Jul 13, 2023 · 1h 0m · lennys-podcast
M&A, competition, pricing, and investing | Julia Schottenstein (dbt Labs)
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this in-depth interview, Lenny Rachitsky speaks with Julia Schottenstein, product leader at dbt Labs and former venture capitalist, exploring tactical frameworks for startup M&A, open-source commercialization, SaaS pricing, and product management execution.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Lenny holds 28.9% of the talking time here. How this is scored →
Lenny as informed peer 3.7 Guest teaching 5.9 Guest disagreement 0.9 Lenny pushing back 1.3
speaking balance: gold is Lenny, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 14:37 Inflicting pain on strategic buyers
Julia presents an aggressive, contrarian playbook for startups looking for M&A: intentionally inflicting pain on target acquirers in competitive product areas to force them to take notice.
Hardest push from Lenny ▶ 24:35 Lenny probing beyond standard startup playbooksLenny pushes back against conventional explanations for startup success, pressing Julia to specify what dbt uniquely did that other failed open-source startups missed.
Biggest teaching moment ▶ 25:00 Revealing the Fishtown Analytics origin storyJulia educates Lenny on dbt's true origin, explaining how two years operating as an internal consulting firm allowed the founders to manually solve real client problems before hardening it into software.
Lenny holds their own ▶ 38:52 Lenny detailing his Airbnb acquisition playbookLenny demonstrates deep firsthand domain expertise in startup M&A by sharing how planting early seeds at a random party led to the acquisition of his company Localmind by Airbnb.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Lenny as informed peer | Guest teaching | Guest disagreement | Lenny pushing back | Why |
|---|---|---|---|---|---|---|
| Career Journey: Transitioning from NEA Investor to Product Leader at dbt Labs | 3 | 5 | 1 | 1 | Lenny asks about Julia's unusual transition from VC at NEA to product management at dbt Labs. Julia explains her thesis on cloud data warehouses and shares the anecdote of losing the deal to Sequoia before joining the company full-time. | |
| Evaluating Early-Stage Startups: People, Market, Product, and Distribution | 5 | 6 | 1 | 2 | Julia outlines her four-part evaluation framework for early-stage companies (people, market, product, distribution). Lenny contributes his own perspective from his upcoming article on product-market fit signs, prompting Julia to elaborate on organic user chatter. | |
| Startup M&A Strategy and the Transform Acquisition Case Study | 4 | 7 | 2 | 1 | Julia delivers actionable M&A advice, famously describing how startups should 'inflict pain' on prospective buyers while staying friendly. She breaks down the strategic rationale behind dbt's acquisition of Transform, in which Lenny was an investor. | |
| dbt Labs' Competitive Philosophy: Three Core Strategic Pillars | 3 | 6 | 1 | 1 | Lenny asks how dbt approaches competitive strategy, and Julia details their three pillars: holding true to vision, growing the overall market pie, and leaning into platform strengths. | |
| The Evolution of dbt: Simplicity, Open Source, and Fishtown Analytics Roots | 4 | 7 | 1 | 2 | Julia explains why dbt won through simplicity and open-source flywheel dynamics. Lenny pushes to uncover what kickstarted the company early on, prompting Julia to reveal their initial two-year foundation as Fishtown Analytics doing hands-on consulting. | |
| Engineering Alignment: Simulating Graph Algorithms with Rope and Sticky Notes | 3 | 6 | 0 | 1 | Julia shares an offsite exercise where she used rope and sticky notes to physically model a DAG algorithm with engineers, drawing inspiration from Gödel, Escher, Bach. | |
| Open Source vs. Commercial SaaS: Defining dbt Cloud's Boundaries | 3 | 6 | 1 | 1 | Julia delineates the architectural and business boundary between dbt Core (open-source logic) and dbt Cloud (proprietary state management and cross-team collaboration). | |
| SaaS Monetization and Pricing Strategy at dbt Labs | 4 | 7 | 1 | 2 | Julia discusses pricing philosophy, referencing Madhavan Ramanujam and dbt's focus on value creation over value capture. She details customer research methodologies used during dbt Cloud's first pricing transition. | |
| Navigating Distressed Startup Sales, Corp Dev, and Market Cycles | 6 | 6 | 2 | 2 | Lenny and Julia engage in an in-depth discussion about distressed M&A, corp dev dynamics, and post-2021 market corrections. Lenny shares his firsthand experience selling Localmind to Airbnb, matching Julia's strategic advice. | |
| Company Values, Radical Transparency, and Community Engagement at dbt Labs | 5 | 6 | 1 | 1 | Julia outlines dbt Labs' cultural values of radical transparency, humility, and high internal usage (30%+ non-engineers contributing data models). Lenny connects these points to his research on Snowflake, Figma, and Reddit communities. | |
| Product Execution Principles: Worse Is Better and Tech Debt as a Champagne Problem | 3 | 6 | 1 | 1 | Julia articulates her core execution mantras: 'worse is better' and 'tech debt is a champagne problem,' illustrating how naive implementations like simple for-loop schedulers are superior to over-engineered architectures at launch. | |
| Transferring Venture Capital Skills to Product Management Leadership | 3 | 6 | 0 | 1 | Julia explains how VC operating disciplines—operator network cultivation, T-shaped generalism, and asymmetric upside thinking—translate directly into product leadership. | |
| Lightning Round: Books, Culture, Interview Tactics, and Contact Info | 2 | 3 | 0 | 1 | Standard rapid-fire lightning round covering book recommendations (Range, Quiet), hiring interview tactics, product picks, and closing promotion of the Analytics Engineering Podcast. |
Statements from this episode (17)
Schottenstein: Snowflake grew from a $4B to $12B valuation in 2019
“Like this was the year where Snowflake went From a four billion dollar company to a twelve billion dollar company.”
