This Week in Startups - E1147: “Godfather of SaaS” Jason Lemkin on 2020’s cloud software boom, public CEO mindsets, how Zoom conquered the competition & more | Rising Stars of SaaS 8

Episode Date: December 2, 2020

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And there's so many interesting emerging companies. And the godfather of SaaS is with us. Jason Lemkin is the other Jason, as we refer to each other. The other Jason, if you're looking for the consumer investor, that's me. And if you're looking for the SaaS investor, that's Jason Lemkin. He's been on the podcast three other times, episode 597, 6663, and 698. When he did two of those are talks, he did our events. And of course, he has Saster, the giant, huge, large event that got canceled as well during the pandemic.

Hit hard. That was, I mean, your events were ginormous and there was a lot of money at stake too. How did you deal with that? Welcome back to the program. First of all, it's been too long. Thanks for having me. Yeah. And tell us what happened with the Saster conference and how you dealt with that because I believe that was at the beginning of the pandemic.

We were the first big event. got taken down by COVID. And yeah, we lost about $10 million all in, which, you know, is more than pocket change for most of us. But yeah, it was, it was crazy. You know, it's funny, looking back in March, you know, there was so little COVID here, right? And we didn't know what we're doing. And it was surreal because not only did we lose 10 million, but the Warriors kept playing. And the world kept moving, like the wheels kept moving in the consumer side.

even though the B2B side was, you know, the B2B side was shut down first for events. And it may be the last to come back for the same reason. But it was brutal. But it's fun. It's like a lot of things. And we should talk about SaaS self. But you adapt, right? You adapt and you learn.

And good things for all of us. I mean, the cloud has zooms quintippled since then. Every cloud stock that could benefit from COVID has. And even for our community, we found ways to benefit from. it. So it's just great when you have a team that's clever and crafty, right? And so many interesting things will come out. Like we didn't know Zoom would be a consumer app, did we? Never in Eric's mind would Zoom be a consumer app. Now it's a $3 billion run rate company. And you know, 40, 40% of that may be from consumer use cases, right? It's hard to know for sure,

right? Which is crazy. Crazy. What date was the event supposed to take place? Second week of March. So RSA got done the week before and then the county just shut it down. And we people, it was funny, people mocked us. In February, we wrote this thing. You have to wear masks. You have to wash your hands. You have to do social distancing. And we got made fun of it. Even the Wall Street Journal said this was crazy. Like it was extreme. And we did passport checks. We had thermal scanning before anyone did it with Matt with enterprise grade consumer heat scanners that were half a million dollars. And everyone mocked us. And then, you know, those weren't bad ideas. Well, it turns out, yeah, you were, you were ahead of the curve. Those have

become the standard. I was in Vegas for a poker taping of a poker game like a poker after dark during the pandemic. And we had to take tests and we were quarantined and all stuff. But when you walk in and out of the hotel, they had those infrared scanners and they were actually scanning people. I didn't spend any time in the casino because I thought, this is too dangerous. We were in our own like a place where there will be videotaped. So how does it mechanically work when you have an event like this cancel and you're so close to the date, just, it just the vendor, the, there's no rescheduling or is there a clause with the venue for like an act. Well, I would say there are, well, it's interesting to me. You really want to go into

interesting, there was a force major event. There's no question. The interesting question is who gets the benefit? Like the venues running a business. Okay, we agree it's a force major. That means who, but who has to pay. Right. This is a funny nuance. Is there a force major clause? Of course there is. It benefits the venue. It benefits food and beverage. It benefits. So yes, there was one. It just doesn't exactly do what you think it does, right? Right. Yes. Yes. We agree. It's a force major. In that case, you owe us everything. Wow. Well, think about it. I know it sounds crazy. And listen, it was stressful for us. But think about it for a moment. A contract decides who assumes risk. And if there's an act of God, if there's a pandemic, a tsunami, one side has to assume risk. And it's not necessarily, it doesn't have to be. the smaller guy or the customer. It could be the vendor. You don't know, right? That's the point of a contract.

Each contract is different. They're all different. This is the first time in our lifetime that really a force measure situation has happened. Yes. And I remember in my early days of running conferences and you and I both have run very large conferences, we would always like debate these or I'd have people on my team who are obsessed with these kind of clauses, you know, and cancellations and payment terms and all this stuff. And then we'd have other people like, ah, this doesn't matter.

And it doesn't matter. 99 out of 100 conferences. And then you have this like black swan event. And you actually go pull out the contract and say, what does it say exactly? And yeah, it could be, it could go either way, right? Could go. A lot of this could go either way. Yeah.

So you move the conference online and does that work? And I saw there were some SaaS companies that are doing online conferences. I wonder what you think of online conferences. They're terrible. They're terrible. They're terrible. Now, we've done a good job. Okay.

So they're terrible, but Saster's doing a great job with it. Okay, explain. Well, because we don't do conferences, right? What we, I mean, it's very interesting to what we talk about SaaS software. You know, the digital events, software space has raised 300 million in the last six months, right? Hopin went from, in less than a year is worth two billion, right? And we could chat about why that is because it's interesting. But these events, you go do, they're terrible.

right do you are you going are you going to reinvent this week are you going to dream force are you going to web summit no have you been to some of those events yes you have we you I don't have much time I've been to dream force 10 times reinvent takes over Vegas right web summit is epic but are you going to the digital versions of those you're probably not are you probably not right there's a reason I mean you're not getting the interactions you're not getting the other pieces right but but you know what is great getting to chat with an Eric Wan or an Aaron Levy or Todd McKinnon or someone like that. And so what we've done is huge digital way that's accretive, which is have Q&A, have the discussions

you and I are having, but have them for 100,000 people. That's what we've done since March. Have these discussions for 100,000 people. And that's worked well for us. But we've ditched all the stuff, the booths and the and the pretend other things. It doesn't work. So Hopin raised $100 plus million dollars at a $2 billion. valuation, something crazy like that. I don't know if you're an investor in the company.

I'm not. But I do think of all the tools, it is the best one. And more importantly, it has the most traction. It has the majority market share in a very large market. And it's gone from zero to 20 million revenue in a single digit number of months, zero to 20 million in 10 months. Now, when you look at it as an investor, when a company goes from zero to 20 million during a pandemic, how does one judge that investment opportunity? Let's say, I don't know if you had it or not, or if I had it or not, but how would one judge an investment opportunity in something that is being driven by the pandemic? Yeah, it's interesting to think about investor psychology. I think it's helpful for founders. I didn't invest in Hopin, but I did a couple that benefited

Talk Desk, which is a contact cloud contact center. They went from one to three billion dollars during the pandemic because everyone couldn't go into call centers anymore. They had to do them from home. And while at first, NetNew struggled, deployments, two-year deployments got done in two weeks. And upgrades were off the chart. So the revenue just is crazy. And you can see it in public comps like Ring Central and others as well. It's not only them that benefited. So that's a quick benefit.

