The Exchanges

Q Yeah, absolutely. And that transparency is important to remember. I guess kind of remaining on the CAC element, are there rules of thumbs on CAC that you agree with? And are there ones that you fundamentally disagree with in terms of rules of thumb that are commonly said that you agree with and then disagree with?

A Well, there's a couple of pretty common rules of thumb around CAC. So one would be that you don't want to spend more than first year's revenue acquiring the customer. And I think that's a pretty good rule of thumb. Another good one is that the long-term value of a customer should be at least three X the CAC. And I would agree with that, but say that it's got to be even higher than that because a three X LTV to CAC ratio implies that the customer is churning after about three years. It's about a one third churn rate per year, which is way too high. So, you know, I like to see a situation where on a revenue basis, if you're looking at cohorts, that the revenue cohort is always growing year after year.

AI assessment note: “one would be that you don't want to spend more than first year's revenue”

Q Can I ask, in terms of the net negative churn, I'm always asked, like, is one 10 good, Harry? Is one 30 good? What is, like, A star? What's decent, and what could do better? How can we benchmark this? How would you respond to that when it comes to kind of good, great, and stellar when it comes to net negative churn that excites you?

A Well, I would say that good or not bad would start at a hundred percent. Otherwise, your bucket has some holes in it, and it's very hard to build a subscription business for the long term If on a revenue basis, the revenue is trading every year. And so you really want to start with at least a hundred percent retention on a revenue basis. And then certainly if you can get up to something like a 130%, that would be industry leading. We've seen some startups get all the way up to close to 200% when they have a land and expand strategy. They might start at a enterprise with a smallish deal, but are able over time to grow that onto a lot more seats. And that's a fantastic scenario when it happens.

AI assessment note: “130%, that would be industry leading”

Q segment that you're selling to. Often in startups, the churn rate is probably the highest of all compared to enterprise and SMB. But you've written before about the kind of the brilliance of the model of selling to startups. Can I ask, why do you think that selling to startups and providing that kind of service to the startup economy is such an exciting segment to serve over maybe others?

A Well, in deciding whether to sell to enterprises or to SMBs, and startups would be an extreme version of SMB selling, I It's really a trade off between the value of a customer and the difficulty level or the ease of selling to that customer. And so I don't dispute that enterprises are the most valuable customers to have. You see that especially during a downturn like this, where enterprises are much less likely to go out of business, whereas startups are going to see a lot of attrition. But the flip side of that is that startups are so much easier to sell to. And so therefore they can provide a great entry point into the market for other startups. Which may find that the difficulty level of trying to sell to a fortune 500 company is just too high.

AI assessment note: “the flip side of that is that startups are so much easier to sell to.”

Q No, absolutely. I guess last one on CAC, but it's, you know, often we see blended CACs and often founders present in blended CAC scenarios. How do you advise founders in terms of the presentation of their CACs and whether blended or not is the right approach to clearly present it?

A Yeah, I mean, this is something I've warned about. You really want to separate your CAC by channel, because what happens is, I guess a blended CAC would just be, you would report on your CAC across all channels. And what can be misleading with that is any startup that has good word of mouth will get a bunch of customers through inbound, where basically there was no CAC. People just came calling. And if you average the CAC across that sort of organic or inbound growth with other types of programs, it will give you an exaggerated sense of the efficiency of outbound channels, and you'll end up over-investing in those channels. And it may take you some time to realize that some of those channels don't actually work. What's really working is inbound. And you're kind of spreading that peanut butter of the good inbound CAC over a bunch of bad outbound channels.

AI assessment note: “You really want to separate your CAC by channel”

Q Yeah, absolutely. And that transparency is important to remember. I guess kind of remaining on the CAC element, are there rules of thumbs on CAC that you agree with? And are there ones that you fundamentally disagree with in terms of rules of thumb that are commonly said that you agree with and then disagree with?

