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SPEAKER_04: Hey everybody, welcome to the Rising Stars of SaaS, a series here on This Week in Startups

SPEAKER_07: that we decided to do because software as a service has been a juggernaut in our industry and there's so many interesting emerging companies. And the godfather of SaaS is with us.

SPEAKER_04: Jason Lemkin is the other Jason, as we refer to each other, the other Jason. If you're looking for the consumer investor, that's me. And if you're looking for the SaaS investor, that's Jason Lemkin. He's been on the podcast three other times, episode 597, 663, and 698. When he did two of those are talks, he did our events.

SPEAKER_07: And of course, he has Saster, the giant, huge, large event that got canceled as well during the pandemic. Hit hard.

SPEAKER_08: That was, I mean, your events were ginormous and there was a lot of money at stake too. How did you deal with that? Welcome back to the program.

SPEAKER_11: First of all, it's been too long. Thanks for having me.

SPEAKER_07: Yeah. And tell us what happened with the Saster conference and how you dealt with that because I believe

SPEAKER_14: that was at the beginning of the pandemic.

SPEAKER_13: We were the first big event that got taken down by COVID.

SPEAKER_15: Um, and, uh, yeah, we lost about $10 million, um, all in, uh, which, um, you know, is more than pocket change for, for most of us, but yeah, it was, it was crazy. You know, it's funny looking back in March, you know, there was so little COVID here, right. And we didn't know what we were doing.

SPEAKER_13: And it was, it was surreal because not only did we lose 10 million, but the warriors kept

SPEAKER_17: playing and the world kept moving.

SPEAKER_18: Like the wheels kept moving and the consumer side, even though the B2B side was, was, you know, the B2B side was shut down first for events.

SPEAKER_15: And it may be the last to come back, uh, for the same reason. Um, but it was brutal, but, uh, it's fun. It's like a lot of things and we should talk about that stuff, but you adapt, right? You adapt and you learn and good things for all of us. I mean, the cloud has zooms quintupled since then. Every cloud stock that could benefit from COVID has. And, um, even for our community, we found ways to, to benefit from it. So, uh, it's, it's just great when you have a team that's, that's clever and crafty. Right. And so many interesting things will come out of it.

SPEAKER_19: Like we didn't know zoom would be a consumer app. Did we never in Eric's mind, zoom be a consumer app. Now it's a $3 billion run rate company. And you know, 30, 40% of that may be from consumer use cases. Right. It's hard to know for sure. Right. But it's crazy.

SPEAKER_21: Crazy. Um, what date was the event supposed to take place?

SPEAKER_15: Uh, second week of March. So RSA got done the week before and then, and then the county just shut it down. And we, people, it was funny. People mocked us in February. We wrote this thing. You have to wear a mask. You have to wash your hands. You have to do social distancing. And we, we got made fun of even the wall street journal said this was crazy. Like it was extreme. Um, and we did passport checks. We had thermal scanning before anyone did it with Matt, with enterprise grade consumer heat scanners that were half a million dollars and everyone mocked us.

SPEAKER_22: And then, you know, those weren't bad ideas.

SPEAKER_23: Well, it turns out, yeah, you were, you were ahead of the curve. Those have become the standard.

SPEAKER_25: I was in Vegas for a poker taping, uh, the poker game, like a poker after dark. Yeah. During the pandemic. And we had to take tests and we were quarantined and all stuff. But when you walk in and out of the hotel, they had those infrared scanners and they were actually scanning people.

SPEAKER_26: I didn't spend any time in the casino because I was like, this is too dangerous. We were in our own like, um, place where it's all be videotaped.

SPEAKER_07: So how does it mechanically work when you have an event like this cancel and you, you're so close to the date, just, it just, the vendor, the, there's no rescheduling or is there a clause with the venue for like an act there are, well, for it's interesting to me.

SPEAKER_33: You really want to go into interesting. Cause you put on events force. There was a force majeure event. There's no question.

SPEAKER_19: The interesting question is who gets the benefit that like the venues running the business.

SPEAKER_35: Okay. We agree. It's a force majeure. That means who, but who has to pay, right? This is a funny nuance. Is there a force majeure clause? Of course there is. It benefits the venue. It benefits food and beverage. It benefits, so yes, there was one, it just doesn't exactly do what you think it does. Right?

SPEAKER_38: Right. Yes. Yes. We agree. It's a force majeure in that case, you owe us everything.

SPEAKER_19: Wow. Well, think about it. It's I know it sounds crazy and listen, it was stressful for us, but think about it for a moment, a contract decides who assumes risk. And if there's an act of God, if there's a pandemic, a tsunami, one side has to assume risk and it's not necessarily, it doesn't have to be the smaller guy or the customer. It could be the vendor. You don't know, right? That's right.

SPEAKER_42: Each contract is different. They're all different. This is the first time in our lifetime that really a force majeure situation has happened.

SPEAKER_46: Yes. And I remember in my early days of running conferences, and you and I both have run very

SPEAKER_42: large conferences, we would always debate these or I'd have people on my team who were obsessed with these kinds of clauses and cancellations and payment terms and all this stuff. And then we'd have other people like, ah, this doesn't matter. Yeah. And it doesn't matter 99 out of 100 conferences.

SPEAKER_08: And then you have this like black swan event and you actually go pull out the contract and

SPEAKER_07: say, what does it say exactly? Um, and yeah, it could be, it could go either way, right?

SPEAKER_51: It could go, a lot of this could go either way.

SPEAKER_07: Yeah. So you move the conference online and does that work? And I saw there were some SAS companies that are doing online conferences. I'm wondering what you think of online conferences, given that's what they're terrible, they're

SPEAKER_52: terrible, they're terrible.

SPEAKER_54: Now we've done a good job. Okay. So they're terrible, but Saster's doing a great job with it. Okay.

SPEAKER_33: Well, because we don't do conferences, right?

SPEAKER_15: What we, we, I mean, it's very interesting to what we talk about SAS software, you know, the digital events software space has raised 300 million in the last six months, right? Hopin went from in less than a year is worth 2 billion, right? And we could chat about why that is, cause it's interesting, but these events you go

SPEAKER_19: to, they're terrible, right? Do you, are you going to, are you going to reinvent this week? Are you going to dream force? Are you going to web summit? No. Have you been to some of those events? Yes, you have. We, you, I don't know how much I've been to dream force 10 times reinvent takes over Vegas, right? Web summit is epic, but are you going to the digital versions of those? You're probably not. Are you probably not. And there's a reason. I mean, you're not getting the interactions. You're not getting the other pieces, right? But, but you know, it is great getting to chat with an Eric Wan or an Aaron Levy or Todd McKinnon or someone like that. And so what we've done is huge digital way. That's a creative, which is have Q and a have the discussions you and I are having, but have them for a hundred thousand people. That's what we've done since March, have these discussions for a hundred thousand people.

SPEAKER_62: And that's worked well for us, but we ditched all this stuff, the booths and the, and the pretend other things it's, it doesn't work.

SPEAKER_64: So Hoppin raised a hundred plus million dollars at a $2 billion valuation. Yes. Something crazy like that. I don't know if you were an investor in the company.

SPEAKER_66: I'm not, but I do think of all the tools, it is the best one.

SPEAKER_19: So. And more importantly, it has the most traction. It has the majority market share in a very large market and it's gone from zero to 20

SPEAKER_67: million revenue in a single digit number of months, zero to 20 million in 10 months.

SPEAKER_42: Now, when you look at it as an investor, when a company goes from zero to 20 million during

SPEAKER_07: a pandemic, how does one judge that investment opportunity?

SPEAKER_25: Let's say, I don't know if you had it or not, or if I had it or not, but how would one judge an investment opportunity in something that is being driven by the pandemic?

SPEAKER_15: Yeah. It's interesting to think about investor psychology. I think it's helpful for founders. I didn't invest in Hoppin, but I did a couple that benefited talk desk, which is a contact

SPEAKER_19: cloud contact center. They went from one to $3 billion during the pandemic because everyone couldn't go into call centers anymore. They had to do them from home.

