The Exchanges

Q Question from Anne at Floodgate. How competitive are you when it comes to playing games?

A I am very, very competitive. I really like learning things, and so Whenever there's an opportunity to become better at something and to just kind of see how good I am at something, I always try to dive in to kind of put it into perspective. A year ago, I lost at a game of chess, and I had never really, like, played chess competitively before. Like, I knew how to play, but I was like, man, I should not have lost that game of chess to that person, and I spent the next six months reading chess books and just, uh, playing probably three to four hours of chess every single day, and I, I don't even like chess that much, so I I just am always trying to compete and be better at things and push myself to the next level.

AI assessment note: “I am very, very competitive.”

Q rise in journey it's been, and we mentioned some of the backers there from Alexis that have initialized to Ali at YC, and I do want to start on that theme of fundraising, because we've spoken before, and you've said that there's some contrarian advice about startup fundraising, so I'm going to be very anti-Harry, and I'm going to let you roll with this, so what's the contrarian advice, Leo?

A Well, first I'll start off with, there is no secret to fundraising. The easiest way to fundraise is to have a really great Product and team. However, I do have a lot of advice that is definitely contrarian that can help you when you're thinking about fundraising and then when you're going throughout the fundraising process. So the first one is, is that generally the advice that you get is that meeting with venture capitalists when you're not fundraising is a waste of time. And generally I would say you should not be meeting with a lot of venture capitalists when you're not fundraising, but having raised a couple of rounds and had many friends who have raised rounds The one thing that we all talk about is that you never raise money from people that you don't know. You don't go into a fundraising process and then two weeks later you met somebody and then they hand you a check for 30 to a hundred million dollars. It just never works that way. And so you have to find time to build a relationship. And this is the part that I try to advise people on. It doesn't mean sitting with them every single week and telling them how your company is doing. Certainly in the early days, I would meet a VC. I would try to figure out how they could add value to Lobb, and I would say, hey, let's work on this project together. Let's go and look at your portfolio companies and work with me to see who we…

AI assessment note: “the first one is, is that generally the advice that you get is that meeting”

Q Can I ask, is there any way to kind of create that viral chatter amongst the Rosewood VCs, just Kind of through being present, through being seen coming out of offices, through how does one create that intermingling and intertalk about you?

A That's a great question. I think it actually, like, tactically, the way you do it is you have a lot of meetings in a short period of time. VCs are going to talk to each other. You don't have to be seen coming out of a sequoia after a meeting, or you don't need to be the one that, like, pulls out your Andreessen deck in the sequoia meeting accidentally. All you have to do is talk to everybody in a short period of time. And so, When I advise people on fundraising, I say, okay, plan it out. If your goal is to raise in three weeks, then you have to have all your meetings in the first week and so forth. And just by having those sheer conversations, all the VCs are going to be talking to each other. You're going to perfect your pitch at the end of the day, and everyone is going to know that you're raising. And if you have a good company, just the hype about raising and putting that pressure and time urgency is going to allow you to create that FOMO, especially when you're saying, hey, I have another conversation later today. So just The sheer amount of scheduling that you're doing will create this sense of hype. And then the second part is leverage and really understanding how to use leverage. And this one is a little bit of a strange one. I always tell people that it's easier to raise money when you don't need the money. Then obviously if you need the money, it's going to be very ha…

AI assessment note: “tactically, the way you do it is you have a lot of meetings in a short period of time.”

Q No, absolutely. I mean, fundraising obviously allows a lot of things, and one of them that VCs often now say they don't always push for, but I'm sure we both agree that they probably do, being aggressive growth. And we've chatted before, though, and you've advocated more for this kind of system of controlled growth. I'd love to start then on that, and how do you define controlled growth?

