putting blinders on, OK?
18:42
Like you have to confront that and you have to confront that
18:45
very deliberately and diligently and be like intellectually
18:50
honest about it. I think that leads, I'm sorry,
18:54
this is like all commentary, but my question from all of that
18:58
commentary is that you just described what you are going to
19:01
not do. So what are you going to do?
19:05
Like let's say you, you now have a point of view of like, hey,
19:09
here's what I think the market structure is going to look like.
19:11
Here's what I think is not tenable.
19:14
I've shared my view that I'd like roughly agree with the
19:17
market structure. I believe that the only thing
19:20
that is growing is AI related software.
19:26
I I don't believe it is happening in the Shopify
19:29
ecosystem. But yeah, I'm curious how you
19:32
think about the go forward strategy to the I mean, and and
19:36
don't share like product road map style info because obviously
19:39
we're not trying to create competitors over here, but like
19:42
how do you think about market structure?
19:44
Yeah. Yeah.
19:46
Well, there's a couple of things here that because I, the
19:50
interesting thing is you can still win in a market where
19:53
people are willing to spend less if you are optimizing for that,
19:58
I think. And so if you look at like, I
20:01
mean, a judge means actually a great example in my opinion.
20:03
Why would you does not really incentive to switch off of
20:09
something that's $15.00 a month and go to something that's $10 a
20:11
month unless it's being really better.
20:12
The cost just doesn't matter, right?
20:14
Like it's it's a slow enough cost it doesn't really matter.
20:18
Totally. I just think that it's very hard
20:20
to grow those businesses. Yeah, you get to a point, but
20:23
but does that matter? And that's there's actually, and
20:25
this is what I'm trying to get at is like, I think there's a
20:27
point where it's about like my objective and the context on
20:31
which I operate this business is to run a profitable business.
20:37
But ideally it's growing. Let's say I was doing like maybe
20:43
operating a business at 10 million in revenue with three
20:46
million a year in profit is an acceptable outcome.
20:48
In that context. The market in Shopify ad space
20:51
depending on what you're doing is probably big enough that you
20:54
can optimize towards well in reviews.
20:57
In reviews. I think that's the case.
20:59
You could optimize towards low cost, highly performing, highly
21:04
cost oriented structure of running a business.
21:07
You don't think so? No, but I don't think so.
21:11
I don't think so. I, I think I, I, dude, I, I
21:15
think the problem is that that'll be true for five years
21:17
and then it'll go from 15 to 5:00 and all of a sudden your
21:20
$10 million business is a $3,000,000 business doing -3
21:23
million of EBITDA if your cost structure hasn't changed.
21:26
Yeah. Well, that's that, Yeah.
21:28
And I guess to be clear, when you're asking about my strategy,
21:31
my strategy is to say, like the things that we do today need to
21:34
be done more efficient, and then we need to innovate on top of it
21:38
in a way that's meaningful. And you can guess what
21:40
innovation looks like today versus four years ago, right?
21:44
The market's changed, the needs of customers have changed.
21:47
And that's ultimately like the big thing in this is to say,
21:50
look, we have to stop doing things.
21:54
There's so much like this business operates the way it
21:57
does today. And this is we're changing this,
21:59
but it it operates the way it does today because of what
22:02
happened five years ago and because of the decisions that
22:04
were made five years ago, that can't happen.
22:07
New information comes available, markets change, needs of
22:10
customers change, all of like the what an e-commerce brand
22:14
wants today is different than what it wanted five years ago.
22:17
And so we need to be thinking about that and we need to be
22:21
building that into our strategy, not saying we're going to make
22:24
this thing better just because it's not very good, for example,
22:27
or we're going to make this more efficient just because it's not
22:30
efficient. You need to be willing to divest
22:33
potentially from this thing that you're doing that was relevant
22:37
five years ago, but but it maybe isn't as relevant today or won't
22:40
be relevant in five years. And so you have to be thinking
22:42
about how do we take new inputs, market changes and use that to
22:48
guide what's what's happening. And obviously, like right now,
22:51
AI is the biggest thing and it's going to become bigger.