SPEAKER_72: And, and, and while at first net news struggled, um, deployments, two year deployments got done in two weeks and, and upgrades were off the chart.

SPEAKER_19: So the revenue just is crazy. And you can see it in public comps like RingCentral and others as well. It's not only them that benefited. So that's a quick benefit. Another one I did, I did a sort of a Zendesk for e-commerce called Gorgeous. Uh, they, they, they, they went from 3 million to 13 million this year, um, because Shopify exploded. Right. So on top of that, what's the number one way to do customer service on Shopify? It's this little app called Gorgeous. And so you look at those, and I think when the pandemic first hit investors were like, well, this is gonna, this is gonna end and this is fatty and they're all going to return to normal. Right. But, and maybe they will, but, but I think what we've learned in SaaS, I don't even think you and I knew this when we chatted the first time and met. And when I talked to so many long-time founders, we all underestimated the powers of brand of brand. And, and Michael Pryor and I from Trello just caught up and he said, I said, where will Trello be in 20, you know, 20, 30? He's like, it'll be a lot like this. We'll be in 2040. He's like, I have no idea what Trello, the app will be like, but the brand will be there. The brand around collaboration and the way we manage projects. And we underestimated that. And we look at all these companies like Zendesk is at a billion HubSpot's at a billion. All of the, the ones we came up with are at a billion in revenue, Slack's at a billion and these brands last forever. And so I think the ones that got these boosts, the boost, like maybe it will decelerate, right? And we can even squint at some of Shopify's numbers and see a deceleration in the sense that five years got pulled forward into, into two months. So that growth can't, you can't have about 200% of commerce be e-commerce, can you? I mean, there's a, there's a, there's a maximum, right? So this could be. But the brands are going to go forever. So, so I think VCs figured that out and they said, look, we're going to play the game and we're going to do hop in at 2 billion and we're going to do all these things because yeah, there'll be some deceleration, but they've been pulled forward so much. These have become winners and we're going to bet on those winners.

SPEAKER_22: That's my, that's what I've seen.

SPEAKER_74: So when we get back from this quick break, I want to know what you think of Slack selling to Salesforce. And if that is a great purchase or they overpaid or who else should have bought it when we get

SPEAKER_76: back on this week at startups. SaaS companies with reoccurring revenue had only two ways to grow. They could sell equity to an investor, a venture capitalist, angel investor like myself, or they

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SPEAKER_07: They had the largest event, thousands of people coming to it, and it got the plug pulled the week of,

SPEAKER_76: what is it, second week in March? And I think we went-

SPEAKER_84: Second week of March.

SPEAKER_76: I started my quarantine on that Monday or Tuesday, which was the 12th, I think.

David Friedberg: Yeah, we sheltered the next week after the post-op. And we sheltered that Monday.

SPEAKER_76: And then Thursday was when the NBA game got canceled in real time. That's when I knew this was going to be a real thing. Yeah. Like, I was watching the videos at my poker game in January of them, like, fumigating in the streets with, like, tanks in Wuhan. And they were blowing, like, anti- and they were, like, welding door shut. And I was like, this seems dystopian and crazy. Like, this is like a movie.

SPEAKER_90: We learned it was just aggressive. Yeah.

SPEAKER_50: And then you have this, like, the NBA game getting called off with people in the arena. Yeah.

SPEAKER_95: I was like, whoa, wait a second.

SPEAKER_25: This is- is that when you knew- what was the moment you knew this was, like, going to be legit when they told you you couldn't have Saster or that in February you kind of realized this is going to be a problem?

SPEAKER_33: You know, it's funny, the- you and I were talking before we went on about black swan events.

SPEAKER_15: You and I have been doing this long enough. You know what I've learned? Every five years there's a black swan event in my career. And every year there's a big- a big arse curveball one, okay? And in January, early January, the CDC put out some announcement on COVID. And I sent it to my- my really- my co-founder for Saster, Amelia Barra, who runs everything. And I said, this is our event this year. This is going to hit us hard, like, the first week of January, the COVID notice. Because I'm like, this is different. This is going to hit us hard. So we immediately prepared and we did all the- you know, we have 15,000 masks in our warehouse. We still can't get out. We did the thermal scanners. But we knew and- so we were already prepared. But no one knew it would be like this, right? No one under- you know, I mean, people did think it would- we- once we- once we sheltered, we all thought we'd be back by the fall. Yeah. Everyone thought we'd be back by the fall, right? I thought the summer. It was rescheduled for the fall. Everything was rescheduled, right? But now we look back at the curves and there was like no COVID then.

SPEAKER_47: There was no COVID back then. No COVID back then. And now we are testing like crazy.

SPEAKER_25: Yeah. The testing and the cases seem to be very much in sync. But the thing that's actually super just- and survivability has been great. But when we're taping this in December 2020, you know, for those people with a historical document, we have over 90,000 people in the hospital for this. And we're starting to see the deaths climb up again. Thankfully, the deaths are not growing at the same pace they were. So we obviously are getting better at this and we have three or four vaccines.

SPEAKER_04: If you had to pick a month when you and I could go to a Warriors game together and we would be vaccinated and have our little vaccination passport to check our papers when we go into the Chase arena, whatever they're calling it, the Warriors arena. What month would that be?

SPEAKER_15: Well, I'm not- I'll tell you what we're planning. We're going to do Sastra annual. We haven't really announced it. We're going to do Sastra next year in September. We have the venue. We're going to move it outside. We're going to do the San Mateo County Fairgrounds. So 90% of it will be outside. Oh, yeah, right by my house. Right by your house. So we're going to get you on stage. We're going to get- you're going to do a main stage interview. We're going to do it live. And we're going to do some different things.

SPEAKER_19: We'll have the- things will be a lot more distance. It's 30 acres, right? So people can stretch out. It's incredible. But we're going to end on September. However, I think, you know, other than the most conservative folks out there, Fauci and everyone says by April or May, everyone that wants the vaccine, at least in the US and Europe, will have it. There'll be vaccine passports. Whether the county goes along with it and whether it's truly safe, we don't know, right? So we're not saying 100% we can. But we decided last week to go full steam forward,

SPEAKER_15: invest our limited capital, and we're going for it in September. We haven't told anybody yet, just between you and me right now. Yeah, we'll keep it here in the other $250. 50,000 people.

SPEAKER_119: But September, we'll put it on our calendar.

SPEAKER_19: What does that mean for the Warriors? I mean, I'm sure in Texas and even Orange County, they keep playing basketball if they could, right? I mean, the 49ers are just moving to Arizona.

SPEAKER_18: So I don't know when we can go to a Warriors game, but I'm pretty sure, you know, by April or by summer, we can go to a basketball game or some sports game somewhere. It just may not be in Northern California.

SPEAKER_19: Northern California may be the last to – we were the first to go into take this stuff seriously, right? Yeah. And it makes sense we'll be the last to – we'll take the least once we'll be the last to come out of it.

SPEAKER_76: Why does that make sense?

SPEAKER_25: What is the underlying phenomenon or the underlying reason why we went first and we'll be last?

SPEAKER_19: Boy, I don't know. I'm not a San Francisco guy. So there's – but I think we have a – I think we have a respect for both science and technology here. We listen to our advisors. And I think – and the world is totally different. And I also think tech companies all immediately went home, right? It was easy. They could. It was easy. It was easy. It was easy for Slack and Salesforce and everyone to make the magnanimous gesture and send everyone home because outside of parts of DevOps, the impact was minimal, right? Versus the meatpacking plants and even retail are not a big deal in San Francisco, right? So it was – and so we have very little, very little COVID here. But I think everyone's cognizant of that. And I think the – you know, there's a lot of weird issues in San Francisco with rents and others. But taxes will – California will make a lot of money from capital gains this year. Things will be okay. And I think people will be slow to take that risk.

SPEAKER_33: But, I mean, this is – talking about SaaS, I mean, who knew that 2020 would be the best year of all for SaaS?