A So controlled growth is a mindset, and it's one where it's a growth trajectory that you can easily tweak that growth dial up and down and always have the ability to become profitable within six months. So it's a balance of growing aggressively, but not spending wastefully or blindly. And ultimately, it gives you control over your own destiny. So I'm, again, a big believer in leverage and being able to control the outcome as a founder. And it's something that I think not everyone really understands. I've seen a lot of great startups and great founders who just are pouring money and growing very aggressively, but then they don't realize that there are things that they can't control, like external market factors. And sometimes they put themselves in a position where the company is growing so successfully and so well, but maybe it's 2008 and venture capital money has dried up and then they couldn't raise. And I would never want to be in a situation where I'm doing very well. I'm pouring money, but I don't have any opportunities Controlled growth is. It puts you in that mindset of what are the levers that I can change in case external factors happen. So, you know, I always think about it as a car. Can you change the gears when you're driving? You can drive very fast, but you need to be able to know how to put it back into first gear and slow it down in case there's an obstacle in th…

AI assessment note: “controlled growth is a mindset, and it's one where it's a growth trajectory”

Q Can I ask, does this situation change if it's really a hyper-competitive market and a land grab situation for kind of aggressive growth to steal that kind of placeholder first place in market? Does that change the situation?

A I don't think it does. You should be spending probably pretty aggressively, but again, if there are external market factors that happen, you have to know how to change the gear down. And if you are investing in certain areas of your business, whether it's Marketing. And you just can't tone it down or the business will die unless you do it. You could potentially put yourself in a situation where you need to raise in order to keep the company moving forward. And in a market again, 2008, and we're definitely due for a market correction. What will happen? What will you do if you cannot raise money? And it's the worst feeling in the world, having a growing company and not being able to raise money and then not being able to like get to profitability in time to keep the company afloat. It's gotta be every founder's worst nightmare.

AI assessment note: “I don't think it does. You should be spending probably pretty aggressively”

Q rise in journey it's been, and we mentioned some of the backers there from Alexis that have initialized to Ali at YC, and I do want to start on that theme of fundraising, because we've spoken before, and you've said that there's some contrarian advice about startup fundraising, so I'm going to be very anti-Harry, and I'm going to let you roll with this, so what's the contrarian advice, Leo?

A Well, first I'll start off with, there is no secret to fundraising. The easiest way to fundraise is to have a really great Product and team. However, I do have a lot of advice that is definitely contrarian that can help you when you're thinking about fundraising and then when you're going throughout the fundraising process. So the first one is, is that generally the advice that you get is that meeting with venture capitalists when you're not fundraising is a waste of time. And generally I would say you should not be meeting with a lot of venture capitalists when you're not fundraising, but having raised a couple of rounds and had many friends who have raised rounds The one thing that we all talk about is that you never raise money from people that you don't know. You don't go into a fundraising process and then two weeks later you met somebody and then they hand you a check for 30 to a hundred million dollars. It just never works that way. And so you have to find time to build a relationship. And this is the part that I try to advise people on. It doesn't mean sitting with them every single week and telling them how your company is doing. Certainly in the early days, I would meet a VC. I would try to figure out how they could add value to Lobb, and I would say, hey, let's work on this project together. Let's go and look at your portfolio companies and work with me to see who we…

AI assessment note: “the first one is, is that generally the advice that you get is that meeting”

Q couldn't agree more, but on, on the theme that you just so eloquently led onto for me, the kind of responsible CEO and responsible CEO ship, so many CEOs I've had on the show before say that their biggest problem is scaling themselves. I'm intrigued. How has the role as CEO changed for you with the growth of the company, and how have you really looked to scale with it?

A Yeah, it's, Definitely changed quite a bit since the early days. In the beginning, you have to be an expert executioner. So for me, it started off as being just a software engineer. I had to be the one building the API and maintaining all the infrastructure. And then, you know, as soon as I figured that out as a CEO, your job is to hire and replace yourself. And then I became a salesperson and I had to understand how to figure out what our company's or our customer's biggest problems were and how to pitch the right value propositions to them. And so you go one by one as being the expert executioner. And then as a CEO, the next phase is really building out the leadership team. And so for me today, I spend most of my time basically hiring an executive team around me who can basically do what I did as a CEO in the early days for their respective teams. And it's definitely very hard because as an executioner, you see all this work that you've done in the past, but now you have so many teammates around you that you have to trust. And it is sometimes very hard to say, oh man, like I can just go and do that myself. But the challenge at this level is around communication and inspiration and really providing that avenue for your team to, you have to pitch them the vision and you have to allow them to go and execute and make those mistakes and take those risks. So it's just very hard whe…

AI assessment note: “today, I spend most of my time basically hiring an executive team around me”

Q Can I ask, is there any way to kind of create that viral chatter amongst the Rosewood VCs, just Kind of through being present, through being seen coming out of offices, through how does one create that intermingling and intertalk about you?