A Well, there's a couple of pretty common rules of thumb around CAC. So one would be that you don't want to spend more than first year's revenue acquiring the customer. And I think that's a pretty good rule of thumb. Another good one is that the long-term value of a customer should be at least three X the CAC. And I would agree with that, but say that it's got to be even higher than that because a three X LTV to CAC ratio implies that the customer is churning after about three years. It's about a one third churn rate per year, which is way too high. So, you know, I like to see a situation where on a revenue basis, if you're looking at cohorts, that the revenue cohort is always growing year after year.

AI assessment note: “one would be that you don't want to spend more than first year's revenue”

Q Can I ask, in terms of the net negative churn, I'm always asked, like, is one 10 good, Harry? Is one 30 good? What is, like, A star? What's decent, and what could do better? How can we benchmark this? How would you respond to that when it comes to kind of good, great, and stellar when it comes to net negative churn that excites you?

A Well, I would say that good or not bad would start at a hundred percent. Otherwise, your bucket has some holes in it, and it's very hard to build a subscription business for the long term If on a revenue basis, the revenue is trading every year. And so you really want to start with at least a hundred percent retention on a revenue basis. And then certainly if you can get up to something like a 130%, that would be industry leading. We've seen some startups get all the way up to close to 200% when they have a land and expand strategy. They might start at a enterprise with a smallish deal, but are able over time to grow that onto a lot more seats. And that's a fantastic scenario when it happens.

AI assessment note: “good or not bad would start at a hundred percent... 130%, that would be industry leading”

Q want to start more from a macro perspective on kind of where we're at in the environment. And we're in a time of greater uncertainty than ever. And I have to start by asking, you know, you've experienced both the dot com, you experienced 2008 on the operator side. How did seeing the prior crashes impact how you think about investing in your investment mentality today? Do you think David?

A Well, innovation doesn't stop during a downturn. My own personal experience was that the two unicorn companies I was involved in creating were primarily built during downturns. PayPal started in 99, but was really built in the wake of the dot com crash in 2002 1001. We IPO'd in 2002, and then the company was acquired. And similarly, Gammer was started in the wake of the 2008, 2009 economic crash. And so my experience with these downturns has been that it's still very possible to create great companies. And in fact, there are things that get easier during downturns. It's potentially easier to recruit talent because there's less competition. There can also be fewer copycats crowding a space. And so there are things that get easier. The thing that gets harder, obviously, is fundraising. But like I said, innovation doesn't stop during a downturn and you can still create great companies.

AI assessment note: “my experience with these downturns has been that it's still very possible to create”

Q You tweeted, Silicon Valley is no longer a place. It's a way of doing business. What did you mean by this?

A Yeah, I mean, I think, especially as we all moved to remote work, but even before this, we were seeing startups pop up all over the world and start to use the Silicon Valley template. And I would say that template consists of a few critical elements. One is that all the employees are owners of the company. You know, they have broad-based stock option pools. The second is the way that VCs and investors work Participate in the company, which is they're providing true risk capital, and nobody is too upset if they end up losing a hundred percent of their investment. And that's not the way the rest of the world works. In a lot of places in the world, if you go to the investors and tell them you lost all their money, they're going to say, no, no, where is it? And send a guy to break your legs. And I think this combination of risk capital combined with broad-based employee ownership and support for just the very best ideas is something that started in Silicon Valley, but it's now Spreading to many other places, and it's a great thing.

AI assessment note: “startups pop up all over the world and start to use the Silicon Valley template”

Q Yeah, no, absolutely. In terms of kind of another core element that can kill startups is the customer acquisition element, and Peter Fenton actually said on the show, the biggest challenge today is there's no free and open distribution. Would you agree with Peter here on the fundamental lack of distribution and soaring tax today?