22:54
It's not, it's not going away. But yet the needs of an
22:57
e-commerce brand now are different than they were five
22:59
years ago. You guys seen this meme?
23:02
It's like a bell curve and then at one end is like, I don't know
23:05
someone who's very experienced someone at one end is a is A2
23:08
fist and they got like IQ from left to right.
23:11
And yeah, I wonder if, you know, AI is just one of those things
23:15
everyone is building now and is building something that they
23:18
want to be successful is looking at it and going, well, what is
23:22
it that the market wants? They want AI, so I'm going to
23:24
build AI. But then there's a lot of people
23:26
who are really in the market and that they don't have to build AI
23:28
because what they've got going already is doing fine.
23:32
So I wonder to what extent, like the people who are just coming
23:36
in and building their thing right now have this immense
23:39
benefit because they have a perfect read on or like that the
23:42
ones that are building the right thing have a perfect read on
23:44
what the market's asking for. But then the people in the mill
23:49
have already got something. You know, they've got a lot of
23:51
tech debt. It's hard to build AI on top of
23:53
what they've already got. You're going to fall behind,
23:57
right? And I wonder if there is some
24:00
space here to AI is definitely part of the market demand for
24:04
sure. Just AAI the, the 2 letters
24:07
slapped on any product, even if it's not AI is going to suffice
24:11
for some people. But then I wondered to what
24:13
extent like the demand is actually for what AI represents,
24:16
which is like minimized inputs, maximized outputs, like profit,
24:19
right? Because you know, you got Oliver
24:22
with Boston and it's growing. It's basically a service
24:24
business, right? But as long as you're able to
24:27
represent value created for the business that's profitable,
24:31
you're able to to grow, right? And if I think about the
24:34
e-commerce consumer, the type of person who comes to a business
24:37
like foreplay or they come to format or know or stamped,
24:40
that's what they're asking for. That's what they're most
24:43
interested in separate from anything that has the 2 letters
24:46
AI written on it. They're looking for something
24:48
that's going to be profitable for their business revenue
24:51
generating. Right.
24:54
I think that's true longer term. I do think right now though,
24:59
there are people who are literally being given mandates
25:01
to go add AI into the functions in their job.
25:06
And so I actually, it's like this is actually really
25:09
interesting because I think if you look at I don't think
25:14
startups have ever had a bigger advantage than they do right
25:16
now. And, and, and software, because
25:20
what happens when you build a company, when you have 0
25:23
customers, you can roll out a feature in minutes.
25:26
You don't have to worry about how it impacts somebody else.
25:28
You don't have to worry about any of those things.
25:31
And it's easier to do that now than it's ever been with AI.
25:35
When you get to the point where you have 100 users, now you have
25:38
to figure out how do which, which group of these users does
25:43
this not work for out-of-the-box and how do we solve that
25:46
problem? And it's maybe ten of those 100
25:49
users. You go to those 10 people, you
25:51
explain to them, hey, you got to do this thing instead because of
25:53
the way this works now and you updated for them.
25:56
It's not a big deal. When you get to like stamped the
25:59
scale that we're at now where you have 10,000 users, you can't
26:02
go to 1000 people efficiently. And so you got to do this, this,
26:06
this and this. So now you have to solve these
26:08
edge cases. You actually have to like build
26:10
in backwards compatibility for things.
26:13
You have to do all this kind of stuff that is like, or you just
26:17
say sorry and you piss people off and that is like.
26:22
Yes, yes. And I think everybody should do
26:25
that. Sorry I'll let you keep going,
26:27
but I have a very strong point of view on this, but I want you
26:30
to finish it. But I think that's, so I think
26:34
that that's The thing is today established software businesses
26:38
are asking that question of can we just tell people, sorry, you
26:41
can't do that anymore? Can we?
26:45
Or do we just build these things?
26:46
And even if you are building it, you still have to think about
26:49
how to make that decision. Like there's a point at which
26:53
you can't tell 90% of your customers, sorry, you can't do
26:56
that anymore. So you still have to build the
26:57
solution to get to the point where you can, where you can
27:02
make that an acceptable trade off, right.
