Invest Like the Best with Patrick O'Shaughnessy - Rebecca Lynn - Finding Your Customers - [Invest Like the Best, EP.309]

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Starting point is 00:01:03 and spend management software all in one place. Ready to accelerate your business, learn more at brex.com slash best. That's bR-e-X.com slash best. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of

Starting point is 00:01:47 O'Shaunacy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of positive sum or O'Shaunacy asset management. This podcast is for informational purposes only. and should not be relied upon as a basis for investment decisions. Clients of positive sum or Oshonnessy asset management may maintain positions in the securities discussed in this podcast. My guest this week is Rebecca Lynn. Rebecca co-founded early stage investor Canvas Ventures in 2013 and is regularly featured as one of the best VCs in the market. She has deep positioning and go-to-market experience, which she honed during her time at Procter & Gamble, and that's the focus of our discussion.

Starting point is 00:02:29 We cover the details of great marketing, why you should say no to customers, and how she has been. campus. Please enjoy my discussion with Rebecca Lynn. So I always try to begin these conversations with something kind of fun. In this case, I thought it would be interesting to ask you, if you were to go back to your alma mater, which was Missouri, undergrad, we were just talking about a place that I've spent a lot of time in Columbia, Missouri, and you had, you were forced to teach, I'll call it, like, a 401 level course, a single course to a group of students who have opted into it that's not a beginner's course, that's an advanced course of some type. What do you think you do a great job? teaching. So I probably wouldn't do nuclear engineering, which is some of what I did when I was

Starting point is 00:03:09 there. I probably would go back and teach startup 101 and force everyone into really thinking out of the box and starting a company. And what I learned recently through my daughter, who's only 16, is that it almost doesn't matter in a way what your idea is because you're going to learn so much just by going through that process. My daughter, Hazel, she came home and she said, hey, my friend and I want to start a dog running business. And I was like, okay. And I almost said, no, like, that's not super interesting. But then I listened. I learned to listen three more beats typically. And she said, hey, our advantage is that we're going to run the dogs and actually exercise them. And she's a cross-country runner. And I said, okay. And she said, hey, can you spend some time with me and my friend while we do this? And so they

Starting point is 00:04:00 actually formally book time on my calendar and they came in, and they had their whole plan. And it was so fascinating because what I take for granted, I realize is not sometimes intuitive. We talked all about supply and demand and how to run a meeting, how to run an effective meeting, how to make decisions, how to have accountability, how to try different channels and what you try first, second and third on how to go to market and acquire supply and demand and then how to have a customer promise that resonates and deliver that promise and then how to have an umbrella concept like, hey, we're going to exercise your sort of obese dog, which is what she's getting the request for. And in reality, the dog probably is just going to walk, but they're offering

Starting point is 00:04:45 the running part of it, right, is their higher level benefit. And I was just fascinated because I thought, wow, I think a lot of us in our careers take for granted what our knowledge base is. And I just realized how incredibly important it is for anyone to learn these concepts and how they do translate from a dog running business to autonomous cars. And I think it's just really fascinating because I'd almost challenge people just to pick any idea and let's just go through it because the building blocks and the things you ask and the foundational elements are all the same. What is the umbrella concept? I've never heard that term. What do you mean by that? So Procter & Gamble 1-0. I was a chemical engineer, believe it or not, in my

Starting point is 00:05:27 old life. That just tends to be who Procter & Gamble likes to hire. And so I worked at P&G and learned a lot about marketing and branding and product market fit and all that when I was there. But you typically lead with this umbrella concept, like your highest tier product. That's always what people advertise. So in every category, you'll offer your highest tier, your biggest benefit. And that umbrella kind of captures everything underneath it. Their example, we're going to run your dog and make that dog incredibly fit. And it's aspirational. It's aspirational offering. You can give to somebody. But then typically you have other products underneath that, but they all kind of ride under that umbrella and that bigger, higher level promise. What else from the P&G experience or a set of lessons from that

Starting point is 00:06:13 time of your career, do you think applies most to the kinds of companies you spend your time with now that may not be typical Silicon Valley startup lore? Marketing, marketing and marketing. So it's really interesting. At Procter & Gamble, most of the marketers and product people I worked with were chemical engineers. And to figure out what product we were going to offer our consumers, we actually developed pretty good models to model out which variable had the biggest factor effect, what we were going to do to the product to move more cases out the door, essentially. And it really varied by geography. So in Mexico versus Japan, versus Germany versus Canada.

Starting point is 00:06:57 And even in different parts of the United States, you had very different consumer preferences, even for things like laundry detergent and toilet paper, believe it or not. And I could talk to you all day about the differences in like Sherman in the U.S., Canada, Mexico, and Germany. It's fascinating what those different consumer preferences might be. And what Crocter & Gamble teaches you is humility that what you think really doesn't fucking matter about the impact.