SPEAKER_35: It is crazy when you think about it. The best for all by far.

SPEAKER_18: By far, if I knew what I knew today, like the best way to be a great – you're an amazing investor, Jason. But the best way to be an investor is to like have – you know, peer into the past. Just a couple years. That's enough, right? Just enough. Just peer into the past, right?

SPEAKER_74: It's an incredible run-up. And I think as part of that, today when we're taping, Salesforce has signed a definitive agreement to acquire Slack.

SPEAKER_76: For, unbelievably, $27.7 billion, they're doing $200 million a quarter. So, $800 million, a billion a year. This is 30 times revenue. Yes. Is this an incredible acquisition? Did they overpay?

SPEAKER_139: What are your thoughts on Salesforce buying Slack for $27.7 billion?

SPEAKER_141: Well, first of all, let's – a couple things. First of all, as crazy as it sounds, Slack's a relative bargain.

SPEAKER_15: Why? Slack did not get quite the boost that Zoom and others got. Slack stock is up, but not what the others are.

SPEAKER_19: So, Mark pounced. Mark learned to pay up. Tableau, $18 billion, right? The first what happened with Salesforce is they bought MuleSoft for $6 billion in, I think, 2017. And everyone's jaw dropped, wow, $6 billion seemed like so much money for MuleSoft. Now, it's like a trinket, right, in SaaS and cloud. And what happened, if you talked into what Salesforce does, the biggest acquisition was their best. Salesforce is too big at $20-something billion in revenue. You have to move the needle, right? Right. Materiality is 10%. So, if Mark can't get $2, $3, $4 billion in revenue minimum out of an acquisition, it's not worth getting out of bed, is it?

SPEAKER_25: Right. This is Microsoft. Microsoft had this problem in the 90s, right?

SPEAKER_79: Anything they could buy was so small that it wouldn't change their fate. Wouldn't change.

SPEAKER_72: Unless it was strategic, like GitHub or LinkedIn or Minecraft. It's probably true today, right? Even today.

SPEAKER_147: Difficult to move the needle, yeah.

SPEAKER_72: So, Slack is a relative bargain. We can chat about why, in my opinion, it's a relative bargain.

SPEAKER_19: And Salesforce prides itself on doing big acquisitions well. Salesforce hits its numbers. And if you squint, there's five clouds at Salesforce now, maybe six. And half the revenue is inorganic. Half the revenue is inorganic. So, they're good at buying things. And Mark knows to pay up. And he's always wanted this. You know, they created a Yammer competitor called Chatter. David Sachs, your buddy will remember this.

SPEAKER_72: Mark put 300 engineers on the Yammer competitor. Back then, that was a lot of engineers at Salesforce with no revenue.

SPEAKER_149: And they were putting billboards up. It failed. It failed.

SPEAKER_19: And Slack is not Yammer or Chatter. Slack is much more than a chat tool, even though it looks like it to most of us. But, you know, when we want something and believe in it as leaders, we want it. And it doesn't go like he wanted LinkedIn for a decade and he lost out. He lost out to Microsoft because he couldn't come up with the $30 billion. Because his market cap was only $50 billion at the time. And he's not going to lose out on another prize. Um, and so he's bold, he's audacious.

SPEAKER_151: Yeah, he wants to move the needle.

SPEAKER_76: Why didn't Slack break out during the pandemic? And is this a failure of Slack as a company that they could not grow and remain independent?

SPEAKER_04: Answer that question when we get back on this week at startups.

SPEAKER_80: Listen, I have invested in over 200 startups. I've advised even more.

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SPEAKER_04: My man, Jason Lemkin is with us chopping up all the SaaS.

SPEAKER_07: God, what a remarkable year for SaaS as we've seen. And I think this Slack acquisition is, along with Zoom's massive run up, this has to be a

SPEAKER_04: watershed moment for SaaS, correct?

SPEAKER_154: Incredible. Incredible. Yeah. It is the war. I mean, it's- We're living in 2025 in the cloud today. We've pulled forward five years.

SPEAKER_139: Amazing. And incredible for investors in this space, employees, et cetera.

SPEAKER_76: But one wonders, why wasn't Slack able to, you mentioned it sort of in passing, but Zoom

SPEAKER_46: just skyrocketed. But Slack did not during the pandemic. Their revenue has grown 50% year over year. That's a high growth company for sure on a smaller number.

SPEAKER_76: But isn't it a failure that Slack could not remain an independent company?

SPEAKER_46: Or is it success that they were able to just cash out? How do you look at it?

SPEAKER_157: And why did they grow? Well, I have thought about this a lot and written about a lot recently in general.

SPEAKER_72: First of all, I'm a huge fan of Slack. We chatted about it the first time you had me on your show. So you were a HipChat fan. I said Slack would be bigger. I was all in on HipChat. I had some fun. I've been a fan.

SPEAKER_19: You know, at the first Sasser Annual ever, the only speaker I didn't know was Stuart Butterfield. I begged him to come when Slack was doing $6 million in revenue. I'm an OG fan, right? Yes.

SPEAKER_15: And I think Stuart is the kind of person we all want to work for. Someone that deeply cares about people, that cares about inclusion, that cares about doing the right thing, that cares about product. He's a mensch. Right? He's a mensch. He really is. And I have no criticisms, only admiration.

SPEAKER_19: But what I have learned now that there's so many SaaS companies, there weren't any SaaS companies at a billion in ARR when Slack was found. Now there's a ton at a billion. Zendesk is at a billion. HubSpot's at a billion. Zero's at a billion. We can go on and on. Slack's coming at a billion. And what we've learned is the ones that approach a billion and don't have a second product line that's equally as big, slow down. Ultimately, there's only so many consumers. Now there are exceptions, but even Zoom, I would say has two product lines. B2C and B2B. Right. And yes, Zoom's at three billion. Zoom's at three billion. But the pure old Zoom is only at a billion. And that Zoom is adding phone to get bigger. Because the old Zoom isn't big enough to get to 10 billion. It needs to add phone. Right? Phone. Yeah. Phone is the B2B push. Like literal phones. Yeah. Zoom has two big pushes, enterprise and phone. And then there's this weird thing that other than revenue market, I don't think Eric ever wanted, which was the yoga and the jazzercise side of Zoom in schools. It's a headache. Clubs, schools. Yeah. I mean, it's great. But so, and the ones that slow down, the Dropbox is in the box. And I love that you and I love these products, but their growth rates are slow. The survey monkeys, they start to slow into the teens, 15, 16, 18. And that's the death knell for a high growth company. You're not a high growth tech company. And you have, and you look at folks like Viva, you know, Viva was this pharmacy around that spun out of Salesforce, another great success, but their vault product, which is where you archive compliance-based content. The vault product's larger than the pharma product today. It's larger than the initial product. Look at Twilio. Twilio's at 3 billion in a rocket ship, but it's added SendGrid. It's added Segment. It's added, it's added call center. It's added a whole bunch of things that if Twilio had just been Twilio, that, that lovely API we love, it was never going to get to 10 billion and Slack didn't do it. And Stuart could do it. There's a great team, but I think culturally they didn't want to do it. And I think you have to decide, okay, guys, are we going to reboot our company? Are we going to reboot our company and be more, or should we be the Slack arm of a bigger company? And I think it's a logical choice for that reason, because there's only one product.

SPEAKER_76: This goes back to the axiom of what got you here may not get you there. What gets you to a billion in revenue is having somebody like Stuart create this incredible family of Slack employees and this mission, but you really need somebody like Jeff or Benioff at Twilio or at Salesforce to then go into that second stage entrepreneur

SPEAKER_08: and say, I'm going to build a collection of brands here and I'm going to scale it that way. Correct?

SPEAKER_33: Yeah. I mean, at Salesforce, the CRM product is their slowest growing cloud. It's very slow growing.

SPEAKER_27: So if this is the case, why hasn't Zoom with their massive market cap?

SPEAKER_76: gone on an acquisition spree. I thought Zoom would buy Slack. I thought Zoom plus Slack would be an incredible combination.