27:04
And so, well, I, yeah, you sounds like you have a
27:06
different. But anyway, that's the way I
27:08
think about it. And I think that that's I think
27:11
that's where builders today have a massive advantage.
27:13
But the only thing I want, I do want to say about this is I
27:16
don't think the fundamentals of running a company over time have
27:19
changed. And so I do think there's a lot
27:22
of people that are building very cool, compelling features today
27:26
that don't know how to run a business and aren't actually
27:29
going to be able to make it through the, the, the ups and
27:34
downs that happen in this context.
27:36
And so I do think there's a lot of companies that are moving
27:38
very slowly today that you're going to see 10 years from now
27:42
out executing these companies. They just can't move as fast
27:45
because they have to, or at least they feel like they have
27:49
to. I mean, you disagree with that,
27:50
but depending on how their business is structured, like
27:53
there's, there's different considerations that they have
27:56
and they can't just like launch something from from start in the
28:00
same way. And that's always been true.
28:02
To be clear, like most startups, if I look at the, the companies
28:05
that start at the same time as no, most of them are out of
28:07
business that are kind of in the e-commerce or they've sold and
28:12
been rolled into something else or like there's, there's not a
28:14
lot of them that have actually like executed well.
28:17
And, and actually, I don't even mean that as a knock.
28:19
I I hope it doesn't come off that way, but it's really hard
28:21
to do that and not everybody wants to do that.
28:25
It's actually a totally different way of building a
28:26
business. Like you get to a certain point
28:28
where it becomes about operational efficiency as
28:30
opposed to building cool things. And that's not something that
28:33
everybody wants to do. So yeah.
28:37
That was a lot. OK, so I'm going to try my best
28:40
to like, breakdown the things that I think I am hearing.
28:46
You tell me if I'm mishearing something I have a pretty
28:51
extreme point of view on, like how one should operate a
28:55
Business Today, especially in software or SAS, whatever you
28:58
want to call it, AI, you know, whatever you want to call it,
29:02
software. I, I, I think.
29:07
Have you guys listened to the Owen McCabe podcast with Lenny
29:10
by any chance? Like on Lenny's podcast?
29:14
No, I haven't with Lenny but. Yeah, you.
29:17
I strongly recommend it. I strongly recommend it.
29:19
And if I can somehow get Owen to come on to this podcast,
29:23
actually, you know what, I'm going to send him a note.
29:25
I'm going to try to get Owen to come out of this podcast.
29:28
I listen to this podcast and it completely shifted how I think
29:33
about running a business completely and the decisions he
29:41
made it sounds like and he didn't get into like as much
29:45
detail. We got into a good level of
29:46
detail. He cut $70 million of ARR in
29:52
order to shift his business to being an AI first business.
29:56
He just like said, sorry to $70 million of revenue.
30:00
So when you say something like you cannot say no to 90% of your
30:03
customers, I don't think that's true.
30:07
I don't think 70 is 90% for him to be clear, right?
30:10
I, I think it's more like 30, right?
30:13
They're probably at the 200 ish. I, I, I don't know what their
30:15
numbers are, right, because it's a private company, probably in
30:17
the 200 ish, probably cut 70. Whatever, whatever it may be,
30:20
whatever the trades may be. I, I, I think that there are
30:25
true decisions to be made as either CEO or founder.
30:31
And the, and your board matters a lot in this context as to like
30:36
what types of decisions you as the CEO are allowed to make and
30:39
what type of risk you're allowed to take to just say, you know
30:43
what, this thing, I don't see the opportunity.
30:47
I'm going to do this other thing and we're just going to go full
30:51
force into this. Like the the example I think of
30:54
is handshake. Do you guys know?
30:55
Handshake is it's like, OK, for five years, this company
31:04
Handshake was like a recruiting platform, OK.
31:06
So it was like the way that you would like go and hire people
31:09
from college is if you have, if you've ever done like campus
31:13
recruiting, it was like on a platform called Handshake, OK.
