This Week in Startups - E1141: CircleUp’s Ryan Caldbeck on the mental & physical toll of being a founder, why he stepped down as CEO & shared his struggle publicly

Episode Date: November 20, 2020

Read Ryan's Medium post: https://rb.gy/zep70h Check out CircleUp: https://circleup.com FOLLOW Ryan: https://twitter.com/ryan_caldbeck FOLLOW Jason: https://linktr.ee/calacanis

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Your first app is free forever, and right now O-Doo is offering $1,000 off your first implementation pack at O-D-com slash twist. that's O-D-O-O-O-com slash twist. Hey, everybody. Hey, everybody. Welcome to another episode of this week in startups. Really excited to have today's guest on us because he's had a really interesting couple of years.

He's been through the fire. And unlike most founders who don't talk about the struggle and the absolute pain and suffering that startups can be. and often, I think, are most often painful, he would agree. He wrote, there was about 40 tweets about his experience. He wrote a Medium Post, and he shared, most notably, an email to a former board member. And I'm going to briefly just outline why that was important as part of doing this. I told Ryan, we talk about the big picture and not obsess over.

the board member in question, who has responded, Craig Shapiro from CoLab Fund, did respond, not to me, but just publicly on Twitter. And the email to this board member was pretty brutal. It was incredibly candid. And it outlined a board member who was insecure, a board member who was disrespectful, a board member who didn't take the work seriously, who was new at the job. and I read it and I just asked publicly, like, anybody know what this is about? And when you have 400,000 followers, you get a bunch of emails back. And, you know, this isn't Ryan's words. These are words that were written to me by other founders.

And we're going to get right off this, Ryan, and talk about your story. But I feel like I need to just confirm. And I do want to ask you why you chose to release the, board member email you sent and people can type in the name of Ryan's startup, circle up board member and they can go find this on Twitter everywhere. It's been talked about a million times. But the words I got were this guy is an entitled douche, liar, bully, wanker, and almost tanked my company. Now that was not your company. Ryan, this is what somebody else told. This is what multiple other people are the words they told us.

So I want to get into your journey of being learned, but you did release this, memo. And this memo was written, I believe, years ago. I just have two questions about the memo. One, why did you write it? Because it is extremely detailed. And what was your intent? And then two, what was the intent to share it? And welcome to the program. Yeah, thanks for having me. So I wrote it last year, the email. My intent in sharing it was similar. to why, or I guess it's the same intent to why I have a turned-down opportunity to talk about it, frankly, which is I wrote it to help other entrepreneurs feel less lonely. You know, when you have a board member, whoever it is, that is counterproductive and really

difficult to deal with, it's hard to talk about that with other founders. me going to another CEO, another founder, another BCU as a friend and saying, one of our board members wants to sell his position. It's hard for that to not come across as a black mark for the company. It's a very, very lonely experience to go through. Similarly, if I say, hey, a board member is always arguing or being difficult, maybe it's you, Ryan, maybe you're the bad CEO, maybe the company is not doing well. And so you get into a pattern, I think particularly in Silicon Valley, frankly, of not wanting to talk about it.

I released it because I know that other founders and CEOs have gone through similar things. And didn't have anyone to talk to. So I wanted them to feel less lonely. It's also why I've had a lot of reporters and whatnot reach out to talk about it. I've always said I would prefer to not focus on that part of the story. Yeah. Because I think at this point in our journey, you know, the, I think it, my hope is that it helps to have it out there, but I don't know that talking about it more helps.

Yeah. I will say just founder to founder and now I'm on the other side of the table, obviously as an investor. And I started my career as a journalist. So I can look at it actually from all the vectors. And I never ever have agreed to have anybody on the program with any rule set. and I wanted to talk to you about this so much that I said, listen, I think your story is so compelling and so good that the memo actually stands for itself. So I don't need to go bullet point by bullet point through the memo. But I will say that the actions did, for me, as a founder, it's so hard to run a company. The board is there to support the heck out of you and to pick you up when you get knocked on your ass. which when you're a founder is a constant. And the company you created Circle Up,

I am very, very familiar with because you were doing something that, I don't know, about 10 years ago, you know, nobody really was doing except you and Naval had both had this crazy idea that you could help fund companies and find new companies to fund and create a platform for equity crowdfunding in some way. And you had the idea to do it for real businesses. Is that a correct summary?

of the original idea for Circleup? I wouldn't say that the other ones were doing it for non-real businesses. We focus on consumer companies. Oh, yeah, so that's a idea. That's my Silicon Valley. We focus on real-world businesses versus consumer product companies.

Yeah, and the original thesis was to build a marketplace that helped connect investors. Individual or family offices, small institutional, and the companies themselves. And it was pretty amazing when you look at, you know, the type of companies you're able to get. I mean, some of these were just all-time great companies, Halo Top Creamery.

I have that ice cream in my refrigerator. I think at this very moment, Little Duck Organics, I've had that many times. When you got there, literally nobody had done this before, right? I mean, this is completely uncharted territory. Yeah, that's right. I mean, I think when we went live in 2012, there were a lot of marketplaces that were trying to build something in crowdfunding. I think the crowdfunding component, frankly, interested me and, you know, my co-founder, a lot less than it did for other folks. I think our belief was just that you could use technology to lower the cost to participate in the market, the market being investing into private companies that are not technology based in Silicon Valley.