A I would agree, but I would divide the problem for B to C versus B to B companies. So B to C, you typically do need some sort of new platform or new distribution platform because consumer companies, they tend to have to grow virally to get to large numbers because you can't afford to spend a lot on CAC. The long-term value of any particular customer is low, and so therefore you can't afford to spend a lot on CAC, generally speaking. B to B is a B to B companies lend themselves towards more of a sales driven approach. The customers have higher long-term values. They tend to have lower churn, so they stick around for a long time. And as a result of that, you can afford to spend money on, on CAC. It does pencil in a different way. So I would, I would agree that in the absence of new consumer distribution platforms, it's very hard to get a CAC to pencil for a new consumer company.

AI assessment note: “I would agree, but I would divide the problem for B to C versus B to B”

Q Can I ask, in terms of the burn multiple, and this is a terrible question, so you can absolutely, you know, chastise me for it. Is there kind of a range that gets you excited, or when someone says, hey, David, this is what is sad, your ears prick up and you get excited. Are they kind of indicators for you?

A So certainly, I've said that if the burn multiple is less than one, which means, like, let's say you've got an early stage startup, and we've seen a few like this, where they're able to burn a million dollars or less to achieve a million dollars or more of net new ARR, I would qualify that as being in the amazing category. And we have seen a few deals like that recently that Kraft has done. The flip side of it is, if you're burning more than three times your net new ARR, I would define that as being suspect or bad. And that's the case where burn needs to be very closely scrutinized. I mean, in other words, you're burning a lot, but you're not growing that much in relation to burn. And the question then is, well, why are you investing so much? What is it really getting you? And are you over-investing?

AI assessment note: “if the burn multiple is less than one... I would qualify that as being in the amazing category”

Q Yeah, no, absolutely. In terms of kind of another core element that can kill startups is the customer acquisition element, and Peter Fenton actually said on the show, the biggest challenge today is there's no free and open distribution. Would you agree with Peter here on the fundamental lack of distribution and soaring tax today?

A I would agree, but I would divide the problem for B to C versus B to B companies. So B to C, you typically do need some sort of new platform or new distribution platform because consumer companies, they tend to have to grow virally to get to large numbers because you can't afford to spend a lot on CAC. The long-term value of any particular customer is low, and so therefore you can't afford to spend a lot on CAC, generally speaking. B to B is a B to B companies lend themselves towards more of a sales driven approach. The customers have higher long-term values. They tend to have lower churn, so they stick around for a long time. And as a result of that, you can afford to spend money on, on CAC. It does pencil in a different way. So I would, I would agree that in the absence of new consumer distribution platforms, it's very hard to get a CAC to pencil for a new consumer company.

AI assessment note: “I would agree, but I would divide the problem for B to C versus B to B”

Q Can I ask, when you look at like, we spoke about enterprise earlier, but when you look at enterprise, obviously you have to invest heavily ahead of time in sales, Marketing and CS, which will give you a pretty shit burn multiple, be it pre-efficient sales. How do you think about that when assessing the burn multiple and capital efficiency?

A So the burn multiple will vary by stage. And so you're right in the earliest days of a startup, invariably the burn multiple will be bad because the company has to invest in R and D. I mean, obviously if the startup is pre revenue, the multiple won't even compute because the denominator will be zero. So in the earliest days where burn is high and new ARR is low, you're going to have a pretty bad burn multiple, but the burn multiple should be improving over time. Obviously, in order for any company to become profitable, which is the goal at the end of the day, its burn must go to zero, and so therefore the burn multiple, again, this net burn over net new ARR should be approaching zero over time, and if you see the burn multiple going in the wrong direction, that's a sign that something isn't working and that you need to be more disciplined about it.

AI assessment note: “So the burn multiple will vary by stage. And so you're right in the earliest days”

Q and survival, when you're advising portfolio companies today in the face of, you know, the environment we're in, what sort of runways are we looking to see? We often hear, you know, I want two years of runway and I want all of my companies to have that. I mean, I don't think it's quite that binary. So how are you advising founders on Runway preservation and expectations around that.