SPEAKER_167: Am I crazy?

SPEAKER_72: Well, first of all, I mean, until you've been acquired, as I have a couple of times, until you've been a vice president in a big tech company where I was at Adobe, you don't really

SPEAKER_19: get how it works, right? But it takes most companies. This is why the Jeff Lawsons to me, I think are bad RCOs. Okay. Most of them, it takes time to build up to big acquisition. I remember in the early days of Adobe Sign, Echo Sign, my last company as a founder, Salesforce wanted to buy us. And they called us up to one market to chat. But Salesforce's market cap was like $4 billion, $5 billion at the time.

SPEAKER_72: And they said, we want to buy you, but the most we've ever paid is $16 million.

SPEAKER_35: So $8 is the highest we can do for you. I said, well, $8, I mean, it's early. I get it. But we raised $3, so $8 is not enough.

SPEAKER_72: I need $30 even to get out of bed to talk about this. So that was $16. They'd done this thing that got them their mobile products, and then they built it up, right? And then their jaws dropped at the MuleSofts or even ExactTarget, $2 something billion to buy email. People thought Mark was crazy. So that's the traditional way. It takes folks time to build up to these big acquisitions if they don't come from that DNA. You have these crazy CEOs who I love. I love Jeff Lawson. He's one of my favorites. He's like, I don't have time, guys. Like, I need scale tomorrow. And they talk a lot about how, when he looked at SendGrid, he said, look, if I don't buy SendGrid, I'm going to buy something small and put 1,000 engineers on it. But I want scale tomorrow. I don't have time. I'm going 100% at a billion, almost 100% at a billion of revenue. I want to buy scale. But most CEOs can't do that. And I think for Eric, I mean, I know him a little bit, but I've never talked to him about M&A. I don't think it's his mindset. So it takes you a while.

SPEAKER_19: It takes you a while. And it often comes out of fear, right, or Mark seeing that Salesforce CRM would never be big enough. He knew it would never be big enough, right? Right. Or come out. But I think it's just one of ServiceNow just bought this AI company out of Canada, Elementum that raised a couple hundred million. Anyhow, ServiceNow is kind of 2004. That's their biggest acquisition ever.

SPEAKER_72: So that's the third biggest cloud company, right?

SPEAKER_38: Second biggest enterprise. That's not their DNA, is it?

SPEAKER_74: No. I mean, it does take a certain mindset for a founder to go from that, let's call it, you know, I can build it, to I should buy it, right?

SPEAKER_76: It's like, I can build it is what Benioff believed in chatter. I'm as smart as Sachs. I can take on Sachs. I could, you know, I could just build it. I could throw 300 years at it. And then all of a sudden, Benioff 2.0 is, I should buy it.

SPEAKER_08: I can build it, but I should buy it. And Lawson seemed to get there quicker, right? Yeah. Jeff's like, hey, you know what? He got there instantly.

SPEAKER_180: Screw it. Why would I even try? Like, SendGrid's out there. Why don't I take that? Or why don't I try to get MailChimp? And then you have Zuckerberg is another great example in the consumer space.

SPEAKER_08: He's sitting there going, yeah, Instagram and WhatsApp could roll us over. Screw it. I'm buying them. And I'm not even going to my board. I'm just going to buy them unilaterally. I'm just telling them. He just told the board, we're buying WhatsApp for whatever it was, 17, 18 billion. We're buying Instagram for a billion. We're done. Like, the deal is done.

SPEAKER_59: Yeah.

SPEAKER_50: One thing I'm curious about is how will you define success for Slack under Benioff's umbrella now? And can they grow faster?

SPEAKER_04: In other words, you know, Facebook, a lot of people say Instagram grew faster as a Facebook property and that YouTube grew faster as a Google property because of the infrastructure and developers and scale that they had already learned as an organization.

SPEAKER_76: Are there things Salesforce knows as an organization that will accelerate Slack's growth?

SPEAKER_188: Yeah. Or do you think there could be integration problems?

SPEAKER_187: Well, there's something that's not obvious about Slack if you don't dig into its financials.

SPEAKER_72: So, since the IPO, the majority of its new revenue, its new bookings has come from the enterprise, has come from six-figure deals, and they have a ton of seven-figure deals.

SPEAKER_19: So, Slack only has one product, but it went from one segment, which was sort of freemium SMB developer to enterprise in a way that's rare. I mean, it went so upmarket, it's almost unbelievable, right? I believe the majority of its growth is all enterprise-fueled. So, that's something that is not their DNA, and that is something that is Mark's DNA, and they will go in with confidence. And where Slack maybe got nervous—I mean, look, Slack crushed it, right? But everyone gets nervous in sales.

SPEAKER_190: I want a million dollars from Procter & Gamble or whatever. Mark will go in and ask for 10. He'll go in and ask for 10. He's an animal.

SPEAKER_193: Yeah, they'll just ask for 10, and they'll price it for value. They're not ripping anybody off. But that's what works. That's why their acquisitions in the enterprise work.

SPEAKER_72: They know how to do this. So, does that mean Slack will be as innovative as it would have been as a standalone company? I mean, we know the answer is no, right? But it has the brand, right? It won the space, and communications became so much more important than we thought, right? When we were talking about HipChat and Slack back in the day, we thought these were cute little apps, right? But now we run our lives on these apps, right?

SPEAKER_197: This isn't AOL or ICQ or Yahoo Messenger. This is the core medium of how we communicate now.

SPEAKER_76: It has impacted culture at startups to a level that I think nobody expected. Like, literally, your entire experience at work, the culture of the company is the culture of the Slack. It is.

SPEAKER_08: And if you let people go crazy on it in, like, the random room or, you know, if people start creating rooms and, you know, you see what happened with Brian Armstrong over at Coinbase, you know, every one of the stories in the New York Times about a company having culture problems starts with, in a Slack room. Yes. In a private Slack room, in a message, in Slack room comments obtained by the New York Times, the following was said, as, you know, and it literally, I tell folks, like, the rule should be you can't talk about politics or any of this, like, you know, political issues on Slack or email. You can only do it in person. So, encourage people to do it on Zoom where they can see each other or in person if you want to have a talk about whatever it is, social justice or poverty or the pandemic or Trump, whatever. Just do it in an opt-in situation where people are in the same room, right?

SPEAKER_80: What did you think of all that Brian Armstrong craziness over there and him saying, don't bring politics to work? I'm curious. You're not a political minister.

SPEAKER_133: You know, I did not. I deeply care about equality and inclusion. That's one of our core values at SASR. I did not follow all the details because some of it was so toxic.

SPEAKER_72: I just have to limit how much toxic behavior. But I will say one thing on it, which is that it's a message I want to do want to challenge folks listening to this. Like, thinking you're going to build a meritocracy with not, with equality, not being a core plank of that is ridiculous.

SPEAKER_19: You know, what's his name? The Snowflake CO. What's the guy's name? Frank Slotman. Legendary eat nails for breakfast enterprise sales guy. He wrote this LinkedIn post at everyone's lot and said, said he doesn't have time for equality. Like, it's a meritocracy. That's toxic. That is toxic today. And Snowflake's done well in Coinbase.

SPEAKER_72: It can't be stopped. But it's disgusting. It's disgusting to, in my opinion, and I rarely, I almost never use that word. You can't leave people behind. The amount of privilege that white men, white males, that you and I, that Brian Armstrong have, it is hubris to discount it and to say meritocracy didn't get us where we needed to be when you and I were growing up. It didn't work when we went to school. And it doesn't work today either. And so, I'm not trying to completely criticize Brian because I didn't read everything, but that meritocracy argument, be careful. And I hear it from young founders all the time, and it worries me when I hear it, right? It worries me when I hear it. It's not enough. You do want a meritocracy, but it has to be a meritocracy where everyone gets to play. Otherwise, it's not a meritocracy.

SPEAKER_64: Yeah. And if we're not where we need to be, and the numbers show we're not where we need to be, then work needs to be done, right?