Schottenstein: NEA lost the dbt Labs funding round to Sequoia
“Tristan said, we're gonna raise some money. He had a term sheet from a firm that he liked. It was a good venture fund. But he also liked me, and he wanted to give me a shot, and I was, like, super excited to get that message, like, this is my chance, and unfor…”
Schottenstein tried to invest 20% of her liquid net worth into dbt
“I was just so convicted that it was going to be a special company that I asked to even put my personal money in, and I asked to put, like, a very irresponsible, irrational amount nearly, like, 20% of my liquid net worth into DBT because I was so convinced that…”
Schottenstein: Distribution advantage is arguably more important than a good product
“And then the last, I think this is more important, arguably, than if they have a good product, but is distribution. Do they have an advantage on how are they going to get to market? Because that's really, really hard”
Schottenstein: Founders with viable standalone paths have the upper hand in M&A
“And if you have that path, then you'll have the upper hand in absolutely every single M&A conversation because you have a viable alternative, which is do nothing.”
Schottenstein: Startups typically have only two to three strategic buyers
“For any one company, there's only ever two to three buyers that find what you're building to be extremely strategic.”
Schottenstein: Startups should inflict competitive pain on potential buyers to get noticed
“And the strategy that I would do in, in how do you get noticed is I would figure out the area that you bring a competitive advantage, and I would inflict pain on that potential buyer. Make it impossible for them to not notice you because that's when they're go…”
Schottenstein: Refusing talks with incumbent acquirers is a founder mistake
“I see a lot of founders get this wrong, and they prematurely will shut down a conversation or they won't talk to an incumbent or a potential future buyer because they take too competitive of a stance. But that's a mistake because M&A is all about creating plan…”
Schottenstein: dbt Labs will hold ground on transformation and semantic standards
“There are a few areas that we do want to hold our ground and that's in our transformation standard as well as our semantic standard because we believe those two are better served together for the user's sake.”
Schottenstein: 20,000 companies use dbt every single week
“20,000 companies using dbt every single week, and that attracts partners to want to build for dbt.”
Schottenstein: dbt reserves stateful interactions and team collaboration for paid Cloud
“We think about dbt open source. It's really the guts of the data transformation. It's where you describe your business logic. And then on the cloud side, we build proprietary software that supercharges the development life cycle and the productionization of db…”
Schottenstein: dbt Labs charges far below its perceived 20-35% warehouse value
“When we talk about what is the value of dbtlabs to our customers, they often talk about how it's either 20 to 35% as valuable as what they spend on their cloud data warehouse. But what we charge our customers is a very small fraction of that 20 to 35%, and tha…”
Schottenstein: dbt Cloud loses deals most often to dbt open source
“And when we lose a deal, we most often lose it to dbt open source.”
Schottenstein: Distressed startups seeking an exit should be openly transparent
“If you're in a Hail Mary situation where you're looking for a home or you need an exit for your business, it's better to be transparent and cast a wider net.”
Schottenstein: 50% of early-stage VC portfolio investments return zero
“50% of portfolios don't return, investments don't return anything.”
Schottenstein: Tech M&A is close to picking back up
“There'll be better assets entering the market soon. And at a certain point, the opportunities will just be too great that that will incentivize a lot of the buyers that have been on the bench to start participating again in the M&A market. And I don't know exa…”