Another one I did, I did sort of a Zendes for e-commerce called Gorgeous. They went from $3 million to $13 million this year because Shopify exploded, right? So on top of that, what's the number one way to do customer service on Shopify? It's this little app called gorgeous. And so you look at those. And I think when the pandemic first hit investors were like, well, this is going to, this is going to end and this is fatty and they're all going to return to normal, right? But maybe they will.

But I think what we've learned in SaaS, I don't even think you and I knew this when we chatted the first time and met. And when I talked to so many longtime founders, we all underestimated the powers of brand, of brand. And Michael Pryor and I from Trello just caught up. And he said, I said, where will Trello be in 20, you know, 2030? He's like, it'll be a lot like this. We'll be in 2040. He's like, I have no idea what Trello.

The app will be like, but the brand will be there. The brand around collaboration and the way we manage projects. And we underestimated that. And we look at all these companies like Zendesk is at a billion. HubSpot's at a billion. All of the ones we came up with are at a billion in revenue, Slack's at a billion. And these brands last forever. And so I think the ones that got these boosts, the boost, like maybe it will decelerate.

And we can even squint at some of Shopify's numbers and see a deceleration in the sense that five years got pulled forward into two months. So that growth can't, you can't have about 200% of commerce be commerce, can you? I mean, there's a maximum, right? So the brands are going to go forever. So I think VCs figured that out and they said, look, we're going to play the game. And we're going to do hop in at $2 billion. And we're going to do all these things because, yeah, there'll be some deceleration. But they've been pulled forward so much, these have become winners.

And we're going to bet on those winners. That's what I've seen. So when we get back from this quick break, I want to know what you think of Slack selling to Salesforce. And if that is a great purchase or they overpaid or who else should have bought it when we get back on this week at startups. SaaS companies with reoccurring revenue had only two ways to grow. They could sell equity to an investor, a venture capitalist angel investor like myself, or they can go into debt. Kind of scary. They can get venture debt.

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But you do get that money for your yearly contracts or quarterly contracts, and you get it today, so you can deploy that money to get more subscribers, more SaaS revenue. It's brilliant. Super easy. It's frictionless, and it's completely transparent. And they only take a couple of minutes for you sign you up, and you'll have the cash in your bank within 24 hours. Pipe is so confident you'll love trading your SaaS subscriptions that if you sign up for

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You can follow them on the Twitter, Jason LK. And you can check out SAC. his website, S-A-A-A-S-T-R.com. They had the largest event, thousands of people coming to it, and it got the plug pulled the week of, what was the second week in March? Second week of March.

I started my quarantine on that Monday or Tuesday, which was the 12th, I think. Yeah, we sheltered the next week after the post office. And we sheltered that Monday, and then Thursday was when the NBA game got canceled in real. time. That's when I knew this was going to be a real thing. Yeah. Like I was watching the videos at my poker game in January of them like fumigating in the streets with like tanks in

Wuhan and they were blowing like anti and they were like welding door shut. And I was like this seems dystopian and crazy. Like this is like a movie. We learned it was just aggressive. Yeah. And and then you have this like the NBA game game. getting called off with people in the arena. Yeah. I was like, whoa, wait a second. This is, is that when you knew? What was the moment you knew this was like going to be legit when they told you

you couldn't have Saster or that in February you kind of realized this is going to be a problem? You know, it's funny. You and I were talking before we went out about black swan events. You and I've been doing this long enough. You know what I've learned every five years there's a black swan event in my career. And every year there's a big, a big, arse curveball. one, okay? And in January, early January, the CDC put out some announcement on COVID, and I sent it to my, really, my co-founder for Saster, Emilia Barra, who runs everything. And I said,

this is our event this year. This is going to hit us hard, like the first week of January, the COVID notice, because I'm like, this is different. This is going to hit us hard. So we immediately prepared and we did all the, you know, we have 15,000 masks in our warehouse. We still can't get out. We did the thermal scanners. But we knew in January. So we were already prepared. But no one knew it would be like this. Right? No one under, you know, I mean, people did think it would. Once we, once we, once we sheltered, we all thought we'd be back by the fall. Yeah.

Everyone thought we'd be back by the fall, right? I thought the summer. It was rescheduled to the fall. Everything was rescheduled, right? But now we look back at the curves and there was like no COVID then. There was no COVID back then. And now we are testing like crazy. Yeah.

The testing in the cases seem to be very much in sync. But the thing that's actually super just, and survivability's been great. but when we're taping this in December 2020, for those of people with the historical document, we have over 90,000 people in the hospital for this, and we're starting to see the deaths climb up again. Thankfully, the debts are not growing at the same pace they were, so we obviously are getting better at this

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

Well, I'm not, I'll tell you what we're planning. We're going to do Saster Annual. We haven't really announced it. We're going to do Sastery next year in September. We have the venue. We're going to move it outside. We're going to do the San Mateo County Fairgrounds. Oh, yeah, right by my house.

Right by your house. So we're going to get you on stage. We're going to do a main stage interview. We're going to do it live. And we're going to do some different things. will have the things will be a lot more distance. It's 30 acres, right? So people can stretch out. It's incredible sense. But we're going on September. I think, you know, other than the most conservative folks out there, Fauci and everyone says by April or may, everyone that wants the vaccine,

at least in the U.S. and Europe will have it. There'll be vaccine passports, whether the county goes along with it and whether it's truly safe, we don't know, right? So we're not, we're not saying we 100% we can, but we decided last week to go full steam forward, invest our limited capital, and we're going for it in September. We haven't told anybody yet, just so it's just between you and me right now. Yeah, we'll keep it here in our audience. And our audience.

And our audience. But September, we'll put it on our calendar. I mean for the Warriors. I mean, I'm sure in Texas and even Orange County, they keep playing basketball if they could, right? I mean, the, the, the 49ers are just moving to Arizona. So I don't know when we can go to a Warriors game, but I'm pretty sure, you know, by April or by summer,

we can go to a basketball game or some sports game somewhere. It just may not be in Northern California. Northern California, maybe the last, we were the first to go into, take this stuff seriously, right? Yeah. And it makes sense we'll be the last to, we'll take the least risk. Why do you, why does that make sense? What is the underlying phenomenon or the underlying reason why we went first and we'll be last?

Boy, I don't know. I'm not a San Francisco guy. So there's a, there, but I think we have a, we, I think we have a respect for both science and technology here. We listen to our advisors. And I think, and the world is totally different. I also think tech companies all immediately went home, right? It was easy. It was easy. It was easy. It was easy for Slack and Salesforce and everyone to make the magnanimous gesture and send everyone home because outside of parts of DevOps, the impact was minimal, right? Versus the meatpacking plants and even retail are not a big deal in San Francisco. And so we have very little,

very little COVID here. But I think I think everyone's cognizant of that. And I think, there's a lot of weird issues in San Francisco with rents and others. But taxes will, California will make a lot of money from capital gains this year. Things will be okay. And I think people will be slow to take that risk. But I mean, this is talking about SaaS. I mean, who knew that 2020 would be the best year of all for SaaS? It is crazy when you think about it. by far, by far. If I knew what I knew today, like the best way to be a great, and you're an amazing investor, Jason,

but the best way to be an investor is to like have, you know, peer into the past. Just a couple years. That's enough. Right. Right. Just enough. Just peering in the past, right? It's an incredible run up.

