Soft Skills Engineering - Episode 37: VC Funding and Internal Presentations

Episode Date: November 29, 2016

In this episode, Dave and Jamison answer these questions: How does venture capital work, and how does it affect me? How do I give great presentations at work?

It takes more than great code to be a great software engineer. This is Soft Skills Engineering, episode 37. I'm your host, Dave Smith. I am your best friend, Jameson Dance. Wait, I said that last time. Okay, hang on, hang on. You're nothing if not predictable. I'm your predictable friend, Jameson.

I'm the boat anchor that keeps you from drifting into unpredictability. Yep, I like that. Thank you for joining us. We are excited to answer your non-technical questions about technical fields. But I think we have some comments from listeners first. Do you want to talk about those, Dave? Yeah, sure. We got a nice comment from a listener named Stepan Pilar.

And he wrote that he has a comment about episode 18, which was dropping out of college. He said, quote, You raised an important point, but you didn't follow it all the way. Right now, you don't need any formal education to get a good and probably even excellent job in software engineering. you noted that this wasn't always the case and assumed that it won't be in the future i tend to agree with you on this but i'd still consider it an argument for formal education thanks for all the great episodes keep up the good work so thank you for that comment yeah thank you all right so also this week we had lots of really awesome twitter love

from lots of people and we wanted to give a big shout out to some people who tweeted about the show big hugs to andrew priyanka and rafael you're the best and i just wanted you to know that hugs are a soft skill maybe even the softest of soft skills hugs are pretty rad um you know what else is rad answering listener questions indeed and and uh smooth transitions smooth transition boy do i have the transition for you shall i read the question you should as smooth as possible how does venture capital work and how does it affect me yes this comes from listener richard and um i know that there's going to be like a thousand answers to this because i think the way venture capital affects you depends a lot on the venture capital if you

live in san francisco venture capital affects you by subsidizing all these like ridiculous services that don't make any money but you can still use them until they fail yeah until they fail so you can like get somebody to take your garbage out for you and then like leave a nice little box of chocolates on top of it and that's some some killer startup idea that is just losing money hand over fist but some but it'll run for a good eight months and then yep yep so in that way it makes your life better a little bit unless part of your 401k was invested in that company yeah That's true. I just get around that by not having a 401k.

Problem solved. The principle of the matter. I was thinking just now, like, I think a lot of people when they hear about venture capital, they think of some, like, eclectic billionaire sitting in a tower. And he's, like, saying, I would like to throw $1 billion at the tech industry. But I don't think that's how it goes. i think these things are actually more like mutual funds than they are um individual investors i think a lot of times it's groups of people who are putting money into these things like large

groups of people yeah don't they go raise a bunch of money for their fund from from institutions and and pensions and stuff like that and then they'll go invest that in into like a bunch of different companies chocolate garbage can deliveries in san francisco the uh soon expanding the pug rental by the hour as a service yep that one is in new york only but soon it will expand to uh portland more of new york yeah yeah no that would never work in portland because everyone already has a pug that's true uh so let's start with the basics they they give money to companies in exchange for a portion of the company and then they hope to make money by selling the portion of the company when the company is worth way more or by not telling it when the company is worth nothing well wait you

don't make do they make up that's how they make money but they have to make it up in volume yeah that's true just just like it's perfect just like the startups you just invest in enough failing startups and you'll make up the losses the meta vcs will come invest in you because you show a lot of deal volume there's like a whole level above you've never even heard of this one yeah dave you've been through some vc investment do you want to talk about how it affected your life yeah so i've worked for one company that was venture backed and i worked for them for about five years and we had four different rounds of venture funding from oh i don't know six or eight different investors and the way that it affected my life was basically uh it it just got me my

paycheck every every month you know it it hardly affected or impacted my engineering day-to-day at all which i know is very different from other people's experience but for me having venture capital be the investment vehicle for my company didn't really change the way we worked other than i never missed they never missed payroll that sounds like a good thing yeah it was nice did you have any options or equity in the company like did did you hear about the how the investment affected that yeah um i did although it was hard to tell but basically if you own any amount of equity in the company in the form of stock or options every time an investor comes in and the company agrees to give that investor a percentage of ownership in the