And amazingly, I looked at the original group of investors in this company and you got Clayton Christensen to invest in your company and Maveron for people who don't know, that's Howard Schultz's venture arm, I believe, right? He founded that and he's the Starbucks guy. Yeah, Dan Leviton is the head of Maveron. It's a great VC firm. Howard is involved in some way. I wouldn't say it's his VC firm. But yeah, we were incredibly fortunate. And Clayton, who passed away earlier this year, and his son run a hedge fund called Rose Park, which has been phenomenally successful.

We had some other great investors as well in our series. Union Square, my friend Fred Wilson. Yep, along with Google Ventures. The B was led by Canaan, some fantastic investors. That, you know, I'll be frank, Jason, like, I think some of the things we did might have been skill and some of them were luck, and the investors we got felt like a fair amount of luck, frankly. I'm not, that's not a humble brag. Just, you know, it wasn't as if we had 50 term sheets for each round.

I mean, especially the seed, where Rose Park, Clayton's firm, let it. We got passed on by 70 investors. So I think there was some amount of luck in that. Candidly, I think, yeah, you're definitely underselling it because the exact advice I gave somebody on a board call before this is. You need to do about 67 in-person meetings to get 20 to 30 second meetings to get seven or eight third meetings to get two term sheets to maybe hope to close one. You literally describe the top of the funnel that I tell first-time founders, of course, you had some experience in this. You had a partner who was great. And you had just impeccable

timing. Angelist. I had launched one of the first, Angelist, I don't even think was doing deals in 2012, were they? No, they were doing deals. I don't think they had done the syndicates. They had them, because I was the first syndicate, and I know the first deal I did was com.com was pretty etched in my memory for obvious reasons. And that was like 2015 or 16. I think 2015 or so, yeah, exactly. 2015 time frame. So you were years ahead of everybody on this. When we get back, I want to understand what worked in those early days and what early signals did you get to sort of convince those Series B and Series C founders to come in. And then the one thing, the one, I'll tell you,

the one sentence that just crushed me. And that's the last thing I'm going to bring up from from the memo you wrote. But there was one piece that was the gut punch for me. And I'll tell that when I get back on this week in startups. If you are a founder, the IRS owes you some serious cash. But the only thing stopping you from claiming your cash is the single most detrimental thing to your productivity. Paperwork.

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Okay, let's get back to this amazing episode. Welcome back to this week in startups. We're very lucky to have Ryan call back on the program. He is the founder and executive chairman of CircleUp. And as we learned in the first segment, he's been really honest about sharing the journey. And we're at the point in the journey where he was able to raise money from literally the best people in the business. And, you know, I promise I wouldn't harp.

on the memo, but the key to this business is getting somebody to believe, some business to post itself. And the board memory question just kept telling you, over and over again, Circle Up has never worked with a good company. And this to me was just such a tough statement to say to a founder, if you're going to try to find the new world, that's like telling somebody who's trying to make it to space, like you haven't made it to space yet. It's like, Well, that's why we're effing here. We're here to get a company to embrace this new idea. How did you get companies to embrace the idea of being public, especially consumer

packaged goods companies? You had to convince them, you know, right in those early days of Angelist and way before syndicates to share their information publicly in order to raise money off the platform. How did you convince them? And what were those first companies' reactions to crowd? crowdfunding and sharing information and raising money in this kind of equity crowdfunding fashion. Yeah, crowdfunding, just to be specific, crowdfunding has a different definition depending upon who you're talking to.

Sure. I think it only applies to unaccredited investors. We only worked with accredited investors. The majority of the capital is actually from institutions. So small family offices, if you'd comment that at an institution. But in terms of convincing what we called the supply side, meaning the companies, to raise money, it was, I would think, easier for us than it was. for some other platforms because the industry we focused on.

You know, when you focus on tech, as almost every other platform did, there's a lot of sources of capital for tech. I mean, there's 750 VC firms in the Valley, right? And so, you know, I think you can make an argument that if you're a tech firm based in South America, it might be harder. But if there's a tech company based in the United States, there's pretty good access to capital. The best access in the world, in fact. Yeah, yeah.

By a magnitude. In the case of consumer, that's not true. In the case of consumer, you know, the market is about three times the size of tech, but receives about 150th the amount of early stage funding. There aren't 10 funds in the country that invest into consumer companies less than 10 million in revenue on a reliable basis. When I say consumer, I mean the vitamin waters the world or the kind bars the world, which sound like cute businesses, but Kind Bar just sold for $5 billion.

And by the way, they almost received zero growth capital along the way. So it's phenomenal. Pretty good business. So those are companies that they don't have a lot of other options. They didn't then and frankly, they don't now. How are they funded typically then, friends and family, bootchrap? Simple friends and family. Yeah, exactly.

So I used to work in consumer-focused private equity. One of the firms I worked for was called TSG Consumer Partners. It did vitamin water. When we invested in vitamin water, which was before my time, I wasn't a part of that investment. There were about 30 million in revenue. They never raised money from an institutional investor. Now, they had raised money from 200 individual investors. So they just were passing the hat for years.

So it's kind of like cobbling together things here and there. It's not even like rounds. It's just cobbling together money here and there. And the markets evolved a little bit since 2012 when we started Circle up, but not dramatically. It is still a very difficult market to raise money. So to answer your question, how we got companies to come a lot easier because there weren't a lot of other options versus tech.

So actually, that was something in your favor. Yes. You had people who were in the desert and you had water. And it was like, I think I have. I've got a water truck here. Do you guys want to try and make this work? So what was the first, tell me about the first couple of deals on the platform and how it was received by investors. And again, so we're clear, you know, there's crowdfunding, which most people would say is Kickstarter.