And I think as part of that today, when we're taping, Salesforce has signed a definitive agreement to acquire Slack. For unbelievably, $27.7 billion, They're doing $200 million a quarter. So $800 million, a billion a year. This is 30 times revenue. Yes. Is this an incredibly incredible acquisition?

Did they overpay? What are your thoughts on Salesforce buying Slack for $27.7 billion? Well, first of all, let's a couple things. First of all, as crazy as sounds, Slack's a relative bargain. Why? Slack did not get quite the boost that Zoom and others got. Slack stock is up, but not what the others are. So Mark pounced.

Mark learned to pay up. Tableau $18 billion, right? The first what happened with sales source is they bought MuleSoft for $6 billion in, I think, 2017. And everyone's jaw dropped. Wow, six billion seemed like so much money for Mulesoft. Now it's like a trinket, right, in SaaS and Cloud. And what happened if you talked to into what saleswors does, the best act, the biggest acquisition was their best.

sales force is too big at 20-something billion in revenue you have to move the needle right materiality is 10 percent so if if mark can't get two three four billion in revenue minimum out of an acquisition it's not worth getting out of bed is it right this is Microsoft had this problem in the 90s right there anything they could buy was so small that it wouldn't change their faith wouldn't change unless it was strategic like like a like GitHub or LinkedIn it's probably or Minecraft it's probably true today right uh even today but so difficult to move the needle yeah So Slack is a relative bargain. We can chat about why, in my opinion, it's a relative bargain.

And Salesforce prides itself on doing big acquisitions well. Salesforce hits its numbers. And if you squint, there's five clouds at Salesforce now, maybe six. And half the revenue is inorganic. Half the revenue is inorganic. So they're good at buying things. And Mark knows to pay up. And he's always wanted this.

You know, they, they created a Yammer competitor called Chatter. David Sachs, your buddy will remember this. Yeah. Mark put 300 engineers on the Yammer competitor. Right. Back then that was a lot of engineers at Salesforce with no revenue and they were putting billboards up and they were. It failed. It failed.

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

So he's bold. He's audacious. Yeah, he wants to move the needle. Why didn't Slack break out during the pandemic? And is this a failure of Slack as a company that they could not grow and remain independent? Answer that question when we get back on this week at startups. 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'd need to maximize efficiency because startups are always under-resourced 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 the 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-O-O-D-O-O-O-O-O-O-O-com change that. O-D-O-O-O-O-com 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

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And I think this Slack acquisition is, along with Zoom's massive run-up, this has to be, yeah, a watershed moment for SaaS, correct? Incredible. Incredible. Yeah. We're living in 2025 in the cloud today. We've pulled forward five years. Amazing. And incredible for investors in this space, employees, etc.

But one wonders, why didn't, why wasn't Slack able to, you mentioned it's sort of in passing, but Zoom just skyrocketed. But Slack did not during the pandemic. Their revenue has grown 50% year over year. That's a high growth company for sure on a smaller number. But isn't it a failure that Slack could not remain an independent company or is it success that they were able to just cash out? How do you look at it?

And why didn't they grow? Well, I have thought about this a lot and written about a lot recently in general. First of all, I'm a huge fan of Slack. We chatted about it the first time you had me on your show. You were a hip chat fan. I said Slack would be bigger. I was all in on hip chat. Yeah.

I had some fun. I've been a fan. I, you know, at the first Asteroannual ever, the only speaker I didn't know was Stuart Butterfield. They begged him to come when Slack was doing six million in revenue. I'm OG fan, right? Yes. And I think Stuart is the kind of person we all want to work for. someone that deeply cares about people that cares about inclusion, that cares about doing the right thing,

that cares about product, right? He's a match. He really is. And I have no criticisms, it's only admiration. But what I have learned now that there's so many SaaS companies, there weren't any SaaS companies at a billion in ARR when Slack was found, now there's a ton of a billion, Zendes is a billion, HubSpot's at a billion, zero's at a billion. We can go on and on Slack's coming in a billion.

And what we've learned is the ones they approach a billion and don't have a second product line that's equally as big, slowdown. Ultimately, there's only so many consumers. Now, there are exceptions, but even Zoom, I would say, has two product lines, B2C and B2B. Right. And yes, Zooms and three billion. Zumes at three billion, but the pure old Zoom is only at a billion. And that Zoom is adding phone to get bigger because the old Zoom isn't big enough to get to 10 billion. It needs to add phone, right? Phone. Yeah, phone is the B2B2B phones. Yeah, a huge amount. Zoom has two big pushes, Enterprise and phone. And then there's this weird thing that other than revenue market, I don't think Eric ever wanted, which was the yoga and the jazzer

side of Zoom and schools. It's a headache. It's great. I mean, it's great. But so, and the ones that slow down, the drop boxes in the box, and I love that you and I love these products, but their growth rates are slow. The survey monkeys, they start to slow into the teens, 15, 16, 18, and that's the death now for a high growth company.

You're not a high growth tech company. And you have, and you look at folks like Viva, you know, Viva was this pharmacy around that spun out of sales force. It's another great success. But their vault product, which is where you archive compliance-based content, the vault product's larger

than the pharma product today. It's larger than the initial product. Look at Twilio. Twilio is at $3 billion in a rocket ship, but it's added send grid. It's added segment. It's added, it's added call center. It's added a whole bunch of things.

If Twilio had just been Twilio, that lovely API we love, it was never going to get to $10 billion, and Slack didn't do it. And Stewart could do it. This is a great team. But I think culturally, they didn't want to do it.

And I think you have to decide, okay, guys, are we going to reboot our company? Are we going to reboot our company and be more? Or should we be the slack arm of a bigger company? And I think it's a logical choice for that reason, because there's only one product. This goes back to the axiom of what got you here may not get you there.

What gets you to a billion in revenue is having somebody like Stewart and create this incredible family of Slack employees and this mission, but you really need somebody like Jeff or Benny off at Twilio or at Salesforce to then go into that second stage entrepreneur and say, I'm going to build a collection of brands here and I'm going to scale it that way, correct? Yeah. I mean, at Salesforce, the CRM product is their slowest growing cloud.