A That's a great question. I think it actually, like, tactically, the way you do it is you have a lot of meetings in a short period of time. VCs are going to talk to each other. You don't have to be seen coming out of a sequoia after a meeting, or you don't need to be the one that, like, pulls out your Andreessen deck in the sequoia meeting accidentally. All you have to do is talk to everybody in a short period of time. And so, When I advise people on fundraising, I say, okay, plan it out. If your goal is to raise in three weeks, then you have to have all your meetings in the first week and so forth. And just by having those sheer conversations, all the VCs are going to be talking to each other. You're going to perfect your pitch at the end of the day, and everyone is going to know that you're raising. And if you have a good company, just the hype about raising and putting that pressure and time urgency is going to allow you to create that FOMO, especially when you're saying, hey, I have another conversation later today. So just The sheer amount of scheduling that you're doing will create this sense of hype. And then the second part is leverage and really understanding how to use leverage. And this one is a little bit of a strange one. I always tell people that it's easier to raise money when you don't need the money. Then obviously if you need the money, it's going to be very ha…

AI assessment note: “tactically, the way you do it is you have a lot of meetings”

Q Tell me, Leo, when's that inflection point between execution master and then a kind of exec and people problem person? When does that transition?

A It usually happens probably at the 20, 25 person mark. It's when you are hiring those first level managers under you, and you probably have a couple of them, that you're really looking for someone to lead a bigger area of your business. That's when you start hiring an exec at the end of the day, because you need to go focus on one area of the business and You know, for me in the early days, it was really focusing on product and engineering, and as soon as I figured that out, I needed to go and hire leaders in that space, and so it happens generally around, I would say, late series A, or when you're around 20 to 25 people, that you really need other people within the company to go and tackle big divisions within your company.

AI assessment note: “It usually happens probably at the 20, 25 person mark.”

Q No, absolutely. I mean, fundraising obviously allows a lot of things, and one of them that VCs often now say they don't always push for, but I'm sure we both agree that they probably do, being aggressive growth. And we've chatted before, though, and you've advocated more for this kind of system of controlled growth. I'd love to start then on that, and how do you define controlled growth?

A So controlled growth is a mindset, and it's one where it's a growth trajectory that you can easily tweak that growth dial up and down and always have the ability to become profitable within six months. So it's a balance of growing aggressively, but not spending wastefully or blindly. And ultimately, it gives you control over your own destiny. So I'm, again, a big believer in leverage and being able to control the outcome as a founder. And it's something that I think not everyone really understands. I've seen a lot of great startups and great founders who just are pouring money and growing very aggressively, but then they don't realize that there are things that they can't control, like external market factors. And sometimes they put themselves in a position where the company is growing so successfully and so well, but maybe it's 2008 and venture capital money has dried up and then they couldn't raise. And I would never want to be in a situation where I'm doing very well. I'm pouring money, but I don't have any opportunities Controlled growth is. It puts you in that mindset of what are the levers that I can change in case external factors happen. So, you know, I always think about it as a car. Can you change the gears when you're driving? You can drive very fast, but you need to be able to know how to put it back into first gear and slow it down in case there's an obstacle in th…

AI assessment note: “controlled growth is a mindset, and it's one where it's a growth trajectory”

Q Can I ask, does this situation change if it's really a hyper-competitive market and a land grab situation for kind of aggressive growth to steal that kind of placeholder first place in market? Does that change the situation?

A I don't think it does. You should be spending probably pretty aggressively, but again, if there are external market factors that happen, you have to know how to change the gear down. And if you are investing in certain areas of your business, whether it's Marketing. And you just can't tone it down or the business will die unless you do it. You could potentially put yourself in a situation where you need to raise in order to keep the company moving forward. And in a market again, 2008, and we're definitely due for a market correction. What will happen? What will you do if you cannot raise money? And it's the worst feeling in the world, having a growing company and not being able to raise money and then not being able to like get to profitability in time to keep the company afloat. It's gotta be every founder's worst nightmare.

AI assessment note: “I don't think it does. You should be spending probably pretty aggressively”

Q Can I ask this controlled mindset growth? It seems the most obvious and attractive of things, but I'm sure there are challenges. What are the core challenges in achieving this and really ensuring this controlled growth?