Starting point is 00:07:24 And it's hilarious because the biggest fallacy in Silicon Valley is that some CEO just knows. Steve Jobs just knew how to do something. Well, Steve Jobs was brilliant and amazing and had an incredible instinct, but he did do a lot of consumer testing. And so at P&G, what they teach you is how to listen to the consumer. They teach the humility of you probably can't predict it. we would all have bets when we tried new versions of products and pretty much whatever the engineer or the really smart brand person would bet on usually would come in dead last. So you learn this humility about how to listen and ask the consumer. The other thing you learn is that not everything

Starting point is 00:08:09 could be accomplished in quantitative testing. Like we did tons of quant analysis and then modeled, actually physically modeled those results. I've actually not seen very many people in Silicon Valley do that. And at P&G2, on the quant side of the world, you damn well better know what your confidence interval and your base size is if you're talking to anybody about X versus Y winning. That's the kind of language I actually have to instill into my marketing teams because they don't naturally do that in Silicon Valley. But when you pull somebody out of Procter & Gamble or American Express or Capital One, that's how they do it. They know how to set up very defined designs of experiments where you can do multivariate testing, and they know their way around statistics.

Starting point is 00:08:54 So oftentimes when I'm recruiting on that quant side, I actually will really look for someone with an economics background because you'd be surprised how many engineers really can't do stats. Anyway, so back into the qualitative piece of it, one thing that people miss out here too is that if you're designing a totally new concept and something people haven't seen before, and let's just take my old PNG days, the disposable diaper or the breeze, which was a really hard thing. It took them years to nail the marketing message on for Brise. Absolutely years. And when you're trying to come up with something that doesn't exist, people can't react to it unless you let them see, touch, and feel it, right? You have to have like

Starting point is 00:09:37 a concept and use test. And you can't ask people, what would you think of X if it doesn't exist? For example, what would you think of a coffee cup with two handles? Well, they've never seen a copy cup it's you handle. So they can't really tell you in a quantitative test what that might be like for them. You can ask them how you want to incrementally improve something, like make it softer, make it stronger, make it work faster, something like that. But you can't ask consumers to conceptualize brand new things without letting them experience them and get any kind of real read. And then the design of the survey is so incredibly important. Do you, Doing things like saying, do you like this versus do you like this comment or not will actually

Starting point is 00:10:27 result in about a 10% difference in negative responses. The people out here often do surveys, but they don't have the training oftentimes to do that. People in the political realm often do with polling or people who come from CPG, but I'll sit in a board meeting or sit with the marketing team and people will tell me, oh, this didn't work or this did work. And then at the end, I'm like, I want to see every piece of copy. I want to see every test. And, you know, how many did you test? Where was it placed? What time of day? And what's really amazing to me, and it's almost always true, is that a lot of the conclusions they have drawn, and especially for what didn't work,

Starting point is 00:11:11 were not based on solid testing methodology. So maybe they tested on too low of a base size. Maybe they had really different places they tested. Then maybe the copy, you look at the copy, and you're like, oh, wow, I see why that didn't work. And so it's really interesting. And I wish that we had more of that core marketing CPG kind of ethos here. it's interesting too when you look at Intuit, the founder of Intuit was from Procter & Gamble,

Starting point is 00:11:41 Meg Whitmane as well, at eBay was from P&G, and you see their touch on things. Everything out here is done a little differently. It's more of a focus on like growth and features. It's just like feature, feature, feature, feature in terms of when people are trying to sell their product and message it. And what I really try to push people into is the higher level need. What is the benefit? What kind of questions have you found effective to tease that out of someone building a product? Like, how do you suss that out with someone talented that's smart and onto something but may not have that messaging down yet? Usually, my first question is how many consumers have they spoken to and which consumers and what did they learn?

Starting point is 00:12:29 What surprised them when they talk to the end consumer and what did they learn about it? oftentimes they have spoken to the consumer, but sometimes it's been a little while. And sometimes when they did speak to an end consumer, they only spoke to the person that loves their product or that hates their products sometimes. Sometimes they just end up on the support calls. And it's really important to get a spectrum of people who love you, who just kind of like you, who are pissed off at you, who haven't tried you, and sort of get that whole gamut and really understand the consumer. And I have to tell you, it is probably shocking, but shouldn't be shocking, that oftentimes they have an assumption of who their consumer is, and it's not right. For example,

Starting point is 00:13:13 I was in a fintech startup. The CEO told me, we have a millennial audience dudes, essentially, and we are helping them, you know, with their finances. I won't name names or anything like that. And I was kind of looking at their product thinking, I don't think so. right? And I said, I bet you that your product is probably middle-aged women. And it's not because I'm so smart. It's because that's who kind of handles the finances for people and the households. And, you know, when I was looking at what was happening in the app, sure enough, was what women do for household finances. And so they were like, you're crazy. And I said, okay, I could be crazy. I'm often crazy. But let's just find out. And sure enough, we did the survey and guess what?

Starting point is 00:13:58 The average age was late 40s, early 50s, female had a financial household. And it was interesting because our marketing was so sort of grow focused, right? And feature focused. And we were able to, through that exercise, really shifted over to addressing our target audience. And so what felt like kind of pushing a rock uphill suddenly felt much easier when we had the right messaging for who we were serving. And there's always a question, too, of, you know, who's our customer today? Who do we want to be our customer? And who's our customer tomorrow?