That's where you get a prize or a product for backing something or Patreon. You get to feel good for backing something. There's equity crowdfunding, which is, I would say companies like Republic, which also does accredited now, seed invest, which also doesn't credit it now. And that's non-accredited investors by the American definition. Then there's accredited investors, which is what I do with the syndicate.com, is what Naval does with Angelist. So you were going to take these companies, package them, select them, and bring them to accredited investors. How did you get the supply and demand side together and tell me about that, you know, kick-starting a marketplace?

Because we always hear that in a marketplace, you know, I hear Bill Gurley say the demand side is really the hard thing. If you need cabs for Uber, you're going to find cab drivers. So I assume you had an easy time with supply. It seems like you said they needed money. Tell me about the demand side. Yeah, look, I think every marketplace I've ever seen that scaled, there was a lot of manual churning of the crank early on on both sides. There's, you know, and you find hacks, and we can talk about different famous historical hacks. In our case, you know, there was a lot of manual cranking, frankly.

And so it was literally calling companies, talking about what we were doing, going to trade shows in the consumer space. There's a trade show every month. And, you know, Miskone Center, January without COVID, you'll see 3,000 food companies in the Misconi Center for three days. It's called Fancy Food. On the demand side, what we called the demand side, which was the investors, you know, we started by reaching out

to angel groups that was not successful at all because angels typically were interested in tech. And to be frank with you, most self-described angel groups, it's a lot about shrimp cocktail at a party and it's not a lot about investing. In fact, some of them are even more nefarious. They're charging, like this one Koretsu forum,

was charging $5,000 to founders. Right. And then, which was the reason I started the launch festival, was to take away that nonsense. And then other ones are just filled with service providers. Nothing wrong with attorneys and lawyers and headhunters. But imagine paying $5,000. Founders don't appreciate how anti-founder-friendly the environment was.

They would demand you pay $5,000. And then you'd be pitching a headhunter and a lawyer and a recruiter and a server farm. And you'd be like, what? Crazy. So we, there were kind of a series of small packs. I don't know. I can walk through them. I don't know that.

I think they're pretty impressive. Yeah. I think they're pretty interesting. As an example, you know, when we would, when we would onboard a company, a company of their degree to work with us, we would talk with their CEO and say, look, like one way we can help you is by reaching out to your existing investors, your cap table and talking to them about this round. And so we would do that. And not everyone would agree with that, but some would. And so when you reach out to their 30 existing index. individual investors, five invest, but probably 20 opened the email, and that got them interested. So we acquired some investors like that.

Another way we did it is we'd reach out to industry experts. And that could be, and it's going to sound ridiculous in the tech space, but in the consumer space, that'd be an investment banker, that'd be a lawyer, that'd be an accounting firm, believe or not. I know that sounds crazy. They're basically insiders, right? Insiders. They get stuff done for companies.

Yeah. And in that industry, you know, if you get an introduction. to Sequoia through an accounting firm that's ridiculous. But in the case of consumer, that happened all the time because there was no Sandhill Road. And so that's how they would meet these folks. And so getting 50 lawyers, 50 accounting firm. Exactly. Yeah.

That's why it exists. That's Ant Hill Road is the fancy food show, which I got invited to a bunch of times. Consumers go to that fancy food show and just pay the 50 bucks and they just go eat a bunch of samples. Some. Not a ton, but some. Yeah. Some will. And so, you know, getting those kind of industry experts or industry,

the insiders on the platform, that then began a little bit of a flywheel to help bring others. And then I think the third is, was just content marketing, content marketing where we were writing blogs and I guess doing a little bit of PR as well, but a lot of blogs about the space and the industry. And so then you'd have an entrepreneur share it with five other entrepreneurs who would tell some of their investors, hey, this is where we are. Got it. Yeah, that content marketing also, when you do content marketing, the press has,

something to link to. So you might even get pressed without even trying because they'll link to it. It also gets the SEO going. Now somebody types in crowdfunding or equity crowdfunding and they find a story from Crane's business or TechCrunch or Mashable or they find your blog post and it all whips itself into a frenzy. And something I think people overlook early on is they don't take credit for the work they're doing. I always tell founders, take a little bit of credit. When we get back from this break, I want to know what the first couple of companies were. And if you could put your finger on a breakout company and the moment you knew you had something, what company would that be when we get back on this weekend startups?

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Everybody loves it. They've been an incredible partner with this program for many years, for which I thank them. Great job, everybody at Squarespace. Love your product and just amazing to see how far the companies come. It's a really great success story in New York, my hometown. Welcome back to this week and startups. Ryan Callback is here from Circle Up. And you can follow him on the Twitter, Ryan underscore Called Beck, C-A-L-D, B-C-C-K.

The D isn't pronounced. It's callback. right? You don't pronounce it as much or you do? Call it back. You do pronounce the deal. Call it back. And he was, of course, the founder and executive chairman of Circle Up. We're going to get to the end game after the next commercial break. But for now, I want to know that breakout moment. You get the idea. You get the cash. We put to bed the problems that you had. People could read the memo for themselves. What about in that first, you know, year or two or

three, when you are, you know, you're exposed as a founder, you got a new idea, there's a pretty good chance. It's not going to work. Let's be honest, right? We both know that. You're a founder. If you choose to do something innovative by definition, the more innovative it is, the less chance it's going to work. So now you're exposed, you're trying to get something to work. Was there a moment or two, a company or two, closing around or two? Tell us what actually started to work that gave you the ability to carry on and keep growing the business. And you look back at those first like four or five deals or so. Yeah.