SPEAKER_76: It really is that simple. The outcome isn't where we want it yet. And just as an angel investor, anecdotally, it's been great to see over the last five years, the number of female founders, founders of color, increase dramatically. Dramatically.

SPEAKER_209: Dramatically.

SPEAKER_76: We can take that as a win, but there still needs to be a ton of change.

SPEAKER_08: When we get back from this final break, I want to talk to you about Zoom and why did that product succeed against GoToMeeting, Cisco, Skype, Slack had video messaging and audio meetings in it, and every other possible Google Hangouts. And somehow, this new company won the space and won the day in a space that was crowded and every single company had an offering.

SPEAKER_212: Yep. How did that happen when we get back on This Week in Startups?

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SPEAKER_76: And the face-to-face meetings are a thing of the past. We all know that. You need to quickly adapt your sales strategy if you want to stay ahead. And the best way to do that is with targeted, targeted, personalized sales. How do you do that? You know the answer already. LinkedIn Sales Navigator.

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SPEAKER_216: All right. Jason Lemkin's with us.

SPEAKER_76: I was amazed when I loaded Zoom. I was a little reticent because of the sort of Chinese servers and the developers. And I am concerned about security from China. And it looks like they cleaned that mess up was pretty vocal about, you know, hey, you probably shouldn't use TikTok or Zoom if they're going to be rooting your operating system and they're going to route the calls through China. I don't trust communist authoritarian countries. They seem to have fixed that. That was obviously a snafu. But they won the day. How did they win the day versus Google Hangouts, Skype, and all these other competitors? I don't understand, you know, how they are the 20th meeting software major platform to come

SPEAKER_07: out in the last decade and they just crushed everybody. What was it about the product?

SPEAKER_72: Well, I don't claim to be quite as much of an expert on the topic as others, but I've certainly studied it. And I've interviewed Eric about it. I've talked to him about it. I've read a lot of things. And what is interesting is there's a bunch of things interesting. But if you hear Eric, even up to 100 million ARR, right? And they're at 3 billion now and growing triply. I mean, it's off the charts, right? It breaks everything. He will say the competition was intense. Intense. Let's not overstate it. Let's not. The collective wisdom of Zoom was such a magical product in the early days that it won on this magical experience. And there's some truth to that. And we can talk about technology. But it was brutally competitive until it won. And then it won, right? It was brutally competitive. And I think, you know, I think there's a couple pieces to it. And there's obviously some luck, right? First of all, if you want an argument, Eric was a first-time founder, but a second-time doer. He was head of engineering at WebEx. So when you get, and everyone I know worked with him at Cisco, right? Including my wife and many other folks I know, Dan Scheiman, who was the first angel investor.

SPEAKER_19: They will all say Eric was one of the smartest and nicest, smartest and nicest people anyone worked with at WebEx. I mean, at Cisco, right?

SPEAKER_33: WebEx. Off the charts on the team. When you have a guy like that that wants to do it again, you write him a check.

SPEAKER_72: Right. Of course. Of course. Now, people didn't. He struggled to race. He was not a business guy. He, it was a crowded space. Perhaps there's some racism and other things and someone like that. It was Dan Scheiman wrote him a check and Qualcomm and other angels. But it took him a while to get, for the VCs to pay attention for a bunch of reasons, right? But I think, you know, and I think he was haunted by the quality of service and other issues that had deteriorated WebEx.

SPEAKER_193: So we're on a Zoom right now, you and I, depending on how people watch this, the ability of this app to scale with QoS is unprecedented. Everything else runs on a crummy background or they run on WebRTC, which doesn't scale.

SPEAKER_72: You know, where you are on WebRTC and you get a bunch of people on, it gets blocky or the audio separates from the video, which, you know, that's horrible. Have you ever had the audio and the video separate in a Zoom?

SPEAKER_79: No. Never. I've had people's video breakdown and just turn off your video and your audio is perfect.

SPEAKER_72: There's always in syncs. Now, before the pandemic, you would connect in a second. Now, sometimes you could wait 10 seconds to connect while it's making sure it's buffered, right? And other issues. But this was a quality of service that does not exist in technology today, which we don't see, but people care about.

SPEAKER_19: That was a commitment. That was a second time founder saying, no matter what, I'm going to build a better product. Two, and he said this many times, he decided to aggressively go freemium, right?

SPEAKER_72: Which, and, you know, you can still use 40 minutes of Zoom for nothing. It is Zoom and Slack. The free version of Zoom and Slack are magic.

SPEAKER_193: Right. Are magic. An ordinary person can use free Zoom for themselves and in their company and Slack in their company and never pay, never ever. It's crazy. This is contrary to everything we've been taught about how freemium and chokes and everything

SPEAKER_72: works, right? Yeah. They both, both products broke the mold on freemium. So that's the second one. And then that none of that is luck, right? This is one is the best engineering. Two is a strategy that people, and then going video first, people don't talk enough about, but Zoom is about video first. And don't forget, we used to be about screen sharing, right? These were technology products, the WebExes and the GoToMeetings and others and other things and built-ins to Salesforce and other products. Share my screen. Share my desktop. Zoom was about us having a conversation. And that ended up being incredibly, incredible foresight on where collaboration would go.

SPEAKER_79: Yeah, it's so prescient, right? Like during a pandemic. So prescient.

SPEAKER_76: And then work from home. So do we think work from home is here to stay and to what extent? Because it is very clear. It's December 2020. We're going to have 40, 50, 60 million shots of the vaccine here in the United States.

SPEAKER_25: It's 94, 95%. There are four of them now.

SPEAKER_08: There will be 14. And they're going to be like literally have more than enough vaccines for everybody on the planet.

SPEAKER_76: We will beat COVID in early 2021.

SPEAKER_46: I am certain you are even planning an event in September. So you believe this as well. What happens to work from home?

SPEAKER_76: What's the good and the bad of this?

SPEAKER_50: Because I'm losing my mind at home, but I kind of like some aspects of it. As a CEO, I kind of got to pick where I worked.

SPEAKER_64: But I don't even know if you can build a company like a Slack or a Zoom if people are not in the same room.

SPEAKER_91: I know you can maintain it, but can you build something that creative without everybody being in the same space?

SPEAKER_233: I don't know. What do you think?

SPEAKER_72: Well, you know, I read something that to me I found very illuminating about events in particular. But I think it works perfectly for more from I think it works for anything that happened in COVID, which is how did it work during COVID? So, for example, will Coachella survive? Look, you can watch online concerts. I have. They're terrible. Okay. I went to Coachella last year. I had tickets this year and I'm going again. I don't look like a Coachella guy, but I like events. It's awesome. I'm going Coachella doesn't work on the internet.

SPEAKER_47: I'll see you at the Sahara tent. Yeah.

SPEAKER_08: I mean, whatever that VIP is right off the Sahara tent. That's my jam. Yeah. Is that little VIP? That's where I live. That little VIP next to Sahara. But go ahead. So, of course, it will come back.

SPEAKER_237: The world's greater is almost certainly basketball is not so great this way. No, you want to go see it in person. Disney World, right?

SPEAKER_33: Yeah. Startups. Hmm. How have startups done since COVID in SaaS or general? Yeah. So, we're not going back. We're not going back.

SPEAKER_72: I'm not saying we're not going to have offices. I've maintained both our offices. Actually, we've added offices in Palo Alto as well as San Francisco. I believe that everyone's going to, you know, Google just signed a massive expansion in downtown San Jose, which had been working on for years. So, the offices aren't going away. Mark Zuckerberg says he wants to train young engineers in the office. But older ones, more seasoned ones, are welcome to work from wherever they want. That sounds logical, right? Wow. And if it worked, did it work like this? If it worked like this, we're not going back. We're not. There's too much momentum. We didn't go back to work in September. If it had been September, we would not be all running distributed teams. We would have just had this weird bump.

SPEAKER_193: But we've all, if you've done better, you can't put the genie back in the bottle. It's not going back.