A Well, I do think at least two years is a good starting point for thinking about it, because we're in a highly disrupted period right now. We could see tremendous economic disruption for two or three quarters, and just the average recession takes about 18 months to come back from, and this one seems much more severe than average. And so I do think you want to have at least two years. Now, of course, there's no such thing as having too much runway, and so really the question is, well, what's the minimum you can get away with? And I do think that much less than two years, you're taking a big risk that you will not be able to fundraise when you need the money, because either your metrics aren't there yet, or because the economy is still in a retracted downturn.

AI assessment note: “I do think at least two years is a good starting point for thinking about it”

Q and survival, when you're advising portfolio companies today in the face of, you know, the environment we're in, what sort of runways are we looking to see? We often hear, you know, I want two years of runway and I want all of my companies to have that. I mean, I don't think it's quite that binary. So how are you advising founders on Runway preservation and expectations around that.

A Well, I do think at least two years is a good starting point for thinking about it, because we're in a highly disrupted period right now. We could see tremendous economic disruption for two or three quarters, and just the average recession takes about 18 months to come back from, and this one seems much more severe than average. And so I do think you want to have at least two years. Now, of course, there's no such thing as having too much runway, and so really the question is, well, what's the minimum you can get away with? And I do think that much less than two years, you're taking a big risk that you will not be able to fundraise when you need the money, because either your metrics aren't there yet, or because the economy is still in a retracted downturn.

AI assessment note: “I do think at least two years is a good starting point”

Q No, absolutely. I guess last one on CAC, but it's, you know, often we see blended CACs and often founders present in blended CAC scenarios. How do you advise founders in terms of the presentation of their CACs and whether blended or not is the right approach to clearly present it?

A Yeah, I mean, this is something I've warned about. You really want to separate your CAC by channel, because what happens is, I guess a blended CAC would just be, you would report on your CAC across all channels. And what can be misleading with that is any startup that has good word of mouth will get a bunch of customers through inbound, where basically there was no CAC. People just came calling. And if you average the CAC across that sort of organic or inbound growth with other types of programs, it will give you an exaggerated sense of the efficiency of outbound channels, and you'll end up over-investing in those channels. And it may take you some time to realize that some of those channels don't actually work. What's really working is inbound. And you're kind of spreading that peanut butter of the good inbound CAC over a bunch of bad outbound channels.

AI assessment note: “You really want to separate your CAC by channel”

Q segment that you're selling to. Often in startups, the churn rate is probably the highest of all compared to enterprise and SMB. But you've written before about the kind of the brilliance of the model of selling to startups. Can I ask, why do you think that selling to startups and providing that kind of service to the startup economy is such an exciting segment to serve over maybe others?

A Well, in deciding whether to sell to enterprises or to SMBs, and startups would be an extreme version of SMB selling, I It's really a trade off between the value of a customer and the difficulty level or the ease of selling to that customer. And so I don't dispute that enterprises are the most valuable customers to have. You see that especially during a downturn like this, where enterprises are much less likely to go out of business, whereas startups are going to see a lot of attrition. But the flip side of that is that startups are so much easier to sell to. And so therefore they can provide a great entry point into the market for other startups. Which may find that the difficulty level of trying to sell to a fortune 500 company is just too high.

AI assessment note: “startups are so much easier to sell to. And so therefore they can provide a great entry point”

Q Yeah, absolutely. In terms of giving them credit for that, we've spoken a little bit about the founders themselves, and the crazy visionary founders are always kind of eulogized in tech, but how do you think about the difference between good crazy versus maybe bad crazy?

A Yeah, founder of psychology is a really interesting topic. Founders are often described as quote unquote crazy, and when everything is up and to the right, that means something positive, and then when the wheels have come off, it means something negative. And so the question is, well, how can you tell the difference between good crazy and bad crazy? And my view on that is that founders need to be far more aggressive than what the average person might think. They need to have these traits of being visionary and pushing and being able to run through walls. And so just having a quote unquote sane level of crazy may not be enough, but where I think things go wrong is when they kind of lose perspective and are immune from seeking advice or listening to good advice. And that's when you'll see a situation where founders can go off the rails.