Yeah. I mean, an interesting thing, I mean, I remember all the first deals, frankly. You know, we ended up over time through the marketplace,

closing about half a billion of transactions. Wow. But I, I, an interesting thing about your question is, the quality of the company, did not seem correlated with the performance of the marketplace. And so that was excruciating.

So weird. We were finding companies that would go on, that we had a lot of conviction in. And our technology, and for the audience, we built a technology called Helio that finds and evaluates companies. And so it would give us, the technology would give us respect to the quality company. And we had a lot of conviction in the company. But then we'd listed on the marketplace and the investors, there's no connection between what they liked and what the technology looked.

And that was excruciating. You know, we would, a Halotop, which you mentioned earlier in an earlier segment is a great example. Helotop, when we worked them twice in 2015 and early 2016, it was less than a million dollars in revenue. And the company, the technology loved the company, we loved the company. But we listed in the marketplace. And, you know, for the audience, it's never tried Helotop. When you try it, it's not the best tasting ice cream you've ever had. it tastes fine, but you would never invest because of its taste.

And so investors in the consumer space will try it. They won't like it, and they'll pass. Now, what they missed is that it wasn't trying to be the best tasting ice cream. It's a whole... We're not competing with gelato in Venice here. We're not trying to... Or hawkins dollars or benedgers. Or hawkins or benedgers.

Exactly. And so the insight they had, which you just mentioned, is when you, a consumer takes a typical pipe of ice cream to try and eat it, they either don't feel satiated because they only have two bites, or they eat the whole pint, and then they feel guilty about themselves. And so Halotop gave consumers permission to eat the whole pint by giving the entire pint by 250 calories. Investors missed that point. They just completely missed it.

And so they tried it and said, well, how can you invest in an ice cream? So the point? Yeah. So that was. I mean, you think about it, a pint of Hogendaz, I think is a thousand calories. Right. So it literally is 25%. Right.

Right. And so that was a challenge for us. It was hard for us to be able to, you know, to work with these companies. that we had a lot of conviction in and we talked to the entrepreneurs who said, guys, we know you're going to be successful. And so the answer was often, well, why don't you invest? Which led us to then raise our own funds to basically put our money on our mouth was. So more skin in the game was the way to overcome that signal. You basically were pitching people who were investors who weren't getting it. They needed to see you have skin in the game. So I guess at

that point, you did your $150 million fund or something to that effect, if I remember correctly. and then you just started putting in half million dollar million checks. And then did you still let the syndicate, as it were, participate? The marketplace? We did for a little while. I just didn't think the marketplace was working. And that was the pivot. So we had a pivot, which we've talked about publicly in 2017, 2016, 2017, where we shut down the marketplace.

We raised the $125 million fund from some great LPs in 2017. And we, you know, there was a little bit of our overlap, but we knew that the marketplace was going to shut down. And so when, and the basic reason was we thought we were selling dollars for 50 cents on the marketplace. We would find a great company. We'd list it. You know, we'd do all the work to go find it. Right.

So we built this technology. It would reach out to 100 companies. 40 would say yes. Of the 40, we'd list, let's say, I don't know, 30. Of those 30, you know, 15 or 10 would raise money successfully. And so the technology was finding 100 great companies and 10 were raising. successful in the marketplace. And so it didn't feel great.

It's a good start, but it's definitely the process didn't feel great. And it's kind of hard to make a living, right? Because you're talking about raising low single-digit millions. It's not like you can take 20% or 30% like the App Store. That would be considered too high of a take rate. So you were getting just like 5% of it or 150,000 fees. Yeah, between 5% and 8%. Exactly.

And just it was a really hard way to make money. Yeah, I've seen that with the other platforms. And, you know, it's like, it's very interesting in terms of a conversation because you would think being the house and being the platform would be the best thing to be. But here, it's actually better to be on the investor side. And that's what you, that was what you came to realize. So it's like the investors were getting the better side. You were doing all the work and you were getting such a small amount of the upside.

Well, yeah. And there's a number of reasons for that. And I think something that the platforms, and myself included, under us, was the lack of feedback loop. We looked at some of the credit platforms like Lending Club or Funding Circle early on as rough analogies. Well, the difference there is that Funding Circle and Lending Club have very short feedback loops. In the case of Lending Club, it would be days or months where you'd understand you get the money

back or you'd at least get information back and how the thing was doing. In the case of an equity investment in the private markets, as you know, it's five, seven plus years. And that's just way too long. Do you even know where you're at? Like just to know where you're at. Right. And so you can try and then play, you know, try and convince the companies to give monthly updates. But like, that's hard.