It's very slow going. So if this is the case, why hasn't Zoom with their massive market cap gone on an acquisition spray. I thought Zoom would buy Slack. I thought Zoom plus Slack would be an incredible combination. Am I crazy? Well, first of all, I mean, until you've been acquired, as I have a couple times, until you've been a vice president in a big tech company where I was at Adobe, you don't really get how it works, right? But it takes most companies. This is why the Jeff Lawson's to me, I think, are bad our CEOs, okay? Most of them, it takes time to build up to big acquisition. I remember in the early days of Adobe Sign, Echo sign, my last company is a fact.

founder, Salesforce wanted to buy us. And they called this up to one market to chat. But Salesforce's market cap was like $4 billion, $5 billion at the time. And they said, we want to buy you, but the most we've ever paid is $16 million. So eight, eight is the highest we can do for you. I said, well, eight, I mean, it's early. I get it. But like, we raise three. So eight's not enough. Like, I need 30, like even to get out of bed to talk about this. So that was 16. They've done this thing that got them their mobile products. And then they built it up. And then and then and then their jaws dropped at the Mulesoft or even exact target to something billion to buy email. People thought Mark was crazy.

So that's the traditional way. It takes folks time to build up to these big acquisitions if they don't come from that DNA. You have these crazy CEOs who I love. I love Jeff Lawson. He's one of my favorites. He's like, I don't have time, guys. Like, I need scale tomorrow. And they talk a lot about when he looked at SendGrid.

He said, look, if I don't buy SendGrid, I'm going to buy something small and put a thousand engineers on it. But I want scale tomorrow. I don't have time. I'm growing 100% at a billion, almost 100% in a billion of revenue. I want to buy scale. But most CEOs can't do that. And I think for Eric, I mean, I know I'm a little bit, but I've never talked about M&A. I don't think it's his mindset.

So it takes you a while. It takes you a while. And it has to, and it often comes out of fear, right? Or Mark seeing that Salesforce CRM would never be big enough. He knew it would never be big enough, right? Right. Or it come out. But I think it just won up service now just bought this AI,

out of Canada Elementum that raised a couple hundred million. Anyhow, service now is 100, 2004. That's their biggest acquisition ever. So that's the third biggest cloud company, right? Second biggest enterprise. That's not their DNA, is it? No. I mean, it does take a certain mindset for a founder to go from that. Let's call it, you know, I can build it to I should buy it, right? It's like, I can build it is what Bennyoff believed in chatter. I'm as smart as sack. I could take off sacks. I could, you know, I could just build it. I can throw 300 years.

And then all of a sudden, bending off 2.0 is, I should buy it. I can build it, but I should buy it. And Lawson seemed to get there quicker, right? Yeah. Jeff's like, hey, you know what? Instantly. Screw it. Why would I even try?

Like, send grids out there. Why don't I take that? Or why don't I try to get Melchimp? And then you have Zuckerberg is another great example in the consumer space. He's sitting there going, yeah, Instagram and WhatsApp. roll us over, screw it. I'm buying them and I'm not even going to my board. I'm just going to buy them unilaterally. Tell the board. He just told the board, we're buying WhatsApp for whatever it was, 17, 18 billion. We're buying Instagram for a billion. It's we're done. Like the deal is

done. Yeah. One thing I'm curious about is how will you define success for Slack under Benioff's, umbrella now. And can they grow faster? In other words, you know, Facebook, a lot of people say Instagram grew faster as a Facebook property and that YouTube grew faster as a Google property because of the infrastructure and developers and scale that they had already learned as an organization. Are there things Salesforce knows as an organization that will accelerate Slack's growth? Yeah. Or do you think there could be integration problems? Well, there's something that's not obvious about Slack if you don't dig into its financials. So since the IPO, the majority of its new revenue, its new bookings has come from the enterprise, has come from six figure deals. And they have

a ton of seven figure deals. So Slack, Slack only has one product, but it went from one segment, which was sort of freemium SMB developer to enterprise in a way that's rare. I mean, it went, it went so up market. It's almost unbelievable, right? I believe the majority of its growth is all enterprise fueled. So that's something that is not their DNA, and that is something that is Mark's DNA, and they will go in with confidence. And where Slack maybe got nervous, I mean, look, Slack crushed it, right? But everyone gets nervous in sales. I want a million dollars from Procter and Gamble or whatever. Mark will go in and ask for 10. He'll go on and ask for 10. He's an animal. Yeah, they'll just ask for 10. And they'll price it for value. They're not ripping anybody off.

But that's what works. That's why their acquisitions in the enterprise work. They know what to this. So will that, does that mean Slack will be as innovative as it would have been as a standalone company? I mean, we know the answer is no, right? But will, but it has the brand, right? It won this space and communications became so much more important than we thought, right? When we were talking about HipChat and Slack back in the day, we thought these were cute little apps, right? But now we run our lives on these apps, right? This isn't an AOL or ICQ or Yahoo messenger. This is this is the core medium of how we communicate now. It has impacted culture at startups to a level that I think nobody expected.

Like literally your entire experience at work, the culture of the company is the culture of the slack. It is. And if you let people go crazy on it in like the random room or, you know, if people start creating rooms and, you know, you see what happened with Brian Armstrong over at Coinbase, you know,

every one of the stories in the New York Times about a company having culture problems starts with, in a Slack room, in a private Slack room, in a message, in Slack room comments obtained by the New York Times, the following was said. And it literally, I tell folks, like, the rule should be you can't talk about politics or any of this like, you know, political issues on Slack or email. You can only do it in person. So encourage people to do it on Zoom where they can see each other or in person if you want to have a talk about whatever it is, social justice or poverty or. the pandemic or Trump, whatever, just do it in an opt-in situation where people are in the same room, right? What did you think of all that Brian Armstrong craziness over there? And him saying,

don't bring politics to work. I'm curious. You're not a political. You know, I did not, I deeply care about equality inclusion. That's one of our core values at Sastro. I did not follow all the details because some of it was so toxic. I just have to limit how much toxic behavior. But I will say one thing on it, which is that it's a message. I think. I do want to challenge folks listening to this. Like, thinking you're going to build a meritocracy with not, with a quality,

not being a core plank of that is ridiculous. You know, what's his name, the Snowflake CEO? What's the guy's name, Frank Slotman, legendary, eat,

eat nails for breakfast, enterprise sales guy. He wrote this LinkedIn post that everyone's lot and said, said he doesn't have time for equality. Like, it's a meritocracy. That's toxic.

That is toxic today. And Snowflake's done well in Coinbase. It can't be stopped. But it's disgusting. It's disgusting to, in my opinion, and I rarely, I almost never use that word, you can't leave people behind. The amount of privilege that white men, white males that you and I that Brian Armstrong have, it's, it is, it is hubris to discount it and to say merit, meritocracy didn't get us where we needed to be when

you and I were growing up. It didn't work when we went to school and it doesn't work today either. And so I'm not, I'm not trying to completely criticize Brian because I didn't read everything, but that, that meritocracy argument, be careful. And I hear it from young, founders all the time. And it worries me when I hear it, right? It worries me when I hear it. It's not enough. You do want a meritocracy, but it has to be a meritocracy where everyone gets to play. Otherwise, it's not a meritocracy. Yeah. And if we're not where we need to be and the numbers show we're not where we need to be, then work needs to be done, right? It's really is that simple. The outcome isn't where we want it yet. And it's just as an angel investor anecdotally,

it's been great to see over the last five years, the number of female founders, founders of color, you know, increase dramatically. And I think, you know, dramatically. It's, we can take that as a win, but there still needs to be a ton of change. When we get back from this final break, I want to talk to you about Zoom.