company, all the other current owners, including stockholders and option holders, the value of their stock or options goes down. And I think we talked about this in the stock options episode a few months ago, but the basic gist of it is that you're giving up some of your ownership in order to take on new investment money. And that's basically how venture capital works. even the very first venture capital round that a company goes through you know you're a you're a founder you own 100 of the company and a venture capitalist shows up and says i've got a million

dollars to give you in exchange for 50 ownership of your company which means if you sell your company they get half the proceeds you know but basically it's more complicated than that i'm sure bankers have a way of complicating everything i mean so do we to be fair good point you thought javascript fatigue was a thing finance fatigue yeah to finance fatigue um so yeah it definitely has some effect on the financial structure of the company i think i'd like to talk more about the effect it has on the culture and the direction of the company venture capitalists generally um they make lots of bets and almost all of them fail and if they do well then one or two of them will go on to become a gigantic mega corp and they'll make all their money from that one

investment so that that affects how they interact with the company generally when they invest they get some amount of influence um sometimes they get a board seat um so so they they have some influence or you just want their investment for the next round like to participate in the next round yeah yeah so and and generally vcs will push the company in a direction that they think has the highest probability of taking off to become a giant megacorp so if there's a choice between um being kind of a quietly profitable company that makes money for their employees and their owners but it's never going to explode and go public or or make billions of dollars or there's a much lower probability but much higher reward they might often push the company

in that direction towards the the higher risk higher reward bet just because that's how they'll get their big payoff if the company becomes quietly profitable and they get 2x their investment out like they they don't care that much that's my impression i'm not a vc um but just from kind of seeing the interactions with them that's that's what it seems like yeah it does if you don't want that it can be a little scary right if you just want to work at a company that's like nice and does good work and tries real hard makes people happy but it's never gonna like uh be a global megacorp then then your your goals are now at odds with your investors which can be tricky yeah and you should we should maybe point out that the way the investors actually get paid

is when there's some kind of exit and i'll put exit in air quotes because it means specifically a point in time where the company can liquidate the shares that are currently issued to these investors. And that can happen through an initial public offering on the stock market, or it can happen through an acquisition where some other company pays cash for your company. And of course, a lot of that cash will get diverted to the investors instead of right into your founder's pockets or your employees' pockets. Yeah, that's true. So it's possible they'll push towards an acquisition if they think that's the best option for them to get their money back and like i don't want to make it sound like they're these evil scheming horrible

people like they're they're experienced business people and and if they do really well then you do really well too and they're not i don't know i don't think they're trying to ruin your life or anything but they they might have different goals than you yeah and their schedule might be different than yours like because we said earlier these venture funds will actually raise money on a timetable and the people who invested into that fund have some kind of guarantee that they'll get a payout by a certain date they might rush companies to an exit in order to meet that schedule sure yeah and they i don't know would you say they have hundreds of investments in a portfolio i don't even know what the order of magnitude is uh i've heard some interviews with

regional vcs and i got the impression it was more for them more like a dozen or two in a in a fund okay but i wouldn't be surprised if there were ginormous mega funds that have you know hundreds of companies sure why did i even ask that question just making small talk on there you know um yeah just i've heard it termed like the vc rocket ship where you take vc money you get a giant chunk of cash and you use that cash to just like explode your business um and just like well you can control a rocket ship maybe the metaphor is breaking down well sometimes that rocket ship propels you into space and sometimes it just blows up on the platform yeah maybe that's a better way to think about it where the the stakes

are raised though for sure i think yeah someone's gonna blow up that's you're definitely gonna go fast the stakes are higher and and it can it can be incredibly helpful if you have figured out how to make money and now you just need a bunch of infrastructure or employees or or marketing to just like funnel in to to make more money that way like it can totally pay off um and i've also worked at and seen lots of companies where the company lives on like a year-long cycle where they raise money spend a year doing work in order to be able to raise money next year and then off that money they will work for a year to raise money the next year and that's just kind of like limps along it's like getting elected maybe yeah but you get elected and then immediately start

fundraising it just feels weird like there's two ways to have a business and one is to make something that people will pay you for like customers and the other one is to make something that vcs will just give you money for and it it just feels different when you're working for when you're working to catch their eye instead of building something that customers will give you money for yeah let's go back to the rocket ship metaphor let's say your rocket blows up on the platform then what happens like what if you just totally fail you can't make any money and your your venture capitalist says what i mean as an employee like you just go get a different job i mean the company is done and then you get you get a new job with the soft skills engineering