31:17
They completely pivoted their business in the last nine months
31:21
to just like finding people to do AI data labeling and the
31:24
company has skyrocketed. Mercour again started as a
31:28
recruiting platform. You, they said, actually you
31:32
can't hire anybody here. The only thing you can do here
31:35
is go find people to do data labeling for AI like foundation
31:40
Labs, right? So they actually literally to
31:42
100% of their previous customers said, sorry, actually we're not
31:45
doing that anymore. Now, I, I, I think like the risk
31:50
tolerance that you have to be willing to take as CEO and as a
31:54
board to do those types of shifts is just like at a
31:57
fundamentally different scale because you're saying like,
32:03
sorry to like basically your revenue base and your customer
32:06
base that you've made commitments to, right?
32:11
But I think that level of risk is being rewarded right now.
32:15
And I think the reason I disagree with you is it's not
32:18
that I don't think it's the right or wrong decision for any
32:21
given person. I just don't think that it's
32:24
possible to say that you cannot do it.
32:27
I actually think that in today's environment you specifically
32:31
must interact with that question.
32:35
So to clarify, I agree with that in terms of like making big
32:40
strategic bets like that. I was more talking about like
32:42
innovating on an existing product from like a feature set
32:45
standpoint. You have to like, if you're
32:47
trying to service the same set of customers, you can't just
32:50
like I mean, you could to your point, it is possible, but it
32:54
may not be wise to constantly do things that are going to break
32:58
their experience with your product if you're trying to
32:59
service that product in the same way.
33:01
I do though, agree with you on like the strategic bat piece.
33:05
And I do think there's a way in which you can go about that
33:07
where you minimize the risk of that, especially if you need
33:11
that money. There's maybe ways in which like
33:15
you can do that in a gradual way you pull different things, but I
33:18
think it that also may not make sense depending on how fast
33:21
you're trying to move on things. So yeah, I I do agree with you
33:24
from a strategic bad standpoint, you got to just go for it.
33:28
Yeah, I, I think like Jeremiah, your version of the world, I
33:32
would call more the Netflix version, which is like you say,
33:36
like, hey, DVD team, you can just keep doing whatever you
33:39
want, but I'm not going to talk to you like, because I need the
33:44
streaming team to become the company.
33:48
And so like they didn't turn off the DVD customers, but they
33:52
completely from an organizational standpoint,
33:55
isolated it. And so like, the great thing
34:00
about business is that you're probably not creating something
34:03
new. Like somebody has done this
34:05
before. So you could just like study how
34:07
like great, you know, how really good people have done it.
34:10
So like, you know, I like, yeah. And I, you know, I'm not a
34:15
shock. Yeah, I'd argue Netflix is a
34:18
great case study of that then in that context of of somebody
34:22
who's done that at a very high level and had massive success
34:24
with it. Yeah, I'm, I'm struggling.
34:28
I mean, I, I get it from why you would take these risks.
34:31
You know, it's just aggressive entrepreneurial discovery.
34:34
But like why? It's.
34:37
A completely pivot out of existing business, is it not
34:39
just a new business, right. And this is one of the strengths
34:42
I think that judged on me has a you know it.
34:44
Their defensibility from having such a wide user base is
34:48
incredible, right. If anyone's going to release AI
34:52
focused products in the review space, I would be extremely
34:55
bullish on judge dot me to hit a home run with it, right.
35:00
But apart from that, apart from the user base and and upsetting
35:04
some of them and turning a huge amount of them off, I don't
35:06
understand that process of entrepreneur or discover in a
35:09
business. I mean, I guess this is on a
35:11
case by case basis. I don't know the specifics of
35:12
the businesses doing this, shutting down huge parts of
35:15
their existing business to create new ones.
35:17
But to me, it's just a different business, right?
35:20
You can continue to serve some customers with some business and
35:24
lots of businesses do continue to serve a growing or shrinking
35:28
user base while doing something else, right?
35:31
Like Yopo doing Yopo Labs, right?
35:33
They're discovering new stuff, they're investing in that, but
35:36
they're not shutting down your PO to do it, right, Although
35:39
they might be shutting down some products, right?
35:43
But I think you do that when there's a shift in the market
35:47
that's big enough. Like the, I actually think the
35:49
Netflix example is, it's such an easy tangible example of they
35:54
saw before Blockbuster and obviously a lot of others that
35:57
DVDs were going to be replaced by streaming.