SPEAKER_74: That is the thing I'm realizing with my own little investment firm, Launch, is that we have been able to do more investing. Our accelerator is doing better.

SPEAKER_76: We have higher quality companies, more people applying, higher quality applications, which is what we're looking for. And doing 16 weeks and having no in-person events and doing it all on Zoom, we had 750 investors attend.

SPEAKER_79: We used to have that virtually in 16 weeks.

SPEAKER_50: If you are a startup and we put you in front of 750 investors and you can't raise money, I mean, we obviously know what's going on here. You're too visionary. Your product is just not ready. Not ready. Not ready. Yeah, you're probably too visionary. We took a flyer or, you know, it's not venture fundable by design.

SPEAKER_25: But when we were doing it in person, we would get, you know, 10 investors and you would come sometimes to RSVP and seven would show up. So by the end of the program, we, you know, get you to 150 investors. So, yeah.

SPEAKER_249: So it's more, it's almost two order of magnitude better for launch. Five times better, yeah. Yeah.

SPEAKER_193: So you're not, you can't, listen, I've been to, and I've been to your stuff and I've been to the, I've met your founders in person. I've been to the barbecues and they're great. This stuff you do in person is special.

SPEAKER_254: Right.

SPEAKER_72: I, you meet, it is different, but what, at the end of the day, most accelerators are going to be judged by the funding of their portfolio. And if you have, if you have an order of magnitude more VCs, you're not going back. Yeah. I think that's the point is, I'm going to just do the barbecue.

SPEAKER_258: Yeah. I'm just doing the barbecue. I'm going to make Wagyu for you. I'll make you some Kobe, some Miyazaki.

SPEAKER_145: But all the other stuff, it worked. It worked when you were, and we didn't know. We, we, we didn't know that this would work. We didn't know.

SPEAKER_203: We thought, we thought this accelerator is, and we thought it had to be hands-on. We thought that was critical to it, but we were wrong. We were wrong. We were wrong.

SPEAKER_74: Yes.

SPEAKER_25: And you know what the thing is, if it used to be that investors would say, and you and I are new investors, but the people who came before us, you know, they were, they were just at the office every day and you had to make your run up and down Sand Hill Road. And that is how it went.

SPEAKER_46: You had to come in person. You had to come to the Mecca. You made the pilgrimage. You went up and down Sand Hill Road, and that's the way it's done.

SPEAKER_25: And if you're not committing to being in Sand Hill Road every six months and meeting everybody and updating everybody, then why are you doing this? And that's over too.

SPEAKER_72: It's, okay, I will, I will, I, I, maybe, I think that what has, when the, the, you, you're a much more prolific investment than I, investor than I have, but the investments, the, the B and later rounds that have happened in my portfolio since March, there has been, there has been the big checks. Okay. There has been a face-to-face. Now that face-to-face was with the mask on and it was during a walk and it was at the end of the process, not at the beginning or it was before COVID or it was, I already knew them before COVID. But I will tell you, walk and talks for VCs happen all the time. I, we moved to downtown Palo Alto. I will tell you how many VCs I see at the restaurants there and I see them dining with founders. It's just, it's not schlepped to the office for the pitch before I get to know you. That's dead. I'm going to do that over Zoom forever. So it's more of like.

SPEAKER_35: Can I get, can I get you a sparkling water, Mr. Kledis? Can I sit you in conference room B7? Right. While you plug in your laptop, try to get it to work and pitch the VC who never even read your deck before.

SPEAKER_133: That's dead, right? That is dead and never should have happened, right? It was always lazy.

SPEAKER_268: So it's, it's at the end of the process. That is so instructive. Yes.

SPEAKER_193: So you only have to have a 10th of meetings. You have a 10th of meetings.

SPEAKER_72: You get to know them, but it's not the same. And then you confirm it with the walk and talk instead of being this great people person where you, you, you smell whether it's a great founder when you walk in the room.

SPEAKER_237: Right.

SPEAKER_72: And there's truth in that. There is, there is truth in that, but you can do more work and you can learn more. Right. And, and I'll tell you for me, all my best investments, I knew I wanted to invest before I even met the person. Same. I knew from email and the deck. I knew.

SPEAKER_273: So like, even the meeting was confirming what I thought is true. What is it about that?

SPEAKER_193: Because the best founders can communicate their vision, their metrics, their traction so well. They're great at sales. They're great at vision. And you already know.

SPEAKER_72: And, and I, most of the meetings, when I, from the email, you know, from the email, you know, I, then I would meet in a person. I would say about 20 minutes and I'd say, I don't mean to interrupt you, Jason, but if everything you've told me is true, this is always my line from it, then I'm in if, but I need to do some work. I need to make sure what you've told me is true. But if it's all true after 20, not even an hour, 20 minutes, but I did all my homework. I read the deck. I read the materials. I did everything. And why do you, why, you know, that was actually in a way a meeting down the funnel, wasn't it? It's just, I'd done my homework before the meeting. It felt like a first meeting, but really it was far down the funnel.

SPEAKER_74: It's almost like, you know, and I'm always reticent to use any kind of a dating analogy.

SPEAKER_76: But if you were to look at the compatibility of the startups and put all the information first, almost like, hey, you know, if we've, what was that site that helped people get married? E-harmony. Yeah.

SPEAKER_50: I read the numbers and yeah, I just see people getting to the point, right?

SPEAKER_76: Because nobody wants to be on Zoom for an hour and a half. Like people just seem to be so TLDR, too long, didn't read. They just get to the point. That's one of the wonderful things.

SPEAKER_15: The thing that we do need to be cognizant of, and if you're building top of the funnel like you are, it helps a lot is, you know, we should be worried that funding for female founders may be down since COVID.

SPEAKER_72: We should be worried that money is going into obvious candidates. We should be worried that this can encourage a reversion to bro activity, to familiarity with Stanford Business School, to familiarity with accelerators and programs. That sense of, boy, because the thing that's happened that I've seen with B and actually all stages of investment since COVID is people have taken more risk. Okay. I just did a deal in one of my portfolio companies at almost 400 million in revenue, one of the best VCs. I know they had one day, they never met them. They didn't do anything. They're calling me and asking me to tell them about the team. There's no time.

SPEAKER_193: Or if it's seed stage, people are investing so quickly over Zoom, they're not even meeting the founder at the pitch, at Wilson Sonsini, your pitch. They're taking more risk.

SPEAKER_72: And that sounds good, but it can exclude people because the way many folks mitigate risk is by grasping for things that seem to also minimize that risk. Is that, do one of the Jasons know them? Can they tell me the real story? That sounds great. But what about all the people you and I don't know? These two white men with some success, we don't only know the people we know. Right. So that's excluding, so I worry about who gets left behind in this and I worry about the lack of serendipity and I don't know what to do about it.

SPEAKER_290: But folks like you and to me to an extent that run top of the funnel, I think we have more obligations now to manage that.

SPEAKER_74: You know, my solution to that is we started this thing, Founder University, and we make, we do six of them a year.

SPEAKER_25: Now we're doing them virtual. Instead of having 50, 60 people in person at Wilson Sonsini, now we have 300 people do it. And half of them or four of the six are for either women or underrepresented founders. Yes.

SPEAKER_50: So what we found was when you make an event explicitly for a group of people who are underrepresented, you find all those people.

SPEAKER_08: Because if not, you don't have the event. And when you eat and when people come to that event, what they tell us over and over again is when I saw you were doing Founder University for Women or Founder University for Underrepresented Founders, I knew you cared. And you take us seriously, and you're doing the work. So I wanted to come because I felt like I should come because you're doing the work. So that's my best advice for everybody out there who's wondering how to get diversity into their pipeline.

SPEAKER_50: You know, you have to plant a flag and say, we are open for business and we want to meet you. As opposed to leaving it up to the person because then you have this big gap between the incumbent and the up and comer, the underrepresented, underestimated founder.