And why did that product succeed against go-to meeting, Cisco, Skype, Slack had video messaging and audio meetings in it, and every other possible Google hangouts. And somehow this new company won the space and won the day in a space that was crowded in every single company had an offering. How did that happen when we get back on this week in startups?

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All right, Jason Lemkins is with us. I was amazed when I loaded Zoom. I was a little reticent because of the sort of Chinese servers and the developers. and I am concerned about security from China. It looks like they cleaned that mess up. It was pretty vocal about, you know, hey, you probably shouldn't use TikTok or Zoom

if they're going to be rooting your operating system and they're going to route the calls through China. I don't trust communist authoritarian countries. They seem to have fixed that. That was obviously a snafum. But they won the day. How did they win the day versus Google Hangouts, Skype and all these other competitors?

I don't understand, you know, how they are the 20th meeting software. where a major platform to come out in the last decade, and they just crushed everybody. What was it about the product? Well, I don't claim to be quite as much of an expert on the topic as others, but I've certainly studied it. And I've interviewed Eric about it. I've talked to him about it.

I've read a lot of things. And what is interesting is, there's a bunch of things interesting. But if you hear Eric, even up to 100 million AR, right? And they're three billion now and growing tripling. I mean, it's off the charts, right? It breaks, it breaks everything. He will say the competition was intense. intense. Let's not overstate it. Let's not the the collective wisdom of Zoom was such a magical

product in the early days that it won on this magical experience. And there's some truth to that. And we can talk about technology. But it was brutally competitive until it won and then it won, right? It was brutally competitive. And I think, you know, there's, I think there's a couple pieces to it and there's obviously some luck, right? First of all, if you want an argument, Eric was a first time founder, but a second time doer. He was ahead of engineering at WebEx. So when you get, and everyone I know worked with him at Cisco, right, including my wife and many other folks.

I know Dan Chyman, who was the first angel investor. They will all say Eric was one of the smartest and nicest, smartest and nicest people. Anyone worked with at WebEx, I mean, at Cisco, right, WebEx, off the charts on the team. When you have a guy like that that wants to do it again, you write him a check. Right. Of course. Now, people didn't. He struggled to.

race. He was not a business guy. It was a crowded space. Perhaps there's some racism and other things and someone like that. It was Dan Scheiman wrote him a check and Qualcomm and other angels, but it took him a while to get for the VCs to pay attention for a bunch of reasons, right? But I think, you know, and I think he was haunted by the quality of service and other issues that had deteriorated WebEx. So we're on a Zoom right now. You and I, depending on how people watch this, the ability of this app to scale with QOS is unprecedented. everything else runs on a crummy background or they run on web RTC which doesn't scale you know where you are a web RTC and you get a bunch of people on they get blocky or the audio separates from

the video which you know that's horrible have you ever had the audio and the video separate in a zoom no I've had people's video breakdown and just turn off your video and your audio is perfect there's always in sinks now before the pandemic you would connect in a second now sometimes you go wait 10 seconds to connect while it's making sure it's buffered, right, and other issues. But this was a quality of service that does not exist in technology today, which we don't see, but people care about. That was a commitment. That was a second time founder saying no matter what, I'm going to build a better product.

Two, and he said this many times, he decided to aggressively go freemium, right? And, you know, you can still use 40 minutes of Zoom for nothing. It is Zoom and Slack, the free version of Zoom and Slack are magic. Right. Are magic. An ordinary person can use free Zoom for themselves and in their company and slack in their company and never pay. It's crazy. This is contrary to everything we've been taught about how freemium and chokes and everything works, right?

Yeah. Both products broke the bold on freemium. So that's the second one. And then none of that is luck, right? This is one is the best engineering. Two is a strategy that people. And then going video first, people don't talk enough about, but Zoom is about video first. And don't forget, we used to be about screen sharing, right?

These were technology products, the WebEx's and the GoToMeetons and others and other things and built-ins to Salesforce and a million products. Share my screen. Share my desktop. Zoom was about us having a conversation. And that ended up being incredibly incredible foresight on where collaboration would go. So prescient, right? Like during a pandemic.

So prescient. So pressing. And then work from home. So do we think work from home is here to stay and to what, extent because it is very clear. It's December 2020. We're going to have 40, 50, 60 million shots of the vaccine here in the United States. It's 94 or 95 percent. There are four of them now. They will be 14 and they're going to be like literally have more than enough vaccines for everybody on the planet. Yeah. We will beat COVID in early 2021. I am certain you are even planning an event in September.

So you believe this as well. what happens to work from home? What's the good and the bad of this? Because I'm losing my mind at home, but I kind of like some aspects of it. As a CEO, I kind of got to pick where I worked, but I don't even know if you can build a company like a Slack or a Zoom

if people are not in the same room. I know you can maintain it, but can you build something that creative without everybody being in the same space? I don't know. What do you think? Well, you know, I read something that to me, I found very illuminating about events in particular, but I think it works perfectly for more from it.

I think it works for anything that happened in COVID, which is, how did it work during COVID? So, for example, will Coachella survive? Look, you can watch online concerts. I have, they're terrible. Okay. I went to Coachella last year. I had tickets this year, and I'm going again. I don't look like a Coachella guy, but I like events.

It's awesome. I'm going, Concella doesn't work on the internet. I'll see you at the Sahara tent. Yeah, I mean, whatever that VIP is right off the Sahara tent. That's my jam.

Yeah. There's that little VIP, that's where I live. That little VIP next to Sahara. But go ahead. So of course it will come back. The war is almost certainly. Basketball is not so great on this way.

No, you want to go see it in a person. Right. Yeah. Startups. Hmm. How have startups done since COVID? In SAS or general.

Yeah. So we're not going back. We're not going back. I'm not saying we're not going to have office. I've maintained both our offices. Actually, we've added offices in Palo Alto as well as San Francisco. I believe that everyone's going to, you know, Google just signed a massive expansion in downtown San Jose, which had been working on for years. So the offices aren't going away. Mark Zuckerberg says he wants to train young engineers in the office, but older ones, more seasoned ones are

welcome to work from wherever they want. That sounds logical, right? And if it worked, did it work like this? If it worked like this, we're not going back. We're not, there's too much momentum. It's this lasted, we didn't go back to work in September. If it had been September, we would not be all running distributed teams. We would have just had this weird bump. But we've all, if you've done better, you can't put the genie back in the bottle. It's not going back. That is the thing I'm realizing with my own little investment firm launch is that we have

been able to do more investing. Our accelerator is doing better. We have higher quality companies, more people applying higher quality applications, which is what we're looking for. and doing 16 weeks and having no in-person events and doing it all on Zoom, we had 750 investors attend. We used to have that virtually in 16 weeks. If you are a startup and we put you in front of 750 investors and you can't raise money, I mean, we obviously know what's going on here.