36:00
And so in that context, you can look at that and say, well, this
36:03
business, it may not be dead today.
36:05
It may be even more profitable in five years than it is now
36:10
because of scales of economy and all this kind of stuff.
36:12
But it's eventually going to die.
36:14
And so we need to invest in this other thing.
36:15
I think that answers your question, Jack.
36:18
But I do think that is where like a company can look at this
36:21
thing, They're like, we know this thing, we understand this
36:24
space, and we see how something is changing in a way that's
36:27
meaningful enough that we need to invest differently than we
36:30
are today. Can I, I'll, I'll give another
36:33
random example that I saw on Twitter yesterday.
36:35
Do you want me to share my screen quickly?
36:37
Did you guys see this Drew's post?
36:38
Do you know what I'm talking about?
36:40
Oh. I saw this as well.
36:43
Yeah, do. You know this, did you see this,
36:45
Jeremiah? This company is like whatever
36:49
there's like, this is like one now one of the fastest growing
36:51
DTC supplement companies. OK, But look at this in 2014, it
36:58
was started as a genetic testing company.
37:01
These things have nothing to do with each other.
37:03
Like I, I, I, I think like, I'm not going to go through the
37:07
whole thread. It's, it's hard to overstate
37:10
Jack like how much I think that like the job of entrepreneurship
37:16
or business building is to like really make really hard
37:23
decisions and like completely shifting the business is what I
37:28
would describe as a really hard decision.
37:31
If you guys read a hard thing about hard things, like that's
37:34
what even Ben Horowitz did, OK, Like, but it is a thing that you
37:38
do as like especially as a founder CEO, much harder to do
37:46
as a quote, UN quote. Hired CEOI think Jeremiah's
37:50
context is different because he is a founder who has increased
37:54
CEO responsibility. So I, I don't think it's like
38:00
fair to say that you're a hired CEO in this context.
38:03
But yeah, I, I don't know, like I, I think like, look, I think
38:09
people should try like I think people should want to be built
38:11
companies. But the more the longer I do
38:14
this and the more I realize like, like Jeremiah, what you
38:16
said, that like business building over the long term is a
38:20
non trivial game or a non trivial task.
38:24
The more I realize, like you, you, you, you have to be willing
38:28
to do that. These types of things that are
38:31
like seem extremely non obvious or seem like, why would you ever
38:35
do acts in order to hit the home runs?
38:40
Yeah. And I I also think it's worth
38:44
noting like the no, I started now I'm incubated it within
38:51
winter school group, but I like I said, we started split it off
38:53
into a company run that no is still growing well, profitable.
38:59
It's the thing I started. The team still likes me, all
39:04
this kind of stuff, right? Like there's a, it's a very
39:06
different field than stepping into a company and doing layoffs
39:10
six months later. And the that is actually really,
39:17
really hard. Like in the context of being
39:20
the, the founder of a startup that's still a relatively small
39:23
team and nothing's ever really gone wrong.
39:25
Everybody likes you. There's no like you don't, you
39:28
haven't hurt people's feelings. You haven't, like, you haven't
39:31
had to do anything really, really hard.
39:33
And I think you know what happens every business, that
39:37
every business gets to a point of hardship like that, that is
39:40
just how it goes. You you it should get shut down
39:42
for some reason. You like, yeah, like no, has not
39:48
had any of those like really big points of hardship.
39:51
And so like the the context of the the of it is different and
39:55
what it feels to be building a lot space is totally different.
39:58
And then you get to something where there's actually like
40:00
hardship and it is you have to really push and fight in a
40:05
different way and you have to make way harder decisions, I
40:07
think. And yeah, so I guess just kind
40:11
of along with what you're saying with shop like it's it's.
40:15
Over the long term you have to do that and it's I don't think,
40:19
I still am not sure if I'm cut out for that.
40:21
Like just to be perfectly honest, like I don't know if
40:23
that's something like could I ever be the CEO of Fortune 500
40:27
company where like those kinds of things are happening all the
40:29
time. Like I, I doubt that or I
40:34
shouldn't say doubt, I question that, right?
