The Exchanges

Q So how can you tell if it is pain point number one? Is that if they're kind of ringing you up, pounding you for the next feature? Because it's often very difficult to gain that customer feedback as to how much you really do have product market fit.

A I'll tell you a few things. I learned something from Jyoti Bunsel, who's the founder and CEO, founder and chairman of AppDynamics. Jyoti has this one question that, that he, he asks people, and he says, if you had to justify this product to your boss, how would you do it? You learn a lot in that question. One is, will the, will the champion that you're talking to actually take the time to go to their boss, right? That's step one. If they don't, you know, it's not a high priority. Can they find some tangible benefit? And are they then willing to ask for budget because it's high enough pain point? That's how you, that's the real way of knowing is, you know, someone going to spend money at the end of the day against this problem.

AI assessment note: “That's how you, that's the real way of knowing is, you know, someone going to spend money”

Q So you recently retweeted. I do do my research pre-interviews. Whenever you have a tough decision in your career to make, always go for the harder one. If you were to look at your career and look at the hard decisions you've made, what's the hardest?

A I'll tell you one that I had a hard decision to make a couple of years ago was one of our companies called Bright Tree. This is a SaaS software company in the healthcare space, and we had offers to, to sell the business for, say, a four hundred million dollar range. After a long conversation with the CEO, we collectively decided to turn that down and to keep going, and we were fortunate that two years later, we announced the sale of the company to ResMed for eight hundred million dollars. That's a really tough decision when, when you can walk away from what obviously would be a good investment or a good result to, uh, Being willing to risk it to get to something greater than that.

AI assessment note: “I'll tell you one that I had a hard decision to make”

Q Now, I'd love to kick off today by hearing a bit about you, and we've got, you know, Marketo, Wayfair, Brightree. Investing in Rocketship seems to be a daily occurrence for you, but where did it all start? What's kind of the near-edge story?

A Sure, you know, I've been at Battery now, 16 years, you know, seems an amazingly long time. I actually got into venture somewhat accidentally, graduated, uh, undergrad with a computer science degree, and thought that I would Work in product management for a software company. And after my, my, uh, business school degree, folks at Battery reached out and said, do you want to do a project on the streaming media space? I had just worked as a summer intern at a company called Real Network. They, uh, they were the inventor of the Real Media Player, so kind of the original, uh, uh, streaming media player. And, uh, I was very excited by that space. I'd worked in satellite TV at Sky TV and thought I would do video on the internet post-business school. But when the Battery folks Uh, came calling. I decided to give it a shot. I thought I would spend a couple of years doing it until I found that magical, perfect startup. Uh, but 16 years later, I'm still, uh, investing in software and internet companies.

AI assessment note: “I actually got into venture somewhat accidentally, graduated, uh, undergrad with a computer science degree”

Q So how can you tell if it is pain point number one? Is that if they're kind of ringing you up, pounding you for the next feature? Because it's often very difficult to gain that customer feedback as to how much you really do have product market fit.

A I'll tell you a few things. I learned something from Jyoti Bunsel, who's the founder and CEO, founder and chairman of AppDynamics. Jyoti has this one question that, that he, he asks people, and he says, if you had to justify this product to your boss, how would you do it? You learn a lot in that question. One is, will the, will the champion that you're talking to actually take the time to go to their boss, right? That's step one. If they don't, you know, it's not a high priority. Can they find some tangible benefit? And are they then willing to ask for budget because it's high enough pain point? That's how you, that's the real way of knowing is, you know, someone going to spend money at the end of the day against this problem.

AI assessment note: “if you had to justify this product to your boss, how would you do it?”

Q So you recently retweeted. I do do my research pre-interviews. Whenever you have a tough decision in your career to make, always go for the harder one. If you were to look at your career and look at the hard decisions you've made, what's the hardest?

A I'll tell you one that I had a hard decision to make a couple of years ago was one of our companies called Bright Tree. This is a SaaS software company in the healthcare space, and we had offers to, to sell the business for, say, a four hundred million dollar range. After a long conversation with the CEO, we collectively decided to turn that down and to keep going, and we were fortunate that two years later, we announced the sale of the company to ResMed for eight hundred million dollars. That's a really tough decision when, when you can walk away from what obviously would be a good investment or a good result to, uh, Being willing to risk it to get to something greater than that.

