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Founded and Funded: The Whys and Hows of (Diverse) Team Building with Founder Justin Beals of Strike Graph

Strike Graph, a company started by two tech guys, and funded in mid 2020 with just an intern, is now growing and serving customers.  It is also two thirds women or gender diverse.  The road to getting there was clear to CEO Justin Beals before he even incorporated.  In this deep conversation with Hope Cochran and Elisa La Cava, Justin talks about the whys and how he set out to build his company this way and what this has meant for their success as a team.

 

Transcript

Erika Shaffer: [00:00:00] Welcome to Founded and Funded. I’m Erika Shaffer with Madrona Venture Group. Hope Cochran and Elisa La Cava sat down with serial founder, Justin Beals, to talk about how he set out with intentionality to build the Strike Graph team from scratch to honor and promote diversity. Justin has seen from past experience, with other startups, that diversity of backgrounds and of thought promote a unique team environment that everyone can own and feel a part of.

We all know how being part of a team working toward a common goal is a powerful element of both enjoying work and being successful. Strike Graph received seed funding from Madrona in mid-2020 and was a Madrona Venture Labs incubated company.

I’m sure you will enjoy this discussion of team building and how to find the people who will propel you to growth.

Hope Cochran: [00:00:57] Hello. Today, Elisa and I are here with our friend, Justin Beals. We have been able to work with him over the past year or so as the CEO of Strike Graph. And have been inspired by him along the way, so it is great to start today off with a conversation with Justin. Justin is the CEO of Strike Graph.

Strike Graph is a security compliance company. A software solution that enables your customer to prepare, obtain, and then maintain their security certificates. Having the SOC two certification, for example, can help your customer sales cycle go faster by removing the security concern from their software.

But this isn’t Justin’s first rodeo as a CEO or product expert. He has an impressive career building companies from the ground up with Roundbox Global, that he founded and grew. He focused on the ed-tech space. And then later became the CTO of Koru that applied machine learning and leading assessment science to measure the things that matter most to the employee performance.

But what is inspiring and clear as you get to know Justin is that he approaches everything thoughtfully and with intention. One of the clear intentions that he set is to create a culture and employee base of talented and diverse individuals. And his views are not that this is just an important thing to do, but it is a key element of the success of building a high functioning company.

This is not something that happened overnight, as he will tell you, but with decades of focusing and working on it. Currently at his company Strike Graph, he has built a team, one that I am proud and love working with, that is two thirds women and are gender diverse. And this is not just in the traditional areas of marketing and HR, but 55% of his engineering team identify as female and 30% of color.

What I love to see is that I get to work with them. I don’t think, oh, this is a female CTO. I think this is a talented individual who’s getting stuff done. The team is full of talent, grit, and a focus on completing things. And one that I love to work with. So welcome Justin.

Justin Beals: [00:03:11] Thanks Hope. And thanks, Elisa, I’m really glad to join today.

Hope Cochran: [00:03:15] Before we jump into the topic at hand, you have become an amazing leader. And I would just love to hear about your leadership philosophy that I know you’ve honed in over time.

Justin Beals: [00:03:25] Sure. I was given the opportunity. I think that’s the way my family would have described it. I would have called it the chore of being a leadership or supporting in leadership from a really young age in their community, the religious community. And so, I hated every second of it, but I was the one that went every Sunday. And so, you wind up being the one, the troop leader for boy Scouts. I and I’m lucky in a way that I’ve gotten a chance to really go through the painful process of learning something about it and the time to do that. My philosophy is really service leadership.

I know that’s a hot phrase right now, and it’s maybe hard to define, but through just the experience of trying to be successful as a team, what you realize is that a leadership role is always in service. You’re in service of your colleagues, you’re in service of your customer. You’re in service of the mission of the organization.

And you have to set the right example. That example is the leadership that people need to see, and it doesn’t come across as dictatorial. Often times it comes across as doing the work side by side with the team and showing that you’re also not afraid to get engaged and get involved. The art of my philosophy of leadership is that it’s very hard to manage the balance between your self-confidence, like I can go and be a leader I can accomplish this thing, or we can, and as well have this really intense humility. This ability to be constantly open, aware, and listening, confronted with the challenges, taking on the hardest parts of the problems that your team is encountering. And so, it’s not an easy role to play and it requires immense strength, like just, the thing I grapple with on a daily basis is knowing like, not micro-managing my teammates, giving them the freedom to do what they need to do, but also know when it’s time to take a decision. Because for the team to effectively meet their goals, they need a clear direction.

Yeah.

Elisa La Cava: [00:05:34] I’m so excited to be here, Justin. This is Elisa It’s so interesting, I, another way you’re setting an example and kind of building this strong team. I remember at a board meeting recently; we were all talking about how quickly the team has grown in the past few months. And your response to that was I’m really big on building habits.

And I thought that was a really interesting thing to say. And I’d just love for you to elaborate. What do you mean by building habits or specifically what habits are you helping cement in your team at a foundational level, given how quickly you’re growing and some of your leadership philosophy?

Justin Beals: [00:06:07] Yeah, this is probably some of me coping with my own inadequacies, but I find it very hard to build like a super long-term strategy, way out in the future and yet not have an incremental and effective method of reaching there. You have to climb the ladder, you have to climb the mountain and you’re not going to get there by imagining what the top looks like, but by putting one step in front of the other and you almost have to forget or be able to let go of that larger end goal to work in the increments. One of the challenges in engineering is really scoping the time it takes to deliver something. And the number one thing you can change about being precise in your prediction is reducing the amount of time or amount of work you’re scoping. So, it’s these incremental habits that matter. In our company and especially with COVID, the daily standup is critical.  I need to show up, and this is my opportunity, to that leadership question, to show what I’m working on alongside my team with them.

But then a regular planning meeting once a week is critical and it’s always on the books and we always show up and it may not be the best planning meeting.  We maybe could improve the rigor with which we do it. But the fact that we can have that habit on a regular basis is critical.

And then it comes down to even communication styles, being clear and transparent as a habit. And the feedback, as a habit, is critical as well, because otherwise we’re not getting that loop going where we’re learning and improving.

Elisa La Cava: [00:07:42] I love it. It’s so exciting seeing your team work together from our vantage point. And one thing I’ve also noticed when we have our meetings together. If it starts at 8:00 AM, every single person is online, video on, ready to go at eight, like on the dot, and you are like, we are starting the meeting and it’s like full jumping in as a full team, every single time, fully prepared.

And I think that’s so incredibly impressive and a testament to how coordinated the leadership team is. And in being productive and working together and getting to the point and making those plans and probably making the most of your daily stand-ups as well.

Justin Beals: [00:08:20] Recognizing that example, right, Elisa, that you set, like if I’m there five minutes before the meeting starts, I find my team shows up too.

Elisa La Cava: [00:08:31] So my next question is flipping this on its head, Justin. And you are a CEO now you have been in leadership roles at companies for a very long period of your career. But thinking about the moment leading up to being CEO and founder of your own company who is someone, in your career journey who has inspired you, inspired your leadership philosophies and someone who or even, a peer or mentor who’s helped you hone those capabilities since you’ve founded Strike Graph.

Justin Beals: [00:09:02] Yeah, I think that’s a great question.  One thing I wouldn’t say is that I’ve been super inspired by the business world, necessarily. I really appreciate the achievements of Steve Jobs or Elon Musk, but I have my criticisms as well. It goes both ways. I think more when I think about as a community of inspiration, it’s really the inventors and the scientists of the world that I find affinity for my motivations with. I really believe that the best part of living is in the boundaries.  The boundaries of what you think you’re capable of, the boundaries of the relationships that we live in, and exploring those, and what we know about the world around us. And those individuals that are a little unafraid to question and lean in and test those boundaries are learning and living at the edge of their own context.

It’s really exciting and amazing. I think that I’ve had people along the way that certainly inspired immense confidence that I didn’t have. The first person to ever give me a contract at Roundbox Global for more than a hundred thousand dollars was a gentleman named Troy Viss. And he was a creative director at McGraw Hill, and he believed in me and no one else did. He thought I could get it done.

He actually baked our services company, Roundbox Global, off of a really massive services company and we won the contract. And that little moment with Troy, was an immense confidence boost. And all of us probably have those stories where someone that didn’t have to believe in us believed in us a little bit and gave us a chance and our whole world changed.

And I hope I’m doing that every day for my teammates. I hope that I’m giving them the opportunity to fail, but the confidence to go try.

Hope Cochran: [00:10:57] That’s really inspiring, Justin. And, as you think about giving them the confidence to try, you have really built a unique team and I see it firsthand at Strike Graph, but I know that this is your at least third time. This is not new for you. This is, as Elisa pointed out, a habit that you have formed. I’ve also, you and I have also talked about the fact that building this diverse team is vital to the outcome of the business.

And that you think that it’s an important element of a successful business outcome. So, I would love to hear from you why you think that’s such an important element to the outcome of the company.

Justin Beals: [00:11:36] The reason that this is so important for a startup, especially, but in any new venture. I think even if you’re in a large organization and you have an internal startup, you’re starting a new team, now you’re going after a new initiative, is that you want that group of individuals to bond around a new identity.

What we do is a team sport. When we build product, as we build an organization, that’s delivering a service, as we put together a marketing plan, that’s all collaboration, that’s all team driven. And for it to be successful, it has to operate that way. But you need a team identity to belong to, to negotiate that collaboration. And if the identity of the team is homogenous because they all come from the same background, you wind up not being able to bring a unique identity but living by the identity that homogenous environment brings. And so, when I want to build Strike Graph, Strike Graph is going to provide a unique service and it needs to differentiate itself and its teammates need to feel differentiated themselves from the other teams that they’re competing against.

So that’s why I think bringing in a diverse team gives me the opportunity and that team to craft their own identity. And so that’s critical in a startup space. The second thing that happens a lot when you build a diverse team, is that when you bring a group of people from a diverse set of backgrounds together, they actually tend to drop off the bad habits of their specific cultural affects or backgrounds.

They can build new, good habits around the new identity. And so, it’s a liberating opportunity to leave your bad habits behind and bring good new habits or your better habits to the larger team. And so, diversity diminishes the opportunity of one cultural or specific set of experiences driving that group identity or those group habits.

And really, it’s all about effective collaboration. That’s both to efficient collaboration, like how can we efficiently reach a decision as a team, and effective, like how can we reach the best decision as a team? And optimizing for both of those requires having your own identity and mission clearly understood and then leaving behind the old habits, so you can create the new effective ones for crafting the right next solution to build, the right next marketing message, the right next demo for a product.

Hope Cochran: [00:14:16] That’s wonderful. And one of your first roles as CEO that you chose yourself was building Roundbox. And you often refer back to that and say people were my product. And I actually feel that way in all companies today, people are our product because software is one thing, but it’s only created by the talent and the people around us.

You had a drive to create that environment and to create that company and to bring those people together. What was that drive that you had, as you set out to build Roundbox?  What inspired that?

Justin Beals: [00:14:55] Yeah. I think the inspiration to build a company was a little twofold. One, is that I wanted to build a tribe, a group of people that I really enjoyed working around and I had some jobs that weren’t great, or some cultures that weren’t very accepting and thought there’s got to be a more collaborative, beautiful way to work every day. And really just set on the path to find that. Another factor that affected it is, my college degree is actually in theater, and to me a start-up is very much like putting a play on. And so, you get this crazy cast of characters together, you have an idea of this production, you’ve got to put on, there’s a deadline, you’ve got to launch it on the server and then you suffer the financial outcomes of your goals.

And I loved that habit.

Hope Cochran: [00:15:42] I have to just interject here that you and I have this in common because my degree is in music. And I always say that music is what I use every day, not my econ degree for the exact same reasons. Practice makes perfect. Bringing a diverse group of people together and trying to unify them and put something on is an incredible challenge.

And these are the skills that I use every day. So, I love that we bring this similar philosophy to the workplace.

Justin Beals: [00:16:09] There’s a joy in sharing, Hope. Sharing yourself, sharing of someone else, getting it back and forth. It’s, it’s enlivening. Yeah. Roundbox, specifically, was an interesting journey. I had a number of failures and this was the next kind of iteration of trying to found a company. I didn’t really have access to capital, it wasn’t my background or a community at the time. And so, we had to bootstrap it, which means that services company almost always. I really think that most founders should go through one bootstrapping experience of a business. There’s no better teacher of what is necessary from nice to have than having immediate financial issues as you roll out your company.

And so, it’s a great training ground. The other thing though, is as a services business, you’re billing a customer for every hour an engineer spends working on their software and they’re really communicating to you a vision of what they want to change about their company or the product for their customers.

And you’ve got to connect those things. I think it’s liberating to really perceive a company so precisely as the people that do the work are the product that we deliver. There’s a disintermediation in the enterprise SaaS sometimes, where you’re like, oh we hire great people to build a product, but we don’t talk to them that much, or as little as possible, so we can afford to charge as cheaply as we do. But it is a critical day-to-day understanding of the people working on the projects.

So, I remember having this really interesting conversation with our, one of our software development centers in San Jose, Costa Rica. And I was speaking with about 90 engineers at an all hands for Roundbox. And I remember telling them that, while we produce code, while we manage massive software systems for enterprise education delivery, and we really support incredibly complex technology. Our true business, the work that team is engaged in is relationships. It’s our relationships with our customers that had to be healthy for Roundbox to be successful and grow as rapidly as it did. And if those relationships aren’t healthy, there’s no chance of us having an effective delivery. And so I told them we’re in the relationship business, not the technology services business.

Elisa La Cava: [00:18:33] So Justin, one thing I’d love to do is talk about team building again, because I think that’s such an incredible topic. Many people and leaders struggle with sourcing unique and diverse candidates.

And we all know when you have limited capital resources each head count is vital. And what I think is notable is in the period that you founded Strike Graph, over the past year or so, you’ve gone from zero to 22 employees, notably two thirds of your company is women or gender diverse. And overall, you have 30% people of color.

This is an incredibly diverse and talented team. And I think one thing a lot of people struggle with is achieving these kinds of goals as fast and as intentionally and as successfully as you have. And so maybe you can share with everyone what’s one of your secrets. How do you find these people?

Where do you go to source candidates like this for your company?

Justin Beals: [00:19:28] Yeah. As you say it, Elisa, I’m really proud, actually. The accomplishments and putting together such a diverse team really comes from the team itself. So, I want to laud praise on their shoulders cause it’s not just me that achieves that, that outcome. But what was important, for me as the CEO and founder in getting there is the first three hires are a critical decision.

And I think this is true, no matter what outcome you’re optimizing for in your team building, because those first three hires are going to make critical opportunities for the next 30 for the next 60 and the next 90.  Think about them. I build in my mind a model of the perfect candidate – for the role, that first role, our first CTO, our first VP of sales, our first head of customer success – and it’s not just, I want five years of customer success experience, or I want someone that has been an engineer for 15 years. It’s actually, I wonder if they would have experience in this type of architecture, or I wonder if they have a deep interest in the psychology of customer purchases.

One time I made a hire of a PhD to a computer science position, a software developer position, because we were doing research into the scientific area that they came from. And even though they wanted to be a software developer, I was looking for that third, fourth, fifth skillset that they came with.

And you’re playing Moneyball, with talent, you want six different things that they’re capable of doing. One of those things that you want is a diverse cultural background. That diverse cultural background brings different types of experiences and different ways of thinking and pushes that three-person collaboration, because that three-person collaboration is how the next group of people, as you scale up, are going to collaborate.

They are setting the tone, the deep-seated cultural architecture of everything that will follow. Pragmatically, just to go find them and get them on board. Once I’ve got in my head who that perfect candidate is, I go search them on LinkedIn. And I am known for finding three or four people and writing them a direct message from the CEO and saying, I think you’re a perfect candidate for us.

I haven’t posted a job description, but you have these skillsets, and they are exactly what the problems we are trying to solve. I think you would get great joy out of solving those problems with us. And typically, I send three messages out and somebody responds, and we go through an interview process and it’s been incredibly successful.

The other thing I think, Elisa, is this is why networks matter. This is why your long-term business relationships matter. Because I can tell you that I started recruiting the first three hires for Strike Graph before we ever incorporated Strike Graph. I had meetings with them, I told them what I was working on, I talked about the types of things that we would like to build, I gathered their feedback and interest and I tracked them the whole way.

Elisa La Cava: [00:22:47] I love that.  I also wanted to touch base on another point you’ve made before about looking for people in candidates who want to join your company, who are reaching up.

Can you tell us a bit more about what you mean by that?

Justin Beals: [00:23:01] Absolutely. I think that’s one of the critical traits for any startup that you’ve got to look for. When you find someone that has been overlooked, for whatever reason, the color of their skin, the gender, diminished or demeaned from typical communities that they might work in, you’re finding someone that wants to achieve, but no one has unlocked their ability to go and see what they can do. You want to give them an opportunity to operate within their boundary. And that’s your job as a CEO is to unblock the talent to deliver everything they can. Not to tell them what to do, but to give them the best opportunity to even outsize the deliverable that you expected of them.

And so that grit, it’s really important to me. And I think that nontraditional candidates are a great way to source that grit, because if they are exhibiting courage, to go and try, they just need a vehicle to travel in. And a startup is that because the one thing a startup can give employees is an opportunity to grow quickly and opportunity to work on new problems and opportunity to do things that, bigger company might have more clearly delineated in roles. And when I have a developer that says I’m interested in dev ops, I’m like, great. We have a lot of dev ops problems. You can get a chance to grow in that way.

Hope Cochran: [00:24:32] Justin, I love this concept of unlocking their potential and finding people who want to reach up, but just haven’t had that opportunity. You and I have talked about some of the ways that you find these candidates. And you’re very intentional about looking for them. Can you walk us through some of the ways you’ve done that? It doesn’t happen by accident.

Justin Beals: [00:24:57] Yeah. So, I think the first step is to understand the context that you’re operating in. So, for example, with Roundbox sometimes we operated in new international contexts – Chile or Costa Rica. And so, geography was a really important limiter to what we were looking for. When you understand the limitations of your sourcing or who you’re going to hire, i.e.., they need to be in the Seattle area or it can be more international or they need to have at least this baseline certification, then you can start to get very creative about where you source it from.

And you need to understand that you’re competing for talent. You’re buying talent, you’re competing for their interest in you, their ability to come work for you and you need to go find them. Now, if you buy the most expensive talent possible, as it gets more expensive, I find there is more and more variation in the actual success of that talent when you bring them on board. But if you look for the places where others are overlooking talent, you will find amazing, talented individuals that are looking for a real opportunity to do that reach up, to climb a ladder, to learn more and grow. And so, I tend to find the educational institutions that are in the area, that are teaching the types of skills we need as a baseline, but are reaching into lesser served communities, people of color, historically black colleges and universities. My own college, Fort Lewis College had an attendance of 30% first nations, native American population. It’s great environments like that.

And here in Seattle I’ve worked closely with the ADA Academy, which focuses on women in coding. And so, these are just really exceptional educational institutions. The talent is high class. I spent time learning about these educational institutions so I could rely on what the students learn, and they’re just an amazing source of talent through and through. That’s that exponential effect because once you bring in one person from the local community college, new graduates are coming out all the time and interested in the opportunity that they’ve seen someone else achieve.

Hope Cochran: [00:27:06] Yeah. I just want to emphasize Justin cause it’s something that I’ve been so impressed by in working with you. When you started Strike Graph, you didn’t say, hey, I’m going to go check out this college and form a relationship, you had formed that knowledge and relationship with those institutions’ years ago.

This is a process. This is not something that just happened because you decided one day that you needed candidates. You have been working with ADA now for years. And as a result, we have some amazingly talented engineers in your organization as a result of that relationship. Same with the colleges, you know where to go because you have done the background work. I just think that’s so impressive. This doesn’t happen opportunistically or by mistake, it was with well laid plans, so congrats to you on that. I think in general, one thing we can’t overlook is you have built this company during the time of lockdown and COVID. And we all talk about how bringing on new hires during COVID has been the challenge.

Your entire company has been new hires and you have built an entire company during this period. So, as you have brought together this amazingly talented and diverse group, can you talk a little bit about also the challenges of doing this in this unique time period?

Justin Beals: [00:28:29] Sure. I’d be happy to. With compassion, this is a really hard time. And one thing, when I’ve been knocked down in business, it’s generally been something chaotic that I never could have predicted happening. And this is chaos in a lot of ways. And I want to respect that I’ve talked to colleagues that have had a horrible year in business.

It’s been really awful. And colleagues that have been very successful because of the chaos. And it’s very hard to predict. I will say that I started Roundbox in 2000 when the internet, no one liked it much anymore. It’s actually a little bit liberating to start a company in some form of downturn or crisis because you can grow as everything starts coming back, which is helpful.

You’ve mentioned the network being really valuable and it is probably my greatest pride, is all the amazing people that I’ve had a chance to work with and learn with, and the future opportunities that I want to create to work with them again, if I’m not already. That network was super important to getting a company off the ground with COVID. And I think, and I’m not sure if this has been your perception, that talent is looking in this COVID time for a team that they can work with and rely on since they can’t go to the office as well. And so, the, their networks have been more valuable to them in selecting a new position or looking for a new opportunity. And I took advantage of that, of course in building a strong team ourselves. Those habits that we mentioned daily, stand up. Planning meeting, writing tickets in our JIRA board, making sure that we’re keeping each other healthy and on track. It is, I think also critical in, in these COVID times. And then the final one is you have to express an outsized empathy. I used to say, a lot of remote teammates over the years, I used to say that you need go see each other every quarter to humanize each other again. So even though you’re on the phone, you remember that you’re talking to a person on the other line and even I get off base with that. It’s hard to remember the humaneness that, that we need to engage each other with when it’s just over a phone or video. We can’t do that now.

And we can’t make those physical connections. And so, I’ve intentionally tried to have moments with all our teammates that are not about work, but just about life. So, we can connect over the water cooler and continue to build a human relationship. Something beyond just the work that we do and enjoy each other in that way as well.

Hope Cochran: [00:31:10] Thank you. Justin, every time I work with you interact with you, I’m inspired. I’m excited to build this company with you. I’m excited to have that opportunity. And I’m just excited about what we’re going after together. So, thank you for letting Elisa and I be part of your journey.

Justin Beals: [00:31:30] Hope and Elisa and Madrona Venture Group and Madrona Venture Labs, our incubator, I have grown over the last year immensely, so I am not static in this process, as well, and all of you have been critical mentors for me, and I’m eternally grateful just for the opportunity to work alongside you and to achieve some success in and go after the next boundary.

Elisa La Cava: [00:31:53] Thank you, Justin.

Erika Shaffer: [00:31:57] Thanks for joining us for Founded and Funded. I hope you enjoyed this e

POSTED IN: Madrona News

Ally.io – From OKRs to Business Success

(pictured, Vetri Vellore, Ally.io founder and S. Somasegar)

Today we are excited to announce our investment in Ally.io.

Recently, we wrote about our core investment themes.  Specifically, our investment theme relating to Ally.io is the Future of Work, Workforce and Workplace.

Ally.io is an integrated software system for improving business performance using OKRs (objectives, and key results) by effectively managing individual, team, unit and company goals in one unified environment.  In an era where communication is the critical link in how employees perform, how they feel about their work and how deeply they understand the overarching business goals and mission is critical for high performance. Ally.io offers a tactical and practical way of keeping everyone on the same page and accomplishing company goals don’t just help people feel good but have significant positive impact on the business.

OKRs, or “Objectives and Key Results” is a goal setting methodology credited to Andy Grove and popularized by John Doerr.  Large companies are increasingly adopting OKRs as a goal setting framework. Google, Intel, Zynga, Twitter, LinkedIn, Netflix, Tableau, Zendesk, etc. all use OKRs to help achieve corporate goals. We are also seeing mid-market companies adopt OKRs in their strategic and leadership planning processes. In many instances, leadership and executive teams are rolling out OKRs across a growing org, as part of a broader strategic refresh, but they can also be implemented at a team level for significant benefit.

In short, OKRs are here to stay. And with nearly $300 million being invested into these companies over the last two years, we expect this method of driving both business results and employee engagement to continue to spread beyond technology companies and become the norm in global companies.

At first glance, OKRs seem to be something that a spreadsheet could track.  But the investment belies that simple take on the market.  We believe these market trends are driving the growth:

  • Companies want to move faster and be more agile
  • Leaders recognize that employees aligned on goals and metrics are more productive
  • Performance and measurement data is scattered across many applications, cloud native apps make it easier to access this data
  • Daily/weekly reviews and integrated dashboards enable leaders to assess and course correct quickly when needed

These trends together are driving innovation in how people are reimagining what tools people need to be effective and successful in today’s day and age.

Vetri (Founder and CEO) and his team at Ally.io recognized these trends a few years ago when they first started working on Ally.io and have been building a simple, easy to use product to serve the market needs.

Customers that use Ally.io love the simplicity and ease of use that make Ally.io the core system of record for tracking, updating, and managing goals. Ally.io operates on the simple principle that people would love to stay in the tools that they use to get their work done and not have to transition back and forth between different tools.  That’s why Ally.io has focused on building a broad and best-in-class integration with other tools and platforms including Slack, Microsoft Teams, Jira, Smartsheet, Asana and many more.

Vetri has taken the idea of OKRs and is building an intelligent business management system that unifies planning, people operations and projects.  We believe this is a massive opportunity.  The experience of 2020 and remote work has brought into focus the need for digital-first workflows to effectively manage the modern workforce.

A compelling vision and a huge market opportunity can be realized only with a world-class team. I have known Vetri for many years, going back to his time at Microsoft. Vetri is an experienced entrepreneur with a track record of success and a history of building strong teams. He bootstrapped his previous startup, Chronus, and had a successful exit.  While at Chronus, he implemented OKRs across the company and has personally lived the roll-out and use of OKRs to drive effective teams. That experience directly led to the creation of Ally.io

It is this combination of a world class team, a huge opportunity, a compelling vision that is highly relevant in the rapidly changing work and workspace environment that led to our decision to invest in Ally.io from our Acceleration Fund. We are excited and eager to partner with Vetri and the Ally.io team in this journey to use OKRs at the core and build out the next generation intelligent business system that enables teams and organizations of all sizes to operate with the highest levels of agility, alignment and performance.

POSTED IN: Madrona News

Ozette – an AI-Powered Immune Monitoring Platform

We are excited to unveil our investment in Ozette Technologies today. Ozette resulted from the marriage of many years of science and software development work performed at the Fred Hutchinson Cancer Research Center and the AI tutorship of the Allen Institute for Artificial Intelligence (AI2). Their goal is nothing short of helping to discover new disease treatments based on an AI-aided understanding of the immune system. Speaking with founding teams like Ozette’s inspires us and supports our belief that this intersection of innovation, where biology and computer sciences come together, will change and save lives.

Ozette is an immune monitoring and analytics platform that enables academics, researchers and pharma companies to understand the immune system with incredible clarity. This clarity enables new biomarkers to be discovered, treatments to be selected, and ultimately, the development of novel drug therapies to fight disease. To do so, Ozette ingests high dimensional single cell data (used to identify specific cell types) and offers scientists an extremely precise view of the entirety of the sample’s cell population.  Unlike traditional analysis techniques which require lengthy hand annotation and only identify a small number of sub-types (while missing the majority of cells), Ozette’s proprietary AI platform rapidly identifies all of the true cell types in a sample, offering unprecedented detail and accuracy. Ozette cuts down months of manual analysis to days or less and provides scientists with a view never seen before. The opportunities resulting from their platform – and the application of AI to single cell analysis and immune profiling – are endless and can potentially help reshape drug discovery.

Developed in the Gottardo lab at the Fred Hutch by Scientific Founder Raphael Gottardo, Chief Technology Officer Greg Finak, and VP of Data Science Evan Greene– recognized leaders in single-cell analysis – Ozette’s core analytics infrastructure has been proven over the last 10 years of research and is widely used by the community in its open source form called Cytoverse. Raphael and Greg teamed up with CEO Dr. Ali Ansary, an EIR at AI2, to build a scalable platform commercialization and industry partnerships. At Madrona we love backing strong technical teams with domain expertise and there is no better example than the founders of. They are truly leaders in their field and we are extremely excited about what they will build.

This is the 5th company Madrona has funded out of the Allen Institute for Artificial Intelligence program that is supporting the application of artificial intelligence technologies across different disciplines.

Both applied AI – AI applied to data and processes – and this intersection of innovation are key themes for our investing now and in the coming years.

We are excited to work with this team and support their growth in the coming years.

Madrona led the $6million seed investment in Ozette with participation from Vulcan.

 

 

 

POSTED IN: Madrona News

Founded and Funded: StartUp Studios and Accelerators, Which is Right for You?

The path to building a company (and getting venture funding) can be varied and long and winding.  In the latest Founded and Funded we talk about two of the paths – Startup Studios and Accelerators.  They each offer different benefits.  Madrona investor, Elisa La Cava sat down with Madrona Venture Labs’ Mike Fridgen and FFA’s Leslie Feinzaig to dig into the differences and the types of companies that benefit these types of programs.

Transcript (this is machine driven transcription so expect some typos)

Erika Shaffer: [00:00:00] .
Welcome to Funded and Funded. I’m Erika Shaffer and I work at Madrona Venture Group. In Founded and Funded we want to tell the stories of founders of venture funded companies. In this episode, we’ll look at how companies get to be venture funded. Two different tracks to that, or joining a startup lab, which is sometimes called a startup studio or joining an accelerator.

We sat down and talked with Leslie Feinzaig of the Female Founders Alliance, which runs an annual accelerator called Ready Set Raise. And with Mike, who runs Madrona Venture Labs, a startup studio that is the innovation arm of Madrona Venture Group. They both sat down to talk with Madrona investor Elisa La Cava.

Elisa La Cava: [00:00:52] Hi everyone. My name is Elisa La Cava and I am an investor at Madrona Venture Group, and I am beyond thrilled today to have two incredibly important people in our Seattle ecosystem on the Founded and Funded podcast. First let me introduce Leslie Feinzaig.

I actually met Leslie when I first joined Madrona two and a half years ago because attending an FFA pitch event was one of the first things I did in my role, as an investor in the Seattle area and meeting some of the first entrepreneurs you worked with in your Ready Set Raise program. So I have been a big fan of Leslie and what she’s been doing for the past two and a half years since I’ve been in my role.

And I know Madrona has been a supporter of FFA. For the full three years that you’ve been doing this program. So this is incredible. But more about Leslie, cause I know you all want to know about her. She is an entrepreneur and investor. She is the founder and CEO of Female Founders Alliance, which we call FFA. And it is a national community of founders, executives, investors, and supporters that collaborate to help under represented founders succeed. And her accelerator Ready Set Raise is three years old and it has been dubbed the Y Combinator for female founders by Tech Crunch. So welcome, Leslie.

Leslie Feinzaig: [00:02:11] Thank you for having me. I’m so excited to be invited to the Madrona podcast.

Elisa La Cava: [00:02:15] Yay. We’re so thrilled to have you. Okay. So I’d like to introduce our second guest, Mike Fridgen. He is the managing director of Madrona Venture Labs, which we will also be calling MVL. So we have MVL and FFA. And he has been managing director of Madrona Venture Labs since 2015. And it is the incubation program of Madrona Venture Group. And Mike has an incredible story, career, as an entrepreneur himself , founding companies since he was in college . Notably, he was part of the founding team at Farecast, which sold to Microsoft. And he was also a founder and CEO at Decide.com, which sold to eBay. So welcome Mike.

Mike Fridgen: [00:02:58] Thank you so much. This is going to be fun.

Elisa La Cava: [00:03:00] Yeah. So the topic were, today is labs and accelerators and this wild world we live in entrepreneurship where people decide to start a company, they have this idea. Maybe they have a co-founder, maybe not, and they decide to start a company and then suddenly think, okay, How do I do that? What’s next? How do I get the resources? Make the network, meet people, understand what the steps are. I need to take both fundamentally to build my business. But also to get customers to, hire your first recruits for your leadership team to get outside funding, if you’re looking for outside investors and there are tons of different ways you can do that.

And so we’re going to talk about two of those ways, which you are both experts in, which is the labs model and the accelerator model. So maybe I’ll just start off with an open question. What the heck is the difference? And what are they?

Leslie Feinzaig: [00:04:02] I think you should go first, Mike.

Mike Fridgen: [00:04:04] Okay. Happy to do it. So I say the difference in a word is the stage. So startup studios began with founders at the earliest possible stage. This is day one with an idea and at MVL there’s really two paths. One is , the path is where it’s our idea and we’re recruiting founders in. And generally when we get to that stage, we’ve done deep market analysis and research.
We’ve talked to dozens of customers. We’ve pretty, sold this idea into a set of investors to see if there’s a market for it. We’re really building conviction that there’s a product to build, there is a real burning problem to solve and the customers want it. And at that point we move forward and we recruit a founding team and we start with the CEO to begin a journey of further validation, then building traction, and then ultimately fundraising.

So that’s one path. A second path is when the founder has the idea, but it’s still very early, it’s at a conceptual level. And we’re going to then engage with that founder to go through our process. To really get it to the next level and ultimately get it to funding and on their way.

Elisa La Cava: [00:05:10] That’s exciting. And we can come back to this later, but the difference between having an entrepreneur who has that concept and then knows to come to you and the MVL team. Versus you and the team coming up and developing and vetting this concept, but then realizing I need a founding CEO. I need to reach out deep into my network and find someone who I think would be incredible at taking the helm of this idea that we’ve already started and launching it from there.

So I would love to, we can circle back later into kind of the process for how you get in touch with these two different profiles of entrepreneurs. Super, incredibly interesting. But before we go any further, Leslie, what’s an accelerator? And how do you think about that in context of what you’re doing differently with FFA?

Leslie Feinzaig: [00:05:59] Yeah. The, let me tell you the bad news is that the word accelerator now means a ton of different things to different people. The first piece of advice that I have for any founder out there is that when you see something described as an accelerator that you double click and go research what they actually mean because it can be like a traditional pitching and fundraising.

Like we are a traditional accelerator we’re pitching and fundraising accelerator. We were modeled after Y Combinator and Tech Crunch and TechStars rather. But there’s also development accelerators, there’s sales accelerators. There’s programs that call themselves accelerators, but all they really do is introduce you to people and you don’t actually accelerate anything.

So it really has a lot of different meanings. I’m going to talk specifically about these pitching and fundraising accelerators that are designed to help a company raise their first round of capital. That’s what Ready Set Raise is. You come into the program and in a few short weeks, we equip you to give a pitch, that is we call it the perfect pitch. And then we put you in front of hundreds of investors nationally. Try to match you as much as possible. We develop a mentor network for you and give you the relationships that you’re ready to walk out of that accelerator and ready to have a very successful fundraising season. So it, it’s less about, it’s less about a short MBA where you learn about sales and marketing. Although we can do all that stuff. It’s more about accelerating your capacity to first to raise that first round of capital and getting your company ready to do that.

Mike Fridgen: [00:07:33] I think it’s so helpful that Leslie points out that accelerator can mean a lot of different things to different people in different organizations, and it matters so much who you’re working with. And it matters so much like the team that’s surrounding you to support you. And when I think about accelerators in terms of stage, I think it’s at a later stage. So this is generally where the founding teams in place, there’s an early product development, product developed. And in some cases they’ve even raised some funding, but they’re looking to take it then to the next level. Most accelerators generally work within a three month time horizon. So something within that range, when you’re talking about a startup studio it’s much earlier, so you’re really at that earliest point and working over six, nine, 12 months before you’re getting to the funding stage, just to help clarify some of those differences in terms of timing and in terms of the idea.

Leslie Feinzaig: [00:08:23] One of the great ways of judging that is we if you are not ready to raise a round, you’re not ready for our accelerator. And that’s a key thing for people to, to be introspective about because just because you need money doesn’t mean you’re ready to raise money. And I mean that in, in the sense of where the business is, there has to be an investible story and we’re going to help you pull everything together to tell it and fundraise successfully versus an accelerator, ours is not the place where you come in to figure out your business.
We assume that you did that on your own already. Versus if you go to a lab, you’re going to have a lot more time, a lot more support to figure out the operating company itself.

Elisa La Cava: [00:08:57] I love what you just said. Leslie, you said just because you need money, doesn’t mean you can raise money.

Leslie Feinzaig: [00:09:03] Which sucks, just to be clear, because when you need money you need money. But the truth of it is it’s in the long-term. Not good for you to get money when you’re not ready for it.

Elisa La Cava: [00:09:14] Right. And when you are ready to bring on outside funding, investors are investing, explicitly because they hope to get a return on their investment at some point. And you have to be in a position to prove that you’ve, de-risked certain elements of your business to be able to deliver on that promise of return one day . Oh, go ahead, Mike.

Mike Fridgen: [00:09:32] I’m just going to say again, I think this was really helpful because so many people have these questions about the differences and how to think about these different models. I think w it’s just such a great point that they have to be ready to raise, and she doesn’t have confidence that, you’re going to be in that spot.

Then it’s just going to give her reservations. Cause she wants to put, people are going to be ready in front of investors and have this be a successful model. And similarly we’re looking for a set of traits around the CEO really early. One of the things that I was going to share though, that I think would be helpful.

Is that also within the studio model, there’s a set of doers that surround the founding team. And what I mean by doers, people actually co-building with you through each phase.

Elisa La Cava: [00:10:11] Maybe talk more about this Mike, because how does it change if it’s an entrepreneur coming to you with an idea versus your team building the idea and then hiring an entrepreneur in.

Mike Fridgen: [00:10:23] In both case, if we have conviction that this is something that needs to exist in the world, this is a real problem. And we are going to partner with the CEO, whether it was our idea or their idea to go build it and to go serve customers and to go create evidence and proof that we can then, without traction, go to investors and make a compelling case to fund it and that we can then take it forward. And what I mean, doers, with our team, we’re a team of former founders across engineering and data science and product and design, et cetera. And so when we work with the founder, we call it swarming.

We really swarm around the founder. And so you’re fast tracking your development. You have a team of people who’ve done it and they can help you take the shortcuts to get that product in market and have it land successfully. So I think those are two differences because the models are different too.

You’re going to, to be clear as an entrepreneur, you’re going to give up more equity generally in a studio model, and that doesn’t make sense for some founders. Some founders are ready for investment and accelerator is more suitable to them, and it makes more sense financially for them because they’re going to, they’re gonna, give up less of a trade off around equity.

Leslie Feinzaig: [00:11:33] To that point, it’s worth mentioning that traditionally one of these fundraising accelerators is going to take, I actually forget what the latest the terms are, but somewhere around 6% of the business and they pre value your business. So you don’t get to negotiate what chunk of equity you’re going to give up and for how much money. We just by virtue of how we started as a bootstrapped company ourselves, right? We’re bootstrapped accelerator. We started off by making it equity free, so we actually don’t take any equity in the companies, what we take this investment rights. So that, that down the line, when you are raising your round, on your terms, on the terms that you set with your lead investor, then we can participate in those terms.
And we are very strict about not negotiating that, so we do take those investment rights and we have the right to invest in you down the line because we believe in every company that comes on board. But like Mike said, that is actually a much like whether we invest on the spot or later on, like that’s a much more traditional participation in the company versus if you go to MVL, like you are co-building that company with an entire team of people, we’re not doing that for you. We assume that you built your business on your own. And we’re going to put the equivalent of the world’s most bad-ass advisor group working for you for free, right? Need to spiffy up your model. We got you. We got your CFO on hand. You need to build that deck beautifully. We got you. We can put the right people in front of you. We’re going to work with you endless hours in a short period of time, but we’re not actually going to do any of that for you. We’re going to put the right people in place that you can do it yourself.

Elisa La Cava: [00:13:10] I love that you bring this up, Leslie, cause this was my next question is that next level down, what would an entrepreneur exactly get or receive in working with a lab or an accelerator? And I love how you frame that saying, if you need specific help, we have people we can connect you to, to flesh out your model, your financial model to go through your investor pitch deck and help you craft that story , to give you access to a number of different advisors who can coach you, but you still have to do all of the work.

And so I’m curious, is there anything else you’d add in terms of specifics for you know what entrepreneurs can hope and look forward to receiving in working with a group like FFA.

Leslie Feinzaig: [00:13:55] I’m channeling my COO here. And what we like to tell entrepreneurs is that you get what you put in. We are not here to do for you. We are here to accelerate you. So the way to think about it is like, whatever work you put in, we’re going a 100x effort by putting you in front of the right people. I don’t know if a100x is the right number, but like we’re going to, we’re going to accelerate and amplify all of the things that you are doing on your own. Need to hire? Let me put you on my 20,000 person newsletter. Need to get on, need to get your press release? Let me put you in touch with whoever at Tech Crunch, GeekWire. Need a specific area of expertise? Opening up our Rolodex. We’re just going to open up all of these network opportunities and to some extent, the people that are really great at supporting startups and all of this stuff can’t support every startup, right? So we become for them and actually for you guys , for Madrona Venture Labs and for Madrona Venture Group, we become like the curators of who they should be supporting.

Like we bring you and say, we just selected these eight companies from 400 of the country’s most promising entrepreneurs. These are worth your time. The primary outcome that we look for in the companies is a successful set of fundraises down the line. So it’s not just about raising our first round.

It’s about setting yourself up for multiple like, for getting on the path successfully for the long term and having a great outcome for your investors. That frequently looks like getting ready to start a round and closing and successfully, but , as it’s turned out we end up having a long relationship with some of these companies, right? Like either I will get on their advisory board or on their board, or, I don’t have the capacity to get everybody’s boards, but they’re, they’ve been recruiting from our mentoring network to put people on their boards. They’ve been recruiting from our mentor network to hire actual employees and C-levels into their companies by introducing each other to investors down the line, lots of media sharing, lots of like stuff that you just share with founders. They’re also a great founder cohort support, right? They actually, even right before we started recording this podcast, I had my monthly Ready Set Raise community check-in where we get all the founders together once a month from all the cohorts and just talk about what’s going on and celebrate each other’s wins. Nobody understands what you’re going through better than somebody who’s going, who’s walking the road with you. So you get that, that Vistage, like network for life.

Elisa La Cava: [00:16:12] And you’re building the power of that network over time with each additional cohort, which is amazing.

Leslie Feinzaig: [00:16:16] That’s exactly right. The, the students become the teachers. These founders are even taking us like the Female Founders Alliance ourselves into their fundraising journey. So all of a sudden we are, our investor network explodes, and we are able to, Hey, you invested in this company, let me show you these five others that came through our accelerator, because I think that you’re going to like that.