SPEAKER_76: And you can bridge that gap by just saying, hey, here's the platform. We do this thing every other month. If you want to come to it, we share all the secrets and all the speakers and we want to meet you. That is the way to do it. You can't just leave it up to like chance. If you don't do anything, nothing will occur, you know.

SPEAKER_234: And I think it's also related to that. I think when we're talking about SaaS and funding, you know, people slice the data differently.

SPEAKER_72: But it's important to remember that the vast majority of these vast amounts of money are flowing to later stage deals. The vast majority. And even when it's earlier, they're flowing to brands. They're flowing. You know, what? Notion, $800 million at $4 million in revenue. What's happening? But everyone knows Notion, right? Yes. Brands. The brands are just collecting more capital than ever. And per our earlier conversation, brands matter. So I don't believe that that's a bad strategy. But if you're below that level, it's harder to get funded in many ways than March, than it was before March. It's harder if you're not breakout, if you're not brand. There's many reasons. And also the bar is higher. The valuations are higher, but the bar is higher, right? And it's harder if you're not quite in that inner circle and you don't have a brand. And I don't have the answers. But just don't think that fundraising is easier today because of these headline numbers, right? There's so much as late stage, right? The best investment of all in SaaS was Sequoia at Zoom at a billion. You want to know why? They didn't even have to show up to a board meeting. Emergence at least had to do some work, okay? They just dropped a bucket of money. Yeah, the IPO in 18 months never show up. At first, they plan to 4x. Then they 10x. Then they 1 billion.

SPEAKER_193: Then they 100 and somethingx for not even... That's the greatest of SaaS. It's quietly the greatest of SaaS, 10% of Zoom for just winning the deal. Literally, that's it.

SPEAKER_74: How do people win these late stage deals? Is it just a matter of who's willing to pay the most and have the least rights?

SPEAKER_76: That's what I've heard. Okay, so what is it then? How does Sequoia win that deal versus what was probably 10 other incredible competitors?

SPEAKER_72: It's obvious, but you've seen in your portfolio, first of all, what all the late stage folks are good at is they're in the hot deals very early, a year ahead of time, two years. You have to be there, right? And you have to be checking in.

SPEAKER_190: So they're there.

SPEAKER_313: Relationship maintenance with the founder and the other investors. They're circling. They're hanging by the rim.

SPEAKER_190: A lot of it.

SPEAKER_14: A lot of it. They're hanging under the rim waiting for that rebound for the easy putback.

SPEAKER_72: The partner's building the relationship and the analyst's job is to know the second they might raise. So, yes, the Sequoias and others are very successful, but they're very aggressive. They lose deals, right? And they want to be the default choice and they get to know you. And the beauty of what happens is when a founder decides they're ready to raise, if Sequoia in particular and a few others have been in the deal, they'll at least get the email. I just went through a fundraising for a company that got five term sheets in a week. Sequoia didn't fund them. They weren't one of the five, but they got the email.

SPEAKER_318: Right.

SPEAKER_72: Checking in, just do you want to invest? Thanks. They said they had a conflict, probably just didn't want to do the deal, right? Conflicts are a little bit of an illusion sometimes, but they got asked, didn't they?

SPEAKER_193: So, there's that and then I think what's hard is, you know, and then you do have to come in high. Sequoia isn't cheap.

SPEAKER_50: They're not cheap.

SPEAKER_74: I mean, I think it was that Yuri Milner had this impact on the industry where he was like, he can't overpay for a great deal. And then I think other people inherited that.

SPEAKER_80: Kleiner Perkins and who else was in that cohort? I think Founders Fund sort of, Brian Singerman over at Founders Fund told me that.

SPEAKER_76: Listen, if it's a great company, it's going to be an amazing company, you really can't overpay. And that was, I mean, with the exception of WeWork, I'm trying to think of an example of somebody overpaying. I mean, people said Masayoshi-san overpaid for Uber, but, you know, Uber at $50 or $51 today, it looks like he's in the money.

SPEAKER_192: So, I wonder if that's true.

SPEAKER_193: Yeah, I mean, some founders take it too far, but most of them later stage, they just have a number. And you just ask.

SPEAKER_72: Interesting. Wow, $400 million sounds like a lot on $9 million of revenue. But if you're tripling or quadrupling, I can make a case. Okay. So, some VCs I like, when they ask the Founders for $400, they'll come back with $281 or they'll

SPEAKER_193: lose some number. But I find the ones that want to win, you know what, they don't come back with $401 or $405, they just say fine.

SPEAKER_18: Right. That's interesting. There's other things we could talk about, secondary liquidity and games and other things.

SPEAKER_72: But I work almost exclusively with first-time founders, and I think you do too, right? And they tend to play fewer games. And they're not running that same playbook again. They may be confident about the value of their shares, but they just want to get it done.

SPEAKER_193: So, they have a number. And the good later stages, they just meet the ask. They just meet the ask or they don't.

SPEAKER_23: Yeah, and that's the way they say it. Hey, what's the ask? Okay, great. We're in. And that's it. We're done. Yeah, yeah.

SPEAKER_72: Or sometimes I can't, but I can do this for real, not for a game.

SPEAKER_38: And then you give a founder a chance to think about it.

SPEAKER_23: How do you think about secondary when the founder wants to sell $5 million, $10 million, $500K,

SPEAKER_25: a million? What do you advise them in terms of they've got a rocket ship company, on paper they're worth, you know, seven, eight, nine figures, and they don't have any cash. What's your best advice to them when they're in that Series B, Series C, in terms of taking money off the table, but not doing too much? Or is it not a concern of yours?

SPEAKER_26: And then getting distracted? Well, I'm conflicted.

SPEAKER_72: I'm conflicted. On the one hand, a lot's changed. You know, I sold my last company just before the cycle started. So, in 2011, I was offered $10 million of secondary liquidity. I turned it down, and we ended up selling to Adobe instead. But I didn't understand how secondary liquidity worked, and the price was low. Should you have taken that? Would it have been better? Oh, yes.

SPEAKER_193: For sure. Yes, for a million reasons. Not only financially, I mean, I don't even want to talk about financially, but also it would have, even if it was less than $10 million, it would have, I'd already made a few million

SPEAKER_72: from my first startup, but it would have de-stressed my life. I could have gone another five years. That's what you want as an investor from secondary. You want, I'm up for another five years, Jason. That's what you want. That's when interests align, right? So, you have to look for that.

SPEAKER_193: If it's too early, I'll tell you when it's too early, I always find it's terrible.

SPEAKER_72: Now, people will argue in 2020, secondary liquidity has dropped into $30, $40 million valuation deals, okay? It used to always be in the nine-figure deals, right? It used to always be, look, when the valuation crossed nine figures, whatever fund couldn't get enough ownership, so they'd throw in some secondary, not out of the goodness of their own heart, but so they could buy a few percent more of the company, right? But as bigger funds got more aggressive, a big fund, whatever, a Sequoia, an Index, an seller, whatever, then putting in $5 million of secondary into a Series A is irrelevant in a big fund, right? Right. Whatever it is, Lightspeed, any big fund. So, it's creeped into early Series A's, and I find that, so I like to de-stress, I find it happens too early, so it's not about going another five years. Right.

SPEAKER_193: And I find they quit, because why sell your shares cheap? The most successful founder I know still has not sold a single share.

SPEAKER_342: Yeah, Elon.

SPEAKER_72: And owns almost half his company. And it's not that he's greedy, he is greedy.

SPEAKER_234: I remember when-

SPEAKER_72: Were you talking about Elon or? I didn't invest in Elon, no, my personal portfolio. The most successful founder in my current portfolio never sold a share and had multiple opportunities, and remember, and this is a first-time founder, at a round at several hundred million in revenue when he didn't have a dollar in the bank, he said, can I borrow some money from you to buy shares in the round? Wow. This wasn't facetious. I love it. This was an honest question.

SPEAKER_346: He's like, I'm broke. Can I get a million-dollar loan to buy some shares in my own company?

SPEAKER_224: Yeah, I want to buy some shares in the company. And so, you kind of- Yum, yum.