It's a hard way to keep investors engaged. So I'll give you probably the best example of this was Beyond Meat was on our platform. And an investor invested in it. And we made the, we made an introduction to Beyond Meat. And this investor put in $250,000. And when it went public several years later, the investor replied to that same email and just said, Thank you. Period. That's it. And he's, he's, he's great guy. He's also an investor in us. And I called him and I said, hey, like, I love to hear about more about like how it went. He said, well, I took

out 29 million. So he went from 250,000 to 29 million. And that's great. It's 100x. 100x plus. It ended up being 109x. And the, um, uh, over what period? Six years. I know. I think no, it was less than that. I want to say it was, four or five years, but I have to go look. Anyway, my main point in saying this is along the way, it wasn't like he made a hundred other investments, right? Because he was waiting for that feedback loop, right? We couldn't have done any better than that, but it was just so elongated that you've got

to survive that long. It just doesn't work. It didn't for us anyway. In fact, Angelist has struggled with this, and Angelist has pushed individual investors because there were two problems that syndicates had. had at these early days is really interesting to talk to you because we've kind of lived this, but never really talked about it because we don't know each other. But, you know, living separate lives in parallel, the real problem, you know, was people would come onto the Angelus platform

and they would do three investments. So there wasn't enough diversification. Now, I don't know what the CPG and ice cream and kind bars hit rate is, but I can tell you in software companies is seven or eight go to zero. And they go to zero in year two or three. And that's called the Jay Kerr, for people who haven't heard, you can look it up. Basically, it means your losses come first and your returns come second. So not only did Angelist have this problem of people wouldn't diversify, they'd make four investments, all four would die or three would die in year two. And they'd be sitting there saying, this is stupid, I'm getting ripped off. But then the people who hadcom.com, thank God that was my first. And thank God it's still the number one deal ever done in a

in a syndicate. It's actually, if you took the top five deals on Angelus, I understand it's bigger than all five put together. I got super lucky with that one. It was a $5 million round and now reportedly a $2 million company. If it hadn't been for that, I think the whole flywheel would have broke. It really is hard to get people to believe in it, which is why when they hit that $250 million mark, I sold 10% of the shares in Com because I was like, I just have to prove to people that this is

actually real money, that it's actually real money. And this classifier, I know it was originally called the classifier, but then it was called Helio, that became the value. What kind of signals were you using? I'm curious, were you looking at reviews? Were you looking at the staff size? Were you looking at what data was important? What data was important? Because when you're building these algorithms, it's super interesting.

Yeah, it pulls data from about 200 different sources. So I'll kind of go through it. There's two reasons this works particularly well in consumer. The first is that all of the business models are the same. So if I'm selling you dog, food, shampoo, or water, the margins are different, channels are different. Business models are identical. You make a widget, you sell a widget. That's very different than, let's say, tech, where you've got a game for your iPhone,

a securities business or cryptocurrency. Wildly different business models. It's because of that, it's the same game of chess over and over again. It's easier to build an algorithm to evaluate the company. The second thing that's so special about this industry, to get to your question of where the data comes from, is there's an outrageous amount of data that's publicly available in consumer. So I can see where a product is sold, not just that there are at Whole Foods, but specifically which Whole Foods. I can see how many skews that company has.

I can see the price points to the skews. If I'm tracking it, I can see what the end users think about the product, to your question about reviews. I can also see how all that information changes every single month and how it compares to every one of its competitors. Now, the problem, and it's a really big problem, is that that data is spread across hundreds of different sources. It's out there, but it's across the first seven or eight pages of Google. So what we've been doing for many years now is pulling it together, cleaning it, normalizing it. It's a really ugly process, stitching it together through a process we call entity resolution, and then building algorithms in top of that data.

And so it paints, again, a really, really interesting mosaic about the performance of these companies, kind of on an absolute level and also kind of relative to the rest of their categories. All right. When we get back from this final break, on October 15th, when you... really, you know, got super public with this. You announced that you were having, that Tuesday was your last day as CEO. I want to know about why you chose to step down as CEO and the struggle of those last couple of years, which was personal and just really hard, it seems. And so to the extent you want to get into it, we'll talk about what it takes to actually step down, which couldn't have been an easy decision when you were so, you know, so much vested in the company. When we get back on this weekend story. Listen, I have invested in over 200 startups. I've advised even more. I've been in the startup game forever. And one of the key things you want to do in a startup is you want to minimize your burn. And you need to maximize efficiency because startups are always under resource

versus larger competitors, right? So I look for people who can take a nickel and turn it into a dollar of value. Well, how do you do that? Well, look at all the different software products you're spending money on and how much time and energy your team has to put into integrating them all together. If you look at those two things, you're going to say, we're spending too much money and it's too much integration time. Well, O-D-O-D-O-O. I want you to go there now and get $1,000 in credit. I mean, I'm not joking. One thousand dollars in credits. It's becoming a little bit of a competition here on the show of who could be the most generous. O-D-O-O-com slash twist and you will get $1,000 in credits for their fully customizable and fully integrated suite of software products

that let you build and scale your stack as you scale your business. It's simple, it's modular, so you use what you need, and all of their apps integrate perfectly together with each other. Plus, it's all open source. You can spend your time on talent instead of expensive software. You need to spend that money building a team. So go ahead and get $1,000 from Odoo at odio.com. slash twist right now. Ryan called back is on the program today. He's been super honest and

candid about his journey at Circle Up. And you decided to step down. Tell us about that decision. And I guess a two-part question, why did you step down from the company that you created? And why were you so transparent and public about stepping down and all the personal issues that you had because there were fertility issues and other issues that you were struggling within your life. And I think it was a very human post. I read it twice because I was like, whoa, this is a lot. And it really, I think, humanized a situation, which is, let's be honest, you and I have

been in the business for a while. People generally just look at this as like marauding capitalism and they don't often think about the humans involved. It's, this is humans. It's personal. So why did you decide? to step down and why did you decide to share so much and tell us the story? The decision to step down, I think, began with some pain, emotional and physical, I guess,