So really amazing things have happened. And I talk it up to the fact that there’s a little bit of, if I just survive a little bit longer, right? This is going to absolutely explode. It’s only been three years and we have so much. There’s so much big announcement stuff coming down for the companies that have participated that it’s almost daunting to imagine where they’re all going to be next year.

Elisa La Cava: [00:17:04] And, you bring up kind of another point that we’ll dive into in a minute, which is the fundraising journey. Which is , deserves chapters of its own. But Mike, I wanted to quickly, get back to the labs model and just get the next level down when going back to the original question I just asked Leslie on what can founders hope to specifically get help with in lock step with you and your team.

I know you mentioned creating evidence and proof and you have this kind of swarming process you do, but what does that actually look like?

Mike Fridgen: [00:17:36] Absolutely. So really when you’re talking to day one founders and what they, when we asked them, what are they looking for? What do they value? There’s really two things. It’s de-risking and fast-tracking building a venture scale company. That’s what they’re looking for. And again, I’m talking about day one, I’m talking about really early because there’s other options.

And other options to bootstrap, which can be a lonely, expensive process over a long period of time. And the idea of coming in MVL is really de-risking and fast tracking. And part of that, is the team. Working with the team to vet the idea, using a proven process that’s been used from, by founders. And, our team has been doing this for decades, but then also over the last dozen companies that we’ve built, we’ve continued to refine this validation process. So that’s an important part. The second piece is we mentioned getting to actual traction and building. We have a process around doing that quickly and access to an incredible network within the Seattle area, not only our personal networks, but frankly Madrona’s deep network in our community to have access to companies and talent.

So when we are building and maybe we just started with the CEO, but we’re out in the market and we’re bringing on an incredibly talented CTO and, lead product, head of design, et cetera. We’re forming that team together, leveraging our network, as we’re working with customers, as we are building that product out. And then ultimately getting to funding, where we’re, de-risking that process all along the way as well. With us, we start talking to investors incredibly early and we make them part of the conversation, so by the time we’re raising there’s a lot of familiarity there and there’s a lot of lean in and interest in leading the rounds and participating in the funding round.

So that’s all part of the mix when you think about de-risking and fast-tracking what might take two years to bootstrap in your garage, you can do over a six to nine month period with people who are focused on your success and have been doing this on a repeated basis throughout their careers.

Elisa La Cava: [00:19:39] okay. Amazing. You just make me think about the sheer number of entrepreneurs and companies who are hoping for help growing their businesses or for raising outside funding. And, you look at MVL and FFA and you have limited resources, namely your time, in how you choose to allocate what kind of companies and what kind of entrepreneurs you’re able to help.

So, and Leslie, you mentioned earlier a stat on 400 people applied to your most recent cohort which means most entrepreneurs and companies don’t fit your program. So can you talk a bit more about what, what doesn’t work with your models?

Leslie Feinzaig: [00:20:22] This a really tricky thing because we don’t want to discourage people from applying. We in fact, want to encourage people from applying. We think that there’s great benefits in going through an application process, because we’re basically asking you to describe your pitch in, in, in like long form.

So as you’re preparing to go into a fundraise, even going through an application like this is good. Second , specifically with women and specifically with women of color it’s important to encourage entrepreneurs to just try, because if you don’t try, you are undercounting yourself, right?

Like you’re immediately assuming that you’re not going to be the one that makes it through. We have more than one example of companies that did not, were not selected one year applied again and were selected the next year. And the companies that we like from there, we end up building relationships with. So who is it for? So the first thing to know is usually when you’re not accepted into a program like this it’s less than there’s something wrong with you or your company. It’s more that there’s a company that fits the program a little bit better. So we’re going to end up selecting companies that we believe we can accelerate the most.

LeslieFeinzaig: [00:21:38] Does that make sense? The best use of my time or the best use of flexing our entire program’s muscle on someone’s behalf is somebody who is absolutely ready and is just missing, it’s just missing that, like that rubber stamp of de-risking. So, very frequently, it’s just somebody who is a little further ahead, who has better chance of opening and closing around at the end of the accelerator, at the moment in time that they’re applying . Who is this not for?

The one thing that we encourage people to do before they apply is to find true evidence of demand for what they’re building. And Mike was talking about how much work, imagine how much work Madrona Venture Labs spends validating those ideas before putting people and money against them.

Think about your own idea in the same way. So we generally don’t admit idea stage entrepreneurs. We admit people who maybe they haven’t built their product because it’s expensive to build something, but they have hacked the backend and demonstrated demand. That might look like a waitlist, that might look like some LOI, some letters of intent signed with possible B2B customers, that might look like a big pipeline of people that you have relationships with that have demonstrated interest in working with you.

So it has different ways, but like show, you need to show us that people that are not your mom and dad and brother, and sister want to buy the thing that you are selling. And that they want to invest their time with you. And it’s not a survey. Like it’s not it’s not the results of the survey. Tell me that 70% of people want to do X. No. It’s like a real signup.

So that’s one category of I don’t want to say don’t apply, but I do want to say, go find evidence of demand that you can demonstrate to us before you apply and you’re going to have a much better chance of being admitted. And, hey, by the way, you’re also going to have a much better chance of raising capital if you have demonstrated evidence of demand.

And the second is we get a lot of applicants who have been at it for a really long time and bootstrapping for a long time and you get into this catch 22 problem, or you are successfully bootstrapping, but also not growing at a pace that, that makes it interesting for investors. So when you think about moving away from a bootstrap for X number of years , not weeks, not months, years to I’m going to raise venture capital. The problem that you get into there is that you don’t have velocity and investors look at it and the investors want to know if we put money into this, is it going to catch velocity and like really take off?

So frequently we get applicants who are like, this is my last ditch attempt because nobody wants to invest in, okay, but I can’t help you. So if that’s you, if you have the five-year trajectory, the thing that we want you to do before you come apply is find evidence of velocity, throw out a new program, right? Get, get a new hire and build in something that demonstrates that you are picking up speed and that there’s a reason to invest in your company now. And again, that kind of goes back to the difference between needing money and being ready for money. If you don’t have, if you’ve been working for a long time and you don’t have any kind of, what changed this year to make it a good investment now, versus it was five years ago? Then it’s going to be really hard for us to get investors excited or to help you execute a round successfully. And I know that it hurts to hear this and I’ve bootstrapped companies myself, so I definitely appreciate how much work it takes. But the more, the more I have developed my own journey and startups and venture capital, the more I realized that this is not about good businesses. This is about venture capital investible businesses. And those two are not necessarily the same thing.

So you might be building an excellent business that needs a different type of capital. So those are some of the things that like, we really want you to think about and look at before you apply, because they’re going to help you make that application a lot more successful. But having said that I, it’s very important to us that people don’t hold themselves back from trying and learning what they can.

We also, unlike I think every other accelerator out there, I don’t know anybody else who does this, but we actually give people feedback, if they ask for it. Every single person who gets rejected and wants to know why, we will gladly, it ends up being a huge time suck for the team, but we will gladly sit with you and help you see it from our eyes.

We, we have an interim step where we ask people to do a self evaluation. So that we’re not just going in blind and like telling you, hey, these like 70 people who you’ve never met think that you’re too early and that’s meaningless. So we ask you to invest in yourself first by, what do you think happened?

And then we confirm or deny some of the things that you’ve and we’ll add some color from the comments that we get on your on your application. So even for that there’s a huge value add in like putting your story down on paper and getting it reviewed by a very large group of like really smart people who do this for a living. And it allows your team to have a very structured way to give that actionable feedback at volumes,

If we’re not, if we’re not helping founders, then what are we doing here? You know what I mean? There’s a natural tension for us specifically for the female founders lines, there’s a tension between how selective venture capital tends to be with how inclusive we need it to be. And so this is why it’s important for us, but like Ready Set Raise is one part of what we do, but it’s not all of what we do.

So any company that does not get selected for Ready Set Raise still has access to a hundred percent of the rest of our programs, many of which are either free or like incredibly cheap. So like our goal is to accelerate the success of every founder who wants to do it. We don’t go so far to do that for you. You have to do it yourself. But we will enable it as to the best of our ability. We just can’t let go and go that deep with like every company you will hate the image of me on zoom after a while.

Elisa La Cava: [00:28:04] Yeah. Mike, what about you with the lab model? Who doesn’t fit working with a lab model?

Mike Fridgen: [00:28:10] The way I was thinking about this for us is it’s, everything is about idea and founder selection. And when you think about, from an idea standpoint, we’re really focused. We’re focused in AI driven applications. We’re focused in RPA and automation. We’re focused on future of work. We’re focused on things where our core MVL team has a track record of execution and experience, Madrona has an investing history and where Seattle has unique capabilities around talent and such. So we’ve narrowed our world around ideas selection. We have a process for vetting ideas within those areas. And then the next piece around founders, this is everything.

So you have to get the idea, right and then you have to put the right founder in that company for it to reach its, meaningful scale and see its full promise through. So we have six things I’ll go through them quickly. We look for in our, this is our founder framework founder selection framework.

One is domain insight. So do they have deep insight in the domain that they’re operating in related to that, are they obsessed about the problem? We have two great examples. One in Brian Camposano who joined us in a company called Stratify. He had been a CFO, he had experienced problems around budgeting and forecasting and Stratify specifically solves that. It was a perfect fit and match.

Another example is Justin over at Strike Graph, the CEO who had problems with SOC two compliance with his business and was driven to go solve that for others in a similar spot. So domain insight, and then obsessed about the problem. And then along with that is a real bias for action. And this is something we tease out, especially in a world where we’re talking to founders who have a long history working in larger companies. The pace of a smaller company is just much faster.

And some people are wired that way. They’re just wired as entrepreneurs and they’ve operated that in every context in which, in their careers, but others haven’t. So we really try to tease out that next piece which is bias for action. And then what goes well with that is rate of learning. You’re taking action and are you humble and grounded that you can learn quickly? You can take from all that effort the right takeaways to, to adjust your business. And then the last one around the core set is strategic judgment. Do you have vision for where to take your company?

And I’d say the most important thing and it’s wrapped in all of those components is, force of will, ambition, drive. We don’t talk about this enough. The people are building meaningful companies have a calling to do it. It is their mission. They can’t not do it. Because these are not people who are doing the math. If they were doing the math, the financial opportunity cost doesn’t make sense, personal sacrifice doesn’t make sense. Probability of success, super low. So people who are doing the math should run, not walk, from doing this. It doesn’t make any sense for them. So you have to be a little crazy, you have to have a calling, and all those other attributes are nice, but if it’s not wrapped in that ambition and drive, it really, isn’t going to amount to much.

Leslie Feinzaig: [00:31:19] Mike, this is all hitting a little close to home. I like to tell people about, you have to be crazy to do what I do. I feel like anybody who’s building something huge, you have to be crazy to live this life. That’s why I’m not scared of people seeing our deck and sure you want to copy it? Like you think you can, you think you can live like this, please? Let’s do it together.

Mike Fridgen: [00:31:41] And this is where it goes back to Elisa’s question around who should not do this. If you’re not crazy and that doesn’t sound like you that’s okay, but you probably shouldn’t do this. I think that to me, that’s the kind of like the long journey to that answer is yeah, if that’s not, you don’t put yourself in that situation. And if you can’t not do it, if you know all of that, you know what doesn’t make sense on paper and you’re still called then it’s, you should go do it. You should go through your life into it.

Leslie Feinzaig: [00:32:07] There is a pace to a venture backed startup that is different from the pace of a business building. So I come from a family of small business entrepreneurs and I think that there’s a lot of people who feel the calling to build a business to create value.

And like to encourage as many people as possible from doing it. And maybe once in your career or twice in your career, you can try to go this kind of high velocity route. But it’s not to discourage people from starting companies. I think that starting a company can be one of the most rewarding things that you will do with your life – create jobs and create value and build products and satisfy customers and make people’s lives better. I think that building a company is one of the coolest things that you can do with your life. And I want more people to do it and more people to try it.
Going down the venture capital route, you have to be willing to kill that company. That’s you have to be crazy enough to grow that company so fast that you would be okay if you failed, but you’re not going to stop trying, like you would rather fail than not try hard enough.

And that is not something that is comfortable, that it’s certainly something that you’re dramatically underpaid compared to the level of work that you’re doing. And as you’re describing the journal venture labs, I’m like, oh, imagine building a startup with health insurance from day one. What is that like? Oh my goodness. Crazy. But like an office space that is nice and people like their snacks there. That sounds amazing. Most of our lives in the early days are like spectacularly unglamorous. And it’s worse because every, like you got one article and everybody thinks that you’re flying high, but actually you’re like eating crap all day, right? ,Like you’re cleaning desks and like sucking up to people and writing 15 different blurbs about yourself, all of which give you imposter syndrome. So you really, you got to want to go big and I hope that you do. Hope more people do. It’s fun. Try it.

Elisa La Cava: [00:34:07] So when people go through your application program, or Mike, they, get in contact with you and you decide who to work with. Now, you’re surrounded, especially with Ready Set Raise, you’re now surrounded by eight different teams of people who, to your point, Mike and Leslie, are ambitious are driven, are, you have everything you’ve learned about them checks those boxes of how much they want to build this company and need to build this company and are willing to break down walls to do it. And so one thing I thought would be fun to share is show off something that has been successful for a team you’ve worked with either at MVL or FFA.

What’s an example of great success you’ve seen of someone who’s gone through working with your teams and your program and has achieved their goal? And how you know, or how have you personally really helped an entrepreneur get past a roadblock that they were facing?

Mike Fridgen: [00:35:02] I’m happy to share a story. Daniel Perrone who is a co-founder and VP of engineering at Chatative. So I’ll tell you where the story ends. Chatative just sold to MailChimp. It was a successful outcome and great for the team and shareholders, and that’s all wonderful, but I’ll tell you this is a company that had many near death experiences and for Daniel coming in, working with the MVL team in early 2016 there was a ton of uncertainty as multiple factors unfolded over time around, product and customer and the team and, a market around conversational commerce and messaging that really took some time to develop. A lot of companies didn’t make it that were funded high flyers over the years. But Daniel was really the heart and soul of this company and keeping it together, keeping a great technology team together, delivering a high quality product over time. Gaining real traction and ultimately to the outcome that company has seen just recently. And, and what it really highlights is that it takes, it does take a village. It takes a lot of people around the table who cared deeply and passionately , are passionate about making the company work.

Like it really does. It’s more than just the CEO or the board. It takes multiple people. And for this business, Daniel really brought everybody together through, everything we talk about the trough of sorrow, the near death experience and got this company to the other side. So he’s a recent success story, but it’s not something you read about or will see. We saw him when the times were darkest, have the biggest impact and keep the company moving forward.

Leslie Feinzaig: [00:36:44] That’s it’s like the trough of sorrow is like, just imagine it sounds like a thing in Game of Thrones, but it’s a real thing that every founder goes through and it really is that dramatic. That’s right. Get yourself a good founder therapist.

Let’s see, so some success stories. It’s just like such a huge privilege to go through this journey with founders and like seeing them come out the other side.

There’s a few notable stories. We had one company from the last cohort in 2019 that it’s a sexual health, so like a sexual wellness company. It’s super cool, huge growth, but a tricky space to fundraise and the founder is an unapologetic. This is a sexual health company and this is what healthy sex looks like. And she just closed $1.2 million and she did it $25,000 at a time. Can you believe what that takes like? That is a crazy person. That is what crazy looks like to not stop and raise $1.2 million $25,000 at a time. That is insanity. I’m incredibly proud of her, that she closed it and her growth is like just amazing this entire time. So that’s one that, that we just learned about.

There was another company in the accelerator last year, that was a local company here in Seattle, technically in Tacoma and Her experience. So this is the company called the Give In Kind, the founder is Laura Malcolm. Laura had bootstrapped this company for four years by the time she got to Ready Set Raise. She started the year like, 2019, she started the year, I’m going to forget her metrics, but like tens of thousands of users, 20% month over month growth. Reliably every month without spending a penny in basically anything. She moved her company to , she moved her company to Thailand, twice, to save on the costs of rent and childcare and development. This is how crazy she was.

And she came back to Seattle early 2019 with these amazing metrics. She started fundraising. She was trying to raise $500,000 on a 3.5 million valuation, which if you know anything about how far this company had gone, is like an insultingly low amount, and she couldn’t even raise a hundred. There was just like, nobody would give her a break. She came through Ready Set Raise and this was almost purely like a change in how to tell your story, drilling down in your business model so that you can demonstrate how it grows and how big the market is.

She ended up raising three times as much as she was aiming for, so she ultimately raised $1.5 million. Madrona participated in that round. I invested in that round. She like doubled or tripled her valuation. Six months later, she raised another million dollars as a bridge, because guess what? Her company was built for COVID and exploded.

And now she’s gearing up to raise her next round. She recruited from the accelerator, and ended up on Tech Crunch, the Today Show, like Digital Properties, like just all kinds of incredible goodness. And a lot, a big part of that was going through the journey with us, which, it’s just one of the most impactful, turnaround stories that I’ve had the privilege to be a part of. And, when you think about what that company does. So this is a company that enables people to support others through in kind help. So what do you do when somebody dies and you want to send a telegram or flowers? She has a marketplace so that you can send things that actually, that are actually helpful and not just, taking up space. So this year through COVID and through her growth, they powered 1 million instances of people helping each other. It’s just mind blowing to have been a part of that.

So that, that’s probably the certainly the most public story, because it’s all out in the public domain. There’s a lot more than I can’t talk about cause it’s coming up later, but that’s a very prominent one that I’m very proud to, I’m very proud to have co-invested with you guys.

Elisa La Cava: [00:40:45] Yeah, it’s such a powerful story. And you hope every company can find breakout success like that, with the help of such a powerful network that both of you can help bring. You touched on COVID. We are in a global pandemic. Why would anyone in their right mind try and start a company right now?

Mike Fridgen: [00:41:06] Yeah, I think this is a great time to start a company. I think there’s three reasons. Okay. So one is talent. If people are so compelled to start a company right now leave their comfy jobs and all the things that come with that, they must be real. They must, they must want it deeply, right?

This is not wantrepreneur time. This is like for the real people who are driven. And can’t cannot do it. So you have, I think for that reason the real strong founders step up in these moments. And I think also, this is also a time of people are drawn to mission.

I think a lot of you can tell just in our community and in our world, so doing something that they really love and believe in, I think there’s , people are putting more stock in that personally, willing to Millie to make those leaps. Second is opportunity. During these types of moments, people change behaviors.

If you go back to the 2007/2009 timeframe, that’s when Airbnb was built. They just had this massive IPO. They’ve totally changed the face of lodging. Go back to that moment. What was happening. People were looking to save money on lodging, as a consumer, people were looking to make some extra money, renting out an extra room in their home.

So there was a moment of change and a company seized that opportunity. And if, if you can go back and listen to their story. Talk about near death experiences. I mean that they had a very tough road, but they caught a moment of a behavioral change and they had a model that really added value within their marketplace, both sides of the equation.

And certainly we’re seeing that with more remote work and work will never be the same for us. So are we seeing massive behavioral change right now? Absolutely. There are new opportunities. We couldn’t have imagined a year ago. And then the third thing I’d say is there’s less competition. You have incumbents retrenching it’s again, there are fewer people taking the leap and trying to build companies.

So I think there’s this real sense of if you are passionate about a problem and you put your head down and in this, the next couple of years through this pandemic, as we come out of these things are building a great product, finding product market fit, demand will come back. So those, so then you’ll see the benefit of everything coming back your way as we emerge out of the pandemic.
So I think for the right founders and the right ideas, this could be a better time for, for some for some companies to be built.

Elisa La Cava: [00:43:23] Wearing my investor hat, there is so much optimism and energy in the private capital markets right now in terms of investors, venture firms wanting to invest and put a lot of money into new startups, against all odds with how crazy 2020 has been, I’ll throw out an interesting stat.

So much capital is going towards new startup creation, but there’ve also been a lot of reports talking about the lack of improvement and even backwards slide in fundraising that supports women entrepreneurs, black entrepreneurs, people of color leading these startups.

And so I’m curious, what is your approach, in the worlds that you live in labs and accelerators, how do you think about attracting founders and incredible teams to your programs and even how do you access founders outside of your networks? How do you reach this incredible population of people you may not be connected to now?

Leslie Feinzaig: [00:44:26] I think when we all went back to zoom and these open networks closed themselves and you have to like book time with people , you know, we also closed avenues for it, it the clique became more cliquey on a nationwide basis, number one. Number two, the entire economy has suffered a woman’s recession, right?

So like we see it in the economy at large that really the big losers in 2020 were women. And that’s partially because of the sectors that were most effected in terms of unemployment, but it’s also partially because we are, we are still the primary caretakers of our children and all of our kids came home.

I can tell you what it’s like to try to run a full-time business, while caring for two toddlers full-time in the household. I am lucky to have a partner that, that is an equitable partner in my house. But even then that was an untenable situation and I’m not surprised that we’re coming out of the next of the past few months of COVID with these very dramatic inequities.

And so the fact that venture capital has retrenched. Is both sad and also a huge missed opportunity for every investor. Okay. I’m off my soap box now. All of that said, I think of like the female founders lines.

Our purpose is to be the conduit of great deal flow for everyone. That’s what we want to do. Like we want every investor in the country to come work with us and to put companies in front of them. I don’t, I don’t, I don’t even know how to answer the question. How do I get away from my network?

There’s 2000 verified companies in the Female Founders Alliance already and thousands more people who are at idea stage or at like founder curious stage. So need the deal flow? Please. Come help us, come work with us, like we, nothing makes me happier than finding rounds that are being led by external investors for people who have been in our community for a long time.
So that’s our reason for being and, and that’s my open invitation. So, what I would like to see is for, for these VC firms to build systems so that they can bring diverse women, non binary people of color, so they can bring these founders into their traditional process and invest full-size rounds equitably. If you’re not. Making like building a real process to evaluate these companies and make them a part of your primary deal flow pipeline, then you’re not actually making a big change.

Elisa La Cava: [00:47:07] Very well said, Mike and Leslie, thank you so much for being a part of our podcast today. It has been incredible to talk with both of you and we’ll continue the conversation.

Mike Fridgen: [00:47:18] Thanks so much.

Leslie Feinzaig: [00:47:24] Thank you so much for having me. This has been super fun. This is like the most social life that I’ve gotten in weeks. So let’s do it again sometime.

Mike Fridgen: [00:47:27] Let’s

Elisa La Cava: [00:47:27] Awesome. Thank you.

Erika Shaffer: [00:47:29] Thanks for joining us for Founded and Funded. If you want more information on either Madrona Venture Labs or the Female Founders Alliance, check out the notes for the episode. Stay tuned for new episodes coming as quickly as we can get them out.

POSTED IN: Madrona News

Founded and Funded – How a Startup is Powering COVID Testing

For our first Founded & Funded podcast  of the year and Season 4 opener, investor Chris Picardo sat down with co-founder and CEO of Ovation.io on the heels of their Series B fundraise, to talk about the incredible journey that the company has been on in 2020.  Ovation is a scientific data company that provides a Laboratory Information System (LIMS) to independent labs.  Ovation stood up testing for COVID for these independent genomic labs in just about a week’s time following the early outbreaks in February of 2020.  And they saw a 75 fold increase in usage.  A growth curve they could not have imagined in early 2020.  They discuss growth and also how the incredible amount of genomic data acquired through testing will be a powerful tool for academics, researchers and drug developers into the future.  Transcript is below the podcast! Podcast is available on all podcast platforms – Apple, Google, Spotify

Transcript (this is machine driven transcription so expect some typos)

Chris Picardo: So I thought, today, given the big funding news that ovation recently announced, it’d be really fun to talk to the CEO, Barry Wark about the company and where things are going and how innovation is serving the future of precision medicine. So I think to, to give some [00:01:00] background here, I first met Barry probably two and a half years ago in a pre COVID world where we met over breakfast to discuss, this company called ovation.

Which was, trying to revolutionize the software that independent genetic testing labs were using. And I remember leaving the breakfast and coming back to Madrona and being like, man, I’ve got to get as many people as I can to meet there because that was just an incredibly exciting vision.

And I want to be involved in this company. And, it took a little while, is as processes normally do. But I think about two years ago, we made the series a investment is I think one of the first institutional investors. And we’ve been working really closely with Barry and team since to build the company.

And I think it will be really exciting to talk a little bit about where we’ve gone from the initial vision and where we are today. So to give a little background before I jump into, chatting with Barry which is always fun. Ovation, when we first talked to them was, really focused on [00:02:00] empowering independent genetic testing labs who formed the backbone of modern precision medicine with  modern software and  at the time and this is still true for a lot of them, the kind of best-in-class software that people were using looked a lot like Excel and probably looked a lot like Excel from the nineties. Not an updated version of Excel. Innovation said, Hey, you know what?

There’s a much better way to do this, . To let labs do significantly more and to have modern tools that, grow their businesses and serve patients better. And we’re going to build that. And, I just remember thinking that is such an awesome vision and a market that a lot of people haven’t touched and that needs to be served better.

And, for reasons we can talk about Barry was also a super compelling person to build the company as it solves sort of his own problem from his postdoc days. Since then the company has been on a tear and  so I’ll let Barry talk about all of the really interesting things that we’ve accomplished.

First thing, Barry, welcome, welcome to the podcast. And [00:03:00] I think that, it’d be great just to hear from you. Cause we talk about the business all the time, but not too much in this context, hear from you a little bit about why you built ovation. You know where it was two years ago, two and a half years ago when we first started talking and what we’re doing now,

Barry Wark: Yeah. Awesome. Well, let me tell you a little bit about what Ovation is today, just to set the context. Ovation is a scientific data technology company. Our products make it easier for labs to bring innovative tests to patients that need them while at the same time, connecting researchers and academics with the insights required to deliver life-changing medicines faster.

This has been the vision from the very beginning. In fact, I’ve been fascinated by the intersection of biology and technology. Since I was in high school, I loved molecular biology and I was lucky enough to have a biology teacher who let us learn how to sequence DNA by hand using electrophoretic gels.

I mean, this was really early days. I was inspired by the same teacher who [00:04:00] returned from a conference with a story about this amazing new instrument that automated DNA sequencing. And these were the first sequencers that were being used in the human genome project. Obviously our high school lab couldn’t afford an instrument like that.

They cost hundreds of thousands of dollars, but we had a new digital camera and I figured there must be a way to take a picture of the gel and have a computer analyze it which is the beginning of my. Programming career. It was the beginning of my love of life science. And it was the beginning of my love of the two together.

So fast forward, I’m finishing my PhD in neurobiology at the university of Washington. And I was just frustrated by the fact that life science researchers like myself. Collected way more data than we could ever use. And the data that we didn’t use ended up sitting idle on our hard drives on our servers.

And this is pervasive all the way from academic research through commercial R and D. And it became a passion and I wanted to help [00:05:00] fix this. I took it at face value that getting that data to the right person at the right time was good for the world would help us develop new therapies. It would help us bring medicines to market faster and.

It’s valuable. And therefore it might be good business. And that, that became just the passion and Chris, by the time you and I finally got to sit down for breakfast. We had a little bit more idea on what that meant. I’d met my co-founder Winston Brasor, who came from the commercial side of life science.

And we were really starting to understand that diagnostic labs were this amazing nexus of acute need for good software to run their business better. And the ability for those labs to work together, to bring insights to academic and commercial researchers that would help patients down the road.

Chris Picardo: Yeah. I think what was interesting to me is that, talking to Barry. Now we talk about how much data is being created in life science and then lifescience research and what should be done with it and how people are trying to do different things. But [00:06:00] the thing that was so interesting is it’s talking about how these independent testing labs are really on the front line for this end to end process and think, very one of the things you had said initially is like, Hey, if you.

Have a rare disease and you need to be into a trial. Well, where are you going to go? You need to go get tested by one of these labs. And these guys are, on the forefront of meeting patients with this very necessary service. And like you said, they were being served, poorly if more or less non-existent they by the software that was out there.

And so I, I think that’s something that you just said, which is worth talking about it a little bit too, is that, this is, when you think about what is going on in precision medicine and what are life science companies thinking about? Well, one way they need they’re really thinking about is how do we reach the patients and be able to get them the right tests at the right time so that we can give them the right therapy.

Barry Wark: Yeah, that’s absolutely right. Patients with rare diseases often experience that diagnostic Odyssey, they see many [00:07:00] providers they’re tested for a variety of conditions before they get to a diagnosis. And it’s these labs that we’re talking about that are doing, like you said, that, that frontline work of precision medicine, helping patients identify the right therapy at the same time, as you said.

Yeah. Therapeutic development teams are under constant pressure to accelerate the speed with which they can bring discoveries to market, reduce the risk of that R and D process. And one of the big costs, both time and dollars in all of that is running clinical trials. Whether that’s for biomarker discovery or validation.

Or later stage trials and one of the obvious ways to reduce that risk to accelerate that process is to not do the trial at all. You hear a lot today about real-world data and the use of real-world data in the drug discovery research and development process. And that’s really, these labs are sitting at the front line of that.

[00:08:00] The data collected by these labs is data about patients in the real world. And. If you address all of these labs worldwide, what you’re seeing is a picture of real world clinical data. And in far more breadth and far more diversity than you could ever get by running a clinical trial.

Chris Picardo: Before we jump into kind of what, the clinical trial picture and how innovation is playing in that, which I think is super interesting. And it will be the meat of the discussion in a second. I think it would be helpful if you just talked a little bit about real world data versus, data from clinical trials and what do you mean when you say.

Real-world data and who’s collecting it. And why is it different for, pharma companies versus trial data?

Barry Wark: Real-world data is simply data about patients from real world clinical practice rather than a controlled clinical trials. So as a patient, you may get enrolled in [00:09:00] a clinical trial and a doctor who’s not your own may maybe collecting data specifically for that clinical trial.

But every time you visit your provider or get a task that goes into your medical record, that’s potentially real-world data. The huge challenge with using this real-world data is its diversity. It’s often unstructured or poorly structured, and it’s also siloed. Real-world data is collected in millions of places around the world.

And so for a clinical team, a clinical R and D team or a researcher to say, we’d like to go use real world data. They face a myriad of challenges in finding, sourcing, structuring and collecting that data in a useful way. The promise though, is twofold. Maybe most importantly, it’s a chance for patients to contribute to their care and the betterment of care for other patients like them.

Many patients when you ask them, if they would like to have some agency to help use contribute their [00:10:00] data to this effort, many patients say yes and I certainly would be one of them. The other side of it is that data that patients choose to contribute is potentially able to accelerate or replace a clinical trial.

Right.

Chris Picardo: Yeah I think that’s really interesting and it’s a nice segue for maybe, talking about what’s happened in the last year. Because I think in a lot of ways, we’re in the biggest real-world data situation that we’ve been in ever, we’re effectively going to run the largest human trial in history because we’ve got to vaccinate.

Everybody. And at the same time, testing has actually popped into the forefront in a way that two and a half years ago, we would not have expected and was not part of our investment thesis here with the fact that. With COVID-19, we are testing  certainly as many people as we possibly could.

So I think it’ll be interesting and this will be eventually good to talk [00:11:00] about what ovation is thinking about doing in the long-term. Let’s talk about first, how Ovation, helped in the COVID-19 pandemic and what we did for our. But what we do for our labs and then to, just how much data are we talking about  and why has COVID, for lack of a better term, been a bit of the catalyst for accelerating, kind of everything that’s going on in this data and precision medicine world.

Barry Wark:  There’s no question that. COVID-19 has pushed labs doing molecular testing and those doing infectious disease testing to the forefront. Like you said, in a way that we never would have predicted, but these are the same labs that ovation has been serving from the beginning.

And so we were well positioned to help those labs. Not only get off the sidelines and contribute to the COVID-19 testing effort, but in some cases achieve truly ambitious healthcare objectives. I think one of the things we can say [00:12:00] about the last year is that it has forced the healthcare.

Industry to tackle ambitious objectives at a scale, and certainly at a pace that was almost unheard of previously. And if you’re going to try and dramatically change an industry dramatically change the businesses of these labs. At that pace and at that scale technology is one of the only ways to achieve it.

Very early on we set as one of our company missions making a significant impact on the availability of testing for COVID-19 in the United States. We don’t disclose exact patient numbers, of course, but ovation customer labs have now processed and millions of SARS CoV-2 tests in the US and worldwide. One of the things we’re most proud of is that we’ve helped our customers achieve. Like I said, ambitious healthcare objectives, whether that’s scaling up to meet massive testing demand in their community.

Standing up new, entirely new labs, literally overnight or new complex workflows [00:13:00] for back to campus initiatives, for example we’re also really proud that because we’ve been able to help labs both large and small our customers are providing testing for often traditionally underserved populations all over the country.

Chris Picardo: I, because I’m, I get to take the time to brag about right. Ovation stuff in a way that you wouldn’t, because you’re too humble. Why don’t you just talk a little bit about how fast we were able to help our lab base. Start COVID testing. I think, we’ve heard about this whole testing issue, but I think, take a second to talk about our software, that approach, and just how fast we were able to turn this on for our launch.

Barry Wark: Well, one of our thesis is in working with with you and the Madrona team is that we understood early on that at our core, we’re a technology company and we believe like you do in investing in great technology and great technology teams. With this pandemic, we were able to bring early in the pandemic, new workflows, new [00:14:00] technologies to market really quickly.

We were the first to market with some of the pooled testing workflows. We’ve been able to adapt to the rapid and ongoing changes in both. Test technology and reporting requirements for all of our labs. And we’ve been able to as I said, rapidly, expand the scale of testing in our labs.

We’ve seen a, roughly 75 fold increase in the utilization of our platform in the last nine months. And it’s been a bit of a wild ride.

Chris Picardo: Yeah, it’s, I, again, like COVID was not in our 2020 plans. It was not where we were planning on, focusing a lot of time on the business. But, I remember from the time that you guys said, Hey, we need to get some, we need to get some software, updates going. For lack of a better term so that we can set our labs can test for COVID to the time that your first lab started testing for COVID. I mean, that must’ve been less than 10 days and,

Barry Wark: Yeah, it was just, yeah, just over a week.  And we’ve been. Building and deploying [00:15:00] updates continuously since then. We’ve also put a lot of time and effort into making it possible for labs to start or expand infectious disease testing in general. There are a lot of labs that hadn’t been doing infectious disease testing before COVID and now need to.

And we’re able to get these labs up and running in less than 72 hours from signup to first production sample. It’s a huge effort all the way across our engineering and operations teams.

Chris Picardo: yeah, it’s, from being able to talk to you about it on basically a daily basis, it’s been pretty impressive to, be along for the ride on how we’ve done this. We’ve got a pretty front row seat, right? Because of this on just how much testing is going on, not just COVID and how much data is being created. . How much what’s the scale of the life science data that’s out there? I mean, obviously we’re, we’ve, we’re seeing parts of it at companies like flat iron and foundation. I’ve seen parts of it, but that just how much data is out there.

And, what’s the current state of how it’s being used.

Barry Wark: I [00:16:00] don’t think anyone really knows how much is out there. And it’s for the reason that I got into this to begin with what’s available. And what is accessible is quite literally the tip of an enormous iceberg. And that’s for a myriad of reasons because real-world data is poorly or completely unstructured because it’s siloed in. And it is all over the world because none of those entities have the technology either in-house or amongst them to work together. We don’t see most of it. And I think what what this pandemic has forced to the forefront is the recognition that we need, the ability to. Use this data for public health uses for accelerating vaccine rollouts, for understanding how to allocate resources in a public health crisis.

But beyond that, like you said it’s opening a lot of people’s eyes to the [00:17:00] value of technology in healthcare in, in enabling some of these ambitious data-driven initiatives.

Chris Picardo: If there’s an enormous amount of data out there, most of it’s untouched, but it’s created. And we’ve talked a little bit about certainly in the beginning, how important this is, and I think COVID has. Just, shined a nag notifying glass, right on just how important this type of data is from the fact that we were able to sequence the virus so quickly to the fact that, the first couple of vaccines out on the market are directly due to sequencing.

The virus and actually using this data that we’re talking about. As you think about what’s going to happen with this, right? What are the breakthroughs coming? Maybe it’s COVID related. And the fact that, now we have this pile of infectious disease data, and we need to think about how that’s used for future pandemics.

Maybe it’s. Maybe it’s not that, I’m sure a lot of talk about right. Using data to create better therapies, but you know what do you think is the [00:18:00] kind of next set of breakthroughs that’s come in and  what are the important things that are going to be enabled by, this sort of proliferation of data, which has really been accelerated in the last year,

Barry Wark: well, I think there’s maybe a couple of lenses that we can use to answer that question. One is a market. View. I think that we would expect even after this pandemic there to be continued interest and continued resources allocated towards infectious disease testing whether that’s surveillance or just maintaining the capacity to handle pandemics like this in the future.

Sadly, this won’t be the last and I think we all realize that the ability to have more elasticity in the. Testing and healthcare infrastructure is something that’s just necessary going forward. That’s an interesting, overall market change and we’re all still trying to understand all of the implications of that.

Secondly, of course, there’s, public health uses, right? We’ve seen a lot more data-driven resource [00:19:00] allocation. We’ve seen the CDC using real-world data to help prioritize and choose amongst the. Various diagnostic tests that have received emergency use authorization, to understand their real-world performance.

And we’re seeing real world data used in planning the vaccine rollout, both in the U S and worldwide beyond that Tragically. There’s a huge population of new patients worldwide, who are suffering from many long-term conditions associated with COVID-19 infection. Those long-term conditions may be biologically or mechanistically related to conditions.

We’re used to treating such as cardiovascular disease. But in other cases, they may be mechanistically relatively new or previously rare diseases such as a multi-system inflammatory syndrome.  In either case there’s a huge opportunity to learn quickly about these diseases from this population of patients.

Scientifically we want to do it quickly. We want to do it efficiently because it’s an opportunity that we hope doesn’t come [00:20:00] back again. But also we want to help these patients  and future patients. And so there’s a lot of urgency to do something smart and effective with this situation.

So that these patients and others can have a better life.

 

Chris Picardo: And would you say that software like ours is really the only way that this is going to all come together efficiently to solve this problem?

Barry Wark: Yeah, absolutely. I think all three of those are. Areas where software has a major role to play. There’s no question that modern technology can help healthcare be more elastic, more efficient and more scalable. There’s no question that companies like ovation and many others are contributing significant real-world data to that immediate public health need playing really significant roles in helping.

Leaders respond to crises like this. But I think in the last point it’s perhaps most important that labs and [00:21:00] providers be able to work together efficiently on a technology platform that allows them to bring their, all of their efforts together with life science researchers to accelerate the development of therapeutics and our understanding of these diseases.

Chris Picardo: I want to dig in a little bit to that last point you made and it relates to something that you brought up earlier about clinical trials and, What’s going on. And how innovation is it’s poised, but you know, to start with we’re in, we just seen the probably fastest, most decentralized clinical trial happen.

In our lifetime, someone might call me on that for not being totally accurate, but I’m willing to bet that’s close to accurate with the vaccine trials that happened.  They managed to do trials in a really tight timeline at decentralized locations with tons of patients and in order to do they took a ton of data along the way, to To sort of speed up  the traditional process. And now that was obviously done out of necessity. But it’s, it’s proved a bit, right? That there is a different model here that can [00:22:00] be used to do trials and are in a really interesting new way. And I think,  let’s dig in a little bit on how ovation as part of our longer term vision is really going to enable what we might call virtual trials or decentralized trials to progress them in a faster and more efficient way than what’s historically been done.

Barry Wark: absolutely. I think it’s important to distinguish. There’s a couple of types of trials that, that therapeutic development team might want to do. There are interventional trials, like the vaccine trials where we’re going to give a patient. A therapy and measure the outcome. There is a ton of pressure that’s been created on those kinds of trials by the COVID pandemic.

It’s much harder to convince patients to come into a central site. If that site has capacity at all in order to perform the test, it’s much harder to retain patients in this environment as well. It’s been a lot of pressure on what you’re describing virtual or distributed trials for interventional studies.

There is a growing, but still young industry in [00:23:00] enabling that kind of trial. And this pandemic has accelerated by decades. The progress in that side of things, The other type of trial or non-interventional trials where a researcher may be trying to understand what are the biomarkers, what are the signals that help us understand which patients are.

The right patients for a particular therapy or which patients are the right cohort for a study and understanding that kind of biomarker early in the life cycle of a therapy before clinical trials, de-risks the entire rest of the program accelerates the rest of the program.  And so there’s a ton of value on those biomarker style studies as well.

And that’s that’s an area that’s seen a lot less. Attention. But where we think that the diagnostic labs that are our customers have an incredibly important role to play because they are one of the main sources for that kind of biomarker measurement. That’s available in the real world.

Chris Picardo: Yeah. So how does ovation? Sit in the middle there, right? How are [00:24:00] we thinking about sort of the software layer, that’s sitting in between labs and potential customers or users to, to speed up this process.

Barry Wark: Our approach is relatively simple. So our goal is to allow patients. They are doctors, providers, diagnostic labs, and life science researchers to work together on a unified technology platform towards solutions for more efficient therapeutic development. So at its heart, this means using technology in our labs to help those labs collect data more effectively and to match researchers with the right data from the right lab.

In ways that are faster than traditional methods. So we’ve been able to prove the value of this approach in some early projects, right? This is basically enabling labs to use the data that they have available to connect with the right researchers and provide some insight again, from the real world, rather than having to start a new trial doing all of this to help patients,  and that’s why I’m so excited about the approach we’re taking. There are diagnostic labs all over [00:25:00] the world, of course, because they’re treating patients all over the world. And so we have an opportunity to do this at really unprecedented scale. That means solving some big challenges, right?

How do we de-identify harmonize and structure this data across thousands of labs worldwide. And how do we allow those labs and researchers to work together effectively? And of course, how do we do all of this while supporting our patients and their privacy and supporting our current and future customers through this massive challenging global health crisis.

Chris Picardo:  I want to talk a little bit about company building based on what you just said and how you’ve thought about. Building what is a software company, but it’s really sitting at this intersection of biological science and software.

So  how have you thought about the challenges. And company building needs with building a software company in this space. It’s, it’s not an enterprise SAS company and the way that you would be if you’re selling to other software companies.

And so [00:26:00] what’s been the biggest challenge, what are the things that you felt like the most important from a company building perspective here?

Barry Wark: Well, you hit on the biggest challenge. It’s exactly what you described that none of us knows everything we need to make this company successful. There are a lot. Of life science researchers who have been forced to learn some software engineering to do their job but are not. Enterprise software engineers by training.

And likewise, there’s a lot of software engineers that have built software for life scientists, but it’s really hard to get in, in, in the mode of understanding what it’s like to be working at the bench in a lab where the day-to-day work is so different from your own. And we thought a lot about this I’m from one of those camps.