advice uh are you talking about as like a founder well just yeah all around i mean and as a founder what happens not nothing i don't know i'm sure it feels hard but you don't go to like debtor's prison or anything i feel so bad well let's go do it again yeah it's like a badge of honor like i rode that rocket ship all the way to the ground yeah yeah i i don't know it doesn't it doesn't seem to have long-term negative effects on people's careers this is the part that amazes me because i always imagined that if someone gave you millions of dollars oh yeah like if i gave someone a million dollars and they came back and were like oops i broke it like yeah like what i want my money back exactly and so and yet that's not really what happens i mean

when when a venture capital when you lose all their money um they basically say dang right and and you walk away i mean is that pretty much how it goes down i don't know i've never done this i watched some episodes of silicon valley though so i've worked at venture-backed companies that have failed uh and i know the kind of the the founders and they're they're fine they haven't told me in detail how how exactly that process went down and i gather it wasn't completely painless but like they've founded new companies and raised more money and it's not the the black spot of doom or anything on the other hand if you borrow money from a bank you know they're going to want that money back no matter what happens to your company yeah right because they

you didn't usually you don't usually give the bank a percentage ownership in exchange for their loan they just give you cash and they expect it to come back yeah um i don't really know if you can get away from that but it seems like in the venture capital world people walk away from it all the time uh let's talk about term sheets and valuation and stuff shall we sure i've in my startup uh where i worked for five years in the early years people were always saying we need to look bigger than we are and the driving factor behind that was that they wanted investors to see them as being very valuable because when an investor comes to invest in your company the founder and the investor or the board and the investor will agree on what's called a valuation and the valuation the higher

it is the better it is for the founder and the worse it is for the investor because what you're saying is usually you're giving away a fixed percentage and uh of ownership to the investor and if you can get that investor to say well your company's worth 10 million dollars instead of just five million dollars then they'll give you more money uh at a lower percentage so that when you pay them back after you're successful you won't have to pay them as much cash that's what it's all about so that's what people mean when they say valuation it's kind of like salary negotiation but on steroids yeah with a couple extra zeros on the end yeah exactly with a little bit higher stakes and it's also way made up right like a lot of these numbers are just like i'm gonna try to

get you to i'm gonna use the best possible sales number i can dig up to convince the investor that i'm worth you know if i were to make that every day of the year that i should be worth 365 times that you know or something when you've only ever landed a sale that big like twice yeah that's a good point a lot of it is driven by well i guess you'd call it the market but the market fluctuates much more wildly than developer salaries do where valuations will go up like 4x in a couple years or something like that just like the average valuation for a tech company that seems to have a good idea or whatever yep and the term sheet is uh basically the sheet the contract that the founder and the investor sign that says i agree your company is

worth x amount of dollars today i agree to purchase x percentage of your company for x price and um that's what gets signed so when you have a signed term sheet that's like i think that's step one in the investment process so if you ever hear your founder say we got a signed term sheet like that means you're almost definitely going to get funding should we talk about pre-money and post money sure when a when an investor comes in and says i think your company is worth x dollars that can be two things either before or after the investment and so if it's a pre-money valuation um like say they think your company's worth a million bucks and they want to invest another million the pre-money valuation is a million and the post if they came in and did

a post-money valuation they would say it's worth two million and so you can you got to be careful when you hear these words pre-money versus post-money or rather when you hear the word valuation you need to ask is that a pre-money valuation or post-money valuation because it changes the amount of dilution that you're going to undergo if you have any ownership in the company so there's your little tip i will use it wisely so the other thing that uh changes when you get venture capital funding is you generally get like crazy ridiculous outrageous perks because you you got that money and you got to show it off now so you get like an office that's shaped like your ceo's horoscope sign or whatever i don't know and the ball pit yeah but the balls

are made out of solid gold now those hurt okay so i've had a i had a friend who whose company got invested in in the through venture capital and those investors came over and started making decisions for the company uh things as crazy as like how to organize the cubicles you know for maximum productivity so you can get these micromanaging investors because they really really want their money to go to a successful company and they think the best way to achieve that is by running the company so it can be kind of bad in that sometimes that could be a good thing too but often it can be pretty rough it does seem like a very tricky trade-off where you need money to have a company and to pay people and and it comes with a lot of strings attached sometimes