AI assessment note: “where I think things go wrong is when they kind of lose perspective”

Q maximum capital extraction there. In terms of kind of the founders that do it, I've read a lot, obviously, from Ben Horace, and one element that I really love about his writing was the wartime versus Peacetime CEOs. I'd love to hear, given your operational experience, you know, you've been CEO many times. Do you agree that it's this binary, and do all founders need to be wartime CEOs now?

A I think the short answer is yes. They do need to be wartime CEOs, and what I associate with a wartime CEO is somebody who is not afraid to make tough decisions, who is not afraid to kind of flip on a dime, and to do the tough things that are necessary. I mean, the reality is, if your business is Just dries up overnight because of COVID and no revenue is coming in the door. Obviously that implies that your burn multiple has become horrible. You've probably got some really tough decisions to make because you go from having an acceptable burn rate to one where the company's going to die in a number of months if you don't react. And you know, wartime measures are called for.

AI assessment note: “I think the short answer is yes. They do need to be wartime CEOs”

Q Can I ask in terms of getting decisions wrong and the failure aspect in Silicon Valley and in the tech ecosystem, many kind of think that the great thing is the celebration of failure. How do you feel around the celebration of failure culture? And what are your thoughts on that?

A Frankly, I hate it. Um, I don't believe in celebrating failure. I think that being a founder is so hard and running a startup is so hard and I've never seen a case. Where a successful startup didn't almost die multiple times. I mean, certainly when, when we were doing PayPal, the company came so close to death so many times when I was doing Yammer and had to compete heads on against Salesforce. And so you had all these really scary challenges. And I think that psychologically speaking, if you allow yourself to think that failure is acceptable, I think you're much more likely to succumb to it. I think psychologically speaking, you're better off burning the boats. So to speak, and saying that failure is not an option. It's not acceptable, and we will do whatever we have to do to survive and persevere. Now, at the end of the day, we know that in reality, failure is an option. It can happen, and we're not going to hold that against somebody. I mean, one of the great things about Silicon Valley and this way of doing business is that when there is a failure, everyone just kind of dusts themselves off, brushes themselves off, and they move on to the next one, and that's okay. It's not like hundreds of years ago, we sent someone to a debtor's prison or something like that, and so On the one hand, we do allow for failure, but I do think that it's better if founders pretend like it can't…

AI assessment note: “Frankly, I hate it. Um, I don't believe in celebrating failure.”

Q maximum capital extraction there. In terms of kind of the founders that do it, I've read a lot, obviously, from Ben Horace, and one element that I really love about his writing was the wartime versus Peacetime CEOs. I'd love to hear, given your operational experience, you know, you've been CEO many times. Do you agree that it's this binary, and do all founders need to be wartime CEOs now?

A I think the short answer is yes. They do need to be wartime CEOs, and what I associate with a wartime CEO is somebody who is not afraid to make tough decisions, who is not afraid to kind of flip on a dime, and to do the tough things that are necessary. I mean, the reality is, if your business is Just dries up overnight because of COVID and no revenue is coming in the door. Obviously that implies that your burn multiple has become horrible. You've probably got some really tough decisions to make because you go from having an acceptable burn rate to one where the company's going to die in a number of months if you don't react. And you know, wartime measures are called for.

AI assessment note: “I think the short answer is yes. They do need to be wartime CEOs”

Q want to start more from a macro perspective on kind of where we're at in the environment. And we're in a time of greater uncertainty than ever. And I have to start by asking, you know, you've experienced both the dot com, you experienced 2008 on the operator side. How did seeing the prior crashes impact how you think about investing in your investment mentality today? Do you think David?

A Well, innovation doesn't stop during a downturn. My own personal experience was that the two unicorn companies I was involved in creating were primarily built during downturns. PayPal started in 99, but was really built in the wake of the dot com crash in 2002 1001. We IPO'd in 2002, and then the company was acquired. And similarly, Gammer was started in the wake of the 2008, 2009 economic crash. And so my experience with these downturns has been that it's still very possible to create great companies. And in fact, there are things that get easier during downturns. It's potentially easier to recruit talent because there's less competition. There can also be fewer copycats crowding a space. And so there are things that get easier. The thing that gets harder, obviously, is fundraising. But like I said, innovation doesn't stop during a downturn and you can still create great companies.