My, my co-founder is from another one of those camps.  And we recognized early on that it takes a lot of curiosity. People have to want to learn something complicated, complex, [00:27:00] different from anything they’ve experienced and a lot of humility to understand where your limitations are and where you need to trust your colleagues.

And so we put a lot of thought into, of course building a team of people that have those qualities and fostering that sense of curiosity and learning and humility that that we need to maintain as a team, as we bring in people. And as we now go into more of a scaling mode, we think a lot about how do you bring in those domain experts and help them?

Teach their knowledge and their skills to a broader team, right? Whether that’s in sales or engineering or operations.  It’s really the core of a lot of what we do from a team building perspective.

Chris Picardo:  I have a couple more company building questions, cause I just think they are interesting and useful for general people who might be listening, who aren’t building in the intersections of innovation base.

And then I’m gonna put you on the spot. But I think one thing that’s really interesting is, there’s been so much talk this year about distributed companies. And people leaving, the [00:28:00] cities where they may have been and and, moving to other places that still work with their companies.

We were pretty ahead of the curve on that one in terms o, I think Ovation, has been distributed since day one. And at the moment we now have offices and Boston Maine,  and Seattle and maybe Spokane,

and so we, and we have team members who also don’t live in any of those places, and yet you’ve been able to build a team that just seems operates so well. And pretty seamlessly that is been distributed. And now, especially it does not get together very often. And so

what’s your biggest learning? I think this is something that founders think about a ton and you guys have really done it from the beginning.

Barry Wark: Well, thanks for the vote of confidence. I would say that we did it by necessity from the beginning. And because we were in this, like you said, this small intersection space between life science and technology, we knew that we were going to need to recruit great talent across. A [00:29:00] really broad spectrum of skills and experiences.

And we just couldn’t pick a place on the map that had all of those. And as a really early stage company, even before you and I met, that’s a big leap for someone to take and building a distributed team becomes a huge recruiting advantage in those early days. So we built a distributed team, from the foundation up I think.

Like you said two years ago that may have been viewed as a potential risk. I think in the last nine months it’s been viewed as a big win. And the reality is probably somewhere in between for, the rest. It forced us to get good at a couple of. Things early on documenting our decisions.

So the team members who weren’t in the room could understand what we were doing and for us to think a lot about how you build culture and connection and engagement, even if you’re not sitting together which has served us well in the last couple of months, our team, more than doubled in size since we went into pandemic lockdown and [00:30:00] we’ve.

Leaned heavily on those skills that we, and those muscle, that, that muscle that we built early on. It’s not all easy though, even for distributed teams. So we used to use a lot of travel. We got on a lot of airplanes to go sit with people face-to-face when we needed to. And obviously we can’t do that now either.

And that’s put pressure on our team as well. There’s no, I think. Secret recipe to this except a lot of hard work and fortunately, some good advice I got from founders that other distributed teams that are, a couple of stages in front of us, really focusing on the hygiene of documentation and information management,  you can slide on a lot of that when you’re all in an office together.

But when you’re distributed it becomes really crucial that you get it right early.

 

Chris Picardo:  In the last couple of years, certainly since we’ve been working together can you point to a couple of examples of things where what we really screwed that up. And then what you did fix that or learn from that, or. Or, use that to build a better company.

Barry Wark: Well, I don’t think we’ve got enough time for all of the [00:31:00] stories there. But we’ve learned from all of them. One of the, one of the interesting ones in this in the COVID era is related to team engagement and. Individuals engagement with what we’re doing. We are an incredibly mission-driven company and we were handed a really important mission by this pandemic.

And and early in the in the course of that pandemic, We were, we were all hands on deck. Like we’ve talked about to get technology in the hands of labs to do what they needed to do to address this pandemic.  And we didn’t realize how easy it was for all of us to get sucked into a really unsustainable pace.

Lot of people dealt with this, working from home for the first time, it’s easy to lose some work life balance. It was even easier for us in some ways, because we were so passionate about what we were doing every day, every night, every free moment there was work to [00:32:00] do. So I think one of the things we missed on was  anticipating , that situation.

And we didn’t invest enough as a team in supporting each other and making sure that people were finding a sustainable rhythm. Even though we were already a distributed team, it was just different on top of what we were used to. So we definitely missed on that. And I think now we’ve been able to recover in a couple of really interesting ways.

One of the challenges of distributed teams overall is this balance between synchronous and asynchronous interaction, right? If everyone’s in an office at the same time all of your interactions are synchronous. You sit together, you talk together, you have a conversation when you’re a fully distributed team, it’s really easy to use asynchronous communication, whether that’s email or other kinds of documentation is as the mode of information transfer and finding that balance, right?

Sometimes you want to get on a phone with someone. Sometimes you want to write something to them. Finding that balance is always challenging in distributed teams. And it’s been actually really crucial in understanding this work [00:33:00] life balance for us.  We do something synchronously. One of our engineers started a five minute abs class every day, every afternoon.

It’s exactly five minutes. It’s a chance for everyone to take a break and just spend some time together doing something that hasn’t. Nothing to do with work, but it’s really rewarding and we all get a laugh out of it. And it’s okay. If you want to just sit and eat your lunch with everyone while they  grunt and do sit-ups.

But it’s an incredibly successful he just finished his 200th class. It’s an unbelievable thing that he’s done for this company in that synchronous mode.

Chris Picardo: Every single person that ovation has six back apps now.

Barry Wark: I wish. But we’re happy to see each other and that’s maybe even more important. The other thing we’ve done actually,  from that same group came a totally asynchronous thing. We had a running competition. We split the company in half and we came up with.

Ways to map every possible kind of exercise to a distance in running. This was a really geeky session that everyone had a good time in. And then, regardless of abilities or [00:34:00] fitness or  physical constraints, everyone was able to participate in some way. We spent a month, we went out and people just did something active in whatever way they could.

And we brought it together, as a group and it was a really nice way to keep connected with people without working 24 seven.

Chris Picardo: Yeah, I think that’s so impressive to hear how you’ve managed to keep your team, doing all the connectivity stuff. And those really have been, frankly, it’s just such a difficult time to, to run a company and to have a distributed team and have this kind of only remote contact.

And I know I’m going to suggest to Madrona that we do a five minute abs class every day.

Barry Wark: It turns out you have to lead it, which is the

Chris Picardo: Wow to lead it but, I think that’s been a good learning for me from this conversation. Well, I want to end this back,  just on, a little bit about what we were first talking about and what’s the future of innovation look like.

And, I do think about 20, 21 and beyond, and I think it would just be a nice place to end to talk a little bit about [00:35:00] what you want to do in the next couple of years.

Barry Wark: sure. Well, I used to get out in the mountains more than I do today, but  I’ve climbed a fair number of mountains and the way you climb a mountain is a one step at a time. So a lot of the, what are we thinking about now is. Just that. What are the next steps? Obviously with this recent fundraise we’re able to invest in sales, marketing, and R and D to grow our ability to help more of our diagnostic labs, serve patients and providers with the best software in the world.

Helping them bring, cutting edge molecular diagnostic workflows to market,  it’s the foundation of everything we do. We’re also expanding our life science business. So we’re enabling our lab customers to combine their insights together and to help life science companies bring new therapies and new diagnostics to patients faster.

We’ve got some really exciting.  Progress in that area. And we’ll have a little bit more to say about that hopefully in the near future. But I think we can confidently say we’re going to be able to rewrite some of the rules and [00:36:00] timelines of therapeutic research and development. And my big prediction is that somewhere down the road everyone in the world who needs precision diagnosis gets it.

And we’ll be pretty happy when that day comes.

Chris Picardo: Well, Barry, this is as always, it’s been super enjoyable conversation. I know we could talk for hours more, but appreciate you coming on the podcast and chatting. And I know I’m personally just super excited to, watch and help the next couple of years of Ovation and see how we can achieve these big goals.

So thanks.

Barry Wark: Yeah. Thank you, Chris. Really, I appreciate the invitation and it’s always great chatting with you. And we’re incredibly grateful for the guidance that you and the rest of the mature on the team have given us on this journey.

Thanks for joining us for founded and funded. If you have any questions or want to get in touch, please email us(Replace this parenthesis with the @ sign)foundedandfundedatmadrona.com and stay tuned for more episodes in the coming weeks.

 

 

POSTED IN: Madrona News

Madrona Announces Announces $500 million to Fund Innovation from Day One for the Long Run

We are pleased to announce the closing our Madrona Venture Fund 8 and Madrona Acceleration Fund 2.  The innovation here is staggering and these funds will go to work for founders and teams from the earliest stages through acceleration stage.  This is the largest raise in Seattle for technology startups and demonstrates the acceleration of the region’s success in driving the global innovation networks.

We are excited for 2021 and what lies ahead!

Madrona Venture Group, the leading venture capital firm based in Seattle announced today the closing of more than $500 million in new funds.  The firm closed two funds simultaneously, Madrona Venture Fund 8 of $345 million and Acceleration Fund 2 of $160 million.  Both funds were heavily over-subscribed.  The funds will be deployed on complementary strategies building startups from the seed stage primarily in the Pacific Northwest and from an acceleration stage, throughout North America.

 

Madrona’s Venture Fund 8 is focused on the core and lasting strategy of supporting entrepreneurs who have founder-market fit from seed and Series A stages, helping them build and scale throughout the company journey.  Acceleration Fund 2 is focused on investing in teams that have found product-market fit, generally Series B or C stage, and value the Seattle mindset for growth – curiosity, agility and an iterative culture. These new Madrona funds come on the heels of six portfolio IPOs in the last five years including Smartsheet, Snowflake and Accolade.

 

Madrona supports their investments through successive rounds of funding and takes an active role working closely with company leadership teams as they grow, experiment, build partnerships, hire and become meaningful contributors to the tech ecosystem.  Madrona works as a team – board members combined with the investment and venture growth professionals, bringing integrity and a commitment to excellence to helping entrepreneurs navigate the ups and downs of building lasting companies.  The firm has added three exceptional Managing Directors the past few years with deep operating experiences – S. Somasegar, Hope Cochran and Steve Singh. Madrona companies cover many different technology sectors including cloud computing, applied AI/ML and SAAS, but all are boldly innovative and focused on customer defined problems.

 

“Inventors and founders in Seattle and the Pacific Northwest are fueling the economic success of our region and beyond.  While it is increasingly possible for companies to be built anywhere, few places have access to talent, understanding of market problems and the ability to build emerging solutions like greater Seattle. The Seattle Mindset, combining curiosity, iteration and agility, has proven to build some of the most innovative and valuable companies in the world. Madrona’s new funds enable us to continue our two complementary strategies – working with entrepreneurs who have founder-market fit from Day One through the full company journey and providing that same hands-on approach to companies that have reached product-market fit and are accelerating their growth,” commented Matt McIlwain, Managing Director.

 

Incubating and Investing in Innovation

 

With Madrona Fund 8, Madrona continues to support early-stage company formation across the greater Seattle region.  Over 90% of investments in Fund 7 were in companies at the seed or Series A stage with more than half of those being seed investments.

 

A component of Madrona’s seed strategy is supporting the work of Madrona Venture Labs.  Madrona Venture Labs, run by experienced founders, Mike Fridgen and Jay Bartot, brings a team of operators to help entrepreneurs through the first steps of company building.  Madrona also supports accelerators across the region such as AI2 Incubator, Female Founders Alliance, Ready Set Raise, Techstars and Pioneer Square Labs.

 

 

Bringing Knowledge and Relationships to Bear at all Stages

 

In 2019, Madrona raised the first Acceleration Fund for initial investments in companies that had found product-market fit and were ready to  . . Accelerate!  At this stage, companies need strategic partnerships and understanding of market forces that can influence their journey and experienced advisors familiar with go-to-market strategies and building teams to scale.  Madrona’s deep relationships with Amazon and Microsoft and enterprise customers as well as the roll up their sleeves attitude comes to bear in these investments.  Previous Madrona investments at the acceleration stage include Snowflake, Accolade, UIPath, Flexe, Clari, VNDLY, Go1, Coda, Trade Coffee and Rec Room.

 

About Madrona Venture Group

 

Madrona (www.madrona.com) is a venture capital firm based in Seattle, WA.  With more than 25 years of investing in early stage technology companies, the firm has worked with founders from Day One to help build their company for the long run.  Madrona invests predominantly in seed and Series A rounds across the information technology spectrum, and in 2018 raised the first fund dedicated to initial investments in acceleration stage (Series B and C stages) companies. Madrona manages over $2 billion and was an early investor in companies such as Amazon, Smartsheet, Isilon, Redfin, and Snowflake.

 

Media contact: Erika Shaffer, erika(Replace this parenthesis with the @ sign)madrona.com 206-972-5514

 

 

POSTED IN: Madrona News

How Do You Start a Venture Firm? Here’s Our Story

Last year (yes really!) and this year we had discussions with people who know Madrona well, founders, early team members, and people like Ed Lazowska & Hank Levy from the Allen School at the University of Washington, Steve Yentzer from DLA Piper, Paul Kwan from Morgan Stanley and a host of others.

We turned some of those conversations into this podcast which kicks off our 4th season of Founded and Funded.  The Madrona co-founders did not set out to create a venture firm – this podcast tells the story in their own words.  Tune in to hear Tom Alberg, Paul Goodrich, Matt McIlwain, Greg Gottesman and Jerry Grinstein talk about the early days, weathering the ups and, pretty significant, headwinds – “near death experience”  is a phrase that is used.  Thanks for listening and advance apologies for the uneven sound quality!

POSTED IN: Madrona News

Founded and Funded – Meet the Founders of Sila, Delivering Banking as a Service

On this week’s Founded and Funded, we talk to the founders of Sila, Shamir Karkal and Angela Angelovska-Wilson.  Managing director, Hope Cochran, talks about why she invested, and the founders share their story of how they came to unite to build Sila.  Sila offers banking as a service to companies which are at their core Fintechs or need a Fintech based infrastructure.  Moving money on the internet, though envisioned from the very earliest days (do you know what error 402 means?) is not easy.  In the US alone there are many regulations at the federal and state levels.  Sila has navigated this complex regulatory and technical world to enable their customers to launch quickly and focus on their product.  The podcast is available on all platforms and below!


Transcript

 

Hope Cochran: [00:00:54] Hello and welcome to the Madrona podcast, Founded and Funded. It is so fun to me to be today with Angela and Shamir. The cofounders of Sila. I found them in my quest to solve financial infrastructure problems as the CFO of many large international companies that had to move lots of money, I was constantly frustrated with the lack of ease in this space.

And so I went in search of someone who understood and knew the problem well, and I found Shamir and Angela. So I am thrilled to be partnering with them, in this quest to solve this very complicated problem, both from a technology perspective and a regulatory perspective. And as I got to know them, I was so taken by their backgrounds and what brought them to this place.

First of all, I’ll just say both of you came from other countries to the United States, you’ve had interesting journeys that led you down the FinTech route. I would love just to hear about those journeys first and foremost, before we get into the vision of Sila  So Shamir could you kick us off?

Thank you.

Shamir Karkal: [00:02:05] My journey in financial technology actually started very early. My grandfather on my mother’s side was a banker.

My parents were bankers. And so I could say I’m a third generation banker, And I wrote my first computer program and I wrote my first check both at the age of 10, back in the 80’s. And I realize that’s a really weird upbringing, but it seemed normal at the time. Of course as.

one does,  I decided in my teens that I was going to do anything except banking and went off to become a software engineer, did that for a few years, came to the U S And was working as a software engineer, went to business school and business school is really where I first learned about the broader world of business and everything that was out there.

Before business school, I was just happy writing code, like 14 hours a day. And after business school, I ended up becoming a consultant at McKinsey and Company, which is a consulting firm . The first project I got assigned to almost randomly, was in financial technology, doing strategy for a bank processor.

And I just fell into that. It was stuff that I knew and understood well, and spent three and a half years at McKinsey, both in North America, Europe, and in the Middle East, just doing more stuff around financial technology, but very broadly defined, processors , banks, insurers, even one country bail out within 2008.

And so in 2009, a classmate and good friend from business school, Josh Shreesh, started asking me all these questions about banking and the story there was, I was the only person who knew the answers, who would actually talk to him. And he was frustrated with his own personal banking experience.

He was a startup entrepreneur. Sold one business before he came to business school and went back to work in startups, straight from business school.  And so he had the entrepreneurial ideas. He sent me an email saying, let’s start a retail bank. And he laid out this vision for how a bank should be tech forward consumer centric, actually helping people manage their finances and, and then building a platform to provide all the other services that people need apart from a checking account and a debit card. And there’s such a compelling vision. I was like, yes, let’s do that. Somebody should do that. And I guess it might just want to be us.

And, you see how crazy I am that in 2009 I thought it was a good idea  to leave, McKinsey and go start a bank, which is what we set out to do. and that was my first startup. It was an online neobank called Simple. We started it in New York in 2009, a couple of years later in 2011,

I moved to Portland,  and Josh moved over to Portland into how’s an 11 launched simple in 2012.

The story there was, it took three years. From first email to launch, and three years to launch is if you ask anybody in the startup world, it’s just unimaginably slow. and then on the flip side, if you ask anybody in the banking world, that actually seems fast. And that was the, the dichotomy that Simple hit head on is the pace difference between those two worlds.

The real reason was it took us about two and a half years to find a bank partner, find a processor, figured out how to connect them, figured out it was not working. Then redo that and then find five more processors and finally build this kind of internal API layer on top of which we could then build a web and mobile apps that customers saw.

And really at Simple and I think at probably at all, fintechs it’s out there, the consumer facing, or the business facing part of the tech stack that people see is really just like the tip of the iceberg. And we finally figured it out, and launched it. And then a couple of years later, Simple, was acquired by a big Spanish bank, BBVA was back then, and still is I think, a very forward thinking bank. They saw the FinTech revolution coming probably before anybody else. And they wanted to partner with Simple. And then the partnership discussions turned into acquisitions as does happen. A few months after the acquisition, I was in, Madrid talking to the guy who’s now the chairman of, BBA. And they, you mentioned this idea of building an API platform. And my immediate reaction was, yes, please. Do it, the world needs API platforms in banking. If such a thing had existed, Josh and I wouldn’t have spent three years launching simple. We could have launched it in six months.

And then who knows what we could have done any sort of payment and LGV spent building our own, internal infrastructure. And, but please do it right. Don’t screw it up. Quickly realized that it was really just an idea at BBVA. Nobody had even put together a document of any sort. So I did and circulated it internally.

They create an internal venture steam. Fast forward a year later and I was running that business. So built and shipped to API forms at BBVA. Did that for a couple of years,  one in Europe, one in, one in the U S but got frustrated by the parts of the organization that I could not control was the back.

So we could build that ship, that deck. And I think the BBB open platform is still a great platform, but we could never onboard customers. And at the speed that I wanted to because of risk compliance, legal and all the internal bank processes. So I left in 2017. Thought about what to do with the rest of my life.

And then, ended up co-founding Cilla with Angela, Alex, and Isaac.

Hope Cochran: [00:07:34] Yeah. And Angela, you have such a tremendous journey and unique background. I really look forward to hearing about it in your words.

Angela Angelovska-Wilson: [00:07:41] thanks. Hope and I, again, thank you for having us on the podcast today. I am a little bit of an unusual, cofounder of a FinTech company, due to the fact that I come from my legal, regulatory background. I started my journey. actually also as an immigrant, I came to the U S when I was 17 as an exchange student and never thought that I would actually stay here and, have my life in the United States.

And definitely did not think that was going to go into, banking or law. Unlike Shamir I come from a family that is everybody is a doctor.  I was on the path of becoming a doctor, but that was definitely , not where my heart was. Due to the fact that I’m the year I came to the U S very, bloody civil war developed.

in former Yugoslavia, I actually got stuck in the United States , as I like to say

 

I was all packed. I was ready to go back. A life for a teenager in the U S when you’re 17 or 18 is not as fun as one in Europe, I have to say. So I was definitely missing my family, my friends, and everybody else. But, It was actually a very interesting time, which kind of set me off on my legal journey because I found myself without a country.

So the country I came to in the United States was the Socialist Federal Republic of Yugoslavia. During my time here that country no longer existed, it had become several different countries. The one country I did have. The right to citizenship, was Serbia, through my mother, but Serbia was the antagonist in the war, and, was under very strict, international sanctions.

So maybe, you’re going to compare it to like Iran, at this time. So , nothing was going in and out. I couldn’t go. And my other country, that I have a right to citizenship where I actually grew up, Macedonia, was not yet to country. So I had to figure out a way to stay legally in the United States, which was quite a challenge because I fit none of the categories.

I was not a refugee because I had not escaped from the war. I was not that nice side lead because I wasn’t afraid to go back. I just couldn’t. So it was the beginning of my legal journey, trying to figure out creative ways of how to make what is in the box and the principles of the laws, fit the unique situations that I was facing.

So the one way to do this was, actually for me to go to university, which was challenging because I never took any entrance exams because I was, not interested in going to university in the U S but through help from my American host family, and many others, I was able to enroll at a university.

Taylor University. And that’s really where my interest and love of technology. And seeing how you can use technology in everyday life and how transformative it’s, what it is in all aspects of life really began. I was a public relations major and, I saw and had an opportunity to really work on, AOL and CompuServe.

And saw that potential. Absolutely loved it. and then moved to, the very beginnings of the internet. I coded in HTML waited until midnight to download the first version of that scape. And, I guess that was the beginning of my entrepreneurial streak in the United States, as well as banking.

I had my own web development company and one of the first projects I did was help a small, very forward looking credit union actually, and offer their services of what is now common place, online banking. And so that was kinda my first thing that I did. And instead of heading to Silicon Valley, at the height of the internet boom, I decided to go to law school.  In law school I focused on electronic commerce and the fledging  law of the internet.

And then, In my private practice at  very prominent law firms, I specialized in financial regulation and technology, and my background and love of tech have really come through, because  I have been able to combine the two in order to understand, the principles of regulation, and how they can be really applied to some of the, technological solutions that are being presented.

In 2018, I heard Shamir’s vision about Sila and I said, Oh my gosh. Yes, because for about 20 years of my career, I watched and helped  FinTech startups navigate all of the different legal, regulatory problems that they had in order to launch, as, Shamir said, the tech was the easy part.It was, navigating the alphabet soup of regulators and regulations that applied to their innovative services, that were no longer siloed out as they are typically in traditional banks. That really was, the biggest challenge. And plus I passed Shamir’s test, he asked me if I knew what internet code 402 stood for and I

Hope Cochran: [00:13:39] did.

 

Okay, you’re going to have to tell us, Angela, what does 402 stand for?

Angela Angelovska-Wilson: [00:13:44] It’s a reserved, error code on the internet and it was built  at the very beginning of the internet protocols. And it stands for payment not found. So the internet was always meant to have a payment protocol built into it it’s just they never got around to it.

Hope Cochran: [00:14:03] Both of you have such interesting and deep journeys that really brought you together to solve this very complex problem that involves both deep technology understanding, deep banking understanding and deep regulatory world to develop Sila. Shamir, I’d love to hear your description of Stila and the vision you have for it.

Shamir Karkal: [00:14:27] I think really the way I like to talk about Sila is really to start with the problem. And the way we define the problem is that it’s just too hard to program with money. There’s been an explosion over the last 30 years since the internet of people building programmed solutions, startups, applications, and all other sorts of things, Alexa skills, to do things right.

But at the end of it, it comes down to writing code and writing code to do different things. So if you’re a developer and you wake up tomorrow, whether it’s in San Francisco or in Shanghai, and you decide that you want to build  any type of online application or you already have a large existing app and you want to embed the email capability into it, for example, that’s you know, that’s easy to do. It’s open protocols, there’s APIs. There’s SDKs. There’s developer tooling  There’s whole ecosystems of industries, which will help you manage email on whatever it is.

As soon as you want to program with money, and that might involve building an online FinTech startup or an online bank, like Simple,  or you might just want to embed a simple payment or money storage or money movement capability into an existing app.

Suddenly, it really does matter whether you’re in San Francisco or Shanghai and you’ll realize that the internet is not one place when it comes to money. There are  no open protocols. There’s almost no APIs or SDKs, at least until silver came along. It really is impossible to do across the internet and that’s what we want to change. We want to make it as easy to program with money as it is to program with email or with any other  internet mechanism. Money actually is just a type of messaging network.

The problem is all about the complexity of the existing payment systems and the existing

regulatory structures and figuring out how to build a layer on top of it, which is really useful for programmers. We started with that vision of really, making money programmable, easily programmable and, launched Sila in October of last year.

Our core product is an API platform. It’s really, a developer platform , which allow people to easily plug in and build the applications they want  and it’s the modern way of doing that. We offer a few services, in the U S currently, we do, online identity verification.

So if you, if you give us, an individual or a business and give us that information, we can verify that using our APIs and our backend technologies  We allow you to securely link a bank account. If you have an account at Chase or Bank of America or Wells or whatever, we can connect to it and securely get the data that we need, which is mainly the routing and account number.

and then we can debit those bank accounts via ACH or credit then via ACH, and do in and out of those bank accounts. One of the unique features of Sila is that we make it as easy to hold money on our platform as it is to move money. And we make it easy to do all combinations of that and program with that, wherever you want to program the it.

Hope Cochran: [00:17:45] Shamir, I think you hit on a really important point there, the ability to not only move money, but to hold money. And it’s a simple statement, but it’s actually really difficult to accomplish that. And that’s where you get into needing  the regulatory requirements and whatnot to, allow your business to grow if you’re holding the money. When I think of what Sila is doing, would it be fair to say that you’re really providing banking as a service to companies who just want to get on with their business, but somehow involve moving and holding money?

Shamir Karkal: [00:18:20] That’s exactly the right description. This nuance to distinction between banking and payments. When people think about payment, they think about transferring money between, two bank accounts or from one card to another. And when they think of banking, they think about holding money.

The core of Sila is that those are both flip sides of the same coin, right? If you’re going to transfer money from A to B, then there’s many times where you might want to transfer it from A to X and then transfer some of it to B, and some of it to C and then some of it to D based on some set of rules and that’s what business is all about.

That, we focus on making both of those things as easy as they can be, and then making it seamless, across them. So we automatically create a wallet for every, individual and business on the platform. We automatically hold funds in those wallets and you can hold it for a second and just transfer it in and transfer it out.

And it’s just a payment, or you can hold it for days or weeks or years and do other things with it. It really comes down to what the business logic and the use case is. We focus on making that very easy for developers, but the back end complexity that comes with it, especially on the regulatory side is  far from trivial is probably the best way to put it.

Depending on kind of what the funds flow is. It that can be additional regulations, the top of that, and understanding those, supporting our customers who are doing those, making sure that we do all of that client fashion and manage risk well, and in fact, building management into the API, that’s the whole secret sauce of the business.

In the FinTech world that, everybody starts off by focusing on kind of building out a payment flow for an end user, and then eventually realizes that really half the company is doing risk management. The famous quote that I always remember,

it was somebody I think might have been Reid Hoffman who said that in the early days of PayPal, he did some math and then told Peter Thiel that it would be cheaper for them to go to the roof of the office and throw sacks of cash off the roof as quickly as possible, rather than operate the business because they were losing money so quickly to fraud.

So we try to make it as easy for developers as possible.

Hope Cochran: [00:20:40] When I really think of what you are enabling is you’re enabling builders to get their product out there faster. And you’ve got some great examples of that in your customer base today, these startups or young, innovative entrepreneurs who want to get to market and don’t even think about the fact that money is actually an important part, and that really could slow them down for years in terms of trying to solve that problem. For instance, I think of Sloan one of your current customers, that is doing student loans and helping people address their student loans.

Or Dinero, which is addressing the Latin community and trying to help them with rewards from day to day shopping. They have purposes that weren’t really to be in FinTech, they need to move money. And so Sila has been a great solution for them.

Shamir Karkal: [00:21:32] There’s a journey that companies typically go through where they start off and they’re focused around solving a problem for a customer. And what we try to do is  to help them stay focused on that problem, right? So for Sloan, what we try to do is to say, Listen, you need to understand your customers’ problems around their student loan payments, how to manage their money, how to most effectively make those student loan payments.

We’d like to remove as many barriers as possible, at least on the programming with money side so that you can get to product market fit as efficiently and quickly as possible, and then scale from there. and this is a journey that, I think a lot of the large, all the large and tech companies, right?

Like Simple or Chime, of course, PayPal, and all of them have gone through. But I also think that a lot of the tech companies have gone through it as well. And I think it’s not always clear. Sometimes you don’t realize whether it’s a large tech company or even a large traditional international company, how much complexity is tied up in large teams of controllers and back end finance people and product managers, just building systems to manage money.

Hope Cochran: [00:22:42] Absolutely. One of the pieces of magic here there that we talked about earlier was the regulatory aspect. Shamir, you addressed a lot of the technical challenges and providing tools to the developers to be able to address those. But really one of the largest hurdles in this world is the regulatory hurdles that you have to go through.

And Angela, this is where you are navigating this. So definitely it’s very impressive. What I appreciate about you, Angela, is that you seem to have this ability to understand the why of what regulatory is meant to do and then navigate within it. So maybe you can talk to us a little bit about the regulatory environment.

It’s one of these environments that’s always changing and adjusting, and I feel like there’s even more change on the horizon. So we’d love to hear your thoughts on that.

Angela Angelovska-Wilson: [00:23:34] One of the things that is very difficult for, especially technology entrepreneurs to understand is that barrier to entry the regulatory moat that exists around financial institutions and even for FinTech providers that have made it, big, And that is, their compliance with the patchwork of regulatory requirements, licenses, compliance obligations, and the rest.

And, around the world, there is a very clear understand. Standing now that the business of banking is really the business of financial technology.  Many years ago I had the opportunity to actually work on the Visa IPO. And, if you look at the filings for the Visa IPO, Visa was a financial company.

Financial payments companies is how they describe their business model. Today, they describe themselves as a technology company. And I think  the regulation of FinTech is, I would call it the, yeah, the number one priority for regulators around the world. There are two, I would call it, very distinct areas that regulators around the world are being focused on with respect to FinTechs.

And the first one is understanding the various technologies that all these new entrants, all the new fintechs are using in order to provide different types of products and services into the marketplace. They’re trying to understand, how people are using biometrics, how people are using AI. Finance is being run by algorithms, after all these days, how new technologies like distributed ledger, blockchain technologies are impacting some of the thinking and the way that we regulate things.

And then the ability of FinTechs technology is borderless. It is global, at the very beginning, that’s the point of the internet. So the use of all these underlying networks that are global in nature, when we have very local stringent regulations, really provides a very difficult environment for fintechs to operate. Even PayPal after so many years in business is not available as an option in every country of the world. They operate in 50 plus jurisdictions last time I checked. So financial regulators are playing catch up. like every other regulation, typically, regulation is catching up to the marketplace and trying to understand how to prevent disasters.

At the same time, providing innovation and encouraging competition. One of my mentors, I’m based in Washington DC, and one of my mentors here once told me that congress does two things, nothing or overreacts. And I think financial regulators around the world are making sure that they are balancing those two acts of doing nothing versus overreacting and really stifling innovation.

So in the US it’s really difficult. I would say that from a global perspective, the U S is probably one of the most difficult jurisdictions to navigate for FinTechs to offer their services. I have helped many companies, that, made their name and are well known internationally, or they started out in Europe or other parts of the world.

And when they come to the United States, they really have a hard time understanding the regulatory regimes because we have a dual system. We have the federal regulators that have their own regulations and principles and then the state regulators. At the end of the day, like we said at the beginning and you did Hope, regulators are looking for those principles of the regulation, so understanding why certain regulations were inactive. Why the legislature reacted. Best example of this is Dod Frank, right? The 2008 crisis, we got 10,000 pages of regulation that turned into couple hundred thousand pages once it was all written and done.

And, we put it in and now we are, putting it away slowly because we have realized that it has really impeded the ability of some of the financial institutions that it regulates to actually do business.  Again, I started from the point of there very few entrepreneurs that start on this journey that are intent on violating law. Being outside the law is never a good business model.

And so when they are trying to navigate all this regulation, it’s difficult for them to understand now I have to really have a calculation on my loan in every single state differently? I can’t do it with just one interest rate? I can’t export that interest rate? Or, if you’re a payments related company, I have to get the license from 49 different states?

And every state is asking me a little bit of a different type of information for my submission? And I’m subject to their oversight and control over the my business every year and I have 49 of them. That seems really unattainable to operate a profitable, forward-moving innovative business, especially when you compare it to the regulations that we have in other jurisdictions like the European Union, with their ability to passport and their ability to have a very streamlined  regulation. Even in the Asian countries it’s much easier to comply with things than in the United States.

Hope Cochran: [00:29:58] That’s right. Angela and Shamir, you both articulated so well some of the real practical challenges with the regulatory environment in the US with the federal and then by each state and just how overwhelming that is for an entrepreneur to navigate. And so when I think about Sila, you’re providing that for them so that they can get going on the business that they’re wanting to run which is such a great service to them. Now, one of the things I want to hit on a little bit is the regulatory environment is important as Angela pointed out because you’re moving money and fraud can happen and all of these things.

So there is a reason for it. And so one of the things that I’ve been so impressed with you all is that you vet your customers, and make sure that  they have the right purpose, integrity, and intent before you allow them to use your system.

Angela Angelovska-Wilson: [00:30:49] Our customers are subjected to, I would call it best practices in the large financial institutions. Again, our backgrounds allow us to have been able to view the kind of industry best practices and to understand why some of those best practices were put in place to begin with. Also, we’ve been burned once or twice in our careers.

So we’ve learned from some of those experiences and we have tried to make the process, that our customers go through as streamlined as possible. But that does not mean that we are lax in any way, shape or form. We are very stringent about making sure that our customers understand and are compliant with the applicable laws and regulations. That is a key to their success. If they are not, their business will suffer, at the end of the day. And so we want everyone to succeed and in order to be able to succeed, compliance is key.

Hope Cochran: [00:32:02] I’m going to switch gears a little bit as we can’t ignore the current environment that we’re all operating with  quarantine and COVID  in our midst. You both have been entrepreneurs multiple times running your own businesses. You’ve led people in companies through difficult times. This is not your first difficult period.

What are some suggestions you have for other leaders on how to continue to move forward, bring growth to your company, but also be a great leader during this environment.

Shamir Karkal: [00:32:36] Anytime you start your own business and go on the entrepreneurial journey, it is always hard and the default outcome is failure. And so  it requires a certain mindset and a certain sort of willpower to just keep powering through.

 

And at least if I can look back and I’m like, how was I, how would we be able to make Simple into a success? And even the BVBA open platform and everything else, a lot of luck for sure and probably some skill involved, but I think like just persistence is massively important. Things will get better. You have to be there when they get better. If there’s one thing I’ve realized is, and I realize it more and more every day is how important communication is. When I was able to sit in the office and of course, we always had at least some team members who were remote, most of the team was in the office in Portland, just being able to like sit around and just lean over and have a chat with product, or engineering.

There was a lot of knowledge that got disseminated through kind of osmosis. It’s hard to tell nobody announced it, but within a few hours, everybody in the office knew sort of thing  That doesn’t happen anymore and communication is always super important to leadership, but it’s, I think it’s even more important now because unless you make it happen, there’s no default communication happening.

And so you can have just people in the company who just don’t know things because nobody told them and they wouldn’t have found out because nobody is sitting next to them to tell them stuff anymore. There’s no water cooler conversation. I have tried and we have tried to be much more mindful about communications and it reminds me a little bit of Simple went from two to about 300 people by the time I left, and.

When you’re at the 200 person stage, you realize that a large part of an executive’s life is all about communication, and doing that well. And then making sure that not just you telling people stuff, but the right people are talking to each other about the right things and managing that.

Angela Angelovska-Wilson: [00:34:41] .

Yeah, I would agree with all of that. And I think one of the other unique opportunities that COVID and this situation has given us is to assure that we are looking at our coworkers and our team  as  a window to their everyday life. And being able to see Shamir as our leader in the closet and being interrupted by his children shows everyone that we are all, facing, different, yet the same challenges on working from home.

Getting our work done, getting our families together and dealing with the new normal, whatever that is these days. So I have really cherished the ability to have established a deeper bond with some of our teammates on a personal level during this time, and really understand about who they are as a person and how they want to grow as a person, not just as a team player, not just this part of the company.

But really understand their challenges and then also give them, sometimes leadership can, seem, separated out, but give them a view of we get frustrated. We have to deal with the kids too.  These are all things that are okay.

Hope Cochran: [00:36:03] I love it. Persistence is one of my themes as well. There’s been many times when you have to find that grit, so I appreciate that. And intentional communication has been something that I think we’ve all had to embrace and address. And Angela, I love your points about just getting to know each other on a deeper level.

And, I’ll just say I’ve loved working with the two of you and getting to know you on a deeper level as well. And I’m proud to be a part of Sila. So thank you all for this time. And, I appreciate you all listening to Founded and Funded.

Shamir Karkal: [00:36:36] Thank you thank you for having us Hope.

Thanks for joining us at Madrona venture group for founded and funded. We really appreciate you listening. Please subscribe, send any comments you have to me. I’m at erica(Replace this parenthesis with the @ sign)madrona.com and it’s E R I K a. At madrona.com. Till next time.

 

 

 

POSTED IN: Madrona News

Our Investment in Coda & The Future of Work

Today we are excited to announce our investment in Coda.

Recently, we wrote some blog posts about our core investment themes. Specifically, two of the themes relating to Coda are the Future of Work, Workforce and Workplace as well as Low code/No Code development platforms.

There are several market trends that drive our thesis on these areas.

  1. Companies want to move faster and be more agile
  2. Cloud-native apps make it easier to access data
  3. More “makers” than ever before
  4. Multi-player collaboration and digital-first workflows

These trends together are driving innovation in how people are reimagining what tools people need to be effective and successful in today’s day and age.

The team at Coda recognized these trends when they first began working on Coda and have been building a fantastic product to serve these market needs.

The Coda team saw these trends and through their product have fundamentally reimagined how we work. They recognized that we move from application to application, and when applications talk to each other to share data and be dynamic, that is where the work gets done. So, they started with that as a core design point.

Coda is a single canvas that brings together the best of documents, spreadsheets, databases and applications. The flexibility of Coda enables users to become ‘makers’, authoring dynamic documents where the lines between a document and application are blurring and becoming one and the same.

Coda envisions a future where documents are alive and interactive – enabling users to interact with data, to interact with systems, and to automate previously manual processes. Coda imagines a world where everybody can be a “maker” and can use Coda to express what they want to and collaborate with others seamlessly.

We believe this is a massive opportunity. The “Maker Generation” has rapidly adopted new platforms and tools to solve problems, build products, and start new businesses, and we have seen many examples of this in other industries – from producing channels on YouTube, to building web sites in WordPress, or developing new games on Roblox.

Coda’s team believes they can unlock the power of software development for the Maker Generation by providing them with the platform and building blocks to build apps that look like docs, and we are already seeing thousands of users building these apps on Coda today.

We are particularly committed believers because we are Coda users. As investors we make decisions on whether to invest in an idea, founder or company together and on many different factors. We built one of the tools we use to start conversations and look at challenges, in Coda. Earlier this year we published this as a document in the Coda Doc Gallery for anyone to use.

Beyond the large market opportunity, we are also thrilled to back this world-class team. We have known Shishir Mehrotra for years since Microsoft where he worked on SQL Server, Windows, and Office before eventually moving down to the Bay Area to join Google as YouTube’s VP of Product, Engineering, and UX. Shishir’s cofounder and CTO, Alex DeNeui is also a world-class technology leader in real-time collaboration tools, and his previous company, DocVerse, was acquired by Google.

With the combination of a fantastic team, great product, and a massive market opportunity, we are looking forward to joining Coda in this journey to reimagine the future of productivity and collaboration. Coda’s blog on their funding is here.

AND we talked to Shishir about his journey to start Coda for our newest Founded and Funded Podcast – you can listen here!

 

Podcast Transcript

 

Erika: [00:00:11] Welcome to Founded and Funded. I’m Erika Shaffer with Madrona Venture Group. And today we’re really excited to bring you Shishir Mehrotra. The founder and CEO of Coda.  Coda announced a new funding round today of $80 million, which we participated in and in this conversation with Madrona managing director Soma and Madrona, senior associate Elisa La Cava, Shishir talks about what Coda is, how it got founded, what you really need to start a company in his view and the very interesting journey that Coda has taken to release their first product, which was five years in the making.  Before founding Coda show this year started his company. Worked at Microsoft for many years where he knew Soma. And then went to run YouTube for Google. Let’s pick up here, where Soma introduces the conversation.

Soma: [00:01:12] Hello, everybody. I’m very excited to be here today to talk about one of our core investment themes, the future of work with the founder and CEO of Coda Shishir Mehrotra. Welcome to Shishir.

Shishir: [00:01:27] Hi, Soma. It’s nice to be here. I was just to comment that you’re one of the few interviewers who can pronounce my name so clearly, okay.

Soma: [00:01:35] Yep. It’s another advantage of coming from the same part of the world. Yeah, but Shishir, really excited to have you on this podcast with us today and as we are very thrilled to be on the Coda journey with you as investors in the funding round that you announced earlier today.

Shishir : [00:01:50] Yeah. Welcome aboard.

Soma: [00:01:51] Thank you. We absolutely believe the Coda is one of the companies leading the charge on enabling what we call the future of work. The thing that is most impressive to me about Coda, when I think about it is how you all are reimagining how the world of documents and applications can come together and goes way beyond what people have access to in terms of productivity tools and collaboration tools that they are used to today.

So that’s been very exciting for us. And the future of work is an area that we’ve been investing for many years now, but we believe that the pace of innovation and more importantly, the demand from customers for adoption of great communication, collaboration tools has dramatically accelerated since the onset of Covid.

We are also going to have with us Elisa La Cava, one of my colleagues at Madrona and she’s been part of the team that has helped us formulate a lot of our thinking on the future of work. So I thought, Shishir, that we’d get started off with your personal journey, talking with you, talking a little bit about your personal journey, leading up to both founding and stuff in Coda, you came out of MIT with your undergrad and right off the bat, you founded a company called Centrata, which was built around that.  How do you describe the entrepreneurial bug that bit you at that early stage in your sort of career as you are just coming out of school? And what do you think it takes for a  person today to cross over into entrepreneurship, challenge themselves and decide to create something that is going to be phenomenally better for the world at large?

Shishir Mehrotra: [00:03:26] I think it’s a great question. Maybe as a piece of background, this is my second time founding a company , I’ve been involved with startups for a long time, but, directly second time founding a company.