AI assessment note: “I'll tell you one that I had a hard decision to make a couple of years ago”

Q Now, I'd love to kick off today by hearing a bit about you, and we've got, you know, Marketo, Wayfair, Brightree. Investing in Rocketship seems to be a daily occurrence for you, but where did it all start? What's kind of the near-edge story?

A Sure, you know, I've been at Battery now, 16 years, you know, seems an amazingly long time. I actually got into venture somewhat accidentally, graduated, uh, undergrad with a computer science degree, and thought that I would Work in product management for a software company. And after my, my, uh, business school degree, folks at Battery reached out and said, do you want to do a project on the streaming media space? I had just worked as a summer intern at a company called Real Network. They, uh, they were the inventor of the Real Media Player, so kind of the original, uh, uh, streaming media player. And, uh, I was very excited by that space. I'd worked in satellite TV at Sky TV and thought I would do video on the internet post-business school. But when the Battery folks Uh, came calling. I decided to give it a shot. I thought I would spend a couple of years doing it until I found that magical, perfect startup. Uh, but 16 years later, I'm still, uh, investing in software and internet companies.

AI assessment note: “I actually got into venture somewhat accidentally, graduated, uh, undergrad with a computer science”

Q And then when you look at your kind of landscape of investors, is there one or two that you most respect and admire and why?

A Oh, there's a ton that I respect. I'll tell you, I, I really admire, um, Doug Leone at, at Sequoia. Maybe not because of all the success that he's had per se. I mean, that's obviously impressive. I had the opportunity to work with Doug on a deal maybe five years ago, and I think Doug by that point was probably already a billionaire. Um, if not, he was well on his way to be a billionaire. And Doug and I were working on an investment. The entrepreneur decided not to go down our path. Doug got on a plane, took a red eye out, sat in the lobby of the person's office, waiting for the person to convince him that, hey, we should really work on this deal together. What I, what I loved about that story is even though he was so successful, He was still so hungry and really just a wonderful role model of someone who's didn't get caught up in his success and is still just hustling to do whatever he thinks makes sense for his investors. But I'll tell you, he does the same thing for his entrepreneurs. He, he will do whatever it takes to make them successful.

AI assessment note: “I really admire, um, Doug Leone at, at Sequoia.”

Q And what is it then do you think that's, that's made you stay in the world of VC and not join startups? Is it that you haven't found that magical startup to join yet, or is it just an innate love for VC and helping a plethora of different companies at the same time?

A Yeah, there are a few things that I, that I think are, are pretty exciting about the VC career path, but one is that there's kind of a lot of variety built into it. You know, I might one week go to board meeting at, at Wayfair and talk about the, the home goods market, and the next week I'll go to, uh, Marketo and we'll talk about marketing technology. Another day, go to Glassdoor and we'll talk about the recruiting space and how that's evolving. You get to learn about all these different segments that are out there that form, broadly speaking, you know, the economy. And, and really kind of think about the trends in each of those segments. I, I would say it's incredibly, um, exciting, um, intellectually speaking. You're trying to understand these markets, try to predict what might happen, ultimately make a few bets, and hopefully your, your predictions will, will play out. So that type of, uh, excitement and variety, it doesn't really exist in, in most other career paths. I, I think that's been One super exciting thing for me. The second part has really been the entrepreneurs that I work with. I've been fortunate to work with some just amazing founders and, you know, they're, they're intoxicating. You, you work with somebody like, you know, Raji at Sprinkler and, uh, you know, you, you, you can't help but leave the board meetings super excited and, you know, um, ready to take o…

AI assessment note: “a few things that I, that I think are, are pretty exciting about the VC career path”

Q Would you say that's one of the fundamental benefits of having a co-founder to share in the very high highs and to console you in the lows of losing your VP of sales at last minute?