that started in 2016. There was a, I detail this in the blog post, but there was a 12 to 18 month long period that was just by far the worst of my career, worse my life. Professionally, it was complicated. So professionally, we were pivoting. business. And for those folks that have ever been a part of a pivot, most pivots tend to not all. Most pivots tend to happen earlier in a company's life. We were post-series C and cat. And it's hard to pivot a company at that stage for a number of reasons. Investors are headed

in one direction. The team that was hired who was headed in a run direction. There's just a lot of momentum behind that. And that was difficult to do that. We had layoffs as part of the a pivot. We also went to raise. It was about 15% of the company at that time, a little bit less. But it was, you know, look, yeah, and it included people that I really cared for and didn't do anything wrong. It was my fault. The people that I hired two months prior. That's the worst. And it was laid them off. And, you know, I should have seen it coming and not hired them. And that was my mistake. I think it's the hardest, it's the hardest part of the layoffs is when it's not the person's fault.

And, you know, you do put it on your shoulders as a CEO that, gosh, you know, I should have known better or maybe I went too fast. And, you know, I was, I had struggles with that myself personally. And I talked to, I didn't have a coach. I know you've had, you talked a little bit better at having a coach. So I think it's a good thing for us to talk about for younger entrepreneurs listening, which there are many. I didn't have a coach, but I was talking to somebody about my, my emotions, my feels

around laying people off. didn't, you know, sort of, it wasn't their fault. And he said, listen, you know, they're, you don't know that there might be two other doors opening for them that will be even better and that you may have been blocking them from some great success. And that actually unlocked it for me like, yeah, okay, this is not life and death in terms of there are bigger things in the world. But you had you get through that, the layoffs. That's just emotionally. It was really hard. I mean, I did not have any secrets. I didn't have a man. coach at that time. I wish I did. Um, and, uh, my co-founder was incredible through it,

but it was just, it's hard on both of us. You know, then, then we went to go raise a first-time fund, the 125 million dollar fund. Then we raised a round for the parent, which raising around for the parent right after a pivot and we raised from TPG and Tomasik, it was really hard. I mean, going back to the earlier point, like there was a fair amount of luck there. Um, and along this, or at the same time that all that was happening, um, My wife and I were going through really difficult fertility issues, and I got diagnosed with cancer. And the combination of those things, look, frankly, any one of those things would have been

really hard for me. But the combination of those things, I think, just led me to kind of run the tank far beyond empty. And I felt exhausted in ways I've never imagined. And that led to depression. And that didn't stop. We know after we raised the round, and there's some kind of public literature about this concept,

but like the length of stress and length of depression made it very difficult to get out of. And so the last couple of years, while my job has been dramatically easier, I stayed in that state. And so, it's like an overhang. That's fascinating. It's like this ditch got dug and climbing out of it takes,

takes longer than falling into it. Yeah. And we had a great board member from Canaan. Or as long, maybe. Yeah, we had a great board member from Canaan named Dan Sophoran who at the end of 2017 said, hey, Ryan, like, I've never seen a CEO as burned out as you are. You need to take a sabbatical. And without, we don't need to go into my personal history, but I've just been a much

things in my life that have gritted out. And I thought I could grit that out. And that was a massive mistake. And I stayed in it, didn't take any sabbatical, didn't take any vacation. and it just kept on compounding on itself. And from there, every little stub of the toe, which would not have impacted me in the slightest three years prior, was now just crushing.

And it was very hard to keep things in perspective. And it kind of came to a head, I guess, end of 2019, when I wrote, and I approached the board and said, I wanted to step down. and it was my daughter, who's now six, then five, coming to me and saying, you know, why is, why is daddy always so sad? Why are you always so sad? Oh.

And that was just, you know, I was really hard. It was really, really hard. I'm a girl, dad, and I can't imagine anything tougher than having your daughter say that. Like, I mean, you're a power through warrior guy. It's so obvious to me. I know the archetype. I probably share a little bit of the archetype, which is I can power through anything. All I have to do is grid it out.

Put a couple more hours in. Put in some weekends. When everybody else falls asleep, I stay up a couple extra hours. I get up a couple extra hours earlier than people. I can just put the team on my back. I can hear it in your description of yourself. And what people don't realize is you can just keep putting stuff on your back until the back breaks. And your back broke, didn't it?

And reasonably so. I mean, it did. It did break, but I think there's two other learnings that just I didn't, I didn't foresee, frankly. So one learning was when my daughter asked me that, there were moments, periods of time, that she looked sad, that I thought she was beginning to internalize, like, the way I was acting around the house. And then I'm thinking, like, what the, what am I doing with my life? if this is the model I'm sitting for my five-year-old, like how is she going to bounce back from this? What is the purpose here?

And so that was a difficult thing. The other thing that I missed just completely was by putting it on my back. And look, let's be clear, my co-founder was both dealing with a lot of pain professionally but also an incredible source of support for me. But like by taking what I did, whatever that was on my back, I also prevented teammates from feeling closer to me. And so you know, you build trust through,

I think, credibility and reliability and authenticity. And the authenticity component for me as the CEO during that three year period, at least the first 18 months, was non-existent. I wasn't being myself. Like,

I was going through cancer and fertility and a living hell, frankly. And I wasn't talking about anything. And so the team would see me and they knew something was up, but like I wouldn't talk about it. But that's hard to build trust

with someone like that. And I missed that opportunity to come together as a team. So that was my failure. Yeah, I mean, and it would have actually, they would have been there for you. So it's a missed opportunity as well. Whenever some great warrior like this decides they're going to, you know, put it all on their back and they're going to be stoic, you know, the stoicism thing, my friend, you know, Tim Ferriss and Kevin Rose,

they were, you know, Naval, they're all tweeting about stoicism and, you know, being strong and all this kind of stuff. I was like, yeah, I get it. I kind of feel like it's a little bit idolizing, denying the core emotion and the core issue here, which is a person can only handle so much. There is a breaking point for all people, even mighty CEOs, even mighty titans of business. There's going to be a breaking point. And you want to make sure you don't break everything around you, like including relationships, whether it's your daughter or coworkers, etc. and I think that's like a really interesting tell as well.