40:35
But like for me, this is a bit of discovery too, of like how,
40:38
how far can I go down that road of being like being the bad guy
40:41
sometimes being like, hey, there's these things we have to
40:45
do. And it is not actually fun to be
40:47
disliked for ultimately doing things that you didn't really
40:51
have a choice about. Like you have a choice of the
40:53
way in which you do it. But when there's not enough
40:56
money to fund the business as it stands today or there won't be
41:01
in in the near future, you have to make hard decisions about
41:04
what that looks like. It's not really a choice in that
41:06
context. Yeah, I, I, if anybody is
41:11
listening and you're whatever, 40 minutes in and you're
41:14
listening to this part of the conversation for whatever
41:17
reason, you know, because you like love pain.
41:20
You love listening to Jeremiah, Jack and Zach and I talk about
41:24
it. I'll say two things just for
41:28
what the very little it's worth, because we're kind of like in a
41:31
negative space. 1 is I wouldn't trade it for fucking anything.
41:35
OK? So it's like the fulfillment
41:38
that I get from building business and creating value in
41:40
the world and things like that. I would never create for
41:42
anything. And the second is is not for
41:44
everyone because like the truth of the matter is like there are
41:49
things that you have to do that are really hard.
41:52
They're decisions that people are going to disagree with and
41:56
guess whose fault it is at the end of the day, no matter what,
42:02
it is your fault. So like, like no matter what.
42:08
All right. And yeah, Jeremiah, I mean,
42:11
like, I hope I do things the right way over time to like, I
42:15
want to play extremely long term games, right?
42:18
And I've been fortunate enough that I've had people follow me
42:21
across multiple roles, across multiple companies because I
42:24
think I do things in a even like I've fired lots of not that I
42:30
take pride in this, but I've probably fired like 70 people
42:33
over the past decade, like personally, right.
42:37
And even amongst the people who I have fired, there are people
42:42
who want to work with me again. And so I think I do it the right
42:46
way. Or there's people who hate me,
42:48
of course, right. Like, and, and but you, you just
42:52
have to do the best you can. But yeah, there's there's like
42:56
moments in companies that are these clarifying moments.
42:59
But again, I think building right now, if you're not doing
43:03
this sort of stuff, you're you're probably not building
43:05
your company correctly. Like Facebook just announced
43:09
another set of layoffs. OK, They make more money than
43:12
God. OK, Like Amazon probably
43:16
announced this set of Amazon record earnings and layoffs.
43:21
You guys saw that right this week.
43:25
I didn't see that but. OK, Yeah, OK.
43:29
Layoffs. 2 days later, stock pops 10% because of record
43:34
earnings. OK.
43:35
Like I think people totally underestimate what business
43:38
building is like today at all scales.
43:42
Yeah, at all scales. But anyway, this was a wild
43:46
convo. Sorry, Jeremiah, go ahead.
43:48
Was saying and what that is at the Netflix or not Netflix at
43:51
the Amazon scale, the amount of scale is it's it's there's so
43:54
many things going on in these businesses.
43:56
The company is evaluating and saying this thing isn't that
43:59
important anymore. Doesn't mean that like the the
44:01
people aren't important. But at the end of the day, like
44:04
this thing within the business is not important anymore.
44:06
We can't we need to change what we're doing here and we need to
44:09
to make that something different or were yeah, I mean that's
44:12
ultimately what it comes down to.
44:14
You're overstaffed for some reason you're doing whatever it
44:16
is like you're the thing that you need to do tomorrow is not
44:19
the thing that you've been doing in the past.
44:20
And I think that's that is a constant process and business of
44:23
optimizing is to ask that question.
44:25
And hopefully that doesn't look like layoffs, but I think it
44:27
does oftentimes, especially at scale with these companies.
44:33
Do you guys think I'd love to hear your thought process on
44:36
this? Do you think that the decision
44:41
to kill certain products, to kill certain parts of the
44:45
business comes from both an understanding of the cost and
44:49
the risk that that part of your business represents moving
44:53
forward? And then also the benefit of
44:57
reallocating resources and the reward that's on the other side
45:00
of that? Because I'm not sure if you
45:02
guys, I'd love to have this guy's on, this guy on.