Starting point is 00:14:36 And then also the P&G experience of this customer life cycle management. The hardest company to be in is the company where you have to reacquire the consumer every single time. What you really have to think about is what is that customer value lifecycle? How do I capture somebody when they're a baby and go all the, the way up so they're married, head of household, retired, the whole bit. And what is that life cycle? Like, how are we meaningful and how do we keep that consumer the whole time? And not just serve that particular consumer for a point in time or a point in their life because the true cost is

Starting point is 00:15:15 the acquiring as a customer. So that brings us right into account management and sort of customer life cycle management, which is also incredibly important to focus on in an early stage and a later stage company. Once, importantly, you have enough customers to actually manage. You've referred a number of times since this kind of overlapping theme of respect for the customer's point of view and identifying who they are and asking questions a certain way of them. And the survey seems like an interesting device in the midst of all this. What are the top three, I guess I'll call them like sins of the survey? A couple of things that people tend to do totally wrong when they're running one of these things, whether it's in tactics or strategy.

Starting point is 00:15:55 One thing is there are certain kinds of products that surveys will get you nowhere and possibly the wrong answer. I learned this kind of the hard way. When I came out of Procter & Gamble, I had this crazy job at P&G. I reported to the global head of the entire category, right, and helped launch new products. And then I got that at an incredibly early age of Procter & Gamble. So I had tons of great exposure, right? So I came out to Silicon Valley. I wanted to work at a startup.

Starting point is 00:16:26 So I took this role heading up product at a company called NextCard. And we were the first online credit card company. And this was back in the Stone Ages where you bounce servers at midnight. You literally did sleep all night at the office because, you know, if the code didn't roll at midnight, you had to roll back before the East Coast woke up. And I say that because I came in and thought I had a great bag of tricks and said, hey, we're going to do surveys on credit card products. and my CEO, who I was a very experienced financial person from a bank called Providian, said, over my dead body, we're going to do that. And I said, well, I don't understand.

Starting point is 00:17:03 This is how we do things. He said, not in financial service. Because there is a judgment. And I thought about it. And I'm like, you're right. Because we had to be really careful about this, especially with some products at PMD. And so whenever there's a judgment about how somebody should. think, feel, or act, you stay away from surveys. So in other words, if you ask somebody,

Starting point is 00:17:28 do they pay their bills on time? It's a judgment. People feel they should answer that question a certain way. So oftentimes, quantitative surveys can really lead you astray. If you ask them something more hardcore, like, hey, what's your credit score? They can kind of give you a ballpark range because that doesn't really imply as much of a judgment. But do you do something where you've been told you should do it all the time. Do you balance your checkbook? What people will say they do and what the reality is are two different things. That's the number one sin of quant surveys is that they ask questions where consumers infer there's a judgment. And then people don't understand the bias that's interpreted in that. So it's always like what people do versus what they say.

Starting point is 00:18:13 So that's where we say, okay, we'll just test it, right? Just throw out some splash pages. Let's just run it and test it and just get a real read on it. a better way to do those things, but it's really hard. How much of a product do you actually make to let them see, touch, and feel to test versus just ask? P&G had some really great concept and use tests. So we would send mocked up product out into the hands of consumers where they could actually get their hands on it and use it, and then we'd ask them questions. And so try to instill that at my companies and say, well, you know, let's put some splash pages out there. Let's just run with the minimum viable product and just get some feedback.

Starting point is 00:18:51 Because a lot of times people will say, oh, do you like this? Would you use this? They're like, oh, of course I would use that. Yes, that makes so much sense because they should. It's just same thing in health care. Do you track your diet? Do you exercise? How many drinks do you have?

Starting point is 00:19:05 Right? Let's just take that one. How many drinks do you have? Classic judgment one, right? Classic judgment one. Has anyone ever answered that question, honestly? I don't know. I mean, how many drinks do you have?

Starting point is 00:19:15 Unless the answer zero. How many girlfriends have you had in your past life? Who answered that, right? And so that's the number one thing. It's just this judgment call of asking those kind of questions and then not applying the filter logic around it to see if it's reality. Is there something on the other end of that spectrum? So if judgment-related type questions are sort of always unreliable in terms of the information

Starting point is 00:19:39 they produce, are there areas or a category or something of type of question or information that someone might be after where surveys are kind of like, always helpful and effective? 100%. I think surveys always can be helpful and effective, especially if it's your customer and especially if they've been using your product. If there's a customer using your product,

Starting point is 00:19:58 100% we can go through an Ask them a Survey. And also, a thousand percent is to figure out who the hell your customer is, right? Yeah. And I'm always mystified by people who assume, and I say, well, who's your customer? And they tell me, and I said, well, have you looked at the data to tell who your customer is?