And you started having headaches, which must have been like a, and these were persistent, describe the headaches. Yeah, I had not had a headache in 20 years. And so the headaches came and it was almost constant. I mean, it was every hour for months and months and they were, you know, crippling. Like I just walk, my wife would see me walk through the house and then just stop and like contort my body and just like sometimes actually physically get on the floor. and it was just unbelievable pain.

And so went to the doctor and, you know, given the type of cancer I had, which I don't want to talk about, they were worried that it would spread, that it had spread to the brain. And they gave me an MRI and they came back and they said they thought it had spread to the brain. Went back a week later to another MRI. They concluded that it had not spread to the brain. and I remember, and I put this in the blog, but I remember the doctor said, you know, we've had 11 doctors look at this.

We don't think it's cancer. And I just like, why did you need 11? Because that's not comforting. What did the feel? Yeah, that is mysterious. That's not normal. There's not consensus. I get a second doctor.

Why did you need 11? What happened there? So it was, I mean, that and there was a period where I was peeing blood and those things just, the doctor kept on saying, no, this is a fluke, this is unrelated to cancer, unrelated to cancer. But in your head, you've got such a small portion of your brain that's able to think about that versus we had a newborn at the time. In addition to the daughter, we also had the business issues and like all these other things kind of stacking up. It was just hard to trust, frankly, hard to trust the doctors, hard to trust other people, hard to open up.

And it was really difficult. now you've taken all this pain and suffering and you share it with the world. It's got to feel great to have everybody, I would think, because I'm emotional talking to you about it. I feel like I've grown just having this conversation with you, Ryan, so I thank you for that. And there's going to be 200,000 people who listen to this conversation. They're going to grow from this. This is a real gift you've given to the world. I hope you realize that.

Thank you. Thanks. I mean, I really wanted to put something out there that helped other founders feel less lonely. I thought one of the reasons I was hesitant to do this, meaning to put it out there in the world. No, no, to put my story out in the world is I don't think it's that unique, frankly. And there are so many ways that I was incredibly privileged. Like, first of all, like white male who lives in the peninsula, healthy, like, there's a lot of privilege there. Sure.

Also, the type of cancer I, we made it through. We ended up having kids. So all the fertility issues were heartbreaking, we ended up having kids. There's so many people that can't. And the business survived. The business is like now thriving. And we've raised money from grade. There's so many ways that we were in such a great position.

And the reason I ended up sharing it is I thought, you know, if I had the worst type of cancer, if we weren't able to have kids, if it was the worst possible situation anyone ever heard of, I don't know that it would be that relatable. My hope is that because it's not the worst thing anyone's ever heard of, it's more relatable. And I think I've seen that. I mean, the outpouring of folks reaching out has been really touching. And I've also been struck at how many of them had far worse situations, but still found some comfort to know that they're not alone. There's a lot of people struggling out there.

And, you know, somebody tweeted something the other day. that I was a podcaster will come to me. Shane, I forgot this podcast right now. Anyway, a podcaster who is a podcast I really enjoy. I think it's Shane Parrish. Shane from the Knowledge Podcast. Yeah, from the Knowledge Podcast said, just remember, there's like billions of people right now who would trade for your problems. Yeah. Right. And so when you're thinking like, these are my problems, like there's somebody in Bangladesh or a little girl in Afghanistan or somebody living in North Korea in a Gulag or a Uyghur in China

being tortured, who would say, like, please give me this set of problems because at least I'd have some control over, you know, the outcome. But man, there is absolutely no doubt that pivoting a business and dealing with cancer and dealing with fertility and dealing with your own depression. I mean, this is, I mean, we're past trifecta, right? We're now at, we're now at four, five or six issues. And so you're probably not even thinking clearly. And this is one of the things that I'll just read from your great thread. And number 16, I've made many mistakes during this time thinking I could just grit it out alone.

Man, I hear that all the time, by the way. I wish I'd join a CEO support group earlier or taken time off. I wish I'd look for a therapist and a management coach sooner. I wish I'd confide it in the wider team, not just the board. I mean, this is, if you had to give a person listening right now whose company is failing, whose marriage is failing, who's failing as a parent, or who's suffering from, God forbid, cancer or fertility issues or whatever combination of these horrible things that you had to go through,

this is the key advice for you that you would give them, and is there anything you to add? I wish that the incubators, I wish that the seed funds, I wish that the business schools or the engineering schools, anyone who is producing entrepreneurs, I wish they would talk about mental health. And I wish they would talk about ways to support your mental health, the entrepreneur's mental health.

I wish that they would talk about it both for the entrepreneurs themselves and the investors that would back them to build empathy. It is by far the thing that I have seen be the most difficult for founders to deal with. and those that are talking about it and talking about the struggle, in my experience, have been the ones that have dealt with it in the healthiest way. The ones that you ask, you or anyone in this listening, ask and respond with, oh, things are great. I really, I just, I love my job. Things are great.