You're too visionary and your product is just not ready. Not ready. Yeah, you're probably too visionary and we took a flyer or, you know, it's not venture fundable by design. But when we were doing in a person, we would get, you know, 10 investors and you would come sometimes to RSVP and seven would show up. So by the end of the program, we, you know, gets you to 150 investors. So, yeah, it's more, it's almost two order of magnitude better for, for launch. Five times better, yeah. Yeah. So you're not, you can't, listen, I've been to, and I've been to the, I've met your founders in person. I've been to the barbecues. And they're great. This stuff you do in

person is special. Right. You meet, it is different. But what, at the end of the day, most accelerators are going to be judged by the funding of their portfolio. And if you have an order of magnitude more VC, you're not going back. Yeah, I think that's the point is I'm going to just do the barbecue. Yeah, I'm just doing the barbecue. I'm going to make Wagu for you. I'll make you some Kobe, some Miyazaki. All the other stuff.

It worked. It worked when you were, and we didn't know. We didn't know that this would work. We thought this accelerators and we thought it had to be hands on. We thought that was critical to it. But we were wrong. We were wrong. Yes.

And you know what the thing is, If it used to be that investors would say, and you and I are new investors, but the people who came before us, you know, they were, they were just at the office every day and you had to make your run up and down Sandhill Road. And that is how it went. You had to come in person. You had to come to the mecca. You made the pilgrimage. You went up and down Sandal Road. And that's the way it's done. And if you're not committing to being in Sand Hill Road every six months and meeting everybody and updating everybody, then why are you doing this? And that's over too. It's, oh, okay, I will, I will, I, I, I, I, maybe. I think that what has, when the, the, you, you're a much more prolific investment than I, investor than I have, but the investments, the, the B and later rounds that have happened in my portfolio since March. There has been, there has been, the big checks, okay? There has been a face to face. Now, that face to face was with the mask on and it was during a walk. And it was at the end of the process, not at the beginning, or it was before COVID, or was, I already knew them before COVID. But I will tell you, walk and talks for VCs happen all the time. We moved to downtown Palo Alto. I will tell you how many VCs I see at the restaurants there and I see them dining with founders. It's just, it's not schlep to the office for the pitch before I get to know you. That's dead.

I'm going to do that over Zoom forever. So it's more like. Can I get you a sparkling water, Mr. Cletus? Can I sit you in conference room B7 while you plug in your laptop trying to get it to work and pitch the VC who never even read your deck before? That's dead, right? That is dead. And never should have happened.

right? It was always lazy. So it's at the end of the process. That is so instructive. Yes. So you only have to have a 10th of meetings. You have a 10th of meetings. You get to know them, but it's not the same. And then you confirm it with the walk and talk instead of being this great people person where you smell whether it's a great founder when you walk in the room. Right. And there's truth in that. There is there is truth in that. But you can do more work and you can learn more. Right. And I'll tell you for me, all my best investments, I knew I wanted to invest before I even the person. Same. I knew from email and the deck. I knew. So like, same. Even the meeting was confirming what is it about that. What is it about that? You just know. Because

because the best founders can communicate their vision, their metrics, their traction so well. They're great at sales. They're great at vision. And you already know. And I have most of the meetings when I'm the email you know from the email you know. I and then I would meet in a person. I would say about 20 minutes and I'd say I don't mean to interrupt you, Jason. But if everything you've told me is true, this is always my line from it. Then I'm in. If, but I need to do some I need to make sure what you've told me is true. But if it's all true, not even an hour, 20 minutes, but I did all my homework.

I read the deck. I read the materials. I did everything. And why do you, why, you know, that was actually in a way, a meeting down the funnel, wasn't it? It's just I'd done my homework before the meeting. It felt like a first meeting, but really it was far down the funnel. It's almost like, you know, and I'm always read as in to use any kind of a dating

analogy, but if you were to look at the compatibility of the startups and put all the information first. Yeah. Almost like, hey, you know, if we've, what was that site that helped people get married? E-Harmony. So I remember meeting E-Harmony back in the day, and they had done all these quizzes and tests to match you up with somebody who was compatible with you for a long-term marriage-type relationship.

And I think that's sort of what's happened in startups now is where you start with like, hey, is this deal compatible with our fund? and you take the socialization from the front end and you move it to the back end and you put the facts up front. Are you looking for money? Are you fundable? What's the growth rate?

What's the numbers? And yeah, I just see people getting to the point, right? Because nobody wants to be on Zoom for an hour and a half. Like people just seem to be so TLDR. Too long didn't read. They just get to the point. That's one of the wonderful things. The thing that we do need to be cognizant of

And if you're building top of the funnel like you are, it helps a lot is, you know, we should be worried that funding for female founders may be down since COVID. We should be worried that money is going into obvious candidates. We should be worried that this can encourage a reversion to bro activity to familiarity with Stanford Business School, to familiarity with accelerators and programs, that sense of, boy, because the thing that's happened I've seen with B and actually all stages of investments since COVID is people have taken more risk. Okay, I just did a deal

in one of my portfolio companies at almost 400 million in revenue one of the best VCs I know they had one day they never met them, they didn't do anything they're calling me and asking me to tell them about the team there's no time or if it's seed stage people are investing so quickly over Zoom

they're not even meeting the founder at the pitch at Wilson Sansini your pitch that they're taking more risk and and that sounds good but it can exclude people because the way many folks mitigate risk is by grasping for things that seem to also minimize that risk. Is that, is that, do one of the Jasons know them? Can they tell me the real story? That sounds great.

But what about all the people you and I don't know? These two white men with some success, we don't, we don't only know the people we know. Right. So that's excluding. So I worry, I worry about who gets left behind in this. And I worry about the lack of serendipity. And I don't know what to do about it. But folks like you, and to me, to an extent that run top of the funnel,

I think we have more obligations now to manage that. You know, my solution to that is we started this thing, Founder University, and we do six of them a year. Now we're doing them virtual. Instead of having 50, 60 people in person at Wilson-Sincini, now we have 300 people do it. And half of them or four of the six are for either women or underrepresented founders. Yes.