Starting point is 00:20:14 and what kind of geographic spread that has or male, female, age, or whatever. And it's really interesting how long sometimes it takes. And for me, that's just so fascinating to really understand, like, who's adopting early, what that life cycle is, what country it is. I mean, there have been a few companies that have diligence in the past. We're like, here's how many customers we have and we crack that open. And they're not interesting customers, right? Because they're in a bracket either maybe not in the U.S.

Starting point is 00:20:42 Or maybe they're too young or, you know, something. they're just not high-value customers. And on the other end of that, we've seen companies that maybe look like they don't have a ton of customers, but they're incredibly high-value customers. And who is your customer? Super easy to get on surveys. And what's the next new Wiz Bank feature we need to do for you?

Starting point is 00:21:04 Not so great on a survey. If you go to your website, I'm always interested by what the navigation bar items are on anyone's given website. You have a very unique item, which is the go-to-market council has its own link, right, in the nav bar, along with portfolio and team and like the typical stuff. So obviously it's important to you. Say a bit about what that is, how it came to be.

Starting point is 00:21:26 And then I think we've probably already started talking about what sorts of things it does or how it helps companies, but I'd love to be exhaustive around that since it does have its own nav bar slot. I didn't even realize it had its own nav bar slot. That's pretty awesome. The Go-to-market Council came about, and it really has always been about, but we just formalized it, I would say. And the reason we did is that we were all talking over many conversations about when companies won, when companies like Lending Club or Doximity or, you know, Luminar or the whole host of these companies, like when they won, what mattered? what did we do that was different and how can we do that more and better?

Starting point is 00:22:12 And I thought about it and I'm like, well, it's marketing, marketing and marketing. And it's funny because marketing kind of has this weird name sometimes with engineers. A lot of people don't even understand what marketing is in a way. Or maybe we just have a different definition. So so often when I'm talking to engineering people, they think it's just like PR or something like that and only that. But for me, marketing is how many cases out the door? How many units of your product are you selling? Right. And so when it's been really successful, it's when we have gone in and we've seen sort of the essence of this product market fit. There's a product. The dogs are kind of eating

Starting point is 00:22:50 the dog food, but it's limited. Maybe they're just doing, you know, Facebook ads or maybe they're on Insta or maybe they're on Google or maybe they're even targeting their own consumer right now, but we've seen some glimmer. And then we go in and spend a good amount of time with the CEO and the team and often, you know, a day a week for a while and figure out really where the opportunity might lie. And then we help them hire that team and get those resources and stand them up. An example of this is Gabby, the insured tech company that was sold to Experian. And we went in and they were offering an insurance product where people could find the best car insurance. And the reason I loved it is that it followed the adage that I learned to PNG.

Starting point is 00:23:37 My favorite adage is don't make me think. So in the consumer realm, if you're selling to a consumer, if you make them think or you make them make a decision, even shot yourself in the foot. Like just make it brain dead simple, just like Apple. Like Apple is the most amazing company. And I would argue that's a huge piece of their success is they don't make you think. Everything is as it should be. The reason everything is as it should be is they ask thousands of people what it should be, right?

Starting point is 00:24:04 And they figured it out. So with Gabby, you could just enter basic information and they had a very amazing AI team on the background to figure out what car insurance you should have with minimal, minimal data entry. And they could compare apples to apples. And then every year, they could just update it for you, right? And you didn't have to think about it. This company, when we came in, they were doing good marketing, but it was very basic at that point in time. It was more buying AdWords or things like that. And when we got in there, I said, you know what?

Starting point is 00:24:35 You have a complete mass market product. The product was ready to go in terms of its ease of use. Oftentimes you come into a company and you want to start marketing it and you find out, well, I have to work on the product and especially the funnel. And for a little bit of Gabby, we did improve the funnel. Then what we did is we had an executive and residence with us that had done a lot of direct-to-consumer. he helped build out sort of dollar-shape glove. And I brought him in and I said, let's think about this, right?

Starting point is 00:25:03 We ended up taking Gabby on television as pre-series B, believe it or not. And it worked. It completely worked. But it worked because we had the right product. We had the right advisor that helped us and that we brought in. And then after they raised their series B, this person took over and became the chief marketing officer. And then thereafter they sold to experience.

Starting point is 00:25:25 That's just one example of helping. that company, you know, really refine their funnel, find a brand new channel, and find the right person. It's always about the person, I think, in the end of the day to help them execute this. And also the resources. We used an agency that I had worked with quite a bit in the past. And so we looked at that and we had several other examples of similar things that we have done. That's the kind of work we do with the Go-to Market Council. So we looked at our companies, what kind of help do they need? And we interviewed, oh, my gosh, a couple hundred people.

