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 [email protected] and that’s E R I K A.

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


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).