A It's a great point. I, I, I've studied this question around starting companies and with a co-founder starting at solo, the number of co-founders in the ideal world, you would have one co-founder so that you have a person to go to. Being a founder CEO is a lonely job. Uh, the co-founder is the, the kind of the confidant until maybe a, you know, you're up to real scale and you've got a real executive team around you. There's some things you really don't want to share with your board and you kind of want Someone else to talk to you, and that's the role a co-founder can play. Having said that, I've worked with companies that have had no co-founders, uh, like Raji at Sprinklr, and I've worked with companies that have had six co-founders, like Guidewire, and they've been equally successful, so I don't think it's a one-size-fits-all.

AI assessment note: “Being a founder CEO is a lonely job. Uh, the co-founder is the, the kind of the confidant”

Q And what's the most common problem that you see them encounter on these kind of, uh, very, very steep trajectories? Is there one that pervades the rest? Is it, uh, hiring? Is it scaling, uh, you know, servers? Whatever it is. What's it for you?

A It really, it really tends to be a recruiting issue. Um, you have on the product side, which you see less of these days, but Battery was an investor in Frencer way back in the day, and I think they were way ahead, but unfortunately grew too fast, they couldn't keep up, and Facebook ultimately won that market, which, which is unfortunate for us. But I'll tell you, the one that we see is kind of a common issue is really around sales leadership, and so we spent a lot of time Uh, blogging about this issue, about hiring a great VP of sales, and how to think about, uh, sequencing, mid-management in sales, and then international expansion. Those are the areas where I think people don't necessarily do a great job finding a great sales leader, sometimes moving on a sales leader to find the next person. It's a high-risk game, because if you pick the wrong person, you're not going to know that for at least 12 or 18 months. And many times that's the difference between the number one and the number two person in a market, is that critical 12 or 18 months.

AI assessment note: “It really, it really tends to be a recruiting issue.”

Q So what's the one that plays on your mind most and what did you learn from that process?

A I would say there, there's a company, a kayak. We spent some time looking at their series B. We ultimately decided to not move forward because at that point in their journey, their, their unit economics weren't such that they were, they were acquiring traffic for free. And so we, we weren't really sure how it would scale. And what we realized is that team was so phenomenal that they built such an amazing product that all the traffic just started showing up over time for free. They got these power users and they built this amazing business. And so You know, our friends, uh, Joel Cutler at General Catalyst, uh, did an incredible job, uh, building, you know, investing that business, and Paul English and Steve Hafner did a great job, uh, building it out. So that's one. You know, I'll tell you, I'll give you another example of one, two. I, I don't know if we really had a shot at this, but we had conversations with Salesforce, um, when I first started Battery in 2000, I think it was, we had a conversation in 2001 or two. At that time, I was a, an associate at Battery, not a partner, not leading my own deals, but I remember we had a conversation with the company, Ultimately, we decided not to move forward because we couldn't get the right structure or downside protection that we were looking for. What I've learned through that deal and many others since then is you should really be wi…

AI assessment note: “I would say there, there's a company, a kayak.”

Q And what is it then do you think that's, that's made you stay in the world of VC and not join startups? Is it that you haven't found that magical startup to join yet, or is it just an innate love for VC and helping a plethora of different companies at the same time?

A Yeah, there are a few things that I, that I think are, are pretty exciting about the VC career path, but one is that there's kind of a lot of variety built into it. You know, I might one week go to board meeting at, at Wayfair and talk about the, the home goods market, and the next week I'll go to, uh, Marketo and we'll talk about marketing technology. Another day, go to Glassdoor and we'll talk about the recruiting space and how that's evolving. You get to learn about all these different segments that are out there that form, broadly speaking, you know, the economy. And, and really kind of think about the trends in each of those segments. I, I would say it's incredibly, um, exciting, um, intellectually speaking. You're trying to understand these markets, try to predict what might happen, ultimately make a few bets, and hopefully your, your predictions will, will play out. So that type of, uh, excitement and variety, it doesn't really exist in, in most other career paths. I, I think that's been One super exciting thing for me. The second part has really been the entrepreneurs that I work with. I've been fortunate to work with some just amazing founders and, you know, they're, they're intoxicating. You, you work with somebody like, you know, Raji at Sprinkler and, uh, you know, you, you, you can't help but leave the board meetings super excited and, you know, um, ready to take o…

AI assessment note: “there are a few things that I, that I think are, are pretty exciting”

Q How do you view markets then? Because markets are often, uh, very difficult to analyze and assess in terms of they, they grow and expand rapidly. You know, ephemeral messaging wasn't a market really before Snapchat, and now it's potentially one of the most exciting social platforms we have. So how do you view the open-endedness of markets?