The company's crushing. Crushing it. They're the ones that are struggling the most. That's straight up bullshit right there. This isn't a matter of like how successful the company is. I've talked to, I had. multiple founders of unicorns reach out to me with stories worse than mine that they don't feel comfortable talking about.

Like, let's let that settle. Like, worse than mine that they don't feel comfortable talking about. And that loneliness compounds on itself. And in my case, it was too much. Or I didn't handle it well, I should say. And I should have found help earlier. And I think that would have allowed me to stay in the seat and be more effective. It is definitely the right decision is to ask for help.

And the right decision is also, if you have friends who are fellow founders, asking them, you know, how's it going? This is the technique I was taught by a friend of mine who's a psychologist. He said, you know, you can ask somebody, how are you doing? And they're going to give you the answer. Like the standard answer, great, crushing it, whatever. Oh, good, how about you? And then you say, you know, how are you really doing?

Like, tell me everything. like the good and the bad and everything in between, like how you're really, really doing. And once you do that, you ask that second and third probing time and you give permission to, hey,

let's open that up and let's talk about it, you know, and let's get real. You know, then you can actually have a chance at getting the right answer. So if you are, in fact,

an investor listening to this or you're a board member who's not an insane narcissist who, who was unreasonable and needed to be corrected. I hope only the best for that person who you had to write that memo to. I think, you know, there's something about really giving people permission to open up because they don't feel, Jerry Colonna taught me a lot of this actually, too.

I'm sure you know Jerry by name or personally because he was associate. Oh, fantastic. He's been a guest on the show three or four times and how much. me in 1994 to read business plans for him and Fred back in the day in New York for GeoCities and the spot, which was Masayoshi-San's soap opera on the web. And, you know, he really talks about this like being a great listener and asking people how they're doing. Everybody should have a coach. It should be mandatory. Josh Felser from Freestyle Capital, yes, Josh Felser is paying for his founders to go to, you know, either coaching therapy or any kind of awareness stuff. So you think you're

a new circle back around with this board member at some point and try to hash it out? Is that part of this process? And where are you at now in your life? You're going to take a year off. You're going to try to reconnect with the kids. What do you have to look at the future after all this?

Because you're not, you're not, I mean, how old do you now? You look like 41. I'm still full time at the company. And I'm here. I mean, in COVID, I'm physically in my house. But, you know, I don't know. I'd certainly be open to it, but my goal, and this was to help other founders. I think our relationship, we're not going to work together again.

So I'm happy to talk to them. So I think, you know, I'm hopeful, and I appreciate you have me on, Jason, because I'm hopeful that these kind of messages help other founders and the communities around them to go through that process in a healthier way than I did for a couple years. For founders of consumer goods and who are making products, how do they work with Circle Up? Reach out. So we have both a credit platform and a series of equity funds. And so we would love both by offering credit and equity.

How does the credit piece work? I see a lot of innovation in that space. Are you doing any innovative stuff there where you're financing marketing or doing any of that kind of interesting stuff that people are trying to do? There are people who are creating marketplaces where they'll sell equity. They'll sell MRR. They'll sell your yearly subscription service to you and put a marketplace up for 92 cents on the dollar or whatever. Yeah. Cool stuff like that.

Yeah. So today we have a $200 million credit fund that offers short-term working capital lines backed by our inventory orders. We lower the CAQ, the customer acquisition cost, to find those companies through Helio. But we're beginning to think through. And you'll see this over the next several months in a year or so. other financial products as well. So we're excited about that market. Yeah, pipe.com, that's the one.

The debt piece is really interesting because a lot of times people have good businesses, but if, man, they could just get $50K a month or $100K a month and extra capital do those Facebook ads or Instagram or Twitter ads or TV ads or podcast ads, they could just

break out. So continue success with that. Really appreciate you coming on the pod. I know it's not easy to talk about these things, but I've really glad we did this episode sincerely. And I appreciate what you've been through. And I appreciate you for sharing it. And if you're listening to this and you're struggling, you are not alone. We all go through it. I've gone through it. I tell you, man, this pandemic has pushed me to the limit. Oh, yeah, the election, the pandemic. I got three girls. I'm a girl dad too. And I got,

it's just hard. It's hard for everybody right now. This 2020 has been crazy. Your 2016, 2017, 2018 experience, that 18 months. It's like the whole country is going through some varying version of that now. Yeah. It's like, you know, we're all in our own like, you know, cage of like, oh, my Lord, you know, having to examine our lives and really, uh, I heard some crazy statistic about the number of people who say they're suffering from depression. And I was feeling pretty melancholy.

I have to be honest. like all my speaking gigs canceled. I know I'm sounding like a privileged white VC, but man, I just loved going to Australia or taking the girls skiing or, I mean, I miss taking my girls to the movies. Like that,

I mean, literally if I had the number one thing on my list, it was just going to the local movie theater and taking them on Friday afternoons or Saturday afternoons to see the movie for the second or third time, haven't been to a movie theater since March. It's a bummer. I want to see the new Wonder Woman.

with my girls. I'm going to rent a theater for that. So if your girls want to come, I'm renting the IMAX. I'll probably have about eight people in there if we're still during COVID. All right, Ryan, this has been great.

Really appreciate you taking the time. And we'll see you all next time on this week and startups. Bye bye.