Starting point is 00:25:58 actually, that were known to be experts in their field in different areas of go-to-market. And it could be positioning and content. It could be enterprise sales. It could be growth hacking, product-led growth. It could be direct marketing. You know, whatever, we kind of made a list of what the companies we had in our portfolio needed and mapped to those skill sets. And importantly, we found people that not only weren't too senior, but also

Starting point is 00:26:28 had seen just crazy growth in their past. An example is Graham Schlafont is one example who had been at one medical. Another one, one of my favorites, Alan Nigg, who was, I think the first marketing person at Livongo. He's now at Frino. And he's helped a number of our companies with their positioning and their go-to-market, like in the health tech space. It's interesting because when you look at it from like a company perspective, like a series A or B company, these are people they couldn't afford to hire. And quite frankly, if they hired them, they wouldn't know what to do quite yet. They would want to hire people or hire a team. But having them involved in their company for a few hours a week or whatever is amazing. It's just like a strategic advisor who was

Starting point is 00:27:14 like on the ground at that point in time. And then we've had a few cases where that person has then joined the company. So Nick Fairbarn, who was this role and then joined Gabby and Graham Schellfant, joint Aravats. We have that model. And for me, that's really what matters. So when we have a Series A company and they kind of had the semblance of product market fit, what they needed to do between there and the series sort of C is find their channels and grow and have that marketing team.

Starting point is 00:27:43 And so what's the most fun is getting them from zero to $10 million in revenue and then $10 to $100 million in revenue. And that's almost never done in a single or even a couple different channels. What I did at Next Card and what I've done in my life is, you know, you have a channel mix. And you need multiple levers to pull. And so when you're running marketing, you have to have different things you can tap at different times. If one channel is having challenges for some reason, you need another channel to go into. And so you need to have that flexibility to do that.

Starting point is 00:28:16 And that's what we try to help our companies achieve pretty early on. If you analyzed, I don't know, God knows how many sales funnels or customer funnels, in what ways are they most commonly broken? The most common break is that handoff from sales to customer implementation, like success, always broken. There's other places that are usually broken too. But typically, that's almost always broken initially, where the salesperson goes and sells a deal and then success has to pick it up. And then for some reason, there's a miscommunication. in that process or there's not complete understanding. And it takes too long to set the customer up.

Starting point is 00:28:58 The customer is not the right customer for some reason. They didn't really have a good understanding of what their ideal customer look like. So it takes some work. I mean, I went into my company at Figure 8, which was an AI machine learning and helped with this a lot and actually took over as a CEO for a bit and learned this firsthand again on the ground, is that that's usually broken. in some way. Why? What makes it always broken? Just incentives? Yeah. So just what I was going to say, people do what they're incentivized to do. And so you really have to be clear about your incentive

Starting point is 00:29:33 program. So the salespeople have to do so many deals, so much revenue. They sign those contracts and they're done. And then the success people, oftentimes they're maybe not incentive-based comp or or maybe more of like an anti-churn kind of thing. And in reality, ownership can't stop from the sales group. And so I think they're stood up. That customer has stood up because that feedback loop is super necessary. And so a lot of times it's really a simple thing. It's just not incentivizing a sales team or maybe extra incentivizing that in a meaningful way

Starting point is 00:30:10 once that customer has gone live. And then also, you know, on the other end, bringing that customer success person forward into the sales process to do a sanity check on is this a customer that's going to be good for us or not. And it's normal. People kind of beat themselves up over this, but they shouldn't because everyone gets it wrong initially because you're starting a new company. You have a new product. You might not know who your ideal customer is at first.

Starting point is 00:30:38 And the really, really, really hard, but critical thing for everyone to do is, say, know to some people. That's really the second question I ask is how many customers have you said no to? Great question. And I'm super impressed if they're like this one, this one, this one, and this is why. And oftentimes it's because they weren't ready yet. The customer wasn't ready yet. They weren't their ideal customer. And it's really hard. It's hard to talk to an early stage CEO who has a massive company like Walmart or Apple or TikTok that wants to come work with them. And it's a real stage CEO who has a massive a company like, you know, Walmart or Apple or TikTok. It wants to come work with them and tell them that that's a really bad idea right now.

Starting point is 00:31:17 And it's just the timelines don't meet and a lot of things don't meet. And it's like that's super flattering, but that's kind of for a day later when we're a little bit further along. If you go up to the very highest point of leverage, maybe you could argue that like a positioning exercise or a category name or something that communicates a value proposition as simply as possible is extraordinarily high leverage. What does great positioning accomplish in your mind? What is positioning?

Starting point is 00:31:43 Why is it important? How do you define great in that skill? More than anything else, great positioning makes the company focus. It makes the executives decide what they are not. And it's critical. When I look at companies across the board, there are very few companies, even if they're a platform play, even if they could serve everybody, there are very few companies that can go out with a super horizontal, we do it all, right? Because it's not meaningful. So what that

Starting point is 00:32:12 positioning exercise often does is it tells you what you're not and who you serve. And oftentimes, it can shift over time. That's one of the things we try to really tell our CEOs is you have to have a vision of not only who you are today, but who you're going to be later, because that helps them understand that you can be that everything to everyone in five or six years. But today, the people you're serving maybe in a vertical. And to get the customer to come in, you really have to verticalize that marketing message. Because if you say, hey, we can solve all your data science needs that's meaningless. But if you say something like companies who look just like you, same size, same problems, same vertical, we help them and we can help you too, that's really

Starting point is 00:32:58 meaningful. And trying to get that positioning where, yes, you have like your umbrella positioning, which is, okay, we're this, you know, Wisbang AI data science platform, or we're this great FinTech company, or we're going to get all your healthcare data in one spot. That's kind of your umbrella in a way. And then what you have to do is you have to then take that and verticalize it when you hit the market and tell your customer exactly how you're going to help solve their problem. And the reason to believe is we have served people just like you and just your space, who had just your problem, and here's what we did for them.