And, I think people are addicted to starting companies. I’m sure. I’m sure you invest in some people where every idea that I think of is formulated as a startup. I’m not one of those people I’m quite comfortable with large environment, small environments, like you I’ve had a chance to work in both of those contexts.

And so it gives me a little bit of appreciation for entrepreneurs and what makes that unique. And I think. When I was at Google before, a very common interaction with somebody would come to me and say, I want to leave to go start a company. And each of us, I’m sure you had this in your past roles as well.

We just developed our viewpoint on how to have these conversations. And I settled on two questions and generally these questions were asked a little bit as almost as a deterrent in some ways, the two questions were. If somebody says they want to start a company, I would ask number one.

Do you have an idea you can’t imagine not working on and number two, do you have a person you can’t imagine not working with? And inevitably people would answer yes. To one of the questions and no to the other. And then we’d have a conversation about, why magic hits when these two things come together.

And they talk about we’ll have this great idea, but I haven’t been able to convince anybody else to do it, or they would talk about how they have a perfect partner, but they haven’t settled on an idea yet. And, I found that the, for entrepreneurship to hit that sort of magic has to hit at that right moment.

So those are the two questions that I’ve developed over time as a kind of litmus test of, should you start a company? And actually in my own journey with Coda, I wasn’t actually trying to start a company. I was fairly sure I would have continued on at Google, running large teams. And for me, these two questions, all of a sudden they answered yes. And I just, couldn’t not start a company. And I often describe entrepreneurship, not as a gift, but as a curse. And at that point, you just can’t think about anything else and everything else seems small. Everything else seems not worth doing. That’s when you, I think start a company and jump all the way in.

Soma: [00:05:30] It’s pretty impressive to see the journey you’ve gone through Shishir, but let me hand it over to Elisa to ask you the next set of questions.

Elisa La Cava: [00:05:38] So after the Centrata experience, I know you did a tour of duty, about six years at Microsoft and another six at Google before founding Coda.

And what I’m curious is what was different for you? If anything, this time around when you started Coda versus when you started Centrata during the height of the .com era, what was different for you in terms of the conditions to start a company, but also your entrepreneurial mindset and drive and determination to build something new.

Shishir Mehrotra: [00:06:13] very interesting question. At 15 years apart in that cycle, my situation  the starting of the companies could not be more different. Cenrata I was coming out of school, we were converting my graduate work into a company. One fun story was the way the financing happened.

The company was in Toronto  and was funded by, a guy named Vinod Khosla. We had been trying to raise money for nine months, flying back and forth from Boston to California. And no real success in doing it. And I get this email from Vinod and, it says, I read your business plan.

I’d like to, I’d like to fund your business. Vinod, is pretty direct, so his emails are direct and short, they’re full of misspellings. It’s like half the words or half the words are misspelled. And so I get this email and, this is, it’s 2000, this is a timeframe when there was no Wikipedia, there was no LinkedIn.

So I, this is a little embarrassing to say, but I had no idea who Vinod was. And so I write one of my, angel. So I had this angel, who had promised to put a half a million bucks into the company, but hadn’t actually done it yet. And so I write him and I say, do you think this email is real?

Is this like spam? Is this what, it’s full of misspellings. I’m not sure who it is. And so the angel says to me,

Elisa La Cava: [00:07:18] Right and you and you hadn’t, you hadn’t spoken yet. He had just looked at your business plan without even talking to you.

Shishir Mehrotra: [00:07:23] And it’s like, what are the chances? That somebody wants to fund the business.

So the  angel says to me  why don’t you walk down the street to the bookstore, the college bookstore and go to the magazine rack, see the person whose face is on all the magazines. That’s Vinod Khosla because that’s when he was at the top of his game. The funny part starts when I come back to my dorm room and my CFO in quotes was my, housemate.

I’m walking back into the house and I’m excited about this and he stops me and I said, I have something important to share. And he says, Oh yeah, I was actually gonna ask $500,000 just showed up in the bank account. Like what, where did that come from? This angel had heard this and wired the money in.

The first experience of starting Centrata was, we didn’t know what we were doing. I didn’t know who the financers were. You’re just figuring everything out from, from scratch. And I think there’s a level of blind determination. You’re not bogged down by the reality of the world. Coda, I got started, we raised our first round of financing  in a weekend. I had a much better sense of what we were doing. I knew what terms to ask for. and so it’s like dramatically different that way.

But what I’d say about that was similar was at these two incredibly different moments of my life. One where,  I didn’t really know what we were doing. And the other one where, I had a better sense of how this whole process works. The similarity, I think was that same level of ridiculous conviction on an idea that honestly, everybody else around us thought was weird and I wasn’t quite sure what to make of it. And I think that similarity and that determination, you can spot it, the eyes of every entrepreneur at that moment. They just don’t understand why you don’t get it.

It’s just so obvious. Like it says, obviously going to work and that’s what you have to have because you’re going to get every type of  you’re going to get every type of no, why don’t you go get a real job, getting all different versions of that.

And  when it works, it’s a particularly exciting, but that’s some similarities and some dramatic differences.

Elisa La Cava: [00:09:12] I love that though. You’re talking about that determination and it sounds like with Coda, you kept thinking about it and thinking about it. And then at one point you just thought, Oh, like I have to do this.

There’s no alternative.

Shishir Mehrotra: [00:09:25] Coda is one of those products where first off, when you can picture it just feels that’s obviously how it should be.

And that, that seems like really clear. Why would anybody bother building it any other way? The other thing that happens with Coda is it’s like this meta product where almost every idea that was pitched to me, I could picture that product, every idea I heard was, Oh yeah, I should just build that on this platform.

Like that. that’s exactly what we should go do. And so it became this sort of, every idea felt small compared to this thing. Now, the flip side, I call my parents, my wife’s on, they all look at me and say, what’s wrong with Microsoft Office? Like, why do you want to go do that? That seems silly.

So you had to, square those two pieces away. And of course, for the, when you cross that entrepreneurship hill and you’re in that convicted, you can’t imagine not working on this thing. You can’t imagine it not working now. Everybody else’s lack of faith actually, emboldens you and you get even more determined.

And even when you get even more certain that, if I don’t do this, then nobody will do it and then I’ll feel really bad, and then, I think Jeff Bezos was talking a lot about regret minimization framework. Yeah. Then you’re going to really feel like, man, if I had just done that,  then the world would have this new product , and it would have worked out in this different way.

And so I think that the, that determination is very similar.

Soma: [00:10:42] That’s a fantastic story, Shishir. You already started talking a little bit about Coda, but I thought, let me pause for a second and hear from you. How would you describe,  what Coda is  all about?

Shishir Mehrotra: [00:10:53] Yeah. I think our users would describe Coda as an all-in-one interactive document and what they would probably say is it blends the best parts of documents, spreadsheets, presentations, and applications together into one new surface.

Our promise is that it allows anyone to make a doc as powerful as an app. And that’s a, that’s the bold promise and something that we’re fairly committed to the, I think that if you step back for a moment, Coda was formed with two primary observations of the world. The first observation is that the world runs on docs, not apps. And that if you were to look yeah, that any team, business, family, individual, and say, what do you use to run yourself, your team, your business, so on. They’ll probably rattle off a set of applications they use, and a lot of packaged applications and I have the CRM system and this inventory system and this task system, and, so on.

But then if you watch them all day long and just stand behind their desk and see what they’re working on, you’ll see them in documents, spreadsheets, presentations, and communication tools all day long. And this observation was pretty stark when I worked at Microsoft on the office team, so that was pretty stark then, but it was particularly vivid for me at Google.

I got to Google 2008, right when Google docs came out and it was transforming the way we ran our businesses. And so YouTube, 2008, we basically ran everything on Google Docs, Google Sheets, and Google Sites. And, there was some kind of extreme examples of this, I have to pick one crazy example. If you hit flag on a YouTube video back in that 2008, 2009 period, it would create a row in a spreadsheet on an ops person’s desk. And that was how, that’s how pervasive this was. And for a lot of people that sounded crazy. But for me, it was part of this observation, that docs, not apps run the world and I think people saw that as a weakness, I saw that as a strength, it gave us complete agility. It meant that when we wanted to change how we did planning, we could do it instantly.

And as the world of how we thought about flagging and content moderation, so on evolved we had total control over it. So this kind of observation, number one, docs not apps run the world. The second observation is that those surfaces document, spreadsheets, presentations haven’t fundamentally changed in over 40 years.

And there’s a running joke in the company that if Austin Powers popped out of his freezing chamber, he wouldn’t know what clothes to wear. He wouldn’t know what music to listen to, but he would know how to work a document, a spreadsheet and presentation because none of them have fundamentally changed since the 1970s.

And this is, if you go back to WordStar Harvard graphics and VisiCalc, and you just take those metaphors. And you just watch really four decades of copy forward and we just took it and we just changed the environment. And we went from green screens to Dos, to Windows, to MacOS, to the web, to the mobile phone, but all the same core metaphors are the same.

 

The operating systems are unrecognizable from that period to now things like web browsers didn’t exist. Databases that we thought were very fundamental are completely different. The search engines didn’t exist. And yet this thing that we stare at, we, the first thing we opened in the morning, the first thing we put our new ideas and the thing that runs our board meetings, the thing that runs our town runs our compensation.

That thing hasn’t changed in 40 years, that seemed crazy to us. So when we started, we took these two observations. So the world runs on docs on apps. Those haven’t changed in 40 years. Why don’t we start from scratch? And so we built a new doc and that’s what became Coda.

Soma: [00:14:21] That’s awesome, Shishir. I want you to go back to the early days of Coda. You started the company, you brought on the first set of people, and the founding team for Coda.

And you started working on what I call the first MVP, the first version that he wanted to put out and see what customers thought about it kind of thing. When you did that, what are the feedback like? Did it catch on like wildfire? I would love to hear the journey that you went through to a place where you found initial product market fit.

Shishir Mehrotra: [00:14:51] Yeah, I think the, I always love this question for entrepreneurs. Cause I feel like it’s a debunking of real products appear. And it just seems Oh, that must have caught right away. And then you go look underneath and you see what the iteration went into it. One thing we decided when we started the company was we decided to start it in stealth, which is not a typical decision.

And there was a bunch of different reasons for it, but the main one was, I didn’t want the team to be distracted. And I felt like we had a number of prominent people in the company and. And backing the company and so on. And I thought if we spend time talking, we wouldn’t really be talking about the product.

So we basically told the company we’re not going to ship, or we’re not going to talk about the company until we can shift the product and let the product lead the story. Which I had no idea how long that would take. So we got started, at the same time, my philosophy was don’t build in a vacuum.

So as soon as possible, if you want to get people onto the product, so our first milestone was just getting to our own usability. You can sometimes we call that a dog food milestone. We had a particular use case we had in mind for that. The company was only six or seven people at the time and we basically converted our planning and task tracking system into Coda.

And then, so we’re feeling pretty good about that. We’re about four or five months in, and we say, okay, let’s, let’s find someone else. Let’s find someone other than us to do it. And so a friend of mine, a guy named Nolan Lavinsky was starting a company and there were also about six people.

And so I called them up and said, Hey, this is working well for us. Would you try it and give us some feedback? And, gladly agreed and said, I’d be happy to do it. So we had a little dashboard that tracked our daily active users and it only went from zero to six because that’s how many people they had in the company.

And then one day this thing hit zero and we wait a day and it’s still at zero the next day. And I call up Nome and I say, I said, what happened? Did you guys go on vacation? Are you having an offsite or for, he says, no, actually I’ve been meaning to call you and tell you.

We, we had a team discussion and, I have some news for you. The team all told me that if I make them keep using Coda, they’re all gonna quit. And so we had to pause and I, my first reaction was okay, I don’t know how you’re going to sugarcoat this. That sounds pretty extreme.

And, and he said, but I have some good news. Okay, what’s the good news. And he said, they’re all totally aligned on the mission for where you’re headed. They just have lots and lots of feedback on things they think you should be fixing. And we’ve built a list of 30 things that you should go work on.

And if you get these things done, we’d be happy to try again. And the interesting thing about this journey and this product, and by the way, that process repeats itself, many times we, Started the company in 2014 and we actually didn’t launch Coda 1.0 until February of 2019. About four and a half years after.

And so it was a much harder product to build than I expected, early on. And I think part of the reason, and we would hear that pattern of feedback over and over again. I totally believe in the mission. I totally understand where you’re headed. I love the promise. Can you fix these 30 things?

And gradually that 30 would go to 25 and go to 20 and so on and you get there, but everybody’s listed 30 was a little bit different. So it wasn’t just like, you could just keep working the same list and I think one of the things about building a product like this, I was talking to a friend of mine who’s deep into the video game space and builds lots of a video game.

And he says, there’s two types of video games you make, there’s some video games where you make a one level and you put it out and you don’t even bother making level two. You see how a level one goes. And once people start beating that, then you make level two. And then he was telling me this other game they made, that was this big Star Wars game.

And they worked on it for, five years. And no one of the components actually work together at all until three months before launch. And the whole thing made no sense until it all worked together. And he said, there’s a sort of two different types of products he sometimes built. And I didn’t know it at the time, but that’s what Coda ended up being.

And I think the reason for that is fairly simple Coda is a product with very high ambitions and aspirations. It’s an empowerment product. but it’s also displacing a set of tools that as I said, had been around for 40 or 50 years. And so the expectations are incredibly high. And so it became a part of, I sometimes describe Coda, like a piece of music when, when one note is off, the whole thing just sounds wrong.

And so you’re constantly finding all those different areas. So anyway, the process of building Coda was very deep interaction with customers and lots of love your vision. Fix these 30 things. I think it worked.

Soma: [00:18:59] Got it. That’s fantastic. Because like you said, most people looking at it from the outside think Hey, you go build something and then boom, it takes off kind of thing.

And maybe occasionally it does, but for a lot of people who now put something out, listen to customers. Iterate and then go through the process in a tight loop fashion, and sooner or later you get to the right place kind of thing. So that’s great to hear your sort of story during the early days of Coda.

Shishir Mehrotra: [00:19:22] Very few people know this, but YouTube started as a dating site and YouTube was more of an overnight success than most, but even there, the migration was, was meaningful.

 

Elisa La Cava: [00:19:34] I loved hearing, about how, the feedback from your early customers, giving you 30 different list of 30 things.

And then today, what you called a meta site, you can create to do lists, brainstorm ideas, manage projects, publish websites, the capabilities are incredibly powerful, and growing and endless.

But on the fun side of things. What have you seen? What’s a neat and perhaps unusual or overlooked use case you’ve seen a maker or user use Coda for so far?

Shishir Mehrotra: [00:20:06] One of the fun parts about working on platforms is that you’re constantly surprised at what people do and YouTube was similar.

I’d walked into YouTube some days and you’d look at it and you’d say, I can’t believe people did that sometimes in a good way, sometimes in a not very good way. And I think Coda has a similar element to that. There’s an incredibly long tail of what people do. Pick one fun example. There’s a venture firm called Madrona that’s apparently making investment decisions in Coda, which I think is actually a really fun one and maybe joking aside is, I think, is a really good representation of how to think about very fundamental processes a little bit differently. And I think that one is a great example of removing bias and a really hard process, and avoiding group think and really soliciting and getting the most out of a partnership, which I think is a really hard thing to do.

Let’s see. Other interesting use cases. One that sort of outside of the traditional teams using Coda to run themselves, Sal Khan’s building one right now called schoolhouse.world, which I think is, I think it was really cool. And this one was interesting, Sal is actually an old college buddy of mine.

He and I both went to school together at MIT and known each other for years, both ended up marrying our college sweethearts and actually lived just a couple of miles from each other. We launched a feature in Coda called publishing where you can publish a code of doc as a website.

And, when we launched that, he emailed me and said, Hey, could I use this to build this thing I’ve been meaning to build? And apparently his basic idea is that Khan Academy is his primary creation, which is, most people know of as a great educational site. He wrote a book called One World Schoolhouse.

And, at that time, he bought a domain called schoolhouse.world, which is, the, his sort of working view is that the boundaries of what we consider school to be will shift from being physical, to being encompassing of the whole world. And so the way the site works is pretty simple. It’s a doc where anybody can sign up as either as a tutor or as a student, and describe what you want to get to and you get match made to different group tutoring sessions.

And, it’s really interesting. It’s being run by a group of volunteers. And I think one of the, one of the really interesting things about it is Sal called me and asked about this and it was up and running in a weekend, because it was so easy to make. So I think that is a really interesting one, I think the breadth of use cases is really fun. It’s really inspiring. It’s really challenging. Building a product that can actually handle all those use cases is not easy. And you can imagine everybody’s list of 30 different things to change is very different across that spectrum, but a lot of fun.

 

Soma: [00:22:33] Awesome, Shishir. Particularly, now I do want to make a plug into Seattle here. I know that earlier on you decided that Hey, as you think about creating a distributed team, that one of the locations you are going to build a team around is in the greater Seattle area in Bellevue.

And given the amount of technical talent, particularly, but in general, the technology ecosystem talent that’s available here, I’m glad that you made that decision earlier on and hope you are happy with the decision so far.

Shishir Mehrotra: [00:23:00] Oh, the first, I think the second person we hired, it was Nigel Ellis who was running engineering for SQL Server at the time, on my old teams.

And, we had this sort of debate about it and said, are we, I know to show you talk about distributed teams being better and so on, but are we really ready to do this and discussion with our board. And honestly, most people’s reaction was that’s a little bit nuts. Like you’re six people. Like, why would you want to be split in multiple offices now?

And you all live near each other. That seems crazy. And one of the arguments I made, I think that distributed teams work better. And I also think that teams that start distributed have a much easier time staying distributed.

Actually one of my pet peeves is when people use the term remote. Remote I view as a pejorative term, a remote implies a headquarters. And I think if you think that way, if you think headquarters and remote, you’ll build one culture. If you think distributed, you have built a very different culture.

And so we started with that and it was an easy case to make it was, Nigel was great and he’s like a great person to hire. And by the way, there’s like thousands of other great engineers in Seattle that are clearly qualified to work on Coda and will be very relevant to us. Why would you box them out of being part of our journey?

And that turned out great. And we’ve got a great, thriving team in Bellevue and now all over the country and all over the world. But I think it was very helpful and setting the right scaffolding for building a distributed team.

Soma: [00:24:19] That’s great. Hey, Shishir in building on the culture that you talked about a lot so far, there is one other thing that I’ve heard about Coda, both from you, as well as  from other people in the ecosystem that I want to start off and ask you about. In the six years that you’ve been around you.

You have a tremendous track record of what I call close rates of candidates. Particularly Hey, when you make an offer to a candidate, I hope many of them, they can actually end up joining. You have a very high number related to pretty much any other startup that I’ve encountered in the last many years.

Tell me what makes you and Coda and the team so special that you have such a high rate, I guess I have heard through the grape vine, it might be related to how you take care of the employees. It could be a charming personality. It could be a vision, maybe your equity policy, maybe all of the above.

So I’d love to hear, what is the reason for the success. And I think this is something that every entrepreneur should pay attention to.

Shishir Mehrotra: [00:25:15] I’m going to give you a right brain and left brain answer to this question. And thanks for the positive thoughts. I think we do well.

I’m sure we can do better. When I was debating, leaving Google to start Coda, as mentioning I was going through my two questions. So I have an idea I can’t imagine not working on and a person I can’t imagine not working with. And, I’m gradually getting conviction on both things and the idea I just couldn’t stop thinking about.

And Alex and I were very clearly like the right pair to go work on this idea. But I was still pretty resistant to starting a company. And a lot of it was because I had a friend of mine who had started a company and I was talking to him and I said, Hey Alex, so I’ve been talking about this idea.

I can’t stop thinking about it. I think I should. I think I should start this company. And this friend of mine said, she said, you can’t do that. And I said, why not? And, and he said, there’s a thousand reasons, but she should, let me give you just one reason. He said, what’s your, close rate for hiring people into YouTube.

And I just come out of a meeting with my HR lead and, and so I had the stats like right on my tip of my tongue. It was about 92%. Like it was. And you to remember at this time, YouTube was like a great place to work. Is startup inside big company, like big mission? well known product, lots of scale, but lots of opportunity for innovation.

We were pretty good at recruiting people and it was very rare that we gave offers and people didn’t accept. And so I’m talking to this friend of mine, he says, okay, that’s interesting, 92%. We sit in the forties. And we said, I spent all day long trying to find the people that are too tall for Google and too fat for Facebook.

and that was his analogy that I’m quoting him, not me and it struck me, he said, you’re just going to find yourself trying to recruit people, and you’re not going to be able to recruit the best, and you’re going to drive yourself nuts.

And for me, that sounded terrible. Like I really wanted to work on this problem. And I thought I had someone great to work with, one of the things you get used to working in a place like Google, Microsoft, and so on is you work with great people and, people that are really talented.

And the idea that I’m going to go try to find second servings from each of these companies, that sounded really terrible. And so I went and had this conversation with reading him with Reid Hoffman, and Hamilton, which ended up being the primary financier is of Coda.

And I talked to both of them about it and they both told me, look, that’s not, what’s going to happen to you and we’re going to help you understand why. And I think those conversations were really critical and me deciding to start Coda. And, so right brain, left brain. The right brain side of this is people join missions.

And the, if you have a big, bold mission and you can get people excited about it, people will find that same level of enthusiasm that you feel in going after this mission. And if you look at people joining Coda, many of them, when they describe why they’re joining and so on, they’ll describe a lot of left brain things.

I’ll talk about in a moment. But they’ll all start with I just thought it was a chance to build a thing that really mattered. And that’s a thing that when you get those opportunities, you get excited about and you really feel motivated about, and that can drive a lot. And I think it’s one of the things I ended up coaching entrepreneurs on a lot is how to tell your story in a way that lets people go on that journey with you.

And there’s probably a version of it that caused you as an entrepreneur to feel that convicted about it. But sometimes telling that and helping people feel part of it is really important. And I think we do a pretty good job with that. I think Coda has a big mission and has it has a good chance of impact lots of the world and lots of different aspects of the world.

And yeah, somebody, if I just talk about, for example, we talked about with distributed teams and changing how you think about bias and that’s the type of thing that would not be obvious. I just told you, Hey, we’re going to go rebuild office because we think it hasn’t been rebuilt in 40 years you probably would be excited, but maybe not that excited, but if I told you, I think the world is full of cases where whole groups of people are ignored  or don’t realize their voice, their potential.

So you might be inspired by it in a totally different way. and so I think getting good at telling that story is really important. And I think, I think my, our recruiting team, each of our leaders are all very good at this and they will tell some version of this in a good way.

And it’s infectious. Then each person that turns around and tells it to the next person and so on. So I think that’s really important. I think people don’t spend enough time on this. Kenny Mendez who runs, people in operations for us is always one of the best storytellers I know. And, and has been a really good at not only doing this himself, but building a team of people that can do this well, that’s the right brain side, the left brain side, talking to him and Reid about this.

They said, look, you’re going to tell a great story. you have a pretty good network to build off of, and people want to join places where they can join other great people. And I think that’s really important, but there’s a practical side of joining a startup. And one of the things that I think companies don’t do.

And so this will get to the mechanical part of this is they’re unrealistic about the decision facing an employee and these employees, anybody you want to hire has many offers and that’s good. Like liquidity is good. The job market is generally healthy. You don’t generally want the person that is not able to get other offers.

In fact, we often offer genuinely to help people with it.  I’ll help people connect with other companies. I’ll help them. I’ll reference, check for them if they, if that’s helpful and someone, because I feel like when you join a place like Coda, I don’t want you to joining because we were your last resort.

I want you to joining because you understood your options and you decided this was the best one. And if it’s not that’s okay. And I think being clear on that is helpful, but at that point, they’re going to have a decision to make, and that decision is likely not theirs alone.

Like they may have a spouse or partner. They may have a parent or family members that are coaching them, they may have an advisor or so on, and those people are gonna start left brain. And I think that from that perspective, the main thing that we end up talking about is we treat employees, making a decision to join a company as being investors.

And that philosophy is the way I think about it is I always tell people, look, when you’re joining a company you’re investing and you’re investing with your time, not with your money, but, boy, time is a way more precious resource the money. So you need to think about it in that way.

And we’ll do a lot of work too try to make this process clear to people. And, I’ll just to give a few of them first off, we’re very generous with equity. We make it such that, and that starts by, we didn’t sell that much to investors so you can get more to employees. My view is most companies end up being held too much by investors and founders and not enough by employees and it’s not a good thing.

So being generous with equity is really important. How you present the offers. I can’t tell you how many people present offers and here’s your number of shares and they don’t tell you basic information. What’s the total float of the company? What was the last round? What were the terms?

What are the gotchas in the around? Are there any special provisions? Like all these things just don’t give enough information for the person to think like an investor. And so we built an offer model that helps people run through this process. One of the things that model does is it gives an unexpected value calculator.

Which is another thing that, most employers I’ll have many employees look at equity and they’ll think of it is worth either zero or worth of a jillion dollars. The employees have no way to gauge anything in between. But smart investors know that’s not how you should think about equity.

And there’s four new investor. In a company, there’s some percentage chance of the mega outcome. And there’s some percentage chance of the mediocre outcome. And there’s some percentage chance of the zero. And yeah. And you define your scenarios and we don’t fill in anybody’s numbers and you should make your own decisions, but we just help people through that decision, give you enough information and to be able to have this conversation with your partner, with your spouse, with your family members and so on.

And, and realize that you may be excited because you want to change the world and you want to change how things operate and so on, but they want to make sure that you’re making an economically sound decision for your, for your family as well. There’s a number of other things we do there. We do a thing called founders preferred stock, which is a special tier of stock that converts a little bit closer to a preferred stock.

The ways we do the actual mechanics of the offer is and options and so on is a little bit different, but the basic philosophy is how people have that same founder level of conviction on your mission, and then treat them like investors as they make a decision to invest their time into your company.

And I thought those were like those two things together lead to building a company full of great people.

Soma: [00:33:11] We’ve had these conversations over the last couple of years, but every time sort of hearing from you about your journey about Coda journey, it’s always been fun.

It’s great. So thank you. Thank you for sharing your sort of thoughts and perspectives and your journey with us.

 

Shishir Mehrotra: [00:33:25] All right. Thank you. This was a lot of fun, lots of great questions and a great exploration. Thank you.

Erika: [00:33:32] Thanks for joining us for Founded and Funded. That was a great conversation with Shishir and there is more to come. We have another podcast coming later this week. That really goes a little bit more in depth into the future of work with Shishir.

Erika: [00:33:48]

Please stay tuned for that podcast coming up later this week. And send us any feedback that you have about the podcast. You can send it directly to me. It’s erika(Replace this parenthesis with the @ sign)madrona.com and that’s E R I K A.

At madrona.com. Thanks and we hope you have a great week

 

POSTED IN: Madrona News

Founded and Funded – AI, NLP and Technology in the Physician’s Office with Saykara

(Dr. Graham Hughes and Harjinder Sandhu of Saykara)

On the newest Founded and Funded podcast, join Madrona managing director, Tim Porter, as he sits down with Founder, Harjinder Sandhu, and President, Dr. Graham Hughes of Saykara to discuss the future of AI in the healthcare provider’s domain. Saykara is an AI, Natural Language Processing and speech recognition-based iOS application for physicians to help them significantly decrease the amount of time they need to spend charting – entering information into the electronic medical record.  Saykara listens and assists the physician, much like a human scribe might do,  interpreting and transforming the doctor- patient conversations into the salient content required for notes, orders, referrals, and scheduling.

But building a business around natural language processing and speech recognition, as you’ll hear, was no easy task. Harjinder and Graham reflect on how these two technologies have evolved – and how combining them with AI has led to an application that is changing physicians’ lives across the country.  The two also talk about the challenges and thrills of building a startup that is doing something entirely new.

When Madrona first invested in Saykara in 2016 we were excited about the technology trends around voice, machine learning and natural language processing and it’s rewarding to see this come to fruition and be changing physician’s lives for the better.

Listen here or on the podcast platform of your choice!

Transcript

Tim

Hi, Harjinder. Hi Graham. Great to be here with you today in this fully remote virtual world. This is my first podcast recording where we’re not all in one little studio, but nice to see you both today.

Saykara is really the first truly intelligent AI assistant that automates physician charting. So, we’ll get more into that. Quick background on Harjinder and Graham, we’re going to talk a little bit today about Saykara, a little bit about startups and the challenge of founding and scaling startups successfully, and a little bit about things going on in healthcare IT broadly of which Saykara is in a really interesting part in the middle of that. Harjinder is the co-founder and CEO of the company. He started his career back as a professor of computer science at York University, and then co-founded a company called Med Remote, which was really one of the first automated medical speech transcription companies that was then acquired by Nuance and helped build what’s become a powerhouse business for Nuance around healthcare speech services. This is his second startup since Med Remote. He co-founded a company called Twistle also in healthcare IT, so he’s a veteran of healthcare and ML-related startups. So, lots of great insights there. And Graham joined as president of Saykara last year and comes with an interesting set of backgrounds as well. Most recently, as CEO of Sutherland Healthcare Solutions and before that, his experience ranged from being a doctor, he’s an MD himself, as well as building healthcare software systems like EMRs, working at GE healthcare and also working on machine learning applied to healthcare at SAS. And so, a great wealth of experience here that’s coming to bear to build Saykara.

 

Let’s jump in. Harjinder, as I mentioned, you’ve been working at the forefront of speech rec and ML in healthcare for over 20 years. Can you just give us a brief history, a primer, on how those technologies developed and where you see things today?

 

Harjinder

Healthcare has been one of the key drivers in the adoption of speech recognition. While in other industries, voice and speech have been interesting modalities to use and it’s alongside other things in healthcare, voice has always been one of the primary modalities that providers have used for documentation. Whenever a physician, a provider sees a patient, they’re required to document that encounter. They need to do so both for legal and billing and clinical purposes. If you’re a typical physician and you see 20 to 25 patients a day, every encounter that you do, with each of those patients, requires a page or two of documentation. If you add all of that up in a typical day, that’s a lot of documentation that a physician has to do.

 

Back in the day before the internet, physicians would dictate their notes and you’d have transcriptionists listening to those dictations and typing them up. Back in around 2000 or so,  myself and a colleague and a few others started looking at how to apply speech recognition to this natural use of voice, which is how do we take this dictation and rather than have people sitting there typing it up, how do we apply speech recognition to this and make this process much more cost effective. Back in those days, transcription used to be about a 10 to 20-billion-dollar industry in this country. So that’s really where speech recognition found a home. In 2000, speech recognition was still very much in its early days, it wasn’t really ready for this space. It took us about three years to get speech recognition to the point where it was actually useful in this space and useful actually meant not that it was replacing transcriptionists, but that it was augmenting the transcriptionists.

 

So, if you think about the cost of transcription, the spend in the millions of dollars for a typical health system, our goal was to use speech recognition to augment the transcriptionist in a way that reduced that transcription costs. We were able to do so and do so very successfully, and speech recognition continued to improve over the years. The use of speech recognition as a tool directly for physicians started around the same time, but really was just for early adopters that would use it for documenting care, but it was really the wealth of data that we were able to capture through this speech recognition process, where we were augmenting transcriptions that gave rise to the real success of speech recognition in healthcare.

 

NLP, natural language processing, was always a secondary focus and that really came about because again, in healthcare, if you think about the use case of physician documentation — 20 years ago, almost all medical documentation was in the form of these narrative notes that were being created through the dictation process or else being typed up by physicians. So, the idea was, and many people were thinking about this back then, is that as long as medical documentation is a narrative format, it’s not really amenable to any kind of automated processes. You can’t do simple analytics on it. You can’t do any kind of drug-drug interaction checking, if all you have is a bunch of narrative that talks about these medications and allergies and all that kind of stuff. So, we had started working on ways to interpret what the system was hearing through this dictation process and that NLP work continues till this day. It actually turned out that NLP was a much harder challenge when it came to interpreting natural language dictations by physicians than speech recognition. Speech recognition has gotten to the point of course today where it’s a commodity. Lots of companies do speech recognition very, very well, but NLP continues to be a challenge.

 

Tim

That’s great. When we originally invested in Saykara a few years ago, we loved the technology trends around voice, around machine learning and around NLP, and as we dug into the use case and problem you’re solving here for physicians, we just thought it was one of the great applications of these set of technologies to solve a really burning pain point for customers. I mean, you’ve both seen both large companies and small companies succeed and fail, maybe fail more often than not, trying to kind of crack the nut around these technologies in healthcare. What are some of the places you’ve seen, quickly, both succeed and fail and kind of what are those characteristics that gets to the kind of why now for Saykara?

 

Harjinder

I would say in terms of success, speech recognition by and large has been a tremendous success. It’s taken many years, but it’s been successful. The primary source of failure I think has been that NLP never kept pace with the quality of speech recognition. So, you think about, again, what everybody wanted to do was put structured data within the medical record and a lot of focus went into how do we take what physicians are saying through their speech recognition process and break it apart into the discrete data components. So, you want to be able to put what medications a patient’s on, what problems they’re being diagnosed with, what procedures they’re undergoing and then all the details around all of those directly into discrete fields in the EHR. And that, by and large, in years past failed. And I think the tail end of your question, in terms of why now for Saykara, largely, because we’re looking at right now is the confluence of speech recognition and NLP capabilities that are now able to do what we weren’t able to do 10 years ago. So, it’s not a bold prediction anymore to say that we are now on the cusp of having automated systems that can both transcribe and interpret what physicians are saying and put that data directly into the medical record.

 

Tim (

Graham, do you want to add anything there?

 

Graham

What I would say is that electronic health record systems and other vendors who’ve tried to look at this space have often made it too complicated and too much of a burden on the physician, or on the backend, it’s not granular enough to really be usable and meaningful for the physician. So, the confluence of technologies and the pressures that doctors are under, I think just makes this the right time.

 

Tim

Yeah, that’s great. So some big . . . the confluence of some big technology trends that have been building for years now, and some big healthcare trends, and I want to come back and talk more about some of those healthcare specific trends, but maybe describe exactly what Saykara is doing. Right? We sort of shorthand AI virtual scribe. What is that and what makes Saykara different and talk about what really are we solving for physicians in the healthcare system.

 

Harjinder

Ultimately physicians just want to talk to their patients, and they want to provide care. They don’t want the tedium of documentation. So, what Saykara focuses on is listening in on doctor-patient conversations and interpreting those conversations and generating out of that conversation a note that otherwise a physician would have to create. Ultimately, the holy grail in this space is that a system such as ours can listen in on that doctor-patient encounter and simply interpret and create that note. I’ve already mentioned that NLP has come a long way, but it remains a very difficult challenge to figure out how to interpret conversations. It’s hard enough to just interpret a dictation, let alone a two-way conversation between a doctor and a patient and then sometimes of course you have more than just two parties in the room. And so, I think the differentiator here for Saykara as a company is our ability to do this successfully in an augmented fashion. What I mean by that is, that having a system that can do this completely autonomously without any human assistance remains our goal, our vision, and something that we’re working towards and making progress towards, but in the meantime, we use a augmented AI solution and have humans that are helping the system to learn. What differentiates us from, I think, virtually everybody else in this space is our ability to actually make that AI system continuously learn from the human in that loop. I would say there’s a lot of companies in this space that are purely human only solutions and they may talk about how they’re trying to incorporate AI into their solutions, but they’re by and large just human transcription companies. And what we’ve been able to do is create a platform that incorporates a combination of AI and human, and in many tasks now, the AI is actually able to do this completely autonomously on specific kinds of tasks within that encounter. That capability is getting better and better over time.

 

Tim

We have this broad investment theme around intelligent applications, and I think a core piece to successful intelligent applications needs to be this continuous learning loop. We were impressed from the beginning and your vision for how to implement that and we think that fully automating this process with this learning system, yet being able to fully delight doctors right away, with the product that we have today, but yet it’s going to continue to get more efficient and over time, is really insightful and exciting part about Saykara and what differentiates you. We also always think about with an investment, you know, who are all the constituents that matter here. And so, clearly, helping physicians is the number one driver, and it helps them with their documentation burden, etc., but health systems like this too, because physician burnout is a key issue for them. They’re not getting the data into the EHR that they originally intended, you know, to be there. I think patients, you know, we’ve learned, like this also kind of makes it more transparent, “What is my physician doing when I’m trying to tell her or him what’s wrong and they’re typing away on the screen and not paying attention to me?” So, really this kind of value prop that’s for the physician, for the system and for the patient I think is really important and exciting about this space. But Graham, not to put blame on you, but you built some of these EHR systems, how do we get to this point, right, where the EHR was supposed to capture all this information, and it’s not fully succeeding at that and yet, physicians like hate it, and so it’s sort of on both ends, you know, causing friction and a problem, you know, in the world right now? How do we sort of get to this point and maybe talk a little bit about how you got excited about Saykara’s solution for it and have come on board here in the last year?

 

Graham

Yeah. That’s true. I kind of joke to Harjinder that I’m here to pay my penance for building these things. What the electronic health record companies tried to do, to their credit, was to try and make this as comprehensive as possible so that you could cover all angles. You know, they ended up, unfortunately though, by trying to accommodate all of those things, is that they created a monster, which meant that doctors ended up getting dragged into using the computer screen and pulled away from the patient interaction. You talked about burnout. That’s really a feeling that about 50% of the doctors in this country have, depending on specialty, where, they’re feeling disempowered, they’ve lost control, they don’t really have the passion for the work anymore and they’re doing the best that they can under terrible situation, where they’re spending sometimes up to three hours at night, trying to catch up on the documentation. With that said, my background, having been involved in physician workflow all my life — as a physician, then working in this space — and then having spent so much time working on natural language processing and analytics and advanced AI at SAS, it just felt to me that this was a problem that needs to be solved. And, I had the great fortune of meeting Harjinder. I love to work with people who live in the future. They’re developing assets that we will be using in four or five- or ten-year’s time. This one was incubated well enough that I could see the great potential, but also the reality of how this could work. So, I’m excited about it, Tim, and I get more excited every day and seeing what we’re doing with customers and the promise of the tech.

 

Tim

That’s great. Really a unique set of backgrounds that allowed you to see this problem/opportunity from all sides. Strategically the opportunity made a lot of sense to you and your experience allowed you to see it from various sides. You know, we had a lot of listeners to the podcast who maybe are not in healthcare related, but they maybe are at a big company thinking about going to a smaller company. So, maybe just talk for a minute on a personal level, making that decision, it made sense strategically, but then, it’s going to work every day and look, Saykara has hundreds of physicians on the system; Harjinder had built the company to a really interesting place, so it wasn’t like this was a de novo startup when you joined, but compared to Sutherland, much smaller. Talk about what that transition was like and how you kind of thought that this was the right time for you personally to make that kind of move once you saw that strategically the company and the solution made great sense.

 

Graham

Yeah, no, you’re right, a lot of organizations at the larger level are somewhat risk averse because they’re trying to keep their performance machine, the existing engine running, and innovation, which could potentially disrupt your existing business, is problematic. And you’ve probably seen, Tim, many, many organizations that have struggled with how to incubate new offerings out of large companies. And so, I actually had found that my passion lay with that type of innovation and transformation. And for me, having run large organizations, it just felt that working with a bunch of really smart people, people who I like, who have deep experience in the industry, strong tech, definitely are thinking about the transformation in healthcare that needs to happen is that for me, I wanted to take everything that I’d learned at a large product and services organizations and then just bring it into Saykara and see what we could do. I love the mission, love the challenge, love the people. Let’s do something really meaningful to transform the lives of hopefully hundreds of thousands of doctors.

 

Tim

You used the word passion and as we’ve seen people successfully go from bigger companies to smaller ones, that’s the number one thing. The second one is, kind of, revel in getting your hands dirty and going and doing stuff and not just kind of directing. We’ve seen that as you’ve jumped in with customers and analytics and internal processes, and we’ll get into a little more of that, but back to the offering. One of the fun things about Saykara is we all know doctors. We’ve heard about this burnout issue, but what are we seeing about the receptivity to use this type of technology? Where are we kind of in the cycle from an adoption standpoint?

 

Graham

It’s interesting because you often think of cool new tech and interesting tech, and you think about, you know, hey, this is going to appeal to the PlayStation generation of doctors — people who grew up with technology in their back pocket, they can’t remember life without Google, and they think that maybe they would be the only folks who are really drawn to this. In fact, nothing could be further from the case. I think that there are physicians who started their career with the idea of just focusing on the patient and whether they had gone through the years of dictation and transcription or whatever, they immediately understand the idea that, hey, this thing would get me away from a computer, it allows me to focus. It’s by reducing all this hassle that’s been brought into their lives over the last 10 years, it’s actually like coming home. So, for doctors, it’s like what they got into medicine for. The time’s right, we’re just seeing an incredible amount of demand out there in the industry, not surprising. Whether it’s doctors in large health systems, individual group practices, large multispecialty practices, ambulatory surgery centers, it’s all about just getting the friction out of their day-to-day life. That’s probably no different than many, many other industries. If you can make it easy for someone to get their job done, and you can make it as transparent as possible, people are going to want to do that.

 

Tim

You refer to the product as a virtual scribe, an AI virtual scribe. So, some physicians actually are fortunate enough to have a person that follows them around and that I believe is sort of why it’s called a scribe. One of the things we loved about, and I loved about Saykara, is it really democratizes access to that type of service, right? Where I think scribes today, it’s very high end specialties who can afford that, and Saykara is at a price point and capability where family docs can have access to this, and also, Saykara doesn’t leave for medical school every one or two years, having to retrain someone else. What are your thoughts and sort of that — Saykara, sort of this AI option versus an in-person?

 

Graham

There’s been an absolute explosion over the last few years of medical scribes, but the problem is, that’s a very expensive model is bringing another person into the room for every visit. It’s also, as you said, these are difficult to train up, you try to bring someone on board and make sure they understand your specialty, understand the way you work, understand the types of way that you document and work with patients. Often times, patients don’t feel that comfortable either having another person in the room. So, we found a tremendous amount of receptivity to the idea that there’s this virtual AI assistant on a mobile device, it just sits there on your mobile phone and, and is unintrusive. The doctor says, “Hey, do you mind if I use my AI assistant — this system that’ll help me here to make sure that we capture everything?” And, the patient has always agreed. I don’t think I’ve ever seen anyone or heard of anyone who’s got a problem with it.

 

Tim

Not to mention, there hasn’t been a lot of people standing together in rooms here over the last few months, how has COVID impacted this whole market? The move to telemedicine is well understood and well-documented, but has this new normal, is this a tailwind for Saykara? Is it a challenge? What have you seen?