AI assessment note: “innovation doesn't stop during a downturn... it's still very possible to create great companies”

Q funding levels being a challenge for Startups. I do also want to dive into a couple of other mechanics that, as you put, can cause kind of startup death and kill your startup. You said before, losing money at the corporate level is okay. Losing money at the unit level is not. This is specifically regarding unit economics. How do you think about assessing unit economics with that in mind?

A Well, what you want to avoid is a situation in which the company is basically selling dollar bills for 90 cents. That's the classic unit economics It's a problem where you're selling a product for less than what it costs you to make on a variable basis. And the reason why this has taken center stage is because over the last decade, as software has eaten the world, you're seeing more and more startups have kind of a hybrid software, real world model. It's not just a pure software business. There's some physical world component to it. It could be a restaurant delivery service where it's not just a mobile app. You actually have a That the cost of providing the service does not exceed what people are willing to pay for it.

AI assessment note: “selling a product for less than what it costs you to make on a variable basis”

Q Can I ask, when you look at like, we spoke about enterprise earlier, but when you look at enterprise, obviously you have to invest heavily ahead of time in sales, Marketing and CS, which will give you a pretty shit burn multiple, be it pre-efficient sales. How do you think about that when assessing the burn multiple and capital efficiency?

A So the burn multiple will vary by stage. And so you're right in the earliest days of a startup, invariably the burn multiple will be bad because the company has to invest in R and D. I mean, obviously if the startup is pre revenue, the multiple won't even compute because the denominator will be zero. So in the earliest days where burn is high and new ARR is low, you're going to have a pretty bad burn multiple, but the burn multiple should be improving over time. Obviously, in order for any company to become profitable, which is the goal at the end of the day, its burn must go to zero, and so therefore the burn multiple, again, this net burn over net new ARR should be approaching zero over time, and if you see the burn multiple going in the wrong direction, that's a sign that something isn't working and that you need to be more disciplined about it.

AI assessment note: “So the burn multiple will vary by stage.”

Q funding levels being a challenge for Startups. I do also want to dive into a couple of other mechanics that, as you put, can cause kind of startup death and kill your startup. You said before, losing money at the corporate level is okay. Losing money at the unit level is not. This is specifically regarding unit economics. How do you think about assessing unit economics with that in mind?

A Well, what you want to avoid is a situation in which the company is basically selling dollar bills for 90 cents. That's the classic unit economics It's a problem where you're selling a product for less than what it costs you to make on a variable basis. And the reason why this has taken center stage is because over the last decade, as software has eaten the world, you're seeing more and more startups have kind of a hybrid software, real world model. It's not just a pure software business. There's some physical world component to it. It could be a restaurant delivery service where it's not just a mobile app. You actually have a That the cost of providing the service does not exceed what people are willing to pay for it.

AI assessment note: “selling a product for less than what it costs you to make on a variable basis”

Q board members there, again, while I have you, why not use this for advice? What would you advise me in terms of gaining my first board seats and kind of being The most impactful board member that I can be, and from your experience seeing the best, both from the world of operations and now from the world of venture, what do the best do to make themselves so good?

A The nice thing about a board is that you've got multiple people on it, and so you can build a team that is well-rounded as a team, and everyone can bring their strengths, in other words. You don't have to, as a board member, it's not a single dimension. So some board members I see are fantastic because in their previous career prior to investing, they were a CFO. And so they bring a very rigorous numbers-based approach, and there's nobody better to kind of scrutinize the numbers and give advice on that dimension. You can have VCs or board members who are very good at supporting the founder emotionally and have a high EQ and are sort of play a more of a cheerleader role. And then you can have board members who are better as strategy. And so everyone should bring their strengths. And I think for you, it would just depend on bringing your strengths to the table and contributing that.