Starting point is 00:33:35 If you think about all these ideas from marketing down to sales, the funnel management, all this kind of stuff, how do you think it's most impacted how you've built Canvas as an investment business? I feel incredibly fortunate to be just in the kind of role I'm in because I never thought I would find a job that serves my sort of massive ADD so well. And so it's been really interesting. We get to see so many different things in the go-to-market. and we built canvas around that.

Starting point is 00:34:03 We were doing it intuitively. We were helping people solve their go-to-market issues with this network that we had, but we hadn't formalized it. So we decided then to formalize the network and really focus on it and double down on it. It's what we were kind of doing anyway. And as we build Canvas,

Starting point is 00:34:22 that will continue to be a big focus because we love to do series A and B. We have stayed focused on that. We tell all of our companies to focus. And so we have tried to sort of drink our own Kool-Aid. We try to continue to do what we're really good at and serve our companies in that way and continue to build out this go-to-market platform that serves our companies and not get distracted, not try to say, oh, we do all stages and we do everything and we do all verticals.

Starting point is 00:34:49 We know what we're good at and we're really good at fintech and healthcare and marketplaces. And we're really good at helping companies figure out their marketing. motion and their sales motion and scale. And that's where we continue to focus. Seems like digital health. And even specifically, I'll call it the quantified self part of digital health is like center of bull's eye for you, just based on a lot of the things you've talked about data and the consumer and technology and all these ideas. What have you learned about that world of, I guess digital health is the umbrella concept I'm interested in, but something tells me like the quantified self underneath that could be even more.

Starting point is 00:35:29 more interesting. Talk us through what you see there. I find it personally interesting. I'm not sure if it's investably interesting. So I've been tracking quantified self since 2008-09, right? I mean, I myself have dealt with some health concerns. I think I have a lot of people that have, and really sort of delved into the quantified self piece of it because you have to. I think my favorite quote is Warren Buffett. The only service provider in it with you is the airline pilot, not your doctor, not your accountant. So good. I love that one.

Starting point is 00:36:02 So, you know, if you're sick, it's you. And you better figure it out because, you know, your doctor's not at night trying to sort you out. They're trying to have dinner with their kids or family or whatever. That is just the reality. So, you know, I was really drawn to quantified self with all the data out there. It is really, really fascinating. And, you know, the continuous glucose monitors we really like and all those things.

Starting point is 00:36:24 I think with quantified self, though, you really are sort of serving this end consumer. You're serving the same pocket of people that balance their bank account every month, which is not a lot. You're sort of serving what they call almost like the worried well often. I love it personally. I have probably read every book on like diet and nutrition and toxicity. I love the microbiome. I think that's really what's going to be the big unlock for neuroscience going forward. And, you know, sleep issues. I've been all over sleep issues. my kids have sleep issues. I think the main issue that we look at in terms of cost in this country, though, as health care costs are continuing to rise, is obesity. And, you know, it's really that.

Starting point is 00:37:07 You know, if you're 50 plus pounds overweight, you then have issues. You have hypertension. You have diabetes. You have sleep apnea. Sleep apnea, you know, the number one cure for sleep apnea is lose 10 pounds. You know, that's the big one. And then a lot of the other stuff is at the margin. I'm a personal, huge advocate of quantified self and could talk for hours about all this. I would love to learn more. And a lot of times, it's really like, don't eat the big Mac. It's not that you need this big, huge algorithm behind you or data science or AI box. You know, it's not that complicated. Now, there are things that are. Those are at the margin. I mean, I'm from the Midwest. I see it. If I could change anything, I would have us have nutrition

Starting point is 00:37:53 in schools. I would make sure the kids are fed that they know how to feed themselves, for goodness sake. And when you look at Japan, I mean, they actually do have the kids make the food. I mean, what better thing could we be actually having the children do? So when you go back and you look and you see, you know, even what is available in the grocery stores in the Midwest, if you go to a small town, the fruit and vegetable selection is pretty minimal. And then, you know, there's tons and tons and tons of carbs and anyone in quantified self will tell you exactly what happens when you eat a little. of carbs and your blood sugar spikes, it crashes and you crave a lot more carbs. I have a personal passion about this.

Starting point is 00:38:28 It's probably my second life, but I would love to help solve that. But it really starts at the elementary school and preschool level, helping kids understand what they should be eating because we're told these things. We're told, oh, avoid fat. It's really bad for you. But it's really not bad for your brain 60% fat. You need fat. All your nerves are coated in fat.