 

Graham

For us, it’s a tremendous tailwind. Our system works just great for telemedicine visits. All that it has to do is to be able to really hear the physician, if it can hear the patient too, even better. But if you’re on a video call with a patient, it’s very difficult to be on your computer, hunting and pecking and clicking through menus. So, yeah, telemedicine visits when you’re face to face with a patient in that way, the ability to just pick up on the voice. Doctors love that ability to just continue to have a hundred percent attention through telemedicine visits and Kara picks it up just as it would do if the patient was in the room.

 

Tim

So, Graham shared some color on what it’s been like and why he made a move from a bigger company to an earlier stage company. Harjinder I guess, at this point, you’re a serial entrepreneur. This is number three. What made you take this leap again? Why do you keep going after these healthcare problems and starting companies? Maybe share a little of the motivations and starting Saykara beyond the technical kind of strategic reasons you shared earlier.

 

Harjinder

Uh, in a word, I like punishment, I guess. Tim, as you probably know, having invested in a lot of companies that the highs and the lows of a startup are pretty extreme versus being in a big company where you have a salary regardless of your successes or failures, but in a startup, you can go from one extreme to another very rapidly. The thrill that I get of a startup is particularly around building solutions that people want to use and that make a difference in people’s lives. I think that I would put a premium on that. When people, when physicians use our solution, it makes a real difference. We hear from physicians that they’re spending hours, literally hours less per day on documentation and the physician burnout problem is so huge, as Graham also talked about. But then, the other side of that, as I said, is getting to work on problems that are unsolved problems that are really difficult problems. Conversational AI is one of those problems. Twenty years ago, speech recognition was one of those problems and getting to kind of join these two things together, the joy of users getting satisfaction out of using your system and building something that’s really complex and hard and has never been done before. That’s what wakes me up every day and gets me excited about working.

 

Tim

You were mostly joking about the punishment comment, but is it fair to say that that largely refers to the sales cycles can be long, that you sort of like, hey, this solution solves the problem, but yet there can be a fair amount of friction to sort of successfully get installed and implemented? Is that sort of some of the challenge? And maybe expand a little bit on other people starting companies in the healthcare space, any advice from what you’ve learned across these three companies and what it takes to be successful?

 

Harjinder

Yeh, so healthcare is particularly challenging largely. In healthcare, for most digital health companies, sales cycles can be anywhere from 9 to 18 months long. That’s typically what you’ll hear quoted from a lot of veterans in this space. Fortunately, ours are not that long, in general, and it really comes down to your sales strategy. We’re able to sell both to very large health systems, which do have these lengthy sales cycles, but next to that we’re also selling to small independent practice or specialty groups and they make decisions much more rapidly. We’ve been able to turn around a lot of deals within the space of a couple of months, which is phenomenal in healthcare. As far as advice to other entrepreneurs, I think the biggest thing I generally think about, and I recommend to others is that, when you’re doing a startup, you have to have, I think, two components, you have to have a big vision and you have to have a small vision. The big vision is, you know, if we’re wildly successful, what can we do here that’s earth shattering, changes the game completely. And you need that to motivate yourself, you need that as kind of that guiding vision of where we can get to. The problem that I see a lot of people get into is they get hung up on that big vision and they don’t actually see or map out the steps that are required to get there, and so, I always like to couple what we do with both that big vision and the small vision. The small vision for us is, there’s a physician that wants to do documentation, and forget about everything else, how do we make that physician happy? How do we save that physician two or three hours a day? Because if we can make that individual physician happy in his or her day-to-day work, we’re going to have the ability to do many more exciting things. I would say, having both those components in mind is critical.

 

Tim

That’s great advice. Couple your big vision with an initial specific problem that you’re going to go solve for a customer, and that they’re going to pay you money for it. I couldn’t say it better myself. Graham, you know, on this sales cycle and go-to-the market side of things, a big piece of what you’re leading for the company is scaling the go-to-market side of the business. Maybe give just a little bit of a sense for where things are today and what you see as the keys to scale to the next level and beyond. Again, with an eye towards, these I think principles and things you’re doing are really broadly applicable while you’re a healthcare IT company or another tech founder here looking to scale their company.

 

Graham

What I’ve learned over the years is you’ve got nothing if you don’t have happy customers. So it always, to me, on a go-to-market, sounds kind of, sort of back to front, which is you focus on your customers to be able to sell more, but it’s kind of obvious as well, is that focusing intensely on delighting our customers with great service and great responsiveness and a level of humility that shows that we respect the complexity of the work they do, and the problem that we’re trying to solve. Once you have that, then you’re in a position I think to start to work on the other pillars, which is figuring out how best to segment and target the market that you want to go after, who’s the right fit for your product in the short term. You’ll take those that happen to sort of find your products as well, but that you focus really your attention right on building the right market awareness, the right outreach, get the target market that you want. For us, we’re small getting the word out there and also managing channels. So, channel partnership relationships become very important. So, I’d say, start with the customer, make sure you’ve got the right market and then start to aggressively communicate to that market and you have to build channel partnerships to help you scale. So those are the three points that we’re focused on.

 

Tim

Talk a little bit more about the channel partnership part. We see a fairly consistent misconception or maybe mistake is for early stage companies to think they’re going to get partners and channels to help them early on before they build enough sort of scale direct selling, customer references, etc. On the other hand, particularly for our market, without figuring out how you work with the other people in the ecosystem and who might be partners, I think you’re really hamstringing yourself, also. So how do you kind of balance that — the direct selling piece versus channel partners, for our market?

 

Graham

Yeah. The point you’re making is right on. I mean our sense is that we’re now at a level where we, I think, have proven our capability in the marketplace, we’ve grown and we’re pretty well penetrated into a number of the markets or at least really started to get a lot of traction. My sense is that we’re looking now not for someone to sort of be the mega company that will push and promote our software and services and the capabilities we have. It’s more to do with finding those types of very strategic alliances where it’s in everyone’s best interest. Where I would recommend that people start is, pick one or two potential strategic partnerships that can help your channel, but no more than that, because you really need to stick to your knitting and make sure that you control the message, control your brand and control the service that you’re delivering. So, much of that, when I’m talking about channels, is on mutually beneficial sales channel relationships and co-marketing arrangements. You still need to control your brand, your customer experience, and ideally, you’re still controlling the majority of the sales cycle once you’ve identified the lead opportunity.

POSTED IN: Madrona News

Founded and Funded – from ‘Cow Tipping’ to CrowdCow with Founder Joe Heitzeberg and Scott Jacobson

L-R: Joe Heitzeberg, Wagyu Rancher, Msakii Ishii, a Cow in Gorgeous Setting

We’ve seen some brilliant ideas take off by way of crowdfunding, but crowdfunding the protein you eat is was a new take on the idea – and it worked!  In this episode of Founded and Funded, Madrona managing director Scott Jacobson sits down with serial founder and CEO of Crowd Cow, Joe Heitzeberg to discuss how Crowd Cow has made quality meat and seafood more accessible at scale while simultaneously cultivating a conscious and responsible consumer culture around protein consumption and working with small ranchers to help them deliver meat directly to consumers.

With the goal of creating a more meaningful connection between the farmer and the consumer, Crowd Cow posed an alternative to the current meat commodity system.  Joe intertwines his learnings from his time leading Madrona Venture Labs with early stage anecdotes of how he and his co-founder, Ethan Lowry, came up with the idea and ‘tested’ it with random Starbucks customers. Stemming from a co-worker who prized his relationship with a local rancher who supplied him with high quality beef, Joe and Ethan, took both a creative and innovative approach to mapping their solution Buy shares of a cow and when all the shares are claimed, the cow tips.  And then you are a ‘steak holder’! Ideas that were jokingly suggested by the founders gained traction, eventually equipping the company with data to keep their customers connected to quality beef, pork, poultry and seafood for every type of consumer and every kind of occasion. Local, quality product delivered from the farm to your door with just the tap of a button– a fresh solution, underpinned by consumer trends around sustainable and transparent purchases.

As the Covid-19 pandemic quickly became an imminent threat to the commercial meat industry, consumers began to see a rise in nationwide meat shortages due to production methodology of big agriculture. Flaws in this system became more apparent and Crowd Cow was not only able to build resilience as a company, but make a case for informed and conscious consumer behavior. In creating a culture of dependability, Joe emphasizes just how important it is for a company to be there for their customers through trying times. Scott and Joe also discuss the future of Crowd Cow and the online grocery industry. For the founder or entrepreneurial listener looking for creative problem solving inspiration or guidance on picking the right investors, this episode is absolutely for you. Listen in and be sure to check out Crowd Cow on social media at @crowdcowusa and www.crowdcow.com.

Full Transcript

Erika

Welcome to Founded and Funded. My name is Erika Shaffer. I work at Madrona Venture Group and I’m very pleased to be here with Scott Jacobson, Managing Director of Madrona Venture Group and Joe Heitzeberg, the Co-founder and CEO of Crowd Cow. Crowd Cow is a marketplace for high quality craft meats from farms and ranches around the world. They deliver directly to you through subscription and direct ordering. This is Joe’s third successful startup. Each of those startups were in somewhat different industries, but they were all looking to help people connect in meaningful and authentic ways. Crowd Cow is taking up that mantle to connect consumers to farmers and ranchers through the dinner table. And the company has some very clever ways of doing that. But I’m getting a little bit ahead of myself. I thought we would start with hearing from Joe about how Crowd Cow got started, where did the idea come from, how did you test it out?

 

Joe

Thank you. Thanks for having me. So, the origin story of Crowd Cow, if you will, was my Co- founder, Ethan Lowry, and I were talking to each other and committed to like working together. We worked together way back in the .com era days, way back when which is now 20 years ago. We have remained friends since, but since that early time we’d never actually collaborated again. We’d both gone off and done different startups on our own, and, I think, always wanted to work with each other again, since we got along so well. And I’d been a solo founder and really wanted to return to having a Co- founder. So, we started a list of ideas. You know, the spreadsheet of different ideas, the thesis, how we might test it, how interested we are, how uniquely we are suited doing that idea, how big the market is… just sort of ranking, ranking what we’d go learn about and test, and to figure out what we’re going to do.

 

Crowd Cow was not on that list at all. It was a guy named Brendan, who had worked for Ethan at Urbanspoon, Ethan’s previous company, as an engineer and then he had worked for me at Madrona Venture Labs. He had come to the office one day saying something like, oh man, I’m so excited, I’m getting a cow on Friday! We’re in this high-rise in downtown Seattle and we’re like, what? You’re getting a cow? He was so excited, and he explained how the farmer takes care of every animal. And by the way, when you when you sail in on the boat that settles the island, as this family did generations ago, you get the best land. And let me tell you, it’s about growing grass, as much as it is about raising animals because it’s about what they eat. The nutrient dense native grasses of this place, they got their pick of the best part of the island, you know, it’s in the family. And he’s explaining, in every different way, how much better this connection he had with his food was, for one, but he also emphasized how the beef tastes incredible. I looked at Brendan. He was so excited and oozing joy, and describing it in a joyful way, and I love beef. It was like when I was five, I would get that excited when my mom said we’re having steak on Friday. So, I can’t have it because he wouldn’t share. And I’m going to go hungry now, so I’m going to schlep it back to the grocery store where they don’t have anything like what he described. The best they seem to have been able to do is a little orange sticker that says “special”. So, whenever you have identified something you really want, that is clearly better for the planet, for the animal, tastes better, and you know the person you will support a small community, well, that is the thing that I want to serve my kid and make my kid excited about. But I don’t have that, the markets not giving me that, so no matter how much money I have, to want to buy that item, it’s inaccessible. Brendan, as he explained it, would drive a truck out there and bring home 500 pounds of meat. You had a huge meat freezer and it just sounded like a pain. I, for example, said, will you introduce me to the farm? And he said, oh, you’re too late, they only slaughter once a year. So, when you had a set of desires and a lot of pain to get there, in early adopters, you know going to that level of trouble, there is an opportunity in that. I didn’t realize that right away it was more just, hey, Ethan, you know, Brendan, you know this thing where he buys a cow? Ethan was like, yeah, he’s been doing that for years and would you ever do that? It sounds cool. Nicole’s a vegetarian, Ethan’s wife, so he’s not going to get a meat freezer. And we just got to talking about like why can’t I just buy five pounds of that somehow and just tap my phone and it shows up? And as we framed it that way, Ethan kind of had the light bulb of, well gee, there really should be a website where you can literally kind of quote “meet the farmer” sitting on your couch on your iPhone, watch a video, see some photos, get that intimacy. And maybe you are buying a cow. Why don’t we crowdfund an actual cow and 50 random strangers on the internet? Can each get their five to 10 pounds? And then we were riffing on this just as kind of a joking around conversation, like, oh, yeah, yeah, you claimed the shares. And when they’ve all sold the cow tips, and you become a stakeholder. It was too fun, we were laughing and smiling and so it was a very real problem. A cool solution that made you laugh and smile underpinned with fundamental consumer trends around sustainable transparent purchases within the beef or protein world. Its environmental concerns, animal welfare, it’s taste, I want the best steak if I’m going to eat steak, eat less meat, eat better meat, there are these mega trends happening. And we knew there was something potent about that idea. I think when we thought through the incumbent industry being so slow and big and vertically integrated, that we thought they’re not going to go do this, you know, and sold offline. They’re not even online yet. It felt like, wow, have we just sort of like identified a very big market. Well, how big is it? You know, beef 100 billion dollars if you add pork, or if you add chicken, it’s like another 40 odd billion dollars. And it just felt potent. The next step was, how do we validate this? And, one of the things that I learned at Madrona Venture Labs was you don’t go and build code or build a prototype, you just start talking to people. So, Ethan called 10 friends and I called 10 friends, literally right then and there, just to get reactions on the elevator pitch and the reactions were so black and white. It was just like, I’m totally doing this, or I’m never doing this I’m a vegetarian. And, so you really have that kind of black and white feedback to an elevator pitch. You usually have a lot of questions and nuances. So, this was great, but those people are our friends. So, we went down to the Starbucks, the nearest Starbucks, literally right then, on the spot, and just randomly went up to strangers. Excuse me, sir, may I ask you, do eat beef? Can I ask you some questions? We’re product designers and we have an idea. We got the same reaction. In fact, people were like, what is the URL, I have got to write this down. You know, we didn’t have a URL or a name or anything, it was just a concept. It was all very encouraging so that we thought, let’s go, let’s get a cow, let’s try to sell it using this crowdfunding thing. If we can sell it, great, that’s validation and we can keep exploring. If we can’t sell it, then you and I will get meat freezers, and we’ll shut it down, and in the worst case we’ll have a lot of great meat to eat. Our wives will be a little mad as us, maybe, but you know, in the name of entrepreneurship, you’ve got to try things you’ve got to be willing to fail. That was the origin story. We sold that first cow within 24 hours and we sent emails to our friends, but we had orders from random strangers. It just, right off the bat, felt right.

 

Scott

I’ll take it from here. It’s a great kind of founding story and you know. Ultimately Crowd Cow has expanded from selling product kind of one cow at a time to a broad assortment, lots of different proteins you can buy at any time, but Crowd Cow isn’t the first company to sell meat online. So, give us a little bit more about what makes Crowd Cow special and different for both your customers and the farmers you work with.

 

Joe

Yeah, and I will say, just in terms of assortment, you’re right, it’s at this point, beef, pork chicken, bison, seafood. In fact, and given the, the quality and assortment even within each of those categories, I think that today Crowd Cow has the best assortment, of any online retailer or offline frankly. Only the pure play seafood things might be some that beat us because we’re just building out our seafood now, but even that assortment is very strong. What really makes us unique is – this idea of a connection to where your food came from! We started with knocking on doors of farms and we built our own supply chain, where we’re talking about farms from 22 different states all across the United States and wild-cut fish from Alaska, etc., where it was literally down to the name of the boat and the fisherman, etc., right there on the pack of meat that shows up at your door with you in charge of which one you’re going to buy and why, and then favoriting your favorites. And, we did not work with the incumbent supply chain at all, we built something completely stand alone, so that gives us and gives you as a consumer access to things you just literally can’t find anywhere else, unless you live within 20 miles of that particular farm and they’re also at a farmer’s market, kind of, you know, quality and assortment. So that’s really that connection back to the producer, that transparency, to know that you’re in control of where your dollars go, who you’re supporting, what you’re eating, why, how it was produced and raised – full transparency on that. We’re really the only ones doing that all in.

 

Scott

Yeah, and that’s powerful. One of the great things about e-commerce, and we’re here in Seattle, in the backyard of Amazon, is just the simplicity for the customer you – you find some things you want to buy, you click and then in a day or two it shows up on your on your front doorstep but there’s obviously a lot of complexity and special things that go into making such a seamless experience. Can you give us a little bit of a look under the hood? What are the some of the things you built out that supply chain that enable that sort of magical customer experience?

 

Joe

A lot of it is forecasting and process and then tools to support all that. So, you didn’t, just back to the very earliest days, we did crowdfund the first cow then go and buy it, get it butchered and wrapped and then we packed and shipped it and that first cow actually shipped exactly five years ago today. It took from the time credit cards were charged, and the cow tipped, probably three weeks before it shipped. And we knew, beyond a niche, people aren’t going to wait that long. It’s got to be, really, the vision of tap your phone and it shows up, right? Instantaneous. We worked hard too and knowing that that was going to be the case, and knowing that we’d have this incredible assortment, we’re not going to have one New York steak product’s queue. That’s the commodity world. The best they can give you is price per pound, and a sticker that says “special”. We’re going to give you variety, different breeds, qualities, dry-aged, grass, grain, your choice, all the farms local, you want something local or want something from Japan. So, we’re going to have a lot of New York steak skews. As we did the math, we’re like we’re going to have hundreds of skews. One of the things we saw right away, when you’re shipping a perishable and you’re getting it to the door frozen and safe is there aren’t, still, and there was certainly not five years ago, third-party logistics companies that could do that for you. It’s possible to sell shampoo, get a Shopify website, and hire a three PL and your shipping orders now – not going to be cheap, they’re not going to be accurate. They’re not going to be cost effective, but they can do it for you. Perishables? They’re going to say, I can’t do that. And especially when you say, well, we’ve got 1000 plus product skews. They’ll just literally look at you and say, I, go away, I can’t even price that I don’t even know. So, we very early on knew that we’d have to build that piece. So just in terms of our supply chain, we don’t raise animals that’s farms. We don’t slaughter them. We don’t do the butcher piece. That’s a network we’ve assembled and coordinate with software. But we do, do the order packing and shipping because there was no one else who could do that. And that’s become a real asset. So, between that whole end to end, from the farm to your door, all the pieces in between, we control that picking piece and we control the curation the relationships, we obviously control the website. But all that software coordination using data will inform us how to keep this the virtual shelves stocked and how we can optimize things so that you know, when you when you place your order today, your order will ship out tomorrow. And if you live in most major cities, you’re going to get it the next day or two days. So, it’s, there’s tons of technology in the whole system.

 

Scott

So, as an entrepreneur you know that product market fit and building delightful customer experiences is tough. Sometimes even when you do that, it’s tough to build a good business. And, you know, I’d love to hear a bit about the journey. How do you go from building the delightful customer experience which you clearly have to navigating to building a great business?

 

Joe

Yeah, that’s a great one. I think first, just to note is Ethan and are not the ying and the yang co-founders that complement each other. We’re probably more similar than we are different. And one of the things we’re most similar on is delightful customer experiences. And I don’t mean just user interface, I really mean customer experience all the way through every point of contact and communication – the physical opening of the box, every aspect of that, measuring it, testing into it, and creating experiences that people want to share with others and make them smile and make them come back. So, we’ve biased for that, we also biased early for scale, because we did want to build a big business. So, we really spent a lot of time as technical co-founders, right, by background, on pre planning and building all the systems for scale and making choices in the business to support scale. We would joke the first maybe one or two years in we were, as you take a step back from all you’ve accomplished, in whatever period of time, we would joke a lot about well we have built the, the most overbuilt meat selling system ever for sure. Because we were doing a small volume of orders with an extremely high attention to detail in terms of the logistics and especially the customer experience, that was preparing for scale. I think the part where it’s always the hardest part in any business in ours, there’s a supply side and the demand side. In our business, the supply side is hard. Shipping orders is hard. The software is hard to supply chain is hard. These are farms don’t have websites, and they don’t answer their phone. So, in the early days, we were knocking on doors and getting the car and driving to meet farms, just to get our base built. And then once we had a reputation, they started coming to us, but it took a while to get over those kinds of humps. They’re not software pumps at all. It took a lot of time. But we always kind of knew, if we were hiring where would we hire complement ourselves. So, for us it’s the growth marketing and the merchandising side of the business. More so than the technical aspects. And certainly, logistics is also an area where the domain industry expertise and experience are very relevant.

 

Scott

COVID-19 has had a major impact on the world and on all our lives and it’s had an outsized impact on the meat industry in which in which you participate. Tell us about the impact COVID-19 has had on Crowd Cow and on the broader industry.

 

Joe

We’ve been at home for a while and our kids aren’t going back to school, right, necessarily, or if they do, we doubt they’ll stay back. And this is already been many months into it. We’re also not going back to work, right? So, so much fundamental demand and behavior has changed. Fundamentally for now going on three or four months and looks to stay changed for a quite long time. For us that meant you know, a lot fewer meals are being eaten in restaurants, initially starting with restaurant demand going to zero, and now creeping up very slowly. All that has gone home, all the school meals and, and lunchtime meals at work have gone home. So, all the at home meal cooked and eaten stuff has gone up dramatically. And that’s accelerated the, the shift to online grocery. Furthermore, I think in our industry, the meat plants had disproportionately been negatively affected by COVID virus infections. These big super scale meat plants, where people are standing shoulder to shoulder it’s all about efficiency and commodity to get you that steak that I described in the grocery store, can’t work with social distancing at the scale and efficiency that it that it used to. And so that created shortages. You know, it’s just viral infections rips through but then they have to re-engineer their processes, space people out and ad automation, that stuff takes a lot of time. So, meat shortages even further shifted the demand towards, towards online. And so, for us the massive uptick in demand immediately overnight. And that’s here to stay for quite some time, fundamentally. I think it exposed some weaknesses in that existing supply chain and hopefully,  also it’s given people a chance to not just panic by… here’s what we hear from our customers –  thank you for doing what you do. And I’ve introduced so many people to it, my parents, other neighbors and friends, people love to be the hero and everyone’s looking for the solution. And we’ve got such a great solution and people are happy to share great things with others. So, we’ve benefited tremendously from all of that.

 

I think the weakness and the incumbents, what I’m trying to say there is there are kind of three big things in the last 10 or 15 years. A series of Netflix documentaries that expose big AG, as having negative environmental and animal welfare consequences that made meat lovers feel guilty and question their habit. Then there was a wave of alt meat, for example, Bill Gates is funding a vegetable-based protein because we’ve got to save the planet. These kinds of messages in the mainstream, again, caused meat lovers to question or feel guilty. It didn’t cause them to stop eating meat, by the way, but it caused them to think about it more. And then the third wave is the fact that you can’t buy meat in any grocery store for a week or more. And the reason why is because these extreme viral infections that just the implications to labor exposes again, once again to the mass populace that, maybe we should be thinking about a better way to do the meat thing. And they’re finding us the ones that are finding us. It is a better way. That’s why we built it. So that’s exciting that we’re getting long term habits formed, but also just the shift of awareness that, hey, there can be another way to do this. It happened in beer and wine, it happened in chocolate and lots of other food categories went from one or two brands that were commodity orientation to local and international and varieties and artisanal, and that’s where meat should be,, too and on the dimension of connected back to the source. So.

 

Scott

You know, I know safety is paramount for you as it relates to your team. Give me a little bit more on why you why Crowd Cow hasn’t been impacted in the ways that that some of the larger players in its market have.

 

Joe

Yeah, so you know, when COVID first hit, it hit in Seattle, which I feel grateful or lucky for, because it made us all here in Seattle, think about COVID. I remember, you remember Scott, Covid-19 was in the local news and it wasn’t in the national news, and we all felt kind of weird about that because we had community spread, and we were all talking about oh no, this is unescapable now, it’s going to change things. And it was weird to not see the national news talking about it yet, there was a period of a few weeks there, at the very, very beginning. So, we took that as we’ve got to act now. I remember Redfin, I think had an infection, right. So, they had also been very exposed to it early, and they’d sent their whole headquarters home. Someone in our office said, oh, wow, my friend works there. And you know, they were just told to work from home. Are we considering that should we send everybody home? And I was like, well, I think the first thing we need to do is I’m going to, I’m driving to our fulfillment center tomorrow, see you, bye. The first thing we need to do is figure out safety for our guys packing the orders out. The vision here is, what we do is we provide a service that allows you to tap your phone and it just shows up. That’s our fulfillment staff. They can’t work from home. It triggered a sort of wartime mentality, we rallied everyone around like, okay, this is real. What are we going to do for safety? What is it going to mean for the business? How do we plan? We sort of got into this like, very wartime mode. And then when we realized what it meant for the business, it was very positive, in terms of demand. What it meant for a lot of our friends’ businesses was very negative, in other industries. We all felt a gratefulness and a responsibility, and like, this is our moment. This is our game day. Our customers need us more than ever. And then, if you think through our farms need is more than ever, because a lot of them depend on restaurant sales, which goes to zero. And our very diverse supply chain to kind of answer your question, little regional processors, little farms, co-ops all across the country were diversified, so even if they’re impacted by the virus in terms of infection, we’ve got so many of them, there’s no single point of failure. So, wow, we’re resilient. In terms of if they’re affected by COVID in terms of restaurant demand going by going down, we can really help them because we’ve got online and we’re already their partner. We sort of realized right away, wow, we’re in a really, we’re ready for this. Very grateful for that.

 

Scott

Broad assortment, as you talked about, ala cart and subscription model easy button for customers, click a couple things on your phone, and it just shows up. You’re in a great spot. What’s the future look like for Crowd Cow? What are what are we seeing five years from now?

 

Joe

Five years is a very long horizon. You know, we’re certainly bullish on online and there are theoretically things in the five-year time frame that would go beyond just online. I don’t know how much I can really talk to that on the podcast. And we’ve dabbled in this, we were suppliers to Shake Shack and the Seattle Mariners, and we’ve done some direct sales to restaurants. We’ve got the number one online Japanese wagyu seller, by far, we are. And that’s a restaurant meat. And so, there are things beyond just online that I think in the five-year timeframe we will consider. In the near term, we’re selling just proteins and people don’t eat just proteins. There are lots of ways to cook proteins and gifting is not a super big part of our business and we have a great product that’s eminently giftable, so I think in the one to two year timeframe, there’s clear growth opportunities for us just in the online business and immediate adjacencies. In the five-year time frame, ambitions can include things that aren’t as adjacent to what’s on your plate and meat, but look like things that could, that our platform could easily accommodate. And of course, the platform in terms of fulfillment is very special. And it’s currently amortized on one brand – Crowd Cow. And I think that there’s opportunity there to amortize that more broadly.

 

Scott

I can appreciate not wanting to share the full playbook with the entire world, so I appreciate the broad approach. To close let’s just talk about, this is not, by far, your first rodeo, you’ve been an entrepreneur many times over, a founder/CEO several times – what are things that you bring from, for the entrepreneurs who are listening here, company to company that you know and have learned over the years, that you’d encourage people to think about?

 

Joe

That’s a great question. Why do I do it is a question I talk to myself in my internal dialogue about a lot over the years – because I think each time I jump into a startup, I guess one thing is to realize you’re jumping into a multi-year thing. Don’t be paralyzed by that, and indecisive, but just because you’ve got to put one foot in front of the other and not give up, ever, just keep going. You also know that you’re on a journey that’s going to take you far down. I’m far deeper in the beef world than I ever thought. And I’ve met with the big major players in the industry at this point. And I’m so much deeper in that industry than I ever would have imagined, if you’d asked me 10 years ago. So, just choose carefully, and keep going.

 

In the early stage, demand is the most important thing. A lot of tech founders and I made this mistake for years. A lot of tech founders use the hammer they’ve got which is tech building, coding, prototyping. There was a whole dialogue for a long time, maybe still is I don’t pay attention, but, on Twitter about MVP, and rapid testing and now they’ve got the no code thing. You can test ideas quick. I don’t even think that’s the right first step. Why would you take your idea and build a website for even three weeks, when you could call the right people, call representative customers, or call people who’ve sold similar things to those same target customers? That was my number one learning at Madrona Venture Labs where we realized we’ve got to be fast at validating. So, as we thought through the problem of how to get fast at validating, it always started with phone calls. And I remember, you remember Scott, we worked in a security camera AI enabled security camera platform, right? There are a lot of different target markets, but we killed the idea. We’d worked on it for quite a long time, like a month or two, and we killed it. Really the day it died, was when we finally talked to this guy, who was a sales guy for 20 plus years selling security camera systems into every possible target market, like airport and apartment buildings, real estate, private home everything, and, he knew all the vendors, he knew all the customer types, he knew all the objections, he knew all the technologies, he knew the patent landscape. He knew all things we didn’t know that you can’t just Google for and talking to him, we realized between the fragmentation and the cost in the market and the patent portfolios that people were litigious about and everything. We realized this is not a good place, right now, at this point in time, for a startup from our lab, at least. And so, I was talking to people, it’s good advice for a technical founder – don’t go build stuff. Go talk to people.

 

Scott

That’s great. No, that resonates, and I think it’s it that’s a good place to wrap. Well, Joe, it’s been an absolute pleasure and honor to be able to ride along with you on this journey. And it’s really a fun story to tell and a very relatable story for customers, for suppliers for everybody. So, thanks for spending some time with us today. And we look forward to all the great things that are ahead of us to come.

 

Joe

Yeah, thank you. If I could put in one more plug, too, this is advice I always give entrepreneurs – when it comes to finding investors to work with, you don’t often have a choice, right? Or as much as you want. But to the extent you’ve got choices, or you want to prioritize your time, go for people who’ve got founder empathy. One of the reasons I really appreciate you, Scott, and working with you, what the pleasure is, is you’ve been an operator, and you can be direct. And the more you can have people around the table, who have got experience and have founder empathy, the happier you’re going to be as a founder, the more successful you’re going to be as a team. So, thank you.

 

Scott

I appreciate that!

 

Transcribed by https://otter.ai

POSTED IN: Madrona News

Madrona’s Investment Themes for 2020 and Beyond

Over these last months of quarantine, we at Madrona have remained very busy, first and foremost working with our portfolio companies to help them navigate the economic turmoil of a global pandemic.  Second, but also importantly, we have continued to invest, adding eight new companies to our portfolio since quarantine began in March (Fauna, VNDLY, Go1, Zeitworks and four others still unannounced).  This continued active pace of investment exemplifies both our commitment to the long-term opportunities we have identified, as well our belief that downturns can be the best time to invest.

As we have been quarantined in home offices in front of Zoom and Teams, we have also taken the opportunity to step back and revisit our investment themes and think about which trends we continue to be most excited, which are emerging, and which perhaps are being accelerated (or dampened) by the aftermath and “new normal” of COVID-19.

It has been 18 months since we last posted about the investment themes that are driving our activities at Madrona.  When we took a fresh look at our current thinking on technology trends that we believe will drive the industry in the next five, ten, or 20 years, the picture that emerged shows significant consistency with our view of the world 18 months ago, but also interesting new opportunities and trends.  The figure above illustrates the overall areas we find most compelling for new company and investment opportunities.

In this post we offer a preview of the themes and will follow this up with deeper dives on the areas outlined in the image above.  We work as a team to fully investigate and build our investment themes and you will see many from the Madrona team as authors – please reach out to us with ideas and your thoughts!

At the center of our investment themes, we continue to see a massive opportunity for companies to create businesses around intelligent applications, fueled by machine learning and modern user interfaces.  We believe that every successful application being built today should be an intelligent application, with a data strategy and continuous learning system at its core.  Intelligent applications have been the single largest area of investment for us over the previous several years, and we expect this to continue for the foreseeable future.  We will continue to invest in the next generation of line-of-business applications being reinvented by machine learning and cloud native delivery. Read more about the areas we are seeing opportunity in intelligent applications in our deep dive.

As the world continues to struggle through the COVID pandemic, we also see a massive acceleration in the emergence of technologies enabling the future of work.  This trend had been evolving for the last several years and the current environment has created an order of magnitude acceleration, as businesses of all sizes rush to find new intelligent applications that help them collaborate more effectively when all employees are remote, build and retain more diverse and distributed workforces, and prioritize digital-first workflows and processes that have remained largely “in-person” and workplace focused. Read more about the work, the workplace, and workforce in our deep dive.

A major new focus area for Madrona is the intersection of innovation between machine learning, intelligent applications, and life science.  We touched on this opportunity in our investment themes 18 months ago, and subsequently invested in several exciting companies including Twinstrand, Nautilus Biotechnology, and Terray Therapeutics.  As our partner Matt wrote when we announced our recent large investment in Nautilus: “Today, these domains are coming together to transform the ways we understand and improve life and health. The biological and chemical sciences are intersecting with computer and data sciences in precision medicine, digital pathology, proteomics and more.  At Madrona, we believe these intersections of innovation will be at the forefront of major breakthroughs in research, analysis, diagnostics, clinical processes, preventions and cures.”

Next, the march to the cloud and broader adoption of the cloud computing model by enterprises continue to create myriad opportunities for next-generation software infrastructure companies — despite the increasing dominance of the hyperscale public cloud providers.  These steady improvements to software infrastructure enable and increase the pace of innovation for all the applications higher in the stack that leverage these cloud services.  Enterprise need for better usability, manageability, security, cost-savings, and performance across diverse devices, cloud platforms and environments will drive new business opportunities that provide hybrid and multi-cloud management, infrastructure automation, and new architectures that leverage serverless and event-driven architectures. Read more in our deep dive on The Remaking of Enterprise Infrastructure.

Another investment theme created by the need to move faster, increase productivity and reduce cost is in the area of low-code or no-code platforms and applications.  The next generation of workers is more tech savvy, and there are more “makers” in business teams and organizations who want to build things directly and not wait for IT, engineering or the data science team.  These range from developers who need to incorporate ML directly into the applications they are building to information workers who become citizen developers in order to quickly solve business problems. Read more about how we think about no-code/low-code in our deep dive.

While we have invested a somewhat higher percentage of our last several Funds in B2B companies, we continue to strongly believe in and invest in new consumer services, often where the digital and physical worlds are fused in a way that create a virtuous cycle to provide a more compelling and fully integrated experience.  This digital transformation of consumer experiences, where mobile-first applications streamline, simplify, and save consumers time and money, is a core pillar in our investment themes going forward.  Read our deep dive on the areas we see changing dramatically in the next five years here.

We are eager to engage with all of you in the community around these updated investment themes.  Each time we have published our thoughts in the past, we have been energized and humbled with the feedback we have received – from founders whose vision hew closely to one of our themes to constructive debate on how we are too early or too late with our ideas.  In the coming weeks, we will post six deeper dives into our themes around software infrastructure, intelligent applications, the future of work, the intersections of innovation, low-code/no-code platforms, and the digital transformation of consumer experiences.  We can’t wait to further discuss, debate and learn from all of you. In the process, we look forward to investing and working alongside some of you to build the next generation of companies that address these exciting areas of innovation.

Send us an email or connect with us on Linked In (all contact info is in our bios which are linked above).

 

 

 

POSTED IN: Madrona News

Angel Investors – Standing Behind Startups

When Madrona Venture Group was founded in 1995, it did not start by raising a venture capital fund right away. In the early days, Madrona invested with funds solely from the four founders: Tom Alberg, Paul Goodrich, Gerald Grinstein and William Ruckelshaus. It was a “super” angel group, so to speak. One of those early angel investments that Tom Alberg made was in a first- time founder with a plan to sell books on the internet – Jeff Bezos and the company that became Amazon.  25 years later, Amazon has fundamentally changed retail as we know it.

It took four years of investing as angels before the founders decided to raise an outside fund.  Building on this history, we, at Madrona, have consistently had a focus on investing in the early stage of companies over the intervening years and have a deep understanding that, for founders, these investors, and other assistance such as accelerators and incubators, at the earliest stages are the most crucial.

We have a long history of collaboration with the angel community here and continue to invest alongside them. Over the past decade, Madrona has participated in 78 deals alongside angel investors, mostly in companies here in our region. In fact, some of our most recent investments have been alongside angel investors, including The Riveter, OctoML and MontyCloud.

The total capital invested by angels in the PNW has steadily increased over the last decade. Alliance of Angels, Keiretsu and Element 8 have been among the most active angel investing groups in the PNW – investing in a combined total of over 1,300 deals over the last decade.

While the individual checks an angel investor or group write may feel small in comparison to the ever-increasing later-stage rounds, that amount adds up. According to Pitchbook, there were 25 PNW angel groups that made investments in 2019, totaling $145M in capital contribution. In contrast, 2009 had 12 PNW angel groups that invested a collective $11M. As part of angels’ commitment through the long run, they participate in later-stage rounds as well. In fact, angel investors participated in over 200 deals that raised $2.8B in the PNW in 2019 alone.

It is important to note that angel investing’s importance extends far beyond capital. While these investments may come in different forms and sizes, a common denominator is the support they provide at a critical time in a new company’s journey. Angels invest early, sometimes alongside seed stage investments from larger funds like Madrona. These investments are personal, ones that the investors are particularly passionate about – and subsequently, angels are known for rolling up their sleeves and getting deeply involved in formative stages. Not only can they be a key factor in reaching the next stage of funding by bringing other investors and VCs to the table, but angel investors provide advice, coaching and network access that remains influential throughout the entirety of a company’s journey. As an example, the Angel Capital Association estimated in 2017 that roughly 40% of angel investors take board seats, and almost 50% have active board advisory roles. In short, when angel investors commit to fostering this growth, they are giving back to the community over the long run – and truly living up to their name.

For those who have yet to take a step into this community, angel investing can be an incredible way to get involved in the rich and vibrant startup community in the PNW. To some, it may seem risky a risky endeavor, rife with unknowns. In many ways, this is the beauty of angel investing; taking a bet on a founding team in an early stage company and helping them navigate growth challenges is an invigorating way to allocate both your capital and time.

A study of over 1,500 angel investors in the US showed that nearly 66% initially got involved in the discipline through angel groups. Participating in these larger groups and communities can create a structured approach, share risk across a variety of investments, learn from each other and alleviate some of the initial apprehension to starting angel investments.

Downturns do affect investing but if history is to be believed, not that much when it comes to angels.  Take 2008 for example where angel investing was relatively consistent through the downturn. The total early-stage venture funding raised in the PNW dropped by 13% from the prior year, and again by 9% from 2008-09. However, seed stage and angel investing only decreased by 10% from 2007-08, and actually increased by 18% the following year, bouncing back to pre-recession levels within 2 years.

If we use sentiment as a historical guidepost, we would have expected to see the venture community invest in fewer deals, at lower valuations and increase their focus on existing portfolios. We have demonstrated, however, resiliency in the face of difficulty. And now, more than ever, fostering innovation is critical.

Madrona has always been excited about the technology innovation and start-up ecosystem in the PNW, but today, we are reaffirming our commitment to invest through the downturn. We continue to remain focused on investing from Day One to the long run. As Seed stage investors, we will roll up our sleeves and partner to go the distance together. By extension, that means working closely with angel investors, other seed funds and entrepreneurs in the community.

We will continue to support Create33, TechStars, Madrona Venture Labs, AI2, FFA among other groups that help get startups ready for any kind of early stage funding. Further, we have a roundtable of start-up founders and senior technology executives working with us on our Pioneer Fund.  These experienced technology execs are also angel investors. The Pioneer Fund enables them to bring more funding to startups through partnering with Madrona in their own angel investments.

To other members of the ecosystem – angel investors and other funds alike – let’s lean in through this tough period. We have a shared responsibility to help both existing and new start-ups continue to innovate through this downturn. Washington State has led the country in COVID-19 responses in a number of ways already. Together, we have the potential to continue leading by demonstrating our commitment to the start-up ecosystem in the Pacific Northwest.

POSTED IN: Madrona News

Investing in VNDLY and the Future of Enterprise Applications – Intelligent Apps

Over the past few years and the next few years, we will see the formation of the next generation of enterprise application companies, companies applying intelligence to their applications.  Over the subsequent decade those companies will replace legacy companies such as SAP, Oracle, NetSuite [part of Oracle] and Salesforce.

This will happen for a simple reason.  It will happen because applications will become, well, intelligent.  As ML/AI becomes integrated into every element of the application stack, applications will learn on a real-time basis and they will start to take actions on our behalf.  Intelligent applications will deliver a far better customer experience, solve more of the customer problem set, and do so at far better economics than traditional or even SaaS applications.

That thesis on intelligent applications is why I am so excited about many of the companies we are working with including, Clari [Revenue Operations], a stealth corporate travel startup, a stealth financial application startup, and our most recent investment, VNDLY.

VNDLY, is a talent management solution founded by Shashank Saxena and Narayan Surabhi.  Based in Cincinnati, OH, VNDLY’s clould-native vendor management solution gives employers and contractors an AI-based platform that adapts to the changing needs of both groups.

Over the past few decades, the contract and contingent portion of the corporate workforce has grown from less than 20% to more than 40%.  My experience leading the Fieldglass team at SAP helped me to see the scale of the challenge businesses face in effectively recruiting, paying, managing and engaging with this critical part of a company.

Like every other component of the enterprise application stack, there is an opportunity to materially improve the completeness, the economic value and the ease of use, of solutions focused on the vendor and contract workforce.

There is an opportunity to serve this part of the workforce with the same fullness of solutions that companies like WorkDay, provide for full-time employees.

Shashank, who was previously an executive at Kroger, and I met a few years ago.  I knew at that time that I would enjoy working with him.  Shashank and his team are customer centric, insatiably curious, intellectually honest and continually raise the bar on themselves.

I am thrilled to have led Madrona’s investment in VNDLY and excited to work alongside Shashank and team as VNDLY’s newest board member.

Our investment in VNDLY is an Acceleration Fund investment, which is focused on companies that have found product and market fit and are scaling their businesses.

 

POSTED IN: Madrona News

Back To Work Toolkit Launched!

As businesses across the nation start thinking about the new normal and how to bring people back to work and back to the office, Madrona launched, in partnership with the Bellevue and Seattle Metropolitan Chambers of Commerce as well as the greater venture network in the region, a Back to Work Toolkit.

Created through hours of conversations with leading companies in our region such as Microsoft, Amazon, Starbucks, Alaska Airlines, Costco, JLL and CBRE, and after combing through hundreds of documents, we launched with a site that has a full webinar on our findings split into three areas.