it's very worth it and sometimes it's the only way you can do it um like there are some businesses that just have large capital requirements where you can't unless you're a crazy rich person already you couldn't just like bootstrap a company that needs to build a power plant or something like that exactly well question answered question answered let us go on to the next one all right this next question is how do i give great presentations at work for example my boss asked me to present something to some customers how do i do this well so we chatted about this beforehand um and dave you you say or you said you you claim allegedly you've done this several times a year for for a decade where you'll get you'll there'll be some meetings scheduled and

it'll be kind of a formal thing where you have you you there's a topic you have prepped for you might have slides you might just have some written notes or whatever but like you'll stand up in front of everyone and present the thing that you've prepared right and i have literally never done this in a company i mean i've given conference talks or whatever but i've never had like a formal scheduled meeting where i present the thing i've prepared which absolutely completely surprised me when you said that maybe they just don't trust me yeah you can go uh stand in front of thousands of people and give conference talks but not in front of your four co-workers no way i mean i've done brown bags but those are basically small conference talks yeah uh on internal like

engineering things to people and i've and i've talked to customers and business people but it's it's never been like a formal meeting with an agenda where part of the agenda is like verily jameson dance first of his name will now present on the engagement metrics or whatever well i've done i've done this for customers for what oh my gosh i know i i have just blocked it out of my mind we literally did this like every week i just i just hated meeting so much that i blocked it out what did you do i presented i i made i made powerpoints i'm remembering now wait you did this every week and you have forgotten yeah for like for like i don't know

almost a year one time i made a presentation that was synced to um that song from uh 2001 a space odyssey where they find the the monolith monolith yeah it was like individually synced every frame oh yeah it was it was it was about like some new launch of a thing we did or something I don't know. That sounds amazing. Okay, so I have done this. I think that there's your answer. That's the answer to this question.

Yeah, it took so long. I spent like three hours on like a two-minute long presentation, and I laughed and laughed, so it was all worth it. Wow, and yet you repressed this memory, Jamie. I did repress it. That probably tells you more about me than the answer to this question. You're like, nope, I've never done this. you know historically on this show that only happens to me that's true yeah i'm having a dave

moment wow i'm so glad i'm not the only one good anyways let's see if i've repressed any any wisdom while you you lay out all the stuff you've prepared because because while we were talking about this i was like i literally have nothing to say about this i do not know i can't tell you maybe i'll have some repressed wisdom that'll come forth all right so here's here's my number one suggestion i have heard so many people stand up and say here's how to do great presentations and public speaking and here's techniques for what to do with your eyes here's techniques for how to stand and how to how to you know control the pitch of your voice and power poses push your shoulders back imagine the audience in their underwear you know and all these awful things

which i've never heard someone stand up and say the first step in doing a great presentation is is having something good to say. You know what I mean? Yeah. Like, it's like, sometimes you're just forced to do a presentation and I get it. But step one is have something worth saying. You know, if you're, if you just have to fill a time slot or something, try your darndest to get out of it. You know, it's like, look, I don't have anything worth saying here. Or, you know, try to figure out something that's worth saying. But that's number one. If you have something that you are proud of saying something interesting and valuable to your audience then everything else will be a lot easier but if you just are filling a time slot it's just gonna suck i don't care how

good of a presenter you are maybe that's why i repressed it because it was just like weekly product like status reports yeah but they were like presentations to a committee of people so everybody had to make slides and okay i can give you some anti-tips um think about what your audience would care about and say that stuff instead of what you care about because there was a lot of status updates that were like here's these things that are important to me that that don't mean anything to other people and i'm sure i did this a lot too but like wait so which one should you do stuff that's important to you or stuff that's important to the audience stuff that's important to the audience do that yeah okay phew

that's totally what i was gonna say like i have an announcement that this is my last week on the podcast yeah i think that that goes in line with what you were saying about have something great to say and if you're not thinking about the audience you'll just fill time like dave said And then everyone will be bored unless you sync it to a song from a sci-fi movie. And then they'll laugh and they won't remember anything that it was actually about. All they'll remember is that that was awesome. Yep. Mission accomplished.

That might be the only one of those meetings I remember. One of the things that I've come to learn doing presentations is that even if you talk to someone for 30 minutes, they really can't remember more than about one thing that you say. Oh, yeah. I've already forgotten everything we talked about so far. I mean, if you have like 15 points that you want to make, just bag it. This isn't the right form. That should be like a written paper or something.