Starting point is 00:38:50 Now, what you don't need is like vegetable oil. That's really a bad idea. But guess what? Animal fats and avocado oils and all of those, you actually need those badly. And so if you have sort of some kind of autoimmune issue, you better be putting that in your diet. And I'm not a doctor and I don't give medical advice. But we've kind of been given this inaccurate picture of what we should be eating for a really

Starting point is 00:39:14 long time. Just to separate and make sure the distinction between interest and investing potential is an interesting one, right? One doesn't mean the other. So to zone in on the investment potential, what are like the must-habs for you when making an investment? Like, what are the base level attributes that you think most indicate investment potential of the type you want at the stage that you're investing? First and foremost, it's the CEO. The CEO has to be somebody that I love working with and vice versa, you know, for the next five to ten years.

Starting point is 00:39:47 There's a chemistry that's really important. And I always want to know there. story. And oftentimes it seems kind of random. But we ask all kinds of questions and I really want to know what is driving them. And then what kind of adversity did they have in their life? Because being a CEO of a startup is not an easy job. And I want to know that there's something fundamentally driving them to succeed and to do this company because it's going to be tough from time to time. They're going to have to make some really hard decisions. There has to be something where they can give me a mean, an example of how at some point in their life, their life kind of went to hell and they picked

Starting point is 00:40:27 themselves up, dusted themselves off, and kept going, and had sort of a good attitude about it. And I really look for that. The other thing, of course, is it has to be a big enough market. And so you talked about quantified self, it has to be something that the average person can adopt readily and understand. And it can't be something that makes people make like 15 different decisions along the way. Can't make them think. Yeah, I don't make a big. It has to be a big enough market and the product has to be designed in such a way that people can pick it up and use it. And the ethos of the CEO has to be that they understand that about the consumer and they're trying to make things much easier for them. And case text is a prime example. Case text is a company that I love having been a lawyer. Actually, I never practice. I don't tell many people I was actually even a lawyer, but I went back after working for about 10 years and got a JD MBA and took a quote sabbatical. I did that. as I started a family. But case text is an interesting company that essentially creates briefs for you.

Starting point is 00:41:28 Probably the most hardcore artificial intelligence platform in my portfolio. Amazing company. So that product market fit, the ease of use, market size. And then it has to be an area where I feel like myself or one of our teams actually can be helpful. So it has to be an area of interest because there's a lot of ECs out there. If we go after a deal, we typically win it. because we're like, we're the perfect DC for you. We have expertise in this area.

Starting point is 00:41:55 We built this kind of team before. We believe in you and we want to help you win. And my biggest barometer is if I wasn't doing this job of venture investing and coaching, is kind of how I see it. Would I join or start this company? That's my goal. If I look at a company and say, damn, I wish I would have thought of that. That's it.

Starting point is 00:42:15 You know? And oftentimes there are companies, the ones I like the most are what I'm like, isn't somebody already doing that? That just seems so crazy that it should just happen. And then they're not. And you think, wow, okay, well, this should be. And jump in. If you think about the most exciting shifts in the world today

Starting point is 00:42:35 that might have implications for where there's attractive businesses or opportunities or something, what is enabling those shifts? Like, what are the things or trends or shifts or however you want to conceptualize the idea that most have your attention? Well, it gave you an impression. really from a couple different directions. The leap forward of, you know, GPD4, for example. Like, AI is really at a point that we can really think of it very pragmatically.

Starting point is 00:43:01 If we were in Siri, we were a Series A investor in Siri. Oh, cool. Yeah, so we've seen the whole thing. And I remember going down the road, like yelling at Siri, trying to find something. And I'm like, no, I said whatever, you know. Before I sold Apple, when it was just Siri, right? In those days, it was frustrating. but it has come so far.

Starting point is 00:43:20 My kids don't know life without Google. They walk in the kitchen in the morning, hey Google, play me some music. Hey, Google, what is this? And if it doesn't have the voice interface, they're kind of shocked, right? I look at that and I'm like, the assumption at this point is there's a voice interface.

Starting point is 00:43:37 And I look at that, and it wasn't that long ago that we had invested in Siri and it was pretty rough and then also touch. But, you know, it's really the same. this voice thing that has just, it's changed the playing field. And I look at that too. And I think about when I do health tech investments and I have a friend at UCSF, she's sort of the general population care. And what was really interesting to me was her advice. She's like, the real cost in health care

Starting point is 00:44:04 is not this quantified cell thing. It's really the 10% of people who aren't literate. You look at how many people in this country can't read or write English. And then we develop all these whizabeth things to help them out, well, voice just breaks that barrier because you can have voice technology in any language. And it really is sort of a democratizing agent, I think, for so many things and it really opens up the market to everyone. So I think this AI, but specifically with the voice enablement, is fascinating. And all of the sudden things that we had said, hey, that's not possible. It's not going to serve particular parts of our population well. Now it does. And then macro. When we did Lending Club, it was right after Lehman crashed, right?

Starting point is 00:44:51 We did Doxemite really early because of our belief in what was happening with all the healthcare services and what was happening there. So I look at Macro now and the sands are continuing to shift very quickly and that's when there's a lot of opportunity. When you look at all the money that's just gone into this transportation infrastructure bill, it's unbelievable. I look at that and I'm like, well, where can we invest there? like what is something that kind of lines up with us?