SPEAKER_72: Like, and so, as a founder myself, I'm completely supportive of de-risking and actually just de-stressing. I don't believe in de-stressing. That's the difference, right? Forget de-risk.

SPEAKER_193: If you see a lot of risk in your startup, just sell it. Just fucking sell it today if you see the risk, right? But if you need to pay your mortgage- There's nothing more stressful than being a founder CEO. There's nothing harder than being a founder CEO. Anyone that says otherwise is full of it. It's the hardest job on planet Earth. It's the hardest job. So, if you not having to- If you having a house and having your husband not have stress and getting support for your kids, right? Getting support at home. If I can pay up for that, that's a gift as an investor, right? Because the last point on it is, that's the general view. And then the other thing today is, boy, this is what changed in the last, since you and I met, is unicorns became decagorns, not in consumer, but in B2B. Right.

SPEAKER_72: Like, there were no- Zoom planned IPO, what, two years ago at a $4 billion market cap. That's what the banks told them-

SPEAKER_236: And Twilio was like a billion or two. Yeah. A couple billion.

SPEAKER_193: A couple billion. Spotify was a couple billion. So, when Marc Andreessen wrote about power laws when I started investing, I wanted to throw

SPEAKER_72: up. I thought it was so- made founders sound like products, right? Which I hate, right? We're not human beings. But he's right, right? And when I started investing in Andreessen, we looked across our portfolio and the top one

SPEAKER_193: or two investments make up the vast majority of our returns. And the reason is, they can become huge. That was what they learned from Skype, right? And so, we want our founders to build decagorns. You've done it yourself in your investment. We don't want them to sell at a billion, right? This week, we're talking about it, who sold at a billion, too. Gainsight sold at a billion. And who else sold at a billion?

SPEAKER_234: I forget. These are great outcomes, but we want them to go for Ted.

SPEAKER_355: Yeah.

SPEAKER_25: I mean, as one VC told me very wisely, who's been in a long time, he said, we just need people to have long-term greed, not short-term greed.

SPEAKER_357: Like, if the long-term, you really, if you sell too early, like, look at Slack.

SPEAKER_25: They probably had countless opportunities to exit at a billion or 500 million or 5 billion. And look, a $27 billion outcome for that company is an extraordinary moment in time, right? I mean, that is a win of-

SPEAKER_33: Especially when you sold your last company for $30 million.

SPEAKER_190: Yeah, Flickr was $30 million. What's $30 million to $30 billion? Let's do some rough numbers. How much more is $30 billion than $30 million?

SPEAKER_359: $10,000, $100,000, $1,000, $1,000 times.

SPEAKER_190: I mean- Wow, we got there.

SPEAKER_72: It took us 10 seconds, but we got there. I've been doing this long. I'm embarrassed to say I've been doing this long enough that I, you know, I remember when Flickr sold, which was Stewart's company before, and $30 million on a company that had

SPEAKER_361: no revenue in the early days of Web 2.0-

SPEAKER_72: People thought Yahoo was dumb. Yeah, like, oh my God, you spent that for a photo site? And they're like, this is about collaborate. You're not getting it.

SPEAKER_193: And like, $30 million for Flickr. And now Slack is worth $30 billion, folks. Like, be inspired by that. Be inspired. If you can't build something great, sell, right? Or quit or exit. But if you have something, this is what I learned for SaaS.

SPEAKER_72: Maybe the last point I'll make. We didn't get this, that recurring revenue occurs. It never stops. It never stops. So if you have something, if you're tired, take some secondary liquidity. Hire a CEO.

SPEAKER_193: Find that VP that you've been dragging your feet. Get some help because the other thing we've learned when you look at all the ones that are a billion in revenue, the majority of their revenue comes from their existing base. They just keep buying from you if they love you. So you can build a deck. As crazy as it sounds like, when you and I were coming up, I didn't believe I could build a unicorn. I wouldn't have sold if I really thought I could build a unicorn, right? Because there weren't enough examples, right? But now you can build it. If you have something, if you can get to $10 million in revenue, you can get to $1,000 million in revenue. Right. You can. Of course.

SPEAKER_365: Of course you can. It's happening all the time. The first $10 million is the hardest.

SPEAKER_72: Yeah. So go for it. I mean, that means you've got product fit. Go long. And just get help. Get help. Because all we know, it's trite to say that all that matters is people because it's true. But after $10 million, all that matters are your VPs. Nothing matters but your executives. Is your executives. And you know, when I first started meeting CEOs, when I came up of late- Wait a second.

SPEAKER_372: Nothing matters but the executives. Why? Why is that-

SPEAKER_193: Because $10 million, you already have 1,000, 100, 10,000 happy customers. Now you have to figure out how to get it to the next level.

SPEAKER_72: And it's not just your brilliant mind. It's 100 times more complicated. Yeah. Who's going to figure out the 10,000 workflows and the higher 500 sales reps and the demand engine strategy. It's not you, the brilliant product. Like your product mind doesn't even matter much after $10 million. You're a critiquer. You're not a visionary anymore. Right? I don't think Brian Armstrong knows how Coinbase works. I'm not sure Stuart Butterfield knows what Slack should do today. He doesn't know. It's too complicated with this multi-org sharing and video.

SPEAKER_375: I mean, he has creative strategy, but he doesn't know at a detail level which icon we should use or how to do it. It's too complicated.

SPEAKER_25: It does get super complicated, super fast. I don't know if you've read the new Reed Hastings books, the No Rules Rules, but he basically goes over there like, you know, hire the all-stars and just overpay for talent. And clearly when you get to this billion-dollar valuation, you have the resources. You got to just go for top tier, top talent in those positions because it becomes unruly. These companies are so huge and the departments are so giant and you're just going to rise and fall with the execution of those VPs.

SPEAKER_378: And it's more, it is true.

SPEAKER_72: And I think the mistake, I think we get that, but I think the mistake founders make is they don't invest the time. I remember, I remember a CEO of a now $40 billion company wanted to acquire us or recruit me or something. And he would like drive down multiple times a week to meet with me in Palo Alto. I'm like, dude, you got better. You're running a bit. You got more things to do than meet with me again. But he knew that if he could get us or me, it would move the needle. It was worth his time, right? He could skip that planning session or something else. It's the people, right? And the best CEOs and founders are, you know, it's trite for years, but they're relentless. They're not just relentless about recruiting. They're relentless about sourcing and finding the best people. And they never quit. They spend years. They spend years recruiting these people again and again and again. They spend all their time.

SPEAKER_193: And, you know, you've got to, you know, maybe my best advice after even a couple million revenue is if you're still doing the VP function, stop.

SPEAKER_119: You and I both, even in our current lives, we do a lot ourselves.

SPEAKER_72: You and I both do too much ourselves. We don't, you and I don't have enough VPs, right? Stop it. Stop it. Go hire the person. No, I know. I keep trying. Recruiting is the hardest thing in the world. It actually is the hardest thing in the world, but it's what the best ones are great at, right? And they spend half their time recruiting.

SPEAKER_18: They spend half their time recruiting, half their time with customers, and half their time with prospects. That's what they spend their 150% of their time, recruiting customers and prospects.

SPEAKER_76: It is what it's all about. All right. With that, Jason Lemkin, thanks for coming on the pod. Stay safe. And I will see you on the other side at the San Mateo Fairgrounds, which is around the corner. I'll be able to come and do a couple of interviews. And my God, that's such an... We were going to do launch festival there one year. And I was just wondering if people would leave the city. And now, people don't want to be in the city, is my perception, right? They don't... The city is just gnarly. And the homeless problem, and the violence, and the crime, and the cost.

SPEAKER_25: I think your timing is going to be spectacular to do it at the San Mateo Fairgrounds.

SPEAKER_04: It's such a huge space. You can really take it over and do a lot of fun stuff with it. So, congratulations on that. Yeah. All right. Good luck, brother.

SPEAKER_391: Thanks for having me back.

SPEAKER_04: All right. Cheers now. We'll talk to you soon. Bye.