  • How to Get Started
  • Preparing the Office
  • Preparing the People

On the site you will find documents, templates and guides that have been curated and created for your use.

Please share widely – and thanks to Katie Drucker, Shannon Anderson and Ishani Ummat for their work on this as well as everyone at Madrona who contributed to this production!

POSTED IN: Madrona News

How Sales Leaders are Meeting the Challenge of COVID19 and Work-From-Home with Snowflake, Clari and SeekOut

(Photo Clockwise, Soma, Tony, Scott and Kevin) 

In this environment, Sales and Go-to-Market (GTM) for enterprise companies has changed, sometimes drastically.  What we do know is that in the work-from-home environment, tight coordination and focus is even more important in selling and GTM.  We spoke with sales leaders representing early, mid and later stage enterprise SaaS startups late last week about how they dealt with the onset of Covid19 and what has emerged as some best practices. See the summary of this below and listen to the podcast for more details on how these companies are continuing to build their business.

We spoke with

  1. Focus on your customers. Connect personally with each and every one.  Be transparent and think outside the box in how you can help them. Being clear that a current contract might not work for the company anymore and figuring out how to work with them regardless, creates loyalty and value in the relationship.
  2. Build your internal competency. Tight sales teamwork is required, and you need the regular check-ins with your team and across teams to ensure everyone is working on the right things for customers and pipeline.  Develop a regular cadence when the whole team comes together and for lower level check-ins – don’t forget the starting or younger employees who might need more support.
  3. Create a classification system for customers and prospects, from those feeling headwinds to tailwinds and adjust your approach and message appropriately.
  4. Introduce price flexibility or financial flexibility for customers who are undergoing stress. Again, being honest and transparent about your situation and wanting to understand the customer helps move these conversations along.
  5. To continue to build the funnel, double down on direct marketing, digital events and being creative. One great example was from Clari, which holds many regional in person dinner or lunch events.  They held it digitally and offered attendees a dinner delivery.


Transcript

Soma
Good afternoon, everyone. We all know this, but we live in unprecedented times now. Whether you call it work from home or shelter in place or social distancing, the COVID-19 situation has had  a tremendous amount of impact in all facets of life, including how companies market and sell to their customers. And today, I’m excited to have a handful of sales leaders from three different companies representing early stage, mid stage and later stage startups, to talk to us about how their sales and go to market efforts, as well as teams have had to change significantly to doing business effectively in this new environment. Please join me in welcoming Kevin Knieriem, Scott Gudmundson and Tony Jackson. Before we get started, can each of you take maybe a minute to introduce yourself and briefly talk about the company that you’re a part of and what business you’re in? And let’s start with the Kevin.

Kevin
Great, thank you, Soma. And thanks for the opportunity to join this call. Kevin Knieriem, I’m the Chief Revenue Officer at Clari. For those of you that don’t know who we are what we do, we help companies provide revenue confidence, and we’re a platform that brings together all of their revenue constituents in a common place. We think of revenue truly as a process and not an outcome. And we provide the instrumentation for sales reps, sales managers, sales leaders, and any really revenue participant to run the business. Our solution quite honestly has allowed us to really navigate COVID-19, understand the impact of business understand where we need to lean in. And we’re working really hard to help our customers go through that same analysis of their business. Thank you, Soma.

Soma
Scott let’s go with you next.

Scott
Yeah, thank you for having me. So, I’m Scott Gudmundson, Head of Sales at SeekOut.io. We are a SaaS-based platform that helps recruiters and sourcers find hard to find and diverse talent. We’re really on the forefront of educating the HR space on a technology stack. And really how we can fit into that stack and help bring multiple pieces of product together to really find that diverse and hard to find talent. And today, I’m representing the small business side of the conversation. So, thank you.

Tony
Awesome. Yeah, thanks for having me, Soma. Tony Jackson, I’m a Seattle native. I spent my entire career in software sales. Half of that’s been at early stage startups. So, I have an appreciation for what’s going on there. The other half has been kind of the pre-IPO through IPO journeys at Tableau Software, MongoDB, and Snowflake. For those that aren’t familiar with snowflake, we effectively help organizations get value out of data through internal analytics, building data products, monetizing data with third parties. And we do that through a completely differentiated Cloud Data Platform. Our company has been around since 2012, products in market since 2015. And we’ve been dubbed the fastest growing enterprise SAS company in history. So really excited to talk through what some of that means in terms of navigating COVID.

Soma
Fantastic, great to have you all join us today. Just to get started, I thought it’d be great if you guys could take a couple of minutes and set some context. And when I say context, it’d be great if you can walk me through what happened in your teams and in your company. In the first few weeks of when stay at home or work from home happened. Okay, and Tony, do you want to continue with that?

Tony
Yeah, absolutely. It was a fun time, I guess we’ll say. So, context setting. I had a two-day QBR scheduled on March 16, and 17th. And it was pretty elaborate. So I had leaders from all across the company and all across the country flying in, we had a day at our office in Bellevue scheduled and we actually had a day of workshops at your office in Madrona scheduled and, the entire thing was designed to be, collaborative with a lot of hands on workshops, and team building exercises, and completely come out of this thing, you know, singing Kumbaya, and we’re ready to go March 4th for the year. March 2nd rolls around and we start, this thing’s picking up steam and we say, hey, asking, should we make travel optional? That was a hard decision, on March 2, right? We do that and, of course, and March 16th rolls around and everybody was at home by themselves. And so, when you say the word scramble, that’s exactly what it was to convert a lot of investment in terms of a two-day, well thought out agenda, and try to convert that into a one-day remote, and try to drive some of the same outcomes was an incredibly challenging. I would say, the things that worked well, I made my intentions clear in terms of what I wanted in terms of outcomes of highly collaborative and participatory. I was impressed at how my team leaned in. Katie Drucker from Madrona participated in the full day remotely, which I’m really appreciative of, and I told her after the fact, that she was the MVP of our QBR. Because she brought a lot of, I’d say, industry and market insights that really shaped the way that we were thinking about going to market in our region. And then on an account level really gave us that board executive viewpoint about how different organizations might be thinking about COVID impacting them. That was a transformational exercise and just all of the conversation around that really inspired us to say hey, how do we be on the right side of history and get out in front of this thing? So, we decided to roll out a two week program where each one of our reps would call every single one of their customers, every prospect that they had an open opportunity with, to show them that we care about them both as a person and about their company and to listen and to learn, and to try to take what we’re learning and come back. And both, at an individual account level, how do we help them outside the context of Snowflake? And then what learnings can we share among our team? I’ve just been blown away by the results of that, but for our team and the response from our customers.

Soma
Awesome. Scott or Kevin, do you guys want to add something to this?

Kevin
Yeah, happy to go next. Our board meeting was March 5th, and that was the last day I traveled. Our CEO was such a hard charger. If you know him, he actually went to London the next week, and we were just trying to get him home and thankfully got back before they shut down travel. That next week for us was really the transition week to okay, are we ready to work virtually? Fortunately, we had a couple things right. We had the right instrumentation. So, the biggest challenge area for us really wasn’t the field sellers, it was our SDR team. We’re used to working in pods, used to working together and that camaraderie and now a lot of these folks were really young folks who in some cases, were still living at home with their families. They were transitioning to TV tables next to their bed in their in their bedrooms, right? And so, we made sure that they were ready and engaged, but more importantly, still had that camaraderie and social engagement. And I’ve got to hand it to my rev dev team, is what we call our inside team, that they really brought that together quickly. What we found was with a lot of our events being canceled, that we could still drive top of funnel remotely and we’ve been trying to have a lot of fun and learnings on how do you best conduct a remote meeting. And we actually just today or this morning rolled out an internal enablement and in selling guide to help us sell and make our meetings with our customers and our prospects super impactful. We’ve also tried interesting things with our prospects and our customers. More of this format of social engagement over Zoom. So, I think, learnings for all of us, I think the hardest part of it has been the end to end Zooms that are on all day. And being able to find the one or two minutes you need to transition from one meeting to the next. So interesting times we feel like we’re taking on the challenge and quite honestly trying to learn from it and become better remote sellers.

Scott
Yeah, I would echo what Kevin said there a little bit, I think the first couple of weeks right as this unfolded was just a frantic pace for everybody. You’re just constantly on back to back, Zoom meetings, not a lot of time to get to the things you really need to do attend to. And so, it’s been nice to see our team particularly, and we’re a smaller group of just 30 in the whole company so, it’s a little different than some of the others, but it’s been nice for us to settle into a nice pace. Similar to Kevin, we had a technology stack, we did 90% of our selling remote already. So, we’ve seen fairly little impact from that standpoint. I think the area that we really needed to double down, and focus was the team, and really making sure that the team was connecting regularly. We started off just being so frantic that some of the people kind of got left off on their own little island. And it became clear really quick that we needed to get the teams together. So I think one of the biggest changes we’ve seen, is both at a company level getting together on a weekly basis, but then individual teams making sure that they’re meeting even two or three times a week sharing best practices, because the one thing that seems to be evolving in this is that what we thought two weeks ago isn’t even the same now. And so, it’s this constant evolution of trying to stay on top of what is the latest moves, what’s happening and how do we adjust to that. But I will say our CEO did a great job when this rolled out of really focusing us on a growth mindset and saying, okay, as opposed to being victims in the situation, how do we go take advantage of what presents itself? And how can we continue to be successful even though times are going to be challenging for the next while?

Soma
Great, I thought I want to take a few minutes and talk about, what are you doing in this environment with your current customer base? Tony just mentioned that he instituted a two-week program, where every account rep reached out to both existing customers, as well as customers in the pipeline to show that, hey, we are here to support you through this. We care about you. I thought that was a great best practice that Tony and his team followed. But in general, how are you thinking about taking care of your existing customers because that, to me, looks like priority number one. And that means, what does your customer success team need to do differently in this current environment? And as a sales leader, how are you thinking about success for your team and for your customer success team in this regard? And have you changed what you’re expecting out of your customer success team in the process? Sort of a bunch of questions but all related to how you are working with your customer success team and your sales team in taking care of your current customers and keeping them happy and successful through this tough time.

Kevin
Our number one goal as a company right now is protect the base right and to rally around our customers. And one of the things that myself and my CEO have been doing is reaching out to our peers, whether you’re a CEO, CFO, or  Head of Sales, and actually walking them through how we are using our own solution not to turn this into a Clari commercial, but using our own solution to navigate COVID-19 and as part of that, we actually come out with a lot of learnings that we’ve been able to help our customers implement. We’ve also been doing things like revenue assessments and health checks for our customers and getting much more focused on them. We have a pretty big rev dev team or inside sales team as well. And as we did this analysis of our installed base and our prospects, we kind of categorize them into headwind or tailwind companies those that are either flourishing, surviving, or are in a challenge. And based on that, we’ve sort of reoriented our focus in our message into those three buckets and so we’ve redeployed some of our rev dev team against our customers to help them better utilize Clari so at the sales rep level, at the manager level, and so trying to get the entire company around this customer first, when you don’t need your full gamut of SDR’s out there just prospecting.

Tony
Yeah, I think I can piggyback on that, I think I’m seeing the same where I think there’re some clear winners and losers in terms of impact in at least the short term, and certainly probably beyond. But being able to identify and categorize which companies fall into which bucket, I think that informs your strategy on how you can help them, our expectations haven’t really changed. And for us, just for context, we don’t have a customer success team, all of that falls into the field sales organization. And, based on the way our business works, which is a utilization and consumption-based service, we’re always very closely aligned with our customers, but I would say the nuances and emphasis on things like overcoming what’s going to happen in every organization is scrutiny on spend, right? And so, we’re being even more proactive about having value engineering, business value realization type conversations and documentation and framework for our customers. One of the things that we’re seeing on both sides is the companies that are being impacted from a personnel perspective and having to undergo layoffs. We’re helpful to them by figuring out, can we help plug gaps for them, while they’re, being short staffed and trying to operate more efficiently? And can we help some of their people land within some of the customer base that is growing and is hiring. And so, we’re adding value to the customers that are growing by connecting them with top talent that now is available that that probably wouldn’t have otherwise been. So those are some of the things again, I think, from our perspective, that we’re just people first, I think, is kind of the way that we’re approaching those situations.

Scott
For us being in the hiring space, obviously, directly impacted pretty quick. We’ve had an opportunity to be able to work with customers on individual basis to put them on pause from their subscription standpoint, work with them around just payment options, and do all of those things that are the right thing to do right now. And we’ve had the luxury of having very deep relationships with our customers. And so, they’ve appreciated being able to come to us and just have very, fact-based conversations and outcomes that are working for both of us. So that’s one thing that I say has helped us. The other thing is, we’ve been fortunate enough to have a really solid customer advisory board. So, we’ve been able to rally them A. check in on them and how they’re doing but B. get their feedback on things that we can be doing to help their businesses. And that’s been pretty valuable for us and just knowing how to move forward.

Soma
Switching focus from protecting the base like you said, Kevin, to starting to think about, hey, how do you move customers through the pipeline? You’ve got each of you have a pipeline of customers in varying stages. What are you doing to be able to move your customers through the pipeline and getting them to be a paid customer and close a deal? How are you thinking about the mechanics of sort of closing a customer? And one important question in that regard is, how are you thinking about price? Or in other words, are you thinking about price as a lever? Because everybody is sort of thinking about budgets every is cost conscious today. Are you sort of saying, hey, let’s use price as the lever for the first year, or at least in the short term, and maybe worry about not the right phrase a year from now, but let’s focus on closing the customer and getting the deal done? I would love to hear some thoughts on that.

Kevin
Yeah, happy having to go again on this one. So obviously, like other companies, we’ve experienced headwinds, right, we’ve had customers budgets freeze, or be put on hold for a while in deals slipped from our Q1 into our Q2. I’m assuming we’re all seeing very similar things. And what I’ve noticed, as well as a lot of companies are still going through their replanning process, which means they’re kind of in this pause mode. And so, as we’ve talked about earlier, as we started to categorize companies based on where they fit and the things that they’re experiencing. From there, we’ve looked at flexibility in some cases, we just want to help and so we’ve done what we consider revenue assessments where we’ve hooked up our solution to their Salesforce instance and have been able to drive insights right away so that they can inform the changes to their operating plan. In others we’ve done, let’s just call it financial flexibility, to allow them to start with us and flexibility through the first year, not necessarily price reductions, if you will, but more just sort of flexibility based on constraints that they have from a budget and an OpEx spend scenario. So, we’re, we’re treating them each uniquely because every company is different. We don’t have a, let’s say, a cookie cutter COVID-19 offer, but we are really trying to lead with that revenue confidence and help these companies navigate.

Tony
Yeah, I would, I would echo those sentiments, I think especially the piece that every customer is in a unique circumstance. And so being really flexible around, what does this customer need and putting first how do we add value for them is kind of the approach that we’ve taken. I’ll take a different lens on the question, Soma, which is the thing that I’ve noticed is it forces really tight sales execution. It reinforces all the discipline around doing the right things around qualification and really being dialed in on understanding, what are the challenges that this customer is going through? What is the business impact that’s available to them? And how can our solution help them and then being really proactive about articulating that, demonstrating that, getting hands on with the product. There’s no room for laziness during these times from a Field Sales execution perspective,

Scott
I would just say you both you both talked at this, being able to classify your pipeline into the heavily impacted, the lightly impacted, and being able to really get down on the deal by deal level for us has been very important. There’s always a lot of deals in the pipeline, but every quarter comes down to a handful of deals that are going to make it or break it. And we found, classifying those deals and really focusing on the ones that have potential is where we’ve seen success. I would also say that a lot of the early prospecting and selling couple weeks back was, hey, people now have time to look at technology. And that quickly burned out, right? That message, if I see that again, I think I might scream. But people do have time right now to evaluate their technology stacks, in whatever vertical, whatever space you’re playing in. And I think that’s a really strong message to go to executives with is to say, hey, while people have a little time to breathe right now evaluating your technology stack and, and how it’s being used is a strong conversation to have with folks to get their attention to get some mindshare and then to potentially see if then you can apply what Tony said and strong sales discipline to actually get a deal closed.

Soma
And we all know that, hey, sales techniques and sales approaches can vary depending on who are target customer bases. Sometimes we are targeting small and medium businesses, mid-market customers, enterprise customers, sometimes we are dealing with inbound leads, sometimes we are looking at outbound leads. And each of these things are has a unique flavor and unique nuance for how we think about go to market, or sales approach kind of thing. To the extent that this kind of thinking applies to your business or to the customers that you target, are there any best practices for how you deal with, say, SMB customer versus an enterprise customer in this situation, any sort of best practices or learnings to be had here?

Scott
I think I’ll take that here, just right out of the gate. The SMB space right now is really tough. They’re definitely tightened up on budgets and everything else. So, in that instance, you’ve really got to be looking for what is their use case and their need and if there’s a fit, then continuing the conversation, if not putting things on pause, I think is the right thing to do. And particularly prospecting thing into that group right now is tough. But in the enterprise, people are still buying people are still needing to do business. And there’s a lot of opportunity there. And what we’re seeing work is we’re having conversations in sales right now, which are much more genuine than they’ve ever been with customers. we’re much more open and transparent in our conversations. And people are seeing that. And it’s resonating, because we’re just having honest dialogue back and forth about what people’s needs are and how we can serve them. And I found that that that’s been a big help for our sales team is just being very genuine and open and building deep relationships. That’s leading to success.

Tony
Yeah, I would add that I’m seeing the same thing. And I think if that if that genuine approach, and that transparency is being reciprocated. And then I think the key is, at more of an organizational level, how quickly can we iterate and share feedback across the team. So, I think that’s the internal aspect, how do you create that collaborative environment is really important. We’ve moved to a cadence of Monday morning calls focused on topics around,  some of the things that we’re learning in dealings with customers. And then bringing in the right subject matter experts potentially, to present to us on how we might be able to help our customers. And then we’ve moved to a cadence in terms of our one on one meetings where every alternate week we do one on ones on Monday, from an AE perspective, and then on the sales engineering side, our counterparts. And then on the alternating weeks, we actually come together two on two where it’s a sales engineering manager and myself with the AE and their sales engineering counterpart. And that’s actually been really helpful at keeping people focused on the right things. And then on Fridays, we actually get together and we just spend probably two or three minutes on each person. What did you accomplish this week? What’s something that you learned and what’s something you either want to learn, focus on, or get better at in the following week, and just creating that framework or foundation to allow for the team to operate as a team, versus a bunch of individuals operating out of their houses has been really, really helpful. And I’ve seen a ton of benefit from it.

Soma
Right? Hey Kevin, you guys, like pretty much every other company on the planet now has gone through a recent process of replanning and reforecasting for the rest of the year, given everything that’s changing around us kind of thing, right? In that context, how do you think about changing compensation targets for your sales people, whether you’re adjusting the sales quota, whether it’s up or down kind of thing, so that you’ve had the right balance between doing what you think is right for the sales teams to keep them motivated and performing well, while still keeping the right business outcome in mind so that you are not on one end of the spectrum or the other. Can you share some of your thinking on that?

Kevin
Yeah, a couple of things on that.  One of the things we did was we really kind of focused our sellers, those that are purely acquisition and those that are taking care of the customer. We didn’t have that model before. Obviously, with growth and complexity, you kind of go to that model. And so, we’ve just implemented that. I’ll  look at it from two areas, for those that are account managers, one of the things we’re focusing on, is there an opportunity to renew customers early. And as part of renewing early, can you expand? Can you understand their business scenario, maybe get creative? So, we spent on early renewals, right, to try and get a quarter plus out ahead of those, right, to secure the business, right. And so, we can focus on driving value versus negotiating the different point in time,  For our sellers and their quota, yes, we’ve made a reduction, not a drastic one. Some of you have seen some of the studies that are floating out around there, I assume what revenue collective put out, quota adjustments have been from zero to 50% or 60%. So, we didn’t ones across the board based on territories that were in line with some of the top line adjustments we made to our targets for the year. We used our own solutions to try and figure out what that should be based on where we were seeing those opportunities that were pushing where they were going to within the year. What we wanted to do most importantly, was to continue to motivate our sellers, to get to feel like they had a fighting chance. And quite honestly, some of the additional things we added in their plans were new logo, right? It is just as important as protecting and surrounding and bear hugging your customers is making sure that you continue to grow me continue to bring new logos into the family.

Scott
So, I take a bit of a different approach just because we’re smaller, right, but for us, going back and analyzing the assumptions we put into the comp plan to begin with and saying do those assumptions still hold or do we need to evaluate a changing landscape. And luckily for us, those assumptions are for the most part holding. So, we’re in a wait and see mode right now on quotas and we’re going to assess at the half year, take a look and kind of see how things are coming along. But I think the most important thing from my perspective is analyzing your assumptions. And if there’s major changes, then you’ve got to address it, or you will have morale trouble real quick.

Tony
Yeah, I think adversity is such a, it just reveals what your culture is, right? And for us, we were in a unique circumstance, in part based on the performance of the company. But the message from us has been, we think we can hit our plan, and we’re still marching towards that. But it hasn’t swung so far on the pendulum such there are a lot of companies that are saying that it appears tone deaf, right, Snowflake I think the history here is that we actually last year revised our plan mid-year, from a quota perspective, not the corporate perspective. And so, knowing that as the company was overachieving, but based on the fact that we resegmented our business mid-year last year, and the company did the right thing, has built a foundation of trust where people all feel really good about, hey, we can march forward. And we know that if this turns out to not be attainable, based on circumstances outside of our control, we have a belief that the company will do the right thing.

Soma
Got it. I want to switch to one question that came in from the audience. This is a question from Gabriel, for Scott. Scott, as you were talking about this is an opportunity or there’s a good opportunity where companies, particularly SMBs, or enterprise, or whoever you are starting to think about no technology stacks. As a way to sort of say, hey, things are changing, some things work. Some things don’t work. Let me sort of take a step back and think about what technology stack I have, or I don’t have an What do I need to do kind of thing. The question specifically is the following. Do you think that people are already evaluating their tech stacks because they want to find ways to cut costs, or what do you think is the reason why this is happening?

Scott
I think, just based on my experience in the limited number of customers I’ve spoken with, and there’s two camps, or people who are doing well, and now is a time for them to evaluate, how can we continue? And how do we shore that up? And then there’s the second camp, which is definitely. there are a lot of reactive companies that have instantly said we need to reduce spend by 40%. And so, we’re seeing people come back and say, okay, who are our more expensive vendors? What is our usage looking like? And they’re starting to make decisions based on those things. And so, we’ve talked about that a little bit as a group here today, but you got to shore up your customer base, for sure. And make sure usage is there, but more importantly, when you’re going after and having these conversations depending on your product and where you’re set in the marketplace there’s at least for us a great advantage to go get share from some of the bigger players that for years have been it price increases. And the value has gone down a bit. And so, we see it as an opportunity as people are evaluating tech stacks to really get in and display share from some of the bigger players in the space.

Soma
Got it! Thanks, Scott. Here’s another question from the audience. The question is this. We are getting a lot of sales email responses such as, let’s revisit post forward. How are you navigating those situations without pushing everything out? Kevin or Tony, do one of you want to start and try to answer this?

Kevin
Part of it depends on the persona of the person. So, for instance, if the persona is a Head of Sales, or CRO which is our typical, executive buyer, or CFO, we might come back with something creative says let us realize your budget frozen, realize you see value in our solution. Let us get you on it now in a creative way. If the persona is a sales manager or an operations director who is just starting to look, we’ll keep them engaged, we’ll keep them educated. But we’ll come back and revisit when we can actually start a real process with them. I think we were finding in this world we’re all working at home. At least on our side, it’s much easier for us to set meetings and get time with people. And we continue to actually overachieve on our goals in setting what we call our RS zeros. So, we’re still doing really well in creating demand, and setting meetings and having those meetings happen. And then it’s sort of a way of qualifying is this an opportunity or is this something that we just want to continue to nurture?

Soma
Okay, Kevin, I have a sub question that is there a way where you got to think about changing your positioning or the value proposition to make it more resonating with people and They say they’re going to either wait for six months or whatever it is kind of thing, as opposed to, let’s engage now and continue the conversation. That kind of thing.

Kevin
Yeah, I think, obviously our offering is actually vital instrumentation now. So, we do, we have sort of pivoted our messaging to confidence, revenue, confidence and instrumentation and being able to help a company navigate, what is the impact this is having on the business? And how to, especially in a mobile world, where everyone is working virtually, how do you help kind of drive a consistent sales methodology and process across your entire sales organization? We really help companies do that. And so, our teams have really been enabled to continue to drive that. And obviously, we leverage challenger as part of our selling methodology and to challenge the status quo and to end in a way that we’re teaching so we’ve pivoted from what would be considered a pitch deck to a teach deck and trying to help educate our potential customers that we can help them through this environment, and it’s resonating.

Soma
That’s great. So, let me go to the next question. And this is a question that I also had, so I’m going to sort of frame my question and then sort of go to the specific question from the audience. Prior to a month ago, or a month and a half ago we were always looking at, conferences and events and other kinds of sort of physical, get togethers  as a way to reach out to customers to get leads to increase our leads to get more people to the top of the funnel, and all that fun stuff, right? That’s not happening now. So, to me, this feels like a phenomenal opportunity to say, how do I double down on what I call digital marketing? How are you thinking about doubling down on digital marketing in this current environment? And the specific question is, can you give some specific examples of how you are successfully generating leads, especially now with physical boundaries?

Tony
Yeah, I’ll take that one because one of the characteristics I would say about Snowflake in the past Soma, was that world class field marketing and that is that is central to our strategy with respect to top of funnel and influencing existing pipeline. Kevin mentioned earlier, his company being well set up and I think Scott agreed, well set up to support remote and we’re the same way, we practice what we preach as a company at Snowflake. So, we’re all in the cloud, we’re a data-oriented company. So, the pivot for us was really, really quick. And I’m just so appreciative, our entire field marketing effort. It probably took about a week to do a 180 and pivot to a virtual marketing team, and the amount of webinars that we’re doing and the thought that’s being put to behind those webinars and the ability to take our partner ecosystem and them in and let them draft off us and then attach to some of the things that they’re doing has been nothing short of remarkable from  our perspective and all of the statements that were made earlier in terms of people being at home, being able to look at things like this, there’s more time people are in less meetings, all of our digital footprint is going up every single week, and is already at record highs.

Scott
I think I throw out a couple learnings just on the smaller end, we really quick realize we weren’t spending enough on digital. And as the landscape has changed, some parts of digital have come down in cost. Others have gone up 5x. If you’re not paying attention to on the digital side, what your costs are looking like and what the rest of the market is doing. You may be spending the same amount of dollars and not getting any return right now and wondering why and those are all things you’ve got to be on top of. The other thing I just throw out real quick is just I think companies that are going to succeed through this, at least in the short term, have good outbound emotions. It’s taking that control of your own destiny and being able to know who your ideal customer profiles are, and sitting back and saying, Hey, have those ideal customer profiles changed in the last two weeks, three weeks, and then being able to. proactively go get in front of those folks. And obviously, that’s more for the enterprise sale, but I just throw that out there that digital is important, but I think success comes without bounding.

Kevin
Yeah, I think as a company, we really spent the last eight months before COVID-19 getting our top of funnel in order. We weren’t great at it before that. A lot of it was the right leadership, the right instrumentation. And so when this happened, obviously, like everyone else, we canceled all of our paid events, but we also had to cancel the events that we were doing and we do a lot of in city networking events where we bring sales operations and revenue leaders together in an online sessions like this where we share best practices and we talk. So, we continued that process virtually, where we have these regional virtual dinners. And we’ll actually send to those that are attending a way for them to either get food delivered or wine if it’s at night. And what we found is there great networking sessions and usually on them, I’ll have a couple customers who will comment, and I’ll have prospects and they’ll start actually selling and I’ll just take a backseat, those have been really effective for us. Our SDRs have gotten amazingly creative. They will share a rejection email with the team and that team will craft the response email together and that typically will get a person to react. So, I’m just I’m seeing unbelievable creativity coming out of our inside sales machine, which has been super important. I think one of the most important things that I think all of us can do as leaders for our sellers is, we’re now in a remote world and in a moment remote world, you now become more transparent. Right? We all now in front of each other on zoom, and having sellers, quite honestly who are open to being critiqued or open to being transparent on how effective they are. Are they making the calls? Are they having the meetings? I know I was one of those people, when I came to Starbucks, I had to transform I couldn’t hide. just behind the phone anymore. And so, if you can get your sellers to transform where they can now use data, and this, they’re going to become much better in this environment. The SDRs are now going through that process on our side.

Soma
Great. Thank you. And for the for the last question before we get into rapid mode. This is a question from Brad. Are you seeing projects that were classified as priority in normal times needing to be repositioned as lifeboat projects in COVID-19 times to achieve funding?

Soma
Do you want to take a crack at this?

Tony
Yeah, I would say pretty commonly, I’d say that’s a that’s a, maybe a daily occurrence in our world. So, yeah, absolutely, I think there’s everything is being reprioritized. So, things that were at the top of the list are now getting shuffled to, the middle or the bottom or uncertain. And then there are some things that were not even on the list that are now the top priority issue for our customers. And I think that just goes back to the key theme of being able to be intimate enough with your customers and your prospects to be able to have those conversations and stay close in terms of cadence and communication and understand where are things today versus yesterday or this week versus last week is the key there.

Scott
Well, I would just say that the one of the things that I think that we’ve seen important and I don’t know if this is going to directly answer the question or not, but getting close with the customer, both where they’re at so going to the communities that they’re in and listening to them, talk to their peers about what they’re experiencing, working with the channel partners to understand what they’re experiencing and what they’re going through, and taking all of these different data points into your decision making. And really getting frontline, I think that’s become much more imperative, at least for us than it was three, four weeks ago.

Soma
As part of wrapping this up, we’ve got about a minute or so to go. I thought I would summarize some of the key things that I heard in this conversation. And one of the things that you guys all have said consistently is, this is the time to strengthen your relationships with customers, or with existing customers to protect the base with pipeline customers and inside your own sales and customer relationship teams. My phrase is, you cannot overcommunicate in this environment. So please think about communicating whether to the customers or with your teams, as much as you can and need to. The second thing is customers appreciate transparency, honesty and going above and beyond to help them through this time, it’s all about engendering customer loyalty. And the more you learn, and the more customers love what you do for them, and that they will be with you for the long term. Third thing is, every customer and company has individual challenges. So, you have to be flexible, somebody mentioned, hey, it’s not a price reduction, but price flexibility. And I thought that was a fantastic way to think about, hey, what, what kind of things that we can be doing, or we should be doing to work with our customers in this tough situation. The other thing is be creative in how you work with customers, from helping them with internal insights, to helping laid-off employees land somewhere, and anything else that you think they’re facing as key challenges. And I think both Kevin and Tony mentioned this, one of the things that we do is, particularly for customers that are both existing customers, and also customers in the pipeline, categorizing them as customers who’re having tailwind and customers are having headwinds. And being able to both flexibly and creatively work with the customers depending on what situation they’re in. I thought that was a fantastic sort of piece of wisdom to keep in mind as we navigate through this. And finally, from an internal perspective, use this time to tighten teamwork, analyze internal sales assumptions. And as they are changing, because things are still changing and fluid, be ready to adjust them as and when you see changes as opposed to waiting until after the fact. These are what I thought were some of the key pieces of information that came out of this conversation. So, thank you all again. Thanks, Kevin. Thanks to Tony. And Thanks, Scott, for taking time out, and I know you guys are all busy, but. taking time out to be able to share your journey, your experiences and your learnings in terms of how go to market teams and sales teams are navigating through this tough situation. All of you be safe and take care.

Erika

Thank you for joining Founded and Funded. If you enjoyed this podcast, please like and share it with your friends. Please stay tuned for more podcasts to come your way and send us your ideas. We’re always looking for new content ideas, especially during this work from home and transition, we hope, back to the office and back to work period of time.

POSTED IN: Madrona News

Helping to Build a Platform Connecting Candidates and Companies in a COVID-19 World – Silver Linings

Plan C Is a Silver Lining in Cloud City

A few months ago we all had a pretty good Plan A, and those of us feeling extra clever had a good Plan B in our collective back pockets.

And then COVID-19 hit. Things are crazy right now for companies and all the good people that make up those companies. Nothing could have prepared us for the fall-out, and all of our Plan A’s and B’s are suddenly woefully inadequate.

Here at Madrona we’ve been working non-stop to support our portfolio company CEOs and HR leaders as they deal with the landfall of new challenges COVID-19 is causing. But it’s not enough, and I’ve been exploring what our greater role can be.

As an HR and TA leader in tech, I’m familiar with the typical open source google sheets typically passed around to communicate talent availabilities and vacancies. We are seeing the start of a mass global talent layoff, coupled with companies that are hiring like crazy. The current system for sharing this is not COVID 19-scalable.

A week ago I created a small task force, and we set out to build a platform to replace the google sheets (like this one https://bit.ly/3dOR6k6) that would be 100% free to the global tech community.

Our mission: To help those affected get back to work as soon as possible.

The team:

  • Madrona Venture Group (myself, Shannon Anderson and Matt Witt)—Seattle’s largest technology startup investor and the producers of the Founded and Funded podcast.
  • Chris Brownridge—who’s been providentially working on exactly the platform we need as a passion project. His Silver Lining platform is like the ultimate matchmaking app between employees and employers and was ready for scaling up to global proportions.
  • Jennie Ellis at Bandwidth (www.bandwidth.team)—Seattle’s most popular recruiting and workforce planning partner for startups. Jennie and Jill (see below) have expertize building and scaling massive teams and have worked through corporate layoffs as HR leaders.
  • Jill Domanico at Skytap—which provides businesses with the capability to run traditional workloads in the public cloud.

Our Plan:

Scale the Silver Lining platform as a not-for-profit, targeted solution that connects candidates and companies. 100% free to everyone. It’s designed so everyone can contribute and benefit. Whether that’s a company forced into layoffs, laid-off employees with great skills, or companies that are hiring and desperately need talent right now.

Why a New Platform Now?

Those of us on our task force are really busy right now. COVID-19 has created more work for us, not less. But we’ve all built careers by focusing on integrity, compassion, and teamwork. And we couldn’t just look away while our friends, neighbors, and casual connections risk losing everything.

We’ve experienced the powerful impact of positive collaboration. We’re curious and persistent learners. And we all believe that Silver Lining is not only a great solution to today’s challenges, but the right thing to do for the sake of our colleagues, entrepreneurs, and country.

How Does it Work?

Companies Who Are Hiring: Use Silver Lining for free. Create a profile and source/contact candidates. Create free unlimited postings and perhaps donate a few dollars to support the effort. (Any extra proceeds will be donated to the WHO Covid-19 Response Fund.) The updated talent dashboard allows for candidate searches by last employee, last job title, location, and job function.

Companies Who Are Laying Off: Use Silver Lining to confidentially submit names and emails of those affected by lay-offs. Once the names are submitted, each candidate will receive an email inviting them to opt in or out. Free of charge. We also have a sample email you can access to forward on to candidates so they know someone has submitted their name.

Companies in Both Scenarios: Use Silver Lining to source/contact candidates and submit names of those being laid off.

Candidates Seeking Work: Submit your profile and preference and then search for jobs. Share your resume, LinkedIn profile, experience level, ideal company size, and desired industry all for free.

Is It Working?

Yes. Candidates are already being approached for work they otherwise wouldn’t have heard of. Employers are discovering incredible talent with immediate availability and are actively interviewing.

We are initially focusing on the Seattle area, with expansions to all US based technology hubs and globally over the next week. Here’s where we’re at:

  • Nearly 2,000 active profiles from companies such as Sonder, Zipcar, Expedia, Bird, and Lyric, and these numbers are growing substantially by the day
  • Companies forced to lay off are submitting their employees to the platform and making a donation to support the service. (Remember, employees opt in before any information is shared on the site)
  • 140 companies have signed on to sourced and reach out to candidates
  • Over 500 live job posts from companies hiring

Are We Done?

No way! As we continue to develop Silver Lining, we are looking at other supportive initiatives for the community, in particular around career coaching, resume writing, and emotional support.

If you are interested in helping out, please contact chris(Replace this parenthesis with the @ sign)getsilverlining.com.

If you’ve been affected by a layoff (as an employee or a company), check Silver Lining out here. Silver Lining will remain 100% free to use for candidates and employers.

 

 

 

 

 

 

 

POSTED IN: Madrona News

Founded and Funded – Deploying ML Models in the Cloud, on Phones, in Devices with Luis Ceze and Jason Knight of OctoML

Photo: Luis Ceze

OctoML on Octomizing/Optimizing ML Models and Helping Chips, Servers and Devices Run Them Faster; Madrona doubles down on the Series A funding

Today OctoML announced the close of their $15 million Series A round led by Amplify Partners.  Madrona led the seed (with Amplify participating) and we are excited to continue to work with this team that is building technology based on the Apache TVM open source program.  Apache TVM is an open-source deep learning compiler stack for CPUs, GPUs, and specialized accelerators that the founders built several years ago.  OctoML aims to take the difficulty out of optimizing and deploying ML models.  Matt McIlwain sat down with Luis Ceze and Jason Knight on the eve of their Series A, to talk about the challenges with machine learning and deep learning that OctoML helps manage. Listen below!

Transcript below:
Intro
Welcome to found it and funded My name is Erika Shaffer and work at Madrona Venture Group and we are doing something a little different here. We’re here with Matt McIlwain, Luis Ceze, and Jason Knight to talk about OctoML. I’m going to turn it over to Matt, who has been leading this investment. We are all super excited about OctoML and in hearing about what you guys are doing.

Matt McIlwain
Well, thanks very much, Erika. We are indeed super excited about OctoML. And it’s been great to get to know Luis and Jason over many years, as well as the whole founding team at OctoML. And we’ll get to their story in just a second. The one reflection that I wanted to offer was that this whole era of what we think of as the intelligent applications era has been building in its momentum over the past several years. We think back to companies like Turi that we were involved with and Algorithmia and more recently Xnor and now I think a lot of those pieces are coming together in the fullest of ways, is what OctoML is doing. But rather than hear it from me, I think you’ll all enjoy hearing it more from the founders. So I want to start off with a question of going back, Luis, to the graduate school work that some of your PhD students were doing at the University of Washington. Now, tell us a little bit about the founding story of the technology, and the Apache TVM open source project.

Luis
Yeah, absolutely. First of all, I would say that if you’re excited, we’re even more excited about this and super excited about the work you’ve been doing with us. Yes, so the technology came to be because there was this observation that Carlos Guestrin and I had a few a few years ago, actually four years ago now, that said that, there are quite a few more machine learning models that were becoming more popular, more useful, and people tend to use them but then there’s also a growing set of hardware targets, one could map these models to so when you have, a great set of models and growing set of hardware targets. Back the question, so I said, “Well, what’s going to happen when people start optimizing models for different hardware and making the most out of their of their deployments.”. That was the genesis of the TVM project. So it essentially became what it is today a fully automated flow that ingests models from expressing a variety of all the popular machine learning frameworks, and then automatically optimizes them for chosen deployment targets. We couldn’t be more grateful to a big open source community that grew around it too. So the project started as an open source project from the beginning. And today, it has over 200 contributors and is in active deployments in a variety of applications you probably use every day from Amazon, Microsoft and in Facebook.

Matt
I think that our listeners always enjoy hearing about founding stories of companies and your founding team, and principally some of the graduate students that you and Carlos had been working with. Maybe tell a little bit about that and then it’d be great to have Jason join in since he joined up with all of you right at the beginning.

Luis
Absolutely, as soon as is a great way of looping in Jason into the right moment, too. So yeah, so as TVM started getting more and more traction, we did the conference at the end of 2018. And we have well over 200 people come and we’re like, “Oh, wow, this there’s something interesting happening here.” and, it was one of those moments where all stars align where the key PhD students behind the project, including Tianqi Chen, and Thierry Moreau, and Jared Roesch, were all close to graduation and thinking about what’s next. And I was also thinking about what to do next. And then Jason was at Intel at that time, and was really interested in and was a champion of TVM on the Intel side. And He then said, Oh, it turns out that I’m also looking for opportunities. So it’s like since he came and visited us and started talking more seriously and the thing evolved super quickly from there. And now you can hear from Jason himself

Jason
Yeah, actually my background is a data scientist. And through a complicated backstory, I ended up at Intel through a silicon hardware, startup acquisition. And I was running a team of product managers looking at the software stack for deep learning and how a company like Intel was going to, make inroads here and continue to impress and delight our huge customer base. And I was helping to fund some of the TVM work as a result of that and really seeing that, despite my best efforts at Intel, kind of pushing the big ship a few degrees at a time towards these kind of new compiler approaches to supporting this type of new workload and new hardware targets, it was clear that the traction was already taking place with open source TVM project and, and that was where the action was happening. And so it was a natural timing and opportunity for something to happen here in terms of not only Intel’s efforts but more broadly, the entire ecosystem needing a solution like this and the kind of pain points I’d seen over and over again at Intel of just end users wanting to do more with the hardware they had available and the hardware that was coming to them and what needed to happen to make that realistic. And so that was a natural genesis for you me and Luis to talk about this and, and make something happen here.

Matt
That’s fantastic. And of course We had known Jason for a little while at Madrona. And we’re just delighted that all these pieces were coming together. Hey, Luis, can you say a little bit more because you had that first conference in December of 2018 and then a subsequent one in December of 2019. It seemed to be that not only the open source community was coming together, but folks from some of the big companies that might want to help somebody build and refine their models or deploy their models were coming together too and that’s kind of a magical combination when you get all those people working together in the same place.

Luis
Yes, absolutely. So, yes, as I said, the conference that made us realize something big was going on was December 2018. And then a year later, we ran another conference. And by that time, OctoML had already been formed. So we formed the company in late July of 2019. And then by December, we already had the demo of our initial project – our initial product that Jason demoed for the conference. Yes. So in the December 2019 conference, we had pretty much all of the major players in machine learning – those that use machine learning to develop machine learning, were present. So we had, for example, several hardware vendors join us. Qualcomm was being fairly active in deploying a hardware for accelerating machine learning on mobile devices. They had Jeff Gehlhaar, there on the record saying that TVM is key to accessing, their new hardware called hexagon. We had ARM come and also talk about their experience in building a unified framework to unify machine learning support in CPUs, GPUs and their upcoming accelerators. We had Xilinx and we had a few others and Intel who came and talked about their experience in this space. So I wanted to add more to that, what was interesting during that conference was having companies like Facebook and Microsoft talking about how TVM was really helpful in reducing their deployment pains of optimizing models enough such that they can scale in the cloud. And also such that it can actually run well enough on on mobile devices. This was very heartwarming for us because it’s confirming our thesis that a lot of the pain in machine learning, in using machine learning modern applications is shifting from creating the model to really deploying and making the best use of them. And that’s really, our central effort right now is to make it super easy for anyone to get their models optimized and deployed. And by offering our TVM in the cloud flow, so maybe Jason can have a little bit to that from the product side.