Starting point is 00:45:18 It reminds me a lot of like the High Tech Act and the Affordable Care Act and when we did the first health tech investments. And so we did practice Fusion, which was the first cloud-based EMR and it sold to all scripts. And it was with the understanding that back in 2009, 6% of medical records were digital, believe it or not. Crazy. Yeah.

Starting point is 00:45:36 And so got a little bit of government money and, you know, that's changed. Again, where the incentives are are what people do. you incentivize the behavior. And if you're ever asking why people did something, look at the incentive they were offered. I think on the macro level, we could talk about inflation and the economy and the GDP and China and Ukraine and all those things that I can't control or predict at all. But what you can kind of look at is, okay, well, there's an infrastructure bill and people are changing spending habits and, you know, what's going to happen with that, essentially.

Starting point is 00:46:10 If we look forward 10 years, obviously the last 10 years has been very good. for this style of investing. Let's say it ends up being in the next 10 years, one third is good or, you know, substantially worse from just like a result standpoint. Why do you think that may have been the case? What has you worried systemically about this style of investing, if anything? I'm not worried now. I was more worried when everything was just crazily up and to the right for forever, right?

Starting point is 00:46:34 So when I entered venture, I'd been an operator at, you know, PNG and a startup that went public and I had my own company for a while. And I'd seen a lot of cycles. I'd seen a couple. You know, next card went public, phenomenal, you know, party and then got delisted, right? I've seen it. And I've seen a bunch of those things happen. And so I came into venture, Lehman crashed in October 2008. So I came in right when that was happening. I took the bar and then came into venture. I had other things I was looking at, but I was so excited to come into venture because I saw the opportunity that market had just been decimated. Everything was frozen. And it was a great opportunity because in these times, you actually can build companies.

Starting point is 00:47:15 Some of the noise kind of goes away. And we did Lending Club in Q1 of 09, right? I think banks were frozen. Nobody was lending to anybody. But it was an opportunity because they were lending to these superprime prime prime borrowers. And in any market, in any economy, there is a pocket of super prime and prime that you can lend to very safely. There was a big dislocation and opportunity created that Lending Club was positioned for. So I actually think it's really interesting.

Starting point is 00:47:43 When I came into venture two, there were a headline. I'd say I should go back and pull them that venture capital is dead, venture capital's college industry, venture capital shouldn't exist. Those were the headlines in late 2008 and 2009. And I don't even know what my title was at that time, but it wasn't partner. And I reached out to Dick Kramlick who founded NEA and Reed Dennis, who founded IVP and David Morgan Thaler, who founded Morgan Thaler ventures. And I said, can you please come and talk to people in my generation and just maybe talk us off the cliff? And it was hilarious.

Starting point is 00:48:20 Like they came and it was pre-partner only and they went back through their war stories and essentially like, oh yeah, every 10 years, you know, venture capital's dead. And those are the best times to be in it. And here's why. And here are the companies I did. You know, and they're all like legends, right? it was really interesting. I remember one of them asked, I think Reed Dennis asked people in the audience to hold up their hand if any of them had ever seen a carry check. Nobody raised their hand. Nobody. So there have been large swaths of time where there were no carry checks, where venture capital effectively was, I wouldn't say dead, but hibernating, right? But those were also the times when these awesome companies were getting built. I think it's just normal. I think if you look back

Starting point is 00:49:04 at the cycles of this industry, it is cyclical. And the abnormality is that we were so up and to the right for so long. We should have had a reset a few years before it happened. And so I think for me, I'm excited now in my mind is the time when you can build a great company, when people are kind of focused internally. And when you can hire, I mean, you look at how many companies are laying people off and that tide is turning in terms of being able to hire just amazing talent. and bring him to your company. Well, it's been really fun exploration. I think that your unique angle on marketing and sales and how much that matters and what you've done to

Starting point is 00:49:43 instrument that at your firm is very distinctive. I ask everybody the same traditional closing question. What is the kindest thing that anyone's ever done for you? The kindest thing that anyone has ever done for me was when I was in high school, my parents moved middle of my junior year to this little teeny tiny town where they had come. I was at a fairly large high school with a very good academic program. And my friend's mom let me live with them for the year. And for me, that was really life-changing because I was a first generation college kid. My parents hadn't gone to college. They were doctors. So they basically

Starting point is 00:50:23 kind of took me under their wing and I had, you know, straight A's and was top of my class and all that. Or, you know, not like the top top, but very close to the top. And they basically looked at me and I'm like, what are you doing? And really sort of refactored, I think, my trajectory in terms of what I thought was possible. So, yeah, very kind. Incredibly cool answer. That is a lot of these answers cluster around a couple key stories or themes, which is great. I had never heard that one before. So wonderful place to close. Thank you so much for your time. Thank you so much. Thank you. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this

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Invest Like the Best with Patrick O'Shaughnessy - Rebecca Lynn - Finding Your Customers - [Invest Like the Best, EP.309]

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