AI assessment note: “for you, it would just depend on bringing your strengths to the table”

Q board members there, again, while I have you, why not use this for advice? What would you advise me in terms of gaining my first board seats and kind of being The most impactful board member that I can be, and from your experience seeing the best, both from the world of operations and now from the world of venture, what do the best do to make themselves so good?

A The nice thing about a board is that you've got multiple people on it, and so you can build a team that is well-rounded as a team, and everyone can bring their strengths, in other words. You don't have to, as a board member, it's not a single dimension. So some board members I see are fantastic because in their previous career prior to investing, they were a CFO. And so they bring a very rigorous numbers-based approach, and there's nobody better to kind of scrutinize the numbers and give advice on that dimension. You can have VCs or board members who are very good at supporting the founder emotionally and have a high EQ and are sort of play a more of a cheerleader role. And then you can have board members who are better as strategy. And so everyone should bring their strengths. And I think for you, it would just depend on bringing your strengths to the table and contributing that.

AI assessment note: “depend on bringing your strengths to the table and contributing that.”

Q speak before, and you've mentioned kind of the comparison between founders and then actors, and kind of being distrusting of kind of agents and the commercial people, and kind of comparing that to VC. How do you think about building that relationship of trust Where the founder really accepts and yearns for the advice and really ingests it versus having that more skeptical relationship. How do you build that trust?

A Well, yeah, so the analogy I've made is that over the last decade or so, a little bit of that Hollywood auteur mentality, you know, among directors has sort of creeped into the tech world, where founders like Hollywood directors want total creative freedom. They want final cut, and that's as it should be. I do think that at the end of the day, founders are the ones running these companies. It's their company. They're the ones who should be making these But if it blinds the founder to seeking advice or seeking to balance their psychology or their perspective, I think that's dangerous, and so I would sort of counsel against the sort of auteur mentality, and founders should realize that everyone's really on the same team, and you know, I always had great relationships with my VCs and the people who were on my board when I was running Yammer, and so the relationship should be very constructive.

AI assessment note: “founders should realize that everyone's really on the same team”

Q I totally agree. Can I ask, in terms of that failure, I guess my question is, when you think about the challenges that you've had, in terms of, like, dealing with those shit-hit-the-fan moments, how have you dealt with them personally? It's such a hard thing to know what to do, and what's worked for you?

A I think the most important thing is you do have to react to the new facts and to the new situation on the ground, and I think where people I think go awry is that they're trapped in some sort of legacy thinking. They're too anchored on the past. They're too anchored on what the old plan was, or what they were supposed to be doing, what they thought they're going to be doing at this time. You know, the old sales plan, the old hiring plan, and so they're slow to react. Or, you know, another version of this is just having rose-colored glasses on, that they don't want to acknowledge the new realities, the new tough realities, and that caused them to be slow to react.

AI assessment note: “most important thing is you do have to react to the new facts”

Q speak before, and you've mentioned kind of the comparison between founders and then actors, and kind of being distrusting of kind of agents and the commercial people, and kind of comparing that to VC. How do you think about building that relationship of trust Where the founder really accepts and yearns for the advice and really ingests it versus having that more skeptical relationship. How do you build that trust?

A Well, yeah, so the analogy I've made is that over the last decade or so, a little bit of that Hollywood auteur mentality, you know, among directors has sort of creeped into the tech world, where founders like Hollywood directors want total creative freedom. They want final cut, and that's as it should be. I do think that at the end of the day, founders are the ones running these companies. It's their company. They're the ones who should be making these But if it blinds the founder to seeking advice or seeking to balance their psychology or their perspective, I think that's dangerous, and so I would sort of counsel against the sort of auteur mentality, and founders should realize that everyone's really on the same team, and you know, I always had great relationships with my VCs and the people who were on my board when I was running Yammer, and so the relationship should be very constructive.

AI assessment note: “founders should realize that everyone's really on the same team”