A I think money is the easiest answer to a lot of problems in the early days. It's, hey, I'm going to go and hire this person, or I'm just going to spend more and more on this, or I'm going to spend on these five channels at once and experiment. So you can sometimes actually in the early days lose control. You can just Go out there and be a little bit reckless. And sometimes reckless is okay, but if you're not aware about it, all of a sudden you've realized, hey, you've raised a 2.4 million dollar seed round. You've been growing aggressively, but you actually spent two million dollars in order to do it. So it's just being responsible. Maybe that's another way to think about it. Controlled growth is just responsible growth. Most companies go bankrupt because they weren't responsible about their growth. And you see them all the time. You're like, man, I thought that company was doing well. Well, they were doing very well, but they ultimately like ran out of money. And so you got to be responsible with the resources that you have. And I do see it from time to time that people get caught up in running a startup or just spending money or hiring and that they forget to be responsible. You know, one of the things that I always tell people about myself as a CEO is I'm not a CEO. That's I don't need to have a million employees under me for me to be successful. Success is not a function of…

AI assessment note: “Most companies go bankrupt because they weren't responsible about their growth.”

Q Can I ask this controlled mindset growth? It seems the most obvious and attractive of things, but I'm sure there are challenges. What are the core challenges in achieving this and really ensuring this controlled growth?

A I think money is the easiest answer to a lot of problems in the early days. It's, hey, I'm going to go and hire this person, or I'm just going to spend more and more on this, or I'm going to spend on these five channels at once and experiment. So you can sometimes actually in the early days lose control. You can just Go out there and be a little bit reckless. And sometimes reckless is okay, but if you're not aware about it, all of a sudden you've realized, hey, you've raised a 2.4 million dollar seed round. You've been growing aggressively, but you actually spent two million dollars in order to do it. So it's just being responsible. Maybe that's another way to think about it. Controlled growth is just responsible growth. Most companies go bankrupt because they weren't responsible about their growth. And you see them all the time. You're like, man, I thought that company was doing well. Well, they were doing very well, but they ultimately like ran out of money. And so you got to be responsible with the resources that you have. And I do see it from time to time that people get caught up in running a startup or just spending money or hiring and that they forget to be responsible. You know, one of the things that I always tell people about myself as a CEO is I'm not a CEO. That's I don't need to have a million employees under me for me to be successful. Success is not a function of…

AI assessment note: “money is the easiest answer to a lot of problems in the early days”

Q So, you've got the benefit of hindsight now. You've advised founders on fundraising. You've advised me on fundraising. Talk to me, if you were to look back and review your own fundraising process, what would you have done differently, and what do you think you did really well at?

A I don't know if I would have done anything differently. You know, the one thing I would say, and this is all hindsight, is that when you raise, you're giving away a part of your company, and you do it sometimes to de-risk too. And so for Lobb, I mean, I wish I hadn't raised money because we keep doing well and we're able to self-fund through sales. So it's almost like I wish I didn't have to fundraise. And I think this is sometimes, you know, founders get caught in the fact that they always need to raise money. And in some cases you actually don't. It would be amazing if Lobb Probably like the biggest thing in hindsight is that, did I really need to raise the money? You know, we raised with ample runway. Should I have pushed out a little bit longer to maybe get a higher valuation, or maybe never even had to raise again?

AI assessment note: “did I really need to raise the money?”

Q So, you've got the benefit of hindsight now. You've advised founders on fundraising. You've advised me on fundraising. Talk to me, if you were to look back and review your own fundraising process, what would you have done differently, and what do you think you did really well at?

A I don't know if I would have done anything differently. You know, the one thing I would say, and this is all hindsight, is that when you raise, you're giving away a part of your company, and you do it sometimes to de-risk too. And so for Lobb, I mean, I wish I hadn't raised money because we keep doing well and we're able to self-fund through sales. So it's almost like I wish I didn't have to fundraise. And I think this is sometimes, you know, founders get caught in the fact that they always need to raise money. And in some cases you actually don't. It would be amazing if Lobb Probably like the biggest thing in hindsight is that, did I really need to raise the money? You know, we raised with ample runway. Should I have pushed out a little bit longer to maybe get a higher valuation, or maybe never even had to raise again?

AI assessment note: “for Lobb, I mean, I wish I hadn't raised money”