Jason
Yeah, so it’s, it’s great seeing the amount of activity and innovation happening in the TVM space at the TVM conference. But it’s clear that there’s still a long, long way to go in terms of just better supporting the long tail of developers who maybe don’t have the amount of experience that some of these TVM developers do in terms of just getting their model and optimizing it and running on a difficult target, like a phone or an embedded platform. So yeah, we’re happy to talk more about that. We actually just put up a blog post kind of detailing some of the things we talked about at the TVM conference. And, and we’ll be giving out more details soon.

Matt
Yeah, maybe I think what’s interesting, if I think about it, from a sort of a business perspective is, on the one hand, you have all kinds of folks, with different levels of skills and experiences, building models, refining their models, optimizing their models, so that they can be deployed. And then you’ve got this whole sort of fragmented group of not just kind of chip makers as you’re referencing but also the hardware devices, that those chips go into to run, whether that’s a phone or a camera or other kinds of devices that you know can be anywhere in a consumer or commercial sense. And what’s interesting to me what I like about the business is that you guys are helping connect some of the dots between those worlds and, a kind of a simplified end to end sort of way. And it would be interesting to spend a little bit more time and maybe talk about the, the the Octomizer, your kind of your first product, specifically, but more generally, what you’re trying to do and connecting those worlds.

Jason
Yeah, definitely. So one way to look at this is we’ve seen a lot of great work from TensorFlow from Google and PYtorch from Facebook and others on the training side for creating deep learning models and training those from data sets, but when you look at the next step in the lifecycle of machine learning model, there’s a lot less hand holding and tools available to get those models deployed into production devices. When you care about things like model size and computational efficiency, and portability across different hardware platforms, etc. And so this actually sits right at the one of the difficulties of the underlying infrastructure and how that’s built with the dependence on hardware kernel libraries. So these are handwritten, hand optimized kernel libraries built by each vendor. And these are, somewhat holding the field back and making it more difficult for end users to get their models into production. And so TVM and the Octomizer that we’re building on top of that makes it easier to just take a model, run it through a system, look at the optimized benchmark numbers for that model across a variety of hardware targets, and then get that model back in a packaged format that’s ready to go for production use, whether you’re using writing a Python application, or you need to bring out every bit of performance with the C shared library and a C API. Or a Docker image with a GRPC wrapper if you want some easy serverless access. So that’s what we’re building with the Octomizer. And it’s designed to be a kind of one pane of glass for your machine learning solutions across any hardware that you care about. And, and, and then we build on top of that with things like quantization and compression and distillation as we move into the future.

Luis
A couple more points to that. Yeah. So those are definitely important. And is the very first step, we’re taking. One interesting to realize is what we’re doing here is that TVM really offers this opportunity of providing a unified foundation for machine learning software on top of our idea of hardware. So by unifying the foundation, in which one could use to deploy models you also create the perfect wedge for you to add more machine learning ops into the flow. So if you know people are starting to realize more and more that, regular software development has enjoyed, incredible progress in DevOps. But now, machine learning doesn’t have that, right. So when we see the Octomizer has a platform, which we start with model optimization and packaging, but it’s the perfect point for us to build on to offer things like instrumenting models to monitor how they’re doing during deployment, to also help understand how models are doing, and essentially provide a complete solution of automated services for machine learning Ops,

Jason
One of those applications as well as training on the edge. In addition, in the sense that training is no more than just a set of additional operations that are required. And having a compiler based approach, it’s quite easy to add these extra set of ops and deploy those to hardware. And so getting things like training on the edge is in target for us in the future as we look forward here.

Matt
That’s great. Well, I want to come back a little bit to the prospect side, but I’m super curious. Now we talked about the company name OctoML. We talked about the product name Octomizer. How did this all come about? How did you guys come up with this name? And, and it’s a lot of fun. I know the story, but for the most the folks here, what, what’s the story?

Luis
Okay, all right. So I always say I’m sure Jason and I can interleave with because we have, there’s multiple angles here. So it turns out, they’re both Jason and I and other folks in our group have an interest in in biology. So nature has been an incredible source of inspiration in building better systems. And nature has evolved incredible creatures, but when you when you look around and you think about some creatures like an octopus, you see how incredibly smart they are. They have distributed brains, right? So they are incredibly adaptable, and they’re very, very, very smart plus very happy and light hearted creatures and creative so this is something that To like resonated with everyone, so it stems really from, from an octopus and, and so like a lot of what we do now has a nautical theme. And then we have the Octomizer, you’re going to hear more in the future about something called aquarium and Cracken and the Barnacles, which are all things that are part of our daily communication, which makes it super creative and light hearted. So all right, Jason, maybe I talked too much. It’s your turn. Now,

Jason
I guess one thing to point out is we really applied machine learning slant to even our name selection, because the objective function or set of regulators, we applied to the name selection process itself, because it needs to be relatively short, easy to spell, easy to pronounce, somewhat unique, but not too unique. And then it has, all these other associations that Luis was mentioning or similar associations. So those are definitely in the objective function as we were working through this process. It’s also rhymes with optimal as well. So, yeah, it took us a while to get there, but we were happy with the result.

Matt
I think you guys did a great job. And I also like the visual notion of, even though they’ve got distributed brains that there is this sort of central part of an octopus and then there’s it can touch anything. So it’s kind of this build one’s gonna run many places sort of image that sort of flows through, but maybe I’m stretching it too much now

Luis
No, that this excellent point is that we do think about, TVM being in our technologies really be a central place, I can touch multiple targets in a very efficient and adaptable and automatic way, right. It’s a definitely within scope of how we’re thinking as well. So great.

Jason
So 9 bits in a byte by being a core primitive computational power of two.

Matt
Very good. Coming back to the open source community, you guys have partly because of your your academic backgrounds and in involvement in other ways in the open source community. So how is it? How are things working within the Apache TVM community along alongside OctoML. So very important time in the life of both and curious to get your thoughts on that.

Jason
Yeah, we really see OctoML as doing a lot of and pushing a lot of work that needs to be done in the open source community, eating our vegetables. So we’re currently ramping up the team to just put more of that vegetable eating spirit in the TVM project and helping pitch in on documentation and packaging, all those things that need to be done. But it’s difficult. Open source is known to attract people to scratch their own itch and solve their own problems. But these kind of less sexy tasks often get undone for long periods of time. So we hope to be a driving force in doing a lot of that. And of course, working with the community more broadly to, connect the dots and help coordinate larger structural decisions that need to be made for the project. And all of this being done under the Apache Foundation, umbrella and governance process. So we’re working closely with the Apache folks and continuing to, smooth and work under that umbrella.

Luis
Yeah, just to add a couple more thoughts here, we are contributing heavily to the Apache TVM project in multiple domains as Jason as Jason said, and we think that this is, also very, very fortuitous for us because we see TVM as well as you one could go and use TVM directly to go and go do what they want. But then, as they start using it they realize that there are a lot of things that a commercial offering, could do, for example, make it much more automated, make it plug and play. TVM the core idea from that start was a research idea and now it’s part of what it I, iss using machine learning for machine learning optimization, and that can be made much more effective with the right data that we are helping to produce as well. So, we couldn’t be happier with the synergy between the open source project, open source community, and also what we’re doing on our private side as well.

Jason
Also, when one thing that’s been nice to see is in talking to users, or soon to be users in the TVM project, they’ll say, Oh, it’s great to see you guys supporting TVM. We were hesitant of kind of jumping in because we didn’t want to jump in and then be lost without anyone to turn to for help. But having someone like yourselves, knowing that you’re there for support makes us feel better about you putting those initial feet on the ground there. So that’s been really nice to see as well.

Matt
Now, that’s really interesting and, we are recording this in a time when in fact, we’re all in different places because we’re in the midst of the Covid-19 crisis. I’m curious on a couple of different levels. One, is with, the open source community two is with the some folks that are interested in becoming, early customers, but even just Thirdly, with your team, how are all those things going for you all working in this environment? And certainly there’s companies like GitLab and others that have had lots of success, both, working as distributed teams and working with their customers in a distributed way. What are some of the early learnings for you all on that front?

Jason
Well, since TVM, start as an open source project, then a lot of us have that distributed collaborative, blood flowing through our veins to begin with. So working remotely in a distributed, asynchronous capacity is kind of part and parcel to working with open source community. So luckily, both those community and us as a company have been relatively untouched on that front.

Luis
Oh, absolutely. So when we when we started the company, we we’re heavily based in Seattle but in no Jason is based in San Diego that started initiatives and we started growing more distributed – we hired people in the Bay Area. We had people in Oregon in the team and it’s working so well it’s been so productive to we were very, very fortunate and lucky not only we already started somewhat distributed to begin with, and now it’s serving us really well. We had great investors with us by to being stuck with us and, and fun years right to the right moment where we need to continue growing. And in fact, we are hiring people in a distributed way. Like just yesterday we had another one another person that we really wanted to hire, assign and join, join our team. So we are fully operating in all capacities, including interviewing, hiring and doing this submitted way and I haven’t noticed any hit in productivity whatsoever. If anything, I think we’d probably be even more productive and focused, right.

Jason
And on the customer side, I would say been a mixed bag in terms of, there are those customers that kind of have some wiggle in their direction or roadmaps here and there, but then there’s also customers that have, orders of magnitude increase in their product demand because they’re serving, Voice over IP or something to that effect. It’s being really heavily in demand in this time of need. And so it just depends, and so luckily, there’s not been any kind of negative shifts there.

Matt
Yeah, you guys, I’ve really been blown away by your ability to attract some just incredible talent to the team here in just a short period of I don’t know, like, seven or eight months of really being a company and I get the sense that that momentum is just going to continue here. So congratulations on that front. I’m curious on the customer front, to pick up on what you were saying, Jason, what are you finding in terms of, kind of customer readiness? I think back to even a few years ago, it seemed like it was almost still too early, there was a lot of, tire kicking around applied machine learning and deep learning. And people were happy to have meetings, but they were more kind of curiosity meetings. Seems like there’s a lot more doing going on now. But I’d be interested in your perspectives on the state of play.

Jason
Yeah, but I would say it’s more than timing, it’s variance, and that we see a huge range and customers that have deep pain in this today in terms of getting computational costs on their cloud bill down yesterday. And because they’re spending, tons of GPU hours on every customer inference request that comes in. And then you have really large organizations with hundreds of data scientists trying to support these very complex set of deployments across, several, half dozen or dozens of different model hardware endpoints. And, and so there’s a lot of pain and a lot of different angles. And it’s, it’s mixed over the set of value propositions that we have performance, ease of use and portability across hardware platforms. And so it’s, been really nice to see, we’re just talking to a large telecom company just the other night. And yeah, just huge amounts of demand. And so it’s, it’s really nice to have the open source ecosystem as well, because it’s a natural, funnel to, to try to pick up on this activity and see, oh, we see someone coming through using the open source project and talking about it on the forums and we have going have a conversation. with them, and there’s naturally already a need there, because otherwise they wouldn’t be looking to the open source project.

Luis
Yeah. And just just one more thing that I think it’s interesting to observe that, yes. So there is there is indication that is, it’s early, but already big enough to have serious impact. For example, we hear companies wanting to move computation to the edge to not only save on cloud costs, but be more privacy conscious. Right now, as you can imagine, as a lot of people working or working from home, all of a sudden, we see a huge spike in conditional demands in the cloud. And, we have some reasons to believe that a lot of that involves running machine learning models in the cloud, that, companies will have to, reduce and improve the performance, because otherwise there’s just simply no way to scale as fast as they need to. So We’re seeing that this spike in demand of cloud services as well being a source of opportunity for us.

Jason
Also, also, one thing I’m excited about too, is on, on the embedded side of things, it’s one reason why there is there’s pent up demand. But it’s, essentially, there hasn’t been much activity in terms of machine learning and the embedded side of things, because there haven’t been solutions out there that people can use to go and deploy machine learning models into embedded processors. And so being able to kind of unlock that chicken and egg problem and solve one, crack the egg essentially, and have a chicken come out and start that cycle, and really unlock the embedded ml market. It’s really exciting proposition to me, as we get there, through our cloud, mobile and embedded efforts.

Matt
And I think that’s what we saw to from, having, been fortunate to, provide the seed capital last summer with you guys into the early fall. And really, be alongside you from day one on this journey. And I’m interested in sort of two things. One is, I think, in retrospect, right, you all made this decision in the early part of this year, that there was enough visibility enough evidence that you were going to go ahead and, and raise a round. And that’s looking like it was well timed now but maybe a little bit of like, why do you decide to do that? And then the second question is, well, what are you going to do with this $15 million that you’ve just raised? And and what’s the plan in terms of, growing the, the business side of the the TVM movement?

Luis
Yeah, absolutely. So we, as I said, we, it was incredibly well timed, by, by luck and good advice as well. Yeah. So at that time, what motivated us was that we had an opportunity to hire, incredible people, and it was quite faster. We actually be more successful in hiring than we could have even, hope for in the best case. So it’s like why not, in this climate when we have interesting people to hire and amazing people, we just go and hire them and need resources for that. And that was the first, let’s do this early. But and now know, as we, as Jason said, we started to engage with, with more customers and getting our technology in the hands of customers. And this is immediately puts, more pressure on us to hire more people to, make sure that our customer engagements are successful. So we’re going to staff that up and make sure that, we have the right resources to make them successful. And also as we as as we go to market and explore more, more thesis on how we build a business around the Octomizer requires effort. And that’s what we that’s we’re going to use the funds for is increase our machine learning systems technology team, and also, grow our platform team because what we’re building here is essentially a cloud platform to automate all of these, a process that requires, a significant amount of engineering. And we’ve been very, very engineering heavy so far naturally because we’re building the technology, and we are very much technologists first. But now’s the time to definitely beef up our business development side as well. And that’s where, a good chunk of our resources are going to go as well.

Jason
Also, one thing to point out is just given where the TVM project sits in the stack, in terms of, having the capability to support pretty much any hardware platform for machine learning, you’re talking about dozens of hardware vendors here, silicon vendors, and then basically be able to cater to any machine learning and deep learning workload on top, whether it’s in the cloud, mobile or embedded, and you’re talking about a huge space of opportunity, right and, and that’s just the beginning in terms of, there’s extensions upstream to training and downstream to post deployment and there’s classical ml and science as well. And so each one of these Kind of permutations is a huge effort in itself. And so just trying to take even small chunks of this huge pie is a big engineering effort. So that’s, that’s definitely where a lot of the money spent is going at this point.

Matt
Well, we’re really excited and honored to be continuing on this journey with both of you and they’re in the not only the founding team, but of course, all the talented folks that you’ve hired. And I think from a timing perspective, the fundraise was, well, timed. But I think from a market perspective, the role that you all are trying to play, the real problems that you’re trying to solve are exceptionally well timed. And so we’re looking forward to seeing how that develops here in the in the months and years ahead.

And we’re excited to be here. Thanks, Matt.

We couldn’t be we couldn’t be more excited. Thank you. Thank you for everything.

 

POSTED IN: Madrona News

Founded and Funded – Building a Distributed Workforce with Those Who Have Done It

What a change we have all experienced in these last few weeks.  Everything has been shifting at an incredibly rapid pace and we have all had to adjust both our personal and professional lives.  For those of us that can, we are primarily working at home, amongst our dogs, children and family.  We have become very familiar with Zoom, Google Hangouts, Microsoft Teams, Bluejeans, etc as we toggle between them.  But is it working?  Most likely, some things are and something aren’t, as we adjust to this new cadence

Recently, we were able to get a great group together to talk best practices in working and managing remotely.  We had Carlos Vega, CEO of Tesorio, Barry Wark, CEO of Ovation and Kara Hamilton, Chief People and Cultural officer of Smartsheet.  Together they talked about the challenges of keeping things on track  in a remote environment.   With big company goals, how do we ensure we are all marching towards them during this disruptive time?  How do we help our teams be productive and effective?  What tools have been most helpful?  We turned this conversation into a pubic podcast which you can listen to below my summary of the recommendations.

The conversation was kicked off with the topic of the cadence of meetings and work – have they changed as we have transitioned from being physically together verses in our remote locations?  Overall, the need for schedule and ‘showing up’ was emphasized, but this was combined with the understanding that this is an unusual time.  Due to kids being home and schedules being disrupted, the group emphasized the need to have great trust in your team – not to micro-manage.  But some specific tips that seem to help the day be more effective were:

  1. In the morning, act as if you are going to the office. Wear office appropriate attire, shower, get  your coffee, etc.  Have a concrete start to the day.
  2. For meetings turn your video on. It is important to see facial expressions and be present when a meeting is happening.
  3. Have a coffee or lunch virtually with a team member. By not being together in the office there are casual interactions that are missed.
  4. As a leader, have a standing time where you are on your video conferencing for a few hours and folks can ‘drop’ in.
  5. At the end of the day, have a transition. It used to be a commute – now maybe it is a walk outside.
  6. Create time in your calendar for thinking time. Block out time with no video meetings or other digital distractions

We also discussed the importance of tools that have been effective. What came out the most was regardless of the tool, the need for documentation was critically important.  It is easier to have misunderstandings when virtual, so writing down everything from process to a decision is imperative.  In regards to tools to enable all of that:

  1. Video Conferencing – Zoom, Microsoft Teams, Google hangouts
  2. Collaboration – Slack, Smartsheet, Confluence, Notion
  3. Fun! – Donut (nudges different employees to meet each other)

Culture and Hiring is more challenging when working remotely.  While we all work on culture even when we are together, much of it happens just through be present with each other and modeling it.  This is much tougher in a digital environment.  Some suggestions were

  1. Again – write it down! The values and goals to help communicate culture
  2. Remember you are still leading and living them by example even virtually.
  3. When not in a Covid crisis, bringing the company together multiple times a year is critical.
  4. If you feel you should get on a plane (not in this crisis period!) don’t hesitate – do it!
  5. Hiring – the job spec really to be written down and fully agreed to. Then in the virtual interview be more specific about what each person is interviewing for.
  6. OnBoarding – ensure that the new hires first day and week are full of intro meetings, virtual lunches. Also, sending swag or a care package that first week to the employee goes a long way.

Managing through this period is bringing new challenges to all of us.  Clearly, just adjusting to the new economic environment and the health of our people are the first things to address.  Hopefully the ideas above can help us handle them in a more constructive and productive way.

Transcript

Hope Cochran

So guys, thanks for joining. And you know, clearly we’ve all had dramatic changes in our life changes that we could have never ever predicted. I was just on a call with another CEO. And we were just commenting on the fact that we do a lot of scenario planning, but this is one we could have never drummed up in our imaginations. So here we are. And it’s been major changes to both our personal and our professional lives. And you all have the difficult task of driving companies that are supposedly growing quickly and have big goals and ambitious deadlines. And so how do we keep those on track during this time? Now, I brought together three panelists who have dealt with this before this period, meaning working with remote workforces. And so we thought we could pull us all together I’ll talk about some best practices as to what we found to be effective during this period and building things from the ground up in this way. So we’ve got Barry Wark from Ovation on with us, Carlos Vega from Tesorio, on with us and Kara Hamilton from Smartsheet.           And so I’ll just let them kick it off by introducing themselves and talking about how they built their companies. With this distributed workforce in mind from the ground up. Carlos, you want to kick it off?

 

Carlos Vega

Certainly, thank you for having us.

 

Carlos Vega

So, Carlos Vega, co founder and CEO of Tesorio. We’re a Series A stage company, Madrona letter A. And we’re very lucky to work with folks like Hope. And so our company you know, I’m originally from Panama. Probably not in San Francisco, I’m in Panama right now just don’t have a pretty Panama background. And my wife’s also from Panama. So I always knew that we would eventually move back. And so we started our company to be distributed. And so we are today based in have an office in Burlingame in the Bay Area. But we only have about eight or nine of our 31 employees there. Everyone else is distributed across the United States. And then we also have people in Brazil, Mexico, Colombia, and Uruguay and in Panama, so it’s a it’s been an exciting ride. I guess the one thing I’d say is that we have to be, you know, deliberate about how we do things more than they would happen if everyone was face to face. And yeah, and company background. In case you’re wondering, what we do is we help companies manage their cash flow actually. So manage their accounts receivable. Time their accounts payable strategically out so the high party vendors are getting paid that sort of thing. It’s a good time right now to be doing those things so I’m we’re trying to do it ourselves and eat our own dog food. So happy to be here and thanks for having me, Hope.

 

Hope Cochran

Yeah, I you know cash right now is King and I know that there was a webinar last week on that very topic. Carlos your product is right in the sweet spot of it so I’m sure it’s getting used widely and deeply by your customers at this moment. Carlos, can you just remind us how many employees Tesorio has currently?

 

Carlos Vega

Yes, we have 31 full time employees. We have also five contractors in Brazil and five contractors in Argentina as well.

Barry Wark

Thanks. Well, it’s a pleasure to be here. Thank you for inviting me. I’m Barry Wark. I’m the co-founder and CEO of Ovation. We’re a Series A clinical informatics company.

 

We’ve got 35 people now in 12 states and a dev team in Paraguay as well. And we, we operate in a very specific vertical, clinical diagnostic labs. There are some amazing world experts in this field in the US, but they’re not all in one place. And so we built ovation from the ground up as a distributed company, knowing that we were going to have to recruit that domain expertise, wherever it was. And we built some of that muscle originally. And it’s now I think, serving us pretty well.

 

Hope Cochran

Yeah. Are you is your company at all involved in helping out with the virus right now? Barry?

 

Barry Wark

Yeah, we’ve had a busy week. Yeah, we’ve got a number of labs that should be coming on this weekend with testing. We’re hoping to make a significant impact in the US testing capacity probably early next week.

 

Hope Cochran

That would be very well received. Thank you for that work. And how many employees are you currently?

 

Barry Wark

We’re currently 35 people

 

Hope Cochran

So Kara, you’re in a bit of a different stage with Smartsheet at but clearly very distributed as well as you guys build a product that helps distributed work. And just so the group knows Perez, the chief people officer and head of culture there at Smartsheet, which I think is definitely important aspect to this conversation.

Thank you Hope. Thanks. Thanks. Hello, everybody. Yes, I am the chief people and culture officer for Smartsheet. And we do provide a collaborative work management platform. So we are in the collaboration space, trying to best practice really with our own workforce. We have grown we are publicly traded now. We’ve grown from 30 people to 1600 in less than eight years, and Madrona was our first VC partner. So part of the family here. We have those 1600 employees are across Bellevue, Boston, Edinburgh, London and Sydney. And I would say we’ve grown from a very in office local to now a global company. And it’s the work has been. There’s technology work to do and tooling. And there’s also like a cultural, I think Barry mentioned this intention. And so I think they’re both equally important. growing into that.

 

Hope Cochran

So, yeah, that’ll be good to talk about. And let’s kick it off with just talking about what is the cadence of work, meaning, you know, when you come into an office, there’s kind of standard norms, you come in in the morning and you leave in the evening, whatever that looks like. How is that different in a virtual setting? Whoever wants to take it away.

 

Carlos Vega

Yeah, I’m happy to start unrelated to work it starts like with yourself Actually, I’m not all combed and shaved just because of this webinar. I actually do follow that routine as if I were going to the office. You know, I think people think remote work is great, I get to work in my PJs, but that there’s something like psychological about just preparing yourself and think you’re to work. So that’s, that’s pretty important the morning routine, and the other one which often gets forgotten, and I’m not good at it. But probably most co founders on this on this line are not going to do either is unplugging at the end of the day. You know, I can share what our teammates do.

 

Hope Cochran

I really struggle with that.

 

Carlos Vega

Yeah, yeah, I’m not I’m not the best example for that. But you know, our teammates Do you know, go for a walk or go for a run at the end of the day to simulate the commute, if you will, or you know, people just very explicitly changed our slack status or something like that. So yeah, so on that end, right? That’s a little bit on the personal side. And then on the work side, I think it all starts with a culture of trust, which is something we can talk about later. But that’s that’s the bit that creeps in the back of your mind like I was previously an investment banker. And at Lazard it’s all about FaceTime not the app, but you better be at your desk, you know, leaning forward with like, madly typing away in Excel all day and if the MD walks by and doesn’t see you there, you’re not working, it doesn’t matter what you’re doing. And so I’m not saying that’s exactly how I manage but, but that’s one of those things that really going completely on the other end is critical, which is making sure you trust your team otherwise you end up micromanaging so we can talk about that later, I’m sure. But over to someone else.

 

Hope Cochran

Barry What have you found similar? Yeah. Oh,

 

Kara Hamilton

I was just gonna say I think the culture of trust is so important and also a mutual understanding of priorities so that we’re all working on the right things. We have a lot of people leaders at Smartsheet that have employees on their team across many time zones. So also being intentional about when we’re going to check in so that people in all areas are feeling like they’re connecting during their work day. And I think that takes a lot of flexibility and intention from people leaders, to really set their teams up for that kind of healthy connection.

 

Barry Wark

Yeah, I think that I think that’s a really good jumping off point. We think a lot about trying to design our interactions and our work environment to leverage what’s great about distributed teams, but also substitute for what is lost when you’re not all in an office together. So one of the things that we find is we somewhat select in some cases for people who want to work from home because they have a child or a parent or some other dependent, that they are responsible for at, you know, odd times of the day. And that work from home schedule allows them to contribute, and, and maintain those other responsibilities. And so, you know, we don’t have a, you know, if you’re sitting at your desk 8am to 5pm kind of approach. It’s very much a, like I said, you have to trust people to be doing their work. And then we have intentionally scheduled sync up points, right, like standups or meetings. And, and, and on the flip side, trying not to spend all of our day on zoom in meetings, right? Something that we often rely on in office environments is we can have a coordination meeting, and then you get, you know, diffusion of knowledge from that meeting, just by people sort of walking around and talking to each other. You don’t get that in a distributed environment. And so we have to design for communicating what happens in those meetings without having to have you know, 1000 one-on-ones to train for that knowledge, and I’d say the last part of cadence that we think a little bit about is when are we actually going to meet up together in person. So we are very intentional about currently Ovation does three, all hands meetings a year, we do it in a location. And it’s, although there’s a little bit of business it’s very intentionally, mostly social and getting to know each other. And part of what Carlos was talking about trust is really hard to build over Slack and Zoom. It’s much easier to build in person, and then transfer that to the distributed environment.

 

Hope Cochran

Yeah, so you’re saying like three meetings a year or gathering zero of the company, Carlos, I feel like you’ve done a similar type pattern.

 

Carlos Vega

Yeah, that’s accurate. Yeah. So what we try to do at least one annual like everyone gets together, but then the different managers have the freedom to basically create all sides for specific purposes, right? So we have a pretty big project we’re working on with folks in different countries and different teams all together. So we all went to Nashville, right?   Which was fun, but the point is really all coming together can really there are certain things which to be honest, are just better done in person. And coordinating those big projects and the timelines and hammering out the details. Sometimes is better to just bring together and so some of that budget from the bigger offices can be dedicated for people to selectively use and that’s part of that trust factor right? Like if a manager of a team or product owner initiative owner is saying like, Look, I think we need to do this and they have a strong argument for it and then going for it is something that’s powerful.

 

Hope Cochran

Yeah. So, Barry you touched on it briefly, but I thought we could dive more into it that kind of meeting cadences meaning, like meeting with your direct team, like do you have regular times that you try and coordinate every week? Or how do you approach that?

 

Barry Wark 13:30

So I personally do scheduled one on ones with all of my team. Again, because we don’t have that sort of passing in the hall interactions always. Most of our teams do team stand ups and then you know, scheduled one on ones. But we also have started doing we call them random coffees, and we, you know, spin a wheel each weekend and assign people to find some time just to sit down over zoom or or chat or something and have a coffee. And what we found is that that feels like

 

Barry Wark 14:11

it may be taking time that you’d want to be doing something else. What we found is that it’s actually reduced the number of meetings we have, by more than the total number of minutes that people are spending and I’m just because we get a little bit of that, that diffusion and synchronization of what’s going on in people’s lives that way.

 

Hope Cochran14:29

Got it. Um, so, yeah,

 

Carlos Vega14:35

I know you have a section on tools later.

 

Hope Cochran 14:37

Yeah, we’re just heading into that. So good segue.

 

Carlos Vega 14:39

Okay, I was just gonna share what Barry just shared is something that one of our engineers suggested too and Barry I’ll admit, I was also like, do we really need to do this like I think we could be doing other work so congrats on the foresight, but one of our engineers implemented a tool called donut which is kind of cool. And here’s a screenshot. It just basically automatically pairs people and you can opt into it. You just put it in slack. And they’ll automatically start pairing different random conversations automatically ask you like a cheeky question to icebreaker. And we’ll create the calendar invite and allow you ought to just connect. So a virtual way of doing what Barry had the foresight to do.

 

Hope Cochran 15:23

That’s interesting. So it’s kind of creating unlikely pairs and relationships that maybe you would have developed in the office because you ran into them. And yet, it’s, it’s giving you that nudge. Right. Yeah. So let’s talk about tools. Kara, let you pick it up, and what tools have you found effective prior to this time, and during this time

 

Kara Hamilton

Yeah, I think we have an approach of kind of a host of tools, looking at different teams, utilizing different things. So Zoom, absolutely, we’ve been able to use zoom to have very large and have meetings like this where you can almost do a town hall. And that feels really good. And we get a lot of participation. Sometimes I think we get more participation than a big in person meeting because it’s almost leveled. everyone is on the same plane. We Slack, we use workplace for internal comms and that provides a lot of area to socialize online. And Smartsheet of course, and then Google Chat. I think I’m between like Google Video and zoom, like back and forth throughout the day for different applications.

 

Hope Cochran 16:35

Okay, you have to tell us like the best use of Smartsheet during this time, as well.

 

Kara Hamilton

The best use of Smartsheet during this particular time is we have a we have a dashboard for our Covid-19 preparedness and so we’re able to keep that updated for our employee base so they can see what each offices we’re now all on complete work from home but as you we were working through this different offices. We’re in different statuses and then lots of links and information and intake if you had something to tell us about what was going on with you, that actually that whole kit is available to any of our customers and free to anybody who was in trial. So that’s like our one of our uses right now. That is been really, really helpful to us. And then just the general collaboration and sharing that we that we’ve always utilized. Smartsheet for.

 

Hope Cochran 17:37

That’s great. Barry, what have you guys utilized?

 

Barry Wark 17:39

So I think actually, our most important tool is just an attitude around written documentation. So we’re going to talk about culture I know. But but in a distributed team against it without that office diffusion, written documentation of what’s been decided and why so that people who are working independently can act independently sort of in the, in the right direction, we found has been really critical. Most of our team failure is centered around lack of documentation. So we use Confluence currently for that. But I think that it is just the attitude that meeting notes, get documented decisions get documented plans get documented. And, again, I think like these random coffee meetings, I feels like a big burden. But it ends up saving us a lot of time in the in the end. We’re also big zoom users and slack as well. So I think I think that’s kind of baseline now even in office companies. Yeah. in office teams.

 

Hope Cochran 18:44

So yeah, you referenced this rigor around writing everything down. I think that’s really interesting. Did you start that from the beginning?

 

Barry Wark 18:54

No, we didn’t. (laughing) But we had a couple of great conversations with distributed teams that were a little bit farther down the road from us. And one of the things that they told us was, by the time they hit, actually now the stage that we’re at, they didn’t have a lot of that, that documentation sort of hygiene in place. And it really ended up being a drag on their team’s ability to execute. So we got we got serious about that, I think in time, and it’s now it’s now one of the sort of driving forces of a lot of our rules of engagement and how we, how we document what we’re doing. We’re not perfect at it yet, but we’re working on it.

 

Hope Cochran 19:36

Yeah. Carlos, I feel like you guys have that rigor as well.

 

Carlos Vega 19:41

Yeah, just echoing with what Barry shared about writing everything down. So we use an app called notion, which we all joke around that my co-founder and he’s a CTO, that he’s a angel investor, because if he sees anything that is, sounds like a process, he will immediately ping you on slack and say you should put that in notion. And so this has basically everything right? It’s got home with like the Quick Links for everything related to, you know, quick resource things that the team might want. But everything you can see over here, I don’t think I can zoom in. But on the left, we’ve been organizing, keeping through everything, everything from sock to processes. Now we’ve got a founders only folder for ourselves, like the different payroll process, employee onboarding, and off boarding, like everything’s on there. And it’s kind of cool. It gets managed, like a little Asana chart or Kanban style for the different proxies. You can choose different things that you do. And then we also just, it’s pretty straightforward. Just have a Google Sheet with all the key initiatives. And then every week when we meet, you know, everyone has the initiative. We have a weekly meeting of the initiative owners every Monday. They go through and they update the status on things and we go through and update, you know, whether something’s been, you know, backlog completed, etc. And this just helps us track like how things are going and what’s what’s, you know how things are progressing that, that we borrowed from a book called The Great CEO Within, which is, you know, a lot of you probably got a Google Doc for it. It’s a good one that was pretty valuable. So yeah, those are two of the main tools, other things, just like, you know, little rules around the tools also matter, right. So in Slack really enforcing people to use group chats instead of going direct, right, actually threading in in Slack, instead of having a massive conversation in the group channel. Always having your video on during a meeting is also really something is pretty relevant. And then establishing rules about when to use Slack when we use email, when you text, when to call. That’s also pretty valuable. And to Barry’s point earlier, like, we reached out also to folks like, like the CFO, CEO of Automatic is their customer and he’s become a good friend. They’re very distributed. And so he told me, basically write everything down everything that you think you kind of logically understand. make it explicit. And so that, that summarize everything. It’s make everything that’s implicit, explicit, and just keep that in your brain and just do that, but that they’ll have the outputs.

 

Hope Cochran 22:38

For Notion Carlos is that a, like an enterprise license that you pay, or

 

Carlos Vega 22:45

I don’t remember, it’s not that expensive. It’s, uh, yeah, it was, I think, I don’t remember honestly. We set it up. It wasn’t like a big decision at all.

 

Hope Cochran 22:54

Yeah. And then the other thing you mentioned, which I know is just a little point, but I’m just always do video when you’re doing these chats. I have found in the past week, I’m so much more present when my videos on. I wish I had the discipline to be as present when it’s off, but somehow I’m finding that when it’s on, it’s a lot more effective. And so as long as I’m not fighting for bandwidth with my teenagers um, let’s switch over to culture. And you know, there’s there’s the logistical aspect of this. And then there’s the cultural aspect. Yeah, Barry…

 

Barry Wark 23:30

Kind of one more thing just on tools that I think we didn’t mention. Not super applicable at the moment. But I think one of the important tools for distributed teams  are airplanes.  We have the now written rule that if you think you maybe should just get on an airplane and go sit and talk with someone, you should already be on the airplane. And what we found is that that breaks down a lot of the barriers that were you know, people are confused over Slack. For a long time, when they could have just sat down and talked about it, we don’t get that in this moment. And it’s definitely something that we’re starting to solve for now, but it’s a tool to have in your tool belt once once it comes back.

 

Hope Cochran 24:13

Very good. On the cultural and hiring like the HR side, we’ve got the logistics, of recruiting, hiring Clearly, we don’t want to be slowing down that process as talent is so key to us. And then also just how do you instill your culture throughout the company? So to kind of two legs to this topic, and let’s just take the tactical first care I’d love your thoughts on you know, how do you do recruiting? How do you do onboarding? I’m here during this time when we’re outside of our normal habits.

 

Kara Hamilton 24:48

Yes, during this time, we have for the past, I think three weeks, we moved all of our interview loops to video and we made a very intentional decision to move everything to video because we didn’t want to introduce bias of people who were this were these were the days where we’re still accepting visitors of the office with you know, health screening questions and we didn’t want people to feel like they didn’t have that they were putting themselves at a disadvantage. So we moved everything to video, it’s gone surprisingly well, we have we arm our candidates with some tips and tricks for video we asked them to practice we have recruiting coordinators that are able to like what I mean is practice the technology to so they can feel comfortable that they’re going to get it right the first time because it’s so nerve wracking, right or you’re already coming in and trying to present your best self and then if you get flustered over technology that can feel really bad onboarding where we have been very much, you know, that’s our touch point with people I can’t say enough about the airplanes and the in person meetings that provides such a great foundation to then build your district distributed relationships on. So onboarding has always been a time where we welcome people to the office, we have new employee orientations. In each office, we’ve gone completely virtual, we’re shipping laptops. And we are doing video calls to do HR onboarding, as well as it onboarding. And then we have sets of videos, I think we’ll do our first set of live new employee orientations. with senior team like every month, I do a half hour talk with all new employees who’ve on boarded in the last month. And so we’re going to start doing that more virtually than we ever have before. So it’s really just can we, I think we, we learned that we can do it. And I’ve gotten feedback from people who’ve been hired in the last few weeks and they’ve I think they see the intent wholly, you know, so that’s appreciated that they were still able to start on time and that we’re definitely doing our best and we’re learning as well. We go, but it’s been positive.

 

Hope Cochran27:02

That’s great.  And Barry and Carlos, you guys actively hiring and is it been awkward during this time or since you have set up this way already? Just continue as normal? And what does normal look like for you?

 

Barry Wark. 27:16

So we are we are still actively hiring. We did have at least some of our interview loops through Zoom already. Because our leadership team is distributed. And our team leaders are distributed. Everyone was always talking to at least a couple of folks on zoom. It has been there’s no question that having someone in person is a way to connect with them on a sort of non you know, not on the resume but just with them as a person. And we’re definitely still challenged to do that purely over zoom.

 

Hope Cochran 28:33

Carlos, you have a very rigorous like process before you start hiring.

 

Carlos Vega 28:41

Yes.

Hope Cochran 28:42

I think that’s interesting.

 

Carlos Vega 28:44

Yeah. It’s, uh, yeah, it’s, it’s, uh, I guess it came from Mike Maples at Floodgate and it’s pretty basic on paper, but it’s like takes about an hour and it really helps out and yeah, it feeds into like one of the points I was gonna make hope Yes. Thanks for bringing that up is like, what we found is to just be really rigorous about the role. And then how you validate that the person fits that description, just by having a lot written down and making sure that everyone’s aligned who is going to interview right. And so my mic, called it a hiring kickoff. And basically, you go through. First off, you define who the hiring committee is for that role. And then you schedule an hour-long call with that hiring committee. And you all work through two sets of questions. The first set is, you know, what are we expect this person to do and what could they be prepared for not doing? And that second part of that question, just kind of, I don’t know, it leads to a lot of passionate conversation, which is really interesting. And it’s mind blowing like, 100% of the time, like, I think we’re super clear on the type of marketing person that the company needs at our stage, given what we’re trying to accomplish and trying to create a category and do all that. And everyone shows up with a different, completely different perspective, that if we hadn’t done that, we would have been trying to hire the wrong like each person, we try and hire someone. Right? And then the second part is, how do you validate that the person meets these criteria? And what types of questions are you going to ask like to confirm that? Right? And that’s where we think about the questions and the exercises and things like that.

 

Hope Cochran 30:33

And I think as you’re hiring in a distributed environment, having this definition becomes so much more important. I do want to we got a question on q&a that I think fits in well here on this topic, which I think is interesting just about you know, maybe if during this specific time care, maybe you can jump in what are we allowing employees to expense and how are we handling their kind of at home stuff.

 

Kara Hamilton 31:00

So we have so what we’re allowing right now as we sent people home is the allowance for monitors because I feel that I mean, I know my first few days fully at home, being on my laptop was just exhausting between being on video and trying to work and collaborate. So monitors I think are like an instant productivity hit and my neck felt much better as well. So having my key like so little items like that, but as we are in a standard like in in our normal practice, if we have someone that is fully remote at home, which we have about 150 employees that are working, what we call in the field, we provide up to $700 allowance for them to set up whatever they need for their office that might be a chair, it might be a standing desk if that’s what they prefer. So it’s really up to them on what they need beyond the current technology that we provide. And we’re exploring a few other things. But right now we’re just on monitors and our IT team is pretty stocked with external keyboards and mice and everything else, you might need extra power cords. I think it’s all the little things that once you get set up, you can feel a little bit more productive. So we’re still exploring it.

 

Hope Cochran 32:28

Yeah, that’s great. Barry, you’d mentioned you know, get on a plane anytime you can. Clearly right now, we’re not getting on planes. But what are some of the ongoing expenses that you say, this is fine.

 

Barry Wark 32:38

That’s a great question. So we have actually, in in sort of normal mode. We do have folks working in offices and we do have folks working truly from home. The folks that are, you know, in the field working from home, one of the things that we pay attention to is like internet bandwidth and You know, when we, when we sent folks home this past week, anyone that didn’t have enough Internet bandwidth to make zoom work effectively. We just, we just paid for it.

 

Barry Wark 33:21

And, you know, I think the question of, you know, what do people expense at home versus at an office? we’ve we’ve been lucky so far. And admittedly, we’re not a huge company yet, in head count. We’ve been lucky that the people on our team have been pretty, pretty, pretty conscientious of what would I be spending in an office that the office would be providing versus what do I have at home? And and we assume that we’re spending about the same amount on people, whether they’re in an office or in their own home. So if we’re, you know, eating snacks or food or something for an office would do the same thing for folks at home.

 

Hope Cochran 33:57

Do they expense it or do you give them some sort of allowance?

 

Barry Wark 34:00

We’re still letting them expense it again because we’re small enough that you know we can see what’s going on before it gets out of hand. Yeah and we’ve got reliable people maybe this speaks I think back to Chris’s idea of you know trust in a distributed team is pretty crucial give people the guidelines and assume that they’re gonna operate within those guidelines.

 

Barry Wark 34:21

I see psi Kara smiling, it’s probably we’re probably going down a different road eventually here.

 

Kara Hamilton 34:28

It is a show of trust and we are not doing that.

 

Kara Hamilton 34:33

So I’m torn in my own head of like, okay, should we be doing that we do send care packages to our field employees every once in a while. So because they do miss out on little like swag that we might pass out in the office. We always make sure to mail anything like that to our field employees, but I have not we’re I don’t think the CFO and really allow us to have a snack budget for them.

 

Hope Cochran 35:00

I know Jenny and I would agree.