A It's a great question. So on, on markets, a lot of people will come to come to us and have this presentation about how this market is a 10 or twenty billion dollar market. And I always find that to be kind of the least exciting part of the presentation. Like in the ideal world, what you're looking for is actually a market that might be close to zero today. And that's going to be like 500,000,003 years from now. And it's really the new opportunity, however you want to define it. And there's a rapid and Rapid growth where you get to enjoy an inflection point in the coming six, 1218 months. That's kind of how I, that's what I think is the ideal market curve. If you get to a space and you're too early for it, many times you'll run out of money before that inflection point comes. And if you're too late, someone's already captured the leadership or the second spot in that market. It's kind of hard to sometimes catch up, although not, not always the case. And so timing is really important. Thinking about the trends that allow for a new market are, are really important. On the consumer side, as you said, there's some differences. On the enterprise side, which is where I spend my time, you know, there's, there's mostly kind of, ah, new greenfield markets is typically where we, where we invest in, and so, markets that just really didn't exist before. Ah, once in a while we'll do some rep…

AI assessment note: “in the ideal world, what you're looking for is actually a market”

Q Would you say that's one of the fundamental benefits of having a co-founder to share in the very high highs and to console you in the lows of losing your VP of sales at last minute?

A It's a great point. I, I, I've studied this question around starting companies and with a co-founder starting at solo, the number of co-founders in the ideal world, you would have one co-founder so that you have a person to go to. Being a founder CEO is a lonely job. Uh, the co-founder is the, the kind of the confidant until maybe a, you know, you're up to real scale and you've got a real executive team around you. There's some things you really don't want to share with your board and you kind of want Someone else to talk to you, and that's the role a co-founder can play. Having said that, I've worked with companies that have had no co-founders, uh, like Raji at Sprinklr, and I've worked with companies that have had six co-founders, like Guidewire, and they've been equally successful, so I don't think it's a one-size-fits-all.

AI assessment note: “the co-founder is the, the kind of the confidant”

Q Mm-hmm. And you said the ups and downs aren't talked about enough there. What do you mean by that? We, we, you know, we, we hear a lot about failure and startups and success. So I'm, I'm just intrigued to hear what you mean by that.

A You know, the, I, I think of it as the highs are incredibly high and the lows are very low. And sometimes they happen in the same day and sometimes in the same hour of the same day for founders, you might lose a big deal. You might have somebody quit on you. You might land a great VP of sales. You know, all those things are happening throughout the The day for, for a founder, they have to somehow be able to detach from those lows and kind of keep going and making sure that there's, uh, opportunity for them. That's kind of what I think about. People don't, people think of it as it's a linear graph, uh, from zero revenue to a hundred million in ARR and everything's hunky dory and the world is awesome. But the, the rollercoaster that's happening throughout that journey is, is it's It's not for the faint of heart. You need to have the right fortitude to be able to, to, to, to handle that.

AI assessment note: “the highs are incredibly high and the lows are very low”

Q How do you view markets then? Because markets are often, uh, very difficult to analyze and assess in terms of they, they grow and expand rapidly. You know, ephemeral messaging wasn't a market really before Snapchat, and now it's potentially one of the most exciting social platforms we have. So how do you view the open-endedness of markets?

A It's a great question. So on, on markets, a lot of people will come to come to us and have this presentation about how this market is a 10 or twenty billion dollar market. And I always find that to be kind of the least exciting part of the presentation. Like in the ideal world, what you're looking for is actually a market that might be close to zero today. And that's going to be like 500,000,003 years from now. And it's really the new opportunity, however you want to define it. And there's a rapid and Rapid growth where you get to enjoy an inflection point in the coming six, 1218 months. That's kind of how I, that's what I think is the ideal market curve. If you get to a space and you're too early for it, many times you'll run out of money before that inflection point comes. And if you're too late, someone's already captured the leadership or the second spot in that market. It's kind of hard to sometimes catch up, although not, not always the case. And so timing is really important. Thinking about the trends that allow for a new market are, are really important. On the consumer side, as you said, there's some differences. On the enterprise side, which is where I spend my time, you know, there's, there's mostly kind of, ah, new greenfield markets is typically where we, where we invest in, and so, markets that just really didn't exist before. Ah, once in a while we'll do some rep…

AI assessment note: “what you're looking for is actually a market that might be close to zero today”

Q Mm-hmm. And you said the ups and downs aren't talked about enough there. What do you mean by that? We, we, you know, we, we hear a lot about failure and startups and success. So I'm, I'm just intrigued to hear what you mean by that.