So what we found was when you make an event explicitly for a group of people who are underrepresented, you find all those people. because if not, you don't have the event. And when people come to that event, what they tell us over and over again is when I saw you were doing founding university for women or founding university for underrepresented founders,

I knew you cared and you take us seriously and you're doing the work. So I wanted to come because I felt like I should come because you're doing the work. So that's my best advice for everybody out there who's wondering how to get diversity into their pipeline. You know, you have to plant a flag and say, we are open for business and we want to meet you,

as opposed to leaving it up to the person, because then you have this big gap between the incumbent and the up-and-comer, the underrepresented, underestimated founder. And you can bridge that gap by just saying, hey, here's the platform. We do this thing every other month. If you want to come to it, we share all the secrets and all the speakers,

and we want to meet you. That is the way to do it. You can't just leave it up to, like, chance. If you don't do anything, nothing will occur. And I think it's also related to that, I think when we're talking about SaaS and funding, you know, people slice the data differently, but it's important to remember that the vast majority of these vast amounts of money are flowing to later stage deals, the vast majority. And even when it's earlier, they're flowing to brands. They're flowing. You know, what, notion, at $1,000, $800 million at $4 million of revenue, what's happening,

but everyone knows notion, right? Yes. Brands, the brands are just collecting more capital than everyone. And per earlier conversation, brands matter. So I don't believe that that's a bad strategy. But if you're below that level, it's harder to get funded in many ways than March than March, than it was before March. It's harder if you're not breakout, if you're not brand. There's many reasons. And also the bar is higher.

The valuations are higher, but the bar is higher, right? And it's harder. It's harder if you're not quite in that inner circle and you don't have a brand. And I don't have the answers. But just don't think that fundraising is easier today because of these headline numbers, right? There's so much as late stage, right? The best, the best investment of all in SaaS was Sequoia at Zoom at a billion. You don't want to know why.

They didn't even have to show up to a board meeting. Emergence at least had to do some work, okay? They just dropped a bucket of money. Yeah, the IPO, an IPO in 18 months never show up. At first they planned a 4x, then they 10x, then they 1 billion to, then they 100 and something X for not even, that's the greatest of SaaS. It's quietly the greatest at 10% of Zoom. for like just winning the deal. Like literally, that's it.

How did people win these late stage deals? Is it just a matter of who's willing to pay the most and have the least rights? That's what I've heard. No. Okay, so what is it then? How do Sequea win that deal versus, you know, what was probably 10 other incredible competitors? It's obvious, but you've seen in your portfolio, first of all that what all the late stage folks

are good at is they're in the hot deals very early. a year ahead of time, two years. You have to be there, right? And you have to be checking in. So they're there. Relationship maintenance. Yeah. With the founder of the other investors.

They're circling, they're hanging by the rim. A lot of it. A lot of it. They're hanging under the rim waiting for that rebound for the easy putback. The partners building the relationship and the analyst's job is to know the second they might raise. So yes, the, the sequoias and others are very successful, but they're very aggressive. they lose deals, right?

And they want to be the default choice and they get to know you. And the beauty, what happens is when a founder decides they're ready to raise, if Sequoia in particular and a few others have been in the deal, they'll at least get the email. I just went through a fundraising for a company

that got five term sheets in a week. Sequoia didn't fund them. They weren't one of the five, but they got the email. Right. Checking in, just do you want it? Do you want to invest? Thanks.

They said they had, had a conflict, probably just didn't want to do the deal, right? Conflicts are a little bit of an illusion sometimes, but they got asked, didn't they? So there's that. And I think, and then I think what's hard is, you know, and then you do have to come in high. Sequoia isn't cheap. They're not cheap. I mean, I think it was the Uri Milner had this impact on the industry where he was like,

he can't overpay for a great deal. And then I think other people inherited that, Cloner Perkins and who else was in that cohort? I think founders fund sort of Brian Singerman over a founders fund told me that. Listen, if it's a great company, it's going to be an amazing company, you really can't overpay. And that was, I mean, with the exception of we work, I'm trying to think of an example of somebody overpaying. I mean, people said Masayoshi's on overpaid for Uber, but, you know, Uber at $50 or $51 today. It looks like he's in the money. Yeah, I wonder if that's true.

Some founders take it too far, but most of them later stage, they just have a number. and you just ask what do you what do you think is fair wow 400 million sounds like a lot on 9 million of revenue but if you're tripling or quadrupling I can make a case okay so some VCs I like when they ask

the founder us for 400 they'll come back with 281 or they'll lose a number but I find the ones that want to win you know what they come but they don't come back with 401 or 405 they just say fine right there's other things we could talk about secondary liquidity in games and other things, but I work almost exclusively with first-time founders, and I think you do too, right?

And they tend to play fewer games, and they're not running that same playbook again. They may be confident about the value of their shares, but they just want to get it done. So they have a number. And the good, the good later safety is they just meet the ask. They just meet the ask or they don't. Yeah, and that's the way they say it. Hey, what's the ask? Okay, great.

We're in. And that's it. We're done. Yeah. Yeah. Or sometimes I can't, but I can do this. for real, not for a game. And then you give a founder a chance to think about it. How do you think about secondary when the founder wants to sell $5 million, $10 million, $500K,000,

a million? What do you advise them in terms of they've got a rocket ship company? On paper, they're worth, you know, seven, eight, nine figures. Yeah. And they don't have any cash. What's your best advice to them when they're in that series B, serious C in terms of taking money off the table but not doing too much or is it not a concern of yours and then getting distracted? Is there a point I'm conflicted? I'm conflicted. On the one hand, a lot's changed. You know, I sold my last company just before the cycle started. So in 2011, I was offered 10 million of secondary liquidity. I turned it down and we ended up selling to Adobe instead.

But I didn't understand how secondary liquidity worked and the price was low. Should you have taken that? Would it have been better for sure. Yes. Yes, for a million reasons. Not only financially, I mean, I don't even want to talk about financially. But also, it would have, even if it was less than $10 million, it would have, I'd already made a few million from my first startup, but it would have de-stressed my life. I could have gone another five years. That's what you want as an investor from secondary. You want, I'm up for another five years, Jason.

That's what you want. That's what interests align, right? So you have to look for that. If it's too early, I'll tell you when it's too early, I always find it's terrible. Yeah. Now, you could, there are people will argue in 2020, secondary liquidity. has has dropped into 30, 40 million dollar valuation deals. Okay.

It used to always be in the nine figure deals, right? It used to always be, look, when the valuation crossed nine figures, whatever fund couldn't get enough ownership, so they throw in some secondary, not out of the goodness of their own heart, but so they could buy a few percent more of the company, right? But as bigger funds got more aggressive, a big fund, you know, whatever, a Sequoite index and Excel or whatever, then putting in five million of secondary into a series A is irrelevant in a big fund, right? whatever it is, light speed, any big fun.

So it's creeped into early series A's. And I find that I thought like to destress. I find it happens too early. So it's not about going another five years. Right. And I find they quit because why sell your share is cheap? The most successful founder I know still has not sold a single share. Yeah, Elon.

And owns almost half his company. And it's not that he's greedy. He is greedy. I remember when you're talking about Elon or? I didn't invest in Elon. No, my personal portfolio. The most successful founder in my current portfolio never sold a share and had multiple opportunities. I remember he's when this is a first time founder at around it several hundred million of revenue when he didn't have a dollar in the bank.