 

Kara Hamilton 35:02

It was a no go. But I’m gonna do more care packages because that’s in my control. So,

 

Hope Cochran 35:09

Carlos, are you doing anything for your employees?

 

Carlos Vega 35:13

Yeah, so we give them two options when they start. And we can either so first off, we give everyone laptops when they start, right, that’s something we, you know, at our stage, you know, we weren’t doing till we were about 15 people, but then we decided that that it was important. So that’s not part of this but we also give people $1,000 budget to build a home office. If they’re going to build from work from home they can expense whatever they want, you know, keep horse monitors desk chairs, whatever. And the funny part is, you know, by adding the thousand bucks you know, there’s a cap but man people buy some pretty expensive chairs is what I’ve noticed. It’s kind of it’s kind of wild. But um, but yeah, then then we if you’re not going to work from home, we also give you We pay up to $400 a month of co-working space that the company will cover for you. And most almost all of them are below that. And then that that co working space budget also comes with a $400 kind of budget to buy some equipment. If you’re working from home or benchmark on bigger companies, what automatic does is they give you a, I think they upped it to either $2,500 or $5,000 for your home office, and they also automatically update your laptop every six years. Right? That’s something else they do. And the chair and the desk are not part of that $2,500 budget. Those are must haves. And so that’s on top of that, and you can spend whatever you want on the chair and the desk, which again, I didn’t know it was such a thing but engineers and you know, mechanical keyboards really cool chairs and really good desks. It is a it’s a thing.

 

Hope Cochran 37:03

Okay. Let’s talk about culture. How do we establish and maintain our culture when we’ve got people working in all different locations? Do you want me to share it? Go for it?

 

Kara Hamilton 37:12

Okay, um, I think I mentioned workplace before, which is a Facebook product and platform and I think workplaces enabled us to stay well connected across our locations across different kind of interest groups. So we have all company announcements, but we also have different we have a diversity inclusion group, we have Smartsheet for dogs, we have, you know, Smartsheet kids, we have all sorts of different interest areas and that’s enabled I think relationships to bloom, where you might not expect them like we really want to have a lot of cross team connection as well as insight you know, in team connection. So that helps That kind of those flows. And I think we also are very purpose driven organization. So our purpose is, we empower everyone to improve how they work. And then we have a set of values that go with that and evaluate that action playbook. And, and I think that foundation that we built helps us we talk a lot about how, how am I showing up for Smartsheet? How am I showing up for my teams? How am I showing up for our customers? That’s all built into our kind of into our vernacular, and it’s built into our hiring process as well. Where Yes, like, where we are looking for expertise and experience and, you know, what is someone going to bring to the team from that side? How are they going to what are they going to bring in terms of leadership, but also what are they going to bring in terms of cultural add and are they are we aligned in our values and how we’re going to show up which is not an easy thing to write, um, like, believe me, we, we are on the journey of how you really evaluate that. But we’ve really looked at those three pillars and we’re dedicated to, to figuring out and doing our best because we think that’s, I think that the values and our purpose have helped immensely. And they communicate constant communication over workplace. I mean, I’ve put out three or four videos in the last month, where we’re doing a lot of lots and lots of updates. I think that kind of thing. Like, if you pull my arm, I’m going to talk about our values, our purpose, how we’re showing up what’s going on with Covid. And we can’t we almost can’t say it enough, because people need to feel that they need to feel that we’re there.

 

Hope Cochran 40:05

Yeah. Follow on conversation. And I want the other to comment on the cultural aspect too, but is worth continually hearing that people’s mental health is it’s hard right? Now, you know, people are feeling lonely. They’re feeling scared. Yeah. And so during this particular crisis time, what are your communication patterns? Or how are you trying to help employees? And so Kara maybe you want to kick us off at to kind of address that, too.

 

Kara Hamilton 40:21

As I talked about the cultural, I think the first thing is to be real about it. So I sent out a pretty long email to our entire workforce, about what it means to show up and our values through like where we are now, and how we have to be creative and flexible and support each other. We have a lot of people whose children I mean, we have a lot of parents who have school aged children, and they are trying to work, take care of their kids do the homeschool, and all of that. So I think it’s a lot about trust in space, and saying, like, we are going to, we’re in it together. We’re going to do the most important things, and we’re here for you and then the mental health things is extremely important. I’m really glad you mentioned that. I feel very fortunate that we had already rolled out better help, which is a virtual mental health tool where you can have a virtual session with the counselor. And we also provide membership to one medical which has virtual appointments. So that’s more of the standard health care. But better help I is great. We’ve also done some mindfulness training we’re very like one of our community awareness programs is is mental health for all and trying to stop the stigma. So it was already in our culture of people being brave enough to share about that. And so we’re and we’re being very intentional. I mean, I’m on our dashboard is are all the links to better health and our EAP and reminding people that we, we know they’re under stress, I think part is just like we’re not going to not talk about it. We’re not going to pretend that People aren’t struggling and aren’t scared. They don’t have the answers either where they’re where their employer and we’re going to do our best to show up how we can.

 

Hope Cochran 42:14

Yeah. Barry, are you seeing these issues more? You know, acute right now versus in your normal day to day or how are you addressing them?

 

Barry Wark 42:23

Um, so we definitely have recognized that it’s easy to suffer in silence when you’re not in an office. Yeah, and the, the sort of passive status update when you see someone you know, shoulders slumped, or, you know, head on the desk on a project, you actually gain a lot of status updates that way in an office environment. So we knew already that it’s easy to lose that in a distributed team. You know what Carlos showed the visible status dashboards kind of thing is a really important tool. And that’s something that You know, we sort of doubled down on in this environment. The flip side of that is over communicating. Like Kara said, We are in a distributed team, you it’s important to over communicate what you think are sort of obvious decisions that have been made. And it’s because you don’t get that diffusion of those announcements through it through a group, you really have to actively think about how are we going to communicate every decision that’s made, so that people stay up to speed and feel like they’re part of the conversation. So those two things are maybe accentuated by the current environment. For us, I don’t want to call it lucky. But we’ve got a you know, 24/7 kind of purpose that’s driving us at the moment to get testing capacity and to help our labs that are at the sort of the tip of the spear for this effort. So we’re, I think, again, very motivated at the moment, we haven’t had folks feeling like they’re lonely and adrift, but It’s certainly something that can happen anytime in a distributed team. And so I think there’s an approach to being very proactive and open about, hey, we know that this is potentially challenging, is valuable, especially for folks when they join our company, if they haven’t been in a distributed team before we spend a lot of time getting them one on one, just, again, sort of random coffee sessions with folks that have done it a lot before. And we found that there’s really nothing more helpful than saying, I remember the first week working from home and it’s really easy to feel like you’re alone and adrift. And you know, here, here are a couple tips. And, you know, here’s how you can reach me if you’re if you need if you need an adult to talk to that kind of stuff.

 

Hope Cochran 44:42

Carlos?

 

Carlos Vega 44:43

Yes. So I say Yeah, I agree with, with what’s being shared, and I’ll share some things that have specifically changed that we kind of went through. Just like last week, right? There were some, I guess what I’ve what I’ve found is, I guess as a company, like We’re I’m extremely transparent about everything. And then as a company, they’ve come to expect that right? So we had our board meeting last week. So at our all hands this week, I walked through the board deck and presented it to the whole company in our own hands. And then that Ned led naturally the conversation around kind of, you know, what are we doing with everything around Covid-19. And I guess what’s been interesting for us is seeing, I guess, you know, very to what you’re mentioning, like if you’re in a room, there’s kind of you can sense everyone in the room the same way where right now I don’t know if everyone can see this in the Brady Bunch view. In in zoom right with the gallery. You can’t quite see everyone just exactly the same, right. And so, as I was overly I guess what I’ve found that as a remote or distributed kind of team is you have to not just explain the decision, but also explain your logic and how you’re thinking about it. Like what’s your framework, and so everyone’s come to joke here goes Carlos with another framework but it just like, at least now they know like why I’m thinking a certain way, right? And so even after going out of my way to explain Hey, look, no failing to prepare is preparing to fail. There’s, you know, the old Churchill way of like, you know, talk about hard talk, not just happy talk. David Sacks wrote a really good post about last week. You know, there’s explained all that share the articles talk about it, but then you still have the folks who’ve never lived through a downturn, which a lot of us have on our team, just start to get really nervous, even though you’re talking about stuff, super overly caveated. Like, hey, these are just things we’ve talked about things we talked about, it’s better to talk about it now. I’ll think about it together. Being together like the kindest, most empathetic things you can say, still character what you’re sharing, right? People are still very nervous, and that’s just like in one ear out the other end. And so going out of the way to reach out, right and so Some things I’ve done, you know, every Monday now I’m just like hanging out by myself until someone joins in zoom meeting, and anyone can join at the company and chat about whatever right like and it’s been pretty interesting. who joins or what people want to talk about. And then the other one…

 

Hope Cochran 47:19

That’s interesting, Carlos, so you just open up zoom and you’re just there and anyone can click in to talk to you?

 

Carlos Vega 47:24

It’s on my calendar. Yeah. And so people can go to my calendar and see it I send it out on the general channel in slack like Hey, remember I’m here I’ll be doing some work someone joins an office hours. Yeah, and then people would just show up and then like, managers are really important weapon right now to more asset not weapon in keeping in touch with those younger folks, or more anxious folks, or whatever it is, they know that the pulse of their, their team better than, than I do as a CEO and then giving you a heads up like So and so I was particularly nervous about that. And then I can vouch for that one on one, right and say, hey, let’s talk about this. Um, so I feel like we have a little bit of extra work right now because of the covert part of, like, extra degree of empathy. So, yeah, that’s, that’s a little bit of our experience, know some things that we could have done better. Some things that we’ve changed.

 

Unknown 48:22

Alright, you all thanks for joining me today. I really learned a lot and I’m learning a lot through this whole process. So I appreciate it. These conversations are helpful.

 

Transcribed by https://otter.ai

POSTED IN: Madrona News

Founded and Funded: Managing through the Downturn with Glenn Kelman, Robert Wahbe, Bill Richter and Steve Singh

These are certainly uncertain times.  The only certain thing is that the world has changed.  As these CEOs shifted to working from home and managing distributed teams, they got on a conference call with managing director, Steve Singh, to share how they have been addressing moving their business forward.  Everything from communication to how they are planning (or not!) for a very different year than was in the cards when we clicked over to 2020 is discussed.  Glenn, Robert, Bill and Steve share heartfelt lessons from previous downturns and how they are navigating their current reality and helping employees and customers through this time.


Transcript below

I’m Erika Shaffer. Welcome to founded and funded. I work at Madrona Venture Group. We are doing something a little different today. We have three CEOs with us. We have Bill Richter from Qumulo, Robert Wahbe, from Highspot and Glen Kelman from Redfin to talk about how they are managing through this really volatile period. As our moderator, we have a managing director, Steve Singh. Steve is best known as the CEO of Concur, which was pulling in a billion in revenue when SAP purchased it. But to get to that point, he had to manage through not one but two downturns. And so both he and Glenn can reflect on their experience of navigating the big recession of 2008 2009. And with that, I’ll turn it over to Steve. Thank you.

 

Steve Singh

Thank you, Erika. Good afternoon, everyone. Today our topic is managing through an economic downturn and we did a version of This webcast for Madrona only companies last week. This podcast is open for all companies. Sadly, the world has changed materially in the past week. At this point, it’s clear that we’re headed into an economic slowdown. Now we can all debate the depth and the duration of that economic slowdown. But what’s not debatable is that every business now has a new set of factors to consider in how they operate. Inclusive in that new operating model is that every company is learning how to efficiently and frankly at scale work remotely. So one of the many values of being a part of a community is that we get to share and learn from each other’s experiences.  Joining me today are three very accomplished leaders. Robert Wahbe, the CEO of Highspot, Bill Richter, the CEO of Qumulo, and Glenn Kelman, the CEO of Redfin. Each of these companies are market leaders operating in large markets, Qumulo and Highspot are private companies in the rapid growth phase of their business. And Redfin as a public company with a rich operating history, having navigated multiple economic cycles. Gentlemen, I’m going to ask each of you to briefly introduce yourself and your company. Robert, let’s start with you.

 

Robert Wahbe

Hi, everyone. My name is Robert Wahbe, CEO of Highspot. We are in the emerging category called sales enablement. We came to market around late 2015, early 2016. And we’ve been experiencing very rapid growth. So over the last 14 months, we’ve gone from about 150 people to about north of 450 people. So thinking about how we’re going to be having discipline growth going forward, given the economic downturn will be a very interesting part of the conversation. Also relevant to the conversation we just raised our series d 130 $5 million, series D, which gives us optionality, , but clearly we need to understand how we’re going to use that as we navigate the downturn. So looking forward to the conversation.

 

Steve

Thank you, Robert. Bill.

 

Bill Richter

Ah, hello, everyone. My name is Bill Richter. I’m the CEO of Qumulo. First, Steve, thanks for putting this on. It’s you and the gang over at Madrona has just been awesome in terms of bringing  together the community of companies to be able to share information quickly and learn from one another. So thanks for doing this. Qumulo is in the business of helping customers store, manage and understand vast sums of data. And we do that both in the public and the private cloud. So that’s our business and we’ve been at it for about eight years. Eight years now we have nearly 500 enterprise class customers and we just finished an absolute blockbuster record year and then we came into some of the new facts this year. And so we like everyone else are working through this downturn, and I’m looking forward to the conversation and to learn a few things the great fellow CEOs on the call here.

 

 

Glenn Kelman

Hi, I’m Glenn Kelman. I’m the CEO of Redfin, a technology powered real estate broker. Our mission is to redefine real estate in the consumers favor. We open for business more than 15 years ago, so survived the great financial crisis of 2008. Before that, I started Plumtree software, which went through the.com, boom, and then the crash before going public, in 2002. So I think I’ve been through some ups and downs and hope I can learn something today and also that I have something to share.

 

Steve

Thanks so much for joining us, Glenn. So my name is Steve Singh, and I’m a partner at Madrona Venture Group. And from time to time in this podcast, I’ll chime in with some of the lessons and strategies that we used to Concur as we managed a couple of economic downturns. But let’s start the conversation with Bill. Bill with the start of the new fiscal year, you sent a fairly detailed framework to your company on how you want Qumulo not just To operate, but to strengthen. So in what is clearly an economic downturn, obviously, you’ve got ahead of this, the key share the principles behind that framework, and maybe how the companies & your people are responding to it.

 

Bill

Yeah, sure. You know, listen, we we’ve been watching the news, like everyone over the last month, and about three weeks ago, or two and a half weeks ago, you know, when I saw enough of the evidence building, what I decided to do for my team is just to write my organization, my leadership team, a note saying, hey, look, let’s say we’re entering a recession right now, an economic downturn, that’s going to significantly impact our how our market behaves.  We don’t know exactly how but what we do know is that it will have an impact. And so I asked the organization just to sort of absorb that and clear the decks in terms of our current operating plan and start rethinking things with the idea that we were going to be entering this model. And one of the things I did for my organization is I kind of wrote them an FAQ, a frequently asked questions, Hey, what does this mean? Or, for example, you know, what if we get this wrong, and we overreact? What What, what will be the impacts of that? Should we act now? Or should we wait? And I walked through that with the team. And my strategy, there was really to, first of all, get the ball rolling quickly. I mean, like Glenn and yourself and Robert, I’ve been executive through the last couple downturns and, you know, you really learn a lot during those cycles. And one of the things I learned most quickly, was you have to move quickly. Going slow through these cycles is not helpful. And the second major thing I learned is that it’s important to communicate deep and wide with the team. And it turns out that people always surprise you when you give them enough information and you share what’s really on your mind. And so with those kind of two principles in mind sort of they are really recognizing that there really were a new set of rules to kind of admitting, hey, we’re going through an economic cycle, let’s get in front of it. And three, let me get really good at communicating with those three principles in mind. I shared a note with my team and said, hey, let’s, let’s rock and roll because the companies that operate well through this cycle will come out the other side, much, much, much stronger, and those that don’t will find themselves in very troubled waters.

 

Steve

Thanks, Bill. Robert, how are you thinking about this Highspot? Is this a process you already engaged in, as Bill has or is this something that you’re currently contemplating? Obviously, you’ve got a lot of capital on the balance sheet.

 

Robert

Yeah, I mean, very similar to bill. We’ve been communicating our plan and you know, we’re Really trying to face the reality that we’re going to be facing this economic downturn. We’re doing a few things. Probably the overarching theme for us is this phrase that we’re using which is ‘our job is to navigate the downturn, but invest for the upturn.” The one thing we know for sure is that inevitably, there will be an upturn. It might be in six months, it might be in 18 months. But  we need to react quickly. I completely agree with Bill. But we also have to not overreact. You know, building a company to survive is not the same thing as building a company to thrive. And you can look at a lot of the experiences in the post mortems from 2000 and 2008. And you talked about this Steve on the earlier panel, where you have to make sure that your balance between making sure you survive and making sure you’re ready to invest in that after and so that’s been kind of a theme for us. And it also helps the company as we communicate, why we might be pulling back in one area, but actually investing and even doubling down in another area because it might be confusing, they might think we should be locking down. But no, we got to be smart about this. And it’s art more than science about how to balance that. So one big thing is this notion of navigating the downturn investing for the upturn. The second thing is controlling costs, you know, and that is two things for us. One is it’s trying to save money wherever we can, but it’s also going through the exercise and not doing too much, because you can overdo this by trying to create optionality in our budgets and our operating plan. So we can say, based on trip wires that say the end of q1, the end of q2, the end of q3, what levers could we create now, so we can pull them whether it’s marketing, whether it’s other kinds of investment, so the second big thing for us is controlling costs. And then the final one, and this is really big, especially as you know, the pandemic has really changed over the last even two weeks and people are now really working from home and in certain cities based on your offices. They’re really required to shelter at home, and they can’t even leave this notion of focusing on execution, especially as opposed to forecasting. I think there’s very, there’s a very big tendency to say, you know what, let’s figure out what’s going to happen in the future, let’s start to think about what our conversion will look like, they start to think about how much we’re going to lose off the top line so we can begin to plan. And what I’ve been saying is, let’s not have that conversation. We don’t know enough yet. Let’s not forecast, it’s not clear how the operating model is going to change. Let’s just focus on execution. And really, we’ve been focused on kind of, you know, the details like, what does it mean to work from home? How should we use zoom and slack and G Suite? We literally had, believe it or not, in an all hands where we walk through best practices for zoom, slack and G Suite, trying to really focus on execution. And then the other part of that is really helping people as they’re anxious. They’re clearly very anxious, staying connected to them, to the company to their managers. And so a lot of talk in fact, I had a meeting today with all the people, managers, again, on best practices to keep connected even in this remote world. So those are kind of the three things that we’ve done. And there’s lots of details under there. But those are the three themes that we’ve we’ve approached it with.

 

Steve

Thank you. And obviously, there’s some themes emerging here. I want to pull the thread down a little bit further. But before we entertain that part of the conversation, Glenn let me ask you to share what’s happening at Redfin, as far as how are you dealing with this downturn? Obviously, I want to be sensitive to the fact that you run a public company. And so you know, the comments would be relative to what is appropriate to share within this context.

 

Glenn

Sure, well, I think we’ve been preparing for this day for a long time, in different ways. When we went public, we recorded a roadshow video that featured a cameo from Bane this villain from a Batman movie because we had told investors that you shouldn’t be afraid of Dark because we were born in the dark, and everyone at Redfin knows that we’re in a cyclical business, there will be ups and downs, and that we’re going to react very quickly to that. And so, if you don’t have that preparation, if you feel offended by a downturn, I think you spend valuable weeks and months, really wondering what to do. But if you’ve built the discipline from the beginning, that there are going to be ups and downs in every single business, and we have a mission that is fundamentally good to make real estate better for regular people. And that if we’re more efficient than other people, there will be times where revenue grows and times where it doesn’t, but over time, the business will become more valuable. So I think that’s the first theme which is just having a mentality, that there will be ups and downs and preparing for that before there are downs. On the second, which is related to is just talking about the mission of the company always because the reason someone should work at Redfin or Highspot or Qumulo is not just because you’re gonna go out and kill it. There’s always going to be a sexier business. There’s always somebody who’s growing five points faster than you. And so you have to develop a rationale to be at a company because you believe in the company. And if that rationale only comes to you, when you’re announcing a layoff, or some kind of cost cutting move, it sounds very hollow. But I remember in 2008 2009 2010 when I thought Redfin was going to go out of business. I told my wife that I felt like such a failure. And she said, Well, I thought you really believed in the mission of the company. And I said, Well, of course I do. But if we go out of business, I’ll still feel like a schmuck. And she said, Well, it’s still a good mission. And you need to be true to that. If you really believe in it, you shouldn’t abandon it now. And so I just think you Have to really reiterate the emotional, the soulful reason to be at a company in hard times because people need chicken soup for their soul as much as they need steaks in their freezer right now. And we try to address both of those issues.

 

Steve

That’s fantastic. I love that. Let’s, pull on a couple of threads. You all talked about a number of different themes, one of which is, is transparency and communication. One is really sharing the purpose of the business and why you’re doing what you’re doing. The other is just is. I think, Robert used the phrase optionality, really making sure that you’ve got lots of decision points or opportunities to react in a way that can add strength to the business over time, but let’s take the optionality piece for a second and drill down on it. Obviously, none of us knows what is going to happen over the next three to six months. How are you talking to the team about that? What is the definition of optionality? What does that mean? When you ask your team to look at optionality? And how much are you pushing on that topic? I mean, it’s easy, obviously, for people to come back and say, Look, of course, we can do lots of things. Are you then taking it to the next level of saying, I want to plan in every one of these areas? Anybody can jump in on this, bill? Maybe I can ask you to start but anybody should jump in.

 

Bill

Yeah, sure. There’s a lot of a lot of ideas come to mind there. I mean, look, we’ve kind of hit on this idea of planning and forecasting. I really like what Robert said that, you know, focus on execution, not forecasting right now. Because at some point that becomes, you know, an exercise that that’s not as valuable but what I’ve been telling my team is the following is, is you know, we at Qumulo really pride ourselves on running a data driven business. I mean, we, we, we talked about it all the time. It’s one of our values of the company, but what I’ve said lately over the last couple weeks is like, Hey, remember business leaders, your data right now in the cycle, your data is going to lie, your data is going to lie. And that’s something that we’re not accustomed to hearing. We love data. We’re a data company. And but what I really mean by that is like, hey, if you look at the old models, if you look at the old trends, if you look at a cost per or, you know, ramp rate of a certain segment of your business, or the performance of a, of a trade show, or whatever those types of things are, you know, you have to kind of figure that in this model right now, or this in this environment. You’re gonna, learn a lot of new things, and your historical data models are going to be far more fragile now than ever. And so what I’m asking people to do is sort of think around corners more than we ever have before. And, and do smaller things much more quickly and learn fast, and that’s going to give us a lot of optionality in terms of how we run the business and really how we resource the business. And actually, I gotta tell you, our team has been responding really well to these things.  We completely over the last two or three weeks, rebuilt our marketing plan for the year, for example, because a lot of our traditional marketing at Qumulo would rely on physical trade shows. So it’s like, okay, you know, that’s a great example. It’s like that the data that we have about performance of those trade shows is completely off. And most of the shows won’t take place, if they are happening, the attendance is going to be much lower, we have to change the way that we’re going to invest. And it’s through those fast changes that we create for more optionality in the business. And so that’s kind of a micro example. And then the macro one for the business, and I’ve been very clear with them on that we have a very healthy balance sheet here. Qumulo. We raised around about a year and a half ago, and we’ve been very slow to spend, which is good. And and in these environments, cash, I would say equals optionality. And so we’ve had very open conversations around that in the business, and people have been You know, I think more appreciative about balance sheet management than I’ve ever seen our tech, your average tech, tech and employee been in the past. And that’s kind of cool. It’s cool to see them adapt quickly.

 

Steve

Robert Glenn, would you want to jump in on this topic?

 

Robert

So one of the things that we’ve been doing, you got to not do this too much as we’ve been trying to take our plans. And we have this concept of a North Star, and then click stops along the way to that North Star. And so if you think about something that we might want to accomplish, whether it’s delivering a particular feature, or new new capability, or a marketing program, we’ve gotten more granular, and we’ve asked the teams, we understand your Northstar. And that took some amount of resources. Now think a little bit harder about could you do incremental things along the way. And then let’s think about kind of like a bill said, let’s do that. Click stop one right now. And let’s fund that right now. And let’s have some tripwires about how we think about click stop to and click stop three. If you go back, you know, it seems like so long ago, you go back on A month ago, we just said, Hey, the plan looks great, the North Star looks great, we’re going to invest toward that, you know, invest wisely, be smart about it. But we don’t need to have that finer grain in the plan. And that’s what’s happening. Now we’re getting much more fine grained in a lot of our big areas of investment, whether it’s marketing programs, whether it’s product capabilities, and the roadmap there, where our big spends are. And so this notion of getting more granular, the one thing I would caution is, you don’t want to do that too much, because then you just sit there and you analyze until the cows come home and you don’t actually execute. So a little bit more click stops a little bit more optionality a little bit more trip wires, and then go do that first click stop. Now right away.

 

Steve

And that goes really to the theme you brought up earlier, which is more data points, more engagement on day to day execution, to really be able to measure what’s going on. Glenn before we go to you,  one of the things I just jump in and share in 2008 2009, when concur was living through the financial crisis that obviously gripped the whole world. One of the data points that we did see early on, was advanced travel bookings were down 50% or there abouts immediately. And so literally on, on one day we saw for travel bookings drop off of a cliff. And in immediately you look at this and say, the first reaction is there’s something wrong in our systems, are we missing something, and then you realize, Okay, the next day, same things happening, same and so on. And what you saw was an immediate drop off in travel which followed very, very quickly with a whole string of other things, including drop off in employment. In fact, in the in the first month of 2009, you can literally pick up the Wall Street Journal. And on the cover of the journal were companies that were all our customers, where they’re laying off 25% of the workforce, 30% 40% of the workforce, or even going you know, bankrupt frankly, like a Lehman did. And so, one of the things that we really had to come to grips was that you All of our data elements as you’re is your highlighting Robert and Bill is that all the data and elements we had in the past were no longer valid. And we have to start measuring things on a daily basis, and learning how to react to things much more real time. And in one of the things we did we happen to be a business that was growing in the 30 40% per year range, and we’re 10% you know, free cash flow margins. But without certainty where the world was going, we decided to pull back and decided to pull back relatively hard. So much. So the operating margins jumped about 24 25% in the fourth year, and we still grew top line about 15% or so year over year. But in looking back at it, boy, I sure wish I hadn’t pulled back so hard. There are things within that, that that, you know, I feel like we might have gotten right there were instructive lessons. I’d love for you guys to comment on your businesses. One of the things we did is we realized that an economic downturn is an opportunity to actually distance yourself from the competition. To actually strengthen your business. And so while we slowed the rate of investment in every area of the business, we actually increased it in product development. So we decided we want to invest more in product and our key distance ourselves from everybody else who we know, didn’t have not just a balance sheet, but the operating, leverage and discipline the business to compete with us. And it has been a massive advantage for us in 2010. So Glenn, maybe you can, you know, kind of a segue off of that into into things that you saw at Redfin in the past, but frankly, also today, in how to improve your competitive position.

 

 

 

Glenn

The point that I wanted to make, which I think is really important is that you try to have employees hold two thoughts in their head at the same time, and one is about the fundamental long term strength in the business. And the second is the short term apocalypse that you’re now facing. Because if you only talk about how strong the company is long term, it sounds like happy horse manure when you’re cutting costs and freaking out. And if you talk only about how you have to cut costs, you throw the baby out with the bathwater. So you try to tell employees, it’s real. What we’re going through is perhaps an existential crisis if you’re a smaller company, but certainly a real threat to the business. And you have to hold that thought at the same time that you remember. We’re the best damn real estate brokerage or  are the best damn cloud software company in the world. And it’s hard for people to hold those to the people who think you’re great. often don’t respond with the right level of urgency. The people who respond with the right level of urgency often forget what made the business so great in the first place. And you just try to have both in your head at the same time. All the time.

 

Steve

Yeah. Bill, any thoughts on that?

 

Bill

I just love it. Like Glenn was talking about that when we think about the opportunities here. You know, I love this quote that gets tossed around, you know, big doesn’t beat small but fast beat slow. And so, you know, we compete with very, very large companies, and I think that they have a tougher time. We all face the kind of the environmentals, but the adaptability of an organization of our size with our mentality can be superior to large competitors. And all that’s in service of customers, right? If the faster that we can move, the more that we product that we can create more value that we can deliver to customers without having a massive amount of fixed costs and a bunch of entrenched people that make change difficult, gives us an advantage. And so that’s something that we’re talking about a lot around here. And then the other thing that just happens to be kind of a big opportunity for Qumulo is a lot of the vertical markets that we focus on, we think, have a decent chance of being counter cyclical here. You know, so for example, like the federal government’s becoming a fast growing market for Qumulo. That will likely be counter cyclical healthcare is a very large market for Qumulo. As healthcare organizations, you go to the doctor, a doctor visit generates an enormous amount of data for any patient. It’s very likely that healthcare will not be underfunded during this cycle. And so I can kind of go through some of the lists, but what we’ve told our organization is, you know, in every business is different. But we said, Hey, you know, pull back and think about the segments of your business that might be impacted less or more and every company’s different, and then go seize that opportunity. And so that’s like, gotten a lot of like, really exciting thinking going on around here. As you know, we’re talking about two things. What are the external opportunities and how nimble and agile can we be to go seize them? And how much faster Can we do that than our competitors? So that’s like been the rallying cry around here.

 

Glenn

I would just think about this as an opportunity to promote financial literacy. If you try to explain to an engineer or a marketer, a balance sheet, they just want to go back to writing their press release or putting together ones and zeros. But when you need to explain to people how much money you have in the bank, and what your ability is to withstand a downturn and you walk them through your income statement and your balance sheet, I think you really put them in your seat when they start seeing the business the way a CEO does, and just the level of urgency that conversation has in a tough time when people distrust rhetoric and just want to see the numbers can really be your friend, you can say, Listen, I’ll show you the business the way I see it. And I’ll explain what would trigger us to have to cut costs further, and how we make decisions about where to invest, and you’ll see exactly the numbers that the execs are seeing. And just walking people through that can build more trust than any bland proclamation about how much you love the employees, even though of course, all of us really do care about our culture and our people.

 

Robert

I was going to say one of the themes that’s emerging, is that done right coming out of an economic downturn, you can actually be a stronger company in many ways. You know, Glenn talked about financial discipline. Bill talked about being very smart about you know, segments. One of the things And I think is unique to this particular time is that we’re all working from home. And one thing that I think is happening is that we’re getting better at collaborating. We think of ourselves as very good at collaborating, but in lots of small and big ways, we’re getting better at it, because we’re having to get better as we work from home. So I think on every level, you can actually come out of this stronger whether it’s financial discipline, whether it’s being smarter about your marketing, whether it’s being better at collaborating. And that is a positive message which is looking at we’re getting better at you know, we had a hard time cutting costs, we’re getting better at it because we’re being forced to

 

Steve

Guys, let’s  pull on a thread here that certainly is becoming more top of mind for our people. And that is looking at difficult economic climate that some companies will have to deal with reducing their workforce. How do you think about engaging in that discussion with your evaluating whether or not it seems something you have to do., I would love to hear your thoughts on on this. What advice would you give others?

 

Glenn

I have been surprised talking to some startup CEOs around town, how slow people are to depart from the narrative of “we’re killing it”. They’re actually worried about what people will think, instead of just deciding what they can afford, and doing it as fast as possible so they can maximize severance for their people. There might be an exception, because some people are waiting for federal stimulus I can understand wanting to know what’s coming before e deciding but I’d still err on the side of moving fairly quickly so that you can give people the maximum amount of notice and respect.

 

Steve

So Glenn, on that transparency theme,  This is open to Bill and Robert How do you pull your team into that process? What have you historically done? What advice would you give young entrepreneurs who may not have gone through an economic downturn before?

 

Bill

I was having a text conversation with one of my leaders, and they were saying how they kind of appreciate what was going on, you know, how we were kind of working through this and, and, and what I told them is like, Look, you know, we get paid as leaders, not just for the kind of nice up into the right cycle, that has plenty of its own challenges, but you actually kind of like, earn your keep through managing through these cycles here. And this is like really, when you earn your stripes, and not just for a CEO, but for anybody in a company, but particularly like the leadership and management team. And, you know, the conversation I had with my leadership team is to say like, hey, just be cognizant of the fact that you’ll have many people that are management rolls in the company, some of them that run big teams that have never been through a cycle like this because they just haven’t been in their career long enough where we’re in a really odd scenario now where we’re sitting here on the back of like a 10,11 year, pure up into the right expansion. And so the implication there is you could be 10 or 11 years into your career. In fact, you could be more like 13 14,15 years into your career, but like as a manager, never having been a manager and not seen something like this. And so you have this scenario where you can have some of your veteran people that have not developed this skill set of being able to manage through a cycle like this and what I told the team is like saying, Hey, you know, the world is cyclical, it does go down. Like Glenn said a minute ago just kind of operating in the world killing it, cycle. Again, that’s hard because killing it’s not easy, but it’s through these cycles that you will really become like a veteran leader. And, you know, my team sort of like has responded to that they’re like, yeah, you know, this is a career development opportunity, as tough as it might be operating through the cycle.

 

Unknown 34:14

I don’t know if you want to add to that.

 

Robert

I agree with both the things that Glen and Bill said, the one piece of I would add is that, even as you’re trying to be transparent, you also have to think about the speed of information and how it lands. You know, as companies get bigger, and I’ve, we’ve some of us work in very, very large companies, the speed of information might be literally six months, six months before everybody in the organization for real for real, understands the key thing that you’re trying to do in small organizations that might be you know, that day in the conference room, but if you think about what’s happening right now, you know, I find that people are anxious enough that they’re not hearing the information as they used to even a month ago, and you have to repeat it a lot more often than I would expect. So for example, we’ve been pretty consistent and pretty disciplined about our work from home policy, starting back when King County did the first set of guidelines, and we’ve documented that we send out an email every Thursday at four o’clock we have within Highspot, you know, the fact we have all these things, and we’ve been very consistent.  I do think as part of transparency, consistency, repetition is more important than it’s been in previous times.

 

Steve

I just expand on one comment that Glen made in the for every entrepreneur, your board will always give you feedback. back and always provide input on what you want to board things that you can do better. I will tell you some of the best learning opportunities I had I Concur, were the mistakes that I made, and that, that fundamentally, those actions or those, those events, created amazing learning opportunities. If I think about the times when we had to do reduction in force, the single biggest thing that I really wrestled with was, how did I not see it coming? How did I not see that this event would happen one day? And why didn’t I have two three contingency plans that I could pull on way before an event happened? And I realized that it’s a high bar to hold yourself to, but it’s the bar that you have to hold yourself to as the CEO, you are responsible for not just the the investment that people have made in your company, but for the people who have trusted you to come to work at your company. So the real trick and CEO’s far better than myself and figured out how do you take that, that ownership and accountability model and keep pushing it down to every level of the business? Because it’s it’s a fallacy to assume that you and you alone can can address challenges or or see them entirely on your own, the more you share, and the more that you involve everybody in the decision process, the better your company becomes. So I really identify with the comments that all of you made. Um, I’m going to hit one more topic and then we’ll, we’ll wrap up. Over the last several years, especially in software businesses, the the world has moved to much more of a SaaS or consumption based model. And that model has tremendous upsides to the customer, but will certainly be put to the test in an economic downturn. And so I’d love to get your thoughts on how do you manage a SaaS business or consumption based business in a In a economic down cycle, and obviously I’d love to share some some experiences from concur as well. So, Bill, why don’t you jump in on this one first?

 

Bill

Yeah, well, I’ll make a few comments. And then I’m going to learn a lot more than I’m going to teach here, but a couple things. And I was having a conversation with someone on my team about this today. And I think in these cycles, what you have to remember is like, keep your customers. And what I really mean is if if you have a model where you like to bill for, you know, multiple years, and customers can’t afford it right now or their or their or their want to be risk adverse, they want to bring in that cycle, they want more flexibility, or if you have a model where you sell them this much, but they only want to be able to buy this much for a little while. I think it’s really important to sort of, sort of rethink how flexible you can you can be for customers, and that’s going to kind of keep them with you like in our business Qumulo. We’re making 5,10, 15 year or more relationships with our customers. And so if you if you think short sidedly about your structures with customers and really push them on it, you know, you might get the deal. But you, you might also force them to back away. And so my opinion is during these cycles, it’s like, you know, think a lot about flexibility. Keep your customers and I’ll give you the counter example, which is, maybe probably, perhaps more telling someone literally came into my office two hours ago and said, Hey, I have this contract from from a vendor, and they’re forcing us to buy for two years. And I just tell him, I told him, why don’t you tell that vendor, absolutely not, goodbye. Because we just want to buy one year. And it’s like, hey, during a cycle like this, I expect my vendors to show up and kind of really partner with us and be and be flexible. And if they’re not willing to do that. It’s like now I know who my partner is and who my partner isn’t. And that’s just kind of an attitudinal difference about operating and actually like forming deep customer and partner relationships during one of these cycles, and I think being rigid is not the way,

 

Steve

Robert.

 

Robert

Yeah, I mean, you know, different businesses are going to be impacted so much differently. And so we’re, I don’t know how much we’re countercyclical. But our usage is actually going up right now, in a couple of ways. One is that the people that naturally aren’t on our platform, because they’re working from home need to access the platform even more. So we have our usage almost doubled across many, many of our bigger customers. And we’re seeing another thing and this is where we’re trying to be creative. And we haven’t figured out the answer yet. But to kind of Bill’s point, they’re also saying, hey, can’t we for a certain amount of time, open up the platform to more people in our company that we want to pay for right now. They don’t normally need access to it. But right now, because everyone’s working from home, can you somehow facilitate that and it’s not just a licensing thing. It’s also just something we have to do Figure out programmatically. So I think this notion of being flexible, is really important. I do think that, you know, you will see in our business and others, you know, when you think about consumption, there’s kind of per user, and there’s per per activity. On the per user side, I think everybody’s gonna try to trim users. Now, we’ve already thought about some of our biggest spends, you know, we’ve been fairly. We’ve been fairly lax about if you have a need and a reasonable will give you a license. And now we might tighten that up. And I think we’ll all see that. I don’t know what’s going to happen on the consumption side where you’re doing activity like AWS, I think for a lot of businesses, those run critical systems, and I don’t know if they’re gonna see a downturn or not, because they they need to run those things. Just like Qumulo for data, you need that data. So it’d be very interesting to see if they really see a downturn as long as those applications continue to function.

 

Steve

First of all, I want to tell you, I happen to be a shareholder in all of your companies, and I’m listening to you, I am very glad I am. Um, there’s a there’s a theme that you guys bring out, which is really amazing. And that is the compassion of who you are, who your company is, has to extend not just to your people, but also to your customers. And it’s now more than ever, having a long term relationship with your client is critical. So I mean, one of the things we did and perhaps not purely out of a thoughtful, you know, planning, but as much as we just want to treat our customers the way we wanted to be treated in 2009, because travel lines are way  Down and expense reporting was way down. And so we went to our customers proactively and said, Look, we’ll let you tier down, you know, we’ll let you buy it, the whatever tier, you need to buy it. And so if you want to reduce your commitment by 25%, that’s fine. Now, obviously, it gave us a chance to re engage with the customer. And think about how we might expand other parts of our relationship either now or in the future. But the biggest thing is that they knew that we had their back and and we were acting in a way that was truly a partner. And, you know, we’re hoping that that kind of partnership building or the relationship building would, over the long term be constructive. And honestly, it was incredibly constructive. The I will give you an example. I’m on the board of Washington federal. And one of these I love about this company is that the CEO has got a culture that that that, you know, honestly it, it speaks to being a partner. It’s not, hey, I’m just a bank and I’m looking at business with you, but it’s a partner. He literally proactively at the beginning of this downturn, went to all of his SMB customers and said, you can move to interest only effective immediately. And it’s it’s that model that that really helps build loyalty and trust. And that’s what I hear in the comments that you guys made.

 

Let me do this. We’re coming up at the top of the hour. And I’m going to try to summarize this conversation. And if I’ve not summarize it correctly , please jump in wherever you like. First is that be decisive and take action now. The theme behind this is very simple the best always take a leadership position and define the path forward before it becomes obvious that has to be done. In that process. The advice we’re getting is be brutally honest and assessing the challenges that your company is facing or that it likely will face in a downturn. The second is cash is king. And that’s true not just in good economic climates, but even more so in tougher economic climates. Use this downturn. to really focus your business, whether it’s on unit economics of driving efficiency into your business, or whatever the metric might be, but make sure that you have you use this opportunity to actually fine tune your business, either build cash reserves or actually decrease your cash burn. Third is take the opportunity to make your company stronger, increase your competitive advantage. One proxy might be every dollar being spent on your top three initiatives. If it’s not, then why is it being spent. It’s an opportunity to increase product leadership. It’s an opportunity to differentiate your relationship with your customers, for example, the Wafed did. Fourth is be transparent and be authentic in your communications across the entire company. There’s no way to over communicate the rationale, the strategy with the specific tactics that you want your company to execute against. And I’ll borrow from a phrase that Glenn used, don’t forget your humanity. do what’s right for your business. But don’t forget that your people are and they’ll always be a huge part of creating your business. If you’re considering reducing the size of your team, do it with full transparency, and do it within the cultural values that define your company. simple lesson trust is really the critical currency that we all have. It always has been critical. It’s even more so in this type of climate. Fifth is, and this is really just what I’ve benefited from, in my experiences, that instrument your business, use this opportunity to make your business better. Are you really measuring the right things? How broadly are those metrics measured? How fast can you take actions based upon that instrumentation? And, you know, look, the best get better in difficult times. So think about it in the context of what’s your competition doing? And how does that factor into your plans? How do you raise the bar and yourself?

 

I’m going to close with two thoughts. That first is that the ideas they’re never the differentiator, these are great ideas that we’ve all shared here. But they’re never the differentiator. It’s the execution of those ideas that create distance between market leaders and those that aspire to be more computers. And then, you know one more thing, this too is going to pass. And when it does, the companies that have adjusted and really optimized, their businesses will be stronger. And they will distance themselves massively from the competition that couldn’t be agile and couldn’t deal with these  issues in honest, authentic way. Bill, Robert Glenn, I can’t thank you enough for sharing your time and your insights to all of our listeners for everyone that madona our best wishes to you and your families. Please be safe. Thank everyone.

 

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