A You know, the, I, I think of it as the highs are incredibly high and the lows are very low. And sometimes they happen in the same day and sometimes in the same hour of the same day for founders, you might lose a big deal. You might have somebody quit on you. You might land a great VP of sales. You know, all those things are happening throughout the The day for, for a founder, they have to somehow be able to detach from those lows and kind of keep going and making sure that there's, uh, opportunity for them. That's kind of what I think about. People don't, people think of it as it's a linear graph, uh, from zero revenue to a hundred million in ARR and everything's hunky dory and the world is awesome. But the, the rollercoaster that's happening throughout that journey is, is it's It's not for the faint of heart. You need to have the right fortitude to be able to, to, to, to handle that.

AI assessment note: “I think of it as the highs are incredibly high and the lows are very low.”

Q And talking of the kind of the core executives there and building that out, at what stages do you think it's right in your space, in the enterprise space, to really start building out the team, getting your VP of sales, do you know what I mean, establishing yourself and the team around you?

A The, the one thing that I would say founders sometimes do, and especially as I've noticed with younger founders, is for some reason they are less willing to hire executives earlier in the cycle. I think sometimes there's this skeptical perspective around what does an executive actually do? And you, whereas an individual contributor, you can see the work they do at an individual contributor, whether it's an engineer or a salesperson, and they tend to bias in that direction. And what you find is, 12 months later, you really do need to bring in leadership, and so my advice to founders is, it's okay to go to invest in leadership early in a, in a company's cycle. A people tend to hire other A people, so if you can bring in a great VP of sales, sooner rather than later is, is kind of, I think, the way to go.

AI assessment note: “sooner rather than later is, is kind of, I think, the way to go.”

Q And what's the most common problem that you see them encounter on these kind of, uh, very, very steep trajectories? Is there one that pervades the rest? Is it, uh, hiring? Is it scaling, uh, you know, servers? Whatever it is. What's it for you?

A It really, it really tends to be a recruiting issue. Um, you have on the product side, which you see less of these days, but Battery was an investor in Frencer way back in the day, and I think they were way ahead, but unfortunately grew too fast, they couldn't keep up, and Facebook ultimately won that market, which, which is unfortunate for us. But I'll tell you, the one that we see is kind of a common issue is really around sales leadership, and so we spent a lot of time Uh, blogging about this issue, about hiring a great VP of sales, and how to think about, uh, sequencing, mid-management in sales, and then international expansion. Those are the areas where I think people don't necessarily do a great job finding a great sales leader, sometimes moving on a sales leader to find the next person. It's a high-risk game, because if you pick the wrong person, you're not going to know that for at least 12 or 18 months. And many times that's the difference between the number one and the number two person in a market, is that critical 12 or 18 months.

AI assessment note: “It really, it really tends to be a recruiting issue.”

Q quantifiable metrics of, you know, can you hit a ten million ARR by year two, uh, and, you know, don't seem to place so much emphasis on the team. So how, how much emphasis do you place on those kind of clearly defined milestone ARR, MRR, Churn. All these, uh, stats that are thrown around kind of meaninglessly or how much do you pay to the characteristics we mentioned earlier?

A One of the beautiful things about investing is that it really is a mix of all these components that you look for. So when I think about patterns, I look for all, for all of it to make my call. You know, I, I'd say there's three kind of stages that people tend to get involved. There's this, uh, one million in recurring revenue stage that, uh, that a lot of investors invest in. There's this kind of five to ten million dollar stage, and then there's really everything from 20 to IPO stage. Battery's a bit unique that we do all these stages, so I personally have made investments across all these stages. It's not as dogmatic on the, on the financial metrics, but I do tend to spend a lot of time going back to market and understanding why now? What's the pain point? I talk to a lot of prospects. I try to understand, is the pain point being discussed The number one or number two pain point they have. I'll tell you the one thing I've learned is that if you're addressing something that's pain point number three, four or five on somebody's list, they just never get around to it. They just don't have enough time to buy that solution.