If you have one point to make, then, you know, a 20 minute, 30 minute presentation could do the job. But you'll have to support that point for 30 minutes and maybe say the point three or four times. But I think one key point is really important. it's it's tempting to just unload all the information you have but try to think about the one most important thing and craft everything else around that these all seem like variations on the theme of uh like you have all this information that you think is important because

you live what you're presenting about most well i guess that's better than the alternative which is someone's like present on this thing that you have to make up completely in the next five minutes so you yeah kind of condensing it into something that they care about that yeah that feels feels like feels like you're hitting on a theme maybe i'll remember it if you come at it from enough different angles and restate it yeah no it doesn't feel like you're restating it's just like different facets um the other thing i'd recommend is to be ready for questions so take your time and do your research so that you can answer things intelligently that can be hard to do because questions sometimes just come out of left field and if you get hit with a question

that you don't know the answer to it's okay to say i'll get you an answer by the end of the day you know it's not usually a kill it doesn't usually kill your presentation if you have to say that it's totally fine are you talking about um persuasive presentations where you're trying to convince someone of something or to do something or does this does this apply to just anything where you're just sharing information i was thinking more about informational stuff i don't think i've really oh maybe i've done persuasive stuff maybe i've done a bunch of persuasive presentations but then i've repressed the memory but i don't remember doing too many yeah because i'm just thinking back to to the question about

presenting something to customers are you trying to like sell them on the thing or are you just giving them showing them how some new feature works or if there's customers involved you can bet there's a certain degree of salesmanship going on would you approach those the same way I probably would because if it looks like it's salesy you'll probably get, well for some audiences you'll get a less good response but if it just looks informative and you're just stating the facts and the facts happen to be amazing

you might get what you want that's true, so step one, work somewhere where the facts are amazing so there's like a thousand things that you can do right and wrong giving presentations I don't think we could possibly even know let alone talk about them here but um i do have one more thing i wanted to share yeah which is specifically about presentations that involve demos have you ever done one of those i have i think that it's really common for people to rush through the setup on a demo have you ever

seen someone do this where it's like they they go so fast to the setup and then they do the demo they click the button the the thing that's supposed to be so amazing happens but everyone in the audience is like now wait what what just wait did i did i miss it you know oh yeah i get it like the context of the demo yeah like it you usually have to take literally in my experience about 10 times as long as you think just to set it up so that when you do the click and the magic thing happens or whatever it is the audience is like yay instead of like wait did you do the demo okay so you don't mean like the practice or prep time or whatever you know i mean while you're doing the demo yeah you have to set the stage exactly aha explain what's going to happen

explain why this is so much better than the old way because usually when you're demoing something it's like a new some new cool way to do something um you know take your time to set that up if you start out with the great idea something that's worth sharing most of the other pieces will fall into place all right question answered question answered we did it we shed wisdom and i remembered i recovered some repressed memories we unlocked the dark corners of jameson's brain oh man there are some dusty things back there well we should say big thanks to our good friends over at dev mountain yeah i was just about to say that we have dev mountain on the mind thank you dev mountain we will never forget you dev mountain nope

we'll never repress you as a memory no uh and it's a technique to say someone's name three times when you first meet them and you'll never forget them dev mountain really yeah you won't forget their name dev mountain um yeah thank you so much for sponsoring go hit our website at softskills.audio slash dev mountain to check out some of the courses that they're offering and see if it's right for you to level up your software development career and how can people submit questions or just hear more from us if you want to submit a question on the show go to soft skills.audio you will be greeted with two choices choose wisely the first choice is to click to tweet us or send us a direct message on twitter

the second option is we have a little form you can fill out that lets us have a little more background information or if you don't use twitter you can use that form fill that out and that'll go to our queue and we promise to get to you we've had so many really awesome questions coming in lately and hopefully we can get to all of them before the universe burns out yeah i i have that hope in my heart as well when you said that there are two choices and you have to choose wisely i i in my head i was like oh one of them when you submit a pit opens up under your chair and you get like sucked down into a dungeon or something like i thought there was gonna be a bad outcome but they both work right neither of them will result in a pit okay cool awesome yeah we would

love to hear more from you and uh i have no more words to say after i just said uh so i'm gonna say thank you for listening we'll catch you next week thanks everybody see ya