He said, can I borrow some money from you to buy shares in the round? Wow. This wasn't facetious. This was an honest question. He's like, I'm broke. Can I get a million dollar loan to buy some shares in my own company? some shares in the company. And so you kind of like, and so I, as a founder myself, I'm completely supportive of de-risking

and actually just de-stressing your life. It's not, I don't believe in distress. It's de-stressing. That's the difference, right? Forget de-risk. If you see a lot of risk in your startup, just sell it. Just fucking sell it today if you see the risk, right? But if you need to pay your mortgage.

There's nothing more stressful than being a founder CEO. There is nothing harder than being a founder CEO. Anyone that says otherwise is full of it. It's the hardest job on planet Earth. It's the hardest job. So if you not having to, if you having a house and having your husband not have stress and getting support for your kids, right,

getting support at home, if I can pay up for that, that's a gift as an investor, right? Because the last point on it is that's the general view. And then the other thing today is, boy, this is what changed in the last since you and I met is unicorns became decagorns,

not in consumer, but in B2B. Right. Like there were no, Zoom planned IPO, what, two years ago at a $4 billion market cap. That was the best. That's what the bank's told. Twilio was like a billion or two. Yeah, a couple billion.

Spotify was a couple billion. So as as when Mark Andreessen wrote about power laws when I started investing, I wanted to throw up, I thought it was so made founders sound like products, right, which I hate, right? We're not human beings, but he's right. And when I started investing in Dries, they were like, we looked across our portfolio and the top one or two investments make up the vast majority of our truth. and the reason is they can become huge.

That was what they learned from Skype, right? And so we want our founders to build deconcorns. You've done it yourself and your investment. We don't want them to sell it a billion, right? This week we're talking about it, who sold it a billion too? Gainsight sold it a billion and who else sold it a billion. I forget these are great outcomes, but we want them to go for TED. Yeah, I mean, it's long, as one VC told me very wisely, who's been in a long time,

we said, we just need people to have long-term greed, not short-term greed. Like if the long-term, you really, if you sell too early, like, look at Slack. They probably had countless opportunities to exit at a billion or 500 million or five billion. And look, a $27 billion outcome for that company is an extraordinary moment in time, right? I mean, that is a win of... Especially when you sold your last company for $30 million. What's $30 million to $30 billion?

Let's do some rough. numbers. How much more is 30 billion and 30 million? A thousand X. A thousand times. I mean, while we got there. Took us 10 seconds when we got there. I've been doing this long. I'm embarrassed to say I've been doing this long enough that I, you know, I remember when Flickr sold for which was Stewart's company before. And 30 million on a company that had no revenue in the early days of Web 2.

People are Yahoo was dumb. Yeah. Like, oh my God, you spent that for a photo site and they're like so dumb. You're not getting it. And like 30 million dollars for Flickr and now Slack is worth 30 billion. folks like be inspired by that be inspired if you can't build something great sell right or quit or exit but if you have something this is what i learned for sass maybe the last point i'll make we didn't get this that recurring revenue occurs it never stops it never stops so if you have something

if you're tired take some secondary liquidity hire a CEO find that VP that you've been dragging your feet get some help because the other thing we've learned when you look at all the ones that that are a billion in revenue, the majority of their revenue comes from their existing base. They just keep buying from you if they love you. So you can't build a decade. It's crazy that sounds like when you and I were coming up, I didn't believe I could build a unicorn. I wouldn't have sold if I really thought I could build a unicorn, right? Because there weren't enough examples, right?

But now you can build it if you have something. If you can get to 10 million in revenue, you can get to a thousand million in revenue. Right. You can. Of course. It's happening all the time. The first 10 million is the hardest. Yeah.

So go for it. Go long. Go long. And just get help, get help. Because all, we know, it's right to say that all that matters is people because it's true. But after 10 million, all that matters are your VPs. Nothing matters but your executives is your executives. And you, we know when I first started meeting CEOs when I came up of late.

Wait a second. Nothing matters but the executives. Why? Why is that? Because 10 million, you already have a thousand, 100, 10,000 happy customers. Now you have to figure out how to get it to the next level. And it's not just your brilliant mind. It's a hundred times more complicated.

Yeah, who's going to figure out the 10,000 workflows and the higher 500 sales reps and the demand gen strategy? It's not you, the brilliant products. Like, your product mind doesn't even matter much after 10 million. You're a critiquer. You're not a visionary anymore, right? I don't think Brian Armstrong knows how Coinbase works. I'm not sure Stuart Butterfield knows what Slack should do today. He doesn't know. It's too complicated with this multi-org sharing and video. I mean, he has creative strategy, but he doesn't know at a detail level, which icon we should use or how to do it. It's too complicated. It does get super complicated, super fast. And I just, I don't know if you've read the new read Hasting books,

the no rules, rules, but he basically goes over there, like, you know, hire the all stars and just overpay for talent. And clearly, when you get to this billion dollar valuation, you have the resources. You got to just go for top tier, top talent in those positions because it becomes unruly. These companies are so huge. And the departments are so giant. And you're just going to rise and fall with the value, the execution of those VPs. And it's more, it is true. And I think the mistake, I think we get that. But I think the mistake founders make is they don't invest the time.

I remember, I remember the CEO of a now $40 billion company wanted to acquire us to recruit me or something. And he would like drive down multiple times a week to meet with me in Palo Alto. I'm like, dude, you got better. You're running a bit. You got more things to do than meet with me again. But he knew that if he could get us or me, it would move the needle. It was worth his time. right he could skip that that planning session or something else it's the people right and and and and the

best CEOs and founders are you know it's trite for years but they're relentless they're not just relentless about recruiting they're relentless about sourcing and finding the best people and they never quit they spend years or they spend years recruiting these people again and again and again and they spend all their time um and you know you've got to you know maybe my best advice after even a couple million of revenue is if you're still doing the VP function stop you and I you're not you're not you You and I both, even in our current lives, we do a lot ourselves. You and I both do too much ourselves. You and I don't have enough VPs, right?

Stop it. I keep trying. I keep trying. I keep trying. It's the, recruiting is the hardest thing in the world. It actually is the hardest thing in the world. But it's what the best ones are great at, right? And they spend half their time recruiting.

They spent half their time recruiting, half their time with customers and half their time with prospects. That's what they spend their 150% of their time. Recruiting customers and prospects. It is what it's all about. All right. fat, Jason Lemkin, thanks for coming on the pod. Stay safe and I will see you on the other side at the San Mateo Fairgrounds, which is around the corner. I'll be able to come and do a couple interviews and my God, that's such an, we were going to do launch festival there one year. And I was

just wondering if people would leave the city and now people don't want to be in the city as my perception, right? You know, the city is just gnarly and, you know, the homeless problem and the violence and the crime and the cost. I think your timing is going to be spectacular. to do it at the San Mateo Fairgrounds. It's such a huge space. You can really take it over and do a lot of fun stuff with it. So congratulations on that. Yeah, for sure. All right, good luck, brother.

Thanks for having me back. All right, cheers now. We'll talk to you soon.