45:04
Have you guys heard of levels? Yeah, I have.
45:10
He's got like so many things that are one like deviation away
45:15
from each other, right? At any point, you could have
45:18
killed one of these things to go all in on another thing.
45:21
They're actually a little bit smaller than I thought that they
45:24
were, but they're all pretty close, right?
45:26
Maybe sharing some user base. And I wonder, you know, for him,
45:31
I imagine that these all independently represent good
45:35
business, even though some of them might be quite small and
45:39
not a good reason to start reallocating.
45:43
But yeah, maybe it what do you guys think?
45:45
Is it from an understanding of the cost and the risk and then
45:49
the benefit of reallocating some of those resources over?
45:52
I think no one should ever try to reproduce what Peter Lovos
45:56
has done, and I think attempting to do so is extraordinarily
46:00
foolish. Yeah, like, it's hard.
46:05
It's sorry, there are more Unicorn venture funded startups
46:13
than there are Peter Levels in the world.
46:15
There's one Peter Levels and there are like 2000 companies
46:20
that are worth over a billion dollars in the private markets.
46:24
OK, what does that tell you? It tells you it's easier to
46:27
build a Unicorn private market valuation company that it is to
46:30
do what Peter Levels does. And I think no one should look
46:35
to Peter Levels is model and try to replicate it.
46:38
I think about opportunity, it cost a lot.
46:41
And that's, that's like one of the things that in that context,
46:47
I, I mean, he's like, clearly not well, I mean, it'd be
46:50
interesting to actually hear from him, but I seriously doubt
46:54
he's regularly investing time and resources into all of those
47:00
things. And and from what, in my own
47:04
experience, that's never gone well for me over time.
47:08
I, I, I think he's a genius. Like, I mean, I think that the
47:12
problem is that because he's like laying back and like small
47:16
piss, you know, it makes it look easy massiveness.
47:22
I think he's a fucking genius and to view him in any other way
47:27
is massively mistaken. Like truly, that's what I think.
47:33
And the way that you can see that is that there's like Jack,
47:36
can you think of anyone else who has done that?
47:39
I can't think of any. Like the maximum I can think of
47:41
as someone who has run like 2 businesses at the same time
47:44
successfully, maybe 3, but none of them are laying back on a
47:49
beach while they're. Always, always doing.
47:52
I don't I don't follow what he's doing in the on his feed, but so
47:57
he's he's chilling on a beach while running like 8 businesses
48:00
simultaneously that's interesting yeah no, I don't
48:04
know just just a few on ONS right every now and then you see
48:07
them on XI want to get someone one of them on here like that no
48:10
one knows but they run like 3 things or they run like 6 things
48:13
and you're like wow this is and they're like a one person team
48:17
right they've got no developers it's just that all right I also.
48:20
Don't. I do not mean this in a negative
48:23
way at all, but the reality is if you add up all those revenues
48:27
together, it's still not a very big business.
48:30
Like it's great. I would be too clear.
48:32
I'd be very happy to have that for myself.
48:34
That would be great. But it's not like a, it's not
48:39
like these things are like hugely successful, like they're,
48:42
they're good, but they're not great in the same way.
48:46
Dude, I think, I think I think this might actually be the point
48:48
is that he's a genius level person because he has managed to
48:52
do this and this is the outcome and he can make whatever
48:56
decisions he wants to make in terms of how he wants to live
48:58
his life. And he has an amazing life.
49:01
And so and he's admired by so many people.
49:05
Like like, let's be clear, he's fine and he's going to be fine
49:10
and he's like an icon, OK, But it you don't do he's not an
49:16
idiot, right? Like and and so like, I don't.
49:21
It's hard to replicate. It's very hard to replicate,
49:25
yeah. Yeah, not that level of success,
49:27
something like a Judge me does 3-4 times the revenue that he
49:31
does a single product, single focus company.
49:37
Right, with next to no marketing for most of its run.
49:41
Yeah, it's interesting. All righty gents, this was wild.
49:47
This is a wild convo, all right. I think this is good.