AI assessment note: “It's not as dogmatic on the, on the financial metrics”

Q And talking of the kind of the core executives there and building that out, at what stages do you think it's right in your space, in the enterprise space, to really start building out the team, getting your VP of sales, do you know what I mean, establishing yourself and the team around you?

A The, the one thing that I would say founders sometimes do, and especially as I've noticed with younger founders, is for some reason they are less willing to hire executives earlier in the cycle. I think sometimes there's this skeptical perspective around what does an executive actually do? And you, whereas an individual contributor, you can see the work they do at an individual contributor, whether it's an engineer or a salesperson, and they tend to bias in that direction. And what you find is, 12 months later, you really do need to bring in leadership, and so my advice to founders is, it's okay to go to invest in leadership early in a, in a company's cycle. A people tend to hire other A people, so if you can bring in a great VP of sales, sooner rather than later is, is kind of, I think, the way to go.

AI assessment note: “so if you can bring in a great VP of sales, sooner rather than later”

Q So then what's your advice for hiring, uh, you know, a crucial sales figure? Uh, say, say a founder, a founder asks you, what, what should I be looking for? How do I approach this stage of the hiring process? What would you advise having seen so many do it so successfully?

A I think for founders, it's really good to have a, either a CEO coach or chairman that they can trust to help them, um, assess executive, uh, leadership. Many of them do, but, but sometimes, uh, Even though they don't really have a ton of experience in that area, we'll try to wing it. So I think having a few folks they trust, and by the way, the vent, the VC investor can also play that role for the founder, but, but many times they'll pick a, um, another person to be chairman or, or a CEO coach that can help out. I think that's a, it's an area that founders underinvest in, but they can do a better job in.

AI assessment note: “good to have a, either a CEO coach or chairman that they can trust”

Q quantifiable metrics of, you know, can you hit a ten million ARR by year two, uh, and, you know, don't seem to place so much emphasis on the team. So how, how much emphasis do you place on those kind of clearly defined milestone ARR, MRR, Churn. All these, uh, stats that are thrown around kind of meaninglessly or how much do you pay to the characteristics we mentioned earlier?

A One of the beautiful things about investing is that it really is a mix of all these components that you look for. So when I think about patterns, I look for all, for all of it to make my call. You know, I, I'd say there's three kind of stages that people tend to get involved. There's this, uh, one million in recurring revenue stage that, uh, that a lot of investors invest in. There's this kind of five to ten million dollar stage, and then there's really everything from 20 to IPO stage. Battery's a bit unique that we do all these stages, so I personally have made investments across all these stages. It's not as dogmatic on the, on the financial metrics, but I do tend to spend a lot of time going back to market and understanding why now? What's the pain point? I talk to a lot of prospects. I try to understand, is the pain point being discussed The number one or number two pain point they have. I'll tell you the one thing I've learned is that if you're addressing something that's pain point number three, four or five on somebody's list, they just never get around to it. They just don't have enough time to buy that solution.

AI assessment note: “It's not as dogmatic on the, on the financial metrics, but I do tend to”

Q So then what's your advice for hiring, uh, you know, a crucial sales figure? Uh, say, say a founder, a founder asks you, what, what should I be looking for? How do I approach this stage of the hiring process? What would you advise having seen so many do it so successfully?

A I think for founders, it's really good to have a, either a CEO coach or chairman that they can trust to help them, um, assess executive, uh, leadership. Many of them do, but, but sometimes, uh, Even though they don't really have a ton of experience in that area, we'll try to wing it. So I think having a few folks they trust, and by the way, the vent, the VC investor can also play that role for the founder, but, but many times they'll pick a, um, another person to be chairman or, or a CEO coach that can help out. I think that's a, it's an area that founders underinvest in, but they can do a better job in.

AI assessment note: “it's really good to have a, either a CEO coach or chairman”